The Federal Court of Canada has, for several years, displayed its willingness to crack down on counterfeiters.  In Harley-Davidson Motor Company v Manoukian, the Federal Court has continued this pattern by granting pre-trial relief arising from the sale of counterfeit Harley-Davidson merchandise.

In granting summary judgment, the court noted long established principles concerning summary judgment motions, including that:

  • both parties are required to put their best foot forward and, while a moving party bears the legal onus of establishing all of the facts necessary to obtain summary judgment, the responding party has an evidential burden of showing that there is a genuine issue for trial; and
  • the test is not whether a party cannot possibly succeed at trial, but rather whether the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial.

While the court noted that there were minor inconsistencies and deficiencies in the plaintiffs' evidence, the court applied a common-sense approach and held that the defendants had failed to meet their evidentiary burden and should not be permitted to frustrate the benefits of the summary judgment process and insist on a full trial on the basis of credibility concerns. The court therefore held that the plaintiffs succeeded in establishing the facts necessary to establish a finding of liability for trademark infringement and passing off.

With respect to the issue of financial compensation, a successful plaintiff may seek damages or an accounting of profits as one of the available remedies. However, as is typically the case, the defendant delivered absolutely no documents relating to its manufacture and sale of counterfeit goods. The court noted that, as it is difficult, if not impossible, to assess the exact extent of the actual damages, it applied its general rule in such circumstances of awarding minimum compensatory damages for each infringing activity, on the following basis:

  • C$3,625 against flea market vendors, street vendors and itinerant sellers;
  • C$7,250 against fixed retail establishments; and
  • C$24,000 against importers, distributors and manufacturers.

The court also noted that the minimum compensatory damage award should reflect the damages suffered by both the trademark owner and its licensee/distributor, and that each party was therefore entitled to compensatory damages.

The court was satisfied that the evidence established that there were three separate incidents of the defendant selling counterfeit merchandise while at a flea market, and one incident of the defendant selling counterfeit merchandise from a fixed retail establishment. The court therefore awarded damages in the amount of C$32,625 to both the trademark owner and its licensee/distributor.

However, the court was not satisfied that the evidence established that the defendant was manufacturing the counterfeit merchandise, and therefore refused to grant the highest level available of minimum compensatory damages. The court's finding was rather surprising as the defendant admitted that it manufactured leather and waterproof garments, was willing to make jackets on order, sold these garments on a wholesale basis, and used to own many sewing machines. Furthermore, the plaintiffs' investigator witnessed the delivery of leather to the defendant.

The court was willing, however, to grant punitive damages in the amount of C$50,000, due to evidence which established the defendant's knowing and blatant disregard of the law. Additionally, the court ordered that the defendant pay elevated legal fees to the plaintiffs due to the its unjustified delays during the defence of the litigation.