May 7, 2019
Mattel Canada Inc. (“Mattel” or the “Defendant”) recently sought an order from the Federal Court (the “Court”) preventing Spin Master Ltd. (“Spin Master” or the “Plaintiff”) from putting into evidence certain portions of a reply report from its accounting expert (the “Reply Report”). Mattel argued that Spin Master could and should have addressed the matters raised in its Reply Report when it filed its report in-chief.
By reasons reported at Spin Master Ltd. v Mattel Canada Inc., 2019 FC 385, the Court dismissed Mattel’s motion, finding that Mattel would not be prejudiced if the Reply Report was allowed into evidence.
Mattel’s motion arose in the context of a patent infringement trial scheduled to commence on April 1, 2019.
Federal Court’s Reasons
In arguing that the Reply Report should be excluded, Mattel relied primarily on two cases: (1) Teledyne Industries Inc. v. Lido Industrial Products Ltd.,  68 CPR (2d) 204 (FC) (“Teledyne”) and (2) R v. Krause,  2 SCR 466 (“Krause”).
Mattel relied on Teledyne for the proposition that, in an infringement action, a plaintiff claiming an accounting of profits must lead evidence of the calculation of profits in order to satisfy its legal burden. It argued that profit includes a deduction of costs, and, since this was not raised in Spin Master’s initial report, it could not now be raised as an issue in the Reply Report.
The Court dismissed this argument, noting that Teledyne does not stand for the proposition put forward by Mattel – i.e., there is no definitive statement in Teledyne that requires a plaintiff in an accounting for profits to lead evidence regarding a defendant’s costs.
Mattel also relied on Krause for the proposition that parties are entitled to know the case they have to meet to prevent case splitting. Mattel argued that, if Spin Master were permitted to rely on the Reply Report, then Mattel would be deprived of knowing the full case it had to meet when tendering its responding expert report, and Spin Master would effectively be allowed to speak to an issue in reply that ought to have been raised in chief.
The Court dismissed this argument, too, on the grounds that the disputed “evidence” raised in the Reply Report – namely, information related to Mattel’s costs and the treatment of those costs by Spin Master’s expert – was drawn from or founded on Mattel’s own evidence:
In the circumstances, since it is Mattel’s own evidence that is being analyzed, I fail to see how this constitutes case splitting or how it could prejudice the Defendant as, presumably, the Defendant was aware of its own costs. This is not a situation where the Plaintiff is relying upon information that was not already in the possession of the Defendant.
Moreover, the Court found that the Reply Report “appeared to be more of a critique of the assumptions of the Defendant’s expert” than an independent analysis, which is “not unusual”.
Although the Court was prepared to admit the Reply Report into evidence at this stage, its relevance will still need to be assessed in light of the whole of the evidence adduced at trial.
Authors: Jordan Scopa, Larissa Fulop and Daniel Seidman