Court File and Parties
COURT FILE NO.: CV-16-0529-FW DATE: 2017-04-24
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PIETRO, PASQUALE-ANTONIO SGROMO (PETER, ANTHONY SGROMO); WIDE EYES MARKETING LTD., Unrepresented Plaintiffs (Responding Party)
- and -
LEONARD GREGORY SCOTT(AN INDIVIDUAL), EUREKA INVENTIONS LLC, BESTWAY (USA), INC., BESTWAY (HONGKONG) INTERNATIONAL LTD., BESTWAY INFLATABLES & MATERIAL CORP. (SHANGHAI), and PATRIZZIO FUMAGALLI (AN INDIVIDUAL),
A. Fletcher and A. Challis, counsel for the Defendants LEONARD GREGORY SCOTT and EUREKA INVENTIONS LLC P. Henein and K. Byers, counsel for the Defendants BESTWAY (USA), INC., BESTWAY (HONGKONG) INTERNATIONAL LTD., BESTWAY INFLATABLES & MATERIAL CORP. (SHANGHAI), and PATRIZZIO FUMAGALLI (AN INDIVIDUAL) Defendants (Moving Party)
HEARD: February 9, 2017, at Thunder Bay, Ontario
Mr. Justice D. C. Shaw
Decision On Motion
[1] The defendants bring motions to dismiss this action for want of jurisdiction. This motion was heard at the same time as a motion to dismiss brought in file CV-16-0566-SR by an unrelated defendant in an action in which Mr. Sgromo was a plaintiff.
Background
[2] The plaintiffs have caused a statement of claim of 354 paragraphs to be issued. It contains extensive, improper pleadings of argument, law and evidence. It is far from a concise statement of material facts as contemplated by Rule 25.06 of the Rules of Civil Procedure.
[3] The statement of claim requests, among other relief, a declaration that the transfers of certain American patents are ineffective, a declaration that the patents belong to the plaintiff, Pietro Pasquale-Antonio Sgromo, a claim for disgorgement of profits made from the patents, claims for mandatory orders relating to documents filed with the United States Patent Office to reverse the transfer of patents and to return ownership of the patents to Mr. Sgromo, and claims for injunctive relief.
[4] Mr. Sgromo is a Canadian citizen. At all times material to this action, he lived and worked in San Francisco, California. He lived and worked in the United States as a non-immigrant worker from May 2001 to August 2010 and from October 2011 to June 2015. From July 2015 to August 2016, he lived in the United States while he faced criminal charges relating to allegations of domestic abuse made by the defendant, Leonard Gregory Scott, with whom Mr. Sgromo had a business and romantic relationship. Mr. Sgromo deposes that the charges were dropped on the first day of a trial scheduled in San Francisco from December 2 to 12, 2016.
[5] The plaintiff, Wide Eyes Marketing Ltd., is a corporation incorporated in British Columbia. According to records from British Columbia Registry Services, dated January 13, 2017, (currency date September 27, 2016) the corporation is in the process of being dissolved. The last annual report for the company was filed in August 2014. Mr. Sgromo is the sole officer and shareholder of the company. The company’s mailing address is shown in the British Columbia Registry Services records as a San Francisco address. The company is not represented in this proceeding by a lawyer as required by Rule 15.01(2) of the Rules of Civil Procedure.
[6] Mr. Scott at all material times has resided in San Francisco. He deposes that he met Mr. Sgromo in 2008 in California, that between 2008 and 2012 they were involved romantically and that between February 2013 and July 2015 they lived together in a home at 637 Noe Street, San Francisco, owned by Mr. Scott and his wife. The relationship between Mr. Scott and Mr. Sgromo ended in July 2015.
[7] The defendant, Eureka Inventions LLC, was incorporated in June 2013 under the laws of California. Mr. Scott deposes that he is the sole member and manager of Eureka. On the other hand, Mr. Sgromo deposes that Wide Eyes is the 100% shareholder of Eureka because Wide Eyes deposited U.S. $64,209.00 into Eureka’s bank account in San Francisco. The registered address of Eureka is the home at 637 Noe Street, San Francisco.
[8] The defendant, Bestway (USA) Inc., is an Arizona corporation whose principal place of business is Phoenix, Arizona. The defendant, Bestway (Hong Kong) International Ltd. Is a Hong Kong corporation whose principal place of business is Kowloon, Hong Kong. The defendant, Bestway Inflatables & Materials Corp. (Shanghai), is a Chinese corporation whose principal place of business is Shanghai, China. None of the Bestway companies have any offices, employees or assets in Canada. None of the employees or representatives of the Bestway companies visit Ontario or visit elsewhere in Canada.
[9] The Bestway companies develop and produce outdoor leisure products, including inflatable leisure products, water sport products and above ground pools.
[10] The defendant, Patrizzio Fumagalli, has been the Chief Executive Officer of the defendant, Bestway (USA) Inc. since the end of 2013. Prior to that he was Global Developer for the defendant, Bestway (Hong Kong) International Ltd. Mr. Fumagalli resides in Scottsdale, Arizona.
[11] In 2006, the United States Patent Office issued U.S. Patent No. 7,046,440, entitled “3-D Vision System for Swimming Pools,” (the “440 Patent”). The original owner of the 440 Patent, who is not a party to this action, subsequently went into bankruptcy. In December 2010, while he was residing in Toronto, Mr. Sgromo, through Wide Eyes, purchased the 440 Patent in the bankruptcy proceedings.
[12] Mr. Sgromo deposes that in 2006 he created a 3-D water slide, which he discovered was covered by the 440 Patent.
[13] There are several agreements which are relevant to the issues in the within action.
[14] On April 26, 2013, Wide Eyes, as licensor, and the Bestway companies, collectively, as licensee, entered into an agreement entitled “Deal Memo” with respect to the 440 Patent. Mr. Sgromo signed the Deal Memo on behalf of Wide Eyes, as President of the company. The Deal Memo provides that the rights granted to the licensee by the licensor are for use in the United States and its territories.
[15] Mr. Scott takes the position that after the execution of the Deal Memo, Mr. Sgromo transferred all his patents to Eureka in consideration for money that Mr. Scott says was owing to him by Mr. Sgromo, including outstanding rent for 637 Noe Street, San Francisco. Mr. Sgromo, however, deposes that the 440 Patent was “unlawfully” transferred on June 19, 2013 from Wide Eyes to Mr. Scott. He attaches to his affidavit on this motion a Patent Assignment document wherein Wide Eyes assigned the 440 Patent to Mr. Scott. The document is not signed. Mr. Sgromo denies that he owed Mr. Scott any unpaid rent. Bestway produces a document from the file of the United States Patent and Trademark Office recording that on June 19, 2013, the 440 Patent was assigned by Wide Eyes to Mr. Scott, with an execution date of June 19, 2013.
[16] Mr. Scott produces an “Exclusive License Agreement” dated June 28, 2013, between himself, as licensor, residing at 637 Noe Street, San Francisco, and Eureka, as licensee, with its registered office at 637 Noe Street, San Francisco, wherein he granted to Eureka the exclusive licence to the 440 Patent. The consideration for the licence granted was royalties of 25% of all income received from the licencing or exploitation of the licenced property. The agreement contains the following clause:
9.4 Choice of Law; This Agreement shall be construed under, and interpreted in accordance with, the laws of the State of California without regard to any conflict of law principles.
[17] On August 20, 2013, Eureka, as licensor, and the Bestway companies, collectively, as licensee, entered into an exclusive licence agreement with respect to the 440 Patent – the “Patent Licence Agreement.” The territory of the licence is described as the United States of America and its territories. The Patent License Agreement provided that any payment, notice or other communication required or permitted was to be delivered to:
In the case of EUREKA Greg Scott Managing Member Eureka Inventions LLC 637 Noe Street San Francisco, CA 94114
with a copy to:
Peter Sgromo Lead Consultant Eureka Inventions LLC 637 Noe Street San Francisco, CA 94114
[18] The Patent License Agreement also contained a choice of law provision:
- GOVERNING LAW This Agreement shall be interpreted and construed in accordance with the laws of the State of Arizona without regard to conflicts of law. The parties each consent to the venue and jurisdiction of any state or federal court located in Arizona. Service of process may be made upon either party by certified mail directed to its address for notices under this Agreement, shown above. This provision is permissive, not mandatory, and each party reserves the right to bring any action, proceeding or other matter arising directly or indirectly hereunder against the other party wherever they might be found or might otherwise be subject to jurisdiction.
[19] The Patent License Agreement was signed by Mr. Sgromo for Eureka. Mr. Scott signed with respect to representation and warranties.
[20] On June 17, 2014, Bestway (USA) Inc., and Bestway (Hong Kong) entered into another licence agreement with Eureka, entitled the “License Agreement.” It is also referred to as the “Slide License Agreement.” This agreement referenced the 440 Patent and technology related to a children’s backyard water slide. Royalty payments were to be wired directly to Eureka’s bank account in San Francisco. The territory for the agreement was the United States of America. Notices to Eureka were to be sent to Mr. Scott at 637 Noe Street, San Francisco, with a copy to Mr. Sgromo, as “Lead Consultant,” at 637 Noe Street, San Francisco. The agreement contained the following choice of law provision:
- GOVERNING LAW; This Agreement shall be interpreted and construed in accordance with the laws of the state of Arizona without regard to conflicts of law or other jurisdictional matters. The parties each consent to the venue and jurisdiction of any court located in Maricopa County Arizona; service of process made by made by either party by certified mail directed to its address for notices under this agreement shown above. Upon termination of this agreement by either party, “Bestway (USA)” and “Bestway (Hong Kong)” shall have the right and ownership of all intellectual property concerning the product identified herein as H20 GO! Waterslide.
[21] The Slide License Agreement was signed by Mr. Sgromo on behalf of Eureka.
[22] Mr. Sgromo deposes that Bestway deposited $90,000 into the Eureka bank account representing monies owed to him for consulting that he performed for the Bestway companies related to the waterslide and that he has not received any of it. He alleges that although he was signatory on the account, Mr. Scott took over the account immediately after Mr. Scott made false allegations of domestic violence about him, and that Mr. Scott stole the money.
[23] On February 15, 2015, Eureka commenced a civil action against Bestway (USA), Inc. and Bestway (Hong Kong) International Ltd. in the United States District Court for the Northern District of California for alleged breach of the June 17, 2014 Slide License Agreement and the August 20, 2013 Patent License Agreement. The two Bestway companies named as defendants in that action counterclaimed for breach of contract. The counterclaim includes the following paragraph:
- On or about May 19, 2015, Bestway was informed by one of its suppliers, American Paper Optics, LLC (“APO”), that Peter Sgromo, a principal of Eureka, contacted APO and intentionally misrepresented to APO that the license agreements between Eureka and Bestway have been “severed” and that “I have a legal action against Bestway that not only includes patent infringement but failure to exercise their first rights under both agreements.” (A copy of the email string between Bestway and its supplier is attached hereto as Exhibit 4.)
[24] The Bestway companies alleged that as a result of Mr. Sgromo’s misrepresentation to APO, APO refused to sell a particular type of stereoscopic film to Bestway. They allege that the film was essential to the manufacture of certain Bestway’s products licensed under the 440 Patent.
[25] The California action was settled by two settlement agreements.
[26] The first settlement agreement was dated October 20, 2015, between the Bestway companies and a company named Wagmore & Barkless LLC, of which Mr. Sgromo was the President. That settlement agreement referred to the Patent License Agreement, the Slide License Agreement and the 440 Patent. It referred to the civil action between Eureka and the Bestway companies. The agreement stated that a dispute had arisen between Eureka and Mr. Sgromo regarding the 440 Patent and the products licenced to the Bestway companies under the 440 Patent and the Slide License. The settlement agreement contained the following:
- GREG SCOTT ARBITRATION/RIGHT OF FIRST REFUSAL (a) The Parties acknowledge and understand that Mr. Sgromo has initiated an arbitration against Eureka President Gregory Scott, Sgromo, Peter v. Scott, Leonard G. , JAMS Ref. No. 1100082204 (the “Arbitration”), concerning (a) the ownership of certain property related to the Lawsuit, including the ownership of the ’440 Patent and certain products offered by Eureka to Bestway under the Disputed Licenses, and (b) who is the rightful beneficiary to royalty payments under the Subject Licenses. The Parties understand and agree that outcome of the Arbitration will affect certain aspects of this Settlement, namely the provisions set forth in Paragraphs (4) and (5). (b) Bestway agrees to not interfere in any of the claims Sgromo may have regarding said claims in the Arbitration. (c) Bestway agrees to cooperate with respect to providing evidence or testimony if necessary in the Arbitration. (d) To the extent that the final Arbitration ruling finds that Peter Sgromo is the owner of the ’440 Patent, W&B agrees to give Bestway a first right of refusal (but not an obligation) to license the exclusive rights to exploit the ’440 Patent, which right must be exercised in writing within forty-five (45) days from the date Bestway received W&B’s written offer.
[27] In the settlement agreement with Wagmore & Barkless LLC, Bestway agreed that royalties that had accumulated under the licences would be deposited in an escrow fund until a ruling was issued in the arbitration proceedings between Mr. Sgromo and Mr. Scott.
[28] Wagmore & Barkless LLC and the Bestway companies agreed that any disputes were to be submitted to mediation in Phoenix, Arizona and, if not resolved at mediation, were to be settled on a final basis by arbitration in Santa Monica, California, using the Judicial Arbitrators and Mediation Systems, Inc. (“JAMS”) expedited arbitration process and were not to be the subject of any further court proceedings except for enforcement of the arbitration award.
[29] The parties to the settlement also released one another on a final basis with respect to all actions and claims of every nature, “including all claims that in any way relate to, arise from, or are in any manner connected to the Disputed Licenses.”
[30] Mr. Sgromo signed the settlement agreement on behalf of Wagmore & Barkless LLC.
[31] The second settlement agreement relating to the California action between Eureka and the Bestway companies was dated October 21, 2015, between Bestway (USA), Inc. and Bestway (Hong Kong) International Ltd. The settlement agreement referenced the arbitration between Mr. Sgromo and Mr. Scott and the payment of royalties into escrow by the Bestway companies pending the arbitration between Mr. Sgromo and Mr. Scott to determine the ownership rights of the 440 Patent and entitlement to royalties under the Slide License. The settlement agreement provided that the choice of law forum was the United States District Court for the Northern District of California, Oakland Division.
[32] Mr. Sgromo deposes that this settlement agreement between Eureka and the Bestway companies breached the settlement agreement that he (Wagmore & Barkless LLC) had entered into with the Bestway companies. He takes the position that the settlement agreement between Eureka and the Bestway companies is invalid.
[33] Subsequent to the execution of the settlement agreements, the Bestway companies deposited royalties into an escrow account in the United States.
[34] Mr. Sgromo commenced an arbitration claim against Mr. Scott and Eureka in California pursuant to the JAMS expedited arbitration process. The claims included monetary damages relating to the 440 Patent, the waterslide, consulting fees and advancing money on behalf of Eureka.
[35] Mr. Sgromo and Mr. Scott had entered into a cohabitation agreement on February 23, 2014, entitled, “Living Together Agreement.” That agreement required the parties to first mediate any dispute and, if not resolved, to proceed to binding arbitration in San Francisco using the JAMS expedited process or a similar expedited arbitration. They agreed “…to never attempt to resolve their issues through litigation.”
[36] Mr. Sgromo and Mr. Scott participated in mediation in California on July 12, 2016. The mediation was unsuccessful.
[37] Shortly thereafter, by letter dated August 5, 2016, Mr. Sgromo’s lawyer wrote to the JAMS arbitrator, advising that the letter was to serve as formal notice that Mr. Sgromo was withdrawing his arbitration claim. On November 30, 2016, Mr. Sgromo and Wide Eyes commenced the within action in Thunder Bay.
[38] On January 13, 2017, the Bestway companies commenced an interpleader action in the United States District Court, Northern District of California, San Francisco Division, to adjudicate among Mr. Sgromo, Wagmore & Barkless LLC, Mr. Scott and Eureka and determine which party was entitled to receive the escrow accounts and future royalties for the 440 Patent and Slide License Agreement.
Discussion
[39] This court has jurisdiction to stay or dismiss an action under s. 106 of the Courts of Justice Act and under Rule 17.06 and Rule 21.01 of the Rules of Civil Procedure.
[40] Section 106 of the Courts of Justice Act provides:
- A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.
[41] Rule 17.06 of the Rules of Civil Procedure provides:
17 .06 (1) A party who has been served with an originating process outside Ontario may move, before delivering a defence, notice of intent to defend or notice of appearance, (b) for an order staying the proceeding. (2) The court may make an order under subrule (1) or such other order as is just where it is satisfied that, (a) service outside Ontario is not authorized by these rules; (b) an order granting leave to serve outside Ontario should be set aside; or (c) Ontario is not a convenient forum for the hearing of the proceeding.
[42] Rule 21.01(3) of the Rules of Civil Procedure provides:
(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that, (a) Jurisdiction – the court has no jurisdiction over the subject matter of the action.
[43] The defendants submit that there are four grounds on which this court should stay or dismiss the action:
(a) The dispute is governed by forum selections clauses; (b) The court lacks jurisdiction simpliciter because there is no real and substantial connection between the litigation and Ontario; (c) The issues in dispute have been arbitrated, litigated and settled in California; and (d) Ontario is not the forum conveniens.
[44] The plaintiff submits that:
(a) The forum selection clauses do not apply to the issues in dispute; (b) There is a real and substantial connection between the subject matter of the litigation and Ontario; (c) The arbitration, litigation and settlements in California are not relevant to the matters in dispute in this litigation; and (d) Ontario is the forum conveniens.
[45] I will deal with the forum selection clauses, jurisdiction simpliciter and the arbitration, litigation and settlements in California. In my view, this court does not have jurisdiction and it is therefore not necessary to deal with the issue of forum non conveniens.
(a) Forum Selection Clauses
[46] The Patent License Agreement of August 20, 2013, between Eureka, as licensor, and the Bestway companies, collectively, as licensee, signed by Mr. Sgromo for Eureka, provided that it shall be interpreted and construed in accordance with the laws of the State of Arizona and that the parties each consent to the venue and jurisdiction of any state or federal court located in Arizona.
[47] The Slide License Agreement of June 17, 2014, between Eureka and Bestway (USA) and Bestway (Hong Kong), again signed by Mr. Sgromo on behalf of Eureka, provided that the agreement shall be interpreted and construed in accordance with the laws of the State of Arizona and that the parties each consent to the venue and jurisdiction of any court located in Maricopa County, Arizona.
[48] The settlement agreement of October 20, 2015, between Wagmore & Barkless LLC and the Bestway companies, signed by Mr. Sgromo on behalf of Wagmore & Barkless LLC, provided that any disputes were to be submitted to mediation in Phoenix, Arizona and, if not resolved by mediation, were to be settled on a final basis by arbitration in Santa Monica, California.
[49] The settlement agreement of October 21, 2015, between Eureka and Bestway (USA) and Bestway (Hong Kong), provided that any dispute regarding the agreement was to be brought in the United States District Court for the Northern District of California, Oakland Division.
[50] The Living Together Agreement of February 23, 2014 between Mr. Sgromo and Mr. Scott provided that any disputes under the agreement were to first be mediated and then, if not resolved, were to proceed to binding arbitration in San Francisco.
[51] The licence agreements and the settlement agreements all pertain to the 440 Patent which is a central feature of the litigation between Mr. Sgromo, personally and through Wide Eyes, and the defendants in this action.
[52] The Living Together Agreement between Mr. Sgromo and Mr. Scott provides that all property owned by them as of the date of the agreement or obtained during the agreement shall remain the separate property of each party and neither will have a claim to the separate property of the other, absent a written agreement transferring ownership. Separate property is stated to include investment income, royalty income, business interests and legal settlements. It acknowledges that a significant portion of Mr. Sgromo’s income comes from Wide Eyes and that Mr. Scott has no ownership rights in Wide Eyes notwithstanding that Mr. Sgromo lists 637 Noe Street, San Francisco as a place of doing business in royalty agreements.
[53] Mr. Sgromo and Mr. Scott dispute whether Mr. Sgromo transferred the 440 Patent to Eureka. There is documentation from the United States Patent and Trademark Office that indicates Wide Eyes transferred the 440 Patent to Mr. Scott on June 19, 2013. Mr. Sgromo claims that this was an unlawful transfer. Mr. Sgromo initiated arbitration against Mr. Scott concerning ownership of the 440 Patent and other products licensed by Eureka to the Bestway companies.
[54] Rights to disputed property as between Mr. Sgromo and Mr. Scott are governed by the Living Together Agreement. Mr. Sgromo recognized this when he commenced the arbitration in California that was required by the Living Together Agreement to deal with such disputes.
[55] Mr. Sgromo disputes that Eureka and Mr. Scott have any rights to the 440 Patent and intellectual property that he has acquired or developed, and he disputes that the Bestway companies, as licensee, have lawfully acquired rights from Eureka, as licensor, to manufacture and sell products covered by the 440 Patent. The Patent License Agreement, the Slide License Agreement, the settlement agreements and the Living Together Agreement all bear on the determination of those rights and all contain choice of forum clauses that require disputes arising thereunder to be conducted elsewhere than Ontario.
[56] The decision of the Supreme Court of Canada in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27 is the leading authority regarding the enforcement of a forum selection clause. As observed by Juriansz J.A., writing for the Court of Appeal panel in Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, at para. 8, the central thrust of Pompey is that the law favours the enforcement of forum selection clauses. The exercise of the court’s discretion not to enforce a forum selection clause is governed by a “strong cause test.” Juriansz J.A. stated, at para. 11, “The plaintiff must show ‘strong cause’ that the case is exceptional and the forum selection clause should not be enforced.”
[57] Justice Juriansz expanded on what a party seeking to avoid a choice of forum clause would have to establish to show that the case was exceptional. At para. 24 he stated:
[24] A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced.
[58] The plaintiffs have not established any of the factors set out by Juriansz J.A. or any analogous factors.
[59] In responding to the principle noted by Bastarache J. in Pompey, that parties should be held to their bargains, Mr. Sgromo maintains that the Bestway companies have breached “… virtually every clause in their agreements” and have failed to engage in honest negotiations. That is an issue Mr. Sgromo may raise at trial. It has not been established in this motion. What has been established is that the parties agreed, on multiple occasions, to include choice of forum clauses in their agreements. When Mr. Sgromo initiated arbitration in California on the issues that he now raises in the within action, he attorned to the jurisdiction of California and conceded that it was feasible for his claims to proceed in California.
(b) Jurisdiction Simpliciter
[60] The determination of whether the court has a right to assume jurisdiction over the claims of the plaintiffs is governed by the principles set out by the Supreme Court of Canada in Van Breda v. Village Resorts Ltd., 2012 SCC 17. The analysis concerning the assumption of jurisdiction is grounded in the real and substantial connection test – objective factors which connect the subject matter of the litigation to the forum.
[61] Van Breda set out four presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute:
(a) the defendant is domiciled or resident in the province; (b) the defendant carries on business in the province; (c) the tort was committed in the province; and (d) a contract connected with the dispute was made in the province.
[62] The burden is on the plaintiffs to establish a recognized presumptive factor. The burden of rebutting a presumptive factor lies with the party challenging the assumption of jurisdiction. At para. 100, the court stated:
If the court concludes that it lacks jurisdiction because none of the presumptive connecting factors exist or because the presumption of jurisdiction that flows from one of those factors has been rebutted, it must dismiss or stay the action….
[63] The plaintiffs must establish on admissible evidence a good arguable case that one of the presumptive factors is present (See Shah v. LG Chem, Ltd., 2015 ONSC 2628, at para. 10).
[64] The plaintiffs have not provided any evidence to show a good arguable case that would justify the Ontario Superior Court of Justice assuming jurisdiction over these defendants. None of the presumptive factors or any analogous factor is present.
[65] Mr. Sgromo submits that:
i. the Bestway companies are carrying on business in Ontario; ii. the tort of negligent misrepresentation occurred in Ontario; and iii. the contracts relied on in the statement of claim were made and breached in Ontario.
[66] I disagree.
[67] Mr. Sgromo submits that the Bestway companies are carrying on business in Ontario because their products are sold at retailers in Ontario. In Van Breda, at para. 87, the Supreme Court of Canada stated that caution must be exercised in considering whether an entity is carrying on business in the jurisdiction, to avoid what would amount to assuming universal jurisdiction in respect of tort claims arising out of certain categories of business or commercial activity. “The notion of carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office or regularly visiting the territory of the particular jurisdiction.”
[68] There is no evidence that the Bestway companies had such an actual presence in Ontario, even if their products were sold in the province by third party retailers, as alleged by Mr. Sgromo. Mr. Sgromo points to the fact that the Bestway companies registered a Canadian trademark in respect of “H20 GO.” However, registration of a Canadian trademark, without an actual presence in Ontario, does not meet the test for “carrying on business” as set out in Van Breda. In Shah v. LG Chem, Ltd., 2015 ONSC 2628, Perell J. held that the foreign defendant corporation in that case did not carry on business in Ontario notwithstanding that it had registered multiple Canadian patents and trademarks. The registration of those patents and trademarks was not a sufficient, actual presence as required by Van Breda.
[69] There is no evidence that any alleged tort of misrepresentation occurred in Ontario. There is no evidence that the relevant contracts were made or breached in Ontario. All of the contracts relevant to this action were entered into in the United States of America. They relate to American patent rights. American patent rights are only enforceable in the United States.
(c) Arbitration, Litigation and Settlement in California
[70] The arbitration, litigation and settlements in California pre-date this action. The California proceedings involve the same disputed 440 Patent and license agreements that are at the heart of this action. Mr. Sgromo fully participated in the California proceedings.
[71] In Morden & Perell, The Law of Civil Procedure in Ontario, (Markham, Ontario, LexisNexis Canada Inc. 2014, 2nd edition) at p. 107, the authors address the issue of abuse of process:
The court has an inherent and broad jurisdiction to prevent the misuse of its process that would be manifestly unfair to a party to the litigation or would in some other way bring the administration of justice into disrepute. Courts have an inherent jurisdiction to dismiss or stay an action on the grounds of abuse of process. The categories of abuse of process are not closed, and the court has the power to respond to new situations.
[72] In my view, it would be an abuse of process to permit Mr. Sgromo to re-litigate matters that were properly heard and resolved in California.
Conclusion
[73] For the reasons given, this action is dismissed.
[74] The defendants request a sealing order pursuant to s. 137 of the Courts of Justice Act.
[75] I am satisfied that there is a real and substantial risk to an important commercial interest of preserving confidential information relating to proprietary technology and to the negotiations surrounding the licencing of that proprietary information, the disclosure of which could create a real and substantial harm to the defendants (See Anderson v. St. Jude Medical Inc., 2010 ONSC 5191). The confidential information is, in large part, contained in material filed by the plaintiffs. In making this order, I also take into consideration that I have ordered this action to be dismissed as not properly before this court. An order shall go that this file be sealed.
Costs
[76] If the parties are unable to agree upon costs, the defendants shall deliver written submissions and Bills of Costs within 20 days. The plaintiffs shall deliver written submissions within 20 days after service of the defendants’ submissions and Bills of Costs. The written submissions shall not exceed five double spaced pages, exclusive of Bills of Costs. If the defendants fail to deliver their submissions and Bills of Costs within 20 days, the issue of costs shall be deemed to be settled.
The Honourable Justice D. C. Shaw
Released: April 24, 2017