T-462-84
The Procter & Gamble Company and Procter &
Gamble Inc. (Plaintiffs)
v.
Nabisco Brands Ltd.—Nabisco Brands Ltée.
(Defendant)
Trial Division, Collier J.—Toronto, May 17 and
18; Ottawa, May 29, 1984.
Judicial review — Equitable remedies — Injunctions —
Interlocutory injunctions — American Cyanamid case expung
ing rule that before court entitled to consider balance of
convenience applicant must prove prima fade case — Court
not prepared to go so far as procedure prior to grant of patent
in England giving rise to obsolescence of rule different from
Canadian procedure — Cyanamid case requiring consideration
of balance of convenience unless plaintiff having no real pros
pect of succeeding at trial — Plaintiffs' claim not frivolous or
vexatious — On balance of convenience plaintiffs adequately
compensated by monetary damages.
Patents — Motion for interlocutory injunction — Action for
alleged infringement of patent and counterclaim for declara
tion of invalidity — No difference as to general principles
governing interlocutory injunctions between patent suit and
other suits.
This is a motion for interlocutory injunction in an action for
patent infringement and counterclaim for declaration of inva
lidity. The plaintiffs obtained the Canadian patent for a new
kind of cookie which they have not yet produced and sold in
Canada. The defendant is producing and marketing a cookie in
Alberta that allegedly infringes the patent, and proposes to
market it nationally. The plaintiffs rely on the British case
American Cyanamid Co. v. Ethicon Ltd. and Canadian cases
adopting it. There, the rule that the Court is not entitled to take
account of the balance of convenience unless the applicant first
proves a prima facie case, was expunged. Instead it was held
that the court must be satisfied that the claim is not frivolous or
vexatious; there must be a serious question to be tried. The
court should then go on to consider whether the balance of
convenience favours granting or refusing relief. The plaintiffs
submit that the Cyanamid case swept away the so-called rule of
practice affirmed in the Ontario case Teledyne Industries Inc.
et al. v. Lido Industrial Products Ltd. There it was said that in
a patent infringement action that was not well established, an
interlocutory injunction would not be granted if the defendant
stated that the validity of the patent would be attacked. The
defendant submits that the applicant must make out a fair
prima facie case.
Held, the motion is dismissed. The reasons given in the
Cyanamid case for the obsolescence of the "rule" were the
existence of an elaborate procedure for the examination of
patent specifications by expert examiners before a patent is
granted, an opportunity for opposition at that stage and provi
sions for appeal to a Patent Appeal Tribunal. In Canada there
are only limited "opposition" proceedings. Cyanamid notwith
standing, the Court would, in view of the differences in proce
dure, not go so far as to sweep away the rule that the applicant
must first make out a prima facie case.
The plaintiffs' claim raises a serious question to be tried.
Since the patent was very new, this would be its first legal test;
and its alleged infringement and its validity are seriously in
issue. The principle governing the issue of the balance of
convenience was stated in the Cyanamid case to be that the
Court should first consider whether the plaintiff would be
adequately compensated by an award of damages. Although
the plaintiffs will suffer harm the plaintiffs' loss could be
reasonably calculated on the basis of the defendant's sales. In
the legal sense, monetary damages will be an adequate remedy.
CASES JUDICIALLY CONSIDERED
APPLIED:
Teledyne Industries Inc. et al. v. Lido Industrial Prod
ucts Ltd. (1978), 19 O.R. (2d) 740 (Ont. C.A.).
DISTINGUISHED:
American Cyanamid Co. v. Ethicon Ltd., [1975] A.C.
396 (H.L.).
REFERRED TO:
Yule Inc. v. Atlantic Pizza Delight Franchise (1968) Ltd.
et al. (1977), 17 O.R. (2d) 505 (Ont. Div. Ct.); The
Bulman Group Ltd. v. Alpha One-Write Systems B.C.
Ltd. et al. (1981), 54 C.P.R. (2d) 179 (F.C.A.); Cutter
Ltd. v. Baxter Travenol Laboratories of Canada, Ltd. et
al. (1980), 47 C.P.R. (2d) 53 (F.C.A.).
COUNSEL:
D. Sim, Q.C. and C. R. Spring for plaintiffs.
D. Wright, Q.C. and D. MacOdrum, Q.C. for
defendant.
SOLICITORS:
Sim, Hughes, Toronto, for plaintiffs.
Lang, Michener, Cranston, Farquharson &
Wright, Toronto, for defendant.
The following are the reasons for order ren
dered in English by
COLLIER J.: This is an action for alleged
infringement of a patent. There is a counterclaim
for a declaration of invalidity.
The plaintiffs have brought the present motion
for an interlocutory injunction, restraining the
defendant, until trial, from carrying on its alleged
infringing activities.
The parties are business world giants. The dis
pute here involves the development and marketing
of a certain kind of cookie. A great amount of
money has already been spent in respect of the
rival products. A great amount more will likely be
spent, in marketing and sales, in the near future.
There are obviously large financial stakes riding
on the outcome of this litigation.
All that said, there is no difference, as to general
principles governing interlocutory injunctions, be
tween a patent suit and other suits. There may be
one small qualification to that statement which I
shall later mention.
The first plaintiff is an American company. It is
the owner of the patent. The second plaintiff is a
subsidiary Canadian company. It is a licensee
under the patent.
The defendant, and its U.S. parent, have had,
for some time, the biggest share of the North
American cookie market. The plaintiffs, in 1978
and 1979, began research and development into
what is said to be a new kind of ready-made
cookie. It employs two doughs, rather than the
traditional one. The baked product, in the choco
late chip variety, is crisp on the outside and chewy
on the inside. This is in contrast to, for example,
the defendant's very successful "Chips Ahoy"
chocolate chip cookie: crisp throughout.
This was the plaintiffs' first venture into the
cookie market. The U.S. plaintiff test-marketed its
two-dough chocolate chip cookie in Kansas City,
Mo. The results were very good indeed. The plain
tiffs intend to market the cookies in Canada.
Plans, and plant construction, are underway. As
yet, none of the cookies have been actually pro
duced and sold in Canada.
The defendant, and its U.S. parent, became
aware of the plaintiffs' cookies, and that of
another competitor. They decided to compete with
a line of their own. The defendant is already
producing and marketing its cookies in Alberta. It
proposes to market them nationally.
The American plaintiff filed a patent applica
tion in the United States on December 29, 1980.
That has not yet resulted in a patent issue. The
patent in Canada issued on January 24, 1984.
On this motion, there were affidavits filed on
both sides. There was extensive cross-examination.
The result is conflicting evidence on several issues.
I go now to the principles to be applied on a
motion of this kind.
The plaintiffs relied on the well-known, now
almost classic, case of American Cyanamid Co. v.
Ethicon Ltd., [1975] A.C. 396 (H.L.), and on
decisions, in this country, which have adopted
Cyanamid: for example, Yule Inc. v. Atlantic
Pizza Delight Franchise (1968) Ltd. et al. (1977),
17 O.R. (2d) 505 (Ont. Div. Ct.). It was said, for
the plaintiffs, the evidence showed their claim is
not frivolous or vexatious; there is a serious ques
tion to be tried.
The Cyanamid case marked, to some extent, a
change in the law. The decision has been followed
in many courts, at different levels, across Canada.
The Yule case, in Ontario, has been frequently
followed and applied at the trial level. Cyanamid
has also been followed and applied in a number of
decisions, reported, unreported, or unrecorded, in
the Trial Division of this Court. It has been
referred to, without criticism, in decisions of the
Federal Court of Appeal.'
The defendant, nevertheless, submitted to me
the following:
The applicant must make out a fair prima facie case. If not, the
application should be rejected.
The first requisite for an interlocutory injunction is that the
applicant must make out a fair prima facie case, i.e. that, if the
case went to trial on no other evidence than was before the
Court at the hearing of the application, the plaintiff would be
entitled to a permanent injunction in the same terms as the
interlocutory injunction. If this is not established, the applica
tion should be rejected.
Similar contentions were considered, in Cyana-
mid, and expressly rejected.
I adopt the principles set out by Lord Diplock at
page 405:
In the instant appeal, however, the question of the balance of
convenience, although it had been considered by Graham J. and
decided in Cyanamid's favour, was never reached by the Court
of Appeal. They considered that there was a rule of practice so
well established as to constitute a rule of law that precluded
them from granting any interim injunction unless upon the
evidence adduced by both parties on the hearing of the applica
tion the applicant had satisfied the court that on the balance of
probabilities the acts of the other party sought to be enjoined
would, if committed, violate the applicant's legal rights. In the
view of the Court of Appeal the case which the applicant had to
prove before any question of balance of convenience arose was
"prima facie" only in the sense that the conclusion of law
reached by the court upon that evidence might need to be
modified at some later date in the light of further evidence
either detracting from the probative value of the evidence on
which the court had acted or proving additional facts. It was in
order to enable the existence of any such rule of law to be
considered by your Lordships' House that leave to appeal was
granted.
and at pages 407-408:
Nevertheless this authority was treated by Graham J. and the
Court of Appeal in the instant appeal as leaving intact the
supposed rule that the court is not entitled to take any account
of the balance of convenience unless it has first been satisfied
that if the case went to trial upon no other evidence than is
before the court at the hearing of the application the plaintiff
would be entitled to judgment for a permanent injunction in the
same terms as the interlocutory injunction sought.
Your Lordships should in my view take this opportunity of
declaring that there is no such rule. The use of such expressions
' See for example, The Bulman Group Ltd. v. Alpha One-
Write Systems B.C. Ltd. et al. (1981), 54 C.P.R. (2d) 179
(F.C.A.) and Cutter Ltd. v. Baxter Travenol Laboratories of
Canada, Ltd. et al. (1980), 47 C.P.R. (2d) 53 (F.C.A.).
as "a probability," "a prima facie case," or "a strong prima
facie case" in the context of the exercise of a discretionary
power to grant an interlocutory injunction leads to confusion as
to the object sought to be achieved by this form of temporary
relief. The court no doubt must be satisfied that the claim is not
frivolous or vexatious; in other words, that there is a serious
question to be tried.
It is no part of the court's function at this stage of the
litigation to try to resolve conflicts of evidence on affidavit as to
facts on which the claims of either party may ultimately depend
nor to decide difficult questions of law which call for detailed
argument and mature considerations. These are matters to be
dealt with at the trial. One of the reasons for the introduction
of the practice of requiring an undertaking as to damages upon
the grant of an interlocutory injunction was that "it aided the
court in doing that which was its great object, viz. abstaining
from expressing any opinion upon the merits of the case until
the hearing": Wakefield v. Duke of Buccleugh (1865) 12 L.T.
628, 629. So unless the material available to the court at the
hearing of the application for an interlocutory injunction fails
to disclose that the plaintiff has any real prospect of succeeding
in his claim for a permanent injunction at the trial, the court
should go on to consider whether the balance of convenience
lies in favour of granting or refusing the interlocutory relief
that is sought.
I have set out, at some length, excerpts from the
Cyanamid case. I did so because of the position,
earlier recounted, taken by the defendant. In fair
ness, there was, during argument, some resiling. It
was, however, never enthusiastic.
I indicated, at the conclusion of argument, I was
satisfied the plaintiffs' claim here is not frivolous
or vexatious; that there is a serious question to be
tried. I now affirm that statement.
In arriving at my decision, I have not overlooked
the so-called rule of practice, expunged by Lord
Diplock in the United Kingdom, at pages 405-406:
The instant appeal arises in a patent case. Historically there
was undoubtedly a time when in an action for infringement of a
patent that was not already "well established", whatever that
may have meant, an interlocutory injunction to restrain
infringement would not be granted if counsel for the defendant
stated that it was intended to attack the validity of the patent.
Relics of this reluctance to enforce a monopoly that was
challenged, even though the alleged grounds of invalidity were
weak, are to be found in the judgment of Scrutton L.J. as late
as 1924 in Smith v. Grigg Ltd. [1924] 1 K.B. 655; but the
elaborate procedure for the examination of patent specifica
tions by expert examiners before a patent is granted, the
opportunity for opposition at that stage and the provisions for
appeal to the Patent Appeal Tribunal in the person of a patent
judge of the High Court, make the grant of a patent nowadays
a good prima facie reason, in the true sense of that term, for
supposing the patent to be valid, and have rendered obsolete the
former rule of practice as respects interlocutory injunctions in
infringement actions. In my view the grant of interlocutory
injunctions in actions for infringement of patents is governed by
the same principles as in other actions. I turn to consider what
those principles are.
The Ontario Court of Appeal has, however,
affirmed the existence of the "rule": Teledyne
Industries Inc. et al. v. Lido Industrial Products
Ltd. (1978), 19 O.R. (2d) 740 at pages 741-743:
On January 13, 1977, leave to appeal to the Divisional Court
was granted by Mr. Justice Labrosse. He doubted the correct
ness of the order because of the judgment of Heald, J., in
Aluma Building Systems Inc. v. J.C. Fitzpatrick Construction
Ltd. (1974), 17 C.P.R. (2d) 275 at p. 278, where he said:
An interlocutory injunction will not be granted in patent
cases when the validity or infringement of the patent is
disputed, the patent is of recent origin, its validity has not
been established by a Court decision and the defendant gives
an undertaking to the Court to keep an account (see for
example—Field v. Otter (1974), 14 C.P.R. (2d) 186; Aurele
Marois Inc. v. International Fibreglass Ltd. (1971), 1 C.P.R.
(2d) 148; Parke, Davis & Co. and Parke, Davis & Co. Ltd.
v. Gilbert Surgical Supply Co. Ltd. (1959), 31 C.P.R. 1, 18
Fox Pat. C. 175). All of said circumstances are present in
this case. Without detailing the evidence adduced by the
defendant, suffice it to say that defendant has raised serious
and substantial issues on the questions of both infringement
and validity and has established that he has a fighting case
thereon. I have therefore concluded that the plaintiff is not
entitled to succeed on this branch of his motion.
Mr. Sim contended that the Divisional Court has elevated a
rule of practice which I have quoted from the Aluma case to a
rule of law providing a complete answer where the applicant for
interim injunction is dependent upon a recently issued and
untried patent. With the greatest deference, I do not agree with
his submission. I think counsel reads much more into the words
of Griffiths, J., than is justified. The learned Judge quite
properly emphasized the necessity of giving consideration to the
rule of practice and the concluding paragraph of his reasons in
this respect makes this clear. It dispels any notion that the rule
of practice should be treated as the determining principle,
rather than as one principle to be considered, along with others,
in deciding whether to exercise one's discretion to grant or
refuse the applications. Griffiths, J., concluded by saying [at p.
116 O.R., p. 451 D.L.R., p. 275 C.P.R.]:
In this case the validity and infringement of the plaintiffs'
patent has been disputed, the patent is of recent origin and
its validity has never been established by a Court decision.
The defendant offered an undertaking to keep an account. In
our view the learned Judge erred in failing to take these
factors into consideration as strong grounds for refusing the
injunction.
I think the practice is no more than this. A recently issued
untried patent is deemed to be valid under s. 47 of the Patent
Act, R.S.C. 1970, c. P-4. When, on a motion for interim
injunction for infringement of such a patent, some evidence of
infringement is offered and the other general principles appli
cable to interim injunction are satisfied, if the motion is
opposed, although no evidence to the contrary is filed, the rule
of practice should be considered. However, in such circum
stances I should think it unlikely that, alone, it would tip the
scales against the plaintiffs. On the other hand, in cases such as
Aluma, supra, the presumption of the validity of the patent
disappears because of the introduction of evidence to the con
trary: Circle Film Enterprises Inc. v. Canadian Broadcasting
Corp., [1959] S.C.R. 602 at p. 606, 20 D.L.R. (2d) 211 at p.
214, 31 C.P.R. 57 at p. 60. There, the evidence was of such a
nature as to raise serious and substantial issues on the question
of both infringement and validity of the patent and showed that
the defendant had an arguable case. In such circumstances, the
rule of practice might well tip the scales of discretion against
the issuing of the injunction. The rule of practice must be
considered in all such applications but is not an absolute bar to
an injunction.
The Teledyne case was heard before the Cyana-
mid case was generally accepted. In both the
Divisional Court and the Ontario Court of Appeal,
the argument proceeded on the basis of the
Ontario law which pre-existed Cyanamid: see page
742 of Teledyne.
Before me, the defendant relied on earlier deci
sions in the Exchequer Court and the Trial Divi
sion of this Court. Again, those cases were
pre-Cyanamid.
Counsel for the plaintiffs submitted, to me, the
so-called rule of practice is now swept away, in
Canada, by reason of the Cyanamid decision.
I am not prepared to go that far.
The reasons given by Lord Diplock, for the
obsolescence of the "rule" in England, do not have
the same force in Canada. There is only very
limited, so-called "opposition" proceedings, if any
at all, in Canada, before a patent issues. I do not
propose to set them out in any detail. Written
"opposition" submissions can sometimes be made
if someone learns a patent is pending. That, as I
understand it, is as far as the matter goes.
Finally, to summarize on this point. I have, in
deciding the plaintiffs' claim raises a serious ques-
tion to be tried, kept these matters in mind: the
patent is very new; this will be its first legal test;
its alleged infringement, and its validity, are seri
ously in issue. I have further kept in mind, in
considering the balance of convenience, the same
rule of practice.
I turn now to that issue.
Once more, I go to Lord Diplock (page 408):
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 plaintiffs 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
tiffs 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.
It is where there is doubt as to the adequacy of the respective
remedies in damages available to either party or to both, that
the question of balance of convenience arises. It would be
unwise to attempt even to list all the various matters which may
need to be taken into consideration in deciding where the
balance lies, let alone to suggest the relative weight to be
attached to them. These will vary from case to case.
Where other factors appear to be evenly balanced it is a
counsel of prudence to take such measures as are calculated to
preserve the status quo. If the defendant is enjoined temporari
ly from doing something that he has not done before, the only
effect of the interlocutory injunction in the event of his succeed
ing at the trial is to postpone the date at which he is able to
embark upon a course of action which he has not previously
found it necessary to undertake; whereas to interrupt him in the
conduct of an established enterprise would cause much greater
inconvenience to him since he would have to start again to
establish it in the event of his succeeding at the trial.
In this case, both parties take the position they
will each suffer irreparable harm or injury, which
cannot be adequately compensated in monetary
damages. The plaintiffs, if the defendant is permit
ted to continue, and expand, its first in the arena
activities in Canada; the defendant, if its present
and proposed activities are halted, yet some con
siderable time later, those activities are held to
have been proper all along.
The question before me was a difficult one.
There was strongly conflicting evidence as to the
advantageous effect, or otherwise, of being first in
the market-place with a new product: in this case
the Canadian cookie market-place.
The plaintiffs have an accepted reputation of
successfully entering a market-place with innova
tive products. Their advertising and marketing
techniques are aggressive, expensive and effective.
They assert they have, by the patent, the right to
be first in the Canadian arena; the defendant's
activities have, and will, effectively destroy all the
advantages that brings; monetary compensation
would be incapable of calculation, and inadequate.
The defendant's evidence, and argument, is that
there is no advantage to being first in; the defend
ant, if forced by injunction to withdraw at this
stage, could not be adequately compensated, even
if it later succeeded in its defence, and re-entered
the market; the harm, in the interim, would be
irreparable.
I have tried, in the limited time at hand, to give
careful consideration to the conflicting opinions
and views.
I am not satisfied the plaintiffs will suffer harm
which cannot be adequately calculated in, and
compensated by, money.
Difficulty in calculating damages is not a com
pelling reason for injunctive relief. There never can
be, in any case, perfect monetary compensation.
The law does not, in tort, permit that.
On the facts before me, I am satisfied the
plaintiffs will suffer injury and harm, from now to
trial, if the defendant is, in law, infringing. But on
the balance of probabilities, on the evidence before
me, I am satisfied the plaintiffs' loss can be rea
sonably calculated on the basis of the defendant's
sales; that, in the legal sense, monetary damages
will be an adequate remedy.
The defendant has agreed to keep an account of
sales and profits.
The motion is otherwise dismissed. Costs are in
the cause.
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