T-1311-84
Dyckerhoff & Widmann Aktiengesellschaft and
Dywidag Systems International, Canada Ltd.
(Plaintiffs)
v.
Advanced Construction Enterprises, Inc., ACE-
Stronghold and Horst K. Aschenbroich (Defen-
dants)
Trial Division, Walsh J.—Toronto, November 15;
Ottawa, November 28, 1985.
Patents — Infringement — Motion for interlocutory injunc
tion restraining patent infringement — Contributing infringe
ment — Defendants selling components to be used in method
indicated in patents — Advising purchasers in use of methods
— Where defendants inducing infringement, not necessary for
supplier to have personal contact with infringing consumers —
Motion allowed — Patent Act, R.S.C. 1970, c. P-4, ss. 36, 47.
Patents — Infringement — Motion for interlocutory injunc
tion restraining patent infringement — Balance of convenience
— Both parties facing serious losses — Plaintiff undertaking
to post $1,000,000 bond if interlocutory injunction granted —
Doubtful whether judgment against defendants collectable —
Balance of convenience and irreparable harm not same thing
— When Court satisfied plaintiff could not collect damages,
even though theoretically damages adequate compensation,
harm irreparable.
Held, an interlocutory injunction should be granted.
The defendants contend that the mere selling of components
to be used in the method indicated in the patent is not an
infringement, as they themselves do not carry out the method.
They submit that the users would be the infringers. The
defendants advised prospective purchasers in the use of meth
ods which the plaintiffs allege are in infringement of its meth
ods patents. The plaintiffs contend that this is contributing
infringement. In Procter & Gamble Co. v. Bristol-Myers
Canada Ltd. (1978), 39 C.P.R. (2d) 145 (F.C.T.D.), it was
held that where the defendant has induced an infringement, it
is not necessary for the supplier to have had any personal
contact with the infringing consumer.
On the issue of balance of convenience, both parties face
possible serious losses. The defendant, ACE, alleges that it could
suffer damages in excess of $900,000 per year. The plaintiffs
have undertaken to post a bond of $1,000,000 if an interlocuto
ry injunction is granted. The defendants have made no similar
offer and it appears unlikely that any judgment rendered
against them could be collected. Balance of convenience and
irreparable harm are not the same thing. Addy J. in Bulman
(The) Group Ltd. v. Alpha One-Write Systems B.C. Ltd. et al.
(1980), 54 C.P.R. (2d) 171 (F.C.T.D.) stated that where,
theoretically, damages would furnish adequate compensation
but in the circumstances of the case, the Court is satisfied that
the plaintiff would be unable to collect, the harm will prove to
be irreparable. However, in Apple Corps Ltd. v. Lingasong
Ltd., [1977] F.S.R. 345 (Ch.D.), Sir Robert Megarry rejected
the conclusion that whenever affluent plaintiffs claim an inter
locutory injunction against defendants with slender resources,
the balance of convenience points toward granting the injunc
tion. He did accept that there are circumstances in which the
means of the defendant will be relevant in considering whether
to grant an injunction.
Small fly-by-night companies are increasingly seeking to
infringe with impunity the intellectual property rights of others,
and when these activities are restrained by injunction they
simply go out of business. The possibility of collecting a judg
ment for damages is a serious consideration and the Court
ought not to be overly sympathetic towards the impecunious
defendant allegedly infringing the intellectual property rights of
a prosperous owner.
Each case must depend on its own facts. It is appropriate to
consider that a substantial judgment would be uncollectable by
the plaintiffs and that the plaintiffs have undertaken to post a
bond so that the defendants will be able to collect any damages
which they might be awarded.
The defendants relied on Cutter Ltd. v. Baxter Travenol
Laboratories of Canada, Ltd. et al. (1980), 47 C.P.R. (2d) 53
(F.C.A.) for the proposition that courts are reluctant to grant
interlocutory injunctions in patent infringement cases. That
practice is based on the proviso that the defendant be able to
pay such damages as may be awarded.
CASES JUDICIALLY CONSIDERED
APPLIED:
Procter & Gamble Co. v. Bristol-Myers Canada Ltd.
(1978), 39 C.P.R. (2d) 145 (F.C.T.D.); Bulman (The)
Group Ltd. v. Alpha One-Write Systems B.C. Ltd. et al.
(1980), 54 C.P.R. (2d) 171 (F.C.T.D.); ici Americas Inc.
v. Ireco Canada Inc., judgment dated October 23, 1985,
Federal Court, Trial Division, T-2560-84, not yet
reported.
DISTINGUISHED:
Cutter Ltd. v. Baxter Travenol Laboratories of Canada,
Ltd. et al. (1980), 47 C.P.R. (2d) 53 (F.C.A.).
CONSIDERED:
Apple Corps Ltd. v. Lingasong Ltd., [1977] F.S.R. 345
(Ch.D.); The Boot Tree Limited v. Robinson, [1984]
F.S.R. 545 (Ch.D.); Procter & Gamble Company v.
Nabisco Brands Ltd., [1984] 2 F.C. 475; 82 C.P.R. (2d)
224 (T.D.); American Cyanamid Co. v. Ethicon Ltd.,
[1975] A.C. 396 (H.L.).
REFERRED TO:
Saunders et al. v. Airglide Deflectors Ltd. et al. (1980),
50 C.P.R. (2d) 6 (F.C.T.D.); Slater Steel Industries Ltd.
et al. v. R. Payer Co. Ltd. (1968), 55 C.P.R. 61 (Ex. Ct.).
COUNSEL:
Donald F. Sim, Q.C. and John N. Allport for
plaintiffs.
Serge Anissimoff and Peter F. Kappel for
defendants.
SOLICITORS:
Sim, Hughes, Toronto, for plaintiffs.
MacBeth & Johnson, Toronto, for defen
dants.
EDITOR'S NOTE
The Editor has selected this judgment for its
discussion of the issue of "contributing infringe
ment" and the point that balance of convenience
and irreparable harm are not one and the same
thing. Of particular interest are His Lordship's
comments on the current and wide-spread prob
lem of fly-by-night companies infringing intellectu
al property rights—often with imported merchan-
dise—and then going out of business once an
injunction has been obtained. The facts of the
case are omitted from this report.
This was a motion for an injunction to restrain
patent infringement with respect to a tension rod
used in steel reinforced concrete construction
projects. Also sought was an injunction against
dealing in components or technical information
and know-how relating to methods of producing
prestressed tension anchors in the ground. A
claim with respect to copyright infringement of
drawings had been resolved pursuant to an
undertaking.
The defendants admit offering deformed steel
bar for sale but attack the validity of plaintiffs'
patent on the basis of prior art and non-compli-
ance with section 36 of the Patent Act (R.S.C.
1970, c. P-4]. The defendants counterclaim for
damages, including punitive damages, alleging
false and misleading statements on the part of the
plaintiffs tending to discredit the defendants'
wares or services.
There was an affidavit before the Court to the
effect that the defendants, in bidding on the CPR
Rogers Pass project, had offered to supply ma
terials, technical information and know-how which
would necessarily involve the use of methods
described in claim 1 and produce a pile as
described in claim 4 of plaintiffs' patent. It was
further deposed that the defendants' bids are for
unreasonably low prices, that their German-made
bars are of inferior quality, that the defendant,
Aschenbroich, lacks substantial financial
resources, occupies small premises in an industri
al plaza and has almost no staff. It was suggested
that none of the defendants would be able to
satisfy a judgment for damages. It was said that
the defendants' activities will cause the plaintiffs
serious and irreparable harm, not only due to the
loss of contracts but also from jobs tendered at
low prices to meet this competition.
The following are the reasons for judgment
rendered in English by
WALSH J.: One of the arguments raised by the
defendants is that with respect to the Anchor
patent 1,073,688 which is for a method only and
not in respect of the components thereof or the
anchor itself the mere selling of components to be
used in the method indicated by the patent is not
an infringement, as they themselves do not carry
out the method. They merely supply Allthread bar
(which if it is infringement would be an infringe
ment of patent 886,847) and related parts and are
not contractors engaged in the installation of
armouring rods or related products and do not
carry out the methods claimed in the Anchor
patent. It would be the users therefore who are the
infringers (see Saunders et al. v. Airglide Deflec
tors Ltd. et al. (1980), 50 C.P.R. (2d) 6
(F.C.T.D.), at page 28). See also Procter &
Gamble Co. v. Bristol-Myers Canada Ltd. (1978),
39 C.P.R. (2d) 145 (F.C.T.D.) where Mr. Justice
Addy stated at page 165:
There is no evidence that the defendant itself used its product
in accordance with the methods outlined in the method claims.
On the other hand, it is evident that the members of the public
who used the defendant's product had no licence express or
implied from the plaintiff to do so.
However, it would appear that the defendants
did propose, as appears from paragraphs 26 and 33
of Aschenbroich's first affidavit, to prospective
purchasers and advise them in the use of methods
which the plaintiffs allege are in infringement of
its methods patents. The plaintiffs contend that
this is "contributing infringement" which was
dealt with at length by Jackett P. (as he then was)
in the case of Slater Steel Industries Ltd. et al. v.
R. Payer Co. Ltd. (1968), 55 C.P.R. 61 (Ex. Ct.).
In the Procter & Gamble case (supra), Mr.
Justice Addy states at page 166:
In the case at bar, not only by its instructions and directions
on the packages of Fleecy as to the method of using it but by its
advertising on television, the defendant invites and induces the
public to infringe the method claims of the patent. Witnesses,
in describing the marketing tactics of the soap and clothes-soft
ening industries, qualified the intensive television and other
media advertising as an "education" of the public.
He concludes at page 167:
It is difficult to conceive how the present defendant should
not be considered as systematically engaging for its own profit
in aiding and abetting any infringement by the public of the
plaintiff's method claims and should not be considered as
constituting itself a party to each infringement committed by
such users. Where the defendant has induced or procured an
infringement, I do not feel that it is at all necessary in such
cases for the supplier to have had any personal contact with the
infringing consumer ....
At this stage of the proceedings the plaintiffs'
patents must be considered to be prima facie valid
pursuant to section 47 of the Patent Act. Moreover
a definitive decision should not be made with
respect to allegations of infringement of them by
the activities of the defendants or whether the
defendants' activities do in fact infringe. This may
well require expert evidence at trial. I find however
that the plaintiffs have established a strong prima
facie case and that the defendants have at least an
arguable defence. It was indicated that similar
litigation between the parent companies is taking
place in the United States with respect to United
States patents. It is now therefore necessary to
look at the issue of balance of convenience.
On the issue of balance of convenience there is
no doubt that both parties will suffer very consid
erable losses if on the one hand the defendant is
allowed to continue to compete with the plaintiffs
in infringement of its patents, or on the other hand
if it is prevented from doing so by an interlocutory
injunction, but later succeeds on its defence on the
merits. It may be some time before the matter can
be brought to trial. In the meanwhile the defend
ant Aschenbroich for all practical purposes will be
put out of business if an injunction is granted. This
is frequently the fate of an infringer. Amounts
involved in these construction contracts are very
substantial. Undertakings to compensate the win
ning party for any damages which may eventually
be awarded are meaningless if the party giving
these undertakings is not in a financial position to
give effect to them by paying the amount awarded.
It would appear that the defendant ACE does not
have any assets in Canada other than possibly a
small stock of reinforcing rods in a warehouse in
Vancouver, and that Mr. Aschenbroich as he him
self admits in his affidavit, is of a comparatively
modest means. He states that he has spent over
$150,000 in Market Development on behalf of ACE
since he began to represent them in November
1983 and that ACE has spent the same in the
United States in providing support to him in de
veloping the Canadian market. He states that if
they are removed from the market at this critical
time by the granting of an interlocutory injunction
a third competitor by the name of Williams which
at present only has one contract would become the
principal competitor in Canada of the plaintiffs.
He suggests in what appears to be an exaggerated
forecast that, assuming the potential Canadian
market to be $8,000,000 a year ACE could capture
50% of it, thereby selling $4,000,000 worth and
that if 23% is accepted as a reasonable figure for
margin it could suffer damages in excess of
$900,000 per year, which is an amount for which
the plaintiff could not compensate it. The plaintiffs
have countered this argument however by under
taking to post a bond of $1,000,000 in 20 days
after judgment is rendered if an interlocutory
injunction is granted to compensate the defendants
for any damages which might result from an
injunction being granted in the event that the
defendants eventually succeed in their action on
the merits. The defendants have made no similar
offer, and as already indicated, it appears unlikely
that any judgment rendered against them would be
collected. The defendant Advanced Construction
Enterprises, Inc. may well be a substantial com
pany in the United States but the extent to which
it is prepared to give financial support to the
defendant Aschenbroich in order to sustain the
sale by him of its products in Canada is very
doubtful. In fact there are clear indications to the
contrary. It is a matter of record that the firm of
attorneys representing the defendants in the
present proceedings sought and obtained leave
from the Court to withdraw from the record
because their accounts to the defendants for ser
vices rendered had not been paid nor had they
received instructions with respect to the contesta-
tion of the present motion for interlocutory injunc
tion. The defendant Aschenbroich although ten
dered conduct money failed to appear, allegedly on
advice of American counsel, for the defendant ACE
for an appointment for examination for discovery
on the merits of the proceedings, as a result of
which the defendants' plea was struck. The conse
quences of this have been dealt with in another
motion granted by consent.
The defendants properly point out that balance
of convenience and irreparable harm are not one
and the same thing. However in the case of
Bulman (The) Group Ltd. v. Alpha One-Write
Systems B.C. Ltd. et al. (1980), 54 C.P.R. (2d)
171 (F.C.T.D.), Mr. Justice Addy states, at page
173:
Altogether, apart from the question of balance of conve
nience, I feel that the question of the financial situation of the
defendant might well be considered earlier, at the stage when
the question of irreparable harm is being decided. Harm is
normally considered as irreparable when, by reason of its very
nature, damages could not truly or effectively compensate the
person harmed. But, since it is the harm to the particular
plaintiff which is being considered, even where theoretically
damages could normally furnish adequate compensation, when,
in the particular circumstances of the case, the Court is satis
fied that the plaintiff will never actually receive the damages,
then, in so far as that person is concerned, the harm will in fact
prove to be irreparable although in essence or in theory it is
capable of being repaired.
The defendants point out however that the con
trary view was expressed by Vice-Chancellor Sir
Robert Megarry in the case of Apple Corps Ltd. v.
Lingasong Ltd., [1977] F.S.R. 345 (Ch.D.), where
he states, at page 351:
In argument, something, though not a great deal, was said
about the balance of convenience. There is not much material
on this before me. Mr. Scott's main emphasis was on the defen
dant company being a £100 company with only £2 paid up.
Therefore, he said, the injunction ought to be granted, since the
defendant company would be unlikely to be able to pay dam
ages, whereas the plaintiffs would be good for the money on
their undertaking in damages. This argument seems to me to
lead towards the conclusion that whenever affluent plaintiffs
claim an interlocutory injunction against defendants with slen
der resources, the balance of convenience points towards grant
ing the injunction. I would reject any such conclusion. I accept
that there are circumstances in which the means of the defen
dant will be relevant in considering whether to grant an injunc
tion: but I do not think that the term "balance of convenience"
was ever intended to produce the result that the prosperous
could go far to obtaining interlocutory injunctions against
defendants of modest means merely by pointing to the financial
disparity.
In another case that of The Boot Tree Limited v.
Robinson, [1984] F.S.R. 545 (Ch.D.), at page
552, Mr. Justice Nourse stated:
Then Mr. Nathan submitted that there was no evidence that
the defendant would be in a financial position to pay any
damages which might be recovered at the trial. That is true but
there is no evidence to the contrary. It may not be clear where
the onus on this point ought to lie in the case of an individual as
opposed to a corporate defendant, but even if it were right for
me to assume that the defendant would not be in a financial
position to pay damages I do not think that this is a decisive
factor in the present case.
There are strong indications in the market-place
as appears from a multiplicity of actions in this
and other courts for patent, copyright and trade
mark infringements that small, fly-by-night com
panies or individuals are increasingly seeking to
infringe with impunity intellectual property rights
of others, frequently with imported merchandise,
and when these activities are restrained by injunc
tion they simply go out of business, after having
caused serious damage to the owners of the rights
entitled to protection, which damages are totally
uncollectable. In making this statement I am not
suggesting that the defendants are conducting
operations of such a nature or are not reputable,
but merely to emphasize that the possibility of
collecting a judgment for damages is a very serious
consideration and that one should not be carried
away by sympathy for any impecunious defendant
who is allegedly infringing intellectual property
rights of a large and prosperous owner of such
rights.
Each case must depend on its own facts and in
the present case I have already stated that there
are strong indications that a substantial judgment
would be uncollectable by the plaintiffs so that,
while the loss they would suffer while the defen
dants continue their infringing conduct, if that be
the case, could perhaps be compensated by dam
ages, difficult as they undoubtedly would be to
calculate I consider it appropriate to take this
factor into consideration as Mr. Justice Addy did
in the Procter & Gamble case. This is all the more
so in view of the security which the plaintiffs have
undertaken to provide to assure that the defen
dants will be able to collect any damages which
they might be awarded if they eventually succeed
in their contestation on the merits after having
their business interrupted, if not in fact being
permanently put out of business in Canada, as a
result of granting the plaintiffs an interlocutory
injunction.
The defendants also argue that the courts are
reluctant to grant interlocutory injunctions in
patent infringement cases, as opposed to cases of
copyright or trade mark infringement. In this con
nection reference was made to the case of Cutter
Ltd. v. Baxter Travenol Laboratories of Canada,
Ltd. et al. (1980), 47 C.P.R. (2d) 53 (F.C.A.), in
which Chief Justice Thurlow stated at pages
55-56:
In this Court the grant of an interlocutory injunction in a
patent infringement action is not a common occurrence in most
instances, the result of an application for an interlocutory
injunction, where infringement and validity are in issue, is that
the defendant gives a satisfactory undertaking to keep an
account and upon that being done the application is dismissed
with costs in the cause. The same practice has been followed in
industrial design actions and was the ultimate result of the
application in Lido Industrial Products Ltd. v. Melnor Mfg.
Ltd. et al. (1968), 55 C.P.R. 171, 69 D.L.R. (2d) 256, [1968]
S.C.R. 769. The principal reason for this practice is, in my
opinion, the fact that in most instances the nature of the patent
rights involved is such that damages (provided there is some
reasonably accurate way of measuring them) will be an ade
quate remedy for such infringement of the rights as may occur
pending the trial and because when the matter turns on the
balance of convenience if the defendant undertakes to keep an
account and there is no reason to believe that he will be unable
to pay such damages as may be awarded, the balance will
generally be in favour of refusing the injunction. It is always
necessary to bear in mind that the damages that can be caused
to a defendant in being restrained, for a period that may run
into several years, from doing what, if he succeeds, he was, but
for the injunction, entitled to do in the meantime, may have
consequences that are as serious for him as any that his
infringement, if he does not succeed, may have for the patentee.
It would appear however that this conclusion is
dependent on the words "there is no reason to
believe that he will be unable to pay such damages
as may be awarded". I have already dealt with
this, and, of course, in the case in question the
defendant's ability to pay was not an issue.
In the case of Procter & Gamble Company v.
Nabisco Brands Ltd., [1984] 2 F.C. 475; 82
C.P.R. (2d) 224 (T.D.), Mr. Justice Collier made
a thorough review of the jurisprudence on this
question. Inter alia at page 483 F.C.; at page 230
C.P.R. he refers to a quotation from Lord Diplock
at page 408 in the leading case of American
Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396
(H.L.) reading as follows:
As to that, the governing principle is that the court should
first consider whether, if the plaintiff were to succeed at the
trial in establishing his right to a permanent injunction, he
would be adequately compensated by an award of damages for
the loss he would have sustained as a result of the defendant's
continuing to do what was sought to be enjoined between the
time of the application and the time of the trial. If damages in
the measure recoverable at common law would be adequate
remedy and the defendant would be in a financial position to
pay them, no interlocutory injunction should normally be grant
ed, however strong the plaintiff's claim appeared to be at that
stage. If, on the other hand, damages would not provide an
adequate remedy for the plaintiff in the event of his succeeding
at the trial, the court should then consider whether, on the
contrary hypothesis that the defendant were to succeed at the
trial in establishing his right to do that which was sought to be
enjoined, he would be adequately compensated under the plain
tiff's undertaking as to damages for the loss he would have
sustained by being prevented from doing so between the time of
the application and the time of the trial. If damages in the
measure recoverable under such an undertaking would be an
adequate remedy and the plaintiff would be in a financial
position to pay them, there would be no reason upon this
ground to refuse an interlocutory injunction. [Emphasis mine.]
Certainly the Cutter case is not authority for a
general rule that interlocutory injunctions should
never be granted in patent infringement cases
where the defendant has an arguable defence.
Such injunctions have been granted in many sub
sequent cases. As always each case must be decid
ed on its own facts and while the Court should
properly be reluctant to grant such injunctions in
patent cases the judge hearing the application is
entitled to exercise his discretion. On the facts of
the present case and for the reasons set out above I
believe the injunction should be granted.
One further issue should be dealt with briefly,
namely that of delay. The plaintiffs first became
aware of the activities of the defendants in the
spring of 1984, Aschenbroich having left the
employ of the plaintiffs in November of 1983. The
action was started in June 1984 and amended in
August 1984 so as to allege infraction of the third
patent. Extensive affidavits had to be obtained
before seeking an interlocutory injunction. The
present motion was first produced in November
1984. The defendants moved to strike out the Kast
affidavit which led to a hearing and judgment
rendered on December 17, 1984 admitting it for
the most part. It is not necessary to go in detail
into all that has transpired since. There was a
lengthy period during which discussions of settle
ment took place. Subsequently Mr. Aschenbroich
did not present himself when an appointment was
made for examination for discovery resulting in
the statement of defence being struck and a
motion for default judgment. There was a change
of attorneys by the defendants. As a result the
motion which was to have been heard on October
30, 1985 was again postponed and fixed peremp
torily for hearing on November 8. Any delays that
have taken place appear to have been caused
primarily by the defendants. In the as yet
unreported case of rcr Americas Inc. v. Ireco
Canada Inc., T-2560-84, a judgment dated Octo-
ber 23, 1985, Federal Court, Trial Division,
Madam Justice Reed discussed the question of
delay at page 14, referring to the leading jurispru
dence on the issue. She states:
In general it is the effect of delay, not the fact of delay that
precludes a party from obtaining an interlocutory injunction.
For example, effects which make delay a reason for refusing an
interlocutory injunction are: (1) the defendant has prejudiced
his position during the time of delay, as for example, through
the expenditure of money in developing a business; or (2) delay
is evidence that the plaintiff does not consider interdiction of
the infringement an urgent or pressing matter.
In the present case the defendants do not appear to
have suffered any serious prejudice as a result of
the delay. On the contrary they have continued tc
tender for contracts in competition with the plain
tiffs and have been able to continue to build up
their business contacts to the prejudice of the
plaintiffs. I conclude that there is no merit to this
argument of the defendants.
Judgment will therefore be rendered granting an
interlocutory injunction to the plaintiffs although
not precisely in the terms sought.
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.