Ottawa, Ontario, January 18, 2007
PRESENT: The Honourable Mr. Justice O'Reilly
BETWEEN:
and
STRATFORD HOLDINGS CORPORATION
previously known as CRANE PLUMBING CORPORATION
and CRANE PLUMBING CANADA CORP.
REASONS FOR ORDER AND ORDER
[1]
QAD Inc. alleges that
the defendants have infringed its copyright in a software program used in
managing the manufacturing process. QAD also alleges that the defendants failed
to pay certain transfer fees when they acquired the software from their
predecessors. The defendants concede that they have violated QAD’s copyright,
but dispute their liability in damages and argue that they should be given time
to replace the software with another program.
[2] QAD argues that the issues and evidence are sufficiently clear that I should grant it summary judgment. The defendants submit that certain key facts remain unresolved and, therefore, that the dispute should go to trial.
[3] While I agree with QAD that many of the issues seem to be settled, I do not feel the conditions for summary judgment are present. I must, therefore, dismiss this application.
I. Issue
[4]
Should
summary judgment be granted?
II. Analysis
(a) Factual brackground
[5] QAD’s software is called MFG/PRO. In January 1998, QAD entered into a licensing agreement with Crane Co., a U.S. Company (not a defendant to this action). The agreement gave Crane Co. permission to use the software subject to certain terms and conditions. Crane Co. paid QAD a license fee based on the number of users. In total, there were 384 users in eight locations, including 65 in Montreal.
[6] The agreement also obliged Crane Co. to notify QAD of any sale of its operations and to give QAD an opportunity to consent to use of the software by the purchaser. Further, the agreement stipulated that the purchaser should pay a transfer fee to QAD and enter into a new licensing agreement with QAD within 30 days.
[7] In October 2001, Crane Co. sold the assets of its Montreal business to the Crane Plumbing Corporation, which later became the defendant Stratford Holdings Corporation. In February 2005, Stratford sold those assets to the defendant Crane Plumbing Canada Corporation (CPCC). Neither of the defendants paid QAD any transfer fees or entered into new licensing agreements with QAD. Stratford used the software from 2001 to 2005. CPCC has used the software since 2005.
(b) Conditions for Summary Judgment
[8] As I stated in Cores Worldwide Inc. v. Ship M/V “Camilla” (The):
The Court grants summary judgments in situations where there is no genuine issue for trial: Granville Shipping Co. v. Pegasus Lines Ltd. S.A., [1996] 2 F.C. 853. It cannot do so where there are serious factual issues to be resolved: Warner-Lambert v. Concord Confections Inc. 2001 FCT 139, [2001] F.C.J. No. 287. The applicant must present evidence showing that there is no factual issue for which a trial is necessary: Feoso Oil Ltd. v. "Sarla" (The), [1995] 3 F.C. 68 (C.A.); Irving Ungermann Ltd. v. Galanis (1991), 4 O.R. (3d) 545 (C.A.); Ruhl Estate v. Mannesmann Kienzle GmbH, [1997] F.C.J. No. 1345. On the other hand, the respondent must "put its best foot forward", in the sense that it must tender evidence showing that there is a genuine factual dispute. It cannot simply deny the applicant's claims or rely solely on the pleadings: Pizza Pizza v. Gillespie (1990), 75 O.R. (2d) 225; ITV Technologies Inc. v. WIC Television Ltd., 2001 FCA 11, [2001] F.C.J. No. 400
(2004 FC 1160, at para. 3).
(c) Facts in dispute
(i) Defendants’
Knowledge
[9] As mentioned, the defendants admit that they have used QAD’s software and have infringed QAD’s copyright. However, they argue that their liability to QAD is limited, given that they had no knowledge of the terms of the original licensing agreement until 2005, when QAD contacted them. They allege that it was Crane Co. who was obliged to inform QAD of the sale of part of its operations and to obtain QAD’s consent. They contend that they assumed when they purchased the assets of their predecessors that they got the software along with them. Accordingly, they submit that their lack of knowledge of the terms of the original agreement, and the fact that their use of the software was in good faith, should figure in the calculation of damages.
[10]
QAD points out that the
defendants admit that they possessed a copy of the original license agreement
and, therefore, either knew or ought to have known about their obligations
under it. QAD contests the defendants’ claim of good faith.
(ii)
Notice to QAD
[11] Stratford maintains that it informed QAD that the Montreal operation had been sold. They contacted QAD in 2002, informed it of the sale and cancelled their maintenance contract. Stratford maintains that QAD was, therefore, aware that it was using the software at that point and never asked for payment of a transfer fee. Accordingly, Stratford argues that QAD, having waited until 2006 to commence its action, is beyond the three-year limitation period set out in s. 41 of the Copyright Act.
[12] QAD submits that notice of the sale was inadequate. The communication was made to one of QAD’s maintenance representatives, not to any person with responsibility for licensing matters.
(iii) Liability of CPCC
[13] CPCC argues that it would not have been liable for the payment of a transfer fee when it acquired Stratford’s assets in 2005. The original licensing agreement between Crane Co. and QAD did not require a transfer fee to be paid by an entity that was a successor to all, or substantially all, of the predecessor’s business. Therefore, if Stratford had entered into a licensing agreement with QAD and subsequently sold all its assets to CPCC, CPCC would not have had to pay any transfer fees.
[14] QAD submits that both sales gave rise to an obligation to pay transfer fees, and to meet other conditions set out in its original agreement with Crane Co.
(d) Genuine Issues for Trial
[15] In my view, there remain genuine issues for trial in this case, including the factual disputes described above. I am unable to resolve those disputes on the material before me. Accordingly, I cannot grant QAD’s request for summary judgment.
[16] The issues for trial are, nevertheless, narrow. The defendants acknowledge QAD’s copyright, admit use of QAD’s software and concede infringement. The defendants raised the defences of laches and estoppel, but these appear to have no application in the circumstances. Questions remain, however, about the operation of s. 41, the applicability of the terms of the original agreement to the sale of Stratford’s assets to CPCC and the appropriate quantum of damages, if any. In my view, the trial can be confined to these issues.
[17] Accordingly, the motion for summary judgment is dismissed.
ORDER
THIS COURT ORDERS that:
1. The motion for summary judgment is dismissed.
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-514-06
STYLE OF CAUSE: QAD INC. v. STRATFORD HOLDINGS CORPORATION previously known as CRANE PLUMBING CORPORATION, and CRANE PLUMBING CANADA CORP.
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: January 15, 2007
APPEARANCES:
|
Jonathon Colombo Christopher Tortorice |
|
|
R. Leigh Youd
|
FOR THE DEFENDANTS |
SOLICITORS OF RECORD:
|
BERESKIN & PAR Toronto, ON |
|
|
BERKOW COHEN LLP Toronto, ON
|
|