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Federal Court
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Cour fédérale
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Date: 20090522
Docket: T-436-05
Citation: 2009 FC 538
Ottawa, Ontario, May 22,
2009
PRESENT: The Honourable Frederick E. Gibson
BETWEEN:
VARCO CANADA LIMITED,
VARCO, L.P.,
WILDCAT SERVICES, L.P. and
WILDCAT SERVICES CANADA, ULC
Plaintiffs/
Defendants by Counterclaim
and
PASON SYSTEMS CORP and
PASON SYSTEMS INC.
Defendants/
Plaintiffs by Counterclaim
REASONS FOR ORDER AND ORDER
Introduction
[1]
These
reasons and order follow the hearing on the 11th of May, 2009, of a
motion for an order under Rule 51 of the Federal Courts Rules allowing
an appeal from an Order of Prothonotary Milczynski made the 22nd of
April, 2009, in which the learned Prothonotary dismissed the Defendants’ motion
for an Order bifurcating issues of liability from issues of quantum of recovery
arising from the Plaintiffs’ claim for damages and profits for patent
infringement. The bifurcation order was sought pursuant to Rule 107 of the Federal
Courts Rules.
[2]
Rule
107 reads as follows:
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107. (1) The Court may, at any time, order the trial of an
issue or that issues in a proceeding be determined separately.
(2) In an order under subsection (1), the Court may give directions
regarding the procedures to be followed, including those applicable to
examinations for discovery and the discovery of documents.
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107. (1) La Cour peut, à
tout moment, ordonner l’instruction d’une question soulevée ou ordonner que
les questions en litige dans une instance soient jugées séparément.
(2) La Cour peut assortir l’ordonnance visée au
paragraphe (1) de directives concernant les procédures à suivre, notamment
pour la tenue d’un interrogatoire préalable et la communication de documents.
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Background
[3]
This
action was commenced by the filing of a Statement of Claim on the 8th of March,
2005. The Plaintiffs claim damages and profits for patent infringement. More
specifically, the Plaintiffs allege infringement of Canadian Patent No.
2,094,313 relating to automatic drilling systems used in drilling rigs to
regulate the release of a drill string to achieve an optimal rate of
penetration.
[4]
The
Defendants’ Statement of Defence and Counterclaim was filed on the 25th of
April, 2005. A series of motions, orders and appeals from those orders
followed in rapid succession.
[5]
Case
Management of the action was ordered on the 3rd of November, 2005, and
Prothonotary Milczynski has been performing case management functions since
that time. She is thus very familiar with this proceeding.
[6]
On
the 10th of March, 2009, an Amended Statement of Claim was filed. Counsel for
the Defendants urges that the amendments “… add allegations of infringement and
claims for damages and profits in respect of activities in other countries
[that is to say, countries other than Canada], including the United
States, Mexico, Argentina
and Australia” and that,
in the result, the complexity of the action is significantly increased. Thus,
he urges, the recent amendments to the Statement of Claim triggered the motion
for bifurcation. Counsel for the Plaintiffs disagrees that the amendments add
jurisdictions and thus increase the complexity of the action. Rather, he
urges, the amendments merely “clarify” the scope of the action. In the Reasons
for Order that is here under appeal, Prothonotary Milczynski expresses the same
view of the impact of the amendments as that urged by counsel for the Plaintiffs.
[7]
The
first round of examinations for discovery has recently been completed, subject
to outstanding motions to require answers to questions where answers were
refused to be provided.
The Decision Under
Appeal
[8]
The
substance of Prothonotary Milczynski’s decision that is before the Court is
quite brief. It follows:
The Defendants have raised the
matter of bifurcation with the Plaintiffs on a number of occasions earlier in
the proceeding, but it was only after the Statement of Claim was recently
amended to clarify that the damages sought by the Plaintiffs’ related to
their allegations of the Defendants’ infringing activity in Canada (the
manufacture of the Defendants’ drilling equipment) and to the monies earned as
a result of that infringing activity - in Canada and in the Defendants’
export markets outside Canada, did the Defendants bring this motion. The
proceeding has, however, had a long history of interlocutory proceedings since
the action was commenced in 2005, as both parties have outlined in their
written representations.
Nonetheless, at any time in a
proceeding, if the Court is satisfied that bifurcation is appropriate in the
circumstances, such order may be granted. The onus is on the moving party
to satisfy the Court, on a balance of probabilities, that in light of the
evidence and all of the surrounding circumstances that bifurcation of the
issues of liability and damages would more likely than not, lead to the most
just, expeditious and least expensive determination of the proceeding on its merits.
In determining whether or not
to exercise its discretion to order bifurcation of the issues of liability and
damages, there are a number of factors the Court may consider, including:
(i)
The
complexity of the case;
(ii)
Whether
the issues of liability are clearly
distinct from
issues of remedy and damages;
(iii)
Whether
the issues of liability and damages are interwoven to such a degree so that no
time or great expense will be saved;
(iv)
Whether a
decision relating to liability will likely put an end to the action altogether;
(v)
Whether
the parties have already devoted resources to all of the issues;
(vi)
Whether
the splitting of the action will save time or lead to unnecessary delay;
(vii)
Whether
the parties will suffer any advantage or prejudice by the granting of the
order; and
(viii)
Whether
bifurcation will result in the most just, expeditious and least expensive
disposition of the proceeding.
In this case, I am not
satisfied on the record filed by the Defendants that bifurcation should be
ordered. As set out in the Plaintiffs’ written representations at paras.40-70,
which I accept, there is nothing particularly unusual about this case,
either in the complexity of the issues or the scope of the productions. I
agree that if bifurcation were ordered in this case, it would be difficult not
to order it in every case. I am also not satisfied that any real economy would
be achieved in that the issue of the patent’s validity on the grounds of
obviousness will raise the factor of commercial success, which in turn, will
require some measure of financial disclosure in any event.
I am also not satisfied that
bifurcation at this juncture will lead to any savings of costs and time since
the parties have been preparing on the basis of a trial on all issues and are
at the stage of examinations for discovery. The recent amendments that add
jurisdictions may increase the volume of documents to be produced and
some examinations, but I do not see that outweighing the interest of
expeditious resolution of all issues in a single trial or the prejudice that
will arise by the delay in the event liability is established.
[emphasis added]
[9]
As
Prothonotary Milczynski noted, she accepts the Plaintiffs’ Written
Representations at paragraphs 40 to 70 of their memorandum which was before
her. She annexed those paragraphs to the Order here under appeal. I will do
the same. Those paragraphs appear as a Schedule to these reasons and order.
Standard of Review
[10]
In Merck & Co., Inc. v. Apotex Inc., the Federal Court of Appeal
clarified the standard of review in matters such as this established in Canada
v. Aqua-Gem Investments Ltd.
when it wrote at paragraph [19]: “... Discretionary orders of prothonotaries
ought not be disturbed on appeal to a judge unless: (a) the questions raised in
the motion are vital to the final issue of the case, or (b) the orders are
clearly wrong, in the sense that the exercise of discretion by the prothonotary
was based upon a wrong principle or upon a misapprehension of the facts.”
[11]
It was not questioned before the Court that the questions
here raised are not vital to the final issue of the case. Rather, counsel for
the Defendants urged that the Order under appeal is “clearly wrong”.
[12]
In Weatherford Artificial Lift Systems Canada Ltd. et
al. v. Corlac Inc. et al.,
Justice Mandamin wrote at paragraphs 26 to 28 of his Reasons:
The role of
a case management judge was discussed by Justice Rothstein for the Federal
Court of Appeal in Sawridge Band v. Canada, ... He stated:
We would
take this opportunity to state
the
position of this Court on appeals
from orders
of case management
judges.
Case management judges must
be given
latitude to manage cases.
This Court
will interfere only in the
clearest
case of a misuse of
judicial
discretion.
Justice Gibson in Microfibres Inc. v. Anabel Canada Inc. ...
considered the role of a prothonotary to be of similar importance. He stated:
I conclude that Mr. Justice Rothstein’s
comments should apply by analogy to
discretionary
decisions prothonotaries
make in the
course of case management
in complex
matters such as this.
Case
management prothonotaries must
be given
latitude to manage cases in
the same
manner in which case management judges are entitled to such latitude.
... Case
Management prothonotaries, like
case
management judges are familiar with
the
proceedings that they are managing to a
degree that
a trial judge, sitting on appeal
from a
prothonotary’s discretionary decision
in such a
context, usually cannot be.
In my view,
the Prothonotary was exercising his discretion in making a case management
decision when he decided against the Defendants’ application for leave to serve
and file the Amended Statement of Defence and Counterclaim. He was familiar
with the course of the proceedings and the procedural complexities involved in
the action. ...
[citations omitted]
[13]
I am satisfied that precisely the same, modified only as to
context, must be said here.
The
Defendants’ Allegations
[14]
Before me, counsel for the Defendants urged that
Prothonotary Milczynski erred in dismissing the Defendants’ motion for
bifurcation to the extent that she was clearly wrong, in the sense that the
exercise of her discretion was based upon a wrong principle or upon a
misapprehension of the facts in that:
a)
she misapprehended the evidence in finding that, on a
balance of probabilities, a bifurcation order would not leave to savings of
cost or time;
b)
she misapprehended the evidence in failing to recognize
that the Plaintiffs’ recent amendments to its pleading significantly increased
the complexity of this action by the addition of new jurisdictions, and that
such increased complexity in the context of this proceeding favours
bifurcation;
c)
she misapprehended the evidence in failing to consider the
Plaintiffs’ prior conduct in another matter that was before this Court, which
conduct would disentitle the Plaintiffs to claim equitable relief such as
profits, thereby resulting in a saving of time and resources in the conduct of
this case, even if the Plaintiffs succeed on liability;
d)
she erred in law in holding that there is a substantial
overlap between issues of commercial success and damages, such that these
issues are not readily separable by bifurcation; and
e)
she erred in law, misapprehended the evidence, and
exercised her discretion based on a wrong principle in adopting and accepting
the Plaintiffs’ written representations at paragraphs 40 to 70 of their
Memorandum that was before her and as set out in the Schedule to these reasons
and order.
Analysis
[15]
I reiterate the words of Justice Mandamin quoted above. In
my view, Prothonotary Milczynski was exercising her discretion in making a case
management decision when she decided against the Defendants’ application for
bifurcation. She was familiar with the course of these proceedings and the
procedural complexities involved in this action. In these circumstances, it
would be inappropriate for me to interfere with the learned Prothonotary’s
decision unless that decision reflects on its face a clearest case of a misuse
of judicial discretion. I am satisfied that this is not such a case.
[16]
As earlier noted and as quoted from the Prothonotary’s reasons,
the Prothonotary was satisfied that the recent amendments to the Statement of
Claim herein were to “... clarify that the damages sought by the Plaintiffs
related to their allegations of the Defendants’ infringing activity in Canada
(the manufacture of the Defendants’ drilling equipment) and to the monies
earned as a result of that infringing activity – in Canada and in the
Defendants’ export markets outside Canada, ...”. In this regard, the
Prothonotary preferred the submissions before her on behalf of the Plaintiffs
over those that were before her on behalf of the Defendants, thus including a
preference for the Plaintiffs’ interpretation of the facts of this matter, as
they impact on any possible savings of cost or time, over the interpretation
urged on behalf of the Defendants. Precisely the same must be said regarding
the impact of the amendments to the Statement of Claim on the complexity of
this matter, that is to say, that the amendments did not materially increase
the complexity and thus did not work in favour of bifurcation.
[17]
While the Prothonotary’s Order does not make reference to
the Plaintiffs’ prior conduct that is commented on in the related file
T-1845-05 in this Court, I am satisfied that it is entirely speculative to
conclude that such conduct and this Court’s commentary on it would be found to
disentitle the Plaintiffs to claim equitable relief such as profits, thereby
resulting in a savings of time and resources, in the view of the Defendants, in
the conduct of this case, even if the Plaintiffs were to succeed on liability.
I am satisfied that that speculative allegation is a matter for another day and
quite appropriately was not commented on by the Prothonotary in the context of
her Reasons on the motion before her.
[18]
With great respect, I am in no position, despite the
Defendants’ submissions before me, to conclude that the Prothonotary erred in
law in concluding that the Defendants were wrong in stating that, in this case,
matters of infringement and whether the underlying patent is valid are “...
separate and distinct from the assessment of the remedies claimed.” Based upon
the materials before me and the submissions of counsel before me, I cannot but
conclude that the Prothonotary’s conclusion that “bifurcation of liability and
damages would do little to narrow the scope of discovery for trial” was
reasonably open to her. With great respect, the Prothonotary simply did not
conclude that there is a “substantial” overlap between issues of
commercial success and damages.
[19]
Finally, it is, with great respect, specious to urge that
the Prothonotary erred in law, misapprehended the evidence and exercised her
discretion based on a wrong principle in adopting and accepting the
Plaintiffs’ written representations at paragraphs 40 to 70 of their memorandum
that was before her. The learned Prothonotary only accepted the
Plaintiffs’ written representations in those paragraphs. She did not go so far
as to “adopt” them.
Conclusion
[20]
For the foregoing reasons, this appeal will be dismissed.
Costs
[21]
Costs would normally follow the event. Counsel for the
Plaintiffs urged that costs, fixed in the amount of $3,000.00, should be made
payable by the Defendants, forthwith. Counsel for the Defendants urged that,
as in the case of Prothonotary Milczynski’s Order leading to this appeal, costs
should be made payable in the cause. I am satisfied that appeals such as this,
where the likelihood of success has been, I am satisfied, minimal, should be
discouraged by costs orders. In the circumstances, I will order that costs of
this motion in appeal will be payable to the Plaintiffs in any event of the
cause. Such costs shall be subject to taxation.
ORDER
THIS COURT ORDERS that this appeal by way of motion
under Rule 51 of the Federal Courts Rules is dismissed. The Plaintiffs
are entitled to their costs to be taxed, payable by the Defendants, in any
event of the cause.
“Frederick
E. Gibson”
Docket: T-436-05
SCHEDULE
TO THE REASONS FOR ORDER
AND ORDER
DATED MAY --, 2009
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