Citation: 2006 FC 952
PRESENT: The Honourable Mr. Justice Harrington
BETWEEN:
AREVA NP CANADA LIMITED
and
ATOMIC ENERGY OF CANADA LIMITED
Defendant
[1] On 23 August 2006, the Court will hear plaintiffs’ application for an interlocutory injunction in this patent infringement case. The schedule leading up thereto is tight. The parties are to exchange, or have exchanged, affidavits, and a number of days of cross-examination thereon have been set aside.
[2] These reasons deal with a responding motion by the defendant, Atomic Energy, to have the Statement of Claim struck in its entirety for failing to disclose a cause of action, or at least one within the jurisdiction of this Court, and to have the action dismissed, or failing that for an order that some of the paragraphs of the Statement of Claim be struck and the plaintiffs ordered to furnish better particulars with respect to others. The matter was treated with urgency as the ruling might well have considerable bearing on the scope of cross-examination on the affidavits in support of or in opposition to the motion for an interlocutory injunction.
[3] The day following the hearing, I dismissed Atomic Energy’s motion in its entirety. These are the reasons why.
HISTORY OF THE PROCEEDINGS
[4] In must be kept in mind that on a motion to strike a statement of claim pursuant to Federal Courts Rule 221 on the ground that it discloses no reasonable cause of action, it is assumed that the plaintiff will be able to prove the allegations it has made, but that nevertheless it is plain and obvious that no reasonable cause of action has been disclosed (Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959. The following history is therefore only the plaintiffs’ side of the story.
[5] Areva NP GmbH, whom I shall call “Areva Germany”, is a worldwide purveyor of technology and equipment of interest to the nuclear power generation industry. Among other things, it has developed technology and apparatuses for the mechanical cleaning of heat exchanger tubes. Oxide deposits accumulate within these tubes and must be removed periodically. In this regard, it owns a number of Canadian patents including number 2,280,348 (‘348) entitled “Method for the Cleaning of Exchange Tubes and Collecting Device for the Collection of Deposits from Heat Exchange Tubes”.
[6] For years, it worked with Atomic Energy, a Canadian Crown corporation, the developer of the CANada Deuterium Uranium (CANDUTM) nuclear power plants, on projects in Canada, and internationally. The relationship has ended on bad terms. Areva Germany filed and served a Statement of Claim in which it alleged that Atomic Energy has infringed and unless stopped will continue to infringe the ‘348 patent, and has and will disclose confidential information and trade secrets unless stopped. There are particular allegations with respect to Bruce Power L.P., the operator of nuclear generating stations on Lake Huron. Atomic Energy carried out some cleaning services at that installation last October and is scheduled to carry out further work next month allegedly in infringement of the patent and contrary to its contractual obligations not to disclose valuable trade secrets.
[7] The Statement of Claim prayed that Atomic Energy be permanently enjoined from practicing any methodology which falls within the scope of the patent and from manufacturing, selling or using any device falling within the scope thereof, an injunction restraining the use or disclosure of confidential information as defined in various agreements between the parties, a declaration that the patent is valid and infringed, damages or an accounting of profits, and related relief.
[8] In reaction, Atomic Energy did two things. It moved for security for costs and it moved to have the entire statement of claim struck.
[9] The motion to dismiss, as originally filed, had two parts to it. Insofar as the Statement of Claim alleged the infringement of a patent, the allegations were so bereaved of particulars that they should be struck for failing to disclose a reasonable cause of action. Failing that the Court should order Areva Germany to furnish better particulars. Some of the other paragraphs in the Statement of Claim should be struck because they were immaterial, while others should be struck because they did not pertain to a patent infringement action, but rather to an action for breach of contract, over which this Court has no jurisdiction.
[10] Areva Germany did not sit idly by. It voluntarily furnished particulars. It also amended its Statement of Claim. Although it did not delete the paragraphs alleged to be irrelevant or as disclosing a cause of action beyond the jurisdiction of this Court, it withdrew its conclusions for an injunction and an accounting of profits arising from breach of contract. However, it added a conclusion for punitive and exemplary damages. It also, together Areva NP Canada Limited (Areva Canada), filed a protective action in the Ontario Superior Court of Justice.
[11] The procedural manoeuvring was not yet over. Atomic Energy amended its motion record to assert that the Federal Court action was now an abuse of process and argued that this Court could not award punitive damages with respect to contracts over which it does not have jurisdiction.
[12] Finally, and at least to some extent in an effort to ward off the Motion for Security for Costs, Areva Germany moved that the Amended Statement of Claim be further amended so that Areva Canada be added as a plaintiff.
[13] At the hearing, I authorized the issuance of a first Re-Amended Statement of Claim to show Areva Canada as a plaintiff, but nevertheless ordered that Areva Germany post security for costs.
ISSUES
[14] A motion to strike is governed by Federal Courts Rule 221. The Rule reads:
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221. (1) On motion, the Court may, at any time, order that a pleading, or anything contained therein, be struck out, with or without leave to amend, on the ground that it (a) discloses no reasonable cause of action or defence, as the case may be, (b) is immaterial or redundant, (c) is scandalous, frivolous or vexatious, (d) may prejudice or delay the fair trial of the action, (e) constitutes a departure from a previous pleading, or (f) is otherwise an abuse of the process of the Court, and may order the action be dismissed or judgment entered accordingly. Evidence (2) No evidence shall be heard on a motion for an order under paragraph (1)(a).
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221. (1) À tout moment, la Cour peut, sur requête, ordonner la radiation de tout ou partie d'un acte de procédure, avec ou sans autorisation de le modifier, au motif, selon le cas : a) qu'il ne révèle aucune cause d'action ou de défense valable; b) qu'il n'est pas pertinent ou qu'il est redondant; c) qu'il est scandaleux, frivole ou vexatoire; d) qu'il risque de nuire à l'instruction équitable de l'action ou de la retarder; e) qu'il diverge d'un acte de procédure antérieur; f) qu'il constitue autrement un abus de procédure. Elle peut aussi ordonner que l'action soit rejetée ou qu'un jugement soit enregistré en conséquence. Preuve (2) Aucune preuve n'est admissible dans le cadre d'une requête invoquant le motif visé à l'alinéa (1)a).
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[15] The issues are :
a) Should certain paragraphs of the Amended Statement of Claim be struck on the basis that either they do not disclose a cause of action over which this Court has jurisdiction, or because even in a patent infringement action, the Court cannot award punitive damages if the behaviour to be punished was with respect to contracts beyond its jurisdiction?
b) Should certain paragraphs be struck on the grounds that although the remedy sought is within the jurisdiction of the Court, the Amended Statement of Claim fails to disclose a reasonable cause of action? In the alternative, should the plaintiffs be required to provide further and better particulars?
c) Should certain paragraphs be struck on the grounds that they are immaterial?
d) Should the entire Amended Statement of Claim be struck, and the action dismissed, on the grounds that it is scandalous, frivolous or vexatious, or otherwise an abuse of process of the Court?
FEDERAL COURT JURISDICTION
[16] Atomic Energy does not take the position that this Court does not have jurisdiction insofar as the action is one for patent infringement. The tripartite jurisdictional test established by the Supreme Court in such cases as Canadian Pacific Ltd. v. Quebec North Shore Paper Co., [1977] 2 S.C.R. 1054 and ITO-International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752 that the matter must fall within a class of subject over which Parliament has legislative authority, that there must be an existing body of federal law essential to the disposition of the case, and that the administration of that law has been confided to this Court, has been easily met.
[17] Section 91(22) of the Constitution Act gives Parliament legislative authority over “patents of invention and discovery”, Parliament has enacted the Patent Act, which specifically deals with infringement, and it confided jurisdiction upon the Federal Court pursuant to Section 20 of the Federal Courts Act.
[18] Atomic Energy’s point is that the original Statement of Claim combined two causes of action: patent infringement, over which the Court has jurisdiction, and breach of contract, over which it has not. By the time its Motion to Strike was heard, we were faced with quite a different Statement of Claim. The conclusions with respect to breach of contract were dropped, but the contractual allegations remained to support new conclusions with respect to punitive and exemplary damages. Atomic Energy still asserts that the long recital of the contractual history between the parties should be struck, not only on the grounds of immateriality on which more will be said under that heading, but also because were the Court to award exemplary and punitive damages, it would have to conclude that it was in breach of contract, a contract over which this Court has no jurisdiction.
[19] In my view, the paragraphs in question should not be struck on jurisdictional grounds for two reasons. The first is that it is not “plain and obvious” that the contracts in question are beyond the jurisdiction of the Court. The second is that even if they are, it is open for Areva to submit Atomic Energy’s behaviour in relation thereto may justify punitive or exemplary damages, should it be found the patent has been infringed.
[20] It has been well established in cases such as Hunt, supra, that a statement of claim should not be struck unless it is “plain and obvious” that the pleading discloses no reasonable cause of action. The plaintiffs should not be driven from the judgment seat at the outset unless it is beyond reasonable doubt that they have no case.
[21] The Court has not seen the contract. It is clear that this Court has jurisdiction over the case as presently framed in the Amended Statement of Claim. It should be emphasized that the plaintiffs unilaterally, and without Court order, amended the Statement of Claim to delete the conclusions for an accounting of profits from breach of contract. While it is true that in the abstract an action for breach of contract pure and simple relates to the legislative class of subject of property and civil rights and is thus reserved to the provinces and to provincial Courts under Section 92 of the Constitution Act, the legal concept of contract as such is neither provincial nor federal. Much depends on the subject matter thereof. As Chief Justice Laskin pointed out in R. v. Rhine, [1980] 2 S.C.R. 442, “it should hardly be necessary to add that “contract” or other legal institutions, such as “tort” cannot be invariably attributable to sole provincial legislative regulation or be deemed to be, as common law, solely matters of provincial law.”
[22] A contract for the sale of goods is provincial. However, a contract for a sale of a ship is federal as being a matter of navigation and shipping (Antares Shipping Corp v. The Capricorn, [1980] 1 S.C.R. 553). Likewise, a contract of insurance is provincial, but a contract of marine insurance is federal as falling within navigation and shipping (Zavarovalna Skupnost Triglav v. Terrasses Jewellers Inc., [1983] 1 S.C.R. 283).
[23] The first question therefore is whether the contracts are sufficiently proximate to the patent that they fall within the federal legislative class of subject of patents of invention (ITO, supra, paragraph 22). Since the contracts are not before the Court, that question cannot be answered at this time.
[24] The second question is whether there is operative federal law. Section 20(2) of the Federal Courts Act gives the Federal Court concurrent jurisdiction in all cases “in which a remedy is sought under the authority of An Act of Parliament or at law or in equity respecting any patent of invention...”. Did Parliament simply grant jurisdiction or did it referentially incorporate or “federalize” common law and equity? On this point, see ITO, supra, paragraph 18.
[25] As noted by Chief Justice Jackett in Associated Metals & Minerals Corp v. The Evie W, [1978] 2 F.C. 710, the pre-Confederation laws continued under Section 129 of the Constitution Act, be they the Common Law of England, a United Kingdom Statute or a pre-Confederation Colonial Statute, are federal law if they can be repealed, abolished or altered by the Parliament of Canada. The Supreme Court concluded ([1980] 2 S.C.R. 322) that he reached the correct conclusion as to jurisdiction in light of its own decision in Tropwood A.G. v. Sivaco Wire & Nail Co., [1979] 2 S.C.R. 157.
[26] Given Rhine, supra, and the comments of Chief Justice Jackett, I think it arguable that Section 20 of the Federal Courts Act established a body of federal law beyond the Patent Act. Certainly, I would not have dismissed without argument on that point.
[27] Since I am not prepared, at this stage, to hold that this Court does not have jurisdiction over claims arising from the alleged breaches of contract, it follows that I will not strike the allegations in the Statement of Claim relating thereto. Moreover, even if the contracts are matters of property and civil rights, it does not follow that this Court cannot take them into account. ITO stands for the proposition that as long as the pith and substance of the action is federal, the Court may have to consider incidental provincial law. In Kellogg Co. v. Kellogg, [1941] S.C.R. 242, the Court held that although the Federal Court’s predecessor, the Exchequer Court, had no jurisdiction to determine an issue truly and simply concerning a contract between subject and subject, the action primarily related to an invention. In determining the case, the Court had to consider the employment contract between the parties. Likewise, in a patent action one cannot be insulated from behaviour which calls for punitive damages because that behaviour arose within the context of a contract which was incidentally relevant. I repeat that the contracts in question are not before the Court on this motion.
[28] In my view, it follows that I will not strike the allegations in the Statement of Claim pertaining to breach of contract at this stage. This is not a preliminary determination of a point of law. The question is not whether the Court has jurisdiction. The question rather is whether it is “plain and obvious” that it has not. Without the contract, and perhaps other evidence that goes to jurisdiction, the Statement of Claim must stand.
ARE THE PATENT INFRINGEMENT ALLEGATIONS SUFFICIENT?
[29] The Statement of Claim, and the particulars furnished so far, allege that Atomic Energy has infringed certain specified claims contained in the patent. Although those claims are not reproduced in the Statement of Claim itself, the defendant acknowledges it has copy of the patent. Its complaint is that not enough detail has been given as to how it infringed the patent. In my view, there is more than enough meat in the Amended Statement of Claim to permit the defendant to know the case it has to meet and to file its Statement of Defence accordingly.
[30] As Mr. Justice Marceau, as he then was, held in Embee Electronic Agencies Ltd. v. Agence Sherwood Agencies Inc. et al (1979), 43 C.P.R. (2d) 285, the point may be revisited after the filing of the Statement of Defence. After pleadings are closed, the rules allow for discovery of documents and examinations for discovery.
ARE SOME PARTS OF THE STATEMENT OF CLAIM IMMATERIAL?
[31] Rule 174 requires every pleading to contain a concise statement of the material facts on which the party relies. Atomic Energy’s position, which admittedly has logic to it, is that the action is for breach of one specific patent. The Statement of Claim refers to three other patents, and, as aforesaid, to various contracts between the parties. The Court need not and should not look at other patents, or at the contracts, to determine whether or not the patent has been infringed. After all, a patent is notionally addressed to a reasonably skilled person in the field who would be able without extrinsic help to duplicate the invention covered by the patent once the monopoly has expired.
[32] While that view has merit, the plaintiffs have to be allowed reasonable latitude in setting out their story. It cannot be said that at this stage, before the defendant has even put in a defence, that the other patents and the contracts are not even incidentally relevant, particularly when one takes into account the allegation that the defendant’s conduct constitutes more than a deliberate infringement of patent rights, and was “highhanded, callous, malicious, oppressive, arbitrary and high reprehensible...” Even if the contract is only incidental, it does not follow that it cannot be pleaded (Kellogg, supra; and Titan Linkabit Corp v. SEE See Electronic Engineering Inc., [1992] F.C.J. No. 807 (QL)). Even in an action limited to patent infringement, the party’s conduct, including its alleged disdain of confidential agreements may be relevant when it comes to punitive or exemplary damages (Dimplex North America Limited v. CPM Corp., [2006] F.C.J. No. 776 (QL).
[33] Although it has been said that a claim for punitive damages need not be specifically pleaded, the better view as set out in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 by Mr. Justice Binnie at paragraph 86 is:
[...] In my view, the suggestion that no pleading is necessary overlooks the basic proposition in our justice system that before someone is punished they ought to have advance notice of the charge sufficient to allow them to consider the scope of their jeopardy as well as the opportunity to respond to it. This can only be assured if the claim for punitive damages, as opposed to compensatory damages, is not buried in a general reference to general damages. This principle, which is really no more than a rule of fairness, is made explicit in the civil rules of some of our trial courts. [...]
[34] Were the allegations not contained in the Statement of Claim, the defendant might be taken by surprise and would have been entitled to seek particulars.
[35] While Atomic Energy conceded that this Court may award punitive damages, it argues that in this case the Court can only take into account its behaviour during the litigation process itself. This Court, unlike the Ontario Superior Court of Justice, cannot look, it suggests, at the manner in which it performed or breached the contracts it had with the plaintiffs. Even if in the fullness of time that position turns out to be correct because the contracts are found not to have been intimately connected with the alleged patent infringement, it would be inappropriate to strike the paragraphs now, as it is not “plain and obvious” that its position is legally correct.
ABUSE OF PROCESS
[36] Section 20 of the Federal Courts Act accords the Federal Court concurrent jurisdiction with other courts, in this case the Ontario Superior Court of Justice. Given Atomic Energy’s attack on part of the original Statement of Claim on jurisdictional grounds, it was quite natural the plaintiffs would protect themselves by filing an action in the Ontario Superior Court. The general rule is that if more than one Court has jurisdiction, the choice rests with the plaintiff, not the defendant. Since the Federal Court unfortunately is plagued with Constitution limits on its jurisdiction, protective actions in provincial Courts are not uncommon. Areva has done nothing out of the ordinary. There may come a time where the plaintiffs are required to make an election, but that time has not yet come. The Court was informed that Areva could not get a hearing in the Ontario Superior Court on the interlocutory injunction motion until September 15, and that they elected to continue in this Court because of their concern that Atomic Energy might be performing the Bruce contract before then. This continuation of this action is neither abusive nor vexatious.
[37] For these reasons, the motion is dismissed with costs.
“Sean Harrington”
Ottawa, Ontario
August 3, 2006
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-915-06
STYLE OF CAUSE: AREVA NP GmbH and AREVA NP CANADA LIMITED
v.
ATOMIC ENERGY OF CANADA LIMITED
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: July 27, 2006
REASONS FOR ORDER: Harrington J.
APPEARANCES:
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May M. Cheng
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Diane E. Cornish |
SOLICITORS OF RECORD:
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Fasken Martineau DuMoulin LLP Barristers & Solicitors Toronto, Ontario
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Osler, Hoskin & Harcourt LLP Barristers & Solicitors Ottawa, Ontario |