2022 FC, 2022 FC 1789

Date: 20221222 Docket: T-530-21 Citation: 2022 FC 1789 Toronto, Ontario, December 22, 2022 PRESENT: The Honourable Madam Justice Furlanetto BETWEEN: BEIJING JUDIAN RESTAURANT CO. LTD. Applicant and WEI MENG Respondent ORDER AND REASONS (COSTS) I. Overview and Background [ 1 ] This Order provides the Court’s disposition on the quantum of costs to be paid to the Applicant in respect of the Court’s Judgment reported at 2022 FC 743 [Judgment]. In the Judgment, Canadian Trademark Registration No.

TMA1020055 for the trademark JU DIAN & Design [Mark] was declared invalid and ordered to be struck from the Canadian Trademarks Register on the basis that the registration was obtained in bad faith contrary to paragraph 18(1) (

e) of the Trademarks Act , RSC, 1985, c T-13 [ TMA ]. The decision provided that the Applicant would be awarded costs and the Judgment allowed the Applicant to provide submissions on quantum. [ 2 ] The Applicant seeks 50% of its actual legal fees, plus its disbursements for the application for an amount totalling $64,897.24.

It argues that this amount recognizes the significant importance and complexity of the Applicant’s challenge to the Mark, the Respondent’s failure to accept a good-faith settlement offer, and the parties’ conduct during the course of the proceeding. [ 3 ] In the alternative, the Applicant seeks lump sum costs in an amount and at such percentage of actual legal fees as the Court deems fit. [ 4 ] In the further alternative, the Applicant seeks an award of costs in the amount of $12,779.49, which consists of: (

a) costs calculated in accordance with column V of Tariff B for legal fees that the Applicant incurred in prosecuting the Application up to April 21, 2021, the date upon which the Applicant made its offer to settle; (

b) double the Applicant’s column V costs from April 21, 2021 onward; and (

c) the Applicant’s reasonable disbursements. [ 5 ] The Respondent took no position on the application and did not file an appeal of the Judgment made, but delivered a letter several months after the Applicant provided its costs submissions arguing that the Applicant was one day late in filing its submissions and that it should therefore be denied any costs of the application. The submissions were not served on the Applicant.

In my view, the Respondent having not participated in the hearing and having no provision in the Judgment for providing submissions, had no standing to provide submissions on costs and in any event, was out of time to do so. However, even if such costs submissions were considered, they do not have merit. [ 6 ] As noted by the Applicant, subsection 27(4) of the

Interpretation Act , RSC 1985, c I-21 provides that where a time is to be calculated from a specified day that the time does not include that day. The Applicant was given thirty (30) days from May 18, 2022 to provide its costs submissions. It provided those submissions on June 17, 2022. The submissions made by the Applicant fell within the timeline afforded by the Court’s Judgment as interpreted pursuant to subsection 27(4) of the

Interpretation Act . [ 7 ] There is no basis to reject the Applicant’s submissions as being out of time. II.

General Principles on Costs [ 8 ] Rule 400(1) of the Federal Courts Rules provides the Court with absolute discretion over the amount of costs that should be paid. [ 9 ] In exercising its discretion, rule 400(3) provides the Court with guidance as to factors it may consider, which include, amongst other factors: the importance and complexity of the issues (factor (c)); any written offer to settle (factor (e)); the amount of work (factor (g)); any conduct of a party that tended to shorten or unnecessarily lengthen the duration of the proceeding (factor (i)); and any other matter that the Court considers relevant (factor (o)). [ 10 ] Rule 420 sets out guidance as to how to handle a formal offer to settle that was made during the course of the proceeding.

Where an Applicant makes a formal offer to settle at least 14 days before a hearing that is not withdrawn before the commencement of the hearing and obtains a judgment as favourable, or more favourable, than the terms of the offer to settle, for the purpose of a calculation under the Tariff, the Applicant is entitled to party-and-party costs to the date of service of the offer and costs calculated at double that rate, but not double the disbursements, after that date. [ 11 ] As set out in rule 407, party-and-party costs are to be assessed in accordance with column III of Tariff B of the Federal Courts Rules unless the Court orders otherwise.

[ 12 ] However, the Court has the discretion to order a lump sum of legal fees as costs in lieu , or in addition to, costs based on Tariff B of the Federal Courts Rules (rule 400(4)) in appropriate circumstances where a precise calculation of costs would be unnecessarily complicated or burdensome and where awarding such costs would advance the objectives of rule 3: Nova Chemicals Corporation v Dow Chemical Company , 2017 FCA 25 [ Nova Chemicals ] at para 11 . [ 13 ] Further, for cases where the Tariff appears to provide grossly inadequate compensation, the Court has used costs on a lump sum basis as a manner of providing indemnification on a substantially higher scale.

The practice of awarding costs on a lump sum basis as a percentage of legal fees has gained broad acceptance in intellectual property cases in view of their complex nature, particularly when dealing with sophisticated commercial litigants that have the means to pay for the legal choices they make: Nova Chemicals at para 16 . [ 14 ] Such lump sum cost awards tend to range between 25% and 50% of actual legal fees, plus reasonable disbursements, although there are cases where a higher or lower percentage may be warranted: Nova Chemicals at paras 16-17 ; Loblaws Inc. v Columbia Insurance Company , 2019 FC 1434 [ Loblaws ] at paras 14-16 .

In general, the higher end of the range tends to apply to cases of exceptional circumstances and complexity and be more common to patent matters, but is not restricted to those proceedings: Loblaws at para 14 . [ 15 ] When determining an award of costs, the Court must keep in mind the three-fold objective of costs, i.e., providing compensation, promoting settlement and deterring abusive behaviour: Thibodeau v Air Canada , 2007 FCA 115 at para 24 . III. Analysis [ 16 ] The Applicant asserts that it should be entitled to costs on a lump sum basis, in an amount that is 50% of the actual legal fees that it incurred.

In the Applicant’s submissions, it provides a Bill of Costs, setting out the purported solicitor and client costs associated with the application ($125,215.50 fees and $2,289.49 disbursements) and also provides a calculation of fees under column III ($3,565 fees, $6,380 with doubling) and column V ($5,995 fees, $10,490 with doubling) of Tariff B to the Federal Courts Rules . It further relies on the factors identified in rule 400(3)(c), (e), (g), (

i) and (

o) in support of its request. [ 17 ] With respect to the factors under rule 400(3)(

c) and (g), the Applicant notes that the Mark was invalidated because it was obtained in bad faith contrary to paragraph 18(1) (

e) of the TMA , which is a new provision that had only been considered to a limited extent in the jurisprudence prior to the Court’s decision in this case. As such, it asserts that extensive research and analysis was required to put together the Applicant’s submissions.

The Applicant asserts that the case was accordingly more complex than other trademark proceedings. [ 18 ] Further, as the Respondent registered the Mark with the intention of extorting money from the Applicant or using the Applicant’s reputation in its JU DIAN Trademarks to obtain money from others, the Applicant asserts it had a significant interest in mitigating the threat to its business and the proceeding was of great importance to the Applicant. [ 19 ] The Applicant also points to its offer to settle made at around six months before the hearing, on April 20, 2021.

It asserts, and I agree, that such an offer constitutes a formal offer under the Federal Courts Rules . [ 20 ] The Applicant asserts that the offer triggers double costs from the date of the offer onward, as the result of the proceeding was less favourable than, or at least as favourable as, the offer in that the offer provided the Respondent an opportunity to give up the Mark without any admission of a finding of bad faith, the offer included payment of $5,000 to the Respondent, and the offer provided an opportunity for each party to bear its own costs, or for the Respondent to assume a low costs award in accordance with column III of Tariff B.

The Applicant asserts that such award would have only amounted to $750 at the time the offer was made. [ 21 ] The Applicant asserts that despite the fact that the Applicant did not obtain injunctive relief (which was part of the offer), the Respondent would not be entitled to use the Mark in Canada in future given the Court’s findings; as such, the end result of the decision is the same.

It argues that it is open for the Court to find the settlement offer to be at least as favourable as the Judgment, or so close as to warrant an award of double costs under the Tariff, or at least consideration under rule 400(3)(e). [ 22 ] With respect to factor 400(3)(i), the Applicant asserts that the Respondent’s non-responsiveness throughout the proceeding unnecessarily forced the Applicant to incur costs to bring a meritorious case forward and obtain a judgment that should have been agreed to by the Respondent.

As such, the Respondent caused the Applicant to incur significantly higher taxable costs than the Respondent despite its success on the application.

The Applicant refers to the decision in Yiwu Thousand Shores E-Commerce Co Ltd v Lin , 2021 FC 1040 at paragraph 67 , where Justice Walker recently considered a request for a lump sum award of costs where an individual respondent failed to participate in a proceeding causing ongoing harm to an applicant: [67] I have considered ThousandShores’ request for an award of costs on a solicitor and client basis in light of the Respondent’s inaction in this proceeding and the resulting increased burden on ThousandShores to prove facts clearly within his knowledge.

I have also considered the Respondent’s apparent disregard of this proceeding despite the ongoing harm to ThousandShores’ business. While I find that full solicitor and client costs are not appropriate, I agree with ThousandShores that its has been forced to incur additional costs due to the Respondent’s conduct and that there is a public interest in deterring such conduct.

As a result and taking into account the factors set out in Rule 400(3), I will exercise my discretion under Rule 400(1) and award costs in the lump sum amount of $25,000 to ThousandShores. [ 23 ] The Applicant additionally asks the court to consider the disparity between the costs attributable under the Tariff and those incurred in the proceeding as an additional factor under rule 400(3)(o). [ 24 ] I agree that a lump sum award is appropriate in this case.

While I have insufficient information to understand the full nature of all of the work identified in the report supplied in support of the costs alleged to have been incurred, the evidence provided is sufficient to demonstrate that the Tariff even at its highest level does not adequately compensate for costs incurred. However, I do not agree that 50% of the fees asserted is justified based on the evidence provided and the rule 400(3) factors.

[ 25 ] First, I note that I have insufficient information to understand the full nature of all of the work identified in the report provided due to redactions made to the description of the work on the basis of privilege. Similarly, the role played by each of the nine individuals identified in the report is not clear.

While the bulk of the time identified is attributable to the two counsel that appeared at the oral hearing, I am unclear on the role of some of the other individuals identified within the report and on this basis am unable to fully evaluate whether the total fees incurred are reasonable in the circumstances ( Nova Chemicals at para 18 ). [ 26 ] Having said that, I agree that the rule 400(3) factors weigh in favour of an elevated cost award for the Applicant.

While I do not consider the circumstances of this proceeding to rise to the same level of complexity as other intellectual property matters in the patent area, which have justified a percentage of legal fees at the extreme high end of the cited range, the fact that the central allegation in the proceeding involved paragraph 18(1) (

e) of the TMA , which is a new provision without established jurisprudence, added greatly to the complexity of the proceeding. [ 27 ] Further, I agree with the Applicant and place emphasis on the fact that the legal fees incurred by the Applicant in bringing this case to a hearing are a direct result of the Respondent’s conduct, including the Respondent’s failure to participate in the proceeding despite the efforts of the Applicant and the nature of the allegations raised.

Such conduct warrants a cost award that seeks to deter this type of behaviour. [ 28 ] Similarly, the good faith efforts of the Applicant to try to reach a settlement with the Respondent well in advance of the hearing on grounds that I consider to be at least as favourable as the Judgment rendered, in my view, supports an order of increased costs under rule 400(1)(e).

As there was no commercial use by the Respondent of the Mark, I consider the request for an injunction as part of the offer (and the fact that it was not granted as part of the Judgment in view of the dismissal of the passing off allegation) to be a neutral factor when evaluating the offer. [ 29 ] I am mindful that when fixing costs on a lump sum basis, my discretion is not unfettered and it is not a matter of plucking a number out of the air ( Nova Chemicals at para 19 ).

Rather, my discretion must be exercised prudently with the aim of creating a consistent approach ( Nova Chemicals at para 19 ). [ 30 ] On the basis that I have some uncertainty regarding the reasonableness of the full quantum of the legal fees incurred, it is my view that a lump sum award that is lower than the cited range should be awarded. I note that the column V Tariff amount, including doubling for the offer of settlement, amounts to roughly 8% of the asserted legal fees incurred. I have kept this in mind when arriving at the lump sum amount I consider to be reasonable.

This is similar to the approach taken by my colleague Justice Pallotta in Patterned Concrete Mississauga Inc v Bomanite Toronto Ltd , 2021 FC 792 [ Patterned Concrete ] at paragraph 23 . [ 31 ] Considering the rule 400(3) factors and the cited jurisprudence, a costs award that amounts to about 15% of the fees asserted, plus the Applicant’s disbursements, or double the adjusted column V amount (which in this case is an award of $20,000), is, in my view, appropriate in these circumstances. ORDER IN T-530-21 THIS COURT ORDERS that: 1 .

The Respondent shall pay to the Applicant costs in the lump sum amount of $20,000.00, inclusive of disbursements. "Angela Furlanetto" Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-530-21 STYLE OF CAUSE: BEIJING JUDIAN RESTAURANT CO. LTD. v WEI MENG SUBMISSIONS ON COSTS CONSIDERED AT TORONTO, ONTARIO, PURSUANT TO THIS COURT’S JUDGMENT IN 2022 FC 743 ORDER AND REASONS (COSTS): FURLANETTO J.

DATED: December 22, 2022 WRITTEN SUBMISSIONS BY : Christopher S. Wilson Christopher A. Guerreiro For The Applicant SOLICITORS OF RECORD : Norton Rose Fulbright Canada LLP Barristers and Solicitors Vancouver, British Columbia For The Applicant