Date: 20010828
Docket: A-7-00
Neutral Citation: 2001 FCA 251
CORAM: ISAAC J.A.
SEXTON J.A.
MALONE J.A.
BETWEEN:
NOVARTIS PHARMACEUTICALS CANADA INC.
Appellant
(Plaintiff)
- and -
NOVOPHARM LIMITED
Respondent
(Defendant)
REASONS FOR JUDGMENT
ISAAC J.A.
[1] This is an appeal by the appellant Novartis Pharmaceuticals Canada Inc., from an order made by a Motions Judge in the Trial Division pursuant to Rule 107 of the Federal Court Rules, 1998, on 15 December 1999, [1999] F.C.J. 1969. The order allowed a motion by the respondent, Novopharm Ltd. for an order directing either a reference or the trial of an issue, to determine the nature and quantum of damages that the appellant should pay as a result of an interim, and then, an interlocutory injunction which it had obtained against the respondent.
Background Fact and Procedural History
[2] In order to appreciate the issues raised in the motion before the learned Motions Judge and the conclusions reached and as well, the issues raised in this appeal, it would be useful to know the essential facts of the case and its procedural history. To that end, I summarize below what I consider to be the essential features of both.
[3] On 5 October, 1993, the respondent received from the Minister of Health Canada a Notice of Compliance for 100 mg slow release diclofenac sodium ("Novo-Difenac"); and, on or about 12 October, 1993, it obtained its first order for 100 mg of Novo-Difenac.
[4] On 3 November, 1993, the appellant, under the name Ciba-Geigy Canada Ltd., as plaintiff filed, in the Trial Division, a Statement of Claim alleging, inter alia, that the promotion and sale by the respondent of diclofenac slow release 75 mg and 100 mg brand diclofenac tablets is likely to result in confusion and deception amongst physicians, pharmacists and other health care professionals and members of the public.
[5] In that Statement of Claim, the appellant sought, among other remedies, an interim, interlocutory and permanent injunction restraining the respondent from directing public attention to the appearance of its diclofenac slow release 75 and 100 mg tablets and business in such a way as to cause or to be likely to cause confusion in Canada between its tablets and business and the VOLTAREN SR 75 and 100 mg tablets and business of the appellant.
[6] Subsequently, Ciba-Geigy Canada Ltd. amalgamated with other companies into a continuing company which changed its name to Novartis Pharmaceuticals Canada Inc. By order dated 10 November, 2000 [2000] F.C.J. 1859, the Associate Senior Prothonotory in Toronto changed the style of cause of this proceeding to read:
NOVARTIS PHARMACEUTICALS CANADA INC.
Plaintiff
- and -
NOVOPHARM LIMITED
Defendant
[7] The respondent became the first supplier of a generic version of VOLTAREN SR.
[8] On or about 5 November, 1993, the appellant served and filed a motion for an interim injunction restraining the respondent from directing public attention to the appearance of its diclofenac slow release tablets and business in such a way as to cause or to be likely to cause confusion in Canada between its tablets and business and that of the appellant. In that motion, the appellant assumed that the respondent would distribute both 100 and 75 mg sizes of the diclofenac tablets, if not restrained.
[9] On 30 November, 1993, Gibson J. issued an interim injunction restraining the respondent from selling its Novo-Difenac tablets. The order related to "diclofenac slow release tablets" and did not differentiate between the 75 or 100 mg sizes.
[10] The order of Gibson J. read in part:
The interim injunction is granted on the plaintiff's undertaking to pay any damages awarded to the defendant and against the plaintiff should the plaintiff not ultimately be successful when this case is decided on its merits.
[11] On 6 December, 1993, the Associate Chief Justice ordered that the application for the interlocutory injunction should be heard on 26 January, 1994.
[12] The hearing of the interlocutory injunction was not concluded on 26 January but was heard for twelve days between 26 January and 9 March, 1994. A further hearing was held on 8 June, 1994, at the request of the Court.
[13] On 29 April, 1994, the respondent filed a statement of defence in which it alleged that the appellant had no reputation or goodwill association with and no exclusive right to the appearance of its diclofenac slow release tablets and, in any case, sales by the respondent of similarly appearing formulation of diclofenac sodium would not be likely to cause confusion in Canada.
[14] On 5 August, 1994, Rothstein J. (as he then was) issued an order enjoining the respondent, until the trial of the action, from "advertising, marketing, selling, shipping and distributing its 100 mg diclofenac slow release tablets in a look-a-like appearance to the plaintiff's VOLTAREN SR 100 mg tablets". A condition of the granting of the injunction was that the appellant (plaintiff) would undertake in writing, satisfactory to the Court, to pay any damages awarded to the respondent (defendant) against the appellant at trial. The learned Judge refused to issue the injunction in so far as it is related to the 75 mg tablets on the basis that:
There is no evidence before me as to the appearance of the defendants' 75 mg tablets and, as I understand the evidence, the defendants are some years away from marketing this dosage.
[15] The appellant brought a motion to reconsider the order of Rothstein J. refusing the injunction in respect of the 75 mg. tablets but was unsuccessful. Rothstein J. ordered as follows:
The plaintiff's application for an interlocutory injunction and application for reconsideration in respect of the defendant's 75 mg tablets is dismissed, without prejudice to the right of the plaintiff to bring a fresh application for an interlocutory injunction if and when a sample of the defendant's tablets is available and upon such application, the parties may rely on the record herein and the record in Court file T-2583-93 and such further evidence as they may choose to adduce.
[16] The interlocutory injunction was granted on the condition that the appellant file with the Court and serve upon the respondent an undertaking in the following terms:
The plaintiff hereby undertakes to abide by any order concerning damages which this Honourable Court may make by reason of the grant of the interlocutory injunction herein.
[17] The respondent appealed from the order of Rothstein J. granting the interlocutory injunction in respect of the 100 mg tablets. The appellant appealed from the order refusing the injunction in respect of the 75 mg tablets. Neither appeal was pursued. Eventually, both appeals were dismissed for want of prosecution.
[18] In parallel proceedings, commenced in the Office of Trademarks, the appellant had applied for registration of a trademark in relation to the VOLTAREN SR tablets. The respondent filed an opposition to the application.
[19] On 17 September, 1997, the Registrar of Trademarks rejected an opposition by the respondent to an application brought by the appellant for registration of the trademark Tablet Design which the appellant had filed. The result of this decision was that the appellant's application was allowed.
[20] On 17 November, 1997, the respondent filed an appeal from that decision.
[21] On 22 February, 1999, Reed J. dismissed a motion for an order dismissing this appeal for delay [1999] F.C.J. 268.
[22] On 14 April, 2000, Rouleau J. allowed the respondent's appeal [2000] F.C. 509 from the decision of the Registrar of Trademarks. I reproduce below three paragraphs of his dispositive reasons for doing so:
17. Applying these principles to the evidence now before me, I am unable to conclude that the colour and shape of Ciba's Voltaren SR tablets are distinctive of the product as there is simply no evidence from any consumer, pharmacist or doctor that the colour or the colour and shape distinguish the Ciba pills from other pills. On the other hand, there was uncontradicted evidence before the Registrar the round, pink tablets are well known in the pharmaceutical industry, indeed are common in the industry, and that there are a number of pink tablets available on the market in Canada. Although Ciba relies on evidence relating to sales figures and promotional material, it is well established that impressive sales figures alone do not satisfy the burden which an applicant for a trade-mark bears of proving distinctiveness.
18. I am satisfied therefore, that the respondent Ciba has not adduced any evidence which clearly establishes, on a balance of probabilities, that a significant number of consumers associate the appearance of its product with a single source. Accordingly, it has failed to establish the distinctiveness required for a valid trade-mark.
19. In my view, the Registrar failed to apply the established principles of law with respect to the issue of distinctiveness. Indeed, he appears to have had virtually little regard for the legal tenets established by the jurisprudence. In the same manner, his findings of fact can only be considered perverse, given that there was simply no evidence before him to substantiate a finding that the respondent's products has obtained recognition or a reputation in the mind of the consuming public as a result of its appearance of get-up.
[23] On 28 May, 1997, the respondent brought a motion in the Trial Division for an order dissolving the interlocutory injunction granted by Rothstein J.
[24] On 19 December, 1997, MacKay J. issued an order dissolving the injunction [1998] 2 F.C. 527. In reaching that conclusion, the learned Judge made the following observations in paragraphs 29 and 30 of his reasons:
In my view the plaintiff has not met its responsibility to proceed with due diligence. That failure in the circumstances of [this case] is sufficient, in my opinion, to justify dissolution of the injunction[s]. There is no burden on the defendants to demonstrate more than that failure, and in particular no burden to establish a new, or additional, irreparable harm, other than that found by Rothstein J. arising from exclusion of the defendants from the market before the rights of the parties are determined.
In [this case], the defendants have done nothing to end the plaintiff's delay until now, yet they cannot be said to have been obstructionist or uncooperative, and they cannot be viewed as causing the delay. For the reasons outlined above, where the court has imposed a constraint on the freedom of action of the defendants, implicitly on the basis that the plaintiff will proceed with its [action] with due diligence, and the plaintiff does not do so, failure of the defendants to take any steps in [this action] does not bar them from seeking to regain their liberty of action by a motion to dissolve the interlocutory [injunction].
[25] His conclusory remarks at paragraphs 31 and 32 of his reasons deserve repeating here and are reproduced below:
The plaintiff has taken no steps to proceed with the [action] in this Court file for more than three years. It has taken no step in the four months following filing of the motions by Novopharm to dissolve the injunction. The plaintiff virtually concedes it has treated the interlocutory [injunction] as the permanent resolution of the disputes. In my opinion, the plaintiff had the responsibility, particularly where the injunction was granted on a quia timet basis, to pursue the matter with due diligence and dispatch. [Emphasis added]
The lengthy and inordinate delay, in [this case] constitutes an extraordinary circumstance that warrants the intervention of this Court. For these reasons, ... the motion brought by Novopharm in T-2582-93 [is] allowed and [an order issues] in [this] file dissolving the interlocutory [injunction] ordered by Rothstein J. on July 24, 1994, as subsequently implemented by his [order].
[26] On 28 August, 1998, the appellant served and filed a notice of discontinuance of the action.
[27] On 13 July, 1999, some 11 months after the notice of discontinuance had been served and filed, the respondent served and filed a motion for an order directing a reference or trial of an issue regarding the nature and quantum of any damages suffered by reason of the granting of the interim and interlocutory injunctions.
[28] The motion was heard on 16 November, 1999 and the resulting order was made on 15 December, 1999. It is from that order that this appeal is taken. The Motions Judge, as I already mentioned, made an order on 15 December, 1999, allowing the trial of an issue to determine the nature and quantum of damages suffered by the respondent by reason of the granting of the interim and interlocutory injunctions.
[29] The Motions Judge concluded that the appellant had not demonstrated that special circumstances existed so as to relieve it of its obligation to compensate the respondent for damages arising from the operation of the injunctions.
[30] Before the Motions Judge, the appellant made several contentions which are summarized in paragraph 10 of the reasons for order which is reproduced below:
Counsel for the plaintiff argues that it is not appropriate to order either a reference or the trial of an issue because: (1) any damages that the defendant suffered would have been trivial and most were caused by the defendant's own actions rather than the operation of the injunctions; (2) the defendant failed to mitigate its damages; (3) related and protracted proceedings occurred in the trade-marks office and the results justify the merits of the plaintiff's claim; (4) the defendant accepted the merits of the injunction order by not appealing it; (5) the defendant delayed too long commencing this motion; (6) the action was terminated by a discontinuance and there has been no decision on the merits against the plaintiff; (7) the discontinuance was for a valid reason - there was nothing left to litigate.
[31] The learned Motions Judge analysed each ground on which the motion was made and rejected them. She concluded that the appellant had not demonstrated that special circumstances existed which relieved it of its obligation to compensate the respondent for damages arising out of the operation of the injunction.
POINTS IN ISSUE
[32] The appellant raised the following issues in the argument of this appeal:
(1) that the Motions Judge erred in ignoring the respondent's delay in bringing this motion under the Federal Court Rules, 1998, while these same rules required the appellant to discontinue the action due to its delay;
(2) that the Motions Judge accepted that the respondent had a threshold burden on its motion to establish by evidence the existence of damages before the Court would grant the leave requested. The appellant submits that she erred in concluding that Novopharm had met that burden; and,
(3) that the Motions Judge erred in fact and in law with respect to special circumstances. The appellant submits that the circumstances including that the action was discontinued as there was nothing left to litigate constituted special circumstances to justify the discontinuance and excuse the appellant from compliance with its undertakings;
ANALYSIS
[33] I am of the view that this appeal should be dismissed with costs for the following reasons.
[34] Firstly, it is well established that the test for appellate review of the exercise of judicial discretion is whether the judge at first instance has given sufficient weight to all relevant considerations. This was the conclusion of the Supreme Court of Canada in Reza v. Canada [1994] 2 S.C.R. 394 at 404.
[35] Secondly, the text of Rule 107(1) is formulated in permissive language:
The Court may at any time order the trial of an issue or the issues in a proceeding be determined separately. [Emphasis added]
[36] Thirdly, I have reviewed with care the reasons for order of the Motions Judge. In similar fashion, I have the memoranda of fact and law which counsel filed in these proceedings and have considered the authorities upon which the parties relied in the joint book of authorities that they had filed. I have concluded that the Motions Judge has given sufficient weight to all relevant considerations. She made findings of fact that are amply supported by the evidence and her application of legal principles to the facts found are unassailable.
[37] For these reasons, I have concluded that it would serve no useful purpose to address in detail the many arguments which counsel for the appellant has advanced both in writing and orally.
[38] I would, therefore, dismiss the appeal with costs on a party and party basis.
"Julius A. Isaac"
_____________________________
J.A.
"I agree
J.E. Sexton J.A."
"I agree
B. Malone J.A."
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