To Do or Not to Do: That is the Question



T
ODOORNOTTODO:THATISTHEQUESTION

by
HuguesG.Richard
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
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“Ifonedoesnothing,therecannotbeanyinducementandtherecannotbe,
either,breachofanegativeinjunction.Valmetwasenjoinedfromdoing
certainthings;itcouldnotbreachthatinjunctionbysimplyremaining
inactive.”
ThisistheopinionofMr.JusticePratteoftheFederalCourtofAppealof
Canadaasexpressedinaunanimousjudgment,datedFebruary1,1988,
betweenValmetOy,Valmet-DominionInc.v.BeloitCanadaLtd.andBeloit
Corporation,CourtNo.A-602-86.Thisjudgmentreversedanorderfor
contemptpreviouslyissuedbyMr.JusticeTeitelbaumoftheFederalCourt,first
instance.
Thefactsofthecasecanbesummarizedlooselyasfollows.ValmetOya
manufacturerofpaper-makingmachines,wasenjoinedonFebruary10,1986
bytheFederalCourtofAppealfrommanufacturing,using,selling,orinducing
otherstousepresssectionswhicharewithincertainclaimsofapatent.That
patenthasbeenheldinvalidbytheFederalCourt,firstinstance.
ValmetOyowns65percentofthesharesofValmetDominionInc.(VDI),and
CanadianGeneralElectricCompanyLimited(CGE)ownstheother35
percent.Ashareholders’agreementexistedbetweenthetwoshareholders.It
provided,interalia,thatcertainmattershadtobeapprovedbyboth,
including”anychangeinthescopeandpurpose(ofthebusiness)as
describedinsection2oftheFoundationAgreementbetweenValmet,CGE
andthecompany…”,andalso”anyothermattersoutoftheordinarycourse
ofthecompany’sbusiness”.
TheevidenceshowedthattheMontrealdirectorsofVDIknewalmostnothing
ofthelitigationbetweenBeloitandValmet.Uponlearningoftheinjunction,
theyimmediatelyconsultedVDI’slawyersonthepossibleeffectofthat
judgmentontheircompany.Theyhadbeentoldthatsincetheinjunctionhad
beenpronouncedagainstValmetalone,VDIwasnotboundbyit.Infact,on
May9,1986,ataspecialBoardofDirectorsmeetingofVDI,itwasdecidedto



r
etaintheservicesofalawfirmasspecialpatentcounseltoassistin
connectionwiththeimpeachmentproceedingsproposedtobetakenbyVDI
againstBeloit.
Asaconsequenceofthatmeeting,VDIcontinuedtomanufactureandoffer
forsaleTri-Nippresssections.Valmet,foritspart,deliveredtoVDIcertainparts
thatVIDhadorderedbeforeFebruary10,1986(whenthepatentwasheld
invalid),tobeusedinthemanufactureofTri-Nippresssections.Therewas
someevidencethatValmethadsentengineerstoassistinthe”start-up”ofa
Tri-NippresssectionsoldbyVDI.
Based,inpart,onthesefacts,thetrialjudgedecidedthatValmetandVDI
wereincontempt.ButMr.JusticePratteoftheCourtofAppealdidnotagree.
HestressedthattheinjunctionwaspronouncedagainstValmetonly;VDIwas
notboundbyitandcouldbefoundincontemptonlyforhavingaidedor
abettedValmetinbreachingit.
AccordingtoMr.JusticePratte,thefirstquestiontobedeterminedonthese
appealswaswhetherValmet,byitsconductafterFebruary10,1986,
breachedtheinjunction.Ifitdidnot,itsappealmustbeallowedandsomust
VDI’s,sinceVDIcouldnotbetheguiltyaccompliceofaninnocentperson.
Valmetcouldhavebreachedtheinjunctioninoneoftwoways:either
becauseitdidsomethingthatithadbeenorderednottodo;orbecauseit
must,byreasonofcircumstances,answerfortheactsofVDI.
TherewereonlytwothingsthatValmetallegedlyhaddoneafterFebruary10,
1986,thatwouldpossiblybeconsideredasbreachesoftheinjunction:first,it
sentemployeesfromFinlandtohelpinthe”start-up”ofapaper-making
machinesoldbyVDI,andsecond,itdeliveredtoVDIcertainpartsthatwere
tobeusedinthemanufactureofTri-Nippresssections.
Afterconsideringtheevidence,Mr.JusticePrattefoundthattheparticipation
ofValmetinthe”start-up”ofthepaper-makingmachinewasnotproven
beyondareasonabledoubt,andthatthebreachoftheinjunctionwasnot
established.
WithrespecttothedeliverybyValmettoVDI,aftertheinjunction,ofpartsthat
weretobeusedinthemanufactureofTri-Nippresssections,hestatedthat
theinjunctionenjoinedValmet”frommanufacturing,usingorsellingor
inducingotherstouse”Tri-Nippresssections.Moresimply,hesaid,itforbade
ValmettoinfringeBeloit’spatent.Thatpatentwasacombinationpatent,a
patentforanewarrangementordispositionoftheelementscomprisinga
presssection.



I
tiswellestablishedthatthereisnoinfringementofapatentinsellingan
articlewhichdoesnotinitselfinfringethepatent,evenwhenthevendor
knowsthatthepurchaserbuysthearticleforthepurposeofusingitinthe
infringementofthepatent.Valmetcouldhavebeenfoundguiltyiftherewas
proofthatitinducedorprocuredVDItoinfringethatpatent.Ifitdidnot,itdid
notinfringeBeloit’spatentinsupplyingcomponentstoVDI,andthereforedid
notbreachtheinjunction.
TheCourtoffirstinstancefoundthatValmet’sfailuretouseitscontroloverVDI
wasequivalenttoaninducementtoinfringe.Afterhavinganalysedthefacts
andthelaw,Mr.JusticePratteconcludedthatValmet’smerepassivitydidnot
amounttoaninducementtoVDItoinfringeBeloit’spatent.
TheCourtofAppealthenconsideredwhethertherelationshipbetween
ValmetandVDIwassuchthatValmetshouldanswerfortheconductofits
subsidiary.VDI’sseparatecorporatepersonalitycouldnotbeignored.Inthe
opinionofMr.JusticePratte,theevidencedidnotdisclosethatarelationship
betweenValmetanditssubsidiarywassuchthatValmetcouldbeheldin
breachoftheinjunctionbyreasononlyofwhatitssubsidiaryhaddone.
Based,interalia,ontheabovefindings,Mr.JusticePratteallowedtheappeal
oftheappellants.
Mr.JusticeMarceau,whofullyagreedwithMr.JusticePratte,gavefurther
reasonsforhisdecision.Hewrote:
“AsIunderstandit,thestrictissimijurischaracterofacitationforcontempt,ina
caselikethisonewhereapartytoproceedingsisbeingaccusedofhaving
disobeyedaprohibitoryinjunction,andathirdpartystrangerofhavingaided
andabettedthedisobedience,hasimportantconsequencesastothe
identificationofwhathastobeproved,aswellastothequalityoftheproof
required,toestablishtheoffense.Onbothaspects,Iseedefectsinthe
reasoningofthetrialjudge.
Regardingthefirstaspect,hesaidthatapartyenjoinedisnotrequiredtouse
allitspowersandinfluencetopreventothersfromdoingtheactfortheirown
purposesandadvantage.Regardingthesecondaspectconcerningthe
qualityoftheproofwhichmustsatisfybeyondanyreasonabledoubt,not
merelyonabalanceofprobability,hestatedthatthetrialjudgedidnotgo
“beyondhisownimpression,belieforconviction,withaviewtoaskinghimself
ifadifferentimpression,belieforconvictioncouldnotbeequallyacceptable.
”



H
ethenconcludedthathewoulddisposeoftheseappealsassuggestedby
Mr.JusticePratte.(Atthetimeofwritingthisarticle,leavetoappealtothe
SupremeCourtofCanadaisstillpossible.)
Publishedat(1988),2W.I.P.R.95-96underthetitleToDoOrNotToDo:ThatIs
TheQuestion.
LEGERROBICRICHARD,1988.



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