2017 QCCA 2060, 2017 QCCA 2060

Druide Informatique inc. c. Éditions Québec Amérique inc. 2017 QCCA 2060 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-027119-171 (500-17-073308-127) DATE: December 21, 2017 PRESIDING : THE HONOURABLE MARK SCHRAGER, J.A. DRUIDE INFORMATIQUE INC. APPLICANT – Defendant/Cross-Plaintiff v. LES ÉDITIONS QUÉBEC AMÉRIQUE INC.

RESPONDENT – Plaintiff/Cross-Defendant JUDGMENT [ 1 ] I am tasked with the adjudication of a motion seeking leave to appeal from the judgment rendered on September 14, 2017 by the Superior Court, District of Montreal (the Honourable Élise Poisson), which granted the Respondent’s action and dismissed the Applicant’s cross-demand. [1] [ 2 ] In addition to permission to appeal, the Applicant seeks an order to suspend provisional execution and a suspension of the appeal process.

A conclusion for the extension of time to March 2, 2018 for Applicant to file its brief was dropped at the hearing as no longer being necessary. [ 3 ] Applicant has developed and marketed software used as an editing tool under the name “Antidote”. [ 4 ] Respondent developed a thematic illustrated dictionary in software form known as “Le Visuel Multimédia”. Working in collaboration with Applicant, the product has been available with Antidote.

The software has been improved and updated over the years. [ 5 ] The parties worked together in this manner since 1998 until differences arose in the relationship leading to the instant proceedings commenced in 2012. The Respondent sought orders to enjoin Applicant from using or selling its software dictionary as well as damages arising from copyright infringement. It is to be noted that a provisional or safeguard order was refused for want of urgency so that Applicant continued the use and sale of the software dictionary of Respondent while the proceedings were pending before the Superior Court.

Specifically, the editions of Antidote brought to market in 2012 and 2015 included the sale of current versions of Respondent’s illustrated dictionary. [ 6 ] After a fourteen-day hearing in June 2017, the judge issued a judgment in October 2017.

She held that Applicant had not satisfied its burden to establish that Respondent granted to it an implicit, irrevocable, non-exclusive licence of an unlimited duration, royalty free allowing Applicant the use of the illustrated software dictionary with its Antidote software. [2] However, the judge did find that Respondent had consented to use prior to the institution of proceedings of older versions of the Antidote software (i.e. “Le Visuel Nano” and “Le Visuel Intégré”) so that consumers who had purchased that software continued to have the right to use it. [ 7 ] Nonetheless, there was no consent to the use in conjunction with subsequent versions launched in 2012 and 2015 by Applicant (respectively Antidote 8 and Antidote 9) after proceedings were instituted.

Thus, there was an infringement in such regard of Respondent’s intellectual property rights. The judge did not allow for a notice of seven years submitted by Applicant as reasonable for Respondent to terminate any agreement since no licence agreement ever existed; rather, there had existed a simple consent for the use of the software. [3] However, the terms of the injunction are such that it will not take effect until later in 2018. [ 8 ] The judge concluded that injunctive relief was appropriate to stop future use. [ 9 ] The judge also awarded damages.

However, the conclusions of Respondent seeking an accounting of profits for the unauthorized use of its intellectual property as well as fees it incurred were split since the proof would be long and complicated and potentially unnecessary if Respondent’s rights were not recognized in the judgment.

Because of the splitting, the judgment is not, technically, final so that leave to appeal is required. [ 10 ] Following are the conclusions of the judgment of the Superior Court: [373] ACCUEILLE , en partie, la Requête introductive ré-amendée en date du 22 décembre 2016; [374] ORDONNE à Druide informatique inc., ses actionnaires, ses administrateurs, ses préposés et ses mandataires, de cesser de reproduire, de représenter, de communiquer à distance, de vendre et d’exploiter de quelque manière les œuvres littéraires et artistiques

dont les droits d’auteur appartiennent à Les Éditions Québec Amérique inc., soit les illustrations, les termes, les définitions dans les langues française et anglaise et leur prononciation, intégrées dans les sections appelées Le Visuel Nano et Le Visuel intégré du logiciel Antidote 9 commercialisé par Druide informatique (les Œuvres), à compter de la première des deux dates suivantes :

i) la date de lancement de la prochaine édition d’Antidote, laquelle devrait normalement survenir en 2018; ou ii) le 31 décembre 2018; [375] ORDONNE à Druide informatique inc., ses actionnaires, ses administrateurs, ses préposés et ses mandataires de restituer à Les Éditions Québec Amérique inc. tous les exemplaires des Œuvres qui se trouvent en sa possession et de détruire ensuite toute copie sur ses ordinateurs, serveurs et supports informatiques, à compter de la première des deux dates suivantes :

i) la date de lancement de la prochaine édition d’Antidote, laquelle devrait normalement survenir en 2018; ou ii) le 31 décembre 2018; [376] CONDAMNE Druide informatique inc. à payer à Les Éditions Québec Amérique inc. la somme de cent mille dollars (100 000 $), à

titre de dommages-intérêts matériels, sans intérêt et sans indemnité additionnelle; [377] CONDAMNE Druide informatique inc. à payer à Les Éditions Québec Amérique inc. la somme de vingt-cinq dollars [ sic ] (25 000 $), à

titre de dommages-intérêts exemplaires, avec intérêts et indemnité additionnelle, à compter du présent jugement; [378] ORDONNE l’exécution du présent jugement nonobstant appel; [379] REJETTE la demande reconventionnelle de Druide informatique inc.; [380] LE TOUT avec les frais de justice en faveur de Les Éditions Québec Amérique inc., tant sur la demande principale que sur la demande reconventionnelle. [ 11 ] The reasons cover 75 pages and contained an exhaustive analysis of the proof during a hearing which took fourteen days. The reasons are completely silent however on the issue of provisional execution ordered at paragraph [378]. DISCUSSION

a) Leave to appeal [ 12 ] The judgment determines the substantive rights of the parties. As such, it determines part of the dispute and qualifies for leave under

Article 31 C.C.P. [ 13 ] The notice of appeal raises questions of fact and mixed fact and law as to the nature of the relationship of the parties that evolved over the years. These questions are significant and merit adjudication by the Court of Appeal. [ 14 ] Accordingly, leave to appeal will be granted.

b) Suspension of proceedings before the Court of Appeal [ 15 ] For the same reasons that leave is granted, the appeal should not be suspended pending resolution before the Superior Court of the issues of accounting for profits and fees that would be due by Respondent. The opposite should happen for the very reasons for splitting the case in first instance. In the circumstances, the parties should not proceed to a long and complex proof on accounting for profits and damages until the substantive rights are resolved by a judgment of this Court. This would not serve the interests of justice. Accordingly, I will not order the suspension of the appeal.

c) Suspension of provisional execution [ 16 ] Injunctive conclusions do not require a specific order of provisional execution as the law provides that this is the rule, not the exception. However, the undersigned has the power to order a stay (Art. 514 C.C.P. ). [ 17 ] On the other hand, the monetary conclusions require a specific order of provisional execution.

The undersigned has jurisdiction to stay the provisional execution as ordered (Articles 660 and 661 C.C.P. ). [ 18 ] Provisional execution may be ordered where the bringing of an appeal is likely to cause serious or irreparable prejudice (Art. 661 C.C.P. ).

Reasons must be given to justify provisional execution. [4] [ 19 ] Suspension of provisional execution should only be ordered with reserve particularly where the provisional execution exists as of right as in the case of an injunction. [5] [ 20 ] To obtain a suspension of provisional execution, three criteria must be met: 1) there must be an apparent weakness in the judgment a quo ; 2) the risk of serious prejudice arising from the order of provisional execution; and 3) the balance of convenience must favour the party seeking the stay. [6] [ 21 ] The order of provisional execution with respect to the monetary condemnations suffers from two apparent weaknesses.

Firstly, it is not the norm that monetary condemnations be the subject of provisional execution.

While judges of our Court have issued or approved orders of provisional execution of damage awards in exceptional circumstances, such orders have been made where an immediate need for funds was demonstrated and, often, where the provisional execution was accompanied by the giving of security for reimbursement. [7] As a general principle, the absence of reasons can be grounds for appeal and a weakness in a judgment. [8] Moreover, the drafting of the new Code of civil procedure specifically requires that a prejudice be shown in order that provisional execution of any type of conclusion be ordered.

The judgment of the Superior Court gives no such reasons. It is silent on the question of provisional

execution, which, while not a problem for the injunctive conclusions per se , is in my view fatal for the non-injunctive conclusions for which a justification is required by the judge. [ 22 ] The second weakness, which is also the prejudice for the party paying a monetary award under provisional execution, is the problem of recovery of sums paid should the appeal succeed. If the money is not voluntarily refunded, the Applicant would have to sue to get it back.

Such a state of affairs negates in effect the right of appeal and as such constitutes serious prejudice. [9] [ 23 ] Equally, the costs order should not be subject to provisional execution. [ 24 ] For the same reasons the balance of convenience favours the Applicant. If Respondent is successful, the delay in recovery is compensated by the payment of interest; it would not be obliged to institute new proceedings to recover its due as would the Applicant. [ 25 ] Regarding the injunctive conclusions, paragraph [374] of the judgment is a cease and desist order with regard to the sale of Respondent’s software.

This follows from the reasons of the judge. The judge’s determinations were in large measure factual so that the grounds raised in the notice of appeal are all questions of fact or mixed fact and law. Though there are elements of proof supporting Applicant’s position (i.e. exhibit D-10), there are other indicia refuting it, such as the fact underlined by the judge in paragraph [292] of the judgment. In such context, I see no weakness apparent on the face of the judgment to justify the suspension of the injunction.

Nor do I see such exceptional circumstances or prejudice that would cause me to order a suspension in the absence of the demonstration of such weakness as has been done in certain instances by judges of this Court. [10] The burden on Applicant is a heavy one given the presumption of validity of the judgment in first instance and the deference due to the trial judge. [11] [ 26 ] Applicant maintains that it benefits from a licence agreement.

There was no formal agreement but rather years of exchanges, verbal and written, between the parties, working toward the completion of a formal licence agreement which never materialized. Applicant pleads that some of those written exchanges contained sufficient elements to be characterized as a licence of indeterminate term. Many (but not all) of the writings, in the form of email exchanges, have been filed with the motion.

However, the judge, in first instance, who had the benefit over a two-week period of considering all the proof, including the testimony, presented same in the judgment in a detailed and cogent fashion. Applicant may or may not succeed on the merits of its appeal but it is not possible for this judge, sitting alone, at this juncture, to conclude that the judgment contains an apparent weakness. [ 27 ] Regarding the second injunctive conclusion (paragraph [375] of the judgment) the situation is different.

Such an order of surrender of offending materials in copyright infringement has been held to be something other than an injunction to which Art. 514 C.C.P. applies to make it enforceable notwithstanding appeal. [12] Rather, the conclusion is characterized as the exercise of the right of “delivery up” referred to in S. 34 (1) of the Copyright Act . [13] I reiterate that no reasons are given by the judge for provisional execution of such delivery up.

As set forth below, the Applicant suffers prejudice as a result of this conclusion being enforceable now. [ 28 ] Moreover, even as an injunctive conclusion (so that a specific justification for provisional execution was not required by the judge) this conclusion suffers from an apparent weakness. [ 29 ] The surrendering of all the original software material pertaining to Respondent’s software and the destruction of any copies may negate the Applicant’s right of appeal.

Should it succeed and obtain judicial recognition of the rights it claims as a licensee, and Respondent does not return the original software items, then Applicant would be forced to institute proceedings to recover them (as is the case with provisional execution of a monetary award). This satisfies both the weakness and prejudice criteria for suspension. I underline that this is not a case of software piracy or theft of intellectual property. Rather, this is a case of a relationship that was never reflected in a formal agreement and unfortunately deteriorated.

There is no bad faith on the part of Applicant akin to that of a software pirate. This does not appear to have been considered by the judge as no reasons whatsoever pertaining to provisional execution are mentioned in the judgment. [ 30 ] Moreover and with regard to the prejudice, Applicant suffers actual prejudice from provisional execution of conclusion [375]. The affiant, Mr.

D’Orsonnens, states that the delivery and destruction would make it impossible to service customers who bought previous editions of the dictionary with their purchase of Antidote which is prejudicial not only to the consumer but also to Applicant’s reputation. Respondent does not suffer prejudice from any ongoing service to consumers since it will eventually be compensated for any unauthorized sales should the judgment be maintained in its favour.

Nor does such ongoing service contradict Respondent’s position that these consumers have a licence to use the software legally acquired from it through the intervention of Applicant. I do not read paragraph [374] as enjoining Applicant from providing such ongoing service. [ 31 ] Applicant pleaded similar prejudice with regard to the other injunctive conclusion [374] but that prejudice arose from its allegation that seven years would be required to develop or obtain a replacement software for the dictionary.

Such fact was alleged and asserted by its witnesses but was not the subject of a finding per se by the judge. Moreover, by Applicant’s own admission, it made no contingency plan during the five years of litigation to replace the software dictionary in the event that it would not be successful in court. Self-inflicted prejudice cannot be the prejudice considered to seek a stay of a final injunction.

Again, I reiterate that I do not see sufficient grounds to stay conclusion [374] though I do see good reason to stay conclusion [375]. [ 32 ] The balance of convenience to stay conclusion [375] favours Applicant since Respondent is protected by the injunctive conclusion of paragraph [374] of the judgment and an eventual accounting of profits. [ 33 ] For the foregoing reasons, the injunctive conclusion of paragraph [375] of the judgment will be the subject of a stay. [ 34 ] Although not the subject of a separate conclusion, and after consultation with the parties, the proceedings in first instance should also be stayed as foreseen by

Article 31 C.C.P. in order to finally determine in appeal the substantive rights of the parties before making proof of lost profits and fees in the lower court. [ 35 ] Given the duration of the trial and in keeping with the Court’s practice, the file will be referred to the judge responsible for case management.

FOR ALL THE FOREGOING REASONS, THE UNDERSIGNED: [ 36 ] GRANTS , in part, the motion for leave to appeal and suspension of provisional execution; [ 37 ] GRANTS leave to appeal of the judgment rendered on September 14, 2017 by the Superior Court, District of Montreal (the Honourable Élise Poisson); [ 38 ] SUSPENDS the proceedings in first instance until judgment of this Court; [ 39 ] SUSPENDS provisional execution of the following conclusions of the judgment: [375] ORDONNE à Druide informatique inc., ses actionnaires, ses administrateurs, ses préposés et ses mandataires de restituer à Les Éditions Québec Amérique inc. tous les exemplaires des Œuvres qui se trouvent en sa possession et de détruire ensuite toute copie sur ses ordinateurs, serveurs et supports informatiques, à compter de la première des deux dates suivantes :

i) la date de lancement de la prochaine édition d’Antidote, laquelle devrait normalement survenir en 2018; ou ii) le 31 décembre 2018; [376] CONDAMNE Druide informatique inc. à payer à Les Éditions Québec Amérique inc. la somme de cent mille dollars (100 000 $), à

titre de dommages-intérêts matériels, sans intérêt et sans indemnité additionnelle; [377] CONDAMNE Druide informatique inc. à payer à Les Éditions Québec Amérique inc. la somme de vingt-cinq dollars [ sic ] (25 000 $), à

titre de dommages-intérêts exemplaires, avec intérêts et indemnité additionnelle, à compter du présent jugement; (…) [380] LE TOUT avec les frais de justice en faveur de Les Éditions Québec Amérique inc., tant sur la demande principale que sur la demande reconventionnelle. [ 40 ] REFERS the matter to the judge of the Court of Appeal responsible for case management in civil matters. [ 41 ] THE WHOLE , with legal costs to follow the outcome of the appeal. MARK SCHRAGER, J.A. M tre Benoît Bourgon ROBINSON SHEPPARD SHAPIRO For Applicant – Defendant/Cross-Plaintiff M tre Francine Martel GOWLING WLG (CANADA) For Respondent – Plaintiff/Cross-Defendant Date of hearing: December 21, 2017