Date: 19990106
Docket: A-317-98
CORAM: MARCEAU J.A.
STONE J.A.
STRAYER J.A.
BETWEEN:
| ALLIEDSIGNAL INC. |
Appellant
- and -
| DUPONT CANADA INC. |
Respondent
Heard at Ottawa, Ontario, Tuesday and Wednesday, January 5 and 6, 1999
Reasons for Judgment delivered from the Bench at Ottawa, Ontario, Wednesday, January 6, 1999
REASONS FOR JUDGMENT OF THE COURT BY: STRAYER J.A.
Date: 19990106
Docket: A-317-98
C O R A M: MARCEAU J.A.
STONE J.A.
STRAYER J.A.
B E T W E E N:
ALLIEDSIGNAL INC.
Appellant
" and "
DUPONT CANADA INC.
Respondent
REASONS FOR JUDGMENT
(Delivered from the Bench at Ottawa, Ontario,
on January 6, 1999)
STRAYER J.A.
I. This is an appeal and cross-appeal with respect to the report of the Honourable Darrel Heald, sitting as a Referee in respect of a reference as to damages owing by the respondent Dupont Canada Inc. ("Dupont") for breach of a patent issued to the appellant Allied Signal Inc. ("Allied").
II. The patent in question, Canadian Patent No. 1,162,012, is in respect of a film, a blended product compound of nylon and polyolefin, used as a carrier film by manufacturers in molding Sheet Molding Compound into a variety of products.
III. During the 1980's Allied used its patent in manufacturing its ER-15 and ER-20 film and by 1989 enjoyed some 73% of the North American market. In 1989 Dupont commenced the manufacture of its DARTEK film, capturing some of Allied's previous market. It manufactured in Canada but exported most of its product, mainly to the United States. In an action by Allied for infringement of its patent, the Trial Division in September 1993 held Allied's patent to be invalid. On appeal this Court in May 1995 held the patent to be valid and infringed by Dupont. This Court issued an injunction against Dupont and left for determination by a previously ordered reference the determination of Allied's damages or Dupont's profits. Allied elected for damages. The Referee filed his report on February 13, 1998 in which he deferred the question of costs. He subsequently received submissions on costs of the reference and issued an order as to costs on April 28, 1998. Appeals from the report were filed in the Trial Division and as to costs in this Court. On a motion for a transfer of all proceedings to the Trial Division, Hugessen J. instead ordered on June 1, 1998 that the appeal and cross-appeal from the report be transferred to this Court for determination.
Appeal
IV. With respect to the appeal, at the hearing Allied abandoned all grounds but the following: (1) that the Referee should have awarded actual damages suffered by it in respect of lost sales to GenCorp, instead of awarding reasonable royalties on sales made by Dupont to GenCorp during the infringing period; and (2) that the Referee should have awarded Allied pre-judgment interest in the form of compound interest rather than simple interest.
V. With respect to the first issue, the learned Referee noted that many of Allied's former customers for carrier films who had switched to Dupont as a supplier in or after 1989 returned to Allied as customers either during or after the infringing period of 1989-1995. From this he drew the inference "that such customers would have remained with the plaintiff but for the presence of the defendant"1. He noted that such an inference, based on the evidence on behalf of the plaintiff
| tips the balance of probabilities in favour of the plaintiff. The validity of such an inference depends nonetheless on an analysis of the facts on a customer-by-customer basis, particularly because there is some evidence to the contrary with respect to some customers.2 |
He then made such a customer-by-customer analysis. He noted evidence presented on behalf of Dupont that GenCorp would not have purchased carrier film from Allied during the period in question under any circumstances, because of problems it had had with Allied when it was Allied's customer prior to Dupont's infringing film becoming available on the market. In other words, he found "evidence to the contrary" bringing into question the validity of the above inference as it might otherwise apply to GenCorp. He therefore concluded as follows:
| [94] Overall, this evidence suggests that, until GenCorp found a suitable alternative, the plaintiff would have captured some of the defendant's sales to GenCorp. The only evidence of a reasonable alternative appearing before 1995, when Deering began producing coextruded film in significant quantities, was the coextruded film to which Budd Co. switched in 1991. However, it is clear that GenCorp's search for an alternative was intensive, reaching beyond the North American market to European suppliers. |
| [95] We are left in a situation of utter speculation as to how soon GenCorp would have moved away from the plaintiff's film. In my opinion, the only fair approach in these circumstances is to award the plaintiff a reasonable royalty on all of the defendant's sales to that company. In the words of Lord Justice Fletcher Moulton in the Meters v. Metropolitan Gas Meters case, referring to the award of a reasonable royalty, "I think that in many cases that would be the safest and best way to arrive at a sound conclusion as to the proper figures" ((1911), 28 R.P.C. 157 at 165 (C.A.)). |
| [96] Accordingly, I would award the plaintiff a reasonable royalty on the defendant's sales to GenCorp. |
VI. In effect the appellant Allied contends that the learned Referee was not entitled to reach such a conclusion because the evidence to the effect that GenCorp would have left Allied as a customer was of no value or was contradicted by other evidence.
VII. From the helpful review of the evidence given us by counsel for both parties we are satisfied that this is not a case for appellate interference with the factual findings of the Referee. There was clearly evidence before him from which, if he believed it, he could conclude that even if perforce GenCorp would have remained initially in 1989 as a customer of Allied until it found some other source of supply, it was more probable than not that GenCorp would, and could, find such an alternative source of carrier film. There was evidence of its determination to do so in 1989, and there was evidence of some other sources that might have proven to be satisfactory to GenCorp. We are unable to say that the Referee committed a palpable error in finding the eventual move by GenCorp to a satisfactory alternative to be more probable than not.
VIII. On the basis of such a finding, it appears to us to have been quite appropriate for him, in the face of uncertainty as to when GenCorp would have made the move to another supplier, to award a reasonable royalty on all infringing sales made by Dupont to GenCorp.
IX. With respect to the second issue, the Referee declined the award of pre-judgment interest on a compound basis. In doing so he concluded that, as Allied had elected to claim damages, a common law remedy, the provisions of the Ontario Courts of Justice Act3 sections 128 and 130 must form the basis for the claim in this Court. He interpreted paragraph 128(4)(b) to preclude interest on interest awarded under subsection 128(1). We see no basis for disturbing that finding, nor do we perceive any authorization under subsection 130(1) for the exercise of a discretion to award compound interest.
X. Therefore we will dismiss the appeal.
Cross-Appeal
XI. The respondent has brought a cross-appeal from the report of the Referee. The five issues argued by counsel for the cross-appellant are: (1) that the date of judgment referred to by the Referee should be determined by this Court to be February 13, 1998 or April 28, 1998; (2) that the currency conversion rate for damages should be fixed, not as it was at the date of judgment, but be based on an average of rates over the period of infringement; (3) that the Referee erred in calculating the royalty rate; (4) that Dupont should not be liable for damages for sales lost by Allied outside of Canada but only be liable for payment of a royalty on those sales; and (5) that no pre-judgment interest should have been awarded in respect of the period between the finding of invalidity of Allied's patent by the Trial Division on September 3, 1993 and the judgment of the Court of Appeal of May 11, 1995 which found the patent to be valid and infringed.
XII. We did not find it necessary to call upon counsel for the cross-respondent in respect of the last three issues. We were satisfied that the learned Referee made no reviewable error in respect of these matters.
XIII. The first issue, that of the date of judgment, is not strictly speaking a matter of appeal or cross-appeal from the report of the Referee as he did not have to deal with that matter. However it presents some difficulties and requires determination for the implementation of a judgment based on the Referee's report. The substance of that report was filed on February 13, 1998. Appeals from it were launched in the Trial Division in accordance with the rules then in force and by those rules the report had not become final before the coming into force of the new rules on April 25, 1998. In the meantime the Referee, who had in his report of February 13, 1998, invited the parties to make submissions on the subject of costs, made certain findings as to costs in an order of April 28, 1998. An appeal from that order was launched in the Court of Appeal. In response to a motion to have all proceedings transferred to the Trial Division, Hugessen J. instead ordered that all the appeals in respect of the report as to damages be transferred to this Court where they have been consolidated and brought on for hearing together.
XIV. We are faced with the problem of dealing with the transition from the old rules to the new rules and with the consequences of the order of Hugessen J. of June 1, 1998 transferring to this Court appeals from a report that had not become the subject of a judgment prior to the coming into force of the new rules. Mindful of the direction in new rule 3 that the rules should be interpreted and applied so as to secure a just and expeditious determination, we have concluded that the judgment date should be deemed to be the date when Hugessen J. transferred the matter to this Court, that is June 1, 1998. Although under the old rules the report had not become a final judgment his order had the incidental but necessary effect of declaring it to be one for the purposes of an appeal under the new rules.
XV. There remains the last issue, the date of currency conversion. Relying on the decision of the Federal Court of Appeal in N.V. Bocimar S.A. v. Century Insurance Co. of Canada4, the cross-appellant argues that the breach date rule should be applied in this instance, and that as in this matter the breach continued over a six year infringement period the yearly average exchange rates from the years 1989 to 1995 should be used to convert the amounts of lost profits and royalties awarded by the Referee. The Referee found that there is no specific breach date in a patent case when the infringement continues over a period of time, and he concluded "that converting the currency as at the date of judgment with respect to this report is the only practical solution".
XVI. We cannot say that the Referee was wrong in his approach. It is clear that the situation in Bocimar, where there was a clear and single breach date, was totally different from the situation that obtains in a patent case such as this involving ongoing infringement. Further, it seems to us that the date of judgment is indeed the most logical date to be used. Evidence of damages in this matter was expressed in terms of U.S. dollars. Damages were experienced or suffered in terms of U.S. dollars and they were assessed as such. It is because of the terms of section 12 of the Currency Act5 that conversion into Canadian dollars of these damages had to be made. In other words, by the conversion, the plaintiff will be awarded the Canadian money required to obtain the full compensation it was found entitled to in U.S. currency.
Disposition
XVII. It will therefore be declared that the date of judgment attributed to the report of the Referee is deemed to be June 1, 1998.
XVIII. In all other respects, the cross-appeal is dismissed.
XIX. There remains the question of costs both in relation to the costs awarded on the reference by the order of the Referee dated April 28,1998 which is the subject of one of the appeals before us, and as to the costs to be awarded on the present appeal. At the request of counsel, the question of costs is left in abeyance to be considered and determined at a later date with the help of written representations to be submitted by counsel on or before January 20, 1999.
XX. The final judgment will therefore be completed and filed at a later date.
"B.L. Strayer"
J.A.
Ottawa, Ontario
__________________3 R.S.O. 1990, c. C-43, as made applicable to this course of action by subsection 36(1) of the Federal Court Act , R.S.C. 1985, c. F-7.