In Seismotech IP Holdings Inc. v. Apple Canada Inc., 2023 FC 1649, the Federal Court dismissed a motion by Seismotech for a Norwich order to force Apple, a non-party respondent, to disclose the names and addresses of consumers who downloaded apps controlling intelligent thermostat devices that allegedly infringe Seismotech’s patents.
Factors to consider when determining whether to grant a Norwich order
The factors to consider when determining whether to grant a Norwich order were identified by the Supreme Court of Canada in Rogers Communication Inc. v. Voltage Pictures, LLC:
- [a bona fide claim] against the unknown alleged wrongdoer;
- the person from whom discovery is sought must be in some way involved in the matter under dispute, he must be more than an innocent bystander;
- the person from whom discovery is sought must be the only practical source of information available to the applicants;
- the person from whom discovery is sought must be reasonably compensated for his expenses arising out of compliance with the discovery order in addition to his legal costs;
- the public interests in favour of disclosure must outweigh the legitimate privacy concerns. [emphasis omitted]
The Federal Court clarified that the fifth factor is not limited to privacy concerns; rather, this factor examines whether the interests of justice favour disclosure.
The Federal Court found that Seismotech’s motion failed for two reasons: Seismotech had not shown a bona fide claim and it would not be in the public interest to order disclosure. The Federal Court therefore did not consider the other factors from Rogers Communication.
No bona fide claim
First, the Federal Court found that Seismotech did not have a bona fide claim. Neither Seismotech’s statement of claim nor the affidavit of Seismotech’s owner provided details of the alleged infringement. When cross-examined, Seismotech’s owner did not explain the basis for his belief that the use of the apps downloaded from the App Store infringed the patents; the Federal Court therefore drew an adverse inference that there was no factual basis for Seismotech’s owner’s subjective belief. In addition, Seismotech’s owner’s affidavit was based on information gathered from the Internet; there was no indication that Seismotech had obtained or examined the devices in question or performed any analysis. Finally, although Seismotech had been aware of Apple’s position that there was no bona fide claim, Seismotech did not provide any additional basis for its allegations.
The Federal Court noted that it was useful to consider whether the statement of claim and Seismotech’s evidence would withstand a motion to strike. Although the test for striking out a claim is not exactly the same as the requirement for a bona fide claim, “it is difficult to contemplate the issuance of a Norwich order where the statement of claim is so deficient that it is liable to be struck.” In the present action, the statement of claim is “purely speculative” and, therefore, cannot be bona fide.
It would not be in the public interest to order disclosure
The Federal Court noted that the considerations that may favour disclosure can be broadly linked to access to justice. In particular, the defendants’ access to justice is an important consideration.
As explained by the Federal Court:
Special considerations arise when a party proposes bringing an action in patent infringement against a large number of individual consumers, each having a relatively modest amount at stake. Patent infringement cases are inherently complex. Patents are intended to be read by a person of skill in the art, not by persons who lack technical skills, such as judges and lawyers and, a fortiori, individual consumers. For this reason, prosecuting or defending an action in patent infringement almost always requires the presence of expert witnesses. In a large proportion of such cases, the validity of the patent is challenged on a number of grounds, which reinforces the need for expert evidence. The quantification of damages also often raises complex issues. For all these reasons, patent litigation is costly.
In addition, the technology at stake in the present case is complex. “End-users of intelligent thermostats cannot be expected to read the patents at issue and to construe their claims”, nor do they have access to the inner workings of the intelligent thermostats or of their apps.
Furthermore, as a result of the small amount at stake for each individual defendant, consumers cannot meaningfully defend Seismotech’s action or obtain adequate legal representation proportionate with their potential liability. It is therefore foreseeable that many defendants would feel compelled to settle the action regardless of the merits of the case or that Seismotech would bring a motion for default judgment against the many defendants expected not to respond.
The Federal Court concluded it was not in the public interest to issue a Norwich order.
A copy of the decision can be found here.
Aitken Klee’s blog post on the Federal Court’s earlier decision to allow Ecobee to join the action in T-1147-23 as a defendant can be found here.