Nortel Networks Corporation (Re), 2016 ONCA 749

The Ontario Court of Appeal upheld a decision granting partial summary judgment to Nortel and dismissing SNMP Research's claim for disgorgement of profits attributable to the unauthorized transfer of SNMP's intellectual property (the "profit claim"). SNMP had licenced its software products to Nortel under an agreement providing that Nortel would keep the source code strictly confidential. During Companies' Creditor Arrangement Act ("CCAA") proceedings, some of SNMP's source code was transferred along with Nortel's assets. SNMP sued Nortel, and advanced its profit claim and a claim for breach of contract, copyright infringement and breach of confidence (the "damages claim"). The Court below found that while Nortel had infringed SNMP's copyright, SNMP failed to show that Nortel profited from the unauthorized transfer of SNMP's intellectual property. Rather, the evidence established that the companies buying assets knew they were not buying SNMP's software and would instead have to negotiate licencing fees with SNMP directly.

The Court of Appeal acknowledged that leave to appeal in CCAA proceedings is granted sparingly and only where there are serious and arguable grounds that are of real and significant interest to the parties. In determining whether leave should be granted, the Court considered four factors, including if the point on the proposed appeal is of significance to the practice. The Court disagreed with SNMP's submissions that the appeal raised broader issues about the intersection of copyright law and insolvency law. Instead, the supervising judge found that SNMP did not meet its burden under s. 35(2) of the Copyright Act to prove that Nortel derived revenues from its infringement of SNMP's copyright.