Major Parallel Market Ruling by Canadian Supreme Court
My partner Jorge Espinosa has launched The Gray Blog dedicated to news, law and trends involving the parallel market. Jorge reported yesterday on the Supreme Court of Canada's decision in Euro-Excellence Inc. v. Kraft Canada Inc. in which the court held that Kraft Canada could not rely on copyright law to prevent the importation of parallel market Toblerone chocolate from Europe.
KCI is the exclusive Canadian distributor of Côte d’Or and Toblerone chocolate bars in Canada for its parent companies KFB and KFS. Euro-Excellence imported and distributed Côte d’Or and Toblerone bars which it had acquired in Europe. In 2002, in order to allow KCI to challenge Euro-Excellence's importations, KFB registered three Côte d’Or logos in Canada as copyrighted artistic works and granted KCI an exclusive license in the works as used in association with confectionery products. KFS did the same with two Toblerone logos. KCI then demanded that Euro-Excellence cease distribution of any product to which the copyrighted works were affixed. When it refused, KCI sued Euro-Excellence alleging that it had engaged in secondary infringement under Section 27(2) of the Canadian Copyright Act by importing copies of KFS and KFB’s copyrighted works into Canada for sale or distribution. Section 27(2) prohibits the importation into Canada of any copy of a work "that would have infringed copyright had it been made in Canada by the person who made it." The Canadian Supreme Court held that Kraft Canada could not rely on this statute to enjoin Euro-Excellence from importing gray market chocolate into Canada because the infringing designs were placed on the imported chocolates by KCI's parent companies, the very same entities that own the copyrights in the logo designs. An exclusive copyright licensee is not entitled to sue its licensor for infringement under Canadian law (and this is contrary to the law in the U.S., by the way). For this reason, the imported chocolate packaging would not have "infringed copyright had it been made in Canada by the person who made it" and Section 27(2) was, therefore, not violated.
Read more about this decision on The Patry Copyright Blog and Jorge's The Gray Blog.
KCI is the exclusive Canadian distributor of Côte d’Or and Toblerone chocolate bars in Canada for its parent companies KFB and KFS. Euro-Excellence imported and distributed Côte d’Or and Toblerone bars which it had acquired in Europe. In 2002, in order to allow KCI to challenge Euro-Excellence's importations, KFB registered three Côte d’Or logos in Canada as copyrighted artistic works and granted KCI an exclusive license in the works as used in association with confectionery products. KFS did the same with two Toblerone logos. KCI then demanded that Euro-Excellence cease distribution of any product to which the copyrighted works were affixed. When it refused, KCI sued Euro-Excellence alleging that it had engaged in secondary infringement under Section 27(2) of the Canadian Copyright Act by importing copies of KFS and KFB’s copyrighted works into Canada for sale or distribution. Section 27(2) prohibits the importation into Canada of any copy of a work "that would have infringed copyright had it been made in Canada by the person who made it." The Canadian Supreme Court held that Kraft Canada could not rely on this statute to enjoin Euro-Excellence from importing gray market chocolate into Canada because the infringing designs were placed on the imported chocolates by KCI's parent companies, the very same entities that own the copyrights in the logo designs. An exclusive copyright licensee is not entitled to sue its licensor for infringement under Canadian law (and this is contrary to the law in the U.S., by the way). For this reason, the imported chocolate packaging would not have "infringed copyright had it been made in Canada by the person who made it" and Section 27(2) was, therefore, not violated.
Read more about this decision on The Patry Copyright Blog and Jorge's The Gray Blog.