The Federal Court of Appeal recently upheld an injunction against a distributor of “gray market” goods, based on a claim of copyright infringement. Gray marketing refers to the legal importation of genuine goods into a country through an unauthorized distributor. A gray market is said to develop where goods intended for sale in one country end up in another country through an unauthorized distribution channel.
Côte d'Or and Toblerone chocolate bars are manufactured in Europe by Kraft Foods Belgium S.A. (“Kraft Belgium”) and Kraft Foods Schweiz AG (“Kraft Switzerland”), respectively, and distributed in Canada under a distribution agreement with Kraft Canada Inc. (“Kraft Canada”).
Euro Excellence, a Québec distributor, had distributed the Côte d'Or brand of chocolate bar under contract with Kraft Belgium, but that agreement expired in 2000. Euro Excellence continued to distribute the Côte d'Or bars after expiry of that agreement, and also began to distribute the Toblerone bars. These products were obtained outside of Canada from an unknown supplier.
In order to prevent the parallel importation of the Côte d'Or and Toblerone chocolate bars by Euro Excellence, Kraft Belgium obtained copyright registrations for elephant, script and red shield artwork that appears on the packaging of the Côte d'Or bars; for the Toblerone brand, a copyright registration was obtained for a mountain in which a bear is discernable within the image. Kraft Belgium and Kraft Switzerland immediately entered into exclusive licensing arrangements with Kraft Canada for the use of these works. Euro Excellence was notified that Kraft Canada now held the exclusive right to the works in Canada. When Euro Excellence refused to stop distributing the bars in Canada, Kraft sought an order blocking the importation of products bearing the copyrighted works.
The trial judge awarded Kraft Canada a permanent injunction restraining Euro Excellence from distributing, exposing or offering for sale any copies of the Côte d'Or elephant or Toblerone bear-within-a-mountain works. A similar injunction required Euro Excellence to render non-infringing any material in their possession before selling, distributing, exposing or offering for sale any Toblerone or Côte d'Or product. Damages of $300,000 were awarded. Euro Excellence appealed.
On appeal, the Court considered two issues raised by Euro Excellence: (1) Whether Euro Excellence violated s. 27(2) of the Copyright Act, and (2) If so, whether a determination of the profits of Euro Excellence should be made.
Subsection 27(2) of the Copyright Act deals with secondary infringement of copyright. A person may infringe copyright even if he or she does not personally reproduce the copyrighted work. There was no evidence in this case concerning who reproduced the copyrighted works. Assuming that the packaging was reproduced in Europe by Kraft Belgium and Kraft Switzerland, that reproduction of the works would not violate the Copyright Act. However, the Court of Appeal concluded that the importation of the works into Canada for sale by Euro Excellence is a secondary infringement of copyright under s. 27(2)(e) of the Copyright Act.
Finally, with respect to the determination of the profits of Euro Excellence, the Court of Appeal concluded that the record was incomplete, set aside the trial judge's decision with respect to that issue, and referred the matter back to the trial judge for determination.
Euro Excellence has appealed this decision. Leave to appeal to the Supreme Court of Canada was granted on May 18, 2006.
See Euro Excellence, Inc. v. Kraft Canada Inc., 2005 FCA 427
Prepared by Christopher G. Tortorice.
On June 2, 2006, the Supreme Court of Canada released two highly anticipated decisions clarifying the law in Canada on famous marks, namely Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltee and Mattel, Inc. v. 3894207 Canada Inc. Through its decisions, the Supreme Court confirmed that being famous does not provide absolute protection of a trade mark. However, the court clarified that it is not necessary to show a connection between wares and services to succeed in an infringement action. On the other hand, to show depreciation of goodwill, a separate cause of action, consumers must believe there is a “link or connection” between the owner of a famous or well-known mark and any subsequently used mark, causing damage to the goodwill of the famous mark.
In Mattel, Inc. v. 3894207 Canada Inc., a small chain of Montreal-area restaurants attempted to register its BARBIE'S trade mark for restaurant services. Mattel, the makers of the Barbie doll, opposed the registration and argued that BARBIE was a famous mark and such famous marks “may not now be used in Canada on most consumer wares and services without the average consumer being led to infer the existence of a trade connection with the owners of these famous brands.” The Trade-marks Opposition Board disagreed and registered the “BARBIE'S” trade mark; the Board accepted the restaurant chain's argument that its use of the “Barbie” name in association with restaurant services was unlikely to create confusion in the marketplace. The fame of the “Barbie” trade mark was tied to dolls and doll accessories and the restaurant mark was for very different services. Both the Federal Court and Federal Court of Appeal upheld the Board's decision.
The Supreme Court dismissed Mattel's appeal and, in so doing, made some important clarifications of the law relating to famous trade marks. The Court agreed with Mattel that the 1953 amendment to the definition of confusion in the Trade-marks Act, that added the phrase “whether or not the wares or services are of the same general class”, was recognition by Parliament that some trade marks are so well-known that use in connection with any wares or services would generate confusion. However, the Court declined to acknowledge BARBIE as having such transcendence. The Court also agreed with Mattel that “stray dicta” in earlier decisions (Pink Panther and Lexus) improperly limited the scope of protection of famous marks to cases where there is a “connection” or “similarity” between the wares or services of the famous mark. Rather, “not only need there be no 'resemblance' to the specific wares or services, but the wares or services marketed by the opponent under its mark and the wares or services marketed by the applicant under its applied-for mark need not even be of the same general class.” However, the Court found that the Pink Panther and Lexus decisions did apply the correct “totality of the circumstances” test. Each situation must be judged by taking into account “all of the surrounding circumstances,” and neither a difference in wares or services nor the fame of a trade mark can “deliver the knockout blow.” In this case, notwithstanding the fame of the BARBIE mark, there was no likelihood of confusion in the marketplace having regard to all the surrounding circumstances, especially the difference in wares and services.
In the second case, Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, the famous champagne manufacturer, Veuve Clicquot Ponsardin (the “appellant”), sought to stop a chain of mid-priced women's wear shops (the “respondents”) from using the trade-name CLIQUOT and its registered trade marks CLIQUOT and CLIQUOT 'UN MONDE A PART', and to have the marks expunged from the Canadian Register.
The appellant's registered trade mark VEUVE CLICQUOT was admitted to have become famous for wines and champagne. The appellant argued that the respondent's marks will confuse consumers to think that the women's clothing and the champagne originate from the same source. The appellant further argued the use of the CLIQUOT name depreciated the goodwill attaching to the famous VEUVE CLICQUOT mark contrary to section 22 of the Act.
The appellant was unsuccessful in the Trial Division of the Federal Court and in the Federal Court of Appeal. At the Supreme Court of Canada, the appeal was unanimously dismissed. As it did in Mattel, the Court held that VEUVE CLICQUOT is a famous trade mark but that when considering infringement, fame was only one factor among all the surrounding circumstances. In this case, the wares were significantly different-“luxury champagne and mid-priced women's wear are as different as chalk and cheese”-and there was no likelihood of confusion and thus no infringement.
With respect to its claim of depreciation of goodwill of the VEUVE CLICQUOT mark, it was argued that the fame of the mark for luxury goods is such that associating the name CLICQUOT (or CLIQUOT as spelled by the respondents) with a mid-range women's clothing store will devalue the brand identity that has been build up in the VEUVE CLICQUOT mark.
The Court stated that depreciation of goodwill has four elements, namely: (a) was the claimant's registered trade mark used by the defendant with wares or services, whether or not such wares and services are competitive with those of the claimant; (b) is the claimant's registered trade mark sufficiently well known to have significant goodwill attached to it; (c) was the claimant's mark used in a manner likely to have an effect on that goodwill, and (d) is the likely effect to depreciate the value of the goodwill?
The Supreme Court stated that depreciation of goodwill does not require use likely lead to confusion, but that any use must evoke a connection to the VEUVE CLICQUOT mark. The Court stated, “without such a link, connection or mental association in the consumer's mind, there can be no depreciation of the appellant's mark”. Furthermore, while there was significant goodwill in the appellant's mark for champagne, there can be no impact on the goodwill of the mark if the consumer does not associate the marks displayed in the respondent's stores with the VEUVE CLICQUOT mark. Lastly, the Court stated that there was no likelihood of depreciation. The Court dismissed the appellant's section 22 claim.
In view of these two decisions, owners of famous or well known marks should be cautioned that fame alone may not be enough to secure a broad zone of exclusivity covering all or most wares and services. On the other hand, those contemplating using a trade mark that is potentially confusing with a so-called “famous mark” should be aware of the impact these decisions will have. No longer will a difference in wares or services be the defense that it was in the Pink Panther or Lexus cases.
By enumerating the elements required to succeed in a depreciation of goodwill action, Veuve Clicquot poses an invitation to owners of famous marks to use the previously neglected depreciation of goodwill provisions to defend the often sizeable reputation that attaches to a famous mark even in cases where there is no confusion. On the other hand, the decision also makes it clear that the section is limited to protecting goodwill, and that there must be a link or connection to the senior user's mark by consumers seeing the junior user's trade mark. Without such a connection, there can not be any impact, positive or negative, on goodwill. Presumably the greater the difference between the wares/services of the allegedly famous or well-known trade mark and a subsequent user, the more difficult it will be to show such “link” or “connection”.
Prepared by Jonathan Burkinshaw and Mina Chana.
Speaking of IP …
Justine Wiebe will be directing and Jonathan Colombo and Brigitte Chan of Bereskin & Parr will be participating in Understanding Trade-marks: An Introductory Course, hosted by the Intellectual Property Institute of Canada (IPIC) and McGill University from August 7 - 11.
Cynthia Rowden of Bereskin & Parr will participate in The Trade-marks Practitioner: An Advanced Course, hosted by IPIC and McGill University from August 14 - 18.
Jill Jarvis-Tonus of Bereskin & Parr will participate in Understanding the Business of Copyright, hosted by IPIC and McGill University from August 21 - 23.
