Euro-Excellence Inc. v. Kraft Canada Inc.,
The Supreme Court of Canada has issued a very contentious ruling on copyright as it affects gray market transactions. It is contentious not only because it allows gray market goods bearing copyrighted logos to be imported into Canada, but because the nine judges involved end-up in four different camps.
Kraft Foods Belgium SA (“KFB”) and Kraft Foods Schweiz AG (“KFS”) were respectively, the owners of the Côte d’Or and Toblerone copyrights at issue in this case, as well as manufacturers of chocolate bars marketed under those brand names. The subsidiary of these two corporations, Kraft Canada Inc. (”KCI”) was appointed by these two companies as their exclusive Canadian distributor of Côte d’Or and Toblerone chocolate bars in Canada.
When Euro Excellence Inc. as defendant, having purchased genuine Côte d’Or and Toblerone chocolate bars, (bearing the subject copyrighted logos) from the manufacturers and copyright owners in Europe, attempted to import such products into Canada, KCI obtained injunctions, upheld at the level of the Canadian Federal Court of Appeal, barring distribution of such chocolate bars in Canada so long as they displayed the copyrighted logos. KCI founded it’s right on its status as an exclusive licensee under the Canadian Copyright Act.
The lower court judgments were overturned. Four judges of the Supreme Court ruled that the grant of an exclusive license cannot place of the copyright owner in the category of being a copyright infringer. According to this theory, the exclusive licensee has a right of action against the owner of copyright in contract only. Since Euro Excellence had purchased the chocolate bars from the copyright owners, there were no circumstances under which the importation of bars bearing the copyrighted logos could constitute an infringement in Canada.
These four judges, essentially, made their ruling based on the technical character of the copyright privilege as established by the Copyright Act, according to their interpretation.
Three of the judges, upholding the right of Euro-Excellence to a import the subject chocolate bars, did so on the basis that the Legislature never contemplated use of copyright for incidental markings on commercial products as a vehicle to interfere with the importation of such products. Thus these judges founded their reasons on the intention of the Legislature: ” The protection offered by copyright cannot be leveraged to include protection of economic interests that are only tangentially related to the copyrighted work. … (The Act) is not meant to protect manufacturers from the unauthorized importation of consumer goods on the basis of their having a copyrighted work affixed to their wrapper, this work being merely incidental to their value as consumer goods….. only those distributions which affect the legitimate economic interests protected by copyright will be held to affect prejudicially the owner of the copyright.” Thus these three judges made their ruling based upon a higher, policy-based ground.
Two judges, however, dissented. These judges rejected the premise that there was an exception to copyright infringement for logos on the basis that they are “incidental” to a commercial product. They relied upon the definition of an exclusive license in section 2.7 of the Act which states that such a license grants: ” an authorization to do any act that is subject to copyright to the exclusion of all others including the copyright owner”. Accordingly, these two judges would’ve upheld the finding of infringement based upon a black-letter reading of the Act.
This decision is significant for the distinct approaches taken by different judges to interpreting the scope of private rights granted by the Legislature. Most significantly, three out of nine judges relied heavily on policy considerations to depart from what should judges considered a black-letter interpretation of the law. No doubt law school professors now in their old age would be proud of what their students are accomplishing.
Supreme Court of Canada - Decisions - Euro-Excellence Inc. v. Kraft Canada Inc.