Date: 20081002
Docket: T-1975-06
Citation: 2008 FC 1101
Ottawa, Ontario, October 2, 2008
PRESENT: The Honourable Madam Justice Tremblay-Lamer
BETWEEN:
MICHELIN
NORTH AMERICA (CANADA) INC.
Plaintiff
(Defendant
by counterclaim)
- and –
9130-4550 QUÉBEC INC. D.B.A. DISRIBUTION NORTOP
&
9131-2173 QUÉBEC INC. D.B.A. RÉCHAPAGE
NORTOP RICHMOND
Defendants
(Plaintiffs by counterclaim)
REASONS FOR ORDER AND ORDER
INTRODUCTION
[1]
This
is a motion brought by the defendants (plaintiffs by counterclaim) pursuant to
rule 51(1) of the Federal Court Rules, SOR/2004-283, s. 2 (the Rules),
appealing an order by Prothonotary Richard Morneau dated August 1, 2008 (the order)
which refused to compel the plaintiff to provide further and better answers to
discovery questions, and to produce related documents.
FACTS
[2]
By
amended statement of claim dated November 21, 2007, the plaintiff brought a
claim for infringement of four registered industrial designs for tires and
treads, registered by the plaintiffs under the Industrial Design Act,
R.S.C. 1985, c. I-9 (the Act).
[3]
The
plaintiff alleged that the defendants, who are in the business of tire
re-treading, the process by which a worn tire’s tread is removed and replaced
with a new tread,
21 […] imported for the purpose of trade
or business, made, sold, offered or exposed for sale including, without
limitation, re-treaded tires and tire treads, in respect of which the
Industrial Designs are registered and to which the aforesaid Industrial
Designs, or designs not differing substantially therefrom, have been applied;
22 Furthermore, the process of tire
re-treading is one that may be construed as an assembly of a kit and therefore,
the Defendants have done in relation to a kit anything specified in paragraph
21 above that would constitute an infringement if done in relation to an
article assembled from the kit; […]
25 The Defendants’ actions have been
without the license or consent of the plaintiff or its predecessors in title;
[…]
[4]
The
defendants, in their re-amended statement of defence and counterclaim, plead
the following: they did not infringe the four industrial designs; the four
industrial designs are invalid; the plaintiff ought to be put to the proof of
establishing the chain of title of ownership for the industrial designs; and
the plaintiff has made false and misleading statements in a press release
notifying the public of the lawsuit, by stating the defendants infringed the
industrial designs. The press release forms the basis of the defendants’
counterclaim that they have suffered damage to their business reputation.
[5]
The
four industrial designs were assigned to the plaintiff less than one month
prior to the start of the action. The assignor of three industrial designs is
Michelin Swiss, and the assignor of the fourth is Michelin France. All are
related corporations.
POSITIONS OF THE PARTIES
[6]
The
defendants submit that the plaintiff ought to be ordered to answer questions
and produce documents relating to the utility and functionality of the four
tire treads for which the plaintiff holds industrial design registrations, including
information related to their design, creation, and testing, as well as the
names of individuals who might have knowledge of the above. This
information will assist in determining if the features to which each
industrial design applies are dictated solely by a utilitarian function of the
tires, which is central to the defendants’ infringement defence. Prothonotary
Morneau erred in finding this information irrelevant to the main issue of
design infringement.
[7]
The
plaintiff argues that the defendants have not shown the relevance of this
information. If the defendants wish to obtain additional information, they
ought to discover those known to have the information. The plaintiff has given
answers to the best of its ability, and it ought not to be ordered to obtain
any information from third party affiliates.
ANALYSIS
[8]
The
case law is clear that a prothonotary’s decision to allow or disallow questions
on discovery, or to direct questions be answered or be given further answers,
is discretionary (Enoch Band of the Stony Plain Indians v. Canada,
[1998] F.C.J. No. 30 (F.C.A.); Hayden Manufacturing Co. v. Canplas
Industries Ltd., (1998) 86 C.P.R. (3d) 19 (F.C.T.D.).
[9]
The
test set out by the
Federal Court of Appeal in Merck & Co., Inc. v. Apotex Inc., 2003
FCA 488 for a review de novo of a prothonotary’s
discretionary decision dictates
the
Court must consider whether the questions raised in the motion are either vital
to the final issue in the case, or whether elements of the Prothonotary’s
decision were clearly wrong, in the sense that the exercise of the
Prothonotary’s discretion was based on a wrong principle or a misapprehension
of the facts.
[10]
In
the present case, the final issue between the parties is whether the defendants
infringed the plaintiff’s four industrial designs. The questions raised by the defendants’
motion reflect design, creation, and testing information targeting the
utility and functionality of the tires. These questions, in my opinion, are
vital to the final issue of infringement, because they form the basis of the defendants’
defence to the infringement allegations, and the resultant counterclaim.
Scope and
relevance in examination for discovery
[11]
Rule
240(a) of the Rules states that the threshold test for an answer to be
provided on discovery is relevance:
240.
A person being examined for discovery shall answer, to the best of the
person's knowledge, information and belief, any question that
(a)
is relevant to any unadmitted allegation of fact in a pleading filed by the
party being examined or by the examining party;
[12]
In
evaluating the relevance of the questions and documents requested on discovery,
Prothonotary Morneau used the principles set out by Reading & Bates Construction
Co. v. Baker Energy Resources Corp., (1998) 24 C.P.R. (3d) 66 (F.C.T.D.) (Reading),
which are the correct principles to use in assessing relevance.
[13]
Prothonotary
Morneau denied discovery on the design, creation, and testing of Michelin tires
because in his view, these topics are irrelevant since the case is about
industrial design validity and infringement, not tire utility and
functionality.
[14]
However,
the principal defence advanced is that there has been no infringement because
the industrial designs are invalid, since the features to which each industrial
design applies are dictated solely by a utilitarian function of the tires,
thereby ousting the protection of the legislation as contemplated by s. 5.1 of
the Act:
5.1
No protection afforded by this Act shall extend to
(a)
features applied to a useful article that are dictated solely by a utilitarian
function of the article; or
(b)
any method or principle of manufacture or construction.
[15]
Thus,
utility and functionality are directly relevant to industrial design validity
and infringement. The consideration of whether the design includes features
that are dictated solely by a utilitarian function of the article to which the
design relates is a central issue. Questions grounded in utility and functionality,
be they related to the design, creation, testing, or development of tires or
treads, are therefore all relevant to industrial design validity and
infringement. Thus, in my view, Prothonotary Morneau erred in finding these
topics irrelevant.
Obligation
to Inform Self
[16]
The
defendants submit that the plaintiff’s representative failed in his obligation
to inform himself on the issues prior to discovery, and to make the required
efforts to obtain requested information, via third parties and related
corporations. The plaintiff indicates its representative gave answers to the
best of his knowledge, information, and belief, and this is not an appropriate
situation in which to order a party to answer questions for which a third party
possesses the answers.
[17]
Rule
241 of the Rules states the following:
241.
Subject to paragraph 242(1)(d), a person who is to be examined for
discovery, other than a person examined under rule 238, shall, before the
examination, become informed by making inquiries of any present or former
officer, servant, agent or employee of the party, including any who are outside
Canada, who might be expected to have knowledge relating to any matter in
question in the action.
[18]
A
party on discovery is therefore required to use its best efforts to obtain
information from those who might have knowledge of any matter in question. The
jurisprudence indicates this includes third party related entities. The Federal
Court of Appeal noted in Crestbrook Forest Industries Ltd. v. Canada
(M.N.R.), (1993) 3 F.C. 251 (F.C.A.) (QL) (Crestbrook) at para. 38:
However,
in Monarch Marking Systems, Inc. v. Esselte Meto Ltd., [1984] 1 F.C. 641
(T.D.), Mahoney J. (as he then was), in ordering a corporate officer to answer
questions in a patent action concerning matters in the knowledge of foreign
affiliated companies, referred to a most important consideration which in my
opinion must be taken into account in modern business litigation. At page 646,
he said:
Today's
commercial reality, with international corporations, large and small, doing
business through affiliates across much of the world and treating national
boundaries as minor inconveniences to be coped with by organizational means,
dictates that the corporate veil ought not be permitted to inhibit the administration
of justice in Canada. Examination for discovery is an
important tool in the administration of justice on its civil side. I have no
doubt that, under proper sanctions by the court, Canadian companies can readily
and economically obtain from their foreign affiliates answers to proper
questions on discovery. I am convinced that they should be required to try and
to pay the consequences of their failure or their affiliates' recalcitrance.
International businesses ought not be permitted, either as an incident or
object of their organizational set-ups, to avoid full compliance with the law
of Canada in respect of the business they do here.
[19]
Justice
James Hugessen in Eli Lilly v. Apotex Inc., [2000] F.C.J. no. 154 (F.C.)
(Eli Lilly) found at para. 5 that “where one may reasonably expect,
because of a relationship existing between a party and some third party, that a
request for information will be honoured. It is proper to require that party to
make such a request.”
[20]
The
evidence, including that a third party affiliate has completed research and
development for two of the four designs, and that extensive research and
development exists at Michelin, has shown that information relevant to the defendants’
defence lies with the plaintiff’s third party affiliates. I also note that all four
industrial designs were assigned to the plaintiff less than one month prior to
the start of the action.
Therefore, it may be reasonably expected that the request for information would
be honoured.
[21]
I am
aware that Crestbrook, supra, stands for the proposition that
ordering a party to answer questions for which knowledge lies with third party
affiliates is an exceptional power that must only be used when the interest of
justice so dictates. This is one such situation.
[22]
I
do not accept the plaintiff’s argument that the defendants ought to avail
themselves of more appropriate procedural channels to discover those known
to possess the relevant information, for the reasons addressed in Crestbrook,
supra, and Eli
Lilly, supra.
Having the plaintiff obtain information from related third party entities does
not circumvent the procedure for examining assignors and non-parties set out in
Rules 237 and 238. Rather, this offers a practical solution given the
commercial reality of international and affiliated corporations, and the
challenges faced by parties in seeking information in this context. Nor do I
accept the plaintiff’s contention that the defendants want this information
only to support
blunt allegations of design functionality. References to functionality are
apparent, among other ways, from the plaintiff’s own promotional materials. A
clear foundation for functionality exists.
[23]
For
these reasons, the defendants’ motion appealing
Prothonotary Morneau’s order dated August 1, 2008, is allowed. Costs will
follow the cause.
ORDER
THE COURT
ORDERS THAT:
1. Paragraph
2 of Prothonotary Morneau’s order dated August 1, 2008 is set aside. The plaintiff
within 15 days of this order will provide the defendants
with answers, or better answers as the case may be, to questions addressing the
utility and functionality of the four industrial designs in issue, including
questions related to the creation, testing, and development of the designs.
2. Paragraph 3 of Prothonotary
Morneau’s order
is set aside;
3. The parties within 20 days of
this order are to jointly submit to the Registry a revised draft scheduling order
setting out the next steps to be completed in this matter;
4. Costs will follow the cause.
“Danièle
Tremblay-Lamer”
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