The decision of the Federal Court in Microsoft Corporation v. 9038-3746 Quebec Inc. et al [2006 FC 1509] is of interest because it adds to the relatively scant Canadian jurisprudence on statutory damages awarded for infringement of copyright.

The judgment sets out the details of Microsoft's licensing and distribution processes (including the retail and the original equipment manufacturer markets), and is interesting for its assessment of how the counterfeit and unlicensed goods are typically released into the market. The defendants' business practices are also explained, including the fact that the defendant companies bought and sold, but did not themselves manufacture, the compact discs and other wares in question.

Despite this, Justice Harrington determined that the defendants 9038-7746 Quebec Inc., 9014-5731 Quebec Inc. (collectively referred to as "Inter-Plus") and Messers Adam and Carmelo Cerrelli had infringed both the trade-marks and literary works protected by copyright owned by Microsoft Corporation (Microsoft) through their sale of counterfeit compact discs containing Microsoft computer software programs, and related documentation such as instruction manuals and certificates of authenticity. The Court held that Microsoft need not prove that the defendants had actual knowledge that the products being sold were infringing, as the Court was satisfied on the balance of probabilities that both Inter-Plus and Mr. Cerrelli knew or should have known that the items were counterfeit and infringed copyright.

In assessing the special statutory provisions in the Copyright Act, the Court reiterated that it must take into account the criteria set out in Section 38.1(5), namely all relevant factors including (a) the good faith or bad faith of the defendant; (b) the conduct of the parties before and during the proceedings; and (c) the need to deter other infringements of the copyright in question. The Court took into account the factors enumerated in section 38.1(5) to find that the defendants had acted in bad faith, and their conduct both before and during the proceedings had been dismissive of law and order such that it demonstrated the need to deter other infringements of the copyrights in question. As such, the Court determined that the statutory maximum of $20,000 per work for each of the 25 copyrights which had been infringed would be just, and damages of $500,000.