A-366-80
Meriah Surf Products Limited, Robert M. Lorri-
man and James G. Lorriman (Appellants)
(Defendants)
v.
Windsurfing International, Inc. and Windsurfing
Sailboards Inc. (Respondents) (Plaintiffs)
Court of Appeal, Heald and Urie JJ. and MacKay
D.J.—Toronto, October 29 and 31, 1980.
Patents — Practice — Appeal from order of Trial Division
that defendants (plaintiffs by counterclaim) deposit security
for costs — Action re infringement of a patent — In their
defence, appellants deny infringement and allege invalidity —
Pursuant to s. 62 of Patent Act, appellants by counterclaim
seek declaration of invalidity — Whether plaintiffs by coun
terclaim to be considered as plaintiffs in an action for
impeachment and liable to security or whether merely defend
ants in an action for infringement and not liable to security —
Patent Act, R.S.C. 1970, c. P-4, s. 62 — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 46(1) — Federal Court Rule
700(3).
Appeal from an order of the Trial Division that the defend
ants (plaintiffs by counterclaim) deposit $2,000 into Court as
security for the costs of the plaintiffs (defendants by counter
claim). This case deals with an action for infringement of a
patent. The appellants, in their defence, deny infringement and
allege invalidity of the patent. Pursuant to section 62 of the
Patent Act, the appellants by way of counterclaim ask for a
declaration of invalidity of the said patent. The question is
whether the defendants, as plaintiffs by counterclaim, should be
considered as plaintiffs in an action for impeachment and be
required to provide security (as the Trial Judge held) or
whether they were merely defendants in an action for infringe
ment of a patent and entitled to obtain a declaration without
furnishing security.
Held, the appeal is allowed. To interpret section 62(3) of the
Act in the manner it was interpreted by the Trial Judge would
mean that the exception to the general rule set out therein i.e.
the exception regarding "a defendant in any action for the
infringement of a patent" would only apply to defendants in an
infringement action where there was no counterclaim. Since the
counterclaim is in the same category as a separate action and is
commenced under section 62, if the expression above quoted
does not include defendants in the position of defendants
herein, then there is no one to whom it might apply. Moreover,
since in practice the infringement action and the counterclaim
are invariably tried together, the increased costs occasioned by
the counterclaim are likely to be minimal.
Also, per Urie J.: The defendants are and continue to be
defendants in an action for infringement. It would be unreason
able to interpret section 62 in such a way that they lose their
right not to furnish security because they choose to enlarge the
ambit of the declaration of invalidity.
Per MacKay D.J. dissenting: If a defendant in an action for
infringement elects to bring a counterclaim for a declaration
that the patent is void, then in respect of the counterclaim, he is
the plaintiff and may be required to give security.
Wic Inc. v. La Machinerie Idéale Cie Ltée [1980] 2 F.C.
241, disagreed with. General Foods, Ltd. v. Struthers
Scientific and International Corp. [1974] S.C.R. 98,
followed.
APPEAL.
COUNSEL:
Ronald E. Dimock for appellants (defend-
ants).
Robert MacFarlane for respondents (plain-
tiffs).
SOLICITORS:
Donald F. Sim, Q.C., Toronto, for appellants
(defendants).
Fitzsimmons MacFarlane & Johnson,
Toronto, for respondents (plaintiffs).
The following are the reasons for judgment
rendered in English by
HEALD J.: This is an appeal from that portion of
an order of the Trial Division dated May 20, 1980
[page 165 supra] wherein it was ordered that the
defendants (plaintiffs by counterclaim) deposit the
sum of $2,000 into Court as security for the costs
of the plaintiffs (defendants by counterclaim) and
that the plaintiffs (defendants by counterclaim)
have their costs in any event of the cause.
This is an action for infringement of a patent
concerning the manufacture and sale of a sail
board. The respondents (plaintiffs) seek in the
action, inter alia, an injunction, delivery up, and
damages and profits from the appellants (defend-
ants). The appellants, in their statement of
defence, deny infringement and allege invalidity of
the patent in suit. Pursuant to section 62 of the
Patent Act, R.S.C. 1970, c. P-4,' the appellants by
way of counterclaim ask for a declaration of inva
lidity of the patent in suit.
The learned Trial Judge concluded that, in these
circumstances, he was empowered to order that
the appellants (the plaintiffs by counterclaim) post
security for the costs of the respondents (the
defendants by counterclaim). In reaching this con
clusion, the learned Trial Judge stated that he was
following a Trial Division judgment of Walsh J. in
the case of Wic Inc. v. La Machinerie Idéale Cie
Ltée 2 , a case having factual circumstances similar
to those in the case at bar. In that case the motion
for security for costs was made pursuant to Rule
700(3) 3 . In concluding that the Court had the
power to order security for costs Walsh J. stated
[at pages 242-243]:
' Said section 62 reads as follows:
62. (1) A patent or any claim in a patent may be declared
invalid or void by the Federal Court at the instance of the
Attorney General of Canada or at the instance of any
interested person.
(2) Where any person has reasonable cause to believe that
any process used or proposed to be used or any article made,
used or sold or proposed to be made, used or sold by him
might be alleged by any patentee to constitute an infringe
ment of an exclusive property or privilege granted thereby,
he may bring an action in the Federal Court against the
patentee for a declaration that such process or article does
not or would not constitute an infringement of such exclusive
property or privilege.
(3) With the exception of the Attorney General of Canada
or the attorney general of a province of Canada, the plaintiff
in any action under this section shall, before proceeding
therein, give security for the costs of the patentee in such
sum as the Court may direct, but a defendant in any action
for the infringement of a patent is entitled to obtain a
declaration under this section without being required to
furnish any security.
2 [1980] 2 F.C. 241.
3 Rule 700(3) reads as follows:
Rule 700... .
(3) In an action to impeach a patent of invention, the
Court may at any time, in its discretion, order that the
plaintiff, unless he is one of Her Majesty's attorney generals
or a deputy thereof, give security for costs before taking any
further step.
In opposing the application plaintiffs rely on section 62(1) and
(3) of the Patent Act, R.S.C. 1970, c. P-4 as amended by S.C.
1970-71-72, c. 1, s. 64(2), which reads as follows:
62. (1) A patent or any claim in a patent may be declared
invalid or void by the Federal Court at the instance of the
Attorney General of Canada or at the instance of any
interested person.
(3) With the exception of the Attorney General of Canada
or the attorney general of a province of Canada, the plaintiff
in any action under this section shall, before proceeding
therein, give security for the costs of the patentee in such
sum as the Court may direct, but a defendant in any action
for the infringement of a patent is entitled to obtain a
declaration under this section without being required to
furnish any security.
Plaintiff contends that a cross-demand is similar to a separate
action referring to Rule 1718(1) which reads:
Rule 1718. (1) A counterclaim or cross-demand may be
proceeded with notwithstanding that judgment is given for
the plaintiff in the action or that the action is stayed,
discontinued or dismissed.
It is necessary to read Rule 700(3) in the light of section
62(3) of the Patent Act. If the plaintiff in the cross-demand is
considered as a plaintiff in an action for impeachment of a
patent, security is required under the provisions of section
62(3), but if the said cross-plaintiffs were merely defendants in
actions for infringement of a patent and if section 62(3) is read
by itself, then as such defendants they are entitled to obtain a
declaration without being required to furnish any security.
Plaintiff contends however that this is only applicable if they
seek to have the patent they are accused of infringing
impeached in their defence in which case the judgment would
only take effect between the parties, but that it does not apply
if by cross-demand they seek as plaintiffs to impeach the patent
and therefore to have it declared invalid with respect to the
whole world.
Reading this section of the Patent Act in the light of Rule
700(3) of this Court it would appear that cross-plaintiffs can be
required to give security in the present proceedings in the same
manner as if they had taken a separate action.
It is to be noted in the above quoted passage
that Mr. Justice Walsh was of the view that it was
necessary to read subsection 62(3) of the Patent
Act in the light of Rule 700(3). If by this state
ment, Mr. Justice Walsh was saying that the plain
and unequivocal words used in subsection (3) of
section 62 are to be modified or qualified in some
way by Rule 700(3), then I must respectfully
disagree with that view. Subsection 46(1) of the
Federal Court Act, R.S.C. 1970 (2nd Supp.), c.
10, provides:
46. (1) Subject to the approval of the Governor in Council
and subject also to subsection (4), the judges of the Court may,
from time to time, make general rules and orders not inconsist
ent with this or any other Act of the Parliament of Canada.
[Emphasis added.]
It is accordingly clear that in case of any con
flict between a statutory provision and a provision
in the Rules of this Court, the statutory provision
is undoubtedly paramount. In the above quoted
passage by Mr. Justice Walsh, I note that he
stated "... if section 62(3) is read by itself, then as
such defendants they are entitled to obtain a decla
ration without being required to furnish any
security ...." I would agree with that interpreta
tion of subsection 62(3). In my view, subsection
(3) requires, as a general rule, that in an action
under section 62 for impeachment of a patent, the
Court has the power to order the plaintiff to
provide security for the costs of the patentee.
There is however, an exception to that general rule
i.e. in cases where a defendant "in any action for
the infringement of a patent" is entitled to a
declaration under section 62 of invalidity, he is not
required to furnish security. In my view these
defendants are clearly in that position. They are
defendants in the infringement action but they are
also plaintiffs in the section 62 action for impeach
ment. A similar view as to the meaning to be
ascribed to subsection 62(3) was expressed by
Pigeon J. in the case of General Foods, Ltd. v.
Struthers Scientific and International Cor
poration 4 . In that case the plaintiff instituted
impeachment actions in the Exchequer Court
while the defendant commenced a series of
infringement actions in the Superior Court of the
Province of Quebec. At page 108, Mr. Justice
Pigeon expressed the following view: "I fail to see
why, under s. 62.3, the right of having a patent
declared void without giving security for costs
would be available to a defendant if sued for
infringement in the Federal Court, not if sued in a
provincial court. Of course 'a declaration under
this section' means a declaration by the Exchequer
Court, now the Federal Court. But 'a defendant in
any action for the infringement of a patent'
4 [1974] S.C.R. 98.
includes a defendant in such an action before any
court, unless some limitation is implied. I am
unable to perceive any reason for so doing, the rule
of construction being not to introduce a distinction
that is not spelled out, except for a good reason."
It is therefore my opinion that the learned Trial
Judge was in error in concluding that, in the
circumstances of this case, and in so far as these
defendants are concerned, he had jurisdiction to
order security for costs. To interpret subsection
62(3) in the manner it was interpreted by the
learned Trial Judge in this case and by Mr. Justice
Walsh in the Wic Inc. case (supra) would mean
that the exception to the general rule set out in
subsection 62(3) would only apply to defendants in
an infringement action where there was no coun
terclaim or cross-demand. Since the counterclaim
is in the same category as a separate action and is
commenced under section 62, if the expression "a
defendant in any action for the infringement of a
patent is entitled to obtain a declaration under this
section ..." does not include defendants in the
position of these defendants, I am not able to think
of anyone to whom it might apply. To interpret the
section in this manner is, in my view, to render
those words of subsection 62(3) meaningless and
nugatory.
In my view, what Parliament was seeking to do
in subsection 62(3) was to provide as a general
rule, that plaintiffs attacking the validity of a
patent, are to be subjected to the Court's discre
tion to order security for the patentee's costs,
possibly as a curb on and a protection against
frivolous and unfounded attacks on a patent's
validity. However, in cases where the patentee
initiates action against a defendant alleging patent
infringement, the rationale for security for costs
against that defendant when he counterclaims is
not the same. The defendant alleges invalidity in
his statement of defence. He also alleges invalidity
in his counterclaim. While the impact of a declara
tion of invalidity in the infringement action is
much less than a similar declaration in the
impeachment action (since in the former case the
matter is inter partes whilst in the latter case it is
in rem), the issues are the same, the facts relied on
by both parties will be the same and the increased
costs occasioned by the counterclaim are likely to
be minimal since in practice the infringement
action and the counterclaim are invariably tried
together. This is in my opinion a perfectly valid
reason for taking a different view with respect to
costs in such circumstances. In my view of the
matter such circumstances provide a reasonable
rationale for this portion of subsection 62(3).
For these reasons I would allow the appeal with
costs both here and in the Trial Division.
* * *
The following are the reasons for judgment
rendered in English by
URIE J.: I have had the advantage of reading
the reasons for judgment of my brother Heald and
I am in full agreement therewith. However, I wish
to add some further observations which I think are
pertinent.
I am of the opinion that the basic rule of
statutory interpretation that the language of a
statute is presumed to be used in its primary and
ordinary sense unless the context otherwise
requires, or such an interpretation would lead to
an absurd result, can and should be applied in the
interpretation of section 62 of the Patent Act. A
plain reading of the section discloses that three
types of situations are contemplated thereunder:
(a) under subsection (1), an action to impeach a
patent or a claim in a patent;
(b) under subsection (2), an action for a decla
ration brought by a person who reasonably fears
that any process used or proposed to be used by
him, or any article made, used or sold by him
might become the subject of a claim of infringe
ment by a patentee; and
(c) under subsection (3), a defendant in an
infringement action already brought may seek
the same kind of declaration as that sought by a
plaintiff bringing an action under subsection
(2).
In the latter type of situation, subsection (3)
makes it clear that a defendant seeking a declara
tion of non-infringement may do so without the
stricture imposed on a plaintiff seeking such a
declaration, namely, that "before proceeding" with
the action he must give security for costs to the
extent directed by the Court.
Such a defendant has a further advantage plain
ly accorded him, as I see it. The remedy which
may be granted to him by virtue of subsection (2)
if he is successful in his claim of non-infringement,
is a declaration thereof which is good only between
himself and the patentee. If he wishes an in rem
declaration of invalidity which is good as well, as
between the patentee and all others, he may coun
terclaim against the plaintiff patentee for such a
declaration, and in my opinion, he may do so
without being required to give security for costs. I
reach this conclusion because of the fact that he is
and continues to be a defendant in an action for
infringement, notwithstanding the fact that he is
also a plaintiff by counterclaim and that a counter
claim is, in law, a separate action. Giving to the
words of the exception from the requirement to
give security for costs provided in subsection (3)
their plain and ordinary meaning, he, as "a
defendant in any action for the infringement of a
patent is entitled to obtain a declaration under this
section [section 62] without being required to fur
nish any security." He cannot, in my opinion, lose
that right because of the fact that he is also a
plaintiff by counterclaim.
To give the words of subsection (3) just quoted
any other construction would not accord with what
I perceive to be the obvious intent of subsections
(2) and (3) of the Act which is to require security
for costs only when the validity of a patent is
challenged in an action brought against the paten-
tee. At least some of the reasons for requiring
security to be posted in such cases have been given
by Heald J. Where the attacker is already a
defendant in any action for infringement he is, of
course, not required to furnish security. It would
not be reasonable to interpret section 62 in such a
way that he loses that right because he chooses to
enlarge the ambit of the declaration of invalidity
he obtains if he successfully prosecutes his coun-
terclaim particularly when it is likely that all of
the facts and evidence upon which he will rely will
have been adduced during his defence in the
infringement action. In my view, to hold otherwise
would lead to an unreasonable or absurd result not
in accord with the plain and ordinary meaning of
the words in the statute.
For the reasons given by Mr. Justice Heald, I do
not think that this conclusion is in any way affect
ed by the existence of Rule 700(3).
Accordingly, I would allow the appeal and dis
pose of the matter in the manner proposed by him.
* * *
The following are the reasons for judgment
rendered in English by
MACKAY D.J. (dissenting): With respect I have
come to a different conclusion from that of my
brothers Heald and Urie in this case. I think the
effect of the provision of section 62, subsection (3)
of the Patent Act is this.
In an action for infringement of a patent, the
defendants, as they did in this case, may plead (1)
that they have not infringed the patent and (2)
that the patent is invalid. In such case by reason of
the provisions of section 62, subsection (3) the
defendant is not required to give security for the
costs in that action. If however, as was done in this
case, the defendants elect to bring a counterclaim
for a declaration that the patent is void in such
case in respect of the counterclaim they are the
plaintiffs and may be required to give security for
the costs in respect of the counterclaim.
As has been said by my brother Heald, the facts
in respect of both the main action and the counter
claim being the same the costs in respect of the
counterclaim would be minimal and I would not
have fixed the security in the sum of $2,000 but as
the amount of the security was in the discretion of
the Trial Judge it should not be varied by this
Court.
I would dismiss the appeal with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.