J.L. de Ball Canada Inc. v. 421254 Ontario Ltd., docket T-252-95

Date: 19991230

Docket: T-252-95

BETWEEN:

J.L. DE BALL CANADA INC.

Plaintiff

and

421254 ONTARIO LTD. AND

LA CAPINERA LIMITED

doing business as Jo-Joe Fashions

Defendants

REASONS FOR ORDER

SHARLOW J.

[1]          The Plaintiff is the manufacturer of velvet fabric bearing a design called "Classic 763," referred to in these proceedings as the "Work". The Plaintiff alleges that the Defendants infringed the Plaintiff's copyright in the Work by producing or causing to be produced a velveteen fabric of inferior quality bearing the Classic 763 design, and using the velveteen to manufacturer girls' dresses that the Defendants then sold to Canadian retailers. The alleged acts of infringement occurred in 1993 and 1994.

[2]          Exhibit P6 from the cross-examination of Mr. A. Papini, held on December 16, 1996, consists of a number of fabric swatches bearing the Work on velvet, in different colour schemes. Exhibit P1 from the same cross-examination is a garment produced by the Defendants bearing a pattern that to my eye bears substantially the same design. Thus there is prima facie evidence of infringement, assuming copyright subsists in the Work: Preston v. 20^th Century Fox Ltd. (1990), 33 C.P.R. (3d) 242 (F.C.T.D.) affirmed 53 C.P.R. (3d) 407 (F.C.A.).

[3]          The Plaintiff has filed a motion for summary judgment, seeking (a) a declaration that copyright subsists in the Classic 763 design, that the Plaintiff is the owner of the copyright, and that the Defendants have infringed the Plaintiff's copyright, (b) a permanent injunction, (c) delivery up of all infringing garments, fabric and other materials, (d) an accounting of profits or judgment for a sum of money calculated on an alternative basis. The Plaintiff also asks for solicitor and client costs. As I understand it, the Plaintiff has also claimed damages in its statement of claim but will not pursue its claim for damages unless its motion for summary judgment fails and this matter proceeds to trial.

[4]          The Defendants raise a number of arguments, some of which overlap, but their main point is that the Plaintiff"s motion for summary judgment should fail for lack of evidence capable of proving the elements of an action for infringement. They have also moved for summary dismissal of the action. They seek solicitor and client costs or alternatively costs on the normal scale.

Summary judgment

[5]          I was referred to a large number of recent cases dealing with summary judgment. I do not propose to review them all. For present purposes it is sufficient to say that a party is entitled to summary judgment if the evidence establishes its entitlement to the remedy claimed and there is no genuine issue for trial: NFL Enterprises L.P. v. 1019491 Ontario Ltd. (1998), 85 C.P.R. (3d) 328 (F.C.A.).

Copyright Act

[6]          The Plaintiff alleges that the Work was created by Marie Loris in July of 1992 and that she assigned the copyright to the Plaintiff on July 31, 1992.

[7]          It was suggested that the Plaintiff should be recognized as the owner of the Work immediately upon its creation, but I find no merit in that suggestion. It is not contended that Ms. Loris was ever an employee of the Plaintiff, and there is no evidence that is capable of establishing that the terms of the arrangement between Ms. Loris and the Plaintiff included any immediate vesting of copyright in the Plaintiff from the moment of the creation of the Work. The Plaintiff"s claim cannot be compared to that of the plaintiff in Randall Homes Ltd. v. Harwood Homes Ltd. (1987), 17 C.P.R. (3d) 372 (Man. Q.B.). In that case, the author himself testified that the plaintiff, who had commissioned the work, was the owner of the copyright from the outset. There was no need in that case for an assignment.

[8]          Given the allegations of the Plaintiff as to the manner in which it acquired the copyright in the Work, the following provisions of the Copyright Act are relevant to these motions:

5(1) Subject to this Act, copyright shall subsist in Canada, for the term hereinafter mentioned, in every original [...] work if any one of the following conditions is met:

(a)      in the case of any work [...], the author was, at the date of the making of the work, [...] a person ordinarily resident in, a treaty country [Canada is a treaty country] [...].

13(1) Subject to this Act, the author of a work shall be the first owner of the copyright therein.

13(4) The owner of the copyright in any work may assign the right, [...] but no assignment [...] is valid unless it is in writing signed by the owner of the right in respect of which the assignment [...] is made, or by the owner"s duly authorized agent.

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 [...]; and

(b)      the author [...] shall, unless the contrary is proved, be presumed to be the owner of the copyright.

(2) Where any matter referred to in subsection (1) is at issue and no assignment of the copyright [...] has been registered under this Act,

(a)      if a name purporting to be that of [...] the author of the work [...] is printed or otherwise indicated thereon in the usual manner, the person whose name is so printed or indicated shall, unless the contrary is proved, be presumed to be the author [...];

(b)      if

(i)      no name is so printed or indicated, [...], and

(ii)      a name purporting to be that of the [...] owner of the work [...] is printed or otherwise indicated thereon in the usual manner,

the person whose name is printed or indicated as described in subparagraph (ii) shall, unless the contrary is proved, be presumed to be the owner of the copyright in question [...].

[9]          No assignment of the claimed copyright has been registered under the Act.

Whether the Work is an artistic work

[10]          The Defendants do not contend that the Work is not an artistic work as defined in the Copyright Act, or that it is incapable of being the subject of copyright. Thus, subsection 34.1(1) requires me to presume that copyright subsists in the Work and that its author is the owner of the copyright, unless there is evidence to the contrary. The Plaintiff says there is evidence to the contrary, in the form of an assignment of the copyright from the author to the Plaintiff. There is no presumption as to the identity of the author. That is a fact that must be proved by the Plaintiff.

Who is the author of the Work?

[11]          The Plaintiff seeks to prove authorship of the Work by the following statements in paragraph 10 of the affidavit of Steven Bhereur, the national sales manager of the Plaintiff:

The pattern which was printed on the Fabric (the "Work") was created in July of 1992 by Marie Loris, a freelance artist who was engaged by the Plaintiff for this purpose and who at the time was a resident of Canada. The Work is an original work of art. The Plaintiff had previously engaged Ms. Loris on several occasions to create artistic works intended to be printed on our fabrics.

[12]          On cross-examination, Mr. Bhereur admitted that he has no personal knowledge of these facts and that he has never personally dealt with Ms. Loris, but bases his statements upon what he had been told by the Plaintiff"s director of design, who is not named. There is no affidavit from the design director.

[13]          Ms. Loris is not a party to these proceedings, and there is no affidavit from her. There is no suggestion that it would have been impossible or even difficult to obtain an affidavit from Ms. Loris.

[14]          In these circumstances I am entitled to draw an inference adverse to the Plaintiff, and I do so. I conclude that the Plaintiff has failed to prove that Ms. Loris is the author of the work.

Did the author assign the copyright to the Plaintiff?

[15]          In case I am wrong on the question of authorship, I will go on to consider whether there is evidence to rebut the presumption that the author still owns the copyright. For this purpose I will assume that Ms. Loris is the author.

[16]          Paragraph 11 of the affidavit states Mr. Bhereur"s understanding of the manner in which the Plaintiff became the owner of the copyright. It reads:

At the time that Ms. Loris was engaged to create the Work, it was the mutual intention of the Plaintiff and Ms. Loris that in return for payment for her services, the Plaintiff would be the owner of all right, title and interest, including all copyright and other intellectual property rights in and to the Work, and that Ms. Loris would waive all moral rights in the Work. This is evidenced by the Assignment from Ms. Loris to the Plaintiff, attached to this my affidavit as Exhibit "C". As such, the Plaintiff has been at all times the owner of the copyright throughout the world in and to the Work.

[17]          Exhibit C is a document entitled "Assignment". The operative part of the document reads as follows:

Now therefore, be it known that Marie Loris hereby confirms the sale, transfer and assignment unto J.L. de Ball, nunc pro tunc, as of July 31, 1992, of all right, title and interest in and to the Work, including all copyright and other intellectual property rights therein, and the waiver of all moral rights in the Work.

[18]          The document bears a signature purporting to be that of Ms. Loris, indicating that it was signed by her on April 9, 1998, in Paris, France. There is a signature purporting to be that of a witness to her signature, but the name of the witness cannot be discerned. The document was signed by Mr. Bhereur on behalf of the Plaintiff on April 13, 1998 in Montreal.

[19]          Mr. Bhereur said in cross-examination that he did not witness Ms. Loris signing this document, and he cannot identify the signature as hers. There is no affidavit from Ms. Loris, or from any person claiming to be the witness to her signature. There is no affidavit from anyone who claims to recognize her signature.

[20]          The evidence is that this document came into existence in response to a request by counsel for the Defendants for a document evidencing the alleged assignment. The Plaintiff does not allege that the assignment of the copyright in the Work was reduced to writing before April of 1998, and there is no evidence that it was.

[21]          The evidence before me is not capable of establishing that the assignment document is authentic. Therefore, I cannot conclude that the copyright in the Work was assigned to the Plaintiff on July 31, 1992, or at all.

If there was an assignment of copyright to the Plaintiff, when did it occur?

[22]          Counsel for the Defendants argued that even if the assignment document is authentic, it cannot be the basis of a claim of infringement in respect of acts of infringement before April 9, 1998.

[23]          There is some force in this argument. The jurisprudence on so-called "nunc pro tunc" documents establishes that they have their stated effect only if they are merely recording an event that occurred or should have occurred. Thus, for example, in an ordinary contract case an oral agreement made on July 31, 1992 may be evidenced by an agreement signed on April 9, 1998 stating that it has effect from July 31, 1992.

[24]          If an oral assignment of copyright were legally possible, an April 9, 1998 assignment stated to have effect on July 31, 1992 might well prove that the copyright was assigned on July 31, 1992. However, by virtue of subsection 13(4) of the Copyright Act, an oral assignment of copyright is not valid: Motel 6, Inc. v. No. 6 Motel Ltd. (1981), 127 D.L.R. (3d) 267 (F.C.T.D.), Bradale Distribution Enterprises Inc. c. Safety First Inc. (1987), 18 C.I.P.R. 71 (Que. S.C.); [1987] A.Q. No. 702 (QL). It must follow that an assignment document signed on April 9, 1998 cannot be the basis of an action for infringement unless the infringement occurred after April 9, 1998.

The presumption of ownership under subsection 34.1(2)

[25]          Counsel for the Plaintiff argued that the Plaintiff is entitled to the benefit of the presumption in subparagraph 34.1(2)(b)(ii), and that the applicability of this presumption is established by Exhibit P6 from the examination of Mr. A. Papini, held on December 16, 1996, the fabric swatches bearing the Work. The swatches are attached by staples to each other and to a cardboard label that bears these words: "DE BALL DESIGN COPYRIGHT".

[26]          Counsel for the Defendant argues that the presumption in subparagraph 34.1(2)(b)(ii) is not intended to be used to prove ownership by someone who does not have a valid assignment from the author. I agree. In this case, ownership of the copyright was in issue from the outset. The Plaintiff"s motion for summary judgment required evidence of the Plaintiff"s ownership by assignment from the author. The only evidence adduced by the Plaintiff is incapable of proving the assignment. In these circumstances, the Plaintiff should not be entitled to rely on the presumption in subparagraph 34.1(2)(b)(ii).

[27]          I also note that there is no evidence as to whether or not this manner of labelling the fabric swatches bearing the Work is the "usual manner" for indicating the owner of the copyright in a fabric design. This point was not addressed in the motion record of either party. When I raised it at the hearing, the Plaintiff argued that I could assume that this was the "usual manner", or alternatively that the affidavit of Mr. Bhereur establishes this point. I have no basis for making the suggested assumption, and I do not read Mr. Bhereur"s affidavit as addressing this point. Mr. Bhereur simply explains that this is the manner in which the Plaintiff presented samples of the Work to its customers.

[28]          I do not accept that the conditions for the presumption in subparagraph 34.1(2)(b)(ii) are met. At least, I must conclude that there is a triable issue on this point.

The remedy of an accounting

[29]          The Plaintiff argued that its claim for an accounting was sufficiently established by the opinion of its accountant, Mr. Duret, to justify summary judgment in the amount of $60,324. This amount is considerably less than the amount claimed in the notice of motion. The difference is explained by a number of concessions made by counsel for the Plaintiff at the hearing.

[30]          The Defendants adduced evidence of their own accountant, Mr. Vettesse, reaching different amounts. The Plaintiff argued that I should ignore some of this evidence on the basis that it was based on information disclosed by the Defendants only recently and contradicts information on which the Plaintiff had relied from almost the beginning of this litigation.

[31]          Counsel for the Defendants argued that the information was introduced late due to a mistake made by the principals of the Defendants as to the number of its dress designs that employed the design that was alleged to infringe the Plaintiff"s copyright, and a misunderstanding by the Defendants as to the relevance of the theft of some of the fabric in the Phillippines. He argued that with one exception, the information cannot properly be excluded because it is found in affidavits that were served on the Plaintiff in accordance with Rule 84(1). The one exception is the affidavit of Mr. Vettesse, sworn September 28, 1999, which cannot be admitted without leave under Rule 84(2). That affidavit sets out his revised calculations of the accounting remedy, based on the newly disclosed facts.

[32]          I have concluded that all of the evidence adduced by the Defendants should be admitted, including the affidavit of Mr. Vettesse, sworn September 28, 1999. The Plaintiff"s concerns as to inadequate and late disclosure are valid, and are not excused by the Defendants" professed mistakes or misunderstandings. However, the remedy for the Defendants" failure to meet its disclosure obligations is not to exclude the evidence in this motion, but to make an appropriate allowance in an order for costs.

[33]          The difference between the two accountants does not reflect a difference in methodology, but in the factual assumptions they relied upon. There is contradictory evidence as to the validity of those factual assumptions, and the contradiction cannot be resolved without assessing the credibility of the Defendants" principals. If I had concluded that the Plaintiff had proved its ownership of the copyright and the acts of infringement by the Defendant, I would have ordered a reference to determine quantum.

Inclusion of insurance proceeds

[34]          One of the remedies sought by the Plaintiff is delivery up of the Defendants" fabric that is alleged to bear copies of the Work. There is some evidence that a significant amount of that fabric was stolen in the Phillippines. It is not clear whether the fabric was recovered or whether the Defendants received insurance proceeds relating to the stolen fabric. The Plaintiff argued that if the fabric was not recovered, the Plaintiff should be entitled to the insurance proceeds. This argument is based on the following words of subsection 38(2):

[...] the owner of the copyright in a work [...] may recover possession of all infringing copies of that work [...], as if those copies [...] were the property of the copyright owner.

[35]          The Plaintiff argues that this provision vests ownership of the infringing goods in the copyright owner and it necessarily follows that any insurance proceeds received as compensation for infringing goods that are stolen must also vest in the copyright owner, or alternatively, that the value of the stolen goods must be included in determining the quantum of the accounting remedy.

[36]          I was referred to no authority on this point. I do not accept that this provision bears the implication for which the Plaintiff argues. The object of an order for delivery up is to put the infringing copies into the possession of the copyright owner. The Copyright Act does not expressly authorize a substitution of money for infringing goods.

[37]          It seems to me that in principle, insurance proceeds received by an infringing party for infringing goods that have been stolen should be taken into account in determining the quantum of an accounting, but only to the extent the insurance proceeds exceed the cost of the stolen goods to the infringing party. If the insurance proceeds are less than the infringing party"s cost, the fact of the theft should be ignored in the accounting. That will ensure that any loss resulting from the theft of the infringing goods is borne by the infringing party and not by the copyright owner.

Limits on the remedies available to the Plaintiff

[38]          With respect to the question of the remedies sought by the Plaintiff, the Defendants rely on subsection 39(1) of the Copyright Act, the relevant part of which reads as follows:

[...] in any proceedings for infringement, the plaintiff is not entitled to any remedy other than an injunction in respect of the infringement if the defendant proves that, at the date of the infringement, the defendant was not aware and had no reasonable ground for suspecting that copyright subsisted in the work [...].

[39]          The Defendants have adduced evidence that is intended to establish that the Plaintiff"s remedies should be limited to an injunction because of this provision. However, the question of whether Mr. Papini and Mr. Wainstock, the Defendants" principals, had actual knowledge that copyright subsisted in the Work cannot be determined without assessing their credibility. I am not prepared to make any such assessment in this proceeding, nor am I prepared to determine, on the evidence before me, whether or not they had reasonable grounds for suspecting that copyright subsists in the Work. On that basis, even if I had found that the Plaintiff was the owner of the copyright in the Work, I would have found that there are triable issues with respect to the application of subsection 39(2).

Conclusion

[40]          I conclude that the Plaintiff"s claim for summary judgment must be dismissed and that the Defendants" claim for summary judgment must be granted.

[41]          The evidence before me does not prove that the Plaintiff owns the copyright it claims. Whether or not the Plaintiff might have proved its claim at a trial is a matter of speculation. The Plaintiff"s obligation in the face of the Defendant"s motion for summary judgment was to present the best available evidence in this proceeding on the question of ownership of the copyright, or at least to provide evidence of a genuine issue for trial. It has failed to do so.

Costs

[42]          Both parties claim to be entitled to solicitor and client costs. I am not satisfied that either party has conducted this litigation in such a reprehensible or outrageous manner that such an award can be justified.

[43]          As the Defendants have succeeded in their motion for summary judgment, they normally would be entitled to costs. However, I agree with counsel for the Plaintiff that the failure of the Defendants to provide complete disclosure of documents during the discovery stage caused the Plaintiff to waste time, money and effort. I accept that the Plaintiff"s cost of the accounting evidence includes $5,000 that probably would not have been spent if the Defendants had made timely disclosure of the fact that some fabric had been stolen. I also accept that if these facts had been disclosed earlier, this proceeding might well have taken a different, less expensive, course.

[44]          Based on the submissions of counsel, I consider it appropriate to award no costs to the Defendants and to award the Plaintiff costs of $5,000, payable forthwith.

                                 Karen R. Sharlow

                            

                                     Judge

Ottawa, Ontario

December 30, 1999