and
SOLTRON REALTY INC.
Plaintiffs
and
MARTINEAU J.
REASONS FOR ORDER
[This is an edited version of the reasons delivered orally from the Bench on April 5, 2006. Redundancies, mistakes, errors, omissions, or any wrong reference to cases cited herein have accordingly been corrected.]
[1] In this motion, the plaintiffs seek leave, pursuant to Rule 75 of the Federal Courts Rules, SOR/98-106, as amended, to file an amended statement of claim on the first day of the trial, which was set to start on April 3, 2006.
[2] Generally, an amendment should be allowed at any stage of an action for the purpose of determining the real questions in controversy between the parties, provided, notably, that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice: see Canderel Ltd. v. Canada, [1994] 1 F.C. 3 (F.C.A.). Factors relevant to the assessment of whether an amendment would cause prejudice to the other party that cannot be compensated by an award of costs include the timeliness of the motion to amend, the extent to which the amendment would delay an expeditious trial, the extent to which the original position caused another party to follow a course which is not easily altered, and whether the amendment facilitates the Court's consideration of the merits of the action: see Scannar Industries Inc. (Receiver of) v. Canada (1993), 69 F.T.R. 310 (F.C.T.D.), aff'd (1994), 172 N.R. 313 (F.C.A.); Yeager v. Canada (Correctional Service) (2000), 189 F.T.R. 196 (F.C.T.D.); Valentino Gennarini SRL v. Andromeda Navigation Inc., 2003 FCT 567 at paragraph. 29, 232 F.T.R. 256.
[3] Essentially, in the original statement of claim filed on December 12, 2001, the plaintiffs allege that the defendant has infringed the plaintiffs' copyrights in its original artistic works, which are comprised of the actual packaging used in association with the line of arts and crafts toys, and also photographs and drawings reproduced on the packaging or included as part of the written instructions within the package. In some cases, the artistic works consist of the actual toys themselves (such as children's tattoos). The plaintiffs also allege that the defendant has directed public attention to its wares and business in such a manner as to cause, or to be likely to cause, confusion in Canada between the defendant's wares and business, and the wares and business of the plaintiffs, and that the defendant has passed off its line of arts and crafts and children's toys as those of the plaintiffs. In addition, the plaintiffs allege that the defendant, by way of trade, has induced others to offer for sale and sell the defendant's Play Art products in Canada and elsewhere and thereby infringes the intellectual property rights of the plaintiffs.
[4] The statement of claim filed December 12, 2001, has not been previously amended during the course of this proceeding, which had been set to trial by Order dated November 12, 2004, some 16 months ago. In the meantime, on April 5, 2002, Justice Marc Nadon granted an order under paragraph 38(1)(b) of the Copyright Act, R.S.C. 1985, c. C-42, as amended, allowing the plaintiffs to seize before judgment the defendant's Play Art products in various stores in the Montreal area.
[5] Some of the plaintiffs' proposed amendments relate to the defendant's expanded line of Play Art products, to the damages or profits that the plaintiffs are now claiming and to information and events revealed during the examinations for discovery.
[6] The defendant is prepared to consent to amendments that are made to allow the plaintiffs to claim infringement of the intellectual property rights as set forth in their original statement of claim with respect to all products offered and sold by the defendant since the seizure order rendered on April 5, 2002. The defendant takes the same position with respect to amendments that are made to specify the quantum of damages that the plaintiffs have suffered as a result of the infringements as set forth in the original statement of claim and the amendments described above. This disposes of paragraphs 1(d), (e), 1(g)(iii), 1(i), 1(k), l(m), 5, 6, 7, 13, 15, 17, 18, 19, 20, 21, 22, 24, 25, 26 and 32 of the draft amended statement of claim communicated to the Court and the defendant on April 4, 2006.
[7] That being said, paragraphs 1(a), 1(b), 1(f), 1(g)(i), 1(g)(ii), 1(g)(iv), 1(g)(v), 1(g)(vi), 9, 10, 11, 12, 16, 23, 27, 29 and 31 of the draft amended statement of claim communicated to the Court and the defendant on April 4, 2006, are contentious. Among the reliefs sought in the original statement of claim by the plaintiffs, paragraph l(a) prays for "a declaration that as between the parties, the plaintiff, Soltron Realty Inc. (hereinafter Soltron) is the owner of the copyright in the original artistic works listed in Schedule A and that said copyrights in the aforesaid works are valid and subsisting". Paragraph l(a) of the amended statement of claim now indicates that Soltron "is the owner of the copyrights in the original artistic works, a representative sample of which is listed in amended Schedule A hereto, consisting of the actual product packaging, the photographs and drawings reproduced on the packaging and/or included as part of the written instructions themselves included within the packaging and/or the actual toys themselves included within the packaging (...)".
[8] The Amended Schedule A was served on the defendant on April 3, 2006. Defendant's counsel argues that his client is taken by surprise by this last minute amendment. He submits that the plaintiffs' claim with respect to copyrighted works is limited to the specific images presently reproduced at Schedule A. The plaintiffs' claim does not concern the actual product packaging, the written instructions and the actual toys themselves. Moreover, the defendant submits that by amending their statement of claim so as to qualify the Amended Schedule A as merely a "representative sample" of the works at issue, the plaintiffs are introducing new causes of action based on new, unknown works.
[9] More specifically, some of the additional claims are:
a) Infringement of the "actual product packaging", rather than the specific works listed in Schedule "A". Since these works are undefined, the defendant does not know what is meant by "actual product packaging", or what is included in this definition. Does it include the title, warnings, layout, colour, the look of the front of the box, the back, the sides, etc.? Does this claim relate to a work of compilation or of joint authorship?
b) Infringement of the "written instructions themselves". The original action was for infringement of "original artistic works" rather than literary works. This is an obvious new cause of action.
c) Infringement of the "actual toys themselves included within the packaging". Are the plaintiffs claiming copyright in the "actual toys themselves"? Is the copyright claimed three-dimensional or two-dimensional? Are the plaintiffs claiming rights to three-dimensional trade-marks as well?
[10] I fully agree with the defendant when stating that certainty is to be expected on the first day of the trial. "Otherwise, the trial will become unfocussed and may proceed on a false premise and give rise to unnecessary procedural wrangles while distorting the essence of the evidence to be led": see Hoechst Marion Roussel Deutchland GmbH v. Adir et Cie (2000), 190 F.T.R. 233 at paragraph 35 (F.C.T.D.). This being said, pleadings only have to reflect the material facts on which the party relies, but shall not include evidence by which those facts are to be proven (Rule 174). Those are matters primarily of evidence, and to some extent of argument based on the evidence: see Merck Frosst Canada Inc. v. Canada(Minister of Health) (1997), 76 C.P.R. (3d) 468 (F.C.T.D.).
[11] As Lord Denning M.R. explained in Re Vandervell's Trusts (No 2), [1974] 3 All. E. R. 205 at 213 (C.A.):
It is sufficient for the pleader to state the material facts. He need not state the legal result. If, for convenience, he does so, he is not bound by, or limited to, what he has stated. He can present, in argument, any legal consequences of which the facts permit.
[12] All this to say, to use the words of Bowman T.C.J. in Continental Bank Leasing Corp. v. Canada, [1993] 1 C.T.C. 2306 (T.C.C.), which are quoted by the Federal Court of Appeal in Merck & Co. v. Apotex, [2004] 2 F.C.R. 459, at paragraph 34:
All [amendments] must be assigned their proper weight in the context of the particular case. Ultimately, it boils down to a consideration of simple fairness, common sense and the interest that the courts have that justice be done.
[13] In the case at bar, I am satisfied that the proposed amendments do not raise new causes of action and that they are necessary to facilitate the Court's consideration of the merits of the action. Moreover, the allegations formulated by defendant's counsel that its client is somewhat taken by surprise is not supported by affidavit and is contradicted by the evidence submitted by the plaintiffs. I generally accept the arguments made in this regard by plaintiffs' counsel at the hearing, particularly in the course of his reply and I will not repeat same. I will however make the following additional comments.
[14] It is debatable whether or not Schedule A should be considered as an integral part of the statement of claim or not. In any event, I note that Schedule A represents a "partial list of images owned by plaintiffs", as appears from the title given by the plaintiffs to this document. Schedule A also contains cross-references with Schedule C which are actual pictures of the plaintiffs' packaging as shown in previous AMAV products catalogues. The reliefs sought by the plaintiffs in paragraph 1 of the original statement of claim cannot be read in isolation and should be construed in conjunction with the allegations pertaining to the material facts alleged by the plaintiffs elsewhere in their statement of claim, notably paragraph 6 of same. I have no doubt that the plaintiffs are entitled at trial to produce evidence to substantiate their allegations of copyright infringement and passing off. The evidence contained in the Amended Schedule A is not new and can certainly be introduced at trial.
[15] The affidavits of Mark Lehberg, Asher Diamant and Avi Sochaczevski filed in support of the motion for seizure before judgment originally returnable December 17, 2001 also provide further useful clarification with respect to the several claims made by the plaintiffs in this case. AMAV's distinctive packaging and internal design elements, including written instructions, dies and molds and artistic product components (such as the sand art and colour-in tattoo products) are discussed in detail by Mark Lehberg in his affidavit. I note that Justice Nadon in his reasons for order given on April 5, 2002 referred to these and further pointed out that the defendant had not challenged the plaintiffs' assertion that its products were for all intents and purposes, identical to the AMAV brand line of arts and crafts products. Indeed, Justice Nadon notes at paragraph 29 that "the defendant purchased part of AMAV'S assets to offer the public products that are 'inspired' or similar to the products previously manufactured and hence, offered to the public by AMAV Industries Ltd. Therefore, the true issue between the parties in this motion is whether the plaintiffs have satisfactorily demonstrated that they have title to the intellectual property which they say the defendant is infringing".
[16] Against this background, I note that in the joint statement on the issues to be determined at trial, regarding allegations of copyright infringement, the Court is specifically asked to determine inter alia:
- whether the plaintiff Soltron Realty Inc. was the owner, at any relevant time for the purpose of these proceedings, of all intellectual property rights, including but not limited to, the copyrights attached to certain artistic works, previously owned by AMAV;
- whether the defendant has distributed, exposed or offered for sale or rental, exhibited in public, sold and/or possessed for such purposes, said products and/or packaging with the knowledge that these toys and/or packaging contained alleged reproductions of some of the relevant works.
[17] The defendant cannot argue today that the "actual product packaging", the "written instructions themselves" or the "actual toys themselves included within the packaging" are new causes of action. Here, the proposed amendments are only made to refocus and particularize specific aspects of the same cause of action, which arose from the alleged infringement of their copyrighted works. Furthermore, these descriptions were previously used, at least in some analogous form, to describe some of the alleged copyrighted products in various affidavits and written representations. For these reasons, I do not agree that the proposed amendments would delay an expeditious trial since the proposed amendments raise no new cause of action and purport only to specify in more detail the material facts in the action. This case is distinguishable from Montana Band v. Canada, 2002 FCT 583, [2002] F.C.J. No. 774 (F.C.T.D.) (QL), because the plaintiffs' proposed amendments do not substantially change the factual basis of the claim. In my opinion, the contemplated amendments would not cause a prejudice to the defendant that cannot be compensated by an award of costs. As such, the defendant has failed to satisfy me that it would have to revise its legal opinions and pleadings, and proceed to new examinations for discovery. In any event, it would be aberrant and wasteful of the Court's resources to require that the plaintiffs institute a separate action based on the same claims of copyright infringement and passing off, relying on the same underlying facts and simply relating to an expanded line of products that allegedly continue to have the same general appearance and distinctive packaging used for all AMAV arts and crafts products.
[18] I will accordingly allow the present motion. At this point, I will not make any award with respect to costs, inviting counsel to make submissions on this point at the conclusion of the scheduled hearing for this trial, which should end on or before April 27, 2006. Finally, provision is also made in the accompanying order with respect to serving and filing by April 7, 2006, 4 p.m., of any amended defence to the amended statement of claim which shall be filed and served by April 5, 2006, 4 p.m.
[On April 6, 2006, the plaintiffs agreed to provide by April 10, 2006, the particulars asked for by letter of defendant's counsel dated April 5, 2006. Accordingly, the delay to serve and file an amended statement of defence has been extended to April 11, 2006. The trial has commenced in the meantime.]
"Luc Martineau"
Judge
Montréal, Quebec
April 7, 2006
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1676-01
STYLE OF CAUSE: Diamant Toys Ltd. et al. v. Jouets Bo-Jeux Toys Inc.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: April 3, 2006
REASONS FOR ORDER: MARTINEAU J.
APPEARANCES:
| François Guay
|
|
| Daniel A. Artola
|
SOLICITORS OF RECORD:
| Smart & Biggar Montréal, Quebec
|
|
| Ogilvy Renault Montréal, Quebec
|