Docket: T-1112-13
Citation:
2016 FC 986
Toronto, Ontario, August 30, 2016
PRESENT: The
Honourable Mr. Justice Hughes
|
BETWEEN:
|
|
E. MISHAN &
SONS, INC. AND BLUE GENTIAN, LLC
|
|
Plaintiffs
(Defendants
by Counterclaim)
|
|
and
|
|
SUPERTEK CANADA
INC., INTERNATIONAL EDGE, INC. AND TELEBRANDS CORP.
|
|
Defendants
(Plaintiffs
by Counterclaim)
|
JUDGMENT AND REASONS
[1]
On June 3, 2016 this Court ordered that a
summary trial he held in respect of the Defendant/Plaintiff by Counterclaim
Supertek Canada Inc.’s claim under section 7(a) of the Trade-marks Act.
Reasons for that decision are cited as 2016 FC 613. The summary trial has now
been held and these are the Reasons for my decision in respect of that matter.
[2]
I provided a Background in respect of this
action at paragraphs 3 to 15 of my previous Reasons. At paragraphs 70 and 71 of
those Reasons I noted that the only remaining claimant was the Plaintiff by
Counterclaim, Supertek Canada Inc. and that its claim was being made only in
respect of two potential customers, Canadian Tire and Wal-Mart Canada, and only
in respect of the years 2013 and 2014. At the hearing of the summary trial
Counsel for Supertek advised the Court that the claim in respect of Wal-Mart
Canada was being dropped leaving only the claim in respect of Canadian Tire
remaining.
[3]
In these Reasons I will refer to Supertek Canada
Inc. simply as Supertek and E. Mishan & Sons, Inc. as Emson.
I.
Issues
[4]
The issues before me may be simply stated:
1.
Has Supertek made out its claim that the
Defendants by Counterclaim have engaged in conduct contrary to the provisions
of section 7(a) of the Trade-marks Act in their dealings with Canadian
Tire in the years 2013 and 2014 and, if so,
2.
Did Supertek suffer damage as a result of that
conduct, and
3.
What is the measure of damages suffered by
Supertek, if any, as a consequence of such conduct?
II.
Evidence
[5]
The evidence before me comprised a mixture of
affidavits, transcripts of cross-examination, read-ins from discovery supplemented
by examination and cross-examination of witnesses appearing in person before
the Court.
[6]
Witnesses who appeared in person before the
Court were:
•
Janny Ng,
of Toronto, Ontario. She was, at the relevant time 2013-2014, manager and buyer
for “watering” products, such as hoses, for
Canadian Tire (often referred to as CTR or CTC in the evidence). She appeared
pursuant to a subpoena. She did not speak with Counsel for any of the parties
about her evidence before she appeared in Court. During her testimony she was
directed to exhibit P7 which was a collection of e-mails largely between her
and others at Canadian Tire and one or other of Supertek or Emson. Her evidence
was straightforward and candid. I accept her evidence entirely and, to the
extent that her evidence may conflict with other evidence, I prefer her evidence.
Further, she supplied evidence where it appeared that others cannot remember.
•
Patrick Noiseux, of St. Malo, Quebec. He is the Vice President, Sales, Marketing and
Development of Supertek, the Plaintiff by Counterclaim. His oral evidence
supplements the evidence provided in three of his affidavits filed with the
Court, exhibits P1, P2 and P3 and the transcript of his cross-examination,
exhibit D15. He provided Supertek’s side of the story. He admitted that he had
no firsthand knowledge as to what may have transpired between Emson and
Canadian Tire or what went on within Canadian Tire itself except for what was
set out in certain e-mails that he received from Canadian Tire. His second
affidavit, exhibit P2, provides the basis for the losses claimed by Supertek by
way of damages. His cross-examination on the point of these losses left me with
the impression that he knew very little about what was set out in this part of
his affidavit; he was often confused as to the data presented, for instance
mixing amounts for United States dollars for Canadian dollars. He was the
witness representing Supertek on discovery and portions of the transcript of
that discovery and exhibits were made of record as exhibit D16.
•
Edward (Eddie) I. Mishan, of New York, New York. He is the President of the Defendant by
Counterclaim E. Mishan & Sons, Inc., often referred to in the evidence as
Emson. His evidence supplements that found in his affidavit exhibits D9, D10
and D11 and the transcript of his cross-examination, exhibit P5. He gave
evidence as to his discussions and meetings with representatives for Canadian
Tire. I am cautious as to his evidence as he claimed he could not remember
certain critical events and was, at times, facile in giving answers. I prefer
the evidence of Janny Ng where it conflicts with that of Edward Mishan. He was
the witness representing Emson on discovery and portions of the transcript of
that discovery and exhibits were made of record as exhibit P8.
•
Jack Guindi, of Brooklyn, New York. He is a Sales Manager for Emson. His evidence
supplements that found in his affidavit, exhibit D12 and the transcript of his
cross-examination exhibit P6. He also was involved in discussions and meetings between
Emson of Canadian Tire. He had a better memory than Edward Mishan and was more
straightforward, however if he had memory lapses or his evidence conflicts with
Janny Ng I prefer that of Ms. Ng.
•
Brad A. Heys, of Toronto, Ontario. He is a Vice President of NERA Economic
Consulting, a valuation, economic and financial analysis firm. His evidence by
way of a report exhibit D14 was tendered as expert evidence. The parties were
agreed as to his expertise (exhibit D23):
Brad Heys is a Chartered Financial
Analyst and an expert in the quantification of economic damages. His expertise
includes loss quantification in commercial and intellectual property disputes.
His report
essentially is a critique of the evidence of Patrick Noiseux as to loss and
damage, exhibit P2. He points out many flaws and shortcomings of this evidence
but he does not put forth a clear alternative to that evidence except to say
that, if the claim against the Defendants by Counterclaim is not made out, then
the damages should be nil.
III.
Basis for a Section 7(a) Claim
[7]
Counsel for the parties are agreed that the essential
elements required to establish a claim under section 7(a) of the Trade-marks
Act, RSC 1985, c. T-13, as amended, are as set out by the Supreme Court of
Canada in S. & S. Industries Inc. v Rowell, [1966] S.C.R. 419 at page
424, namely that there must be established in evidence:
1.
A false and misleading statement;
2.
Tending to discredit the business wares or
services of a competition; and
3.
Resulting damages.
Counsel are agreed
that resulting damage is an essential element of the claim. They are further
argued that the damages must flow as a result of the false or misleading
statement, that is, that there must be a causation link between the statement
and the damage.
IV.
What is a False or Misleading Statement
[8]
In the S. & S. Industries case the “false and misleading” statement was in the form of a
solicitor’s letter sent by a solicitor representing a patent owner to a number
of the patent owner’s competitors making or selling a competitive product
alleged to incorporate the patented feature. That letter is reproduced in the
reasons of the Supreme Court at pages 430-431 of the report. I set out the last
paragraph of that letter:
You are hereby advised that unless you
inform us within the week that you will immediately cease and desist from the
manufacture, sale and use of such flat arcuate wires for use in brassieres, you
will leave us with no other alternative but to forward the matter to my
Canadian associates for institution of legal proceedings for infringement of
the aforesaid patent. Your reply is awaited.
[9]
It is to be noted that, at the time the letter
was sent, there was no judgment of any court declaring the patent to be invalid;
it was only subsequently that a Court held the patent to be invalid in an
impeachment action instituted by a recipient of such a letter. The criticism
leveled by the Court as to false and misleading statements is that the patentee
never did commence the threatened legal action but simply relied upon what I
will describe as sabre rattling. At page 431, Spence J. wrote:
The defendant, however, instituted no
such “legal proceedings for infringement of the aforesaid patent” as it had
threatened. One cannot but note that such an action would have been the
forthright method which the defendant might have utilized to protect its patent
if it honestly believed the patent were valid, and that in such an action by
virtue of s. 59 of the Patent Act, the defendant could have obtained an
injunction completely protecting its alleged rights. The defendant, however,
turned to other methods of “protecting its patent”.
[10]
This is to be contrasted with the circumstances
addressed by Cullen J. of this Court in M&I Door Systems Ltd. v Indoro
Industrial Door Co. Ltd. (1989), 25 CPR (3d) 477 (FCTD) where solicitors
acting for a patentee wrote letters to prospective customers of a competitor
which letters the Court said were “more informative
than threatening” and the patentee backed up its claims with Court
action even though, in that action, the patent was ultimately held to be
invalid. Cullen J. wrote, at page 523:
As already indicated I have determined
that Canadian patent No. 1,178,882 is null and void and of no effect. An order
revoking and annulling that patent will be made.
In addition, the defendant has claimed,
“damages, including punitive and exemplary damages for breach of section 7(a)
of the Trade Marks Act”. My response to the defendant’s claim is tempered by
the fact that had I found the patent in suit to be valid, I would have had
little or no difficulty in determining that the defendant had in fact infringed
the patent. The claim for damages is also tempered by the fact that when a
corporation has a registered patent it is prima facie valid and the patentee
has the right to act on that basis. However, the patentee must also be aware of
the fact that the patent is subject to challenge so that letters or
communication directed to the alleged infringer’s customers must be very
carefully worded and circumspect. I have examined exs. P-17 to P-21 and D-6
which were letters to prospective customers of the defendant. In my view
Taylor’s letters (exs. P-17 and P-18) are quite restrained and really more
informative than threatening. Similarly, the letters emanating from the law
firm of Moss Hammond, namely, exs. P-19 to P-21, are follow-ups to the same
corporations and again are more informative than threatening. Taylor’s letter,
which is ex. D-6, uses the stronger phrase: “As these doors were a complete
copy of our patented Re-Coil-Away Rolling Rubber Door system, we commenced
legal action for patent infringement at that time.” Taylor was certainly
convinced that this in fact was the case and indeed so strongly convinced that
his company launched this particular action for infringement. It may seem, as
counsel for the defendant has suggested, a harsh word but it is a word
sincerely believed by Taylor and backed up with court action.
As indicated earlier, the plaintiff and
defendant are competitors in the roll-up door business so that these letters
conceivably could be going to people who might be customers of the plaintiff or
future customers of the plaintiff and certainly there would be no intention to
offend them or to be threatening in any way.
[11]
It can be concluded from these cases that it is
not every assertion of a patent or other intellectual property such as an industrial
design which may be subsequently be held to be invalid which will be held to
constitute a false and misleading statement. The Court must inquire as to the
nature and circumstances of the assertions and any subsequent conduct by the
party making the assertions.
[12]
It is, therefor, important to review the context
of the discussions, meetings and e-mails between Emson and Canadian Tire in the
relevant period which is essentially the first half of 2013.
[13]
Emson supplies, sometimes through a related
entity, an expandable hose product to several markets, including Canada, under
the name Xhose. It sells it to several Canadian retailers including Canadian
Tire and Lowe’s. The Xhose was picked up by Canadian Tire in the latter half of
2012, Janny Ng said it was her first significant buy; she found it to be
new and innovative. The Xhose was featured in a Canadian Tire dealer fair held
in late 2012 and the dealers placed substantial orders for the product, so much
so that the unusual step of shipping in the product by air was undertaken.
Emson promoted the Xhose through television advertising and the product was
sold in Canadian Tire stores on an “as seen on TV”
basis.
[14]
In or prior to April 2013 Supertek approached
several Canadian retailers with its competitive version of the Xhose which it
called Pocket Hose. Several retailers bought this product from Supertek with
the intention of launching it in a spring promotion. Canadian Tire was
approached by Supertek to purchase the Pocket Hose and offered an indemnity in
respect of any lawsuit by Emson. This prompted Janny Ng to contact a Canadian
Tire in-house legal counsel by e-mail for advice because the Xhose vendor
(Emson) was “threatening possible legal action”.
That e-mail dated May 2, 2013 said:
I was wondering if you could you provide
us some guidance on a possible patent issue that has come up regarding two
products: Xhose and Pocket Hose.
Before carrying the product, Supertek
(vendor supplying with the “Pocket Hose”) provided me with a letter
indemnifying CTR against any claims made against Pocket Hose along with their
legal perspective on the Xhose patent. Xhose is a current vendor for CTR and is
aware that we are carrying the Pocket Hose, they are threatening possible legal
action.
Can you please review the attachments and
provide your legal opinion as soon as possible?
We have the Pocket hose in an upcoming
flyer dropping on May 17th and need to know what are the possible implications
related to this issue.
[15]
Meanwhile Eddie Mishan of Emson was receiving
rumours from some Canadian retailers, including Lowe’s, that Supertek was
trying to sell its Pocket Hose to these retailers, including to Canadian Tire.
He flew from New York and met with Canadian Tire, in particular Janny Ng and
her boss Greg Ritchie. Janny Ng recalls this as a telephone call, not a
meeting. There is no record as to what was said at that meeting or call. Mr. Mishan
denies threatening to sue Canadian Tire. Ng’s recollection as to what was said
was:
A. And basically just restating that they have a patent on
the Xhose and that they take it very seriously. So they just basically
reiterating in that conversation that they have taken action against retailers
and suppliers of competing products.
Q. Okay. And what, if anything, did you think he was
suggesting would happen to Canadian Tire.
A. That we would be included in that.
[16]
The next day, May3, Janny Ng sent an e-mail to
Supertek asking if Canadian Tire could be removed from a television commercial
Supertek was going to run about the Pocket Hose. Apparently, Canadian Tire was
to be identified (tagged) as one of the retailers offering the Pocket Hose. The
e-mail asked if Canadian Tire could be removed from the commercial as Emson was
“threatening legal action”:
Can we remove CTR from the Pocket Hose
commercial?
We met with Emson yesterday and they are
threatening legal action, we feel we can still proceed with the flyer and the
product in store that want to be removed from the tv commercials – also they
need to be approved by Canadian Tire’s strategic marketing.
Can you do a conference call at 2pm?
[17]
Supertek replied at once by e-mail saying that
Canadian Tire wold not be “tagged” on the
commercials:
I have confirmed with Patrick that CTC
will not be tagged on any Pocket Hose commercials. The commercials airing will
be for general information and will not specify retailers.
The following is a list of retailers in
Canada who will have Pocket Hose from us – Jean Coutu, Home Hardware, Home
Depot and Staples tbc.
Please let us know if you require any
additional information and if you would still like to have the conference call
at 2pm.
We appreciate your continued support,
[18]
Mimi Bibla of Supertek had a telephone
conversation with Janny Ng that same day, May 3. Bibla reported the substance
of this conversation to Patrick Noiseux. The substance of the conversation, as
set out in the e-mail was that “because of Emson”
Canadian Tire would not be purchasing any additional Pocket Hose product but
was willing to discuss offering it on an FMA which is internal language in
Canadian Tire meaning essentially that individual dealers could order the
product from Supertek. Janny Ng said that she could not recall the specifics of
this conversation but did not deny that Bibla had reported it correctly. It
said:
Recap of call with Janny – as of right
now, because of Emson CTC will not be issuing any additional PO’s for Pocket
Hose.
Janny will be speaking with Greg their
VP) re. the future of Pocket Hose. She will be asking him if they sell out
doing the flyer if they can reorder?
Alternatively, if they cannot reorder she
will discuss with us the opportunity to offer Pocket Hose on an FMA.
We won’t really know more until the end
of the flyer.
[19]
Further, on May 3, Janny Ng sent an e-mail to
Eddie Mishan saying that Canadian Tire could not do anything in respect of the
flyer which was already printed but assuring him that the Pocket Hose was a “one time” offer. It said:
We have checked on the status of the
Pocket Hose, the flyer has printed and product is already distributed; at this
point there is nothing we can do as this is not a Health Canada related recall.
We want to state that we did not approach any supplier for their business, in
fact we did receive one other pitch for Flex-Able hose that we passed on.
As you know the Pocket Hose is already
widely sold on the Internet and many retailers across Canada. Canadian Tire
made the decision to do a one-time offer on Pocket Hose to stay
competitive in the market after receiving legal information from the Pocket
hose vendor. It is unfortunate that the product did make it to retail and we
had to proceed with the actions to maintain competitiveness in the market since
so many retailers at the time were already carrying the Pocket Hose.
To date only Xhose 50’ is carried in line
and we are working to add the 75’ Xhose and hose hanger to the assortment.
Having the products listed in the assortment is a testament of our commitment
to Xhose and long term business plans we discussed yesterday.
Greg and I will be in Vegas next week
attending the Hardware Show, let us know if
You will be at the show as we would be
happy to drop by for a quick meeting.
[20]
Mishan responded by asking for a conference call
“right now”. Janny Ng’s recollection is that
there was such a call the substance of which is set out at page 32 of the
transcript of her evidence:
Q. Did you have a call with Mr.
Mishan - -
A. Yes.
Q. -- that afternoon?
A. Yes.
Q. And what did he say?
A. So that’s where - - I think that’s where the email
previous is in response to what the conversation I had with - - no, this is
after. I think that’s where he asked to have it - - to stop sale. In the call
he stated that there were various action, legal action, against the suppliers
and - - the suppliers of the competitive hoses and retailers, and that he was
going to send it to us to let us review for us to assess our actions, and it
was very insinuating. It wasn’t like we’re going to sue Canadian Tire, but it
was very insinuating.
Q. Insinuating that?
A. That we could be implicated as a result of carrying the
Pocket Hose.
[21]
Mishan responded on May 3 by e-mail to Janny Ng
and her boss Greg Ritchie saying that “the inventor of
the Xhose Patents is very litigious” and providing some details as to
three Canadian lawsuits and one each in the Netherlands, France and Australia. He
wrote:
As per our conversation the inventor of
the Xhose Patents is very litigious against all infringers and marketers. Here
are some of the lawsuits that have been filed worldwide and we understand
others are being filed shortly. In addition there are also lawsuits filed in
the USA.
The inventor takes this matter very
seriously.
We look forward to hearing from you
regarding the telephone conversation we had today to clear up this matter.
[A brief designation of the six lawsuits
follows]
[22]
The reference to the “inventor”
being litigious is somewhat coy. On discovery Eddie Mishan admitted that the
decision makers were he and his brother:
Q. And you’re in charge of deciding whether to enforce
patents or designs, right?
A. Like I said before, sometimes I’m in charge of it and
sometimes it’s our attorneys.
Q. Well, they don’t decide for
Emson.
A. They advise for Emson.
Q. And you decide?
A. But they advise.
Q. And you decide?
A. And we decide.
Q. You and your brother?
A. Yes.
[23]
At 1:22 at night of May 4, Ritchie sent an
e-mail to Mishan, rather an impatient e-mail, essentially offering Emson two
choices, one was to allow Canadian Tire to continue with the one-time promotion
unmolested following which Canadian Tire would stick with the Xhose, the other
was for Emson to sue Canadian Tire which would result in the end of any
business between Canadian Tire and Emson. The e-mail concluded by saying that
retailers were choosing Xhose or Pocket Hose and that, at this point Canadian
Tire has chosen Xhose. It said:
Hi Eddie,
I was out working in stores all afternoon
so I have not been able to get a hold of Janny to get an update on your
conversations. Janny and I are at the airport Monday morning and should be able
to give you a call around 8 am. We need resolution on this on Monday and from
my perspective you there are two outcomes here:
•
The patent holder understand the value in
doing business with us and confirms there will be no litigation from the one
time promotion on the Pocket Hose, based on that we continue with the plans we
have in place to continue to aggressively sell Xhose and expand the assortment
through the balance of year, hopefully [sic]yhis leads us to many great
opportunities in the Lawn and Garden category over the next few years
•
The patent holder confirms his intent to sue
us over this matter, at that point I do not see us continuing to do business
with Xhose and CTC would need to reassess all of our business with related
parties
I apologize if this is too direct but I
manage $750 million for CTC and although Watering is a $50 million category
this product so far is a very small portion of the Watering business and I
can’t afford to spend time every day discussing possible outcomes. I now have
multiple legals documents from multiple manufacturers of expandable hoses
including documents indicating other patent holders are suing Xhose for
infringing their patents. From the list of retailers currently selling Pocket
Hose it seems to be about ½ of the Canadian market place and several on-line
retailers, everyone seems to be [sic]allgning with one manufacturer or another
and at this point we have selected you.
Look forward to sorting this out on Monday
[24]
On the following Monday Janny Ng met with Jack
Guindi at a trade show in Las Vegas. Janny Ng’s recollection of that
consideration is set out at page 35 of the transcript of her evidence:
Α. Yes. So I met with
Jack G. in the show, and basically what I did was reiterate that XHose at that
time was the product that was in the assortment. Basically reiterating that the
strategy with Pocket Hose was a one-time buy with a specific number of units
purchased to support the flyer and the flyer only. At that time it was the
right thing to do. XHose and Pocket Hose were both on TV, and because it was
widely nationally sold across different retailers, that we would support that
strategy and that we wouldn’t even talk about any more litigation or anything
like that, because it was a very stressful conversation for all parties.
Q. So this was you and Jack at the show? Do you remember
where you met?
A. Me
and Jack, yeah, having that conversation.
[25]
On May 10, Greg Ritchie sent an e-mail to Jack
Guindi saying that “it looks like Janny has resolved
the issue with you”.
[26]
At various points in her testimony Janny Ng
referred to these dealings with Emson as being stressful. I particularly have
in mind that the Xhose purchase was her first major transaction. Eddie Mishan
and Jack Guindi both denied that, in any meeting or conversation that Emson
threatened to sue Canadian Tire. Having observed both of them in the witness
box I conclude that they are shrewd, canny, street smart individuals. It is
quite possible that no direct statement was made that Emson would sue Canadian
Tire. They did not have to, enough was said to leave Janny Ng with the clear
impression that Canadian Tire wold be sued if they continued to deal with
Supertek’s Pocket Hose. Her boss, Ritchie, stepped in with a midnight e-mail in
effect telling Emson that Canadian Tire would continue with a one-time
promotion of the Pocket Hose unmolested by Emson or, if Emson did decide to sue
Canadian Tire, the relationship would be at an end. That was the deal as
concluded between Ng and Guindi at the Las Vegas trade show, namely that
Canadian Tire would continue with the one-time promotion of the Pocket Hose and
was not sued by Emson.
[27]
I conclude, on the evidence, that Emson, in
particular Mishan and Guindi, in their dealings with Canadian Tire,
particularly Janny Ng, deliberately and skilfully conducted themselves so as to
leave Canadian Tire with the impression that it would be sued by Emson (as well
as the inventor) for patent infringement. That patent, as well as a related industrial
design, has been held to be invalid in proceedings against Supertek but not
Canadian Tire. As a result, Emson has made false and misleading statements
tending to discredit the wares of Supertek contrary to the provisions of
section 7(a) of the Trade-marks Act.
V.
Damages and Causation
[28]
Damages are, as previously stated, an essential
element in a claim under section 7(a) of the Trade-marks Act. Supertek
claims three sorts of damages:
•
Cancelled orders. The evidence shows that
Canadian Tire cancelled two orders totalling 9,996 units of the Pocket Hose
with Supertek.
•
Lack of access to individual Canadian Tire
dealerships (called FMA’s by Canadian Tire). The evidence shows that an Orillia
dealer did order 300 units of Pocket Hose from Supertek, the transaction was
handled manually. No other dealer ordered the Pocket Hose.
•
Canadian Tire never placed any further orders for
Pocket Hose with Supertek. Supertek assumes that it would have sold 64,500
units of 50 foot Pocket Hoses for each of the years 2013 and 2014.
[29]
There must, however, be a causal link between
the wrongful activity in uttering false and misleading statements and the
alleged damage suffered.
[30]
Justice Sopinka of the Supreme Court of Canada
wrote about causation in his reasons, for the Court, in Snell v Farrell,
[1990] 2 S.C.R. 311. He wrote that there must be causation, that is, a
relationship between the tortious act and the injury to the victim. While the
plaintiff bears the burden of proving causation, the Court may look at the
evidence as a whole on a robust and pragmatic basis in order to determine if
there is causation. I repent some of which he wrote at pages 326, 328 and 330:
At 326:
Causation is an expression of the
relationship that must be found to exist between the tortious act of the
wrongdoer and the injury to the victim in order to justify compensation of the
latter out of the pocket of the former. Is the requirement that the plaintiff
prove that the defendant’s tortious conduct caused or contributed to the
plaintiff’s injury too onerous? Is some lesser relationship sufficient to
justify compensation?
. . .
At 328:
I am of the opinion that the dissatisfaction
with the traditional approach to causation stems to a large extent from its too
rigid application by the courts in many cases. Causation need not be determined
by scientific precision. It is, as stated by Lord Salmon in Alphacell Ltd. v.
Wood ward, [1972] 2 All E.R. 475, at p. 490:
… essentially a practical question
of fact which can best be answered by ordinary common sense rather than
abstract metaphysical theory.
Furthermore, as I observed earlier, the
allocation of the burden of proof is not immutable. Both the burden and the
standard of proof are flexible concepts. In Blatch v. Archer (1774), 1 Cowp.
63, 98 E.R. 969, Lord Mansfield stated at p. 970:
It is certainly a maxim that all
evidence is to be weighed according to the proof which it was in the power of
one side to have produced, and in the power of the other to have contradicted.
. . .
And at 330:
The legal or ultimate burden remains with
the plaintiff, but in the absence of evidence to the contrary adduced by the
defendant, an inference of causation may be drawn although positive or
scientific proof of causation has not been adduced. If some evidence to the
contrary is adduced by the defendant, the trial judge is entitled to take
account of Lord Mansfield’s famous precept. This is, I believe, what Lord
Bridge had in mind in Wilsher when he referred to a “robust and pragmatic
approach to the …facts” (p. 569)
[31]
In the present case, were it not for the
evidence of Janny Ng, I would have found, by inference, that there was a causal
link between the false and misleading statements made by Mishan and Guindi of
Emson, and the damages alleged to have been suffered by Supertek. However, the
evidence of Janny Ng is otherwise. Her evidence is, in effect, that Canadian
Tire was happy with the Xhose product and intended to stick with it. The Pocket
Hose purchase was a one-time only buy and Canadian Tire did not want to have an
inventory problem by handling two product lines; while the discussions with
Emson were stressful, they ultimately played no part in the decisions made by
Canadian Tire.
[32]
I repeat some of the evidence of Janny Ng:
At pages 40 to 42 of the transcript in
direct examination:
Q. Roughly how many units are we
talking?
A. It was about 13,000 units.
Q. And did Canadian Tire cancel these orders for the Pocket
Hose?
A. Yes.
Q. And you say in your email:
"We are
having to cancel these POs."
A. Yes.
Q. And why did you have to cancel
these POs?
A. Because it was an internal decision to go ahead with the
flyer to meet the dealer's demand for this flyer only, but this demand, as we
decided, came in after the flyer. So dealers were buying in not to support the
flyer. They would support sales after the flyer, and that wasn't what we were
intending to do.
Q. How, if at all, were the threats by Emson of a possible
lawsuit a factor in this business decision?
A. They definitely were stressful, but they were not the
reason why we were -- we went ahead and made those decisions. We actually
focused on the fact that we didn't want to support the program after the flyer,
because we want to make sure that -- given the fact that we were also supplying
Emson's product, we didn't want to have all these products, and it would cause
overstock situations in our warehouse. So the decision at that point was,
okay, we tab, we tab really well, which means the orders came in for the Pocket
Hose and they did really well. That means we were successful. We're going to
now wait for the sales to happen in stores. Given that that season was very
rainy, we didn't also want the products to be stuck in stores, and also we had
the XHose. So we had two competing products in stores that could potentially
be overstocked for the dealers. So we want to make sure that we stopped it,
almost like turn off the tap, so we don't cause a lot of inventory issues later
on.
Q. And this business decision was
discussed with Greg?
A. With Greg, with Mandeep. You know, even though we talked
internally in terms of the stress of the threats, that wasn't the reason why we
made the decision. It was basically a business decision. Inventory management
is a big portion of my job, to make sure that we don't carry a lot of inventory
for -- to have it, because there's a lot of times that we are stuck with a lot
of product that is irrelevant for the customer.
Q. But the stress of these threats
was part of the discussion?
A. It is part of the thought
process.
Q. And did -- the Orillia store of Canadian Tire, do you know
whether they later bought themselves 300 units of Pocket Hose?
A. Yeah, I don't know about that. I don't know specific
FMAs, so for approvals that actually get executed. It was approved, so we
welcomed Supertek to take the time and actually approach the stores
individually to supply them. But for the national program, it wasn't go
forward.
Q. Right. And at tabs KK and LL of the brief of emails, I
see an email from David DeSouza to you on June 3rd and the response back from
you that day where David DeSouza asks if they could do an FMA to satisfy
stores. Do you see that?
A. Yes.
Q. And then the response back to you saying:
"We cannot
approve any FMAs at this time."
A. Yeah, I would have to go back to check on the FMA, why it
wasn't approved. I personally allowed that to happen, so I would have to
double check on that one.
Q. So that was a corporate
decision?
A. I would have to say yes.
At pages 61 to 63 in cross-examination:
Q. Fair enough. Do you recall -- or were you involved in any
sort of discussion regarding the outcome of the litigation?
A. No.
Q. Do you know if that was a consideration at all within
Canadian Tire as to the outcome of the litigation?
A. No.
Q. Once Canadian Tire gets an indemnification from their
supplier, the issue of the litigation, if they're not sued themselves, isn't
the reason why they're making their buying decisions, is that fair?
A. That's correct. Once we get the indemnity letter, we
feel more comfortable, and my take on it is basically source products that
supplies customers' needs and demands and so on and so forth gives me the
ability to think freely for my own customers and make sure that I buy products
that will meet the demands of the customers, whether it's a demand driven by a
TV commercial or it's a specific household need. That allows me to think
solely on the customer.
Q. So here you had received two indemnifications from
Supertek?
A. Correct.
Q. And your decisions regarding which expandable hose
products you were going to carry were based on business decisions regarding the
product, their sales, their advertising, the items we've talked about?
A. Correct.
Q. You didn't cancel any purchase orders for Pocket Hose
because of something Emson said to you?
A. No. If -- like, definitely the conversations were not
pleasant with Emson, but the idea is that the -- you know, my conviction is to
really go ahead with the strategy that we started in 2012: Offer XHose as an
inline SKU. So that's the one that we would replenish and make sure that our
dealers and our customers have access to it. The opportunity buy -- Pocket
Hose was always an opportunity buy. Had we felt the threat or really
considered the threat of the legal actions from Emson, we would have actually
pulled the flyer, not -- pulled the flyer, basically cancelled the promotion
activity, and actually returned the product to Supertek.
Q. And that's not what you did, is
it?
A. No. We actually bought -- the original forecast for
every flyer, a one-time buy, is around 15,000 units. I believe my latest
numbers when I pulled, we ordered about 20 some odd thousand units. We sold
through. It was a successful flyer, despite the rainy season, and yeah, we
carried on.
Q. So Supertek -- I mean Canadian Tire, rather, carried out
the plans that they had made in 2012?
A. Correct.
Q. And those plans were carried out based on the business
decisions of the company?
A. Right.
[33]
Given this evidence I must conclude that there
is no causal link between the false and misleading statements made by Emson and
the damages alleged to have been suffered by Supertek. Therefor, the claim by
Supertek under section 7(a) of the Trade-marks Act must fail.
VI.
Damage Quantification
[34]
Having found that the section 7(a) claim must
fail it is unnecessary for me to make findings as to the quantification of
damages. I will offer a few comments as to the evidence however.
[35]
The evidence as to quantification of Supertek’s
claim comes entirely from the second affidavit of Noiseux, exhibit P2. That
evidence is heavily criticized by Emson’s expert Heys. Having read Noiseux’s
affidavit and Heys’ report and observed each of them in the witness box I have
concluded that the evidence of Noiseux is quite unsatisfactory. It includes
fundamental errors such as confusing US and Canadian dollars. It fails to take
into account items such as cost of shipping and receiving. In estimating what
the sales of Pocket Hose would have been in a “but for”
would the use of Magic Mesh, a screen product, which comparison is unsatisfactory.
The manner in which Noiseux handled himself in the witness box when dealing
with these issues has led me to conclude that he is not at all familiar with
such calculations or adept in handling the topic. I would find that Supertek
has not satisfactorily established a quantification of its damages.
VII.
Conclusion and Costs
[36]
In summary, I have found that, while Emson,
through Mishan and Guindi, have made false and misleading statements, no causal
link to Supertek’s alleged damages has been established. Supertek’s section
7(a) claim fails.
[37]
Turning to costs in respect of this summary
trial as well as costs of the proceedings that were reserved in my June 3, 2016
decision (2016 FC 613) I did indicate to Counsel at the hearing that I would
invite submissions in this respect. However, having further considered the
matter it will be unnecessary to hear from them as I find that each party
should bear its own costs, thus no order will be made as to costs.
[38]
The principal issue in this action, which has
taken several trials and hearings, was the validity and infringement of the
‘882 patent. Once that was resolved by a finding of invalidity by this Court
affirmed by the Federal Court of Appeal the remaining issues as to validity of
the design and the section 7(a) claim should have been settled. Emson tried to
get rid of the design issue by a “dedication”
but Supertek persisted, and won, on the invalidity issue. But why bother?
Supertek’s section 7(a) claim kept shrinking as the matter proceeded to summary
trial, only the Canadian Tire issue and the years 2013-2014 remained from a
much broader claim. On the surface there was something to that claim but the
evidence of Janny Ng, which nobody could have predicted, put an end to it. More
rational persons would have settled the matter once the patent issue had been
finally determined. It is appropriate for each party to bear its own costs.
Email this Content