Date: 19980203
Docket: T-2502-93
BETWEEN:
G.D. HANNA INCORPORATED (HANNA DESIGN)
Plaintiff
- and -
L.S. DISPLAY SYSTEMS INC.
Defendant
REASONS FOR JUDGMENT
REED, J.:
[1] This is a summary judgment application seeking an order that claims 1 through 16 and claims 18 and 20 of Patent No. 1,152,744 (the "3744 patent") are valid and have been infringed by the defendant. A permanent injunction is sought restraining any further infringement of the patent by the defendant; an order requiring the destruction or delivery up of any remaining infringing product is sought; as is an order requiring the defendant to pay to the plaintiff its profit from the sale of the infringing products. Pre-judgment and post-judgment interest is also sought and the costs of the motion and the action.
[2] In support of the motion for summary judgment the plaintiff filed two affidavits: (1) an expert witness affidavit, by Ronald Hanna, Operations Manager of Hanna Design, sworn October 22, 1997; an affidavit of Klaus Luddemann, President of Hanna Design, sworn October 22, 1997. The defendant filed the affidavit of L.S. Shalit, sworn December 4, 1997. None of the deponents were cross-examined on their affidavits.
[3] The 3744 patent was issued to Gary D. Hanna on August 30, 1983. By confirmatory assignment signed on October 18, 1993, and effective September 1, 1983, Gary D. Hanna transferred all right, title and interest in the Hanna Patent to G.D. Hanna Incorporated. The patent relates to panel display systems used by exhibitors, for example, at trade shows.
[4] The summary of the invention set out in the patent reads:
| ... there is provided in accordance with the present invention a display panel which is formed from a substantially rigid sheet which has a peripheral channel around its outer edge. The peripheral channel is lined with a compressible or frictional material. |
| In an alternative embodiment this panel may be hinged along one or more dimensions to provide an articulated panel. |
| Junction between any two of these panels is accomplished by very simple connectors which have specific configuration. |
| These connectors each have rounded ends which permit penetration of the slots; a length which permits engagement of the slots through their depth; and a thickness which permits them to be grasped by or compress the adjacent slot walls. |
| These connectors take different specific configurations; however, they all have in common the features mentioned previously. |
| As will be seen from the drawings and description, the particular embodiments of the panels and connectors may be manufactured from relatively cheap materials and with minimum capital outlay and simplicity of manufacture. It will also be apparent that the embodiments described are illustrative and other alternatives will be apparent to those skilled in the art. |
[5] Claims 1, 9 and 16 are independent claims. They are set out in Mr. Hanna's affidavit in a manner that identifies the individual elements of each claim with explanatory comments added. The explanatory comments are shown in parenthesis. I repeat that description below.
[6] The invention claimed by claim 1 is:
| A panel for use in display structures which comprises: |
| a substantially rigid panel member having at least one edge, |
| said edge defining a connecting slot therein; |
| said slot being of predetermined depth, being narrower than the thickness of a connecting member insertable therein and having opposed side walls adapted to grasp adjacent surfaces of said connecting member inserted therebetween. |
[7] Claim 9 reads:
| A panel for use in display structures which comprises: |
| a first sheet member having a plurality of peripheral edges and an outer and an inner surface; [such as a corrugated cardboard sheet] |
| a second sheet member having a plurality of peripheral edges, and an outer and an inner surface; [such as another corrugated cardboard sheet] |
| a first sheet of facing material mounted on said first sheet member to cover said outer surface and overlap said peripheral edges thereof and secured to said inner surface; [the facing material may be a lined fabric, is larger than the sheet, and is glued to the outside surface of the first cardboard sheet, wraps around the sheet edges and the fabric overlap is glued to the inner surface of the sheet] |
| a second sheet of facing material mounted on said second sheet member to cover said outer surface thereof and overlap said peripheral edges thereof and secured to said inner surface; [the facing material may be a lined fabric, is larger than the sheet, and is glued to the outside surface of the second cardboard sheet, wraps around the sheet edges and the fabric overlap is glued to the inner surface of the sheet] |
| said first and second sheet members being secured to one another to define a peripheral slot of predetermined depth along at least one of said edges thereof; [the inside surfaces of the two cardboard sheets are glued together except for a predetermined portion along at least one outer edge thereby defining a slot or channel] |
| said slot being narrower than the thickness of a connecting member insertable therein and being defined by said inner surfaces having opposed side walls adapted to grasp adjacent surfaces of said connecting member. [the slot defined by the inner surfaces of the fabric covered sheets is narrower than the thickness of the connecting members insertable in the slot] |
[8] Claim 16 defines the connector used to join a pair of adjacent panels having opposed peripheral or outer slots of predetermined depth and width. It reads:
| A connector for use in the junction of a pair of adjacent panel elements each having opposed peripheral slots of a predetermined depth and width, said width being variable from a first closed position to a second open position; |
| said connector comprising |
| a first end section, [one end of the connector pushed into the slot of one panel] |
| a second end section, [the other end of the connector is pushed into the slot of the other panel] |
| and an intermediate section connecting said end sections, [the intermediate portion serves to connect the two ends] |
| said end sections having rounded outer edges to permit penetration of said opposed slots on said panel members, [the end sections are rounded] |
| and having a thickness greater than the width of said opposed slots to urge contiguous areas of said slots from said closed to said open position whereby said connector is grasped in said slots. [the connector is thicker than the width of the panel slots thereby forcing apart fabric covered sheets in the slot area resulting in the securing of the connector and joinder of the panels] |
[9] Sometime in 1992, the plaintiff became aware that the defendant was selling display panel systems, under the name "Fold-a-Wall". The plaintiff purchased one of these and concluded that the defendant was infringing the 3744 patent. A letter, dated January 20, 1993, was sent to the defendant informing the defendant of this conclusion. The defendant's solicitor replied by letter dated March 5, 1993, giving an undertaking, on his client's behalf, that it would not in future manufacture, offer for sale, promote or sell in Canada display panels that infringed any of the claims of the 3744 patent. The letter stated "[t]his undertaking is being offered by our client without any admission of liability on their part, but simply as a means to buy their peace".
[10] In April 1993, the plaintiff learned that panels were being sold in the United States that had originated from the defendant. It purchased one of these panel systems through a third party, Jay's Mailing Service. A statement of claim was filed on October 22, 1993. A statement of defence was filed on November 29, 1993. On March 17, 1994, the plaintiff filed a motion for an interim and interlocutory injunction. This was heard by Mr. Justice Rothstein on March 28, 1994, and a provisional order was issued. The defendant had not appeared to respond to the motion seeking an interlocutory injunction against it. The defendant is a "one-man" company, Mr. Shalit being its principal, and it is located in Montreal. There are several statements by Mr. Shalit, in the material filed, asserting that the defendant could not afford legal representation to contest the action being brought against it.
[11] On March 28, 1994, Mr. Justice Rothstein ordered that the plaintiff's motion would be granted, an interlocutory injunction would issue and the defendant would be required to provide, forthwith, an interim accounting of the sales it had made of the display panels, unless the defendant indicated, before April 1, 1994, that it wished to appear and make representations as to why such an order should not issue. Counsel for the defendant indicated to counsel for the plaintiff that the defendant did not intend to make representations with respect to the order sought. A supplementary order confirming the March 28, 1994 order granting an injunction and requiring an accounting was entered on May 5, 1994.
[12] As of June 10, 1994, the defendant had not provided the interim accounting of sales required by the May 5, 1994 order. The plaintiff therefore filed a motion for an order requiring the defendant to show cause why it should not be found in contempt of Court for not doing so. Mr. Shalit filed an affidavit on July 26, 1994, listing, in handwritten form, the sales in question. This listing showed revenues of $70,563.50 from the sales. This listing also showed sales in April 1994. The sales in April 1994 were after Mr. Justice Rothstein's order of March 28, 1994. This led the plaintiff to file, on August 26, 1994, a motion for an order requiring the defendant to show cause why it should not be found in contempt of the orders of March 28, 1994 and May 5, 1994.
[13] A show cause order was issued and a hearing was finally held on December 6, 1994. In response to the show cause order, Mr. Shalit filed an affidavit on October 11, 1994, stating that he had not infringed the March 28 and May 5 Court orders, that in April he had simply been filling purchase orders that had been placed with the defendant before the injunction was granted. He stated that the defendant lacked funds and that he had had a heart attack. On February 10, 1995, the Associate Chief Justice fined the defendant $1,000 and $2,000 costs for a technical contempt of the order of the Court. An appeal of that order was filed on January 27, 1995. This was eventually dismissed by the Federal Court of Appeal for want of prosecution.
[14] On June 15, 1995, the plaintiff brought a motion to have the defendant's statement of defence struck out or to require the defendant to provide an affidavit of documents and to require Mr. Shalit to re-attend in Toronto, at his own expense, to answer questions that remained outstanding from his examination for discovery, which had taken place on November 8, 1994. Neither the defendant nor counsel on its behalf appeared to respond to this motion. The order that was sought was granted and costs were awarded on a solicitor/client basis.
[15] On June 12, 1997, the plaintiff filed the motion for summary judgment that is the subject of the present hearing. On September 3, 1997, Mr. Justice Hugessen issued a scheduling order.
[16] I turn then to the judgment sought by the plaintiff. The jurisprudence with respect to the applicable test for granting summary judgment is found in Collie Woollen Mills Ltd. v. The Queen, 96 D.T.C. 6146 (F.C.T.D.); Feoso Oil Ltd. v. "Sarla" (The), [1995] 3 F.C. 68 (C.A.); Wall v. Brunell, [1997] F.C.J. No. 608 (F.C.T.D.), and Granville Shipping Co. v. Pegasus Lines Ltd.(1994), F.T.R. 77.
[17] With respect to the request for a declaration of validity, the validity of the patent was not really put in issue in this lawsuit. The granting of a patent carries with it a presumption of validity, refer section 43 of the Patent Act, R.S.C. 1985, c. P-4. A declaration of validity is not necessary to dispose of this litigation and in any event, if one were granted, it would only operate against this defendant.
[18] With respect to the issue of infringement, the evidence of Mr. Hanna and Mr. Luddemann establish the following facts. The defendant's display panels that are the subject of this litigation were constructed of individual sheets of stiff triple corrugated cardboard panel members having a slot all around their outer edges. Fabric was laid over the outside surfaces of the corrugated panels and affixed by glue. The fabric was wrapped around the outer edges of the cardboard panels and tucked into the slot. Three or four plastic tabs are inserted into the slotted areas to connect a header on top of a base or a base on top of another base. The defendant made and delivered header units identified as FAW/H and base units identified as FAW/B. All of the display panel units had creases or folds in them.
[19] Following the language of the claims, the defendant's product is a panel for use in display structures that is comprised of a substantially rigid panel member having several edges. The display panel is comprised of one flat triple corrugated cardboard sheet. The triple corrugated cardboard sheet used in the defendant's product is comprised of two sheets of corrugated cardboard joined by an intermediate layer of corrugation. The cardboard sheet is centrally cut along the outer edges to form a " to 1 inch deep slot or channel around its outside edge. Cushion lined fabric is laid over the outside surfaces of the cardboard sheet and is affixed with glue to the outer sheet surfaces. The lined fabric is wrapped around the edges of the cardboard sheet and is tucked into the slot. The result is a slot having walls of cushion lined fabric; the cushioned lining allows compression of the fabric. The narrower width of the slot in comparison to the connector tab width and the presence of the cushioned lined fabric in the slot results in the grasping of the connector tabs by compression and friction. The defendant's panels are also articulated or hinged by folds provided by crushing the corrugations along straight lines and at appropriate positions. The defendant's base and header units have two hinged areas.
[20] The defendant's product uses three or more flat, solid plastic tabs. These have rounded end sections and a middle or intermediate section. The first end of the connector is inserted into the slot of one panel leaving about half of the tab exposed. A second panel with a slot is placed over the exposed connector end thereby connecting the two panels together either one on top of the other or side by side.
[21] The defendant's products have all the key aspects of independent claims 1, 9, and 16 of the 3744 patent. There is no doubt that the defendant's product infringed that patent.
[22] The revenue earned by the defendant from the sale of the panels from December 1992 to April 1994 totals $70,563.50.
[23] That leaves for consideration the amount that should be awarded to the plaintiff as profits made by the defendant from its sale of the display panel systems. Counsel for the plaintiff argues, firstly, that the sum of $70,563.50 should be awarded to the plaintiff in the absence of the defendant proving the costs that it incurred to earn that revenue: see Teledyne Industries Inc. v. Lido Industrial Products Ltd. (1982), 68 C.P.R. (2d) 204 at 209 (F.C.T.D.). He argues, secondly, that there is some cost data available from the cross-examination of Mr. Shalit and if one extrapolates from it, a reasonable cost assessment would be in the order of $35,000. The questions asked on cross-examination relate mainly to the cost of materials. They do not support the cost estimate counsel for the plaintiff suggests.
[24] Mr. Shalit in his affidavit of December 4, 1997 stated that his proximate gross profit from sales of the panels was in the area of $18,000. Counsel for the plaintiff argues that that assessment is too vague and is not sufficiently supported by detailed evidence to be accepted by the Court. I do not agree. The plaintiff did not cross-examine Mr. Shalit on that affidavit. The plaintiff did not seek more detailed information. While the figure is an estimate by the defendant, it is a reasonable one.
[25] The defendant sought leave to file, through his counsel at the hearing, an amended affidavit. This was outside the schedule provided for by Mr. Justice Hugessen for filing affidavit evidence. Counsel for the plaintiff objected to its acceptance. I allowed it to be filed and offered counsel for the plaintiff an opportunity to request additional time to cross-examine on it or take whatever responsive measures he deemed necessary. Counsel did not seek any such additional time.
[26] While I allowed the affidavit to be filed, I did not find its contents useful. In it Mr. Shalit states that while his proximate gross profit was in the area of $18,000, his net profit was $9,300. The affidavit does not describe, however, what expenses the defendant deducts to compute net profit that are not deducted in computing gross profit. The affidavit seems to indicate that the difference consists of expenses relating to the cost of materials, production and overhead expenses. This is not my understanding of the difference between the two concepts.
[27] While there is a difference between the parties as to the appropriate profit figure, neither wants that issue to be the subject of further litigation. Both want an end to this dispute. There is sufficient evidence on the file to allow me to make a decision. I accept the profit figure of $18,000 for the purposes of determining what should be paid by the defendant to the plaintiff.
[28] I turn then to the question of interest. There is no reason why post-judgment interest should not apply. With respect to pre-judgment interest, the question is for what period of time, if any, should the defendant be required to pay interest. The defendant argues: the plaintiff, largely, had control of the pace of this litigation; the plaintiff knew in the spring of 1994 that the defendant did not intend to seriously contest the action; it knew, by July 1994, the amount of gross revenue the defendant had earned from the sales of the panels.
[29] The failure to have the dispute resolved more quickly was not, however, the plaintiff's fault alone. A review of the Court file leads one to conclude that the defendant's tactic was what I will call "a head in the sand" approach: if the litigation was ignored, it would simply go away, particularly, since an interlocutory injunction was in place. While the plaintiff may have been able to move the proceedings ahead more quickly, the defendant, at an early date, could also have put an end to the litigation by filing a consent to judgment, putting in issue only the accounting of profits. Pre-judgment interest will therefore be awarded for the whole of the relevant period of time.
[30] Costs will be assessed after argument has been heard thereon.
Judge
OTTAWA, ONTARIO
February 3, 1998