T-1175-87
Aktiebolaget Hassle (Plaintiff)
v.
Apotex Inc. (Defendant)
INDEXED AS: AKTIEBOLAGET HASSLE V. APOTEX INC.
Trial Division, Dubé J.—Ottawa, September 24
and 29, 1987.
Federal Court jurisdiction — Trial Division — Patents —
Licences — Royalties — Court without jurisdiction to enter
tain claim for unpaid royalties — Collection of unpaid royal
ties matter of contract between subjects — Only incidentally
relating to matters under Patent Act — Application to strike
statement of claim allowed.
Patents — Licences — Royalties — Claim for unpaid
royalties — No authority under Patent Act for Federal Court
to entertain claim — Collection of unpaid royalties contractu
al matter between subjects — Only incidentally related to
granting of licence.
This is a motion to strike out a statement of claim on the
ground that the Federal Court is without jurisdiction to enter
tain claims for royalties due and unpaid under the Patent Act.
The defendant was granted a licence under the plaintiffs
patent relating to medicine. The plaintiff contends that it is
entitled to the remedy provided by subsection 41(4) of the Act
which requires the Commissioner to grant a licence and fix the
amount of royalty, and in so doing, to have regard to the
welfare of the public, consistent with giving due reward to the
patentee. The defendant argues that the claims are matters of
contract to be pursued before provincial courts, and not matters
falling under section 20 of the Federal Court Act.
Held, the motion should be allowed.
Subsection 41(4) of the Patent Act does not confer on the
Federal Court the jurisdiction to entertain a claim for unpaid
royalties. The collection of unpaid royalties is primarily a
matter arising under a contract between subjects; it only inci
dentally relates to the granting of a licence by the
Commissioner.
The decision Composers, Authors & Publishers Assoc. of
Canada Ltd. v. Sandholm Holdings Ltd. et al., [1955] Ex.C.R.
244 does not support the plaintiffs claims. Subsection 10B(8)
of The Copyright Amendment Act, 1931, at issue in that case,
provided a statutory remedy to collect unpaid royalties. The
Patent Act affords no such remedy. On the contrary, subsection
72(1) of that Act provides that the grant of a licence operates
as a contract between the patentee and the licensee "without
prejudice to any other method of enforcement".
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 20.
Federal Court Rules, C.R.C., c. 663, R. 419(1)(a).
Patent Act, R.S.C. 1970, c. P-4, ss. 41, 45, 72(1).
The Copyright Amendment Act, 1931, S.C. 1931, c. 8,
s. 10s(8).
CASES JUDICIALLY CONSIDERED
APPLIED:
McCracken et al. v. Watson, [1932] Ex.C.R. 83.
DISTINGUISHED: -
Kellogg Company v. Kellogg, [1941] S.C.R. 242; (1941),
1 C.P.R. 30; rev'g [1942] Ex.C.R. 87; Leeson Corp. v.
Sinyor Spinners of Canada Ltd. (No. 2) (1975), 19
C.P.R. (2d) 46 (F.C.T.D.); Composers, Authors & Pub
lishers Assoc. of Canada Ltd. v. Sandholm Holdings Ltd.
et al., [1955] Ex.C.R. 244.
CONSIDERED:
General Foods Ltd. v. Struthers Scientific & Interna
tional Corp. (1971), 3 C.P.R. (2d) 97 (F.C.T.D.).
COUNSEL:
R. Smart, Q. C. for plaintiff.
Malcolm Johnston, Q.C. for defendant.
SOLICITORS:
Smart & Biggar, Ottawa, for plaintiff.
Malcolm Johnston, Q.C. for defendant.
The following are the reasons for order ren
dered in English by
DUBÉ J.: This motion by the defendant is to
strike out in its entirety the statement of claim in
this action pursuant to Rule 419(1)(a) [Federal
Court Rules, C.R.C., c. 663] on the ground that it
discloses no reasonable cause of action within the
jurisdiction of this Court. In a nutshell, the issue to
be resolved is whether or not this Court has the
jurisdiction to entertain a claim for royalties due
and unpaid under the Patent Act.'
R.S.C. 1970, c. P-4.
The statement of claim alleges that the plaintiff,
a Swedish corporation, is the owner of Canadian
patent no. 982,140 granted to it on January 20,
1976, in respect of an invention entitled "Phenoxy-
Hydroxypropylamines and Their Preparation". On
July 30, 1984, the Commissioner of Patents grant
ed under section 41 of the Patent Act to the
defendant, a Canadian corporation, interim licence
no. 659 Int and on January 23, 1985, licence no.
659 under the plaintiff's patent.
The plaintiff claims in the statement of claim
that subsequent to September 30, 1984, the
defendant sent no accounting statements to the
plaintiff and made no payment of royalties. Pursu
ant to paragraph 9 of the licence a notice of
termination was issued on the ground of those
breaches. The unremitted royalty due as of Janu-
ary 22, 1985, was of $28,468.66. The plaintiff
therefore claims that the plaintiff is entitled to an
accounting before this Court to determine the
amount of royalty due and unpaid and an order to
the effect that the defendant has breached the
terms and conditions of the licences which are now
automatically terminated because of the defaults
aforementioned.
The defendant argues that these claims are mat
ters of contract to be pursued before provincial
courts and not properly matters falling under the
Federal Court Act. 2 Section 20 of the Act dealing
with industrial property reads as follows:
20. The Trial Division has exclusive original jurisdiction as
well between subject and subject as otherwise,
(a) in all cases of conflicting applications for any patent of
invention, or for the registration of any copyright, trade mark
or industrial design, and
(b) in all cases in which it is sought to impeach or annul any
patent of invention, or to have any entry in any register of
copyrights, trade marks or industrial designs made,
expunged, varied or rectified,
and has concurrent jurisdiction in all other cases in which a
remedy is sought under the authority of any Act of the Parlia
ment of Canada or at law or in equity, respecting any patent of
invention, copyright, trade mark or industrial design. [My
underlining.]
Any jurisdiction of this Court to entertain the
plaintiff's claim would have to be under the au
thority of the Patent Act. However, section 72 of
2 R.S.C. 1970 (2nd Supp.), c. 10.
the Patent Act provides that the grant of a licence
operates as if it were embodied in a deed, therefore
a contract between the parties. Subsection 72(1)
reads as follows:
72. (1) Any order for the grant of a licence under this Act,
without prejudice to any other method of enforcement, operates
as if it were embodied in a deed granting a licence executed by
the patentee and all other necessary parties.
In a 1932 Exchequer Court of Canada decision
McCracken et al. v. Watson, 3 the plaintiff's claim
was that the defendant had infringed the patent in
question by selling tile making machines in prohib
ited territory defined in a second agreement. The
Court held that the issue between the parties was
one relating to an alleged breach of contract
affecting property and civil rights and that it has
no jurisdiction to entertain such an action.
Maclean J. said at page 87 that the allegation
"that the defendant had sold three machines to
persons within the prohibited territory, does not
suggest infringement but possibly a breach of
contract".
In Kellogg Company v. Kellogg' the Supreme
Court of Canada dealt with paragraph 8 of the
statement of claim wherein the plaintiff pleaded
that the first inventor of the subject-matter of the
patent application created the invention while
employed by the plaintiff and that it was entitled
to the benefit of the invention. The Exchequer
Court [[1942] Ex.C.R. 87] struck out the para
graph on the ground that it had no jurisdiction to
determine those issues: any jurisdiction would have
to be found within section 44 (now 45) of the
Patent Act "as otherwise the appellant's claim, in
paragraph 8, was one which dealt with property
and civil rights and which fell within the jurisdic
tion of the provincial courts" [at pages 247
S.C.R.; 36 C.P.R.]. The former section 44 and the
present section 45 deal with conflicting applica
tions for patents. Rinfret J. said as follows at pages
249 S.C.R.; 39 C.P.R.:
3 [1932] Ex.C.R. 83.
4 [1941] S.C.R. 242; (1941), 1 C.P.R. 30.
It is undoubtedly true, as stated by the learned President,
that the Exchequer Court has no jurisdiction to determine an
issue purely and simply concerning a contract between subject
and subject ... ; but here the subject-matter of the appellant's
allegation only incidentally refers to the contract of
employment ....
The Supreme Court found that the allegation
primarily concerned the invention and allowed the
appeal.
In General Foods Ltd. v. Struthers Scientific &
International Corp., 5 Noël A.C.J. of the Federal
Court held that the Court has no jurisdiction
where the issue is purely and simply the rights
under a contract between subject and subject. But,
where the subject-matter of the plaintiffs allega
tion may well only incidentally refer to a contract
between the parties and may lead to the result that
the plaintiff is entitled to the rights from the
invention, the pleading should be accepted and the
issue be determined by the trial judge.
In Leesona Corp. v. Sinyor Spinners of Canada
Ltd. (No. 2), 6 Walsh J., formerly of this Court,
dismissed an application for stay as he found the
action of the plaintiff on its face to be an action for
the infringement of a patent, which is a matter
within the jurisdiction of the Court. He said, how
ever, at pages 50 and 51:
The jurisprudence cited by counsel for defendant in support
of his contention that when a matter concerns primarily a
breach of contract and only incidentally deals with patent
infringement, the Court has no jurisdiction, has no application
here as the issue before this Court is clearly one of patent
infringement, the contract not even being invoked by plaintiff.
In the instant case, the plaintiff argues that it is
seeking and is entitled to the remedy provided by
subsection 41(4) of the Patent Act. The subsection
stipulates that the Commissioner shall under cer
tain conditions grant to the applicant a licence
under any patent relating to medicine. The subsec
tion directs that in settling the terms of the licence
and fixing the amount of royalty, or other con
sideration payable, the Commissioner shall have
regard to the welfare of the public, consistent with
giving due reward to the patentee.
5 (1971), 3 C.P.R. (2d) 97 (F.C.T.D.).
6 (1975), 19 C.P.R. (2d) 46 (F.C.T.D.).
In my view, that section does not clothe the
Federal Court with the jurisdiction to preside over
the collection of unpaid royalty, which is primarily
a matter arising under a contract between subjects
and only incidentally relates to the granting of a
licence by the Commissioner. The purpose of the
subsection is to insure that the public has access to
medicine at the lowest possible price (consistent
with due reward to the patent holder). Subsection
41(4) does not provide a statutory remedy with
reference to unpaid bills.
The plaintiff relies mostly on a 1955 Exchequer
Court decision Composers, Authors & Publishers
Assoc. of Canada Ltd. v. Sandholm Holdings Ltd.
et al., 7 a matter under the Copyright Act [R.S.C.
1927, c. 32]. The defendant in that case did not
pay its licence fees for the performance of a musi
cal work in which the plaintiff owned the perform
ing rights. The plaintiff alleged that the said
performances by the defendant after the suspen
sion of a licence constituted infringements of its
copyright, that it had suffered damage by reason
thereof, and sought to recover for the said
infringement in addition to the unpaid licence fees.
Thorson P. remarked as follows at pages 249 and
250:
At the commencement of the trial I had doubt whether the
plaintiff had a right to sue for license fees in this Court. This
was based on the assumption that the plaintiff's cause of action
was based on a contract between subject and subject. My doubt
was twofold, firstly, whether this Court had been vested with
jurisdiction to entertain such an action and, secondly, if so,
whether it was within the competence of Parliament to vest
such jurisdiction in it.
I am now satisfied that there is no reason for this doubt. A
consideration of the relevant statutes makes it clear that this
Court has been vested with jurisdiction to hear and determine
such an action as this. I refer first to section 22(c) of the
Exchequer Court Act, R.S.C. 1927, Chapter 34, as amended by
section 3 of chapter 23 of the Statutes of Canada, 1928, which
reads as follows:
22. The Exchequer Court shall have jurisdiction as well
between subject and subject as otherwise,
(c) in all other cases in which a remedy is sought under
the authority of any Act of the Parliament of Canada
or at Common Law or in Equity, respecting any
patent of invention, copyright, trade mark, or indus
trial design.
7 [1955] Ex.C.R. 244.
In my view, the present action is within the ambit of this
enactment for the plaintiff seeks a remedy respecting copyright
under the authority of an Act of the Parliament of Canada,
namely, subsection (8) of section 10B of The Copyright
Amendment Act, 1931, which I have already cited. The plain
tiff issued a license to the defendant to perform musical works
in which it owned the performing rights, a segment of copy
right, and Parliament has given it a statutory remedy against
its licensee. The action is thus not an action to enforce a
contractual right but to enforce a statutory remedy. In my
view, this sufficiently distinguishes the present case from
McCracken v. Watson.
My next reference is to subsection 6 of section 20 of the
Copyright Act, R.S.C. 1927, chapter 32, as enacted by section
7 of The Copyright Amendment Act, 1931, which reads as
follows:
20(6) The Exchequer Court of Canada shall have concur
rent jurisdiction with provincial courts to hear and determine
all civil actions, suits, or proceedings which may be instituted
for violation of any of the provisions of this Act or to enforce
the civil remedies provided by this Act.
This section disposes of any doubt that Parliament has given
this Court jurisdiction to hear and determine such an action as
this for it is clearly a civil action to enforce the civil remedy
provided by subsection (8) of section 10B of The Copyright
Amendment Act, 1931. In view of the enactments to which I
have referred I have now no hesitation in finding that this
Court has been vested with jurisdiction to hear and determine
an action for license fees in respect of the issue of a license by a
performing rights society such as the plaintiff for the perform
ance of musical works in which it owns the performing rights.
[Underlining added.]
With all due respect, that decision under The
Copyright Amendment Act, 1931 [S.C. 1931, c. 8]
is of no assistance to the plaintiff. That Act is
dissimilar in many respects to the Patent Act. In
the former Act, the right to sue for the amounts
approved by the Copyright Appeal Board was
expressly conferred by subsection 10B(8) [as am.
by S.C. 1936, c. 28, s. 2] which stipulated that
"the society, association or company concerned
may respectively lawfully sue for or collect" its
fees or royalties. That subsection clearly provided
a statutory remedy to collect unpaid royalties.
Whereas the Patent Act affords no such remedy to
the patentee. On the contrary, it states under
subsection 72(1), already cited, that the grant of a
licence operates as a contract between the patentee
and the licensee "without prejudice to any other
method of enforcement". Again, the instant action
against the licensee is primarily for the enforce
ment of a contract between the parties and deals
only incidentally with matters under the Patent
Act.
Consequently, the statement of claim herein will
be struck out in its entirety pursuant to Rule
419(1)(a) on the ground that it discloses no
reasonable cause of action within the jurisdiction
of this Court.
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.