snIP/ITs Insights on Canadian Technology and Intellectual Property Law

No Interlocutory Injunction—How About “Terms” Instead?

Posted in Copyright, Intellectual Property, Litigation, Technology License Agreement
David TaitMartin Brandsma

Some would say keeping a software license alive by an injunction is like requiring specific performance of a contract – something courts don’t like to do. However, a recent Ontario decision appears to have done about just that, by relying on its discretion to grant “terms” according to Ontario Rule 37.13(1) in extending an interim injunction for six months, despite the plaintiff failing to justify its request for an interlocutory injunction to trial.

 In this software contract dispute, the Plaintiff (“ProPurchaser”) sought to convert an interim injunction into an interlocutory injunction that would require the Defendants (“Wifidelity”) to provide access to its software, until trial. Without access, the Plaintiff said it would be out of business.                                                         

ProPurchaser operated a website (ProPurchaser.com) that provided businesses with pricing information about the cost of purchasing raw materials, supplies, goods, and services. In doing so, ProPurchaser used software developed by Wifidelity pursuant to a license agreement.

The Parties proceeded for several years unaware of the other’s different understanding about what was being charged by Wifidelity and paid for by ProPurchaser. The Defendant elected to cancel the license after a dispute over payment, and ProPurchaser commenced the underlying action. It brought this motion to extend an interim right to access the Defendants’ software, until trial.

 The Court applied the three-part test for an interlocutory injunction set out in RJR-MacDonald Inc. v. Canada (AG), [1994] 1 S.C.R. 311: (1) whether the plaintiff presents a serious issue to be tried; (2) whether the plaintiff would suffer irreparable harm; and (3) whether the balance of convenience lies in granting or refusing the injunctive relief.

Ultimately, the Court was unsatisfied that withdrawal of the license amounted to irreparable harm—the alleged harm could be compensated for in damages. The Court also found that the balance of convenience favoured the Defendants, in part because the license agreement allowed the Defendants to terminate, making the proposed injunction akin to specific performance of a revocable contract. Accordingly, ProPurchaser’s motion was dismissed.

However, in dismissing the motion, the Court provided “terms” according to its discretion under Rule 37.13(1) of the Ontario Rules. The terms extended the earlier interim injunction and  restrained Wifidelity from shutting down ProPurchaser’s website for six months, provided that ProPurchaser paid Wifidelity a monthly fee. This was intended to prevent the Plaintiff from going out of business, and afford the time the Defendants were willing to give for the Plaintiff to find replacement software.

 It is unclear whether the decision will be appealed. However, it is clear that “terms” may provide litigants with an alternative to ever-difficult interlocutory injunctions for maintaining the status quo while alternative business arrangements can be made during litigation.