Date: 20061212
Docket: T-556-06
Citation: 2006 FC 1484
Toronto, Ontario,
December 12, 2006
PRESENT: The Honourable Mr. Justice von Finckenstein
BETWEEN:
WI-LAN TECHNOLOGIES CORP.
Plaintiff
and
D-LINK SYSTEMS,
INC. and
D-LINK CANADA INC.
(d.b.a. D-LINK
NETWORKS)
Defendants
REASONS FOR ORDER AND ORDER
[1]
This is an
appeal from the decision of Prothonotary Milczynski dated August 23, 2006. In
response to a motion to strike out portions of the amended Statement of Claim,
the Prothonotary refused to strike out subclause 1(f) and clause 13 of the
amended Statement of Claim. These clauses states:
1(f) exemplary and punitive
damages by reason of the Defendants’ wilful infringement of the Canadian
Letters Patent No. 2,064,975
13 The Defendants at all material
times have been aware of the Patent and have chosen to knowingly, deliberately,
and wilfully market infringing products in Canada. The Defendants were at all material
times fully aware that the Plaintiff’s predecessor in title, Wi-LAN Inc. had
made statements at least as early as July 7, 1998 to the IEEE-SA Standards
Board Patent Committee of the Institute of Electrical and Electronics Engineers
stating that the Plaintiff’s predecessor in title, Wi-LAN Inc. would provide
licenses for its patents for the practice of the OFDM technology on fair,
reasonable, and non-discriminatory terms and conditions to qualified applicants
in accordance with IEEE Patent policy. The Defendants did not enter into
negotiations for a licence but rather unreasonably, wilfully and callously
ignored the Plaintiff’s predecessor in title, Wi-LAN Inc. and the Patent.
Rather, the Defendants callously adopted the attitude that the Plaintiff’s
predecessor in title, Wi-LAN Inc. and the Plaintiff would lack the financial
resources to enforce its Patent. The conduct of the Defendants was
particularly egregious in the circumstances where the Defendants were fully
aware that the inventors of the Patent Hatim Zaghloul and Michael Fattouche,
who are also the founders and principals of the Plaintiff’s predecessor in
title, Wi-LAN Inc., are men of modest means who immigrated to Canada and staked
both their personal assets and reputations in an endeavour to promote a truly
worthy invention. The Plaintiff’s predecessor in title, Wi-LAN Inc. was
desirous of cooperating with chip manufacturers such as the suppliers to the
Defendants but was callously ignored and effectively forced out of the wireless
product sales market by the aforesaid actions of the Defendants.
[2]
The Defendants
allege that the Prothonotary erred in not striking these paragraphs. In their
view, the facts alleged in paragraph 13 would not give rise to punitive and
exemplary damages even if every allegation was proven.
[3]
As this is
an appeal from a decision of a Prothonotary, the Defendants have to justify the
test set out in Merck & Co. v. Apotex Inc. (2003), 30 C.P.R. (4th) 40 at 53, which provides:
a) the
questions raised in the motion are vital to the final issue of the case, or
b) the
order is clearly wrong, in the sense that the exercise of discretion by the Prothonotary
was based upon a wrong principle or upon a misapprehension of the facts.
[4]
The
Defendants rely on the second prong, in other words, that the order is clearly
wrong. The Plaintiffs on the other hand argue that this is a matter to be dealt
with by the trial judge and that on the basis of the allegations set out in
paragraph 13, a court may well award punitive or exemplary damages.
[5]
The test
for punitive or exemplary damages is stated by Cory J. in Hill v. Church of
Scientology, [1995] 2 S.C.R. 1130 at paras. 197, 199:
197 Unlike compensatory damages, punitive damages are not at
large. Consequently, courts have a much greater scope and discretion on appeal.
The appellate review should be based upon the court's estimation as to whether
the punitive damages serve a rational purpose. In other words, was the
misconduct of the defendant so outrageous that punitive damages were rationally
required to act as deterrence?
…
199
Punitive damages can and do serve a useful
purpose. But for them, it would be all too easy for the large, wealthy and
powerful to persist in libeling vulnerable victims. Awards of general and
aggravated damages alone might simply be regarded as a license fee for
continuing a character assassination. The protection of a person's reputation
arising from the publication of false and injurious statements must be
effective. The most effective means of protection will be supplied by the
knowledge that fines in the form of punitive damages may be awarded in cases
where the defendant's conduct is truly outrageous.
(Underlining added.)
[6]
This was
repeated with approval by Binnie J. in Performance Industries Ltd. v. Sylvan
Lake Golf & Tennis Club Ltd., [2002] 1 S.C.R. 678 at para. 79, which
stated:
79 Punitive
damages are awarded against a defendant in exceptional cases for
"malicious, oppressive and high-handed" misconduct that "offends
the court's sense of decency". The test thus limits the award to misconduct
that represents a marked departure from ordinary standards of decent behaviour:
Whiten, supra, at para. 36, and Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at para. 196.
(Underlining added.)
[7]
If we analyse
paragraph 13 it becomes apparent that the Plaintiff alleges two things: a) that
the Defendants callously, knowingly and wilfully infringed their patent, and b)
that they failed to negotiate with the Plaintiff or seek a licence. I fail to
see how any of the allegations of paragraph 13, if proven, would amount to ‘misconduct that represents a marked departure from ordinary
standards of decent behaviour’.
[8]
I agree
with my colleague Mosley J. who said in Dimplex North America Ltd. v. CFM
Corp., 2006 FC 586 at para 123:
123 There
are no patent cases in the Federal Court that I am aware of where punitive
damages have been awarded simply because the defendant knowingly or
intentionally infringed the patent without more. Punitive or exemplary damages
have been awarded in connection with litigation misconduct, or abuse of process,
such as continuing activities found by the court to constitute infringement in
disregard of a court order to cease such activities.
[9]
To counter
the Dimplex case the Plaintiff relies on Polansky Electronics v. AGT
Ltd. (1999), 3 C.P.R. (4th) 34 and Underwriters Survey Bureau
Ltd. v. Massie & Renwick Ltd. (1942), Ex. R. 1. These cases are of no
help to the Plaintiff. The Polansky case was overturned on appeal and
the retrial found no infringement. It thus hardly advances the Plaintiff’s
case. The Underwriter Survey case involved unsubstantiated counter
proceedings of conspiracy and criminal conduct. There is no conduct of that
sort in this case.
[10]
Since the
Plaintiff does not allege any other facts such as abuse, fraud, malice,
contract, fiduciary obligation, agency, or the like, the allegations pleaded are
not sufficient to allow a court to arrive at a conclusion that punitive or aggravated
damages are present. Failing to strike this paragraph will merely lead to an unnecessary
delaying of pre-trial proceedings.
[11]
Accordingly,
I agree with the Defendants that paragraph 13 should be struck and I find that the
Prothonotary was in error when she failed to do so.
ORDER
THIS COURT ORDERS that:
- This appeal is allowed;
- The order of Prothonotary Milczynski
of August 23, 2006, is amended by changing paragraph 1 thereof to read as
follows: “1. Subparagraph 1(c) and 1(f) and Paragraph 13 of the Statement
of Claim are struck without leave to amend”; and
- Costs for this motion to follow the
cause.
“Konrad
W. von Finckenstein”
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