BAUER HOCKEY LTD. Plaintiff (Defendant by Counterclaim) v. SPORT MASKA INC. D.B.A. CCM HOCKEY, 2018 FC 1200

Date: 20181128 Docket: T-197-18 Citation : 2018 FC 1200 Montréal, Quebec, November 28, 2018 PRESENT: Madam Prothonotary Alexandra Steele BETWEEN: BAUER HOCKEY LTD. Plaintiff (Defendant by Counterclaim) and SPORT MASKA INC. D.B.A. CCM HOCKEY Defendant (Plaintiff by Counterclaim) ORDER AND REASONS [ 1 ] The Plaintiff, Bauer Hockey Ltd. [Bauer], brings a motion to strike allegations contained in the last sentence of paragraph 8, and paragraphs 51(b), 53 and 54 of the Defendant, Sport Maska Inc. d.b.a. CCM Hockey [CCM]’s, Statement of Defence and Counterclaim pursuant to Rule 221(1)(

a) of the Federal Courts Rules [the Rules]on the basis that the impugned allegations do not support a claim under

section 7(

a) of the Trade-marks Act [the TMA]. Bauer requests that the allegations be struck without leave to amend. [ 2 ] For the reasons set out herein, the Plaintiff’s motion shall be granted. I. The Pleadings and the Motion to Strike [ 3 ] Bauer owns Canadian patent number 2,778,555 [the ‘555 Patent] which is directed to a helmet visor system used in the sport of hockey. [ 4 ] On February 1, 2018, Bauer filed a patent infringement action against CCM with respect to the ‘555 Patent. At paragraphs 5 and 21 of the Statement of Claim dated February 1, 2018 [Statement of Claim], Bauer asserts: 5.

CCM Hockey has a long history of deliberately misappropriating features of Bauer’s commercially successful products with complete disregard to Bauer’s extensive intellectual property rights in Canada and elsewhere, as evidenced by the four (4) actions for trademark and patent infringement that are currently pending before this Court (Court files Nos. T-311-12, T-546-12, T-123-15 and T-1368-17), not including other matters that have been resolved over the years. […] 21.

CCM Hockey’s conduct has been egregious and highly reprehensible as its aforementioned actions were intentional, wilful and done with the full knowledge of Bauer’s rights in the 555 patent, which conduct warrants an award of punitive damages in the particular circumstances of this case. [ 5 ] In its Statement of Defence and Counterclaim dated March 20, 2018 [Statement of Defence and Counterclaim], more particularly in paragraphs 8, 51(b), 53 and 54, CCM alleges that Bauer has made statements in the Statement of Claim that are contrary to

Section 7(

a) of the TMA. The impugned paragraphs are as follows: 8. With respect to paragraphs 5 and 21, CCM denies having a “long history of deliberately misappropriating” features of Bauer’s products or having engaged in any egregious or reprehensible conduct. Bauer’s allegations to these effects are false, misleading and discredit or tend to discredit of CCM’s business, goods and services contrary to

section 7 of the Trade-marks Act . 51. The Plaintiff by Counterclaim, CCM, claims: […] b. damages or an accounting of profits as CCM may elect after due inquiry, along with exemplary damages, aggravated damages and punitive damages for false and misleading statements made by Bauer tending to discredit the business, goods and services of CCM, contrary to

section 7 of the Trade-marks Act as recited in Bauer’s claim; […]

53. CCM also pleads that Bauer’s false and misleading allegations are vexatious and abusive of the Court’s process and damaging toCCM’s goodwill and reputation, including but not limited to the goodwill and reputation of CCM’s business and products. 54. Bauer’s course of conduct against CCM is sanctionable, and this Honourable Court should not allow false allegations to standwithout sanction.

CCM therefore seeks not only compensatory accounting of profits or damages but elevated damages regardless ofcompensation to sanction Bauer’s conduct. [6] It should be noted that although paragraph 44 of the Statement of Defence and Counterclaim was also originally in issue on thismotion, the Plaintiff withdrew its request to strike this paragraph at the hearing. [7] The Plaintiff’s motion to strike is brought pursuant to Rule 221(1)(

a) which reads as follows: "221

(1) On motion, the Court may, at anytime, order that a pleading, or anythingcontained therein, be struck out, with orwithout leave to amend, on the ground that it" "(

a) discloses no reasonable cause of actionor defence, " "as the case may be, " "[…] " "221

(1) À tout moment, la Cour peut, surrequête, ordonner la radiation de tout oupartie d’un acte de procédure, avec ou sansautorisation de le modifier, au motif, selon lecas : " "

a) qu’il ne révèle aucune cause d’action oude défense " "valable; " "[…] " [8] To succeed under Rule 221(1)(a), the Court must be convinced, assuming the facts alleged are true, that it is “plain and obvious” thatthe claim discloses no reasonable cause of action. This test was set out in Hunt v Carey Canada Inc., (SCC), [1990] 2SCR 959, at pages 979-980: While this Court has had a somewhat limited opportunity to consider how the rules regarding the striking out of a statement of claim areto be applied, it has nonetheless consistently upheld the "plain and obvious" test.

Justice Estey, speaking for the Court in AttorneyGeneral of Canada v. Inuit Tapirisat of Canada, (SCC), [1980] 2 S.C.R. 735, stated at p. 740: As I have said, all the facts pleaded in the statement of claim must be deemed to have been proven. On a motion such as this a courtshould, of course, dismiss the action or strike out any claim made by the plaintiff only in plain and obvious cases and where the court issatisfied that "the case is beyond doubt": Ross v. Scottish Union and National Insurance Co. […] Thus, the test in Canada governing the application of provisions like Rule 19(24)(

a) of the British Columbia Rules of Court is the sameas the one that governs an application under R.S.C. O. 18, r. 19: assuming that the facts as stated in the statement of claim can be proved,is it "plain and obvious" that the plaintiff's statement of claim discloses no reasonable cause of action? […] [9] The Court must therefore be satisfied before striking all or part of a pleading that, assuming all of the facts are true, it has noreasonable prospect of success (R v Imperial Tobacco Canada Ltd, 2011 SCC 42 , [2011] 3 SCR 45, at paras 17 and 22).

Anydoubt must be resolved in favour of allowing the pleading or allegation to be proved at trial (Elbit Systems Electro –Optics Elop Ltv vSelex ES Ltd, 2016 FC 11, at para 29). [10] Finally, the Court has discretion to grant a party leave to amend the faulty pleading. When the defect is not curable by amendment,leave to amend should not be granted (Simon v Canada, 2011 FCA 6, at para 8). II.

Analysis [11] The thrust of Bauer’s argument on its motion to strike is that the allegations made by CCM in paragraphs 8 (last sentence), 51(b),53 and 54 of its Statement of Defence and Counterclaim cannot support a cause of action under

section 7(

a) of the TMA, are privilegedat common law and cannot be “saved” by an amendment. [12] CCM argues that there are essentially two (2) grounds for the allegations contained in paragraphs 8, 51(b), 53 and 54 of theStatement of Defence and Counterclaim: (

i) Bauer has made false and misleading statements contrary to the

section 7(

a) of the TMA byinter alia claiming that CCM is a "“serial infringer”"; and (ii) Bauer’s conduct constitutes an abuse of process. Accordingly, CCMpleads that none of the allegations should be struck as there is a reasonable prospect of success for any one of these grounds at trial. A. CCM’s

section 7(

a) of the TMA claim [13] Before dealing with the parties’ respective arguments, it is useful to reproduce

section 7(

a) of the TMA:

"7 No person shall " "(

a) make a false or misleading statementtending to discredit the business, goods orservices of a competitor; " "[…] " "7 Nul ne peut : " "

a) faire une déclaration fausse ou trompeusetendant à discréditer l’entreprise, les produitsou les services d’un concurrent; " "[…] " [14] Upon reviewing the case law submitted by the parties, the following principles can be extracted:

a) Generally, false and misleading statements tending to discredit a competitor’s products, services or business are made to third parties(Levi Strauss & Co v Timberland Co, (1997) 74 CPR (3d) 49 [Levi Strauss], at page 54). For example, in S. & S. Industries Inc v Rowell, (SCC), [1966] S.C.R. 419 [Rowell], liability under

section 7(

a) of the TMA arose where the defendant had chosen tosend threatening letters to retailers, to publish negative advertisements, in lieu of taking a patent infringement action against the plaintiff.

b) The fact of commencing numerous actions is not tantamount to making false and misleading statement under

section 7(

a) of the TMA(Levi Strauss, at page 53).

c) Allegations contained in a statement of claim cannot form the basis for recourse under

section 7(

a) of the TMA (Chase ManhattanCorp v 3133559 Canada Inc, [1999] F.C.J. No. 1044, [Chase Manhattan], at para 2).

d) Statements made in pleadings are allegations considered privileged at common law (Chase Manhattan Corp, at para 3; Levi Strauss,at page 53.) If such were not the case, then any statement of claim would give rise to actionable conduct under

section 7(

a) of the TMA. [15] CCM argues that by instituting multiple actions, and making allegations such as the ones found in paragraphs 5 and 21 of theStatement of Claim, Bauer sends a negative message to the market concerning CCM and this in turn causes CCM prejudice, and thiscourse of conduct is not subject to privilege. CCM relies on Rowell in support of its proposition. I do not read Rowell as standing forwhat CCM proposes. In Rowell, the Supreme Court of Canada found the defendant liable under

section 7(

a) of the TMA because insteadof taking the appropriate patent infringement against the plaintiff, it chose to adopt "“other methods of “protecting its patent””"(Rowell, at page 431) and avoiding "“[…] any test therein to the validity of its patent […]”" (Rowell, at page 433), such as attacking theplaintiff’s market and customers directly. This is not the situation in the present case. [16] Applying the principles of Levi Strauss and Chase Manhattan, I conclude that since the allegations in Bauer’s Statement of Claimare the sole basis for CCM’s claim under

section 7(

a) of the TMA, the last sentence of paragraph 8 of the Defence, and paragraphs 51(b),53 and 54 of the Counterclaim have no reasonable prospect of success and they should be struck. [17] With respect to leave to amend, as CCM has plead no other material facts in its Statement of Defence and Counterclaim whichrelate to

section 7(

a) of the TMA, nor were any other material facts brought to my attention at the hearing, I find there is no cure for thedefect and leave to amend is consequently denied. B.

CCM’s claim for abuse of process [18] CCM’s second argument is that the impugned paragraphs also go to CCM’s claim for abuse of process. [19] Bauer argues that there is no support in the Statement of Defence and Counterclaim for a claim of abuse of process. [20] While the principles of the tort of abuse of process were not extensively argued before me, I understand that abuse of process canoccur when the process of the Court is used for an improper purpose, for ulterior or collateral purpose (Levi Strauss, at page 52). [21] A claim for abuse of process is neither explicit nor can it be inferred from the language of the last sentence of paragraph 8 of theDefence. [22] As for paragraphs 51(b), 53 and 54, I find that these paragraphs are interrelated and go to CCM’s counterclaim for financialcompensation under

section 7(

a) of the TMA. While paragraph 53 of the Counterclaim does mention abuse of the Court’s process asfollows: CCM also pleads that Bauer’s false and misleading allegations are vexatious and abusive of the Court’s process and damaging toCCM’s goodwill and reputation, including but not limited to the goodwill and reputation of CCM’s business and products. [Emphasis added.] there is objectively no request for relief or other conclusions in either the defence or the counterclaim for any claim against Bauer forabuse of process.

The above reference is the only reference to abuse of process in the entire pleading and it appears to me more of a baldstatement in passing rather than a properly supported allegation. [23] I therefore cannot conclude that CCM’s argument for an actual, potential or intended claim for abuse of process is sufficient to“save” paragraphs 8 (last sentence), 51(b), 53 and 54 of the Statement of Defence and Counterclaim. [24] As mentioned previously, the debate on this motion did not turn on abuse of process, but rather on

section 7(

a) of the TMA. In myview, if CCM wishes to claim abuse of process, it would need to put forward an amended pleading stating the material facts in support ofits claim. At this juncture, the Statement of Defence and Counterclaim does not support the existence of a claim for the tort of abuse ofthe Court’s process.

III. Conclusion [ 25 ] The following paragraphs of CCM’s Statement of Defence and Counterclaim shall therefore be struck as follows, without leave to amend: 8. With respect to paragraphs 5 and 21, CCM denies having a “long history of deliberately misappropriating” features of Bauer’s products or having engaged in any egregious or reprehensible conduct. Bauer’s allegations to these effects are false, misleading and discredit or tend to discredit of CCM’s business, goods and services contrary to

section 7 of the Trade-marks Act . 51. The Plaintiff by Counterclaim, CCM, claims: […] b. damages or an accounting of profits as CCM may elect after due inquiry, along with exemplary damages, aggravated damages and punitive damages for false and misleading statements made by Bauer tending to discredit the business, goods and services of CCM, contrary to

section 7 of the Trade-marks Act as recited in Bauer’s claim; 53. CCM also pleads that Bauer’s false and misleading allegations are vexatious and abusive of the Court’s process and damaging to CCM’s goodwill and reputation, including but not limited to the goodwill and reputation of CCM’s business and products. 54. Bauer’s course of conduct against CCM is sanctionable, and this Honourable Court should not allow false allegations to stand without sanction. CCM therefore seeks not only compensatory accounting of profits or damages but elevated damages regardless of compensation to sanction Bauer’s conduct. IV.

Costs [ 26 ] The Plaintiff has suggested costs on this motion in the amount of $3,000.00, payable forthwith. At the hearing, the Defendant did not dispute the amount, but suggested that disbursements should be included in the amount. [ 27 ] As the Plaintiff has been successful on its motion, I shall grant costs to the Plaintiff in the lump sum amount of $3,000.00 inclusive of disbursements, payable forthwith. ORDER ACCORDINGLY, THIS COURT ORDERS THAT: 1 .

The last sentence of paragraph 8 of the Statement of Defence and Counterclaim dated March 20, 2018, which reads “ Bauer’s allegations to these effects are false, misleading and discredit or tend to discredit of CCM’s business, goods and services contrary to

section 7 of the Trade-marks Act.” , is struck without leave to amend. 2 . Paragraphs 51(b), 53 and 54 of the Statement of Defence and Counterclaim dated March 20, 2018 are struck without leave to amend. 3 . Costs are awarded to the Plaintiff in the lump sum amount of $3,000.00 including disbursements, payable forthwith. “Alexandra Steele” Prothonotary FEDERAL COURT SOLICITORS OF RECORD Docket: T-197-18 STYLE OF CAUSE: BAUER HOCKEY LTD. v. SPORT MASKA INC. D.B.A. CCM HOCKEY PLACE OF HEARING: MONTRÉAL, QUEBEC DATE OF HEARING: JUNE 26, 2018 ORDER AND REASONS: STEELE P.

DATED: NOVEMBER 28, 2018 APPEARANCES : Jean-Sébastien Dupont For The plaintiff/DEFENDANT BY COUNTERCLAIM Jay Zakaïb For The defendant/PLAINTIFF BY COUNTERCLAIM SOLICITORS OF RECORD : Smart & Biggar Montréal, Quebec For The plaintiff/DEFENDANT BY COUNTERCLAIM

Gowling WLG (Canada) LLP Montréal, Quebec For The defendant/PLAINTIFF BY COUNTERCLAIM