Unilin Beheer B.V. v. Triforest Inc.

Unilin Beheer B.V. v. Triforest Inc.
Court (s) Database
Federal Court Decisions
Date
2017-01-20
Neutral citation
2017 FC 76
File numbers
T-2105-16
Decision Content
Date: 20170120
Docket: T-2105-16
Citation: 2017 FC 76
Ottawa, Ontario, January 20, 2017
PRESENT: The Honourable Mr. Justice Gascon
BETWEEN:
UNILIN BEHEER B.V. AND
FLOORING INDUSTRIES LIMITED, SARL
Plaintiffs
and
TRIFOREST INC., JUNWU ZHANG
ZAIRONG FENG, CONGYU ZHANG
AND MOLSON INTERNATIONAL TRADING INC.
Defendants
PUBLIC ORDER AND REASONS
I. Overview [1] By an amended notice of motion dated December 28, 2016, the Plaintiffs Unilin Beheer B.V. [Unilin] and Flooring Industries Limited, Sarl [FIL] request three remedies from this Court. First, they apply for a review of the execution of the ex parte Mareva injunction order [the Mareva Injunction Order] issued by Mr. Justice LeBlanc on December 19, 2016 against the Defendants Triforest Inc. [Triforest], Mr. Junwu Zhang, Ms. Zairong Feng and Ms. Congyu Zhang [collectively, the Triforest Defendants], and a declaration that this Mareva Injunction Order was lawfully executed. Second, they seek to convert this Mareva Injunction Order into an interlocutory Mareva injunction pursuant to Rule 373 of the Federal Courts Rules, SOR/98-106. Third, they want to obtain an interlocutory injunction order against the Triforest Defendants as well as the Defendant Molson International Trading Inc. [Molson] pursuant to Rule 373 or, in the alternative and as the Defendants may elect, an order to deposit into Court. The three aspects of the Plaintiffs’ motion are collectively referred to as the Review Motion in this judgment.
[2] The Plaintiffs claim that the Defendants are infringing certain patents they hold with respect to laminate flooring products. Laminate flooring is a multi-layer wood-based flooring product and generally consists of multiple panels that are coupled together to cover a floor surface.
[3] The Plaintiffs contend that an interlocutory Mareva injunction order should be issued by this Court against the Triforest Defendants as there is genuine risk that the Triforest Defendants would remove their liquid assets from Canada or dissipate them to render ineffective any judgment of this Court. The Plaintiffs further submit that the Court should also issue an interlocutory injunction order against all Defendants to prevent them from continuing to manufacture, use, sell or import into Canada their laminate flooring products until the questions of patent infringement and validity are finally determined by this Court on the main action.
[4] The Defendants respond that the Court should dismiss the Plaintiffs’ request on the execution of the Mareva Injunction Order as the Order was improperly obtained and is impossible to properly enforce. The Defendants further submit that the Plaintiffs have failed to establish the existence of a real risk that the Triforest Defendants have or will expatriate or dissipate financial resources, let alone outside the normal course of business and for the purpose of avoiding the possibility of a judgment. Finally, the Defendants argue that the Court should not issue an interlocutory injunction to restrain them from manufacturing, using, selling or importing into Canada laminate flooring products that purportedly infringe the Plaintiffs’ patents as the Plaintiffs have failed to establish irreparable harm that cannot be compensated financially.
[5] There are three issues to be decided on this Review Motion:
A. Was the Mareva Injunction Order lawfully executed?
B. Should the Mareva Injunction Order be converted into an interlocutory Mareva injunction order?
C. Should the interlocutory injunction order sought by the Plaintiffs be granted?
[6] For the reasons that follow, the Plaintiffs’ Review Motion is granted in part. I conclude that the Mareva Injunction Order was lawfully executed in accordance with its terms and followed the applicable procedural rules. However, I am not persuaded that the elements required to issue an interlocutory Mareva injunction order are satisfied. This is because the evidence obtained and provided by the Plaintiffs is not sufficient to demonstrate, on a balance of probabilities, that there is a real risk of removal or dissipation of assets in order to frustrate judgment. I am also not satisfied that the tripartite test set forth in RJR-MacDonald Inc v Canada (Attorney General), [1994] 1 SCR 311 [RJR-MacDonald] for the issuance of interlocutory injunctions is met, as the Plaintiffs have notably failed to provide the required clear and non-speculative evidence to demonstrate, on a balance of probabilities, that they will suffer irreparable harm if the injunction is not granted.
II. Background A. The parties [7] The Plaintiffs Unilin and FIL are sister companies that are part of the Unilin Group. Unilin is a Netherlands-based company and FIL is a Luxembourg company. The Unilin Group regroups companies that are leading manufacturers of a variety of products in the building materials industry, including laminate flooring products.
[8] Traditionally, laminate flooring was installed by coupling panels with each other using a simple tongue and groove joint secured by an adhesive such as glue. The Unilin Group then developed a revolutionary technology for joining panels of laminate floor products without the use of an adhesive [the Glueless Locking Technology], and launched it in the market in 1997. The Glueless Locking Technology involves shaping the profiles of the tongue and groove of the flooring panels such that they are “locked” when coupled together. The tongue and groove of the flooring panels can be coupled together by rotation or lateral displacement. The Glueless Locking Technology is protected throughout the world by a vast portfolio of patents held by the Unilin Group.
[9] Unilin owns the patent rights relating to the Glueless Locking Technology and FIL is responsible for the licensing and enforcement of the Unilin Group’s patent rights. The Plaintiffs do not manufacture or sell directly laminate flooring products in Canada but they are present in the Canadian market through importers of their licensed products.
[10] The Defendant Triforest is a Canadian importer, distributor and retailer of laminate flooring products. Triforest operates three stores in Canada, one in Markham, Ontario and two in the Vancouver area in British Columbia. It has a total of 20 employees. Triforest sells its laminate flooring products to retailers in association with at least the trademarks TOUCAN and TOUCAN FOREST PRODUCTS, and the retailers in turn resell them to Canadian customers. The laminate flooring products currently sold by Triforest are not licensed by the Plaintiffs [the Unlicensed Products].
[11] The three individual Defendants are all directors of Triforest. They are members of the same family, Mr. Zhang and Ms. Feng being husband and wife and Ms. Zhang being their daughter.
[12] The Unlicensed Products imported by Triforest are manufactured by at least two companies located in China, namely Chuzhou Runlin Wood Industry Co Ltd [Runlin] and Shenglang Wood Co, Ltd [Shenglang]. Triforest, Runlin, Shenglang and the three individual Defendants are also associated with a third Chinese company, Chuzhou Jiude Wood Co, Ltd [Jiude]. Shenglang was a licensee of the Unilin Group from January 2014 until March 2016, when its license was terminated due to Shenglang’s inaccurate reporting of products manufactured and sold under license, and thus of the royalties due to Unilin. Runlin and Jiude are not and have never been licensees of Unilin. Mr. Zhang, Ms. Feng and Ms. Zhang, are also the shareholders and legal representatives of the three Chinese manufacturers Runlin, Shenglang and Jiude.
[13] In other words, the three individual Defendants are involved in both Triforest’s business activities in Canada and in the Chinese companies that manufacture and export the Unlicensed Products imported and distributed in Canada by Triforest.
[14] The Defendant Molson sells laminate flooring products imported into Canada by Triforest from two retail locations located in Markham, Ontario and Mississauga, Ontario. According to the Plaintiffs’ investigation of publicly available information data, Molson is estimated to be the largest Canadian importer of unlicensed laminate flooring products manufactured by Runlin, after Triforest.
B. The Plaintiffs’ patents [15] Unilin owns a vast portfolio of patents and patent applications around the world pertaining to the Glueless Locking Technology, including Canadian Patent Nos. 2,475,076 [the 076 Patent] and 2,522,321 [the 321 Patent], directed at certain aspects of the Glueless Locking Technology [collectively, the Canadian Patents]. FIL is a licensee of the Canadian Patents, and has the right to grant sublicenses.
[16] Over the years, the Unilin Group has developed an extensive licensing program for the Glueless Locking Technology, whereby Unilin grants licenses to manufacturers around the world to manufacture and sell flooring products incorporating this technology. At present, the Unilin Group has approximately 150 active licensees for the Glueless Locking Technology and, on the basis of data available to the Plaintiffs, some 49 Canadian importers of laminate flooring products have exclusively imported Unilin’s licensed products in 2016.
[17] In 2012, the Plaintiffs developed a program pursuant to which licensed manufacturers in certain countries (including China) must affix a holographic authentication label [the L2C Label] to each box of flooring products they manufacture under license from the Plaintiffs [the L2C Program]. The purpose of the L2C Program was to more easily identify Unilin’s licensed products in the marketplace and more accurately trace the complete volume of products incorporating the Glueless Locking Technology manufactured by its licensees.
[18] The Unilin Group has distributed over 143 million L2C Labels to its licensees since the start of the L2C Program in April 2012. Since that time, these licensees have reported the manufacture and sale of approximately 280 million square meters of laminate flooring products. In addition, the Plaintiffs have spent time and resources enforcing their patents related to the Glueless Locking Technology throughout the world, including in Canada.
C. History of the proceedings [19] Around August 2014, the Plaintiffs became aware of Triforest’s alleged infringing activities. An investigation by the Plaintiffs uncovered that Triforest imported, distributed and sold in Canada laminate flooring products manufactured by Runlin that were not licensed by the Plaintiffs, that allegedly infringe several claims of the Canadian Patents and that did not bear the L2C Label.
[20] Between September 2014 and September 2015, the Plaintiffs and their counsel wrote several letters to Triforest requesting that it cease importing and selling unlicensed laminate flooring. In October 2015, representatives of Triforest (including Ms. Feng) met with counsel for the Plaintiffs. The evidence submitted by the Plaintiffs shows that, during that meeting, it was confirmed that Triforest imported Unlicensed Products manufactured by Runlin. Ms. Feng also represented that Triforest would not be in a position to compensate the Plaintiffs for the unpaid royalties associated with the past importation and sale of the Unlicensed Products and that if Triforest were forced to do so, it would go bankrupt. Triforest also confirmed at the meeting that it would cease selling unlicensed laminate flooring products in Canada.
[21] In early 2016, the Plaintiffs learned that, despite the October 2015 meeting, Triforest had continued to import into Canada significant amounts of unlicensed laminate flooring products from Runlin. According to the Plaintiffs’ investigation, as of August 2016, Triforest had imported close to one million square meters of unlicensed laminate flooring products from Runlin to Canada.
[22] Between October 2013 and April 2015, the Plaintiffs also sent letters to Molson. At first, it was to inform Molson about the L2C Program, the L2C Label and the patents held by the Unilin Group on laminate flooring products incorporating the Glueless Locking Technology. When they learned that Molson was selling laminate flooring products manufactured by Runlin and supplied by Triforest, the Plaintiffs requested that Molson cease its importation and sale of unlicensed laminate flooring products.
[23] In May and June 2016, investigators were retained by the Plaintiffs to purchase sample flooring products sold by Triforest and Molson in Toronto and Vancouver. The vast majority of the boxes of Unlicensed Products obtained by the investigators did not bear L2C Labels. In June and July 2016, the Plaintiffs’ technical expert, Dr. Joseph Loferski, proceeded to test and analyse some of the sample flooring products purchased by the investigators, in order to assess whether they infringe any of certain specific claims of the Canadian Patents. Dr. Loferski issued his opinion in October 2016 and concluded that each and every element of claims 13 to 17, 19, 20 and 21 of the 076 Patent and of claims 10, 11 and 12 of the 321 Patent were found in each of the samples of the products he had analysed.
[24] In October 2016, Mr. Olivier Soucisse, an analyst investigator, was engaged by the Plaintiffs to investigate the financial situation of the Triforest Defendants. Mr. Soucisse conducted background checks, ascertained ownership of real estate and other assets, and gathered wealth and financial information on these Defendants. Mr. Soucisse issued his report in November 2016, indicating that the Canadian assets of the Triforest Defendants included heavily leveraged real estate, as well as bank accounts for which the details and contents were unknown.
[25] On December 6, 2016, the Plaintiffs commenced an action for infringement against the Defendants and brought an ex parte motion for a Mareva injunction against the Triforest Defendants. On the basis of the evidence then provided by the Plaintiffs, including affidavits from the investigators, from Dr. Loferski, from Mr. Soucisse and from a representative of FIL, Ms. Christine Walmsley-Scott, the ex parte motion was heard and granted by this Court on December 19, 2016. The Mareva Injunction Order was directed at Triforest, at the three individual Defendants and at various banks and financial institutions.
D. Settlement privilege issue [26] The Triforest Defendants claim that the Plaintiffs improperly rely on certain documents which are the subject of settlement privilege. These documents relate to the October 2015 meeting between representatives of Triforest and counsel for the Plaintiffs, where the importation of Unlicensed Products and the alleged infringement of the Plaintiffs’ Canadian Patents were discussed.
[27] I do not agree with the Triforest Defendants. It is well established that the settlement privilege requires the presence of three conditions: a litigious dispute in existence or within contemplation; a communication made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and a communication made with the purpose to attempt to effect a settlement (Kirkbi AG v Ritvik Holdings Inc, [2002] FCJ No 793 at para 175). However, there is an exception to the rule of settlement privilege where the communication subject to privilege is not used as evidence of liability for the conduct which is the subject of negotiations or of weak cause of action, but is used for other purposes. In those circumstances, the privilege does not bar production in Court (Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 4th ed, Markham: LexisNexis Canada Inc, at para 14.343; Sabre Inc v International Air Transport Assn, [2009] OJ No 903 at paras 20-21).
[28] This is the case here, as the Plaintiffs do not rely on the impugned documents to establish the liability of the Triforest Defendants for the alleged infringement of its Canadian Patents, but instead as evidence that Triforest were aware of the Plaintiffs’ licenses and that its representatives had then indicated that they would not have the financial resources to pay the license fees on all the Unlicensed Products if they had to.
[29] These documents and the arguments relying on their content can therefore be properly considered by this Court in the context of the Plaintiffs’ Review Motion.
III. Analysis A. Execution of the Mareva Injunction Order [30] The first question to be determined is whether the Mareva Injunction Order issued on December 19, 2016 was lawfully executed.
[31] The issue on this first portion of the motion brought by the Plaintiffs is to review the execution of the Mareva Injunction Order to determine if the execution was lawful and proper. This is not an appeal on the merits of the Mareva Injunction Order granted or a motion for a stay of the Order. Nor is it a motion to vary or set aside the Mareva Injunction Order pursuant to Rule 399.
[32] On the record before me, I am satisfied that, in the circumstances of this case, the Mareva Injunction Order was lawfully executed by the Plaintiffs.
(1) Mareva injunctions [33] A Mareva injunction is a type of interlocutory injunction whereby the assets of a party are frozen so that they cannot be removed from the jurisdiction or dissipated in order to frustrate judgment. This is an exceptional form of injunction, granted on the basis that there is a genuine risk that the defendants will dissipate their assets or remove them outside of the jurisdiction prior to judgment, which would render judgment against that party useless, as there would be nothing against which to enforce it.
[34] A Mareva injunction is a most extraordinary remedy. The general rule established in Lister & Co v Stubbs, [1886-90] All ER 797 (CA) is that execution cannot be obtained prior to judgment and judgment cannot be obtained prior to trial (Aetna Financial Services v Feigelman, [1985] 1 SCR 2 [Aetna] at 10; Eli Lilly Canada Inc v Novopharm Limited, 2010 FC 241 [Eli Lilly] at para 15). The fundamental principle is that a litigant is not entitled to a remedy or execution against a defendant’s assets before having established liability on the part of that defendant. Moreover, the Mareva injunction is typically an ex parte order, which puts an even higher threshold on the moving party. The granting of a Mareva injunction is therefore only available where the strict conditions for its issuance are met, and the courts should be prudent and cautious before issuing one.
[35] The test for the granting of a Mareva injunction is well-established and was first developed by Lord Denning in Third Chandris Shipping Corporation v Unimarine SA, [1979] 1 QB 645 (CA) [Third Chandris]. The requirements outlined by Lord Denning in Third Chandris have been cited with approval in Canada, and the Canadian courts have developed and re-articulated them in various cases (Chitel et al v Rothbart et al (1982), 141 DLR (3d) 268 (Ont CA) [Chitel] at paras 43-57; Aetna at 19-21; Marine Atlantic Inc v Blyth et al (1993), 113 DLR (4th) 501 (FCA) [Marine Atlantic] at paras 5-10; Eli Lilly at paras 17-20; Cho v Twin Cities Power-Canada, 2012 ABCA 47 at para 5).
[36] Further to those precedents, the moving party must therefore satisfy the following test to obtain a Mareva injunction:
A. establish a strong prima facie case;
B. meet the five following guidelines developed in Third Chandris as modified and rephrased in Chitel:
i. make full and frank disclosure of all matters in its knowledge which are material for the judge to know;
ii. give particulars of its claim against the defendant, stating the ground of its claim and the amount thereof, and fairly stating the points made against it by the defendant;
iii. give some grounds for believing that the defendant has assets in the jurisdiction;
iv. give some grounds for believing that there is a risk of the assets being removed from jurisdiction or dissipated in order to frustrate judgment; and
v. give an undertaking in damages in case it fails in its claim or the injunction turns out to be unjustified; and
C. satisfy the regular tripartite test for an interlocutory injunction described in RJR-MacDonald, namely the presence of a serious issue to be tried, irreparable harm if the injunction is not granted and the balance of convenience favouring the moving party.
[37] If the moving party fails on any of these conditions, the courts should refuse the Mareva injunction.
(2) Execution of the Mareva Injunction Order [38] The terms regarding the execution of the Mareva Injunction Order were set out in the Order.
[39] The Mareva Injunction Order required that the Plaintiffs deposit with the Court the amount of $50,000 as security for damages prior to service upon the Defendants, banks or financial institutions. The Plaintiffs did file the $50,000 deposit with the Court on December 20, 2016.
[40] The Mareva Injunction Order was then sent by facsimile and formally served on December 21 and 22, 2016 on eight banks and financial institutions (namely Bank of Montreal, CIBC, HSBC, Royal Bank of Canada, Scotiabank, TD Canada Trust [TD], Bank of China and Industrial and Commercial Bank of China [ICBC]). The Mareva Injunction Order was accompanied by a letter from counsel for the Plaintiffs, indicating what the Mareva Injunction Order required these banks and financial institutions to accomplish. The letter notably mentioned to the banks and financial institutions that the Order was to prevent the Triforest Defendants from transferring assets (including by the payment of monies) outside of Canada.
[41] The Mareva Injunction Order was then properly served upon Triforest, Ms. Feng and Ms. Zhang on December 21, 2016, and the following day upon Mr. Zhang and Molson. The affidavits filed by the Plaintiffs in support of the Review Motion attest to that.
[42] As required, the Plaintiffs brought their motion to review the execution of the Mareva Injunction Order before the Court within 14 days of service upon all Defendants, namely on January 4, 2016, one day before the scheduled expiry of the Order. Plaintiffs’ counsel also filed with the Court the written reports received from the banks and financial institutions further to the execution of the Order. There is no indication that the Plaintiffs did not compensate the banks and financial institutions for reasonable expenses they incurred in carrying the searches and freezing of assets ordered.
[43] Based on my review of the evidence, I find that the procedure followed was in accordance with the terms of the Mareva Injunction Order, that no improper execution of the Order arose and that the behaviour of the Plaintiffs and their counsel involved with the execution of the Order was irreproachable. I also do not find that the Order was obtained for an improper purpose and I observe that, at the time the Order was issued, the conditions for the issuance of the ex parte Mareva injunction were met to the satisfaction of the presiding judge.
[44] The Triforest Defendants claim that the Mareva Injunction Order cannot be considered as having been lawfully executed on two grounds: they contend that the Plaintiffs have failed to make a full and frank disclosure, and they complain about the fact that the banks and the financial institutions ended up freezing all banking accounts of the Triforest Defendants, thereby widely exceeding the scope of the Order.
[45] I am not convinced that these arguments raised by the Triforest Defendants reflect an unlawful execution of the Mareva Injunction Order.
[46] I agree that a party seeking an ex parte Mareva injunction is required to make full and frank disclosure of all material facts as the Court is asked to grant such order solely on the basis of the evidence presented by the moving party. It is indeed a well-established principle of our law that a party seeking the extraordinary relief of an ex parte injunction must provide a balanced and complete presentation of the facts. A fact may be material even if it is not determinative. However, I do not find that there was a lack of full and frank disclosure in the Plaintiffs’ application for the Mareva Injunction Order or that they omitted or misrepresented material facts. On the contrary, I conclude that the Plaintiffs lived up to their obligations and duties imposed by the law.
[47] The Triforest Defendants essentially take exception with the Plaintiffs’ reliance on the fact that they had been recently unable to pursue a similar claim for infringement against a third party, MGA Commodities Inc. [MGA], who became insolvent before the Plaintiffs could execute a judgment against it. In their submissions, the Plaintiffs expressed strong concerns that the Triforest Defendants would imitate MGA and seek bankruptcy protection to avoid paying any amount for which they would be liable to the Plaintiffs for patent infringement. The Triforest Defendants claim that the Plaintiffs failed to disclose to the Court that there was no relationship between MGA and Triforest; that by November 2016, the financial investigations into the Triforest Defendants showed significant assets in Canada and no risk of insolvency; and that the MGA case dealt with counterfeiting of the Plaintiffs’ laminate flooring products as well as allegations of copyright and trademark infringement, unlike the present proceeding limited to an alleged patent infringement.
[48] I am satisfied that the Plaintiffs made a full and frank disclosure of the MGA situation in their attempt to draw a parallel between that case and the current case. At no point did the Plaintiffs claim or suggest that there was a relationship between MGA and the Triforest Defendants. In addition, the results of the Plaintiffs’ financial investigations, the existence of the real estate assets owned by the three individual Defendants and the financial situation of all Triforest Defendants were fully disclosed through the affidavit of Mr. Soucisse. Finally, the failure to specifically mention the counterfeiting aspect of the MGA case was not, in my opinion, a material element. In fact, Ms. Walmsley-Scott testified that, in her view, infringement and counterfeiting were serious problems of a similar nature for the Unilin Group. Moreover, the parallel drawn with the MGA situation was made with respect to the inability to collect payment following an infringer’s insolvency rather than in relation to the features and extent of the infringement by MGA.
[49] The Triforest Defendants also complain about the fact that the Plaintiffs have been unable to properly enforce the Mareva Injunction Order, which only permitted the prohibition of money transfers by the Triforest Defendants to recipients outside of Canada. Instead, the banks and financial institutions have completely frozen the bank accounts and credit cards of the Triforest Defendants, preventing them from depositing or withdrawing any funds in the normal course of their livelihoods or business.
[50] The Plaintiffs acknowledge that the financial assets of the Triforest Defendants have been completely frozen, that this was not the remedy contemplated by the Mareva Injunction Order, and that this went beyond the scope of the terms of the Mareva Injunction Order. The banks and financial institutions that were served with the Mareva Injunction Order indicated to Plaintiffs’ counsel that it was not possible for them to limit their application of the Mareva Injunction Order to its scope as issued. The evidence before me and the representations made by counsel at the hearing, however, indicate that, as soon as this became known to the Plaintiffs, their counsel had discussions with the banks and the financial institutions to find a solution, which proved difficult to do during the Christmas holiday period.
[51] While this might have raised an issue with respect to the enforceability of the Mareva Injunction Order and might have provided grounds to the Triforest Defendants to vary the Order or to set it aside, I am not ready to find that this constitutes an unlawful or improper execution of the Order by the Plaintiffs or its representatives. I note that, in the interim order issued with the consent of the Triforest Defendants on January 5, 2017, to remain valid until the issuance of this judgment, the terms that the banks and financial institutions had found impossible to implement have been modified and that the banking accounts of the Triforest Defendants are no longer frozen.
(3) Conclusion on the review of the Order [52] For the above reasons, I am thus of the view that the execution of the Mareva Injunction Order was carried out lawfully by the Plaintiffs. The Plaintiffs are therefore authorized to withdraw the deposit of $50,000 they had filed with the Court on December 20, 2016.
B. Interlocutory Mareva injunction [53] The second issue to be determined is whether the Mareva Injunction Order should be converted into an interlocutory Mareva injunction order. To succeed, the Plaintiffs have to demonstrate that all the components of the test for the issuance of Mareva injunctions remain satisfied further to the evidence obtained from the execution of the Mareva Injunction Order and the receipt of the response materials filed by the Triforest Defendants.
[54] I have reviewed the voluminous evidence obtained by the Plaintiffs from the four banks and financial institutions that provided banking accounts information on the Triforest Defendants, as well as the evidence tendered by the Triforest Defendants through the affidavits of Mr. Steve Wang, accountant for Triforest, and Ms. Zhang. The Plaintiffs’ evidence is contained in the various affidavits of Ms. Julie Morin and of Ms. Van Khai Luong containing the letters and reports from the banks and financial institutions, and in the extracts of the Triforest Defendants’ bank statements and passports prepared by Plaintiffs’ counsel for the hearing before this Court. On the evidentiary record before me, I am not satisfied that there is clear and convincing evidence allowing me to conclude that a remedy as exceptional and extraordinary as an interlocutory Mareva injunction should be issued in this case. More specifically, I do not find that there is evidence supporting, on a balance of probabilities, a real risk that the Triforest Defendants would remove their assets from Canada or dissipate them outside of normal and lawful course of business, for the purpose of avoiding or rendering ineffective a judgment that the Plaintiffs may obtain on their claim of infringement. The evidence uncovered through the execution of the Mareva Injunction Order simply does not confirm the risk anticipated and feared by the Plaintiffs when the ex parte Order was issued.
[55] This “genuine risk” factor contained in the five Third Chandris / Chitel guidelines is the “overriding consideration” for the issuance of a Mareva injunction (Aetna at 24), and I conclude that the Plaintiffs do not satisfy it. As this is sufficient to refuse the interlocutory Mareva injunction, there is no need to consider the other factors and conditions prescribed by the jurisprudence on Mareva injunctions.
(1) Strong prima facie case [56] That said, since the parties and their respective counsel spent a fair portion of their written and oral submissions on the issue of the “strong prima facie case” of infringement, and in anticipation of the discussion below on the RJR-MacDonald test, I will make the following remarks on this point.
[57] The Triforest Defendants dispute the assertion that the Plaintiffs have a strong prima facie case against them. They raise four arguments in support of their position. The Triforest Defendants first assert that the infringement analysis of Dr. Loferski is flawed because he did not measure the density of the core in the Unlicensed Products, whereas claims in each of the 076 Patent and the 321 Patent require that the product be made with HDF or MDF. The Triforest Defendants also contend that claim 10 of the 321 Patent requires “elastic deformation of the groove” and that Dr. Loferski admitted that the lower lip of the Triforest products deformed, not the groove. They further submit that the 076 Patent and the 321 Patent are invalid on the basis of various grounds including overbreadth, claim ambiguity, indefiniteness, anticipation by other patents and lack of utility. Finally, the Triforest Defendants have provided decisions issued in other countries where Unilin Group’s patents apparently corresponding to the Canadian Patents have been found invalid, and where the corresponding European patents had their claims narrowed.
[58] For the following reasons, I am not satisfied that the Triforest Defendants have provided clear and convincing evidence disputing the validity of the 076 Patent and the 321 Patent, to the point where the statutory presumption of validity has been displaced and where the Plaintiffs’ case no longer falls within the range of a strong prima facie case of infringement. The Triforest Defendants may have laid the ground for some arguable points on the merits of the Plaintiffs’ case of patent infringement, a matter to be decided at trial. However, at this stage, I find that the evidence adduced by the Plaintiffs provides answers to the various arguments raised by the Triforest Defendants against the validity of the Canadian Patents, sufficient to satisfy me that the Plaintiffs have demonstrated a strong prima facie case.
[59] I pause to note that counsel for the Triforest Defendants opposes the production of the second supplemental affidavit of Ms. Luong filed on behalf of the Plaintiffs, which contains responding evidence on the issue of prior art documents submitted to the Canadian Patent Office in 2006, during the prosecution of the Canadian Patents. I do not agree. I am instead satisfied that this affidavit can be admitted as it is relevant and is assisting the Court on an issue raised by the Triforest Defendants in their response and discussed at length in the cross-examination of Ms. Walmsley-Scott. I am also of the view that it causes no undue prejudice to the Triforest Defendants and that it serves the interests of justice to have it on the record (Atlantic Engraving Ltd v Lapointe Rosenstein (2002), 23 CPR (4th) 5 (FCA) at paras 8-9).
[60] Turning to the Triforest Defendants’ arguments, I am not persuaded that the cross-examination of Dr. Loferski allows to conclude that, since the density of the core in Triforest’s Unlicensed Products was not measured, it was not possible for Dr. Loferski to conclude that these products infringed the identified claims of the Canadian Patents. Dr. Loferski stated in his evidence that he was able to confirm that the Triforest Unlicensed Products were made of HDF and MDF, and there is evidence showing that Triforest explicitly advertises that its products are made of HDF. Similarly, on the elastic deformation of the groove, I agree with the Plaintiffs that there is evidence showing that Dr. Loferski equates the groove with the lower lip.
[61] As to the decisions arising from the other jurisdictions, I am not persuaded that they erode the strong prima facie case of the Plaintiffs. Despite certain challenges in Europe, the Plaintiffs’ patents have remained valid and have been slightly modified further to those decisions, prior to the Canadian Patents being issued. These decisions, in my view, are not sufficient to question the validity of the Canadian Patents. Patent law varies between jurisdictions and the scope of the claims and of the monopolies granted to the Plaintiffs’ various patents related to the Glueless Locking Technology will therefore differ from one country to the other. Absent any expert evidence challenging the validity of the Canadian Patents, I do not find that the decisions issued in the UK, France and the Netherlands pertaining to patents owned by the Unilin Group in these jurisdictions, as well as the two pieces of prior art cited by the Triforest Defendants, are sufficient to dispute, cast doubt or challenge the deemed validity of the Plaintiffs’ Canadian Patents.
[62] More specifically, the evidence shows that the relevant UK patent was declared valid following an amendment, and a corresponding European patent was also found valid following opposition proceedings. Similarly, in France, there was consent to the reversal of the French decision invalidating certain claims of a European patent, following a parallel opposition to the same patent decided in the Plaintiffs’ favour after the issuance of the French decision. As to the decision in the Netherlands, I agree with the Plaintiffs that it is of no relevance, as it pertains to a patent directed at an invention different from the inventions covered by the Canadian Patents. Finally, the Plaintiffs point out that the pieces of prior art raised by the Triforest Defendants were submitted and considered by the Canadian patent authorities prior to the issuance of the Canadian Patents.
[63] I am therefore of the view that the Plaintiffs have demonstrated a strong prima facie case of infringement against the Triforest Defendants. A strong prima facie case requires more than an arguable case; it implies that the moving party has a high chance of success on the merits. In this case, the Plaintiffs own the rights in the 076 and 321 Patents, including the exclusive right, privilege and liberty of making, constructing, using and selling to others to be used, the inventions as claimed therein. This was confirmed in the affidavits of Ms. Walmsley-Scott and Dr. Loferski. There is an initial presumption of validity. The Canadian Patents are in force since 1997, and their validity has never been challenged in Canada. Furthermore, the expert evidence of Dr. Loferski demonstrates that the Unlicensed Products imported and sold by the Triforest Defendants incorporate all of the elements of many claims of the 076 Patent and 321 Patent and infringe upon the Plaintiffs’ exclusive patent rights. The evidentiary record also satisfies me that the Triforest Defendants sell and distribute Unlicensed Products that may infringe upon the 076 and 321 Patents and do not bear any L2C Label. The Plaintiffs’ investigations further show that the Defendants hold a significant inventory of Unlicensed Products. All of this evidence points to a high chance of success for the Plaintiffs in their action for infringement.
[64] The Triforest Defendants claim that statutory presumption alone is not sufficient to establish a prima facie case required to support an interlocutory injunction when affidavit evidence is offered disputing the validity of the patent, relying on Teledyne Industries Inc et al v Lido Industrial Products Ltd (1977), 33 CPR (2d) 270 at 276 [Teledyne]. However, Teledyne was a case where expert affidavit evidence from a patent agent had been offered to dispute the validity and infringement of the patent. In addition, this was a case where the patent was of recent origin and its validity had never been established. This is not the situation here. On the contrary, the Triforest Defendants did not submit any expert affidavit evidence challenging the validity of the Plaintiffs’ Canadian Patents.
[65] Accordingly, I am satisfied that the Plaintiffs have made out a strong prima facie case of patent infringement against all Defendants.
(2) Real risks of removal or dissipation of assets [66] The problem with the Plaintiffs’ motion for an interlocutory Mareva injunction is the requirement of a real risk of removal or dissipation of assets by the Triforest Defendants.
[67] The Plaintiffs claim that the banking information received further to the execution of the Mareva Injunction Order confirms that the Triforest Defendants have liquid assets in Canada, and that they frequently and easily transfer