Ottawa, Ontario, this 29th day of April , 2005
PRESENT: THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE
BETWEEN:
ESCO LIMITED
Plaintiffs
- and -
REASONS FOR ORDER AND ORDER
O'KEEFE J.
[1] This is a motion brought pursuant to Rule 51 of the Federal Court Rules 1998, SOR/2004-
283, s.2 wherein the plaintiffs, Esco Corporation and Esco Limited (the "appellants") appeal against the order of the Prothonotary dated October 25, 2004, in which the appellants'motion for the production and delivery up of new "as built"and worn "as used" samples of the respondent's products was granted in part. The Prothonotary granted the request for new "as built" samples but dismissed the request for the delivery up of the worn "as used" samples.
Summary of the Background Facts
[2] The appellant, Esco Corporation is a corporation organized and existing under the laws of
the United States and the owner of Canadian Patents ("019", "818" and "644") specified in the statement of claim, related to attachments for excavating equipment (replaceable edge and tooth components for buckets used on large digging machines employed in mining and tar sands extraction). The appellant, Esco Limited is a wholly owned Canadian subsidiary corporation organized and existing under the laws of Canada which carries on business as a distributor of Esco Corporation's attachments for excavating equipment.
[3] The defendant, Quality Steel Foundries Limited (the "respondent") is a corporation
incorporated under the laws of Alberta, and manufactures and sells accessories and replacement parts for mining and excavating equipment. In the statement of claim, the appellants claim that the respondent's equipment infringes the appellants' patents in question. The respondent has denied this and counterclaimed that the patents are invalid.
[4] The appellants filed a motion requesting that the Court order the respondent to "deliver up
for inspection and examination by the appellants, samples of parts alleged to infringe the appellants' patents, in both new, "as built" condition, and in worn, "as used" condition. In Schedule A attached to the notice of motion (and the notice of return of motion), the appellants further particularized the request. The Prothonotary granted the motion insofar as the request for new "as built" parts, and also ordered the production (for non-intrusive examination) of earlier version of the respondent's parts but dismissed the request for the production of the "as used" parts. The appellants appealed the order of the Prothonotary as it relates to the dismissal of the request for an order that the respondent deliver up samples of certain worn "as used" used parts in its possession. The appellants also requested a slight modification to the order granting the delivery up for inspection of certain "as built" parts.
[5] The respondents filed a cross-motion before the Prothonotary. The appeal of the
Prothonotary's order on that motion is dealt with in separate reasons.
Summary of the Appellants' Submissions
[6] The appellants submitted that the Prothonotary erred in law and proceeded upon a wrong
principle in concluding that inspection, analysis and testing of certain used parts would not yield evidence of any relevance, and would be of no assistance to the Court at the trial. The Prothonotary further erred in restricting samples of new parts to a subset of the relevant parts sought by the appellants, and refusing to order inspection of certain parts.
Summary of the Respondent's Submissions
[7] The respondent submitted that as the Prothonotary properly considered all factors relevant
on a motion to inspect (necessity, expedience, utility to the trial Court (inclusive of admissibility, relevance and weight) and intrusiveness), her discretion was exercised upon the basis of a correct principle.
[8] The respondent submitted that (i) the evidence shows that as a result of changes in certain
elements of the parts once used, an analysis of the used parts provides little if any evidence about infringement on their date of sale, manufacture of distribution, (ii) the appellants already had some of the parts in question "as used", (iii) the evidence before the Prothonotary established that the order sought in relation to "as used" parts was extremely intrusive, and (iv) in relation to the appellant's submission that the Prothonotary erred in "restricting samples of new parts to a subset of the relevant parts sought by the appellant", the appellants are seeking relief on this appeal that they did not seek before the Prothonotary.
Issues
[9] The issues are:
1. What is the appropriate standard of review to be applied to the decision of the Prothonotary?
2. Did the Prothonotary commit a reviewable error?
Relevant Statutory Provisions
[10] Rule 249(1) of the Federal Court Rules, 1998, supra states:
| 249. (1) On motion, where the Court is satisfied that it is necessary or expedient for the purpose of obtaining information or evidence in full, the Court may order, in respect of any property that is the subject-matter of an action or as to which a question may arise therein, that
(a) a sample be taken of the property;
(b) an inspection be made of the property; or
(c) an experiment be tried on or with the property. |
|
249. (1) La Cour peut, sur requête, si elle l'estime nécessaire ou opportun pour obtenir des renseignements complets ou une preuve complète, ordonner à l'égard des biens qui font l'objet de l'action ou au sujet desquels une question peut y être soulevée:
a) que des échantillons de ces biens soient prélevés;
b) que l'examen de ces biens soit effectué;
c) que des expériences soient effectuées sur ces biens ou à l'aide de ceux-ci. |
Analysis and Decision
[11] Issue 1
What is the appropriate standard of review to be applied to the decision of the Prothonotary?
The Federal Court of Appeal in Merck & Co. Inc. v. Apotex Inc. 2003 FCA 488, at paragraph 19, stated that discretionary orders of a Prothonotary ought not to be disturbed on appeal to a judge unless:
1. the questions raised in the motion are vital to the final issue of the case; or
2. the orders are clearly wrong, in the sense that the exercise of discretion by the Prothontary was based upon a wrong principle or upon a misapprehension of the facts.
[12] The appellants submitted that the Court should exercise its discretion de novo
on the basis that the Prothonotary's exercise of discretion was based upon a wrong principle. The Prothonotary erred in determining at a preliminary stage that certain potential evidence was inadmissible at trial on the basis that it was unreliable, and she thereby usurped the role of the trial judge. The respondent submitted that as the Prothonotary properly considered and balanced various factors as is required on a motion for inspection, she exercised her discretion upon the basis of the correct principle and her decision should not be disturbed on appeal. In the present case, the Prothonotary exercised her discretion to refuse part of a motion for inspection and delivery up of parts which is not a question vital to the final issue of the case. I must now determine whether the Prothonotary was "clearly wrong in the sense that the exercise of discretion by the Prothonotary was based upon a wrong principle or upon a misapprehension of the facts." On the basis of the reasoning below, I would find that the Prothonotary did not err in the exercise of her discretion. Accordingly, I should not exercise my discretion de novo.
[13] Issue 2
Did the Prothonotary commit a reviewable error?
The notice of return of motion before the Prothonotary requested the following:
1. an order in the form attached hereto as Schedule "A", requiring that the defendant deliver up for inspection and examination by the plaintiffs samples of parts alleged to infringe patents of the plaintiff, Esco Corporation.
2. an order directing that the defendant shall pay the plaintiffs' costs.
[14] The grounds for the motion were:
1. The plaintiffs' claims that the defendant had infringed each of the three patents in question (the 019 patent, the 818 patent, and the 644 patent);
2. The plaintiffs had not been able to secure all relevant samples of the defendant's allegedly infringing wares for testing. On discovery, the defendant revealed that the designs of the parts have changed over time and that the drawings produced by the defendant are not in all cases representative of the actual parts sold by the defendant. In the circumstances, the plaintiffs require production of samples of the defendant's new "as built" and worn, "as used" parts.
3. The inspection and testing would involve minimal inconvenience and no financial burden to the defendant. Moreover, the inspection and testing of samples will facilitate obtaining and leading evidence about infringement at trial and thereby simplify the trial.
[15] In granting the appellants' motion in part, the Prothonotary stated:
I agree with the submissions made by counsel for the Plaintiffs that simply referring to drawings of the products alleged to infringe the Plaintiff's patents is inadequate in this case, and that production of new "as built"product samples that are sought for examination and analysis is necessary and appropriate. To the extent the Defendant has in its possession earlier versions of its products, their production and delivery to the Plaintiffs, subject to return, for non-intrusive examination is also appropriate. However, it is wholly unreasonable to direct that the Defendant permit the Plaintiff's representatives access to its premises to rummage through scrap to find used parts or order that the Defendant deliver up used parts that have been returned for scrap of its own accord. Analysis and testing of these used parts would not yield evidence of any relevance, and would be of no assistance to the Court on the hearing of the application. The history of use of these used parts would be unknown. The nature and duration of their use would be unknown, as would any information relating to their maintenance and servicing. This information is entirely beyond the knowledge and control of the Defendant, yet may affect the physical appearance and functioning of the parts in question.
I also find that it would be onerous and potentially damaging to the Defendant's relations with its customers to order the Defendant to assist in or otherwise facilitate the sale of its parts to the Plaintiffs by a third party.
[16] The Prothonotary then ordered the respondent to deliver up samples of (i) an SE218 point,
(ii) an SE218, (iii) an 230ST11 adapter, (iv) two pins and two uninstalled locks for the SE218 point, in new "as built" condition, and (v) "all parts used in the Maglock retention system currently in use, other than the shroud and the lip to which the shroud is affixed, the delivered parts to include the Maglock boss, pin carrier, pin, pry bar and adapter for use with the plaintiffs' bosses".
[17] The Prothonotary also ordered the respondent to deliver up and make available for non-
intrusive inspection by the appellants, a sample of earlier designs of manufactured versions of specified parts.
[18] The appellants submitted that it was an error of law for the Prothonotary to exclude delivery
up of the entire Maglok Shroud as that very part is covered by the claim. The appellant requested that the Prothonotary's order should therefore be amended to require the inspection and delivery up of the Maglok Shroud.
[19] I disagree. There was no error on the Prothonotary's part. The Prothonotary utilized the
specific wording provided by the appellants in paragraph 1(f) of the draft order attached as Schedule "A" to both the notice of motion and the notice of return of motion. The appellants were provided with exactly what they requested in that regard.
[20] The appellants submitted that the Prothonotary erred in law and proceeded upon a wrong
principle in concluding that inspection, analysis and testing of certain used parts would not yield evidence of any relevance, and would be of no assistance to the Court at the trial.
[21] The appellants submitted that they require the used parts as it is relevant to determining how
the respective surfaces function which is in issue in the claim. In its claim for infringement, it is necessary for the appellants to have evidence of the exact configurations of certain of the parts. Further, contrary to the Prothonotary's determination as to the usefulness of an analysis of used parts, there was affidavit evidence before the Prothonotary, of an engineering expert, confirming that an inspection of worn parts would provide information about the bearing surfaces of the devices.
[22] The appellants submitted that the question of how the intervening use of the parts may affect
their appearance and functioning is a question to be answered by expert evidence at trial and for the trial judge to weigh. The evidence to be potentially tendered at trial could only be developed after an inspection. Accordingly, the Prothonotary erred in determining that any evidence would be inadmissible as she did not have the evidence before her. The Prothonotary applied the wrong test in determining that evidence that might arise from the inspection of the respondent's parts was irrelevant. Further, the question of the weight of evidence is to be left to the trial judge (see Everest & Jennings Canadian v. Invacare Corp. (1984), 79 C.P.R. (2d) 138 (F.C.A.)).
[23] The appellant further submitted that it would not be inconvenient to the respondent to
provide the used parts, as retrieval of the parts is part of the company's usual business practice.
[24] The respondent submitted that on a motion for inspection, the Prothonotary is required to
weigh and consider a variety of factors including necessity, expedience, utility to the trial court (inclusive of admissibility, relevance and weight) and intrusiveness. The Prothonotary had evidence before her on each of these factors and properly weighed and considered each.
[25] The respondent submitted that there was evidence before the Prothonotary that an
inspection of additional used parts was not necessary (see Posi-Slope Enterprises Inc. v. Sibo Inc. (1984) 1 C.P.R. (3d) 140 (F.C.A.)). The appellants already had samples of all of the used parts in respect of which they sought an inspection.
[26] The respondent submitted that the evidence before the Prothonotary established that an
inspection of used parts would not likely be of utility to the trial court as (i) the evidence sought was inadmissible as the respondent could not be responsible in law for the characteristics of the product it sells after many months of use, and (ii) the appellants admitted during discovery the effects of usage can cause significant changes in the internal geometry of teeth and further it is impossible to know the history of any given tooth. Those factors affect the physical appearance and functioning of the used teeth, rendering any analysis of them to be irrelevant in determining infringement at the time of sale (see Poly Foam Products Ltd. v. Cascades Sentinel Ltd. (1989), 31 C.P.R. (3d) 140 (F.C.A.)). This supports the Prothonotary's decision.
[27] The respondent further submitted that the evidence before the Prothonotary established
that the order sought was extremely intrusive. It amounted to a request for a search of the premises of a commercial competitor (see P.J. Wallbanck Manufacturing Co. v. Kuhlman Corp. (1980), 50 C.P.R. (2d) 145 (F.C.A.)).
[28] I cannot agree with the appellants' argument in this case. In my view, the Prothonotary
correctly took into account the questions of not only relevance but also usefulness to the Court in light of the significant number of unknown variables that are entirely out of the control of the respondent. As the Prothonotary noted, "the history of use of these used parts would be unknown. The nature and duration of their use would be unknown, as would any information relating to their maintenance and servicing. This information is entirely beyond the knowledge and control of the Defendant, yet may affect the physical appearance and functioning of the parts in question."
[29] The appellants' submissions amount, inter alia, to an assertion that a Prothonotary cannot
make a determination as to the relevance of matters and ultimate usefulness to the Court at trial, on a motion for production. In my view, that is an untenable position. In making a determination on whether to grant an order for production pursuant to Rule 249, the Prothonotary is not precluded from taking into account any number of factors, including relevancy and usefulness to the Court at trial, when it is reasonably related to the question at hand.
[30] In any event, if I were to find that the Prothonotary erred, I would nonetheless exercise
my discretion to not grant the relief sought as the appellants' representative, Carl Goeth confirmed that the appellants have at least one of each of the parts they are seeking in used condition.
[31] In response to the appellants' submission that they require additional "representative"
used parts as determined by the respondent, I would note that in his affidavit, the respondent's representative, Dennet Netterville ("Netterville") attested that the respondent cannot assist with the appellants' request as the respondent does not know, nor is it possible to ascertain the history of use of the SE218 teeth in its scrap yard.
[32] Even if the used parts were ordered to be delivered up and they were then disassembled,
there would be no way of knowing what caused any changes to the internal surfaces of the parts. There was evidence before the Prothonotary to the effect that, for example, the as found condition of the internal surfaces of the used parts could have been caused by any number of factors, including the looseness of the fit of a point on a nose, or fitting the new point onto a damaged nose. It would not produce evidence useful to the trial judge.
[33] At the hearing before me, the appellants narrowed the scope of the relief sought if the
appeal was granted, to a request for the delivery up for inspection of samples of the used parts that have been put aside by the respondent from the "transient" pile of scrap metal, as referred to in the affidavit of Dennett Netterville, sworn July 22, 2004.
[34] During discovery, Netterville confirmed that the respondent had recently discovered a
"transient" pile of scrap metal in which they found samples of the used parts in question (possibly representative of early production). He further confirmed that the respondent has put aside those used parts, and it would not be significantly inconvenient or disruptive to provide them to the appellants if the Court so ordered. It is only those parts the appellants now request be delivered up for inspection, on the terms specified in the draft order submitted at the hearing.
[35] While access to only those parts would resolve the Prothonotary's concern as to the
disruptiveness and inconvenience of a search on the respondent's premises, for the reasons noted above, I do not find she erred in the exercise of her discretion. Further, as earlier noted, the appellants are already in possession of at least one sample of each of the used parts they are requesting.
[36] I therefore dismiss the appeal of the Prothonotary's order as it relates to the
request for the delivery up and production of "as used" samples of the respondent's parts, with costs to the respondent.
ORDER
[37] IT IS ORDERED that:
1. The appeal of the Prothonotary's order as it relates to the request for the delivery up and production of "as used" samples of the respondent's parts is dismissed, with costs to the respondent.
J.F.C.
Ottawa, Ontario
April 29, 2005
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-238-03
STYLE OF CAUSE: ESCO CORPORATION and
ESCO LIMITED
- and
QUALITY STEEL FOUNDRIES LTD.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: November 22, 2004
REASONS FOR ORDER AND ORDER OF: O EEFE J.
APPEARANCES:
Mr. Bruce Stratton
Mr. Kevin Laroche
FOR DEFENDANT
FOR PLAINTIFFS
Borden Ladner Gervais LLP
Ottawa, Ontario
FOR DEFENDANT