Ontario Court declines jurisdiction, stays Ontario plaintiff’s trademark infringement claim

Magnum Integrated Technologies Inc. v. Intergrated Industrial Systems, 2010 ONSC 3389 (CanLII) (“Magnum Integrated“) applies the new Van Breda test for jurisdiction simpliciter and highlights how concurrent foreign proceedings impact on the judicial characterization and interpretation of jurisdictional facts.
In Magnum Integrated, Brampton based plaintiff, Magnum commenced an action alleging unauthorized use and passing off, of “materials, drawings, designs, documents, records, and/or computer-stored information relating to the business of” Magnum by the defendants.  Magnum also claimed breach of fiduciary duty, interference with contractual relations, conversion and the use of the trade-marks SENDZIMIR, ZMILL and AS U ROLL (collectively “trade-marks”).  The statement of claim included declaratory and injunctive relief as well as general and punitive damages.  Service ex juris was alleged on the basis of rule 17.02(a) (property in Ontario), (h) (damage sustained in Ontario) and (i) (injunction claimed in Ontario) of the Rules of Civil Procedure.  During the course of argument, Magnum also relied on rule 17.02(g) (tort committed in Ontario).
The defendants moved to set aside service of the statement of claim outside Ontario and for dismissal of the action on jurisdictional grounds or alternatively, for a stay on the basis of forum non conveniens.  Justice Grace granted the defendants’ motion. The motion judge considered whether the plaintiff, Magnum’s claims fell under any of the enumerated presumptions for subject-matter jurisdiction based upon a “real and substantial connection”: Van Breda v. Village Resorts Limited, 2010 ONCA 84 (CanLII), 2010 ONCA 84 (C.A.), (at paragraph 109, Sharpe J.A.) Plaintiff’s counsel relied upon the following portions of Rule 17.02:
“17.02 A party to a proceeding may, without a court order, be served outside Ontario with an originating process…where the proceeding against the party consists of a claim or claims,
(a)   Property in Ontario – in respect of real or personal property in Ontario;
(g)   Tort committed in Ontario – in respect of a tort committed in Ontario;
(i)      Injunctions – for an injunction ordering a party to do, or refrain from doing, anything in Ontario or affecting real or personal property in Ontario;”
The court found that Rule 17.02(a) was inapplicable. While the subject-matter was tangible property, “such as drawings or designs, located in Ontario…. Magnum’s claims in respect of trade-marks are restricted to those in Canada. ” Grace, J. further noted that “…the assumption of jurisdiction to determine rights in rem presupposes that the Ontario based property is the primary object of the action as opposed to rights and liabilities which are incidental to such property.” (at para. 13).
That “actions are framed by the pleadings”, is a truism.  Parallel or concurrent proceedings with overlapping subject-matter tend to  colour the court’s approach to characterization.
In Magnum’s case, it was concurrently a defendant in a complaint initiated  in the United States District Court for the District of Connecticut, brought by a non-party questioning, inter alia, the validity of the trade-marks in the United States, which the court observed “…challenges the very foundation upon which rights to personal property in Ontario are asserted by Magnum in this action…” (at para. 15). Hence, the plaintiff was unable to satisfy the court that the “issues in this action involved competing claims to Canadian trade-marks or the other personal property referred to in the statement of claim…” Since the activity undertaken or affecting property was not in Ontario, the court reached the same conclusion in respect to rule 17.02(i) (injunctions).
 The court also rejected the ground that the torts were committed in Ontario under Rule 17.02(g):
[18]      Magnum also relies on subrule 17.02(g).   While not mentioned in the statement of claim as a basis for service outside Ontario, it was relied upon in Magnum’s factum.   There is simply nothing in the evidence to suggest that any tort was committed by the defendants in Ontario.  If Magnum’s property was used or passed off, that occurred in Connecticut and in the jurisdictions in which Intergrated has customers.  Magnum relies on work done by Intergrated for Wolverine Ratcliffs Inc. (“Wolverine”), in Fergus, Ontario, However, the relationship was long known by Magnum, involved the supply of less than $15,000 of parts between 1997 and 2001 and ended shortly before Wolverine’s operations in Canada closed in 2002.  While Intergrated may, some years ago, “have dipped a small toe in Ontario”, I do not believe that to be sufficient to satisfy Rule 17.02(g): Unity Life of Canada v. Worthington Emond Beaudin Services Financieres Inc.reflex, (2009), 96 O.R. (3d) 769 (S.C.J.) (“Unity Life”) (paras. 32-33).

[23]  … As already stated, the connection between Magnum’s claim and Ontario is small.   If Intergrated misused propriety information and trademarks, converted property or interfered with contractual relations, it did so in Connecticut and in the other jurisdictions in which it carries on business.

[26]     The activity which caused Magnum to commence these proceedings occurred in China.  Mr. Healey submits the fact Intergrated’s website can be accessed from Ontario and mentions two of the trade-marks is sufficient connection.  With respect, I do not agree.  The website was created and is maintained in the United States.  The website does not even mention Ontario or, indeed, Canada.  The appropriateness of the references to SENDZIMIR and Z-MILL on the website will presumably be addressed in Connecticut by reason of the Sendzimir complaint.  Intergrated has already deleted mention of the trade-marks from its website to eliminate the issue going forward.  The website is not, with respect, demonstrable or weighty. 

[27]     My comments with respect to the employees of Intergrated apply to the individual defendants Messrs. Herbst, Jin and Vaitheeswaean (described in the statement of claim as Vaitheeswarun).  They are not Canadian, do not reside or carry on business here or have cause to come to Ontario for any reason.  If the individual defendants owe Magnum fiduciary duties they arose in Connecticut where Jones & Lamson carried on business and have been breached during their tenure with Intergrated in that same State.”

 Grace, J. concludes,

[32]      Weighing the evidence introduced to date, it seems to me inappropriate and unfair to accept jurisdiction.  The defendants are, in every sense of the word, strangers to Ontario.  Their connection is essentially limited to the fact a competitor, Magnum, is based here.  That is not, in my view, nearly enough.  If a foreign court were to accept jurisdiction in comparable circumstances, I cannot imagine Ontario being willing to recognize and enforce a judgment rendered over an Ontario based defendant’s jurisdictional challenge.  Indeed, in my view, the proceeding would smack of an unhealthy dose of protectionism which would be difficult to accept as appropriate.  The action should be stayed. I agree that “a defendant can reasonably be brought within the embrace of a foreign jurisdiction’s law where he or she has participated in something of significance or was actively involved in that foreign jurisdiction” but, as outlined already and addressed further in these reasons, that is not the case here: Beals v. Saldhana, 2003 SCC 72 (CanLII), [2003] 3 S.C.R. 416 at para. 32.

Justice Grace found that “Connecticut is clearly the more convenient forum for this action…” but even had jurisdiction simpliciter been established, he would have stayed the action on the basis of forum non conveniens. (at para. 33-34, citations omitted).

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