Date: 20011124
Docket: T-1020-01
Neutral citation: 2001 FCT 1431
BETWEEN:
CONTOUR OPTIK INC. and CHIC OPTIC INC.
Plaintiffs
- and -
E'LITE OPTIK, INC.
Defendant
[Pronounced orally from the Bench on
Tuesday, December 18, 2001]
[1] The defendant moved, pursuant to Rule 399(1) of the Federal Court Rules, 1998, (the "Rules") to set aside the default judgment, obtained ex parte, Justice Blais granted the plaintiffs on November 29, 2001. I allowed the motion from the Bench for reasons which are now expressed in writing.
[2] The plaintiffs launched a patent infringement action against the defendant, a U.S. corporation based in Texas, by way of statement of claim filed in this Court on June 11, 2001 and served on the defendant on June 14, 2001. The action relates to magnetic sun clips that transform one's prescription glasses into sunglasses covered by Canadian Patent 2,233,295 (the "295 patent").
[3] Rule 399(1) reads:
| 399. (1) On motion, the Court may set aside or vary an order that was made (a) ex parte; or (b) in the absence of a party who failed to appear by accident or mistake or by reason of insufficient notice of the proceeding, if the party against whom the order is made discloses a prima facie case why the order should not have been made.
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399. (1) La Cour peut, sur requête, annuler ou modifier l'une des ordonnances suivantes, si la partie contre laquelle elle a été rendue présente une preuve prima facie démontrant pourquoi elle n'aurait pas dû être rendue : a) toute ordonnance rendue sur requête ex parte; b) toute ordonnance rendue en l'absence d'une partie qui n'a pas comparu par suite d'un événement fortuit ou d'une erreur ou à cause d'un avis insuffisant de l'instance. |
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[4] The test for setting aside a default judgment obtained ex parte is set out by Lutfy J., as he then was, in Tailor Made Golf Co. et al. v. 1110314 Ontario Inc., (d.b.a. Selection Sales) (1998), 81 C.P.R. (3d) 237. It is a three-part test with the defendant being required to satisfy the Court all three parts have been met:
(1) First, the defendant must establish either "substantial reasons", a "satisfactory excuse" or a "reasonable explanation" for the failure to file its statement of defence;
(2) Second, the defendant must move the Court promptly to set aside the default judgment; and
(3) The defendant must establish a prima facie defence.
[5] I conclude the defendant has met the required three-part test.
(1) Reasonable explanation
[6] First, the defendant has satisfied me he has a reasonable explanation for not filing a statement of defence within forty days after being served. In my view, in the circumstances of this case, it was reasonable for James Hamaker, its Chief Operating Officer, to assume his Canadian solicitors would have had knowledge of this new action launched and would handle the matter for him. As will be seen, his Canadian solicitors had no knowledge of this action.
[7] The plaintiffs, or some of them, and the defendant are not strangers to one another: they are engaged in a number of lawsuits against one another both in Canada and in the United States whether they be actions for trade-mark infringement, patent infringement or misleading advertising.
[8] In Canada, David Chao, the inventor and patentee of Canadian patent 2235917 launched an action against the defendant in this Court on June 14, 2000, claiming patent infringement. That action is court file T-1045-00. The defendant has filed a statement of defence and counterclaim and the action is being prosecuted and defended by the same counsel as in this action.
[9] The same parties and counsel were involved in a trade-mark infringement action launched by Chic Optic Inc. in this Court (court file T-1064-00 filed on June 16, 2000). This proceeding was dismissed by the Court for delay on December 5, 2001 .
[10] On June 12, 2001, in court file T-1029-01, the defendant and its sister company E'lite Optik Canada Inc. launched a trade-marks action alleging misleading advertising against the plaintiffs in this action. Plaintiffs and defendant's counsel are the same as in this action.
[11] The action in court file T-1029-01 was commenced by counsel for the defendant after counsel for the plaintiffs had sent, via telecopier, a show cause letter dated June 4, 2001, directly to the defendant in Texas complaining about a full page advertisement in VM Vision of May 7, 2001, which was said by the plaintiffs to contain false information.
[12] Counsel for the defendant wrote back to counsel for the plaintiffs on June 6, 2001, requesting the plaintiffs' firm not contact its client directly in the future.
[13] Counsel for the plaintiffs wrote back to counsel for the defendant on June 7, 2001. He explained the June 4, 2001 letter was a show cause letter which had to be addressed directly to his client and the issue involved was different than the patent infringement case which the defendant's firm was handling. Counsel for the plaintiffs added if there was any oversight on their part it would have been to provide the defendant's law firm in Canada, as a courtesy, with a copy of such letter.
[14] In an affidavit in support of the defendant's motion to set aside the ex parte default judgment, James Hamaker provided the following excuse:
If I did receive the statement of claim in this proceeding, I would have understood that my Canadian counsel would also have received a copy of the statement of claim, as has occurred in the past in the U.S. I was also aware that my Canadian counsel had requested that plaintiff's [sic] counsel deal directly with our Canadian counsel . . . . The failure to provide my Canadian counsel with the statement of claim in this proceeding would have been the result of inadvertence by me and E'lite Optik Inc.
E'lite Optik has always vigorously defended every suit brought by Chic Optic Inc. and Contour Optic Inc. in Canada and the U.S. and desires to do so in this proceeding.
[15] In my view, the defendant has satisfactorily explained why it did not file its defence on time. Mr. Hamaker could, in the circumstances, reasonably believe his Canadian counsel would have been aware of the new action which as it turned out was not the case.
[16] This reliance is borne out by the defendant's actions in other litigation between the parties. It is inconceivable the defendant would have done nothing about the new action but for the reasonable belief it had that its Canadian solicitors were on top of things.
(2) Acting promptly
[17] In terms of the second prong of the three-part test, acting promptly, I conclude the defendant did so after being served in early December with a copy of the default judgment. Counsel for the plaintiffs did not argue otherwise.
(3) Prima facie defence
[18] The defendant established a prima facie defence.
[19] The defendant asserts its clip-on glasses do not infringe the 295 patent which has four claims.
[20] Claim one, an independent claim, is not infringed, the defendant says, because its product does not have a first magnetic member on the primary frame.
[21] As to claim two, another independent claim, the defendant says its product does not have a first connector secured in the middle bridge portion of the primary frame.
[22] Those assertions, at this early stage, are sufficient, in my view, to satisfy the third prong of the Tailor Made test.
[23] For all of these reasons, Justice Blais' order of Monday, November 29, 2001, granting default judgment is set aside with costs of the motion in the event of the cause. Defendant shall serve and file its statement of defence on or before January 7, 2002.
"François Lemieux"
J U D G E
OTTAWA, ONTARIO
DECEMBER 24, 2001
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1020-01
STYLE OF CAUSE: CONTOUR OPTIK INC. ET AL. v. E'LITE OPTIK, INC.
PLACE OF HEARING: OTTAWA
DATE OF HEARING: DECEMBER 18, 2001
REASONS FOR ORDER: LEMIEUX, J.
DATED: DECEMBER 24, 2001
APPEARANCES:
JEAN CARRIÈREFOR THE PLAINTIFFS
SCOTT MILLER
SHARON GRIFFINFOR THE DEFENDANT
SOLICITORS OF RECORD:
MENDELSOHN ROSENTZVEIG SHACTER
MONTRÉALFOR THE PLAINTIFFS
MARUSYK MILLER & SWAIN, LLP
OTTAWAFOR THE DEFENDANT