Louis Vuitton has been granted what is believed to be the highest award of damages in Canada against purveyors of counterfeit goods. Following several recent Federal Court decisions that cracked down on counterfeiters, on June 19 2008 the British Columbia Supreme Court expressed its disapproval of counterfeiting activities in Louis Vuitton Malletier SA v 486353 BC Ltd (2008 BCSC 799). In a summary trial decision, Justice Boyd ordered a first group of defendants to pay a total amount of C$980,000, including compensatory, punitive and exemplary damages, to the plaintiffs, Louis Vuitton Malletier SA and Louis Vuitton Canada Inc. The court also awarded costs of an additional amount to be assessed and adjourned its deliberation of damages against a remaining defendant until later this year.

The defendants included two corporations and four individuals which were operating stores in the greater Vancouver area, through which they were selling counterfeit Louis Vuitton merchandise.

The first group of defendants, against whom the collective C$980,000 award of damages was made, operated three stores under the name Wynnie Lee Fashions and one store under the name Francisca's Fashion Club. In August 2004 the plaintiffs executed an Anton Piller order against two of the Wynnie Lee Fashions locations, seizing hundreds of counterfeit Louis Vuitton products. Despite that seizure and a subsequent judgment obtained in the Federal Court, the defendants continued to sell counterfeit Louis Vuitton merchandise. The defendant Wynnie Lee, who was the principal player in the Wynnie Lee Fashions stores and the importer of the goods being sold, entered into a settlement agreement with the plaintiffs in March 2006 after being served with a cease and desist letter, but subsequently continued to breach both that agreement and the Federal Court judgment. Between January 2006 and January 2008 numerous purchases and observations of counterfeit Louis Vuitton merchandise were made at the various locations, including several after the plaintiffs had commenced their action in the British Columbia Supreme Court for breach of contract, trademark infringement, passing off and copyright infringement.

In addressing the issue of damages for trademark infringement, the court considered the decision and reasoning of the Federal Court in Louis Vuitton Malletier SA v Pi-Chu Lin  (2007 FC 1179) (for further details see “Canadian Courts Get Tough on Counterfeiters”), although the evidence before the court in the present action permitted the court to grant a significantly greater award of damages. In the Pi-Chu Lin Case the Federal Court had granted the traditional nominal damages award of C$7,250 (C$6,000 adjusted for inflation) on a per instance of infringement basis in a default judgment. In the present action the defendants had defended the action and had been examined for discovery, yielding evidence that their turnover of inventory occurred approximately three times a year, enabling the court to apply the C$7,250 damages award on a per turnover of inventory basis. Moreover, as the traditional award of C$7,250 was designed to reflect the activities at a single retail location for a single plaintiff, the court also made this per inventory turnover award at each retail location and for each of the two plaintiffs.

The court also made an additional award of damages against the principal player and importer of the counterfeit goods, Wynnie Lee. It used C$29,000 (C$24,000 adjusted for inflation) as a starting point for nominal damages against her as an importer/distributor, and again applied that amount on a per inventory turnover and per plaintiff basis, but deducted Wynnie Lee's liability at the retail level to avoid double jeopardy on the calculation of trademark infringement damages.

In addition, the court awarded full statutory damages of C$20,000 per work for the instances of copyright infringement by the various defendants, citing the defendants’ misconduct both before and during the proceedings.

Further, following the test set out by the Supreme Court of Canada in Whiten v Pilot Insurance Co (2002 SCC 18) and finding that the defendants' “previous and ongoing actions are clearly knowing, planned and deliberate”, the court also granted an award of C$200,000 in punitive and exemplary damages against Wynnie Lee and C$100,000 in punitive and exemplary damages against the other three defendants acting in concert with Wynnie Lee. The court further granted special costs against this group of defendants, citing the deliberate and inexcusable repeat infringement of the plaintiffs’ rights and the failure of the defendants to cooperate to any significant degree in the litigation.

While the court declined to levy a fine for contempt of the previous Federal Court judgment, it was noted that the punitive and exemplary damages awards granted included an element of rebuke for the defendants’ breach of that judgment.

The court also found liability of the remaining defendant, Jacqueline Lee, who imported and distributed counterfeit Louis Vuitton merchandise through two retail outlets operating under the trade name Coloro Collection. However, the court deferred the issue of quantum of damages against this self-represented defendant, who had appeared on the first morning of the summary trial and unsuccessfully sought an adjournment for the purpose of retaining counsel. The determination of damages against this last defendant has been adjourned until later this year.

As with the previous Louis Vuitton decision, this judgment will hopefully send another strong message to counterfeiters in Canada and provide an additional precedent for IP rights holders to seek enhanced damages against recidivist offenders. These decisions also illustrate an important consideration for IP rights holders: damage awards in these types of scenario can be maximized by gathering evidence of repeated sales of counterfeit products over a period of time or other reliable evidence of inventory turnover.

For further information on this topic please contact Karen F MacDonald at Smart & Biggar/Fetherstonhaugh by telephone (+1 604 682 7780) or by fax (+1 604 682 0274) or by email ([email protected]).