Date: 20000113
Docket: T-1812-99
BETWEEN:
MODERN HOUSEWARE IMPORTS INC.,
Plaintiff,
- and -
INTERNATIONAL SOURCES LTD.,
INTER-BEST HOUSEWARES INC.,
GREG RITA AND STEPHEN MARACLE,
Defendants.
REASONS FOR ORDER
MR. JOHN A. HARGRAVE,
PROTHONOTARY
[1] This proceeding involves allegations of infringement of a trademark and of copyright packaging, used for pot-scrubbers, by individuals alleged to have been employees of the Plaintiff. These reasons arise out of the Plaintiff"s motion for particulars and to strike out to paragraphs of the Defence.
[2] Following the hearing of the motion I declined to strike out paragraphs 29 and 30 of the Defence, which deal with notice of the claim and with a unilateral ceasing and desisting by the Defendants, but reserved on the balance of the motion. I will touch first upon the reasons why paragraphs 29 and 30 are to remain.
ANALYSIS
Notice of the Proceeding and Steps Taken by the Defendants
[3] Paragraph 29 of the Defence alleges that the Plaintiff did not give the Defendants any notice of this action. The Plaintiff points out that not only is there no requirement that notice be given, but also the absence of notice does not give rise to a defence. Thus, on this basis, paragraph 29 is said to be immaterial.
[4] Paragraph 30 sets out unconditional steps which the Defendants took when they realized that there was a claim against them, including immediately stopping the sale of the pot-scrubbers, retrieving the impugned packaging, advising that they would not use the packaging in the future and stating that they did not have any material used in the creation of the packaging.
[5] Again, the Plaintiff submits that these activities do not give rise to a Defence, that they relate to an attempt at settlement, the disclosure of which is contrary to Rule 422 and that all this plea will do will be to delay the trial.
[6] The Defendants say that paragraphs 29 and 30 are responsive, for the Statement of Claim sets out that the Defendants have infringed and continue to infringe on the rights of the Plaintiff, that there is a tangible risk of infringement in respect of the Plaintiff"s other products and packaging, that the Defendants threaten to continue their activities unless restrained and to this end the Plaintiff seeks injunctive relief and punitive damages.
[7] Paragraph 29 of the Defence, particularly in the light of the remedies sought and the events described in paragraph 30, points to the distinct possibility that the Defendants, had they received early notice of the infringement, would have ceased infringing activities. This certainly goes to answer some of the remedies sought by the Plaintiff and presents a contrasting view of the facts.
[8] I have examined paragraph 30, and the light of both its responsiveness and its basis, a with prejudice letter of 15 October 1999 from counsel for the Defendants to counsel for the Plaintiff. After denying allegations of wrong-doing, the letter sets out, in part, that the Defendants, for purely business reasons, have taken steps to immediately stop the sale of the pot-scrubbers, have taken steps to retrieve from the distribution chain all of the impugned packaging, that they will not use the packaging in the future and that they do not have any of the packaging material on hand. These assertions are not in the context of settlement, for the concessions are absolute, unconditional and not in consideration of the Plaintiff doing anything. The letter does go on to offer a written undertaking that the Defendants will not use the packaging in the future, and states that the sales have been negligible. In the letter counsel says he trusts that the Plaintiff will discontinue, but warns that if the Plaintiff elects to proceed, the letter will be drawn to the attention of the Court as to the issues of liability and remedies, including costs.
[9] The test for striking out a pleading, or a portion of a pleading, is a difficult one to meet. Were I convinced that the only use for paragraph 30 of the Defence might be to mitigate any award of costs, I would be inclined to strike out paragraph 30 on the basis that while it could have a time and place in the proceeding, that time and place would be only later and in the context of costs. However, paragraph 30 goes farther than a submission on costs. It sets out a different view of the facts: rather than a continuing infringement or risk of infringement, with the need for injunctive relief to curtail activities, the Defendants set out that they have ceased the activities unconditionally and of their own accord.
[10] Counsel for the Plaintiff makes an interesting argument to the effect that the letter advising the Plaintiff that there will be no more chance of infringement, if infringement it be, is part of a settlement negotiation and as such it is barred by Rule 422 which, paraphrased, forbids that an offer to settle or an offer to contribute be communicated to the Court, except in a case management context, until all matters of liability and relief have been dealt with, other than costs.
[11] To accept the Plaintiff"s proposition I must ignore the "with prejudice" endorsement on counsel"s letter and accept that the offer of a sworn statement is part of a settlement negotiation. Counsel for the Plaintiff submits that all settlement letters are without prejudice, no matter what the endorsement or lack thereof, and thus privileged from production in litigation, here referring to Canadian Media Corporation v. Canada (1992), 48 F.T.R. 68. There the Crown applied to Mr. Justice Cullen to have struck out portions of the statement of claim which improperly referred to privileged pre-litigation settlement negotiations. Mr. Justice Cullen pointed out that, generally, communications attempting to effect a settlement are privileged from disclosure and that the presence or absence of the phrase "without prejudice", or similar phrases, is not conclusive, for once this settlement communication privilege is established it extends to the course of negotiations and not just to communications expressly marked as being without prejudice (page 71). Mr. Justice Cullen went on to observe that:
| As a whole, the communications in question bear all the hallmarks of the negotiation process and indicate objectively that the intention of both parties was to settle the matter without litigation. ... I would infer that settlement was reasonably contemplated by both parties. ... [and that] the process bears all the badges of a negotiation, with all its attendant give-and-take. [page 72] |
[12] This concept, of all communication in a settlement negotiation being privileged, is neither new nor novel, being founded on the concept that parties ought to be encouraged to negotiate a settlement, before resorting to the courts, and that if communications in such settlement negotiations were not privileged, but might come back to embarrass a party later on in litigation, that would hamper any settlement taking place: see Canadian Media Corporation at page 71. However this concept of automatic privilege for settlement negotiation communications does not extend to a letter clearly marked as being with prejudice. The client may always waive privilege. It is at least implicit in the letter from counsel for the Defendants to counsel for the Plaintiff that the waiver of privilege is on the instruction of clients. Moreover, the letter has none of the badges or hallmarks of a negotiation, but rather the Defendants set out what they have unilaterally done, perhaps in the hopes that the Plaintiff might go away, but certainly what the Defendants have done, they have done unconditionally. Counsel"s letter of 15 October 1999, written two days after the Statement of Claim was issued and that letter, as reflected in the Defence, are properly disclosed and go to liability and remedies. Paragraph 30 will thus remain.
[13] Counsel for the Defendants advised that he intended to amend the Defence to refer to an 8 December 1999 with prejudice letter confirming what the Defendants have done and going on to advise as to a gross profit on the sale of the impugned pot-scrubbers, of $1,186.77, followed by an unconditional offer to provide sales data supporting that figure. Counsel for the Defendants again asks counsel for the Plaintiff to obtain instructions as to the resolution of the proceeding. I have not been referred to any letter from counsel for the Plaintiff to counsel for the Defendants in response either to the letter of 13 October or to the letter of 8 December 1999. Presumably the 8 December letter is not part of any settlement negotiation. It would also seem that it might be referred to in amended defence on the basis of Rule 179 by which a party may plead a fact occurring after the commencement of the action. The amendment of the Defence was not the subject of any motion: if necessary the Defendants will have to bring a motion in due course.
Particulars of Mitigation
[14] The Plaintiff submits that the Defendants" bare plea of failure to take reasonable steps to mitigate any loss or damage ought to be accompanied by particulars.
[15] The opportunity to avoid a loss by taking reasonable steps may take many forms. Here it might include any failure to capitalize on the Defendants" advice of withdrawal of the offending packaging, the undertaking not to further offend the Plaintiff and the offer of an accounting of $1,186.77 in gross profit. But at this point the Defendants have no idea what the Plaintiff may or may not have done. Yet, understandably, the Defendants wish to keep open their options for discovery and for trial.
[16] It is not usually an answer to a demand for particulars to say that certain matters ought to be within the knowledge of the party seeking particulars. However, this concept is generally limited to instances in which both parties have some knowledge of a given aspect of a claim. Here I have in mind cases such as Munsingwear, Inc. v. Promafil Canada Ltee (1995), 61 C.P.R. (3d) 158, a decision of Associate Chief Justice Jerome who, at page 160, relied on the observation of Mr. Justice Walsh that "Neither is it proper to assume that plaintiff"s knowledge is necessarily co-existent with whatever knowledge the defendant may have and that therefore defendant need not give further particulars of the facts on which it basis its claim of invalidity..." (Bror With v. Ruko of Canada Ltd. (1977) 31 C.P.R. (2d) 3 at 5).
[17] Alternately, there is authority for the proposition that when the party requesting particulars is, itself, in a far better position to have the information, particulars will not be ordered. Here I have in mind, by way of example, Linden Fabricating and Engineering (Prince George) Ltd. v. Équipement-Hydraulique Boréal Inc. (1995), 57 C.P.R. (3d) 89 (F.C.T.D.), where at issue was the defendant"s request for particulars of the allegation that it had sold goods which were the subject matter of a patent. The plaintiff, in making the allegation, was aware of one sale, but was ignorant of any others.
[18] Particulars of mitigation were dealt with by Master Quinn, of the Alberta Court of Queens Bench, in Ozoray v. Alberta [1983] A.J. No. 417, an otherwise apparently unreported decision of 30 September 1983, where particulars of mitigation were denied:
| The plaintiff also asks for particulars of the way the plaintiff has failed to mitigate his damages. The plaintiff knows what he has done and what he has not done, and does not have to rely on any particulars from the defendant. The defendant is not required to provide such particulars. |
This denial of particulars is not inconsistent with the concept that where particulars are known by both sides a party may still have to give its" version of the particulars upon demand. Here, by way of reconciliation, I would refer to a passage from the 1997 edition of The White Book (The Supreme Court Practice) at page 319:
| (9) Inability to give -- The party from whom particulars are sought often declares that he cannot give any further information, or that he cannot do so without laborious research or exhaustive inquiry. Such objections, if genuine, are often met by an order that he shall deliver forthwith the best particulars which he can at present give, with liberty to supplement them within a specified period after discovery and inspection has been completed (Marshall v. Inter-Oceanic, etc., Co. (1885) 1 T.L.R. 394; Williams v. Ramsdale (1886) 36 W.R. 125; Harbord v. Monk (1878) 38 L.T. 411). |
This approach, of a deferral of particulars, can be reasonable and useful.
[19] In the present instance the Defendants say they have no particulars. Yet, if this matter does go to trial, the Defendants by then may have some views as to what the Plaintiff failed to do by way of avoiding loss. The Plaintiff ought not to be ambushed by this at trial. Therefore the Defendants will provide particulars of the Plaintiff"s failure to mitigate or to avoid loss within 30 days after the discovery process, including undertakings, has been completed.
Pleas of No Knowledge and of Specific Denial
[20] The balance of the request for particulars deals with formula pleas made by the Defendants to the effect that the Defendants have no knowledge of various alleged facts, specifically deny the allegations and then put the Plaintiff to the strict proof. This basic plea is, in some instances, embellished by a repeating of the Plaintiff"s claim wording in the form of a further specific denial. For example, in paragraph 28 of the Statement of Claim the Plaintiff alleges that the packaging of a specific sponge/scourer unit is an artistic and literary work which a named author made while employed by a subsidiary of the Plaintiff. The Defendants reply, in paragraph 23 of the Defence, that they "had no knowledge of the alleged facts and specifically deny the allegations, and in any event deny that the sponge/scourer scrubber packaging constitutes an original artistic and literary work.". Similarly, in various paragraphs of the Statement of Claim, the Plaintiff sets out facts surrounding the making of the artistic and literary works, being the packaging of various pot-scrubbing aids and concludes that copyright exists. To this the Defendants reply, in paragraph 25, that they "... specifically deny that the Hand Scrubber Packaging Nylon Scrubber Packaging or Sponge/Scourer Packaging are works in which copyright may subsist in Canada under the Copyright Act , R.S.C. 1985, c. C-42, as alleged or at all.". In effect, at issue are the existence of copyright and the ownership of copyrights in the packaging of the pot-scrubbers.
[21] The Plaintiff seeks particulars of the denials that the various packagings constitute original artistic and literary works, saying the denials are vague. The Plaintiff goes on to point to Rule 183 which provides that where a party, here the Defendant, intends to rely on facts which differ from the other side"s facts, those contrary facts must be pleaded. The established concept is that a pleading must give fair notice of all the factual grounds of attack which, if not raised, would likely take the other side by surprise.
[22] The basic proposition upon which the Defendants rely in order to oppose the request for particulars is that a denial, in the form of a traverse, "... even one in the form of an affirmative, so long as it is in substance a traverse of the other side"s allegation, does not give rise to a right for particulars...": Chingee v. Chingee (1998), 144 F.T.R. 156 at 159-160, there referring to Weinberger v. Inglis [1918] 1 Ch. 133 at 138. Of course, where the traverse is a negative averment it may constitute a negative that is pregnant with an affirmative and thus require particulars (loc. cit.). If one were to accept this analysis paragraphs 20 and 22 of the Defence, which deny ownership of the copyright, might remain.
[23] Paragraphs 19, 21, 23 and 25, which deny the existence of copyright, require some further analysis. These statements are, on one level, traverses in that they merely repeat what the Plaintiff has pleaded, but in the form of a denial. Yet, if denials raise a question of law, without the support of any facts, particulars ought to be ordered: see for example Norac Systems International Inc. v. Massload Technologies Inc. (1997), 115 F.T.R. 289 at 300. However, in Norac Systems the plea in question was complex, referring to the rule in Curtis v. Platt (1863) 35 L.J. Ch. 852, a rather involved rule giving narrow construction to mechanical improvements to an existing mechanism. In Norac Systems, Mr. Justice Nadon was concerned that neither was the rule identified nor the facts bringing the claim within the rule set out. In the present instance, the Defendants say they have done no more than deny the Plaintiff"s conclusion of law: they have not pleaded any new and separate question of law that requires particularization.
[24] The Plaintiff also refers to the Copyright Act presumptions of existence of copyright and of ownership, taking the position that those presumptions have been denied in the Defence, but without particulars. Here counsel for the Plaintiff refers to Glaxo Canada Inc. v. Apotex Inc. (1995) 58 C.P.R. (3d) 1 and as overturned on appeal, Apotex Inc. v. Glaxo Canada Inc. (1996) 64 C.P.R. (3d) 191, as examples of affirmative pleas challenging the presumptions which pleas contained particulars that were acceptable.
[25] The Plaintiff also relies upon ITT Hartford Life Insurance v. American International Assurance Life Company (1998), 131 F.T.R. 121, which sets out an example of a positive plea challenging the existence of copyright, but lacking particulars together with an acceptable amendment. The positive plea was to the effect that a literary work was not original but rather "... a common place arrangement of ordinary words put together without the exercise of more than negligible skill" (p. 124). The amended and acceptable version referred to the wording at issue as being phrases from insurance policies within the public domain, thus requiring a negligible degree of skill, judgment or labour in producing the new clauses in question.
[26] The pertinent point that the Plaintiff makes is that the Copyright Act, which it pleads directly or indirectly in a number of paragraphs in the statement of claim and which are denied by the Defendants in the impugned paragraphs of the Defence, establishes presumptions of the existence of and the ownership in the copyrights in issue, which presumptions take more than a mere denial to overturn.
[27] I will begin this portion of the analysis by referring to a passage from Hughes on Copyright and Industrial Design, the looseleaf text published by Butterworths. The authors make the point that various benefits accrue from the registration of a copyright, including the presumption of the existence of copyright and ownership:
| A certificate of registration is evidence that copyright subsists in the work and that the person registered is the owner of such copyright. By the production of a certificate and in the absence of any evidence to the contrary, there is prima facie evidence that copyright subsists and that the persons registered are the owners thereof. The issue of a certificate of registration does not necessarily mean that it is inviolable, but the person attacking it must lead credible evidence to displace the presumption. The person attacking the registration must not plead a simple denial buy must allege facts showing the basis upon which the particulars of the registration are denied. [page 515 of Issue 38, March 1998] |
While all of this passage is relevant, particularly pertinent is the last proposition that an attack on registration cannot be mounted by a simple denial, but that there must be allegations of fact showing the basis upon which particulars of the registration are challenged. Hughes on Copyright relies on various cases for this proposition, including Circle Film Enterprises and Blue Crest Music, which are referred to in Samsonite to which I will now turn.
[28] Mr. Justice Noël, as he then was, pointed out in Samsonite Canada Inc. v. Costco Wholesale Corporation (1993), 48 C.P.R. (3d) 5 that the presumption of ownership, based on registration of a copyright, carries the day unless there is evidence to establish that copyright ownership or title lies elsewhere: Sampsonite at pages 11-12, referring there to [1959] S.C.R. 602">Circle Film Enterprises Inc. v. C.B.C. [1959] S.C.R. 602 and to Blue Crest Music Inc. v. Canusa Records Inc. (1975), 17 C.P.R. (2d) 149 (F.C.T.D.). Mr. Justice Noël, at page 12 of Samsonite, points out that "it is open to the defendant to challenge this presumption by pleadings provided that it is in a position to allege facts which, if proven, can have the effect of rebutting the presumption of ownership.". Mr. Justice Noël then goes on to point out that the impugned paragraph in the defence says that the Plaintiff was not the first owner of the copyrights and that they were not acquired by assignment. However, even if taken as proven, in the context of the rule allowing striking out, that plea did not override the presumption of ownership by way of a certificate of registration, for that presumption of ownership is prima facie evidence of ownership against all, including the first owner of the copyright:
| In the case at hand, para. 10 of the statement of defence alleges facts which indicate that the plaintiff was not the first owner of the copyrights in issue which suggests that they were acquired by way of assignment but concludes by stating that the plaintiff has not acquired the copyrights by a legal assignment. The allegation that plaintiff was not the first owner of the copyright in issue, which must be taken as proven in the context of Rule 419, does not reach the presumption of ownership which arises from the certificate of registration. This presumption stands as prima facie evidence of ownership in the work against all including its first owner. |
The conclusion Mr. Justice Noël draws is that even if the facts set out in the impugned paragraph of the defence were proven, that could not possibly overcome the presumption of ownership and therefore that specific provision of the defence ought to be struck out. However, that did not end the matter, for the particular paragraph of the defence went on to say that the plaintiff did not acquire the copyrights by way of legal assignment: if that allegation were based on some material fact of which the defendant was aware, that would be a proper pleading. In fact, in Samsonite, the conclusion of lack of a proper assignment was speculative and without foundation, being a bald conclusion without the necessary facts to allow the defendant to go behind a certificate of registration in order to rebut the presumption of ownership. Thus the whole of the provision in the defence was struck out, with leave to amend.
[29] Samsonite is referred to by the trial judge in Glaxo Canada Inc v. Apotex Inc. (supra). Glaxo, which relies heavily on Samsonite, is useful in that it sets out the paragraphs of a defence that was at issue. However, for the final outcome, one must follow the case to the Court of Appeal, Apotex Inc. v. Glaxo Canada Inc. (supra), where Mr. Justice Strayer noted that the defendant"s allegations challenging copyright and ownership, which were quite clearly and fully set out, could overcome the evidence of the plaintiff"s ownership.
[30] In the present instance, the fairly skeletal denials of copyright and of ownership are, in the light of the presumptions as to the existence of copyright and ownership, established by section 34.1 of the Copyright Act, R.S.C., 1985, c. C-42 and as elaborate upon in Samsonite and Glaxo, inadequate and of no assistance to the Defendants. The Defendants will thus have 21 days within which to provide suitable particulars of paragraphs 19 through 23 and 25 of the Defence, failing which they are deemed to have been struck out.
[31] I thank counsel for thorough argument. Given that there has been mixed success costs will be in the cause.
(Sgd.) "John A. Hargrave"
Prothonotary
January 13, 2000
Vancouver, British Columbia
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS ON THE RECORD
| COURT FILE NO.: T-1812-99 |
| STYLE OF CAUSE: MODERN HOUSEWARE IMPORTS INC. |
v.
| INTERNATIONAL SOURCES LTD., INTER-BEST HOUSEWARES INC., GREG RITA AND STEPHEN MARACLE |
PLACE OF HEARING: VANCOUVER, BC
DATE OF HEARING: January 10, 2000
REASONS FOR ORDER OF MR. JOHN A. HARGRAVE, PROTHONOTARY
APPEARANCES:
| Mr. Paul Smith for the Plaintiff |
| Mr. Bradley J. Freedman for the Defendants |
SOLICITORS OF RECORD:
Paul Smith Intellectual
Property Law
| Vancouver, BC for the Plaintiff |
Ladner Downs
| Vancouver, BC for the Defendants |
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