Date: 20020102
Docket: T-196-99
Neutral Citation: 2002 FCT 1
Toronto, Ontario, Wednesday the 2nd day of January, 2002
PRESENT: Roger R. Lafrenière, Esquire
Prothonotary
BETWEEN:
DARK ZONE TECHNOLOGIES INC.
Plaintiff
- and -
1133150 ONTARIO LTD., ALI NASSER-EDDINE
and MOHAMED HAFEZ
Defendants
REASONS FOR ORDER AND ORDER
[1] The Plaintiff seeks leave to discontinue the within action without costs pursuant to Rule 402 of the Federal Court Rules, 1998.
[2] The Plaintiff's action alleges violations by the Defendants of its intellectual property rights in an inter-active laser tag game and the operation of virtual reality systems known as the "DARKZONE". The Defendants formerly operated a DARKZONE franchise granted by the Plaintiff in Thornhill, Ontario. The Plaintiff terminated the franchise in 1996 but discovered in January 1998 that the laser tag business was still being operated at the same location where the Defendants had operated their DARKZONE franchise. During examination for discovery of the Defendants, the Plaintiff was persuaded that the Defendants had not infringed their rights after learning that another party, a friend of one of the Defendants, had taken over the premises in 1996. Consequently, the Plaintiff offered to discontinue the action against the Defendants without costs. The Defendants refused to waive their costs.
[3] The Plaintiff submits that it should be relieved from having to pay the Defendants' costs since it was only through the discovery process that it was able to ascertain the identity of the party allegedly infringing the Plaintiff's intellectual property rights. The Plaintiff maintains that legal proceedings could easily have been avoided had this crucial information been volunteered earlier by the Defendants.
[4] The Defendants' responding motion record consists solely of the affidavit of counsel for the Defendant and does not contain any written representations as required by Rule 365(2)(d) of the Federal Court Rules, 1998. Counsel states that the Plaintiff instituted the action without conducting a proper investigation into who was conducting business at the former franchise location. He says that his clients maintained at all times that they were not involved in the operations after the Plaintiff terminated the franchise and that it was not up to the Defendants to disprove the Plaintiff's allegations. Counsel submits that the Defendants incurred significant costs in defending the action and should be entitled to recover them from the Plaintiff.
[5] The general rule is that a party against whom an action has been discontinued is entitled to costs forthwith (see Rule 402 of the Federal Court Rules, 1998). Notwithstanding, the Court has the discretion to decline costs to a party where it is in the interests of justice to do so.
[6] I have carefully reviewed the evidence presented by the parties, including the exchange of correspondence between counsel and the extract of the transcript of the discovery of the Defendant, Ali Nasser-Eddine, taken November 7, 2000. There is no dispute that before instituting the action, counsel for the Plaintiff corresponded with counsel for the Defendants to give notice of the allegations of infringement as against his clients. In his affidavit filed in support of the motion, Plaintiff's counsel states that he received no response from the Defendants' counsel. Counsel for the Defendants maintains that he did respond to the letter by speaking, presumably by telephone, to a junior lawyer with the law firm representing the Plaintiff. He says that he informed the junior lawyer that the Defendants were not involved in any continuing business activity at the former location of the franchise and had not infringed the Plaintiff's intellectual property rights.
[7] In the absence of any cross-examination, I find that counsel for the Defendants did respond to the letter from the Plaintiff, albeit orally, and gave notice that his clients denied any involvement in the continued business activity at the former location of the franchise. In fact, the Defendants maintained the same position in their Statement of Defence and throughout the proceedings.
[8] Yet, in the particular circumstances of this case, it was not sufficient for the Defendants to simply deny the allegations of infringement. It is commonplace in intellectual property disputes for parties to simply deny infringement when confronted with allegations by the owner of intellectual property rights. Not surprisingly, such denials are usually treated with scepticism.
[9] The Defendants claim that the Plaintiff acted rashly by instituting the action without conducting a proper investigating. I disagree. The Plaintiff had reasonable grounds to suspect that the Defendants, and Mr. Nasser-Eddine in particular, may have been involved in the operations at the former franchise location after the franchise was terminated. It was therefore logical for the Plaintiff to approach the Defendants to determine whether the information it had obtained independently was correct.
[10] Mr. Nasser-Eddine was fully aware that his friend, Mr. Almatrook, had been dealing with his bank and landlord to take over the business premises. His denial of any knowledge of Mr. Almatrook's subsequent activities at that location strikes me as disingenuous, especially in light of their friendship. Ultimately, the Defendants' reluctance to disclose Mr. Almatrook's involvement in taking over the business until discovery unnecessarily lengthened the proceeding. Their failure to cooperate with the Plaintiff was clearly unreasonable and resulted in a waste of time and resources for both parties.
[11] I conclude that the Plaintiff acted reasonably in bringing this action and in moving promptly to offer to discontinue once provided with the Defendants' exculpatory information. In the circumstances, I would exercise my discretion in refusing to grant the Defendants their costs of this action.
ORDER IT IS ORDERED THAT:
12. The Plaintiff is hereby granted leave to serve and file forthwith a Notice of Discontinuance, without costs.
"Roger R. Lafrenière"
Prothonotary
Toronto, Ontario
January 2, 2002
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-196-99
STYLE OF CAUSE: DARK ZONE TECHNOLOGIES INC.
Plaintiff
- and -
1133150 ONTARIO LTD., ALI NASSER-EDDINE and MOHAMED HAFEZ
Defendants
CONSIDERED AT TORONTO, ONTARIO PURSUANT TO RULE 369
REASONS FOR ORDER
AND ORDER BY: LAFRENIÈRE P.
DATED: WEDNESDAY, JANUARY 2, 2002
WRITTEN SUBMISSIONS BY: Mr. Robert H. Hook
For the Plaintiff
No written submissions on behalf of the Defendants
SOLICITORS OF RECORD: FILLMORE RILEY
Barristers and Solicitors
Patent and Trade Mark Agents
1700 Commodity Exchange Tower
360 Main Street
Winnipeg, Manitoba
R3C 3Z3
For the Plaintiff
GOWLINGS LAFLEUR HENDERSON
Barristers and Solicitors
Suite 4900, Commerce Court West
Toronto, Ontario
M5L 1J3
For the Defendants
FEDERAL COURT OF CANADA
Date: 20020102
Docket: T-196-99
BETWEEN:
DARK ZONE TECHNOLOGIES INC.
Plaintiff
- and -
1133150 ONTARIO LTD., ALI NASSER-EDDINE and MOHAMED HAFEZ
Defendants
REASONS FOR ORDER
AND ORDER