Docket: T-775-16
Citation:
2016 FC 1000
Ottawa, Ontario, September 2, 2016
PRESENT: Madam Prothonotary Mireille Tabib
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BETWEEN:
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ELBIT SYSTEMS
ELECTRO-OPTICS ELOP LTD.
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Plaintiff
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and
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SELEX ES LTD.
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Defendant
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ORDER AND REASONS
[1]
In the context of this infringement action, the
Defendant brings a motion for an order striking out parts of the Statement of
Claim without leave to amend and for an extension of time within which to serve
and file its Statement of Defence.
[2]
The action concerns the procurement of upgrades
to Canada’s fleet of Lockheed CP140 Aurora aircraft, and in particular, to the
installation of DIRCIM systems in the aircraft. The Plaintiff alleges that the
systems to be supplied, delivered and installed by the Defendant would infringe
the Plaintiff’s Canadian Patent No. 2,527,754 entitled “Fiber Laser Based
Jamming System”. The Defendant is a subcontractor to General Dynamics Mission
Systems – Canada (“GDC”), the prime contractor for the upgrade contract. The
action claims that the Defendant has, or will imminently infringe the patent by
offering, agreeing or contracting with GDC to supply its systems, but also that
the Defendant is inducing or procuring the infringement of the patent by GDC
and the Canadian Government. It is useful to note that neither GDC nor the
Canadian Government are named as defendants, even though allegations are made
that they both have or will directly infringe the patent and that GDC has or
will induce infringement by the Government of Canada.
[3]
The Defendant withdrew its motion in respect of
paragraphs 41 and 1(c) of the Statement of Claim (“SOC”) and classified the
remaining impugned paragraphs of the SOC as follows:
1.
Allegations of inducement to induce (portions of
paragraph 18 and paragraphs 19 and 37).
2.
Bald assertions or speculation (portions of
paragraph 21, paragraph 24 and paragraphs 46 to 48).
3.
Irrelevant pleadings (portions of paragraphs 12,
13, 14 and 17).
[4]
I will adopt this structure and deal with each
category in that order.
I.
Inducement to induce
[5]
The Defendant puts forward two arguments for
this category: It argues first that “inducement to induce infringement” is not
a recognizable cause of action and, second, that even if such a cause of action
arguably exists, the Plaintiff has failed to plead the material facts essential
to establish it.
[6]
Neither party could refer the Court to any case
where procuring or inducing a person to procure or induce another person to
infringe was pleaded or considered as a cause of action. The Defendant’s
argument rests entirely on the following passage of paragraph 162 of Weatherford
Canada Ltd. v Corlac Inc., 2011 FCA 228:
(…) A determination of inducement requires the application of a
three-prong test. First, the act of infringement must have been completed by
the direct infringer. Second, the completion of the acts of infringement must
be influenced by the acts of the alleged inducer to the point that, without the
influence, direct infringement would not take place. Third, the influence must
knowingly be exercised by the inducer, that is, the inducer knows that this
influence will result in the completion of the act of infringement. (…)
[7]
The Defendant argues that, as the Federal Court
of Appeal’s three-prong test expressly requires the influence of the alleged
inducer on a direct infringer who completes the act of infringement, the
test cannot admit for indirect inducement i.e. influencing a person who then
influences a direct infringer.
[8]
I am not satisfied that the passage of Corlac
identified by the Defendant was intended by the Federal Court of Appeal to
negate indirect infringement as a cause of action, or that the analysis it
presents necessarily leads to the conclusion that no cause of action for indirect
infringement can exist. There were no allegations of indirect infringement in Corlac.
Further, the Defendant’s argument ignores the first sentence of paragraph 162
of Corlac: “It is settled law that one who
induces or procures another to infringe a patent is guilty of
infringement of the patent”. Since inducement is itself an act of
infringement, the “act of infringement” referred to in the Federal Court of
Appeal’s analysis could be read as including a previously established
infringement by inducement. For the purpose of determining whether a second or
indirect inducer is itself guilty of infringement by inducement, the first
inducer could then be construed as the “direct infringer”. I need not embark on
a complete review of the law of inducement to determine whether the law would
otherwise support the Defendant’s interpretation of the Federal Court of
Appeal’s reason in Corlac. It was the Defendant’s burden to satisfy the
Court that a cause of action in indirect inducement did not have the slightest
chance of success; its argument, based as it is solely on the interpretation of
one paragraph of a 172-paragraph decision, falls far short of the required
standard.
[9]
The second prong of the Defendant’s argument on
this issue is that, even assuming that indirect infringement is a recognizable
cause of action, the “act of infringement” allegedly completed by the first
inducer, GDC, includes an agreement by GDC to indemnify Canada. Since the SOC
fails to allege, in turn, that the Defendant’s actions in any way influenced
GDC in giving that indemnification agreement, the three prong test in Corlac
cannot be met, and the action is bound to fail. The Defendant’s argument
requires a very strict reading of the allegations of the SOC, to the point that
the giving of an indemnity by GDC to Canada would become a necessary component
of the alleged inducement. I am not satisfied that, either on a fair reading of
the SOC or at law, the giving of an indemnity is a sine qua non
condition of inducement. Further, the SOC specifically alleges, at paragraph
22, that: “Without [the Defendant’s] influence by way of among other things,
(…) agreeing (…) to indemnify GDC (…), GDC would not have selected [the
Defendant] (…).” Assuming as I must, that this and other allegations of the SOC
are proven, I am not satisfied that there are no grounds on which a court might
find that the Defendant’s acts influenced GDC’s acts to the point that without
them, GDC would not have given the alleged indemnity to Canada.
II.
Bald assertions or speculation
[10]
The Defendant argues that the allegation in
paragraph 21 that “It is also customary and ordinary practice in the defence
industry that contracts (…) contain [indemnity clauses]” is speculative as well
as irrelevant to the Defendant’s specific activities. I am satisfied that the
existence of an industry practice is an allegation of fact. Further, that
allegation is arguably relevant as it provides some factual basis for the
allegation, in the next paragraph, that the Defendant in fact agreed to
indemnify GDC. The allegation should not be struck.
[11]
The Defendant also takes issue with the
assertion, in paragraph 24, that “at all material times, [the Defendant] has
been aware of the ‘754 Patent”. This allegation is, technically, an allegation
of a state of mind that ought to be particularized pursuant to Rule 181.
However, I note that the defect would have been more adequately addressed by a
motion for particulars. The use of partial motions to strike should not be
encouraged where the defect is amenable to being cured by an informal request
for particulars. The Court declines to exercise its discretion to strike this
paragraph.
[12]
Finally, the Defendant submits that paragraphs
46 to 48 of the SOC improperly speculate as to what it might do in the future. The
Defendant cites Faulding (Canada) Inc. v Pharmacia S.p.A., 1998 82 CPR 3rd
435 in support of its argument that they should be struck. I agree with the
submissions of the Plaintiff to the effect that the facts alleged in those
paragraphs do not purport to set up a speculative cause of action, but to
support a claim for a certain species of damages flowing from the alleged acts
of infringement. The pleadings therefore do not impermissibly plead a
speculative cause of action. If there is an element of foretelling as to the
damages that might in the future flow from the infringement, it is not, in the
circumstances, purely speculative or improper, as the future losses are
reasonably arguable as foreseeable consequences of a specifically pleaded set
of past and current factors.
III.
Irrelevant facts
[13]
The impugned parts of paragraphs 12, 13 and 17 refer
to a different and distinct procurement process from a foreign military which
the Canadian Government allegedly considered against and rejected in favour of
the commercial competitive acquisition process that ultimately led to the
allegedly infringing bid. There is nothing in the SOC as drafted that would
make that parallel process in any way material to the cause of action alleged
against the Defendant. The Plaintiff has not suggested or articulated any way
in which the allegations might be material to the cause of action asserted
other than that they “are part of the surrounding circumstances” and “provide
context” to the dispute.
[14]
I fail to find any materiality to the
allegations that the government considered a different procurement process and
preferred the allegedly infringing bid, even as “context” or as part of the
surrounding circumstances. The Courts are however generally disinclined to
strike paragraphs that are mere “surplus” if they are not also prejudicial (Apotex
Inc. v Glaxo Group Limited et al, 2001 FCT 1351). I find that the presence
of these allegations in the SOC is prejudicial to the conduct of this action.
The facts alleged are not facts to which the Plaintiff is privy. They are not
facts which the Plaintiff controls, or could be permitted to place before the
Court at its own discretion as background or contextual facts. Counsel for the
Plaintiff, in his oral submissions and in an attempt to clothe the allegations
with an appearance of materiality, suggested that an understanding of why the
government preferred the competitive bid of GDC to that received from a foreign
military might somehow shed light on its inducement allegations. This is pure
speculation and casts the allegations as a fishing licence. If allowed to
remain in the pleadings, they would oblige the Defendant to look for, consider
and disclose any documents in its possession, or in the possession of another
third party, that might pertain to that other process or the Canadian
Government’s decision to choose the commercial bid. The Defendant should not be
put through such an onerous task over allegations that are plainly irrelevant
and immaterial.
[15]
I have no such concerns in respect of the
impugned portions of paragraph 14. The general reference to GDC having issued
the request for proposal for the allegedly infringing system as part of other requests
for proposals for “various components” of the upgrade program is sufficiently
casual and vague that it does not reasonably require documentary production in
respect of these other requests for proposals.
IV.
Extension of time
[16]
The Defendant seeks an extension of time of 30
days from the date of this order to serve and file its Statement of Defence.
The Plaintiff argues that 10 days should be sufficient. I am satisfied that 21
days is reasonable and sufficient in the circumstances.
ORDER
THIS COURT ORDERS that:
1.
The following passages shall be struck from the
Statement of Claim:
a.
The text “two separate procurement processes.
One process that the Canadian government considered was a purchase directly
from a foreign military, and in particular, the United States Air Force. A
second process considered was a” in paragraph 12;
b.
The text “the second” in the first sentence and
the entire second and third sentences in paragraph 13; and
c.
The entire first sentence of paragraph 17.
2.
The time within which the Defendant is to serve
and file its Statement of Defence is extended to 21 days from the date of this
order.
3.
This action shall continue as a specially
managed proceeding.
4.
The parties shall, no later than 15 days from
the close of pleadings, file written submissions as to a schedule for the next
steps to be taken in this action.
5.
Costs, in the amount of $1,500.00 plus
disbursements, shall be in the cause.
"Mireille Tabib"
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