Date: 20040318
Docket: T-153-01
Citation: 2004 FC 417
Ottawa, Ontario this 18th day of March, 2004
Present: THE HONOURABLE MR. JUSTICE von FINCKENSTEIN
BETWEEN:
ROSS STONEHOUSE
Plaintiff
and
BATCO MANUFACTURING LTD. and
AG GROWTH INDUSTRIES INC.
Defendants
REASONS FOR ORDER AND ORDER
(Delivered orally from the bench and subsequently written for clarification and precision)
[1] This is an appeal from the order of Prothonotary Lafrenière dated February 18th, 2004 dismissing the defendants' motion to add Brandt Agricultural Products Ltd. (Brandt) as a party.
[2] The pertinent facts are as follows:
-The plaintiff claims to be the owner of Canadian Letters Patent No. 2,123,257 (Patent 257).
- On January 25th, 2001, he commenced proceedings against the defendants for infringement of this patent.
- On May 22nd, 2001, the defendants filed a Statement of Defence and Counterclaim to this action.
- Discoveries were held in February 2002.
- On December 18th, 2002, while this action was proceeding, the plaintiff assigned Patent 257 to Brandt.
- The defendants only became aware of the assignment in February 2003.
- In a second agreement, dated May 14th, 2003, but executed as of December 19th, 2002, Brandt purported to reassign Patent 257 back to the plaintiff, and Brandt became merely a licensee of the patent.
-In June 2003, examinations took place regarding the assignment and re-assignment.
- In order to reflect the new facts concerning ownership of Patent 257, the plaintiff filed an Amended Statement of Claim in August 2003.
- In September 2003, the defendants responded with an Amended Statement of Defence and Counterclaim. While the defendants dispute the validity of the reassignment and allege that Brandt is now the owner of Patent 257, they did not add Brandt as a third party or as a defendant by way of counterclaim at this time.
- In January 2004, the defendants brought a motion before Prothonotary Lafrenière for leave to commence a third party claim against Brandt or to add Brandt as a defendant to the counterclaim.
[3] On February 18th, 2004, Prothonotary Lafrenière denied the motion essentially on the following grounds :
1. the action could be settled effectually and completely if Brandt was not added as a party given that the facts on the Record were clear with regards to the assignment and subsequent reassignment of Patent 257;
2.Brandt, as either the exclusive licensee or assignee of Patent 257, would effectively be bound by any judgment against the plaintiff without needing for it to be added as a party, and
3.the defendants had unduly delayed in bringing their motion with resulting prejudice to both the plaintiff and Brandt.
[4] It is well-established law that prothonotaries are to be given ample elbow room when making interlocutory decisions and judges should be hesitant to upset their rulings (Remo Imports Ltd. v. Jaguar Cars Ltd., [2003] F.C.J. No. 93, aff'd [2003]_F.C.J. No. 765 (F.C.A.)).
[5] The test for disturbing rulings of prothonotaries is set out in Merck & Co. v. Apotex Inc., [2003] F.C.J. No. 1925 at para. 19 as follows:
Discretionary orders of protonotaries ought not be disturbed on appeal to a judge unless:
a) the questions raised in the motion are vital to the final issue of the case, or
b) the orders are 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.
[6] In this case I do not see that the applicants meet the first leg of this test.
[7] The applicants submit that they are seeking in their counterclaim i) a declaration of invalidity of Patent 257 and ii) a declaration of non-infringement of this patent by them. They fear two outcomes:
a) If Brandt is found to be the owner, this lawsuit and the counter counterclaim will have to be dropped, leaving them exposed to future lawsuits by Brandt.
b)If Brandt is found to be a licensee and Patent 257 is found to be valid, a ruling of non-infringement will not be binding on Brandt as Brandt is not a party. The applicants will be exposed to a future suit by Brandt for infringement.
Consequently these points are vital to the final issue of the case.
[8] With respect to outcome i), the applicants chose not to add Brandt as a defendant to their amended counterclaim when they filed it in September 2003. That was a strategic decision. It was therefore within the Prothonotary's discretion to refuse the application to add Brandt as a defendant several months later, given the state of the proceedings and the fact that the issue of whether or not Brandt was a licensee or assignee was known to applicants for over a year. The risk of a lawsuit by Brandt, if it is found to be an assignee, is one of the consequences which the applicants must bear as a result of their strategic decision. It is, of course, totally within the applicants' power to avoid this outcome, they simply have to drop their attack on the reassignment, thereby confirming Brandt's status as a licensee.
[9] With respect to outcome ii), unfortunately for the applicants, they never asked for relief by way of a declaration of non-infringement in their Amended Statement of Claim, nor is this relief mentioned in the motion before Prothonotary Lafrenière. Consequently, he could not take it into consideration. As the issue was not before the Prothonotary, this Court on review cannot consider it either (James River Corp. of Virginia v. Hallmark Cards, Inc. (1997), 72 C.P.R. (3d) 157; Canada v. Mid-Atlantic Minerals Inc., [2002] F.C.J. No. 740).
[10] Aside from this flaw, I also do not accept that the applicants could be exposed to an action for infringement by Brandt should it be found that Brandt is a licensee, the patent is valid, and there has been no infringement. It is well-established that a licensee can sue for infringement but must join the patentee in such a case (Amfac Foods Inc. v. Irving Pulp & Paper Ltd. (1984), 2 C.I.P.R. 115, aff'd (1986) 72 N.R. 290 (F.C.A.)). It is hard to see how, in such an eventuality (with the plaintiff being a party), the issue would not be considered res judicata.
[11] Accordingly, as the applicants have failed to meet the first leg of the test in Merck & Co. v. Apotex Inc, supra., this appeal must fail and will be dismissed with costs.
ORDER
This Court hereby orders that this appeal be dismissed with costs.
"K. von Finckenstein"
Judge
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-153-01
STYLE OF CAUSE: ROSS STONEHOUSE
and
BATCO MANUFACTURING LTD and AG GROWTH INDUSTRIES INC
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MARCH 17, 2004
REASONS FOR ORDER AND ORDER : von FINCKENSTEIN
DATED: MARCH 18, 2004
APPEARANCES:
Peter E.J. Wells FOR PLAINTIFF
Lindsay Neidrauer
Christopher C. Van Barr FOR DEFENDANTS
SOLICITORS OF RECORD:
Lang Michener FOR PLAINTIFF
Toronto, ON
Gowlings Lafleur Henderson FOR DEFENDANTS
Ottawa, ON
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