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Kraft tries again to stop Euro-Excellence

|Written By Jennifer McPhee

Kraft Canada Inc. is trying once again to stop a Quebec company, Euro-Excellence Inc., from importing and selling grey market chocolate bars.

In the latest twist in the battle between the companies, Kraft Foods Belgium (the manufacturer of the popular Toblerone and Cote d’Or chocolate bars) has assigned copyright in the logos on the wrappers of the bars to its exclusive Canadian distributor, Kraft Canada.  Previously, the manufacturer had registered the logos on the wrappers in Canada as copyrighted artistic works and granted Kraft Canada the exclusive licence to use these works, but had not assigned the rights to Kraft Canada.

Kraft brought an action against Euro-Excellence alleging copyright infringement under s. 27(2) of the Copyright Act. It won at the Federal Court of Canada, and the Federal Court of Appeal upheld that decision.

But ultimately, when Euro-Excellence Inc. v. Kraft Canada Inc. went to the Supreme Court of Canada, it was the fact that Kraft was not assigned the rights that caused it to lose.

However, now Kraft Canada has started new copyright infringement proceedings against Euro-Excellence under s. 27(2) of the act by initiating another application in the Federal Court of Canada.

Timothy Lowman, lead counsel for Kraft Canada, says his client is again seeking injunctive relief to prohibit the importation and sale of the copyrighted work, as well as damages from the time of the Supreme Court’s decision.

The Kraft decision revealed a deep division in the Supreme Court of Canada on issues of copyrights and grey marketing, says Lowman, of Sim Lowman Ashton & McKay LLP in Toronto.

A 7-2 majority on the Supreme Court allowed Euro-Excellence to continue importing grey market goods. But the groups of justices came to their conclusions for different reasons.

Lowman says a majority on the Supreme Court actually held that Kraft was correct on the three issues at stake.

“It is only because the composition of the majority changed on each issue, and because fewer than five of the nine ultimately concluded that all three had been established, that the appeal was allowed.”

It appeared clear from the divided decision that if Kraft Canada had been assigned the Canadian copyright in the works, enough justices to form a majority would have sided with Kraft and the Euro-Excellence appeal would have been dismissed.

If Kraft is successful this time, as it was at the Federal Court before, intellectual property holders will have a means of enforcing their intellectual property rights “against the very serious problems they face as a consequence of grey marketing,” says Lowman.

Daniel Drapeau, an Ogilvy Renault LLP intellectual property lawyer based in Montreal, says the Supreme Court’s fractured decision has a low precedential value because the justices couldn’t agree amongst themselves.

“Now you have a litigant who says, ‘I’m going to force you to re-examine this issue and to narrow down your thinking,’” he says. “So that, I think, is extremely interesting.”

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