Wolfe v Shawcor Ltd, 2015 ABQB 181

The Alberta Court of Queen’s Bench granted summary judgment dismissing an action for breach of confidentiality brought by Donald Wolfe (“Wolfe”) and related companies against a group of former employees, contractors, and related companies for lack of standing. A number of departing employees were alleged to have provided the defendant applicant Flexpipe with the confidential technology required to produce a competing flexible composite pipe. [3] Of the three plaintiffs, each of which lacked standing, one was a corporation that was dissolved, [9] one had assigned all of its relevant intellectual property to the now-dissolved corporation, [18] and one was a shareholder that had no cause of action independent of the corporations. [23]

Proflex, CTI, and Wolfe have no Standing

The confidential information for producing flexible composite pipes was developed by the plaintiff Composite Technologies Inc. (“CTI”) and used by the plaintiff Proflex Pipe Corporation (“Proflex”). [11] Wolfe was an officer and shareholder in both corporations. [14]

Proflex, the company that used the technology, had been dissolved in 2006 over two years prior to the issuance of the statement of claim, [5] and was thus incapable of revival. [9] Proflex’s claims were therefore an abuse of process and were struck. [10]

CTI, the company that had transferred its intellectual property regarding the flexible composite pipes for use by Proflex, [11] also had no standing since the entirety of its relevant intellectual property was assigned to the now-dissolved Proflex. This transfer was made through a technology transfer agreement between CTI and Proflex. The most relevant provision was as follows:

“CTI hereby sells, assigns, transfers and sets over to Proflex its entire right, title and interest in and to:

1.   the inventions disclosed in the Assigned Patents;
2.   the Assigned Patents; and
3.   all issued patents and patent applications assigned in the future to CTI relating to the Products;
4.   the Assigned Know How.” [17, emphasis retained]

The plaintiffs argued that it was their intention for CTI to retain the intellectual property while simply allowing Proflex to use it. [14] These arguments were dismissed as resting on inadmissible statements of subjective intention. [15-16] Having no relevant intellectual property, CTI therefore had no standing as it could have suffered no detriment. [18]

Wolfe, the only remaining plaintiff, had no standing because he did not suffer a detriment as an individual shareholder that was distinct from the detriment to the other plaintiff corporations. Citing the rule in Foss v Harbottle and Hercules Management Ltd v Ernst & Young, [1997] 2SCR 165, any cause of action of Wolfe’s would have had to have been brought through CTI or Proflex. [23]

Having concluded that none of the plaintiffs had standing, the Court awarded summary judgment in its totality. [28-29]

Commentary

This case clearly states that an entity that assigns all of its interest in confidential information (in this case pending patents and know-how) loses its standing to bring an action for breach of that confidential information. As a practical matter, it also provides an example of the kind of wording in a technology transfer agreement that would make such a transfer clear.