Date: 20070118
Docket: T-514-06
Citation: 2007
FC 53
Ottawa, Ontario, January 18, 2007
PRESENT: The Honourable Mr. Justice O'Reilly
BETWEEN:
QAD
INC.
Plaintiff
and
STRATFORD HOLDINGS CORPORATION
previously known as CRANE PLUMBING
CORPORATION
and CRANE PLUMBING CANADA CORP.
Defendants
REASONS FOR ORDER AND ORDER
[1]
QAD Inc. alleges that
the defendants have infringed its copyright in a software program used in
managing the manufacturing process. QAD also alleges that the defendants failed
to pay certain transfer fees when they acquired the software from their
predecessors. The defendants concede that they have violated QAD’s copyright,
but dispute their liability in damages and argue that they should be given time
to replace the software with another program.
[2]
QAD argues that the
issues and evidence are sufficiently clear that I should grant it summary
judgment. The defendants submit that certain key facts remain unresolved and,
therefore, that the dispute should go to trial.
[3]
While I agree with QAD
that many of the issues seem to be settled, I do not feel the conditions for
summary judgment are present. I must, therefore, dismiss this application.
I. Issue
[4]
Should
summary judgment be granted?
II. Analysis
(a) Factual brackground
[5]
QAD’s software is
called MFG/PRO. In January 1998, QAD entered into a licensing agreement with
Crane Co., a U.S. Company (not a defendant to this action). The agreement gave
Crane Co. permission to use the software subject to certain terms and
conditions. Crane Co. paid QAD a license fee based on the number of users. In
total, there were 384 users in eight locations, including 65 in Montreal.
[6]
The agreement also
obliged Crane Co. to notify QAD of any sale of its operations and to give QAD
an opportunity to consent to use of the software by the purchaser. Further, the
agreement stipulated that the purchaser should pay a transfer fee to QAD and
enter into a new licensing agreement with QAD within 30 days.
[7]
In October 2001, Crane Co.
sold the assets of its Montreal business to the Crane Plumbing
Corporation, which later became the defendant Stratford Holdings Corporation.
In February 2005, Stratford sold those assets to the defendant Crane
Plumbing Canada Corporation (CPCC). Neither of the defendants paid QAD any
transfer fees or entered into new licensing agreements with QAD. Stratford used the software from 2001 to 2005. CPCC has used
the software since 2005.
(b) Conditions for Summary Judgment
[8]
As I stated in Cores
Worldwide Inc. v. Ship M/V “Camilla” (The):
The Court grants
summary judgments in situations where there is no genuine issue for trial: Granville
Shipping Co. v. Pegasus Lines Ltd. S.A., [1996] 2 F.C. 853. It
cannot do so where there are serious factual issues to be resolved: Warner-Lambert
v. Concord Confections Inc. 2001 FCT 139, [2001] F.C.J. No. 287. The
applicant must present evidence showing that there is no factual issue for
which a trial is necessary: Feoso Oil Ltd. v. "Sarla" (The),
[1995] 3 F.C. 68 (C.A.); Irving Ungermann Ltd. v. Galanis (1991),
4 O.R. (3d) 545 (C.A.); Ruhl
Estate v. Mannesmann Kienzle GmbH, [1997] F.C.J. No. 1345. On the
other hand, the respondent must "put its best foot forward", in the
sense that it must tender evidence showing that there is a genuine factual
dispute. It cannot simply deny the applicant's claims or rely solely on the
pleadings: Pizza Pizza v. Gillespie (1990), 75 O.R. (2d) 225; ITV
Technologies Inc. v. WIC Television Ltd., 2001 FCA 11, [2001] F.C.J.
No. 400
(c) Facts in dispute
(i) Defendants’
Knowledge
[9]
As mentioned, the
defendants admit that they have used QAD’s software and have infringed QAD’s
copyright. However, they argue that their liability to QAD is limited, given
that they had no knowledge of the terms of the original licensing agreement until
2005, when QAD contacted them. They allege that it was Crane Co. who was
obliged to inform QAD of the sale of part of its operations and to obtain QAD’s
consent. They contend that they assumed when they purchased the assets of their
predecessors that they got the software along with them. Accordingly, they
submit that their lack of knowledge of the terms of the original agreement, and
the fact that their use of the software was in good faith, should figure in the
calculation of damages.
[10]
QAD points out that the
defendants admit that they possessed a copy of the original license agreement
and, therefore, either knew or ought to have known about their obligations
under it. QAD contests the defendants’ claim of good faith.
(ii)
Notice to QAD
[11]
Stratford maintains that it informed QAD that the Montreal operation had been sold. They contacted QAD in 2002,
informed it of the sale and cancelled their maintenance contract. Stratford maintains that QAD was, therefore, aware that it was
using the software at that point and never asked for payment of a transfer fee.
Accordingly, Stratford argues that QAD, having waited until 2006
to commence its action, is beyond the three-year limitation period set out in
s. 41 of the Copyright Act.
[12]
QAD submits that notice
of the sale was inadequate. The communication was made to one of QAD’s
maintenance representatives, not to any person with responsibility for
licensing matters.
(iii) Liability of CPCC
[13]
CPCC argues that it
would not have been liable for the payment of a transfer fee when it acquired Stratford’s assets in 2005. The original licensing agreement
between Crane Co. and QAD did not require a transfer fee to be paid by an
entity that was a successor to all, or substantially all, of the predecessor’s
business. Therefore, if Stratford had entered into a licensing agreement
with QAD and subsequently sold all its assets to CPCC, CPCC would not have had
to pay any transfer fees.
[14]
QAD submits that both
sales gave rise to an obligation to pay transfer fees, and to meet other
conditions set out in its original agreement with Crane Co.
(d) Genuine Issues for Trial
[15]
In my view, there
remain genuine issues for trial in this case, including the factual disputes
described above. I am unable to resolve those disputes on the material before
me. Accordingly, I cannot grant QAD’s request for summary judgment.
[16]
The issues for trial
are, nevertheless, narrow. The defendants acknowledge QAD’s copyright, admit
use of QAD’s software and concede infringement. The defendants raised the
defences of laches and estoppel, but these appear to have no application in the
circumstances. Questions remain, however, about the operation of s. 41, the
applicability of the terms of the original agreement to the sale of Stratford’s assets to CPCC and the appropriate quantum of
damages, if any. In my view, the trial can be confined to these issues.
[17]
Accordingly, the motion
for summary judgment is dismissed.
ORDER
THIS COURT ORDERS that:
1.
The motion
for summary judgment is dismissed.
“James
W. O’Reilly”
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