Court File No. T-2408-91
FEDERAL COURT - TRIAL DIVISION
BETWEEN:
Ottawa, Ontario, Wednesday the 17th day of May, 2000
Present: The Honourable John J. Urie, Referee
MERCK & CO. INC., and
MERCK FROSST CANADA INC.
Plaintiffs
- and -
APOTEX INC.
Defendant
REASONS FOR ORDER
The Defendant/Applicant in this motion seeks:
| (a) an Order directing that each of the Plaintiffs deliver to the Defendant an Affidavit of Documents relating to the issues raised in this Reference for an accounting of the Defendant"s profits arising from the infringing actions of the Defendant; and |
| (b) an Order directing that the Defendant be at liberty to examine for discovery representatives of each of the Plaintiffs in respect of the issues raised in the Reference; and |
| (c) the Defendant"s costs of the motion. |
The relevant facts for the purpose of the motion are these:
The Judgment of MacKay J. in this action was rendered after trial on December 22, 1994, whereby it was held that the Defendant had infringed the Plaintiffs" patent and it was directed that a Reference be held to determine the damages suffered by the Plaintiffs or the loss of profits made by the Defendant during the infringing period. A subsequent Order by MacKay J. confirmed the Plaintiffs" right to the election as between damages and profits arising from the infringing activities of the Defendant.
The Federal Court of Appeal allowed an appeal in part but upheld the Trial Division"s findings of infringement with respect to certain quantities of the Defendant"s drug in issue. Application for leave to appeal to the Supreme Court of Canada from the Judgments of the Court of Appeal were dismissed.
The Associate Senior Prothonotary Giles in an Order dated July 4, 1997, inter alia, directed that, following an Examination for Discovery of a knowledgeable nominee of the Defendant, the Plaintiffs would elect as between their damages and an accounting of the Defendant"s profits, within 30 days of completion of the discovery of the Defendant"s nominee and, by paragraph 4 of the Order:
| 4. In the event the Plaintiffs elect an accounting of the Defendant"s profits, there will be no Examination for Discovery or discovery of documents of the Plaintiffs, unless otherwise agreed between the parties or ordered by the Court. |
Paragraph 11 of the Order also provided as follows:
| 11. The parties may apply to the Court at any time prior to the date fixed for the hearing of the Reference for an Order requiring a party to produce documents and be examined for discovery on any issues arising during the course of such issue by the Court or Referee on the Reference. |
The Plaintiffs elected to received an accounting of profits.
The Associate Chief Justice designated me as Referee pursuant to Rule 153 for the purpose of an accounting of the Defendant"s profits.
By letter dated November 12, 1999, counsel for the Defendant suggested dates for delivery of the Plaintiffs" list of documents and for the Defendant"s discovery of the Plaintiffs. In a facsimile message dated the same day, counsel for the Plaintiffs declined to furnish a list of documents or to produce any witnesses for discovery on the basis that there was no right to such in an accounting of profits. Counsel reiterated his refusal on January 18, 2000, on March 7, 2000 (where he took the position that how the Plaintiffs account for their costs is irrelevant) and March 10, 2000.
All of the foregoing resulted in this motion in Ottawa on May 15, 2000.
Counsel for the Defendant takes the position that by the rules relating to References as well as in practice, a Reference is conducted in the same manner as a trial and, therefore, as in a trial, the parties thereto are entitled to the same rights to oral discovery and to a list of documents to be produced as they have in the trial of an action. In support of that contention, he submits that the Order of the Senior Prothonotory directing the Reference for an accounting of profits contemplated by paragraphs 4 and 11, supra, that while there may be no discovery as a matter of right, one may be had if the parties agree or if the Court so orders. This provision, he says, is reinforced and supported by the plain meaning of paragraph 11. Thus, he is entitled to seek oral discovery and production of documents. As I see it, he is only so entitled if he can satisfy me that the direction by the Senior Prothonotory that there be none is not supportable in light of the purposes for having such discovery and list as in any trial. In that connection, such purposes include:
| (a) so that the case to be met is known; |
| (b) for the procurement of admissions to enable dispensing with formal proof or to undermine the opponent"s case; |
| (c) facilitating settlement; |
| (d) narrowing of the issues; |
| (e) avoidance of surprise at trial. |
All of those purposes are well known and acceptable. But, as counsel for the Plaintiffs forcefully pointed out, they are irrelevant since the whole proceeding is to determine the profits earned by the Defendant from the patent infringement. As Addy J. pointed out in Teledyne Industries Inc. v. Lido Industrial Products Ltd. (1982) 68 C.P.R. (2d) 204 at 209:
| Where the defendant, as in the present case, has been found at fault and has been ordered to account, that obligation to account rests without reservation entirely on him. There exists no onus whatsoever in this respect on the owner of the property. The judgment obliges the defendant to account for the full amount of all revenue received from the use of the property. Negligent or wilful failure to declare any such amounts might well render the infringer guilty of contempt of court. The amount so declared becomes payable to the rightful owner of the property and is subject to be reduced only by such bona fide expenses or disbursements as the infringer can by positive evidence establish as having been actually incurred in the case of a claim for damages the onus rests with the plaintiff. |
| Contrary to what was said by the referee in the Dubiner v. Cheerio Toys case, supra, and which was apparently approved by the judge in reviewing the report, I cannot accept that, where a person who has been found by a court to have misappropriated property and is required to account for all illegal profits derived therefrom, there should be any onus whatsoever on the person wronged to establish those profits. |
I accept these pronouncements as being supported in law and they were not questioned by the Federal Court of Appeal in the appeal from that decision. That being so, in my view, not one of the purposes listed above taken from the Defendant"s written submission has meaningful relevance in an accounting of profits Reference where "... there should [not] be any onus whatsoever on the person wronged to establish those profits" (see also Hugessen J.A. in Lubizol Corp v. Imperial Oil Ltd. (1996) 71 C.P.R. (3d) 26 at 34).
As was said by McNair J. in Reading & Bates Construction Co. v. Baker Energy Resources Corp. et al (1988) 24 C.P.R. (3d) 66 at 74:
| Clearly, the questions [of costs to be deducted in the calculation of profits] must be judged by the legal test of their relevancy to the profits earned by the defendant from the patent infringement. |
Thus, for example, the methods used in such calculations by the Plaintiffs for what may be reasons peculiar to their business totally lack relevancy to the calculation methods used by the Plaintiffs, in my view. The same comment applies to all of the other examples given by the Defendant as reasons for it requiring discovery of the Plaintiffs.
Accordingly, the Defendant"s motion is dismissed.
| John J. Urie, Referee |