TR Technologies Inc. v. Verizon Communications Incorporated, 2011 ABQB 390

Court of Queen ’ s Bench of Alberta Citation: TR Technologies Inc. v. Verizon Communications Incorporated, 2011 ABQB 390 Date: 20110622 Docket: 1003 03586 Registry: Edmonton Between: TR Technologies Inc. and Telecommunications Research Laboratories Respondent/Plaintiffs - and - Verizon Communications Incorporated Applicant/Defendant _____________________________________________________ Reasons for Judgment of the Honourable Mr. Justice S.D.

Hillier _______________________________________________________ Introduction [ 1 ] In this matter the Plaintiffs TR Technologies Inc. and Telecommunications Research Laboratories (TR Labs) seek to enforce a technology licensing agreement against the Defendant Verizon Communications Incorporated (Verizon).

Verizon requests that this action be stayed in favour of proceedings in the state of New Jersey, USA as the forum conveniens . [ 2 ] For reasons which follow, the Court has concluded that Alberta retains proper jurisdiction for resolution of the contractual dispute but that proceedings here ought properly to defer, at least initially, to the jurisdiction of New Jersey where the dispute as to the

US patents is being litigated. Subject to the outcome of the US action, or upon earlier review of whether this stay should be lifted, this action may or may not be required. Facts [ 3 ] TR Labs is a private, not-for-profit company based in Alberta that generates revenue, in part, by licensing their technology to companies in Canada and worldwide. It owns various patents directed to methods and systems for protecting and/or restoring mesh networks. Dr.

Wayne Grover, TR Lab’s Chief Scientist in Network Systems Research, is the named inventor on a number of these patents, including those which are related to these proceedings. [ 4 ] TR Labs entered into a License Agreement with MCI Communications in 1996. MCI subsequently merged with WorldCom. The merged company filed for

Chapter 11 bankruptcy protection in 2002. It emerged from bankruptcy in April 2004 pursuant to a Plan of Reorganization. [ 5 ] Verizon is a major corporation that provides communications products and services in the United States. It is incorporated in Delaware with principal place of business in Ashburn, Virginia and significant business operations in New Jersey. In January 2006, Verizon acquired MCI in a merger. Pleadings [ 6 ] The Statement of Claim was filed by TR Labs in Alberta on March 3, 2010 and served on Verizon in Delaware, USA pursuant to an Order for Service ex juris dated October 28, 2010.

The claim alleges that: a. TR Labs entered into a License Agreement with MCI Communications Inc. (MCI) in 1996 relating to network restoration or recovery; b. Verizon is an assignee of MCI from 2006 arising out of bankruptcy; c.

Verizon breached the License Agreement by deploying certain technology which contains every element of one or more of the claims of certain US patents allegedly owned by TR Labs and by failing to pay TR Labs certain fixed payments set out in the License Agreement. [ 7 ] TR Labs also filed an action against Verizon in the US District Court in New Jersey alleging infringement of other US Patents in relation to similar mesh network technology (TR Labs New Jersey Action). Issues raised in that action include the validity, enforceability and infringement of those patents.

Verizon has counterclaimed for a declaration of invalidity and non-infringement of the TR Labs’ patents at issue in that action. [ 8 ] Verizon filed a declaratory judgment action on March 11, 2011 in the US District Court of New Jersey (Verizon New Jersey Action), asking the Court to declare the US patents asserted in this action to be invalid and unenforceable for failing to meet US patentability requirements, and for a declaration that Verizon’s networks infringe neither of the US patents.

TR Labs has attorned to the New Jersey jurisdiction in that action. [ 9 ] On March 14, 2011, Verizon filed the within motion for a stay of Alberta proceedings and the matter was argued on May 24, 2011, Verizon relying on the Affidavit of Joseph Palmieri and TR Labs on that of Vinod Ratti, together with questioning transcripts for each deponent.

License Agreement [ 10 ] TR Labs asserts that it entered into a License Agreement with MCI Telecommunications Corporation effective January 1, 1996 by which MCI was granted rights to “all Technology which was developed and all Intellectual Property rights which were obtained by TR Labs … prior to [January 1, 1996] relating to network restoration or recovery”. [ 11 ] Under Art. 2.2(

b) of the License Agreement, MCI was to pay TR Labs $425,000 US upon initial deployment of technology that would infringe, inter alia , “one or more claims specified in one or more of the Patent Applicant(

s) actually filed as of the first date of such deployment or use”, and three more annual payments of $425,000 following such initial deployment. [ 12 ] The License Agreement provides: 12.3 Assignment Neither Party may assign this Agreement or any of its rights and/or obligations hereunder without obtaining the prior written consent of the other Party which consent will not be unreasonably withheld or delayed; provided, however, that notwithstanding the foregoing MCI, Licensor or TR Labs may assign this Agreement or its respective rights and/or obligations hereunder to any of its Related Companies or its or their Subsidiaries, to a successor in interest or to a purchaser of substantially all of its assets or of its assets as to which this Agreement primarily pertains.

This Agreement shall be binding on and inure to the benefit of the Parties hereto and their respective successors and permitted assigns. 12.4 Applicable Law This Agreement shall be read and construed according to the laws in force in the Province of Alberta, except with respect to its conflict of laws provisions and the parties hereby submit to the nonexclusive jurisdiction of the courts of the Province of Alberta and the courts having jurisdiction on appeal from such courts. Preliminary Matter [ 13 ] Verizon argues that the affidavit sworn by Mr.

Ratti fails to disclose the source of information and belief for many of the statements upon which TR Labs seeks to rely. From a full review it does not appear that much actually turns on the source or veracity of information provided by Mr. Ratti. The impugned paragraphs relate to Mr. Ratti’s understanding of how the litigation would unfold. Any such evidence is necessarily speculative. The Court is well aware of the usual course and vicissitudes of commercial litigation. Issue [ 14 ] Verizon’s initial position is that Alberta is not the forum conveniens for any aspect of the related actions.

In the alternative, but heavily emphasized in oral submissions, it takes a more pragmatic position: the authority to litigate contract issues may rest here, but should properly be stayed pending determination of the patent dispute which can only be litigated in the US. [ 15 ] Although TR Labs disagrees that a dispute arises on the underlying patents, it does join issue that assessment is required at this stage to determine the appropriate forum for its action to enforce the terms of the Licence Agreement. [ 16 ] Given the parties’ positions, the central determination is whether proceedings in Alberta should be stayed on the basis that New Jersey is the more appropriate forum or has jurisdiction to proceed first, and that TR Labs be left to its option to counterclaim under

the Licence Agreement or await disposition in the US before assessing whether to pursue its claim in Alberta.

Summary of Arguments [17] Verizon emphasizes that the alleged breach of the Licence Agreement is in respect of activities conducted in the US by a UScorporation, contrary to two US patents. In the Verizon New Jersey Action, the US Courts have the exclusive jurisdiction to determineall issues on the patents in question (validity, infringement and enforcement). That is also the case in the TR Labs New Jersey Actionagainst Verizon for alleged infringement of other patents dealing with similar technology.

As a matter of comity, the Court here shouldrecognize the legitimate juridical advantages to Verizon and no significant disadvantage to TR Labs, including that witnesses may berequired who are in the US but not compellable to attend in Canada.

The Verizon New Jersey Action will proceed in any event, and TRLabs retains two options: to counterclaim under the Licence Agreement, or to pursue any residual remedies in Alberta if the outcome ofthe US action justifies lifting the stay of proceedings. [18] By contrast, TR Labs states overall that its action was commenced first in Alberta, one year prior to Verizon’s initial filing inthe Verizon New Jersey Action. The Alberta Action is predicated upon the language of the License Agreement which specificallyrecognized the non-exclusive jurisdiction of the Alberta Courts.

Verizon is unable to meet the high burden of proof to establish thatAlberta is not the appropriate jurisdiction; TR Labs is entitled to the juridical advantage of licensee estoppel and to avoid if possible thecostly burden of full patent litigation in the United States; in all events there is no justification for a stay of these proceedings on a fairreview of the forum conveniens criteria. The Court in Westec Aerospace Inc. v.

Raytheon Aircraft Co., 1999 BCCA 243, 173 D.L.R.(4th) 498 at para 38 points out that: “ By fashioning rules that attempt to avoid or minimize the inefficiencies and injustices that canresult from parallel proceedings, the court, to some degree, will necessarily favour on the jurisdiction question the party who initiatesproceedings first”. [19] Counsel agree that the approach and factors used to assess forum conveniens are applicable to the exercise of the Court’sdiscretion in these circumstances.

Verizon and TR Labs also agree that these factors have been identified in well recognized decisionsincluding: Amchem Products Inc. v. British Columbia (Worker’s Compensation Board), (SCC), [1993] 1 S.C.R. 897 Muscutt v. Courcelles (2002), (ON CA), 60 O.R. (3d) 20, [2002] O.J. No. 2128 (C.A.) Kuffner v. Manitoba Public Insurance Corp., 2005 ABCA 440, 376 A.R. 86 Spar Aerospace Ltd v. American Mobile Satellite Corp., 2002 SCC 78, [2002] 4 S.C.R. 205 Re Foote Estate, 2007 ABQB 654, 431 A.R. 338 Dirtt Environmental Solutions Ltd. v.

Almond, 2010 ABQB 499 (Master). [20] No exhaustive single list of factors has been prepared nor do these cases dictate the emphasis or weight to be placed onspecific factors, which may vary with the circumstances. Verizon and TR Labs have both worked from the same list and, havingreflected on those submissions, I am satisfied that they fairly reflect the most important points to govern this matter. [21] Although each side relies on a tally of the factors, one point is starkly clear: Verizon wants to challenge the validity of thepatents upon which TR Labs purports to base its claim under the Licence Agreement.

If successful, this could be raised as a defence inthis lawsuit if heard in the US. TR Labs says that the law in Canada does not countenance such a challenge because of licensee estoppel.At this stage it is not yet clear the extent to which proof of deployment under the Licence Agreement will overlap with various detailsthat would underlie the patent litigation, but it is safe to anticipate that proceedings in either jurisdiction will be complicated if notprotracted. Analysis

[22] I note at the outset that this is not strictly a matter of forum conveniens in the sense that Verizon does not submit singularlythat this particular contract action must be heard only in the US.

Their written materials express that initial position but their oralsubmissions profiled an alternative position that TR Labs be accorded two options: either their Alberta litigation be deferred pendingoutcome of the patent related US litigation; or they defend and counterclaim on the Licence Agreement as part of the Verizon NewJersey Action. [23] Nevertheless, the practical reality is that two potentially overlapping lawsuits are profiled and Verizon and TR Labs havereasonably framed the issue as one to which the forum conveniens analysis applies.

I will address the relevant factors in the order listedby both sides in presenting their positions, however, that sequencing does not reflect priority or weight. The factors bear differing weightwith each case: Re Foote Estate. [24] As an initial finding of fact, there is no doubt that TR Labs has commenced proceedings in Alberta in good faith as thejurisdiction named under its Licence Agreement and therefore clearly within the contemplation of the signatories.

Verizon cannot and infairness does not complain of forum shopping, since there is a prima facie “real and substantial connection” to Alberta: Tolofson v.Jensen, (SCC), [1994] 3 S.C.R. 1022 at para. 40. 1. Where are the majority of the parties located? [25] This factor is neutral. The corporations making up the Plaintiff consortium are located in Canada. Verizon with its relatedcompanies are located in the United States. 2. Where are the majority of the key witnesses and any physical evidence located? [26] Clearly, Verizon has an interest on this application in outlining an expansive US witness list.

However, it is unclear at thisstage how many witnesses are likely to be called from each jurisdiction. [27] The acknowledgment from Mr. Palmieri that inventors tend to be called in patent cases does not really address the relevanceof their evidence in an enforcement of license agreement case in Canada. Similarly, the three experts from Verizon are, at best, potentialwitnesses only and there may be overlaps that would make it unnecessary to call all three of them. Nor do I have information as towhether any of those witnesses would be more inconvenienced travelling to Alberta than New Jersey.

Although Verizon speculates that aMr. Briggs as the signatory to the License Agreement may be called, that is insufficient evidence to offset the reality that the plaintiffmust call representatives to meet its burden of proof as to breach of the License Agreement. [28] Since the breach is alleged to have occurred in the US, it is reasonable to anticipate the requirement to produce at leastdocumentary and perhaps some physical equipment evidence located somewhere in the US.

By the same token, TR Labs’ records fromits files in Alberta are likely to be producible. [29] Like the first, this factor is neutral based on the information before the Court at this stage of the proceeding. 3. What do the contractual provisions say about forum? [30] Generally, the burden lies on the moving party to establish that there is another more appropriate jurisdiction than thedomestic forum chosen by the plaintiff.

In this case if Alberta possesses jurisdiction over Verizon as of right, Verizon has the higheronus of showing that there is another available forum which is clearly or distinctly more suitable: United Oilseed Products Ltd. v. RoyalBank of Canada, 1988 ABCA 207 , [1988] 5 W.W.R. 181, [1988] A.J. No. 467 (C.A.). However, service ex juris is not itselfsufficient to assert jurisdiction as of right. [31] Under

Article 12.4, Alberta is the only forum named. Although the language is non-exclusive, it is irrevocable. No issue hasbeen raised regarding the validity of the non-exclusive jurisdiction clause. Verizon argues that it was not an original party to the License

Agreement. However, they do acknowledge that the licensee MCI merged with WorldCom. In the summer of 2002 the merged entityfiled for bankruptcy protection and emerged in April 2004 pursuant to a Plan of Reorganization. It was in 2006 that Verizon states itacquired MCI in a merger. [32] Whether or not Verizon ever became bound by the terms of the License Agreement is one of the preliminary and potentiallydecisive issues in the contract action.

Although Verizon has not produced a clear indication of its position on this point (as it has notattorned to the jurisdiction), the responses to questioning of Palmieri on his affidavit suggest that Verizon might take the position that theLicence Agreement did not survive MCI’s bankruptcy, or if it did then Verizon is not, in any event, bound by it. [33] The parties have referred to a number of decisions regarding non-exclusive jurisdiction clauses. The contract in Sugar v.Megawheels Technologies Inc., [2006] O.J.

No. 4493 (Sup.Ct.Just.) contained similar wording to the effect that Alberta law wouldapply and the parties irrevocably attorned to the non-exclusive jurisdiction of the Alberta Courts. Brown J. noted that contracts rangefrom:

i) those containing no choice of forum clause, where the appropriate forum for the adjudication of disputes will be decided inaccordance with general principles of jurisdiction, to ii) those containing exclusive jurisdiction clauses, to which courts will give weight, although such clauses cannot oust thejurisdiction of a domestic court. [34] Brown J. approved of the approach to non-exclusive clauses taken by the English Court of Appeal in Ace Insurance SA-NVv.

Zurich Insurance Company, [2001] All E.R. (Comm.) 802, [2001] EWCA Civ. 173 (C.A.) whereby either party may sue the otherwherever it has the right to do so, but when a suit arises in the named jurisdiction, the party must keep its bargain by attorning to thatjurisdiction. Brown J. concluded that despite the non-exclusive jurisdiction clause favouring Alberta, Ontario was the more appropriateforum. In that case, however, there were not multiple proceedings. The plaintiff chose to sue in Ontario for reasons that the courtaccepted as to the perceived cost savings of a simplified procedure. [35] In Hayes v.

Peer 1 Network Inc. (2007), (ON SCDC), 86 O.R. (3d) 475 (Sup.Ct.Just.), a non-exclusivejurisdiction clause was described as “… only one factor to consider in the analysis of the appropriate forum…” The Canadian plaintiffargued the unenforceability of a clause which attributed non-exclusive jurisdiction to courts in Washington. The plaintiff raised variouschallenges to the formation of the employment contract in issue, including unequal bargaining power and public policy arguments.

TheCourt held that the onus would shift if there was no real issue about the validity of the non-exclusive attornment clause, but in that casethe onus remained on the moving party to show that there was clearly a more appropriate forum than Ontario which had jurisdiction as ofright. [36] In Blue Note Mining Inc. v. CanZinco Ltd. (2008), (ON SC), 297 D.L.R. (4th) 640, [2008] O.J. No.3403 (Sup.Ct.Just.), the agreement expressly provided that if an action was brought in Ontario it would not be opposed on the basis offorum non conveniens.

That level of exclusivity imposes a strong onus on the challenging party to show why the Court should not holdthe parties to the terms of their agreement. There is no similar language in the License Agreement. [37] The Court in Multiactive Software Inc. v. Advanced Service Solutions Inc., 2003 BCSC 643, 48 C.P.C. (5th) 125 held thatthe non-exclusive jurisdiction clause was a substantial competing factor in that case. It was to be given weight in determining the forumbut it did not attract the more significant weight that an exclusive jurisdiction clause would.

The Court stated at para. 34 that in view ofthe wording of the clause it could be placed on no higher footing than evidence that the parties turned their mind to the issue of thelocation of proceedings if disputes should arise and agreed proceedings in British Columbia could not be defeated by an objection tojurisdiction and that British Columbia law would apply to the

interpretation of the Agreement. The B.C. Court ultimately declinedjurisdiction. [38] These cases generally stand for the common sense proposition that a non-exclusive jurisdiction clause must be given weight,but will not necessarily be determinative. Sugar suggests the first to file in the non-exclusive jurisdiction secures that forum. However,even exclusive jurisdiction clauses cannot oust jurisdiction. In my view,

Article 12.4 must be viewed in the context of the particularcircumstances of this case, including that:

a) the US clearly has exclusive jurisdiction regarding US patent validity, enforceability and infringement; and

b) the real issue is the appropriate order of proceedings. [39] Verizon initiated the Verizon New Jersey Action in which it requests a declaration that the US Patents asserted in this actionare invalid and unenforceable, and that Verizon's networks do not infringe either of the US patents. This suggests, at a minimum, aperception on the part of Verizon of risk of exposure on the cause of action in the lawsuit filed in Alberta.

I am mindful that it would be asimple matter in any contract case to assert, without attorning, that the defendant is not bound by the contract for one reason or another. [40] Considering all of the circumstances in this case, I find that the non-exclusive jurisdiction clause having been exercised byone party merits some weight, favouring the Alberta proceedings. 4.

Will there be multiple proceedings? [41] As matters presently stand, there are two proceedings ongoing in relation to the patents affected by the Licensing Agreement:this one in Alberta commenced in March 2010, and the Verizon New Jersey Action commenced in March 2011.

While not preferred,parallel proceedings would “not be disastrous”; since it is unlikely that they could be tried concurrently, the judgment of the first court toresolve matters germane to the second would likely be accepted as binding by the other jurisdiction in most cases: Amchem at para 24. [42] TR Labs argued that a declaration out of the US Courts as to the validity of the patents is not relevant to the Alberta Actiondue to licensee estoppel. This doctrine has found favour with Canadian Courts but apparently not in the US.

Quoting from the leadingtext, Hughes & Woodley on Patents, 2nd ed. (Markham, Ont.: LexisNexis Butterworths, 2005-), Vol. 1 at 554: A licensee cannot dispute the validity of a patent, and its invalidation is not a defence to an action for royalties in the absence of awarranty of validity; in the absence of fraud, such a warranty will not be implied. [43] Generally by this doctrine, a licensee will be estopped from denying the validity of the patent or the title of the licensor:Coyle v. Sproule (1941), (ON SC), 2 C.P.R. 125 at 127 (Ont. H.C.).

Exceptions arise, for example where the licensorhas covenanted for validity, the right to dispute validity is reserved, or the licensee acts outside the licence. Estoppel does not operate topreclude a defence regarding the scope of the patent: Barclay v. McAvity (1894), 1 N.B. Eq. 1 (N.B. S.C.). Lederman J. explained inBayer Aktiengesellschaft v. Apotex Inc. (1995), (ON SC), 60 C.P.R. (3d) 58, [1995] O.J.

No. 141 (Gen.Div.): 47 ...The rationale for licensee estoppel is that one may not enter into a licence and thereby obtain immunity from a claim by thepatentee for infringement, use the claimed invention, yet seek to deny the patentee's rights and avoid paying royalties. The corollary isthat where the patentee sues for infringement for acts outside the licence, the licensee, having lost the benefit of immunity from suit, isnot bound by licensee estoppel. In other words, in a normal licence relationship, estoppel applies by reason of the bargain in placebetween the licensor/patentee and licensee.

The licensor/patentee has foregone the right to claim infringement against its licensee andlimits itself to a claim for royalties. In turn, because the licensee is insulated from an infringement claim, it foregoes any right to allegeinvalidity of the patent. But when the patentee asserts a claim outside of that licence relationship and seeks to make infringement anissue, the licensee is similarly freed from any restriction in attacking patent validity. [44] It is inappropriate in this motion to undertake a detailed analysis of the License Agreement.

However, on the face of theAgreement the enforceability of the intellectual property which is the subject of the license is arguably relevant.

Article 2.1(

a) providesthat the Licensor grants to MCI, in the Territory, during the Term, a non-exclusive license under the Intellectual Property.

Article 1.1(y)defines “Term” as a period continuing for so long as any of the Intellectual Property might continue to be enforceable in any jurisdictionwithin the Territory. [45] While TR Labs is entitled to put its best foot forward, it is difficult to escape the risks of overlap between findings in theVerizon New Jersey Action and the Alberta Action. It follows that if the Alberta Action continues, there will inevitably be parallel

proceedings, since it is agreed that the declarations sought in the Verizon New Jersey Action are within the exclusive jurisdiction of the US Courts. [ 46 ] Given the necessary involvement of the US Courts with respect to the enforceability of the US patents in question, a recognition of Alberta as the appropriate first forum will result in multiple proceedings.

Comity would support that this Court find a way to minimize the risk of multiple proceedings, subject to considerations of relative juridical advantage. [ 47 ] As noted earlier, Verizon is not seeking to preclude the Alberta Action indefinitely but rather to obtain a stay pending determination of the US action. Verizon argues that TR Labs may assert its contractual claim by way of defence and/or counterclaim in the Verizon New Jersey Action, which would avoid multiple proceedings.

If the Alberta Action proceeds prior to the Verizon New Jersey Action, there will be a potential for inconsistent findings. [ 48 ] In all of the circumstances, this factor favours the Verizon New Jersey Action proceeding prior to the Alberta Action. 5. What is the applicable law relating to the dispute, and what weight is to be given to legal issues in comparison to the factual issues? [ 49 ]

Article 12.4 provides that the

interpretation of the Licence Agreement is subject to the laws of Alberta, except with respect to its conflict of laws provisions. Application of Alberta law in US Courts may require expert evidence as to that law. On its face, this factor appears to favour Alberta since TR Labs is suing on the License Agreement. No expert evidence would be required regarding the Alberta law which governs that Agreement if the action proceeds here. [ 50 ] However, US patent law would apply to any issues which might arise regarding the patents themselves, including scope and engagement. Even if TR Labs is correct that licensee estoppel will apply, it acknowledges that

interpretation of the License Agreement will require at least some limited analysis of US patent law, because in order to claim entitlement to the prescribed fees, the evidence must support a finding that the activities of Verizon that triggered “deployment” involve technology falling within the scope of the patents. [ 51 ] Verizon asserts further that US bankruptcy law may be germane to the issue of whether the License Agreement remains extant and enforceable as against Verizon.

Although it is important not to weigh the relative merits of positions being advanced at this stage, I do not find this latter point especially compelling. Verizon has not introduced any preliminary affidavit evidence to suggest that a post bankruptcy merger may, as a matter of US bankruptcy law, annul or otherwise exempt Verizon from the terms of the License Agreement. Nor would it be fair to simply assume that the circumstances raise a complicated US bankruptcy law issue.

Nonetheless, it is at least a small variable within this factor for consideration by this Court, perhaps in the context of how TR Labs alleges that the use of mesh networking amounts to deployment under the Licence Agreement. [ 52 ] Overall, the designation of Alberta law as the governing law of the License Agreement merits some weight in the ultimate analysis. However, it appears inevitable that issues of US patent law at least may well arise, which supports a stay of the Alberta Action pending determination of the Verizon New Jersey Action. 6.

Are there relevant geographical considerations? [ 53 ] Verizon properly points out that consideration under this factor is not impacted so much by distance and travel expenses but rather the question of borders and compellability of witnesses to attend proceedings either in Canada or the United States. Although matters are in early stages, it appears that both sides are likely to call roughly similar numbers of representatives from their own organizations. Verizon asserts that former officers and employees of MCI may be required to testify about circumstances surrounding the License Agreement.

Verizon further raises the possibility that witnesses may have to give evidence on behalf of Ciena, a non party located in the US named in para. 21 of the Statement of Claim, and which is not under the control of the Defendant. Verizon has used Ciena to deploy technology in its network in the US. As well, physical evidence may be required, including that of Ciena. Non parties such as Ciena witnesses and former employees of MCI may not be compellable in Alberta; however, at present there is nothing to indicate that they are compellable in New Jersey either.

[ 54 ] As mentioned above, TR Labs argues that because it is suing on the Licence Agreement, there can be no challenge to the underlying patents to undermine entitlement to the fees or royalties otherwise payable, precluding the necessity to adduce evidence as to the validity or enforceability of the underlying patent claims. [ 55 ] TR Labs’ characterization of the litigation as a relatively straightforward contractual dispute to which licensee estoppel may apply, and Verizon’s position that the US Courts have exclusive subject matter jurisdiction with respect to patent matters, suggest that Verizon’s position regarding potential physical evidence and witnesses necessary to the Alberta Action may be overstated.

Given the speculative and vague information before the Court on this issue at this time, I find this factor to be neutral. 7. Will a party be deprived of a legitimate juridical advantage? [ 56 ] Sopinka J. explained in Amchem at para. 32 that the weight to be given to juridical advantage is very much a function of the parties' connection to the particular jurisdiction in question.

A party whose case has a real and substantial connection with a forum has a legitimate claim to the advantages that the forum provides, based on a reasonable expectation that in the event of litigation arising out of the transaction in question, those advantages would be available. [ 57 ] In this case, TR Labs has a reasonable expectation that the litigation will take place in Alberta, due to

Article 12.4. It argues that it will lose the juridical advantage of being able to raise licensee estoppel if the matter does not go ahead in Alberta. [ 58 ] This factor cuts both ways. In the same way that TR Labs will be deprived of the juridical advantage of raising license estoppel in the US, Verizon will be deprived of the advantage of attempting to raise the validity of the patents if the matter proceeds in Alberta. Verizon argues that it has never derived benefit from the Licence Agreement and that it was unaware of its existence and terms until it was served with the Statement of Claim last fall.

It points to the knowledge of TR Labs in 2006 as to the Verizon merger with MCI arising out of bankruptcy and the failure to notify Verizon of the obligations under the Licence Agreement. Further, it notes that Verizon was not advised of TR Labs’ position on deployment in 2008 until two years later.

The matter is further complicated as Verizon asserts that these issues together with related questions of enforcement of the US patents are raised in the Verizon New Jersey Action, including whether Verizon’s deployment of mesh network equipment amounts to any infringement. [ 59 ] It is at least arguable that because the License Agreement designates Alberta law as governing its

interpretation, TR Labs could successfully rely on the doctrine of licensee estoppel in US litigation to the extent that the terms of the License Agreement are in issue. Nothing in the materials provided to this Court meets the onus to show that such a result cannot derive in the other jurisdiction: United Oilseed Products at para. 32. [ 60 ] Nevertheless, the application of the doctrine in US litigation is problematic; to the extent that the License Agreement would be in issue in the US proceedings, TR Labs would be deprived of

interpretation by an Alberta Court of the substantive law of this province. In either jurisdiction it will be necessary to consider whether Verizon has derived benefit from the Licence Agreement as an assignee, so as to attract the equities of licence estoppel on these facts. [ 61 ] TR Labs raises the prospect of a jury trial as a juridical disadvantage if the matter does not proceed in Alberta. However, it is unclear whether Verizon might successfully apply for a jury trial in Alberta.

The patent aspect of the case signals complexity, however it is TR Labs’ own position that this is a straightforward contractual matter. Further, although of limited relevance, it is interesting to note that TR Labs appears to have opted for a jury trial in the TR Labs New Jersey Action.

More to the point, a jury is really part of the consideration of relative costs which is a separate factor to be considered. [ 62 ] Delay in the Alberta Action due to a stay pending determination in the US proceedings could potentially create a juridical disadvantage for TR Labs due to the mere passage of time and its effects on memory and availability of evidence.

However, Verizon asserts that TR Labs can raise its contractual claim by way of counterclaim and/or defence in the Verizon New Jersey Action if it does not wish to defer that claim until a stay is lifted in Alberta. [ 63 ] On balance and noting that both parties are affected by off-setting advantages, it is clear that Alberta has no jurisdiction with respect to the patent subject matter, and it cannot be said at this stage that those issues simply will not arise here. If they did, then any

findings by an Alberta Court regarding scope, deployment and enforceability, would be subject to, and might well conflict with, determinations flowing from the US patent litigation. This point, together with the exceptions to licence estoppel that must be considered in all the circumstances here, does narrowly favour the position of Verizon. TR Labs want it to be simple but that is unlikely. 8. Where does each party carry on business? [ 64 ] This factor is neutral. 9.

Where did the cause of action arise? [ 65 ] TR Labs argues that the cause of action arose because Verizon failed to honour the License Agreement and to pay license fees due to TR Labs which is located in Canada. [ 66 ] Verizon submits that a necessary underpinning to liability is a finding of infringement of the US patents, and the 2008 deployment of Verizon mesh network technology occurred only in the US. [ 67 ] The cause of action is the breach through deployment, which is alleged to have been committed by Verizon in the US, without payment.

Article 2.2(

c) provides that payments are to be made into an interest bearing account to be promptly established after the Deployment Date by the Licensor and MCI with a financial institution all as mutually agreed by the parties acting in good faith. There was no evidence of such account. [ 68 ] In my view, this factor favours Verizon’s position. 10. Where did the loss or damage occur? [ 69 ] Verizon underlines that license fees are payable in US Dollars under the License Agreement. I agree with TR Labs that this is insignificant.

TR Labs asserts that the loss of license payments caused damage to TR Labs in Alberta where they do business. While the ultimate effect of the alleged breach of the License Agreement was felt in Alberta, the alleged deployment occurred in the US. The considerations under this factor do not advance the position of either side. 11. What is the cost of conducting litigation? [ 70 ] In my view, this factor merits little weight in the circumstances. Verizon has expressed an intention to proceed in any event with the US patent litigation, over which Alberta Courts have no subject matter jurisdiction.

Therefore it appears that TR Labs will be faced with any cost associated with that litigation regardless of the outcome of this application. Generally, an approach which avoids conflicting findings will be more cost effective. [ 71 ] Similarly, the factor of a jury as referenced earlier does not account for much in relation to the total cost of the dispute between these parties. If they are unable to find an alternative way to resolve their dispute, the litigation will be expensive for both sides especially since the Verizon New Jersey Action will be going ahead regardless of the outcome of this motion. 12.

Will there be difficulty in proving foreign law if necessary? [ 72 ] I have canvassed this to some extent under Question #5. In either jurisdiction, it may be necessary to prove foreign law. Any US bankruptcy and patent law which may be raised in the course of the proceedings would be more complex than the principles

comprising the Canadian common law of contracts. Issue estoppel may be somewhat more difficult to prove but overall the factor is somewhat more favourable to the position of Verizon. 13. Where was the contract negotiated and executed? [ 73 ] Verizon and TR Labs agree that this factor is neutral. 14. Where are the Defendant’s assets located? [ 74 ] Verizon and TR Labs agree that this factor is neutral. 15.

Which forum is favoured by the interests of justice? [ 75 ] As set out above, TR Labs argues that the claim is made on behalf of Alberta entities trying to enforce a contract under Alberta law for payments under a license that specifically names Alberta as a court of competent jurisdiction. If the action were tried in New Jersey, licensee estoppel may not be available and TR Labs would be required to enter into protracted, complicated and expensive patent litigation to defend the validity of their patents.

Verizon asserts that it is a third party to the Licence Agreement and should have an opportunity to establish unenforceability of the US patents before being called upon to respond to the Alberta Action on the License Agreement. [ 76 ] Although the prospect of a stay of the action filed first in time in a jurisdiction named by the parties does raise some optics of unfairness, the test for interests of justice has more to do with what is the proper forum overall from a review of all of the preceding factors. 16.

What are the interests of the parties? [ 77 ] TR Labs submits that it is in the interest of the plaintiffs to have this contractual dispute heard expeditiously and efficiently in the Alberta Courts, and the validity of the patents need not be in issue. Verizon argues that the action should be stayed pending the outcome of the Verizon New Jersey Action, to enable the New Jersey Court to fully determine all the issues of US patent law including the issues of invalidity of the US patents. Again it is not so much a choice of which proceeding is simplest to take to trial.

The parties are entitled to pursue their options and in the event of jurisdictional conflict, their interests must be reflected in the forum which is best able to respond to the interests identified by the review of factors that have been raised in this application. 17. Will the judgment have to be recognized in another jurisdiction? [ 78 ] Verizon argues that it has no relevant connection to Canada and conducts no activities in Canada relevant to the issues in this action, and therefore any judgment obtained in this action would require recognition in the US in order to be enforced.

TR Labs acknowledges this, but submits that this is not a significant factor. Conclusion [ 79 ] Verizon forcefully argues, as a non signatory of the License Agreement, that it would be unfair to attribute much weight to the terms of the Agreement. However, the naming of Verizon in this suit is not illogical in the context outlined by the sparse available facts. Denial of liability by a defendant who has not attorned is an inevitable feature in applications to determine forum conveniens.

[ 80 ] In my view, if this were a simple contractual matter, the Court would have strong reasons in the circumstances to find Alberta to be the preferable forum. The License Agreement contemplates the non-exclusive jurisdiction of the Alberta Courts, and Alberta law was intended to govern.

The Alberta Courts would readily be able to consider the law surrounding licensee estoppel, although the case may be complicated by US bankruptcy law. [ 81 ] However, to the extent the License Agreement is raised in the US litigation, TR Labs can argue that Alberta law governs, including application of the licensee estoppel doctrine. The converse is not true. Alberta Courts do not have subject matter jurisdiction over patent matters.

If TR Labs were to be unsuccessful here in Alberta in establishing that Verizon is bound by the License Agreement, it would be left with a potential infringement claim - with respect to which licensee estoppel could not be raised. [ 82 ] Most significantly, I am persuaded that if the Alberta Action proceeds first, then despite TR Labs’ best efforts Verizon will likely succeed in raising patent issues in the context of this contractual lawsuit, even if only to inform the question of the applicability of the doctrine of licensee estoppel on the facts of the case.

To the extent that patent issues are unavoidable in this action, judicial economy and comity dictate that this action be stayed pending the outcome of the US patent litigation. [ 83 ] In the result I find that the forum conveniens analysis favours New Jersey as relates to the multiplicity of issues that are being pursued, the exclusive jurisdiction on US patent matters, the proofs of law, and to some extent the relative juridical advantages. These are more compelling overall than the prior choice to file proceedings in Alberta consistent with the Licence Agreement.

In reaching this conclusion, I am strongly affected by the option left available to TR Labs to either pursue by way of counterclaim or to continue the Alberta Action later. Order [ 84 ] Accordingly there will be a stay of proceedings issued against this Action pending further directions of this Court as may arise from the outcome of the Verizon New Jersey Action either by way of final judgment or such other disposition as would affect the exercise of this Court’s assessment of whether the stay should remain in effect.

Factors in that regard could include proof of alternate dispute resolution, inordinate delay, or difficulties in advancing a counterclaim. Heard on the 24 th day of May, 2011. Dated at the City of Edmonton, Alberta this 22 nd day of June, 2011. S.D. Hillier J.C.Q.B.A.

Appearances: Christopher Kvas Piasetzki Nenniger Kvas LLP for the Plaintiff Timothy Lowman Sim, Lowman, Ashton & McKay LLP for the Defendant