Date: 20041029
Docket: T-1021-04
Citation: 2004 FC 1534
BETWEEN:
SAFILO CANADA LTD.
Plaintiff
and
CONTOUR OPTIK INC.
and
CHIC OPTIC INC.
Defendants
REASONS FOR ORDER
RICHARD MORNEAU, PROTHONOTARY:
[1] This is a motion by the defendant Chic Optic Inc. (hereinafter Chic) to strike the plaintiff's statement of claim (the statement of claim) and dismiss the action with respect to itself pursuant to paragraph 221(1)(a) of the Federal Court Rules (1998) (the Rules) on the ground that this Court does not have jurisdiction to hear the said action against Chic, and that accordingly the statement of claim should be seen as having no reasonable cause of action.
Criteria for striking out
[2] The following passage from Hodgson et al. v. Ermineskin Indian Band et al. (2000), 180 F.T.R. 285, at 289 (affirmed on appeal, 267 N.R. 143; leave to appeal to the Supreme Court of Canada denied, 276 N.R. 193) establishes that an approach raising a question of jurisdiction or the absence of a cause of action under that paragraph must be plain and obvious for the Court to allow it. This passage also notes that with respect to jurisdiction, evidence is admissible.
[9] I agree that a motion to strike under rule 221(1)(a) [previously rule 419(1)(a)] on the ground that the Court lacks jurisdiction is different from other motions to strike under that subrule. In the case of a motion to strike because of lack of jurisdiction, an applicant may adduce evidence to support the claimed lack of jurisdiction. In other cases, an applicant must accept everything that is pleaded as being true (see MIL Davie Inc. v. Société d'exploitation et de développement d'Hibernie ltée (1998), 226 N.R. 369 (F.C.A.), discussed in Sgayias, Kinnear, Rennie, Saunders, Federal Court Practice 2000, at pages 506-507).
[10] . . . The "plain and obvious" test applies to the striking out of pleadings for lack of jurisdiction in the same manner as it applies to the striking out of any pleading on the ground that it evinces no reasonable cause of action. The lack of jurisdiction must be "plain and obvious" to justify a striking out of pleadings at this preliminary stage.
[3] Further, as indicated by the following passage from Apotex Inc. v. Eli Lilly and Co. (2001), 13 C.P.R. (4th) 78, at 80 to 83, when the situation under consideration involves complex questions of statutory interpretation, this Court is more than hesitant to proceed to strike on a preliminary motion:
[7] In [1980] 2 S.C.R. 735">Canada (Attorney General) v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735 at p. 740, the Supreme Court of Canada set the appropriate standard to be applied on motions to strike pleadings:
As I have said, all the facts pleaded in the statement of claim must be deemed to have been proven. On a motion such as this a court should, of course, dismiss the action or strike out any claim made by the plaintiff only in plain and obvious cases and where the court is satisfied that "the case is beyond doubt" . . .
[8] Further, it must be noted that the onus is clearly on the moving party to establish that there are appropriate grounds to strike the statement of claim. In their submissions, the defendants argue that there is no basis for the plaintiff's claim because there was no application pending on March 12, 1998 (date at which section 8 of the Regulations was amended). Section 8 of the Regulations is not available to the plaintiff, therefore there is no reasonable cause of action and the statement of claim should be struck.
[9] Essentially, the defendant Lilly Canada bases its submissions on an analysis of the transition provision, subsection 9(6) of the Regulations and its application to the amendment to section 8 of the Regulations. Lilly Canada seeks to distinguish the use of the term "application" in that subsection from the term "appeal" as employed in the Federal Court Rules, 1998.
[10] The plaintiff contends that the defendant Lilly Canada is neither correct in law nor in fact, and advances its own theory in reply to that of Lilly Canada. Suffice it to say that the issues to be determined are sufficiently complex, and not clear and obvious, and should not be disposed of by a motions judge in a preliminary proceeding.
[11] I accept the plaintiff's position that the power of the Court to strike pleadings must be exercised with great care and only in cases where the plaintiff could not possibly succeed. Thus, the Court should only strike pleadings in the clearest of circumstances, where there is no arguable basis for including the matters to which objection has been taken.
[12] In reviewing the statement of claim, and applying the criterion established by the Supreme Court of Canada, I am not convinced that it is "plain and obvious" that the impugned pleadings fail to disclose a reasonable cause of action.
[13] The moving party in this instance has chosen to ask this court to engage in a rather complex exercise of statutory interpretation, which it contends will lead to a conclusion that would justify the "draconian measure" of striking the plaintiff's statement of claim. I am of the view that the interpretation of section 8 and the determination of its objects is a complex matter of statutory interpretation and is better left for argument at trial where proper evidence may be adduced and should not be disposed of by a motions judge in a preliminary proceeding.
[14] The jurisprudence appears to be settled, that contentious legal issues of statutory interpretation will not be dealt with on motion to strike a pleading. Mr. Justice Lemieux in Pfizer Canada Inc. v. Apotex Inc. addressed the issue: [1999] F.C.J. No. 959 (QL) (T.D.) at paras. 33 to 35 [reported 1 C.P.R. (4th) 358]
In the context of issues relating to statutory interpretation, Reed J. in Amway of Canada Ltd. v. Canada, [1986] 2 F.C. 312 (T. D.) at 326, was of the view that where there exists a contentious legal issue of a statutory interpretation to be resolved, that issue, not being clear and obvious, should be left for argument at trial and should not be disposed of by a motions judge in a preliminary proceeding.
In Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, Wilson J., for the Court, canvassed the applicable principles governing the determination of a motion to strike on the basis of no reasonable claim. She canvassed the origins of the provision now incorporated in rules of practice and considered its application in English and Canadian jurisprudence.
As I see it, Wilson J. endorsed the principle where arguments as to law and fact are intricate and complex, they should be dealt with at trial after all of the evidence is adduced because in such circumstances it is impossible to reach the conclusion that there is no cause of action in fact or law.
[15] For the above reasons the motion of the defendant Lilly Canada for an order to strike the statement of claim in its entirety, and alternatively specific paragraphs as pleaded, will be dismissed.
[16] The defendant Lilly U.S., has brought a motion for an order to be struck out of this proceeding on the grounds that they are not a proper party in that the statement of claim fails to disclose a reasonable cause of action pursuant to Rule 221 of the Federal Court Rules, 1998.
[17] Defendant's counsel argues that section 8 of the Regulations, as amended, cannot apply to the defendant Lilly U.S. since section 8, by referring to a "first person", was only intended to apply to "the person who files or has filed a submission for a Notice of Compliance and has submitted a patent list". The plaintiff argues that this interpretation of section 8 of the Regulations is incorrect in that it ignores the purpose of section 8. Further, the plaintiff contends that Lilly U.S. exercised complete control over Lilly Canada, its wholly owned subsidiary, throughout the prohibition proceedings and in respect of the marketing and selling of nizatidine. Because of this common enterprise, the plaintiff contends that both Lilly Canada and Lilly U.S. can be identified as one company for the purposes of seeking rights against the parent and the subsidiary.
[18] Again, the contentious issues are of a complex nature better suited for determination at trial. The defendant Lilly U.S. has not convinced me "beyond doubt" that the claim against it will fail.
[19] For the above reasons, I find the defendant Lilly U.S. has failed to satisfy the burdensome test enunciated at Rule 221 of the Federal Court Rules, 1998. The motion by the defendant Lilly U.S. to be struck as party will be dismissed.
[Emphasis added.]
(See to the same effect the Federal Court of Appeal's judgment in Vulcan Equipment Co. Ltd. v. Coats Co., Inc. (1981), 58 C.P.R. (2d) 47, at 48, and Gund Inc. v. Ganz Brox Toys Ltd. (1989), 23 C.P.R. (3d) 344.)
Background
[4] The plaintiff Safilo and the defendants all work in the field of magnetic optical items. The defendant Contour Optik Inc. (hereinafter Contour) is the holder of patent 714. The defendant Chic is a licensee of Contour for the use of that patent.
[5] In connection with its action, the plaintiff Safilo relied on section 60 of the Patent Act, R.S.C. 1985, c. P-4 (the Act), as a basis for asking the Court to invalidate patent 714 or to rule that certain items which it marketed did not infringe the said patent.
[6] Section 60 of the Act reads as follows:
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60. (1) A patent or any claim in a patent may be declared invalid or void by the Federal Court at the instance of the Attorney General of Canada or at the instance of any interested person.
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60. (1) Un brevet ou une revendication se rapportant à un brevet peut être déclaré invalide ou nul par la Cour fédérale, à la diligence du procureur général du Canada ou à la diligence d'un intéressé.
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(2) Where any person has reasonable cause to believe that any process used or proposed to be used or any article made, used or sold or proposed to be made, used or sold by him might be alleged by any patentee to constitute an infringement of an exclusive property or privilege granted thereby, he may bring an action in the Federal Court against the patentee for a declaration that the process or article does not or would not constitute an infringement of the exclusive property or privilege.
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(2) Si une personne a un motif raisonnable de croire qu'un procédé employé ou dont l'emploi est projeté, ou qu'un article fabriqué, employé ou vendu ou dont sont projetés la fabrication, l'emploi ou la vente par elle, pourrait, d'après l'allégation d'un breveté, constituer une violation d'un droit de propriété ou privilège exclusif accordé de ce chef, elle peut intenter une action devant la Cour fédérale contre le breveté afin d'obtenir une déclaration que ce procédé ou cet article ne constitue pas ou ne constituerait pas une violation de ce droit de propriété ou de ce privilège exclusif.
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[7] The plaintiff brought its action under section 60 of the Act, including as defendants both Contour as patentee and Chic as licensee.
[8] It further appeared that the parties at issue here were engaged in a sort of race to court, since the plaintiff initiated the action at bar here when it knew that it was on the point of being sued in the Quebec Superior Court pursuant to section 55 of the Act for infringement of patent 714. Such an action by Contour and Chic, among other plaintiffs, was in fact filed in the Superior Court against Safilo and it appeared that, in view of this action in the Superior Court and the action at bar in the Federal Court, the parties quite recently contested a motion in lis pendens in the Superior Court, and then on appeal in the Quebec Court of Appeal.
[9] Along the same lines, it is understandable there were discussions in court at the hearing of the motion at bar so that the outcome of this motion could assist the argument in the Superior Court, inter alia in the sense that if by the motion at bar Safilo's action against Chic were dismissed, the plaintiffs in the Superior Court would rely on this fact as a further argument that there was no lis pendens in this provincial court.
Analysis
[10] Chic essentially argued that subsections 60(1) and (2) of the Act did not allow a concerned party to join the holder of a licence as defendant in one or other of the two actions covered by those provisions [invalidating of patent, 60(1), and non-infringement of product, 60(2)]. Consequently, this Court would lack jurisdiction to hear Safilo's action against it.
[11] It should be noted at the outset, as appears from the following reasons, that Chic's approach is based on a relatively complex statutory interpretation.
[12] Nevertheless, this conclusion could suffice to dismiss the instant motion by Chic.
[13] However, in reviewing in outline below the interpretation given by each party to section 60 of the Act, as to whether a licensee is included as defendant in an action taken on its behalf, the Court could also rule on whether the interpretation adopted by Chic is plain and obvious.
[14] As regards a patent invalidity ruling by this Court pursuant to subsection 60(1) of the Act, no one questions Chic's argument that such a ruling has an in rem effect and so can be set up against anyone. In Chic's submission, this conclusion means that it should not be involved in an argument under subsection 60(1), and consequently Safilo's action under that subsection should be dismissed in its favour. Chic also extends the argument on interpretation of subsection 60(2) of the Act (as we shall see below) to support its position under subsection 60(1).
[15] However, the plaintiff Safilo maintained that subsection 60(1) says nothing about the parties who may be impleaded as defendants, and further it was not shown on a plain and obvious basis by Chic that there was any prohibition against its being involved in the capacity of defendant.
[16] These arguments by the plaintiff Safilo seem to the Court to have some weight. Consequently, I must conclude that it is not plain and obvious that the Court should adopt the approach taken by Chic regarding subsection 60(1) of the Act.
[17] On subsection 60(2) of the Act, which provides for the possibility of filing an action for a declaration of non-infringement, Chic argued here that this subsection is more indicative than subsection 60(1) of the Act, since subsection 60(2) indicates against whom such an action should be brought.
[18] In fact, the wording of the subsection in question itself indicates that the action should be brought against the "patentee". Further, from the definition of that term in section 2 of the Act, and the interpretation given to the word over the years in dealing with section 55 of the Act (see [1933] S.C.R. 581">Electric Chain Company of Canada Ltd. v. Art Metal Works Inc., [1933] S.C.R. 581; Fiberglas Canada Ltd. et al. v. Spun Rock Wools Ltd. et al., [1947] 2 D.L.R. 465 (P.C.); and [1982] 1 S.C.R. 907">Armstrong Cork Canada et al. v. Domco Industries Ltd. et al., [1982] 1 S.C.R. 907), the Court must necessarily conclude that it is difficult to argue that the word "patentee" includes a licensee. Concentrating on the wording in section 55 of the Act and that put forward in subsection 60(2) of the Act, Chic argued it is clear that when in section 55 of the Act Parliament intended to allow a licensee to bring an action for patent infringement itself, it made sure to include after the word "patentee" the phrase "and to all persons claiming under the patentee". Since the latter phrase was not included in the wording of subsection 60(2) of the Act, the latter should be interpreted as allowing an action only against the patentee, to the exclusion of a licensee. This interpretation, which rests essentially on the wording of sections 55 and 60 of the Act, is impressive; but is it plain and obvious that any other interpretation cannot prevail?
[19] For example, can it be argued that to allow a licensee to act aggressively, that is by bringing an action, Parliament had to provide for it expressly in section 55 of the Act, but a contrario that need was not felt as in subsection 60(2) the patentee or licensee would only be defendants to an action? Further, as in subsection 60(1), Parliament did not expressly prohibit the addition of a licensee as defendant alongside a patentee.
[20] At the same time, the plaintiff Safilo relied on the wording of sections 10 and 12 of the Interpretation Act, R.S.C. 1985, c. I-21, as amended. Those sections read:
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10. The law shall be considered as always speaking, and where a matter or thing is expressed in the present tense, it shall be applied to the circumstances as they arise, so that effect may be given to the enactment according to its true spirit, intent and meaning.
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10. La règle de droit a vocation permanente; exprimée dans un texte au présent intemporel, elle s'applique à la situation du moment de façon que le texte produise ses effets selon son esprit, son sens et son objet.
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12. Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.
[Emphasis added.]
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12. Tout texte est censé apporter une solution de droit et s'interprète de la manière la plus équitable et la plus large qui soit compatible avec la réalisation de son objet.
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[21] Based on these rules of interpretation, the plaintiff Safilo argued, and this conclusion seems to the Court to be correct, that the purpose of subsection 60(2) of the Act is to enable a party wishing to market a product in Canada to ask this Court to declare that the marketing of the product does not contravene the rights of the holder of a Canadian patent. The purpose of this provision is thus to enable a person wishing to market a product in Canada to take precautions against a possible infringement action which could be commercially harmful to it, whether valid or not.
[22] In Canada, and this is where the problem arises, the persons who enjoy the monopoly conferred by a patent, and who under section 55 of the Act can sue an infringing party, are the patentee and its licensee.
[23] According to the plaintiff Safilo, the statutory interpretation which Chic wishes to place on subsection 60(2) of the Act does not allow that provision to meet its objective, since a person who has obtained a judgment against the holder of a patent under subsection 60(2) of the Act would still be subject to an infringement action which could be brought by a licensee of the patentee under section 55 of the Act, since it is far from certain that any declaratory judgment made against the patentee could also be set up against its licensee.
[24] In other words, according to the plaintiff Safilo, accepting Chic's interpretation of subsection 60(2) of the Act would be to some extent to sanction an imbalance between the rights of some and the rights of others under sections 55 and 60 of the Act, in that the Act on the one hand (subsection 55(1)) would allow a licensee enjoying the monopoly conferred by the Canadian patent to bring an infringement action, but on the other hand (subsection 60(2)) would not allow a person concerned to obtain a non-infringement declaration which could be set up against the licensee.
[25] In short, the plaintiff Safilo argued that its interpretation of subsection 60(2) of the Act, as by implication authorizing the joining of a licensee to a defendant patentee is an interpretation which is fully consistent with the objectives of sections 10 and 12 of the Interpretation Act, supra, and is in line with the spirit of paragraph 104(1)(b) of the Rules, which reads:
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104 (1) At any time, the Court may
. . .
(b) order that a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined be added as a party, but no person shall be added as a plaintiff or applicant without his or her consent, signified in writing or in such other manner as the Court may order.
[Emphasis added.]
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104 (1) La Cour peut, à tout moment, ordonner :
. . .
b) que soit constituée comme partie à l'instance toute personne qui aurait dû l'être ou dont la présence devant la Cour est nécessaire pour assurer une instruction complète et le règlement des questions en litige dans l'instance; toutefois, nul ne peut être constitué codemandeur sans son consentement, lequel est notifié par écrit ou de telle autre manière que la Cour ordonne.
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[26] I have to say that the interpretation put forward by the plaintiff Safilo is worth considering and leads me to conclude that, in this motion to strike and to dismiss the action, the interpretation put forward by Chic of subsections 60(1) and (2) of the Act is not plain and obvious. Consequently, I must dismiss the motion by Chic with costs.
[27] An order will be made accordingly.
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Richard Morneau
Prothonotary
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Montréal, Quebec
October 29, 2004
Certified true translation
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1021-04
STYLE OF CAUSE: SAFILO CANADA LTD.
Plaintiff
and
CONTOUR OPTIK INC. and CHIC OPTIC INC.
Defendants
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: October 18, 2004
REASONS FOR ORDER BY: Richard Morneau, Prothonotary
DATED: October 29, 2004
APPEARANCES:
Jean-Sébastien Brière FOR THE PLAINTIFF
Marc-André Boutin FOR THE DEFENDANTS
SOLICITORS OF RECORD:
Smart & Biggar FOR THE PLAINTIFF
Montréal, Quebec
Davies, Ward, Phillips & Vineberg FOR THE DEFENDANTS
Montréal, Quebec
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