Federal Court of Appeal Decisions

     A-253-97

CORAM:      STRAYER J.A.

     DÉCARY J.A.

     LINDEN J.A.

B E T W E E N:

     INNOTECH PTY. LTD.

     Appellant,

     " and "

     PHOENIX ROTARY SPIKE HARROWS LTD.

     BRIAN READ and

     SELECT INDUSTRIES LIMITED

     Respondents

     REASONS FOR JUDGMENT

     (Delivered from the Bench at Ottawa, Ontario

     on Wednesday, June 18, 1997)

STRAYER J.A.

     This is an appeal from a decision of the Trial Division dismissing a motion to strike out the counterclaim filed by the respondent Phoenix Rotary Spike Harrows Ltd. ("Phoenix").

     The statement of claim in this action alleges infringement of the appellant's patent by Phoenix and others. In its statement of defence Phoenix alleged that it acted under a license and was therefore not liable. It also filed a counterclaim seeking a declaration as to the validity of the license, injunctions for its enforcement, and damages for the alleged breach by the appellant of the license.

     The learned motions judge concluded as follows:

The Statement of Claim alleges that infringement has taken place since these defendants have, without permission or license, used the plaintiff's patent. It is, however, the defendants' contention that their use of the invention was at all times under a valid license. That pleading is central to their defence. It also alleges that it is the plaintiff who has acted in breach of the terms of the license, wherefore it is the defendants who will be entitled to the customary kind of relief granted at trial, be it injunctive or monetary. In my opinion, the Counterclaim does no more than particularize the basis of the grievance claimed by the defendants. The license which forms the basis of the Counterclaim is the same one that forms the basis of the defence of non-infringement.

It would therefore be inappropriate to microscopically sever the one pleading from the other. The plaintiff's application is therefore dismissed. Costs in the cause.

     With respect, it appears to us that although it is the same license which is involved in both the statement of defence and the counterclaim, it is invoked for a different purpose in each pleading. In the statement of defence it is being used as a shield against a claim of infringement. In the counterclaim it is being used as a sword, a basis for obtaining remedies against the appellant for its enforcement. The counterclaim, when viewed by itself, would stand alone as an action for breach of contract and as such is not within the jurisdiction of this Court. Using the language of Kellogg v. Kellogg¹ the main action is primarily for the enforcement of a patent. That claim can be decided on the basis of the statement of claim and the statement of defence, and incidental to that determination the license, its existence, terms, and validity may well have to be considered. But the counterclaim which must be viewed as a distinct action² primarily involves a claim for an alleged breach of contract.

     It may well be, as counsel for the respondent ably demonstrated, that this result will lead to inconvenience. But that is not, of itself, a basis for this Court assuming jurisdiction.

     The appeal must therefore be allowed, and the counterclaim struck out.

    

                                 J.A.

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1      (1941) 1 C.P.R. 30 at 39 (S.C.C.).

2      Ruhrkohle Handel Inter GmbH et al v. Fednav Ltd. et al (1992) 42 C.P.R.(3d) 414 at 418 (F.C.A.)