Court File and Parties
Court File No.: CV-17-29 Date: 20171205 Superior Court of Justice - Ontario
Re: David Rowland, Plaintiff And: Anthony Stephan, Estate of David Hardy, Drew Dahl, The Synergy Group of Canada Inc., Truehope Inc., and Nutratek Health Innovations Inc., Defendants
Before: Petersen J.
Counsel: D. Rowland, Self-Represented Plaintiff D. Reive and T. Johnson, for the Defendants, Anthony Stephan, The Synergy Group of Canada Inc. and Truehope Inc. T. Gordner, for the Defendants, Estate of David Hardy, Drew Dahl and Nutratek Health Innovations Inc.
Heard: September 25, 2017
Endorsement
Introduction
1The Defendants have brought two separate motions under Rule 21.01(1)(b) of the Rules of Civil Procedure for an order striking out the Plaintiff’s Statement of Claim, without leave to amend, on the ground that it discloses no reasonable cause of action. The Plaintiff moves for leave to amend his Statement of Claim to correct deficiencies in his pleading. All three motions were consolidated by an Order of Justice Price dated April 4, 2017 and were heard before me on September 25, 2017 in Guelph.
2A Statement of Claim discloses no reasonable cause of action if its allegations do not give rise to a recognized cause of action or if it does not plead the necessary material facts to establish the legal elements of an otherwise recognized cause of action. Coote v. Ontario (Human Rights Commission), [2009] O.J. No.4264, at para.39. These issues must be determined while assuming all of the facts pleaded by the Plaintiff to be true. R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at paras.17 and 22.
The Allegations
3The Statement of Claim in this case alleges that the Defendants committed “theft of the Plaintiff’s trade secret” and engaged in an elaborate scheme to conceal the alleged theft. The purported “trade secret” is the knowledge that, when shilajit is added to vitamin and/or mineral compositions in a concentration of between 0.4% and 10% of the total weight of the composition, it significantly enhances the effectiveness of such dietary supplements by increasing their energetic properties.
4The Plaintiff David Rowland is the patented inventor in both Canada and the United States of vitamin/mineral compositions containing shilajit to enhance their energetic properties. He applied for the patents in 1991. His application for the Canadian patent became publicly available, pursuant to the provisions of the Patent Act, R.S.C.1985, c.P-4, on June 12, 1993. His United States patent was granted and published on April 11, 1995. Both patents expired in 2011.
5Mr. Rowland claims that the Defendants stole his “trade secret” by manufacturing and selling, in both Canada and the United States, a successful line of EMPowerplus vitamin and mineral products that contain 1.1% (by weight) shilajit. He claims that shilajit has been present in EMPowerplus products since at least the year 2000 and that the Defendants began using shilajit to develop their products in 1996 – namely, during the patent protection period and up to the present.
6Mr. Rowland pleads that he discovered that EMPowerplus products contain shilajit in May 2016. He further pleads that the Defendants deliberately hid this fact from the public (and hence from him) through falsification of product labels, misleading advertising and other deliberate acts of deception. He alleges that this was done to conceal their theft of his trade secret and to deprive him of the royalties to which he claims he is legally entitled as the owner of the stolen intellectual property.
7Mr. Rowland claims that a “standard royalty for intellectual property of this nature is 10% of sales.” He estimates the total sales of EMPowerplus products from their inception to present to be $200 million. He seeks payment of damages in the amount of $20 million for lost income, plus punitive damages in the amount of $2 million and an Order transferring ownership of the EMPowerplus TM trademark to him, so that he will benefit financially from future sales of the Defendants’ shilajit-enhanced products.
Analysis
8In their motions to strike the Statement of Claim, the Defendants argue that there can be no cause of action for theft of a trade secret because, based on Mr. Rowland’s pleadings, there is no confidentiality (and hence no “trade secret”) regarding the beneficial effects of introducing shilajit into vitamin and/or mineral formulations.
The Definition of "Trade Secret"
9“Trade secret” is a technical legal term. Merck Frosst Canada Ltd. v. Canada (Minister of Health), 2012 SCC 3, [2012] 1 S.C.R. 23, at para.104. The definition of a “trade secret” requires (among other elements) that there be confidential commercial information known by only one person or relatively few persons, who demonstrate their intention to treat the information as “secret”. Merck Frosst Canada, supra, at para.109. The Defendants argue that any confidentiality that may have previously existed with respect to the shilajit information ceased to be treated as a secret when Mr. Rowland chose to obtain patent protection, which necessitated full voluntary disclosure of the details of his invention. As the Supreme Court of Canada noted in Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60, [2012] 3 S.C.R. 625, at para.32:
The patent system is based on a “bargain”, or quid pro quo: the inventor is granted exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge. This is the basic policy rationale underlying the [Patent] Act…. Binnie J. explained the quid pro quo as follows in AZT, at para.37:
A patent, as has been said many times, is not intended as an accolade or civic award for ingenuity. It is a method by which inventive solutions to practical problems are coaxed into the public domain by the promise of a limited monopoly for a limited time. Disclosure is the quid pro quo for valuable proprietary rights to exclusivity which are entirely the statutory creature of the Patent Act.
10In Merck Frosst Canada, supra, at para.107, the Supreme Court discussed the characteristics of a trade secret as follows: “it is usually understood to mean a secret formula or process not patented but known only to certain individuals using it in compounding some article of trade having a commercial value” (emphasis in original).
11I accept the Defendants’ submission that, having chosen to obtain patent protection, Mr. Rowland forfeited any right to claim a trade secret in the addition of shilajit to vitamin and/or mineral compositions to enhance their effectiveness. He cannot now bring an action against the Defendants for theft of a trade secret. The facts as pleaded by Mr. Rowland do not establish the legal elements of a recognized cause of action.
Proposed Amendments
12Mr. Rowland submits that the Defendants are trying to strike his Statement of Claim simply because of “phraseology”. He argues that his Claim is for damages resulting from the theft of a “proprietary idea”, which he referred to in his pleading “as a ‘trade secret’, whereas ‘intellectual property’ would have been a more appropriate descriptor.”
13It is clear that Mr. Rowland did not initially appreciate the legal definition of a “trade secret” when he used that term in his Statement of Claim, as evidenced by his incongruous pleading that his “trade secret was protected by Canadian and U.S. patents”. The Court of Appeal has stated that, in Rule 21 motions to strike, the pleading must be read generously in favour of the Plaintiff with allowances for drafting deficiencies. Williams v. Canada (Attorney General) (2009), 2009 ONCA 378, 95 O.R. (3d) 401 (Ont.C.A.) at para.10. I am of the view that such allowances are particularly important in cases involving a self-represented litigant.
14In his motion, Mr. Rowland requests leave to amend his Statement of Claim by substituting the expression “intellectual property” for “trade secret” throughout. He also seeks leave to add pleadings to his Statement of Claim, including a pleading that his Canadian and U.S. patents established him “as the rightful owner of any vitamin-mineral product that includes shilajit as part of its composition, regardless of the use, applications, or properties of said product.”
15Even allowing for deficiencies in drafting by a self-represented litigant and/or granting Mr. Rowland leave to amend his pleading, I have concluded (for the reasons set out below) that his Statement of Claim must be struck because it is certain to fail. Coote, supra, at para.39.
16Mr. Rowland argues that disclosure of intellectual property by making a patent application is not an invitation to steal it. Rather, it is a safeguard to ensure that the invention is not stolen by someone else (for the period of patent protection). This is not disputed by the Defendants, but they argue that (1) there is no protection beyond the patent protection period and (2) prior to the expiry of the patents in 2011, the only potential claim relating to the Defendants’ alleged (mis)use of shilajit to enhance the effectiveness of vitamin or mineral compositions would be a claim for patent infringement, which Mr. Rowland did not plead.
17The Defendants submit that, absent breach of a fiduciary obligation amounting to the tort of misuse of confidential information, “appropriation of inventions” or “theft of intellectual property” is not a cause of action known at common law. Techform Products Ltd. v. Wolda (2000), 5 C.P.R. (4th) 25, at para.78, rev’d on other grounds , 56 O.R. (3d) 1. There is no allegation in Mr. Rowland’s pleading, or in his proposed Amended Statement of Claim, that he disclosed the shilajit information to any of the Defendants in circumstances that would give rise to a duty of confidence or a fiduciary relationship. The Defendants argue that the facts pleaded in the Statement of Claim therefore do not give rise to a recognized cause of action.
Assignment of Rights
18It is unnecessary for me to decide whether, during the currency of the patents, there is any recognized cause of action that could be pleaded other than patent infringement, because Mr. Rowland’s pleading suffers from a more fundamental flaw that is fatal to any Claim he seeks to bring against the Defendants in relation to his shilajit invention: he assigned all of his rights, title and interest in the shilajit invention to Creative Nutrition Canada Corp. (“Creative Nutrition”) in December 1991.
19Mr. Rowland’s pleading states that the Canadian and U.S. patents relating to shilajit list him as the “inventor”. Although no evidence is admissible on a motion to strike under Rule 21.01(1)(b), I am entitled to consider documents specifically referred to and relied on in the Statement of Claim, which are deemed to be incorporated into the pleading. Web Offset Publications Ltd. v. Vickery, [1999] O.J. No.2760 (C.A.), at para.3. In both his Statement of Claim, and his proposed Amended Statement of Claim, Mr. Rowland refers to and relies on the shilajit patents. The patents were produced as part of the motion record and are admitted pursuant to ss.13 and 14 of the Patent Act. They list Mr. Rowland as “inventor” (consistent with his pleading) but list Creative Nutrition as “owner” (the Canadian patent) and “assignee” (the U.S. patent). This likely explains why Mr. Rowland did not commence a legal proceeding based on alleged patent infringement – he does not own and never did own the shilajit patents.
20The patent files include signed copies of Mr. Rowland’s assignment of his interests to Creative Nutrition dated December 23, 1991 (as well as a reassignment dated April 20, 1992). These documents, which are incorporated into Mr. Rowland’s pleading, confirm that Mr. Rowland transferred to Creative Nutrition the full and exclusive right to his shilajit invention in Canada, the United States and all other countries, including but not limited to any patents that might be granted with respect to the invention.
21Given these assignments, Mr. Rowland has no proprietary interest in the shilajit invention. He therefore has no rights to assert with respect to the Defendants’ use, misuse, or alleged theft of his invention, whether characterized as a “trade secret” or “intellectual property” (or using any other term).
Conclusion
22It is not possible for Mr. Rowland to cure the deficiencies in his Statement of Claim through amendments. His Claim, however drafted or re-drafted, has no reasonable prospect of success. Assuming all the facts pleaded to be true, it is plain and obvious that the pleading (even with the proposed amendments) discloses no reasonable cause of action. R. v. Imperial Oil, supra, at para.17.
23I therefore grant the Defendants’ motions. Mr. Rowland’s Statement of Claim dated January 26, 2017 is hereby struck, without leave to amend. The Plaintiff’s motion for leave to amend his Statement of Claim is denied.
Costs
24The Defendants are entitled to their costs of these motions. If the parties are unable to agree on the amount of costs to be paid by Mr. Rowland, they may make written submissions of no more than 2 pages, excluding any Outline of Costs and settlement offers.
25The Defendants will serve and file their costs submissions by no later than December 22, 2017 and the Plaintiff will serve and file his costs submissions by January 8, 2018. (Written submissions should be mailed to my attention at Ontario Superior Court of Justice in the A. Grenville and William Davis Courthouse in Brampton, Ontario.)
Petersen J.
Date: December 5, 2017