During the month of November 2007, Smart & Biggar was involved in three separate cases resulting in significant decisions against counterfeiters and pirates in Canada.
It is hoped that this trilogy of cases will send a strong message to counterfeiters and pirates in Canada that recidivism and disdain for previous Court orders will not be accepted. At the least, the precedents will provide IP rights holders with support for seeking increased relief from counterfeiters and pirates, particularly in cases where recidivism may be established.
Precedent-setting award of damages in favour of Louis Vuitton. Our Vancouver office, representing Louis Vuitton, brought default proceedings in the Federal Court of Canada against purveyors of counterfeit Louis Vuitton merchandise. The defendants included two individuals, Tim Yang Wei-Kai and Lin Pi-Chu Yang, who operated a retail store in the Parker Place Mall in Richmond, British Columbia under the name “K2”. In December 2001, and then again in December 2003, Louis Vuitton executed “John Doe” Anton Piller orders against the K2 store, seizing large amounts of counterfeit Louis Vuitton purses. The counterfeiters failed to defend the actions, and default judgments were obtained. Agents for Louis Vuitton subsequently attended at K2, who voluntarily delivered-up significant volumes of counterfeit Louis Vuitton merchandise on two occasions, and Louis Vuitton had evidence of four other instances where counterfeit merchandise was purchased or seen at K2. Notwithstanding the judgments, attendances by agents, follow-up correspondence and warnings sent by mall management at the request of Louis Vuitton, the defendants failed to cease sale of counterfeit goods.
Louis Vuitton commenced an action in the Federal Court in July 2007, claiming trademark infringement and passing-off of Louis Vuitton’s famous trademarks, as well as infringement of copyright in monogram prints. The defendants again failed to defend, and a motion was brought for default judgment. Justice Snider heard the motion and rendered her decision on November 14, 2007 (Louis Vuitton Malletier S.A. et al. v. Pi-Chu Lin et al. (2007 FC 1179)).
The Court had no issue finding that the defendant’s activities constituted passing-off and infringement of both trademark and copyright, and awarded injunctive relief and delivery-up. With respect to monetary compensation, the Court, citing the bad faith of the defendants and the need for deterrence of both the defendants and others, awarded maximum statutory damages for copyright infringement in each of the two works infringed for a total of $40,000. The Court also awarded $87,000 “nominal” damages for trademark infringement (applying the “traditional” $6,000 award on a per-plaintiff basis to each of the six proven instances of infringement, and allowing for inflation of the $6,000 set in 1997 to $7,250 in 2006). Further, recognizing that the plaintiffs were suffering on ability to prove damages as a result of the refusal of the defendants to participate in the proceedings, the Court granted an award of $100,000 in punitive and exemplary damages. Finally, the Court granted solicitor-and-client costs of $36,699.14 based on the defendants’ continued flagrant activities and “dismissive attitude towards this proceeding and past judgments of [the] Court” for a total monetary award of $263,399.14.
Significant victory for Microsoft. Our Montreal office, representing Microsoft Corporation, sought interlocutory relief against a serial software pirate, Carmello Cerrelli, and a plethora of companies he operated. Microsoft had previously pursued Cerrelli for copyright and trademark infringement resulting from his sale of pirated copies of Microsoft software. After drawn out proceedings in the Federal Court of Canada, Justice Harrington granted Microsoft injunctive relief and awarded significant damages for copyright and trademark infringement, punitive damages and costs (the total award exceeding $2,000,000). Despite that award, Cerrelli continued to sell pirated Microsoft software.
Microsoft commenced a new action in the Federal Court naming Cerrelli and his companies, and immediately sought and obtained interim relief, including an Anton Piller order and interim Mareva and other injunctions. In a decision following a review motion released November 19, 2007 (Microsoft Corporation v. Carmello Cerrelli et al. (2007 FC 1213)), Justice de Montigay confirmed the propriety of Microsoft’s execution of previous orders, granted an interlocutory Mareva injunction freezing all Cerrelli’s assets (and noted that bank funds had already been transferred to the Court by a previous interim order in the proceedings), granted an interlocutory injunction against Cerrelli, inter alia, selling, distributing or advertising software products in association with the MICROSOFT trademark and awarded Microsoft solicitor-client costs.
Major decision for the Entertainment Software Association. Our Toronto office, representing the Entertainment Software Association (“ESA”), an association whose members collectively publish more than 90% of the video games sold in Canada, was involved in criminal proceedings against Ka Man Chan, an individual accused of the manufacture, distribution and sale of pirated video games. Chan had previously been charged with video game piracy after execution of a search warrant by the RCMP at his store in the Pacific Mall in Markham, Ontario. A plea bargain resulted in the previous charges being dropped against Chan, but his company pled guilty to offences under the Copyright Act and the Criminal Code and was fined $67,000. Subsequent investigations and execution of search warrants by the RCMP confirmed that Chan was continuing his pirating activities from his home, and was supplying pirated video games to stores in the Pacific Mall. He was charged again.
Chan pled guilty to charges under the Copyright Act and the Criminal Code, and a sentencing hearing was held on November 5, 2007. Judge Gorewich of the Ontario Court of Justice, recognizing the significance of the crimes and the recidivist nature of Chan’s activities, imposed a conditional sentence of the maximum two years less a day house arrest and 200 hours of community service. He also ordered forfeiture of funds and goods seized during an RCMP search and seizure (including $37,000 in cash, computers, materials used in the production of counterfeit video games, etc.), directed payment of $9,700 to the ESA as restitution for costs expended by the ESA in supporting the investigation of Chan, and imposed a fine of $40,000.
The need for updated tools for combating counterfeiting and piracy in Canada has been recognized by the Canadian Government, and reform is anticipated in the near future. In the meantime, Canadian courts are recognizing the seriousness of the problem, and the willingness evident from this trilogy of cases to address the need for deterrent penalties is to be applauded.
Louis Vuitton was represented by Michael D. Manson and Karen F. MacDonald of our Vancouver office. Microsoft was represented by François Guay and Marc-André Huot of our Montreal office. The ESA was represented by Brian P. Isaac of our Toronto office.