Contour Optik Inc. v. Viva Canada Inc., 2005 FC 724

Date: 20050519

                                                                                                                             Docket: T-1927-02

Citation: 2005 FC 724

BETWEEN:

CONTOUR OPTIK, INC.

and

CHIC OPTIC INC.

Plaintiffs

and

VIVA CANADA INC.

and

VIVA OPTIQUE, INC.

Defendants

AND BETWEEN:

VIVA CANADA INC.

Plaintiff by counterclaim

and

CONTOUR OPTIK, INC.

and

CHIC OPTIC INC.

Defendants by counterclaim

REASONS FOR ORDER

RICHARD MORNEAU, PROTHONOTARY:

[1]         This is a motion by the defendants and the plaintiffs by counterclaim Viva Canada Inc. and Viva Optique, Inc. (collectively hereinafter Viva) for an order under rule 223 et seq. of the Federal Courts Rules (the Rules) for the purpose of obtaining from the plaintiffs and defendants by counterclaim Contour Optik, Inc. and Chic Optic Inc. (collectively hereinafter Contour and Chic) service of further and better affidavits of documents, particularly in regard to the prior art that may support Viva's allegations concerning the invalidity of patent 714.

Context

[2]         The present motion is made in an intellectual property context in which Contour and Chic allege that Viva has infringed patent 714 and, in return, Viva in its counterclaim cites the invalidity of the said patent, which has to do with magnetic eyewear.

[3]         The pleadings stage in this case ended in October 2003. Then the examinations for discovery stage was planned and initiated by the parties. The examination of David Chao as a representative of Contour began on November 24-26, 2003. It was then adjourned, however. Notwithstanding some efforts by the Court (see the orders of April 1 and September 16, 2004) and by counsel for Contour and Chic to resume this examination, its adjournment has continued to this day on the ground that Viva and its counsel think the documents listed so far by Contour and Chic in their affidavits of documents are not complete.

[4]         The examination of Nonu Ifergan as a representative of Chic has not yet begun since the parties mutually agreed that this examination would not take place until after Mr. David Chao's examination.

[5]         The examination of Viva's representative, Mitchel Barkley, began on November 17 and 18, 2003. It appears from the submissions of Contour and Chic that some questions and undertakings are still pending in this regard. Only the first phase of this examination has been completed, therefore, as of January 28, 2004.

[6]         The motion under review was filed on June 14, 2004, and it was not until April 21, 2005, that it could be heard. My assessment of the file indicates to me that this delay is largely attributable to Viva. This observation will have some impact on the award of costs on this motion.

General applicable principles

[7]         In Reading & Bates Construction Co. et al. v. Baker Energy Resources Corp. et al. (1988), 24 C.P.R. (3d) 66, at paragraphs 70-72 (Reading & Bates), Mr. Justice McNair, in a general six-point reminder, first defines, in points 1 to 3, the tests for relevance of a question or document, and then itemizes in points 4 to 6 a series of circumstances or exceptions in which, at it happens, at the end of the day, a question need not be answered or a document need not be produced.

[8]         The Court states, at pages 70 to 72:

1.      The test as to what documents are required to be produced is simply relevance. The test of relevance is not a matter for the exercise of the discretion. What documents parties are entitled to is a matter of law, not a matter of discretion. The principle for determining what document properly relates to the matters in issue is that it must be one which might reasonably be supposed to contain information which may directly or indirectly enable the party requiring production to advance his own case or to damage the case of his adversary, or which might fairly lead him to a train of inquiry that could have either of these consequences: Trigg v. MI Movers Int'l Transport Services Ltd. (1986), 13 C.P.C. (2d) 150 (Ont. H.C.); Canex Placer Ltd. v. A.G. B.C. (1975), 63 D.L.R. (3d) 282, [1976] 1 W.W.R. 644 (B.C.S.C.); and Compagnie Financiere et Commerciale du Pacifique v. Peruvian Guano Co. (1882), 11 Q.B.D. 55 (C.A.).

2.      On an examination for discovery prior to the commencement of a reference that has been directed, the party being examined need only answer questions directed to the actual issues raised by the reference. Conversely, questions relating to information which has already been produced and questions which are too general or ask for an opinion or are outside the scope of the reference need not be answered by a witness: Algonquin Mercantile Corp. v. Dart Industries Canada Ltd. (1984), 82 C.P.R. (2d) 36 (F.C.T.D.); affirmed 1 C.P.R. (3d) 242 (F.C.A).

3.      The propriety of any question on discovery must be determined on the basis of its relevance to the facts pleaded in the statement of claim as constituting the cause of action. . . .

4.      The court should not compel answers to questions which, although they might be considered relevant, are not at all likely to advance in any way the questioning party's legal position: Canex Placer Ltd. v. A.G.B.C., supra; and Smith, Kline & French Laboratories Ltd. v. A.-G. Can. (1982), 67 C.P.R. (2d) 103 at p. 108, 29 C.P.C. 117 (F.C.T.D.).

5.      Before compelling an answer to any question on an examination for discovery, the court must weigh the probability of the usefulness of the answer to the party seeking the information, with the time, trouble, expense and difficulty involved in obtaining it. Where on the one hand both the probative value and the usefulness of the answer to the examining party would appear to be, at the most, minimal and where, on the other hand, obtaining the answer would involve great difficulty and a considerable expenditure of time and effort to the party being examined, the court should not compel an answer. One must look at what is reasonable and fair under the circumstances: Smith, Kline & French Ltd. v. A.-G. Can., per Addy J. at p. 109.

6.      The ambit of questions on discovery must be restricted to unadmitted allegations of fact in the pleadings, and fishing expeditions by way of a vague, far-reaching or an irrelevant line of questioning are to be discouraged: Carnation Foods Co. Ltd. v. Amfac Foods Inc. (1982), 63 C.P.R. (2d) 203 (F.C.A.) and Beloit Canada Ltee/Ltd. v. Valmet Oy (1981), 60 C.P.R. (2d) 145 (F.C.T.D.).

[Emphasis added.]

[9]         In many situations, the balancing the Court alludes to in Reading & Bates, in point 5, will be necessary.

[10]       Indeed, as mentioned in Faulding Canada Inc. v. Pharmacia S.p.A. (1999), 3 C.P.R. (4th) 126, page 128:

. . . the general tendency of the courts to grant broad discovery must be balanced against the tendency, particularly in industrial property cases, of parties to attempt to engage in fishing expeditions which should not be encouraged.

[11]       I think that such a principle is much more appropriate in this case than the more general comments that the Court may have expressed in such decisions as Liebman v. Canada (Minister of National Defence) (1995), 87 F.T.R. 154, paragraph 15 and Havana House Cigar & Tobacco Merchants Ltd. v. Neime (1998), 80 C.P.R. (3d) 132, paragraph 23.

Analysis

[12]       At paragraph 117 of its written representations in support of the motion before me, Viva identifies no fewer than 18 major classes of documents that it would like Contour and Chic to list:

(a)        A comprehensive list of all litigation in Canada dealing with magnetic eyewear of which Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are either aware, in which they are parties, or have been called as witnesses. All litigation should be disclosed, whether before the Federal Court or other courts, and whether of not same deal with the Canadian '714 Patent, the US '545 Patent or any other patent dealing with magnetic eyewear;

(b)        A comprehensive list for all litigation in United States dealing with magnetic eyewear of which Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are either aware, or in which they are parties, or have been called as witnesses. All litigation should be disclosed, regardless of which courts are seized of the matters, and whether of not same deal with the Canadian '714 Patent, the US '545 Patent, or any other patent dealing with magnetic eyewear;

(c)        A comprehensive list for all litigation abroad dealing with magnetic eyewear of which Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are either aware, or in which they are parties, or have been called as witnesses. All litigation should be disclosed, regardless of which courts are seized of the matters, and whether of not same deal with the Canadian '714 Patent, the US '545 Patent, or any other patent dealing with magnetic eyewear;

(d)        A comprehensive list of all interference proceedings in Canada that Contour, Chic,, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are aware of, have been or are a party to, or in which they have been called as witnesses or in which they have given evidence regarding any magnetic eyewear patents;

(e)        A comprehensive list of all interference proceedings in the United States that Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are aware of, have been or are a party to, or in which they have been called as witnesses or in which they have given evidence regarding any magnetic eyewear patents;

(f)         A comprehensive list of all interference proceedings abroad that Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are aware of, have been or are a party to, or in which they have been called as witnesses or in which they have given evidence regarding any magnetic eyewear patents;

(g)        In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all procedures or proceedings filed into the various Court records of interference proceedings;

(h)        In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all witnesses who have testified and led evidence, whether in open court, on examination on discovery, or by way of affidavit evidence, with a detailed list of the dates of all depositions or discoveries taken or given (filed or not) and of all exhibits filed and/or provided as a result of the said testimony and examinations or appended to any such affidavits, accompanied by a brief summary of the subject of their testimony;

(i)         In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all opinions dealing with the validity or invalidity of any magnetic eyewear patents (filed or not);

(j)         In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all opinions dealing with the infringement or lack thereof of any magnetic eyewear patents (filed or not);

(k)        In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all experts' reports dealing with the validity of invalidity of any magnetic eyewear patents (filed or not);

(l)         In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all experts' reports dealing with the infringement or lack thereof of any magnetic eyewear patents (filed or not);

(m)       In all of the lawsuits and interference proceedings mentioned hereinabove, a comprehensive list of all affidavits or writings relating to documentary discovery, whether they are Affidavits of Documents as required under the Federal Court Rules, or similar rules dealing with documentary discovery in other jurisdictions.

(n)        A comprehensive list of all objections or opposition proceedings (akin to s. 34.1 of the Canadian Patent Act) that Contour, Chic, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ashai Optical Inc., and their related individuals and companies are either aware of, or in which they are parties, or have been called as witnesses, whether in Canada, the United States or abroad;

(o)        A comprehensive list of all information related to magnetic eyewear alleged by anyone whomsoever to constitute prior art (including, without restriction, all plans, sketches, designs, models, mock-ups, diaries, day planners, agendas, prototypes and regardless of the medium of storage or communication (including, without restriction, written, digital, photographic, electronic, and computer formats) whether in their capacity as a witness in or a party to any of the litigation and proceedings referred to herein above, whether in Canada, the United States, or abroad;

(p)        A comprehensive list of all settlement agreements and side-letters relating to the litigation and proceedings referred to herein above;

(q)        A comprehensive list of all contracts, agreements, licenses, distribution agreements, and transfers of ownership or rights dealing with magnetic eyewear whether concluded prior to, during, as a result of, or after the litigation and proceedings referred to herein above;

(r)         A comprehensive list of all patent applications and issued patents dealing with magnetic eyewear that Contour, Chic,, Aspex Eyewear Inc., David Chao, Richard Chao, Manhattan's Design Studios Inc., Ahai Optical Inc., and their related individuals and companies or anyone else, are aware of, have filed, or own, whether in Canada, the United States or abroad.

[13]       There is no denying that this is an extremely impressive list. In their written representations in opposition to Viva's motion, Contour and Chic, at paragraphs 79 et seq., review these different classes and identify in respect of each of them the type of documents they have supplied so far to Viva as well as the reasons why they do not think they have to list further documents.

[14]       In a fair number of situations or classes, Contour and Chic consider in the circumstances that Viva's demands are unreasonable and in the nature of a fishing expedition.

[15]       Unless, in what follows, I go back over some of Viva's 18 classes, it must be assumed that I share the opinion of Contour and Chic.

[16]       Concerning Viva's paragraph 117(a) (reproduced above in paragraph 12), the evidence shows that Contour and Chic have gathered together and given to Viva a major series of proceedings affecting primarily the defences or points of invalidity that other corporations, often direct competitors of Viva, have argued in opposition to actions brought by Contour and Chic, or by corporations not at arm's length from them, for alleged infringement of Canadian patent '714 and its corresponding American patent US'545.

[17]       Apart from the documents that may not have been listed so far by Contour and Chic because of the implied undertaking rule (hereinafter the Rule), to which we will return in paragraphs 21 to 24, infra, it is my view concerning this paragraph 117(a) that Contour and Chic have in the last analysis acted fairly and reasonably to this point and that any further demand by Viva is too far-reaching and becomes a fishing expedition (see Reading & Bates, supra).

[18]       However, the record indicates the knowledge and existence in the possession of Contour and Chic of documents that may be relevant but are not listed so far because of the Rule.

[19]       In my earlier decision, dated September 16, 2004, I stated:

[9] Moreover, Viva's counsel consulted with Mr. Miller on July 23, 2004, and the latter has in my opinion already given Viva sufficient further information to enable Viva to advance its motion for further and better affidavits of documents on the basis that Contour and Chic have failed to comply with their obligation to list in the affidavits already produced all of the relevant documents affecting the validity or invalidity of patent 714. Indeed, paragraphs 55 to 58 of the affidavit of Natacha Lecompte contain the following description of this conversation of July 23, 2004:

55.        During the said conversation, Me Argun asked Me Miller whether the latter was aware of the existence of documents, testimony and/or evidence given or gathered in any proceedings around the world and not listed in Viva's affidavits of documents and that could be useful to Viva in defending the suit brought against it, and more specifically as regards the defense of non-infringement and the cross-claim of invalidity of the patent Contour and Chic are invoking (the '714 patent, and corresponding US '545 patent).

56.        Me Miller answered "yes" to the above-mentioned question.

57.        During the said conversation, Me Argun also asked Me Miller whether he provided any such documents, testimony and/or evidence to any counsel acting for Contour, Chic, or Messrs. David and Richard Chao, Nonu Iffergan, MDS (Manhattan Design Studios Inc.), Aspex Eyewear Inc.

58.        Me Miller answered "yes" to the above-mentioned question.

[20]    In the affidavit of Arthur Garvis, dated January 10, 2005 (the Garvis affidavit), filed as evidence by Contour and Chic, the following is stated at paragraphs 16 to 19:

16)        During the November 25, 2003 examination for discovery of David Chao, the latter was asked whether he had seen any sketches or drawings by Julie Madison, other than the ones disclosed in the Defendants' Supplemental Affidavit of Documents.

17)        In response to such inquiry, Me Richard Uditsky from my firm notified Me Ali Argun that in fact in other law suits pending both in Canada and the United States, there had been filed documents which purportedly emanated from Julie Madison, but none of these documents had been produced by the Plaintiffs in such cases.

18)        Accordingly, Richard Uditsky took the position at that time that because of the implied Undertaking Rule in force in the Federal Court of Canada, the Plaintiffs were not at liberty to furnish such documents in this case, unless they were ordered to do so by this Court.

19)        In addition, Richard Uditsky explained to Me Ali Argun, that in the United States actions, there were in force Confidentiality Orders which likewise prevented him from furnishing to Me Argun the documents which he had requested. In this regard, I file in a sealed confidential envelope as exhibit H to this affidavit copies of pages 174 to 183 from the transcript of such discovery.

[21]    The scope of the Rule and the possibility of relieving a party of the obligation to follow it were examined in the landmark decision of the Supreme Court, Lac D'Amiante du Québec Ltée v. 2858-0702 Québec Inc., [2001] 2 S.C.R. 743, at pages 778-79, paragraphs 76 and 77. This is what the Supreme Court said:

The Scope of the Rule of Confidentiality

76.      Before concluding, it would seem to be in order to comment on the scope of the rule of confidentiality. The rule applies during the case to both a party and the party's representatives, and it remains applicable after the trial ends. However, there must be some limits on the rule. For instance, the court will retain the power to relieve the persons concerned of the obligation of confidentiality in cases where it is necessary to do so, in the interests of justice. However, the courts will avoid exercising that power too routinely, as to do so would compromise the usefulness of the rule, if not its very existence. For example, the exceptions to the rule of confidentiality must not be used, where a party has obtained information at an examination to enable the party to use that information virtually automatically in other court proceedings. That practice would be contrary to the public interest and would amount to an abuse of process.

77.      The courts must therefore assess the severity of the harm to the parties involved if the rule of confidentiality were to be suspended, as well as the benefits of doing so. In cases where the harm suffered by the party who disclosed the information seems insignificant, and the benefit to the opposing party seems considerable, the court will be justified in granting leave to use the information. Before using information, however, the party in question will have to apply for leave, specifying the purposes of using the information and the reasons why it is justified, and both sides will have to be heard on the application. The court will determine whether the interests of justice in the information being used in the relations between the parties and, where applicable, in respect of other persons, outweigh the right to keep the information confidential.

[Emphasis added.]

[22]       For the purposes of relieving Contour and Chic of the application of the Rule - since Viva requests this in its motion - I consider, notwithstanding any order of confidentiality in place in Canada or the United States, that the information that Viva may and ought to obtain consists of and is limited to the otherwise relevant documents that E'Lite Optik Canada Inc. and E'Lite Optik Inc. (hereinafter collectively Elite) brought to the attention of Contour and Chic in the litigation between these parties in this Court (hereinafter the information subject to the Rule).

[23]       In this instance, I am prepared to say that the superior interests of justice in having the information subject to the Rule used in this case prevail over the right to keep such information confidential. I am therefore prepared to relieve Contour and Chic, and their counsel, from following the Rule as it affects the information subject to the Rule.

[24]       The advantage here for the two parties consists in being able to refer freely to some relevant documents. The disadvantage for Contour and Chic is relatively insignificant since this information initially derives from Elite and the latter intends to use it against Contour and Chic.

[25]       Concerning Viva's paragraph 117(b) (reproduced above at paragraph 12), the documents in relation to the U.S. litigation, it appears that although there is no equivalent to the Rule in the United States, all of the relevant litigation referred to in paragraph 117(b) is covered by confidentiality orders issued by various courts in that country.

[26]       It appears from the Garvis affidavit that in the past Viva and its counsel did not wish to put anyone in a situation of potential violation of any of these orders. I have no intention here of forcing Contour and Chic to find themselves in a comparable situation.

[27]       Similarly, I have no intention of ordering Contour and Chic, as Viva suggests, to list, at the very least, the relevant documents notwithstanding these confidentiality orders, even if it means postponing the actual disclosure of these documents. I think that would be an indirect violation of these confidentiality orders, going step-by-step down a slippery slope for Viva, ultimately, to obtain their disclosure.

Conclusion

[28]       As was stated in paragraph 22, supra, Contour and Chic and their counsel will be relieved of the Rule, as it affects the information subject to the Rule.

[29]       Contour and Chic, therefore, will be ordered to serve on Viva, within ten (10) days of the order accompanying these reasons, affidavits of documents listing the information subject to the Rule.

[30]       Concerning the continuation of the examination of Mr. David Chao, it shall be held on the tenth (10th) day following service of the affidavits of further and better documents of Contour and Chic or, if the parties manage to reach an agreement to this effect, at a date that is agreeable to the parties.

[31]       Mr. Ifergan's examination shall be held within thirty (30) days after the end of Mr. David Chao's examination.

[32]       Viva's motion will otherwise be dismissed.

[33]       In view of the delay in filing this motion (see paragraph 6, supra), and because Viva is not fully successful on this motion, there will be no order as to costs on the motion by Viva.

"Richard Morneau"

Prothonotary

Montréal, Quebec

May 19, 2005

Certified true translation

K. Harvey

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:                          T-1927-02

STYLE:                                    CONTOUR OPTIK, INC. and CHIC OPTIC INC.

Plaintiffs

and

VIVA CANADA INC. and VIVA OPTIQUE, INC.

Defendants

and

VIVA CANADA INC.

Plaintiff by counterclaim

and

CONTOUR OPTIK, INC. and CHIC OPTIC INC.

Defendants by counterclaim

PLACE OF HEARING:          Montréal, Quebec

DATE OF HEARING:                              April 21, 2005

REASONS FOR ORDER:                      Richard Morneau, Prothonotary

DATE OF REASONS:                             May 19, 2005

APPEARANCES:

SOLICITORS OF RECORD: