Date: 20000310
Docket: T-577-87
BETWEEN:
THE LUBRIZOL CORPORATION
AND LUBRIZOL CANADA LIMITED
Plaintiffs
- and -
IMPERIAL OIL LIMITED
AND ITS SUBDIVISION PARAMINS
Defendants
CORRECTED1 REASONS FOR ORDER
(delivered orally from the bench in Ottawa, Ontario,
on Wednesday, February 9, 2000)
HUGESSEN J.
[1] I have before me a motion brought by the defendant Imperial Oil seeking an order for directions. That order would deal generally with two matters, the first being the conduct of the examination for discovery by Imperial of the plaintiff Lubrizol in the context of the reference which is now being held to establish the amount, if any, of the profits which Imperial must give up as a result of its infringement of the Lubrizol patent. The second general area covered by the motion and the directions which it seeks has to do with the conduct not only of that reference, but also of the continuation of the trial which has been ordered by the Court of Appeal dealing specifically with the question of exemplary damages resulting from the Defendant's breach of an injunction and the establishment, if any, of the quantum thereof.
[2] I am going to dismiss the motion.
[3] First, in my view, the motion, insofar as it bears on the conduct of the discovery, is premature. I am not asked to deal with specific questions but rather with general areas into which Imperial says it wants to go and where it says it has been advised by Lubrizol that the latter will object. I do not think this is a sound basis upon which a Court should rule on the conduct of an examination for discovery. It is fraught with difficulties. A Court can really only rule on questions when it has the questions before it. A great deal turns on how questions are worded and two questions which might to the layman appear to be substantially the same, may to the lawyer be quite clearly different, one admissible, the other not. I am not prepared, as I say, to deal with this matter on that basis.
[4] There is, however, another and equally fundamental basis upon which I am not prepared to make a ruling at this time. The parties have entered into an agreement with respect to the conduct of the reference. It is not entirely clear what the position of the defendant is with respect to that agreement. At one time it appears to say that the agreement has not been properly concluded and is still in inchoate form and another time it seeks to invoke the benefit of that agreement. I need hardly say that such blowing hot and cold is not an attitude which is likely to find much sympathy in the Court. Be that as it may, I am satisfied on the evidence before me that there was an agreement entered into by the parties. Indeed, I can think of few agreements which have been so hedged about with professional advice, legal and otherwise on both sides. Clearly, in my view, there was an agreement. It was entered into in January 1997. There were some small loose ends that remained to be tidied up but I am satisfied that the conduct of the parties is such that by at the latest April 30, 1997 those loose ends had been tided up and the agreement was in final form. That is not to say, of course, that the parties are now in agreement as to what their agreement means or as to how it is to be construed, but that is an entirely different matter and that is something
which the Court is going to have to deal with.
[5] The agreement may, in general terms, be said to define the issues which are going to have to be dealt with on the reference and to eliminate large amounts of evidence which would otherwise have to be led on the reference. The agreement, like any agreement, requires to be interpreted and applied. It deals very specifically with the proper means of calculation of Imperial's costs on its sales of the infringing product, it also deals with possible methods of an apportionment by Imperial, a subject as to which Imperial clearly has the burden of proof. Finally, the agreement deals with the specific products which are to be the subject of the accounting for profits.
[6] Insofar as the agreement bears on the question of costs and on apportionment, it is, I think, tolerably clear, however, I would be unwise in the extreme if I were to underestimate the ability of counsel to find ambiguity where I did not think there was any. And no doubt there will be issues raised with respect to what are or are not proper questions on discovery on the issues of costs and apportionment.
[7]
Quite apart from, as I said, those questions only being resoluble when we know what the questions are, the fact is that I can only determine the proper interpretation of the agreement with respect to its application to particular facts and questions when I have those particular facts, those particular questions before me.
[8] It is otherwise, with respect to the third area of discovery questions, which are sought to be sanctified in advance, so to speak, by the present motion and those are questions dealing with a settlement of an action in the State of New Jersey some twenty or so years ago as a result of which an undertaking was given by the plaintiff or its parent to the defendant's parent. In that case, the undertaking which, as I understand it, extended to affiliates and subsidiaries, was that there would be no assertion of rights in the predecessor or the foreign equivalent to the patent in suit with respect to certain products.
[9] As I say, the agreement deals very specifically with what products are to be made the subject of the accounting for profits. That agreement was entered into in 1997. The action was brought in 1987 and went to judgment three years later. In that judgment, there was a finding that certain products, which I am now told, were apparently covered by the settlement agreement in New Jersey, were specifically found to have been infringing the patent. No defense on this ground was urged prior to that judgment, which was, I may add, confirmed in substance by the Court of Appeal.
[10] With respect to the allegedly non infringing character of sales of products which were covered by the New Jersey settlement agreement, there is no cogent explanation as to why that was not timely pleaded.
[11] It is urged on me by counsel for Imperial that because there was a bifurcation order in the trial in this action, the finding of infringement, which was a very clear finding, was somehow improper or inchoate because the question of the extent of the infringement was left to be determined on a reference. I disagree. Infringement and extent of infringement are two separate questions and the finding that product X infringes patent Y is a finding that binds the parties with respect to the fact of infringement. If the defendant asserts that at the time of the trial it was in fact freed of liability for infringement of the patent by reason of a non-assertion agreement in the New Jersey settlement, it should have taken that point at trial. It did not do so.
[12] I recognize that an account of profits is an equitable remedy and it is wrong for one party to enrich itself unjustly at the expense of another. But the finality of judgment is also a fundamental principle in our legal system. I do not exclude the possibility that the defendant here might perhaps have been able to reopen the matter and to assert the New Jersey settlement upon a proper showing that it somehow did not know, as counsel told me, what it had done, but there is no cogent evidence to that effect presently before me.
[13] Accordingly, I can see no basis upon which I could allow questions now which would allow the defendant to reopen what has been settled for some 10 years now in this very file.
[14] That brings me to the second aspect of the motion for directions. It seeks an order from me "confirming" that the continuation of the main trial which, as I have said, would deal with the issue of exemplary damages and quantification thereof shall be separate from the reference presently under way.
[15] First, such an order would again be entirely hypothetical. I have not ordered, and there is, as far as I know, no order extant requiring that the two matters be tried together.
[16] But I would take the matter further. I can see no reason why such an order should not be made if an appropriate showing were made to support it. Counsel for the defendant tells me that such an order could not be made because it is precluded by the terms of the judgment of the Court of Appeal. I disagree. While it is true that the Court used the word "after" to describe the relationship of the continuance to the reference, I am satisfied that it was used in an intellectual rather than a temporal sense. In the same way a Judge who hears a personal injuries case only determines quantum "after" he has determined liability, but he does both at one and the same hearing and will generally dispose of both in one and the same judgment. I see no reason in principle why an award of exemplary damages should not be made in the same hearing as the account of the defendant's profits, but must be made "after", except in the sense that in deciding whether to make such award, and if so how much, the judge must know what he or she is awarding in the account of profits.
[17] It is said that this creates an unfairness for the defendant since in the continuation of the main trial it will "have", to use counsel's words, to waive its solicitor/client privilege for the advice it received following the grant of the injunction. I cannot see how the defendant will ever "have" to waive its privilege. That will be its decision; it is its privilege to waive or not as it sees fit. The American jurisprudence cited to me is not applicable. It deals with an entirely different situation where the court may award triple damages for wilful infringement. American courts have held that it is presumptively unfair to force a party to risk its solicitor/client privilege in order to address the triple damages question before liability has been determined. That is not our case. Here it has been determined that the defendant infringed. Here it has been determined that the defendant has breached the injunction. There is liability. All that remains to be decided is was that breach callous. If it was callous, and if the amount of the recovery is not so great as to provide sufficient deterrence to the defendant and others, the court may award exemplary damages in a figure that may be punitive.
[18] Accordingly, this aspect too of the motion must fail.
[19] On the matter of costs, it is my view, that the motion should not have been brought so I shall order that defendant pay plaintiff's costs forthwith and in any event and I fix such costs at $7,500 plus allowable disbursements.
"James K. Hugessen"
Judge
Ottawa, Ontario
March 10, 2000
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1 Due to a failure of the recording system, the portions marked by side bars do not appear in the original version.