On January 16, 2007, in Microsoft Corp. v. Cerrelli et al. (2006 FC 1509), the Honourable Mr. Justice Harrington of the Federal Court of Canada issued judgment against a purveyor of pirated copies of Microsoft software. The case evolved from two seizures of pirated software from the Defendants in Montreal in November, 1999 (RCMP) and March, 2000 (Montreal Police). Despite two police seizures of products confirmed to be counterfeit, some of the products were returned to the Defendants and the authorities did not prosecute. Microsoft accordingly commenced a civil action in August, 2000.
The Defendants included brothers Carmelo and Adam Cerrelli and two numbered companies under which they carried on business as “Inter-Plus” commencing in 1996. In August, 1999, Magnasoft and Adam Cerrelli had pleaded guilty to criminal copyright piracy charges arising from distribution of infringing copies of Microsoft software.
The evidence established that Inter-Plus purchased Microsoft products from unauthorized distributors. According to the somewhat contradictory evidence of Carmelo Cerrelli, Inter-Plus’ revenue was $3 to 5 million per annum and 60 per cent was from the sale of Microsoft products.
Commencing in March, 1997, Microsoft sent a number of letters to Inter-Plus raising concerns over distribution of counterfeit products. In December, 1998, the Defendants received confirmation that a product sent to Microsoft by their lawyer was counterfeit. The Defendants nevertheless continued distribution of counterfeit products, leading to the two police seizures and the action by Microsoft.
On the evidence before him, Mr. Justice Harrington found that “Inter-Plus and Carmelo Cerrelli knew or should have known that the items were counterfeit and infringed copyright” and found liability for copyright infringement, trademark infringement, passing-off and depreciation of goodwill in the Microsoft trademarks.
With respect to remedies, Microsoft had elected to seek statutory damages in respect of the infringement of copyright. The Court awarded $20,000 in statutory damages for each of the 25 copyright works infringed, resulting in a $500,000 award, the highest award to date under Canada’s relatively new copyright statutory damage provision. In addition, the Court awarded $200,000 in punitive damages for a total damage award of $700,000 against the corporate Defendants and Carmelo Cerrelli personally. The Court also provided declarations of validity and infringement, ordered delivery up of offending products, granted injunctions in respect of the rights asserted and relief requested in the pleadings, ordered pre- and post-judgment interest on the damage award and directed the parties to make submissions as to costs.
The decision should serve as a warning to and set the standard for pursuing copyright pirates in Canada.
The Defendants are appealing to the Federal Court of Appeal, and any significant development in the appeal will be reported.
Brian P. Isaac, Toronto