2022 FC, 2022 FC 1149

Date: 20220802 Docket: T-1228-21 Citation: 2022 FC 1149 Toronto, Ontario, August 2, 2022 PRESENT: Case Management Judge Trent Horne BETWEEN: FOX RESTAURANT CONCEPTS LLC Plaintiff and 43 NORTH RESTAURANT GROUP INC., ANTONIO VISCA AND FERNANDO COLAVECCHIA Defendants ORDER AND REASONS I. Overview [ 1 ] The defendant has brought two motions. The first is to strike certain paragraphs of the statement of claim; the second is for a protective order. For the reasons that follow, the motion to strike will be allowed in part. The motion for a protective order will be dismissed. II.

Background [ 2 ] The plaintiff’s action is for copyright and trademark infringement. In general, the plaintiff claims that it operates popular restaurants in the United States branded as Culinary Dropout and Doughbird, and that these restaurants are well known to Canadians who routinely visit them while travelling in the United States. The plaintiff alleges that the defendants have opened and are operating two copycat restaurants, specifically a Culinary Dropout in Fonthill, Ontario and a Dough Box in Hamilton, Ontario.

In addition to the names of the restaurants, the plaintiffs allege that the defendants have also copied slogans, website content and restaurant themes or concepts. [ 3 ] After being served with the statement of claim ( " “Claim” " ), the defendants served a " “request for striking, material facts, particulars and documents” " on May 4, 2022.

In a brief letter dated May 11, 2022, the plaintiff refused to provide any of the requested information, indicating that it was not required for the purpose of pleading as it sought evidence and not material facts. [ 4 ] The defendants’ motion to strike only seeks relief under Rule 221 of the Federal Courts Rules , SOR/98-106 . The motion does not request, as alternative relief or otherwise, particulars or production of documents pursuant to Rule 206 . III. The Motion to Strike [ 5 ] The defendants’ motion requests that all or part of 17 paragraphs of the Claim be struck.

At the hearing, counsel for the defendants acknowledged that the practical result sought on the motion was to strike the Claim in its entirety. The notice of motion does not indicate whether the motion to strike is with or without leave to amend. At the hearing, counsel for the defendants submitted that the Claim should be struck without leave to amend. A. Law on Motions to Strike [ 6 ] The legal principles applying to motions to strike are well known. To strike a pleading, it must be plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action.

It needs to be plain and obvious that the action is certain to fail because it contains a radical defect ( R v Imperial Tobacco Canada Ltd , 2011 SCC 42 , [2011] 3 SCR 45 at para 17 ). [ 7 ] It is incumbent upon a plaintiff to plead the facts which form the basis of his or her claim as well as the relief sought. These facts form the basis upon which the success of a claim is evaluated.

A plaintiff must plead with sufficient details the constituent elements of each cause of action or legal ground raised ( Pelletier v Canada , 2016 FC 1356 at paras 8 and 10 ). [ 8 ] To disclose a reasonable cause of action, a claim must: (

a) allege facts that are capable of giving rise to a cause of action; (

b) disclose the nature of the action which is to be founded on those facts; and (

c) indicate the relief sought, which must be of a type that the action could produce and the Court has jurisdiction to grant ( Oleynik v Canada (Attorney General) , 2014 FC 896 at para 5 ). [ 9 ] To show a plaintiff has a reasonable cause of action, the statement of claim must plead material facts satisfying every element of the alleged causes of action. The plaintiff needs to explain the " “who, when, where, how and what” " giving rise to the defendant’s liability ( Al Omani v Canada , 2017 FC 786 at para 14 ( " “ Al Omani ” " )).

[10] On a motion to strike, the pleadings must be read as generously as possible, erring on the side of permitting a novel but arguableclaim to proceed to trial (Atlantic Lottery Corp Inc v Babstock, 2020 SCC 19 at para 19). [11] Striking a pleading without leave to amend is a power that must be exercised with caution.

If a pleading shows a scintilla of a causeof action, it will not be struck out if it can be cured by amendment (Al Omani at paras 32-35). [12] Rather than address the 17 impugned paragraphs of the Claim individually, I will consider the causes of action advanced by theplaintiff (copyright, trademarks, and trade dress/restaurant concepts) and the defendants’ assertions in respect of them. B. The Copyright Claims [13] The essence of the defendants’ motion in respect of the copyright claims is that the plaintiff has not provided material facts for theownership of copyright. [14] Paragraph 1(a)(

i) of the Claim requests a declaration that copyright subsists in original literary and artistic works depicted in anattached

schedule A. The works are defined as the "“Fox Works”", and identified as excerpts from the plaintiff’s websites, menus,promotional items and logos. [15] Paragraph 1(

d) of the Claim states that there are five Fox Works. [16]

Schedule A to the Claim is described as a side-by-side comparison of some of the egregious examples of defendants’ blatantcopying, showing Fox’s original copyrighted material, trademarks and trade dress elements next to the infringing versions adopted andused by the defendants. [17] In

schedule A, the left column is entitled "“Fox restaurant concepts, including North Italia, DoughBird and Culinary Dropout”". Theright column in the

schedule is entitled "“43 North Restaurant Group, including Dough Box and Culinary Dropout”". The

schedule is notlimited to illustrating the allegations of copyright infringement. [18]

Schedule A includes about 11 logos, images and website excerpts. It is not apparent from the Claim, including the schedule, whatthe five Fox Works are. [19] As for ownership of copyright in the Fox Works, this is addressed at paragraph 10 of the Claim: 10.

All of the sales and marketing materials used by Fox to promote its restaurants are created internally by Sam Fox and/orby employees of Fox in the ordinary course of their employment, and constitute “works for hire” under U.S. copyright law.In addition, each employee involved in the creation of copyright protected works has signed an agreement confirming that allrights in such works, including all copyright, belong to Fox.

All copyright in Canada is owned by Fox in accordance with theCanadian Copyright Act and the Berne Convention. [20] Rule 174 requires that every pleading shall contain a concise statement of material facts upon which a party relies, but shall notinclude evidence by which those facts are to be proved. [21] It is fundamental to the trial process that a plaintiff plead material facts in sufficient detail to support the claim and relief sought.Pleadings play an important role in providing notice and defining the issues to be tried.

The Court and opposing parties cannot be left tospeculate as to how the facts might be variously arranged to support various causes of action. The latter part of this requirement –sufficient material facts – is the foundation of a proper pleading. If a court allowed parties to plead bald allegations of fact, or mereconclusory statements of law, the pleadings would fail to perform their role in identifying the issues. The proper pleading of a statementof claim is necessary for a defendant to prepare a statement of defence.

Material facts frame the discovery process and allow counsel toadvise their clients, to prepare their case and to map a trial strategy. Importantly, the pleadings establish the parameters of relevancy ofevidence at discovery and trial (Mancuso v Canada (National Health and Welfare), 2015 FCA 227 at paras 16 and 17). [22] The plaintiff’s allegations of copyright infringement do not meet the requirements of Rule 174. [23] It is not clear what five literary or artistic works are included in the definition of Fox Works.

Unless there is a closed and specificlist of the works that the plaintiff includes in its definition of "“Fox Works”", the issues are not adequately framed for discovery andtrial. [24] Whether the Fox Works are "“works for hire”" under United States law is immaterial. Copyright is a statutory scheme; copyrightlegislation simply creates rights and obligations upon the terms and in the circumstances set out in the statute. The legislation speaks foritself and the actions of a party must be measured according to the terms of the statute (Compo Co Ltd v Blue Crest Music et al, (SCC), [1980] 1 SCR 357 at 372-373).

The Copyright Act, RSC 1985, c C-42 sets out the conditions for the existence,ownership and enforceability of copyright.

What is material is whether the plaintiff can demonstrate ownership pursuant to the terms ofthe Canadian Copyright Act. [25] Pursuant to subsection 13(3) of the Copyright Act (referred to by the plaintiff in argument, but not referenced in the Claim), wherethe author of a work was in the employment of some other person under a contract of service, and the work was made in the course ofemployment by that person, the employer is the first owner of copyright, subject to any agreement to the contrary. [26] Paragraph 10 of the Claim reproduced above does not expressly state that Sam Fox is an employee of the plaintiff.

There is noreference to a contract of service. The authors of each of the Fox Works is unknown. Even if the Claim had set out a closed list of whatwas included in the definition of Fox Works, I am not persuaded that the plaintiff has pleaded sufficient material facts to establishownership of the works to sustain a claim for copyright infringement.

[27] Some of the issues on this motion are similar to a ruling I made in Sony Music Entertainment Canada Inc v SUVA Beauty Inc (T-1256-21) dated January 31, 2022 ("“Sony”"). That was a copyright infringement proceeding alleging unauthorized use by the defendantsof popular music in social media advertising. [28] As in Sony, I have absolutely no doubt that the defendants in this proceeding know the nature of the case against them. In addition toallegations that the defendants copied the names of the plaintiff’s restaurants, there are examples in the

schedule to the Claim where itappears that the defendants copied the plaintiff’s website content word for word. [29] In Sony, I struck the statement of claim with leave to amend. The statement of claim was struck, in part, because the plaintiff did notexpressly plead that its right or interest by grant (i.e. the license) was in writing, as required by subsection 41.23(1) of the Copyright Act.The requirements of pleading a copyright case are not relaxed or modified where the defendant is alleged to be a knowing and deliberateinfringer.

The same conclusion applies here. [30] While there are shortcomings in the Claim, it will not be struck without leave to amend. There is more than a scintilla of a cause ofaction for copyright infringement. Any defects can be cured by an amendment. [31] As will be discussed below, there are shortcomings in the Claim as it relates to the allegations of trademark and trade dressinfringement. While I have the discretion to order that particulars be provided, there is a benefit to having all of the plaintiff’s allegationsand material facts in a single document.

The most efficient way to move the matter forward is to strike the Claim in its entirety, but withleave to amend. [32] To avoid further motions related to the statement of claim, any amended pleading shall include: (

a) a closed list of the "“FoxWorks”" that are in issue; (

b) the authors of each work; (

c) whether the plaintiff’s claimed ownership in the works arises by operation oflaw or assignment (or both); and (

d) how or where each of the copyrighted works are alleged to have been reproduced, in whole or insubstantial part, by the defendants. C. The Trademark Claims [33] The defendants’ essential complaint in respect of the allegations of trademark infringement (passing off) is that the Claim does notinclude sufficient material facts to establish reputation or goodwill in Canada. [34] In addition to the CULINARY DROUPUT and DOUGHBIRD word and design trademarks, the plaintiff asserts infringement offive slogans that have been used as trademarks. These are enumerated at paragraph 23 of the Claim. None of the asserted trademarks areregistered in Canada. The plaintiff relies on 7(

b) and 7(

c) of the Trademarks Act, RSC 1985, c T-13 and the common law. (While not anissue raised by the defendants, I question whether the Court has jurisdiction over a claim based on the common law tort of passing off –Dragona Carpet Supplies Mississauga Inc v Dragona Carpet Supplies Ltd, 2022 FC 1042 at paras 87-91.) [35] In argument, counsel for the plaintiff also referred to the NORTH ITALIA & Design trademark that is included in

schedule A. [36] On the face of the Claim, it is not apparent whether the plaintiff’s allegations related to NORTH ITALIA & Design are based oncopyright infringement, trademark infringement, or both. As with the copyrighted works, the defendants are entitled to a closed list of thetrademarks that are included within the definition of "“Fox Trademarks”", and are alleged to be infringed.

If NORTH ITALIA & Designis one of the trademarks that is alleged to be infringed, then it must be included in paragraph 23 of the Claim or elsewhere. [37] The defendants acknowledge that use of a trademark in Canada is not a necessary pre-condition for the existence of goodwill inCanadian law.

Rather, the requisite goodwill within a defendant’s market may be shown to exist by virtue of the reputation of theplaintiff’s trademark in the defendant’s market, even where the plaintiff does not use the trademark in that market (Sadhu SinghHamdard Trust v Navsun Holdings Ltd, 2016 FCA 69 at para 25). [38] A claim for passing off requires a plaintiff to prove three things: (

i) the existence of goodwill or reputation; (ii) deception of thepublic due to a misrepresentation; and (iii) actual or potential damage to the plaintiff. In this context, "“goodwill”" is to be given a broaddefinition.

It is a term which must be understood in a very broad sense, taking in not only people who are customers but also thereputation and drawing power of a given business in its market (Ciba-Geigy Canada Ltd v Apotex Inc, (SCC), [1992] 3SCR 120 at pages 132-134). [39] The defendants argue that the Claim does not include sufficient material facts to support the plaintiff’s reputation and goodwill inthe defendants’ Ontario market.

The defendants’ "“request for striking, material facts, particulars and documents”" asks for details suchas the number of Canadians that access the plaintiff’s social media accounts, and the number of Canadian Facebook users who have"“liked”" the plaintiff’s Culinary Dropout restaurant in the United States. [40] A party is entitled to enough information to understand the other party's position and prepare a responsive answer, not every fact onwhich the action is based (Océan Navigation Inc v Abitibi Consolidated Inc, 2007 FC 413 at para 6). [41] Much of the information and detail in the "“request for striking, material facts, particulars and documents”" is evidence that will bethe proper subject of discovery.

Having reviewed the Claim as a whole, I am satisfied that sufficient material facts have been pleaded toestablish goodwill or reputation in Canada, and sustain a cause of action for trademark infringement. [42] The defendants also argue that the Claim is deficient in that it does not include adequate material facts to establish actual or potentialdamage. I disagree. Paragraph 39 of the Claim alleges harm and damage arising from the defendants’ activities. The evidence by whichthat allegation will be proved need not be included in the Claim (Rule 174); it will be disclosed on discovery. D.

The Trade Dress/Restaurant Concepts Claims

[43] In addition to the trademarks discussed above, the plaintiff asserts that the defendants have copied the trade dress or restaurantconcepts of the plaintiff. [44] I have no difficulty concluding that the appearance of a restaurant, whether described as a theme or concept, is capable of attractingintellectual property protection, and can form the basis for an infringement proceeding. [45] However, as with all causes of action, a pleading based on trade dress must be sufficiently detailed to enable the defendants and theCourt to know the material facts supporting the allegations.

The defendants are entitled to a closed list of what the plaintiff alleges to bethe unique trade dress or concepts for its restaurants. To the extent the plaintiff is asserting that the proprietary trade dress or conceptsfor its Culinary Dropout and Doughbird restaurants are different, those claimed rights must be separately enumerated. [46] The Claim does not meet this standard. In its written submissions in response to the motion, the plaintiff included a chart of variousparagraphs of the Claim that relate to the trade dress claims.

It is difficult to see how some of the referenced material facts could becapable of distinctiveness (e.g. local bands and sports televisions). In other respects (e.g. a California look with a bow truss ceiling), it isnot apparent if the defendants are alleged to have appropriated the element. [47] I am not satisfied that the Claim includes sufficient material facts to establish what the plaintiff’s unique trade dress/restaurantconcepts are. This requires a closed list of the elements that comprise the trade dress or restaurant concept.

Further, I am not satisfiedthat the Claim adequately enumerates the elements that the defendants are alleged to have misused. [48] To enable the defendants to prepare a defence, and properly frame the issues for discovery and trial, the statement of claim mustidentify the specific elements that are alleged to comprise the trade dress or restaurant concept of the plaintiff, and how the defendantshave copied these elements. IV. Protective Order [49] The plaintiff’s written representations on this motion attach as

schedule 1 an exchange of emails between counsel. The defendantsobjected to the inclusion of these emails on the basis that they were not attached to an affidavit, and are protected by settlement privilege. [50] Rule 363 is clear – a party to a motion shall set out in an affidavit any facts to be relied on by that party in the motion that do notappear in the Court file. The emails are not in the Court file. As I indicated during the hearing, I will not consider these emails on thebasis of non-compliance with Rule 363.

I need not determine if they are also protected by settlement privilege. [51] The defendants ask that a protective order, based on the Court’s model order, be issued. The plaintiff objects, asserting that theimplied undertaking rule is sufficient to protect the information that will be exchanged during the discovery process. [52] The parties are in agreement on the applicable test.

The test for granting a protective order requires the moving party to establishthat: 1) the information has been treated by the party at all relevant times as confidential; and 2) on a balance of probabilities, theasserting party’s proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of the information (ABHassle v Canada (Minister of National Health & Welfare), (1998), (FC), 83 CPR (3d) 428 (FCTD) at paras 29-30;aff’d (2000) (FCA), 5 CPR (4th) 149 (FCA). [53] The defendants’ evidence on the motion is an affidavit of Antonio Visca (one of the personal defendants).

It comprises only threeparagraphs, which are reproduced below: 1. I am the President of 43 North Restaurant Group Inc, ("43 North"), a privately held corporation. I have held this positionsince 43 North came into existence in 2015. I have personal knowledge of the matters hereinafter deposed to based on mypersonal knowledge, as well as my understanding of 43 North's records. 2.

Details of: (1) 43 North's financial records; and (2) the personal defendants market intelligence in Southern Ontario, developed over 30 , years in the beverage and serviceindustry (together "Confidential Information"); is and always has been confidential information of the Defendants, and notknown to the public at large. 3.

If any of the Defendants are forced to disclose the Confidential Information, then the Defendants will suffer irreparableharm since all aspects of the privately held corporation, as well as the market intelligence of its principals, would becomepublic knowledge, and available for use by its competitors. [54] Between associate judge Tabib’s decision in Live Face on Web, LLC v Soldan Fence and Metals

(2009) Ltd, 2017 FC 858, and theFederal Court of Appeal’s decision in Canadian National Railway Company v BNSF Railway Company, 2020 FCA 45, much has beenwritten about the necessity, availability and benefits of protective orders. One of the decisions along that path was justice Phelan’s orderin Paid Search Engine Tools, LLC v Google Canada Corporation, 2019 FC 559.

In determining that a protective order should be grantedin that proceeding, justice Phelan (at para 14) indicated that the bona fide concerns of Google were substantially laid out in a supportingaffidavit. [55] Even if there is sufficient evidence to conclude that the information referenced in Mr Visca’s affidavit has been treated asconfidential, the defendants’ evidence on the motion is far from substantial, and inadequate to meet the second part of the test. [56] Mr Visca expresses concern that the defendants’ confidential information will become public knowledge.

But protective orders onlyregulate how documents and information are to be exchanged between the parties during the pre-trial proceedings, and, as such, do not

engage the open court principle ( Fibrogen, Inc v Akebia Therapeutics, Inc et al , 2022 FCA 135 at para 9 ( " “ Fibrogen ” " )). If either party wishes to file the defendants’ documents or information, or refer to it in open court, the defendants are at liberty to request an interim sealing order or a confidentiality order under Rule 151. [ 57 ] There are certainly benefits to protective orders. In Fibrogen , the Court of Appeal noted that protective orders are integral to how litigation proceeds in the Federal Court (para 10).

I cannot, however, conclude that the implied undertaking rule is presumptively insufficient or inadequate to protect commercially sensitive information exchanged during the discovery process. The fact that the Court has published a model protective order does not create a presumption that such an order is inherently required or presumptively available in matters where financial or other commercially sensitive information will be disclosed during discovery. Parties routinely request, and are granted, protective orders on consent.

Parties may generally agree on the need for a protective order, but require the Court’s intervention to resolve disputes on specific terms. On a contested motion to determine whether a protective order is required at all, as is the case here, the moving party must lead evidence to satisfy both parts of the relevant test. [ 58 ] There is insufficient evidence on the motion to support a conclusion that the defendants’ commercial interests could reasonably be harmed by the disclosure of information to the plaintiff in the ordinary course of the discovery process. The motion must therefore be dismissed. V.

Costs [ 59 ] The Court has full discretionary power over the amount and allocation of costs (subrule 400(1)). [ 60 ] On the motion to strike, the parties agreed at the hearing that the successful party should receive costs of $3,000.00. The defendants did not achieve their objective: to strike the claim without leave to amend. On one hand, it was not reasonable for the defendants to have an expectation that the Court, in the circumstances of this case, would grant such relief.

On the other hand, it would have been reasonable for the plaintiff to have provided certain of the information requested by the defendants before the motion was brought so that the matter could proceed to discoveries. I decline to award costs to either party on this motion. [ 61 ] On the motion for a protective order, the parties agreed at the hearing that the successful party should receive costs of $1,000.00. That amount is reasonable, and will be awarded to the plaintiff. ORDER in T-1228-21 THIS COURT ORDERS that : 1 . The statement of claim is struck, with leave to amend. 2 .

Any amended statement of claim shall be served and filed by August 31, 2022. 3 . A statement of defence, and counterclaim, if any, shall be served and filed by September 30, 2022. 4 . The defendants’ motion for a protective order is dismissed. 5 . By no later than October 14, 2022, the parties shall write to the Court with a status update, a proposed timetable for the next steps in the action, and mutually available dates for a case management conference, should one be required. 6 . No costs are awarded in respect of the defendants’ motion to strike. 7 .

Costs of the motion for a protective order are awarded to the plaintiff, fixed at $1,000.00, payable in any event of the cause. "Trent Horne" Case Management Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-1228-21 STYLE OF CAUSE: FOX RESTAURANT CONCEPTS LLC v 43 NORTH RESTAURANT GROUP INC., ANTONIO VISCA AND FERNANDO COLAVECCHIA PLACE OF HEARING: HELD BY VIDEOCONFERENCE

DATE OF HEARING: July 26, 2022 ORDER AND REASONS: CASE MANAGEMENT JUDGE TRENT HORNE DATED: August 2, 2022 APPEARANCES : Amrita V. Singh For The Plaintiff Michal Niemkiewicz Dino Clarizio For The Defendants SOLICITORS OF RECORD : Marks & Clerk Law LLP Barristers and Solicitors Toronto, Ontario For The Plaintiff Ridout & Maybee LLP Barristers and Solicitors Toronto, Ontario For The Defendants