Hospira Healthcare Corporation v. The Kennedy Institute of Rheumatology, 2016 FCA 215

For intellectual property owners undergoing litigation before a prothonotary, it is important to note that the Federal Court of Appeal (“FCA”) has just altered the standard of review to give greater deference to discretionary orders made by prothonotaries. This means that it will be more difficult to overturn the decision of a prothonotary, which is a judicial officer who exercises many of the same powers as Federal Court judges, including mediation, case management, practice motions, and trials of actions in which up to $50,000 is claimed. In this case, a five-judge panel of the FCA has held that the standard of review applicable to discretionary orders made by prothonotaries that was enunciated in Canada v. Aqua-Gem Investments Ltd., [1993] 2 FC 425 (“Aqua-Gem”) should be abandoned. In its place, the court adopted the standard that was set out by the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33 (“Housen”), which is consistent with the standard of review applicable to the decisions of judges.

The Prothonotary Decision on the ‘630 Patent Litigation

The Kennedy Institute of Rheumatology Research (“Kennedy”) is the owner of Canadian Patent No. 2,261,630 (the “‘630 Patent”). [3] Hospira Healthcare Corporation (“Hospira”) commenced an action against Kennedy seeking declarations that the ‘630 Patent was invalid and that Hospira’s proposed product did not infringe the ‘630 Patent. [4] Hospira had requested two days of discovery with each of the two inventors of the ‘630 Patent, however, examination of each inventor was terminated by Kennedy at the end of the first day. [6] In response, Hospira brought a motion seeking to continue the examination of the inventors. [7]

The motion was heard by the prothonotary who had been case managing the action from the outset. She ordered that Hospira was entitled to an additional half-day examination with each inventor, to be conducted by teleconference. [8] A motions judge dismissed Hospira’s appeal after applying the standard of review set out in Aqua-Gem, finding that the decision was not vital to the final issue of the case and the order was not clearly wrong. [9]

The issues at hand in this current appeal were whether the court should revise the standard of review applicable to discretionary orders made by prothonotaries and whether the motions judge was wrong in refusing to interfere with the prothonotary’s order. [11]

The Aqua-Gem Standard of Review is Rejected

Under the Aqua-Gem standard, discretionary orders of prothonotaries are reviewable on appeal in two circumstances: 1) if the decision was clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle of law or upon a misapprehension of the facts, or 2) if it raises a question vital to the final issue of the case. In the second circumstance, where a vital question is raised, the judge can exercise their own discretion de novo. [36]

The Housen Standard of Review is Adopted

The standard of review enunciated in Housen is essentially the same as the first circumstance in the Aqua-Gem standard and excludes the ability to review a discretionary order if it raises a question vital to the final issue of the case. [26] Nadon JA, writing for the FCA, wrote “It is my respectful view that it is not in the interests of justice to continue with a plurality of standards when one standard, i.e. the Housen standard, is sufficient to deal with the review of first instance decisions.” [28]

There were two primary reasons why the FCA adopted the Housen standard over the Aqua-Gem standard. First, there has been a great deal of confusion as to what constitutes a question vital to the final issue of the case. [46] Second, prothonotaries at not viewed as inferior judicial officers and there is no principled basis for distinguishing between the decisions made by them and those of judges for the purpose of standard of review. [51][63] As such, the second circumstance of the Aqua-Gem standard regarding a vital question has been abandoned.

Upon review of the prothonotary’s and motion judge’s decisions, the FCA found that there was no error in law or misapprehension of the facts, and therefore deferred to the decision of the prothonotary. [105]