Form 10
[Rule 3.25]
COURT FILE NUMBER
1201-
COURT
COURT OF QUEEN’S BENCH OF
ALBERTA
JUDICIAL CENTRE
CALGARY
PLAINTIFF
P.S. Knight Co. Ltd.
DEFENDANT
Canadian Standards Association
DOCUMENT
STATEMENT OF CLAIM
ADDRESS FOR SERVICE
AND CONTACT
INFORMATION OF PARTY
FILING THIS DOCUMENT
McCarthy Tétrault LLP
Barristers & Solicitors
3300, 421 – 7th Avenue SW
Calgary, AB T2P 4K9
Attention: Timothy St. J. Ellam / Cecilia Hoover
Telephone: 403-260-3533 / 3648
Fax: 403-260-3501
Clerk’s Stamp
NOTICE TO DEFENDANT(S)
You are being sued. You are a defendant.
Go to the end of this document to see what you can do and when you must do it.
The Parties
1.
P.S. Knight Co. Ltd. (“Knight Co.”) is a corporation duly continued pursuant to the laws of
Alberta on or about March 26, 2011 and it is registered to carry on business in the Province of
Alberta. Prior to incorporation, Knight Co., was a sole proprietorship which was formed in 1967.
2.
The Defendant, the Canadian Standards Association (“CSA”) is a not-for-profit corporation
duly incorporated pursuant to the The Companies Act, as amended by The Companies Act
Amendment Act of 1917 and carries on the business of inter alia, facilitating, developing, assessing
and certifying conformance with various safety standards, including those relating to electrical
safety. CSA is one of a number of entities that are collectively referred to as the “CSA Group”. The
CSA main office is in Toronto, Ontario, but it carries on business throughout Canada.
3.
CSA is not a share capital corporation but rather its financing and control is overseen by its
members represented by a board, two thirds of which is elected by CSA members. The CSA’s
members are comprised of both private and government participants.
Knight Co. Principles
4.
Peter Knight (“P. Knight’) is the founder of Knight Co. From 1967 to April, 2010 P. Knight
was the President and sole shareholder of Knight Co. P. Knight retired in April, 2010 and is no
longer a principal or shareholder of Knight Co.
5.
Gordon Knight (“G. Knight”) is the son of P. Knight. In or about November 15, 2010, G.
Knight purchased P. Knight’s shares in Knight Co. From November 15, 2010, G. Knight has been
the sole shareholder and the President of Knight Co. Knight Co.
History and Background
(a)
6.
CSA and the Canadian Electrical Code
CSA’s stated mandate, as described by its Letters Patent of 1944 includes the promotion of
“…a knowledge of, and the use of, approved Canadian standards…in Canada”. As part of its
mandate, the CSA publishes the Canadian Electrical Code, Part 1, Safety Standards for Electrical
Installations (the “Code”) which it sells for $175.00 per copy. CSA has been publishing the Code
(at times, under different titles) since 1927. The Code is currently on its 22nd edition, published in
2012.
7.
The Code is a compilation of written work from various third party authors of relevant and
varying expertise, principally electrical inspectors and related employees of the provincial
governments, and is not the work product of CSA itself. It is the Defendants’ belief that at no time
have these third party authors assigned or transferred any rights in the Code to the CSA.
8.
The Code, both directly and sometimes with provincial amendments, has been adopted as
legislation for the purpose of governing electrical safety in all Canadian provinces for over 80 years,
each province having adopted the Code by 1930. By virtue of its adoption into legislation in all
provinces, the Code is legally binding and has the force of law in Canada. Persons found to be in
non-compliance with the Code are subject to penalties.
9.
The safety standards which comprise the Code are approved by the Standards Council of
Canada and developed by a committee, principally comprised of third party authors employed by,
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and in the payroll of, provincial governments. CSA’s role in the development of the Code is
administrative. CSA does not develop, draft, evaluate, test, or verify the changes, additions,
amendments, or new regulations that are made or otherwise introduced to the Code.
10.
In 1990, CSA began publishing an annotated version of the Code (the “CSA Handbook”)
the purpose of which is to provide to persons relying upon and applying the Code with the rationale
and intent of the standards contained in the Code. The CSA Handbook sells for $130.00 per copy.
(b)
11.
Knight Co. Granted Licence to Reproduce the Code in the Electrical Code
Simplified
In 1967, P. Knight, formed his sole proprietorship and began to publish the Electrical Code
Simplified (“ECS”) under its original title, “Canadian Electrical Code in Simple Terms and
Diagrams”. The ECS is a publication that includes direct excerpts from the Code as well as plain
language annotations written by P. Knight and contributing electrical engineers and trade
professionals. P. Knight is a former electrician, electrical inspector, and former Chief Electrical
Inspector for North Vancouver, BC. P. Knight’s contribution to the electrical trade spans six
decades. The purpose of the annotations is to provide persons undertaking electrical wiring with a
practical guide to the Code to ensure their compliance with the safety standards therein.
12.
P. Knight was an attending Chief Electrical Inspector of British Columbia. In 1967, P. Knight
obtained the consent of the Chief Electrical Inspector to reproduce parts of the Code and was
encouraged to publish the ECS. As an electrical inspector, P. Knight had been, as many electrical
inspectors were, asked and did contribute commentary to the CSA regarding the Code, some of
which were incorporated into and reflected revised versions of the Code. P. Knight was regularly
invited to and did attend and contribute at committee meetings even after his retirement from
electrical inspection, and all in the benefit of the CSA until 2006.
13.
By letter dated November 28, 1968, P. Knight’s continued reproduction of the Code was
encouraged by CSA. Among other things, this letter stated the following:
“As the uniformity of requirements throughout Canada is the prime
object of the Canadian Electrical Code, we certainly appreciate any
move to assist in publicizing it and promoting greater understanding
of its purpose and its requirements.
However, we must also protect CSA’s Copyright of the Code in the
interests of all those who participate in its development and those
whose function is to enforce it”
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CSA also requested that P. Knight forward a copy of the Canadian Electrical Code in Simple Terms
and Diagrams for its own review. P. Knight complied with this request on December 3, 1968.
14.
In a letter dated December 27, 1968, P. Knight requested clarification regarding CSA’s
concerns relating to its alleged copyright as asserted in the November 28, 1968 letter. By letter
dated January 20, 1969, CSA responded to P. Knight’s December 27, 1968 letter, again
encouraging the publication of the ECS and responding to P. Knight’s request for clarification
regarding CSA’s copyright concerns. The January 20, 1969 letter stated, among other things:
“We appreciate the purpose of your book and any move to assist in
the use and understanding of the wiring regulations in any particular
area will certainly benefit those concerned, including the general
public.”
…
“…the “Canadian Electrical Code” is copyrighted by CSA and
therefore, the appearance of this term as the main caption of your
book, in our opinion, is an infringement of our copyright”.
15.
CSA did not at this time assert any further copyright infringement by P. Knight vis-à-vis the
publication of the ECS.
16.
As a result of this correspondence and other discussions, P. Knight changed the title of his
publication from Canadian Electrical Code in Simple Terms and Diagrams to Electrical Code
Simplified.
17.
By letter dated May 12, 1969 (the “1969 Letter”), CSA unequivocally confirmed P. Knight’s
licence (the “Licence”) to reproduce the Code. This letter stated, among other things, the following:
“…you have our permission to quote from the Code providing recognition of the source
is given in a clear manner on those items which are direct quotations...”
18.
On or about July 12, 1985, Knight Co. was incorporated in British Columbia at which time,
the Licence was assigned by P. Knight to Knight Co. Knight Co was continued as an Alberta
corporation on March 26, 2011.
(c)
19.
Provisions of Advance Memoranda by CSA to P. Knight and Knight Co.
For over three decades, spanning from 1974-2005, CSA provided P. Knight and later, Knight
Co., with memoranda containing the new revisions to the Code in advance of publishing its newest
Code edition (the “Memoranda”).
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20.
The provision of these memoranda was intended to assist P. Knight and later, Knight Co. to
publish the ECS concurrent with publication of the new edition of the Code. CSA knew that advance
provision of these Memoranda was essential to the business and profitability of P. Knight and later,
Knight Co.
21.
At all times from 1985 onward, CSA knew of the incorporation of Knight Co. and the
assignment of the Licence from P. Knight to Knight Co. For twenty years, CSA continued to provide
Knight Co. with the Memoranda and did not challenge the assignment of the Licence.
22.
In spite of having provided the Memoranda to Knight Co. for twenty years, without
explanation in 2005, CSA initially refused to provide Knight Co. with the Memoranda relating to the
2006 edition of the Code. CSA refused to provide these Memoranda with full knowledge that such
refusal would be highly detrimental to the business and economic welfare of Knight Co.
(d)
Erroneous Memoranda
23.
After discussions between Knight Co. and CSA, CSA agreed to provide the Memoranda.
24.
When P. Knight received the Memorandum relating to the 2006 edition (the “Erroneous
Memoranda”), he called one of his contacts at the CSA to obtain confirmation that he had been
provided with complete, full and accurate information. That CSA contact represented to P. Knight
and reassured him that he had received complete and accurate information via the Memorandum.
25.
In reliance on this representation, P. Knight revised the 2006 edition of the ECS and sent it
to the printers. When the Code was published within a few days of CSA giving this representation,
P. Knight discovered that he had in fact received incomplete information representing a small
fraction of the total revisions to the Code. As a result, P. Knight was forced to call the printers and
cease publication until all the necessary revisions to the ECS could be made. The Plaintiff states,
had the ECS been published on the basis of the incomplete information provided to P. Knight, his
and Knight Co.’s financial position would have been badly compromised and his and Knight Co.’s
credibility in the industry would have been irreparably diminished, both facts of which CSA was well
aware. CSA refused to provide any further Memoranda to Knight Co. after the provision of the
Erroneous Memoranda.
(e)
26.
Demand for Copyright Application
During discussions in 2005 and 2006 relating to the CSA’s sudden refusal to provide the
Memoranda to Knight Co., CSA requested that Knight Co. submit a Copyright Application in order to
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receive the usual Memoranda. At this time, P. Knight reminded CSA of the Licence granted to P.
Knight and later assigned to Knight Co. CSA did not at that time purport to terminate the Licence or
request that Knight Co. refrain from selling the ECS.
(f)
27.
Publication of CSA Handbook
In 1981, CSA approached P. Knight and inquired about gaining CSA permission from P.
Knight for distribution of the ECS through CSA. At that time, CSA distributed various annotated
safety codes, including those relating to electrical safety standards, which were authored and
published in the United States.
28.
In 1990, the CSA began to publish the CSA Handbook, a publication in direct competition
with Knight Co.’s ECS. CSA’s decision to cease providing Knight Co. with the Memoranda meant
that the availability of the ECS to consumers would be delayed by many months, thus unfairly giving
CSA an advantage in the marketplace to sell the CSA Handbook as well as the Code itself. In the
following Code year, 1994, the standard four year Code revision cycles were shortened to three
year cycles.
(g)
29.
CSA’s Inquiries Relating to the Purchase of Knight Co.
In or about April 2003, CSA approached P. Knight and expressed an interest in acquiring the
shares of Knight Co. Negotiations relating the CSA’s potential share purchase of Knight Co.
occurred over the next year, culminating and ending in a rejected offer in or about May, 2004 due to
an offer by CSA that represented approximately 20% of the value of only Knight Co.’s inventory at
that time with no value consideration for Knight Co.’s 36 years of established goodwill, copyright,
equipment, contracts or related assets.
30.
During the negotiations, and upon various requests made by CSA, Knight Co. provided CSA
with highly confidential financial and sensitive commercial information including, but not limited to,
information relating to Knight Co.’s assets, costumers, sales, business expenses and financial
projections (collectively “Internal Business Information”) Knight Co.’s detailed audited financial
statements were included in the information provided to CSA.
31.
Knight Co.’s provision of its Internal Business Information to CSA was subject to a
confidentiality agreement (“Confidentiality Agreement”) which provided that CSA only allow
Knight Co.’s Internal Business Information to be seen or used by employees and professional
advisers who reasonably need to see or use it for the agreed to purpose of negotiating the purchase
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of Knight Co. Pursuant to the Confidentiality Agreement, CSA was also contractually bound, upon
the request of Knight Co. to return or destroy any confidential information.
32.
Shortly after the negotiations were terminated, G. Knight requested that CSA ensure
compliance with the Confidentiality Agreement and destroy or return all documents previously
provided that contained Internal Business Information. In or about June, 2004, CSA alleged by
email to G. Knight that it had complied.
33.
At all times, the Plaintiff provided the Internal Business Information to CSA in trust and in the
good faith belief that such information was being used by the CSA in a bona fide manner for the
purpose of genuinely assessing the value of Knight Co. The Plaintiff states, the offer made by CSA
to Knight Co. representing approximately 20% of the actual value of Knight Co. The Plaintiff states,
CSA requested access to the Internal Business Information under the guise of an interest in
purchasing Knight Co. in order that CSA could assess the sales market and profits of Knight Co,
and then determine on that basis, whether CSA would take steps to attempt to circumvent the
dissemination of the ECS which it considered in direct competition with the Code and the CSA
Handbook.
(h)
34.
CSA Raises Copyright Issue in 2007and Subsequently Purports to Unilaterally
Terminate Licence Without Notice
In 2007 and in spite of the fact that Knight Co. had, for 40 years, been including references
to and extracts from the Code in ECS with CSA’s express permission, CSA wrote to Knight Co.
regarding the inclusion of Code provisions in ECS. By letter dated January 29, 2007, CSA
requested a copy of the letter given to Knight Co. by which the Licence was granted and stated that
CSA would grant Knight Co. a licence to reproduce the Code in the future and such licence would
apply retroactively. As a condition of this grant of licence, CSA stipulated that it would have the right
to review new editions of ECS prior to publication and, if it deemed changes necessary, Knight Co.
would be compelled to comply. Moreover, in spite of the assignment of the existing Licence in 1985,
of which CSA knew, CSA stated that such licence would be granted to P. Knight only in his personal
capacity and would be non-transferable.
35.
A copy of the 1969 Letter granting the Licence was provided to CSA on March 5, 2007 by
which Knight Co. maintained its right to include extracts from the Code in the ECS. This letter
further stated that Knight Co. would entertain a reasonable offer from CSA for the purchase of
Knight Co.
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36.
Seven months later, by letter dated July 12, 2007, CSA replied that it was not interested in
purchasing Knight Co. but that upon certain conditions, it would grant a licence to P. Knight in his
personal capacity to reproduce portions of the 2006 Code in the 2006 edition of the ECS. CSA did
not terminate the Licence at this time.
37.
On or about May 12, 2011, CSA wrote to Knight Co. purporting to unilaterally and without
due notice, terminate the Licence (the “Purported Termination”) it had granted and which was
relied upon by Knight Co. and formed the basis for Knight Co. publications for forty-four years.
38.
CSA’s attempt to unilaterally and without notice terminate the Licence, coincided with its
anticipated publication of its own 2012 (22nd edition) of the Code. Knight Co. also published a
revised ECS based on the 22nd edition of the Code without receiving new Code memoranda and
with resulting publication delays.
39.
On June 19, 2012 the CSA commenced proceedings in the Federal Court of Canada against
the Plaintiff, G. Knight and P. Knight alleging copyright infringement of the 2012 edition of ECS.
The Code
40.
The Plaintiff states the Code has been adopted as legislation in all provinces and therefore
has the force and effect of law in Canada. Publication of the Code either in whole or in part can
only serve the public interest and precludes the Code from being subject to copyright.
41.
The Plaintiff states that the Defendant has no copyright in the Code and is estopped from
asserting a copyright to it. In the alternative, the Plaintiff states that in the event the CSA has
copyright in the Code it has then specifically authorized any acts of infringement and is deemed to
have given approval to, sanctioned, permitted, favoured or encouraged the use of the Code by third
parties including the Plaintiff.
42.
In the further alternative, the Plaintiff has a subsisting, perpetual, irrevocable and sole and
exclusive Licence to utilize the Code in ECS and other publications. Further, the Plaintiff states it is
fair comment to refer to the Code in its publications.
Breach of Confidence
43.
The Plaintiff states that since 2003, the Defendant was in possession of the Internal
Business Information pursuant to the Confidentiality Agreement. The Internal Business Information
was communicated to the Defendant for the sole and limited purpose of enabling the Defendant to
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negotiate a purchase and sale agreement to be entered into between the parties for the acquisition
of Knight Co. by CSA and for no other purpose. In the premises, the Defendant received the
Internal Business Information well knowing the limited purpose for which it was communicated. By
reason whereof, it became and was at all material times under a duty of confidence towards the
Plaintiff in respect of the Internal Business Information and are not entitled to use the said Internal
Business Information or any part thereof without the prior consent of Knight Co. for any purpose
other than for which it applied to them.
44.
The Defendant failed to quote Knight Co. a reasonable price for the purchase of its business
as more particularly set out in paragraphs 29 through 33 of the within Statement of Claim.
45.
The Plaintiff states as a result of the Purported Termination it became aware that CSA is in
breach of an obligation of confidence and the Confidentiality Agreement and without consent of the
Plaintiff have unlawfully made use of the Internal Business Information otherwise for the purpose for
which it was received. The Defendant has used the Internal Business Information to take whatever
steps were necessary to interfere with the economic activities of the Plaintiffs the particulars of
which include, but are not limited to:
(a)
Refusing to provide Knight Co. with the Memoranda relating to new editions of the
Code;
(b)
Providing the Erroneous Memoranda to Knight Co.;
(c)
Refusing to recognize the Licence;
(d)
Demanding in 2006 and subsequently that Knight Co. submit a new “copyright
application”;
(e)
Purporting in 2011 to unilaterally and without due notice terminate the Licence
despite such Licence being in place for some 44 years;
(f)
Threatening copyright infringement; and
(g)
Commencing copyright infringement proceedings in the Federal Court of Canada in
2012.
46.
The Plaintiff states that taken collectively the foregoing actions by the Defendant all of which
took place after the execution of the Confidentiality Agreement and after the supply of Internal
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Business Information has allowed the CSA to use the confidential information of the business of
Knight Co. to directly aid and assist the CSA to take the foregoing action in breach of confidence
and in breach of the Confidentiality Agreement.
Interference with the Grant of Licence
47.
In addition and in the alternative, it was at all material times understood and agreed by CSA
that the purpose and intent of the License is to facilitate the desire of the CSA to publicize and
promote greater understanding of the purpose of the Code and Code requirements.
48.
The Plaintiff pleads the grant of License was in part to facilitate the long term growth of its
business for, inter alia, the development, manufacture and commercialization of its own products
which would serve to assist and benefit the CSA in disseminating as widely as possible the Code.
49.
It was, further, at all material times understood and agreed that in doing so, the Plaintiff
intended to utilize the grant of License and all rights thereunder for the purposes of continuing,
furthering and developing, for the interest and to the benefit of Knight Co., the dissemination of the
Code by commercial means.
50.
Further, pursuant to the terms of the Licence, by implication or otherwise, Knight Co. was
and is fully entitled to the entire right and benefit of all development, enhancement and
commercialization of the Code. In particular:
(a)
The License and all rights thereunder were provided on a perpetual and irrevocable
basis such that Knight Co. accepted the entire commercial risk and responsibility and was
entitled to the entire benefit related to or arising out of the License and the development,
manufacturer use of sale of any product based therein or arising therefrom;
(b)
Any and all annotations, comment or otherwise on the Code developed or arrived at
from and after the date of the License are the sole and exclusive property of Knight Co.; and
(c)
All proceeds and rights of any nature or kind whatsoever from the invention,
creation, development, commercialization and sale of products from the Licence are the
sole and exclusive entitlement of Knight Co.
51.
In the further alternative, and in any event, by the terms of the Licence, P. Knight and later,
Knight Co. were granted an irrevocable, sole and exclusive Licence for the use, inter alia, of
disseminating the Code. CSA, therefore, by its actions as more particularly set out in paragraphs
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12 through 39 of the within Statement of Claim culminating with the Purported Termination unduly
interfered with the grant of Licence and/or the use of the Code by Knight Co. and has thereby
caused the Plaintiff loss and damage.
Interference with Economic Interest
52.
The Defendant’s actions as more particularly set out in paragraphs 12 through 39 are
malicious, highhanded and made with the intention of interfering with the publication and distribution
of ECS and preventing Knight Co. from competing with the CSA in the dissemination of the Code.
The Defendant by its actions intended to cause deliberate damage to the Plaintiff’s business and
the source of its livelihood and this conduct amounts to unlawful interference with the Plaintiff’s
economic interest.
53.
As a result of the actions of the Defendant in refusing to provide the Memoranda, providing
the Erroneous Memoranda, the Purported Termination, and threatening and commencing an action
for copyright infringement the Plaintiff’s income has suffered as it has not been able to publish ECS
in a timely manner in order to compete with the CSA Handbook as by its actions the CSA has
ensured that the CSA Handbook is published many months in advance of ECS.
54.
As a further result of the Defendant’s unlawful and malicious actions, the Plaintiff has
suffered special and general damages, including economic loss of business, profit, reputation and
goodwill.
55.
The Defendant’s conduct is an unwarranted and wanton disregard of the Plaintiff’s rights
including the grant of Licence for which the Plaintiff is entitled to and award of punitive and
exemplary damages.
56.
The Plaintiffs do not anticipate the length of this trial will exceed 25 days.
57.
The Plaintiff proposes the action be tried in Calgary, Alberta.
Remedy Sought
(a)
An injunction to refrain the Defendant by itself or its agents, officers or employees or
otherwise howsoever from using the Internal Business Information of the Knight Co. or any
part thereof in order to compete with the Plaintiff in its distribution of the ECS;
(b)
An inquiry as to damages for breach of confidence;
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(c)
Further or alternatively, an accounting of profits made by a Defendant for publication
of the CSA Handbook since 2004;
(d)
General damages for breach of confidence in the amount of $100,000;
(e)
General damages for interference with the grant of Licence in the amount of
$75,000;
(f)
General damages for interference with economic relations in the amount of
$200,000;
(g)
Interest on the aforesaid sums pursuant to the Judgement Interest Act R.S.A. 2000,
c. J-1;
(h)
Costs of the within action on a full indemnity basis; and
(i)
Such further and other relief as this Honourable Court may deems just.
NOTICE TO THE DEFENDANT(S)
You only have a short time to do something to defend yourself against this claim:
20 days if you are served in Alberta
1 month if you are served outside Alberta but in Canada
2 months if you are served outside Canada.
You can respond by filing a statement of defence or a demand for notice in the office of the clerk of the Court of
Queen’s Bench at Calgary, Alberta, AND serving your statement of defence or a demand for notice on the
plaintiff’s(s’) address for service.
WARNING
If you do not file and serve a statement of defence or a demand for notice within your time period, you risk losing
the law suit automatically. If you do not file, or do not serve, or are late in doing either of these things, a court may
give a judgment to the plaintiff(s) against you.
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