Damages for Counterfeit Goods – Another Significant Award

We previously reported on the Federal Court case Louis Vuitton Malletier S.A. et al. v. Yang et al. (“Yang”). Louis Vuitton was back in court in June, but this time the venue was the British Columbia Supreme Court. In Louis Vuitton Malletier S.A. v. 486353 B.C. Ltd., Louis Vuitton proceeded by way of a summary trial under British Columbia’s Rule 18A, seeking judgment against a number of defendants for trademark and copyright infringement.

In 2004, Louis Vuitton had executed an Anton Pillar Order against the defendants. In 2005, Louis Vuitton obtained a Federal Court order against the defendants and entered into a settlement agreement in 2006, whereby the defendants pledged to Louis Vuitton that they would not sell any more counterfeit merchandise.

There were four individual defendants and two corporate defendants. The principal of the enterprise was Wynnie Lee (“W. Lee”). W. Lee’s daughter, Francisca Hung-Yee Ngan (“Ngan”), W. Lee’s sister, Jacqueline Lee (“J. Lee”), and a former employee, Lisa Le Dung Tran (“Tran”) were co-defendants. W. Lee and J. Lee carried on business through W. Lee Corporation and J. Lee Corporation, respectively. However, the Court found that the corporations could not be used as a shield, because W. Lee’s and J. Lee’s actions constituted willful and deliberate infringement.

The defendants W. Lee, W. Lee Corporation, J. Lee Corporation, Tran and Ngan operated a business under the trade-name “Wynnie Lee”, with stores located in three malls. The defendants W. Lee and Ngan operated a business under the trade-name “Francisca’s Fashion Club” with one store located in a mall. The defendant J. Lee operated a business under the trade-name “Coloro” with stores located in two malls. The Court found that all six locations sold counterfeit merchandise and that W. Lee and J. Lee were responsible for the importation of the counterfeit merchandise. However, that part of the hearing regarding damages recoverable against the defendant J. Lee, was adjourned to the Fall of 2008 since she, unlike the other defendants, attended the summary trial and asked for an opportunity to consult counsel.

The Court declared that the copyright and trademarks of Louis Vuitton are valid and subsisting and that the defendants had infringed those copyrights and trademarks. The Court then ordered the delivery-up of all infringing materials, permanently restrained and enjoined all of the defendants from continuing in their infringing activities, and then went on to consider damages.

S. 53.2 of the Trade-marks Act provides for an award of damages or profits in relation to infringing activities. A reasonable estimate of profits was not possible since there were no business records. Thus, the Court chose to follow Nike Canada Ltd. v. Goldstar Design Ltd. et al. and awarded damages based on a “nominal” scale. This scale, when adjusted for inflation, awards $3,625.00 where the defendants operate from a temporary premise, $7,250.00 where the defendants operate from conventional retail premises, and $29,000.00 where the defendants manufacture and distribute the goods.

The Court also found that “the historical once-only nominal award of damages is inapplicable in the case of a group of defendants whose continuous and blatantly recidivist infringing activities have taken place over a period of three years since the date the Anton Pillar Order was served”. Previous cases, for example Yang, had awarded nominal scale damages for every proven infringement. However, in this case the Court had evidence that each store would sell through its inventory every four months. Thus, the operators of each store were jointly and severally liable for $7,250.00 for every four-month period that the store sold counterfeit merchandise. W. Lee was liable for $29,000.00 for every four-month period that she imported counterfeit merchandise, although the Court deducted the amount that W. Lee was jointly and severally liable for due to her retail activities. The Court granted nominal damages to each plaintiff, Louis Vuitton Malletier S.A. as owner of the trademarks and copyrights, and Louis Vuitton Canada Inc. as the exclusive distributor in Canada. The total damages awarded under s. 53.2 amounted to $475,600.00.

S. 38.1 of the Copyright Act allows a copyright owner to elect to receive statutory damages instead of damages and profits under s. 35. Statutory damages are awarded on a scale from $500.00 to $20,000.00 per work infringed, with a preference for the high-end of the scale where the conduct of the defendants is “dismissive of law and order and demonstrates a necessity for deterring future infringements”. In this case, due to the ongoing nature of the infringement and the defendants’ lack of co-operation in the conduct of the litigation, the Court awarded the maximum amount of $20,000.00 per infringement, with the total damages awarded under s. 38.1 amounting to $100,000.00.

Since the defendants’ conduct was “clearly knowing, planned and deliberate” and they also attempted to “deliberately conceal or cover up their activities”, punitive and exemplary damages were also awarded. The defendants W. Lee Corporation, Ngan and Tran were jointly and severally liable for a total sum of $100,000.00 in punitive and exemplary damages. Since W. Lee was the principal of the enterprise and was responsible for the importation and distribution of the counterfeit merchandise, she was solely liable for $200,000.00 in punitive damages.

Special costs against W. Lee, W. Lee Corporation, Ngan and Tran were also awarded because of their “reprehensible, scandalous and outrageous conduct”. However, the Court declined to find the defendants in contempt of the Federal Court Order, being satisfied that the award of punitive and exemplary damages included an element of rebuke regarding the breach of the Federal Court Order. The final total assessed was over $1,000,000.00 and the total against J. Lee is still to be determined, a very significant award in a counterfeit goods case.

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The authors of the Canadian Trademark Blog are all members of the Canadian law firm Clark Wilson LLP, based in Vancouver, Canada. Each author's practice focuses–either in whole or in substantial part–on Canadian intellectual property law. Together, they manage the trade-mark portfolios of local, national and international brand owners in nearly all industries and markets.

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