COURT OF APPEAL FOR ONTARIO

CITATION: Nortel Networks Corporation (Re), 2016 ONCA 749

DATE: 20161014

DOCKET: M46504

Hoy A.C.J.O., Benotto and Huscroft JJ.A.

In the matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c.C.36, as amended

And in the matter of a plan or arrangement of Nortel Networks Corporation, Nortel Networks Limited, Nortel Networks Global Corporation and Nortel Networks Technology Corporation

BETWEEN

SNMP Research International Inc. and SNMP Research Inc.

Claimants

and

Nortel Networks Corporation, Nortel Networks Limited, Nortel Networks Global Corporation and Nortel Networks International Corporation and Nortel Networks Technology Corporation

Debtors

Heard: In writing on October 3, 2016

ENDORSEMENT

[1] This motion for leave to appeal arises out of the Nortel insolvency.

[2] SNMP Research International Inc. and SNMP Research Inc. (collectively, “SNMP”), licenced its software products to Nortel to use in its computer networks. Nortel’s use of the software was governed by a 1999 licence agreement that provided, among other things, that Nortel would keep SNMP’s source code strictly confidential. When Nortel’s assets were sold during the CCAA proceedings beginning in 2009, some of SNMP’s source code was transferred along with those assets. Nortel acknowledged that it was not authorized to provide source code to anyone, and that in doing so it breached its licence agreement with SNMP. SNMP sued Nortel, advancing two claims: one for disgorgement of profits attributable to the unauthorized transfer of SNMP’s intellectual property (“the profits claim”), and one for damages for breach of contract, copyright infringement and breach of confidence (“the damages claim”). The profits claim is valued at $86 million. The damages claim is for a comparatively much smaller amount.

[3] The supervising judge granted partial summary judgment to Nortel and dismissed the profits claim. He ordered that the damages claim be held in abeyance for six months pending ongoing discovery in a parallel U.S. proceeding.

[4] In dismissing the profits claim, the supervising judge held that while Nortel had infringed SNMP’s copyright, SNMP failed to show that Nortel profited from the unauthorized transfer of SNMP’s intellectual property. Instead, the evidence established that the companies that bought Nortel’s assets knew they were not buying SNMP’s software and would instead have to negotiate licencing fees with SNMP directly.

[5] SNMP now seeks leave to appeal.

[6] Leave to appeal is granted sparingly in CCAA proceedings and only where there are serious and arguable grounds that are of real and significant interest to the parties. In considering whether leave should be granted, the court will consider:

(a) whether the proposed appeal is prima facie meritorious or frivolous;

(b) whether the point on the proposed appeal is of significance to the practice;

(c) whether the point on the proposed appeal is of significance to the action; and

(d) whether the proposed appeal will unduly hinder the progress of the action.

See, for e.g.: Re Stelco Inc. (2005), 2005 CanLII 8671 (ON CA), 75 O.R. (3d) 5 (C.A.), at para. 24; Re Timminco Ltd., 2012 ONCA 552, 2 C.B.R. (6th) 332, at para. 2.

[7] We conclude that leave should not be granted.

[8] On the first factor, the proposed appeal turns on the supervising judge’s findings of fact about the sufficiency of the evidence SNMP marshalled to oppose Nortel’s motion for summary judgment. Those findings are entitled to deference and cannot be disturbed on appeal absent palpable and overriding error: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 81. We see no such error in the supervising judge’s reasons.

[9] Our conclusion on the second factor follows from our conclusion on the first. Contrary to SNMP’s submissions, the proposed appeal turns on the particular facts of this case and does not raise broader issues about the intersection of copyright law and insolvency law. The supervising judge’s decision does no more than decide that in this case, on these facts, SNMP did not meet its burden under s. 35(2) of the Copyright Act, R.S.C. 1985, c. C-42, to prove that Nortel derived revenues from its infringement of SNMP’s copyright. The proposed appeal does not raise issues of significance to the practice.

[10] On the third factor, we observe that this court very recently refused leave to appeal in another Nortel matter, one which addressed the allocation of some $7.3 billion in proceeds from the sale of Nortel’s assets: Re Nortel Networks Corporation, 2016 ONCA 332, 130 O.R. (3d) 481, leave to appeal to S.C.C. requested. In that case, the court observed that even if the allocation issue was significant to the CCAA proceeding, that factor, standing alone, was insufficient to warrant granting leave. The court observed, at para. 95: “To perhaps state the obvious, typically parties tend to seek leave to appeal a decision that is of significance to an action.”

[11] Finally, this motion for leave has to be considered in the context of the Nortel litigation as a whole. As this court emphasized in the allocation decision, these proceedings have dragged on for several years, to the detriment of individuals and businesses awaiting a resolution. The fact that this is a liquidation rather than a restructuring does not render the delay immaterial. Given our conclusions on the other three leave factors, we are not satisfied that a further delay is justified in these circumstances.

[12] For these reasons, the motion for leave to appeal is dismissed.

[13] The responding party shall be entitled to its costs of the motion, fixed at $1,500.

“Alexandra Hoy A.C.J.O.”

“M.L. Benotto J.A.”

“Grant Huscroft J.A.”