Excalibre Oil Tools Ltd v. Advantage Products Inc., 2016 FC 1279

This decision concerned the validity and/or infringement of a number of claims in three Canadian Patents. The Plaintiffs in the impeachment action were collectively referred to as the Excalibre Parties. The Defendants in the impeachment action were collectively referred to as the API Parties. In a decision that turned on the facts, the Court held that some of the impugned claims were valid, but not infringed by any version of a torque anchor sold by the Excalibre Parties (the "CTA Torque Anchors").

In the impeachment action, the Excalibre Parties also brought a claim under section 7(a) of the Trade-marks Act, asserting that the API Parties damaged the Excalibre Parties' business relations through false and misleading statements. The Court agreed that the Excalibre Parties were entitled to damages against API. In this case, the evidence established the three essential elements required for a claim under section 7(a): 1) a false and misleading statement; 2) tending to discredit the business, wares or services of a competitor; and 3) resulting damages.

The Court considered a number of cease and desist letters, sent on behalf of API, to customers and former customers of the Excalibre Parties. Given the finding of no infringement, the Court found that the letters contained false and misleading statements. However, the Court noted that not every assertion of a patent or other intellectual property, which is subsequently held to be invalid, will be held to constitute a false and misleading statement per section 7(a).

The Court concluded that it was clear that all of the letters to Husky and the letter to Bronco (both customers or former customers) were threatening, and not simply informative, since they contained threats that they would be sued if they did not stop sourcing or purchasing CTA Torque Anchors. The statements were also found to discredit Excalibre's CTA Torque Anchors, as is generally the case with threatening cease and desist letters .

Turning to the third element required under section 7, the Court stated that it is settled law that evidence of actual or potential damage is a necessary element for finding liability. The Court found that the evidence established that the damage to the Excalibre Parties' business due to Bronco's and Husky's decisions to cease sourcing CTA Torque Anchors was caused by the false and misleading statements made in the letters. Thus, the Excalibre Parties were entitled to damages against API, which are to be determined in a reference after trial. However, the Court did not accept Excalibre Parties' argument that resulting damage included any cessation in sale of other Excalibre products to customers beyond the CTA Torque Anchors.