Inhesion Industrial Co. v. Anglo Canadian Mercantile Co., docket T-2410-98

Date: 20000413

Docket: T-2410-98

BETWEEN:

INHESION INDUSTRIAL CO. LTD.

Plaintiff

- and -

ANGLO CANADIAN MERCANTILE CO. LTD.

Defendant

REASONS FOR ORDER

O"KEEFE J.

[1]      This hearing concerned a motion for summary judgment made by the plaintiff Inhesion Industrial Co. Ltd. ("Inhesion"). As well, the defendant Anglo is maintaining that the parties have settled the dispute and consequently, argues that an order should issue granting summary judgment in favour of the defendant. The issues surrounding the striking of the reply affidavit of Aric Chang and the affidavit of Charles A. Bertrand were not in issue before me.

BACKGROUND

[2]      The underlying action in the case at bar concerns copyright infringement,

wherein Inhesion alleges copying by Anglo of a particular artistic work namely, a poinsettia design ("Poinsettia Pattern") which was created and affixed to various pieces of tableware sold by Inhesion. The statement of claim was filed on December 21, 1998 and claimed for:

(1)      A declaration that Anglo has infringed Inhesion"s copyright in the Poinsettia Pattern;

(2)      Injunctive relief;

(3)      Damages and an accounting of profits;

(4)      Aggravated, punitive and exemplary damages; and

(5)      An order directing the defendant to deliver up under oath.

[3]      Inhesion is a Hong Kong corporation specializing in the manufacture, export and sale of fine porcelain china, specifically tableware. Various artistic designs are affixed to the china. According to the evidence filed in support of the motion for summary judgment, Inhesion designs approximately 100 new patterns for use on tableware every year. The designs are created by employees of Inhesion or its wholly owned subsidiary, Concord Ceramics Shenzhen Limited ("Concord"), with some independent contractors providing designs to the plaintiff. According to Inhesion, the underside of its tableware displays Inhesion"s "Sunflower & Design" trade-mark and indicates that the product originates in China.

[4]      In its motion record, Inhesion states that on December 8, 1990, in the regular

course of his employment with Concord, Tsai Min Jen, a resident of China, created the Poinsettia Pattern. The copyright in the Poinsettia Pattern was allegedly assigned to Inhesion by Concord on August 5, 1998.

[5]      Inhesion exports and sells its products to major department stores. One of its

customers is Canadian Tire Limited ("Canadian Tire"). More specifically, Inhesion sells its Poinsettia Pattern, to Canadian Tire for sale in Canada in advance of, and during the Christmas season. Beginning in 1993, the Ponsettia Pattern has been exclusively sold in Canada by Canadian Tire during the Christmas season. The Poinsettia Pattern was an extremely popular product, with sales growing each year. With the increasing popularity of the design, new products such as a gravy boat, butter dish and a cake plate were added to the original product line.

[6]      In January 1998, Canadian Tire requested a price decrease from Inhesion with

respect to tableware bearing the Poinsettia Pattern that it would purchase for the 1998 Christmas season. Inhesion refused to provide such a price decrease. Canadian Tire then informed Inhesion that it would not be purchasing any tableware from Inhesion for the 1998 Christmas season and would instead be looking for a new pattern from another manufacturer.

[7]      In May, 1998, Inhesion learned that a plant in China which the company

occasionally contracted to produce tableware was manufacturing tableware for a third party, which tableware carried an exact duplicate pattern of Inhesion"s Poinsettia Pattern. Through further investigation, Inhesion learned that this particular tableware was being manufactured at the request of Anglo for resale to Canadian Tire. Anglo is a major importer and distributor of glassware and tableware in Canada.

[8]      Subsequent to this discovery, representatives of Inhesion approached Canadian

Tire. Mr. Dykeman of Canadian Tire, allegedly admitted that it was purchasing the Anglo tableware and that the design was deliberately copied from Inhesion"s Poinsettia Pattern, and was an exact replica of the pattern.

[9]      Inhesion sent a cease and desist letter to Anglo on August 21, 1998 informing

Anglo of Inhesion"s claim to copyright in the Poinsettia Pattern. The letter demanded that Anglo cease all activity involving the Poinsettia Pattern. Anglo refused and proceeded to import the product into Canada and sold tableware bearing the Poinsettia Pattern to Canadian Tire for the 1998 Christmas season.

                                        

[10]      Anglo had, for a number of years, provided Canadian Tire with Poinsettia

glassware and other products. Anglo has imported and distributed fine tableware, glassware and dinnerware throughout Canada and other countries for many years. Prior to 1996, Libbey, another major glassware manufacturer had supplied the glassware to Canadian Tire. When asked by Canadian Tire to supply the Poinsettia Pattern tableware, Anglo allegedly believed that the rights to the Poinsettia Pattern were owned by Canadian Tire.

[11]      In December, 1998, Anglo commenced its action against Anglo for damages for

copyright infringement and injunctive relief.

[12]      Representatives of Anglo, Inhesion and Canadian Tire met in January, 1999 in an

attempt to try to settle the matter, but without apparent success. Inhesion then matched Anglo"s price and received Canadian Tire"s 1999 Christmas order for the Poinsettia tableware.

[13]      Anglo claims that Inhesion was aware of Anglo"s manufacture of Poinsettia

tableware in May, 1998, but waited until August 21, 1998 to first notify Anglo that Inhesion claimed copyright in the Poinsettia design.

                            

[14]      As evidence on this motion, the plaintiff has filed the affidavits of Aric Chang and

the defendant relies upon the affidavits of Charles A. Bertrand, president of Anglo and the affidavit of Selim Moghrabi, Anglo"s former solicitor.

ISSUES

[15]      Two issues are raised by the parties. These involve the merits and propriety of the

motion for summary judgment as well as the existence of a settlement between the parties.

[16]      At the hearing of this motion, the plaintiff requested that the settlement issue be

dealt with at trial as there were issues of credibility at stake. I raised with him the question as to what there would be to litigate if the parties had settled the matter. The Court was advised that it would depend on the terms of the settlement, if one existed, which he denied. Counsel for the defendant argued that the matter was settled and that ended the matter. After discussion, it was agreed that the motion for summary judgment would proceed.

LAW

[17]      Motions for summary judgment are governed by Federal Court Rules 213, 215

and 216:

213. Where available to plaintiff (1) A plaintiff may, after the defendant has filed a defence, or earlier with leave of the Court, and at any time before the time and place for trial are fixed, bring a motion for summary judgment on all or part of the claim set out in the statement of claim. (2) Where available to defendant"A defendant may, after serving and filing a defence and at any time before the time and place for trial are fixed, bring a motion for summary judgment dismissing all or part of the claim set out in the statement of claim. 215. Mere denial A response to a motion for summary judgment shall not rest merely on allegations or denials of the pleadings of the moving party, but must set out specific facts showing that there is a genuine issue for trial. 216. Where no genuine issue for trial (1) Where on a motion for summary judgment the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant summary judgment accordingly. (2) Genuine issue of amount or question of law"Where on a motion for summary judgment the Court is satisfied that the only genuine issue is (a)      the amount to which the moving party is entitled, the Court may order a trial of that issue or grant summary judgment with a reference under rule 153 to determine the amount; or (b)      a question of law, the Court may determine the question and grant summary judgment accordingly. (3) Summary judgment"Where on a motion for summary judgment the Court decides that there is a genuine issue with respect to a claim or defence, the Court may nevertheless grant summary judgment in favour of any party, either on an issue or generally, if the Court is able on the whole of the evidence to find the facts necessary to decide the questions of fact and law. (4) Where motion dismissed"Where a motion for summary judgment is dismissed in whole or in part, the Court may order the action, or the issues in the action not disposed of by summary judgment, to proceed to trial in the usual way or order that the action be conducted as a specially managed proceeding.

213. Requête du demandeur (1) Le demandeur peut, après le dépôt de la défense du défendeur " ou avant si la Cour l"autorise " et avant que l"heure, la date et le lieu de l"instruction soient fixés, présenter une requête pour obtenir un jugement sommaire sur tout ou partie de la réclamation contenue dans la déclaration. (2) Requête du défendeur"Le défendeur peut, après avoir signifié et déposé sa défense et avant que l"heure, la date et le lieu de l"instruction soient fixés, présenter une requête pour obtenir un jugement sommaire rejetant tout ou partie de la réclamation contenue dans la déclaration. 215. Réponse suffisante La réponse à une requête en jugement sommaire ne peut être fondée uniquement sur les allégations ou les dénégations contenues dans les actes de procédure déposés par le requérant. Elle doit plutôt énoncer les faits précis démontrant l"existence d"une véritable question litigieuse. 216. Absence de véritable question litigieuse (1) Lorsque, par suite d"une requête en jugement sommaire, la Cour est convaincue qu"il n"existe pas de véritable question litigieuse quant à une déclaration ou à une défense, elle rend un jugement sommaire en conséquence. (2) Somme d"argent ou point de droit"Lorsque, par suite d"une requête en jugement sommaire, la Cour est convaincue que la seule véritable question litigieuse est: a)      le montant auquel le requérant a droit, elle peut ordonner l"instruction de la question ou rendre un jugement sommaire assorti d"un renvoi pour détermination du montant conformément à la règle 153; b)      un point de droit, elle peut statuer sur celui-ci et rendre un jugement sommaire en conséquence. (3) Jugement de la Cour"Lorsque, par suite d"une requête en jugement sommaire, la Cour conclut qu"il existe une véritable question litigieuse à l"égard d"une déclaration ou d"une défense, elle peut néanmoins rendre un jugement sommaire en faveur d"une partie, soit sur une question particulière, soit de façon générale, si elle parvient à partir de l"ensemble de la preuve à dégager les faits nécessaires pour trancher les questions de fait et de droit. (4) Rejet de la requête"Lorsque la requête en jugement sommaire est rejetée en tout ou en partie, la Cour peut ordonner que l"action ou les questions litigieuses qui ne sont pas tranchées par le jugement sommaire soient instruites de la manière habituelle ou elle peut ordonner la tenue d"une instance à gestion spéciale.

[18]      These sections of the Rules have been considered judicially in a number of cases.

A useful summary of the applicable law is contained in Granville Shipping Co. v.Pegasus Lines Ltd., [1996] 2 F.C. 853 (F.C.T.D.) at p. 859-860 where Tremblay-Lamer J. summarized the general principles as follows (citations omitted):

1. the purpose of the provisions is to allow the Court to summarily dispense with cases which ought not proceed to trail because there is no genuine issue to be tried (Old Fish Market Restaurants Ltd. v. 1000357 Ontario Inc. et al);2

2. there is no determinative test (Feoso Oil Ltd. v. Sarla (The))3 but Stone J.A. seems to have adopted the reasons of Henry J. in Pizza Pizza Ltd. v. Gillespie.4 It is not whether a party cannot possibly succeed at trial, it is whether the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial;

3. each case should be interpreted in reference to its own contextual framework (Blyth5 and Feoso);6

4. provincial practice rules (especially Rule 20 of the Ontario Rules of Civil Procedure, [R.R.O. 1990, Reg. 194]) can aid in interpretation (Feoso7 and Collie);8

5. this Court may determine questions of fact and law on the motion for summary judgment if this can be done on the material before the Court (this is broader than Rule 20 of the Ontario Rules of Civil Procedure) (Patrick);9

6. on the whole of the evidence, summary judgment cannot be granted if the necessary facts cannot be found or if it would be unjust to do so (Pallman10 and Sears);11

7. in the case of a serious issue with respect to credibility, the case should go to trial because the parties should be cross-examined before the trial judge (Forde12 and Sears).13 The mere existence of apparent conflict in the evidence does not preclude summary judgment; the court should take a "hard look" at the merits and decide if there are issues of credibility to be resolved (Stokes ).14

[19]      Upon a motion for summary judgment, both parties must file their best evidence.

The moving party must of course lead evidence which it believes will convince the Court that it is appropriate to grant summary judgment in its favour. The responding party must however also put its best evidence forward. This issue was discussed by Justice Evans in F. von Langsdorff Licensing Limited v. S.F. Concrete Technology, Inc. (8 April 1999), Court File No. T-335-97 (F.C.T.D.):

Accordingly, the respondent has an evidential burden to discharge in showing that there is a genuine issue for trial: Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68, 81-82 (F.C.A.). However, this does not detract from the principle that the moving party has the legal onus of establishing the facts necessary to obtain summary judgment: Ruhl Estate v. Mannesmann Kienzle GmbH (1997), 80 C.P.R. (3d) 190, 200 (F.C.T.D.); Kirkbi AG v. Ritvik Holdings Inc. (F.C.T.D.; T-2799-96; June 23, 1998). Thus, both parties are required to "put their best foot forward" so that the motions judge can determine whether there is an issue that should go to trial: Pizza Pizza Ltd. v. Gillespie (1990), 33 C.P.R. (3d) 519, 529-530 (Ont. Ct. Gen. Div.).

ANALYSIS AND CONCLUSION

ISSUE 1: Should the summary judgment requested by the plaintiff be granted?

[20]      It is accepted that the rules respecting summary judgment have been interpreted liberally by this Court. The respondent has an evidential burden to discharge in showing that there is a genuine issue for trial and the applicant has the legal onus of establishing the facts necessary to obtain summary judgment. If after considering all of the evidence, the necessary facts cannot be found, summary judgment cannot be granted.

[21]      Inhesion has relied on the affidavits of Aric Chang to support its application. The

first Chang affidavit states that the author of the Poinsettia Pattern was Tsai Min Jen who authored the pattern on December 8, 1990 while in the regular course of his employment at Concord"the Inhesion subsidiary. Mr. Chang also stated in his first affidavit that the copyright in the Poinsettia Pattern was subsequently assigned to Inhesion by Concord on August 5, 1998.

[22]      The alleged assignment of the copyright from Concord to Inhesion has been

attached to the affidavit of Aric Chang as exhibit E. It was witnessed by relatives of Aric Chang but Mr. Chang himself does not recall if he was present at the execution. It is commonly accepted that a document is not rendered relevant or admissible simply because it is attached to an affidavit. Documents generally must be proven before their admission. It would have been simple to have the individual who witnessed the execution of the assignment provide an affidavit to that effect.

                                        

[23]      The existence of the assignment is vital to Inhesion"s case. Without the

assignment, the owner of copyright in the Poinsettia pattern (assuming that copyright subsists) remains Concord, not Inhesion. On cross-examination, Aric Chang admitted that:

(1)      On December 8, 1990, he was not employed by Inhesion but was a student at the University of Toronto. (Cross-examination of Aric Chang, Q. 7, 15 - 17, Anglo Motion Record, Tab 1, p. 4).

(2)      Mr. Chang stated that it is not his "line of business". He was "not in charge of the design and creativity". (Cross-examination of Aric Chang, Q. 142, Anglo Motion Record, p. 21).

(3)      Mr. Chang admitted that he did not speak to Tsai Min Jen, does not know when he left Concord, how long he was employed by Concord or what was involved in his position. (Cross-examination of Aric Chang, Q. 214-225, Anglo Motion Record, p. 32 and 33).

(4)      Mr. Chang stated that he did not know whether Tsai Min Jen created a poinsettia design in 1988, 1989 or 1990 or what inspired him in creating this poinsettia design "because, as I told you, I would not be involved in that duty and in 1990 I wasn"t in Inhesion at all." (Cross-examination of Aric Chang, Q. 228-230, Anglo Motion Record, p. 34).

(5)      Mr. Chang admitted that he does not know whether Tsai Min Jen copied the poinsettia design from someone else. (Cross-examination of Aric Chang, Q. 231, Anglo Motion Record, p. 34).

(6)      Mr. Chang stated that he had no knowledge as to whether anyone tried to locate Tsai Min Jen for the purpose of this litigation. (Cross-examination of Aric Chang, Q. 232, Anglo Motion Record, p. 34).

(7)      Mr. Chang testified that he had no actual knowledge of the assignment of the copyright from Tsai Min Jen to Inhesion. (Cross-examination of Aric Chang, Q. 135-136, Anglo Motion Record, Tab 1, pp. 20-21).

                                

[24]      The Court is aware that Mr. Chang could provide facts in his affidavit based on

his information and belief (See Rule 81(1) Federal Court Rules, 1998). However, if he does so, he must disclose the grounds. I have perused the first affidavit of Aric Chang and I can only find that he deposed his affidavit on the basis of "personal knowledge and the business records of the plaintiff company to which I have access". (See plaintiff"s Motion Record (Summary Judgment), Tab 2, Page 1, Paragraph 1). For example, by reference to paragraph 6 of the same affidavit, the Court cannot determine from which records or persons Mr. Chang received the information for this statement. The Court is aware from the cross-examination of Mr. Chang that he did not speak with Tsai Min Jen and had little personal knowledge of the transfer of the copyright to Inhesion.

[25]      In argument before me, counsel for the defendant Anglo rightly pointed out the

scope of the provisions of the Copyright Act, R.S.C. 1985, c. C-42, with respect to presumptions. Subsection 34.1(a) and (b) operates to presume that copyright subsists in a work if the existence thereof is put in issue by the defendant:

34.1 (1) In any proceedings for infringement of copyright in which the defendant puts in issue either the existence of the copyright or the title of the plaintiff thereto, (a) copyright shall be presumed, unless the contrary is proved, to subsist in the work, performer's performance, sound recording or communication signal, as the case may be; and (b) the author, performer, maker or broadcaster, as the case may be, shall, unless the contrary is proved, be presumed to be the owner of the copyright.

34.1 (1) Dans toute procédure pour violation du droit d'auteur, si le défendeur conteste l'existence du droit d'auteur ou la qualité du demandeur_: a) l'oeuvre, la prestation, l'enregistrement sonore ou le signal de communication, selon le cas, est, jusqu'à preuve contraire, présumé être protégé par le droit d'auteur; b) l'auteur, l'artiste-interprète, le producteur ou le radiodiffuseur, selon le cas, est, jusqu'à preuve contraire, réputé être titulaire de ce droit d'auteur.

Since copyright is presumed to subsist in a work, originality of the work must, by logical extension, be presumed: Blue Crest Mustic Inc. v. Canusa Records Inc. (1975), 17 C.P.R. (2d) 149 (F.C.T.D.). The operation of these provisions would therefore put the burden on the defendant, in this case Anglo, to show that the work was not original, not the proper subject matter of copyright, and so on. However, there is no presumption that copyright is owned by a particular plaintiff in an action for copyright infringement. While copyright is presumed to subsist in the Poinsettia Pattern, unless the contrary is proved by Anglo, there is no presumption that Inhesion is the owner of copyright, such that it would have standing to sue for infringement.

[26]      Given the state of the record, I cannot find the facts necessary to decide the issue

of the ownership of copyright in the Poinsettia design by Inhesion. However, nor can I find that there was no such assignment. I believe that there are issues of credibility at issue in any determination of this question. Therefore, summary judgment cannot be granted. I am of the opinion that there is a genuine issue for trial, that is, whether Inhesion is the owner of copyright in the Poinsettia Pattern.

                                        

[27]      I have considered the argument raised by the defendant that the Poinsettia Pattern

is not the proper subject matter of copyright, but rather is properly the subject of an industrial design registration. I considered making a ruling on this issue. Subsection 64(2) and (3) of the Copyright Act state as follows:

64.(2) Where copyright subsists in a design applied to a useful article or in an artistic work from which the design is derived and, by or under the authority of any person who owns the copyright in Canada or who owns the copyright elsewhere, (a) the article is reproduced in a quantity of more than fifty, or (b) where the article is a plate, engraving or cast, the article is used for producing more than fifty useful articles, it shall not thereafter be an infringement of the copyright or the moral rights for anyone (c) to reproduce the design of the article or a design not differing substantially from the design of the article by (i) making the article, or (ii) making a drawing or other reproduction in any material form of the article, or (d) to do with an article, drawing or reproduction that is made as described in paragraph (c) anything that the owner of the copyright has the sole right to do with the design or artistic work in which the copyright subsists. 64.(3) Subsection (2) does not apply in respect of the copyright or the moral rights in an artistic work in so far as the work is used as or for (a) a graphic or photographic representation that is applied to the face of an article;

64.(2) Ne constitue pas une violation du droit d'auteur ou des droits moraux sur un dessin appliqué à un objet utilitaire, ou sur une oeuvre artistique dont le dessin est tiré, ni le fait de reproduire ce dessin, ou un dessin qui n'en diffère pas sensiblement, en réalisant l'objet ou toute reproduction graphique ou matérielle de celui-ci, ni le fait d'accomplir avec un objet ainsi réalisé, ou sa reproduction, un acte réservé exclusivement au titulaire du droit, pourvu que l'objet, de par l'autorisation du titulaire " au Canada ou à l'étranger " remplisse l'une des conditions suivantes_: a) être reproduit à plus de cinquante exemplaires; b) s'agissant d'une planche, d'une gravure ou d'un moule, servir à la production de plus de cinquante objets utilitaires. 64.(3) Le paragraphe (2) ne s'applique pas au droit d'auteur ou aux droits moraux sur une oeuvre artistique dans la mesure où elle est utilisée à l'une ou l'autre des fins suivantes_: a) représentations graphiques ou photographiques appliquées sur un objet;

Given the wording the exception in subsection (3) for graphic representations applied to a useful article, I would question whether the defendant"s submissions have merit. However, the application of the subsection is contingent upon a finding that the article in question is reproduced in quantities of more than fifty by or under the authority of any person who owns copyright in Canada or who owns the copyright elsewhere. Therefore, the question of ownership of copyright must be decided before a defendant can rely on the subsection. Given my ruling on the motion for summary judgment, I believe it is preferable to leave a finding on this argument to the trial judge who will determine questions concerning the ownership of copyright. Ruling on this matter at this stage of the proceedings would be to rule on a contingent matter and I am not prepared to do so.

ISSUE 2 : Was the matter settled by the parties?

[28]      I indicated to the parties at the end of the hearing of the motion that I would

review the correspondence with respect to the alleged settlement and if necessary, I would allow counsel to argue the issue as to whether or not a settlement resulted from the negotiations between the parties.

[29]      I have determined that the issue of whether a settlement occurred between the

parties as a result of their various correspondence and telephone calls and I am of the opinion that the issue of whether or not a settlement took place should be determined by the judge hearing the trial. My conclusion is based on the fact that there is conflicting testimony covering what took place during the alleged settlement negotiations and hence, credibility is put in issue. The credibility issue can be better determined by the judge at trial who will have the advantage of observing the witnesses as they provide their testimony. Consequently, summary judgment in favour of the defendant will not issue on this ground.

CONCLUSION

[30]      The applications for summary judgment are dismissed.

                    

[31]      The issue as to whether the parties concluded a settlement will be determined by the trial judge.

[32]      The costs of the motion shall be costs in the cause.

                    

                                     "John A. O"Keefe"

                                                                          J.F.C.C.

Toronto, Ontario

April 13, 2000