Grey Marketing: An Overview of Recent Developments



GREYMARKETING:ANOVERVIEWOFRECENTDEVELOPMENTS

by
FrançoisM.Grenier
*
LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
www.robic.ca-info@robic.com

Greymarketingishardlyanewphenomenonbutinaworldmarket
characterizedbythefacilitywithwhichgoodsbecomeinternationallyknown
andcirculated,theproblemscausedbythepracticearemoreacutetoday.
Definitionof”greymarket”goods
GreymarketgoodsaregoodsthatareimportedanddistributedinCanada,
againstthewishesofatrademarkorcopyrightowner,authorizedimporteror
distributor,andthatoriginatefromasourcehavingsomerelationshiptothe
intellectualpropertyrightowner.Theyarecalled”grey”becausetheywere
legitimatelymarketedandacquiredabroadbutdoubtsexistastowhether
theymaybeimportedinCanadawithoutinfringingalocaltrademarkor
copyright.Theexpressions”greygoods”and”greymarketing”wereproperly
coinedsomeyearsagoandarestillpropertoday.Afterthejudgments
recentlyhandeddownbytheFederalCourtofCanada,TrialDivision,inthe
NINTENDOandthetwoEDANFOODScases,”greygoods”areasgreyasever.

Theproblemraisedbygreymarketingistwofold.Goodsthatattractgrey
marketersarethosethatcanbepurchasedontheworldmarketatprices
substantiallylowerthanthepriceschargeddomesticallybytheintellectual
propertyownerorhisauthorizeddistributorsenjoyingaquasi-monopoly.
Lowerpricesbeingevidentlymoreattractivetoconsumers,thegrey
marketers’businesswillthriveandthe”legitimate”distributorcaneasilybe



















































*
LEGERROBICRICHARD,1991.
Lawyer,FrançoisM.GrenierisaseniorpartnerinthelawfirmLEGERROBICRICHARD,g.p.and
inthepatentandtrademarkagencyfirmROBIC,g.p.Thismaterialwasdesignedforthe
purposeofalecturemadeduringaprogramofTheCanadianInstituteheldon1991.12.03on
thetheme”Copyright:FromBeginningtoEnd”.Itwasmeantfordiscussionanddoesnot
conclusivelystatetheopinionoftheauthororthemembersofherfirmonthesubjectmatter
nordoesitprovideanexhaustivereviewthereof.TheSchedulestothismaterialarenot
reproducedhere.Publication128.



driventobankruptcy.Fromtheperspectiveofconsumersandfree
competitionadvocates,agreymarketsituationisheaven.
However,fromtheintellectualpropertyownerperspective,higherlocalprices
maybeperfectlyjustified,forexample,byhigheroverheadandcosts
Canada,expensiveafter-saleservice,theestablishmentofalarge
distributionnetworktocovertheterritoryorcompliancewithlocallegislation
andregulations.Onceitsnetworkiswellestablished,itisembarrassingand
costlyforthetrademarkorcopyrightownertocompetewithitsowngoods,
possiblyhavingdifferentcomponentsandpackagingandsoldatalower
price.Therefore,fromtheperspectiveofinternationalintellectualproperty
ownersandtheirlawyers,agreymarketsituationishell.
Greymarketingissometimesreferredtoas”paralleldistribution”or”parallel
imports”.Tryingtoprevent,bywhateverlegalmeans,greymarketingcauses
problemsandwillalwayscauseproblems:thegoodsaregenuine.

Thepopularityofgreymarketingandparallelimportationhasrisen
considerablyinthepastfewyears.Someauthorsbelievethatthevalueof
goodssoldthroughsuchchannelstobeworthover10billiondollarsperyear
inNorthAmerica.
Roleofintellectualpropertyrightsindefeatinggreymarketing
Trademarksandcopyrightscanbeusedtostopgreymarketingandprevent
theflowofgoodsbearingthetrademarksorinassociationwithwhich
copyrightedmaterialisused,evenifsuchgoodsaregenuine,providedthat
appropriatelegalprotection(flowingfromacombinationofthelawandthe
facts)exists.
Inthe1960’s,whengreymarketingwasnotaspopularasitistoday,itwas
believedthatownershipofatrademarkbyaCanadianoperationwould,in
allcases,besufficienttopreventgreymarketing.Inthesimplestcases,a
trademarkownerwouldbeablethedefeatgreythemarketingofits
productsbybringinganinfringementaction.Unders.19oftheTradeMarks
Act(1985R.S.C.,c.T-13),theownerofavalidCanadiantrademark
registrationhastheexclusiverighttousethetrademark,throughoutCanada,
inassociationwiththewaresforwhichthetrademarkisregistered,andthis
rightisinfringedbytheunauthorizeduseofthetrademark.
InRemingtonRandLimitedv.TransworldMetalCompanyLimited
([1959-60]
19FoxP.C.,204),aninterlocutoryinjunctionwasgrantedtotheplaintiffonthe
aboveprincipletopreventparallelimportationinCanadaofelectricshavers



fromtheUnitedStates.Inthatcase,thetrademarkswereownedbythe
plaintiff,aCanadiancompany.Thevalidityoftheregistrationswasnot
constestedandthewareswerenotoriginatingfromtheplaintiffbutfroma
commonmanufacturingsourceintheUnitedStates.Commentingonthe
balanceofconvenience,theCourtfoundthatapurchasercouldbe
deceivedif,buyingaU.S.shaver,helaterfoundthattheshaverwasnotsold
andnotwarrantedbytheplaintiff.
Inacasewherethefactsweresimilar,WilkinsonSword(Canada)Limitedv.
Juda([1968]2Ex.C.R.137),aninjunctionwasrefused,thetrademark
registrationsinissuehavingbeenfoundinvalidforlackofdistinctivenessby
theCourt.TheWILKINSONmarkshadbeenusedinCanadaforover40years
byaUnitedKingdomcompanyandlaterassignedtoitsCanadiansubsidiary,
in1965,priortobringinganactionagainstaparallelimporter.TheCourt
foundthatthetrademarks,whentheactionwasbrought,signifiedtothe
Canadianpurchasingpublicwhattheyhadalwayssignified,notwithstanding
thetransfertotheCanadiansubsidiary.[seealsoUlayCanadaLtdv.Calstock
TradersLtd.[(1969-70)42FoxP.C.178].
ThesameconclusionprevailedinBrecksSportingGoodsCo.Ltd.v.Magder

[(1976)S.C.R.,527].TheSupremeCourtofCanada,confirmingtheFederal
CourtofAppeal,foundthattheregistrationforthetrademark”MEPPS”,
ownedbytheCanadiandistributorofthegoodsfollowingsuccessive
assignmentsofthemark,tobeinvalidforlackofdistinctiveness,themarkstill
beingassociatedbythepublictothemanufacturerofthewares,itsoriginal
owner.
Alltheabovecasesconcerned”internationally”knowntrademarks.Inall
cases,themarkwasownedbytheCanadiancompanydealingwiththe
productsonanexclusivebasisandinallcaseswherethevalidityofthe
registrationwasputinissue,itwasdeclaredinvalidorthevaliditywasplaced
indoubt.InallcasestheCourtfoundthatthemarkwasstillassociatedbythe
publicinCanada,withthemanufacturerofthegoodsabroad,theoriginal
ownerthemark.
LifewasbeingmadedifficultbyCanadiancourtsforexclusivecontractual
distributors,evenwhentheyownedatrademarkregistration.Itmustbe
understoodthatnormallyexclusivedistributorshavenotrademarkor
copyrightinterestintheproducttheydistribute.Thefinancialand
administrativecommitmentofthesedistributorsissubstantialsincetheyhave
theobligationtomaintainatrainedsalesstaff,producepromotional
materials,etc.,expensesunknowntogreymarketers.Exclusivedistributorsare
vulnerabletoparallelimporterswhobenefitfromtheiradvertisingand
promotionexpenses.



Owningatrademarkregistrationbeinginsufficient,otheroriginalwayshadto
befoundtoprotectlocalmarkets.Anattemptwasmadebyanauthorized
distributortorelyuponthelawofpassing-offtopreventgreymarketing,when
thefactsshowedthatthepubliccouldbedeceivedintothinkingitwas
gettinggoodsprovidedbyanauthorizeddistributorwithallthebenefits
attachedtothesegoodswheninfactitwasnot.Thiswastheeraofthe
“extendedpassingoffaction”.
In1984,intheSEIKOcase,theSupremeCourtofCanadalimitedtherightof
actionofauthorizeddistributorsagainstgreymarketers.Firstly,theCourt
supportedthepolicyoffreedomofcompetitionandheldthatattemptsto
restrictgreymarketingwouldbeinfluencedbythedoctrineofexhaustionor,
inotherwords,therighttoresellgoodslegallyacquiredontheworldmarket.
Recently,otherdecisionschangedthepolicyconsiderationswithrespectto
greymarketers.Theywillbediscussedlater.

TheSEIKOdecision
SeikoTimeCanadaLtd.wastheexclusivedistributorofSEIKOwatchesin
Canadaandwasneithertheregisteredowneroraregistereduserofthe
trademarkSEIKO.ThewatchesweremanufacturedbyK.Hattori&Company
LimitedinJapan,theregisteredownerofthetrademark.Theproductwas
marketedaroundtheworldthroughadistributionsystemconsistingof
authorizeddistributorsandtheirauthorizeddealers.Bycontractual
arrangements,SeikoTimeCanadawasanauthorizeddistributorandwas
entitledtochooseauthorizeddealerswhowouldsellSEIKOwatchesin
Canada,providetheserviceandrespectthemanufacturer’swarranty.The
defendant,ConsumerDistributingCo.Ltd.,wasnotanauthorizeddealerof
SEIKOwatches.
Theproductssoldbythetwocompanieswerephysicallyidentical.Theonly
differencewasthattheguaranteebookletaccompanyingthewatchessold
byConsumersDistributingwasintendedfortheUnitedStatesandstatedthat
theguaranteewouldbevalidonlyifproperlyfilledbyanauthorizeddealer.
Theplaintiffwasaskingforapermanentinjunctionenjoiningthedefendant
fromadvertisingorsellingSEIKOwatchesinCanadaor,alternatively,a
permanentinjunctionrestrainingthedefendantfromholdingitselfoutasan
authorizedSEIKOdealeroftheplaintiffbyadvertisingandsellingSEIKO
watchesasinternationallyguaranteed,anddamages.

Mr.JusticeHollandoftheOntarioSupremeCourtfound[50C.P.R.(2d)147]
thattheSEIKOproductcomprisedthewatchitselfboxedwithaninstructional
booklet,thepointofsaleservice,thewarrantyproperlyfilledoutbyan
authorizeddealer,andtheaftersaleservice.ThewatchessoldbyConsumer



DistributingwereannouncedandsoldasSEIKOproducts.Thedefendantwas
misleadingthepublicsinceitofferedonlyoneofthefourelementsofthe
“product”.
HealsofoundthattheCommonLawactionof”passingoff”appliedtothe
presentcaseforanumberofreasons.Thereisamisrepresentationtothe
public,madebyatraderinthecourseoftrade,toprospectivecustomers,
whichiscalculatedtoinjurethebusinessorgoodwillofanothertrader,and
whichcausesactualdamagestoabusinessorgoodwillofthetraderby
whomtheactionisbrought.Thejudgegranted,interalia,aninjunction,
permanentlyenjoiningthedefendantfromadvertisingandsellingSEIKO
watchesinCanadaandawarded$5,000fordamagessufferedbythe
plaintiff.
ConsumersDistributingappealledtheinjunctiondescribedabove[60C.P.R.
(2d)222].Theappealwasdismissedforthereasonsgivenbythetrialjudge
andparticularlybecauseofthefactthattheproductmarketedbythe
plaintiffwasnotsimplyawatchalone.

IntheSupremeCourt[10D.L.R.(4th)161],Mr.JusticeEstey,fortheCourt,
foundthattheconductofthedefendantdidnotamountto”passingoff”,as
theconceptisknowninCanada,formanyreasons:
a)First,elementssuchasthepointofsaleserviceandtheaftersale
servicewhichwereofferedbySeikoTimeCanadaforitsauthorized
dealersonlycannotbeincludedinthedefinitionofthe”product”.The
defendantwassellingpreciselythesamewatch,comingfromthe
samesource,astheplaintiff.
b)Restraininggreymarketingof”legitimate”productscouldbeperceived
tobearestrictiontotherightoffreecompetitioninthemarketplace
andwouldhavethefollowingconsequences:
.ThepublicwouldbedeprivedoftherighttopurchaseSEIKO
watchesonthealternativebasisthatthewatchwouldbe
unsupportedbythemanufacturer’swarranty;
.Amonopolywouldbeestablishedsimilartothatestablishedbya
validlyissuedpatentexceptthatthemonopolywouldbeforan
unlimitedperiodoftime.

c)Attemptstorestrictgreymarketingbyassertingtrademarkrightsmust
beinfluencedbythedoctrineofexhaustion.Once”legitimate”goods
aresoldintothemarketplaceanywhereintheworld,therecanbeno



furtherrestrictionontheirphysicaltransferbytheassertionofintellectual
propertyrightsthatresideinthegoods.
d)Thereisarequirementinpassingoffcasesthattheremustbea
misrepresentationordeceitofsomekindtothepublicbyreasonofthe
saleofgreygoods.InSEIKO,therewasnosuchmisrepresentationor
deceitoncethedefendantwasorderedtowarrantthepublicbyway
ofnoticespostedatpoint-of-purchaselocationsthatConsumers
Distributingwasnotanauthorizeddealerandthatthewatchesitsold
werenotinternationallyguaranteedbySeikoTimeCanada.
e)Theextendeddefinitionofthe”passingoff”actionwasnotapplicable
becausethewatchessoldbyConsumersDistributingwerenotfalsely
described,bothSeikoTimeCanadaandConsumersDistributinggave
retailbuyersaformofguaranteeand,ineachcase,thetrademark
SEIKOdistinguishedtheproductfromallothers.
Theappealwasallowedandtheinjunctionpermanentlyenjoining
ConsumersDistributingfromadvertisingorsellingSEIKOwatchesinCanada
wasorderedtobedeletedfromthejudgementissuedattrial.However,the
CourtnotedthatnothingwasadvancedbySeikoTimeCanadawith
referencetoanyrightsflowingbywayofaregisteredtrademarkinthename
oftheownerK.Hattori&CompanyLimited,orrightsflowingfroman
appointmentasregistereduserofsaidmark.
TheSupremeCourtofCanadahasnotruledout,ineverycase,thepossibility
ofsuccessofapassingoffactiontopreventgreymarketing.IntheSEIKO
case,theCourtfoundthatthepubliccouldnotbedeceivedoncethefirst
injunctionwasissued.Anymisrepresentationbygreymarketersmaystillbe
enjoined.TheprincipleestablishedbytheSEIKOdecisionhasbeenappliedin,
interalia,Bergeronc.Babin
[(1988)17C.P.R.(3d)73].

TheNINTENDOdecision
Asmentionedearlier,theSupremeCourtofCanada,intheSEIKOcase,
expresselystatedthatitwasnotconcernedwithasituationwheresomerights
couldflowfromaregistrationofatrademarkorasaregistereduserofa
trademark.TheFederalCourtofCanada,TrialDivision,wascalleduponto
considersuchasituationin1989.IntheNINTENDOcase[(1989)37C.P.R.(3d)
358],MattelCanadawasaskingforaninterlocutoryinjunctionrestrainingthe
defendant,GTSAcquisitions,frominfringingtheNINTENDOtrademarks.
MattelCanadawastheregistereduserofthetrademarksandwas
appointedexclusivedistributorofNINTENDOproductsinCanada.The
registredownerofthetrademarkswasaU.S.company,theexclusive



distributorinNorthAmericaofNINTENDOproductsmanufacturedinJapanby
NintendoCo.Ltd..
Theplaintiffhadspentthroughtheyears20milliondollarstopromoteits
productsinCanada,offeredawarrantyagainstalldefectsandprovided
telephonehotlinestoanswerquestions.Thedefendantbegan,in1989,to
importU.S.videogamesintoCanadafordistribution.MattelCanada
broughtanactionimmediatelywhenitdiscoveredthatagreymarketwas
developinginthecountry.
Thetwoproductswerephysicallyidenticalandweremadebythesame
company,theonlydifferencebeingthattheU.S.productwasavailablewith
thepackagingandtheinstructionalmaterialinEnglishonly.Thewarrantydid
notapplytoU.S.productsandMattelCanadahadtoexplaintothepublic
thatitcouldnotbeheldresponsiblefortheU.S.videogames.Thisaffectedits
credibilityanditscapacitytomeetitsminimumsalescontractuallyagreedto
withitsU.S.principal.
ThedefendantreliedontheSEIKOdecisionandarguedthattherecouldbe
noinfringementoftheNINTENDOtrademarkswhenusedinassociationwith
thegenuinegoodssuppliedbytheactualownerofthemark.
Mr.JusticeJoyalwasdealingwithanapplicationforaninterlocutory
injunctionandthushadtofindfirstwhethertherewasaseriousissuetobe
tried.Hecametotheconclusionthatthelackofanydeceptionofthepublic
bythesaleofatrademarkowner’sowngoodswasnotconclusiveofthekind
ofissuebeforehim.TheSEIKOcaseleftthedooropentootherconsiderations
ifaregistereduserorownerwasinvolved.Othertestsmustbeconsidered
whensomekindofunfaircompetitionisraised.

“Accordingtos.-s.49(3)oftheAct[now50(3)]thepermitteduseofa
trademarkbyaregistereduserhasthesameeffectforallpurposesof
theActastheusethereofbyaregistredowner.Ishouldthinkthat
primafacie,suchaprovisionaffordstheplaintiffsomeprotection.”[p.
365]

JoyalJ.thenreferredtoparagraph7(e)oftheActwhichprovidesthatno
personshalladoptanybusinesspracticecontrarytohonestindustrialor
commercialusageinCanada.(NoreferencewasmadetotheSupreme
CourtdecisioninMcDonaldvsVaporCanadaLtd.
[(1977)2R.C.S.,134]
wheresection7(e)wasdeclaredultravires.)
JoyalJ.concludedthatsince”Asin…theRemingtonRandcase,supra,the
defendantissellingaproductundertheplaintiff’strademarkforwhich
neitherleavenorlicensehasbeenobtained.”,thethresholdtestforthe

issuanceforaninterlocutoryinjunctionhadbeenmet.Thereferenceto
“plaintiff’strademark”ishereclearlywrong,plaintiffbeingonlyaregistered
user.InRemingtonRandasseenabove,theplaintiffwastheownerofthe
markinCanada.

Itishardtoreconcilethisdecisionwithpreviousdecisions:
a.Atp.362[27C.P.R.(3d)],JoyalJ.found:
“IftheactionbeforemewerebytheowneroftheNintendomarkandif
theonlyevidencebethatthedefendantissellingaNintendoproduct
coveredbythetrademark,therewouldbenocasefortheowner.It
wouldbesomewhatridiculoustoassertinfringementorpassingoff
whenthedefendantisdealingwiththeowner’sownwares.There
cannotbe,insuchcircumstances,anydeception.”

Later,hefound:
“Accordingtos.-s.49(3)oftheAct,thepermitteduseofatrademark
byaregistereduserhasthesameeffectforallpurposesoftheActas
theusethereofbyaregistredowner.”

Thisbeingso,aregisteredusercannotbeinabetterpositionthanthe
registeredownerofatrademark.Havingfoundthattheregisteredowner
wouldhavenorightofactioniftheonlyevidenceavailablewasthatthe
defendantwassellingaNINTENDOproductcoveredbytheowner’strade
mark,therecouldbenorightofactionforaregistereduser.
Section50(3)isofnorelevanceinasituationwheregenuineproductsare
soldbythirdparties.Itisjustasridiculousforaregistereduser”…toassert
infringementorpassingoffwhenthedefendantisdealingwiththeowner’s
ownwares”.Norightsflowingfromaninscriptionasaregisteredusercanbe
infringediftheregisteredowner’srightsarenotinfringedwhenconsidering
thesamesetoffacts.
b.JoyalJ.shouldnothavegrantedtheinjunctiononthebasisofunfair
competitionintheabsenceofaclearfindingoffactthatthedefendant’s
activitieswerecausingdeception.Parallelimportationassuch,asdecided
intheSEIKOcase,doesnotamounttounfaircompetition.
c.JoyalJ.alsofoundthattheTradeMarksActcannotprotectunlawful
activities.Tobeunlawful,anactivitymustbecontrarytolaw.Thejudge

basedthispartofhisdecisiononparagraph7(e)oftheActwhichwas
declaredultraviresin1977.
RegisteredusersoftrademarksactingasexclusivedistributorsinCanada
shouldfindnocomfortinthisdecision.

TheHEINZandNESTLEdecisions
Twointerlocutorydecisionsofimportanceonthesubjectofgreymarketing
wererecentlydeliveredinFebruaryandJuly1991.Bothinvolvedas
defendantEdanFoodsSalesInc.,agreymarketer.Thejudgementinthefirst
casewashandeddownFebruary13,1991inH.G.HeinzCompanyofCanada
Ltd.v.EdanFoodsSalesInc.[(1991)35C.P.R.(3d)213],ajudgementofMr.
JusticeCullenoftheFederalCourtofCanada,TrialDivision.
HeinzCanadawasaskingforaninterlocutoryinjunctionrestrainingEdan
Foodsfrominfringingitsregisteredtrademarksforketchupbyimportingin
CanadaketchupproducedbyHeinzU.S.,theplaintiff’sparentcompany.The
HEINZtrademarkshadbeenusedinCanadabytheU.S.companyfrom1909
until1940whentheywereassignedtoHeinzCanada,uponitsincorporation.
Sincethen,HeinzCanadaadvertiseditsownketchupwhichismadein
CanadainaccordancewiththetastepreferencesoftheCanadianpublic.
Thepackagingwasspecificallydesignedwiththecharacteristicsofthe
Canadianmarketinmind.
Dealingwithamotionforaninterlocutoryinjunction,CullenJ.merelyhadto
findthatplaintiffhadsatisfiedthe”seriousissuetobetried”testbefore
consideringirreparableharmandbalanceofinconvenience.

Thecourtfoundthattherewasaseriousissuetobetried,relyingonsections
19,20and6oftheTradeMarksAct.Plaintiffhadaregisteredtrademarkand
apresumptionofinfringementexistsifapersonnotauthorizedbytheowner
usestrademarklikelytocreateconfusionwitharegisteredtrademark,as
definedbysection6.
Tofindashedid,CullenJ.didnothavetoconsideranyofthetraditional
argumentsadvancedbygreymarketers.Hedidbrieflyrefertospecial
circumstancescreatedbyasituationofgreymarketingundertheheading
“Importation”andfoundthe”…caseatbaronallfourswiththeRemington
Randcase…”referredtoearlier.HealsocitedwithapprovaltheMattel
Canadadecision.
ThesecondcaseinvolvedNesleEnterprisesLimitedv.EdanFoodsSalesLtd.
,a
decisionnotyetreportedofMr.JusticeStrayerdatedJuly31,1991.Nestle



Enterprises,aregistereduserofthetrademarkNESCAFEinCanada,filedan
applicationforaninterlocutoryinjunctionbasedonsection7(b)oftheTrade
MarksActagainstthedefendanttoprohibittheimportationofaninstant
coffeecalled”MountainBlend”,soldinassociationwiththetrademark
NESCAFEinajarwithacylindricaltopvirtuallyidenticaltothoseusedbythe
plaintiff.EventhoughNesleEnterprisesallegedinfrigementofitsexclusive
rightsflowingfromitsstatusasregistereduseroftheNESCAFEtrademarkinits
statementofclaim,itonlysoughtinjunctivereliefwithrespecttotheconduct
prohibitedbysection7(passingoff).
Theinterlocutoryinjunctionwasrefusedformanyreasons.Firstly,Nestle
Enterpriseshaddelayedapplyingforitsinjunctionanditwasnotshownthatit
wouldsufferirreparableharmshouldthedefendantcontinuetosell
“MountainBlend”coffeeinCanada.(Thispartofthedecision,notrelevant
withrespecttoanygreymarketingconsiderations,isbasedontherecent
decisionoftheFederalCourtofAppealdatedMay8,1991inNovopharm
Ltd.v.Syntexwhereitwasfoundthatalleginginfringementofaregistered
trademarkisnotsufficientinitselftoestablishirreparableharm.Here,the
plaintiffisnoteventheownerofthetrademark.)
StrayerJ.distinguishedMr.JusticeCullen’sdecisionintheHEINZcaseonthe
factthatinthelattercasetheplaintiffwastheowneroftheregisteredtrade
mark.Healsofoundthatthelabelsoftheproductsinvolvedweresufficiently
differenttopreventpotentialconfusion.StrayerJ.eventhoughdealingwith
aclaimadvancedbyaregistereduserdidnotrefertotheNINTENDOcase.
Nodecisiononthemerithasbeenrenderedtodateineithercases.Heinz
Canadashouldsucceedinitsaction.IthasownedthetrademarkHEINZin
Canadaforover50years,itsproductis”canadianized”(advertising,
containersandcontent).EdanFoodswouldbehardpressedtoarguethat
theHEINZtrademarkisnotdistinctiveoftheCanadiancompany’sproducts.
Onthatbasis,thedecisionsinWILKINSONSWORDandBRECKSSPORTING
GOODSareclearlydistinguishable.

ThesituationinNESLEENTERPRISESisclearlydifferent.Asmentionedwhen
commentingontheNINTENDOdecision,itishardtoseehowthecourtcould
findinfringementoftherightsflowingfromaregistrationasuserofatrade
mark,whennoinfringementoftheregisteredowner’srightcouldbefound.
Thepassingoffconclusionsarehopelessintheabsenceofanyfindingof
misrepresentationbythegreymarketer,followingthedictaintheSEIKOcase.
Summarizingtheabove,itappearsthattheonlysolutiontopreventgrey
marketingoflegitimategoodsliesintheearlyestablishmentofaseparate
andindependentCanadianoperationexclusivelydealingintheproducts
withintheterritoryandunderstoodassuchbytheconsumers,toprotectthe



distinctivenessofthetrademark.Insuchcircumstances,theCanadian
operationshouldpreferablyfromthestartorasearlyaspossiblewhenthe
worldmarketjustifiesit,becomeowneroftheregisteredtrademark,byfiling
anapplicationorthroughassignmentofthemarktogetherwiththegoodwill.
Exclusivedistributorshipandregistereduseragreementwillalwayscreate
problemswhendirectinterventionisneededtopreventgreymarketingof
goods,legallymarkedabroadwiththeregisteredowner’strademark.
Therightsoftheregisteredownerofatrademarkshouldberecognizedwhen
somedegreeofbusinessindependencefromthecontrolofaforeignparent
canbeshownandthata”Canadian”goodwillinthetrademarkexistsinfact.
Theabsenceofdistinctivenessofthetrademarkcanalwaysberaisedand
maybeeasytoshowifthetrademarkwasrecentlyassigned,forthepurpose
oflitigation,specificallytoprotecttheterritoryfromgreymarketing.
OTHERCONSIDERATIONS
Canadiancopyright
Ifanycopyrightedmaterialisassociatedtotheproductssold,anassignment
ofcopyrightinsaidmaterialbyitsforeignownertotheCanadiandistributor
orlicenseemaypreventparallelimportationorgreymarketing.Section27(4)
oftheCopyrightAct[(1985)R.S.C.,c.C-42]providescivilremediestoprevent
importationinCanadaofanyworkthat,ifithadbeenmadewithinCanada,
wouldinfringeaCanadiancopyright.(seeLesDictionnairesRobertCanada
SCCetal.v.LibrairieduNomadeInc.[(1987)11F.T.R.,44].Evidently,
assignmentofcopyrightmaycreateotherproblems,amongstwhich,theloss
ofcontrolbytheowneroverthecopyrightsubsistinginhiswork.

InWellaCanadaInc.v.PearlonProductsLtd.
[(1985)4C.P.R.(3d)287],the
plaintiffallegedthatcopyrightsitheldwithrespecttopackagingandinserts
forhaircareproductsthatitsoldinCanadawereinfringedbythepackaging
andinsertsforhaircareproductsimportedfromitsU.S.parentcorporationby
thedefendant.Thecourtmadenoorderinrespectofcopyright
infringement.
ApplicationsoftheFreeTradeAgreementtoCanadiantrademarkrights
AtthebeginningofthenegotiationsbetweenCanadaandtheUnitedStates,
therewasadesiretoeliminatenon-tariffbarriersbetweenthetwocountries.
Itcanbearguedthat,infact,thiscouldhaveeliminatedcausesofaction
basedonintellectualpropertyrightsagainstagreymarketerwhoimports
greygoodsligitimatelysourcedwithinCanadaortheUnitedStates.TheFree



TradeAgreementwasadoptedin1988withnothinglikelytobeconstruedas
affectingintellectualpropertynon-tariffbarriers.
Thereis,ofcourse,somesectionsofgeneralapplicationsuchasarticle102
whichdefinesthegoalsoftheAgreement,amongstwhichthefollowingmay
berelevantforagreymarketingsituation:
a.Eliminatebarrierstotradeingoodsandservicesbetweentheterritories
oftheparties;
b.Facilitateconditionsoffaircompetitionwithinthefree-tradearea.

Article105providesthatnationaltreatmentshallbeaccordedbyeachparty
tothetradeofgoodsandservices.Article501providesthatnational
treatmentshallbeaccordedinaccordancewiththeexistingprovisionsof
GATTRules.Thereisnospecificarticleonintellectualpropertyexcepta
generalone,article2004,whichprovidesthatthepartiesshallco-operatein
theUruguayRoundofmultilateraltradenegotiationsandinother
internationalforumstoimproveprotectionofintellectualproperty.
IntheNESTLEcase,thedefendantfiledanoticeofmotionforhearingatthe
timeoftheinjunctionapplication,seekinganorder”solicitingtheviewsofthe
governmentofCanadaconcerningtheeffectofArticles102,105,501and
2004oftheFreeTradeAgreementupontherightofaCanadianpurchaserof
authenticnamebrandgoodsplacedontheUnitedStatesmarketbythe
trade-markownerorwithhisconsent,toresellsuchgoodsinCanadawithout
interferencebythetrademarkowneroranyotherCanadiancompanies
whicharerelatedtothetrademarkownerorwhichotherwisederiveany
trademarkrightstherefrom.”
Themotionwasbasedonarticle1808oftheFreeTradeAgreementwhich
statesinpart:
“ThePartyinwhoseterritorythecourtoradministrativebodyislocated
shallsubmitanyagreedinterpretationtothecourtoradministrative
bodyinaccordancewiththerulesofthatforum.IfthePartiesare
unabletoreachagreementontheinterpretationoftheAgreementat
issue,eitherPartymaysubmititsownviewstothecourtor
administrativebodyinaccordancewiththerulesofthatforum.”

SinceStrayerJ.haddecidednottoissuetheinjunctionagainstEdanFood,
therewasnoneedforhimtoconsiderwhethertheFreeTradeAgreement
wouldhaveprovidedafurtherdefence.Inanycase,appealingtothe
CanadianandU.S.governmentsforaninterpretationoftheFTAwouldtake
solongthattheapplicationoftheinjunctionwouldbefutile.



IftheFTAdoesnotapplytogreymarketing,thequestionremainsopenasto
whetherCanadawouldhavetochangeitslegislationtoreduceintellectual
propertybarrierstotradebetweentheUnitedStatesandCanada.This
howevershouldnotbedonebeforetheUnitedStatesagreestoeliminateits
effectiveintellectualpropertybarrierstoimportsfromCanadaandother
countries,throughtheITC(InternationalTradeCommission).

Criminalsanctions
Undersection406oftheCriminalCode,everyoneforgesatrademarkwho:
a)withouttheconsentoftheproprietorofthetrademark,makesor
reproducesinanymannerthattrademarkoramarksonearly
resemblingitastobecalculatedtodeceive;or
b)falsifies,inanymanner,agenuinetrademark.
Forthepurposesofthissection,themeaningofthewords”trademark”is
definedinsection2oftheTradeMarksAct.Thiswasconfirmedinarecent
decisionoftheCriminalDivisionoftheCourtofQuebecinR.v.ImpencoLtd.

(anunreportedjudgmentofMr.JusticeLouisLegault,C.Q.Montreal,dated
July11,1990No.500-01-022447-897.)
Theoffencesarecreatedinsections407to411andthesentencesaresetout
insection412.Threeoftheoffencescanberelevanttooursubject.Firstly,
section407whichprovidesthatitisanoffencetoforgeatrademarkwiththe
intenttodeceiveordefraudthepublicoranyperson,whetherascertainedor
not.

Section408,whichprovidesthateveryonecommitsanoffenceif,withthe
sameintenttodeceive,passesoffotherwaresorservicesasandforthose
orderedorrequired.Thisisthecounterpartofthecivilactionprovidedin
section7(b)oftheTradeMarksAct.Finally,section409providesthatevery
onecommitsanoffencewhomakes,hasinhispossessionordisposesofadie,
block,machineorotherinstrument,designedorintendedtobeusedin
forgingatrademark.
Thesesectionscameintoplayinasituationofgreymarketingwhenthe
CrownlaidchargesagainstImpencoLtd.forhavingmanufacturedandsold
togreymarketersinCanadaandabroad,boxesmarkedwiththeSEIKOtrade
mark(SeikoCanadawasthecomplainant).Thechargeswerelaidunder
sections406and409oftheCriminalCode(reproductionofthetrademark
andpossessionofaninstrumentusedtoforgeatrademark).Impencoisa



manufacturerofboxesofallkinds.Itisnotengagedinanybusinessrelated
tothepotentialcontentsoftheboxesthatitmanufactured.
Toprovetheinfractionsofsections406and409,thecourtfoundthatthe
Crownhadtheburdenofshowingthatthedefendantwasinpossessionof
theinstrumenttoforgeandthattheowner’sconsenttothereproductionofits
markhadnotbeengiven.
Threemaindefencesweresubmittedbythedefendant.Firstly,theaccused
argueditslackofcriminalintent,secondly,itsgoodfaith,adefence
specificallysetoutinsection409(2)tonegatethemensrearequiredinsub-
paragraph(1)and,thirdly,thatthetrademarkownerhadtacitlyconsented
tothereproductionofitsmark.
ThecourtfoundthatImpencowasdealingwithretailersactiveinthegrey
marketoftheSEIKOproductswhich,justlikeauthorizeddistributors,were
responsibleforthepackagingandpresentationoftheSEIKOproducts.The
courtconcludedthatthecriminalintentoftheaccusedwasnotprovedand
thattheaccusedhadactedingoodfaithandintheordinarycourseofits
business.
Finally,inviewofthefactthattheproductseventuallyputintotheboxes
weregenuineSEIKOwatches,evenwhensoldbyunauthorizeddistributors,
thecourtconcludedthatnoevidenceexistedtoshowtheabsenceof
consentbytheownerofthetrademark.

Conclusion
Thelegaluncertaintycreatedbygreymarketinginacountrywherefree
competitionistheruleandmonopolyistheexception,isprobablyamatter
forlegislativeintervention.Intheabsenceofaknownsetofrules,hopefully
applicabletoallandinallsituations,futuredecisions,likepastdecisions,will
bebasedontheappearingequitiesorinequitiesofafactualsituationand
mayverywellcausefurtherconfusion.



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domaines:brevets,dessinsindustrielsetmodèlesutilitaires;marquesdecommerce,marques
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ROBIC,agroupoflawyersandofpatentandtrademarkagentsdedicatedsince1892tothe
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COPYRIGHTER
IDEASLIVEHERE
ILATOUTDEMÊMEFALLUL’INVENTER!
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PATENTER
R
ROBIC
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ROBIC++++
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THETRADEMARKERGROUP
TRADEMARKER
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