Punitive Damages: Trademark and Copyright Infringement

The most recent case from the Federal Court continues the Court’s tough stance with respect to trademark and copyright infringement in Canada. 

In Harley-Davidson Motor Co. Group LLC v. Manoukian, the Court awarded significant compensatory and punitive damages against the Defendant company and its principal.

The Plaintiffs, H-D Michigan, LLC (“MI”), Harley-Davidson Motor Company Group, LLC (“MCG”) and Harley-Davidson Company, Inc. (“MCI”), hired an investigator to conduct an investigation into the alleged manufacture, offering for sale and sale of counterfeit Harley-Davidson clothing by the Defendants.  The investigator attended two separate locations of the Defendants.  While in attendance at both locations, the investigator was shown and purchased a number of counterfeit items including t-shirts, cloth and leather jackets and hooded sweatshirts, all of which contained unauthorised productions of the Harley-Davidson trademarks.

The Court was satisfied the matter could proceed on a motion for summary judgment.  In determining the damage award, the Court noted that where Defendants provide no records to substantiate the manufacture and sale of counterfeit wares, it is difficult to assess damages.  However, in these circumstances, the Court will apply a minimum compensatory damage award on a per infringing activity basis.

Following such cases as Ragdoll Productions (UK) Ltd v. Jane Doe and Oakley Inc. v. Jane Doe, the Court awarded damages for trademark infringement of $3,625 for each of the three occasions on which the Defendant was observed selling counterfeit goods at a flea market and $7,250 for each of the two occasions on which the Defendant was observed selling wares from a fixed retail establishment.  As the Plaintiffs were seeking damages on behalf of the trademark owner, MI, and the licensee/distributor, MCI/Fred Deeley, these amounts were doubled for a total of $65,250, payable jointly and severally by the Defendants.

In addition, although the Defendants’ lack of records made an accurate assessment of profits impossible, the Court found that the Plaintiffs were entitled to punitive damages of $50,000 to sanction the “blatant disregard” of the law by the Defendant.  In awarding the punitive damages, the Court noted that the Defendants had been offering for sale and selling counterfeit Harley-Davidson merchandise since as early as October 2006, and continued to do so despite the cease and desist letter served on the Defendants in 2010.  The Court also noted that there was evidence that the Defendant Manoukian, was well aware of the illegal nature of his trade.

The Court refused to award solicitor-client costs, since the evidence that the Defendants had missed a number of deadlines was not the kind of conduct attracting solicitor-client costs.  Further, the Defendants’ unjustifiable and inexcusable violation of the Plaintiff’s rights was covered by the punitive damages.

In Honour of Black Friday – Big Brand Retailers Fight Quebec Language Law

CBC reports that a group of  well-known retailers, including  WALMART, COSTCO and BESTBUY, are taking the Quebec Government’s French language watchdog to Court over its recent requirement that all retailers have signs that include either a generic French name or add a slogan or explanation to reflect what they are selling.  For example, rather than featuring signage with just the well-known WALMART mark, the Quebec government wants that retailer’s signs to now read “Le Magasin WALMART” or something to that effect.

While Quebec’s French Language Charter requires the name of a business to be in French, until now this requirement hasn’t been applied to registered trademarks by the Office Québécois de la Langue Française (OQLF).  There has been some debate over the last few years about whether unregistered trademarks should be treated the same as registered trademarks in terms of this exemption.  The OQLF is now requiring all signs to include French language, whether or not registered or unregistered trademarks are involved.

For their part, the retailers (also including GAP, OLD NAVY and GUESS) argue that there has been no formal change to the applicable provision of the language law.  Further, they argue that the OQLF has no right to change the application of the existing law and that by changing its policy, it is in effect changing the law.  The retailers also point out that these are all famous brands and through extensive long term use they have come to identify the businesses behind them, such that no one in Quebec needs the assistance of the language law to know what these businesses sell or represent.

Some other popular brand owners, such as KFC or “Poulet Frit Kentucky” as it’s known in Quebec, have already opted to adopt Quebec specific branding, rather than carry on with an English business name.

A trial of this matter is unlikely to take place before the end of 2013.

I Hear You Calling – Sound Mark Applications Now Being Accepted

In a reversal of it’s long held position, the Canadian Intellectual Property Office (CIPO) has today announced that it is now accepting applications to register sound marks.  This announcement apparently comes as a result of ongoing Federal Court of Canada proceedings regarding an application filed in 1992 by Metro-Goldwyn-Mayer Studios Inc. (MGM) to register as a trade-mark in Canada, the sound of a roaring lion that precedes most, if not all, of their film productions.  

For many years, CIPO’s blanket policy has been to refuse all applications for sound marks on the basis that Section 30(h) of the Trade-marks Act requires “a drawing of the trade-mark and such number of accurate representations of the trade-mark as may be prescribed” unless the application is for a word or words not depicted in a special form.  The MGM case is the first where the issue of the registrability of sound marks has been dealt with by the Federal Court.

CIPO’s new Practice Notice on applications for sound marks states that “The application for the registration of a trade-mark consisting of a sound should:

  1. state that the application is for the registration of a sound mark;
  2. contain a drawing that graphically represents the sound;
  3. contain a description of the sound; and
  4. contain an electronic recording of the sound.”

This change of tune for CIPO comes on the heels of a recent (and still outstanding) consultation on a number of proposed changes to the Trade-marks Act Regulations, including a proposal to permit registration of non-traditional marks, such as sound marks, motion marks and holograms.  Time will tell how many applicants decide to take advantage of this change of policy.  Certainly, there are a number of well known sound marks in the marketplace and registration of such marks has been possible in other important jurisdictions, such as the United States, for many years.

Trademark Interlocutory Injunction Denied to Target

In Target Brands Inc. v. Fairweather Ltd., the Federal Court of Canada refused to grant the interlocutory injunction sought by the American retail chain, this recent application being part of a continuing battle.

In 2002, Target’s counsel initiated proceedings under s. 45 of the Trade-Marks Act to cancel INC’s trade-mark registration for TARGET APPAREL. The Registrar of Trade-marks issued a notice on April 2002 requiring INC to show use of the trade-mark registration in Canada. INC filed an affidavit on its use of the trade-mark in response to the s. 45 notice. The Registrar of Trade-marks held that the evidence was insufficient to show use. INC appealed the Registrar’s decision and the Federal Court reversed that decision on October 19, 2006. Target’s counsel appealed to the Federal Court of Appeal, which affirmed the Federal Court decision on November 26, 2007.

Target claimed that they only became aware of INC’s use of TARGET APPAREL as a store name in June 2010. Its counsel sent a letter to INC objecting to the use of the TARGET trade name on August 3, 2010. Again, Target commenced a s. 45 proceeding to cancel the trade-mark registration of TARGET APPAREL. The Registrar of Trade-marks has issued another notice to INC under s. 45 of the Trade-marks Act on July 30, 2010, and the proceeding is currently underway.

Target also requested an injunction for the months leading up to the trade-mark dispute trial, scheduled to begin in November 2012.

The Court set out and applied the three-step test for applications for interlocutory injunctions. Although the Court found the first requirement of a serious question to be tried had been met, the question of irreparable harm to the Plaintiff was answered in the negative.
The Court found the Plaintiff’s submission on irreparable harm, advanced on the basis of a marketing theory about “sincere” and “exciting” brand personalities, difficult to assess. The Court noted, where expert evidence is provided by affidavit and is challenged in the course of the proceedings, the assessment of such expert evidence is best left for the fullness of a trial where review of qualifications and in-court testimony, direct, cross-examination and redirect, are present.

In deciding the question of irreparable harm, the Court held that the level of confusion among prospective customers to be a matter of debate, the expert opinions required closer examination and assessment, and the time to trial was relatively short. Resultantly, Target had not proved on balance of probabilities that it would suffer irreparable harm during the intervening months until a decision is rendered at trial.

The Court further considered the issue of the balance of convenience and determined that the balance favoured INC. In looking back upon the chain of events, the Court noted that INC did not begin expansion with the Target Apparel stores until after the Federal Court of Appeal decision in its favour. At that point, Target had not yet announced its expansion into Canada. The Court held that INC’s decision was not the sort of risk that should be met with the Court’s disapproval. They had taken precautionary steps in the face of Target’s claims: they had inscribed a red maple leaf in a circle rather than using a red bull’s-eye; posted a disclaimer to the effect that it is not Target; and undertaken to maintain records of sales while the litigation is continued. 

No evidence was presented to suggest that Target would be prevented or delayed from opening Target stores in Canada, but the granting of the requested injunction would result in INC having to remove and replace its signage for all stores. Such removal and replacement would not only be costly, but may also suggest instability to INC’s customers, having significant consequences for the company. Consequently, the balance of inconvenience, as it was described by the Court, lay with INC rather than Target. Presumably the matter will now proceed toward trial in November 2012.

Counterfeit Goods: Significant Statutory and Punitive Damages

We have been following the line of cases dealing with counterfeit goods and the resulting damage awards, and note the most recent case from the Federal Court makes clear that a tougher approach to trademark  and copyright infringement can now be expected in Canada.  In Louis Vuitton Malletier S.A. v. Singga Enterprises (Canada) Inc., the Court awarded significant damage awards as well as punitive damages against the three defendant companies and their principals.

The Plaintiffs, Louis Vuitton and Burberry, hired a number of investigators to attend the stores and warehouses of the defendants Singga Enterprises Canada, Altec Productions and Guo (doing business as Carnation Fashion Company), as well as purchase items from their websites. While in attendance at the stores and warehouses, the investigators were shown and purchased a number of counterfeit items including handbags, sunglasses and jewellery, all of which contained unauthorized productions of the Louis Vuitton and Burberry trade-marks. The Plaintiffs were successful in showing that the defendants’ activities of manufacturing, importing, distributing, offering for sale and actual sale of bulk quantities of counterfeit and/or infringing items had been ongoing and, in the case of one of the defendants, had continued after the commencement of the proceeding and the motion for summary trial brought by the Plaintiffs.

The Court noted that none of the defendants, with the exception of the defendant Guo, had filed any materials in response to the motion or attempted to cross-examine any of the Plaintiffs’ affiants on their affidavits. Additionally, none of the defendants, again with the exception of Guo, had attended the hearing of the matter.

Following cases such as Louis Vuitton Malletier S.A. v. Lin Pi-Chu Yang and Louis Vuitton Malletier S.A. et al v. 486353 B.C. Ltd., the Court took a tough stance toward the defendants.  Noting the defendants’ knowing and wilful behaviours, the Court awarded damages for trade-mark infringement of $30,000 for each instance of infringement against the Singga defendants and defendant Guo. Resultantly, the Singga defendants were found liable for a total of $300,000 to the Louis Vuitton Plaintiffs and $180,000 to the Burberry Plaintiffs, and the Guo defendant was required to pay $180,000 to the Louis Vuitton Plaintiffs and $120,000 to the Burberry Plaintiffs.

With regard to the Altec defendants, the evidence showed a high level of importation and inventory turn-over and was held to warrant an award of damages on a turn-over basis rather than simply a per instance basis of infringement. The Altec defendants were required to pay $480,000 in damages to the Louis Vuitton Plaintiffs, and $480,000 to the Burberry Plaintiffs. Additionally, the Singga and Altec defendants were found jointly and severally liable for the activities of the Altec defendants, for which the Singga defendants received a commission, and were required to pay $60,000 to the Louis Vuitton Plaintiffs and $60,000 to the Burberry Plaintiffs.

In addition to the damages awarded for the defendants’ infringement of the Trade-marks Act, Louis Vuitton was found to be entitled to recovery of damages and profits, pursuant to the Copyright Act, in relation to infringement by each of the groups of defendants. Statutory damages for copyright infringement were awarded at the high end of the scale due to the defendants’ bad faith conduct, which was found to be dismissive of law and order, and demonstrating a necessity for deterring future infringements. The Court awarded a total of $40,000 per group of defendants.

Additionally, the Court found that the Plaintiffs were entitled to punitive and exemplary damages as against each of the defendants. Following the earlier cases referenced above, which held that punitive and exemplary damages may be awarded where a defendant’s conduct is “outrageous” or “highly reprehensible” and with little regard for the legal process, the Court awarded punitive and exemplary damages against each of the defendants. The Louis Vuitton Plaintiffs were awarded $200,000 against the Singga defendants, $250,000 against the Altec defendants, and $50,000 payable by the defendant Guo.

Finally, citing the Louis Vuitton cases mentioned above, the Court awarded solicitor and client costs due to the defendants “disrespectful disregard” for the process of the Court, and the higher legal fees and disbursements incurred by the Plaintiffs as a result.

An appeal has now been filed by the Singga defendants, which means that there may eventually be a Federal Court of Appeal decision regarding the awards. We will continue to follow this story.

You Know The Olympics Are Over When…

The Canadian Intellectual Property Office (CIPO) sent out a reminder today, advising that pursuant to the Olympic and Paralympic Marks Act (OPMA), marks and expressions listed on Schedules 2 and 3 of that Act will expire on December 31, 2010.   As a result, commencing on January 1, 2011, CIPO will no longer raise an objection pursuant to Section 12(1)(i) of the Trade-marks Act on the basis that an applied for mark consists of or so nearly resembles as to be mistaken for a mark or expresssion found in either of those Schedules. 

As regular readers of this blog will recall, the Canadian government enacted this legislation well in advance of the 2010 Vancouver Olympic Winter Games (Vancouver Games), to provide the organizers of the Vancouver Games (VANOC) with another very useful tool in their fight against unauthorized use of numerous trademarks and symbols that are associated with the Olympics generally and more specifically those associated with the Vancouver Games.  Schedule 1 to the OPMA, which sets out various Olympic marks that are not specific to any particular Olympic Games, will remain in force.  Schedules 2 and 3 set out various marks and expressions that are specific to the Vancouver Games and as those games are now part of history, the need to protect those marks and expressions is no longer justifiable.

It was Schedule 3 in particular that raised the ire of some pundits, since it specified that a combination of words from Part 1 with words from Part 2 of that Schedule – including seemingly innocuous combinations of words such as “21st” or “Tenth”, with words such as “Winter” or “Whistler” – could be used as evidence in support of a finding that a person was promoting their business, goods or services in a manner likely to mislead the public into believing that there was an approval, authorization or endorsement by, or a business association with, the Canadian Olympic Committee (COC) or the Canadian Paralympic Committee (CPC).  This, coupled with the ability of VANOC or the COC/CPC to obtain an interlocutory injunction without having to prove that they would suffer irreparable harm, made the effect of these provisions very far reaching.

Bonhomme, Maclean’s “meilleurs amis”

In an update to a story we shared with you a few weeks ago, a report today that the organizers of the Quebec Winter Carnival and Maclean’s magazine have reached a settlement regarding Maclean’s use of the image of Bonhomme – mascot of the Carnival – as part of a cover image promoting an article on corruption in Quebec.   While Carnival organizers confirmed the settlement and advised that they were “pleased”, specific terms of the settlement were not disclosed.