Ruling sees no misuse of judicial discretion, given procedural history and proceeding delays
In a patent infringement action against three corporations and three individuals, the Federal Court dismissed a motion to stay requirements for the defendants to provide discovery documents and take further steps pending the disposition of their security for costs motion.
In January 2019, the plaintiffs brought the underlying patent infringement action against the corporate defendants. The action alleged that three corporations breached three patents.
The plaintiffs later sought amendments to name three directors of the corporate defendants as individual defendants in the action. The plaintiffs claimed that the proposed individual defendants set up a complex corporate scheme to sell unlicensed products.
The defendants countered that the requested amendments were statute-barred under s. 55.01 the Patent Act, 1985, or under s. 4 of Ontario’s Limitations Act, 2002. They argued that allowing the amendments four years after the action began would not serve the interests of justice.
In June 2024, Associate Judge Martha Milczynski, in her capacity as case management judge, permitted the plaintiffs leave to amend their claim.
Milczynski noted that the corporate defendants allegedly acted together as a single business and filed a joint defence denying the infringement and asserting invalidity of the plaintiffs’ patents.
Milczynski determined that the plaintiffs pleaded enough material facts to sustain a patent infringement claim against the individual defendants and could not have known about the relationships’ intricacies or the degree to which the three officers allegedly operated the business in disregard of the corporate constructs.
The defendants moved to appeal Milczynski’s decision.
Appeal motion denied
Last Mar. 25, in Unilin Beheer B.V. v. 6035558 Canada Inc., 2025 FC 552, the Federal Court dismissed the motion to appeal and upheld the case management judge’s decision allowing the amendments of the claim by adding three corporate directors as individual defendants upon seeing no error warranting intervention. The court awarded the plaintiffs $1,000 in costs.
On Aug. 5, the defendants filed a motion seeking security for costs.
Associate Judge Cotter issued an order dated Sept. 3. Subparagraph 1b) required the defendants to produce discovery documents by Nov. 28.
On Sept. 12, 2025, the defendants moved for orders setting aside subparagraph 1b) and staying any requirement to take other steps until the resolution of their security for costs motion.
The defendants alleged that Cotter made a reviewable legal error in law or a palpable and overriding error in scheduling more substantive steps for the defendants despite the pending security for costs motion.
The defendants argued that they should not have to spend legal fees and disbursements before the posting of security for costs, given that they might be unable to recover those expenses if the plaintiffs failed to post security for costs.
The defendants asserted a serious issue in the security for costs motion, potential irreparable harm without a stay, and a balance of convenience strongly favouring staying the action until the motion’s resolution.
Stay motion dismissed
On Oct. 8, in Unilin Beheer B.V. v. 6035558 Canada Inc., 2025 CanLII 102446 (FC), the Federal Court denied the motion to stay and ordered the defendants to pay $6,000 in motion costs, inclusive of GST and disbursements.
First, the court ruled that Cotter did not misuse judicial discretion, considering the procedural history, significant delays, and the defendants’ last-minute switch in position.
The court added that Cotter reasonably ordered the parties to proceed with the discovery of documents and required the defendants to perfect their motion within short deadlines.
Next, the court saw no need to address the issue of whether the defendants were entitled to a stay of their obligation to produce documents relating to the individual defendants until the disposition of the security for costs motion.
The court noted the lack of delay in resolving the motion. The court said the defendants’ counsel acknowledged that the defendants would not need this relief if there was no such delay.
