Supreme Court of Canada Sides With Grey-Marketer in its Copyright Infringement Battle with Kraft

S
UPREMECOURTOFCANADASIDESWITHGREY-MARKETER
INITSCOPYRIGHTINFRINGEMENTBATTLEWITHKRAFT

STELLASYRIANOS*
LEGER
ROBICRICHARD,LLP
L
AWYERS,PATENT&TRADEMARKAGENTS
Inwhatmaybehailedasalandmarkdecisionconcerningtheuseofcopyrightasa
meanstopreventparallelimportationinCanada,aheavilydividedSupremeCourtof
Canadareversedboththelowercourts’decisionsbyrulingthatagrey-marketer’s
activitiesdidnotconstituteinfringementbycommercialimportationanddistribution
ofartisticworksinCanada,pursuanttoSection27(2)(e)oftheCanadianCopyright
Act[Euro-ExcellenceInc.KraftCanadaInc.2007SCC37(Docket31327)July26
th,
2007].
TheFacts
KraftCanadaInc.(“KCI”)istheexclusiveCanadiandistributoroftwobrandsof
chocolatebarsmanufacturedinEuropeforitsparentcompanies,KraftFoods
SchweizAG(“KFS”)andKraftFoodsBelgiumSA(“KFB”):Swiss-madeToblerone
andBelgium’sCôted’Or.Euro-Excellence,animporterofhigh-endconfectionary
products,hadlegallyobtainedaccesstoKraft’sTobleroneandCôted’Orbranded
chocolatebarsthroughanunnamedthird-partydistributorofKraftfoodsinEurope.
KFBregisteredcopyrightinCanadaintheartisticworksappearingontheCôted’Or
chocolatebarspackagingandKFSdidthesamewiththelogosappearingonthe
Tobleronechocolatebars(logosofanelephantandmountainappearingonthe
candy’swrappers).KraftCanadaInc.wasgrantedanexclusivelicencetoproduce
andreproducethecopyrightedworksinCanada.KraftCanadaInc.andtheKraft
parentcompaniessubsequentlyaccusedEuro-Excellenceofcopyrightinfringement
intheartisticworks.
LowerCourtrulings
BoththeFederalCourtofCanadaandtheFederalCourtofAppealhadruledthat
theactivitiesofEuro-ExcellenceconstitutedinfringementpursuanttoSection

©CIPS,2007.*Lawyerandtrade-markagent,StellaSyrianosisamemberofLEGERROBICRICHARD,L.L.P.,a
multidisciplinaryfirmoflawyers,andpatentandtrademarkagents.Publication142.202.

2
27(2)(e)oftheCanadianCopyrightAct.FollowingaFederalCourtinjunction,Euro-
ExcellencehadbeenorderedtopayKCI$300,000indamagesandconcealthe
artisticworkswithcoveringwrappers.
SupremeCourtofCanadadecision
OnappealtotheSupremeCourtofCanada,Euro-Excellenceraisedtwoissues:
1.Thelogosinquestionwere“incidental”totheactualchocolatebars
themselvesandthereforesalesofthelattershouldnotbefoundtobesalesof
thelogos,therebypreventings.27(2)oftheCopyrightActfrombeing
triggered;
2.TherewasnotheoreticalinfringementofcopyrightsinceKCI’sparent
companieswerethecopyrightownersinCanadaandevenifintheorythey
hadmadethebarsinCanada,thiswouldbeabreachoftheirexclusive
licencecontractwithKCIratherthaninfringementofcopyright.
InordertosucceedinitsactionunderSection27(2)(e)oftheCopyrightAct,KCI
neededtoestablishthefollowingthreeelements:
(i)thatcopyrightsubsistsinthelogosinquestion[allninejusticesagreed
thatthelogosweresubjecttocopyrightprotection];
(ii)thatEuro-Excellence’ssalesofthechocolatebarsinquestionwere“sales”
ofthelogosappearingonthepackaginginquestion[sixofthenine
justicesagreedbystatingthatthelawdoesnotdistinguishbetweenthe
saleofgoodsthatfeaturecopyrightelementsonpackagingversusthe
saleofgoodsthatarethemselvesthesubjectofcopyright,whilethe
remainingthreejusticesheldthats.27(2)isnottriggeredbythesaleof
productsthatfeatureonly“incidental”elementsthatarecoveredby
copyright];and
(iii)thatEuro-Excellenceimportedworkswhichhadtheybeenmadein
Canadabythesamepersonswhoinfactmadethemabroad(KCIparent
companies),theactualmakerswouldbefoundtohaveintheoryinfringed
copyrightinCanada[fiveoutofninejusticesrespondedpositivelywhile
theremainingfourjusticessaidno].
Onthislastpoint,theCourthasseeminglyclarifiedthelimitsonexclusivecopyright
licenses.TheKraftcompaniesarguedthattheKCIparentcompanies(KFBand
KFS)wouldhaveinfringedcopyrightiftheyhadproducedthecopyrightedworksin
CanadabecausetheyhadlicensedsametoKCI.Inrejectingthisargument,the
Courtheld,initsreasonsforjudgementdeliveredbyJusticeRothstein,thatsince
theKCIparentcompanieshadproducedtheartisticworksatissueandwerealso
theCanadiancopyrightownersinsaidworks,therecouldbenoinfringementgiven
thatbydefinition,nopersoncansimultaneouslybeownerandinfringerofcopyright.
Conclusion

3
Whilethisdecisionisbeingwelcomedbyretailersasavictoryforcompetitionand
freetrade,theSupremeCourtofCanadahasnotprecludedbrandownersfrom
effectivelyrestraininggrey-marketingactivitiesinCanada;ithasconceivablyleftthe
dooropentocopyrightholderstodosobyassigningcopyrighttothelocalrights
holders
1.However,sincemultinationalsmayunlikelycedelogorightstosubsidiaries
duetolossofcontrolissuesandtaximplications,nottomentionthatitmaynoteven
work
2,thespoilsofvictoryappeartoindeedbesweetforparallelimportersoperating
undercircumstancessimilartothoseoutlinedinthepresentdecision.

1However,itisworthnotingthattheexclusivelicenceversusassignmentdistinctionsmadebyJustice
Rothsteinwererejectedbyfiveoutoftheninejustices.
2JusticesBastarache,LeBelandCharronsuggestthatevenanassigneemayexperiencedifficultyin
usingcopyrighttocurbparallelimportswherethecopyrightedelementisonly“incidental”totheconsumer
goodsinquestion.Moreover,somemembersoftheCourtalsoexpressedconcernsthatKraftwastrying
tousecopyrightlawasabarriertotrade.

4
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