American Cyanamid Company (Appellant)
v.
Novopharm Limited (Respondent)
Court of Appeal, Jackett C.J., Bastin and Sweet
D.JJ.—Toronto, May 11, 1972.
Patents—Infringement—Right of action for infringement
by non-exclusive patentee—Patentee must be party to
action—Stay of proceedings—Patent Act, s. 57(1) and (2).
The non-exclusive licensee of a patent of invention
brought action for damages against an alleged infringer of
the patent. The defendant moved to strike out the statement
of claim (1) as disclosing no cause of action and (2) because
the patentee was not a party as required by section 57(2) of
the Patent Act.
Held (Jackett C.J. dissenting in part), reversing Noël
A.C.J. in the Trial Division, the motion must be dismissed.
Per curiam: A non-exclusive licensee of a patent is a
person claiming under the patentee within the meaning of
section 57(1) of the Patent Act ;
Per Bastin and Sweet D.JJ.: A non-exclusive licensee is
entitled to recover from the infringer the damages he has
suffered by reason of the infringement, and these can only
be determined following a trial.
Per Jackett C.J.: Since a non-exclusive licence merely
entitles the licensee to use the patented invention, which
right is not affected by the infringement, he suffers no
damage from the infringement and therefore the statement
of claim discloses no cause of action and should be dis
missed before trial.
Held also (per curiam): While failure to make the paten-
tee a party to the action as required by section 57(2) is not
ground for striking out the statement of claim, proceedings
in the action should be stayed until final disposition of a
motion to make the patentee a party to the action.
Fiberglas Canada Ltd. v. Spun Rock Wools Ltd. [1943]
S.C.R. 547; (1946-47) 6 Fox Pat. C. 39, applied; Elec
tric Chain Co. of Can. Ltd. v. Art Metal Works Inc.
[1933] S.C.R. 581, considered.
APPEAL from Noël A.C.J. [1971] F.C. 534.
Donald F. Sim, Q.C., and Roger T. Hughes
for appellant.
L Goldsmith, Q.C., for respondent.
David Watson for Bristol-Myers Co.
JACKETT C.J.—This is an appeal from a deci
sion of the Trial Division dismissing with costs
the appellant's action on a motion made before
a Defence was filed to strike out the Statement
of Claim.
By Statement of Claim filed June 23, 1971,
the appellant brought an action against the
respondent for relief in respect of acts alleged
to constitute infringement of Canadian Letters
Patent No. 726,675, which "was granted to and
is owned by Bristol-Myers Company".
The appellant alleges that it is "a non-exclu
sive licensee" under certain claims in Letters
Patent No. 726,675.
By Notice of Motion filed October 25, 1971,
the respondent gave notice of a motion for an
order striking out the Statement of Claim on the
grounds that it discloses no reasonable cause of
action, that the appellant, as a non-exclusive
licensee under the Letters Patent owned by
Bristol-Myers Company, has no status to main
tain its action without making the patentee a
party thereto as required by section 57(2) of the
Patent Act and that an action by Bristol-Myers
Company for alleged infringement of the patent
against the respondent is pending in this Court.
Pursuant to an order of the Court, notice of
that motion was given to Bristol-Myers Compa
ny with the result that that Company appeared
by counsel upon the return of the motion before
the Associate Chief Justice. Counsel represent
ing Bristol-Myers Company also appeared and
made submissions during the argument of this
appeal.
When disposing of the motion, the Associate
Chief Justice dealt with the ground of the
motion based on section 57(2) of the Patent
Act, which reads as follows:
57. (2) Unless otherwise expressly provided, the paten-
tee shall be or be made a party to any action for the
recovery of such damages.
by rejecting the appellant's contention that it
was the "patentee" within the meaning of that
provision and saying that as, in his opinion, no
action should be defeated by reason of the
non-joinder of a party, "if this were the only
impediment to this action", he would not hesi
tate to allow the appellant to move to have
Bristol-Myers Company made a party. He held,
however, that a non-exclusive licensee cannot
claim damages for infringement of a patent and
that the appellant having, accordingly, no status
in the action, it should be dismissed.
This appeal is from the resulting judgment
dismissing the action without costs.
A copy of the licence agreement and certain
amending letters was attached to the Statement
of Claim by the appellant. By its terms, Bristol-
Myers Company "grants" to the appellant "a
non-exclusive right and license", under certain
claims of Patent No. 726,675, "to manufacture,
have manufactured for it, use and sell" certain
products manufactured by any of a specified
class of processes. There is a further right con
ferred on the appellant by the licence document
to "sublicense" one sublicensee when it is not
itself manufacturing the specified products. The
licence agreement contains provisions for pay
ment of royalties and other provisions not rele
vant to the present problem. In addition it con
tains detailed provisions under the heading
"Article V — THIRD PARTY INFRINGE
MENT AND EQUAL TREATMENT". Those
provisions read as follows:
If at any time while this Agreement is in effect, CYANA-
MID shall believe that substantial infringement of the Sub
ject Patent is occurring with respect to the rights licensed to
CYANAMID hereunder, CYANAMID may so notify BRIS-
TOL and at the same time furnish to BRISTOL information
upon which CYANAMID'S belief is based, together with
sufficient facts demonstrating that CYANAMID's or its
sublicensee's sales in Canada of Tetracycline and products
containing or made with Tetracycline have been or will be
substantially detrimentally affected. In such notice
CYANAMID may request BRISTOL to advise CYANA-
MID whether BRISTOL will initiate appropriate steps to
bring about a discontinuance of such alleged infringement.
If, within a period of one hundred and twenty (120) days
after receipt of such notice and request BRISTOL fails to
notify CYANAMID that it will initiate appropriate steps to
bring about a discontinuance of such alleged infringement
or notifies CYANAMID that it does not intend to do so,
CYANAMID shall, after the expiration of such period, be
relieved of its obligation to pay royalties hereunder with
respect to the Letters Patent which were alleged to be
infringed.
If BRISTOL in the reasonable exercise of its judgment
determines that the information submitted by CYANAMID
or otherwise available to BRISTOL is insufficient to indi
cate the reasonable probability of such alleged infringement,
or that sales of Tetracycline by CYANAMID or its sublic-
ensees have not been, or will not be, substantially detrimen-
tally affected by such infringement, and so notifies
CYANAMID within such period, then CYANAMID shall
not be so relieved.
In the event, after receipt of CYANAMID'S notice as
above stated, BRISTOL advises CYANAMID that it will
initiate such appropriate step, CYANAMID shall not be
relieved of its obligation to pay such royalties hereunder
except as hereinafter provided.
CYANAMID shall have the benefit of any decision of a
court of competent jurisdiction of Canada, unappealable or
unappealed within the time allowed for appeal, holding the
Subject Patent invalid in whole or in part, or holding that
the Subject Patent or any particular claim or claims of such
Subject Patent is not infringed by a particular product.
Should a court of competent jurisdiction of Canada hold
such Subject Patent invalid in whole or in part or hold that
such Subject Patent or any particular claim or claims of
such Subject Patent is not infringed by a particular product,
CYANAMID shall have the benefit of that decision unless
and until it is reversed as provided below. To the extent
royalties would not thereafter accrue under this Agreement
if the holding of such a decision were followed, payment of
such royalties shall be suspended. In case such decision is
reversed by the decision of a court of competent jurisdic
tion, unappealable or unappealed within the time allowed
for appeal, and if pursuant to the holding of that reversed
decision suspended royalties would accrue hereunder, then
such royalties shall thereafter be paid in accordance with
the terms of this Agreement, and to the extent payment of
such royalties shall have theretofore been suspended, the
amount thereof shall become due and payable to BRISTOL.
If CYANAMID shall have given BRISTOL the notice
and request, together with the information and facts, pro
vided for above and for a period of three (3) years from the
date of such notice, substantial infringement of the Subject
Patent referred to in such notice has continued to the
substantial detriment of the sales of Tetracycline in Canada
by CYANAMID, its subsidiary or a sublicensee hereunder,
CYANAMID shall be relieved of paying royalties hereunder
with respect to such Subject Patent so long as such alleged
infringement thereafter continues.
In the event that CYANAMID is relieved of the obliga
tion to pay royalties under the foregoing provisions, and
BRISTOL is thereafter successful in bringing about a dis
continuance of the infringement which was the basis for the
relief, CYANAMID's obligation to pay royalties shall there
upon revive and if BRISTOL, in bringing about the discon
tinuance of said infringement, shall have collected royalties
(or damages) for said past infringement the revival of
CYANAMID's obligation to pay royalties shall be retroac
tive to whatever extent BRISTOL was successful in collect
ing royalties (or damages) for such past infringement.
There is one further significant fact to be
mentioned. On June 24, 1971, Bristol-Myers
Company commenced an infringement action
against the respondent in this Court and para
graph 13 of the Statement of Claim in that
action reads as follows:
13. The Plaintiff is willing to grant to the Defendant a
licence under Canadian Patent 726,675 at a royalty rate of
31 per cent and being cancellable by licensee upon 90 days'
notice and containing other conventional provisions.
The questions that arise for consideration on
this appeal, as I understand them, are, in effect,
as follows':
1. Having regard particularly to the fact that
the appellant is a "non-exclusive licensee" on
the terms that I have indicated, do the facts
alleged by the Statement of Claim disclose a
cause of action?
2. Even if this Court concludes that the
Statement of Claim does not disclose a cause of
action, should that question nevertheless be left
to be decided after the trial of the action?
3. Even if the action would otherwise be
allowed to go to trial, is it defective for failure
to comply with section 57(2) of the Patent Act,
and if so, what should the judgment be on this
appeal?
I propose to consider first what right, if any,
section 57 of the Patent Act confers on a licen
see who is not an exclusive licensee as against
an infringer.
Before proceeding to consider this problem, it
is useful to refer to the following provisions of
the Patent Act 2 :
2. In this Act, and in any rule, regulation or order made
under it,
(d) "invention" means any new and useful art, process,
machine, manufacture or composition of matter, or any
new and useful improvement in any art, process,
machine, manufacture or composition of matter;
(e) "legal representatives" includes heirs, executors,
administrators, guardians, curators, tutors, assigns and all
other persons claiming through or under applicants for
patents and patentees of inventions;
(g) "patent" means letters patent for an invention;
(h) "patentee" means the person for the time being enti
tled to the benefit of a patent for an invention;
12. (1) The Governor in Council, on the recommendation
of the Minister, may make, amend or repeal such rules and
regulations as may be deemed expedient
(c) in particular, but without restricting the generality of
the foregoing, with respect to the following matters
(iii) the registration of assignments, transmissions,
licences, disclaimers, judgments or other documents
relating to any patent,
46. Every patent granted under this Act shall contain the
title or name of the invention, with a reference to the
specification, and shall, subject to the conditions in this Act
prescribed, grant to the patentee and his legal representa
tives for the term therein mentioned, from the granting of
the same, the exclusive right, privilege and liberty of
making, constructing, using and vending to others to be
used the said invention, subject to adjudication in respect
thereof before any court of competent jurisdiction.
48. Every patent granted under this Act shall be issued
under the signature of the Commissioner and the seal of the
Patent Office; the patent shall bear on its face the date on
which it is granted and issued and it shall thereafter be
prima facie valid and avail the grantee and his legal repre
sentatives for the term mentioned therein, which term shall
be as provided in and by section 49.
53. (1) Every patent issued for an invention is assignable
in law, either as to the whole interest or as to any part
thereof, by an instrument in writing.
(2) Such assignment, and every grant and conveyance of
any exclusive right to make and use and to grant to others
the right to make and use the invention patented, within and
throughout Canada or any part thereof, shall be registered
in the Patent Office in the manner from time to time
prescribed by the Commissioner.
(4) Every assignment affecting a patent for invention,
whether it be referable to this section or section 52, is null
and void against any subsequent assignee, unless such
instrument is registered as hereinbefore prescribed, before
the registration of the instrument under which such subse
quent assignee claims.
57. (1) Any person who infringes a patent is liable to the
patentee and to all persons claiming under him for all
damages sustained by the patentee or by any such person,
by reason of such infringement.
(2) Unless otherwise expressly provided, the patentee
shall be or be made a party to any action for the recovery of
such damages.
59. (1) In any action for infringement of a patent the
court, or any judge thereof, may, on the application of the
plaintiff or defendant make such order as the court or judge
sees fit,
(a) restraining or enjoining the opposite party from fur
ther use, manufacture or sale of the subject matter of the
patent, and for his punishment in the event of disobedi
ence of such order, or
(b) for and respecting inspection or account, and
(c) generally, respecting the proceedings in the action.
(The italics in section 12 are mine.)
A review of these provisions shows that let
ters patent for an "invention" under the Patent
Act grant to the patentee (the person for the
time being entitled to the benefit of the patent)
and his legal representatives (which term
includes "assigns and all other persons claiming
through or under ... patentees of inventions")
for a term "the exclusive right, privilege and
liberty" of making, constructing and using the
invention and of "vending" it to others to be
used. (Section 46.)
Such a patent is specifically made assignable
"either as to the whole interest or as to any part
thereof". (Section 53(1).)
While there is no express authority in the
statute for a sub-grant of some portion of the
patent rights, it is expressly recognized that
there may be a "grant and conveyance" of an
"exclusive right to make and use and to grant to
others the right to make and use the invention
patented" either throughout Canada or any part
thereof. (Section 53(2).)
Finally, there is no express provision under
which the patentee may grant a licence in its
ordinary sense of "liberty (to do something),
leave, permission", but this must be inherent in
ownership of the patent as well as in the right
granted to the patentee of "vending to others to
be used". That this is so is confirmed by the
fact that the Act contemplates rules and regula
tions providing for the registration of "licences"
(section 12(1)(c)) and that it also contemplates
exclusive and non-exclusive compulsory
licences in certain circumstances. (Section 68.)
Before proceeding further, it is important to
have in mind the two principal kinds of arrange
ment by which a patentee may bestow on some
other person authority to use the patented
invention, viz:
(a) a "grant or conveyance" of an "exclusive
right" to make and use and to grant to others
the right to make and use the invention,' and
(b) a grant of a mere licence to make and use
the invention so that the licensee can do so
lawfully when, without the licence, it would
be unlawful for him to do so.
An arrangement of either kind may be, and
usually is, accompanied by special contractual
terms.
I think it is clear law that, apart from statute,
a mere licence to use property confers no inter
est or property right in the property that is the
subject of the licence and cannot, in itself,
confer a right to damages against a third person
who also uses that property, whether or not the
third person has a licence from the owner to use
it. A licence is, therefore, apart from some
statutory provision to the contrary, different in
kind from a grant of an "exclusive right" to
make and use property. The grantee of such a
right in respect of property has an exclusive
right in the property (carved out of the paten-
tee's full ownership rights) which exclusive
right is infringed by user inconsistent with it
and the law would, I should have thought, pro
vide a remedy for any such infringement wheth
er or not the statute expressly provides for such
a remedy. 4
The first question that has to be decided in
considering whether the facts alleged by the
Statement of Claim in this case disclose a cause
of action is the question whether section 57
makes the person who infringes a patent liable,
not only to a grantee of an "exclusive right" to
use the patented invention but also to a mere
non-exclusive licensee, as being a person
"claiming under" the patentee, for all "damages
sustained ... by any such person".
As a matter of first impression, I should have
thought that the words "persons claiming
under" the patentee refer to persons claiming
against the infringer by virtue of a property
right derived directly or indirectly from the
patentee. This clearly would include a person to
whom the patentee has granted an "exclusive
right" to use the patented invention and who is
claiming against a person who has infringed that
exclusive right. Having regard, however, to the
fact that the grant by a patentee of a mere
licence confers only a liberty to use the inven
tion and no property right, it would not seem, as
a matter of first impression, that the grant of
such a licence supplies any basis for a claim
against an infringer. And, indeed, this would
seem to have been the state of the law in earlier
times even if there was a contract between the
patentee and the licensee that the licence was
exclusive. See Heap v. Hartley (1889) 42 Ch. D.
461, which was applied by the Supreme Court
of Canada in Electric Chain Company of
Canada Ltd. v. Art Metal Works Inc. [1933]
S.C.R. 581, at pages 586-87. The respondent's
position is, however, that it has been deter
mined by the decision of the Supreme Court of
Canada [1943] S.C.R. 547, and the decision of
the Privy Council (1946-47) 6 Fox Pat. C. 39, in
Fiberglas Canada Ltd. v. Spun Rock Wools
Ltd. that a mere licensee has a good cause of
action, by virtue of section 57, against a person
who infringes the patent.
Whether or not section 57 confers a cause of
action on a bare licensee will depend on what
effect is to be given to Fiberglas Canada Ltd. v.
Spun Rock Wools Ltd. Before examining that
decision, however, it is important to ascertain
what was decided by the Supreme Court of
Canada in Electric Chain Co. of Canada Ltd. v.
Art Metal Works Inc. [1933] S.C.R. 581.
In the Electric Chain case, the question
before the Court arose in a somewhat unusual
way. A New Jersey corporation had brought an
action for infringement of a Canadian patent of
which it was the patentee. The defendant admit
ted the facts pleaded by the statement of claim
and put damages and profits in issue. There
was, in effect, a consent judgment for inter alia
damages to be determined on a reference. On
the reference, it appeared that the New Jersey
corporation did not itself carry on business in
Canada but that it had a wholly owned subsidi
ary that did. When the referee's report came
before a judge, he gave leave to add the subsidi
ary as a party plaintiff. Substantial damages
were allowed based on damage sustained by the
subsidiary. In the Supreme Court of Canada it
was determined that there was no "grant and
conveyance of any exclusive right" to use the
patented invention from the New Jersey corpo
ration to its subsidiary, but merely "evidence of
a licence". The statute in question was the
Patent Act of 1927, R.S.C. 1927, c. 150, which
defined "patentee" to mean "the person for the
time being entitled to the benefit of a patent"
(section 2(e)), provided that an infringer was
liable to "the patentee" or his legal representa
tives in an action for damages, and defined
"legal representatives" to include "heirs, execu
tors, administrators, guardians, curators, tutors,
assigns or other legal representatives". The
Supreme Court [at p. 487] referred to Heap v.
Hartley (1889) 42 Ch. D. 461 where it was
unsuccessfully argued that "since a patentee
was ... 'the person for the time being entitled
to the benefit of a patent', an exclusive licensee
for a particular district was quâ that district .. .
in the position of a person to whom the paten-
tee had given his monopoly ... and was entitled
to maintain an action for infringement of his
rights within the district in his own name, and
without joining the patentee". Reference was
made by the Supreme Court of Canada to a
passage in the reasons for judgment in Heap v.
Hartley, where it was said: "... the licence pure
and simple, and by itself, never conveys an
interest in property. It only enables a person to
do lawfully what he could not otherwise do,
except unlawfully". Applying this decision, the
Supreme Court held that the patentee's subsidi
ary in the Electric Chain case was not "the
patentee" or "the legal representative of the
patentee" and had no right to be a party to the
infringement action. In the result, the New
Jersey corporation got damages for the infringe
ment that did not include damages sustained by
its licensee.
After the Electric Chain case and before the
Fiberglas case, the provision of the Patent Act
spelling out the liability of an infringer was
changed. As has already been noted the new
section, which came into force in 1935 and is
now section 57(1), provides that an infringer is
liable to "the patentee and to all persons claim
ing under him for all damages sustained by the
patentee or by any such person".
In the Spun Rock case, a Canadian patent had
issued to a foreign company, who granted
exclusive licences to intermediate parties who,
in turn, granted exclusive licences to Fiberglas
Canada Ltd. The foreign company became an
enemy with the result that its interest in the
patent became vested in the Custodian under
the Trading with the Enemy Regulations. In
those circumstances, when Fiberglas com
menced its action in the Exchequer Court of
Canada against Spun Rock for infringement of
the patent, it joined the Custodian as a defend
ant. (See judgment of Kerwin J. at page 558 and
judgment of Rand J. at pages 565-66.) The trial
judge gave leave to add one of the intermediate
parties as a plaintiff and gave judgment in
favour of the plaintiffs. The Supreme Court of
Canada (Rand J. dissenting) reversed that judg
ment on the ground that there was no invention
in the claim sued upon. In these circumstances,
although it was not necessary for the decision,
the status of the plaintiffs in the action was
discussed. Davis J., who gave the judgment of
himself and Taschereau J., said that the relevant
provision was section 55 (now section 57). He
said that "The statutory remedy provided is an
action 'for all damages sustained' ..." and
expressed the opinion that "A licensee is ... for
the purposes of the section, a person claiming
under the patentee ..." (page 557). He pointed
out, however, that "the statutory liability is 'for
all damages sustained' by such person by
reason of such infringement" (page 557). He
also expressed the opinion that the intermediate
party was neither a necessary nor a proper
party. Kerwin J. said: "... the appellant admit
ting infringement if it be held that the claim
sued on is valid, Fiberglas Canada Limited, as
exclusive licensee, would be entitled in that
event to the usual order of restraint against the
appellant" (pages 558-59). He then referred to
the decision in the Electric Chain case and the
subsequent changes in the statute and said: "So
far as a claim for damages is concerned, there
fore, an exclusive licensee claims under the
patentee within the meaning of this section, and
the presence of the Custodian as a party
defendant in this litigation would, I think, be
sufficient if the plaintiff had worked the inven
tion in Canada" (page 559). Hudson J. said: "As
the patentee and the original licensees are
before the Court, I think it is unnecessary for
me to express any opinion as to the status of
the plaintiff to bring the action" (page 560).
Rand J. dealt with the question at pages 565 and
566 as follows:
A further defence was raised as to the right of the
respondents to maintain the action. The original plaintiff
claimed to be the exclusive sub-licensee of the added plain
tiff, Owens-Corning Fiberglas Corporation, under exhibits
3, 4 and 5: but that these documents conveyed such an
interest was seriously challenged. The capacity of the added
plaintiff, in turn, was alleged to be that of exclusive licensee
of the patentee. There does not appear to be any doubt of
that fact, and the inclusion of the corporation in the action
cures any defect in parties of beneficial interest. The paten-
tee was a corporation of Holland and, by the provisions of
the regulations respecting Trading with the Enemy (1939),
the legal title to the patent has been vested in the defendant
Custodian. All interested parties are, therefore, before the
court and whether as plaintiff or defendant would not, in
the circumstances, appear to be material.
In the Privy Council the matter was dealt with
in the judgment delivered by Lord Simonds by
a passage at pages 46-7 of (1946-47) 6 Fox's
Patent Cases, as follows:
Their Lordships do not think it necessary in the circum
stances again to examine in detail the several documents.
With the assistance of counsel they did so at the hearing
and were satisfied that the appellants had established their
title to sue as licensees, and it is plain that the learned
Judges of the Supreme Court took the same view.
There remains then the question of general importance,
what under Canadian law are the rights of a licensee of a
patent.
The respondent contends that a licensee has no right to
sue for damages and that even if he has such a right he has
no right to an injunction to restrain infringement.
The first relevant provision is sec. 55 of the Patent Act,
1935, which provides as follows:
55. (1) Any person who infringes a patent shall be liable
to the patentee and to all persons claiming under him for all
damages sustained by the patentee or any such person, by
reason of such infringement.
(2) Unless otherwise expressly provided, the patentee
shall be or be made a party to any action for the recovery of
damages.
Here the question is, whether a licensee is a person
claiming under the patentee. Upon this question, even if it
was argued before him, the learned trial Judge can have had
no doubt; for he makes no mention of it in his judgment. In
the Supreme Court Davis J. (with whom Taschereau J.
concurred) held that a licensee is for the purposes of the
section a person claiming under the patentee. Kerwin J.
came to the same conclusion, pointing out that in the 1935
Act the relevant provision was recast, the words "the paten-
tee and all persons claiming under him" taking the place of
the words "the patentee or his legal representatives," which
occurred in the earlier Patent Act of 1932 and were not apt
to include a licensee. Upon this question neither Hudson J.
nor Rand J. expressed an opinion, but the latter Judge, who
was in favour of dismissing the appeal, can have had no
doubt upon the matter.
In the face of this consensus of opinion upon a Canadian
Statute their Lordships would in any case hesitate to
express a contrary view. But it appears to them that the
statutory amendment of 1935 following upon the decision
of Electric Chain Co. of Canada v. Art Metal Works Inc.,
(1933) S.C.R. 581 points irresistibly to the conclusion that
licensees are persons claiming under the patentee within the
meaning of the section. The patentee by definition means
the person for the time being entitled to the benefit of a
patent. Sec. 55(1) contemplates an action not only by the
person for the time being entitled to the benefit of a patent
but also by any person claiming under that person. Upon
the plain language of the section a licensee answers that
description.
Before attempting to come to a conclusion on
the effect of section 57, I must consider further
the reasons given by the Associate Chief Justice
for reaching the conclusion that he did in this
matter.
After reviewing the proceedings and the deci
sions in the Electric Chain and the Spun Rock
Wools cases and disposing of the argument
based on section 57(2), the Associate Chief
Justice said, with reference to the present ques
tion, that, notwithstanding the Spun Rock case,
where it was decided "that one holding an
exclusive licence can sue", he had serious
doubt as to whether a non-exclusive licensee
can sue for infringement (a) because he cannot
claim "under the patentee", and (b) because he
cannot claim damages for infringement under
the patent. He expressed the view that section
57(1) must be construed strictly and after refer
ring to the terms of the licence held by the
plaintiff in the case and to what was said by
Lord Buckmaster L.C. in King v. David Allen &
Sons [1916] 2 A.C. 54 at p. 59, he concluded
that there was nothing but a personal obligation
between the licensee and the plaintiff. He con
cluded, therefore, that the plaintiff had no
status in the action and that it should be dis
missed with costs.
In the absence of other authority, I should be
content to say that I agree with the general
principles enunciated by the Associate Chief
Justice. I should also say that, when the deci
sion in Fiberglas Canada Ltd. v. Spun Rock
Wools Ltd. is restricted to the facts that were
before the courts in that case, I agree that that
decision is only authority for the proposition
that an exclusive licensee is a person "claiming
under" the patentee within the meaning of sec
tion 57, as it now is, of the Patent Act. Lower
courts are not, therefore, in my view, bound by
the doctrine of stare decisis, even if it is appli
cable, to hold that it has been decided by that
case that a non-exclusive licensee falls within
those words.5
For that reason, if I thought it was open to
me to do so, I should reach the conclusion,
which I suggested earlier in these reasons, that
a person is "claiming under" the patentee
against an infringer if he is claiming for
infringement of some property right received
directly or indirectly by way of grant or convey
ance from the patentee, and I would include
within this, as I would be bound by the Spun
Rock decision to do, an exclusive licensee as
being a person to whom an "exclusive right"
has, in effect, been granted. I would not in such
circumstances, include a non-exclusive licensee
as a person "claiming under" the patentee.
However, possibly because of my common
law background, I take something out of the
judgments in the Spun Rock case that, it is
clear, was not found there by my brother Noël.
As I read those judgments, they contain impor
tant declarations that I think I should regard as
authoritative even though I cannot see a logical
basis for them. In the Supreme Court of Canada
two of the judges (Davis and Taschereau, JJ.),
having made it clear that they had prepared
their observations on the point because the
question had been argued at considerable length
and was of "general importance", stated quite
generally, "A licensee is ... for the purposes of
the section, a person claiming under the paten-
tee ...". In the Privy Council, after prefacing
the relevant part of his judgment with the words
"There remains then the question of general
importance, what under Canadian law are the
rights of a licensee of a patent", Lord Simonds,
delivering the judgment of the Judicial Commit
tee, quoted section 55(1) (as it then was) and
said that the question "Here", was whether a
licensee is a person claiming under the patentee,
and answered that question by saying: "Upon
the plain language of the section a licensee
answers that description". I have been tempted
by the view that there was no intention on the
part of these judges to express any opinion
except with reference to the facts before them
and also by the view, which has been suggested,
that what they really had in mind, when they
said "licensee", was an exclusive licensee. I
cannot, however, think that either Lord
Simonds or Davis J., with their respective back-
grounds in the common law, would have used
the very familiar concept of "licence" to mean
only some very narrow class of licence without
saying so. 6
I am, therefore, constrained to take the view
that a person who is a licensee under a patent is
a person claiming under the patentee within the
meaning of those words as used in section 57(1)
of the Patent Act.
However, that is not the end of the matter.
Prior to the addition of the reference to persons
claiming under the patentee to section 57(1), the
effect of the decisions was that an infringer was
not liable to any licensee. Since that addition,
an infringer has been liable to a licensee to the
extent set out in the revised section 57(1). The
effect of the change in the provision was to
create a statutory cause of action that did not
previously exist. The next step is, therefore, to
determine what that cause of action is.
In the first place, what a licensee may claim
under section 57(1) is damages sustained by
himself and not the damages sustained by any
other person. This was made quite clear by
Lord Simonds in the Spun Rock case at page 47
where he said: "... since the action is in sub
stance an action by Fiberglas (the ultimate li
censee), whose right and interest as licensee
began on December 29th, 1939, it should be
made clear in the order that the damages recov
erable are limited to the damages suffered after
that date by Fiberglas as beneficial owner or by
Owens-Corning (the intermediate licensee) as
trustee for Fiberglas". (See also Davis J. at page
557 of [1943] S.C.R.)
The next question to be considered in this
case is therefore: What are the "damages" sus
tained by a licensee within the sense of section
57(1)?
In so far as a licensee is concerned, what
section 57(1) does is to say that an infringer of
a patent is liable to a licensee, as a person
claiming under the patentee, for all damages
sustained by the licensee by reason of the
infringement. Keeping in mind that an infringer
is only liable to a licensee under section 57(1)
because a licensee is a person "claiming under"
the patentee, which must, in my view, mean a
person claiming some right by virtue of some
grant from, or other arrangement with, the
patentee, it follows, in my view, that what sec
tion 57(1) makes the infringer liable to the licen
see for is the damages sustained by the licensee
by reason of the encroachment of the infringe
ment on the right claimed by the licensee under
the patentee.
If I am right in my analysis of section 57(1),
where the person claiming under the patentee
by virtue of section 57(1) is a licensee with an
exclusive right of user that has been infringed
by the defendant, such as the plaintiff Fiberglas
was in the 1943 case, his damages are clearly, I
should have thought, neither more nor less than
the damages that have been sustained as a
result of the encroachment of the infringement
on the right of exclusive user that the licensee
held "under" the patentee.
It follows that where the patentee has con
ferred on a licensee an unqualified right of
exclusive user of the invention, any user by an
infringer of that invention encroaches on the
rights held by the licensee under the patentee.
When, therefore, a statement of claim sets up
such rights in the plaintiff and sets up an
infringement, it reveals a primo facie cause of
action under section 57(1).
I come now to applying the conclusions that I
have reached to the first question that arises on
this appeal as I framed it early in these reasons,
viz:
1. Having regard particularly to the fact
that the appellant is a "non-exclusive licen
see" on the terms that I have indicated, do
the facts alleged by the Statement of Claim
disclose a cause of action?
In this case, the Statement of Claim alleges
that the plaintiff is a "non-exclusive licensee"
under certain claims in the patent that is being
sued on. Taken by itself,' that means only that
the plaintiff has an arrangement with the paten-
tee under which he can use the invention with
out being an infringer. Such arrangement would
confer on him no right that there should be any
limitation on user of the invention by other
persons. User of the invention by a third
person, whether or not he is an infringer, would
not, therefore, in any way, deprive the licensee
of any part of what he was entitled to as
between himself and the patentee. It follows
that the Statement of Claim in this case does
not, in my view, disclose a cause of action.
Where the person claiming under the patentee
is a non-exclusive licensee, it is difficult, if not
impossible, to conceive of a state of facts upon
which he can argue that he has sustained dam
ages by reason of being deprived of the rights
that he held under the patentee as a result of
infringement of the patent. In such a case, an
infringer of the patent is a person who is an
infringer because he did not himself get a
licence from the patentee. The patentee, there
fore, has a legal claim for such an infringement.
It is difficult, however, to see what complaint a
mere non-exclusive licensee has when the
infringer would not be an infringer if he had had
a licence the granting of which is no part of the
legal interest or concern of such licensee.'
As I see it, a bare licence under a patent,
being merely a permission from the patentee to
do something that it would, otherwise, have
been unlawful to do, a person who infringes the
patent does not commit any wrong against the
licensee and does not deprive the licensee of
anything to which he was entitled as between
himself and the patentee. In other words, the
licensee has no right to complain against
infringement of the patent either by reason of
any right vested in him that is good as against
the perpetrator of the particular act of infringe
ment, or by virtue of a contract with the paten-
tee whose legal rights are infringed by such act.
A bare licensee who exercises the patent for a
profit may indeed suffer a diminution in profit
from selling the invented product as a result of
competition from some other person who also
exercises the patent rights whether such person
does so under licence from the patentee or as
an infringer. As it seems to me, however, that
diminution in profit is not a loss for which he
has any recourse at law. Compare Bradford v.
Pickles [1895] A.C. 587.
The appellant does not accept the view that
section 57 only confers on a person claiming
under a patentee a right to damages sustained
by that person as a result of having been
deprived by the infringement, of some part of
what he is entitled to by virtue of the rights he
holds under the patentee. It says that such a
view unduly limits the effect of section 57(1) as
applied by the decision of the Judicial Commit
tee in the Spun Rock case. The appellant's
contention is that all that is required to give a
licensee of a patent a right of action under
section 57(1) is that there be an infringement of
the patent and that the licensee has thereby lost
something that he would otherwise have had. In
other words, even if no right of the licensee
either contractual or otherwise has been inter
fered with in any way, if there has been an
infringement of the patentee's rights and the
licensee has thereby been deprived of profits
that he would otherwise have made, the appel
lant says that section 57(1) makes the infringer
liable to it for such "de facto damages".
On the appellant's view of the matter, section
57(1) does not merely create a remedy whereby
an exclusive licensee, or other person claiming
under the patentee, can recover directly dam
ages for interference with the rights held by him
under the patentee, but it confers on a non-
exclusive licensee a cause of action for "dam-
ages" although his rights have not been
adversely affected in any way.
I find nothing in section 57(1) to indicate any
intention to create a statutory obligation arising
out of the tort of infringement to a person
whose rights were not affected thereby and I
find nothing in the judgments in the Spun Rock
case that suggests such a result. In the absence
of something quite specific to indicate an inten
tion to confer such a gratuitous benefit, I do not
think that any such intention should be imputed
to Parliament.'
My conclusion is, therefore, as I have already
indicated, that a Statement of Claim whereby a
non-exclusive licensee claims damages for
infringement of a patent does not disclose an
arguable cause of action unless facts are plead
ed upon which it can at least be argued that
there was some interference with the rights held
by the plaintiff under the patentee by reason of
the defendant's alleged infringement of the
patent.
In this case it is true that the Statement of
Claim does allege that, by reason of the acts of
the defendant, "the plaintiff has suffered loss
and damage" by reason of the alleged infringe
ment, which is all that is normally alleged on the
question of damages in a claim by a patentee or
an exclusive licensee. However, the situations
are different. In the case of infringement of a
property right, such as those granted to the
patentee by the patent or the exclusive rights of
an exclusive licensee, an allegation of loss or
damage suffered by the owner of the right as a
result of its infringement may well, depending
on the circumstances, be all that is required to
inform the defendant and the Court of the sub
stance of the plaintiff's case even though it is
technically deficient in that it pleads the conclu
sion resulting from applying the law to the facts
instead of pleading the facts.
Where, however, all that is pleaded is the
infringement of the property rights of a paten-
tee, it is not apparent that a bare licensee has
suffered any damage within the sense of section
57(1) and it becomes necessary to plead facts
that set up an arguable case of loss or damage
sustained by the licensee that would be recog
nized by the law. In this case, it was not sug
gested by counsel, when the matter was raised,
that any facts could be pleaded, if an opportuni
ty were given, that would show that the
infringement had in any way interfered with the
rights held by the appellant under the patentee.
That brings me to the second question, which
I have framed earlier in these reasons as
follows:
2. Even if this Court concludes that the
Statement of Claim does not disclose a cause
of action, should that question nevertheless
be left to be decided after the trial of the
action?
Whether or not an action should be disposed
of, in whole or in part, before trial, on a ques
tion of law, is a matter of judicial discretion. In
my view, in this case, the question of law
should be decided at this stage—that is, before
further pleadings, discovery or trial. On the one
hand, if the matter is decided at the outset and
the ultimate decision is that the pleadings do not
disclose a cause of action, the matter will have
been decided with only the expense and delay
of an argument on the question of law in the
Trial Division, of an appeal on the question of
law to this Court and of an appeal on the
question of law to the Supreme Court of
Canada, and, if the matter is decided at the
outset and the ultimate decision is that the
pleadings do disclose a cause of action, that
expense and delay will probably to a large
extent have been thrown away. On the other
hand, if the question of law is postponed until
after trial and the ultimate decision is that the
Statement of Claim does not disclose a cause of
action, the parties will have been put to the very
substantially greater expense of pleading, dis
covery, preparation for trial and trial of a patent
infringement action—a matter that not infre
quently runs into many, many thousands of
dollars. On that consideration alone, as it seems
to me, the balance of convenience in this case is
in favour of a decision at the outset. The only
consideration that, in my view, was urged
against that conclusion with any weight was
that a trial was necessary in order to find the
relevant facts. I think, however, that it became
clear during argument that, if there are any
facts that require to be ascertained in order to
decide the law to be applied, they should have
been pleaded, and counsel for the appellant was
not prepared to suggest any such facts that
might be pleaded. Finally, any analogy with
Decorite Igav (Canada) Limited v. Ciba Corpo
ration where, earlier this year, this Court upheld
a decision of the Trial Division that a similar
question concerning section 57 be left until
after trial breaks down when it is realized that,
there, the patentee and licensee, with common
representation in the matter, merely wished to
bring the licensee into the patentee's infringe
ment action, which would have to go to trial in
any event, whereas here, the patentee and licen
see are separately represented and show no
signs of any possibility of cooperating on a
joinder of actions or a common trial and the
Court cannot impose either course on non-
cooperating plaintiffs.
My conclusion is that the appeal should be
dismissed with costs.
As, however, the other members of the Court
have reached the conclusion that the Statement
of Claim does disclose a cause of action, con
sideration must be given to the third question,
which I have framed earlier in these proceed
ings as follows:
3. Even if the action would otherwise be
allowed to go to trial, is it defective for fail
ure to comply with section 57(2) of the Patent
Act, and, if so, what should the judgment be
on this appeal?
I repeat section 57 of the Patent Act here for
convenience.
57. (1) Any person who infringes a patent is liable to the
patentee and to all persons claiming under him for all
damages sustained by the patentee or by any such person,
by reason of such infringement.
(2) Unless otherwise expressly provided, the patentee
shall be or be made a party to any action for the recovery of
such damages.
Counsel for appellant conceded that this
Court was bound by the decision of the
Supreme Court of Canada in Electric Chain
Company of Canada Ltd. v. Art Metal Works
Inc. (supra) to hold that the appellant is not the
"patentee" within the meaning of that word as
used in section 57 although he reserved his
position on that point so that he will be in a
position in the Supreme Court of Canada to
argue that the appellant is the "patentee" and
that the action as framed does comply with
section 57(2).
I agree with the Associate Chief Justice that
section 57(2) does not make a nullity ab initio
of an action that has been commenced without
complying with that provision and that, if fail
ure to comply with that provision had been the
only basis for the motion to strike out, the
hearing of the motion might well have been
adjourned, if the appellant so desired, to permit
the appellant to apply to add the patentee as a
party. However, there was the other ground on
which the judgment of the Trial Division pro
ceeded and, in this Court, the appeal from that
judgment must be disposed of on the material
that was before the Trial Division—no applica
tion having been made to this Court to receive
further evidence under Rule 1102.
While, in my view, a failure to make the
patentee a party as required by section 57
should not be made a ground for striking out the
Statement of Claim without giving the plaintiff
an opportunity to correct the defect, I am of the
view that, once the question has been raised, a
plaintiff should not be permitted to proceed
with an action that does not comply with sec
tion 57.
If, therefore, I were of the view that the
majority takes on the question whether the
Statement of Claim discloses a cause of action,
I should be of the view that the judgment
appealed against should be set aside and that
there should be a judgment staying all proceed
ings in the action other than an application to
add the patentee as a party until the final dispo
sition of an application to make the patentee a
party to the action results in the patentee
becoming a party and providing that
(a) upon the expiration of 30 days from this
Court's judgment without any application
having been made to make the patentee a
party to the action, or
(b) upon the final disposition of such an
application without the patentee becoming a
party to the action,
the action should stand dismissed with costs.
On the same assumption, I would be of the
view that the judgment of this Court should
provide that the appellant should, in any event,
pay to the respondent the costs of the motion in
the Trial Division and that the respondent
should pay to the appellant one-half of the costs
of the appeal to this Court. The latter opinion is
based on the view that the appellant has three-
quarters success on the appeal and the respond
ent has one-quarter success.
BASTIN D.J.—The Chief Justice in his rea
sons for judgment has explained the nature of
this appeal so I shall confine myself to the
ground upon which the action was dismissed in
the court below. I believe the following quota
tion from the judgment gives the reasoning:
The right of a licensee to sue is purely statutory and, in so
far as the Patent Act is concerned, is contained in section
57(1) of the Patent Act. This section, in my view, is subject
to a strict interpretation and should go no further than the
words of the section will allow. It is not, in my view,
sufficient to say that an infringer is liable to all persons
claiming under a patentee in order to give a right of action.
The person suing must also have a defined right to do so
and he must be able to exercise this right against those
persons infringing his right. Although there may be some
basis for allowing an exclusive licensee to sue as a person
claiming under the patentee, I fail to see how a non-exclu
sive licensee can do so. The latter, indeed, has no defined
right. [Page 537.]
The issue in this appeal is whether a non-
exclusive licensee has the right to sue an
infringer to recover damages for loss attribut
able to the infringement. The answer depends
on the interpretation given to section 57(1) of
the Patent Act. The words of this section were
introduced into the Act in 1935 following the
decision of the Supreme Court of Canada in
Electric Chain Company of Canada Ltd. v. Art
Metal Works Inc. [1933] S.C.R. 581. In this
case the Supreme Court applied the principle
enunciated in the case of Heap v. Hartley
(1889) 42 Ch. D. 461. I quote from the judg
ment of Fry L.J. as follows:
A licence may be, and often is, coupled with a grant, and
that grant conveys an interest in property, but the licence
pure and simple, and by itself, never conveys an interest in
property. It only enables a person to do lawfully what he
could not otherwise do, except unlawfully. I think, there
fore, that an exclusive licensee has no title whatever to sue.
It is reasonable to assume that the amend
ment which is now embodied in section 57 was
intended by Parliament to alter the law, and
both the Supreme Court of Canada and the
Privy Council held that such a change in the law
had been effected, in the case of Fiberglas
Canada Ltd. v. Spun Rock Wools Ltd. (1946-
47) 6 Fox Pat. C. 39. That case related to an
exclusive licensee, but in holding that an exclu
sive licensee had been given the right to claim
damages from an infringer by the amendment to
the Act neither the judges of the Supreme Court
nor the member of the Privy Council who gave
the Privy Council judgment made any distinc
tion between an exclusive and a bare licensee.
In my opinion this is very significant. It is also
significant that the legislators when changing
the law used such general and comprehensive
words. It is a cardinal principle of interpretation
that the ordinary and grammatical sense of the
words be adhered to unless this would lead to
manifest absurdity. Parliament could not have
used words with a more comprehensive mean
ing than those found in this section:
. all persons claiming under him (the patentee) for all
damages sustained ... by any such person, by reason of
such infringement.
As the Associate Chief Justice stated in his
judgment, "The right of a licensee to sue is
purely statutory". It follows that the intention
of Parliament must be ascertained from the
words of the statute. The Court is not justified
in reading into the plain meaning of this section
qualifications which Parliament could have
expressly provided if that was the intention.
It cannot be argued that a non-exclusive lic
ensee is not a person claiming under the paten-
tee. Whether the permission he receives from
the patentee is called a right, a privilege or a
benefit, it is derived from the patentee and he
is, therefore, a person claiming under the paten-
tee. It remains to consider whether he can sus
tain damages by reason of such infringement.
The ordinary meaning of damages is compensa
tion for loss. Halsbury, 3rd ed., vol. 29, page
110 has this to say regarding damages for
infringement.
Where the plaintiff is a manufacturer, the ordinary measure
of damages is the loss of the profit the plaintiff would have
made had his sales not been diminished by the infringement;
it is presumed, in the absence of evidence to the contrary,
that sales by the infringer were taken from the plaintiff.
It can hardly be questioned that the diminu
tion in the volume of his sales due to sales by
an infringer can result in a loss to a non-exclu
sive licensee. It might be argued that Parliament
never contemplated compelling an infringer to
compensate a non-exclusive licensee for such
de facto damages but intended to restrict dam
ages for which an infringer is liable to those of a
person whose rights were directly infringed by
the particular act of infringement. On this rea
soning, a bare licensee has merely permission to
make use of the patent and, unless his freedom
to exercise this permission is interfered with, he
cannot complain. On the other hand, an exclu
sive licensee has been granted a monopoly and
an infringement of the patent directly affects
this legal right. This may appear a logical argu
ment but the answer is that the right of any
licensee to collect damages is purely statutory
and, if Parliament had intended to distinguish
between an exclusive and a non-exclusive
license, it would have made this clear. Since
Parliament has made no such distinction, it fol
lows that all licensees should be treated alike.
As the law now stands, the only qualification
to enable a licensee to sue is actual loss attribut
able to the infringement. Damages are the gist
of the action and these can only be determined
in the trial. For the purpose of an application to
strike out the statement of claim for want of a
cause of action, the allegations in the statement
of claim are assumed to be true. The plaintiff
has alleged loss so it has set out a cause of
action, but it has failed to particularize its loss
as it should have done when its claim is con
fined to special damages. However, this is a
defect which can be remedied by the giving of
particulars.
Counsel suggested that to grant every bare
licensee the right to collect damages from an
infringer would result in a vast increase of
litigation. However, all such claims with respect
to a particular infringement would be similar so
all claimants with respect to an infringement
could be brought into one action or their dam
ages could all be assessed in the one trial. In
any case, this possibility must have been con
sidered when Parliament in section 68 granted
to a non-exclusive licensee, who derives his
licence from the Commissioner of Patents, the
right to institute proceedings against an infring-
er of the patent if the patentee neglected to act
after being requested to do so.
I agree with the suggestion made by the Chief
Justice as to the disposition of this appeal in the
circumstances.
* * *
SWEET D.J.—I have had the advantage of
reading the reasons for judgment of my Lord,
the Chief Justice. In them he indicated relief
sought, the nature of the application resulting in
the order of The Honourable, The Associate
Chief Justice appealed from, history of the pro
ceedings to this point, and reviewed and
analyzed relevant jurisprudence including Heap
v. Hartley, (1889) 42 Ch. D. 461, Electric Chain
Company of Canada, Ltd. v. Art Metal Works
Inc. [1933] S.C.R. 581, and Fiberglas Canada
Ltd. v. Spun Rock Wools Ltd. [1943] S.C.R.
547; (1946-47) 6 Fox Pat. C. 39.
The relevant licence agreement here contains,
inter alia:
BRISTOL hereby grants to CYANAMID a non-exclusive
right and license, with the right to grant sublicenses, as
hereinafter expressly set forth, under all valid Tetracycline
product claims to manufacture, have manufactured for it,
use and sell Tetracycline manufactured by Current
Operations.
As between the parties to the licence agree
ment such a provision would, in itself, do noth
ing more than permit the licensee to do that
which otherwise could not be done without
violating the rights of the patentee. Moreover, it
would appear from Heap v. Hartley (supra),
referred to in Electric Chain Company of
Canada, Ltd. v. Art Metal Works Inc. (supra),
that, as the legislation was at the time those
cases were decided, the only rights a licensee,
as distinguished from an assignee, would have
had would be whatever contractual rights he
might have had against the licensor. He would
have no rights against infringing third parties.
What is to be decided here is whether or not
section 57(1) of the Patent Act has created a
statutory right in a non-exclusive licensee to
recover from an infringer of the patent for loss
sustained by the non-exclusive licensee by
reason of the infringement.
The creation, by statute, of rights and liabili
ties which did not previously exist requires
clear and unequivocal wording.
Section 57(1) of the Patent Act is:
57. (1) Any person who infringes a patent is liable to the
patentee and to all persons claiming under him for all
damages sustained by the patentee or by any such person,
by reason of such infringement.
Respectfully, I agree in the result with the
conclusion of The Honourable, the Chief Jus
tice that a person who is a licensee under a
patent is a person claiming under the patentee
within the meaning of those words as used in
section 57(1) of the Patent Act.
It is, I think, clear from Fiberglas Canada
Ltd. v. Spun Rock Wools Ltd. (supra), that both
exclusive licensees and non-exclusive licensees
are "persons claiming under" a patentee within
the meaning of section 57(1).
One might add that the subsection refers to
"all persons claiming under him". The word
"all" must include every person who might
claim under the patentee which would neces
sarily include every type or kind of licensee and
whether exclusive or non-exclusive. No word
could be more embracing, more inclusive than
"all".
However, as my Lord says, that is not the
end of the matter.
Although prior to the enactment of section
57(1) a non-exclusive licensee had no remedy
against a person infringing the patent, it cannot
be said that such a licensee was ever without
any rights. By virtue of his licence he had the
right, even though non-exclusively, to benefit in
some way and to some extent in or from the
patent. The infringer had no such right. He was
and is a wrong-doer. There are circumstances
when an infringer by his infringement, his
wrongdoing, could cause the licensee to sustain
damage. The infringement could reduce or even
destroy benefits which were the licensee's by
right because of his agreement with the
patentee.
The extent to which the licensee may become
legally entitled to use or benefit from the
patent, or its subject-matter, is, of course, still
governed by the terms of the licence. As
between the patentee and the bare non-exclu
sive licensee there is no element of exclusivity.
Nevertheless, by the very fact of the licensee
having the licence and the infringer not having
it, there is established an element of exclusivity
as it relates to the licensee and the person
infringing which remains until the patentee also
licenses the infringer and so removes that
exclusivity. The encroachment, by the person
infringing, upon that exclusivity could seriously
damage and cause loss to the licensee.
It would seem logical for Parliament to decide
to correct the situation wherein the licensee,
under such circumstances, had no protection
from and no recourse against the infringer and,
in enacting section 57(1) in its present form, to
create, by statute, a right in the licensee against
the infringer and to provide a means of enforc
ing that right. Certainly the change was not
necessary for the protection of the patentee or
the assignee of the patent. They were already
protected.
An analysis of section 57(1) of the Patent Act
reveals, I think, Parliament's intention to create
such a right and to provide the accompanying
remedy and that it has implemented that inten
tion and accomplished its purpose. In this con
nection, the following are noted:
1. The expressed liability of the person
who infringes both to the patentee and to all
persons claiming under him is set out in the
same subsection and in the same terms.
2. The words "any person who infringes a
patent is liable to" relate both to the patentee
and to persons claiming under him.
3. The words "for all damages sustained"
relate both to the patentee and to persons
claiming under him.
4. There is no differentiation between the
liability of the infringer to the patentee and to
persons claiming under him nor is there any
differentiation between the nature of the
rights the patentee and the persons claiming
under him have against the person infringing.
It seems to me to be made manifest by the
legislation that what the patentee is entitled to
and what the persons claiming under him are
entitled to are basically the same, namely, "all
damages sustained" by them respectively by
reason of the infringement. It would, of course,
be inconceivable that the patentee with a valid
patent would not be entitled, from the person
who infringes, to damages in compensation for
his loss by reason of the infringement. Having
regard to the structure of section 57(1), I am of
opinion that all persons claiming under the
patentee, who would include non-exclusive lic
ensees, now have the same basic right, as has
the patentee, namely, to recover from the
person who infringes, damages in compensation
for their losses by reason of the infringement.
By virtue of section 57(1), the position of the
non-exclusive licensee is advanced beyond
whatever rights or benefits he might have vis-Ã -
vis the patentee arising out of the contractual
relationship between them. In my opinion the
person infringing is now liable to a non-exclu
sive licensee for all damages he sustains by the
infringement to the extent that it encroaches
upon that element of exclusivity as between the
licensee and the infringer previously mentioned.
The situation of a non-exclusive licensee may
change from time to time because of the right of
the patentee to grant other non-exclusive
licences which might dilute and diminish the
benefits of the licensee. Even then there would
still be a right under the licence to the non-
exclusive licensee which the infringer would not
have unless he also became a licensee. Even if
the infringer should later become a licensee
there would still be the prior period to be con
sidered. In any event, when dealing with a situa
tion such as this, regard is to be had to the
circumstances as they exist at the relevant time
and not as they might possibly be sometime in
the future.
I am of opinion that by section 57(1) Parlia
ment, by apt and adequate wording, has accom
plished and implemented an intention to create
a right in a non-exclusive licensee to recover
from a person who infringes a patent, in respect
of any matter relevant to his licence, damages
in compensation for the licensee's loss by
reason of such infringement.
Accordingly in this context the statement of
claim, in my opinion, discloses a cause of action
and sets up a triable issue.
I agree with the views of the Honourable, the
Chief Justice, as to the effect of section 57(2)
of the Patent Act.
I am of the view that the judgment appealed
from should be set aside and that, as the Hon
ourable, the Chief Justice has indicated in his
reasons for judgment his views would be in that
event, there should be a judgment staying all
proceedings in the action other than an applica
tion to add the patentee as a party until the final
disposition of an application to make the paten-
tee a party to the action results in the patentee
becoming a party and providing that
(a) upon the expiration of 30 days from this
Court's judgment without any application
having been made to make the patentee a
party to the action, or
(b) upon the final disposition of such an
application without the patentee becoming a
party to the action,
the action shall stand dismissed with costs.
In the event that the action be not dismissed
with costs by reason of the foregoing I concur
with the views of the Honourable, the Chief
Justice, as to costs as set out in the last para
graph of his reasons for judgment.
No submission was made in this Court to support the
motion to strike out in so far as it was based on the
existence of the infringement action brought by Bristol-
Myers, the patentee, against the respondent.
2 As the substantive rights involved arose prior to the
coming into force of the Revised Statutes of Canada of
1970 on July 15, 1971, I refer to R.S.C. 1952, chapter 203,
as amended. See section 9(2) of the Revised Statutes of
Canada Act, chapter 48 of the Statutes of 1965.
3 In which classification, I am inclined to include in
modern times an exclusive licence regardless of the wording
used to create it. Formerly, I have no doubt, a distinction
would have been made between a grant of an exclusive right
to use and a grant of an exclusive licence. Having regard to
the modern looseness in the use of words, this distinction is
probably now unrealistic.
4 "If a man has a right, he must, it has been observed,
'have a means to vindicate and maintain it, and a remedy if
he is injured in the exercise and enjoyment of it; and,
indeed, it is a vain thing to imagine a right without a
remedy, for want of right and want of remedy are recipro
cal'." See Broom's "Legal Maxims", 8th ed. (1911) pages
153-54, quoting from the famous dictum of Holt, C.J. in
Ashby v. White, 2 Ld. Raym. 953. According to Broom the
maxim "Ubi jus ibi remedium" means that whenever the
common law gives a right or prohibits an injury, it also gives
a remedy. I should have thought that, similarly, where
Parliament creates a right, there is a necessary implication
that it is accompanied by a remedy.
5 It is trite law that, for purposes of stare decisis, the
principles that are enunciated in a decision must be read in
relation to the facts that were under consideration, for, if
other facts not being considered had been brought to the
court's attention, the statement of principles might have
been modified to exclude them.
6 When the final Court of Appeal (i.e. the Supreme Court
of Canada or, as it was at that time, the Privy Council) has,
very deliberately and explicitly pronounced, in current
times, upon a question of "general importance" concerning
the interpretation of a Canadian statute, I do not consider
that I, as a judge of a lower court, should take a contrary
position because I do not agree with that pronouncement
even though I am not, strictly speaking, bound to apply it.
In my view, it cannot help but bring the administration of
justice into disrepute if lower courts deliberately ignore
declarations by the final court of appeal as to the effect of
the statutory law. If there is room for reconsideration, that,
I should have thought, is the task of the final court. It may
be otherwise where passage of time may have made the
pronouncement of the final court irrelevant by reasons of
changed circumstances or where the obiter dicta relates to
the principles of the common law.
7 As already indicated, a copy of the licence agreement is
attached to the Statement of Claim and it shows that the
licensee had no special rights in relation to user by other
persons except a right, in certain circumstances, to be
relieved of paying royalties to the patentee during a period
when the patent was being infringed. See Article V of the
licence agreement quoted, supra. While the facts upon
which the plaintiff relies as showing damages sustained by it
are not pleaded, as I understood counsel during argument,
the appellant proposes to establish that it was damaged
because it lost sales of the product covered by the patent as
a result of the infringement. As I understand the arrange
ment between the plaintiff and the patentee, the plaintiff
had no right to complain of such a loss of sales but only a
right, in certain circumstances, to be relieved of paying to
the patentee royalties on its own sales if there had been an
infringement.
I am not overlooking that I have accepted it that even a
non-exclusive licensee is a "person claiming under" the
patentee and that, by virtue of the definition of "legal
representatives" as revised since the Electric Chain case, a
non-exclusive licensee now falls within the provision in
section 48 that a patent "shall ... avail the grantee and his
legal representatives". Having regard, however, to the Privy
Council decision in the Spun Rock case, this must mean that
it shall avail each person claiming under the patentee to the
extent of the rights conferred on him by the patentee and it
shall avail the patentee or other legal representatives to the
extent of the patent rights that have not been parted with to
such "claiming under" persons.
Two possibilities have suggested themselves to me where
it would be at least arguable that an infringement would
interfere with the rights of a non-exclusive licensee, viz: (a)
where the patentee has agreed that he will not license any
other licensee at less royalty than that payable by the
licensee claiming damages, and (b) where the patentee has
agreed to restrict production to a defined level by himself
and licensees other than the licensee claiming damages and
the infringer has carried production by persons other than
the licensee claiming damages over that ceiling.
9 Where you have, as you apparently have here, a paten-
tee whose practice is to grant licences, he will be entitled to
recover from an infringer the amount of royalties he would
have obtained if the infringer had taken a licence. (Canadian
Patent Law by Fox, 4th Ed., page 496) Alternatively, he
may elect to take the infringer's profits from the infringe
ment on an assumed waiver of the infringement (idem pages
503 et seq.). In the case of an exclusive licence neither of
these remedies would be compatible with the exclusive
licence, but a non-exclusive licence would be no bar to
them. Nevertheless, if the appellant's view is right, in addi
tion to the full relief for the infringement to which the
patentee is entitled, each non-exclusive licensee can bring
an action for any amount that he lost by reason of the fact
that this new competitor came into the market. There would
seem to be some duplication of liability for such an infringe
ment on such a view of the law.
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.