2013 FC, 2013 FC 1043

Date: 20131015 Docket: T-1591-05 Citation: 2013 FC 1043 Ottawa , Ontario , October 15, 2013 PRESENT: The Honourable Mr. Justice de Montigny BETWEEN: DISTRIMEDIC INC. Plaintiff and DISPILL INC. AND EMBALLAGES RICHARDS INC. Defendants AND BETWEEN: EMBALLAGES RICHARDS INC. and DISTRIMEDIC INC., ROBERT POIRIER, CLAUDE FILIATRAULT, DISTRIMEDIC CANADA INC. AND 9268-2244 QUEBEC INC. Plaintiff by Counterclaim Defendants to the Counterclaim REASONS FOR JUDGMENT AND JUDGMENT I. OVERVIEW ... 3 II. FACTUAL BACKGROUND .. 4

a) The Parties . 4

b) The Patent at Issue . 7

c) The Products in Question . 17 i. Richards’ Product 18 ii. Distrimedic’s Product 22

d) Related Proceedings . 23 i. The Patent Disclaimer Proceedings . 23 ii. The Trade-mark Registration Proceedings . 27 III. ISSUES . 29 IV. FACT WITNESSES . 30

a) Richards’ Fact Witnesses . 31 i. Gerry Glynn . 31 ii. Marie-Josée Glaude . 39 iii. René Thibault 44

b) Distrimedic’s Fact Witnesses . 46 i. Claude Filiatrault 46 ii. Robert Poirier . 50 iii. Paul van Gheluwe . 51 V. EXPERT WITNESSES . 52

a) Richards’ Expert Witnesses . 52 i. Koen de Winter . 52 ii. Tarek Abdelrahman . 62 iii. France Morissette . 68 iv. James McAuley . 71

b) Distrimedic’s Expert Witnesses . 75 i. Claude Mauffette . 75 ii. Philip Levi 78 VI. ANALYSIS . 81

a) Patent 81 i. Patent Construction . 82 ii. Infringement 92 iii. The Disclaimer . 97 iv. Alternative Argument: Anticipation and/or Obviousness of the Disclaimed Claims 102

b) Misrepresentation . 110

c) Passing Off . 115 i. The Dispill Colour Scheme Is Not A Trade-Mark . 120 ii. The Distrimedic Original Colour Scheme Was Not “Used” In A Way That Triggers The Application Of Paragraph 7(

B) Of The Trade-Marks Act 128 iii. Distrimedic Did Not Direct Public Attention To Its Business In Such A Way As To Cause Confusion With That Of Richards . 131

d) Copyright 134

i. The Relevant Legal Principles Applicable To Copyright Protection . 134 ii. Is The Dispill Label Form Susceptible To Copyright Protection? . 139 iii. Does Richards Own Any Copyright In The Dispill Label Form? . 146 iv. Did The Defendants To The Counterclaim Infringe Any Copyright? . 152 VII. CONCLUSION .. 157 JUDGMENT .. 158 APPENDIX .. 159 I.

OVERVIEW [ 1 ] Distrimedic Inc. commenced the present proceeding on September 26, 2005, with the filing of a Statement of Claim seeking a declaration of non-infringement of Canadian Patent No. 2,207,045 (the ‘045 Patent), owned by Emballages Richards Inc. (hereinafter “Richards”), pursuant to subsection 60(2) of the Patent Act , RSC 1985, c P-4 ( Patent Act ). The product for which the declaration was sought is a kit for the manufacture of a set of individual pill containers.

Distrimedic Inc. amended its Statement of Claim on November 3, 2005. [ 2 ] On or about December 1, 2005, Richards filed a Statement of Defence and Counterclaim against Distrimedic Inc. and various related parties (Robert Poirier, Claude Filiatrault, Distrimedic Inc. and 9268-2244 Quebec Inc.). Each of these Defendants to the Counterclaim is represented by the same counsel and will hereinafter collectively be referred to as “Distrimedic”. The Statement of Defence and Counterclaim was amended on November 27, 2006, on January 29, 2007, and again on September 27, 2010.

Shortly before filing its original Statement of Defence and Counterclaim, Richards filed a document purporting to be a disclaimer under

section 48 of the Patent Act in relation to some of the claims of the ‘045 Patent. [ 3 ] On February 12, 2010, Distrimedic Inc. discontinued its original action, paying costs assessed in the amount of $11,908.82 to Richards as a result. Nevertheless, the counterclaim continued. [ 4 ] In Distrimedic’s view, the Three Times Amended Statement of Defence and Counterclaim significantly expanded the scope of the proceeding, adding many new allegations and legal claims and joining many other companies and people affiliated with Distrimedic.

In addition to alleging infringement of the ‘045 Patent (and thus covering precisely the subject-matter of Distrimedic’s action), Richards’ Counterclaim added several new issues, namely the infringement of the disclaimed claims, the validity of the disclaimer, copyright infringement, several issues related to trade-mark rights alleged to be held by Richards, breach of the Competition Act , RSC 1985, c C-34 and damages claimed in relation to the various allegedly infringed rights.

In Richards’ view, it was necessary to add the related Defendants as they have in effect rendered Distrimedic Inc. judgment-proof through their corporate arrangement of the various related parties. [ 5 ] The hearing of this file took place from March 25 to April 16, 2013, and the parties filed written representations on April 15 and 16, respectively.

Both parties made submissions in connection with a list of issues established in an Order of Prothonotary Morneau dated September 28, 2011, following a pre-trial conference between the parties. [ 6 ] For the reasons that follow, the Court finds that Richards’ counterclaim should be dismissed. II. FACTUAL BACKGROUND

a) The Parties [ 7 ] As described by Richards and in the parties’ Agreed Statement of Facts, this case has its genesis in an idea of Mr. Michel Bouthiette, a dentist by training and the named inventor of the patent in suit.

[ 8 ] Mr. Bouthiette, who was also active in the retirement home business, had an idea for a system that would improve the administration of medication to a patient over a given period of time, such as a week. After applying for a United States patent in 1996, Mr.

Bouthiette filed a Canadian patent application claiming priority from his United States filing, and the ‘045 Patent issued on June 1, 1999. [ 9 ] Bouthiette incorporated Dispill Inc. (Dispill) to sell the components of his pill dispensing and storage system on November 11, 1997; he operated as a sole proprietor until he exchanged his business and its assets as consideration for shares of Dispill in 1998. [ 10 ] Dispill rented office space from La Société d’Impression Filiatrault & Poirier (La Société), a corporation owned by Defendants Robert Poirier and Claude Filiatrault, and La Société purchased a 50% shareholding in Dispill for $100,000.

From 1998 until September 2002, Filiatrault and Poirier were both employees and, through La Société, shareholders of Dispill. [ 11 ] In 2002, a dispute arose and Filiatrault and Bouthiette invoked a shotgun clause in the Dispill Shareholders Agreement; however, Bouthiette prevailed and the relationship ended with a numbered company owned by Bouthiette purchasing La Société’s shares in Dispill. [ 12 ] Although subject to a two-year non-compete agreement from September 3, 2002 to September 3, 2004, Filiatrault and Poirier met with patent agents during that time to discuss whether they might develop a pill dispenser product in order to compete with Dispill, upon expiry of the non-compete agreement, without infringing the ‘045 Patent. [ 13 ] Distrimedic Inc. was incorporated on September 7, 2004, and, by 2005, Filiatrault and Poirier were ready to compete with Dispill.

Distrimedic Inc. does not have employees on its payroll as it shares resources, including employees and sales representatives, with two other companies owned and operated by Filiatrault and Poirier: La Société, which offers printing services and printed products to pharmacies, pharmaceutical laboratories, insurance companies and others; and Emballages Alpha Inc. (Alpha), which sells vials for medicines to pharmacists.

The two companies bill Distrimedic Inc. for salaries and commissions accordingly. [ 14 ] In a series of transactions, Richards, a manufacturer and distributor of packaging products incorporated under the laws of Canada, acquired Dispill from Bouthiette in July 2005 and Dispill was subsequently dissolved.

On July 29, 2005, prior to dissolution, Dispill assigned the ‘045 Patent to Richards. [ 15 ] On September 16, 2005, Richards had its counsel send a letter to Filiatrault and Poirier, care of La Société, alleging that their efforts to market Distrimedic Inc.’s competing pill dispenser system infringed Richards’ exclusive patent and trade-mark rights. [ 16 ] In an attempt to settle the patent infringement issue, Distrimedic Inc. commenced its action seeking a declaration of non- infringement of the ‘045 Patent on September 26, 2005.

An Amended Statement of Claim was filed November 3, 2005. [ 17 ] On November 8, 2005, after being served with Distrimedic Inc.’s Statement of Claim but prior to entering a defence, Richards filed a disclaimer in relation to a number of claims in its ‘045 Patent (the Disclaimer). [ 18 ] Richards then filed its Statement of Defence and Counterclaim, which it subsequently amended three times as described above.

Also described above, Distrimedic Inc. discontinued its original action on February 12, 2010, and paid Richards costs assessed at $11,908.82. [ 19 ] Following the filing of these proceedings, in October 2010, Filiatrault and Poirier entered into an agreement in which Filiatrault repurchased all of Poirier’s shares in all of the Quebec companies (La Société, Distrimedic Inc., Alpha and 9120-2994, an investment company). In exchange, Poirier repurchased all of Filiatrault’s shares in Distrimedic France and another company, Rx-V.

Distrimedic Canada Inc., which was incorporated for sales of Distrimedic products in provinces other than Quebec and one of the original Defendants to the Counterclaim, never did business and was dissolved in 2008. On September 1, 2012, Alpha and La Société amalgamated to form 9268-2244 Quebec Inc. To reflect these transactions, the syle of cause has been amended accordingly.

b) The Patent at Issue [ 20 ] The ‘045 Patent in dispute in this action, registered in connection with Richards’ product, is entitled “Kit and Process for the Manufacture of a Set of Individual Pill Containers”. It was filed on May 21, 1997, claiming priority on a US provisional patent application filed on July 22, 1996. The ‘045 Patent was opened to the public on June 21, 1997 and issued on June 1, 1999.

It will expire on May 21, 2017. [ 21 ] The ‘045 Patent, as originally issued, had 28 claims, with Claims 1, 11, 15, 22, 26 and 28 being independent and the remainder dependent, either directly or indirectly, on one of the independent claims. Richards filed a disclaimer on November 8, 2005 in relation to a number of claims of the ‘045 Patent, namely Claims 15 to 21. The disclaimer amended Claims 15 and 17 to 21 and removed Claim 16 entirely. More will be said about the disclaimer below. [ 22 ] The ‘045 Patent describes a system for preparing a pill dispenser.

The system comprises a tray having a number of evenly spaced apart recesses that is used to support a container-defining sheet made of clear plastic and itself having a corresponding number of evenly spaced apart cavities embossed therein.

The idea is to make a series of containers for holding pills to be taken four times per day (breakfast, lunch, dinner, and bedtime) over seven days. [ 23 ] Once filled as prescribed, the container-defining sheet is sealed by a self-adhesive container-sealing sheet upon which has been printed required information about the prescription such as the names of the patient and the pharmacist, the date, and the medications in each container.

The container-sealing sheet is aligned with the container-defining sheet by means of two upwardly projecting protuberances on the top surface of the tray that engage corresponding pairs of holes in both the container-sealing sheet and the container-defining sheet. The alignment of the sheets aligns the perforations thereon, permitting each container to be readily separated from the others.

Once the alignment has been achieved, an adhesive cover on the back of the container-sealing sheet can be removed and the sheet stuck over the container-defining sheet. [ 24 ] The first page of the ‘045 Patent provides a brief description of the prior art over which it claims to provide an improvement: To prepare a set of individual pill containers for use by a patient, it has already been suggested to use a sheet of plastic material in which a plurality of recesses are molded. Each of these recesses defines a small upwardly opened container that can be filled with pills.

After filling, all the containers are closed by means of a plastic sealing sheet on which can be printed all the desirable indications like the patient’s name, the date and hour of administration, etc…. The sealing sheet is applied onto the container-defining sheet and thermo- sealed onto same. As can be understood, the indications are printed and formatted onto the sealing sheet so that each group of information referring to a given container be positioned in regard to the said container.

Tearing lines are provided on both the container- defining sheet and the sealing sheet to allow for easy separation of the individual pill containers. This assembly is efficient. However, it has some drawbacks. More particularly, it is very difficult and time consuming to ensure correct positioning of the preprinted sealing sheet on top of the containers. As can be understood, incorrect positioning of the sealing sheet will make the pill containers difficult to separate.

Also, thermo sealing is not economical, as it calls for thermo-sealing equipment. [ 25 ] The US Patent No. 3,780,856 (the “Braverman Patent”), reproduced in the Appendix to these Reasons, was published on December 25, 1973. It is thus citable as prior art against the ‘045 Patent for the purposes of both anticipation and obviousness. It describes a pill dispensing device similar in many ways with the pill dispensing system described in the ‘045 Patent.

As stated by the Patent Office in its December 17, 1998 Office Action during prosecution of the application that led to the ‘045 Patent: The patent to Braverman discloses a kit and method for the manufacture of a set of individual pill containers. The kit is comprised of a container-defining sheet (100) made of plastic which has a top surface with a given number of evenly spaced apart cavities embossed therein. These cavities are shown to be in regularly spaced apart rows and columns. Each cavity is upwardly opened and defines a container (120).

Each container is surrounded by a flange (122) that has a central dotted line (117,118) punched therein The kit also has a recessed support (200) with a top surface provided with a number of recesses (212) at least equal to the number of cavities in the container-defining sheet. A container-sealing sheet (122) is provided. This sheet has a top surface and a bottom surface and is shaped and sized to cover at least all of the containers and surrounding flanges.

The bottom surface of the container-sealing sheet has bands (126) covered with a self-adhesive material that are shaped and sized to exactly correspond to and fit over the flanges. The bands are covered until use by a protective peelable covering (128,129) and have central tearing lines (170,172) of their own.

Positioning means provided on at least the top surface of the container-defining sheet and on the container-sealing sheet (the edges of the sheets 196) to ensure that, in use, the bands covered with self-adhesive material and their tearing lines be in exact superposition on top of the flanges and the dotted lines of the container-defining sheet. The patent to Braverman also discloses printing information on the container- sealing sheet (see column 4, lines 32 to 37, for example). The number of recesses is not considered patentable subject matter. Joint Book of Documents, No 144.

The figures found in the Braverman Patent and referred to in the above quote are reproduced below:

[ 26 ] It is not necessary, for the purposes of this proceeding, to consider all of the elements of the claims found in the ‘045 Patent. The key element of Claim 1 (including Claims 2 to 10 dependent thereon), 11 (including Claims 12 to 14 dependent thereon), 15 (including Claims 17 to 21 dependent thereon) and 22 (including Claims 23 to 25 dependent thereon) reads as follows:

d) positioning means provided on at least the top surface of the container-defining sheet and on the container-sealing sheet to ensure that, in use, after the container-defining-sheet is fitted onto the recessed support, the paper covering is peeled off from the bands of the container-sealing sheet and said container-sealing sheet is positioned on top of the top surface of the container-defining sheet, the bands covered with a self-adhesive material and their tearing lines be in exact superposition on top of the flanges and the dotted lines of the container-defining sheet, wherein the positioning means comprises at least one upwardly projecting protuberance provided on the top surface of the recessed support, at least one hole provided into the container-defining sheet and at least one other hole provided in the container-sealing sheet, said at least one hole and one other hole being sized and positioned to correspond to and be engaged by said protuberance. [ 27 ] Claim 15, as disclaimed, reads as follows (with amendments introduced by disclaimer indicated in bold underlining):

d) positioning means provided on at least the top surface of the container-defining sheet and on the container-sealing sheet to ensure that, in use, after the container-defining sheet is fitted onto the recessed support, the container-sealing sheet is properly positioned on top of the top surface of the container-defining sheet, with its tearing lines in exact superposition on top of the dotted lines of the container- defining sheet,

wherein the positioning means comprises at least one upwardly projecting protuberance provided on the top surface of the recessed support and engaging means provided on the container-defining sheet and other engaging means provided on the container-sealing sheet, said engaging means and other engaging means being sized and positioned to correspond to and be engaged by said protuberance. [ 28 ] With regard to the remaining claims (Claims 26 to 28), construction of the claims is not necessary because there is no evidence or argument that the elements thereof are incorporated in any product manufactured, used or sold by Distrimedic. [ 29 ] The positioning means are described in the ‘045 Patent as follows at page 8: Positioning means are provided onto at least the top surface of the container-defining sheet (3) and on the container-sealing sheet (9) to ensure that, when the latter is positioned on top of the top surface of the container-defining sheet (3), the bands (18) and their tearing lines (11) be in exact superposition on top of the flanges (10) and the dotted lines (4) of the container-defining sheet (3).

In the illustrated embodiments, which are the preferred ones, these positioning means comprise two protuberances (5) provided on the support (1) and which project upwardly from the top surface of the recessed area “A”.

The positioning means also comprises the holes (7), provided with the container-defining sheet (3)container-sealing sheet (9), two holes (15) sized and positioned to engage the two protuberances (5) of the support (1). [ 30 ] The ‘045 Patent also describes (at p. 10) an alternative for the positioning means as follows: Because the dotted and tearing lines (11) and (4) have to be precisely one above the other, it is very important that the container sealing sheet (9) be precisely positioned above the container defining sheet (3).

To do so, the two holes (15) of the container-sealing sheet (9) engage the two protuberances (5) of the support (1). It has been found more convenient to provide the support (1) with protuberances, and the container-defining sheet (3) and the container- sealing sheet (9) with corresponding holes. However, some variations can be made without departing from the spirit of the invention. For example, the protuberance(

s) to be engaged by the corresponding hole(

s) provided on the container-sealing sheet (9), may be moulded directly on the top surface of the container-defining sheet (3) instead of being provided on the support (1). After the holes (15) of the container-sealing sheet (9) are engaged to the protuberances (5) of the support (1), the paper covering is peeled off the bands (18) of the container-sealing sheet (9) and applied on the top surface of the container-defining sheet (3). [ 31 ] The figures to which the numbers found in these two quotes from the ‘045 Patent are reproduced below:

c) The Products in Question [ 32 ] Both Richards and Distrimedic produce weekly, detachable pill dispenser products that are primarily used in nursing home facilities. The parties’ respective products are described in greater detail below. i. Richards’ Product [ 33 ] Richards sells a pill dispenser to sort pills, tablets and capsules.

Richards’ pill dispenser is described in the ‘045 Patent and in Figure 7 thereof, (reproduced above). [ 34 ] As described by both parties, the lowermost element of Figure 7 is a tray (also called a recessed support) that is used to support a container-defining sheet made of clear plastic (sometimes called a blister) having a given number of evenly spaced apart cavities embossed therein. Once filled as prescribed, the container-defining sheet is sealed by a container-sealing sheet (sometimes called a label), which is the uppermost element of Figure 7.

The container-sealing sheet is aligned with the container-defining sheet by means of two upwardly projecting protuberances on the top surface of the recessed support that engage corresponding pairs of holes in both the container-sealing sheet and the container-defining sheet. [ 35 ] Richards uses two types of container-sealing sheets, one for covering the container-defining sheet permanently (permanent labels), and one that is resealable/replaceable (replaceable labels).

Both types of its container-sealing sheets have a top surface on which information may be printed, and a peelable bottom layer to permit the sealing of the cavities of the container-defining sheet. The top surface of each container-sealing sheet has an upper portion which is white, and a lower portion which is divided into four columns of equal width being, respectively from left to right, pink, green, yellow and white. Examples of Richards’ permanent and replaceable container-sealing sheets are reproduced here:

[ 36 ] The mounting tray for a resealable label has indentations that facilitate pulling up tabs (Exh. 508) (JBD 19). The blister tray has slight indentations on the side that align with these indentations to facilitate the tab. The difference between the permanent and the removable blisters are the indentations on the side allowing one to access the tabs on the removable blisters (Exh. 509) (JBD 21):

The difference between permanent and resealable labels is that there is a small plastic tab aligned with the colouring on the resealable label that allows for pealing back and resealing, while there are indentations to facilitate the breaking of the seal to remove the pill on the permanent label (Exh. 510 (permanent label) and 511 (resealable label): Computer-generated information associated with when the pill is taken, the name of the pharmacy and the name of the patient can be printed on each cell of a sealed and completed sheet as demonstrated in Figure 6 of the ‘045 Patent (reproduced above). [ 37 ] Richards initially sold an 8.5” x 10” label only, but later sold an 8.5” x 11” label also.

It presently sells both sizes. Blank labels are sold to the pharmacists, who fill the blisters and do their own printing. [ 38 ] Richards makes a variety of accessories available to pharmacists to facilitate the filling, verification and shipping of the product, as well as the making of corrections to previously sealed sheets.

These include, among others, a pill sorter, which consists of two moving plastic sheets that permit the user to put the pills on an indented tray first and then move it across to dispense the pills into the appropriate recesses in the container-defining sheet, as well as a knife and knife guide, verification stand, and shipping-related products. ii. Distrimedic’s Product

[ 39 ] As described in the Agreed Statement of Facts, Distrimedic also sells a pill dispenser to sort pills, tablets and capsules.

Distrimedic’s pill dispenser includes a container-defining sheet made of clear plastic having a given number of evenly spaced apart cavities embossed therein, which is sealed by a container-sealing sheet. [ 40 ] The following is an image of one of Distrimedic’s trays (Exh. 500): [ 41 ] Like Richards, Distrimedic provides both permanent and replaceable container-sealing sheets in 8.5” x 11” and A4 size, all of which have a top surface with an upper portion that is white, and a lower portion that is divided into four coloured columns. Distrimedic’s current container-sealing sheet is reproduced here:

d) Related Proceedings i. The Patent Disclaimer Proceedings [ 42 ] As noted above, on November 8, 2005, subsequent to the commencement of the main action by Distrimedic Inc., but prior to entering a defence or launching its counterclaim, Richards filed a disclaimer in connection with the ‘045 Patent pursuant to

section 48 of the Patent Act with a request that “recordal of th[e] disclaimer be expedited” (JBD 144). [ 43 ] The changes in Claim 15 resulting from the disclaimer filed by Richards on November 8, 2005, are shown in bold and in parentheses:

a) a container-defining sheet made of a plastic material, said container-defining sheet having a top surface comprising a given number of evenly spaced apart cavities embossed therein, each of said cavities being upwardly opened and thus defining a container, each of said containers being surrounded by a flange of a given width provided with a central dotted line punched therein, said dotted lines provided in all of said flanges making it possible to detach each of the containers from the container-defining sheet and from the adjacent containers;

b) a recessed support having a top surface provided with a number of recesses at least equal to the number of cavities embossed in the container-defining sheet, said recesses being positioned, shaped and sized to receive the containers defined by said cavities embossed in the container-defining sheet;

c) a container-sealing sheet having a top surface and a bottom surface and being shaped and sized to cover at least all the containers and surrounding flanges of the container-defining sheet, the bottom surface of said container-sealing sheet having bands that are positioned, shaped and sized to exactly correspond to and fit over the flanges of the container-defining sheet, with at least said bands being covered with a self-adhesive material which is covered until use by a protective peelable paper covering, and said container sealing sheet being provided with tearing lines making it possible to tear said container-sealing sheet into a number of cover pieces corresponding to the number of said containers; and

d) positioning means provided on at least the top surface of the container-defining sheet and on the container-sealing sheet to ensure that, in use, after the container-defining sheet is fitted onto the recessed support, the container-sealing sheet is properly positioned on top of the top surface of the container-defining sheet, with its tearing lines in exact superposition on top of the dotted lines of the container- defining sheet, wherein the positioning means comprises at least one upwardly projecting protuberance provided on the top surface of the recessed support [at least one hole] and engaging means provided [into] on the container-defining sheet and [at least one other hole] other engaging means provided [in] on the container-sealing sheet, said [at least one hole] engaging means and [one other hole] other engaging means being sized and positioned to correspond to and be engaged by said protuberance. [ 44 ] As described by Justice Martineau in a decision of the Court on application for judicial review, Richards was notified after the filing of its disclaimer that its request had been referred to a patent examiner (Richards Packaging Inc v Canada (Attorney General) , 2007 FC 11 at para 19 [ Richards ] ).

The file was ultimately considered by a Patent Project Officer, who refused Richards’ disclaimer by letter dated December 20, 2005.

The Officer found that the request could not be considered a disclaimer and should therefore be refused, reasoning that the disclaimer rendered the whole claim broader than what was originally allowed and that it would result in claiming more than what was until then protected in the claims of the patent ( Richards , above, at para 21 ). [ 45 ] Richards filed an application for judicial review seeking mandamus and other forms of declaratory relief and, on February 27, 2006, Prothonotary Morneau allowed a motion made by Distrimedic to be added as a respondent to the judicial review proceeding ( Richards Packaging Inc v Attorney General of Canada , 2006 FC 257 ). [ 46 ] In Richards , at paragraph 23 , Justice Martineau described the impact of the disclaimer at that point in time on the file now before this Court as follows: 23 At this point, I note that on December 1, 2005, following the filing with the Patent Office of the applicant's disclaimer, but prior to the making of the impugned decision, the applicant filed before the Court a statement of defence and counterclaim in which it contends that various claims in the patent are valid and that Distrimedic infringed these claims.

Its allegations rely in large part on the applicant's disclaimer, filed on November 8, 2005. Following a motion to strike brought by Distrimedic, on June 29, 2006, Prothonotary Morneau ordered that the paragraphs of the applicant's defence and counterclaim making reference to the applicant's disclaimer be struck out.

Although this Court had not yet addressed the legality of the impugned decision, Prothonotary Morneau nevertheless concluded that "this notice of application for judicial review does not for the time being change the fact that there is no valid disclaimer now affecting the patent '045 claims" ( Distrimedic Inc. v. Dispill Inc. , [2006] F.C.J. No. 1045 , 2006 FC 832 at para. 38 ) [emphasis added]. On October 17, 2006, my colleague Justice Max M.

Teitelbaum maintained Prothonotary Morneau's order on appeal and agreed "that until the issue of the validity and effect of the disclaimer has been judicially reviewed , the references to the disclaimer should be struck out of the Defence and Counterclaim on the grounds that they are immaterial and frivolous pursuant to Rule 221(1)(

b) and (

c) of the Federal Court Rules" [emphasis added] ( Distrimedic Inc. v. Dispill Inc. , [2006] F.C.J. No. 1532 , 2006 FC 1229 at para. 56 ).

That being said, Justice Teitelbaum indicated, at paragraph 54, that should the applicant "be successful in that judicial review proceeding, they may then move this Court to allow them to amend their pleadings to reintroduce allegations based on the disclaimer into the Defence and counterclaim". [Underlining in original] [ 47 ] Finding that the Patent Office had no discretion to refuse entry or recordal of a disclaimer once it has been submitted in the proper form and manner and the prescribed fee has been paid, Justice Martineau accepted Richards’ arguments that: “1) Dionne [the Patent Officer] had no jurisdiction under the Act and the Rules either by way of delegation or otherwise to examine the applicant's disclaimer and to make the impugned decision; and 2) that the Commissioner is not empowered under the Act and the Rules to refuse the filing or recordal of the applicant's disclaimer that was filed on November 8, 2005 in the prescribed form and manner, as provided by subsection 48(2) of the Act and

section 44 of the Rules” ( Richards , above, at para 24 ).

[ 48 ] Although Distrimedic argued that “the Court's adoption of the applicant's position would render patents unfair, impossible to predict and make them a ‘public nuisance’” and that “potential competitors of the patentee would be in a constant state of uncertainty with respect to the scope of the patent, since the patentee could broaden the claims at any time by way of a document purporting to be a disclaimer”, Justice Martineau concluded that Canadian patent law is entirely statutory and “this Court cannot rely on valid policy considerations to substitute itself for Parliament” ( Richards , above, at para 25 ). [ 49 ] Finding that the power to consider the validity of a disclaimer rests entirely with the courts, but that a judicial review proceeding was not “the proper vehicle to obtain a judicial declaration as to the validity or invalidity of a disclaimer filed by a patentee with the Patent Office”, partially given the lack of expert evidence, Justice Martineau set aside the Officer’s decision letter such that the disclaimer would be considered filed and effective as of its filing date of November 8, 2005.

In doing so, Justice Martineau overturned the Patent Officer’s finding that the amendment would result in claiming more than what is currently protected in the claims of the patent, as this is a factual and legal determination on the merit of the disclaimer which the Patent Officer had no jurisdiction to make. [ 50 ] Justice Martineau’s decision was confirmed by the Federal Court of Appeal in an oral judgment rendered on January 8, 2008 ( Distrimedic Inc v Richards Packaging Inc , 2008 FCA 4 ). ii.

The Trade-mark Registration Proceedings [ 51 ] In its Three Times Amended Statement of Defence and Counterclaim, Richards argues that by virtue of its extensive advertising and sales, the “Richards Packaging Label Colour Trade Marks” (i.e., the colours applied to the top surface of both its permanent container-sealing sheets and its replacement container-sealing sheets) have become well and favourably known to pharmacists, nurses and nursing home employees, as well as the public, and have become distinctive trade-marks of Richards’ packaging in association with its Dispill pill dispenser (Statement of Defence and Counterclaim, September 27, 2010, at paras 28-29). [ 52 ] The Richards Colour Trade Mark, referred to by Distrimedic as the “Dispill Colour Scheme”, is the subject of Canadian Trade-mark Application No. 1,393,024.

Upon opposition of the registration by Distrimedic, an oral hearing was held and the Registrar of Trade-marks ultimately refused the application on October 31, 2012. The Registrar found that Richards had not used the colour scheme as a trade-mark, as defined in

section 2 of the Trade-marks Act , RSC 1985, c T-13 , but as a colour code indicating the time of day for taking the medication contained in the pill dispenser rather than as a trade-mark identifying the source of the wares. As a result, the Opposition Board allowed Distrimedic’s opposition and concluded that (

i) the Dispill Colour Scheme was not intended to be used as a trade-mark; (ii) the Dispill Colour Scheme is inherently non-distinctive because it is functional; and (iii) Richards did not present sufficient evidence of public recognition of the Dispill Colour Scheme as a trade-mark. [ 53 ] An appeal of the Registrar’s decision was submitted on February 4, 2013, and is currently before this Court as Richards Packaging Inc v Distrimedic Inc , T-236-13. Richards filed a requisition for hearing on June 21, 2013.

Richards argues that, in rejecting the application, the Registrar erred in a number of ways: by applying a higher standard of proof than appropriate in considering use of the applied-for mark (which he considered “non-traditional”); by holding that in a situation where a mark possesses some level of functionality, the burden on the applicant to establish the distinctiveness of the trade-mark will be high; by holding that a trade-mark comprising a colour or colours applied to the surface of a product is inherently non-distinctive; in its consideration of the evidence and testimony before it; and in connection with one finding of fact, although the significance of the alleged error is unclear based on the Notice of Application alone.

Richards made much the same arguments in the context of the case at bar. III.

ISSUES [ 54 ] On September 28, 2011, following a pre-trial conference with the parties, Prothonotary Morneau issued an Order setting out the following list of issues to be addressed at trial: Patent 1 Construction of the 2,207,045 Patent 2 Whether Distrimedic has infringed the 2,207,045 Patent by manufacturing and selling the Distrimedic pill dispenser 3 Whether the disclaimer filed in relation to claims 15 to 21 of the ‘045 Patent is valid, and whether claims 15 and 17-21 as disclaimed are invalid in light of invalidity of the disclaimer.

4 In the event that the disclaimer is valid and the disclaimed claims are construed broadly enough to encompass the Distrimedic pill dispenser, are claims 15 and 17-19 as disclaimed nevertheless invalid as being anticipated by or made obvious in light of US Patent No. 3,780,856 (Braverman) Alleged Misrepresentations 5 Whether the defendants to the counterclaim have made false and misleading statements that tended to discredit the business, services and wares of Richards Trade-Mark 6 Whether trade-mark rights subsist in the arrangement of colours applied to Richards’ container-sealing sheet 7 Whether Distrimedic has used any such trade-mark rights in the original colour arrangement that is or was contrary to

section 7(

b) of the Trade-Marks Act 8 Has Distrimedic directed public attention to its business in such a way as to cause confusion in Canada with those of Richards? Copyright 9 Whether copyright subsists in the Dispill Label Form 10 Whether Richards is the owner of any such copyright in the Dispill Label Form 11 Whether Distrimedic has infringed any copyright owned by Richards in the Dispill Label Form Alleged Joint Liability 12 Whether any of the Defendants to the Counterclaim other than Distrimedic Inc. are liable for any of the allegedly-infringing activities Remedies 13 In the event that there has been infringement as alleged, whether:

a) Richards has suffered damages and, if so, the extent of same

b) regarding copyright infringement, whether Richards is entitled to damages and an accounting of profits

c) whether Richards is entitled to an injunction and to the declarations requested regarding validity of the Patent and actions of the defendants to the counterclaim

14 Costs. IV.

FACT WITNESSES [ 55 ] Prior to the commencement of the trial, both Richards and Distrimedic proposed to call three fact witnesses each. [ 56 ] Richards would call Gerry Glynn, Chief Executive Officer (CEO) of Richards Packaging Inc., Marie-Josée Glaude, the General Manager of Richards’ Dispill Division, and René Thibault, a pharmacist and Dispill customer who was approached by Distrimedic when it entered the market. [ 57 ] Distrimedic would call Claude Filiatrault and Robert Poirier, both former employees of and shareholders in Dispill and current or former shareholders in the other corporate Defendants to the Counterclaim.

Distrimedic also intended to call Paul van Gheluwe, a prior Dispill employee and sale representative for Distrimedic, but felt that his testimony was unnecessary for the reasons explained below.

a) Richards’ Fact Witnesses i. Gerry Glynn [ 58 ] Mr. Gerald Glynn has been the CEO of Richards since 2002, and was called to provide factual evidence regarding Richards Packaging Inc., Dispill Inc., the Dispill pill dispenser and related financial information, as well as to testify regarding the use of the Richards’ colour trade-mark, the Dispill Label Form, and the patent disclaimer. [ 59 ] During his examination-in-chief, Mr. Glynn provided an explanation of his role within Richards and a picture of Richards’ corporate structure and business as a whole, including the types of products sold. Mr.

Glynn then went on to describe the circumstances surrounding the acquisition of Dispill Inc. and the Division’s place within the company as a whole, including geographical distribution, representation and internal reporting structure. Glynn described what he referred to as the “Dispill solution” and its primary customers. [ 60 ] Richards’ counsel went on to have Mr. Glynn introduce various documents into the record related to the acquisition of Dispill Inc, acknowledging that Mr. Glynn cannot read French, and it was agreed that documents would be taken as proven unless an objection was raised.

After introducing a number of documents, Mr. Glynn testified that he learned of Mr. Filiatrault and Mr. Poirier and their failed attempt to acquire Dispill Inc. during the due diligence related to Richards’ acquisition but that, apart from reading about them, he had never met them. [ 61 ] Mr. Glynn introduced two DVDs containing instructional videos for nursing homes and pharmacies, respectively, which constituted marketing material for Richards and were played for the benefit of the Court. Mr. Glynn was unsure when they were made but confirmed that they pre-dated the 2005 acquisition. Mr.

Glynn then introduced a number of physical items into the record, and explained their uses. Mr. Glynn took the Court through the items listed in a Dispill price list, explaining the intended uses for specific product components and accessories and who would use them (e.g., the pharmacist, nurses or non-professional staff of either the drug store or nursing home). Mr. Glynn went on to discuss the profit margin for various products, noting that the majority of Richards’ sales are of consumables (blisters and labels) and that accessories are sold primarily to facilitate the consumable business.

Sample labels were then introduced and described. [ 62 ] Mr. Glynn explained that when Dispill Inc. commenced operations, it had an exclusive relationship with the pharmaceutical company Novopharm Quebec. Products purchased or ordered by pharmacies were invoiced to and paid for by Novopharm. Later, that relationship with Novopharm came to an end and, thereafter, Dispill invoiced pharmacies directly for products they ordered. [ 63 ] After introducing additional physical exhibits, Mr.

Glynn introduced a complete solution provided to Richards by Distrimedic as a sample when their action was begun, with a label bearing the same colours as the Richards product, as well as a sample received at a trade show with Distrimedic’s current colour scheme. [ 64 ] Mr. Glynn reviewed Richards’ disclaimer, explaining why in his view certain claims were too broad and needed to be narrowed and indicating that they wanted to provide a more specific definition of the label and a clearer description of the purpose of the holes, which was to provide an engaging means. Mr.

Glynn explained that the timing of the disclaimer was motivated by their review of

the patent following receipt of Distrimedic’s Statement of Claim and indicated that the intent of the disclaimer was to narrow the patent’s application and to correct inadvertent errors or inadequate descriptions, both for the benefit of the litigation involving Distrimedic and to clarify the patent in connection with Richards’ other competitors. [ 65 ] Mr.

Glynn went on to discuss the importance of the colours on the Dispill labels, explaining that they do two things: one is to “sort of brand your product as recognizable”, the other is “to facilitate the sort of use of the product” (Transcript, March 25, at p 125). He noted that unless otherwise required by law, for example when issuing narcotics, Richards always uses the same colour scheme and is not aware of any other company using the same colours, apart from Distrimedic’s brief use of them. Mr. Glynn indicated that the pharmacists do their own printing and that patients aren’t likely to see a complete label.

He then went on to discuss the products and colours employed by various Richards ’ competitors, specifically Jones and Manrex, and the advantages of the Richards solution over those other products (e.g., Richards’ does not require a thermal seal), introducing samples along the way. He added that the Dispill system is a superior system to both Jones’ and Manrex’s systems due to its functionality and to the added safety of printing on the blister cell. Delivery of pills to patients takes less time with the Dispill system and the error rate is lower.

Jones and Manrex have a small percentage of the market in Quebec, but they have a larger share of the overall Canadian marketplace. As for the other products on the market prior to Distrimedic’s entrance, Mr. Glynn suggested they were alternate solutions to dispensing pills and not competing products. [ 66 ] Mr. Glynn went on to discuss the various software companies and programs associated with Dispill Inc. at various points in time, including Kroll and DLD’s Mentor program.

He stated that when Dispill had an agreement with a software company, the agreement would recognize that the software company was using Dispill’s software. Screenshots from both DOS and Windows versions of the DLD software were reviewed, noting a hyperlink connected with Distrimedic’s name in at least one version. [ 67 ] Mr. Glynn confirmed that sales of consumables represent about 97-98% of Richards’ business and noted that label sales exceed blister sales by approximately 20-25%, as more labels will be used if any changes are made.

Financial documents demonstrating discounting, price decreases and rebates were also discussed. Mr. Glynn indicated that prices dropped by about 20% when Distrimedic entered the market in 2006. Correspondingly, the number of customers being offered discounts increased, even if the discounts offered did not change. Mr. Glynn indicated that rebates are offered in response to pricing pressures in the marketplace from Distrimedic. With the exception of the initial launch year by Distrimedic and the corresponding correction of the pricing, Richards’ sales have been growing each year thereafter.

If Distrimedic were not in the marketplace, Mr. Glynn believes that Richards would be able to increase its prices. [ 68 ] In her cross-examination of Mr. Glynn (Glynn, March 26, at pp 45-153), Distrimedic’s counsel touched on a variety of issues. Mr.

Glynn confirmed that he is not involved in the day-to-day activities of the Dispill Division and spends “very little” of his overall time on that portion of Richards’ business; he also admitted that he had no direct knowledge of the business of Dispill Inc. prior to Richards’ July 2005 acquisition, apart from information disclosed to him as part of the due diligence that preceded the transaction. [ 69 ] Counsel also questioned Mr.

Glynn with respect to Richards’ concurrent trade-mark application proceedings, Richards’ specific trade-mark concerns (no claim in relation to Distrimedic’s current colour use or name), the specifics of Richards’ copyright claim (no claim in any software and no claim that Distrimedic used the software themselves but rather that they induced use on the part of pharmacists, admitting the DOS version likely hasn’t been used since at least 2006), and Richards’ relationship with the various software companies (including the ownership of the Dispill Label Form and payments for programming services or software licensing). [ 70 ] Mr.

Glynn reiterated that the Dispill product has become an industry standard and has basically dominated the Quebec market. Counsel had Mr. Glynn clarify the circumstances surrounding the 2005 acquisition and intellectual property-related due diligence. He admitted that neither the Dispill Colour Scheme nor the Dispill Label Form were specifically discussed during the due diligence or specifically mentioned in the transaction agreements.

He indicated, however, that the agreement between Richards and Dispill Inc. was meant to be all-inclusive such that all intellectual property held by Dispill Inc. would be transferred to Richards. In his view, although

Schedule 5.1(ee) of the Share Purchase Agreement dated July 29, 2005 (JBD 244), which makes no mention of the Dispill Colour Scheme or Dispill Label Form, indicates that it is a list of all intellectual property, it was the seller’s obligation to complete the list. To the extent that anything was missing from the seller’s representation of its intellectual property, it would not affect Richards’ right to acquire all of Dispill Inc.’s intellectual property. [ 71 ] Counsel went on to question Mr.

Glynn regarding the attribution of decreased pricing to Distrimedic’s entry in the market, Richards’ response to Distrimedic’s entry (e.g., the notice sent to all pharmacist customers in September 2005 with respect to potential infringement of Dispill’s patent, purportedly in response to confusion in Richards ’ customer base and to dispel any confusion between Richards and Distrimedic), and the legality of the movement of employees from Dispill to Distrimedic. [ 72 ] Finally, counsel had Mr.

Glynn discuss the practical differences between the Dispill solution and solutions offered by competitors such as Jones and Manrex (e.g., with respect to sealing and printing labels, querying why although they are also authorizing pharmacists to print labels with similar information to Richards’ they have not been sued), and the difference between the Dispill Label

Form and the broader pharmacy software programs. At one point Mr. Glynn agreed that the copyright Richards is claiming is in the method of printing information onto individual cells, not on the top part of the container-sealing sheet. In other words, he suggested that the copyright that is claimed is the method of having individual cells that can be broken off while remaining sealed, with information displayed on the back of the cell so that it can be a stand alone product.

He describes Richards ’ copyright as being identifiable on the basis of a two-part test: so long as the information appears on each cell and is substantially the same as what was selected as part of Richards’ screenshots, copyright will be infringed. When pointed to a recently released Jones product incorporating printing on individual cells, Mr.

Glynn indicated that Richards hadn’t followed up on the details of the product and wasn’t sure if it was infringing the patent, but, as far as his company was concerned, Jones was infringing the copyright by printing on the back of each cell of its solution, however the printed information is organized. [ 73 ] With respect to patents, counsel for Distrimedic had Mr. Glynn confirm that accessories are not sold subject to any restriction regarding their use apart from the fact that they are patent-protected. He also confirmed that there is no allegation that Distrimedic is selling a knife or a cutting board.

Reviewing Richards’ reasons for filing the patent disclaimer, Mr. Glynn accepted that the last paragraph of the original Claim 15 stated that the holes were sized and positioned to correspond to and be engaged by said protuberances, and ultimately offered that he filed the disclaimer on the basis that “the new description is a better description when read in combination with this than this alone”, presumably referring to the new and old wording (Transcript, March 26, at p 102). Despite acknowledging similarities between Claims 1 and 15 of the ‘045 Patent, Mr.

Glynn had no answer as to why the disclaimer was not made to apply to Claim 1 as well as to Claim 15. He indicated that Richards did not speak to Mr. Bouthiette regarding the need for a disclaimer, that it was a mistake not to specify a reference to adhesive bands in the original patent, and that the language referring to engagement was “not as descriptive as it should have been” (Transcript, March 26, at p 104). [ 74 ] Upon being asked for some further clarification regarding the copyright infringement claim and the specific claims arising from or underlying “Dispill’s Label Form”, Mr.

Glynn (referring to Exh. 164 and 165) claimed that initially there was no Distrimedic link in the Mentor software, so the printing of the Distrimedic label would be done by defaulting to the Dispill label. When a Distrimedic link was subsequently added to the software, Mr.

Glynn agreed that “the problem [ Richards has] with Distrimedic, with respect to the copyright and the software is that they have -- Distrimedic has commissioned an application in the existing pharmacy software that allows the pharmacists to make the same selection of fields and print them onto a label …on top of the cell” (Transcript, March 26, at pp 122-123). Maintaining his position that Dispill offers a value-add over competitors’ products in part due to the value of the associated intellectual property and in part due to ease of use, Mr.

Glynn confirmed that Richards has “the right to prevent anybody from using the Mentor program for purposes of printing onto a pill dispenser with the information on individual cells” (Transcript, March 26, at p 126). [ 75 ] Mr. Glynn went on to discuss the Dispill target customers (pharmacists and nursing homes), factors affecting competition (nursing homes are more concerned with functionality and accuracy than with price) and pricing in the marketplace. Mr.

Glynn repeated that Richards began increasing its rebates in 2006 and decreasing its prices in 2007 in response to Distrimedic coming into the market; Dispill had no competitor before Distrimedic, as Jones and Manrex were alternate solutions but were not offering the same kind of product. Mr.

Glynn mentioned that the intellectual property owned by Dispill Inc. was not a factor in the negotiations leading to its purchase by Richards. [ 76 ] In 2006, Richards removed the volume target necessary to obtain a rebate instead of lowering its prices as a means of appeasing certain customers without immediately offering a lower price to each customer. Before Distrimedic entered the market, few customers reached the volume targets and thus the number of rebates offered was small.

Afterwards, the volume rebate percentage remained at approximately 7%, but the number of rebates increased because the number of customers who were offered discounts increased significantly in order to compete with Distrimedic’s lower prices. In 2007, Richards was forced to drive down its prices due to competition by Distrimedic. The price (revenue per case unit) had dropped by approximately 20% by December 31, 2007. Outside of Quebec, however, pricing and discounting remained the same before and after Distrimedic’s launch. ii.

Marie-Josée Glaude [ 77 ] Marie-Josée Glaude, Vice-President of Sales and Trade Relations in Richards ’ Retail Division and General Manager of Richards’ Dispill Division in Montreal, was called to provide factual evidence and introduce various documents regarding Richards Packaging Inc., its relationship with various software companies, and pricing, including discounts offered in connection with Dispill products. Ms. Glaude was examined and cross-examined on March 26 and 27, 2013. She broadly confirmed Mr.

Glynn’s testimony with respect to pricing, adding that the pricing of Dispill products was dealt with on a case-by-case basis; the price was lowered if it made sense to do so in order to keep a customer. She provided numerous examples of Dispill customers consistently advising Dispill, after the entry of Distrimedic into the marketplace, that they could get the same product at a lower price from Distrimedic.

She also referred to some emails and handwritten notes of employees of Richards tending to establish that some representatives of Distrimedic had used Dispill brochures to order Distrimedic products and suggesting that Dispill accessories can be used with Distrimedic products. When made aware of these practices in the fall of 2005, a Notice to Pharmacists was sent by mail stating that “[i]t has come to our attention that certain persons without our authority have been promoting a product similar to DISPILL® or as a complete substitute for DISPILL®”.

The letter went on to advise that such persons were not associated with DISPILL® or Richards Packaging and did not have any authority to sell the product or to represent themselves as associated with it. The letter indicated that any other product represented as related to DISPILL® would infringe Richards’ trade-mark rights, that DISPILL® is protected by patent, that any use of components such as blister sheets or adhesive backing sheets purchased from sources not authorized by Richards to manufacture sets of individual pill containers

would infringe its patented method for DISPILL®, and that any product that was a copy of or purported to be the same as DISPILL®would infringe Richards’ patent rights in the product (Exh. 141 and 143). [78] I agree with counsel for the Defendants to the Counterclaim that Ms. Glaude is not a witness who can testify to thedistinctiveness of the alleged trade-mark or to any instance of confusion or misrepresentation on the part of any of the Defendants to theCounterclaim without it being hearsay or speculation.

Indeed, she admitted to not being in direct contact with Dispill’s pharmacycustomers and did not present any evidence to the effect that she is in contact with nursing homes. With respect to software issues, Ms.Glaude admitted to not being familiar with Mentor or the more modern versions of pharmacy software and indicated that she could notspeak to the Dispill Label Form (JBD 149), which ceased being used prior to Richards’ acquisition of Dispill Inc.

For those reasons, Ifind that her testimony has little relevance on this point and should be given little weight. [79] Moreover, certain documents relied upon by Ms. Glaude to bolster Richards’ allegations of misrepresentations are notadmissible because they contain hearsay.

This is true, particularly in light of an email exchange ending with a January 3, 2007 messagefrom Hugo Lebrun to Dispill, which includes a handwritten note (found at JBD 168 and JBD 352 at p 6), an email dated October 25,2007 from Maryse Fontaine to Hugo Lebrun (found at JBD 182, JBD 183 at p 2 and JBD 352 at p 7), and a handwritten page headed“Automne 2006” referring to Ph Fleury & Ass. (found at JBD 352 on the third last page).

All of these records were prepared by MaryseFontaine, who works at Richards’ Dispill Division in Granby, Quebec. [80] The general rule prohibiting hearsay evidence has been succinctly stated as follows: Written or oral statements, or communicative conduct made by persons otherwise than in testimony at the proceeding in which it isoffered, are inadmissible, if such statements or conduct are tendered either as proof of their truth or as proof of assertions implicit therein. Alan W. Bryant, Sidney N. Lederman & Michelle K.

Fuerst, Sopinka, Lederman & Bryant: the law of evidence in Canada, 3rd ed(Markham: LexisNexis, 2009) at 229-230. [81] At the core, the rule prohibits reliance on any written or oral statements made out-of-court, if the evidence is to be tenderedfor the truth of its contents.

The Plaintiff by Counterclaim argues that the above-mentioned documents should be accepted as admissibleeven if they contain hearsay evidence because they constitute business records. [82] The exception to the inadmissibility of hearsay evidence for business records is grounded in the fact that the identity of theperson who created the record may be unknown and, even if present in Court, such person could not add anything to what appears in therecord.

Moreover, there are reasons for confidence in the accuracy of information contained in business records: the routine and habit ofmaking entries in business records, and an employee’s concern over disciplinary consequences that could follow in the event of anyinaccuracy. [83] Section 30(1) of the Canada Evidence Act, RSC 1985, c C-5 allows for documents to be admitted into evidence that wouldotherwise be hearsay provided that they are identified as records made in the usual and ordinary course of business.

However, section30(10) sets out certain categories of records that are not rendered admissible under section 30(1), including documents made incontemplation of a legal proceeding (s. 30(10)(a)(ii)). This exception exists because there is a danger that a record made incontemplation of a legal proceeding will lack objectivity, rendering it unreliable: see Performing Rights Organization of Canada Ltd vLion d’Or

(1981) Ltée, [1987] FCJ No. 934, at p 3; Setak Computer Services Corp v Burroughs Business Machines Ltd (1977), (ON SC), 15 OR (2d) 750, at p 755 (On Sup Ct). The main requirements for admission of hearsay evidence under thecommon law business records exception are that the person who created the record did so contemporaneously, based on personalknowledge and under a duty to do so: Ares v Venner, (SCC), [1970] SCR 608.

Under the principled approach, hearsayevidence must be necessary to prove a fact in issue and must be reliable, with necessity going to the relevance and availability ofevidence: R v Khan, (SCC), [1990] 2 SCR 531; R v Khalawon, 2006 SCC 57 , [2006] 2 SCR 787. [84] In the case at bar, Ms. Glaude gave no indication that Maryse Fontaine was unavailable to give testimony, and in factconfirmed that Ms. Fontaine was working in Granby on the day of Ms. Glaude’s testimony. Ms. Glaude also acknowledged that at leasta portion of Ms.

Fontaine’s notes were not written contemporaneously but rather later in time, either from memory or based on othernotes not tendered as evidence. [85] Moreover, the first chain of emails ending with the January 3, 2007 message from Hugo Lebrun to Dispill alleges that arepresentative of Distrimedic showed a potential customer a Dispill catalogue for the purposes of ordering accessories. The allegedevent occurred between the representative of Distrimedic and the potential customer.

The potential customer then allegedlycommunicated this event to two Dispill representatives who in turn allegedly communicated it to Fontaine who, according to Glaude,wrote the note. The content of the handwritten note therefore constitutes triple hearsay. Even if the handwritten note were qualified as a

business record, it would still constitute double hearsay. [ 86 ] The email dated October 25, 2007 from Ms. Fontaine to Hugo Lebrun alleges that Distrimedic told one of its customers to call Dispill for accessories. The situation is similar to that set out in the previous paragraph. The alleged event occurred between Distrimedic and the customer. The customer then allegedly communicated the alleged event to a nursing home that in turn allegedly communicated it to Fontaine who, according to Glaude, wrote the email.

The content of the email therefore constitutes triple hearsay such that, even if it were qualified as a business record, it would still constitute double hearsay. [ 87 ] Finally, the handwritten page headed “Automne 2006” alleges that a pharmacist received a La Société d’Impression business card with Dispill’s phone number written on it. The pharmacist allegedly advised Ms. Fontaine. There is no evidence that either Ms. Fontaine or Ms. Glaude saw the alleged card. Moreover, there is no evidence as to when the page was written. The page indicates the date as “Automne 2006 (Je crois Nov. 06)”.

This indicates that the document was created after the alleged phone call was received, likely by several months. [ 88 ] None of the issues in dispute described by the above-listed documents was based on personal knowledge of Ms. Fontaine. Further, all such documents were created well after the commencement of the present action in September 2005 and it does not appear that Richards’ practice was to create such documents before the commencement of the present action. For all of the foregoing reasons, I find that these documents fail to satisfy the business record exception to the hearsay rule. iii.

René Thibault [ 89 ] Mr. René Thibault, a pharmacist and Head of the Département de pharmacie, Centre CSSS, Institut universitaire de gériatrie de Sherbrooke, was a customer of the Dispill pill dispenser who was approached by Distrimedic when it first entered the market. Mr. Thibault was examined and cross-examined on March 27, 2013. [ 90 ] In 2006, Mr. Thibault became aware of Distrimedic because he was looking for the best offer available for blister products. In the autumn of that year, Mr. Thibault met with a representative from Distrimedic, Mr.

Paul van Gheluwe, in order to see whether Distrimedic could offer a better contract on blister products than Dispill was offering at the time. When Mr. Thibault considered switching from the Dispill product to the Distrimedic product, he was concerned with whether Distrimedic had the same or similar accessories as the Dispill system. He testified that the representative of Distrimedic presented accessories that could be used with the Distrimedic pill dispenser with the help of a catalogue. When Mr.

Thibault, who at the time was very familiar with Richards’ pill dispenser, asked if Distrimedic had accessories to use with their products, he was shown product sheets that were very similar to the sheets found in the Dispill catalogue shown to him as Exhibit 513, but without the word “Dispill” on them. It was due to this similarity that he thought the two companies must have had the same external supplier. [ 91 ] On cross-examination, Mr. Thibault testified that ease of use was his primary consideration in choosing a product.

He also indicated that some information must be printed on a prescription drug, like the name of the patient, the name of the drug and its strength, its dosage and how it should be taken. Since such information is required by law, he would not be allowed to use a pill dispenser that did not allow for the inclusion of the required information. [ 92 ] Mr. Thibault also mentioned that he was the one who contacted the representative from Distrimedic in 2006 to inquire about his product, after being told by colleagues that Distrimedic offered a similar product to Dispill at a lower price.

When shown the Distrimedic price lists (JBD 27 and 34), he did not think that such price lists would have left him with the same impression of similarity to Dispill’s catalogue as the lists he remembered viewing. Mr.

Thibault also acknowledged, however, that when he met with the representative of Distrimedic, the representative did not try to mislead him into thinking that he was a Dispill representative or that he was selling Dispill products, and never falsely and misleadingly presented Distrimedic’s products; it was clear to him at the time that they were two distinct companies. [ 93 ] Counsel for the Plaintiff by Counterclaim argued that the Court ought to draw an adverse inference from the failure of the Defendants to the Counterclaim to call Mr. van Gheluwe in order to contradict any of Mr. Thibault’s evidence.

In response, counsel for the Defendants to the Counterclaim submitted that there was no reason to call Mr. van Gheluwe as a witness since there was no evidence of wrongdoing to be rebutted; indeed, Distrimedic’s counsel are of the view that Mr. Thibault was a very credible witness, that he was the only one of Richards’ witnesses in a position to give non-hearsay evidence of the misrepresentations or false statements allegedly made by Distrimedic, that he gave clear and precise answers and that the weight of his evidence should be considered high.

I shall say more about his testimony when discussing the allegations of misrepresentation in the analysis portion of these reasons.

b) Distrimedic’s Fact Witnesses i. Claude Filiatrault [ 94 ] Mr. Claude Filiatrault was examined on April 5, 2013, with the examination continuing and the cross-examination taking place from April 8 to 9, 2013. [ 95 ] Mr. Filiatrault is the unique shareholder of the corporate Defendants to the Counterclaim, and also a Defendant to the Counterclaim in his personal capacity. He is the common thread between each of the named defendants in this case and was one of three officers of Dispill Inc. from 1997 to 2002, before he and Mr. Poirier sold their shares to Mr. Bouthiette.

Following a two-year term instituted by a non-compete agreement, he started Distrimedic with Mr. Robert Poirier, with whom he controlled or directed each of the other corporate defendants (with Alpha and La Société amalgamating last year). His testimony was presented as relevant to Dispill background and his activities at Dispill, Distrimedic’s background, activities, products and operations, and the activities, products and operations of other Defendants to the Counterclaim. [ 96 ] Mr.

Filiatrault explained that the corporate Defendants to the Counterclaim share certain resources for efficiency, resource management and fiscal purposes, but are operated as distinct entities that are each responsible for separate commercial activities. Each of these companies keep distinct and clearly separated financial records and account to one another for the value of shared resources.

For example, there is only one payroll for all the employees of the three companies; La Société is responsible for paying all the employees and then invoices the other two companies for the amounts paid in salaries and commissions. Mr. Filiatrault also explained that rebates are sometimes given to a client of one company in recognition of the fact that it also purchases products of the two other companies, as a way to build loyalty. [ 97 ] Mr.

Filiatrault suggested that in recent years pharmacists have become more and more sophisticated as consumers and managers, that they share commercial information, and that those working for banners have commercial support from trained staff and even receive training in business negotiation. He also explained the roles of the banner corporations versus the franchised pharmacies in deciding which products are bought and at what price. He touched upon the early days of Dispill Inc. and its business relationship with Novopharm. [ 98 ] Mr.

Filiatrault mentioned that Dispill Inc.’s executives, at the time of marketing their product, never contemplated using the colour code as a trade-mark, but rather always viewed it as a safety feature of their products. He also spoke of the pharmacists as the key targets of the company’s publicity and marketing efforts, and of an aborted consumer-wide promotional campaign that Dispill had to discontinue because pharmacists were not able to respond to the consumers’ demand. [ 99 ] As for the selection of information appearing on each cell, Mr.

Filiatrault did not remember how it was made but was of the impression that it was originally selected by Mr. Bouthiette as a result of his collaboration with a pharmacist; he added that the Ordre des Pharmaciens du Québec would also have a practice code specifying the minimum amount of information to appear on the label of drug containers sold to customers. He testified that Bouthiette’s nephew programmed the initial DOS software, and that some input was also received from pharmacist and software companies as to the selection of fields and operation of the DOS software.

He then went through some of the computer software programs that had been used through the years to transfer the information about patients in the pharmacists’ data banks to the Dispill label sheets. In this respect, he introduced into evidence two agreements, one between Dispill Inc. and DLD and the other between Dispill Inc. and InfoPharm, relating to the installation of the DOS software and the creation of a “bridge” from the DOS software to the DLD and InfoPharm platforms. To his knowledge, no copyright for these applications was ever registered. [ 100 ] Mr.

Filiatrault then went on to explain the circumstances surrounding the sale of his and Mr. Poirier’s shares to Mr. Bouthiette, and the non-competition agreement clause whereby Mr. Filiatrault and Mr. Poirier agreed that they would not compete with Dispill for a two-year period beginning September 3, 2002. He stated that they never had any intention to breach that agreement. They also sought the opinion of legal counsel on the basis of the drawing of a new product to determine if they would be infringing the ‘045 Patent of Dispill Inc.

According to that opinion dated March 5, 2003, their drawing would not infringe any of the claims found in the ‘045 Patent. They then sat on that project until the beginning of 2005, after having incorporated Distrimedic Inc. on September 7, 2004. It took most of 2005 to find a manufacturer and to obtain a good quality prototype of their new product that they would start showing to pharmacists in order to get their feedback. Distrimedic started selling its products in June of 2006.

At the time, a box of 500 labels (container-sealing sheets) with 500 blisters (container-defining sheets) would sell for approximately $380.00, while the equivalent product from Dispill sold for approximately $460.00. [ 101 ] Mr. Filiatrault introduced into evidence a document (JBD 549) compiling all the labels that have been used by Distrimedic since November 2005. He admitted that, in November and December of 2005, they printed a small quantity of container-sealing sheets using the same colour scheme as the Dispill Colour Scheme. Mr. Filiatrault stated that approximately 100,000 sheets with that colour scheme

were printed, of which about 15 batches of 500 sheets were distributed for free to approximately 11 pharmacies for testing purposes. Mr. Filiatrault claimed that these sheets were later destroyed and were never used by pharmacists to sell to their clients. It should be noted that Distrimedic used the same product codes (ETCA-500 and ETCP-500) for labels incorporating, at different points in time, the allegedly infringing colour scheme and its current colour scheme. [ 102 ] Mr.

Filiatrault also mentioned that Distrimedic never used catalogues, but only price lists with illustrations of their products; they now use an internet website to show their products to pharmacists. He also insisted that he never told his clients that they could use Distrimedic products with Dispill accessories, because they had their own accessories and products that they wished to sell and because at least some of Dispill’s accessories do not fit with Distrimedic products.

He explained that some of Dispill’s customers changed to Distrimedic because their products are more functional (claiming larger cells, more legible labels, more ergonomic trays), because of their customer service and because their prices were competitive. He added that a decision to change from one product to another is usually not made on the spur of the moment and may take days, if not weeks, depending on the decision-making process in each pharmacy and the amount of time required to acquire the new computer software. ii. Robert Poirier [ 103 ] Mr.

Robert Poirier was examined, cross-examined and re-examined from April 11 to 12, 2013. He was presented to provide additional information on most of the areas addressed by Mr. Filiatrault. [ 104 ] Mr. Poirier is a Defendant to the Counterclaim in his personal capacity and was a shareholder of the corporate Defendants to the Counterclaim until 2010, as well as being one of three officers of Dispill Inc. from 1997 to 2002. Mr.

Poirier actively participated in the development of the Dispill product and, although he has been absent from the day-to-day business of Distrimedic since 2006 and completely absent from the business since 2010, his testimony confirmed and supplemented that of Mr. Filiatrault and was helpful in providing background information about the start of Dispill Inc. [ 105 ] Among other things, Mr.

Poirier confirmed that Dispill’s executives never intended to use the Dispill Colour Scheme as a trade- mark but rather only viewed it as a functional element of their product, as an indication of the periods of the day when pills should be taken. He also corroborated Mr. Filiatrault’s testimony that Mr. Bouthiette’s nephew programmed the DOS software used to print the information on the Dispill label sheets.

He confirmed that Distrimedic distributed small quantities of the container-sealing sheets bearing Distrimedic’s Original Colour Scheme as a prototype to no more than 15 of its client pharmacists; these sheets were later destroyed and were never used by pharmacists to sell to their clients. [ 106 ] Mr. Poirier denied having misrepresented Distrimedic as being Dispill, or encouraged Dispill’s clients to buy Distrimedic and use it with Dispill accessories. Finally, Mr.

Poirier testified that the software written in the DOS language, which was used originally as the Dispill Label Form, has ceased to be used since the late 1990s or early 2000s. According to Mr. Poirier, neither he nor Mr. Filiatrault had any involvement in the execution of the mandate given to DLD to create the Distrimedic Module, which permits users of the Mentor software to print on to Distrimedic’s container-sealing sheets. iii. Paul van Gheluwe [ 107 ] Distrimedic elected not to call Mr. Paul van Gheluwe, a prior Dispill employee and sale representative for Distrimedic.

Counsel for Distrimedic intended to have Mr. van Gheluwe present a response to allegations of misrepresentation, but concluded that the evidence presented by Mr. Thibault was not sufficient to support Richards’ case so no further testimony was needed. V. EXPERT WITNESSES

[ 108 ] Richards presented expert witnesses to provide opinions on the patent-related issues, going to the claims of copyright and trade- mark infringement, and in support of its claims for various associated remedies. [ 109 ] Distrimedic presented both patent and financial experts to respond to the submissions made by Richards’ experts in both those regards.

a) Richards’ Expert Witnesses [ 110 ] Richards presented Mr. Koen de Winter as an expert in support of its patent-related claims, Dr. Tarek Abdelrahman for his opinions regarding computer software (in support of the copyright infringement claims), Ms. France Morissette as an expert user of the Dispill product and as a fact witness with respect to the product’s colours (going to the trade-mark infringement claims), and Mr. James McAuley as a financial expert in support of the associated claims for remedies. i.

Koen de Winter [ 111 ] Richards tendered Mr. de Winter as an expert on the state of knowledge of a person skilled in the art to which the ‘045 patent relates and, as such, to give opinions regarding its

interpretation and to comment regarding infringement of that patent and the validity of certain claims in issue. [ 112 ] Mr. de Winter studied ceramic technologies in 1962 and completed his education in industrial design. He designed numerous industrial objects and is a named inventor of more than 25 patents. He has also won several awards in industrial and graphic design, an

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