Schmidt v. Wood, 2012 ABQB 261

Court of Queen ’ s Bench of Alberta Citation: Schmidt v. Wood, 2012 ABQB 261 Date: 20120419 Docket: 0903 06000 Registry: Edmonton Between: Gerhard Schmidt, Giant LLC Nevada and Giant LLC North America Plaintiffs and Defendants by Counterclaim - and - Joseph Wood, Joseph R. Wood & Associates Inc., Marc Bilodeau, Amanda Wood and 1341453 Alberta Inc., carrying on business as Giant Marketing LLC and Giant LLC Marketing Defendants and Plaintiffs by Counterclaim _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Brian R.

Burrows _______________________________________________________ [ 1 ] The Defendants, in their capacity as Plaintiffs by Counterclaim, seek specific performance of certain obligations undertaken by the Plaintiffs (Defendants by Counterclaim) in two written agreements entered on May 30 and June 5, 2007. They also seek a

declaration as to certain rights they acquired under the contracts. [ 2 ] The Defendants ’ position is that the general intent of the agreements was to give Joseph Wood, Marc Bilodeau and Amanda Wood, Mr. Wood ’ s daughter, an interest in the profits to be made through the manufacture and marketing of certain technologies which Gerhard Schmidt had invented and developed. Mr. Wood and Mr. Bilodeau were to take steps to raise financing to be used in the further development and promotion of the technologies and to market the technologies. [ 3 ] The intellectual property for the technologies was held by Mr.

Schmidt through a Nevada company of which he was sole owner, Giant LLC (sometimes referred to as Giant LLC Nevada, or Giant LLC Nevada Corporation in the materials). It was intended that Mr. Schmidt, through his company, would continue to own the intellectual property. Under the arrangement with Mr. Bilodeau and Mr. Wood, the right to manufacture equipment and market it would be shared, unequally, by Mr. Schmidt, Mr. Bilodeau, Mr. Wood and Mr. Wood ’ s daughter, Amanda. [ 4 ] Mr. Bilodeau and Mr.

Wood say the arrangement was that two new companies would be incorporated in Nevada, Giant LLC North America and Giant LLC Marketing. There would also be two companies incorporated in Alberta for the same purposes. The shareholders of Giant LLC North America and its Alberta sister would be Mr. Schmidt as to 70%, Mr. Wood as to 10%, Mr. Bilodeau as to 10% and another individual as to 10%. The shareholders of Giant LLC Marketing and its Alberta sister would be Mr. Schmidt as to 40%, Mr. Wood as to 28%, Mr. Bilodeau as to 24%, and Ms.

Wood as to 8%. [ 5 ] Further, the intention was that Giant LLC North America would undertake the manufacturing of the equipment that Mr. Schmidt had invented and Giant LLC Marketing would undertake the marketing of that equipment. As mentioned, the intellectual property would continue to be held by Mr. Schmidt ’ s company, Giant LLC Nevada, which would receive a royalty of 10% of the proceeds of selling or leasing the manufactured equipment. [ 6 ] Mr. Bilodeau and Mr.

Wood required that the terms of the arrangement be put in writing so as to “ protect our rights by guaranteeing us a return if the inventions were successfully taken to market. ” The agreements of May 30 and June 5, 2007 resulted. They were drafted by Mr. Bilodeau and Mr. Wood without legal advice. [ 7 ] The issue before me is whether the agreements can be interpreted as giving effect to what Mr. Bilodeau and Mr. Wood say was the intention and whether in the circumstances the Defendants are entitled to the order for specific performance and the declaration which they seek.

Procedural History [ 8 ] The procedural history is complicated and of some importance. [ 9 ] The Plaintiffs commenced this action on April 24, 2009. They alleged that Gerhard Schmidt entered the agreements of May 30 and June 5, 2007 in reliance on “ representations by the Defendants that they would assist in raising capital for and [would market] technology created by Gerhard Schmidt and his companies. ” They alleged that the Defendants failed to raise capital or to properly market the technologies and were in breach of the agreements with the result that the agreements were no longer in force or effect.

They sought several remedies including a declaration that the agreements were not in force or effect, an injunction restraining the Defendants from using the name associated with the Plaintiffs ’ technologies and interfering with the Plaintiffs ’ efforts to raise capital and to market the technologies, and damages. [ 10 ] On June 25, 2009, the Defendants filed a Statement of Defence and Counterclaim. They alleged that they had in fact made the efforts to obtain financing and to market the technologies that had been contemplated at the time the agreements were entered.

They denied they were in breach of the agreements or that they had made any misrepresentations to Gerhard Schmidt or that they had interfered with Mr. Schmidt ’ s efforts to secure financing or to market the technologies.

[ 11 ] In the Counterclaim they claimed that the agreements gave them the exclusive, non-revocable right to market the Plaintiffs ’ technologies, past, present and future. They alleged that the Plaintiffs had breached the agreements by marketing the technologies in their own names and had retained the proceeds that resulted.

They sought, among other things, specific performance of the agreements and a declaration that 1341453 Alberta Inc. had the exclusive right to market the Plaintiffs ’ technologies. [ 12 ] On July 15, 2009, in the context of an application initiated by the Defendants, Clackson J. issued a Consent Order, which set out terms under which both sides could continue to market the technologies pending trial. All marketing, by either party, was to be done in the name of Giant LLC North America or 1341453 Alberta Inc.

The Order required the Plaintiffs to allow the Defendants to have access to the Plaintiffs ’ technologies for marketing purposes and to provide information to the Defendants to facilitate their marketing efforts. [ 13 ] On December 9, 2009, the Plaintiffs filed a Statement of Defence to Counterclaim in which the matters alleged in the Counterclaim were denied. [ 14 ] On June 16, 2010, Sulyma J., on application of the Defendants, held that Mr. Schmidt was in contempt of the Clackson Order. The evidence of the Defendants was that Mr.

Schmidt had not given them access to the technologies and the other information he had been ordered to give them and had himself undertaken marketing efforts other than through Giant LLC North America or 1341453 Alberta Inc. Sulyma J. directed that Mr. Schmidt pay a fine of $10,000 to the Court. She directed him to purge his contempt “ by contacting all parties to whom he has directed marketing activities since the [Clackson Order] and clarify that he is acting through Giant North America LLC or its associated Alberta corporation, 1341448 Alberta Inc. ” [ 15 ] Mr.

Schmidt did not pay the fine or purge his contempt as ordered. On May 5, 2011 Sulyma J. held him in further contempt of the Clackson Order, fined him a further $10,000, stayed his claim in this action pending his purging his contempt, ordered him to provide a full accounting of his marketing activities by June 30, 2011, and enjoined him from engaging in any further marketing activities. [ 16 ] Mr. Schmidt did not comply with the second order of Sulyma J. On July 15, 2011, Hillier J., on the Defendants ’ application, held that Mr.

Schmidt “ remains in contempt of the Order of Clackson J. ” He struck the Statement of Claim and Statement of Defence to Counterclaim in this action. He further ordered: The Defendants/Plaintiffs by Counterclaim shall have leave to bring an application for judgment with respect to their counterclaim, to be restricted to the

interpretation and scope of the two Marketing Agreements as affecting appropriate remedies as the court may determine between the parties. The Plaintiffs/Defendants by Counterclaim shall receive notice of the application and shall be permitted to make representations with respect to the

interpretation and scope of the Marketing Agreements, but shall not be permitted to raise any of the claims in the Statement of Claim or any other assertions challenging the validity and enforceability of the Marketing Agreements. [ 17 ] In a subsequent application by Mr. Schmidt, Hillier J. declined to vary the order he had granted on July 15, 2011 and confirmed that the formal order was an accurate reflection of what he had ordered on that date. [ 18 ] No appeal was taken from any of the orders described above. [ 19 ] I heard the Defendants ’ application made pursuant to Hillier J. ’ s order on April 16, 2012.

The Defendants do not seek judgment for all the relief claimed in the Counterclaim. In particular they do not seek a money judgment. Rather they seek an order for specific performance of the agreements and a declaration that 1341453 Alberta Inc. has the exclusive right to market the Plaintiffs ’ technologies. [ 20 ] Mr. Schmidt and the other Plaintiffs were represented and made representations as to the

interpretation and scope of the agreements. Though counsel for the Plaintiffs attempted to also make representations as to the validity and enforceability of the agreements, I declined to permit him to do so, given the express prohibition of such representations in the Hillier Order.

The Agreements [ 21 ] The Defendants accept that in some respects the agreements, interpreted literally, do not fully record the arrangement the parties entered. They provide sworn evidence as to what was intended. They say that the agreements should necessarily be construed in a manner that gives them commercial sense. This will involve inferring meaning not found in the actual words of the agreements, but based on the evidence as to the parties ’ intent. [ 22 ] By a literal and strict reading, the agreements provide that: May 30, 2007 Agreement:

a) Gerhard Schmidt and Giant LLC North America granted and conveyed property and rights described in the agreement to Joseph R. Wood, Joseph R. Wood & Associates Ltd., and Marc Bilodeau.

b) The consideration flowing to Gerhard Schmidt and Giant LLC North America was $100.

c) The rights conveyed were:

i) Interests in Giant LLC North America 1. a 10% interest in Giant LLC North America to Joseph R. Wood; 2. a 10% interest in Giant LLC North America to Marc Bilodeau; 3. protection for Joseph R.

Wood and Marc Bilodeau against personal liability for the debts of Giant LLC North America. ii) Right to Market “ The exclusive, non-revocable right to market and sell all the past, present and future products of Giant LLC North America in all the territories assigned to Giant LLC North America by Giant LLC Nevada, namely: North & South America, Australia & New Zealand, Japan, the Phillippines, Korea and all Islands in the Pacific Ocean. ” iii) Rights concerning Giant LLC Marketing “ The right to form a company called “ Giant LLC Marketing ” in which 100% of the voting shares will be divided as follows: Gerhard Schmidt - 48% of shares of the company, Joseph Wood - 28% of the shares of the company, Marc Bilodeau - 24% of the shares of the company..

Giant LLC Marketing would be registered in Nevada and Alberta. iv) Rights of First Refusal Should any shareholder of Giant LLC North America or Giant LLC Marketing wish to divest himself of his shares, the other shareholders would have a right of first refusal to acquire those shares at a price to be decided on at the time of the divestiture.

v) Specific Equipment Mr. Schmidt would transfer “ the Filerfuge TM equipment and the Universal Thermal Facility TM equipment ” to Giant LLC Marketing, “ so that it may be used as collateral against any loan or equity investment ” . “ The wholesale cost of this equipment will be reimbursed to Giant LLC Nevada ” . vi) Bilodeau Bonus Right Bilodeau is appointed Director of Sales and would received an “ upfront bonus ” of 2% of the net of any sales processed ” .

This was an incentive for him to devote his time and energy to marketing the products of Giant LLC North America. vii) Wood Bonus Right Wood, and his company, is appointed Director of Operations and Finance, and would receive a bonus of 2% of the net of any sales processed as an incentive.

d) Royalty to Giant LLC Nevada Giant LLC Nevada would receive “ a Royalty fee of 10% of the retail of all products sold or leased. ”

e) Warranty by Gerhard Schmidt and Giant LLC North America “ I hereby warrant that I am the lawful owner of said property and rights and that I have full legal right, power and authority to sell or convey said property and rights. I further warrant said property and rights to be free of all encumbrances and that I will warrant and defend said property hereby sold or conveyed against any and all persons whomsoever. ” June 5, 2007 Agreement:

a) Gerhard Schmidt and Giant LLC Marketing granted and conveyed property and rights described in the agreement to Amanda H. Wood.

b) The consideration flowing to Gerhard Schmidt and Giant LLC North America was $100,000.

c) The rights conveyed were:

i) Interest in Giant LLC Marketing 8% interest in Giant LLC Marketing from the interest owned by Gerhard Schmidt. ii) Share in Sales Proceeds 1% of any sales or funds generated by Giant LLC Marketing until her investment of $100,000 is repaid.

d) Right to Form Giant LLC Marketing A company called Giant LLC Marketing would be formed. The shareholding would be: Gerhard Schmidt - 40% Joseph Wood - 28% Marc Bilodeau - 24% Amanda Wood - 8%

e) Specific equipment transferred to Giant LLC Marketing Mr. Schmidt would transfer “ the Filerfuge TM equipment and the Universal Thermal Facility TM equipment ” to Giant LLC Marketing, “ so that it may be used as collateral against any loan or equity investment ” . “ The wholesale cost of this equipment will be reimbursed to Giant LLC Nevada ” .

f) Statements as to Giant LLC Marketing and its Rights

i) Giant LLC would be registered in Nevada and Alberta. ii) “ Giant LLC Marketing shall have the exclusive, non-revocable right to market and sell all the past, present and future products of Giant LLC North America in all the territories assigned to Giant LLC North America by Giant LLC Nevada, namely: North & South America, Australia & New Zealand, Japan, the Phillippines, Korea and all Islands in the Pacific Ocean. ”

g) Warranty by Gerhard Schmidt and Giant LLC North America “ I/we hereby warrant that I/we are the lawful owner of said property and rights and that I/we have full legal right, power and authority to

sell or convey said property and rights. I/we further warrant said property and rights to be free of all encumbrances and that I/we will warrant and defend said property hereby sold or conveyed against any and all persons whomsoever. ” [ 23 ] The evidence indicates that the two new companies mentioned in the agreements, Giant LLC North America and Giant LLC Marketing were in fact incorporated in Nevada. Two affiliated companies were also incorporated in Alberta: 1341448 Alberta Ltd. as the sister for Giant LLC North America; and 1341453 Alberta Ltd. as the sister of Giant LLC Marketing.

Shareholdings in each of these Nevada corporations and their respective Alberta sister corporations were as set out in the agreements.

Interpretation Issues: Do the agreements give Giant LLC North America exclusive manufacturing rights? [ 24 ] The Defendants say the agreements were intended to grant to Giant LLC North America an exclusive right to manufacture commercially marketable products using the intellectual property associated with Mr. Schmidt ’ s inventions. The agreements were also intended to grant to Giant LLC Marketing an exclusive right to market the products. The intellectual property itself, the evidence indicates, is owned by the Plaintiff Giant LLC Nevada, a company owned solely by Mr. Schmidt.

The Defendants do not suggest that the agreements convey the intellectual property. [ 25 ] The agreements are in fact absolutely silent as to any manufacturing right. They are absolutely silent about the purpose for which Giant LLC North America was to be created. They do not give Giant LLC North America anything.

Indeed, under the first agreement Giant LLC North America is a granter or transferor of rights and property - not a grantee or transferee. [ 26 ] The agreements do not say anything about the manner in which Giant LLC North America would acquire products which were to be subject to the marketing efforts of Giant LLC Marketing, whether by manufacturing them or purchasing them or any other manner of acquisition.

Neither do they contain any reference to any right of manufacture or other acquisition being exclusive. [ 27 ] The agreements do contemplate Giant LLC North America being incorporated and that it would have products that could be marketed. But they do not say anything about Giant LLC North America doing the manufacturing. In order to read the agreements in the manner proposed by the Defendants, one would have to presume a prior agreement giving Giant LLC North America manufacturing rights.

There is no evidence of such an agreement. [ 28 ] In my view, it is not necessary, in order to make commercial sense of the agreements, that they be interpreted as meaning that Giant LLC North America was to have exclusive right to manufacture products. Whatever the parties intended as to how Giant LLC North America would acquire the products that Giant LLC Marketing would market, they did not enter any formal agreement in that regard.

I decline to construe the agreement they did enter as containing by necessary inference such a provision. [ 29 ] In this regard it is relevant to note that the Defendants did not, in their Counterclaim, allege that Giant LLC Nevada or Mr. Schmidt had granted Giant LLC North America an exclusive right to manufacture products in accordance with the intellectual property owned by Giant LLC Nevada. They did not seek any declaration as to manufacturing rights. So the Defendants ’ present application for an order declaring that there is such a right cannot be sustained either on the basis of the

interpretation of the agreements or on the basis of the pleadings. Was it Giant LLC Marketing or was it Wood and Bilodeau who were granted marketing rights? [ 30 ] In the May 30, 2007 agreement, Mr. Schmidt and Giant LLC North America granted “ the exclusive, non-revocable right to market and sell all the past, present and future products of Giant LLC North America ” in the territories identified to Mr. Wood, his company and Marc Bilodeau. In the June 5, 2007 agreement, Mr. Schmidt and Giant LLC Marketing declare that the same right would be held by Giant LLC Marketing.

[ 31 ] The Defendants acknowledge that despite the wording of the May 30 agreement, the intention was that Giant LLC Marketing and not the individual grantees identified in the agreement, would have the marketing rights. They acknowledge that Mr. Schmidt was intended to have a share in the marketing profits – indeed a 40% share. Accordingly, the agreements provided that he was to be a 40% shareholder of Giant LLC Marketing. By a strict reading of the May 30 agreement, Mr. Schmidt would not share in the marketing profits because Giant LLC Marketing did not acquire them. Neither side suggests that was the intent.

The June 5, 2007 agreement in effect corrected the error made in the May 30 agreement in that regard. [ 32 ] In my view, the proper

interpretation of the agreements is that the grantee of marketing rights is Giant LLC Marketing. What is to be marketed pursuant to the marketing rights granted in the agreements? [ 33 ] The agreements give Giant LLC Marketing the “ exclusive, non-revocable right to market and sell all the past, present and future products of Giant LLC North America ” . [ 34 ] The Defendants contend that “ products ” means such wares as are manufactured using the intellectual property resulting from Mr. Schmidt ’ s inventions whenever those inventions are made and whoever manufactures them.

They submit that the Filterfuge and the Universal Thermal Facility were within that description and that there were also other products within the description. [ 35 ] The Plaintiffs submit that the description of “ products ” was further limited by the words “ of Giant LLC North America ” . Accordingly, they say, at best the agreement granted marketing rights in respect only of products which were manufactured on the basis of the Schmidt inventions and which were owned by Giant LLC North America. Nothing obliged Mr.

Schmidt or Giant LLC, the formal owner of the intellectual property, to grant Giant LLC North America manufacturing rights or to otherwise cause Giant LLC North America to own product. [ 36 ] In support of the

interpretation they advance, the Defendants cite the one instance of marketing under the agreement which was actually concluded. The evidence establishes that in September 2007, the Filterfuge was leased to a Calgary firm for a month. The lease agreement is in evidence. The lessor was Giant Marketing LLC. In the agreement, Giant LLC Marketing warrants to the lessee that it possesses the legal title to the Filterfuge and has the right and authority to lease it to the lessee. The evidence establishes that the rent paid by the lessee, $50,000, was distributed as dividends to the shareholders of Giant Marketing LLC.

Accordingly, Mr. Schmidt would have received 40% of it. [ 37 ] The lease makes no mention of Giant LLC North America. The Defendants say this shows how the arrangement was intended to operate. Equipment resulting from a Schmidt invention was leased out by Giant Marketing LLC. It was not equipment owned by Giant LLC North America. Giant LLC Marketing ’ s right to market it arose because it was a product based on a Schmidt invention regardless of who owned it and regardless of who held the intellectual property. [ 38 ] In my view, this evidence justifies the

interpretation of the marketing provision advanced by the Defendants. In my view, in order to give the provision commercial sense, the marketing provisions of the agreements must be interpreted as creating in Giant LLC Marketing an exclusive, non-revocable right to market and sell product manufactured on the basis of a Schmidt invention including all past, present and future Schmidt inventions, regardless of who might have manufactured the product and regardless of who might hold title to the intellectual property associated with the invention.

In effect, the provision constitutes an encumbrance on the intellectual property – indeed a very onerous encumbrance. [ 39 ] The provision in effect obliges Mr. Schmidt not to license or permit the owner of the intellectual property, presently his company, to license any entity to manufacture product based on a Schmidt invention without such license being subject to Giant LLC Marketing ’ s exclusive marketing right. Similarly, Mr. Schmidt and his company cannot transfer title to the intellectual property except subject to Giant LLC Marketing ’ s exclusive marketing rights.

Of what significance is it that Giant LLC Nevada is not formally party to the agreements?

[ 40 ] In my view, that Giant LLC Nevada, the owner of the intellectual property, is not a party to the agreements is of no practical significance. Mr. Schmidt is the sole shareholder and controlling mind of Giant LLC Nevada. It is clear from the agreement that, though it is not formally signatory to the agreement, Mr. Schmidt and the other parties intended Giant LLC Nevada to be bound. In particular: - Mr. Schmidt warranted that he owned the property and rights conveyed and that he had the authority to convey them and that they were free of encumbrances.

Clearly he had authority as sole owner of Giant LLC Nevada to enter an agreement, the effect of which was to limit and encumber Giant LLC Nevada ’ s interest in the intellectual property. This

interpretation may involve a piercing of the corporate veil. In my view, that is appropriate in the circumstances. - The agreement provided compensation to Giant LLC Nevada for the encumbrance on its rights – it was to receive reimbursement for its costs in relation to the prototype equipment to be transferred to Giant LLC Marketing and it was to receive a royalty of 10% of the proceeds of marketing.

How should the provision regarding transfer of the Filterfuge and the Universal Thermal Facility be interpreted? [ 41 ] As previously noted, the agreements contain the following provision: Gerhard Schmidt will transfer the Filterfuge TM equipment and the Universal Thermal Facility TM equipment valued at $7.68 Million dollars to Giant LLC Marketing, so that it may be used as collateral against any loan or equity investment.

The wholesale cost of this equipment will be reimbursed to Giant LLC Nevada. [ 42 ] The Defendants ’ evidence is that part of the function they were to perform was to raise financing for the further development of the inventions and for the marketing of the products manufactured on the basis of the inventions. There was, at the time of the agreements, a prototype Filterfuge and, I gather, a prototype Universal Thermal Facility.

It is apparent that the intention was that title to this prototype equipment was to be transferred to Giant LLC Marketing albeit for a limited purpose – to be used as collateral against any loan or equity investment. [ 43 ] The provision clearly did not contemplate an unqualified transfer of title. Giant LLC Marketing would hold title for a limited purpose. In effect, it would be a trustee holding legal title to the equipment and would be obliged not to alienate that title except for the purpose of granting security over the equipment to a lender or equity investor.

Further, the “ wholesale cost ” of the equipment, the amount of which was not specified, would be reimbursed to Giant LLC Nevada, presumably by Giant LLC Marketing, though the use of the passive voice makes it unclear how and by whom the reimbursement was to be accomplished. Validity and Enforceability of the Agreements [ 44 ] As previously mentioned, counsel for the Plaintiffs sought to raise several points regarding the validity and enforceability of the agreements.

I did not permit him to do so given the express prohibition against the Plaintiffs making representations on that subject in the unappealed Hillier Order previously described. [ 45 ] Counsel for the Plaintiffs took the position that whether or not he was allowed to make representations on that subject, it would be necessary for me to deal with the issue of validity and enforceability. I disagree. [ 46 ] In the original Statement of Claim, the Plaintiffs sought a declaration that the agreements were of no force or effect as a result of actions of the Defendants.

The Plaintiffs claimed that, as a result of the Defendants ’ alleged failure to raise capital or market technologies, the agreements were of no further force or effect. The Plaintiffs did not plead any other basis for the agreements being invalid or unenforceable either in the Statement of Claim or in the Defence to Counterclaim.

[ 47 ] In my view, not having raised any other issue relating to validity or enforceability in their pleadings, and the basis they did raise having in effect been dismissed when their pleadings were struck, the Plaintiffs cannot be permitted to raise any other issue concerning validity or enforceability at this point. In effect, the result of their pleadings being struck and the effect of the Hillier Order is to foreclose the Plaintiffs from disputing the validity or enforceability of the agreements.

Remedy [ 48 ] The Defendants seek a declaration and an order for specific performance, both of which were claimed in the prayer for relief in the Counterclaim. In my view, a declaration and an order for specific performance in respect of the obligation to transfer the two prototype pieces of equipment only, are appropriate and justified remedies in the circumstances. [ 49 ] In my view, the Defendants are also entitled to a permanent injunction to support the declaration.

In the prayer for relief in the Counterclaim the Defendants sought, “ such further and other relief as the nature of the case may require, and as the Honourable Court may deem meet, including amendments to the Pleadings ” . In my view, a permanent injunction is within that description. [ 50 ] I grant the Defendants the following Declaration: IT IS DECLARED that under the Agreement dated May 30, 2007 between Gerhard Schmidt and Giant LLC North America and Joseph R. Wood, Joseph R.

Wood & Associates Inc. and Marc Bilodeau and under the Agreement dated June 5, 2007 between Gerhard Schmidt and Giant LLC Marketing, and Amanda H.

Wood, Giant LLC Marketing and 1341453 Alberta Ltd. were jointly granted and jointly received an exclusive, non-revocable right to market and sell product manufactured on the basis of any invention ever made by Gerhard Schmidt, and ever hereafter made by Gerhard Schmidt, regardless of who manufactured the product and regardless of who holds title to the intellectual property associated with the invention. [ 51 ] Further, I grant the following Order for Specific Performance: Gerhard Schmidt is ordered to transfer or cause to be transferred to Giant LLC Marketing the prototype Filterfuge TM equipment and the prototype Universal Thermal Facility TM equipment.

Giant LLC Marketing shall hold title to that equipment subject to the restriction that it shall not alienate that title except for the purpose of granting security over the equipment to a lender or an equity investor. It shall also receive title to the equipment subject to a charge in favour of Giant LLC Nevada for the wholesale cost of the equipment. [ 52 ] Further, I grant the Defendants the following permanent injunction: Gerhard Schmidt, Giant LLC Nevada and Giant LLC North America are all absolutely enjoined and restrained:

a) from marketing or selling product manufactured on the basis of any invention ever made by Gerhard Schmidt, or ever hereafter made by Gerhard Schmidt, regardless of who manufactured the product and regardless of who holds title to the intellectual property associated with the invention, and

b) from granting to anyone:

i) any interest in intellectual property relating to any invention ever made by Gerhard Schmidt, or ever hereafter made by Gerhard Schmidt, whether the intellectual property is owned by Gerhard Schmidt or Giant LLC Nevada or any other entity controlled by Gerhard Schmidt or Giant LLC Nevada;

ii) any right or license to manufacture product on the basis of any invention ever made by Gerhard Schmidt, or ever hereafter made by Gerhard Schmidt, whoever may own the intellectual property in relation to such invention; iii) any right to market or sell any product manufactured on the basis of any invention ever made by Gerhard Schmidt, or ever hereafter made by Gerhard Schmidt, whoever may own the intellectual property in relation to such invention. except where such grant is expressly made subject to the exclusive and non-revocable joint right of Giant LLC Marketing and 1341453 Alberta Ltd. to market and sell product manufactured on the basis of any invention ever made by Gerhard Schmidt, or ever hereafter made by Gerhard Schmidt, regardless of who manufactured the product and regardless of who holds title to the intellectual property associated with the invention.

This injunction is for the benefit of and shall be enforceable by Joseph Wood, Joseph H. Wood & Associates Ltd., Marc Bilodeau, Amanda Wood and 1341453 Alberta Inc., carrying on business as Giant Marketing LLC and Giant LLC Marketing, or any of them. [ 53 ] In these proceedings, Mr. Schmidt has been held in contempt of court for breaching orders of the court three times. In the circumstances, I consider it appropriate to set out the Rule of Court which prescribes the punishment for civil contempt of Court, Rule 10.53:

(1) Every person declared to be in civil contempt of Court is liable to any one or more of the following penalties or sanctions in the discretion of the judge: (

a) imprisonment until the person has purged the person ’ s contempt; (

b) imprisonment for not more than 2 years; (

c) a fine and, in default of paying the fine, imprisonment for not more than 6 months; (

d) if the person is a party to an action, application or proceeding, an order that (

i) all or part of a commencement document, affidavit or pleading be struck out, (ii) an action or an application be stayed, (iii) a claim, action, defence, application or proceeding be dismissed, or judgment be entered or an order be made, or (iv) a record or evidence be prohibited from being used or entered in an application, proceeding or at trial.

(2) The Court may also make a costs award against a person declared to be in civil contempt of Court.

(3) If a person declared to be in civil contempt of Court purges the person ’ s contempt, the Court may waive or suspend any penalty or sanction.

(4) The judge who imposed a penalty or sanction for civil contempt may, on notice to the person concerned, increase, vary or remit the penalty or sanction. [ 54 ] The Defendants shall be entitled to costs of these proceedings. Heard on the 16 th day of April, 2012. Dated at the City of Edmonton, Alberta this 19 th day of April, 2012. Brian R. Burrows J.C.Q.B.A. Appearances: Travis Lidstone for the Plaintiffs Phyllis Van Campenhout for the Defendants