American Cyanamid Company (Plaintiff)
r.
Novopharm Limited (Defendant)
Trial Division, Noël A.C.J.—Toronto, Novem-
ber 29; Ottawa, December 8, 1971.
Patents—Infringement—Non-exclusive licensee not enti
tled to sue for—Patent Act, secs. 2(h), 57.
A non-exclusive licensee of a patent has no right to bring
an action for infringement of the patent.
Spun Rock Wools Ltd. r. Fiberglass Canada Ltd.
[1943] S.C.R. 547, aff'd. (P.C.) 6 C.P.R. 57, distin
guished; King r. David Allen & Sons Ltd. [1916] 2 A.C.
54, referred to.
MOTION.
R. T. Hughes for plaintiff.
I. Goldsmith for defendant.
NOËL, A.C.J.—The defendant applies for an
order striking out the statement of claim herein
pursuant to Rule 419 of th'e Rules of this Court
on the ground that it discloses no reasonable
cause of action and, or in the alternative, that it
is otherwise an abuse of the process of the
Court by reason of the fact that the plaintiff, as
a non-exclusive licensee under Canadian Patent
number 726,675 owned by Bristol-Myers Com
pany, has no status to maintain this action with
out making the said patentee a party thereto as
required by section 57(2) of the Patent Act; and
that an action for alleged infringement of the
said patent against the defendant herein by
Bristol-Myers Company is pending in this Court
being action number T-2153-71. A further argu
ment was raised at the hearing by both counsel
for the defendant and counsel for Bristol-Myers
Company that a non-exclusive licensee has no
right to sue under section 57(2) of the Patent
Act. Counsel for Bristol-Myers Company was
brought into these proceedings as a result of an
order issued by my brother Gibson J. whereby
Bristol-Myers Company was served with the
present motion and "given an opportunity to
make a submission with reference in any event
to the definition of `patentee' in section 2 of the
Patent Act and Rule 1716 of the Rules of this
Court" which deals with the power of the Court
to add parties in a proceeding.
Some background is required for a proper
understanding of those issues which deal with
the right of a licensee to sue for infringement.
In 1933 in Electric Chain Co. of Canada Ltd.
v. Art Metal Works Inc. [1933] S.C.R. 581 at
pages 586-587 (following Heap v. Hartley
(1889) 42 Ch. D. 461) the Supreme Court of
Canada held that a licensee had no right to be a
party even though the statute in force defined a
patentee as "the person for the time being enti
tled to the benefit of the patent". This definition
is still the same as section 2(h) of the Patent
Act. In 1943 in Spun Rock Wools Ltd. y. Fiber
glass Canada Ltd. [1943] S.C.R. 547 at page
559; affirmed (1947) 6 C.P.R. 57 at page 66, the
Supreme Court held, and the Privy Council
affirmed that the definition of the word "paten-
tee" remained the same hut that in view of the
change to section 55(1) (now 57(1)) an exclu
sive licensee claims under the patentee.
Section 57(1) and (2) reads as follows:
57. (1) Any person who infringes a patent is liable to the
patentee and to all persons claiming under him for all
damages sustained by the patentee or by any such person,
by reason of such infringement.
(2) Unless otherwise expressly provided, the patentee
shall be or be made a party to any action for the recovery of
such damages.
A number of issues were raised in this
motion. I will first deal with the right of the
plaintiff to take action and sue for infringement
of the patent. Counsel for the plaintiff takes the
position that (1) the plaintiff is entitled to sue
alone on the basis that under the definition of
section 2(h) of the Patent Act it is "the person
for the time being entitled to the benefit of a
patent" and (2) if it is not, then the owner of the
patent which here happens to be Bristol-Myers
Company, can be brought in as a party as
provided for by section 57(2).
There is no question that a licensee is not a
patentee even if one refers to section 2 of the
Patent Act. It was held not to be so in Electrical
Chain Co. of Canada Ltd. iv. Art Metal Works
Inc. (supra), under the corresponding definition
of a patentee at the time which, as we have
seen, has not changed and I must, therefore,
take it that a licensee today cannot be a
patentee.
Counsel for the plaintiff, however, says that
if the patentee must become a party to the
action to cure it, this can be done either by
allowing the patentee to come in as a voluntary
plaintiff if he wishes to do so or by bringing him
in as a defendant if he refuses, by means of an
order of the Court under Rule 1716 of the Rules
of this Court.
I agree that no action should be defeated by
reason of the non-joinder of a party (Mackay P.
The King [ 1928] Ex.C.R. 149) and if this were
the only impediment to this action, I would not
hesitate to allow the plaintiff to move that Bris-
tol-Myers Company Ltd. be made a party
defendant to the action.
I have, however, serious doubts as to whether
a non-exclusive licensee can sue for infringe
ment even if the patentee is made a party to the
action as I do not feel that he can claim under
the patentee nor that he can claim damages for
infringement of the patent.
I say this notwithstanding the decision
referred to above, that one holding an exclusive
licence can sue, because there is, in my view, a
difference between the latter's situation and
that of a non-exclusive licensee. The latter, in
my view, having a non-exclusive right has not,
therefore, a defined right exclusive of any other
and cannot claim under the patentee.
The non-exclusive licensee has only a non-
exclusive privilege. (In the present case he has
the right to manufacture the product covered by
the patent, upon payment of royalties but he
has no defined right to enforce against infring-
ers.) His only recourse, indeed, is against the
licensor and this recourse is covered by the
licence agreement. He can either cease paying
royalties or, if the licensor has put it out of his
power to fulfil his obligation under the agree
ment, he may, in some cases, have an action in
damages for breach of contract. The right of a
licensee to sue is purely statutory and, in so far
as the Patent Act is concerned, is contained in
section 57(1) of the Patent Act. This section, in
my view, is subject to a strict interpretation and
should go no further than the words of the
section will allow. It is not, in my view, suffi
cient to say that an infringer is liable to all
persons claiming under a patentee in order to
give a right of action. The person suing must
also have a defined right to do so and he must
be able to exercise this right against those per
sons infringing his right. Although there may be
some basis for allowing an exclusive licensee to
sue as a person claiming under the patentee, I
fail to see how a non-exclusive licensee can do
so. The latter, indeed, has no defined right. His
only recourse, therefore, is against the licensor,
as set down in the licence agreement, if any,
and if there is no such recourse, he may then
protect his rights by means of whatever action
he has under the law but such action can be
taken against the licensor only and cannot be
taken against third parties. The non-exclusive
licensee has no recourse against third parties
even if he alleges to be claiming under the
patentee because he has no personal recourse
against those who are affecting his rights. In
King v. David Allen & Sons, Billposting, Ltd.
[1916] 2 A.C. 54 at page 59, Lord Buckmaster
L.C., dealing with a non-exclusive licence said:
My Lords, I have looked anxiously and carefully through
this document to see whether it was possible to derive from
its construction anything except the creation of a personal
obligation between the appellant and the respondents with
regard to the use of this wall, and I am unable to find it.
(Italics are mine).
I believe that here also there is but a personal
obligation between the licensee and the plain
tiff. Furthermore an examination of the licence
document shows that the parties have provided
for third party infringement of the patent in
article V thereof where it is said that in the case
of infringement of the patent by third parties,
the licensee shall notify the patentee and fur
nish information as to the infringement and
request it to initiate appropriate steps to bring
about a discontinuance of such infringement.
The licence document also provides that if
within a period of 120 days after receipt of such
notice and request, the patentee fails to notify
the licensee that it will initiate a discontinuance
of such infringement or notifies the licensee
that it does not intend to do so, the licensee
shall be relieved of its obligation to pay
royalties.
The above, in my view, is the only recourse
the plaintiff has under its non-exclusive licence
and it has no other as, once again, it has no right
to claim under the patentee against infringers
but is restricted to whatever action it can take
under the licence agreement. This solution also
happens to deal effectively with the practical
problem involved by non-exclusive licensees or
non-exclusive sub-licensees or sub-sub-licen
sees taking action against infringers with the
consequent difficulties involved in segregating
or apportioning or identifying the damages or
loss of profits, to which each non-exclusive
licensee, sub-licensee or sub-sub-licensee is
entitled.
I should add that if the present decision is
reversed on appeal, the plaintiff may then move
(unless the patentee volunteers to become a
plaintiff therein) to bring in the Bristol-Myers
Company as a defendant in this action under
Rule 1716 of the Rules of this Court, and both
actions (the present one and action No. T-2153-
71) should then be allowed to proceed to trial at
which time, however, steps should be taken to
cause both of them to be heard by the same
judge in order to ensure a proper segregation
and distribution of the damages or loss of prof
its and unnecessary duplication or overlapping.
The possibility of causing the present plaintiff
to become a plaintiff in the other action should
also be considered.
The plaintiff having no status in this action, it
shall be dismissed with costs against it.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.