Enforcement of Licence Agreements

1993-01-01

ENFORCEMENTOFLICENCEAGREEMENTS

by
BarryGamache
*
LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
www.robic.ca-info@robic.com

Whilepreparingthispresentationontheenforcementoflicenceagreements,
Irealizedthatthevastnessofthesubjectcouldjustifydifferentapproaches.
Thesubjectcouldbestudiedbyreviewingthecontentoflicensing
agreements;itcouldalsobestudiedbytakingnoteofvariousstatutes
affectingthelicensee’scapacitytoenforcehisorherownrightsunderthe
licenceagreement.Idecidedtotakethelatterroadandremaininasingle
laneandconcentrateonaparticularpoint,thatisthelegislativesetting
regulatingalicensee’sstandingtosueaninfringerunderthreespecificlawsin
thefieldofintellectualproperty,namelytheCopyrightAct
,thePatentAct
andtheTrade-MarksAct
.
Theword”licence”hasveryancientorigins;initsprimitivesense,itmeansa
leave,apermissionorthelibertytodosomething.Forexample,theShorter
OxfordEnglishDictionaryonHistoricalPrinciplesindicatesthatmedieval
Englishattributedtothewordlicencethemeaningof”aformalpermission
fromaconstitutedauthoritytodosomething,e.g.tomarry,preach,carryon
sometrade”.
Fastforwardingtotoday,onerealizesthattheword”licence”retainstheidea
ofaspecialpermissionorauthorization.
Toquoteonesource,TheDictionaryofCanadianLaw
(Toronto,Carswell,
1991)hasthefollowingdefinitionfortheterm:

LÉGERROBICRICHARD,1993.
*Lawyer,BarryGamacheisapartnerwithinlawfirmLEGERROBICRICHARD,g.p.andinthe
patentandagencyfirmROBIC,g.p.Speechmadeon1993-01-11fortheContinuingLegal
EducationCommitteeoftheCanadianBarAssociation.Publication115.

“Thepermissiongiventodosomethingwhichwouldotherwisebe
unlawful.”

InCanada,inthefieldofintellectualproperty,theCopyrightAct
,theTrade-
MarksActandthePatentAct,throughmechanismsoftheirown,grant
monopolisticrightsincertaincasestoindividualsormoralentitiesoverthe
resultofacreativeeffort,atrade-markoraninvention.Thesemonopolies
canbevoluntarilybrokenbytheindividualorentitytowhomtheserights
havebeenrecognizedbythegrantingofalicenceaffectingoneormoreof
therightsflowingfromtheelementofintellectualpropertysoprotected.This
presentationwilldealwiththeenforcementoflicensingagreementsand
rightsgrantedthereunder.Whomaysue?Whomaybesued?Andmore
specifically,doesalicenseehaveastandingtosueaninfringerinthecontext
ofalicensingagreementcoveringmaterialprotectedbycopyright,apatent
oratrade-mark?Thispresentationwillattempttoanswerthesequestions.
COPYRIGHT

Firstly,Iwillconcentrateonthequestionofalicensee’sstandingtosuean
infringerundertheCopyrightAct
.Astherelationshipbetweenalicenseeand
aninfringeroftherightgrantedtothelicenseeisobviouslynottobesettled
byareviewoftheLawofContracts,referencemustbemadetothe
CopyrightAct
tolocateoridentifyalicensee’ssanctionableright.Toquote
Mr.JusticeDubéinJeffreyRogersKnitwearProductionsLtd.
v.B.D.
InternationalStyleCollectionsLtd.,19C.P.R.(3d)217:
“Therightsandobligationsofpersonsregardingthefieldof
copyrightaretobefoundexclusivelyintheCopyrightAct
and
aredefinedandlimitedbytheboundariesofthatAct.”

Theownerofcopyrightinaworkpossessestheexclusiverightsenumeratedat
Section3oftheCopyrightAct
,R.C.S.1985,c.C-42,includingtherightto
authorizetheactsenumeratedtherein;alicensingagreementbetweenthe
ownerofcopyrightinaworkandalicenseemaythereforeconcernoneor
moreoftheexclusiverightsofSection3inrelationwiththeprotectedwork
(forexample,therightofreproductionofabookprotectedbycopyright).
Thequestionofthestandingtosueofalicenseeinthecaseofinfringement
oftherightorrightsgrantedundersuchlicencehasnotdefinitelybeen
settledbyCanadianCourts.
Section36oftheCopyrightAct
dealswiththequestionofaparty’sstanding
tosueundertheCopyrightAct
.Itprovidesthattheauthorortheownerof

anyright,titleorinterestinthecopyrightmayinstitutelegalproceedings
individuallyfortheprotectionofhisindividualrightwithoutjoiningother
parties.Morespecifically,itstates:
“36.Theauthororotherownerofanycopyrightoranyperson
orpersonsderivinganyright,titleorinterestbyassignmentor
grantinwritingfromanyauthororotherownermayeach,
individuallyforhimself,inhisownnameaspartytoasuit,action
orproceeding,protectandenforcesuchrightsashemayhold,
andtotheextentofhisright,titleandinterestisentitledtothe
remediesprovidedbythisAct.”

ItwouldappearthatSection36wasenactedinordertoclarifythestanding
tosueofassigneesinthecaseofpartialassignments.
In1931,beforetheHouseofCommons,Canada’sSecretaryofStateMr.
CahanexplainedinthefollowingtermstheintroductionofSection36ofthe
CopyrightAct
:
“SeparaterightshavegrownupundertheCopyrightAct.Thereis
theperformingright,thereistheproducingrightbymechanical
instrument,thereisthebroadcastingright,andunderthelawasit
nowstandsthereisdoubtastowhetherornottheplaintiff,who
hastheperformingrightwhichhedesirestoenforce,must
necessarilyjointheauthorortheownerofthecopyrightasa
partytothesuit.Thissectionprovidesthattheauthororthe
ownerofanyright,titleorinterestwhatsoevermaysueinthe
courtsindividuallyfortheprotectionofhisindividualrightwithout
joiningotherparties.”
[HouseofCommons-Debates
,SecondSession,17Parliament,
Vol.III(1931.06.08),atp.2417]

Section36thereforeprovidesastandingtosuetofourcategoriesofpersons
whomayaloneclaimonthebasisoftheirdistinctrights:
i)theauthor;
ii)theownerofcopyright;
iii)apersonorpersonsderivinganyright,titleorinterestby
assignmentin
writing;
iv)apersonorpersonsderivinganyright,titleorinterestby
grantinwriting.

Ofcourse,licensorandlicenseearenotspecificallyidentifiedatSection36of
theCopyrightAct
.However,all4categoriesmentioned(eitheraloneorin
combinationwithothers,incertaincases)maycoverthesituationofthe
licensor.Forexample,alicensormaybetheauthorandtheownerof
copyright,simplytheownerofcopyright,apersonderivingarightby
assignmentinwritingorapersonderivingarightbygrantinwriting.Hemay
nothoweversimplybetheauthorofawork(yettheauthortotheextentof
hisright,isstillentitledtodealwithhismoralrights).Alicensor’sstandingto
sue(asowner)maybesharedwiththeauthorofthework.Therefore,when
the”author”andthe”ownerofanycopyright”arenotthesameperson,each
willbeabletoprotectandenforcehisrightsinhisownname,separately.
Beforeappraisingalicensee’sstandingtosue,letusrecallthatcaselaw
distinguishesthreetypesoflicenses:amereor(ordinary)license,asole
licenseandanexclusivelicense.Onthesedifferences,LordDenningmade
thefollowingcommentsinMurray(H.M.InspectorofTaxes)
v.Imperial
ChemicalIndustriesLtd.(1967),44T.C.175(C.A.)atp.211:
“Anordinary”licence”isapermissiontothelicenseetodo
somethingwhichwouldotherwisebeunlawful.Itleavesthe
licensoratlibertytodoithimselfandtograntlicencestoother
personsalso.A”solelicence”isapermissiontothelicenseetodo
it,andno-oneelse,savethatitleavesthelicensorhimselfat
libertytodoit.An”exclusivelicence”isapermissionwhichis
exclusivetothelicensee,sothateventhelicensorhimselfis
excludedaswellasanyoneelse”.

Ascopyrightinaworkmaybejointlyowned,cautionshouldbeexercisedby
ajointownerbeforegrantingalicence.Indeed,thequestioncanbeasked:
canajointownerofcopyrightlicencetheworkwithouttheotherjointowner’s
consent?AsputbyMillettJ.inMailNewspapersPlc
v.ExpressNewspapers
Plc(1986),[1987]13F.S.R.90(Ch.D.)atp.93:”itissettledlawthatonejoint
ownercannotgrantanexclusivelicencewithouttheconsentoftheother
ownerorowners.Evenifitwerepossibleforoneco-ownertograntalicence
withouttheconsentoftheothers,suchalicencecouldnotpossiblybean
exclusivelicence,sincehewouldnotbeable,withouttheconsentofthe
others,toexcludetheothersortheirlicensees”.
However,ajointownercansueforinfringementofcopyrightwithout
obtainingtheconsentofhisco-owner;butthenhecanrecovermonetary
reliefonlytotheextentofhisinterest.
Andnowafewthoughtsconcerningthelicensee,thepersonorentitywho
hasbeenauthorizedtorealizeoneormoreoftheexclusiveactslistedat
Section3oftheCopyrightAct
inrelationtoaworkprotectedbycopyright.

FromareadingofSection13(4)oftheAct,whichrecognizesthevalidityofa
grantofinterestinaright,donebywayofawrittenlicense,onecansuppose
thatagranteeunderSection36couldalsoincludealicensee.
PursuanttoSection13(4),copyrightmaybeassignedinwholeorinpart,
generallyorsubjecttoterritoriallimitations,andforthewholeofitstermorjust
apartthereof.Moreover,thecopyrightownermaygrantaninterestinhis
copyrightbyenteringintoalicenceagreementratherthanproceedbyway
ofassignment.Thedistinctionbetweenalicenceandanassignmentcanbe
comparedwiththatofaleaseandasale.
Itappearsthatalicencecreatesapersonalobligationratherthananinterest
inthething.Alicencedoesnotmeanthetransferofanypropertyright.As
putbyFOX(HaroldGeorge),TheCanadianLawofCopyrightandIndustrial
Designs:”alicencedoesnotconfirmaright.Alicencepreventsthatfrom
beingunlawfulwhich,butforalicence,wouldbeunlawful;itisaconsentby
anownerofarightthatanotherpersonshouldcommitanactwhich,butfor
alicencewouldbeaninfringementoftherightofthepersonwhogivesthe
licence”.Canalicenseederiveanyright,titleorinterest,thusgivingita
standingtosue?Onemustnotlooktothecourtsforadefiniteanswerto
thesequestions.CourtsinCanadahavegenerallyavoidedtoanswerthis
theoreticalquestion,preferringtodecidethecaseonitsownfactualmerit,
referringtoassignmentsratherthanlicences.
Insupportofthestandingofalicenseetosue,referenceisoftenmadetothe
TrialDivisiondecisioninAsthon-PotterLtd.
v.WhiteRoseNurseriesLtd.,an
appealofwhichwashoweverallowedbytheAppealDivisionoftheFederal
Court.
Inthisaction,beforetheTrialDivision,uponthemotionofdefendanttostrike
thestatementofclaimasdisclosingnocauseofaction,theTrialDivisiongave
standingtosuetotheplaintiff,asalicenseeofthecopyrightowner.
Initsstatementofclaim,plaintiffhadallegeditspositionaslicenseeflowing
fromalicenceagreementwith2companiesfromSwitzerlandandalleged
thatithadacquiredfromthelicensorstherighttoreproduceinCanadaon
behalfofcustomersofthePlaintiffcertaincolouredprintsofflowers,bushes
andshrubs.
Inordertoascertaintherightsoftheplaintiff,theCourtreviewedtheLicence
Agreementwhichcontained,amongothers,thefollowingclauses:
“1.Thelicensorherebygrantstothelicenseetherightto
reproducetheprintingmaterialfurnishedbythelicensorfor

printingprocessesandtodistributecolouredseedbags,labels,
cataloguesandsalespromotionmaterialmadebytheuseof
suchreproducedoriginals.Thecopyrightshallremainpropertyof
thelicensor”.(…)
“3.Thelicensorherebyundertakesnottograntanylicenceforhis
designstoanyothercompanywithinthecountryofCanada”.
“4.Thelicensorundertakesnottosend,duringthetermofthis
agreement,anyemptyseedbags,printedwithhisdesigns,into
thecountryofCanada”.

Withoutdecidingwhetherthecontractwasamere,soleorexclusivelicense
agreement,Mr.JusticeKerrconcludedatp.695thatSection36(thenSection
20(5))was”…broadenoughtoincludearightandinterestinacopyright
acquiredbyalicenseebyanagreementsuchasthelicensingagreement
hereunderconsideration”.Onappeal,thedefendant,attackingthe
licensee’sstandingtosue,pleadedthattheplaintiffasallegedexclusive
licenseeofforeigncompanies,didnotmentioninhisstatementofclaimthe
licensors’rights.Thedefendantstated,interalia,thatplaintiffomittedto
allegeinitsstatementofclaimthatcopyrightssubsistedinCanadainthe
namedworkandmadenoreferencetotheownerofcopyright.The
defendantfurtherpleadedthat,atCommonLaw,evenanexclusivelicensee
hasnointerestintitleinproperty,suchascopyright,sothathemaynotsue
others.TheappealwasallowedandMr.JusticeJackettoftheFederalCourt
ofAppealstated:
“Unlesstherespondentamendshisstatementofclaimsoasto
pleadthefactsuponwhichtherightsofthelicensorsarebased,
thestatementofclaimshallbestruckoutandtheactionstand
dismissedwithoutfurtherorder.”

Eventually,thelicenseefiledanamendedstatementofclaimbutthewhole
matterwassettledbeforegoingtotrial.
AsitmaybeconsideredthatMr.JusticeKerr’sdecisionwasoverturnedon
morethanamereproceduralpoint,thatis,absenceofreferencetothe
licensor’srights,cautionshouldbeexercisedinfindingthatMr.JusticeKerr’s
decision,whichwasnotleftundisturbed,gavestandingtosuetoalicensee
andfinallysettledthematter.
Inanothercase,LesdictionnairesRobertCanadaSCCetal.
v.Librairiedu
NomadeInc.,oneofthetwoplaintiffsinvolvedwastheexclusivedistributorin
Canadaofliteraryworkswhosecopyrightrestedwiththesecondplaintiff.
TheCourtgrantedaninjunctionanddamagestobothplaintiffsforcopyright

infringement,withouteverquestioningthedistributor’scapacitytosueorhis
rightasdistributor,toobtaindamagesandaninjunctionundertheCopyright
Act(ofcourse,adistributormayhaveotherrecoursesatCommonLawor
undertheCivilCodeofLowerCanada
).Despitethisisolateddecision,ithas
beendecidedthatagentsactingonbehalfofcopyrightownersdonot
haveastandingtosue,eveniftheyhaveastrongbusinessinterest.
DespitethecleardraftingofSection36,thereseemstobeareluctanceof
thepartoftheCourtstorecognizethatlicenseeshaveastandingtosue.The
rationalebehindthisreluctancemightbetheconcernofprotectingalleged
infringersfromsuccessivelawsuits.
Areviewofcaselawindicatesthatcourtshavebeenmorecomfortablein
recognizingasassignments,eithertotalorpartialanyauthorizationgivenby
thecopyrightownertorealizeoneormoreoftheactsenumeratedatSection
3oftheCopyrightAct
.Thissituationofhesitationcanbeattributedtothe
draftingofSections13and36oftheCopyrightAct
;itisthetypeofdrafting
thatledMr.JusticeKerrtosimplystatethatSection36wasbroadenoughto
coveralicensingagreement.
ThoughtheseSectionsoftheCopyrightAct
mightbeseenasgivinga
standingtosuetoalicensee-andithasevenbeenarguebycertainauthors
thattheycanindeedgiveastandingtosue-thisquestionhasnotbeen
definitelysettledbyCanadianCourts.
PATENTS

Letusnowturnourattentiontoapatentlicensee.
Apatentofinventioncouldbedefinedasatemporarytitleofproperty
deliveredbygovernmentauthoritytoaninventor,orhisrepresentative,ona
technologydevelopedbythisinventorandwhichpresentstheparticularityof
beinguseful,newandoriginalinviewofwhatexistsinthefield.i.e.theprior
art.
Onceissued,thistitleofpropertygivestoitsowneranexclusiverighttoexploit
thistechnologyinthecountrywherethepatentisissued.Byexclusiveright,is
meanttheexclusiverighttomanufacture,sell,useandevenimport.
Canada’sPatentAct
providesthelegalframeworkwithinwhichpatentsare
granted.Ofcourse,thePatentAct
doesnotcontainanyprohibitionrelating
tolicencesanditisabundantlyclearthatapatenteemaygranteitheran
exclusiveoranon-exclusivelicencetousethepatentedinvention.Toquote
Mr.JusticeJackett:

“Thereisnoexpressprovisionunderwhichthepatenteemay
grantalicence,butthismustbeinherentinownershipofthe
patent”.

Thispresentationwilldealsolelywithcontractuallicencesandnotcompulsory
licencesgrantedinspecialcircumstanceswhicharedescribedatSection66
ofthePatentAct
.Moreparticularly,Iwillconcentrateuponalicensee’s
standingtosueinlightofrecentjurisprudentialdevelopments.
BydecisiondatedDecember21,1992,theFederalCourtofAppealin
SignalisationdeMontréalInc.
v.LesServicesdeBétonUniverselsLtéehas
considerablyenlargedthepoolof”personsclaimingunderthepatentee”
underSubsection55(1)ofthePatentAct
.ThisSubsectionstatesamongother
thingsthat:”Anypersonwhoinfringesapatentisliabletothepatenteeand
toallpersonsclaimingunderthepatenteeforalldamagessustainedbythe
patenteeorbyanysuchperson,afterthegrantofthepatent,byreasonsof
theinfringement”.
Itisworthnotingtheextenttowhichthispoolhasbeenenlargedoverthe
years,followingtheadoptionofSection55(1)ofthePatentAct
in1935.
BeforetheadoptionofSubsection55(1),aplaintiff’sstandingtosuefor
infringementunderthePatentAct
waslimitedbyaverynarrowdoor:
indeed,thePatentAct
(asitstooduntil1935)providedthataninfringerwas
liabletothepatenteeorhislegalrepresentativesinanactionfordamages.
Thenotionoflegalrepresentativewasdefinedinanon-exhaustivemanner.
Priortothe1935amendment,whichintroducedSubsection55(1),the
SupremeCourtofCanada,inElectricChainCo.ofCanadaLtd.
v.ArtMetal
WorksInc.etal.confirmedthatalicenseedidnothaveastandingtosuein
aninfringementaction.
Indoingso,theSupremeCourtreferredtothecaseofHeap
v.Hartleyof1889
whichdealtwiththestandingtosueofanexclusivelicenseeinthefollowing
terms:
“Anexclusivelicenceisonlyalicenceinonesense;thatistosay,
thetruenatureofanexclusivelicenceisthis.Itisaleavetodoa
thing,andacontractnottogiveleavetoanybodyelsetodo
thesamething.Butitconferslikeanyotherlicence,nointerestor
propertyinthething.(…)Itonlyenablesapersontodolawfully
whathecouldnototherwisedo,exceptunlawfully.Ithink,
therefore,thatanexclusivelicenseehasnotitlewhatevertosue.”

In1935,theprovisionofthePatentAct
regardingthepatentinfringer’sliability
wasmodifiedtoreadthataninfringerisliableto”thepatenteeandtoall
personsclaimingunderhim”foralldamagessustainedbythepatenteeorby
anysuchpersonbyreasonofsuchinfringement.Thisamendmentprovided
thelegislativesettingfortheSupremeCourtofCanada’sdecisioninSpun
RockWoolsLimitedv.FiberglassCanadaLimitedetal..Inthiscase,a
CanadianpatenthadbeendeliveredtoaDutchcompanywhohad
grantedexclusivelicencestointermediatepartieswho,inturn,hadgranted
exclusivelicencestoFiberglassCanada.
InMay1940,theDutchcompanybecameanenemyunderCanada’swar
timelegislationregardingtradeandtherightsunderthepatentwere
transferredtoaCustodianunderthewartimelegislation.FiberglassCanada
initiatedpatentinfringementproceedingsagainstSpunRockWoolsand
namedtheCustodianasdefendant;duringtheproceedings,oneofthe
intermediatepartieswasaddedasplaintiff.Althoughitrejectedtheplaintiffs’
claimforlackofinventioninthepatentreliedupon,theSupremeCourt
confirmedtheplaintiff’sstandingtosueaslicensee.
ThejudicialcommitteeofthePrivyCouncilreversedtheSupremeCourt’s
decisionastothevalidityofthepatentandsidedwiththeplaintiff.Indoing
so,itaffirmedthatthelicenseeofapatentisapersonclaimingunderthe
patenteewithinthemeaningofthePatentAct
ofCanadaandassuchis
entitledunderthesectiontosuefordamagesforinfringement.Thus,inLord
JusticeSimonds’words:
“Butitappearsthatthestatutoryamendmentof1935following
onthedecisionofElectricChainCo.ofCanada,Ltd.
v.ArtMetal
WorksInc.pointsirresistiblytotheconclusionthatlicenseesare
personsclaimingunderthepatenteewithinthemeaningofthe
section.Thepatenteebydefinitionmeansthepersonforthe
timebeingentitledtothebenefitofapatent.Section55,sub-s.
1,contemplatesanactionnotonlybythepersonforthetime
beingentitledtothebenefitofapatentbutalsobyanyperson
claimingunderthatperson.Ontheplainlanguageofthe
sectionalicenseeanswersthatdescription.Theappellantsas
licenseeswerethereforeentitledtosuefordamagesunders.55.”

Thus,theamendmentof1935anditssubsequentapplicationbytheCourts
enlargedthenarrowdoorandrecognizedaninfringer’sliabilityfordamage
sufferedbyalicenseeinthecaseofapatentinfringement.
Inthe1972caseofAmericanCyanamidCompany
v.NovopharmLimited
[1972]F.C.739(F.C.A.),theFederalCourtofCanadapushedthedooropen

evenfurtherwhenitdecidedthatanon-exclusivelicenseeofapatentisa
personclaimingunderthepatenteewithinthemeaningofSubsection55(1)
ofthePatentAct
.
Inthatcase,AmericanCyanamidinitiatedasuitagainstNovopharmalleging
thatthelatterhadinfringedapatentwhichwasgrantedandownedby
BristolMeyersCompany.AmericanCyanamidallegedthatitwasanon-
exclusivelicenseeundercertainclaimsofthepatent.Grantingamotion
presentedbyNovopharmseekinganorderstrikingoutthestatementof
claim,Mr.JusticeNoelA.C.J.heldthatanon-exclusivelicenseecouldnot
claimdamagesforinfringementofapatentandhadthereforenostanding
tosue.
AmericanCyanamidappealedtotheFederalCourtofAppealwhich
expressedacontraryview.ReferringtotheFiberglassCanada
case,Mr.
JusticeBastinstatedthatneitherthejudgesoftheSupremeCourt,northe
memberofthePrivyCouncilwhogavethePrivyCounciljudgementinthat
casemadeanydistinctionbetweenanexclusiveandabarelicensee.Mr.
JusticeBastinalsoconsidereditworthmentioningthatParliamentwhen
changingthelawin1935usedgeneralandcomprehensivewordsthatdid
notmakeanydistinctionbetweenanexclusivelicenseeandabarelicensee.
Inhisview,anon-exclusivelicenseeisapersonclaimingunderthepatentee
asthepermissionhereceivesfromthelatter(whetherlabelledaright,a
privilegeorabenefit)isderivedfromthepatentee.
Mr.JusticeSweetconcurred,findingthatthewords”allpersonsclaiming
underhim”mustnecessarilyincludeeverytypeoreverykindoflicensee,
whetherexclusiveornon-exclusive.Inhisview,bytheamendmentof1935,
Parliamentcreatedbystatutearightofactionforthelicenseeagainstan
infringerfordamagessufferedbytheformer:Henotedthat:
“Thereisnodifferentiationbetweentheliabilityoftheinfringerto
thepatenteeandtopersonsclaimingunderhimnoristhereany
differentiationbetweenthenatureoftherightsthepatenteeand
thepersonsclaimingunderhimhaveagainsttheperson
infringing.”

Mr.JusticeSweetconcludedthatitwasParliament’sintentiontocreatea
rightforanon-exclusivelicenseetorecoverfromapatentinfringer,inrespect
ofanymatterrelevanttohislicence,damagesandcompensationforthe
licensee’slossbyreasonoftheinfringer’saction.Inshort,aninfringerisliable
toanon-exclusivelicenseefordamagescausedbysuchinfringement.

ThereasoningoftheFederalCourtofAppealinAmericanCyanamidwas
confirmedbytheSupremeCourtofCanadainArmstrongCorkCanada
Limitedv.DomcoIndustriesLimited.
ItmightbesaidthattherecentdecisionoftheFederalCourtofAppealin
SignalisationdeMontréalInc.
hasnowknockedthedooroffitshingesin
determiningwhoisapersonclaimingunderthepatenteeunderSection55(1)
ofthePatentAct.ThissplitdecisionpermittedtheCourttoreviewseveral
questionsraisedbytheapplicationofsaidSubsection55(1)ofthePatentAct
,
namely1)whocanbecalledalicenseeand2)underwhatrationalemaya
licenseesueaninfringer.
Inthiscase,plaintiffSignalisationdeMontréalInc.(“Signalisation”)
commencedlegalproceedingsbywayofastatementofclaimalleging
infringementofitspatentrightsbydefendantLesServicesdeBétonUniversels
Ltée.Interlocutoryinjunctivereliefwassoughtbytheplaintiff.Defendant
BétonUniverselsimmediatelypresentedamotionunderRule419ofthe
FederalCourtRules
toobtainanorderstrikingoutthestatementofclaim
arguingthatplaintiffcouldnotclaimthereliefsoughtasitwasnotthe
patenteenorapersonclaimingunderthepatentee.
PlaintiffSignalisationwasnottheownerofthepatentwhichwasthesubject
oftheseproceedings.ThepatentwasheldinthenameofEnergyAbsorbtion
SystemsInc.whowasnamedasadefendant.Theownerofthepatenthad
grantedalicensecoveringtheUnitedStatesandCanadatoBarrierSystems
Inc.Thespecificclaimswhichwereallegedlyinfringedcoveredamethodof
transferringtransferableroadwaylinedividersfromonesideoftheroadway
totheotherinordertopermitarapidchangeofthedirectionofvehicleflow
inhighdensitytrafficareas.
LicenseeBarrierenteredintoanagreementwithplaintiffSignalisation
wherebyBarrierappointedSignalisationasexclusiverepresentativeofits
productsinacertainTerritory.
PlaintiffSignalisationhadacquiredanapparatusknownaslanedividersfrom
Barrierandhadbeenmakinguseofitandofthepatentedmethodwhile
carryingonitsbusiness.
Themotionjudge,Mr.JusticeRouleau,allowedthedefendant’smotionand
struckoutplaintiff’sstatementofclaimindicatingthat:”…thereisnodoubt
thattheplaintiffhasa”right”or”license”touse
theequipmentasheseesfit,
thiscorollarydoesnotconferonitany”rights”underthepatent.He
concludedthattheplaintiffisnomorethananexclusiverepresentativeof
Barrier,themanufactureroftheequipment,intheterritoryofOntarioand
Quebecandithad,infact,nocapacitytoseekinjunctiverelief.”

Onappeal,Mr.JusticeHugessen,supportedbyMr.JusticeLétourneau,
overturnedthemotionjudge’sdecision.Indoingso,itprovideditsownsetof
answerstothequestionspreviouslyputforth:Mr.JusticeHugessenindicated
thatthepurchaserofapatentedproductacquirestherighttouseandthe
righttoselltheproductinquestion,thisrighthavingbeendescribedasa
licenseasearlyas1871byLordHatherlyinBetts
v.Willmott.Furthermore,Mr.
JusticeHugessenrestatedtheprinciplethatthelicenseeisaperson”claiming
under”thepatenteeandisentitledtosueforinfringement.
Thereafter,Mr.JusticeHugessenbridgedtogetherthesetwoprinciplesand
wrote:”…ifIpurchaseapatentedmonkeywrenchfromahardwarestore
whichhasacquireditfromawholesalerwhichhasobtaineditfroma
distributorwhogotitfromamanufacturerwhoholdsalicencefromthe
patentee,aninfringementactionbythelatteragainstmewillfail,not
becauseIhaveinfringedbutamprotectedfromtheclaimassertedagainst
me,butratherbecauseIhavearight
tousethethingwhichIhavebought,a
rightthatcanbeassertednotonlyagainstthepatenteebutagainstthe
worldatlargeandwhichpreventsmefrombeinganinfringer.Justlikeany
otherlicensee,Iamaperson”claimingunder”thepatenteeandthatclaim
availsasmuchagainstthelatterasagainstanyoneelse.”
Finally,Mr.JusticeHugessenstatedthattheplaintiffwasclearlyaperson
coveredbySubsection55(1)ofthePatentAct
:”Inhisview,aperson
“claimingunder”thepatenteeisapersonwhoderiveshisrightstousethe
patentedinvention,atwhateverdegree,fromthepatentee.Therighttouse
aninventionisonethemonopolytowhichisconferredbyapatent.Whena
breachofthatrightisassertedbyapersonwhocantracehistitleinadirect
linebacktothepatenteethatpersonis”claimingunder”thepatentee.It
mattersnotbywhattechnicalmeanstheacquisitionoftherighttousemay
havetakenplace.Itmaybeastraightforwardassignmentoralicence.It
may,asIhaveindicated,beasaleofanarticleembodyingtheinvention.It
mayalsobealeasethereof.Whatmattersisthattheclaimantassertsaright
inthemonopolyandthatthesourceofthatrightmaybetracedbacktothe
patentee.Thatisthecasewiththeappellanthere.”AlthoughMr.Justice
Hugessenoverturnedthemotionjudge’sdecision,henonethelessrefusedthe
interlocutoryinjunctivereliefwhichwasrequestedbyplaintiff.
Inastrongdissent,Mr.JusticeDécarytookissuewiththefactthatthe
purchaserofapatentedproductbecomesbyimplicationalicenseeunder
thepatentandthus,apersonclaimingunderthepatenteeinaccordance
withSubsection55(1)ofthePatentAct
;ofcourse,hedidnothaveany
qualmswiththefactthatthereisindeedan”impliedlicense”or”implied
warranty”(apreferableexpressioninMr.JusticeDécary’seyes)grantedtothe
owneranduserofapatentedproducttouseitwithoutinfringingthepatent.

Inhiswords,”thisimpliedwarrantyderivesfromthecontractofsalebywhich
theinventor,theassigneeorthelicenseeandthepurchaserarebound,and
itattachestotheproductsold”.However,thiswarrantyonusewhichis
attachedtotheproductisnotanimpliedlicenseunderthepatentwhich
wouldbeattachedtothepatentitself.
DistinguishingtheArmstrong
case,Mr.JusticeDécarypointedoutthatthe
licensethenatissuewasgrantedbythepatenteeandconferredaninterest
inbothpatentandproduct.Mr.JusticeDécaryrefusedtoextendtheright
affordedbySubsection55(1)ofthePatentAct
tothesimplepurchaserand
userofapatentedproductwhodoesnothaveamandatefromtheinventor,
assigneeorlicensee.Toacceptthecontraryview,inMr.JusticeDécary’s
opinion,wouldbe”tointerpretSubsection55(1)oftheActasifthewords
“claimingunderthepatentee”didnotappear,andasifitweresufficientfor
damagestohavebeenincurredasaresultoftheinfringementofapatentin
orderfortheinjuredpartytohavearemedyunderthatsubsection”.
Thissplitdecisionpresentstwoverydifferentoutlooks:themajorityjudges
favouredanall-embracingnotionofalicenseeandreliedheavilyonthe
Armstrong
casewhereSubsection55(1)ofthePatentActwasseenas
permittinganylicenseetoclaimfordamagessustainedinconsequenceof
aninfringementofapatent.Thedissentingjudgeinterpretedtheterm
“license”asmeaningmorethanthesimplerighttouseasitsownera
patentedproduct;hethereforefoundthatalthoughlicenseesarecovered
bySubsection55(1)ofthePatentAct
,thesimplepurchaseranduserofa
patentedproductisnotapersonclaimingunderthepatenteewithinthe
meaningofthisSubsection.
Thenetresultofthisdecisionistogiveanypurchaserofapatentedarticlea
standingtosueagainstanyinfringerfordamagessufferedbythispurchaser
astheresultoftheinfringement.Ofcourse,onemaywonderwhatthese
damagesmaybe.Onemayenvisionthesituationwherethepurchaserofa
patentedarticlehasbeenpromisedanexclusiveuseoftheproductina
certainterritory;damagesmaybesufferedbythatpurchasershould
someonebeusinganinfringingproductinthesameterritory.Finally,another
consequenceofthisdecisionistopostponethedecisionregardingthe
sanctionofapurchaser’srightfromthemotion
tostrikeunderRule419stage
tothefinaldispositionofthematter,asitappearsthatthestandingtosue
issuedoesseemsettled.
TRADE-MARKS

Andnowafewcommentsregardingthelawoftrade-marks.Asthelaw
presentlystandsinCanada,anylicensingagreementwhichauthorizesa

licenseetousealicensor’strade-markimpliestherecordaloftheformeras
theregistereduserofthelatter’strade-markwhichimplies,ofcourse,thatthe
relevanttrade-markiseitherpendingorregisteredwiththeCanadianTrade-
MarksOffice.
CourtshaveremindedusthatSection50oftheTrade-MarksAct
mustbe
strictlycompliedwithinordertoreservethedistinctivecharacterofatrade-
mark.
Inadditiontopreservingthedistinctivecharacterofatrade-mark,the
provisionsrelatingtoregisteredusersofferotheradvantagestothelicensor
anditslicensee:ordinarily,theonlypersonentitledtoinitiateproceedingsfor
infringementofarightistheownerofthatright.However,underSubsection
50(4)oftheTrade-MarksAct
,aregisteredusermayinstituteproceedingsfor
infringementinhisownnameasifheweretheowner.Theregistereduser
mayfollowthispathaslongashehascalledontheownerthereoftoinitiate
proceedingsforinfringementandtheownerhasrefusedorneglectedtodo
sowithinthetwomonthsafterbeingsocalledupon.Ofcourse,shouldthe
registereduserinitiateproceedingsinhisownname,theownermustbe
namedasadefendant.However,Section50doesnotimposeanyobligation
againsttheregisteredusertoinitiateanyinfringementproceedings.Itistobe
notedhoweverthattherightforaregisteredusertoinitiateproceedingsfor
infringementaresubjecttoanyagreementthathasbeenconcluded
betweentheparties,thatisbetweentheowneranditslicensee.Thus,intheir
agreement,thelicensoranditslicenseemayagreeinadvanceontheparty
whowillbeinitiatinginfringementproceedings,ifneedbe.
Inorderthatatrade-marklicenseebeabletoinitiateinfringement
proceedings,thatlicenseemusthavebeenrecordedasregistereduserof
thelicensedtrade-mark.
Couldsuchalicenseerecordedasregistereduserinitiateinfringement
proceedingsonhisown,withoutfollowingtheproceduresetoutat
Subsection50(4)?
Jurisprudenceisdividedonthequestion.Forexample,Mr.JusticeCattanach
commentedonthematterinS.C.Johnson&Son,Ltd.
v.Marketing
InternationalLtd.(1977)32C.P.R.(2d)25wheretwoplaintiffs,atrade-mark
owneranditsregisteredownerwerebothsuingfortrade-markinfringement.
TheHonourablejudgehadthistosayregardingthecapacityforthe
registeredusertobejoinedasplaintiffwiththetrade-markowneratp.29of
hisdecision:
“Obviously,rightsareconferredupontheregistereduserbythe
registeredowner.Theserightsarisebyvirtueoftheagreement

betweenthem,butaregisteredusermayalsobesorely
aggrievedbyaninfringingusebyothers.
Inthatevent,s.49(4)oftheTradeMarksAct
providesthatthe
registeredusermaycallupontheregisteredownertotake
proceedingsforinfringement.Iftheownerrefusesorneglectsto
dosowithintwomonthsofbeingcalledupontodoso,then,and
inmyopiniononlythen,maytheregistereduserinstitute
proceedingsinhisownnameasifheweretheownerbutthe
ownermustbenamedasadefendantintheproceedingsandis
notliableforcostsunlesshetakespartintheproceedings.Inmy
opinion,s.49(4)makesitabundantlyclearthattheonly
circumstanceswherearegisteredusermaysueinhisownname
forinfringementiswhentheprocedureoutlinedinthesectionhas
firstbeencompliedwith.
Thisdidnothappeninthepresentinstance.Theownerandthe
registereduserarejointplaintiffsandforthereasonsexpressed
theCanadianplaintiff,beingaregistereduser,isimproperly
joined.”

Ofcourse,cautionshouldbeexercisedifrelyingonthisdecisionasitwas
overturned,althoughforotherreasons,bytheFederalCourtofAppeal,who
concludedthattherehadbeennoinfringement.ThisdecisionoftheFederal
CourtofAppearwasconfirmedbytheSupremeCourtofCanada.
Ontheotherhand,Mrs.JusticeReedcametotheoppositeconclusionthan
Mr.JusticeCattanachinTonkaCorp.etal.
v.TorontoSunPublishingCorp.et
al.,(1990)35C.P.R.(3d)24.Inthatcase,twoplaintiffstookactionfortrade-
markinfringement;thefirstwastheregisteredownerofthemarkwhilethe
secondwasitsregisteredowner.Thedefendantappliedforanorderstriking
outfromtheactiontheplaintiff,registereduserofthemarkontheground
thattheregistereduserdoesnothavetherighttoinstituteanactionas
plaintifffortrade-markinfringement.
Mrs.JusticeReeddismissedthemotionforthefollowingreasons:
“Idonotreads.50(4)assettingoutanexhaustivedescriptionof
thecircumstancesinwhicharegisteredusermaycommencean
actionfrotrademarkinfringement.Inmyviews.50(4)isancillary
totherightofalicensedusertocommenceanactiononitsown
shoulditwishtodoso.Section50(4)providesthatalicenseduser
maycallonanownertocommenceanactionandiftheowner
doesnot,mayaddtheownerasadefendant.Butthe
subsectiondoesnotsaythatthisistheonlyremedyopentoa

licenseduser.Theprovisiondoesnotsaythatalicenseduser
mayonlycommenceactiononitsownafterithasfirstsoughtto
havetheownercommencetheactionandtheownerhas
refused.
OnreadingtheTradeMarksAct
asawhole,onefindsthatitis
remarkablysilentastowhocansueandunderwhat
circumstances.Section57(1)providesthat”anyperson
interested”canseekexpungement.
(…)Apartfromthisprovision,however,thereisnoexpress
provisionaccordingeventhetrademarkownertherightto
commenceanaction.ThetextoftheActclearlyleavesthat
righttobeimpliedfromthetermsoftheAct;termswhich,for
example,givethetrademarkownertherighttotheexclusiveuse
ofthemark.Inmyview,therightofaregistereduserto
commenceanactionisequallyimplicit.Thisflowsfromprovisions
suchass-ss.50(1)to(3)inananalogousfashiontotheimplicit
righttosuewhichflowsfromtheowner’sexclusiverighttosuethe
mark.”

ItistobenoticedhoweverthatanappealwasfiledagainstMrs.Justice
Reed’sdecisioninfileA-1051-90.
However,nodecisionhasbeenrenderedtothisdate.
Aswecansee,courtshavenotadoptedadefiniteviewonthecapacityfor
atrade-marklicenseeasregisteredusertoinitiateinfringementproceedings
withoutfollowingtheschemeofsubsection50(4)oftheTrade-MarksAct
.
Inarecentdevelopment,inadecisionthatshedsnewlightonthenecessity
ofregisteringtrade-marklicensees,theTrialDivisionoftheFederalCourtin
SteinbergInc.
v.J.L.DuvalLimitée(1992)44C.P.R.(3d)417(F.C.T.D.,Denault
J.)hasruledthatatrade-markownerneednotregisteritslicenseeas
registereduserincertaincases,iftheownerexercisescontrolovertheuseto
preventdeceptionorconfusionofthepublic.
Inthiscase,J.L.DuvalLimitéewastheregisteredownerofthedesigntrade-
markMARCHEEXTRA,whoseregistrationcoveredthewholesaledistribution
andsaleoffoodproducts.SteinbergInc.hadappliedforanorder
expungingtheregistrationpursuanttoSection18(1)(b)oftheTrade-Marks
Act,onthebasisoflackofdistinctivity.
Steinbergpleadedthatthetrade-markinquestionwasnotdistinctiveofthe
servicesprovidedbyDuvalasthelatterhadallowedover30licensees(all

retailers)touseitsmarkwithoutrecordingthemasregisteredusersunder
Section50oftheTrade-MarksAct
.
Inrenderinghisdecision,Mr.JusticeDenaultindicatedthatdistinctivenessis
essentialtoatrade-mark’sstrengthandmustbeevaluatedinlightofthe
specificfactsineachcase.Mr.JusticeDenaultunderlinedthat”distinctive
meanssomequalityinthetrade-markwhichearmarksthegoodssomarked
asdistinctfromthoseofotherproducersofsuch
goods”.TheCourtthen
proceededtoreviewtheregistrationinquestion,notingthatitcovered”the
wholesaledistributionandsaleoffoodproducts”;itthendeterminedwhether
themarkhadbeenused,eitherbytheownerorothersinassociationwith
thosespecificserviceslistedintheregistration,thatisthewholesale
distributionandsaleoffoodproducts.
TheCourtreviewedtheevidencesubmittedbythepartiesandconcluded
thatnootherwholesaleroffoodproductshadbeenusingtheJ.L.Duval’s
registeredtrade-markwhichwasheldasproperlydefiningDuval’sexisting
rights.InresponsetotheargumentthatJ.L.Duvalshouldhaverecordedits
licensees,allretailers,asregisteredusersofitstrade-markcoveringwholesale
services,Mr.JusticeDenaultrepliedthatthiswasnotnecessaryastheretailers
didnotuseJ.L.Duval’strade-markinassociationwithanyoftheservices
describedintheregistrationforthedesigntrade-markMARCHEEXTRA.
FromMr.JusticeDenault’scomments,onecanunderstandthattheprovisions
ofSection50oftheTrade-MarksAct
neednotbefollowedblindlyandthatan
unregisteredlicensee’suseofatrade-markwillnotautomaticallydamage
saidmark’sdistinctivecharacter.Inthiscase,Mr.JusticeDenaultdeclared
himselfsatisfiedastothedegreeofcontrolexercisedbytheownerofthe
trade-markoveritsusebyitslicensees.Asindicatedbytheevidence,Duval
wasresponsiblefortheinstallationandmaintenanceofasignappearing
outsideofeachofitslicensees’premiseswhichdisplayedJ.L.Duval’strade-
markaswellasthecaption”affiliatedtoJ.L.Duval”.
InrejectingSteinberg’sapplicationtoexpungeJ.L.Duval’sregistration,Mr.
JusticeDenaultconcluded:
“Inmyview,atrademarkshouldnotautomaticallybeheldtobe
invalidmerelybecauseitsownerhaspermitteditsrestricteduse
inassociationwithwaresorservicesnotincludedinthetrade
markowner’sregistrationofitsmark.Insuchcases,amore
detailedstudyoftheowner’scontrolovertheuseofitsmarkand
publicperceptionisrequired.”

InlightoftherecentdiscussionsrelatingtotheeventualabolitionofSection
50oftheTrade-MarksAct
,Mr.JusticeDenaulthasprovidedanindicationof
thestepstobetakenbyatrade-markownerwhoconcludeslicensing
agreementsinordertoprotectthedistinctivecharacterofitstrade-mark.
WithoutSection50,thetestofdistinctivenesswouldappeartorestonan
examinationofthetypeofcontrolexercisedbythelicensoroveritslicensees,
ratherthanonareviewofentriesattheTrade-MarksOffice.WithoutSection
50,itremainstobeseenunderwhatrationaletrade-marklicenseeswillorwill
notbegrantedtherighttosuefortrade-markinfringementconsidering,as
statedbyMrs.JusticeReed,thattheTradeMarksAct
asitnowstandsis
remarkablysilentastowhocansueandunderwhatcircumstances.
CONCLUSION

Licensingagreementsinthefieldofintellectualproperty,whetherrelatingto
materialprotectedbycopyright,patentedinventionsortrade-marksrequire
morethanareviewofthelawofcontracts.Aswehaveseen,various
provisionsoflegislationineachspecificareaofintellectualpropertyaffect
therelationshipbetweenthepartiesthemselvesandvis-à-visinfringers.
Thispresentationhasattemptedtoanswercertainquestionsregardinga
licensee’scapacitytosueinrelationtocertainstatuteswhendefiniteanswers
havebeenprovidedbytheCourts.Whilethisareahasnotbeendefinitely
explore,licensingagreementsmustbedraftedwhilekeepinginmindour
courts’latestpronouncementssoastobettermanagethepitfallsinherentto
ourclients’activities.

ROBIC,ungrouped’avocatsetd’agentsdebrevetsetdemarquesdecommercevoué
depuis1892àlaprotectionetàlavalorisationdelapropriétéintellectuelledanstousles
domaines:brevets,dessinsindustrielsetmodèlesutilitaires;marquesdecommerce,marques
decertificationetappellationsd’origine;droitsd’auteur,propriétélittéraireetartistique,droits
voisinsetdel’artisteinterprète;informatique,logicielsetcircuitsintégrés;biotechnologies,
pharmaceutiquesetobtentionsvégétales;secretsdecommerce,know-howet
concurrence;licences,franchisesettransfertsdetechnologies;commerceélectronique,
distributionetdroitdesaffaires;marquage,publicitéetétiquetage;poursuite,litigeet
arbitrage;vérificationdiligenteetaudit;etce,tantauCanadaqu’ailleursdanslemonde.La
maîtrisedesintangibles.
ROBIC,agroupoflawyersandofpatentandtrademarkagentsdedicatedsince1892tothe
protectionandthevalorizationofallfieldsofintellectualproperty:patents,industrialdesigns
andutilitypatents;trademarks,certificationmarksandindicationsoforigin;copyrightand
entertainmentlaw,artistsandperformers,neighbouringrights;computer,softwareand
integratedcircuits;biotechnologies,pharmaceuticalsandplantbreeders;tradesecrets,
know-how,competitionandanti-trust;licensing,franchisingandtechnologytransfers;e-
commerce,distributionandbusinesslaw;marketing,publicityandlabelling;prosecution
litigationandarbitration;duediligence;inCanadaandthroughouttheworld.Ideaslive
here.
COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLUL’INVENTER!
LAMAÎTRISEDESINTANGIBLES
LEGERROBICRICHARD
NOSFENÊTRESGRANDESOUVERTESSURLEMONDEDESAFFAIRES
PATENTER
R
ROBIC
ROBIC+DROIT+AFFAIRES+SCIENCES+ARTS
ROBIC++++
ROBIC+LAW+BUSINESS+SCIENCE+ART
THETRADEMARKERGROUP
TRADEMARKER
VOSIDÉESÀLAPORTÉEDUMONDE,DESAFFAIRESÀLAGRANDEURDELAPLANÈTE
YOURBUSINESSISTHEWORLDOFIDEAS;OURBUSINESSBRINGSYOURIDEASTOTHEWORLD