Date: 20051011
Docket: T-920-05
Citation: 2005 FC 1379
BETWEEN:
OMEGANUTREL INC.,
STONEY CREEK DAIRY LTD. and GRAND VALLEY FORTIFIERS INC.
Plaintiffs
and
FOOD SYSTEMS INNOVATION INC.
Defendant
REASONS FOR ORDER
PHELAN J.
BACKGROUND
[1] The Plaintiff, OmegaNutrel Inc. ("ONI"), seeks an interim injunction to prevent the Defendant, its employees, officers, directors or agents from:
(a) disseminating any further statements, in any manner whatsoever, to any maker, seller or user of dairy products which allege a breach or infringement of Canadian Letters Patent No. 2,208,392 (the "Patent") or other alleged rights; and
(b) threatening legal proceedings for infringement or breach of the Patent or other alleged rights.
[2] This motion for what is in reality a "gag order", arises from a claim by ONI and the other Plaintiffs, pursuant to section 7(a) of the Trade-marks Act (false and misleading statements) in regard to letters from counsel for the Defendant ("FSI"). These letters were sent from FSI's counsel to certain companies and refer to the rights of the University of Guelph under the Patent. The letters are standard lawyers' letters outlining rights claimed by the client and explicitly or implicitly threatening litigation if those rights are breached.
[3] ONI seeks an interim injunction to prevent the sending of threatening letters in which FSI asserts its rights under the Patent.
[4] At the root of the litigation is a claim by ONI that it is the owner of technology for a novel feed supplement, which, when fed to cows, results in the cows expressing milk containing higher levels of Omega 3 fatty acids. It has a patent application pending.
[5] The significant fact is that ONI's technology does not include feathermeal - ground-up feathers - which is apparently used in many dairy products.
[6] The other two Plaintiffs are directly or indirectly involved with each other. Grand Valley Fortifiers Inc. ("GVF") produces the feed supplement according to ONI's technology and then sells the supplement to farmers contracted to produce the enriched milk.
[7] That enriched milk is then sold to Dairy Farmers of Ontario who sell it to the initial processor, Gay Lea Food Cooperative Ltd. ("GLF"), who then sell the separated enriched cream to the other Plaintiff, Stony Creek Dairy Ltd. ("SCD"). SCD then makes dairy products, e.g. ice cream, from this enriched Omega 3 cream. SCD has an exclusive purchase, marketing and licensing agreement for the ONI technology.
[8] FSI is the exclusive licensee for the Patent, a process which includes feathermeal.
[9] ONI says it is not in breach of FSI or the University of Guelph's rights because its technology does not include feathermeal. FSI says that ONI's technology is based on the research, intellectual property and technology of the University of Guelph.
[10] Counsel for FSI put various parties on notice that FSI was asserting that ONI was in breach of the Patent and other intellectual property rights. These letters were sent to GVF, to SCD, and to GLF, as well as others.
[11] ONI alleges that some buyers, such as Loblaws, have stopped purchasing SCD's omega enriched ice cream because of the dispute about the technology.
[12] Three days before filing for the injunction, one Plaintiff, SCD, advised ONI that it would not be purchasing dairy products (e.g. enriched cream) using ONI technology.
[13] ONI claims that without the revenue stream from sales through SCD, its start-up operation cannot succeed.
[14] As a result, ONI wants this Court to prevent FSI from informing third parties that it has patent rights which it believes are being infringed and expressly or implicitly threatening these third parties with the legal consequences of patent infringement.
ANALYSIS
[15] The tripartite test for injunctive relief is so well-known that it need not be set out in these Reasons in any detail.
[16] The evidentiary record for this motion, while substantial, also contains significant gaps. There is no evidence from the other Plaintiffs. Most particularly, there is nothing from SCD as to its reasons for refusing to continue producing and selling product using ONI technology. Yet it is a plaintiff in this action and its actions are a critical plank in ONI's claim of irreparable harm.
[17] I am not satisfied that ONI has established that it would suffer irreparable harm. ONI may, under its licensing agreement, have a claim as against SCD for failure to perform its obligations to purchase and sell products using ONI technology. There is no evidence that damages are not quantifiable. Indeed Exhibit H to ONI's principal witness' affidavit details and is entitled "Estimate of Damages".
[18] Even if ONI had made out a case of irreparable harm - the Court is aware of the difficulty that this can pose to start-up technology companies - the Court would be extremely reluctant to issue an injunction which amounts to prior censorship.
[19] The Court is mindful of the warning in Fox, The Canadian Law and Practice Relating to Letters Patent For Inventions, 4th ed. Ch. XIII, that the threat of patent litigation can have a very "chilling" effect on customers; these threats amounting to trade libel. On a better record it may be that an injunction should issue where the effect of the communications is to bludgeon a party into extinction.
[20] However, this concern for the deleterious effects of these communications must be weighed against the legitimate interest of a party to protect its rights including the giving of notice that the rights are being infringed.
[21] Finally, these competing concerns are overlaid with societal concerns for free speech. While an injunction to restrain commercial communications may not invoke the same concerns as limiting other expressions of political or societal opinion, the Courts have shown a reluctance to issue interim injunctions restraining the publication of alleged libels. See Canada Metal Co. Ltd. v. Canadian Broadcasting Corporation (1975), 7 O.R. (2d) 261 (Div. Ct.).
[22] The Court has not been shown any precedent for the issuance of interlocutory injunction in circumstances such as the present case.
[23] While the Plaintiff may have established an arguable issue of law in respect of non-infringement, it has not established either that irreparable harm would flow if no injunction is granted nor has it shown that the balance of convenience favours the issuance of an injunction.
[24] For these reasons, this motion will be dismissed with costs to the Defendant.
"Michael L. Phelan"
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