2013 ONSC 5747, 2013 ONSC 5747

CITATION : The Procter & Gamble Company, Procter & Gamble Inc . v. Brushpoint Innovations Inc. , 2013 ONSC 5747 COURT FILE NO.: 56995-2013 DATE: 2013-09-13 SUPERIOR COURT OF JUSTICE - ONTARIO RE: Procter & Gamble Inc., Applicants AND Brushpoint Innovations, Respondent BEFORE: Justice M. Z.

Charbonneau COUNSEL: Scott Miller, Counsel for the Applicants Kenneth Hanna, Counsel for the Respondent HEARD: August 16, 2013 ENDORSEMENT [ 1 ] The applicants bring this application asking the court to enjoin the respondent from breaching a restrictive covenant contained in a written agreement entered into by the parties on December 11, 2012. [ 2 ] In the fall of 2012, the applicants sued the respondent in Federal Court alleging infringement of their Canadian patents covering certain products (the products). On December 11, 2012 the parties entered into a settlement agreement.

In that agreement, the respondent undertook and promised to: “not make, construct, use, or sell, or induce others to make, construct, use or sell the Products, in Canada, while any of the Patents are in force.” [ 3 ] The application raises two issues: 1) What exactly did the respondent promise not to do? 2) Did the respondent breach that promise?

Position of the Parties [ 4 ] The applicants submit that given its ordinary plain meaning the words of the restrictive covenant the respondent has promised not to induce in Canada, others from dealing with the product anywhere in the world. [ 5 ] The applicant submits that the clause is unambiguous and no extrinsic evidence can be used to interpret it.

Alternatively, if the court finds that the clause is ambiguous and decides to consider extrinsic evidence, the applicants submit that the fact that the applicants made several concessions in the final draft, namely, accepted that the word “induce” be used instead of “instruct” as provided in their first draft, and also accepted certain modifications to the introductory “whereas clauses” in the agreement, clearly indicates that the parties agreed to prohibit the respondent from inducing anyone in Canada regardless of where the products were ultimately sold or otherwise dealt with. [ 6 ] The applicants further submit that the respondent, by issuing a purchase order in Canada, actually entered a sale’s contract for the sale of the product in Canada pursuant to

article 3 of the International Sale of Goods Act R.S.O. 1990,

chapter I. 10.(ISGA) [ 7 ] On the other hand, the respondent agrees that the clause is unambiguous.

However, the respondent submits that according to the clear wording of the clause in promised not to “make, contract, use or sell” the products in Canada and not to induce anyone from dealing with the products in Canada. [ 8 ] The respondent submits that if the court finds the clause is ambiguous, an objective analysis of the factual matrix surrounding the formation of the contract can only lead to the conclusion that the restrictive covenant only addresses activity relating to the product which infringes the applicants’ Canadian patents which only covers dealings with the products in Canada. [ 9 ] The respondent rejects that there is any evidence of a prohibited activity in Canada.

The evidence clearly establishes that the products are made, shipped and sold in the U. S.A. At no time did those products enter Canada and the transfer of title in the products took place in the U.S.A. [ 10 ] The respondent further submits that the Canadian domestic law, i.e. the Patent Act, applies to the agreement and that in any event the effect the applicant proposes be given to

article 3 of the I.S.G.A. in untenable at law.

Analysis -

Interpretation [ 11 ] I find that the restrictive covenant is clear and unambiguous. It restricts the respondent from making, constructing, using or selling the products in Canada or inducing someone else to do so. In order to find that the words “in Canada” apply to the verb induce it would have to immediately follow that word and then specify that the prohibited dealing with the products could occur “anywhere in the world”. The absence of those latter words makes the

interpretation proposed by the applicant nonsensical unless the court accepts to read those words into the clause. I am certainly not prepared to do so in the overall context of this agreement. [ 12 ] I must say that if I found the clause ambiguous, I accept the respondent’s submissions that the factual matrix clearly favours an

interpretation that what was intended was to prevent the respondent or someone induced by the respondent from dealing with the products in Canada in contravention of the applicants’ patents. I find the submissions of the applicants regarding the so-called concessions in the final drafting of the agreement not to be very convincing. There are many other very plausible reasons why those relatively minor changes were made during the negotiations.

Was there a Breach [ 13 ] The main submission put forward by the applicant is that the respondent induced Norrizon, its sales agent, in Canada, to sell the product to Target in the U.S.A. and also induced, in Canada, Clio, a manufacturer of the product situated in New Jersey, to make and sell the product in the U.S.A. In view of my

interpretation of the restrictive covenant this does not constitute a breach. [ 14 ] I am not satisfied that there is any evidence establishing on a balance of probability that the product was made, constructed, used or sold in Canada. I agree with the submissions of the respondent that

article 3 of the I.S.G.A. has no application to the issues in this case. [ 15 ] For all of these reasons, the application is dismissed. Costs should follow the event. If so advised, Counsel may provide me with brief written submissions in that regard, within 20 days. M. Z. Charbonneau Date: September 13, 2013 CITATION : The Procter & Gamble Company, Procter & Gamble Inc . v. Brushpoint Innovations Inc.

ONTARIO SUPERIOR COURT OF JUSTICE RE: Procter & Gamble Inc., Applicants, AND Brushpoint Innovations, Respondent BEFORE: M. Z. Charbonneau COUNSEL: Scott Miller, Counsel for the Applicants Kenneth Hanna, Counsel for the Respondent ENDORSEMENT M. Z. Charbonneau Released: September 13, 2013