Director not personally liable for alleged corporate IP infringement

In Sunsolar Energy Technologies v Flexible Solutions International Inc, the Federal Court of Canada has struck out an action that claimed that an officer/director was personally responsible for the allegedly infringing actions of two corporate defendants.

Sunsolar Energy Technologies brought the action against Daniel O'Brien, the president of Flexible Solutions International Inc and Flexible Solutions Ltd, on the grounds that he "authorized and directed" a course of deliberate and wilful trademark infringement by the corporate defendants. The Flexible Solutions companies were allegedly infringing Sunsolar Energy's TROPICAL FISH trademark. However, Sunsolar Energy's statement of claim failed to include any material facts to support the allegations against O'Brien.

At first instance, the prothonotary refused to strike down the action against O'Brien as:

"the statement of claim point[ed] to circumstances on which it could be reasonable to conclude that Mr O'Brien, as president of both of the corporate defendants, could have been involved in a deliberate, wilful and knowing pursuit of a course of conduct likely to constitute infringement, or a course of conduct reflected in an indifference to the risk of it."

However, on appeal to the Federal Court, Justice Rouleau agreed with the Flexible Solutions companies' submission that this was too speculative a test. He ruled instead that an officer/director must be more than "involved" in actions of a corporate defendant to be liable.

Rouleau held that to be a party to an action, it must not only be alleged that a corporate officer/director actually knows of likely infringement or be indifferent to the risk thereof, but in addition, the basis for this knowledge of likely infringement must be pleaded with particularity in order for a claim against an officer/director to stand.

This ruling confirms that the Federal Court will not hesitate to strike out unparticularized claims against corporate officers/directors at the pleadings stage. Plaintiffs will not be permitted to embark on speculative actions against officers or directors without first pleading with particularity the factual basis indicating that the officer/director (i) made the infringing actions "his own", or (ii) had actual knowledge or indifference to infringement.

Franc Boltezar and Emily Stock, Smart & Biggar/Fetherstonhaugh & Co, Vancouver