Statements made outside Canada may form basis of Section 7(a) claim

In J2 Global Communications Inc v Protus IP Solutions Inc (Case 2008 FC 760, June 18 2008), the Federal Court has considered whether statements made outside of Canada can form the basis for a claim under Section 7(a) of the Trademarks Act.
Section 7(a) prohibits the making of a false and misleading statement tending to discredit the business, goods or services of a competitor. The statement must involve some element of intellectual property, otherwise Section 7(a) will not apply. This section has been used to prohibit comparative advertising which may tend to disparage a competitor’s product. There is case law that the false and misleading statement must have been made in Canada in order for the Canadian courts to have jurisdiction. In addition, there is case law that correspondence sent to persons outside Canada does not attract liability under Section 7(a).
J2 Global Communications Inc owned Canadian patents which were allegedly infringed as a result of Protus IP Solutions Inc's internet-based fax services. Protus counterclaimed in the underlying action, alleging that the three patents at issue were invalid for anticipation, obviousness and over breadth, among other grounds. Protus further asserted that J2 had made false and misleading statements in violation of Section 7(a) of the Trademarks Act and Section 52 of the Competition Act.
During the discovery examinations, questions about false and misleading statements made to third parties outside of Canada were refused or taken under advisement. Protus filed a motion requesting that the court order that those questions be answered.
The primary consideration for the court was relevance. However, even if a question is relevant, the court may still decline to order the question to be answered if:
  • it is not at all likely to advance the questioner's legal position;
  • the answer to a question would require much time, effort and expense to obtain and its value would appear to be minimal; or
  • the question forms part of a 'fishing expedition' of vague and far-reaching scope. 
In this case, the questions related to the pleading that false and misleading statements were made. Notwithstanding the existence of some case law to the contrary, the court held that the questions had to be answered. The court stated that relevance in this case was governed by the non-admitted allegations of fact in the pleadings at the time of discovery. There had been no motion to strike those aspects of the pleadings dealing with statements made by J2 in the United States. According to the court, it was at least debatable whether statements made outside of Canada can form the basis for a claim under Section 7(a) of the Trademarks Act and/or Section 52 of the Competition Act. In addition, the court pointed out that there were damages issues to which such statements could be relevant.
Absent a successful motion to strike an aspect of the pleadings, any question relevant to the pleadings must be answered on discovery. The option open to J2 is to challenge the pleading. The validity of the pleading should not be resolved in the context of a refusals motion. A party cannot simply ignore a pleading, even if there is case law to the contrary. There must be a motion to strike if discovery is to be limited.
John Macera, Macera & Jarzyna - Moffat & Co, Ottawa

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