As fashion industry observers may be aware, Chanel is highly
protective of its intellectual property. In a decision released
last week, Chanel S. de R.L. v Lam Chan Kee Company
Ltd., 2016 FC 987 the Federal Court reaffirmed an
earlier decision awarding Chanel substantial damages and costs for
In a prior action, Chanel sued the Lam Chan Kee Company Ltd.,
2133694 Ontario Inc. and two individual defendants, Annie Pui Kwan
Lam, and Siu-Hung Lam, alleging that they had sold counterfeit
Chanel items and thereby infringed Chanel's intellectual
property rights. Chanel was awarded default judgment against the
two corporate defendants and was successful on a motion for summary
trial against Ms. Lam on the basis of four separate instances of
infringement, with the court granting declaratory relief,
injunctive relief, and awarding $370,000 in damages and costs. Ms.
Lam then appealed the decision to the Federal Court of Appeal, who
directed that a new summary trial be heard by the Federal
The limited question for consideration by the Federal Court was
whether Ms. Lam was liable for the fourth instance of infringement
and accordingly, whether the quantum of damages and costs awarded
was appropriate. Ms. Lam took the position that she was not liable
for the fourth instance on the basis that she was not associated
with the Lam Chan Kee Company at the time of the fourth instance,
and that damages awarded in the case were unreasonable,
disproportionate, and out of line with precedent in other Canadian
trade-mark and copyright cases.
Unfortunately for Ms. Lam, the court held that both the original
finding of liability and the quantum of damages and costs award
should remain unchanged. Key to the decision of the court were the
As a controlling mind of Lam Chan Kee
Company, Ms. Lam derived financial benefit from its ongoing
activities. As noted by the court, she "was aware that the
advertising and the selling of counterfeit product was contrary to
both the law and the previous order rendered against her... [she]
failed to prove that she took sufficient steps to halt this
Ms. Lam had "personal knowledge
of the infringing and illegal activities"
Ms. Lam had been ordered in 2006 to
restrain from infringing Chanel's trade-marks. However, she
failed to take proper steps after being served with the Statement
of Claim, which allowed the infringing activities to continue. She
failed to provide any evidence that they had attempted to stop the
sale of counterfeit products. The defendants also failed to
demonstrate that the four instances of infringement were isolated
instances, from which the court drew a negative inference in
respect of the daily activities of the defendants.
Interestingly, the court made several statements which were in
support of Chanel's right to vigorously protect their
intellectual property, and which may well be of use to other
designers, whether they are a large corporation or a small,
independent outfit. The court explicitly noted that while the
infringement in question may not have seemed serious to the
defendants, Chanel had worked very hard to protect their
brand's reputation and as such, erosion of that reputation was
a serious matter. The court also noted that despite the fact that
Chanel's financial capacity was not in issue, they nevertheless
remained vulnerable. Instead, Chanel's vulnerability was due to
"their incapacity to control the daily sale of counterfeit
merchandise which diminished the value of the goodwill associated
with the Chanel trade-marks."
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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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