The decision of the Federal Court of Appeal in Annie Pui
Kwan Lam v. Chanel S. De R.L. et al1 reviewed
a finding of liability for trademark infringement arising from the
offering for sale and sale of counterfeit CHANEL merchandise. The
case against the individual defendant, Ms. Lam, proceeded by way of
summary trial. Corporate defendants that did not participate in the
appeal were previously judged in default.
On appeal, the trial judge's decision was set aside and
remitted back to him for redetermination, in particular on the
issue of "the quantum of damages and costs." The Court of
Appeal found that as a result of ambiguity in the trial judge's
Reasons, it was impossible to discern whether Ms. Lam was found to
have committed all four acts of alleged infringement or only three.
Faced with this uncertainty, and given that the trial judge
"premised his liability determination on an adverse
credibility finding", the Court of Appeal held "it would
not be appropriate for this Court to step in and resolve the
ambiguity by determining whether the appellant should be held
liable for three or four occasions of infringement."
Notwithstanding the foregoing, in its review of the underlying
Reasons the Court of Appeal provided helpful guidance in respect of
a number of issues relevant to counterfeiting and other trademark
Summary trial was "particularly well-suited"
The Court of Appeal endorsed the trial judge's decision to
allow the matter against the individual defendant to proceed by way
of a summary trial. In coming to its conclusion, the Court of
Appeal agreed with the trial judge that there was no need for a
full trial in this case as the plaintiffs had put forward
convincing proof of infringement, while the defendants had put
forward little evidence in support of their defence. The Court of
Appeal's more general endorsement of the summary trial
procedure in cases such as this one is clear from its statement
Cases like the present, involving ongoing sales of counterfeit
goods by a defendant that seeks to put forward a specious defence,
are particularly well-suited to being decided by way of summary
Given the factual particularities of the case, the actual
quantum of compensatory damages arising from the infringing acts
was difficult to assess, and as a result nominal damages were
awarded by the trial Court. The Court of Appeal agreed that the
award of nominal damages is appropriate in cases in which "the
defendants are uncooperative, proof of actual damages is difficult
and it is hard to estimate the harm done to the trade-mark
owner's goodwill through the sale of inferior quality
counterfeit goods". In this case nominal damages were assessed
at $8,000 per act of infringement.
Proving damages can be a challenge in counterfeiting cases, and
the Court of Appeal's endorsement of nominal damages is helpful
for rights holders seeking at least some form of monetary
compensation for harm caused.
Punitive Damages Award
At the trial level the Court awarded the plaintiffs $250,000 in
punitive damages, holding that such an award was warranted given
the defendants' "blatant disregard for the rights of the
plaintiffs, as well as the blatant disregard for the process and
Orders of this Court" and because "... the amount of
nominal damages awarded ... is simply not sufficient to denounce
and deter the subject defendants' activities."
The Court of Appeal confirmed that although larger than awards
in prior cases, such an award may be appropriate, particular given
that "the need for deterrence is ... very real and may require
a significant punitive damages award where compensatory damages can
only be calculated on a nominal basis due to the nature of the
defendant's infringing acts." The Court of Appeal went on
to hold that "the violation of trade-mark rights through the
repeated sale of counterfeit goods is serious misconduct worthy of
sanction and justifies damages awards that are high enough so as to
deter the defendant and others from engaging in such reprehensible
Notwithstanding the foregoing, as noted above, the Court of
Appeal remitted the issue of damages, including punitive damages,
back to the trial judge for re-determination.
1 Annie Pui Kwan Lam v. Chanel S. DE R.L., Chanel
Limited and Chanel Inc.,
2016 FCA 111.
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