Unequivocal Acceptance Of All Essential Terms Required For Binding Settlement Agreement

On April 10, 2025, the Federal Court (the Court) issued its decision in Aria Vent Inc v 2213785 Ontario Inc, 2025 FC 672, dismissing 2213785 Ontario Inc. and TRM Holding Inc.’s (collectively, the Defendants’) motion to enforce a settlement agreement between the Defendants and Plaintiffs (Aria Vent Inc. and 2721111 Ontario Inc.) to settle claims of copyright infringement for the Defendants’ unauthorized use of a Plaintiff image in its catalogue and price list.

The Plaintiffs commenced an action against the Defendants in March 2023 alleging patent infringement and, later, sought to amend its Statement of Claim to add the above allegations of copyright infringement. The Defendants offered to settle the copyright issues, and the Plaintiffs proposed a settlement with the following three essential terms:

1. a settlement payment of $5000 CAD;
2. a release of any copyright infringement claims relating to the image in issue; and
3. the Plaintiffs’ right to rely upon the Defendants’ alleged use of the image at issue in support of their continuing patent infringement claim.

In its letter of October 7, 2024 (the Defendant Letter), the Defendants agreed to the $5000 CAD payment and provided a “full and final release” for the Plaintiffs to execute. Following October 7, the parties continued negotiating the wording of the settlement agreement, but this later devolved and the Plaintiffs retracted all previous settlement offers. In response, the Defendants brought the current motion, arguing that the parties reached a binding settlement agreement on October 7, 2024.

The Court reasoned that a binding settlement agreement requires an offer and acceptance of the essential terms of that offer, which the Defendants have not done and, consequently, the settlement agreement was not binding. Although the Defendants’ response to the Plaintiffs’ offer had not disputed the financial element of the settlement or the release of copyright claims, it did not indicate their acceptance of the third term relating to carving out the Plaintiffs’ continuing patent infringement claim. In fact, the Defendant Letter included broad sweeping language that the payment of funds was for “complete settlement of the inadvertent use of the photograph”. The Court ultimately held that the Defendants’ response to the Plaintiffs’ settlement offer was not an unequivocal acceptance of the terms of the agreement and no binding settlement was reached prior to the Plaintiffs’ revocation of all previous offers.

Therefore, the Court dismissed the Defendants’ motion with costs.

Summary By: Amy Ariganello