Federal Court of Appeal Decisions

Date: 20060905

Docket: A-447-05

        Citation: 2006 FCA 293

CORAM:        RICHARD C.J.                                                        

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

RAYDAN MANUFACTURING LTD.

Appellant

and

EMMANUEL SIMARD & FILS (1983) INC.

Respondent

Heard at Ottawa, Ontario, on September 5, 2006.

Judgment delivered from the Bench at Ottawa, Ontario, on September 5, 2006.

REASONS FOR JUDGMENT OF THE  COURT BY:                                      RICHARD C.J.

Date: 20060905

Docket: A-447-05

Citation: 2006 FCA 293

CORAM:        RICHARD C.J.

LÉTOURNEAU J.A.

PELLETIER J.A.

BETWEEN:

RAYDAN MANUFACTURING LTD.

Appellant

and

EMMANUEL SIMARD & FILS (1983) INC.

Respondent

REASONS FOR JUDGMENT OF THE COURT

(Delivered from the Bench at Ottawa, Ontario, on September 5, 2006)

RICHARD C.J.

[1]    This is an appeal from an order of Justice Simon Noël of the Federal Court dated July 12, 2005, (2005 FC 973), in which he refused to allow costs to the appellant (defendant) after having dismissed the respondent’s claim for patent infringement and granted, in part, the appellant’s counterclaim for patent invalidity. The main issue in this appeal was whether the trial judge properly exercised his discretion under rule 400(1) of the Federal Courts Rules, when he refused to award costs to the appellant on the ground that it was a case of “mixed results”.

[2]    In our opinion, the outcome of this appeal is governed by the decisions of this Court in Gorse v. Upwardor Corp. (1992), 140 N.R. 295 (F.C.A.), and, more recently, in Illinois Tool Works Inc. v. Cobra Anchors Co., (2003) 312 N.R. 184 (F.C.A.), 2003 FCA 358, where it was held that a trial judge’s discretion in the allocation of costs must be exercised judicially with regard to the principles and factors enumerated at rule 400(3) of the Federal Courts Rules. These decisions further held that a defendant in a patent infringement case need not be successful in both its defence of non-infringement and invalidity in order to be entitled to its costs. If successful in defending the main action of patent infringement, such a defendant is entitled to costs.

[3]    In the instant case, the respondent sued the appellant for patent infringement. The appellant raised a two-part defence: first that its products did not infringe the respondent’s patent and, second, that the respondent’s patent was in any event invalid under section 59 of the Patent Act.  The appellant also brought a counterclaim against the respondent under section 60 of the Patent Act, repeating each of the alleged defences. The trial judge, having found that the appellant’s product does not infringe the patent, dismissed the action and granted the counterclaim, but only to the extent that the respondent had admitted invalidity in relation to one specific claim of the patent.  The trial judge then refused to allow costs on the ground that “mixed results” were arrived at.  He explained his refusal at paragraph 83:

For the reasons mentioned above, I will dismiss the action and grant the counterclaim only in part because of the admission made in relation to claim 9.  More specifically, claim 7 is valid for the construction given to such claim as detailed in the above reasons.  Also, claim 9, was admitted, is invalidated.  No costs will be allowed because of the mixed results arrived at which indicate that each party has received an outcome justified by the conclusion (see Saint John Shipbuilding and Dry Dock Co. v. Kingsland Maritime Corp. (1981), 126 D.L.R. (3d) 332 at para. 26 (F.C.A.); see also R.B. v. Children’s Aid Society of Metropolitan Toronto, [1995] 1 S.C.R. 315 at paras. 155-156) [emphasis added].

[4]    In our opinion, the trial judge did not properly exercise his discretion under rule 400(1) in refusing costs to the appellant. Rule 400(3) enumerates many factors that would justify the exercise of judicial discretion to deny costs to a successful party, but we see nothing in the trial judge’s reasons or in the facts that would warrant such a result.

[5]    The fact that the counterclaim was granted only in part was no reason in itself to deny costs to the appellant. The entire proceeding was conducted as a single action and the counterclaim was an integral part of the defence to the main action. There is no indication that the attack on validity was vexatious, improper or otherwise inappropriate. The trial judge did not take into consideration the end result of the proceedings, as required by rule 400(3), when he concluded that “mixed results” were arrived at.

[6]    The respondent submitted that this Court should draw a distinction between invalidity raised as a defence under section 59 of the Patent Act and invalidity raised as a counterclaim under section 60 of the Patent Act. The respondent’s argument is that invalidity raised under section 60 has a larger impact in that it results in a declaration in rem available to anyone.

[7]    From the point of view of costs, that distinction does not reflect the reality of a patent trial. Once invalidity is raised, whether as a defence or by way of counterclaim, the trial judge is bound to deal with it. The issues are the same in either case, the only difference being the consequences for the plaintiff. Those consequences do not justify denying a successful defendant its costs.

[8]    For these reasons, the appeal will be allowed with costs. The decision of the trial judge dated July 12, 2005 relating to costs will be set aside, and rendering the decision he should have made, the action will be dismissed with costs. The matter of costs will be remitted to the trial judge for a determination as to quantum of costs in accordance with the Federal Courts Rules. An opportunity shall be given to the parties to present factors relevant to quantum, including offers to settle.

“J. Richard”