In Louis Vuitton and Burberry v Singga Enterprises, the
Federal Court has delivered a stern warning to those engaging in
counterfeiting luxury goods in Canada by awarding an aggregate of
$1.98 million in damages for trade-mark and copyright infringement
and a further $0.5 million in punitive damages.
While there are a number of important lessons in the decision,
perhaps the most important was the court's adoption of the
principle from the British Columbia Supreme Court case Louis
Vuitton Malletier SA v 486353 BC Ltd: "a corporation will
not be allowed to be used to shield officers, directors and
principal employees from their actions in the willful and knowing
sale of counterfeit and infringing goods."
As is usually the case, the counterfeiters did not have or at
least did not provide any records regarding their sales of the
infringing goods. Recognizing that difficulty in assessing damages
or profits does not relieve the court from the duty of assessing
them as best it can, over the years a number of rules of thumb have
been developed to estimate damages in a counterfeiting case. In
1997, a scale of damages was developed: $3,000.00 if the
counterfeiter operated from temporary premises such as a flea
market, $6,000.00 if the counterfeiter operated from conventional
retail premises, and $24,000.00 for manufacturers or distributors
of counterfeit goods. These amounts are adjusted for inflation, and
in this case the court calculated that the distributor amount in
2009 was $30,000.00. The court also estimated the number of
inventory turn-overs, and multiplied this by the $30,000.00 amount
to arrive at the final damages figure.
On the issue of punitive damages, the Federal Court reviewed the
principles set out in earlier cases, particularly the need for such
damages in cases where the defendants' conduct has been
malicious, oppressive and high handed, and where all other
penalties imposed by way of damages are inadequate to deter and
denounce the conduct. The object is to ensure that ordinary damages
are not treated as a mere cost of doing business by those who seek
to profit through outrageous disregard for the rights of others.
Such awards ought to be substantial enough to get the
defendants' attention. Underscoring that the purpose of such an
award is to deter such conduct, the damages awarded against one of
the defendants was considerably less than the other punitive
damages awards on the basis that that particular defendant showed
contrition for her conduct and gave the court the impression that
she had learned her lesson.
While the legal process can be frustrating and time consuming,
this case makes it clear that Canada's courts will develop
practical solutions to prevent parties from trying to thwart the
system by hiding behind corporations without assets and refusing to
provide documentation needed to prove the case. All of this ensures
that justice is truly done among the parties.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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