That is the lesson form a ruling by the Supreme Court of Canada in a dispute between Kraft Foods and a parallel importer, Euro-Excellence.
In a seven-two decision yesterday (Thursday), the Court ruled that Kraft Canada Inc could not block imports of copyright-infringing chocolate bars by importer Euro-Excellence as Kraft Canada had been licensed the rights by parent companies Kraft Foods Belgium Kraft Foods Schweiz.
This licence meant that, by suing the importer for secondary infringement, Kraft Canada was implicitly accusing its own parent companies of primary infringement. But, said Mr Justice Rothstein in the majority opinion: “The Kraft parent companies retain a residual ownership interest in the copyright, which prevents Kraft Canada from suing them for infringement.”
Therefore, he said, Canada’s Copyright Act “does not extend protection against parallel importation to exclusive licensees”. He added: “If Parliament decides that this result is problematic, it can amend the Copyright Act. In the meantime, this Court must apply the Act that Parliament has given us.”
The dispute arose when Euro-Excellence imported genuine chocolate bars into Canada from Europe.
In 2002 the two Kraft parent companies registered three logos for Côte d’Or and two for Toblerone as copyrighted artistic works in Canada, and granted an exclusive licence to use them to Kraft Canada.
Kraft Canada sued Euro-Excellence alleging that it engaged in secondary infringement under Canada’s Copyright Act. At first instance, the judge found in favour of Kraft and it was awarded C$300,000 in damages.
The Court of Appeal refused an appeal on the merits, and Euro-Excellence appealed to the Supreme Court.
Rothstein’s opinion was joined by three of the nine judges. Three more wrote a separate, concurring opinion in which they argued (citing Australia’s law) that the logos that Kraft sought to protect were incidental and should not be protected by copyright.
Two judges dissented, arguing that “where the owner of a copyright has granted an exclusive licence, it has temporarily granted a proprietary interest in the copyright itself to the exclusive licensee”. Therefore, “an owner-licensor is ... liable to an exclusive licensee if it breaches the copyright interest it has granted”.
Mark Evans, a partner of Smart & Biggar in Toronto, told MIP Week the lessons from the case were clear, despite the divided bench: “If brand owners are stuck and can only rely on copyright to stop parallel imports, then assign the copyright. But if there is a material difference in quality, you may be able to bring an action based on passing off.”
Daniel Drapeau, a partner of Ogilvy Renault in Montreal, added that the decision is part of a trend in the Supreme Court: “The general trend in Canadian law is a cautious balancing of IP rights, especially when applied in a commercial context.”
Drapeau said that Rothstein’s suggestion that Parliament may want to examine the law on parallel imports is unlikely to be acted on soon: “Parliament is now looking at counterfeiting reform. That will be addressed before the grey goods issue.”
Evans added that parallel importers might be emboldened by the weakness of the US dollar. “We haven’t seen many parallel import cases in recent years because the Canadian dollar has been so weak. But it is now at its strongest in 30 years relative to the US dollar. So, regardless of this decision, we may see increasing parallel imports into Canada.”
Importers may find it attractive to import goods from the US or countries whose currency is pegged to the US dollar, said Evans: “In addition, some importers may misunderstand the scope of this decision as giving them a green light.”
Euro-Excellence was represented by Francois Boscher in Montreal and Kraft by Sim, Lowman, Ashton & McKay in Toronto.
