Mekhala Chaubal is a JD candidate at Osgoode Hall Law School.

A recently-decided US case (Louis Vuitton Malletier SA v. Akanoc Solutions Inc.) has trumped Canada’s largest LVM settlement so far (Louis Vuitton Malletier SA v. Singga Enterprises Inc). While the company is arguably only protecting its market share as one of the world’s premier fashion houses, one must wonder about the nature of these lawsuits, the practice of awarding compensatory, statutory and punitive damages all at once, and whether the Canadian courts might not be going perhaps a bit too far in their desire to prevent copyright and trademark infringement.

Professor David Vaver muses on precisely this point in his new book, Intellectual Property: Copyright, Patents, Trade-Marks,2nd ed, when he mentions two previous Canadian LVM lawsuits in the last decade — Louis Vuitton Malletier SA v. Yang (2007), and Louis Vuitton Malletier SA v. 486353 B.C. Ltd. (2008) — that led to substantial damages being awarded to the fashion conglomerate.  While injunctions were not ordered, the court saw fit to award a total of $263,00 and $963,000 respectively to LVM. In Yang, a combination of deemed infringement of the Canadian Copyright Act and Trade-mark Act, as well as the defendants’ bad faith and conduct, led to the court raising its usual limit of $6,000 for ‘traditional’ damages to much higher.  Additionally, it also held the defendants responsible for their disregard for court procedure, and their repeated and deliberate ignorance of three cease-and-desist orders were weighty factors in the ultimate issuance of punitive damages.

Similarly, 486353 B.C. Ltd. saw the BC Supreme Court use its power to rebuke the defendants in a stronger manner, by not only upping the ultimate compensation sum awarded to LVM, but also ensuring that the defendants’ dismissal of the court’s processes and their intentional and continuous breaches of statutory law raised the final monetary award considerably. Finally, Singga, decided in March 2011, built on the precedents set by the other two LVM cases and applied these principles to punish the defendants’ knowledge of wrongdoing, their willingness to continue with the illegal acts, their subsequent attempts to hide their counterfeiting operations and their disrespectful behaviour towards the court as a sign that substantial punitive, exemplary and special damages ought to be awarded to LVM.

South of the border, Akanoc extended contributory trademark infringement to a website-hosting company for allowing the operation of counterfeiting websites to run on its servers and online platforms, leading to a judgment of a whopping $10.5 million for LVM. While in this case, the defendants attempted to prove their efforts to prevent their online infrastructure from being used for illegal trademark and copyright infringement, the court simply was not convinced, since the defendants did not respond directly to the letters and correspondence sent to them by LVM itself. In short, this case might have made it possible for a third-party host to be responsible for the actions of one of its offshore, online clients with respect to rights infringement.

Comparing the above cases, Professor Vaver critiques the lack of sufficient investigation of the Canadian statutory damages scheme, as well as the practice of awarding excessive punitive damages. He cautions courts to maintain the necessary balance between being fair to the rightsholder’s as well as the infringer’s interests. In the Canadian cases mentioned above, the scale seems to be tipped quite sharply in the direction of the plaintiff, with the defendants being forced to pay “sums way beyond anything the right-holder could possibly have lost (Vaver, 645).”

Moreover, LVM’s practice of trying to gain maximum compensation through individuals and groups or businesses jointly and severally also points to an abuse of the available means of preventing infringement. Ultimately, Professor Vaver’s critique that the application of statutory factors to infringement cases is in essence, criminal law masquerading as its civil counterpart, with not as many high thresholds to live up to, only highlights the indiscriminate free-rein that is being given to LVM as the rightsholder (Vaver, 644). While the company is certainly justified in having a no-nonsense policy towards counterfeiting, Akanoc is a cautionary note for Canadian judges. It does seem that the Canadian approach is somewhat more lenient than the American one, but the fact that the awards have been increasing steadily might serve as an indicator of what is to come in terms of protection of copyright and trademark.

Posted in Canada, Copyright, Fashion Industry, Infringement, IP Litigation Practice, Trademarks, US