Canada: Leave To Appeal Dismissed Where, Inter Alia, "Conflicting" Decisions Regarding The Issues In Play Were Not From Ontario (Intellectual Property Weekly Abstracts Bulletin - Week Of November 21, 2016)

Patent Decisions

Leave to appeal dismissed where, inter alia, "conflicting" decisions regarding the issues in play were not from Ontario
Apotex Inc. v Pfizer Ireland Pharmaceuticals, 2016 ONSC 7193

The Ontario Court dismissed Pfizer's motion for leave to appeal from the decision dismissing its motion to strike out various claims, made by Apotex, for failing to disclose a reasonable cause of action.

The Court addressed two preliminary matters concerning the factum and reply factum filed by Pfizer. First, Pfizer's factum did not comply with the Rules of Civil Procedure, in that it did not meet the standard of "characters used shall be of at least 12 point". While the Court accepted the factum to prevent further delays, the Court noted that ignoring the requirements of the Rules in respect of the proper format for documents is not to be countenanced. Further, the Divisional Court office has standing instructions to refuse to accept for filing any factum that does not comply with the Rules. Second, the right to file a reply factum is very limited and Pfizer's reply factum did not satisfy the requirements set out in the Rules. Therefore, the Court chose to give little consideration to the contents of the reply factum.

In dismissing Pfizer's motion, the Court found that Pfizer failed to meet both tests for leave to appeal set out in Rule 62.02(4). Concerning the first test, the Court noted that not all of the conflicting decisions were from Ontario, and even if there were conflicting Ontario decisions, it was not desirable for leave to appeal to be granted. The Court stated that this was a pleadings motion and it should only be the rare or unusual case that ought to warrant the consideration of the Court by way of an appeal. This was not the case here, especially when the pleadings issue would not be the end of the claim or the defence.

The Court also did not have good reason to doubt the correctness of the motion judge's order, in respect of the second test. The motion judge correctly applied the test on a motion to strike and found that it was not plain and obvious that the claims could not succeed.

 

Complex proceedings may justify an award at the high end of Column IV, but not a further increase
Eli Lilly Canada Inc. v. Hospira Healthcare Corporation, 2016 FC 1218

Hospira brought a motion seeking directions concerning the assessment of its costs in the underlying proceeding. The Court agreed with the parties that a lump sum award was preferable.

The Court refused to reduce the costs for Hospira's unproven Section 53 allegation. The Court agreed that this was an alternative allegation in the Notice of Allegation that was contingent on Eli Lilly's adoption of a position it did not assert; accordingly, there was no Section 53 issue presented to the Court for determination.

The Court noted that an award of costs is not intended to represent a full indemnity, but only a reasonable contribution to the costs of litigation. While complex proceedings may warrant an award at the high end of Column IV, the Court found that it did not justify a further increase. Also the fact that a party may employ three or more counsel at various stages was of no particular relevance since the usual practice is to allow for two counsel and not three.

Hospira had requested a lump sum award of $576,001.12 plus interest of 5% per annum. After disallowing a Section 53 reduction, the Court allowed Hospira costs and disbursements in the amount of $495,000.00 plus interest at 3.5% per annum.

Copyright Decisions

Small Claims Court orders punitive damages for Defendants' false report that Plaintiff's song infringed their copyright
Whyte Potter-Mäl c. Topdawg Entertainment Inc., 2016 QCCQ 11725

The Plaintiff sought damages after one of his songs was taken down from YouTube and SoundCloud by the Defendants for two months due to their report that the upload was infringing their copyright. The Plaintiff requested damages in the amount of $15,000. The Defendants did not contest the small claims application.

The Court concluded that the evidence established that the Plaintiff's income and his reputation were negatively affected from the false report of the Defendants. The Court allowed $5,000 in moral and material damages, and an additional $1,000 per Defendant as punitive damages.

Trademark Decisions

Settlement agreements preventing sale of branded, legitimately sourced goods found not to be restraint of trade
Mars Canada Inc. v Bemco Cash & Carry Inc., 2016 ONSC 7201

In the Ontario Superior Court, the Plaintiff moved for summary judgment for rectification of the written form of a settlement agreement and a declaration of liability of the Defendant Bemco Cash & Carry Inc ("Bemco Cash"). The Plaintiff also sought a declaration of liability of the other Defendants for breach of a second settlement agreement.

The Plaintiff had originally sued Bemco Cash in the Federal Court for engaging in grey marketing of goods bearing the Plaintiff's trademarks. Grey marketing is referred to as "[b]uying genuine branded products abroad and selling them in competition with a local distributor of the foreign vendor (and/or its parent company or group of companies)".

The Court noted that there is nothing inherently wrong with grey marketing. Furthermore, the sale of the legitimate foreign purchased goods in Canada cannot be claimed to amount to unlawful passing off. The situation is less clear as to whether trademark registration affords a Canadian trademark owner the ability to prevent third parties from selling products bearing its marks, which are legitimate goods sourced from a foreign parent or affiliate of the Canadian trademark holder.

The Federal Court of Appeal had previously held that a Canadian licensee cannot rely upon its licensed trademark rights to prevent the sale of goods purchased legitimately from the foreign owner of the plaintiff's licensed trademarks. However, the Court of Appeal expressly distinguished the situation where the plaintiff is not just a licensee but actually owns the Canadian trademarks, as was the case here. Furthermore, the Court of Appeal made no decision concerning that situation.

The Ontario Court stated that Bemco Cash had every right to advance the defence that the Plaintiff's trademarks could not be used to prevent grey marketing. However, Bemco Cash did not defend the case, and instead, decided to settle. In the settlement agreement the Defendant was referred to as "Bemco Confectionary Sales" (name of the vendor who had sold its business to the Defendant), rather than Bemco Cash. On the issue of rectification, the Court was satisfied that it was in the interests of justice to resolve the matter summarily. The evidence showed that the intention of both sides was that Bemco Cash was the party to the settlement agreement. The agreement was rectified to replace "Bemco Confectionary Sales" with the actual Defendant. The Court also found that Bemco Cash had breached the agreement by resuming grey marketing activities without the Plaintiff's consent.

The Court also held that the second settlement agreement was breached. Pursuant to the first settlement agreement, Bemco Cash had disclosed to the Plaintiff its source of foreign goods was the Defendant GPAE. The Plaintiff demanded that GPAE also cease its grey market activities. GPAE entered into a second settlement agreement rather than having the issue resolved in Federal Court. The agreement purported to bind GPAE's affiliates, shareholders, directors, officers, employees, and agents. The Defendant Mr. Ebert, knowing that the agreement included his personal covenant as shareholder, signed the agreement on behalf of GPAE. For the purposes of this litigation, GPAE admitted that it had once again imported the Plaintiff's branded products from the United States. Thus, the Court held that GPAE and Mr. Ebert were therefore plainly and admittedly violating their settlement agreement.

The Court also dismissed the Defendants' argument that the agreements to refrain from purchasing the Plaintiff's branded products from the Plaintiff's affiliates abroad are not a valid contract. Even if the agreements engaged the doctrine of restraint of trade, the Court found that the restraint was supported by three different grounds, which all satisfied the four part test set out in Tank Lining Corp. v. Dunlop Industrial Ltd. The three grounds were that:

  • The Agreements are Settlement Agreements to resolve litigation, which are strongly favoured and supported by the law;
  • The Plaintiff has a statutory right to enforce its registered trademarks; and
  • The Defendants are prohibited from selling the grey marketed products by Federal Labelling and Packaging Law.

Therefore, the Court held that the two settlement agreements were not void in restraint of trade.

 

Default judgment granted in trademark infringement case
Maxwell Realty Inc. v. Omax Realty Ltd., 2016 FC 1122

Maxwell Realty Inc. (Maxwell) brought an ex parte motion for default judgment against Omax Realty Ltd. (Omax) in its trademark infringement suit.

Maxwell is a full service real estate agency operating under the registered trademark MAXWELL. Omax used the term OMAXWELL in association with the Omax real estate business. Maxwell sent a cease and desist letter. Omax responded with a franchising inquiry, and continued to use the name. Internet search evidence was filed. In addition, there is evidence that a number of real estate agents associated with Omax have been or are subject to professional ethics violations. The Statement of Claim was served twice on Omax, with no response.

The Court considered the test for confusion and found that the risk of confusion is high. The Court also held that Omax's online presence with the prominent use of the word "Maxwell" with only an "O" in front of it is an attempt to pass of their services as being associated with the Plaintiff's. Furthermore, while the Plaintiff had not provided direct evidence of loss of goodwill, they had provided evidence of professional sanctions against agents associated with the Defendant. The Defendant had wrongly infringed the trademark and damages could be assessed. Default judgment was granted with compensatory damages of $10,000 plus $5,000 costs.

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