Friday, April 5, 2019

A Stay in Favour of Provincial Superior Courts Will Be Granted Only in the Clearest of Cases

Stelpro Design Inc. v. Thermolec Ltée, 2019 FC 363 St-Louis J

While the Federal Court has exclusive jurisdiction to annul a patent (Federal Courts Act s 20(1)), its jurisdiction in respect of infringement is concurrent with that of the provincial superior courts: s 20(2). In Stelpro, the patentee, Thermolec, brought an action in the Superior Court of Québec, and Stelpro defended there in part on the basis that the patent was invalid. Stelpro then brought an impeachment action before the Federal Court. Stelpro moved to have Quebec action stayed; that motion was refused by the Quebec court: [9]. Thermolec in turn sought to have the Federal Court action stayed by the Federal Court. That motion was also refused by St-Louis J in this decision.

The facts are similar to those in Safilo Canada Inc v Contour Optik Inc 2005 FC 278, in which Safilo brought action for impeachment in the Federal Court a few hours before the patentee, Contour, brought an action in the Superior Court of Québec. (In Safilo it is clear that the patentee was motivated to bring its action in the Quebec courts in part by the prospect of obtaining an interlocutory injunction, which is of course essentially impossible for a patentee to obtain in the Federal Court, and which was granted by the Quebec court. One might speculate that Thermolec’s motivation was the same, as it was also granted an interlocutory injunction in Quebec).

In considering whether to grant a stay, both de Montigny J in Safilo and St-Louis J in the case at hand, referred to the list of relevant factors summarized by by Dubé J. in White v EBF Manufacturing Ltd, 2001 FCT 713:

1. Would the continuation of the action cause prejudice or injustice (not merely inconvenience or extra expense) to the defendant?
2. Would the stay work an injustice to the plaintiff?
3. The onus is on the party which seeks a stay to establish that these two conditions are met.
4. The grant or refusal of the stay is within the discretionary power of the judge.
5. The power to grant a stay may only be exercised sparingly and in the clearest of cases.
6. Are the facts alleged, the legal issues involved and the relief sought similar in both actions?
7. What are the possibilities of inconsistent findings in both Courts?
8. Until there is a risk of imminent adjudication in the two different forums, the Court should be very reluctant to interfere with any litigant's right of access to another jurisdiction.
9. Priority ought not necessarily be given to the first proceeding over the second or, vice versa.

Two important additional factors emerged in Safilo.

First, only the Federal Court can rule on the in rem validity of the patent and dispose of it at a national level, while the Superior Court judgment would only be valid between the parties and in Quebec. This strongly suggests that the FC action should not be stayed. To address this difficulty, the patentee in Safilo, who was seeking to pursue the action in Quebec, gave an undertaking that if the final result in the Quebec litigation was that the patent was invalid as between the parties, the patentee would agree to the striking out of the patent by the Federal Court [33]. (This practice was derived from the copyright case of Apotex v Astrazeneca [2003] 4 FC 826.) A similar undertaking was given in this case. In Safilo de Montigny J indicated that an undertaking “makes moot the distinction between the in rem and in personam nature of the remedies which the Federal Court and Superior Court may grant respectively” [34]; in this case, St-Louis J quoted this statement and remarked “I have no reason to disagree” [45]. The undertaking thus removes one major substantive objection to staying the FC action.

As noted by St-Louis J at [42], a second important consideration emerging from Safilo is the relative state of advancement in the proceedings in each of the courts. In Safilo, de Montigny J granted the stay, essentially on basis that case was further advanced in Quebec and in light of undertaking to expunge given by the patentee [38]. (And see also YKK Zipper v Wahl Bros (1972), 8 CPR(2d) 131, also granting a stay when the proceedings in the Superior Court of Québec were very far advanced when the FC action was initiated.)

In Stelpro, in contrast, St-Louis J refused to stay the Federal Court action. The decisions are straightforwardly distinguishable, because, as St-Louis J emphasized, in Stelpro, unlike in Safilo, the proceedings on the merits were at an early stage in both courts.

St-Louis J concluded that

[48] As per the Safilo Canada guidelines, the power to grant a stay may only be exercised sparingly and in the clearest of cases. As can be shown from the paragraphs above, I have not been convinced that this is “the clearest of cases”, and will thus not grant the stay.

This is despite the undertaking given by Thermolec to agree to consent to the entry of a judgment in the Federal Court that mirrors the Superior Court’s future decision on the validity of the patent [9], and despite the fact that a stay had been refused by the Superior Court of Québec, giving rise to a real prospect of duplicative litigation and conflicting outcomes.

This illustrates that the principle that a stay will granted only in the rarest of cases is an important one. Per the 8th point from White v EBF, “the Court should be very reluctant to interfere with any litigant's right of access to another jurisdiction.” While I acknowledge the force of that principle, and St-Louis J’s decision in this case does appear to be consistent with the prior caselaw, I must say that the result does not seem entirely satisfactory.

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