The Federal Court decision in Burberry Limited and Chanel Limited, et al v. Ward et al, 2023 FC 1257 marks a significant enhancement in the remedies available to rights-holders against purveyors of counterfeit goods. Notably, the Federal Court granted novel injunctive relief on a rolling basis against a purveyor of counterfeit goods, allowing the plaintiffs to halt future importation of counterfeit goods brought in under new aliases and addresses by the defendants. Further, the Court ordered third parties to disclose infringing conduct in situations where the plaintiffs can show a bone fide belief that the conduct is related to the defendants.
In a further good news move for rights-holders, the Court also returned to using the 1997 scale set for compensatory damages and granted significant punitive damages due to the nature and scope of the infringing conduct, reversing course from two prior decisions related to online sales of counterfeit goods.
BACKGROUND
The defendants, Juvilyn Ward and Kevin Ward, imported, offered for sale and sold a large number of counterfeit Burberry and Chanel goods over a two-year period of time spanning from April 2021 through at least July 2023. Such activities were carried out on a large-scale basis through online channels, operating out of a residential location in Edmonton.
Despite receiving and signing a cease and desist letter and relinquishment of goods in relation to an early shipment of counterfeit goods detained by Canada Border Services Agency (CBSA), the defendants continued importing counterfeit goods under their own and multiple fake names, often rerouting deliveries to alternative names and addresses after the goods had cleared Customs in an effort to avoid detection. They similarly offered for sale and sold counterfeit Burberry and Chanel merchandise through constantly changing Facebook accounts and related livestream broadcasts, streamed simultaneously through a number of third-party Facebook pages.
These activities continued despite personal service of a statement of claim in relation to such activities. When the defendants failed to participate in the action against them, Burberry and Chanel brought an ex parte motion for default judgement. The defendants took no part in the hearing before the Federal Court.
FEDERAL COURT DECISION
Justice Walker for the Federal Court granted the plaintiffs' motion for default judgement and found the defendants jointly and severally liable for trademark infringement and passing off contrary to ss.7(b), ss.7(c), ss.7(d), s.19, s.20, and s.22 of the Trademarks Act. The Court also determined that the defendants violated s. 3 and s. 27 of the Copyright Act and had infringed upon Burberry's rights to their copyright protected works.
Given the nature and scope of the infringing conduct, the Court granted declaratory relief and a permanent injunction restraining the defendants from infringing against the Burberry and Chanel Trademarks and the Burberry copyrighted works. They also ordered the defendants to deliver and destruct any and all of their counterfeit merchandise.
Of note, the Court granted additional injunctive relief that was tailored to the nature and scope of the defendants' importation and online business activities. First, they granted Chanel and Burberry's request for an order requiring the defendants to provide the names and contact information of the manufacturers and suppliers of their counterfeit merchandise.
Second, the Court granted the plaintiffs' request for an order restraining third parties with notice of the judgement from knowingly assisting the defendants. and requiring such third parties to provide information regarding the defendants infringing activities. This order is conditional on the basis that the plaintiffs have a bona fide belief that the third party is in possession of information that is connected to the defendants' infringing conduct and requires the plaintiffs to establish to the Court on an ex parte informal motion that the third party likely has such information. This order therefore places a positive obligation on third party shippers to provide information to the plaintiffs relating to the defendants' infringing activities and facilitates the cooperation of third parties in stopping the infringing conduct.
Third, to address the fact that the defendants have and will likely continue to change names and shipping addresses in order to continue importing the counterfeit goods, the Court not only ordered that the goods that had previously been detained by CBSA were to be delivered up to the Plaintiffs, but also granted rolling relief for future shipments. The rolling injunction allows additional names used by the defendants, and shipments otherwise linked to the defendants, to be included in the delivery up from the CBSA without a new signed relinquishment or court order. Such names and shipments are added to the Order by way of informal motion to the court establishing the connection between the name(s) and/or shipments and the defendants.
Finally, the Court found that unlike in two recent decisions of lululemon Athletica Canada Inc. v Campbell, 2022 FC 194, and Louis Vuitton Malletier v Sheine Reyes Rosales, 2023 FC 217, per incidence compensatory damages for online sales for this decision should not be given on a lower scale than what had previously been established over numerous years by the Federal Courts.1 The Court found that the online nature of the business does not warrant a departure from the established jurisprudence, and in fact, the Court noted that online sales helped the defendants operate their business on a large scale and found that their "operations are at least equivalent to a traditional physical establishment."
The Court additionally confirmed that the small-scale nature of each individual sale in evidence does not require a reduction in damages given the high value of the items in question, nor should a reduction in scale amount be based on the profits of the seller of the counterfeit goods. To do so would ignore "the reputational harm of counterfeit merchandise in the marketplace and the resulting loss of goodwill and brand value."
The Court therefore assessed the damages at the $6000 retail per incident rate on the 1997 scale set by the Federal Court, adjusted for inflation, multiplied per instance and awarded to each of the rights-holders and Canadian distributors. Total trademark damages for Burberry and Chanel were calculated as $395,000 and $394,000 respectively. Given that the defendants acted in bad faith, the Court also awarded the statutory maximum damages for copyright infringement for a total award of $120,000. Finally, the Court ordered punitive damages of $100,000 in light of the defendants' evasive and intentional conduct and "considerable reach of her infringing activities."
KEY TAKEAWAYS
This case shows that with sufficient evidence of infringement, the Federal Court will grant damages for online sales of counterfeit goods at the well-established scale of damages set by the Court, resulting in significant deterrent compensatory and punitive damages. It remains to be seen whether the Federal Court will continue this trend for other cases, or if the Federal Court has now set itself up for conflicting lines of jurisprudence.
The Federal Court was also receptive to adapting the usual injunctive relief to capture the defendants' evasive conduct and the new reality of the online marketplace. The rolling injunction granted allows for a more effective remedy in stopping future importations by the defendants under new fake names, without having to start a new process before the courts in future instances of infringement or importation of counterfeit goods.
Further, by requiring third parties to disclose information of new shipments, third party shipping services are now obligated to assist in halting the rerouting and importation of goods by the defendants that do make it through Canadian Border Services.
To secure similar relief, both in quantum of damages and potentially broad and creative injunctive relief, trademark holders wishing to access these remedies should continue to ensure that they have a strong evidentiary foundation for such relief.
Footnote
1. Set in 1997 at $3,000 for flea markets, $6,000 for retail establishments and $24,000 for manufacturers and importers, and since 2007 adjusted for inflation and multiplied on a per instance/turn-over basis, with damages for each individual plaintiff including Canadian exclusive licensees and distributors.
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