Date: 20060803
Docket:
T-915-06
Citation:
2006 FC 952
PRESENT: The Honourable Mr.
Justice Harrington
BETWEEN:
AREVA NP GmbH and
AREVA NP CANADA LIMITED
Plaintiffs
and
ATOMIC
ENERGY OF CANADA LIMITED
Defendant
REASONS FOR
ORDER
[1]
On
23 August 2006, the Court will hear plaintiffs’ application for an
interlocutory injunction in this patent infringement case. The schedule leading
up thereto is tight. The parties are to exchange, or have exchanged,
affidavits, and a number of days of cross-examination thereon have been set
aside.
[2]
These
reasons deal with a responding motion by the defendant, Atomic Energy, to have
the Statement of Claim struck in its entirety for failing to disclose a cause
of action, or at least one within the jurisdiction of this Court, and to have the
action dismissed, or failing that for an order that some of the paragraphs of
the Statement of Claim be struck and the plaintiffs ordered to furnish better
particulars with respect to others. The matter was treated with urgency as the
ruling might well have considerable bearing on the scope of cross-examination
on the affidavits in support of or in opposition to the motion for an
interlocutory injunction.
[3]
The
day following the hearing, I dismissed Atomic Energy’s motion in its entirety.
These are the reasons why.
HISTORY OF THE
PROCEEDINGS
[4]
In
must be kept in mind that on a motion to strike a statement of claim pursuant
to Federal Courts Rule 221 on the ground that it discloses no reasonable cause
of action, it is assumed that the plaintiff will be able to prove the
allegations it has made, but that nevertheless it is plain and obvious that no
reasonable cause of action has been disclosed (Hunt v. Carey Canada Inc.,
[1990] 2 S.C.R. 959. The following history is therefore only the plaintiffs’ side
of the story.
[5]
Areva
NP GmbH, whom I shall call “Areva Germany”, is a worldwide
purveyor of technology and equipment of interest to the nuclear power
generation industry. Among other things, it has developed technology and
apparatuses for the mechanical cleaning of heat exchanger tubes. Oxide deposits
accumulate within these tubes and must be removed periodically. In this regard,
it owns a number of Canadian patents including number 2,280,348 (‘348) entitled
“Method for the Cleaning of Exchange Tubes and Collecting Device for the
Collection of Deposits from Heat Exchange Tubes”.
[6]
For
years, it worked with Atomic Energy, a Canadian Crown corporation, the
developer of the CANada Deuterium Uranium (CANDUTM) nuclear power
plants, on projects in Canada, and internationally. The relationship has ended
on bad terms. Areva Germany filed and served a Statement of Claim in which
it alleged that Atomic Energy has infringed and unless stopped will continue to
infringe the ‘348 patent, and has and will disclose confidential information
and trade secrets unless stopped. There are particular allegations with respect
to Bruce Power L.P., the operator of nuclear generating stations on Lake Huron.
Atomic Energy carried out some cleaning services at that installation last October
and is scheduled to carry out further work next month allegedly in infringement
of the patent and contrary to its contractual obligations not to disclose
valuable trade secrets.
[7]
The
Statement of Claim prayed that Atomic Energy be permanently enjoined from
practicing any methodology which falls within the scope of the patent and from
manufacturing, selling or using any device falling within the scope thereof, an
injunction restraining the use or disclosure of confidential information as
defined in various agreements between the parties, a declaration that the
patent is valid and infringed, damages or an accounting of profits, and related
relief.
[8]
In
reaction, Atomic Energy did two things. It moved for security for costs and it
moved to have the entire statement of claim struck.
[9]
The
motion to dismiss, as originally filed, had two parts to it. Insofar as the
Statement of Claim alleged the infringement of a patent, the allegations were
so bereaved of particulars that they should be struck for failing to disclose a
reasonable cause of action. Failing that the Court should order Areva Germany to furnish
better particulars. Some of the other paragraphs in the Statement of Claim
should be struck because they were immaterial, while others should be struck
because they did not pertain to a patent infringement action, but rather to an
action for breach of contract, over which this Court has no jurisdiction.
[10]
Areva
Germany did not sit
idly by. It voluntarily furnished particulars. It also amended its Statement of
Claim. Although it did not delete the paragraphs alleged to be irrelevant or as
disclosing a cause of action beyond the jurisdiction of this Court, it withdrew
its conclusions for an injunction and an accounting of profits arising from
breach of contract. However, it added a conclusion for punitive and exemplary
damages. It also, together Areva NP Canada Limited (Areva Canada), filed a
protective action in the Ontario Superior Court of Justice.
[11]
The
procedural manoeuvring was not yet over. Atomic Energy amended its motion
record to assert that the Federal Court action was now an abuse of process and
argued that this Court could not award punitive damages with respect to
contracts over which it does not have jurisdiction.
[12]
Finally,
and at least to some extent in an effort to ward off the Motion for Security
for Costs, Areva Germany moved that the Amended Statement of Claim be further
amended so that Areva Canada be added as a plaintiff.
[13]
At
the hearing, I authorized the issuance of a first Re-Amended Statement of Claim
to show Areva Canada as a
plaintiff, but nevertheless ordered that Areva Germany post security for costs.
ISSUES
[14]
A
motion to strike is governed by Federal Courts Rule 221. The Rule reads:
|
221.
(1) On motion, the Court may, at any time, order that a pleading, or
anything contained therein, be struck out, with or without leave to amend, on
the ground that it
(a)
discloses no reasonable cause of action or defence, as the case may be,
(b)
is immaterial or redundant,
(c)
is scandalous, frivolous or vexatious,
(d)
may prejudice or delay the fair trial of the action,
(e)
constitutes a departure from a previous pleading, or
(f)
is otherwise an abuse of the process of the Court,
and
may order the action be dismissed or judgment entered accordingly.
Evidence
(2)
No evidence shall be heard on a motion for an order under paragraph (1)(a).
|
221. (1) À tout moment,
la Cour peut, sur requête, ordonner la radiation de tout ou partie d'un acte
de procédure, avec ou sans autorisation de le modifier, au motif, selon le
cas :
a) qu'il ne révèle aucune cause d'action ou de défense valable;
b) qu'il n'est pas pertinent ou qu'il est redondant;
c) qu'il est scandaleux, frivole ou vexatoire;
d) qu'il risque de nuire à l'instruction équitable de l'action ou
de la retarder;
e) qu'il diverge d'un acte de procédure antérieur;
f) qu'il constitue autrement un abus de procédure.
Elle peut aussi ordonner que l'action soit rejetée ou qu'un
jugement soit enregistré en conséquence.
Preuve
(2) Aucune preuve n'est admissible dans le cadre d'une requête
invoquant le motif visé à l'alinéa (1)a).
|
[15]
The
issues are :
a) Should
certain paragraphs of the Amended Statement of Claim be struck on the basis
that either they do not disclose a cause of action over which this Court has jurisdiction,
or because even in a patent infringement action, the Court cannot award
punitive damages if the behaviour to be punished was with respect to contracts
beyond its jurisdiction?
b) Should
certain paragraphs be struck on the grounds that although the remedy sought is
within the jurisdiction of the Court, the Amended Statement of Claim fails to
disclose a reasonable cause of action? In the alternative, should the
plaintiffs be required to provide further and better particulars?
c) Should
certain paragraphs be struck on the grounds that they are immaterial?
d) Should the
entire Amended Statement of Claim be struck, and the action dismissed, on the
grounds that it is scandalous, frivolous or vexatious, or otherwise an abuse of
process of the Court?
FEDERAL COURT
JURISDICTION
[16]
Atomic
Energy does not take the position that this Court does not have jurisdiction
insofar as the action is one for patent infringement. The tripartite
jurisdictional test established by the Supreme Court in such cases as Canadian
Pacific Ltd. v. Quebec North Shore Paper Co., [1977] 2 S.C.R. 1054 and ITO-International
Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752 that
the matter must fall within a class of subject over which Parliament has
legislative authority, that there must be an existing body of federal law
essential to the disposition of the case, and that the administration of that
law has been confided to this Court, has been easily met.
[17]
Section
91(22) of the Constitution Act gives Parliament legislative authority
over “patents of invention and discovery”, Parliament has enacted the Patent
Act, which specifically deals with infringement, and it confided
jurisdiction upon the Federal Court pursuant to Section 20 of the Federal
Courts Act.
[18]
Atomic
Energy’s point is that the original Statement of Claim combined two causes of
action: patent infringement, over which the Court has jurisdiction, and breach
of contract, over which it has not. By the time its Motion to Strike was heard,
we were faced with quite a different Statement of Claim. The conclusions with
respect to breach of contract were dropped, but the contractual allegations
remained to support new conclusions with respect to punitive and exemplary
damages. Atomic Energy still asserts that the long recital of the contractual
history between the parties should be struck, not only on the grounds of immateriality
on which more will be said under that heading, but also because were the Court
to award exemplary and punitive damages, it would have to conclude that it was
in breach of contract, a contract over which this Court has no jurisdiction.
[19]
In
my view, the paragraphs in question should not be struck on jurisdictional
grounds for two reasons. The first is that it is not “plain and obvious” that
the contracts in question are beyond the jurisdiction of the Court. The second
is that even if they are, it is open for Areva to submit Atomic Energy’s
behaviour in relation thereto may justify punitive or exemplary damages, should
it be found the patent has been infringed.
[20]
It
has been well established in cases such as Hunt, supra, that a statement
of claim should not be struck unless it is “plain and obvious” that the
pleading discloses no reasonable cause of action. The plaintiffs should not be
driven from the judgment seat at the outset unless it is beyond reasonable
doubt that they have no case.
[21]
The
Court has not seen the contract. It is clear that this Court has jurisdiction
over the case as presently framed in the Amended Statement of Claim. It should
be emphasized that the plaintiffs unilaterally, and without Court order,
amended the Statement of Claim to delete the conclusions for an accounting of
profits from breach of contract. While it is true that in the abstract an
action for breach of contract pure and simple relates to the legislative class
of subject of property and civil rights and is thus reserved to the provinces and
to provincial Courts under Section 92 of the Constitution Act, the legal
concept of contract as such is neither provincial nor federal. Much depends on
the subject matter thereof. As Chief Justice Laskin pointed out in R. v.
Rhine, [1980] 2 S.C.R. 442, “it should hardly be necessary to add that
“contract” or other legal institutions, such as “tort” cannot be invariably
attributable to sole provincial legislative regulation or be deemed to be, as
common law, solely matters of provincial law.”
[22]
A
contract for the sale of goods is provincial. However, a contract for a sale of
a ship is federal as being a matter of navigation and shipping (Antares Shipping
Corp v. The Capricorn, [1980] 1 S.C.R. 553). Likewise, a contract of
insurance is provincial, but a contract of marine insurance is federal as
falling within navigation and shipping (Zavarovalna Skupnost Triglav v.
Terrasses Jewellers Inc., [1983] 1 S.C.R. 283).
[23]
The
first question therefore is whether the contracts are sufficiently proximate to
the patent that they fall within the federal legislative class of subject of
patents of invention (ITO, supra, paragraph 22). Since the contracts are
not before the Court, that question cannot be answered at this time.
[24]
The
second question is whether there is operative federal law. Section 20(2) of the
Federal Courts Act gives the Federal Court concurrent jurisdiction in
all cases “in which a remedy is sought under the authority of An Act of
Parliament or at law or in equity respecting any patent of invention…”. Did
Parliament simply grant jurisdiction or did it referentially incorporate or
“federalize” common law and equity? On this point, see ITO, supra, paragraph
18.
[25]
As
noted by Chief Justice Jackett in Associated Metals & Minerals Corp v.
The Evie W, [1978] 2 F.C. 710, the pre-Confederation laws continued under
Section 129 of the Constitution Act, be they the Common Law of England,
a United Kingdom Statute or a pre-Confederation Colonial Statute, are federal
law if they can be repealed, abolished or altered by the Parliament of Canada. The
Supreme Court concluded ([1980] 2 S.C.R. 322) that he reached the correct
conclusion as to jurisdiction in light of its own decision in Tropwood A.G.
v. Sivaco Wire & Nail Co., [1979] 2 S.C.R. 157.
[26]
Given
Rhine, supra, and the comments of Chief Justice Jackett, I think it
arguable that Section 20 of the Federal Courts Act established a body of
federal law beyond the Patent Act. Certainly, I would not have dismissed
without argument on that point.
[27]
Since
I am not prepared, at this stage, to hold that this Court does not have
jurisdiction over claims arising from the alleged breaches of contract, it
follows that I will not strike the allegations in the Statement of Claim
relating thereto. Moreover, even if the contracts are matters of property and
civil rights, it does not follow that this Court cannot take them into account.
ITO stands for the proposition that as long as the pith and substance of
the action is federal, the Court may have to consider incidental provincial
law. In Kellogg Co. v. Kellogg, [1941] S.C.R. 242, the Court held that
although the Federal Court’s predecessor, the Exchequer Court, had no
jurisdiction to determine an issue truly and simply concerning a contract
between subject and subject, the action primarily related to an invention. In
determining the case, the Court had to consider the employment contract between
the parties. Likewise, in a patent action one cannot be insulated from
behaviour which calls for punitive damages because that behaviour arose within
the context of a contract which was incidentally relevant. I repeat that the
contracts in question are not before the Court on this motion.
[28]
In
my view, it follows that I will not strike the allegations in the Statement of
Claim pertaining to breach of contract at this stage. This is not a preliminary
determination of a point of law. The question is not whether the Court has
jurisdiction. The question rather is whether it is “plain and obvious” that it
has not. Without the contract, and perhaps other evidence that goes to
jurisdiction, the Statement of Claim must stand.
ARE THE PATENT
INFRINGEMENT ALLEGATIONS SUFFICIENT?
[29]
The
Statement of Claim, and the particulars furnished so far, allege that Atomic
Energy has infringed certain specified claims contained in the patent. Although
those claims are not reproduced in the Statement of Claim itself, the defendant
acknowledges it has copy of the patent. Its complaint is that not enough detail
has been given as to how it infringed the patent. In my view, there is more
than enough meat in the Amended Statement of Claim to permit the defendant to
know the case it has to meet and to file its Statement of Defence accordingly.
[30]
As
Mr. Justice Marceau, as he then was, held in Embee Electronic Agencies Ltd.
v. Agence Sherwood Agencies Inc. et al (1979), 43 C.P.R. (2d) 285, the
point may be revisited after the filing of the Statement of Defence. After
pleadings are closed, the rules allow for discovery of documents and
examinations for discovery.
ARE SOME PARTS OF THE
STATEMENT OF CLAIM IMMATERIAL?
[31]
Rule
174 requires every pleading to contain a concise statement of the material
facts on which the party relies. Atomic Energy’s position, which admittedly has
logic to it, is that the action is for breach of one specific patent. The
Statement of Claim refers to three other patents, and, as aforesaid, to various
contracts between the parties. The Court need not and should not look at other
patents, or at the contracts, to determine whether or not the patent has been
infringed. After all, a patent is notionally addressed to a reasonably skilled
person in the field who would be able without extrinsic help to duplicate the
invention covered by the patent once the monopoly has expired.
[32]
While
that view has merit, the plaintiffs have to be allowed reasonable latitude in
setting out their story. It cannot be said that at this stage, before the
defendant has even put in a defence, that the other patents and the contracts
are not even incidentally relevant, particularly when one takes into account
the allegation that the defendant’s conduct constitutes more than a deliberate
infringement of patent rights, and was “highhanded, callous, malicious,
oppressive, arbitrary and high reprehensible…” Even if the contract is only incidental,
it does not follow that it cannot be pleaded (Kellogg, supra; and Titan
Linkabit Corp v. SEE See Electronic Engineering Inc., [1992] F.C.J. No. 807
(QL)). Even in an action limited to patent infringement, the party’s conduct,
including its alleged disdain of confidential agreements may be relevant when
it comes to punitive or exemplary damages (Dimplex North America Limited v.
CPM Corp., [2006] F.C.J. No. 776 (QL).
[33]
Although
it has been said that a claim for punitive damages need not be specifically
pleaded, the better view as set out in Whiten v. Pilot Insurance Co.,
[2002] 1 S.C.R. 595 by Mr. Justice Binnie at paragraph 86 is:
[…] In my view, the suggestion
that no pleading is necessary overlooks the basic proposition in our justice
system that before someone is punished they ought to have advance notice of the
charge sufficient to allow them to consider the scope of their jeopardy as well
as the opportunity to respond to it. This can only be assured if the
claim for punitive damages, as opposed to compensatory damages, is not buried
in a general reference to general damages. This principle, which is
really no more than a rule of fairness, is made explicit in the civil rules of
some of our trial courts. […]
[34]
Were
the allegations not contained in the Statement of Claim, the defendant might be
taken by surprise and would have been entitled to seek particulars.
[35]
While
Atomic Energy conceded that this Court may award punitive damages, it argues
that in this case the Court can only take into account its behaviour during the
litigation process itself. This Court, unlike the Ontario Superior Court of
Justice, cannot look, it suggests, at the manner in which it performed or
breached the contracts it had with the plaintiffs. Even if in the fullness of
time that position turns out to be correct because the contracts are found not
to have been intimately connected with the alleged patent infringement, it
would be inappropriate to strike the paragraphs now, as it is not “plain and
obvious” that its position is legally correct.
ABUSE OF PROCESS
[36]
Section
20 of the Federal Courts Act accords the Federal Court concurrent
jurisdiction with other courts, in this case the Ontario Superior Court of
Justice. Given Atomic Energy’s attack on part of the original Statement of
Claim on jurisdictional grounds, it was quite natural the plaintiffs would
protect themselves by filing an action in the Ontario Superior Court. The
general rule is that if more than one Court has jurisdiction, the choice rests
with the plaintiff, not the defendant. Since the Federal Court unfortunately is
plagued with Constitution limits on its jurisdiction, protective actions in
provincial Courts are not uncommon. Areva has done nothing out of the ordinary.
There may come a time where the plaintiffs are required to make an election,
but that time has not yet come. The Court was informed that Areva could not get
a hearing in the Ontario Superior Court on the interlocutory injunction motion
until September 15, and that they elected to continue in this Court because of
their concern that Atomic Energy might be performing the Bruce contract before
then. This continuation of this action is neither abusive nor vexatious.
[37]
For
these reasons, the motion is dismissed with costs.
“Sean Harrington”
Ottawa, Ontario
August 3, 2006
Email this Content