Docket: T-632-05
Citation:
2017 FC 1119
Ottawa, Ontario, December 8, 2017
PRESENT: The Honourable Madam Justice Kane
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BETWEEN:
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ALPHA MARATHON
TECHNOLOGIES INC.
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Plaintiff
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and
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DUAL SPIRAL
SYSTEMS INC. AND
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RAFAEL J.
CASTILLO
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Defendants
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ORDER AND REASONS
[1]
The Defendants, Dual Spiral Systems Inc. [DSS]
and Rafael Castillo [Castillo] seek an Order, pursuant to Rule 221 of the Federal
Courts Rules, SOR/98-106 [Federal Courts Rules] to strike the
Plaintiff’s Statement of Claim and dismiss the Plaintiff’s action. The
Defendants submit that this Court is without jurisdiction to determine this
action, which is about the ownership of an invention that is not patented in
Canada and is based primarily on a contractual dispute.
[2]
The Defendants also seek an Order pursuant to
Rule 118 to dismiss the action because of the Plaintiff’s failure to notify the
Defendants of a transmission of interest in this litigation arising from the
evolution in ownership and status of the Plaintiff, as required by Rule 117 of
the Federal Courts Rules.
[3]
Alternatively, in the event that the action is
not dismissed, the Defendants seek an Order pursuant to Rule 416 requiring the
Plaintiff to provide security for the Defendants’ costs in the trial of the
action.
I.
Overview
[4]
The Plaintiff’s claim involves a dispute over
the ownership of an invention that was patented by the Defendant, Castillo, in
the United States. The Plaintiff claims to be a co-inventor of the invention due
to the contractual relationship with the DSS and/or an employment relationship
with Castillo. The Plaintiff also claims that its former principal, Alfredo
Bentivoglio [Bentivoglio], “invented and/or discovered”
the invention at issue, “together with”
Castillo. In its Statement of Claim, the Plaintiff seeks declaratory and
injunctive relief with respect to the invention claimed in the US Patent
Application.
[5]
The Plaintiff argues that because the claims
relate to an invention made in Canada and by Canadians this Court has
jurisdiction pursuant to subsection 20(2) of the Federal Courts Act, RSC
1985 c F7 [Federal Courts Act], which provides concurrent
jurisdiction where the remedy sought is in law or equity with respect to “any patent of invention”. The Plaintiff further
argues that there is a body of federal common law regarding inventorship and patents
that applies.
[6]
For the more detailed reasons that follow, I find
that the Plaintiff has not established that this Court has jurisdiction to
determine its action. The test established in International Terminal
Operators Ltd. v Miida Electronics, [1986] 1 S.C.R. 752, 28 DLR (4th)
741 [ITO, or the ITO test), and more recently explained and
applied in Windsor (City) v Canadian Transit Co, 2016 SCC 54, [2016] 2
SCR 617 [City of Windsor], which first requires that there is a statutory
grant of jurisdiction to the Federal Court, has not been met.
[7]
The Plaintiff has not pointed the Court to any
jurisprudence where this Court has found jurisdiction based on subsection 20(2)
to grant relief regarding an invention that has not been patented in Canada, or
that is not subject to any pending patent application in Canada, or with
respect to an invention patented in another country.
[8]
Even if subsection 20(2) could be interpreted to
provide a statutory grant of jurisdiction, the other aspects of the ITO
test are not met. In addition, the dispute is primarily based on a contractual
dispute and/or a disputed employer-employee relationship, not on principles or
concepts of inventorship. In order to resolve this dispute, the Court would
first be required to interpret the contractual documents and other evidence
that the parties might adduce regarding their agreements. It does not appear
that the common law regarding inventions or patent law, even if applicable,
would be essential to the determination of the claims.
[9]
The parties have been engaged in this litigation
since 2005, although it appears that the Plaintiff’s pursuit of its action has
not been rigorous or consistent. Both parties acknowledge that they participated
‒ off and on – in settlement discussions, without success. Regardless of
the passage of time or their earlier apparent assumption that the Federal Court
had the jurisdiction to determine the Plaintiff’s cause of action, the parties
cannot attorn to the jurisdiction of the Court where the jurisdiction does not
exist. The Defendants’ delay in bringing this motion is curious given that both
parties were represented by Counsel for most of the relevant period of the
litigation, albeit with changes in counsel at various times. Ironically, in the
Plaintiff’s Reply and Defence to the Defendants’ Counterclaim, filed on
September 2, 2005, the Plaintiff raised, among other issues, the jurisdiction
of the Court to address the Defendants’ claims that their Trade-mark and
Copyright had been infringed. It appears that the Plaintiff did not turn its
mind to the jurisdiction of the Court to adjudicate its own action and assumed,
with confidence, that it did. Unfortunately, much time and effort has been spent
without looking to the fundamental basis of the claim.
[10]
Due to this history and the importance of
determining the jurisdictional issue, the jurisprudence has been carefully
considered as documented in these reasons.
[11]
Given my finding that the Defendants’ Motion
pursuant to Rule 221 will be granted because the Court lacks jurisdiction to
determine the Plaintiff’s cause of action, there is no need to address the
Defendants’ alternative relief. However, if I am wrong in finding that the
Court lacks jurisdiction, I am not satisfied, based on the limited and
conflicting evidence provided regarding the sale, bankruptcy and subsequent
revival of the plaintiff corporation, that the action should be dismissed
pursuant to Rule 118 as a result of the Plaintiff’s alleged failure to provide
a notice of transmission of interest as required by Rule 117. I am also not
persuaded that an Order for Security for Costs would be warranted if the trial
were to proceed, although this issue could be revisited.
II.
Background/Context
[12]
The Plaintiff, Alpha Marathon Technologies Inc.
purports to be an Ontario Corporation involved in the manufacturing and
distribution of plastic molding equipment. According to the Corporate Record
submitted by the Plaintiff at the hearing, Domenic Marzano is the President, Director
and Secretary of a numbered company which, from 1997 until 2007, was previously
known as Alpha Marathon Technologies Inc. The Defendants question the identity
and legal status of the Plaintiff for this and other reasons.
[13]
The Defendant, DSS is an Ontario Corporation
involved in the design and development of plastic wrap production equipment.
The Defendant, Castillo, is the principal of DSS.
[14]
In or around November, 2000, the parties entered
into a business relationship wherein Castillo would provide his research,
design, and development services to the Plaintiff in exchange for payment. The
Plaintiff alleges that this was an employment relationship. Castillo disputes
this and maintains that he was an independent contractor, as clearly set out in
the written Collaboration Agreement the parties later entered into.
[15]
In addition, in or around August 20, 2001, the
Plaintiff retained DSS to provide computer programming and modeling services.
This arrangement was related to an Industrial Research Assistance Program
Project, arising out of a contract between Alpha Marathon Technologies Inc. and
the National Research Council of Canada [the IRAP Project].
[16]
It appears that as a result of work done
pursuant to both these arrangements, new technology was invented relating to a “co-extrusion die system” [the Invention]. The
Plaintiff alleges that it owns or co-owns the Invention because Castillo was
its employee and because DSS acknowledged that all inventions arising out of the
IRAP Project would be owned by Alpha Marathon Technologies Inc. The Plaintiff also
alleges that its former president, Bentivoglio, “invented
and/or discovered” the Invention “together with”
the Defendants.
[17]
In its Statement of Claim, the Plaintiff states
that it intended to apply for a United States Patent respecting the Invention. The
Plaintiff alleges that it directed Castillo to act as its representative to instruct
a US Patent Agent. However, Castillo instructed the patent agent to list his
name alone as the inventor.
[18]
The US Patent was ultimately granted (US Patent
No. 6,902,385 B2), listing Castillo as the sole inventor. The US Patent is described
as a “continuation-in-part” of an earlier patent
in which Castillo held a one-third interest along with two other inventors,
neither of whom are involved in the present dispute.
[19]
The Plaintiff alleges that Castillo ignored or
refused its demands to execute an assignment of all the rights under the US
Patent to Alpha Marathon Technologies Inc.
[20]
In its Statement of Claim, the Plaintiff alleges
that it is the owner of all right, title and interest in and to all
technologies, discoveries and inventions claimed in the US Patent Application. The
Plaintiff seeks the following relief, as well as damages:
- A declaration that Bentivoglio is a co-inventor of technologies,
discoveries, and inventions claimed in the US Patent Application;
- A declaration that the Plaintiff is the owner (or, in the
alternative, “co-owner”) of all right,
title and interest in and to the technologies, discoveries and inventions
claimed in the US Patent Application, and all priority rights derived
therefrom;
- An interim, interlocutory, permanent and mandatory injunction
against the Defendants requiring them to “execute
all documents and to do all things necessary to convey” their
interest in the US Patent Application to the Plaintiff (or, in the
alternative, to declare Bentivoglio as inventor on said US Patent
Application);
- An interim, interlocutory, permanent and mandatory injunction
against the Defendants from infringing the US Patent Application;
- An interim, interlocutory, permanent and mandatory injunction
against the Defendants requiring them to “execute
any and all further papers which may be necessary or desirable to vest or
perfect the title in and to any and all technologies, discoveries and
inventions claimed in the US Patent Application”.
[21]
The Defendants recount the events and
relationship with the Plaintiff very differently. The Defendants deny that the
Plaintiff had any role in the discovery of the Invention, and assert that Bentivoglio’s
role was restricted to sales and marketing. The Defendants dispute that
Castillo was an employee and point to the explicit terms of the Collaboration
Agreement which state that Castillo is not an employee, but an independent
contractor. The Defendants add that the agreement was that DSS would retain
exclusive rights to any intellectual property developed during the course of
the relationship.
[22]
The Defendants also allege that the Plaintiff
clandestinely copied information about the invention from Castillo’s computer
after inviting Castillo to a meeting, then ejected him from the premises
without his computer.
[23]
According to the Defendants, the Plaintiff
applied for a Canadian patent respecting the same Invention in 2003, but
abandoned the application soon after the Defendants filed an objection. The
Defendants note that there is no Canadian patent or patent application with
respect to the Invention.
III.
The Motion
[24]
The Defendants’ primary argument is that the
Plaintiff’s action should be dismissed because this Court has no jurisdiction
to determine the claims given that the claims involve a dispute about the ownership
of a US patent, and turn on matters of contract law.
[25]
The Defendants also submit that the claim should
be dismissed pursuant to Rule 118 because Alpha Marathon Technologies Inc.
has passed through bankruptcy and been bought and sold, without any notice of transmission
or assignment of the interest of this litigation, as required by Rule 117.
[26]
In the event that the Statement of Claim is not
struck, the Defendants ask for Security for Costs pursuant to Rule 416 based on
their allegation that Alpha Marathon Technologies Inc. is a holding company,
which does not conduct any business, and is likely impecunious.
IV.
The Issues
[27]
The motion raises the following issues:
- Whether and
how the Plaintiff’s preliminary objections should be addressed.
- Whether the
Federal Court has the jurisdiction to determine the Plaintiff’s claims.
- Whether the action
should be dismissed based on the Plaintiff’s failure to notify the
Defendants and the Court of a transmission of interest.
- Whether, if
the action proceeds, the Plaintiff should be ordered to give security for
costs.
V.
The Preliminary Issues
[28]
The Plaintiff first challenges whether section
221 can be relied on to strike the Plaintiff’s Statement of Claim. A motion to
strike under Rule 221 will succeed where it is “plain
and obvious” that the claim discloses no reasonable cause of action (Hunt
v Carey Canada Inc., [1990] 2 S.C.R. 959, [1990] 1 WDCP (2d) 523). The “plain and obvious” test also applies to the striking
of claims for lack of jurisdiction (Hodgson et al. v Ermineskin
Indian Band et al. (2000), 180 FTR 285 at 289, 95 ACWS (3d) 788 (TD), aff’d
(2000) 267 NR 143, 102 ACWS (3d) 2 (CA), leave to appeal to SCC refused (2001)
276 NR 193, 2001 CarswellNat 1860).
[29]
The plain and obvious test was endorsed more
recently in City of Windsor, where the Court stated, at para 24:
The sole issue is whether the Federal Court
has jurisdiction under the ITO test to hear the Company’s application. If it is
plain and obvious that the Federal Court lacks jurisdiction to hear this
application, the motion to strike must succeed.
[30]
The Plaintiff next submits that the Defendants’
motion exceeds the Case Management Judge’s direction. The Plaintiff explains
that the Defendants initially brought their motion pursuant to Rule 221 to be
determined by the Case Management Judge without a complete Motion Record. The
Case Management Judge then set a date for the Court to determine the Motion and
directed the Defendants to serve and file a revised Motion Record with written
representations by July 24, 2017. The Plaintiff submits that the present motion
should be restricted only to the Rule 221 issue and should not address the
Defendants’ request for relief based on the Plaintiff’s alleged failure to give
notice of transmission of interest or to address the issue of security for
costs. I do not agree.
[31]
There is no requirement for a party to seek
leave of the Case Management Judge to bring a motion in the present
circumstances. The Plaintiff has not cited any authority for its proposition
that the motion should be restricted to that which the Case Management Judge
directed. Nor has the Plaintiff suggested that it has suffered any prejudice in
responding to the other grounds set out in the motion. The Plaintiff had more
than ample notice of this motion which was filed in July 2017, and ample time
to respond in advance of the hearing, which took place in October, 2017.
[32]
The Plaintiff also challenges the affidavit of
Castillo as irrelevant and inflammatory, and submits that it should be
disregarded because Rule 221(2) provides that no evidence shall be heard on a
Rule 221 motion.
[33]
As the Defendants note, affidavit evidence is
permissible where the motion to strike the pleadings is based on the Court’s
lack of jurisdiction. In Mil Davie v Hibernia Management & Development
Co. (1998), 226 NR 369 at para 8 (CanLII), 1998 CarswellNat 814 (CA), the
Federal Court of Appeal clarified that Rule 419, which is now Rule 221, could
be relied on to strike pleadings for want of jurisdiction. The Court of Appeal
also clarified that the prohibition on adducing evidence on such motions does
not apply where the issue is the jurisdiction of the Court. At para 8, the Federal
Court of Appeal stated:
Generally speaking, where an objection is
taken to its jurisdiction, the Court must be satisfied that there are
jurisdictional facts or allegations of such facts supporting an attribution of
jurisdiction. The existence of the necessary jurisdictional facts will normally
be found in the pleadings and in the affidavits filed in support of or in
response to the motion. In this respect, the prohibition contained in Rule
419(2) against the admissibility of evidence does not apply when it is the jurisdiction
of the Court which is contested as opposed to a mere objection to the pleadings
on the basis that they do not reveal a reasonable cause of action. We mention
this to dissipate any doubt as to the admissibility of affidavit evidence in
the present instance.
VI.
Does the Federal Court have Jurisdiction to
Adjudicate the Plaintiff’s Claim?
[34]
The parties were requested to provide additional
written submissions post-hearing to elaborate on the issue of the Court’s
jurisdiction, more specifically: the application of the ITO test and its
recent consideration in City of Windsor; whether the Federal Court has
the statutory jurisdiction to determine the claims at issue pursuant to Section
20(2); and, whether there is any jurisprudence in support of the Plaintiff’s position
that this Court has the jurisdiction to determine claims about the ownership of
an invention made in Canada but not patented in Canada. The post-hearing
submissions are summarized below along with the other written and oral
submissions.
A.
The Defendants’ Submissions
[35]
The Defendants refute the Plaintiff’s submission
that it has attorned to the jurisdiction of this Court. The Defendants submit that,
although the parties have been engaged in this litigation for several years and
have engaged in two or three mediation sessions, the Defendants have not and
cannot attorn to the jurisdiction of the Court because the jurisdiction simply
does not exist. (Canadian National Railway v Canada (Canadian Transportation
Commission) (1987), [1988] 2 FC 437; 1987 CarswellNat 226) (TD).
[36]
The Defendants further submit that the jurisdiction
of the Court can never be presumed. The onus to establish jurisdiction is on
the party bringing the claim, in this case, the Plaintiff (Norrail Transport
Inc. v Canadian Pacific Ltd. (1998), 154 FTR 161 at paras 22-23, 79
ACWS (3d) 288 (TD) [Norrail]).
[37]
The Defendants argue that the Plaintiff has not
established that the Federal Court has jurisdiction. The three essential
requirements for the Federal Court to have jurisdiction were established by the
Supreme Court of Canada in ITO: there must be a statutory grant of
jurisdiction by the federal Parliament; there must be an existing body of
federal law which is essential to the disposition of the case and which
nourishes the statutory grant of jurisdiction; and, the law on which the case
is based must be a “law of Canada” as the phrase
is used in section 101 of the Constitution Act¸1867, 30 & 31
Victoria, c3 (UK) [Constitution Act], meaning laws enacted by the
Parliament of Canada (see also Norrail at paras 24-25).
[38]
The Defendants submit that the first requirement
‒ a statutory grant of jurisdiction ‒ is not satisfied. Subsection
20(2), which provides concurrent jurisdiction for the Federal Court, is not applicable
because the words “any patent of invention” in
that section mean a patent of invention obtained in Canada, not simply an
invention or a patent of invention obtained in another country.
[39]
The Defendants point to the Plaintiff’s
Statement of Claim which seeks declaratory and injunctive relief related to the
ownership of a US patent. The Defendants submit that the question of who has
rights to the technology or invention claimed in a US patent has nothing to do
with the Patent Act, RSC 1985, c P4 [Patent Act] and cannot be
determined in accordance with any other law within the meaning of “laws of Canada”.
[40]
The Defendants also argue that even if a
Canadian patent or patent application existed, there would be no jurisdiction
for this Court to determine the claim because the dispute focuses on
contractual issues, including the alleged employment relationship between the
parties, and possibly tort (i.e., conversion). The Defendant notes that the Plaintiff
points only to the Collaboration Agreement in support of its claim to an ownership
interest in the US patent, which confirms that the basis of the dispute is
contract. The Defendants submit that the proper forum for the dispute is the
Superior Court of a province.
[41]
The Defendants submit that Kellogg Company v
Kellogg (1941), [1941] S.C.R. 242, [1941] 2 DLR 545 (SCC) [Kellogg],
relied on by the Plaintiff, is not authority for this Court to find
jurisdiction in this case, noting that in Kellogg, a Canadian patent application
was at issue, i.e., there was a statutory grant of authority.
The Defendants refute the Plaintiff’s
characterization of the dispute as about “inventorship”, noting that there is
no evidence on this issue, just a bare claim. Moreover, inventorship would have
to be determined based on American patent law. The Defendants note that the Plaintiff
has not pursued any action in the United States.
B.
The Plaintiff’s Submissions
[42]
The Plaintiff first submits that the Defendants
should have brought a preliminary motion pursuant to Rule 208 and, having not
done so, have clearly attorned to the jurisdiction of this Court, which
disposes of the jurisdictional argument. The Plaintiff notes that the
Defendants filed a Statement of Defence and Counterclaim in 2005, and in the
intervening years participated in two Court ordered mediations and a subsequent
“impromptu” mediation, yet never challenged the
jurisdiction of the Court, until now.
[43]
Second, the Plaintiff submits that it has met
the three part ITO test to establish that the Federal Court has jurisdiction.
[44]
The Plaintiff notes that in City of Windsor,
the Supreme Court of Canada reiterated the ITO test and stated that the starting
point is to identify the nature or character of the claim (at para 25). The
Plaintiff characterizes its claims as seeking equitable remedies (declaratory
and injunctive relief) about the inventorship and ownership of Canadian “inventions claimed in US Patent Application NO 10/060, 0081”.
The Plaintiff also states that the essential character of its claim is a
dispute over the inventorship and ownership of a Canadian invention made by
Canadians in Canada against a Canadian resident, i.e., it is not about a US
patent. The Plaintiff submits that the Federal Court has jurisdiction to decide
the question of ownership and inventorship. The Plaintiff also submits that its
claims for relief are based on common law with respect to patents, or are based
on patent law, both of which are matters of federal competence.
[45]
The Plaintiff submits that the contractual
aspect in the dispute does not preclude the Court’s jurisdiction where the
subject matter of the action concerns a patent, trade-mark or copyright (Kellogg
at 249-250).
[46]
The Plaintiff relies on subsection 20(2) of the Federal
Courts Act, which provides concurrent jurisdiction to the Federal Court where
a remedy is sought “at law or in equity respecting any
patent of invention”. The Plaintiff submits that it seeks equitable
remedies regarding “any patent of invention” and
points to Kellogg at 249-250, in support of its position.
[47]
With respect to the second part of the ITO
test, the Plaintiff submits that the federal common law regarding patents and inventorship,
which is well established (Apotex v Wellcome, 2002 SCC 77 at para
96-99, [2002] 4 S.C.R. 153 [Wellcome]; Weatherford v Corlac Inc,
2011 FCA 228 at para 99, 422 NR 49 [Weatherford]), applies. The
Plaintiff adds that the ownership of inventions made by employees is part of
the body of federal patent law which “surrounds”
the interpretation and application of the Patent Act (C Searle &
Co v Novopharm 2007 FCA 173 at para 36-40, 281 DLR (4th) 207).
[48]
With respect to the third part of the ITO test,
the Plaintiff submits that the “law of Canada”
relied on is both the federal common law regarding inventorship and patents,
and the Patent Act.
[49]
In response to the Court’s request to the
Plaintiff to provide jurisprudence to support its position that the Federal Court
has jurisdiction to determine a dispute about the ownership of a foreign patent
– or simply of an invention ‒ the Plaintiff continues to rely on Kellogg,
noting that Kellogg has been cited with approval in other cases,
including recently by the Federal Court of Appeal in Allergan v Apotex Inc,
2015 FC 367 at para 32- 33, 252 ACWS (3d) 433, rev’d on other grounds but aff’d
on jurisdiction, 2016 FCA 155 at para 11-13, 399 DLR (4th) 549 [Allergan].
[50]
The Plaintiff submits that Cellcor Corp v
Canada v Kotacka (1976), [1977] 1 FC 227, 1976 CarswellNat 87 (CA) [Cellcor]
(where the Court expressed disagreement with a passage in Kellogg) can
be distinguished because in Cellcor, a patent application was pending,
but in the present case, there is no patent application.
C.
The Federal Court Does Not Have Jurisdiction
(1)
The ITO test
[51]
In City of Windsor the Supreme
Court of Canada cautioned that the Federal Court only has the jurisdiction
conferred on it by statute and that “the language of
the [Federal Court Act] is completely determinative of the scope of the
Court’s jurisdiction” (at para 33).
[52]
As noted above, the Supreme Court of Canada reiterated
the three essential requirements for the Federal Court to have jurisdiction as
set out in ITO, all of which must be established, noting at para 34:
This Court held in ITO that a
statutory grant of jurisdiction is necessary, but not alone sufficient, for
the Federal Court to have jurisdiction in a given case. Because Parliament
established the Federal Court pursuant to its competence, under s. 101 of the Constitution
Act, 1867, to establish “additional Courts for the better Administration of
the Laws of Canada”, the role of the Federal Court is constitutionally limited
to administering “the Laws of Canada”, which in this context means federal law
(Thomas Fuller, at p. 707; Quebec North Shore, at pp. 1065-66; Consolidated
Distilleries, at pp. 521-22). The three-part ITO test for jurisdiction is
designed to ensure the Federal Court does not overstep this limited role (ITO,
at p. 766, per McIntyre J.):
1. There must be
a statutory grant of jurisdiction by the federal Parliament.
2. There must be
an existing body of federal law which is essential to the disposition of the
case and which nourishes the statutory grant of jurisdiction.
3. The law on
which the case is based must be “a law of Canada” as the phrase is used in s. 101
of the Constitution Act, 1867.
[53]
Before assessing whether the three part test is
met, the essential nature of the Plaintiff’s claim must be considered. As the
Supreme Court of Canada noted in City of Windsor at para 25, “the conferral of jurisdiction depends on the nature of the
claim or remedy sought”, adding that “Jurisdiction
is not assessed in a piecemeal or issue-by-issue fashion”.
[54]
The Plaintiff has characterized its claims in
several ways and made related submissions that are difficult to reconcile. The
Plaintiff states that it seeks equitable remedies (declaratory and injunctive
relief) about the inventorship and ownership of Canadian inventions claimed in
a US Patent. The Plaintiff also states that the essential character of its
claim is a dispute over the inventorship and ownership of a Canadian invention
made by Canadians in Canada against a Canadian resident, i.e., it is not about
an US patent or a patent at all. However, in relying on Kellogg, the
Plaintiff argues that the presence of a contractual aspect in the dispute does
not preclude the Court’s jurisdiction “where the
subject matter of the action concerns a patent, trade‑mark or copyright”,
which is inconsistent with the Plaintiff’s characterization of its claim as
about an invention and not a patent.
[55]
The Plaintiff also submits that the well-established
federal common law dealing with patents and inventorship provides the basis for
its claim and also “nourishes” it, at the second
part of the ITO test. The Plaintiff adds that the ownership of
inventions made by employees is part of the body of federal patent law which “surrounds” the interpretation and application of the Patent
Act. However, the action is not based on the provisions of the Patent
Act.
[56]
The Plaintiff’s Statement of Claim cannot be
ignored in identifying the nature of the claim. As noted above, the Plaintiff seeks,
among other relief: a declaration that it is the owner (or, in the alternative,
“co-owner”) of all right, title and interest
in and to the technologies, discoveries and inventions claimed in the US Patent
Application; and, an interim, interlocutory, permanent and mandatory
injunction against the Defendants from infringing the US Patent Application.
To the extent that the Plaintiff suggests some distinction between a patent
“application” and a patent, the Plaintiff
acknowledged that the US Patent was issued.
[57]
In my view, the essential nature of the
Plaintiff’s claim is declaratory and injunctive relief (equitable remedies) with
respect to the ownership of an invention, which is also the subject matter of a
US Patent. Given this characterization of the claim, the first question is
whether there is a statutory grant of authority pursuant to subsection 20(2).
(2)
The Scope of Subsection 20 (2) of the Federal
Courts Act
[58]
Section 20 of the Federal Courts Act
provides:
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20 (1) The Federal Court has exclusive original jurisdiction,
between subject and subject as well as otherwise,
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20 (1) La Cour fédérale a compétence exclusive, en première
instance, dans les cas suivants opposant notamment des administrés :
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(a) in all cases of conflicting applications for any patent of
invention or for any certificate of supplementary protection under the Patent
Act, or for the registration of any copyright, trade-mark, industrial
design or topography within the meaning of the Integrated Circuit
Topography Act; and
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a) conflit des demandes de brevet d’invention ou de certificat de
protection supplémentaire sous le régime de la Loi sur les brevets, ou
d’enregistrement d’un droit d’auteur, d’une marque de commerce, d’un dessin
industriel ou d’une topographie au sens de la Loi sur les topographies de
circuits intégrés;
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(b) in all cases
in which it is sought to impeach or annul any patent of invention or any
certificate of supplementary protection issued under the Patent Act, or
to have any entry in any register of copyrights, trade-marks, industrial
designs or topographies referred to in paragraph (a) made, expunged, varied
or rectified.
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b) tentative
d’invalidation ou d’annulation d’un brevet d’invention ou d’un certificat de
protection supplémentaire délivré sous le régime de la Loi sur les brevets,
ou tentative d’inscription, de radiation ou de modification dans un registre
de droits d’auteur, de marques de commerce, de dessins industriels ou de
topographies visées à l’alinéa a).
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[59]
As explained in greater detail below, I am of
the view that subsection 20(2) does not provide a statutory grant of
jurisdiction with respect to this dispute. In order to fall within subsection
20(2), the Plaintiff must be seeking a remedy that arises from “federal law”. With respect to patents, the only
relevant “federal law” is the Patent Act, which
does not create remedies respecting the ownership of unpatented inventions or
foreign patents.
[60]
In asserting that subsection 20(2) provides a
statutory grant of jurisdiction over this dispute, the Plaintiff relies almost
exclusively on Kellogg. Kellogg involved two competing patent
applications for the same product allegedly made by an employer and its former
employee (whose estate was pursuing the claim). The Commissioner of Patents
determined that the respondent’s late husband was the first inventor. The
appellant, employer, then launched proceedings in the Exchequer Court to
determine the rights of the parties. One of the alternative claims made by the
appellant was that even if the employee (the respondent’s husband) was the true
inventor, the appellant was the owner of the invention by virtue of its
contract of employment with the employee. The Exchequer Court struck out the
alternative claim on the ground that that it was a contractual issue over which
the Court had no jurisdiction. The Supreme Court disagreed and restored the
claim. The Supreme Court noted, at 249, that presuming the allegations in the
alternative claim are true, this would provide one reason to declare the
appellant entitled to the issue of a patent, including the claims in conflict,
and would lead to the remedies sought which are within section 44 of the Patent
Act, 1935 (Dom c32). The Supreme Court then stated at page 249-250),
“It is undoubtedly true…that the
Exchequer Court has no jurisdiction to determine an issue concerning a
contract between subject and subject…but here the subject-matter of the
appellant’s allegation only incidentally refers to the contract of
employment…The allegation primarily concerns the invention alleged to have been
made by [the employee] and of which the appellant claims to be the owner as
a result of the contract and of the other facts set forth; in the
allegation. The contract and the claims based thereon are advanced for the
purpose of establishing that the appellant is entitled both to the rights
deriving from the invention and to the issue of a patent in its own name. That
is precisely the remedy which the Exchequer Court of Canada has the power to grant
under paragraph (iv) of subsec. 8 of sec. 44 of the Patent Act.
[Emphasis added]
[61]
The Plaintiff first relies on Kellogg for
the proposition that, although some contractual issues are involved in the
determination of its claim, the jurisdiction of the Federal Court is not
precluded. This proposition is not in dispute. Kellogg is still cited
for the proposition that the Federal Court may resolve “incidental”
contractual issues where the overall claim is, in “pith
and substance”, within the Court’s jurisdiction (ITO at 781; Allergan
at paras 11-13; Ballantrae Holdings Inc. v Pheonix Sun (The), 2016
FC 570 at para 142, 267 ACWS (3d) 259). In Kellogg, the Court found that
the remedy sought was based on section 44 of the Patent Act and that the
contractual issue was incidental; the overall claim was within the Court’s
jurisdiction.
[62]
In Allergen, at paras 11-13, the Federal
Court of Appeal reiterated that contractual issues can be addressed by the
Federal Court where it is “part and parcel of a matter
over which the Court has statutory jurisdiction”. Justice Stratas
explained at para 13:
[13] On the issue of jurisdiction, I
agree with the Federal Court and substantially adopt its analysis. I would add
the following. Contract law, when viewed in a vacuum, is normally under
provincial jurisdiction. However, the Federal Court has jurisdiction when the
contract law issue before the Court is part and parcel of a matter over which
the Federal Court has statutory jurisdiction, there is federal law essential to
the determination of the matter, and that federal law is valid under the
constitutional division of powers: ITO-Int’l Terminal Operators v. Miida
Electronics, [1986] 1 S.C.R. 752, 28 D.L.R. (4th) 641; Canadian Transit
Company v. Windsor (Corporation of the City), 2015 FCA 88, 384 D.L.R. (4th)
547.
[63]
In Salt Canada Inc v Baker, 2016 FC 830, 269
ACWS (3d) 153 [Salt Canada] the applicant sought a declaration under
section 52 of the Patent Act that it was the owner of a registered
Canadian patent. The Court acknowledged that it had authority to determine
questions of patent ownership in some circumstances, but found that the Court “lacks jurisdiction where determination of ownership of the
patent depends upon the application and interpretation of contract law
principles” (para 20). The Court noted that the common thread in the
relevant jurisprudence is that the Court is without jurisdiction when “determining patent ownership first requires the
interpretation of contractual documents” (para 23).
[64]
As the jurisprudence makes clear, there must
first be a statutory grant of jurisdiction. The incidental contractual issues
will not necessarily preclude jurisdiction if the contractual dispute is “part and parcel” of the overall claim, which is
otherwise within the Court’s jurisdiction. On the other hand, where the claim
is “purely and simply” a contractual dispute, or
where an issue over which the Court might have jurisdiction is “secondary to and dependent upon” the resolution of a
contractual issue, the Court has no jurisdiction (see Salt Canada).
[65]
These principles are well established, however,
they are of no assistance to the Plaintiff. The question in the present case is
not simply whether the contractual issues are “part and
parcel” of the overall claims or merely incidental, but whether the overall
claims are, in “pith and substance”, within the
Court’s jurisdiction (Kellogg), i.e., whether there is a statutory grant
of jurisdiction.
[66]
In attempting to address this question, the
Plaintiff also relies on Kellogg for the proposition that subsection
20(2) provides jurisdiction where a remedy is sought in law or equity
concerning “any patent of invention”. In Kellogg,
the Supreme Court of Canada’s comments suggest a broad interpretation of
paragraph 22(c) of the Exchequer Court Act, RSC 1927, c 34 [Exchequer
Court Act] which is the forerunner/predecessor to the current
subsection 20(2) of the Federal Courts Act. The Supreme Court of Canada
noted at page 250:
It will be noticed that subsec. (c) deals
with the "remedy" which is sought. And it enacts that the Exchequer
Court shall have jurisdiction between subject and subject in all cases where a
"remedy is sought" "respecting any patent of invention"
"under the authority of any Act of the Parliament of Canada or at Common
Law or in Equity." The remedy sought by the appellant, as a result of
paragraph 8 of its statement of claim, is evidently a remedy in Equity
respecting a patent of invention. The appellant claims that remedy as a
consequence of the facts alleged in its paragraph 8. It claims the remedy as
owner deriving its title from the same alleged inventor of whom the respondent
claims to be the assignee, through other assignors. In such a case, the
invention or the right to the patent for the invention is primarily the subject
matter of the appellant's claim, and the remedy sought for is clearly
"respecting any patent of invention." And this is covered by subsec.
(c) of sec. 22 of the Exchequer Court Act, as it stands at present.
[67]
This paragraph, read in isolation, suggests that
the Federal Court has jurisdiction over any action which seeks any remedy
respecting a patent based on common law or equity. However, the words of the paragraph
must be considered in the context of the decision as a whole and the facts in Kellogg.
I do not interpret this as support for the view that subsection 20 (2) provides
this Court with concurrent jurisdiction in all circumstances where any
equitable remedy is sought with respect to any patent of invention. In Kellogg,
the subject of the claim was a pending Canadian patent application and a
decision of the Commissioner of Patents, which the appellants challenged. As
noted above, the Court found that the remedy sought was based on section 44 of
the Patent Act.
[68]
Moreover, this passage must be interpreted in
light of subsequent jurisprudence, both with respect to the Federal Courts
Act generally and subsection 20(2) in particular.
[69]
The subsequent jurisprudence reflects a more
constrained approach to the interpretation of the Federal Courts Act, which
considers the constitutional status and role of the Federal Court (ITO,
Quebec North Shore Paper v CP Ltd., [1977] 2 S.C.R. 1054, 71 DLR (3d) 111 [Quebec
North Shore], City of Windsor). As noted below, the broad and literal
reading of the forerunner to subsection 20(2) offered in Kellogg, particularly
with respect to the phrase “a remedy is sought under
the authority of an Act of Parliament or at law or in equity” has
not been reflected in more recent jurisprudence. The more recent jurisprudence has
confirmed that, in order to establish a statutory grant of jurisdiction, the “remedy” sought must arise from “federal law”, whether statutory or otherwise (Quebec
North Shore at 1065-1066). The jurisprudence does not support
the notion that subsection 20(2) provides a statutory grant of authority for
any action in which a party seeks any equitable remedy respecting any
patent of invention.
[70]
Cellcor is the
most analogous case to the present facts. In Cellcor, Kotacka sought a
declaration that it was “the inventor of the subject
matter of the United States Patent Application . . . filed by or on behalf of
the Defendant Hughes and the person entitled to apply for and obtain letters
patent therefor in Canada” (para 4). There was no equivalent Canadian
patent respecting the invention. The Federal Court had found that the
circumstances were similar to those in Kellogg and that the Court had
jurisdiction to determine the ownership of the subject matter of a US patent.
[71]
Cellcor appealed and argued that the Court had
no jurisdiction because the Patent Act did not provide any right to the
relief sought. The appellant argued that the federal legislative power under subsection
91(22) of the Constitution Act is limited to legislation relating to “patents of invention and discovery”, it does not
extend to legislation relating to inventions in themselves, and that the
jurisdiction of the Federal Court pursuant to section 20 of the Federal
Court Act would be subject to the same limitation. The appellant noted that
the dispute was about the ownership of an invention for which no patent was
applied for or obtained. The appellant added that section 20 of the Federal
Courts Act deals only with jurisdiction and does not create the right to
relief, which must be found in some other statutory provision; the Federal Court does not have jurisdiction in
respect of letters patent of invention if a right to relief does not exist
under federal legislation. In other words, there was no legal basis for the
relief sought.
[72]
The respondent, Kotacka, argued that the relief
sought was a declaration that, as the owner of the invention, it was entitled
to apply for letters patent under the Patent Act, which is relief “respecting a patent of invention within the
meaning of section 20”. In allowing the appeal,
the Court of Appeal agreed with the appellant, Cellcor’s, submission that there
was no legal basis for the relief claimed (i.e. to make a declaration that a
party was the owner of an invention) and, therefore, that the Court was without
jurisdiction, explaining at para 10,
10 The respondent's contention is, in
my view, ill-founded. Assuming that the declaration sought in this action is a
remedy respecting a patent of invention, within the meaning of section 20, I am
nevertheless of opinion that, in the circumstances of this case, it is not a
relief that the Federal Court has power to grant because I agree with the
appellants' view that there is no legal basis for it. Under the Patent
Act, the official who must first decide whether a patent may issue to an
applicant is the Commissioner. The Act does not empower the Courts to give him
directions on the decision he should reach; it is only if he is alleged to have
made a wrong decision that, under the statute, the Courts may be seized of the
matter. In my view, it would be contrary to the scheme of the Patent Act for
the Courts to assume the power, in a case like the present one, to make the
declaration sought. In my opinion, the power of the Court, under Rule 1723,
to make "binding declarations of right" cannot be exercised in respect
of letters patent of invention when its exercise is not expressly or impliedly
contemplated by the Patent Act or another statute within the legislative
jurisdiction of Parliament.
[Emphasis added]
[73]
The Federal Court of Appeal acknowledged, at
para 11, that its conclusion may be difficult to reconcile with the comments of
the Supreme Court of Canada in Kellogg at page 250, but added that the
statements in Kellogg were also difficult to reconcile with the Supreme
Court of Canada’s subsequent decision in Radio Corporation of America v
Philco Corporation (Delaware), [1966] S.C.R. 296, 56 DLR (2d) 407 [Radio
Corporation]. In Radio Corporation, the Supreme Court of Canada
found that, although the Exchequer Court had jurisdiction pursuant to paragraph
22(c) of the Exchequer Court Act (the forerunner to subsection 20(2) of
the Federal Courts Act) to determine conflicting applications for a
patent pursuant to section 45 of the Patent Act, the Court did not have
jurisdiction to determine claims which were not based on the Patent Act.
In other words, you need to first find the legal basis for the claim in the
federal statute or law.
[74]
In Cellcor, the Court of Appeal clearly
confirmed that jurisdiction cannot be found pursuant to subsection 20(2) where
the remedy sought has no legal basis. The Court of Appeal’s agreement with the
appellant’s arguments and its reference to the Patent Act reflect that
the Court of Appeal accepted that the Patent Act is the sole source of “federal law” in the realm of patents. Accordingly,
the Federal Court does not have jurisdiction to make declarations about the
ownership of inventions claimed within a foreign patent, for which there is no
Canadian equivalent, because the Patent Act does not give the Federal
Court that authority.
[75]
Cellcor was
applied in Suncor Energy Inc. v MMD Design, 2008 FC 488, 327 FTR 22 [Suncor].
In Suncor, the plaintiff sought a declaration that it was the true owner
of the intellectual property described in a Canadian patent application, for
which no patent had yet been issued. The Prothonotary struck the claim for lack
of jurisdiction. The Court upheld the Prothonotary’s order, noting at para 10:
The plaintiff submitted that the Cellcor
case could be distinguished from the present case in that there were no patent
entries at issue in Cellcor, above. I do not accept this argument. The
Federal Court of Appeal clearly stated in Cellcor, above that the proper
person to decide whether the patent should issue to the defendant was the
Commissioner. In the present case, that has not yet been done. It may be that
should the Commissioner make a wrong decision under the [Patent Act], this
Court may become seized of the matter.
Justice O’Keefe added at para 11, that “The
Prothonotary was correct in holding that this Court has no jurisdiction to make
a preliminary decision as to the ownership of the invention.”
[Emphasis added]
[76]
The Plaintiff argues that Cellcor should
be distinguished because there was a patent application in Cellcor, and
not in the present case. I do not agree. First, it is not clear whether there
was a patent application in Cellcor. Second, the Plaintiff’s submission
misses the point made by Cellcor and Suncor: the Court has no
jurisdiction to determine the ownership of an invention, because nothing in the
Patent Act allows for it. I also note that Justice O’Keefe rejected the
opposite argument, advanced by the plaintiff in Suncor, that Cellcor
could be distinguished because there were “no patent entries at issue in Cellcor”. In the
present case, there is no patent or patent application ‒ there is only
the invention.
[77]
Cellcor was also
relied on in Peak Innovations Inc. v Meadowland Flowers Ltd., 2009 FC
661, 75 CPR (4th) 359 [Peak Innovations], where Justice
Tremblay-Lamer rejected the Plaintiff’s argument that subsection 20(2) of the Federal
Courts Act could be relied on to find jurisdiction and stated at paras 8-9;
[8] The Plaintiff relies on s. 20(2)
of the Federal Courts Act, R.S.C. 1985, c. F-7 to argue the Federal
Court has jurisdiction over declaratory relief in the form of a declaration of
non-infringement, since it has jurisdiction to address “any remedy” – the
Federal Court has broad jurisdiction to address any remedy relating to
industrial designs, and the jurisdiction extends to any remedy sought under the
overall law of industrial designs. I disagree.
[9] Section 20(2) of the Federal
Courts Act only establishes jurisdiction for remedies where jurisdiction
for the underlying cause of action is established elsewhere in a statute. This
is supported by the analysis used in Radio Corporation of America v. Philco
Corporation (Delaware), [1966] S.C.R. 296 (S.C.C.); and Cellcor Corp. of
Canada Ltd. v. Kotacka (1976), 27 C.P.R. (2d) 68 (F.C.A.).
[78]
Justice Tremblay-Lamer made the same point as in
Cellcor ,that subsection 20(2) of the Federal Courts Act by
itself cannot establish jurisdiction for a cause of action; the remedy must be
found in a federal statute (at para 10, 12).
[79]
In City of Windsor, the Supreme Court of
Canada interpreted the term “under an Act of Parliament
of Canada or otherwise” in paragraph 23(c) to mean under “federal law, whether under statute or regulation or common
law” (at para 40, quoting Quebec North Shore). The Court stated,
at para 41, that this language requires “the claimant’s
cause of action, or the right to seek relief” to be “created or recognized by a federal statute, a federal
regulation or a rule of the common law dealing with a subject matter of federal
legislative competence”. Although the wording of subsection 20(2) is not
identical, it is similar.
[80]
Applying the same approach to the wording of
subsection 20(2), I cannot find that the Plaintiff’s remedy or “cause of action or the right to seek relief” is
created or recognized by “an Act of Parliament or at
law or in equity” dealing with a subject matter of federal legislative
competence.
[81]
With respect to patents, the only relevant
federal law is the Patent Act, which is a complete statutory scheme
(Clarizio et al, Hughes and Woodley on Patents, 2nd ed (Markham, Ont:
LexisNexis, 2005) (loose-leaf revision 57-6/2017) §2 at pg. 105, citing Commissioner
of Patents v Fabwerks Hoechst Atiengeselschaft Vormals Meister Bruning,
[1964] S.C.R. 49 at 57, 41 CPR 9, among others). This is implicit in Cellcor
and Suncor where the Courts held that they had no jurisdiction over the
dispute, because nothing in the Patent Act provided the remedy which the
Plaintiffs were seeking.
[82]
In Safematic, Inc. v Sensodec Oy (1988),
21 CPR (3d) 12, 20 FTR 132 (TD) [Safematic] the Plaintiffs alleged that
the Defendants falsely held themselves out as owners of patent rights which
belonged to the Plaintiffs, but for which the Plaintiffs held no patent. The
Court granted the Defendant’s motion to strike on jurisdictional grounds,
finding that “rights under the Patent Act only arise
once the monopoly has been granted” under that Act (at 21).
[83]
In the present case, no monopoly has been
granted under the Patent Act. Therefore, no rights arise from that Act. There
is nothing in the Patent Act that creates the relief sought by the Plaintiff
regarding the ownership of the invention. If the cause of action were to some
extent about inventorship (unrelated to the issue of the disputed employment or
contractual relationship), the Patent Act does not provide for the
Federal Court to resolve questions of inventorship until, at least, the party
has sought patent protection in Canada. Nor does any Canadian law govern the
ownership of infringement of a US Patent.
[84]
To summarize, the jurisprudence establishes
that: the Federal Court’s jurisdiction must be conferred by statute (City of
Windsor); the statutory grant of jurisdiction is not, on its own,
sufficient, i.e., all three elements of the ITO test must be established
(City of Windsor); the conferral of jurisdiction depends on the essential
nature of the claim (City of Windsor); contractual disputes will not
preclude the Federal Court’s jurisdiction where the overall claim is within the
Court’s statutory jurisdiction (Kellogg, ITO, Allergan)
but where the contractual dispute is central to resolving the issues, the Court
does not have jurisdiction (Kellogg, Salt Canada); the statutory
jurisdiction provided by subsection 20(2) deals only with jurisdiction and does
not create the right to relief or legal basis for the claim, which must be
found in a federal statute or other law within federal competence (Cellcor,
City of Windsor, Peak Innovations); the Federal Court does not have
jurisdiction to determine the ownership of an “invention”
(Suncor), because nothing in the Patent Act allows for it; rights
arise under the Patent Act, a matter of federal legislative competence,
only once the Patent has been granted or remedies under that Act have been
sought (Safematic).
[85]
Based on the jurisprudence, I find that there is
no statutory grant of jurisdiction for this Court to determine the Plaintiff’s
claims. Nothing in the Patent Act provides for determining the rights of
parties regarding a foreign patent, for which Canadian patent protection has
not been sought nor is there any federal common law which provides a
legal basis to determine the ownership of an invention.
(3)
Parts 2 and 3 of the ITO Test
[86]
Having found that the first step of the ITO
test has not been satisfied, it is unnecessary to consider steps two and three.
Moreover, the application of steps two and three are somewhat illogical given
the necessary connection to a statutory grant of jurisdiction, However, if subsection
20(2) could possibly be interpreted to provide a statutory grant of
jurisdiction, I also find that the Plaintiff has not satisfied the second and
third steps in the ITO test.
[87]
The second part of the ITO test imposes a
high threshold. It is not enough that a consideration of federal law is a “necessary component”; it must be essential to the
disposition of the case. At para 67 of City of Windsor, the Court
stated,
[67] The second part of the ITO test
requires that federal law be “essential to the disposition of the case” such
that it “nourishes the statutory grant of jurisdiction” (p. 766, per McIntyre
J.). Indeed, the fact that the claim involves rights and obligations conferred
by federal law will be relevant to this question. This requirement is important
because it speaks to the constitutional status and role of the Federal Court
under s. 101 of the Constitution Act, 1867.
[88]
The Court reiterated this again, at para 69,
noting, “[t]he fact that the Federal Court may have to
consider federal law as a necessary component is not alone sufficient; federal
law must be “essential to the disposition of the case”. It must “nourish” the
grant of jurisdiction.””
[89]
The Plaintiff submits that the federal common
law regarding inventorship must be considered to determine the claim. The
Plaintiff points to Wellcome at paras 96-99, and Weatherford at
para 99 as reflecting the body of federal common law regarding
inventorship.
[90]
In Wellcome, the issue was the validity
of a Canadian patent. Clearly there was no issue of the Federal Court’s
jurisdiction to determine the claims. The Supreme Court of Canada found that
the patent would only be void pursuant to section 53 of the Patent Act
if there was a material misstatement (regarding the inventor) that was
willfully made to mislead and found there was no such evidence. The Court referred
to the jurisprudence regarding the various nature and roles of inventors at paras
94-99, noting at para 99:
To the extent this suggests that an
individual who contributes to the inventive concept may be a co-inventor
without being the prime originator, I agree with it. To the extent, however,
that it can be read to include as inventors those who help the invention to
completion, but whose ingenuity is directed to verification rather than the
original inventive concept, I respectfully, for the reasons already given,
disagree.
[91]
Weatherford was
an infringement action pursuant to the Patent Act. Again, the Court’s
jurisdiction was not at issue. The Federal Court of Appeal, at para 99 endorsed
the law regarding “inventorship” as articulated
in Wellcome.
[92]
In the present case, the Plaintiff submits that
the federal common law regarding inventorship will apply to determine the
claims. I do not agree, based on the allegations in the Statement of Claim and
the submissions made on this Motion, that inventorship is a key issue in the
Plaintiff’s claims. The Plaintiff’s claims are based to a greater extent on the
contractual and/or alleged employment relationship. The common law regarding
inventorship, to the extent that Wellcome and Weatherford can be
regarded as common law, given that the Courts were addressing claims under the Patent
Act, is not essential to the disposition of the issues in this case. It
cannot be said to “nourish” the statutory grant
of jurisdiction, even if such jurisdiction were established.
[93]
The Plaintiff also submits that federal patent
law applies to the determination of the claims. As noted above, this is not so,
given that there is no Canadian patent at issue or any other remedy pursuant to
the Patent Act.
[94]
The third part of the ITO test requires
that the law on which the case is based must be “a law
of Canada” as the phrase is used in section 101 of the Constitution
Act, 1867. The federal law relied upon to support the Court’s jurisdiction
must be within the legislative competence of Canada (ITO at 777).
[95]
In City of Windsor, the Supreme
Court recognized that this part of the test is “somewhat
duplicative” of the second part, and that the first two parts of the
test do the “heavy lifting in the analysis” (City
of Windsor at para 117, Moldaver and Brown JJ’s dissent (though not on this
point), citing Stratas JA in the judgment under appeal, 2015 FCA 88). As found
above, the Plaintiff’s claim is not based on a law of Canada as that term has
been interpreted in City of Windsor and other cases.
(4)
Primarily a Contractual Dispute
[96]
Even if subsection 20(2) could be interpreted to
find a statutory grant of jurisdiction in these circumstances and if the other
two parts of the ITO test were also established; in other words, the
Court had concurrent jurisdiction, the pleadings reveal that the contractual
issues raised by the parties are central to resolving the claims. The
Plaintiff’s claims regarding its ownership or inventorship of the Invention
appear to depend to a greater extent on the contractual and/or alleged
employment relationship and not on the additional claim, which is not explained,
that Bentivoglio was a co-inventor.
[97]
The Plaintiff’s other claims are also clearly based
on the contractual relationships with Castillo, including the alleged
employment relationship, and with DSS (e.g. the IRAP Project). The Defendants
submit that these contracts explicitly state that intellectual property arising
from the relationship is to be retained by the Defendants. To resolve the
question of ownership, this Court would first be called upon to interpret the
contractual documents and other evidence that the parties might adduce
regarding the agreements they entered into. It does not appear that patent law,
even if it were applicable, would be essential to determine the claims. As
found in Salt Canada, this Court would not have the jurisdiction to resolve
the central contractual issues.
VII.
Should the Claim be struck pursuant to Rule
117-118?
[98]
The Defendants acknowledge that it does not have
first-hand knowledge of the Plaintiff’s business history, including its
bankruptcy. However, the Defendants note the answers provided by Mr. Marzano
(President of Alpha-Marathon Technologies Inc.) on cross‑examination of
his affidavit and a publicly available interview of Mr. Marzano which revealed
that he was Vice-President from 2000-2006, the company was sold in 2006, the
company was bankrupt in 2008, and Mr. Marzano purchased the assets of the
bankrupt company from the trustee in bankruptcy and incorporated a new company.
[99]
The Defendants also rely on the affidavit of
Castillo, which recounts, among other things, that: in 2006 Alpha Marathon
Technologies Inc. was sold to Robert Kazimowicz, who subsequently sold the
assets to Alpha Marathon Technologies Group Inc.; in 2008, Alpha
Marathon Technologies Group Inc. was declared bankrupt; and, subsequently, Mr.
Marzano purchased the assets of the company from the trustee in bankruptcy and established
Alpha Marathon Film Extrusion Technologies. The Defendants assert that this
litigation was not listed in the assets of the bankrupt company and it was not
notified of any transmission of interest.
[100] The Defendants submit that there is at least some evidence that the
plaintiff corporation was sold at least twice. The Defendants add that the
records relating to the bankruptcy of Alpha Marathon Technologies Inc. do not
list this litigation as an asset. The Defendants, therefore, submit that the
action should be dismissed pursuant to Rule 118 because the Plaintiff failed to
notify the Defendants of the transmission of interest in the litigation.
[101] The Plaintiff responds that the Defendants’ serious allegations that
the failure to provide notice amounts to criminal misconduct are based on
hearsay and speculation and are groundless and should be sanctioned by an award
of costs forthwith.
[102] The Plaintiff acknowledged in oral submissions that it did not
provide a notice of transmission of interest with respect to this litigation,
but submits that this was not necessary because a third party went bankrupt,
not Alpha Marathon Technologies Inc. At the hearing of this motion, the
Plaintiff submitted a Corporation Profile Report dated February 18, 2014 for a
numbered Ontario Company – 1234001 Ontario Inc. This Report includes the
Corporate Name History; 1234001 Ontario Inc. has been in effect since January
30, 2007 and Alpha Marathon Technologies Inc. was in effect from April 18,
1997. Domenic Marzano is identified as the Director, Secretary and the
President. The Plaintiff submits that the numbered company is the same legal
entity as the Plaintiff.
[103] I note that the Plaintiff cross-examined Castillo about the source
of his information about the bankruptcy of Alpha Marathon Technologies Inc.,
which he stated came from several sources, including publicly available
sources. The Plaintiff also questioned Castillo about his filing of a Statement
of Defence and Counterclaim in 2005, which was later amended, whether he
changed counsel at various times since 2005, and Castillo’s participation in
two or three mediations.
[104] I find that it is not necessary to address the Defendants’ motion
pursuant to Rule 118 given that the action is dismissed pursuant to Rule 221 for
the reasons provided above; this Court does not have jurisdiction to determine
the Plaintiff’s action. However, if I am wrong in finding that the Court lacks
jurisdiction, I am not satisfied, based on the limited and disputed evidence
provided regarding the sale, bankruptcy and subsequent revival of the Plaintiff
corporation, that the action should be dismissed pursuant to Rule 118 as a
result of the Plaintiff’s alleged failure to provide a notice of transmission
of interest as required by Rule 117.
VIII.
Should the Plaintiff be ordered to pay Security
for Costs?
[105] The Defendants alternatively argue that if the action proceeds, the
Plaintiff should provide security for costs. The Defendants submit that if
Alpha Marathon Technologies Inc. continues to exist, it is merely a shell and
may be without any assets. The Defendants dispute that their delay in bringing
this motion for security of costs bars this relief, noting that the Plaintiff
has offered no evidence that it would suffer prejudice as a result.
[106] The Plaintiff responds that the Court should not exercise its
discretion to order security for costs pursuant to Rule 416 given the delay of
the Defendants in bringing this motion and given that the Defendants rely on
facts that were known at least as early as 2014 at the time of examinations for
discovery.
[107] Again, I find that it is not necessary to address the Defendants’
motion pursuant to Rule 416 given that the action is dismissed pursuant to Rule
221 because this Court does not have jurisdiction to determine the Plaintiff’s
action. However, if I am wrong in that finding, and the action proceeds, the
issue of security of costs can be revisited based on the evidence available at
that time.
IX.
Conclusion
[108] In conclusion, the Defendants’ motion pursuant to Rule 221 to strike
the Plaintiff’s Statement of Claim is granted as it is plain and obvious that
this Court lacks jurisdiction to determine the Plaintiff’s claims. The Defendants’
alternative motion pursuant to Rule 118 to strike the Plaintiff’s Statement of
Claim due to its failure to notify the Defendants of a transmission of interest
need not be determined. Nor does the Defendants’ alternative motion pursuant to
Rule 416 need to be determined.
[109] I decline to make any Order with respect to Costs. Although the
Plaintiff launched its Statement of Claim in 2005 and the Defendants responded
with a Statement of Defence and Counterclaim, the litigation languished over
the years for long periods. Both parties participated in mediation attempts
‒ on and off ‒ which were unsuccessful. The parties apparently
assumed that this Court had jurisdiction. As noted above, the Plaintiff argued
in its response to the Defendants’ Counterclaim that the Court lacked
jurisdiction to determine certain claims, but did not consider the Court’s
jurisdiction to determine its own claims. The Plaintiff bears the onus of
establishing that the Court has jurisdiction. The Defendants’ motion, which
raises a fundamental issue of this Court’s jurisdiction, was made very late in
the day – after the trial date had been set and after time and effort had been
spent by both parties. Although successful on the motion, I do not find that
costs in favour of the Defendants are warranted. Nor do I find that the
Plaintiff should be awarded costs based on the Defendants’ allegations
regarding the possible consequences of the Plaintiff’s failure to provide
notice of a transmission of interest, if such a notice were required. Although
the allegations may be regarded by the Plaintiff as inflammatory, they are not
irrelevant or baseless. There is some evidence to support the Defendants’
motion pursuant to Rule 118, but it is not sufficient for the Court to make a
finding, nor is such a finding necessary.
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