Date: 20080725
Docket: T-754-08
Citation: 2008FC906
Toronto, Ontario, July 25,
2008
PRESENT: Kevin R. Aalto, Esquire, Prothonotary
BETWEEN:
GEORGE ARTHUR KENT
Plaintiff
and
UNIVERSAL
STUDIOS CANADA INC.
Defendant
REASONS FOR ORDER AND ORDER
Overview
[1]
Charlie
Wilson’s War (the “Movie”) is a Hollywood film released on December 21,
2007 in both Canadian and U.S. theatres. It stars several well known
actors including Tom Hanks, Julia Roberts, and Phillip Seymour Hoffman. The
film concerns the exploits of a U.S. Congressman in his quest to persuade the
U.S. Congress to approve funding of a covert operation by the U.S. to assist the
resistance fighters of Afghanistan who were opposing the
Soviet invasion in the 1980’s.
[2]
The
Defendant (“Universal Canada”) is the Canadian distributor of the Movie. The
Plaintiff (“Mr. Kent”) is a well-known Canadian journalist who spent more than
two months in northern Afghanistan in the mid-1980’s as a
freelance journalist filming various aspects of the Soviet-Afghan war and interviewing
leaders of the so-called “mujahideen” resistance fighters.
[3]
Mr.
Kent prepared a news report from the film footage he shot in Afghanistan and he also recorded
the voiceover narrative for the report. The news report was broadcast on the
BBC. Mr. Kent obtained a
Canadian Copyright Registration for the BBC report.
[4]
In
this action, Mr. Kent alleges that the Movie makes unauthorized use of parts of
the BBC report which is an original audio, visual and audio-visual work
authored by Mr. Kent.
[5]
This
motion is brought by Universal Canada for an order temporarily staying this
action pursuant to s. 50(1) of the Federal Courts Act pending the
resolution of a similar proceeding brought by Mr. Kent against Universal Canada’s
affiliate, Universal Pictures, and others, in the United States District Court
for the Central District of California, Western Division (the “U.S. Action”).
[6]
The
U.S. Action and this action both concern Mr. Kent’s allegation
that approximately 34 seconds of audio and 5 seconds of video from the
television documentary were used in the Movie in a manner that infringes Mr. Kent’s copyright
and related rights.
[7]
The
U.S. Action was commenced on April 24, 2008 against approximately 20 parties.
The Canadian action named simply one Defendant, Universal Canada. The U.S.
Defendants have brought various motions attacking the legal sufficiency of
portions of Mr. Kent’s complaint, which is now in its second
iteration and is referred to as the Second Amended Complaint. In the U.S.
Action, the motions are set to be heard in August 11, 2008. No defence has yet
been filed in the U.S. Action or this action.
[8]
On
May 13, 2008, Mr. Kent commenced this action against Universal Canada
pursuant to sections 27(1), 27(2) and 28.1 of the Copyright Act, R.S.C.
1985, c.C-42, as amended (the “Act”). Universal Canada is not a defendant
in the U.S. Action.
[9]
In
this action, Mr. Kent seeks various declarations including a
declaration that copyright subsists in the news report aired on BBC and that Mr.
Kent is the owner of it. He also seeks an interim and permanent injunction and
damages for infringement as well as punitive and exemplary damages and other
relief. He has also commenced a motion for summary judgment in this action.
[10] The U.S.
Action asserts claims for violation for U.S. copyright
and trade-mark law as well as claims for damages.
[11] There is a
significant overlap between the factual allegations in the Statement of Claim
in this action and the Second Amended Complaint in the U.S. Action. Indeed,
several of the allegations appearing in the Statement of Claim in this action are
taken virtually verbatim from the Second Amended Complaint. Universal Canada in its
submissions emphasized the significant similarities between this Statement of
Claim and the Second Amended Complaint. Universal Canada also
emphasizes that it had no role in the production of the alleged infringing
material used in the Movie. As the Movie was produced by Universal U.S., it is
the primary culprit if there is a finding of infringement. Thus, Universal
Canada argues that the U.S. Action will resolve the primary determination of
copyright infringement against the producer of the Movie.
Issues
[12] The following
issues are raised on this motion:
(a)
Should
this action be temporarily stayed pending the outcome of the U.S. Action?
(b)
If
this action is not stayed, should the Defendant be granted an extension of time
for the filing of the Statement of Defence?
Analysis
[13] The second
issue does not raise any great difficulty. Universal Canada is within
its procedural rights to bring a motion for a stay instead of immediately
filing its Statement of Defence. For the reasons that follow I am not
persuaded that a stay should be granted and, thus, Universal Canada will be
granted an appropriate time frame within which to file its Statement of
Defence.
Should A Stay
be Granted?
[14] Section 50(1)
of the Federal Courts Act gives the Court discretion to grant a stay in
certain circumstances. Section 50(1) provides as follows:
50(1) Stay of proceedings authorized –
The Federal Court of Appeal or Federal Court may, in its discretion, stay
proceedings in any cause or matter
(a)
on the
ground that the claim is being proceeded with in another court or jurisdiction;
or
(b)
where for
any other reason it is in the interest of justice that the proceedings be
stayed.
[15] The general
test to be applied on a motion for a stay pursuant to section 50(1) of the Federal
Courts Act is a two-part test, which has been consistently applied by this
Court and other Courts over many years. This two-part test requires that the defendant
demonstrate:
(a)
that the
continuation of the action will cause prejudice or injustice (not merely
inconvenience or extra expenses) to the defendant; and
(b)
that the
stay will not work an injustice to the plaintiff.
There
is a long line of cases that support this two-part test. They include: Empire-Universal
Films Limited et al. v. Rank, [1947] O.R. 775 (H.C.), at p. 779; Hall
Development Co. of Venezuela, C.A. v. B. and W. Inc. (1952), 16 C.P.R. 67
(Exch. Ct.), at p. 70; Weight Watchers International Inc. v. Weight
Watchers of Ontario Ltd. (1972), 5 C.P.R. (2d) 122 (F.C.T.D.), at pp.
129-130; Varnam v. Canada (Minister of National Health and Welfare),
[1987] F.C.J. No. 511 (F.C.T.D.), at p. 3; Figgie International Inc. v.
Citywide Machines Wholesale Inc. (1992), 50 C.P.R. (3d) 89 (F.C.T.D.), at
p. 92; Discreet Logic Inc. v. Registrar of Copyrights (1993), 51 C.P.R.
(3d) 191 (F.C.T.D.), at p. 191; Biologische Heilmittel Heel GmBH et al. v.
Acti-Form Ltd. (1995), 64 C.P.R. (3d) 198 (F.C.T.D.), at p. 201; Compulife
Software Inc. v. Compuoffice Software Inc. (1997), 77 C.P.R. (3d)
(F.C.T.D.), at p. 456; Canadian Pacific Railway Co. v. Ship Sheena M (2000),
188 F.T.R. 16 (F.C.T.D.), at p. 16; White v. E.B.F. Manufacturing Ltd.,
2001 FCT 713 (CanLll), at para. 5; and, Safilo Canada Inc. v. Contour Optik
Inc. (2005), 48 C.P.R. (4th) 339 at p. 27.
[16] It should
also be noted that the granting of a stay is a discretionary order and the
Court’s discretion must be exercised sparingly and only in the clearest of
cases. There are many cases which support this proposition including: Mugesera
v. Canada, [2005] 2 S.C.R. 91, at para. 12; Safilo Canada Inc. v.
Contour Optik Inc., supra, at para. 27; and, Compulife Software
Inc. v. Compuoffice Software Inc., supra, at para. 16.
[17] A summary of
guidelines which have evolved over time to assist in the determination of
whether a stay should be granted are usefully summarized by Justice Dubé of
this Court in White v. EBF Manufacturing Limited et al., [2001] F.C.J. 1073
as follows:
1. Would the continuation
of the action cause prejudice or injustice (not merely inconvenience or extra
expense) to the Defendant?
2. Would the stay work an
injustice to the Plaintiff?
3. The onus is on the
party which seeks a stay to establish that these two conditions are met;
4. The grant or refusal
of the stay is within the discretionary power of the Judge;
5. The power to grant a
stay may only be exercised sparingly and in the clearest of cases;
6. Are the facts alleged,
the legal issues involved and the relief sought similar in both actions?
7. What are the
possibilities of inconsistent findings in both Courts?
8. Until there is a risk
of imminent adjudication in the two different forums, the Court should be very
reluctant to interfere with any litigant's right of access to another
jurisdiction;
9. Priority ought not
necessarily be given to the first proceeding over the second one or, vice
versa.
[18] These
guidelines have been approved in other cases in this Court. See, for example, Safilo
Canada Inc. v. Contour Optik Inc., supra at pp. 349 - 350.
[19] There is one
additional factor that is sometimes referred to and that is whether an undertaking
has been given by the defendant in the action which is sought to be stayed that
it will abide by the factual or legal determinations made in the ongoing action.
No such undertaking has been given in this proceeding by Universal Canada. The
only undertaking given by Universal Canada which was made during the course of
oral argument was that Universal Canada’s defence would raise the following
material factual issues common to both actions:
23. The U.S. Second Amended Complaint and the
Canadian Statement of Claim raise the following material factual issues common
to both actions:
a)
the amount
and character (quantity and quality) of material allegedly taken from the BBC
Segment;
b)
the extent
to which the Movie’s alleged use of a small excerpt of the audio, and an almost
non-discernable portion of the video from the BBC Segment, adversely affected
the commercial value of the BBC Segment;
c)
whether
Mr. Kent is the sole author and owner
of the BBC Segment;
d)
whether
the BBC Segment is owned by the BBC;
e)
whether
the BBC Segment, or the excerpts used by Universal U.S., were licensed to
Universal U.S., or any other third party, by the BBC;
f)
whether
the Movie’s alleged use of excerpts of the BBC Segment adversely affects the
value and reputation of Mr. Kent; and
g)
whether
the Movie’s alleged use of excerpts of the BBC Segment was incidental and not
deliberate or intentional.
[20] Fundamental
to Universal Canada’s position is that the factual matrix between the U.S.
Action and this proceeding are the same. They argue that a finding of primary
infringement in the U.S. Action is a prerequisite to this action. As the producer
of the Movie is one of the U.S. Defendants prima facie there must be a
finding of infringement in the U.S. Action before there can be a finding of
infringement against the distributor of the Movie, the Canadian Defendant,
Universal Canada. They point to the lengthy portions of the Statement of Claim,
which target Universal Studios, the U.S. Defendant, as the main culprit. This,
they say, will result in having to try the action in Canada and require many of
the witnesses and parties in the U.S. to come to Canada to provide
evidence if this action is not stayed. The net result of this is prejudicial
to Universal Canada because it will entail substantial cost, duplication of
effort and inconvenience and raises the spectre of inconsistent factual and legal
findings. Staying this action will avoid a multiplicity of legal proceedings
and the concomitant prejudice that two actions seeking the same relief will
generate.
[21] They further
argue that by staying this action, the result in the U.S. Action may render
this action moot and would be the best use of judicial resources. As the U.S.
Action is wider in its scope in both the causes of action asserted and in the
number and breadth of defendants, it should proceed in advance of this action
and save some or all of the expense of litigating in Canada.
[22] They further
argue that there will be no prejudice to Mr. Kent as he will
have his day in Court in the U.S. Action and to the extent that any issues
remain outstanding after that proceeding he will be free to pursue those
matters in this action as Universal Canada is only seeking a temporary stay not
a permanent stay. In addition, Universal Canada argues that Mr. Kent would be
free to move to lift the stay if the U.S. Action becomes a quagmire of
procedural wrangling and does not proceed in a timely manner.
[23] Notwithstanding
the fervency with which these arguments were put forth by counsel for Universal
Canada, I am not persuaded that this action should be stayed in favour of
letting the U.S. Action be determinative of issues raised in this action. Mr. Kent has separate
and distinct rights, which he is asserting in this action and he should be
allowed to pursue them.
[24] There is
ample authority for the proposition that mere expense and the inconvenience
that may be encountered is not a sufficient ground for a stay to be granted.
While Universal Canada may incur costs in bringing witnesses from Hollywood to respond to
this action, in and of itself that is insufficient grounds upon which to grant
a stay. In addition, the U.S. Action is at its seminal stage and there is
little likelihood given the initial procedural issues being dealt with that
there is any “imminent” possibility of a decision being made, never mind one
that may be inconsistent with a decision in Canada.
[25] There is no
doubt that both this action and the U.S. Action flow from the same set of
facts. This, however, is not determinative of whether a stay of this
proceeding should be granted. It is but one factor. A determination in the
U.S. Action of whether there has been infringement will not necessarily be
determinative of the outcome in Canada. In this action, Mr. Kent must
demonstrate that, under Canadian law, he is the owner of the copyright
in issue and that Universal Canada has performed one or more of the specific
acts set out in the Copyright Act. While there will have to
determinations in the U.S. Action of copyright infringement such determinations
will be made under U.S. copyright law.
[26] Copyright law
is statutory law and there are both subtle and not so subtle differences
between U.S. copyright
law and Canadian copyright law. For example, statutory definitions are not
identical nor are the treatment of moral rights which are in issue in this
proceeding. A finding that Universal U.S. did not infringe Mr. Kent’s copyright
is not necessarily determinative of any issue in this proceeding. There may be
defences to available to Universal U.S. under U.S. copyright
law that would not be available under Canadian copyright law. As the Supreme
Court of Canada noted in Compo Co. Ltd. v. Blue Crest Music et al.,
[1980] 1 S.C.R. 357 , per Estey, J. at pp. 372-3:
Mr. Hughes for the respondent in answer
to a question from the Bench put it very well when he said that copyright law
is neither tort law nor property law in classification, but statutory law. It
neither cuts across existing rights in property or conducts nor falls between
rights and obligations heretofore existing in the common law. Copyright
legislation simply creates rights and obligations upon the terms and in the
circumstances set out in the statute. This creature of statute has been known
to the law of England at least since the days of
Queen Anne when the first copyright statute was passed. It does not assist the
interpretive analysis to import tort concepts. The legislation speaks for
itself and the actions of the appellant must be measured according to the terms
of the statute.
[27] Thus,
copyright issues in Canada must be determined by reference to the Canadian
Copyright Act. Findings under U.S. copyright law may not
necessarily be the same as those under Canadian law. As noted by Justice Estey
in Campo, supra:
The United States Copyright Act, both in
its present and earlier forms has, of course, many similarities to the Canadian
Act, as well as to the pre-existing Imperial Copyright Act. However, United States court decisions, even where
the factual situations are similar, must be scrutinized very carefully because
of some fundamental differences in copyright concepts which have been adopted in the
legislation of that country. [emphasis added]
[28] Further, in Euro-Excellence
Inc. et al. v.
Kraft Canada Inc. et al., [2007] SCC 37, a recent decision
of the Supreme Court of Canada it was noted at par. 20:
Section
27(2)(e) stands out as an apparent exception to the rule in CCH
that secondary infringement first requires primary infringement because, unlike
s. 27(2)(a) to (d), it does not require actual primary
infringement. Instead, it requires only hypothetical primary
infringement. Under s. 27(2)(e),
It is an infringement
of copyright for any person to... import...a copy of a work...that the person
knows...would infringe copyright if it had been made in Canada by the person
who made it.
Section 27(2)(e) substitutes hypothetical primary
infringement for actual primary infringement. It is possible that the
infringing imports may have been lawfully made outside of Canada. Still, they are
deemed to infringe copyright if the importer has imported into Canada works
that would have infringed copyright if those works had been made in Canada by the persons who
made the works abroad.
[29] The
differences between U.S. copyright law and Canadian law militate against
a stay of this action being granted. However, this factor is not absolutely
determinative. It is simply one of the guidelines to be considered in the
exercise of the discretion of the Court.
[30] A further key
factor which militates against the granting of a stay is the prejudice or
injustice that may be suffered by Mr. Kent versus the prejudice or
injustice that may be suffered by Universal Canada if this action is stayed.
There is no evidence from Universal Canada of any actual prejudice other than
the submission that the two proceedings are duplicative which will necessitate
extra costs to Universal Canada and cause inconvenience. This is not enough.
Unnecessary or excessive litigation costs can always be dealt with in costs
orders which are within the discretion of the Court at the hearing of the
action.
[31] The onus of
demonstrating that no injustice will be suffered by Mr. Kent has not been
met by Universal Canada. It argues that as the Movie has been released in
theatres and is now available on DVD, this action will not pre-empt any alleged
infringement as the “horse is already out of the barn”. Thus, there is no
urgency to Mr. Kent’s claim and he will be saved the expense of
both litigating here and in the U.S. and may have the benefit of rulings in the
U.S. that will
narrow the issues in this action or be completely determinative of them.
[32] However, the
fact of having the Movie distributed in Canada is a
continuing instance of infringement if those allegations are proven. If Mr. Kent is correct
in his allegation of infringement to permit the distribution to continue is
indirectly licensing the offending actions. This is an injustice to Mr. Kent as he is
entitled to his day in Court with respect to the claims that he has asserted.
[33] Further, there
is no timetable relating to the U.S. Action to give any comfort that it will be
expeditiously heard and disposed of. Mr. Kent could be
left in limbo for some considerable period of time without a remedy or access
to this Court. It may be that Universal Canada is only seeking a temporary
stay and conceding that Mr. Kent can return to Court to lift the stay if the
U.S. Action does not proceed expeditiously. That is an injustice in itself as,
for example, he will then have the onus of demonstrating why the stay should be
lifted and incurring the costs of such a motion.
[34] Finally, on
the point of injustice, Justice Heald’s observations in Weight Watchers
International Inc. v. Weight Watchers of Ontario Ltd. (1972), 5
C.P.R.(2d) 122 at p. 131 are apposite:
I
have concluded that a stay at this point in time would work a grave injustice
on the Plaintiff. The Plaintiff alleges trade-mark infringement, both within
and without Ontario and indeed, has tendered evidence
of such infringement. To prevent the Plaintiff from proceeding with his
infringement action might well result in irreparable loss and damage. Plaintiff
has alleged that Defendant has embarked on a deliberate course of action which
is designed to destroy the value and worth of the Plaintiff’s registered trade-marks.
Surely, he must have the opportunity to place such serious allegations before
the Court at the earliest possible moment.
[35] Mr. Kent ought to be
afforded that opportunity as well.
[36] During the
course of argument counsel for Universal Canada argued at some length that the
decision of Justice Farley in Hollinger International Inc. et al. v. Hollinger
Inc. et al., [2004] O.J. No. 3464 should be applied. This case was raised
in the context of whether the test for granting a stay was different for a
temporary stay as opposed to a permanent stay. Justice Farley was dealing with
a temporary stay of an Ontario proceeding pending the
final disposition of an Illinois proceeding. The
temporary stay was granted. In so doing, Justice Farley noted at par. 5:
5. It appears that
temporary stays pending resolution of a foreign proceeding are typically
granted when the foreign proceeding would “substantially reduce the issues to
be determined” or if success in the foreign proceeding could render the local
proceeding “substantially moot” or otherwise have a “material” impact on the
outstanding issues in the case: see Ainsworth Lumber Co. v. Canada (Attorney
General) (2001), 1 C.P.C. (5th)
49 (B.C.C.A.); Dowell v. Spencer, [2001]
O.J. No. 5149 (Ont. S.C.J. Master); Carom v. Bre-X Minerals Ltd. (1998), 20 C.P.C. (4th) 163 (Ont.
Gen. Div.). Courts have considered the following issues in deciding to
exercise their discretion in issuing a temporary stay pending the resolution of
another proceeding:
(a)
whether there is substantial overlap of issues in
the two proceedings;
(b)
whether the two cases share the same factual background;
(c)
whether issuing a temporary stay will prevent
unnecessary and costly duplication of judicial and legal resources; and
(d)
whether the temporary stay will result in an
injustice to the party resisting the stay.
[37] It is to be
noted that while these observations relate to a temporary stay, the tests
summarized by Justice Farley are very similar to those discussed above. In my
view, there is no substantive difference between the tests to be applied for a
temporary stay versus a permanent stay. Each type of stay deprives a litigant
of rights and each of the two components of the test must be carefully
considered without priority one over the other.
[38] Thus, in
reviewing the all of the materials and the authorities referred to in the
course of argument I conclude that:
(a)
Universal
Canada has not met
the heavy onus of demonstrating that the continuation of this action would
cause them prejudice or injustice;
(b)
that
a stay would cause injustice to Mr. Kent;
(c)
that
this in not the clearest of cases in which a stay should be granted;
(d)
that
while there are overlapping factual issues between this action and the U.S.
Action, the legal issues are not identical and not such that a finding in the
U.S. Action will be determinative of the issues in this action;
(e)
that
there is no risk of an imminent inconsistent finding in the U.S. Action;
(f)
that
Mr. Kent is entitled to proceed with his action in Canada.
The
motion for a temporary stay is therefore dismissed. Universal Canada will be
granted an extension of time to August 18, 2008 to serve and file its statement
of defence.
Costs
Mr.
Kent is entitled
to his costs of this motion. Counsel for Mr. Kent proposed
that costs be fixed in the amount of $15,000 payable forthwith. Counsel for
Universal Canada proposed that costs should be based on the tariff although
conceded in response to questions from the Court regarding the fixing of costs
that $10,000 would be an appropriate amount. There was no bill of costs to
support a claim for $15,000. However, there is little doubt that a substantial
amount of work went into the preparation of the motion and the very helpful
written representations and oral submissions of both counsel. In my view,
considering the length of time spent on arguing the motion and the factors
relating to the awarding of costs in the Federal Courts Rules, I
conclude that costs in the amount of $12,000 payable forthwith is appropriate.
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