Stay Granted in Favour of Provincial Superior Court

Thermolec Ltée v Stelpro Design Inc 2019 FCA 301 Locke JA: Boivin, Nadon JJA rev’g 2019 FC 363 St-Louis J

This brief but significant decision from the FCA clarifies the circumstances in which a patent action in a Federal Court should be stayed in favour of an action in a provincial superior court. While the outcome seems right in terms of economy of judicial resources, the whole problem may be an unintended, and unwelcome, side-effect of the Federal Court’s unwillingness to grant interlocutory injunctions in patent cases.

As discussed in my post on St-Louis J’s decision, while the Federal Court has exclusive jurisdiction to annul a patent, its jurisdiction in respect of infringement is concurrent with that of the provincial superior courts (in this case Quebec): under the Federal Courts Act s 20(1)(2). When actions are brought concurrently, which, if either, should be stayed? One important consideration is that only the Federal Court can rule on the in rem validity of the patent and dispose of it at a national level. This would strongly imply that the FC action should not be stayed. To address this difficulty, the practice has arisen of the patentee giving an undertaking that if the final result in the litigation in the provincial superior court is that the patent is invalid as between the parties, the patentee would agree to the striking out of the patent by the Federal Court. This practice has now been sanctioned by the FCA in this decision [6].

If such an undertaking is given, the question largely boils down to judicial economy, which will be driven by the relative stage of proceedings in each court. In this case, St-Louis J had refused to grant a stay of the FC action, and the FCA has now reversed, giving the following list of the “most important considerations” on the facts of this case:

1) The advanced state of the Quebec proceeding relative to the Federal Court action;

2) The fact that the patent in issue, the issue of the validity thereof, and the parties are common to the two proceedings;

3) The duplication of efforts and the inefficient use of resources, both private and public, if both proceedings were allowed to proceed; and

4) In the event that the Quebec Superior Court determines that the patent in issue is invalid and the Undertaking is exercised, third parties (including the respondent) would be assured that they would not have to defend themselves from allegations of infringement in any other Canadian jurisdiction.

While this list was directed to the relevant facts of the case, it also provides more general guidance.

St-Louis J had not emphasized different factors; her decision to refuse the stay turned on her view that “the proceedings on the merits are still at an early stage in both courts” [FC 47]. The FCA pointed out that this observation is factually incorrect, and in fact the Quebec action was substantially further advanced [4]-[5], and it was primarily for this reason that the FCA reversed. This means that only the Quebec action will proceed, avoiding wasteful duplication.

While this outcome certainly seems preferable on the facts of this case, there is a larger question. In terms of efficacy of the overall judicial system, no doubt it is preferable to have a single action in provincial superior court as opposed to one there and one in the Federal Court. But arguably it would be even better to have a single action in Federal Court, which is, in effect, a specialized patent court, with trial and case management judges who are expert in patent law and the management of complex patent cases. Why are patentees foregoing these advantages? The cases on this issue show that it is typically the patentees who are seeking to avoid the Federal Court. It was a patentee who came up with the idea of giving an undertaking to allow its patent to be struck out, and a patentee who prefers to litigate in the Federal Court can tilt the scales in that direction by refusing to give such an undertaking.

So why do some patentees prefer to litigate in provincial superior court? I suspect that the choice may be motivated by the potential availability of an interlocutory injunction in provincial superior court, as opposed to the firm unwillingness of the Federal Court to grant interlocutory injunctions. That was clearly the case in Safilo v Contour Optik 2005 FC 278, and may also have been true in this case, as the patentee, Thermolec, was granted an interlocutory injunction in Quebec). Whatever the substantive merits on the Federal Court’s position on interlocutory injunctions was directing litigation to a less suitable forum, thereby undermining the efficiency of the patent litigation system as a whole.