T-1849-82
Midway Mfg. Co. (Plaintiff)
v.
Melvin Bernstein, 436635 Ontario Limited, carry
ing on business as Amusement Sales & Distribu
ting, Fun Donuts Ltd., Karrum Amusements Ltd.,
Karsten Rumpf, Canadian Amusement Sales and
Distributing Ltd., Raymond Alexander Halady,
Porta -Flex Products Limited, Coinex Video
Games Inc., Donald F. Guy, David Carnie, Arc
Video Distributors Inc., Daniel O'Leary, Con
Waugh, Metro Fun Fair Inc., Kiril Glavanov,
Patricia Rutty, Tivoli Funfair Limited, Arthur S.
Richman, Astromin Limited, Lawrence Isadore
Herman, Kurt Reichenberger, Harold Schneider-
gruber, Peg's Pinball Parlour Inc., Margaret Eliz-
abeth McKinlay (Defendants)
Trial Division, Collier J.—Vancouver, September
22, 23, 24, 1982.
Copyright — Practice — Interlocutory injunction set aside
because relevant and material facts not disclosed — Anton
Piller portions of orders allowing entry by plaintiff of defend
ants' premises to remove documents pertaining to alleged
breach of copyright not affected by non-disclosure.
This is a motion to set aside ex parte orders restraining the
defendants from infringing the plaintiff's copyright in three
video games and permitting the plaintiff to enter the defend
ants' premises to search for and remove documents relating to
the games. The orders were granted ex parte because of the
plaintiff's submissions that the games and documents would
likely disappear if notice were given. The plaintiff's profits from
the video games is from their sale to distributors. The plaintiff
did not reveal that it had ceased the manufacture and sale of
one of the games, Pac-Man, two months before the affidavits in
support of the ex parte motion were sworn, nor that it had
introduced a variation of the game.
Held, the motion is allowed in part. On an ex parte motion
for an injunction the plaintiff must establish irreparable harm.
Since Pac-Man no longer existed at the time of the motion, no
economic harm can be established. The injunction is set aside.
The Anton Piller portions of the orders will stand since there
was sufficient evidence to warrant them and the non-disclosure
does not bear directly on that aspect of the orders.
CASES JUDICIALLY CONSIDERED
FOLLOWED:
Thermax Limited v. Schott Industrial Glass Limited,
[1981] F.S.R. 289 (Ch. D.); Gulf Islands Navigation
Ltd. v. Seafarers International Union of North America
(Canadian District) et al. (1959), 18 D.L.R. (2d) 216
(B.C. S.C.).
REFERRED TO:
The King v. The General Commissioners for the purposes
of the Income Tax Acts for the District of Kensington,
[1917] I K.B. 486; Dalglish v. Jarvie (1850), 42 E.R. 89
(Ch. D.); Lazard Brothers and Company v. Banque
Industrielle de Moscou, [1932] 1 K.B. 617; Lazard
Brothers and Company v. Midland Bank, Limited,
[1933] A.C. 289; Griffin Steel Foundries Ltd. v. Canadi-
an Association of Industrial, Mechanical & Allied
Workers et al. (1977), 5 C.P.C. 103 (Man. C.A.); Bar-
deau Ltd. et al. v. Crown Food Service Equipment Ltd. et
al. (1982), 36 O.R. (2d) 355 (H.C.J.); Bardeau Ltd. v.
Crown Food Service Equipment (further decision of
Steele J., unreported, dated April 23, 1982); Kraupner v.
Ruby (1957), 7 D.L.R. (2d) 383 (B.C. C.A.); Canadian
Pacific Railway v. United Transportation Union, Local
144, et al. (1970), 14 D.L.R. (3d) 497 (B.C. S.C.).
COUNSEL:
Alfred S. Schorr and Ivor M. Hughes for
plaintiff.
Burton B. C. Tait, Q.C. for defendants Coinex
Video Games Inc., Donald F. Guy, David
Garnie, Arc Video Distributors Inc., Con
Waugh.
R. H. C. MacFarlane for defendants Melvin
Bernstein, 436635 Ontario Limited, carrying
on business as Amusement Sales & Distribu
ting, Fun Donuts Ltd., Kurt Reichenberger,
Harold Schneidergruber, Peg's Pinball Par
lour Inc.
SOLICITORS:
Ivor M. Hughes, Toronto, for plaintiff.
McCarthy & McCarthy, Toronto, for defend
ants Coinex Video Games Inc., Donald F.
Guy, David Garnie, Arc Video Distributors
Inc., Con Waugh.
Fitzsimmons, MacFarlane, Toronto, for
defendants Melvin Bernstein, 436635 Ontario
Limited, carrying on business as Amusement
Sales & Distributing, Fun Donuts Ltd., Kurt
Reichenberger, Harold Schneidergruber,
Peg's Pinball Parlour Inc.
The following are the reasons for judgment
delivered orally in English by
COLLIER J.: There are here three similar
motions on behalf of certain of the defendants.
The motions are to set aside two orders made by
me on March 22 and March 31, 1982.
The plaintiff commenced this action on March
18, 1982. It alleged it is the owner of copyright in
three coin-operated electronic audio visual or video
games known as Galaxian, Pac-Man and Rally-X;
that it manufactured and sold the games to dis
tributors; that the defendants have infringed copy
right by selling, displaying or operating for profit
"pirated copies" of the games.
An ex parte motion, on behalf of the plaintiff,
was heard by me on March 22, 1982. The relief
sought was an Anton Piller* type of order permit
ting the plaintiff and its representatives to enter
the defendants' premises to search for and remove
documents relating to the alleged infringing
games, and for the defendants to deliver up all
infringing games, apparatus, etc., for custody until
trial. As well, an interlocutory injunction forbid
ding infringement, which frequently is part of an
Anton Piller order, was sought.
The reason for requesting the motion to be
heard ex parte was the fear, asserted by the plain
tiff, that if notice of the proceedings were given,
games, apparatus and documents would likely
disappear.
After consideration of the material in support of
the motion and submissions on behalf of the plain
tiff, I directed the matter to be heard ex parte.
The plaintiff filed four affidavits:
(a) Laurence Berkelhamer, deposed to on Feb-
ruary 11, 1982;
* [Anton Piller KG v. Manufacturing Processes Ltd. et al.,
[1976] 1 Ch. 55; [1976] 1 All E.R. 779.]
(b) Arthur V. Weller, deposed to on March 11,
1982;
(c) Jeffrey Chapnick, deposed to on March 11,
1982;
(d) Donald L. Welsh, deposed to on March 11,
1982.
Berkelhamer was the plaintiff's sales director for
the United States and Canada. Weller and Chap-
nick had been assigned the role of investigators to
obtain evidence supporting the plaintiff's com
plaints against the defendants. Welsh was an
attorney in a Chicago, Illinois law firm. He was
principally responsible for representing the plain
tiff in copyright and unfair competition litigation
in the United States in respect of some of the
plaintiff's video games, including the three games
referred to in this action.
Based on the affidavit evidence, and after hear
ing submissions by counsel for the plaintiff, I made
an order restraining the defendants (except Tivoli
Funfair Limited) from infringing the plaintiffs
copyright in the three games, and from parting
with possession of, or hiding, or defacing or
destroying any relevant documents. The injunction
was effective until March 31, 1982.
The order I made included so-called Anton
Piller provisions requiring the corporate defend
ants and certain of the individual defendants to
permit entry by the plaintiff and its representatives
onto those defendants' premises for the purpose of
searching for and removing relevant documents,
and requiring the same defendants to deliver up to
sheriffs all infringing games, apparatus, etc.
There was some unavoidable delay in executing
the order. It was finally carried out late in the
afternoon of March 30, 1982. The plaintiff at the
same time served a motion, returnable in Toronto
on March 31, to continue my order of March 22.
A number of the defendants consulted solicitors.
There was obviously no time for proper instruc
tions to be obtained. Some of the defendants
appeared on March 31, 1982. Some motions were
filed to set aside my order. It was apparent further
time was required. After considering the matter, I
continued my previous order. One of the purposes
in doing so was to permit the defendants to cross-
examine on the affidavits filed, and to gather their
own evidence and material in order to take what
ever steps they might see fit.
The cross-examination of the deponents earlier
referred to has taken place.
As I said at the outset, the motions presently
before me are to set aside my orders of March 22
and March 31.
The chief grounds advanced by the defendants
are that there was non-disclosure of relevant facts
in the affidavit material, particularly in the affida
vit of Berkelhamer.
It is obvious, from reading all the affidavits, a
major complaint of the plaintiff was infringement
of its Pac-Man game. The whole inference to be
drawn, when the affidavit of Berkelhamer is read
as a whole, is that Pac-Man was very successful
and that copyright in it was being infringed.
Again, a strong inference to be drawn from the
affidavit as a whole, an inference which I in fact
drew on March 22, was that the plaintiff was
suffering economic loss because its sales of Pac-
Man were being interfered with by the operations
of the alleged infringers.
But, in fact, as it now appears from Berkelham-
er's cross-examination, the plaintiff had ceased
manufacturing and selling Pac-Man approximate
ly two months before his affidavit was sworn. The
plaintiff had brought out a new version of Pac-
Man called MS Pac-Man. It was enjoying great
success in the marketplace. Berkelhamer knew
those facts. For reasons, presumably known to him
and his United States legal advisers, it was not
thought necessary to bring forward those matters.
1 digress here to point out the plaintiff's profit
from video games is from the sale to distributors.
It obtains no economic benefit, other than perhaps
good will, from the operators of the games, or from
the customers who pay to play the games.
Berkelhamer said, in part, in paragraph 13:
My company does not manufacture any variations of this game
"where the physical characteristics of the Adventurer have
been changed", or use any variation of its trade mark Pac-Man
on any of its games.
The words "where the physical characteristics of
the Adventurer have been changed" were appar
ently inserted after Berkelhamer questioned the
initial wording and having in mind the MS Pac-
Man game.
It is clear to me MS Pac-Man is, indeed, a
variation of Pac-Man.
In paragraph 16, it was said in part:
My company does not market the "Pac-Man" game under any
other name.
That is not in accordance with the facts.
In paragraph 25 this was said:
Midway Mfg. Co. has had at least two games which have been
popular for an inordinate length of time in relation to the video
game market. One such game was Galaxian. Pac-Man is
presently enjoying success and it is my belief that it can be
successfully sold and distributed for as long a period if not a
longer period of time, as Galaxian, if not for the fact of wide
scale piracy, the effect of which being virtually impossible to
determine.
In paragraph 29 this appears:
Because the Pac-Man game is unique and is still in the midst of
market acceptance, any unauthorized exploitation of the game
poses the risk that the market will be flooded or otherwise
improperly managed before the Pac-Man game has achieved its
potentials [sic].
In paragraph 26, this was said:
If an injunction is not granted with reference to the matters
complained about in these proceedings, irreparable damage will
be suffered by Midway Mfg. Co. in that although with some
difficulty the actual damages might conceivably be calculated
with reference to the Galaxian, Pac-Man and Rally-X games,
the acts complained of would destroy the legitimate distribution
of electronic video games in Canada.
Further in paragraph 26:
The conduct of the Defendants would result in putting Midway
Mfg. Co. out of business in Canada.
Later in paragraph 26:
Furthermore, if an interlocutory injunction is not now granted,
by reason of the length of time, which I am advised by Counsel
and do verily believe, that it will take until this action reaches
trial, which time lapse would probably be greater than the
commercial life of the games themselves, an injunction at trial
would accomplish nothing more than a licence fee for
piracy ....
The defendants submit that when all these para
graphs are read together, the implication is that
Pac-Man is still being manufactured and sold; that
the plaintiff was suffering economic loss, presum
ably because potential customers in the market
place would buy, or were buying, cheaper and
inferior "pirated" games.
I agree with the defendants' submission.
The omission to set out the current status of the
Pac-Man game, and the introduction of the MS
Pac-Man game, was a relevant and material fact.
Counsel for the plaintiff, candidly and com
mendably, indicated, if he had known those facts
on March 22, 1982, he would have disclosed them
to me. The whole argument put forward on behalf
of the plaintiff is that the facts, while perhaps
relevant, were not material.
I disagree.
It was my view at the time, and it is still my
view, that a plaintiff, particularly on an ex parte
motion for an injunction, must establish irrepa
rable harm.
I read (past tense) the Berkelhamer affidavit as
establishing irreparable harm primarily because of
the interference in the sales of Pac-Man. But at
the date of his affidavit there was, in effect, no
more Pac-Man.
While I appreciate the dangers of hindsight I
say this: If the status of Pac-Man and MS Pac-
Man had been disclosed to me, I might well have
considered requiring that the defendants be noti
fied of that part of the motion requesting an
injunction.
In any event, if all these facts had been in front
of me, I would have had some doubt as to whether
the plaintiff had proved a case of irreparable
harm, warranting an injunction, rather than the
ordinary remedy of damages.
The law is clear that where there has been
non-disclosure of relevant facts, whether deliberate
or unintentional, an ex parte injunction can, and
usually ought to, be set aside.
I rely on the following cases:
The King v. The General Commissioners for the purposes of
the Income Tax Acts for the District of Kensington, [1917] 1
K.B. 486.
Dalglish v. Jarvie (1850), 42 E.R. 89 (Ch. D.).
Lazard Brothers and Company v. Banque Industrielle de
Moscou, [1932] 1 K.B. 617.
Lazard Brothers and Company v. Midland Bank, Limited,
[1933] A.C. 289.
Griffin Steel Foundries Ltd. v. Canadian Association of Indus
trial, Mechanical & Allied Workers et al. (1977), 5 C.P.C. 103
(Man. C.A.).
Bardeau Ltd. et al. v. Crown Food Service Equipment Ltd. et
al. (1982), 36 O.R. (2d) 355 (H.C.J.).
Bardeau Ltd. v. Crown Food Service Equipment (further deci
sion of Steele J., unreported, dated April 23, 1982).
Kraupner v. Ruby (1957), 7 D.L.R. (2d) 383 (B.C. C.A.).
Canadian Pacific Railway v. United Transportation Union,
Local 144, et al. (1970), 14 D.L.R. (3d) 497 (B.C. S.C.).
Thermax Limited v. Schott Industrial Glass Limited, [1981]
F.S.R. 289 (Ch. D.).
Gulf Islands Navigation Ltd. v. Seafarers International Union
of North America (Canadian District) et al. (1959), 18 D.L.R.
(2d) 216 (B.C. S.C.).
I make specific reference to the Gulf Islands
Navigation case, particularly at page 218, where
Wilson J., later Chief Justice of the Supreme
Court of British Columbia, laid down what 1 adopt
as an accurate and terse summary of the law in
respect of discharging ex parte injunctions where
there has been non-disclosure. I also rely on this
case as an excellent dissertation as to what a judge
can consider, or what he ought to consider, when a
motion is made to dissolve an interlocutory ex
parte injunction, where non-disclosure is not an
issue.
I have no hesitation here in setting aside my two
orders in respect of the injunction provisions.
There are no mitigating facts in favour of the
plaintiff.
Browne-Wilkinson J., in the Thermax case
[supra] said this [at page 298]:
I therefore reach the conclusion that material facts known to
the plaintiff company were not disclosed to Woolf J. This was
an error of judgment only but in my judgment an important
one. As time goes on and the granting of Anton Piller orders
becomes more and more frequent, there is a tendency to forget
how serious an intervention they are in the privacy and rights of
defendants. One is also inclined to forget the stringency of the
requirements as laid down by the Court of Appeal. In my
judgment the rule of full disclosure to the court is almost more
important in Anton Piller cases than in other ex parte applica
tions. Since Anton Piller orders give compulsory rights of
inspection, once those inspections have taken place the informa
tion procured from it is in the hands of the other side and the
situation is irreversible. I therefore think it is very important
indeed that in making applications it should be in the forefront
of everybody's mind that the court must be fully informed of all
facts that are relevant to the weighing operation which the
court has to make in deciding whether or not to grant the order.
It is true Browne-Wilkinson J. was referring to
Anton Piller type orders. But in that case, the
order in issue also included the usual negative type
injunction. In any event, I adopt his words as my
own, in applying them to the situation where there
has been non-disclosure in an ex parte injunction
application.
I indicated at the end of argument I did not
propose to set aside the so-called Anton Piller
portions of my two orders. In my view, there was
sufficient evidence before me warranting the
making of those orders. The non-disclosure
referred to does not bear directly on that aspect of
the relief sought on March 22 by the plaintiff.
There will be appropriate orders made giving
effect to these reasons. The defendants who
brought these motions will recover, in any event of
the cause, 75% of their costs of this motion and of
the hearing in Toronto on March 31.
I will deal with the request that there be a
reference in respect of any damages sustained by
these defendants. I think what is required is a
proper motion for a reference and also for direc
tions, with notice to the plaintiff. It seems to me
there will have to be some kind of evidentiary
procedure set up for the reference, including
examination for discovery and discovery of docu
ments. 1 am directing, in respect of the request for
a reference, that a proper motion be made pursu
ant to the rules, not only for a reference, but for
directions. The motion will have to be supported
by affidavit material.
In respect of the request to increase the party
and party costs, or to set a fixed sum or amount,
my sympathies are with you, Mr. Tait. But all you
are going to get is my sympathy.
There is no doubt the tariffs, compared with
many of the provinces, are low. I was for several
years the chairman of the Judges Rules Commit
tee. It is, fortunately or unfortunately, the Judges
who make the rules in this Court. While I was
chairman, the Judges Committee worked jointly
with a Canadian Bar Committee. One project we
undertook was a survey of the tariff of costs in the
various provinces, as compared to the tariff in the
Federal Court. We all knew what the answer
would be. We wanted something to compare.
Many of us felt the Federal Court tariffs were low.
That project, I understand, has been completed.
It will be brought before the Judges Rules Com
mittee. It may be there will be a change.
My personal position has always been, that
while I had sympathy for the criticism of low
tariffs, I have never yet increased, in any case, the
tariffs. Some of my colleagues have. I take the
view any increase should rarely be made. I find
support in two court of appeal cases. The name
and citations, at the moment, escape me. I agree
the tariffs are extremely low. But it is my view the
remedy is to change the rules setting out the
tariffs, rather than for judges to get around the
tariffs by, in a particular case, increasing them. I
heard the case of Xerox v. I.B.M. [T-730-72, July
5, 1977, not reported]. A tremendous amount of
preparation went into it. The trial went for
months. I refused to increase the tariffs in that
case, for the same reason I deny it in this case. A
judicial increase of costs makes a mockery of the
rules.
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.