Date: 20001215
Docket: T-1001-99
BETWEEN:
DEK-BLOCK PRODUCTS LTD.
Plaintiff
(Defendant by Counterclaim)
- and -
PATIO DRUMMOND LTÉE
Defendant
(Plaintiff by Counterclaim)
REASONS FOR ORDER
TREMBLAY-LAMER J.:
[1] Dek Block Products Ltd., plaintiff-defendant-by-counterclaim-respondent (the Respondent) filed a statement of claim on June 8, 1999, against Patio Drummond, defendant-plaintiff-by-counterclaim-applicant (the Applicant), for infringement of Reissued Canadian Patent No. 1,338,454.
[2] The Applicant filed a motion for summary judgment on December 21, 1999, seeking to dismiss the statement of claim filed by the Respondent, to declare null and void Reissued Canadian Patent No. 1,338,454, and to allow the counterclaim.
FACTS
[3] The Applicant is a corporation incorporated and subsisting under the laws of the Province of Québec and has a principal place of business at 8435, St-Joseph Boulevard, Drummondville, Québec. The Applicant makes and sells concrete blocks in Canada.
[4] The Respondent is a corporation incorporated and subsisting under the laws of the Province of Ontario and has a principal place of business at Cobourgh, Ontario. The Respondent is in the concrete block business in Canada.
[5] The Respondent is the owner of Reissued Canadian Patent No. 1,338,454, issued on July 16, 1996 (amended Canadian Patent No. 1,297,260). The patent relates to a construction device for anchoring or connecting construction elements to a base (referred to as a concrete base or block). The patent names Paul Hoffman and Sam Bright as inventors.
[6] Dek Block Ontario Ltd., the predecessor-in-title to the patents and industrial designs now owned by the Respondent, applied to the Patent Office for Canadian Patent No. 1,297,260 to be reissued because the said patent allegedly included an unnecessary limitation requiring a rectangular central socket to the concrete base. The patent now includes concrete bases with a non-rectangular central socket.
[7] The Respondent and its legal representatives have until March 17, 2009, the exclusive right, privilege and liberty of making, constructing, using and vending to others to be used the invention under the patent.
[8] The Applicant designed in 1992 a concrete base with a rectangular central socket, named Patio Bloc, which had a design and function similar to the Respondent's concrete base covered by the patent.
[9] On May 8, 1992, after being put on notice of the Respondent's intellectual property rights, the Applicant unilaterally redesigned the Patio Bloc to include a circular central socket.
[10] Following the initial assertion of the Respondent's rights in 1992, counsel for the Respondent and counsel for the Applicant discussed the possibility of a settlement. In the settlement discussions, counsel for the Respondent indicated that the Respondent did not consider the Patio Bloc with a circular central socket to infringe its patent.
[11] Once Canadian Patent No. 1,297,260 was amended (now Reissued Canadian Patent No. 1,338,454), the Applicant was again put on notice of the Respondent's intellectual property rights and this action ensued.
ISSUES
[12] To decide this motion for summary judgment, the Court must determine if there exists genuine issues for trial concerning the two questions raised on this motion:
| a) Was there a binding agreement, made by the parties before the reissue, that extends to preclude the Respondent from bringing this action for infringement of the patent? |
| b) Was the application for reissue based on fraudulent representations about what the inventors had invented? |
ANALYSIS
| Applicability of Summary Judgment |
[13] I have summarized the general principles pertaining to summary judgment in Granville Shipping Co. v. Pegasus Lines Ltd.1 as follows:
| 1. the purpose of the provisions is to allow the Court to summarily dispense with cases which ought not proceed to trial because there is no genuine issue to be tried (Old Fish Market Restaurants Ltd. v. 1000357 Ontario Inc. et al); |
| 2. there is no determinative test (Feoso Oil Ltd. v. Sarla (The)) but Stone J.A. seems to have adopted the reasons of Henry J. in Pizza Pizza Ltd. v. Gillespie. It is not whether a party cannot possibly succeed at trial, it is whether the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial; |
| 3. each case should be interpreted in reference to its own contextual framework (Blyth and Feoso); |
| 4. provincial practice rules (especially Rule 20 of the Ontario Rules of Civil Procedure, [R.R.O. 1990, Reg. 194]) can aid in interpretation (Feoso and Collie); |
| 5. this Court may determine questions of fact and law on the motion for summary judgment if this can be done on the material before the Court (this is broader than Rule 20 of the Ontario Rules of Civil Procedure) (Patrick); |
| 6. on the whole of the evidence, summary judgment cannot be granted if the necessary facts cannot be found or if it would be unjust to do so (Pallman and Sears); |
| 7. in the case of a serious issue with respect to credibility, the case should go to trial because the parties should be cross-examined before the trial judge (Forde and Sears). The mere existence of |
| apparent conflict in the evidence does not preclude summary judgment; the court should take a "hard look" at the merits and decide if there are issues of credibility to be resolved (Stokes).2 |
| Purported Agreement |
| a) Submissions of the Applicant |
[14] The Applicant first submits that the applicable law to the matter is the Civil Code of Québec3 because the agreement is more closely connected to the Province of Québec, in terms of the exchange of correspondence, of the formation and execution of the contract, and of the principal place of business of the Applicant.
[15] The Applicant takes the position that the letters dated March 26, 1992 (alleged offer from the Respondent), May 1, 1992 (alleged counteroffer by the Applicant) and September 1, 1992 (alleged acceptance by the Respondent) constitute a binding agreement between the parties which permits the Applicant to make and sell concrete bases with a circular central socket.
[16] The Applicant is of the opinion that the letter of March 26, 1992 (demand letter from the Respondent) constituted an offer to settle with two independent terms, one with respect to the future, that the Applicant undertake not to make and sell concrete bases with a rectangular central socket (acknowledgement of rights), and one with respect to the past, that the Applicant make up for the losses on the sale of bases with a rectangular central socket (past damages or disclosure of sales).
[17] The Applicant considers the letter of May 1, 1992 to be a counteroffer on the term regarding the acknowledgement of rights, that the Applicant had ceased to make concrete bases with a rectangular central socket and that the Applicant would submit drawings for approval of a concrete base (with a circular central socket) that would not infringe the patent.
[18] The Applicant views the letter of September 1, 1992 as an acceptance of the term respecting the acknowledgement of rights, in that the Respondent confirmed that a concrete base with a circular central socket did not infringe its rights under the patent. The Applicant puts emphasis on the following excerpts from the letter to conclude that there is a agreement:
| Having received instructions from our client pursuant to the reception of the modified concrete base of your client attached to your letter dated May 25, 1992, our client having consulted its regular patent attorney thereon, wishes to hereby inform you that it does not consider that the said modified base infringes the registered industrial designs and patents of our client. |
| [...] |
| Now that your client has adopted with our approval a new design of concrete base, it would be appear appropriate to settle this case out of court.4 |
[19] The Applicant argues that this acceptance was not conditional upon an agreement by the parties on the term regarding the past damages or disclosure of sales.
[20] Considering that the Respondent explicitly recognized that a concrete base with a circular central socket did not infringe Canadian Patent No. 1,297,260, the Applicant argues that the same also applies to any reissue of the patent.
[21] With respect to the term regarding the past damages or disclosure of sales which the Respondent requested again in its letter of September 1, 1992, the Applicant points out that it responded in its letter of April 19, 1993, that it had not made any profit arising out of the sale of concrete bases with a rectangular central socket, and therefore no money needed to be paid, but that the Respondent could contact the Applicant if not satisfied with this information. The Respondent allegedly failed to do so.
[22] In the alternative, in the event that there does not exist an agreement on the two independent terms, the Applicant submits that there exists at least a partial agreement with respect to the concrete bases with a circular central socket (the term respecting the acknowledgement of rights). In any event, the Applicant submits that the Respondent is time barred from seeking remedy with respect to the concrete bases with a rectangular central socket (the term regarding the past damages or disclosure of sales).
| b) Submissions of the Respondent |
[23] The Respondent first submits that the applicable law to the matter, if an agreement exists, is the law of the Province of Ontario because this Court should consider the Applicant as a licensee and give effect to the implied intention of the Respondent that the law governing all licenses under the patent be the law of the Province of Ontario.
[24] The Respondent alleges that the parties, at all the relevant time, did not characterize the exchange of correspondence as being offer, counteroffer and acceptance.
[25] The Respondent argues that the letter of March 26, 1992 cannot be regarded as an offer because there was no allegation of infringement of the patent but only allegation of infringement of Industrial Design No. 61629.
[26] The Respondent does not consider the letter of May 1, 1992 to be a counteroffer because the Applicant refused to acknowledge its rights by continuing to sell its current inventory of concrete bases with a rectangular central socket and because the letter itself does not address the issue of past damages or disclosures of sales, which was indivisible from the issue of the acknowledgement of rights.
[27] The Respondent argues that there was no binding agreement reached by the parties because the letter of September 1, 1992 required the Applicant to fulfill a condition before the matter could be settled:
| We will furthermore request, in the settlement document, an undertaking by your client and its main officers that they will not directly or indirectly make, sell nor distribute the objectionable blocks as long as the industrial design and patents covering same are valid and enforceable.5 |
[28] The Respondent explains that this condition was essential to the agreement because the Applicant had refused to acknowledge its rights. This condition was allegedly not satisfied by the Applicant.
[29] The Respondent also argues that the letter of September 1, 1992 cannot be regarded as an acceptance because it also required the Applicant to pay for past damages or disclose its sales. The Respondent notes that there is nothing to suggest that the term regarding past damages or disclosure of sales was severable or that the Respondent intended the two terms to be independent of each other.
[30] The Respondent submits that the fact there existed no agreement is confirmed in a letter dated October 7, 1992 from counsel of the Applicant, not put into evidence by the Applicant, which mentions that counsel for the Applicant was seeking instructions and comments from his client.
[31] In any event, had there been an acceptance by the Respondent of the counteroffer by the Applicant, the agreement would be limited to Canadian Patent No. 1,297,260 and not Reissued Canadian Patent No. 1,338,454 because the agreement does not expressly refer to such.
| c) Discussion |
[32] The parties have not stated expressly their intention with respect to the applicable law to the alleged agreement in their exchange of correspondence. This Court must therefore determine their implied intention. Sections 3077 and 3112 of the Civil Code of Québec6 provide that:
| 3077. Where a country comprises several territorial units having different legislative jurisdictions, each territorial unit is regarded as a country. [...] 3112. If no law is designated in the act or if the law designated invalidates the juridical act, the courts apply the law of the country with which the act is most closely connected, in view of its nature and the attendant circumstances. |
| 3077. Lorsqu'un État comprend plusieurs unités territoriales ayant des compétences législatives distinctes, chaque unité territoriale est considérée comme un État. [...] 3112. En l'absence de désignation de la loi dans l'acte ou si la loi désignée rend l'acte juridique invalide, les tribunaux appliquent la loi de l'État qui, compte tenu de la nature de l'acte et des circonstances qui l'entourent, présente les liens les plus étroits avec cet acte. |
[33] In considering the nature of the alleged agreement and the attendant circumstances, this Court notes that the alleged agreement relates to concrete bases with a circular central socket not infringing the patent, which is confirmed by the letter of May 1, 1992 from the Respondent.
[34] This Court cannot consider that the alleged agreement put the parties in a licensor-licensee relationship as argued by the Respondent. There is nothing in the exchange of correspondence between the parties to permit this Court to conclude that the alleged agreement constituted or included a licensing agreement.
[35] The letters dated March 26, 1992, May 1, 1992 and September 1, 1992, reveal that the alleged infringement, the assertion of rights, the formation and execution of the alleged agreement, all relate to the Province of Québec, except for the principal place of business of the Respondent (which is not determinant).
[36] Given these observations, it would appear that the applicable law to the matter is the Civil Code of Québec. What this Court must determine now is whether or not the agreement exists, and if so, whether or not it covers the reissue of the patent.
[37] To determine if an agreement exists between the parties, assuming that the alleged offer and counteroffer were valid, this Court must consider the alleged acceptance of the Respondent. Section 1393 of the Civil Code of Québec7 provides that:
| Acceptance which does not correspond substantially to the offer [or counteroffer] or which is received by the offeror after the offer has lapsed does not constitute acceptance. It may, however, constitute a new offer. |
L'acceptation qui n'est pas substantiellement conforme à l'offre, de même que celle qui est reçue par l'offrant alors que l'offre était devenue caduque, ne vaut pas acceptation Elle peut, cependant, constituer elle-même une nouvelle offre. |
[38] It is well known that the Federal Court of Canada is able to enforce an agreement reached between the parties in a litigation, but this is available where the terms are certain and complete.8
[39] In the present matter, the alleged offer by the Respondent related to both terms referred to in the settlement discussions, namely the one regarding past damages or disclosure of sales, and the one respecting the acknowledgement of rights.
[40] The alleged counteroffer by the Applicant related to the acknowledgement of rights only.
[41] As for the alleged acceptance by the Respondent, it related to both terms and further imposed a condition on the Applicant to provide an undertaking not make or sell concrete bases with a rectangular central socket.
[42] Even if both terms were considered independent of each other, it is doubtful that the parties ever reached consensus ad idem with respect to one term or the other, because the alleged acceptance did not correspond substantially to the alleged counteroffer.
[43] Furthermore, it cannot be determined from the evidence filed in this motion whether or not the condition in the alleged acceptance requiring the Applicant to provide the undertaking was essential to the alleged agreement.
[44] Given my conclusion that there does not appear to be an agreement between the parties, it is not necessary to discuss whether or not the alleged agreement covers the reissue of the patent.
[45] For these reasons alone, this motion for summary judgment based on baring this action due to the alleged agreement ought to be refused because it is not clear from the evidence whether or not the parties intended or even reached a binding agreement.
| Validity of Reissue |
[46] Subsection 47(1) of the Patent Act9 provides for the issuance of a new or amended patent in particular circumstances:
| Whenever any patent is deemed defective or inoperative by reason of insufficient description and specification, or by reason of the patentee's claiming more or less than he had a right to claim as new, but at the same time it appears that the error arose from inadvertence, accident or mistake, without any fraudulent or deceptive intention, the Commissioner may, on the surrender of the patent within four years from its date and the payment of a further prescribed fee, cause a new patent, in accordance with an amended description and specification made by the patentee, to be issued to him for the same invention for the then unexpired term for which the original patent was granted. |
Lorsqu'un brevet est jugé défectueux ou inopérant à cause d'une description et spécification insuffisante, ou parce que le breveté a revendiqué plus ou moins qu'il n'avait droit de revendiquer à titre d'invention nouvelle, mais qu'il apparaît en même temps que l'erreur a été commise par inadvertance, accident ou méprise, sans intention de frauder ou de tromper, le commissaire peut, si le breveté abandonne ce brevet dans un délai de quatre ans à compter de la date du brevet, et après acquittement d'une taxe réglementaire additionnelle, faire délivrer au breveté un nouveau brevet, conforme à une description et spécification rectifiée par le breveté, pour la même invention et pour la partie restant alors à courir de la période pour laquelle le brevet original a été accordé. |
[47] The Commissioner may reissue a patent where the original patent was defective because it did not reflect the complete invention that the inventor intended to disclose or cover.10
[48] The Applicant alleges that the reissue of Canadian Patent No. 1,297,260 (now Reissued Canadian Patent No. 1,338,454) is null and void because it was based on a fraudulent affidavit filed by one of the inventors, Mr. Hoffman, in that he had never thought of a concrete base with a circular central base. The Applicant submits that he knew of a concrete base with a circular central socket only because of the Respondent's product, and was encouraged by the Respondent, from who he receives royalties, to remember that he had thought of a concrete base with a circular central base. However, the affidavit of Mr. Hoffman contradicts this assertion.
[49] In fact, Mr. Hoffman states in his affidavit that it is not true that the idea of having a circular shape for the central socket in his concrete block was one which came from Patio Drummond, a company with which he is not familiar and whose products he does not know.
[50] Further, in cross-examination Mr. Hoffman confirms that he had independently arrived at a circular socket configuration before Patio Drummond but excluded the circular shape for the central socket at the development stage. He also confirms that he had not heard of Patio Drummond as of the date of the reissue.
[51] The whole case of the Applicant rests on the assumption that Mr. Hoffman lied about the earlier development of the circular shape for the central socket and that Mr. Hoffman only knew of a concrete block with a circular central socket because of Patio Drummond. This undoubtedly raises an important issue with respect to credibility. I am unable at this stage to conclude that Mr. Hoffman lied under oath. This finding must be reserved for the trial judge.
[52] I am also troubled by the allegation made by the Applicant that Mr. Smith, the principal of Dek-Block, undoubtedly encouraged Mr. Hoffman to "remember" that he had surely envisioned a circular shape for the central socket at the time of developing his invention.
[53] A careful review of the evidence before me does not support such an allegation. Again this raises a serious issue with respect to credibility. The law is clear that a determination regarding credibility ought not to be made on a motion for summary judgment. The issue respecting the validity of Reissued Canadian Patent No. 1,338,454 must be determined by a trial judge.
[54] The motion for summary judgment is dismissed. Costs will be awarded in the cause.
"Danièle Tremblay-Lamer"
JUDGE
OTTAWA, ONTARIO
December 15, 2000
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1001-99
| STYLE OF CAUSE: DEK-BLOCK PRODUCTS LTD. v. PATIO DRUMMOND LTÉE |
PLACE OF HEARING: MONTRÉAL
DATE OF HEARING: DECEMBER 6, 2000
REASONS FOR ORDER OF TREMBLAY-LAMER
DATED: DECEMBER 15, 2000
APPEARANCES:
MR. RONALD DIMOCK
MR. BRUCE STRATTON FOR PLAINTIFF
MR. FRANÇOIS GUAY
MR. MARC-ANDRÉ HUOT FOR DEFENDANT
SOLICITORS OF RECORD:
DIMOCK STRATTON CLARIZIO
TORONTO FOR PLAINTIFF
SMART & BIGGAR
MONTRÉAL FOR DEFENDANT
__________________1 [1996] 2 F.C. 853. (F.C.T.D.).
4 Applicant's Motion Record, Vol. 3, Tab 16 at 421.
8 See, e.g., Bandag Inc. v. Vulcan Equipment Co. Ltd. (1977), 32 C.P.R. (2d) 1 (F.C.T.D.) at 4.
10 See, e.g., Mobile Oil Corp. v. Hercules Canada Inc. (1995), 63 C.P.R. (3d) 473 (F.C.A.).