Kraft Foods Belgium SA (KFB) and Kraft Foods Schweiz AG (KFS) make Côte d’Or and Toblerone chocolate bars in, respectively, Belgium and Switzerland. Kraft Canada Inc. (KCI) had distributed Toblerone bars in Canada as exclusive Canadian distributor since 1990. KCI was an authorized Canadian distributor of Côte d’Or bars before 1997, and in 2001 entered into an exclusive agreement to distribute the bars in Canada.

McCarthy Tétrault Notes:

Euro-Excellence also imports both Toblerone and Côte d’Or bars into Canada and distributes those bars here. Beginning in 1993, Euro-Excellence was an authorized distributor of Côte d’Or bars. For a period of approximately three years ending in 2000, Euro-Excellence was also the exclusive Canadian distributor of Côte d’Or bars. That distribution contract was not renewed. Since 2000, Euro-Excellence has imported genuine Côte d’Or bars as an unauthorized distributor. In 2001, Euro-Excellence began importing and distributing genuine Toblerone bars, also on an unauthorized basis.

Thus, from 2001 until the litigation commenced, KCI was the exclusive licensed Canadian distributor of both Côte d’Or and Toblerone bars (i.e., KCI had exclusive importation and distribution contracts with KFB and KFS, respectively). Notwithstanding these exclusivity agreements, Euro-Excellence continued to import and distribute both Côte d’Or and Toblerone bars, which it had acquired legally in Europe. Euro-Excellence was successful enough in its distribution of the chocolate bars to give KCI cause to attempt to find a way to prevent Euro-Excellence from importing and distributing them.

KCI is the owner in Canada of the trade-marks ‘Côte d’Or’ and ‘Toblerone.’ On October 25, 2002, KFB registered three Côte d’Or logos in Canada as copyrighted works in the artistic category. That same day, a licensing agreement between KFB and KCI was also registered, pursuant to which KCI purported to "acquire the sole and exclusive right and license in the Territory to produce, reproduce and adapt the Works or any substantial part thereof, in any material form whatsoever, and to use and publicly present the Works in association with the manufacture, distribution or sale in Canada of confectionary products, including, but not limited to, chocolate."

Also on October 25, 2002, KFS registered two Toblerone logos in Canada as copyrighted works in the artistic category, and entered into a substantially similar licensing agreement with KCI

Armed with these new copyrights, KCI called upon Euro-Excellence to cease and desist distribution of any product to which the copyrighted works were affixed. When Euro-Excellence refused, KCI brought this action.

The key issues in the appeal were the following:

  • Can an exclusive licensee in Canada claim protection against secondary infringement when the copyrighted work was produced by the owner-licensor?
  • Is a work ‘sold’ within the meaning of Section 27(2)(a) if it is merely affixed (as a logo) to a non-copyright good?
  • Are the rights under the Copyright Act to be read down to protect only the legitimate economic interests of the copyright holder?

In short, the Supreme Court held (5 to 4) that an exclusive licensee in Canada can claim protection against secondary infringement when a copyrighted work is produced by the owner-licensor and imported into Canada without the consent of the exclusive licensee.

This means a Canadian publisher can resort to the secondary infringement provisions of the Copyright Act, provided it is an exclusive licensee of a foreign publisher with respect to books published by the foreign publisher and imported into Canada without the consent of the Canadian exclusive licensee.

The decision is a very complicated one, owing in large part to the fact that four separate opinions were delivered in the case. Much of the complexity also resulted from an attempt by the respondent (KFS) to prevent the parallel importation of chocolate bars by claiming secondary infringement related to logos affixed to the chocolate bars at the time of importation and sale.