Forum Selection in Counterfeiting Cases

Most intellectual property disputes can be advanced in either the Federal Court or the Provincial Court. The former is a court created by statute; the latter is a court with inherent jurisdiction to hear all matters unless excluded by statute. The statutory basis for this concurrent jurisdiction can be found at s. 20(2) of the Federal Courts Act, R.S.C. 1985, c. F-7, which reads as follows:

(2) The Federal Court has concurrent jurisdiction in all cases, other than those mentioned in subsection (1), in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention, copyright, trademark, industrial design or topography referred to in paragraph (1)(a).

Section 20(1) of the Federal Courts Act, grants exclusive original jurisdiction to the Federal Court between subject and subject, as well as otherwise, in respect of the right to impeach or annul any patent, or to have any entry in any register of copyrights, trademarks, industrial designs or topographies made, expunged, varied or rectified. The Federal Court has also been granted exclusive jurisdiction in respect of all cases of conflicting applications for patents, or for the registration of any copyright, trademark, industrial design or topography.

This exclusive original jurisdiction of the Federal Court extends to actions in rem, such that determinations can have effect beyond the lis between the parties.

The Supreme Court of Canada has prescribed a three-part test to support a finding of jurisdiction in the Federal Court. The essential requirements, as outlined in ITO v Milda Electronics Inc., [1986] 1 SCR 752 at 766, are:

1. There must be a statutory grant of jurisdiction by the federal Parliament
2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction
3. The law on which the case is based must be “a law of Canada” as the phrase is used in s.101 of the Constitution Act, 1867.

In addition, certain statutory provisions mandate exclusive recourse to the Federal Court, rather than the Superior Court. Specifically, and by way of example, s. 56 of the Trademarks Act, R.S.C. 1985, c. T-13, grants to the Federal Court the exclusive right to hear appeals from a decision of the Registrar of Trademarks, while s. 57 of the Trademarks Act grants the Federal Court exclusive original jurisdiction to strike out or amend entries on the trademarks register.

Some tips to help guide forum selection include:

• If the cause of action is based on common law passing-off and there is no statutory cause of action, the action is not properly within the jurisdiction of the Federal Court.
• Similarly, trade secret theft is founded on common law tort of breach of confidence and falls outside the scope of the Federal Court’s statutory jurisdiction.
• Copyright infringement can be pursued in either Federal or Provincial Courts for works infringed in Canada. However, infringements of copyright in these same works outside of Canada can only be pursued in Provincial Courts, not in Federal Court
• Intellectual property disputes that include contractual disagreements have been held to fall within the jurisdiction of the Federal Court if the “pith and substance” of the action primarily concerns a patent, trademark or copyright. However, if the main purpose of the action is to seek a remedy in relation to a breach of contractual terms rather than to establish a claim of infringement, the Federal Court does not have jurisdiction. (Saunder Rennie Garton, Federal Courts Practice, 2017 ed. (Toronto: Thomson Carswell, 2016) at 199, summarizing Netbored Inc. v. Avery Holdings Inc., [2005] F.C.J. No. 620(F.C.))
• According to R. 189 of the Federal Courts Rules, the Federal Court only has jurisdiction to deal with an allegation in a counterclaim that is capable of standing on its own as a separate action. Accordingly if the counterclaim is primarily one of tort or contract and not contingent upon a finding of infringement it will likely be struck as being beyond the jurisdiction of the Federal Court. (Innotech Pty. Ltd. v. Phoenix Rotary Spike Harrows Ltd., [1997] F.C.J. No. 855 (F.C.A.) )
• The Federal Court is not a court of last resort for parties who are dissatisfied with the outcome of other court proceedings. “To the extent that a plaintiff is dissatisfied with the outcome of any court proceeding, the remedy is to pursue avenues of appeal, not to commence a lawsuit in this Court. Such allegations are vexatious, disclose no reasonable cause of action, and are an abuse of process.” (Mitchell v Academy of Learning Mississauga, 2022 FC 607 (F.C.))
• If the wrongful conduct is taking place in more than one province and you are seeking an injunctive remedy, the Federal Court’s national jurisdiction is advantageous because there are no extra steps needed to enforce the injunction across Canada.
• The Federal Court is experienced in dealing with intellectual property matters, which can lead to efficiencies to the benefit of the litigants.
• Consideration should be given to other procedural advantages associated with selecting the provincial courts. (Quebec has seizure before judgment provisions, the proclivity to issue interlocutory injunctions, the availability of summary trial procedures, etc.)

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