Canada: Copyright Infringement Overseas Can Give Rise To Compensation In Canada

Last Updated: January 30 2014
Article by François Larose and Amy Dam

In a recent decision, Layette Minimôme Inc. v. Jarrar 2013 QCCS 6084, the Superior Court of Quebec ("the Court") awarded damages to a Canadian company whose goods were being copied, on the grounds that the infringing party did not respect its obligation of good faith under the Civil Code of Quebec ("CCQ"). However the Court did not award any remedies for copyright infringement under the Copyright Act ("the Act") because the violation took place overseas.

The plaintiff, Layette Minimôme Inc., designs and sells clothing for children. The defendants, Canadian Fashion Designs Inc. and its representative M. Jarrar, acted as a broker between Layette and Babyshop, a clothing chain with stores across the Middle East. Under the agreement between Babyshop and Layette, Babyshop selected items from Layette's collection and a pre-approved manufacturer in China copied the clothes which were sold under a Babyshop brand. Babyshop paid Layette the cost of manufacturing plus 25 percent and Layette returned 5 percent of the commission to Jarrar. In 2008, following manufacturing delays, Babyshop terminated its contract with Layette. Shortly after, Layette discovered a collaboration between Jarrar and Babyshop in which Jarrar provided samples of the Layette collection to Babyshop and an unauthorized manufacturer in China made copies of the garments.

The plaintiff presented to the Court a substantial body of evidence:

" Babyshop tried to convince the plaintiff to end its relationship with Jarrar to reduce costs. The plaintiff refused, based on its loyalty to the defendants.
" The reasons behind the rupture of the contract between Babyshop and the plaintiff were rather nebulous.
" The economic importance of the contractual relationship between the defendant and Babyshop.
" As a sales representative for Layette, Jarrar borrowed samples from the Layette collection but was reluctant to return them to Layette.
" Jarrar admitted to giving samples of the Layette collection to Babyshop even though Layette had explicitly asked him to keep an eye on possible counterfeiting.
" A Chinese manufacturer with whom Layette had no business relationship claimed he was making clothes for Layette.
" The plaintiff found copies of Layette clothing on Babyshop's website and in Babyshop stores in Dubai.
" Babyshop received samples of clothing from the Layette collection before the clothes were made available to the public.
" Jarrar's testimony was vague and lacked credibility.

The preponderance of evidence was sufficient to convince the Court that there was a presumption of copyright infringement of Layette's clothing, that the defendants were involved in the infringement, and that they violated their obligation of good faith pursuant to articles 6, 7 and 1375 CCQ.

 Interestingly, the Court dismissed the copyright action. Even though the garments created by Layette were distinctive and original works that may be protected by copyright, the Court found that the Act does not apply to the circumstances at hand because it does not have an extraterritorial reach. The copies were manufactured in China at the request of a resident of Dubai and sold in the United Arab Emirates. 

Also noteworthy, the defendants alleged that the plaintiff could not claim copyright because each garment was a design applied to a useful article and the garments were reproduced in a quantity of over 50 (section 64(2) of the Act). Layette argued the exceptions to this rule under section 64(3) of the Act which states that the non-infringement rule does not apply where: the work is a graphic or photographic representation applied to the surface of an article; the material has a woven or knitted pattern; or the work is a representation of a real or fictitious being, event or place. As the plaintiff is presumed to be the owner of the copyright pursuant to section 34.1(1) of the Act – a presumption that the defendants made no effort to overturn – had it not been for the extraterritorial aspect in this case, the Act would have been applicable and the Defendants' argument under section 64(2) of the Act would have failed.  

Despite refusing to apply the Act, the Court did allow the motion in part and awarded Layette damages for loss of profits from the sales due to the defendants' violation of their obligation of good faith. Jarrar's liability was extracontractual under article 1457 CCQ since only Canadian Fashion Designs had contracted with Layette. The Court found that Jarrar failed to display a behavior equal to that which Layette could have expected and that his behavior was disloyal and wrongful. The defendants were required to pay $144,050.96 in damages to Layette.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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François Larose
Amy Dam
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