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.

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No Trademark Monopoly: Red Horse / Black Horse

Red Horse Black Horse

In January 2013 the Federal Court considered whether an ordinary beer drinking consumer, on hearing the words RED HORSE, would likely think that RED HORSE must be a beer made by the same company that makes BLACK HORSE.  The Court’s response: “unlikely”.

This decision was reached in San Miguel Brewing International Ltd v. Molson Canada, in which the Federal Court allowed an appeal by San Miguel from the refusal of the Trade-Mark Opposition Board to register San Miguel’s RED HORSE trademark and horse head design.

In the proceedings before the Board, the Member analysed the surrounding circumstances to determine whether the RED HORSE mark was confusing with the  BLACK HORSE trademark in the minds of the relevant consumer.  The Member found that the RED HORSE mark had noteworthy design features, but the word HORSE in the mark rendered it too similar to the BLACK HORSE mark.  Accordingly, the Board denied registration on the basis of confusion.

On appeal, Justice Phelan of the Federal Court applied the well-established test set out in the Supreme Court of Canada decision of Masterpiece  Inc. v. Alavida Lifestyles Inc., emphasizing that one has to: (1) look at the mark as a whole and not tease out each portion of the mark; (2) approach confusion on the basis of first impression, from the perspective of the average person who goes into the market; and (3) use common sense.  The average consumer being the “‘ordinary harried purchaser’ – neither the ‘careful diligent purchaser’ nor the ‘moron in a hurry’”.  Justice Phelan held that the ordinary purchasers in this case were beer drinkers “sensitive to the names of beers and to what they know and like”.  The ordinary purchaser was not the “non-beer drinking life partner who is asked to pick up beer”.

In reversing the Board’s decision, the Court concluded that one look at the labels above, and common sense, was “sufficient to dispel any notion of confusion”.  The Court then went on to state that the Member did not consider that in refusing to register the RED HORSE trademark, Molson was effectively being granted a trademark monopoly over the word HORSE of any colour in relation to beer.  The breadth of that monopoly was found to be unreasonable.

It is clear that Justice Phelan looked at the marks as a whole, including the design element.  It is also of note that he focused on a beer-drinking consumer and not just an average consumer.  However, it is the concern about granting a monopoly that is most interesting.

An Interplay of Canadian Official Marks and Canadian Trademarks

A February 2010 blog, “Professional Designations and Abbreviations, Acronyms and Initials” discussed the summary judgment and permanent injunction obtained by the College of Traditional Chinese Medicine Practitioners and Acupuncturists of British Columbia (“the College”) against the Council of Natural Medicine College of Canada (“the Council”) pursuant to which certain trademarks which the Council had registered, such D.C.T.M (DOCTOR OF TRADITIONAL CHINESE MEDICINE) and REGISTERED D.P.C.M, were expunged on the basis that the marks were clearly descriptive or deceptively misdescriptive (contrary to s.12(1)(b) of the Trade-Marks Act) and recognised in Canada as designating the services of doctors of Traditional Chinese Medicine and acupuncturists (and therefore contrary to s.10).  The Council was also enjoined from registering similar trademarks.  The Council appealed this decision, but subsequently discontinued the appeal.

The Council did, however, bring an application for judicial review asking the Federal Court to set aside the notice given by the Registrar of Trade-marks of the adoption and use by the College of various official marks, including D.C.T.M (DOCTOR OF TRADITIONAL CHINESE MEDICINE) and REGISTERED D.P.C.M.  Section 9(1)(n)iii) grants protection to “any public authority” in Canada that adopts and uses a mark and in respect of which the Registrar of Trade-marks has given notice.  In Council of Natural Medicine College of Canada v. College of Traditional Chinese Medicine Practitioners and Acupuncturists of British Columbia the Federal Court concluded that the official marks were valid and that section 9(1)(n)(iii) was constitutional.

As explained in the decision, the Council is a private non-profit company incorporated under federal legislation which created educational programs in traditional Chinese medicine.  The courses were offered by affiliated private schools.  Prior to the earlier Federal Court decision the Council also entered into trademark licence agreements with the graduates of its programs.  The College, however, had been established under the British Columbia Health Professions Act to regulate the practice of traditional Chinese medicine, including the titles that could be used by practitioners. 

On judicial review, the Council sought to establish that the College was not a public authority, that it had not “adopted” its official marks and that section 9(1)(n)(iii) was contrary to the division of powers scheme in the Constitution, as well as freedom of expression.  As explained by the Court, notice of an official mark means that others are prohibited from adopting, in association with a business, a mark that resembles the official mark and may be mistaken for it.  It is also not necessary for a public authority to demonstrate the distinctiveness of a proposed official mark or any secondary meaning, and there is no requirement that public notice be given of a request to the Registrar.  Following an earlier decision, Ontario Association of Architects v. Association of Architectural Technologists of Ontario the Court concluded that the College was a “public authority” given that the requisite governmental control was evident.  With regards to adoption and use, the court noted that these terms were broad in scope and for purposes of section 9,  a mark is adopted and used if it is displayed in association with services, even if the mark is not distinctive or clearly descriptive.  The marks at issue had been displayed on a publicly accessible website before the date of public notice and whether the College had displayed the marks merely to support its application to the Registrar was not relevant. 

With regards to the constitutional issues, the Court was not prepared to read down the provisions of the Trade-marks Act on the basis that provincial responsibility regarding the regulation of professions is infringed if the federal government is able to provide for the protection of official marks relevant to professions.  The Court was not convinced that provincial powers were in any way infringed and noted that the federal legislation, while it overlapped with provincial jurisdiction, reinforced the provincial powers, since self-governing professions, by obtaining official marks, were able to ensure that professional designations did not become articles of commerce.  Professional titles generally cannot be registered as trademarks, not because regulation of a profession is within provincial jurisdiction, but because they are descriptive or non-distinctive, tests that are not relevant when considering official marks.  With regards to freedom of expression, section 9(1)(n)(iii) infringed section 2(b) of the Charter, but it was justified as a reasonable limit prescribed by law given the College’s need to prevent confusion between government and private services and the need to prevent persons from capitalizing upon or misusing public symbols and marks.

 Thus, the private entity, the Council, was not entitled to trademarks such as D.C.T.M (DOCTOR OF TRADITIONAL CHINESE MEDICINE) and REGISTERED D.P.C.M, but the College is entitled to its official marks, thereby allowing the College greater control over the use of professional designations.

About the Blog

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.

The Authors