The Supreme Court of Canada has released its reasons for judgment in the grey-marketing case Euro-Excellence Inc. v. Kraft Canada Inc. (2007 SCC 37). "Grey-marketing" refers to the sale in Canada of foreign-sourced products acquired outside the authorized Canadian distribution chain. The wares are not "black-market" (counterfeit), but they are in Canada against the wishes of the local rights-holder and are referred to as "grey."
Euro-Excellence (EE) imports and sells foreign-sourced TOBLERONE chocolate bars into Canada. Kraft Canada Inc. (KCI) is the exclusive Canadian distributor for these bars, and neither made the bars nor authorized the imported bars to be in Canada. Litigation was commenced in the Federal Court.
The legitimacy of grey-marketing is a subject of frequent debate. Proponents say that it helps deliver the lowest possible retail price for branded goods. Opponents say it is an inherently unfair practice that allows grey-marketers to "free-ride" on goodwill built up by local manufacturers and distributors. Usually, local rights-holders attempt to block grey-marketing under trade mark law. In this case, KCI sought relief under subsection 27(2) of the Copyright Act, asserting that EE's importation of bars in packaging bearing artistic logos that were controlled in Canada by KCI violated KCI's copyright interests in the packaging and artistic logos.
KCI was successful before the Federal Court and the Federal Court of Appeal. EE's appeal to the Supreme Court of Canada was heard in January 2007 and the decision released on July 26, 2007.
The Supreme Court of Canada divided sharply on the issues. A majority found that KCI had proved each element of its case, although the composition of the majority changed for each element. Because fewer than five members of the Court ultimately concluded that all three elements had been established, KCI was unsuccessful and EE's appeal was allowed. Given the Court's findings on the elements, however, this decision may come to be seen as an important case for local rights-holders in combatting grey-marketing activities in Canada.