J.J. Mackay Canada Ltd. v. Société en Commandite Stationnement de Montréal, 2005 FC 985

Date: 20050714

Docket: T-115-05

Citation: 2005 FC 985

Montréal, Quebec, the 14^th day of July 2005

Present: RICHARD MORNEAU, PROTHONOTARY

BETWEEN:

J.J. MACKAY CANADA LIMITED

Plaintiff/

defendant to counterclaim

and

SOCIÉTÉ EN COMMANDITE

STATIONNEMENT DE MONTRÉAL

Defendant/

plaintiff by counterclaim

REASONS FOR ORDER AND ORDER

[1]        This case concerns a motion filed by the defendant and plaintiff by counterclaim Société en commandite Stationnement de Montréal (hereinafter Stationnement de Montréal) under Rule 107 of the Federal Courts Rules (the Rules), essentially praying the Court to order the severance of the proceeding so that the issue of the infringement and validity of patent ’677 be ruled on first and the question of damages and loss of profits resolved in a separate proceeding, should the Court find that the patent is valid and was infringed.

[2]        The relevant portion of Rule 107 reads as follows:

Background

[3]        Stationnement de Montréal was sued for infringement of patent ’677; the invention covered was a computerized system of parking charge collection.

[4]        In its defence, Stationnement de Montréal argued that patent ’677 was invalid in that the invention covered by said patent had been anticipated.  Stationnement de Montréal submitted that the patent was an almost identical copy of a call for tenders document prepared by Stationnement de Montréal and distributed to the plaintiff/defendant to counterclaim J.J. MacKay Canada Limited (hereinafter MacKay) on October 2, 2002.

[5]        This document was sent to MacKay as part of a bidding process the purpose of which was to replace the parking meters that were then located on the streets in the territory of the City of Montréal by a computerized system.

[6]        According to MacKay, a Canadian corporation based in Nova Scotia, it developed the invention in issue in the course of its business, which consists in producing, distributing, selling and maintaining parking meter systems.

[7]        The parties have reached the stage where they are filing their affidavits of documents and this motion was filed, and opposed by MacKay, in the course of discussions as to the content of the affidavit of documents of Stationnement de Montréal.

Analysis

[8]        Although MacKay emphasized in its affidavit that, in the action at bar, it wished to proceed as quickly as possible with the whole case, and it further objected to this motion, these factors and the other prejudicial points raised by MacKay - which cannot be ignored - should, I would think, be assessed in the light of the test this Court set out in Illva Saronno S.p.A. v. Privilegiata Fabbrica Maraschino “Excelsior” (T.D.), [1999] 1 F.C. 146 (hereinafter Saronno), at page 154, paragraph 14, where the Court stated that:

Accordingly, on the basis of previous authority, and in light of the changes introduced by the 1998 Rules, I would formulate the test to be applied under Rule 107 as follows.  On a motion under Rule 107, the Court may order the postponement of discovery and the determination of remedial issues until after discovery and trial of the question of liability, if the Court is satisfied on the balance of probabilities that in view of the evidence and all the circumstances of the case (including the nature of the claim, the conduct of the litigation, the issues and the remedies sought), severance is more likely than not to result in the just, expeditious and least expensive determination of the proceeding on its merits.

[9]        For the reasons that follow, I have found that Stationnement de Montréal has discharged its onus by establishing on a balance of probabilities that time and money will be saved and a just solution to the litigation will be achieved by severance; therefore, departure from the general rule that all issues raised by a proceeding should be considered together is warranted.

[10]      MacKay further noted, referring to decisions of provincial courts, that in its view courts are slow to grant severance because this results, inter alia, in additional costs, delays and duplication.  In this Court, however, although each case must be examined on its own merits, I cannot accept that the submission of MacKay reflects the current trend, especially in matters of intellectual property.

[11]      Indeed, in Apotex Inc. v. Bristol-Myers Squibb Co. (2003), 308 N.R. 152, at page 155, at paragraphs 8 and 9, the Federal Court of Appeal, by the following comments, acknowledged that it is common practice at the intellectual property bar to consent to a bifurcation order under Rule 107 in patent proceedings:

8              Counsel for the appellant suggested that no conclusion could be drawn from the evidence that a number of bifurcation orders had been made on consent, on the ground that each case stood on its own facts. However, such cases may also have certain things in common. William L. Hayhurst Q.C., a distinguished member of the intellectual property bar had this to say about the practice in patent litigation:

Because the trial of an action for patent infringement may be lengthy and complex (largely because of the technology involved rather than because of any special difficulty about the applicable law), the parties have commonly agreed to an order deferring an inquiry into damages or an accounting until the court has decided whether the patentee has established its right to any remedy. This may eliminate some needless pre‑trial discovery and avoid premature disclosure of confidential financial information. If discovery after trial is required, anything that may have been held not to infringe may be ignored, at least if no appeal is pending.

Hayhurst, W.L. Remedies in Henderson, G., Patent Law in Canada, Carswell, Toronto 1994 at p. 289.

9              When an experienced specialist bar like the intellectual property bar commonly consents to the making of a bifurcation order . . .

[12]      I have garnered hereunder the points of analysis mentioned in Saronno for review.

A.        Nature of litigation and issues

[13]      In order to establish, inter alia, that the issues of infringement and invalidity were quite straightforward in the case at bar, Stationnement de Montréal offered in evidence an affidavit from its counsel.  MacKay submits that this approach is inappropriate and that part of the affidavit should be struck out.  I do not intend to proceed with the total or partial striking out of this affidavit in this case, but I will examine if I should give it some weight, depending on the points reviewed below.

[14]      In this respect, I agree with MacKay that determining whether the issues of infringement and invalidity are straightforward involves an interpretation of the patent claims in issue, which is not for counsel for Stationnement de Montréal to do.  In this regard, the affidavit of Stationnement de Montréal will not be followed.

[15]      According to MacKay’s written submissions (see at paragraph 39), the issue of infringement, and thus quite possibly the issue of invalidity of the patent in issue, are complex matters.  However, MacKay did not offer any convincing evidence in support of its view.  In any event, even if the Court were prepared to accept MacKay’s submission, the Court would be led to find that the issues of infringement and invalidity are complex.  Now, as Hayhurst, cited by the Federal Court of Appeal (see paragraph 11), points out, the complexity of such issues favours severance.

[16]      Additionally, through an affidavit from MacKay’s director of technology, Greg Chauvin, MacKay sought to establish that the financial information about the Stationnement de Montréal telecommunication expenses and network is required not only with respect to the issue of relief but also to establish infringement by Stationnement de Montréal.  Thus, all these issues are said to be related and no bifurcation order under Rule 107 should be contemplated.

[17]      If I understand MacKay correctly on this point, the invention protected by its patent makes possible the transmission of a minimum volume of data to various terminals.  Stationnement de Montréal’s telecommunication and network expenses are said to be directly proportional to the volume of data transmitted.  If MacKay were informed of Stationnement de Montréal’s expenses, it would be able to see whether Stationnement de Montréal was infringing its invention through a minimum transmission volume.

[18]      However, it seems to me that it is precisely the actual volume of data transmission which could in theory be relevant to establish a possible infringement.  If this volume is still relevant in view of the written submissions, it seems to me that the matter could be resolved directly by an investigation without making an evaluation of Stationnement de Montréal’s expenses.  I am of the view that MacKay is indirectly seeking to create an artificial link between the issues of liability and relief in order to avoid a bifurcation order.

[19]      Further, it appears from the submissions of Stationnement de Montréal that the only defence raised by Stationnement de Montréal in response to MacKay’s action is that its system had no function which enabled it to receive information about space occupancy.

[20]      Therefore, this issue of data transmission volume is quite probably no longer in issue, in view of the written submissions.

[21]      As to the claim for punitive damages made by Stationnement de Montréal in its counterclaim, the facts in Carpenter v. Amherstburg (Town) Police Services Board, [2003] O.J. No. 3101 (Ont. S.C.J.), to which MacKay referred the Court, were totally different from this situation and is thus to be distinguished.  In my opinion, this aspect of the claim by Stationnement de Montréal is not a bar to an order under Rule 107.

[22]      Accordingly, I find that the Court will not have to analyze in any way the issue of damages or profits in order to rule, inter alia, on the issues of infringement or patent validity, and conversely.

B.        The proceeding and the relief sought

[23]      It appears that, at this stage of the proceedings, the parties have not devoted much attention to the issue of relief.

[24]      First, it appears that the affidavits of documents of the respective parties are still to be filed.

[25]      In addition, it should be noted that the examinations for discovery have not taken place, either on the issue of liability or on the issue of relief.

[26]      Further, although, at the end of the day, an award of profits depends on the Court’s discretion, the fact does remain that, at this stage, the issue of profits is still in issue.

[27]      Again, MacKay has objected to the fact that Stationnement de Montréal filed in support of its motion an affidavit from one of its counsel.  Although this is the case, I do not intend to exclude the allegations it contains.  Although I am not persuaded, as alleged in the affidavit, that the portion of the litigation relating to the issue of relief would take the equivalent of a month, I am of the view that the affidavit credibly tends to establish that the computation of profits will be a lengthy and costly process.

[28]      That process should reflect what happened in the following intellectual property cases, where it was held that, in order to assess a party’s profits, several kinds of financial information of a business must be examined.  (See Teledyne Industries, Inc. v. Lido Industrial Products Ltd. (1982), 68 C.P.R. (2d) 56; Diversified Products Corp. v. Tye-Sil Corp. (1990), 32 C.P.R. (3d) 385.)  In Depuy (Canada) Ltd. v. Joint Medical Products Corp. (1996), 67 C.P.R. (3d) 145, the Federal Court of Appeal stated at 146-147:

We are also of the view that had the motions judge correctly instructed himself in the law he would have granted the order sought. This is a patent infringement action in which the defence and counterclaim raise serious issues of validity. The plaintiffs reserve the right to seek an accounting of profits with the result that, if severance is not ordered, discovery will necessarily range across the whole of the defendants' business and not be limited to the single allegedly infringing item.

[29]      Therefore, this motion by Stationnement de Montréal for bifurcation is allowed with costs and the Court orders the severance of the proceeding so that the issue of the infringement and validity of patent ’677 will be ruled on first and the issue of damages and loss of profits ruled on in a separate proceeding if the Court concludes that the patent is valid and was infringed.

[30]      In addition, the parties will ensure that their affidavits of documents be served on or before August 15, 2005.

Certified true translation

François Brunet, LLB, BCL

                                     FEDERAL COURT

                              SOLICITORS OF RECORD

DOCKET:                                                                  T-115-05

STYLE OF CAUSE:                                                  J.J. MACKAY CANADA LIMITED v. SOCIÉTÉ EN COMMANDITE STATIONNEMENT DE MONTRÉAL

PLACE OF HEARING:                                            Montréal, Quebec

DATE OF HEARING:                                              July 11, 2005

REASONS FOR ORDER BY:                                 Richard Morneau, Prothonotary

DATED:                                                                     July 14, 2005

APPEARANCES:

Michael Crichton                                                          FOR THE PLAINTIFF/DEFENDANT TO COUNTERCLAIM

Julie Desrosiers                                                             FOR THE DEFENDANT/PLAINTIFF BY COUNTERCLAIM

SOLICITORS OF RECORD:

Gowling, Lafleur, Henderson                                         FOR THE PLAINTIFF/DEFENDANT TO

Ottawa, Ontario                                                           COUNTERCLAIM

Fasken, Martineau, DuMoulin                                       FOR THE DEFENDANT/PLAINTIFF BY

Montréal, Quebec                                                        COUNTERCLAIM