CITATION: Actuate v. Symcor, 2015 ONSC 689

COURT FILE NO.: CV-13-10098-00CL

DATE: 20150130

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Actuate Canada Corporation and Xenos IP Partnership

Plaintiffs

– and –

Symcor Services Inc.

Defendants

Matthew P. Gottlieb, Daniel A. Schwartz and Laura M. Wagner for the Plaintiffs

Daniel Murdoch, Patrick Duffy and Sean Gibson for the Defendants

HEARD: November 21 and 27, 2014

penny j.

Overview

[1] In this motion the plaintiffs seek summary judgment on liability for contract breach and copyright infringement. The claim involves alleged breaches of a software licence agreement. The plaintiffs argue that there are no genuine issues requiring a trial and that it is therefore appropriate for the court to declare the breach of the licence agreement and related copyright infringement, grant judgment accordingly and refer the question of damages to a reference.

[2] The defendants agree that the portions of the plaintiff’s motion involving contract interpretation are appropriate for summary judgment, although they take a very different view of what the contract means. However, the defendant argues that it has defences, in addition to its arguments on the scope of its contractual obligations, involving estoppel and limitation periods. This requires an examination of the plaintiffs’ knowledge of the defendant’s use of the software post-contract, raising factual issues which are in dispute. Full discovery and a trial, the defendant says, are required to resolve the estoppel and limitation issues.

The Issues

[3] The plaintiffs say the licence agreement imposed three material restrictions upon Symcor’s use of the d2e software:

(i) it could only be used on one server (use on more servers required more licences);

(ii) it could only be used with the AIX operating system (use on other systems required additional licences); and

(iii) it could only be used with IBM’s CMOD database (use with other databases also required additional licences).

[4] It is admitted by the defendant that it used the d2e software on multiple servers, adapted and used it on other operating systems (Windows) and used it with non-CMOD databases. The defendants argue that:

(i) there is no ‘one licence one server’ restriction;

(ii) there is no AIX restriction (references in the licence agreement to AIX were ‘informational’ only); and

(iii) the requirement to use d2e only with the CMOD database was “removed” in 2003.

[5] In addition, Symcor argues that Xenos employees were well aware that Symcor used d2e on other servers, with other operating systems besides AIX and with databases other than CMOD since at least 2004. Xenos made no complaint about these uses and actively supported its d2e products in all of Symcor’s applications from 2004 to 2011.

[6] Symcor argues that this knowledge gives rise to estoppel by conduct and the expiry of applicable limitation periods for all activity prior to January 25, 2010. Symcor argues that the record is incomplete on the issue of Xenos’ knowledge of the alleged breaches and infringement and that full documentary and oral discovery, including the discovery of additional Xenos employees and possibly third parties, is necessary to get to the bottom of how much Xenos “knew” about Symcor’s “non-compliant” use of the d2e software prior to its complaints in 2011.

[7] Finally, Symcor argues that there was implicit authorization for these uses because the “licence key” provided by Xenos, which was required to operate the d2e software, did not prevent its use with multiple servers or other operating systems and databases.

[8] Xenos responds by saying that there is no evidence that anyone at Xenos with knowledge or responsibility for licence matters knew anything about Symcor’s non-compliant uses of the d2e software. Indeed, those with responsibility for technical support at Xenos at the time have given unchallenged evidence that Xenos’ technical support personnel were not responsible for and had no knowledge of Xenos’ licence conditions. There is simply no evidence that those who had responsibility for licence matters at Xenos had any knowledge of Symcor’s non-compliant uses whatsoever.

[9] Xenos says its evidence that the “licence key” is not a means of licence enforcement is also unchallenged. In any event, the failings of the “licence key,” if any, cannot alter or amend the licence agreement.

[10] Xenos says that if Symcor wanted to assemble more evidence for the motion, it should have taken steps to do so in advance of the return date for the motion. It cannot now claim to need more discovery when it has known about the pendency of this motion for many months.

[11] In view of these positions, there are three basic issues:

(1) Was the d2e software licence restricted to:

(a) use on one server only?

(b) use on AIX only? and/or

(c) use on CMOD only? and

Was Symcor’s eventual use of the software in breach of the licence agreement?

(2) Did the non-compliant uses of the software infringe Xenos’ copyright?

(3) Could the claim for breach of contract/copyright infringement be estopped or limited by Xenos’ knowledge of non-compliant uses and is the record on the motion sufficient to deal with that issue?

Background

[12] The plaintiffs, which I shall collectively refer to as Xenos, develop, license and support computer software. Xenos developed and sold software called d2e, which was used to transform bills, account statements (such as for credit cards, banks, investment companies and utilities) from a paper or print stream format into an indexed electronic format such as a webpage or Adobe PDF, which can later be retrieved through a secure website.

[13] Symcor is a privately held corporation owned by three of Canada’s largest banks. Symcor is Canada’s largest financial processing outsourcing services provider and is in the business of processing cheque images, payments and financial statements of various kinds, primarily for banks and retail and telecommunications companies.

[14] In 2001, IBM and Xenos software was marketed together by IBM as an integrated enterprise content management solution for large customers such as Symcor. Xenos’ d2e software and IBM’s Content Manager OnDemand database were offered as a package to convert print streams into popular electronic formats for storage in and retrieval from IBM’s CMOD database.

[15] Symcor began discussions with IBM and Xenos about acquiring this integrated software solution. Symcor’s plan was to acquire the right to test the d2e software in its operations before making the financial commitment to acquire the software for use in a production environment.

[16] On June 19, 2001, Xenos prepared a written quotation for IBM to present to Symcor as part of a package. That quotation provided pricing and terms for two non-production, test or development licences and one production license to use specified components of the d2e software. This quotation explicitly provided that the proposed system for which d2e was to be licensed was an AIX hardware system. The price quoted for the production licence was described as a “one time charge licence per server.” That quotation, however, was not pursued as Symcor did not want to pay the licence fee of over $250,000 associated with the production licence until it had tested the d2e software.

[17] Accordingly, on January 28, 2001, Xenos provided a new quote for two test licences only, priced at 25% of the cost of a production licence. It is clear from that quotation that the proposed d2e system was for use on an AIX hardware system and with the CMOD archive system. Nothing was said, however, about “servers” in the June 28, 2001 quotation. This quote also offered a production licence at a specified price if acquired by December 15, 2001.

[18] The following day, the parties entered into their respective agreements.

[19] Under the IBM agreement, Symcor acquired certain “passport advantage products” from IBM. Some, but not all, of these products are said to be licensed for one server. In paragraph 3c of that agreement, under “Usage Limitations”, Symcor acknowledged that:

All the licences, Software Subscription and Support acquired from us under this Special Order are for use only in conjunction with your OnDemand archiving applications.

[20] Section 4 of the IBM agreement deals with “Xenos Programs”. It confirms that Symcor is acquiring two non-production test licences for certain Xenos programs. The section goes on to provide:

We are a remarketer of the Xenos Program for Xenos Group Inc. (called “Xenos”) in Canada. You are acquiring the Xenos program from us. The charges for the acquisition are the one-time charge for the licence and the annual charge for maintenance and support for the first year only. Consideration for these charges is included in the charge in section 6.

The Xenos program is licensed under the terms provided by Xenos. You represent that you have agreed with Xenos’ terms for the Xenos Program.

[21] On the same day, Symcor entered into a licence, services and support agreement with Xenos for its purchase of the non-production d2e software. Under the terms of this licence agreement, Xenos granted to Symcor, in section 2.1:

a non-exclusive, non-transferable, perpetual licence to use the Software at the Location(s) upon the terms and conditions of this agreement. Xenos acknowledges that such use shall extend to the Customers wholly owned subsidiaries.

[22] The term “Location(s)” is defined to mean “any Customer owned, occupied or controlled site.”

[23] The licence agreement defines “Software” as “the object code or executable versions of the modules of the computer software listed in Product Schedule(s).” Product Schedule(s) is defined as a “written description of the Software to be licensed and Consultancy Services to be provided hereunder from time to time by agreement between the Parties and method of recording any other agreed changes to this Agreement.”

[24] Section 2.3 of the licence agreement provides:

The Software may be used only: (i) to process the Bureau Client(s) data and (ii) for Customer’s own internal operations.

Customer may not use the software for any other purposes.

[25] Bureau Client(s) is defined as “any entity for which Customer provides services in the ordinary course of its business.”

[26] Under the heading “Customer’s Obligations,” Symcor agreed not to copy the Software “except for the creation of copies of the Software reasonably required for Customer’s enterprise wide use,” archival purposes and disaster recovery.

[27] Schedule A of the licence agreement contains additional terms and conditions. It expands the scope of s. 2.3 quoted above to include the following:

The Software can be used on an enterprise wide basis by Customer without restriction on the number of copies but only in association with the IBM software product known as Content Manager\OnDemand or any IBM successor product to Content Manager OnDemand.

[28] In Product Schedule No. 1, also signed on June 29, 2001, Xenos agreed to provide, subject to the terms of the licence agreement, “the Software hereinafter specified.” The schedule goes on to list the components of two non-production d2e software licences for operation on the IBM’s AIX platform.

[29] A few months later, Symcor decided to purchase a d2e software production licence, as offered in the June 28 quotation. On September 27, 2001, Product Schedule No. 2 was issued. It lists the components of one production d2e software licence for operation on IBM’s AIX platform. Symcor also licensed, without charge, three (two non-production, one production) PCL Parsers, for use with the d2e software.

[30] Product Schedule No. 2 also creates a time-limited exemption for use of the d2e software in a non-CMOD environment, stating:

Xenos will allow Symcor to use the Xenos software in their current file server environment (non-IBM Content Manager OnDemand) for a period of 9 months from the date of approval of this schedule.

[31] In 2003, the parties discussed an expansion of Symcor’s Xenos licence to remove the limitation for use only with IBM’s CMOD so that Symcor might use the software with any other archive product licenced by Symcor. Symcor also wanted to license a new component of the d2e software called a “Print Generator”. As a result, Xenos issued a quotation to Symcor on May 21, 2003. Expanding the existing licence for use with databases other than IBM’s CMOD was priced at approximately $224,000. Adding the print generator component was priced at approximately $88,000.

[32] The evidence is not controversial that, in September 2003, Symcor paid $88,000 for one production and two test licences for the d2e print generator component, for operation on the AIX platform. Product Schedule No. 3, to this effect, was issued on September 30, 2003 and signed by both parties. There is no evidence that Symcor ever paid the $224,000 quoted for expansion of the d2e licence for use with databases other than IBM’s CMOD or that any product schedule concerning this expansion was ever issued or signed.

[33] For several years, the parties carried on. Xenos provided technical support for the d2e software that Symcor was using. In 2007, internal questions were raised within Symcor about the status of the Xenos licences. Symcor requested Xenos to send details of the existing licences.

[34] Xenos sent a breakdown of Symcor’s existing licence, confirming that Symcor had one production and two non-production licences and that the licences were all “on AIX.” Xenos also provided a quote for Symcor to acquire a production licence to use the d2e software on a computer running either the Linux or Solaris operating systems (as opposed to AIX). The draft Product Schedule No. 4 quoted a fee of approximately $167,000 to licence the use of the d2e software on the Solaris or Linux hardware platform. The quotation confirmed that Xenos was providing a discount “based on existing licence restriction usage with CMOD.”

[35] This information generated questions internally at Symcor, particularly about the licence restriction that the d2e software could be used only in association with CMOD. It appears that Kevin Smith, Vice President Statement Solutions for Symcor in 2007 (now deceased) was under the impression that Symcor had “gotten agreement to use [the d2e software] outside of OnDemand and paid some money for it.”

[36] There is no other witness evidence on this, however, and all the documentary evidence shows that Symcor elected not to purchase any additional licence rights. Product Schedule No. 4 was never signed.

[37] Again in 2011, Symcor made inquiries of Xenos about the terms and conditions of its licence. In this case, Symcor wanted to know whether its use of the d2e software in a Windows environment (not AIX) and not in association with CMOD was covered by the licence agreement. Following an investigation, Xenos concluded that Symcor had been using the d2e software in production environments using the Windows operating system (not AIX) and a database other than CMOD.

[38] Shortly after this revelation, negotiations between the parties broke down and this litigation ensued in which Xenos seeks damages for breach of its licence agreement and for copyright infringement.

Analysis

Summary Judgment

[39] The leading authority framing any discussion of summary judgment is the decision of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7.

[40] The court in Hryniak emphasized the importance of the proportionality principle, striving to find procedures that are appropriate to the circumstances and explicitly recognizing that the best forum for resolving a dispute is not always that with the most painstaking procedure. Amendments to Rule 20 of the Rules of Civil Procedure changed the test for summary judgment from asking whether the case presents ‘a genuine issue for trial’ to asking whether there is ‘a genuine issue requiring a trial.’ Where the only genuine issue is the quantum of damages, Rule 20.04(3) specifically provides that the court may grant judgment with a reference to determine damages.

[41] The Supreme Court stated that there will be no genuine issue requiring a trial where the summary judgment process:

(a) allows the judge to make the necessary findings of fact;

(b) allows the judge to apply the law to the facts; and

(c) is a proportionate, more expeditious and less expensive means to achieve a just result.

[42] The ultimate test for whether a dispute can reasonably be resolved on summary judgment is whether the summary judgment process gives the judge confidence that he or she can “find the necessary facts and apply the relevant legal principles so as to resolve the dispute.”

[43] While the size or complexity of the case may be factors in this analysis, they are not, of themselves, any reason to deny summary judgment. As Corbett J. said in Sweda Farms et al. v. Egg Farmers of Ontario et al., 2014 ONSC 1200 at para. 108, aff’d 2014 ONCA 878 (C.A.), a party resisting summary judgment on the basis of complexity, size or insufficient process has to “strive for maximum clarity and rigor in explaining the additional steps required to decide the case, and the reasons for those additional steps.” Ultimately, to refuse summary judgment, there must be disputed issues of fact central to the disposition of the case, the resolution of which requires the forensic machinery of a trial.

[44] Post-Hryniak, a party defending a summary judgment motion must still put its best foot forward and lead trump or risk losing. Further, the court is entitled to assume, absent clear explanation to the contrary, that the record on a summary judgment motion contains all the evidence the parties would present at trial.

[45] Cases involving contractual interpretation are often well-suited to determination on a summary judgment motion, particularly in light of the limited role for extrinsic evidence. Here, the parties agree that on the issue of contract interpretation, the record before the court contains all of the information required

1. The Contract and Contract Breach

The Principles of Contract Interpretation

[46] Both sides cited the same cases on the basic principles of contract interpretation. A commercial contract is to be interpreted:

(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the cardinal presumption that they have intended what they said;

(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and, to the extent there is any ambiguity in the contract,

(d) in a fashion that accords with sound commercial principles and good business sense and that avoids a commercial absurdity.

Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, [2007] O.J. No. 1083 (C.A.) at para. 24.

[47] The Supreme Court of Canada has recently considered the principles of contract interpretation in Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53. The overriding concern is to determine the intent of the parties. To do so the decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own. No contract is made in a vacuum. (para. 47).

[48] While the surrounding circumstances will be considered in interpreting the terms of the contract, they must never be allowed to overwhelm the words of the agreement. The goal of examining such evidence is to deepen the decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. Interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (para. 57).

[49] While the nature of the evidence to be considered as surrounding circumstances varies from case to case, it should consist only of objective evidence of the background facts at the time of the execution of the contract. This involves knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting (para. 58).

[50] The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing. The rule precludes, among other things, evidence of the subjective intentions of the parties. The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (para. 59).

[51] These purposes are exemplified by the reasons of Ground J. in Misfud v. Owens Corning Canada Inc., 2003 8654 (ONSC) when he said, at para. 15:

The rationale of the exclusion of such evidence is, as stated in the Respondent’s factum, that no system of commerce could function if, every time there was some ambiguity in the wording of a contract, there had to be a parade of witnesses who had been involved in the negotiation of the contract giving conflicting evidence, with the benefit of hindsight, as to what positions the parties took at various stages during the negotiations and as to what the parties subjectively intended to agree to or subjectively understood the contract to mean.

[52] The parol evidence rule does not, however, preclude evidence of the surrounding circumstances. Evidence of surrounding circumstances is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise (para. 60).

[53] With these principles in mind, I will now turn to my analysis of the licence restrictions in issue in this case.

(i) The “One Server” Issue

[54] I begin with the general observation that the evidence of both parties’ affiants in this matter consisted of certain basic facts, identification of documents and some objective evidence of surrounding circumstances (although neither affiant was involved in any licensing functions in 2001, with their current respective employers or otherwise), together with a good deal of argument, opinion, legal conclusion, speculation and subjective evidence of personal, corporate or imputed intention.

[55] I have, I must say, entirely disregarded the affiants’ “evidence” when it falls into the realm of argument, opinion, legal conclusion, speculation or subjective intention (corporate or otherwise).

[56] This problem is particularly acute in connection with the “one server” issue, perhaps because the licence agreement itself is so inconclusive and vague on this point.

[57] Stripped of the legal conclusions, speculation, argument and subjectivity, the plaintiffs’ argument that each licence granted for use of the d2e software was for only one server, rests on essentially three factual foundations. First, the original June 19, 2001 quotation from Xenos to IBM made reference to a price per licence per server. Second, the IBM contract, with respect to some components of the products which IBM was supplying, made reference to a licence for one server. Third, product schedules 1, 2 and 3 to the licence agreement make reference to “two non-production licences” and “one production licence.”

[58] These facts are, in my opinion, too thin a reed to support the conclusion that the d2e production licence could only be used on one Symcor server.

[59] It is common ground that the contract “as a whole” in this case includes the licence agreement and the associated product schedules. As contemplated by the licence agreement, the product schedules are the vehicle by which the software being licensed is “described” and by which “any other agreed changes” are made to the licence agreement.

[60] The interpretive principle that the contract is to be interpreted as a whole, therefore, includes the licence agreement and the associated product schedules. They are to be read together giving meaning to all of their terms, avoiding an interpretation which renders a term ineffective.

[61] That said, the starting point for the analysis is clearly the terms and conditions of the licence agreement itself.

[62] The licence agreement grants a perpetual licence to Symcor to use the d2e software at any Symcor site for any entity to which Symcor provides services in the ordinary course of its business. There is no restriction, therefore, on locations from which or clients for which Symcor may use the d2e software.

[63] There is a general prohibition against making copies. A significant exception to this prohibition, however, is any copies reasonably required for Symcor’s enterprise wide use. Schedule A to the licence agreement confirms that Symcor can use any number of copies of the software on an enterprise wide basis without restriction, but only in association with CMOD.

[64] Nothing in the licence agreement suggests that the software can only be used on one server. Indeed, the provisions cited above are very much to the opposite effect.

[65] The product schedules also say nothing about servers. The language of the product schedules (particularly schedules 1 and 2) make it clear that the purpose of the schedules is to “describe” the software licence being acquired. Product schedule 2 is the only one of the three schedules that even uses the word “server”; and that is in connection with a brief, nine-month exemption from the requirement to use the software only in connection with the IBM CMOD database. The exemption enables Symcor to use the software for nine months in “their current file server environment” (which was non-CMOD).

[66] The June 19, 2001 quotation is, in my view, profoundly unhelpful in the interpretation exercise. This quotation was never accepted. It was superseded by the June 28, 2001 quotation which says nothing about servers at all, much less containing a limitation on one server per licence.

[67] The June 19, 2001 quotation is also superseded by the licence agreement and product schedules which actually formed the parties’ bargain. The language of the licence agreement is broad and expansive – in effect, unlimited copies for enterprise wide use at any Symcor location to service any ordinary course Symcor client. The product schedules on their face do not contain any limit on the number of servers.

[68] The June 19 quotation is also in the nature of evidence of pre-contract negotiation. I have grave doubts that pre-contract negotiations form part of the factual matrix typically admissible in contract interpretation cases. Contract interpretation involves construing the bargain the parties made, not the bargain they wanted, or hoped, to make. Even if contract negotiations were admissible under the rubric of factual matrix, they should be treated with caution as inherently suspect as they necessarily involve an element of subjectivity. Positions in negotiations may be taken for purely strategic reasons. At best, they tend to show only what a party wanted, not what they got, in the ultimate bargain.

[69] I take a similar view of the relevance of the IBM agreement. That agreement makes no mention of a “per server” limitation in its description of the “Xenos Programs”. More importantly, the IBM agreement specifically disclaims that it has anything to do with the Xenos licence. The IBM agreement states that the Xenos software “is licensed under the terms provided by Xenos,” and requires Symcor to represent that it has “agreed with Xenos terms” for its acquisition of the right to use the Xenos software. The mere fact that the IBM agreement contains a per server limit on some of the IBM deliverables says nothing about what was agreed to between Symcor and Xenos with respect to the d2e licence.

[70] The plaintiff’s main argument focuses on the fact that the production schedules make reference to one production licence and two development, or non-production, licences. Xenos says that in 2001, Symcor was only planning to use the d2e software to serve one client. Xenos argues that it would have been unnecessary for Symcor to acquire two development licences if Symcor had the right to use the software on as many servers as it wanted. Ergo, Xenos says, one production licence means use on only one server.

[71] This argument is a true non sequitur in my view; that is, it is an argument the conclusion of which does not follow from the premise.

[72] There is no evidence that Symcor provided service to its clients on a “server” basis. While it may be true that Symcor was initially planning to try the software out on only one client, the licence agreement says Symcor can use the software in any Symcor location on an enterprise wide basis to serve any client for which Symcor provided service in the ordinary course of its business.

[73] Xenos relies on the principle that the specific excludes the general; that the “specific” of the product schedule excludes the “general” of the licence agreement. Xenos has, in my view, turned the argument on its head. On the question of “servers” (a term that is not defined in the licence agreement and the use and function of which was not the subject of any evidence put before me), the product schedule is absolutely silent and contains no specific words of limitation that would exclude the broad usage rights conferred under the language of the licence agreement per se.

[74] There are any number of reasons why Symcor may have wanted two development licences (which were Windows and PC-based). There is no room for an inference (as opposed to what amounts to the plaintiffs’ speculation) that the acquisition of two development licences meant they could be used on only two servers such that the acquisition of one production licence meant that it could only be used on one server.

[75] For these reasons, I find that the agreement between the parties, read as a whole and properly interpreted in accordance with the principles laid out in Ventas and Sattva, does not restrict Symcor’s use to one server per licence.

(ii) The AIX Issue

[76] The licence agreement itself is silent on the question of operating or hardware systems but all three of the product schedules describe the software being licensed as being for the hardware platform AIX.

[77] Symcor argues that the AIX proviso in the product schedules is descriptive only; that it tells the user what the d2e software is designed to work on rather than constituting a limitation on use under the licence.

[78] This argument, in my view, misconceives the purpose of the product schedule. The product schedule is not, properly construed, merely explaining what the d2e software was designed to work on, as if it was a warranty or representation. The product schedule, under the licence agreement, constitutes the definition of the software “to be licensed.” In that context, the software that was licensed was code or modules for use on the AIX platform. Symcor’s use on another platform was not within the use contemplated under the 2001 licence agreement.

[79] Evidence of post-contract conduct may be admitted for the purpose of interpreting a written agreement, Montreal Trust Co. of Canada v. Birmingham Lodge Ltd., 1995 438 (ON CA), [1995] O.J. 1609 (C.A) at p. 11. Some caution should be exercised, however, in the use of such evidence because it was not, by definition, available at the time the agreement was made. As well, there is a risk that such evidence may reflect subjective intentions, opinions or legal conclusions (correct or incorrect) about the parties’ rights which may say little or nothing about what the parties agreed to many years earlier.

[80] I have, therefore, founded my conclusion about the scope of the licence with regard to the operating platform on the plain words of the licence agreement and associated product schedules. To the extent post-contract conduct is admissible, I use that evidence as confirmatory, rather than dispositive, of the conclusions reached on the plain words of the contract.

[81] In this case, there is such confirmatory conduct because, in 2007, there were discussions about the scope of Symcor’s licence and, specifically, the operating system AIX. Xenos confirmed to Symcor that the d2e licence was all “on AIX.”

[82] Xenos provided a quote for the purchase of a licence for use of d2e on Solaris or Linux. This involved a quoted fee of about $167,000.

[83] Mr. Smith, Symcor’s deponent in this proceeding, agreed in cross-examination that if Symcor wanted to use the d2e software on the Solaris or Linux operating systems, it would have been necessary for Symcor to pay to acquire a licence for that use. That, he said, is what Symcor was investigating in 2007.

[84] Although of limited use (for the reasons outlined above), the June 28, 2001 quotation which gave rise to the licence agreement is also consistent with this conclusion in specifying that “the proposed system is to be on an AIX hardware system.” Similarly, the IBM agreement (again of limited use) mentions AIX in connection with the licence for the “Xenos Programs.” Again, standing alone, these facts would not be dispositive but they are confirmatory of a consistent understanding throughout that the d2e licence was for use on the AIX operating platform.

[85] I find, for these reasons, that the AIX proviso contained in the licence agreement was a limitation on Symcor’s use of the d2e software. To the extent Symcor used the d2e software in a production setting on an operating platform other than AIX, it was in breach of the licence agreement.

(iii) The CMOD Issue

[86] The CMOD issue is a simpler case because Symcor concedes that the use of the d2e software on CMOD was a licence restriction. It would be hard to take any other position given the explicit language in Schedule A to licence agreement and the proviso to product schedule 2, both cited earlier in these reasons.

[87] According to Symcor, CMOD only worked in conjunction with AIX. In 2003, Symcor became interested in running the production portion of d2e for some of its customers on Windows rather than AIX servers in association with CMOD. There were discussions about removing the CMOD restriction. A quote was prepared for Symcor by Xenos for the removal of the CMOD restriction which involved a one-time charge of $224,200 and an annual licence charge of $34,200.

[88] On September 30, 2003 Symcor and Xenos executed Product Schedule No. 3 which contemplated the payment of $88,500, comprised of a $75,000 initial fee and a $13,500 annual fee to acquire additional print generators. Product Schedule No. 3 makes no reference to CMOD or the CMOD restriction.

[89] Symcor’s affiant conceded that he was not personally involved in the negotiation of Product Schedule No. 3. He also conceded that there is no evidence of how the discussions in 2003 were resolved apart from the documentary evidence. All he can say is that following the execution of Production Schedule No. 3, Symcor operated on the basis that the CMOD restriction had been lifted and the vast majority of Symcor’s use of the d2e software was, thereafter, on Windows using a non-CMOD database. The other Mr. Smith (deceased) apparently thought that Symcor had “gotten agreement” to use d2e outside of CMOD but, again, there is no documentary or other support for this belief.

[90] There is simply no evidence that Xenos and Symcor ever agreed to lift the CMOD restriction. Symcor made inquiries about removing that restriction. It was going to cost Symcor about $224,000 for another licence to do so. It never paid the money. The only product schedule executed at the time dealt with the acquisition of print generators for the d2e software for a much smaller amount.

[91] Use of the d2e software on CMOD was a licence restriction. That restriction has never been amended. To the extent Symcor used the d2e software with a database other than CMOD, therefore, it was in breach of the licence agreement.

2. Copyright Infringement

[92] Computer programs fall within the definition of “literary work” under the Copyright Act, R.S.C. 1985, c. C-42. Under s. 3(1) of the Act, copyright is the sole right to produce or reproduce the work or any substantial part thereof in any material form.

[93] Under ss. 53(2) and (3) of the Act, copyright registration is prima facie evidence of copyright ownership. There is no evidence to challenge the plaintiffs’ chain of ownership or certificates of registration of copyright in the d2e software. Actuate Corporation owns the copyright and, under s. 3(1) of the Act, it possesses the sole right to produce or reproduce the d2e software in any material form, absent the grant of an interest to a third party by licence.

[94] Section 13(4) of the Act permits the owner of any copyright to grant an interest in the copyright by way of a licence.

[95] Section 27(1) of the Act provides that it is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that by the Act only the owner of the copyright has the right to do. Thus, it is an infringement to produce or reproduce a copyrighted work without the consent of the owner because, under the Act, only the owner may produce or reproduce the work.

[96] Any use of the d2e software by Symcor that exceeded the scope of the licence agreement was a reproduction of the software in a material form within the meaning of s. 3 of the Act without consent and, thus, an infringement of Actuate Corporation’s copyright.

[97] Since I have found that Symcor’s use of the d2e software on an operating platform other than AIX, in a production setting, and with a database other than CMOD, were breaches of Xenos’ licence agreement, it follows that these breaches also constituted infringement within the meaning of the Act.

3. Estoppel and Limitation Issues

[98] Symcor argues that its use of d2e on Windows and a non-CMOD database was not surreptitious. Xenos employees provided Symcor with technical service and support for d2e through Xenos’ customer and professional service groups. When seeking technical service and support, Symcor would fill out a problem report that contained details about the issue being experienced with d2e.

[99] The information Symcor provided in each problem report included, among other things, a description of the problem and the hardware or operating system on which d2e was operating at the time.

[100] Symcor points to documents produced in the context of the ongoing technical support provided by Xenos’ customer and professional service groups which, it says, reveal that Symcor was using d2e on both AIX and Windows (and, therefore, by inference, also not on CMOD) in a production environment from 2004 onwards and that Xenos actively provided service and support for this usage without objection.

[101] Symcor’s witness also deposed to the fact that Xenos’ licence key does not prevent the use of the d2e software with a non-AIX operating system or a non-CMOD database. Symcor relies on the inference that, because Symcor technically could to use the d2e software in these environments, it was somehow permitted to do so under the licence.

[102] Symcor argues that all of this evidence could give rise to the defence of estoppel and to limitations defences. Symcor says, however, that the evidentiary record to advance these defences is incomplete. Symcor argues there is no evidence from “important witnesses” (not identified) and that documentary production from Xenos is deficient. Symcor argues, therefore, that Xenos’ motion for summary judgment is premature.

[103] In response to Symcor’s evidence about the alleged knowledge of Xenos’ customer and professional support groups, Xenos has filed responding affidavits from Mr. Schumacher, who worked in the customer service group starting in 2003 and whose name is mentioned in some of the technical support documentation; Sarah Romain, who has worked in Xenos’ customer support group in roles of ascending seniority since 1991; and, Calvin Knights, who has worked in Xenos’ professional services group since 2003. All three of these deponents testified that neither they, in their technical support roles, nor anyone else in technical support roles working with or under them, knew about, were responsible for knowing or ensuring compliance with, the terms and conditions of Xenos’ customer’s product licences.

[104] Each of these witnesses described the purpose of technical support as being to resolve customer’s technical problems with Xenos products as expeditiously as possible. As Mr. Schumacher said:

If we had been required to verify and enforce stated restrictions in the customer’s licence agreement prior to providing support, this would have delayed resolution of their problems and created significant tensions in our customer relationships.

[105] The technical support witnesses have also pointed out that the development, or non-production, licences were always intended to be run on Windows, not AIX. It is not possible to determine, from most of the problem report documents disclosing a Windows operating platform, whether the problem for which Xenos’ technical support was being sought was in a development, or a production, context.

[106] Although cross-examined, none of these witnesses were seriously challenged on this evidence.

[107] As to the use and function of licence keys, these witnesses’ evidence was that licence keys are a basic and rudimentary form of protection and do not control, nor are they intended to control, each and every parameter of the terms and conditions of each customer’s licence. Specifically, the licence keys do not check or control whether the software is being run on a particular platform or operating system or in connection with a particular database. There was also no serious challenge to this evidence.

[108] In the context of the analysis of a possible estoppel defence, it is important to remember that the mere fact that a party does not strictly police and vigilantly enforce its legal rights does not necessarily mean that it has amended or lost those rights.

[109] The licence agreement itself, for example, provides:

No relaxation, forbearance, delay or indulgence by either party in enforcing any of the terms and conditions of this Agreement or the granting of time by either party to the other shall prejudice, affect or restrict the rights and powers of that said party hereunder nor shall any waiver by either party of any breach hereof operate as a waiver of any subsequent or any continuing breach hereof.

[110] The licence agreement also provides:

No amendment or other variation to this Agreement shall be effective unless it is in writing, is dated, and is signed by or on behalf of each of the Parties.

[111] There is, in addition, a significant evidentiary burden on a party seeking to establish estoppel by conduct. As the Supreme Court of Canada put it in Maracle v. Travellers Indemnity Co. of Canada, 1991 58 (SCC), [1991] 2 S.C.R. 50 at para. 15:

The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted upon. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position. [emphasis added]

[112] In essence, therefore, Symcor must establish that, in failing to report or act on information obtained during service calls (during which it was possibly revealed that Symcor was operating d2e on Windows, not AIX), and by failing to object to that use, the technical support personnel working in Xenos’ customer and professional service groups intended to amend the licence agreement and intended to lift the licence restrictions requiring Symcor to use d2e with AIX and CMOD.

[113] In order to intend to affect legal relations in the corporate context, it is at least necessary that the relevant employee(s) who is said to have knowledge of the alleged breach of licence have knowledge of the terms of the licence, responsibility for ensuring compliance and apparent authority to effect a change in licence-related legal relations. I do not think Symcor has met that threshold. There is simply no evidence that Xenos’ technical support workers had: a) knowledge of the licence terms; b) responsibility for enforcing licence terms; or c) apparent legal authority to affect legal relations with respect to Symcor’s licence agreement with Xenos.

[114] Nor is there any evidence that Symcor’s use of d2e on AIX or on a non-CMOD database ever came to the attention of anyone at Xenos who did have knowledge, responsibility or authority over licensing matters before 2011.

[115] I do not think Symcor is able, on a motion for summary judgment where they have raised this issue, to sit back and say they need to examine more employees or former employees to explore the limits of their authority, or to require Xenos to produce more documents. It was incumbent on Symcor to seek to obtain that additional evidence in advance of the motion. This is the learning from not only the history of summary judgment in Ontario but, most recently, from Sweda Farms, supra, upheld by the Court of Appeal for Ontario. This is what ‘best foot forward’, ‘lead trump or risk losing’ and ‘assume on the motion that the record contains what would be presented at trial’ means.

[116] If the defendant thought it needed more documents or to examine more potential witnesses, it ought to have taken steps to obtain that evidence in advance of the motion. I do not think that the case management endorsement of Newbould J. of March 20, 2014 placed any restriction on the defendant in this regard. Newbould J.’s endorsement simply meant that the substance of the defendant’s proposed motion to strike the plaintiffs’ summary judgment motion should be dealt with by way of defence to the summary judgment motion, not as a separate, preemptive strike. It did not prevent Symcor from insisting on further document production or examining further witnesses.

[117] On the record before me, there is no genuine issue requiring a trial on the estoppel defence. For this reason, I decline to dismiss the plaintiffs’ motion for summary judgment on this basis.

[118] The defendant’s limitation defence relies on the same facts and suffers from the same frailties. In addition, the limitation issue is, to a significant extent, premature because there will necessarily have to be a trial on damages in any event. The licence breaches are ongoing. The defendant’s limitation defence would, therefore, at best reduce the number of years for which the plaintiffs could seek damages. For these reasons, I decline to dismiss the motion for summary judgment on the basis of the limitation defence as well.

4. Amendments

[119] One ground of relief sought on this motion is an order to continue under Rule 11.02 transferring and transmitting the interest in this action of the plaintiff, Xenos IP Partnership, to Actuate Corporation and amending the style of cause substituting Actuate Corporation as a plaintiff in the place of Xenos IP Partnership.

[120] This ground of relief was not opposed and is therefore granted.

Conclusion

[121] Para. 141 of the plaintiffs’ factum seeks an order for the following relief:

(a) an order to continue pursuant to Rule 11.02 transferring and transmitting the interest in this action of the plaintiff, Xeno IP to Actuate Corporation and amending the style of cause substituting Actuate Corporation as a plaintiff in the place of Xenos IP;

(b) summary judgment declaring that:

(i) the transmitted plaintiff, Actuate Corporation, is the owner of the copyright of the d2e;

(ii) Symcor has infringed the plaintiffs’ copyright in the d2e software, contrary to the Copyright Act, R.S.C. 1985, c. C-42; and

(iii) Symcor has breached the terms of the licence agreement;

(c) summary judgment declaring that the plaintiffs are entitled to:

(i) damages for Symcor’s breaches of contract or Symcor’s profits therefrom; and

(ii) damages for Symcor’s copyright infringement and Symcor’s unjust enrichment and profits therefrom, or statutory damages pursuant to s. 38.1 of the Copyright Act, at the election of the plaintiffs;

(d) an order pursuant to Rule 20.04(3) directing a reference or in the alternative a trial to determine the amounts of such damages described in paragraph (c);

(e) summary judgment granting the plaintiffs a permanent injunction restraining Symcor from breaching the licence agreement and infringing the copyright of Actuate Corporation;

(f) an order requiring Symcor, at the option of the plaintiffs, either to deliver to the plaintiffs or their designated agent, or destroy under oath, all materials (including electronic files and programs) in Symcor’s possession, power or control, the use of which may offend any injunction granted; and

(g) costs of this motion and the action thus far on a substantial indemnity basis.

[122] Judgment is granted in accordance with subparas. 141(a) and (b) cited above. It seems to me that the relief sought in subpara. (c) of the plaintiffs’ factum is superfluous in light of the relief sought, which, in some form, will be granted, under subpara. (d).

[123] I agree with the defendant that, on the evidence, the damages portion of this case is likely to be difficult, time-consuming and involve significant expert evidence. It is clear that further documentary and oral discovery will be required. The limitation defence will also be a component of the damages hearing. For these reasons, the appropriate order is for a trial on the issue of damages rather than a reference.

[124] Subparas. (e) and (f) were not the subject of any submissions during the argument of the motion. I will not grant this relief without it being specifically addressed by both parties. There shall be a case conference to determine how this will be addressed and a further hearing date, if necessary.

Costs

[125] I strongly urge the parties to reach an accommodation on costs. Failing agreement, however, the plaintiffs may seek their costs by submitting a brief type-written submission (not to exceed three pages), together with a Bill of Costs and any supporting documents, within three weeks. The defendant may respond to any request for costs by submitting a brief type-written submission (subject to the same page limit) within a further two weeks.

Penny J.

Released: January 30, 2015

CITATION: Actuate v. Symcor, 2015 ONSC 689

COURT FILE NO.: CV-13-10098-00CL

DATE: 20150130

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Actuate Canada Corporation and Xenos IP Partnership

Plaintiffs

– and –

Symcor Services Inc.

Defendants

REASONS FOR JUDGMENT

Penny J.

Released: January 30, 2015