Date: 20020405
Docket: T-1676-01
Neutral citation: 2002 FCT 384
BETWEEN:
DIAMANT TOYS LTD. and
SOLTRON REALTY INC.
Plaintiffs
- and -
JOUETS BO-JEUX TOYS INC.
Defendant
[1] The plaintiffs seek an Order under paragraph 38(1)(b) of the Copyright Act, authorizing them to seize before judgment products which they claim infringe their copyrighted works.
[2] Both the plaintiff, Diamant Toys Ltd., and the defendant are manufacturers of toys for children. The dispute herein is in respect of works referred to as the AMAV brand arts and crafts products, and arises in the following circumstances.
[3] In 1976, Amos and Avi Sochaczevski founded a company under the name of AMAV Sales Limited. This company sold children's toys. Commencing in 1979, the company began to manufacture its own toys and changed its name to AMAV Industries Limited ("AMAV").
[4] By 1997, AMAV had become one of the largest manufacturers of toys in Canada, and a highly-successful company, selling more than 200 products and employing approximately 1,000 persons. Its gross revenues were in excess of $80 million. Its head office was situated in the city of St. Laurent, in the province of Quebec, where it occupied over 700,000 sq. ft.
[5] By 1997, AMAV had taken its business to the United States. AMAV Industries Ltd. ("AMAV U.S."), a wholly-owned subsidiary of AMAV, operated out of Plattsburg, in the state of New York, where it occupied 80,000 sq. ft. and employed 150 persons. AMAV also had a British subsidiary called AMAV Industries Limited ("AMAV U.K.").
[6] Two types of toys were, at that time, being designed and manufactured by AMAV, one of which was the arts and crafts/activity toys destined for children between the ages of 3 and 11.
[7] According to Avi Sochaczevski, now President of the plaintiff Soltron Realty Inc. ("Soltron"), AMAV's intellectual property was developed by AMAV and remained with the company. Included in AMAV's intellectual property were the AMAV brand name, innumerable artistic works, various product trademarks and the distinctive AMAV packaging, used in association with AMAV's products.
[8] AMAV was organized as a vertically integrated company, designing its own products and packaging, and manufacturing more than 85% of its components, including the packaging. AMAV also assembled most of its components.
[9] Every product in AMAV's line of arts and crafts products was given a name that was displayed in the upper left portion of the package, the predominant colour of which was referred to as "AMAV Red".
[10] On the package, there appeared numerous illustrations or photographs which depicted what the product, when assembled, would look like. Except for the photography, AMAV's entire package design and construction was done in-house by AMAV employees.
[11] The photographs were taken by commercial photographers retained by AMAV for that purpose. The photos and the negatives, it goes without saying, remained AMAV's property. After representative photos were chosen and scanned, they were saved on AMAV's computer and CD-Roms. Two sets of over 900 CD-Roms each were compiled. Each set contained a catalogue of original artistic works belonging to AMAV and integral to the product design and distinctive packaging of AMAV's arts and crafts line of products.
[12] On October 19, 1995, but effective October 1, 1995, AMAV's assets, including its copyrights, were sold. The introductory paragraph to the Asset Purchase Agreement[1] (the "Agreement"), dated October 19, 1995, reads as follows:
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made this 19th day of October, 1995, effective as of October 1, 1995 ("Effective Date"), by and among Amav Industries Ltd., a corporation incorporated under the laws of Canada (the "Company"), Avi Sochaczevski and Amos Sochaczevski, individual residents of Quebec, Canada (each a "Stockholder" and collectively, the "Stockholders"), ERO Industries, Inc. ("ERO") with respect to Section 2.29d), ERO NY Acquisition, Inc., a Delaware corporation and wholly-owned Subsidiary of ERO ("NY Acquisition") and ERO Canada Acquisition, Ltd., a corporation incorporated under the laws of New Brunswick and a wholly-owned Subsidiary of NY Acquisition ("Canada Acquisition"). Canada Acquisition and NY Acquisition are sometimes referred to herein individually as a "Buyer" and collectively as the "Buyers".
[13] As appears from the above paragraph, ERO NY Acquisition, Inc. ("ERO NY"), a Delaware corporation and ERO Canada Acquisition, Ltd. ("ERO Canada"), a New Brunswick corporation, are referred to as the "Buyers". ERO NY is described as a wholly-owned subsidiary of ERO Industries, Inc., and ERO Canada is described as wholly-owned subsidiary of ERO NY.
[14] Article B of the recitals to the Agreement confirms that Avi and Amos Sochaczevski (the "Stockholders"), through AMAV Realty Ltd., are the owners of the immovable property and buildings located at 4505 Hickmore Street, in the city of St. Laurent, province of Quebec, where AMAV conducts its business.
[15] Article 1.1 of the Agreement, provides the following:
1.1. Purchased Assets. On the terms and subject to the conditions set forth in this Agreement, the Buyers shall purchase from the Company and its Subsidiaries (and, in the case of the Hickmore Property, from the Stockholders), and the Company and its Subsidiaries (and, in the case of the Hickmore Property, the Stockholders through Amav Realty Ltd.) Shall sell, transfer, assign and deliver to the buyers and their designees on the Closing Date (as hereinafter defined), all of the following assets of the Company and its Subsidiaries (and, in the case of the Hickmore Property and related leases and prepayments, Amav Realty Ltd.), wherever located (collectively, the "Purchased Assets"), and all benefits and income therefrom from and after the Effective Date (except for the Hickmore Property, which shall be as of the Closing Date):
[...]
(f) All goodwill incident to or associated with the Business as a going concern, all telephone numbers, telephone and advertising listings relating t the Business, customer lists and all other information and data relating to the customers or suppliers of the Business, and all product development, packaging development, design and product patents, trademarks, trade names (including, without limitation, all rights to the name "Amav") and all combinations with the foregoing), service marks, copyrights, computer programs and software, trade secrets, processes, know ho, engineering, drawings, plans and product specifications, promotion displays and materials, all other Intellectual Property and any applications related thereto "Intangible Assets").
[16] At least by February 15, 1996, ERO Canada changed its name to AMAV Industries Ltd. ("AMAV ERO").
[17] Both Amos and Avi Shochaczevski agreed to remain with AMAV ERO for a period of two years, serving respectively as President and Executive Vice-President of the company. According to Avi Shochaczevski, the shares of AMAV ERO were purchased by Hedstrom Corporation ("Hedstrom"), a U.S. multinational toy corporation, in 1997 and, as a result, AMAV ERO[2] became a wholly-owned subsidiary of Hedstrom. There is, however, no documentary evidence of the acquisition of AMAV Industries Ltd.'s shares by Hedstrom. Mr. Shochaczevski testified that he was made aware of Hedstrom's purchase of the shares by Dick Ryan and Arnie Ditri, respectively the Chairman of ERO Industries Inc. and the President of Hedstrom Corporation. According to Mr. Shochaczevski, the acquisition of AMAV Industries Ltd.'s shares by Hedstrom was made public. He also testified that AMAV Industries Ltd.'s intellectual property had not transferred to Hedstrom, but had remained with the company.
[18] In 1999, Hedstrom filed for Chapter 11 bankruptcy protection in the United States, from which, according to Avi Shochaczevski, it "now has emerged". However, AMAV Industries Ltd., after seeking court protection in Canada, ceased its operations and its assets were liquidated during the course of the year 2000.
[19] In November 2000, the defendant purchased from AMAV Industries Ltd.'s liquidator, Nick Vandagriff, part of the company's inventory of raw materials relating to the arts and crafts product line.
[20] By agreement dated November 30, 2000, plaintiff Diamant purchased from AMAV Industries Ltd., of Ville St. Laurent, a New Brunswick company, all of the rights, title and interests of AMAV in, inter alia, the following assets:
3. Purchase and Sale of Assets. On the terms and subject to the conditions hereof, the Seller covenants and agrees to sell, assign and transfer to the Purchaser, and the Purchaser covenants and agrees to purchase from the Seller, effective as of the Closing Date, all of the right, title and interest of the Seller in and to the following assets (the "Assets"):
a) the injection plastic molds used to produce products known as the Amav Arts and Crafts Product Line, the whole as listed on Annex A attached hereto;
[...]
d) all intellectual property, including graphics, designs, artwork, owned by the Seller and used to produce products known as the AMAV Arts & Crafts product Line;
e) the name brands "AMAV" and "EXPRESSWAYS";
f) all remaining raw and component inventory as of the date hereof;
[21] In consideration of plaintiff Soltron's commitment to finance its aforementioned purchase, plaintiff Diamant, pursuant to an agreement dated December 11, 2000, conveyed all of the assets purchased from AMAV Industries Ltd., including the intellectual property rights, to plaintiff Soltron which, in turn, granted to plaintiff Diamant a license to use the aforesaid asset.
[22] In a note dated December 18, 2000, Nick Vandagriff, AMAV Industries Ltd.'s liquidator, confirmed that plaintiff Diamant and its nominee [plaintiff Soltron] had acquired ownership of AMAV's intellectual property rights in the arts and crafts line of products. The note reads as follows:
This letter is to confirm that Diamant Toys, Ltd. and/or its nominee, are the sole owners of any and all of the rights to the name AMAV and EXPRESSWAYS, as well as any and all intellectual property, including designs, artwork, graphics in all forms, copyrights, and test certificates used to produce the Arts & Crafts and battery operated car line of products known as AMAV and/or EXPRESSWAYS.
[23] When plaintiff Diamant took possession of AMAV Industries Ltd.'s assets in Ville St. Laurent, it could not find one of the sets of over 900 CD-Roms. This set, which has yet to be found, contains electronic copies of the artistic work created over the years by AMAV Industries Ltd., and includes the photos and illustrations used on AMAV packaging material, layouts of the packaging and the instruction sheets provided with the products.
[24] By letter dated January 12, 2001, plaintiff Diamant advised the defendant of its purchase of AMAV Industries Ltd.'s intellectual property rights, including designs, art work and graphics.
[25] Although the defendant purchased some inventory, dies and machinery from AMAV Industries Ltd.'s liquidator in the fall of 2000, it did not acquire any interest in AMAV's intellectual property.
[26] The plaintiffs' position is that the defendant is in possession of the missing set of 900 CD-Roms containing the artistic work at issue, and that using the CD-Roms, the defendant has launched a brand of arts and crafts products "that closely mimic the distinctive AMAV packaging and incorporate many of the artistic works created by AMAV, for which the plaintiffs hold the copyright". The plaintiffs further submit that the defendant has been manufacturing, exhibiting, promoting and selling its PLAY ART line, which line is, for all intents and purposes, identical to AMAV's line of arts and crafts products. The plaintiffs further contend that the defendant has extensively incorporated the AMAV intellectual property, and that it is trading on AMAV's reputation.
[27] The defendant, it goes without saying, opposes the plaintiffs' motion. The defendant's position is that the plaintiffs have not established that they own the intellectual property which constitutes the basis of the present motion.
[28] Before turning to the defendant's submission regarding the plaintiffs' ownership of the intellectual property rights, I wish to point out that the defendant has not challenged the plaintiffs' assertion that its products are, for all intents and purposes, identical to the AMAV brand line of arts and crafts products. In his affidavit, dated December 20, 2001, Jacques Richer, the President of the defendant's Board of Directors, referred to an affidavit dated March 12, 2001, which he signed in proceedings instituted by the plaintiffs in the Quebec Superior Court against the defendant[3]. At paragraph 4 of his affidavit in the present proceedings, Mr. Richer states that he adopts each and every allegation made in his affidavit of March 12, 2001. At paragraph 11 of that affidavit, Mr. Richer states:
11. Depuis au moins décembre 2000, si non depuis novembre 2000, les demanderesses [Diamant et Soltron] étaient au courant que la défenderesse avait acheté une partie importante des actifs d'Amav et que lesdits actifs ont été acquis afin que la défenderesse puisse offrir au marché des produits inspirés ou semblables à des produits fabriqués avec l'équipement et composantes achetés d'Amav. [emphasis added]
[29] As it appears from the above statement made by Mr. Richer, the defendant purchased part of AMAV's assets to offer to the public products that are "inspired" or similar to the products previously manufactured and, hence, offered to the public by AMAV Industries Ltd. Therefore, the true issue between the parties in this motion is whether the plaintiffs have satisfactorily demonstrated that they have title to the intellectual property which they say the defendant is infringing.
[30] The thrust of the defendant's arguments is that AMAV Industries Ltd., the seller under the Asset Purchase and Sale Agreement of November 30, 2000, a New Brunswick company, did not own the intellectual property in regard to the AMAV arts and crafts line of products. According to the defendant, the intellectual property rights in regard to that product line belonged to Hedstrom Corporation of Mont Prospect, in the state of Illinois.
[31] In my view, that position is incorrect. On the record before me, I am satisfied that the plaintiffs have established that they own the intellectual property rights with respect to the AMAV arts and crafts product line. My reasons are as follows.
[32] There is nothing in the record which supports the defendant's argument that Hedstrom Corporation acquired any rights to the intellectual property which the plaintiffs assert is theirs. I will now briefly examine the chain of title which, the defendant argues, is not clear enough to support the plaintiffs' claim.
[33] Firstly, I accept Avi Sochaczevski's evidence that until October 1, 1995, AMAV owned the intellectual property rights relating to its arts and crafts line of products. Effective October 1, 1995, AMAV was sold to ERO NY and ERO Canada, and ERO Canada, by the latest February 15, 1996, changed its name to AMAV Industries Ltd., which I have sometimes referred to as AMAV ERO[4].
[34] As I have already indicated, ERO Canada was described in the Asset Purchase Agreement of October 19, 1995, as a wholly-owned subsidiary of ERO NY. This, in my view, is confirmed by the annual declarations for 1995 and 1996, which are attached as Exhibits B and C to Ms. Paulhus' affidavit of January 8, 2002. I should point out that the address given for ERO NY in the annual declarations, 585 Slawin Court, Mount Prospect, Illinois, is the same address as that given for Hedstrom Corporation, as it appears in the Asset Purchase and Sale Agreement of November 30, 2000, between AMAV Industries Ltd. and plaintiff Diamant.
[35] Commencing with AMAV Industries Ltd.'s annual declaration for the year 1997, the name of ERO NY disappears and is replaced, under the heading of Principal Shareholders, with that of AMAV Industries Inc. of 585 Slawin Court, Mount Prospect, Illinois. According to the annual declarations filed for AMAV Industries Ltd. for the years 1998, 1999 and 2000, AMAV Industries Inc. of Mount Prospect remained the majority shareholder of the company. I also wish to note that the person who signed AMAV Industries Ltd.'s declarations for the years 1999 and 2000 was their in-house counsel, Mr. John A. Adams. For the years 1995 to 1998, the annual declarations were signed by Steeve Robitaille, of the law firm Stikeman, Elliott of Montreal.
[36] I also note that for the years 1999 and 2000, the directors of AMAV Industries Ltd. were David Crowley and Arnold Ditri, whose addresses were at 585 Slawin Court, Mount Prospect. For the years 1995, 1996 and 1997, the directors, as their names appear on the annual declarations, were Richard Ryan and Ted Luekem, also both situated at Slawin Court in Mount Prospect. For the year 1998, the directors were Richard Ryan and Christopher Brown of, once again, Slawin Court, Mount Prospect.
[37] I now come back to the chain of title. Avi Shochaczevski's evidence is to the effect that on October 19, 1995, effective October 1, 1995, AMAV sold all of its assets, including all of its intellectual property, to ERO Acquisition Ltd., a New Brunswick company. This, as I have already noted, is not entirely accurate, as the assets were sold to both ERO NY and ERO Canada, the latter company being a wholly-owned subsidiary of ERO NY. I have also indicated that by February 15, 1996, ERO Canada changed its name to AMAV Industries Ltd. It is from this company that the plaintiff Diamant, on November 30, 2000, purchased, inter alia, "all intellectual property, including graphics, designs, artwork, owned by the Seller and used to produce products known as the AMAV Arts & Crafts Product Line".
[38] The name of Hedstrom Corporation does not appear in the Asset Purchase Agreement of October 19, 1995. In the Asset Purchase and Sale Agreement of November 30, 2000, however, the name Hedstrom Corp. appears under clause 17 thereof, which provides that should any notice be given to the seller, AMAV Industries Ltd., a copy of the notice shall be given to Hedstrom Corp., which copy shall not constitute notice. From this, I can only conclude that Hedstrom Corp. was fully aware of the agreement made between AMAV Industries Ltd. and the plaintiff Diamant. There is no doubt, from the evidence in the file, that Hedstrom Corp. had an interest in AMAV Industries Ltd. I cannot be entirely certain as to Hedstrom Corporation's interest in AMAV Industries Ltd. However, I believe that the following can be said with some degree of assurance. Hedstrom Corporation, AMAV Industries Inc. and ERO NY all appear to have operated from the same location in Mount Prospect, Illinois. During the course of his testimony, John Adams, AMAV Industries Ltd.'s in-house counsel, testified that the shares of AMAV Industries Ltd. had been purchased by Hedstrom Corporation, "either directly or through another company". The likelihood, in my view, is that Hedstrom's interest in AMAV Industries Ltd. was exercised through AMAV Industries Inc. Mr. Adams, who testified having been with AMAV for approximately eight years, was not aware of any sale of assets made by AMAV Industries Ltd. to Hedstrom Corporation.
[39] I am therefore satisfied that, as of November 30, 2000, AMAV Industries Ltd. owned all of the intellectual property rights pertaining to the AMAV arts and crafts product line. As a result, I am also satisfied that plaintiff Diamant, by the Asset Purchase and Sale Agreement of November 30, 2000, did acquire, as per clause 3 of the agreement, AMAV Industries Ltd.'s intellectual property rights in regard to the arts and crafts product line.
[40] The defendant raised an issue concerning the employment of the people at AMAV Industries Ltd. engaged in the creative work. Specifically, it is the defendant's contention that the "creative people" were employees of Hedstrom Corporation, and not of AMAV Industries Ltd. Consequently, the defendant argues that the copyright resulting from the work performed by Hedstrom employees belongs to Hedstrom. In support of this argument, the defendant relies on the affidavits of a number of former employees, namely Richard Bonomo, Sheda Shojai, Brigitte Cantin and Sevag Minassian. These employees testified that they were employed by Hedstrom Corporation, and not by AMAV Industries Ltd.
[41] John Adams, the in-house counsel for AMAV Industries Ltd., filed an affidavit in which he stated that all of the personnel working at AMAV Industries Ltd.'s premises in Ville St. Laurent were employees of AMAV Industries Ltd. During the course of his testimony, Mr. Adams confirmed that statement and testified that every year, as legal counsel, it was his duty to file corporate documents with the Quebec government departments, including the "Commission de la santé et de la sécurité du travail" (the "CSST"). All of the documents filed by Mr. Adams were documents filed on behalf of AMAV Industries Ltd. In Mr. Adams' mind, there was no doubt that all of the personnel working at the Ville St. Laurent premises were employed by AMAV Industries Ltd.
[42] After careful consideration of all of the evidence, and in particular, Mr. Adams' evidence, I am satisfied that, at all material times herein, the employees working at the Ville St. Laurent premises were employed by AMAV Industries Ltd., and not by Hedstrom Corporation.
[43] The defendant has not adduced any evidence to show that it acquired any intellectual property rights in respect of the assets that it purchased both from Hedstrom and from AMAV Industries Ltd. There is simply no evidence whatsoever to support the defendant's assertion that it acquired more than the physical assets purchased in October and November 2000. In his affidavit, dated January 8, 2002, Mr. Georges Gareau, the President of the defendant company, stated the following, at paragraphs 5, 6 and 7 thereof:
5. Qu'au mois de septembre 2000, Hedstrom Corporation a demandé à la défenderesse si elle était intéressée à acheter la division montréalaise de Hedstrom Corporation mais, vu le prix exorbitant demandé et les nombreuses lignes de produits non reliés aux affaires ou aux besoins de la défenderesse, celle-ci a refusé l'offre;
6. Que la défenderesse est toujours intéressée à acquérir les lignes de jeux artisanaux de la division montréalaise de Hedstrom Corporation et de faits, pendant les mois d'octobre et novembre 2000, la défenderesse a acquis tous les designs industriel, patrons, desseins et matrices nécessaires à la fabrication des produits artistiques, de bricolage et de jeux artisanaux de Hedstrom Corporation.
7. Que lors de l'achat, la défenderesse fut assurée d'acquérir tous les droits afférents aux produits achetés de Hedstrom Corporation;
[44] Mr. Gareau's assertion, in paragraph 7 above, is similar to the statement made by Mr. Jacques Richer, the President of the defendant's Board of Directors, where, at paragraph 7 of his affidavit of December 20, 2001, he states:
7. Lorsque la défenderesse a acquis les droits de Hedstrom Corporation et par la suite Amav Industries Limited, Nick Vandagriff et autres représentants et mandataires de Hedstrom Corporation ont indiqué de façon claire et sans équivoque que ces produits pouvaient être utilisés pour la revente et que la défenderesse, en tant qu'acheteur, avait tous les droits découlant de la vente;
[45] These assertions by Mr. Gareau and Mr. Richer are not supported by the record. There is simply no proof to support their assertions. I am therefore satisfied that the defendant did not acquire any intellectual property rights in regards to the assets purchased in the fall of 2000.
[46] Paragraphs 38(1)(a) and (b) of the Copyright Act, provide as follows:
38. (1) Subject to subsection (2), the owner of the copyright in a work or other subject-matter may
(a) recover possession of all infringing copies of that work or other subject-matter, and of all plates used or intended to be used for the production of infringing copies, and
(b) take proceedings for seizure of those copies or plates before judgment if, under the law of Canada or of the province in which those proceedings are taken, a person is entitled to take such proceedings,
as if those copies or plates were the property of the copyright owner.
[47] The plaintiffs, relying on paragraph 38(1)(b), submit that they are entitled to a seizure before judgment of the products listed in paragraphs 1 and 2 of their Notice of Motion:
(i) Bead Bungees;
(ii) Beaded Hair Fun;
(iii) Candle Art;
(iv) Clay Pot Creations;
(v) Color-In Tattoos;
(vi) Creative Candles;
(vii) Dot Art;
(viii) Mosaic Boxes;
(ix) Soap Factory;
(x) Soft Soft Art; and
(xi) Sand Art
and any other products bearing or containing any of the Plaintiffs' copyrighted works set out in Schedule "A" hereto, along with any plates, CD Roms, and all other material associated with the aforementioned products of the Defendant and bearing or containing the Plaintiffs' copyrighted works as aforesaid;
[48] The plaintiffs ask that this Court authorize a bailiff, authorized to act in that capacity in the province of Quebec, to seize the aforesaid products at the defendant's premises situated at 7760 Grenache Street, Anjou, Quebec, and at the following locations, namely: Jean Coutu, 4930 Saint-Jean, Pierrefonds, Quebec; Wal-Mart, Kirkland Plaza, Kirkland, Quebec; Jean Coutu, Sources Centennial Plaza, Montreal, and; Toys R Us, 7125 Newman Blvd., Lasalle, Quebec.
[49] I am satisfied, for the purposes of this motion, that the plaintiffs have established that the works which constitute the subject-matter of the dispute are "artistic works" as that expression is defined at section 2 of the Copyright Act:
"artistic works" includes painting, drawings, maps, charts, plans, photographs ... and compilations of artistic works.
[50] The works at issue were created by individuals who were ordinarily resident in Canada at the time the work was created. The "creators" of the works were employees of AMAV Industries Ltd. at the time that they created the works, which they did in the ordinary course of their employment. Hence, AMAV Industries Ltd. is deemed to be the first owner of the copyright in the work.
[51] I come to the same conclusion with regards to the photographs of the works that were created by photographers retained by AMAV Industries Ltd. for that specific purpose.
[52] As I indicated earlier, the defendant has not challenged the plaintiffs' assertions of infringement. In his Memorandum of Fact and Law, and in his oral arguments before me, counsel for the defendant did not address the issue of infringement. Rather, counsel forcefully challenged the plaintiffs on the issue of title and took the position that the employees who created a number of the works at issue were not employees of AMAV Industries Ltd.
[53] After careful examination of the evidence, I am satisfied, again for the purposes of this Motion, that in reproducing the plaintiffs' photographs on packaging used in connection with its play art products, in reproducing the plaintiffs' drawings on the written instructions accompanying its play art products, and in reproducing the plaintiffs' drawings as part of a number of play art products, the defendant infringed the plaintiffs' copyright in the works.
[54] In reaching this conclusion, I obviously have in mind the following provisions of the Copyright Act:
Section 2 - Definitions:
"Infringing" means
(a) when applied to a copy of a work in which copyright subsists, any copy, including any colourable imitation, made or imported in contravention of this Act;
"Infringing" means
(a) in relation to a work in which copyright subsists, any copy, including any colourable imitation, made or dealt with in contravention of this Act.
Section 3 - Copyright in works:
3(1) For the purposes of this Act, "copyright", in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever ... and to authorize any such acts.
Section 27 - Infringement Generally:
27(1) It is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that by this Act only the owner of the copyright has the right to do.
[55] I therefore conclude that the plaintiffs have established a prima facie case of copyright infringement by the defendant. Consequently, it is my view that paragraphs 38(1)(a) and (b) of the Copyright Act, in conjunction with Rule 377(1) of the Federal Court Rules, 1998, allow the plaintiffs to seize before judgment all infringing copies of the works in regard to which they own the copyright.
[56] If I am right that the plaintiffs are entitled to a seizure before judgment, akin to the seizure before judgment which a plaintiff can obtain under article 734(1) of the Quebec Code of Civil Procedure, then the plaintiffs need not meet the tripartite test applicable to interlocutory injunction applications [Théberge v. Galeries d'Art Yves Larakia (2000), 9 C.P.R. (4th) 259 (Que. C.A.)]. In any event, I am of the opinion that the tripartite test has been met. Firstly, as I have already indicated, the plaintiffs have established to my satisfaction a prima facie case of copyright infringement. Thus, the serious issue part of the test is met. With respect to irreparable harm, I agree with the plaintiffs that they need not establish that they will suffer irreparable harm in order to obtain an injunction. In that regard, I adopt, and entirely agree with, what Madam Justice Reed said at page 201 of her Reasons in International Business Corporation v. Ordinateurs Spirales Inc./Spirales Computers Inc. (1984), 80 C.P.R. (2d) 187 (F.C.T.D.):
In any event, I am not convinced that the degree of harm required to be proved in a case such as this, where there had been blatant copying, is as high as that required in other cases of interlocutory injunction. Counsel for the plaintiff argued that the irreparable harm test was appropriate to patents because it was easy to inadvertently infringe a patent right. Thus, the courts are slow to grant interlocutory injunctions to patent cases. He argued, however, that copying could not take place inadvertently and therefore the courts were more willing to grant interlocutory injunctions in copyright infringement actions when the copying was very clear, without requiring irreparable harm or a finding that damages would not be adequate. I accept this reasoning. It accords with my interpretation of the jurisprudence. It may be that the courts in such cases are doing no more than taking into account equitable considerations such as the bona fides or male fides of the party, as they have always done in granting equitable remedies. But, in any event, in copyright infringement cases it seems to me, when the copying is blatant, it is appropriate to consider a less stringent test of potential damage, than would otherwise be the case.
[57] Finally, with respect to the balance of convenience, it lies in favour of the plaintiffs. In 75490 Manitoba Ltd. v. Meditables Inc. (1989), 29 C.P.R. (3d) 89, Mr. Justice Rouleau, after noting that the plaintiffs had met the serious issue part of the test, and that the defendant had not denied copying, made the following remarks, at pages 93 and 94:
I am satisfied that a serious issue has been raised, if not in fact a prima facie case. The defendant has not denied the copying, but argued that an injunction should not issue since there was no evidence of irreparable harm. However, I am satisfied that the balance of convenience favours the plaintiffs regardless, having established such a flagrant case of infringement. To allow this prima facie infringement to continue until such time as the trial may be heard would be unconscionable. I note in this regard the formulation of the test for interlocutory injunctions as recently stated by the Federal Court of Appeal in turbo Resources (A-163-88, rendered January 18, 1989, at pp. 22-3 [reported 27 C.P.R. (3d) 1, [1989] 2 F.C. 451, 22 C.I.P.R. 172]), as well as the following quote by Dubé J. in Jeffrey Rogers Knitwear Productions Ltd. v. R.D. International Style Collections Ltd. (1985), 6 C.P.R. (3d) 409 at pp. 410-11, [1985] 2 F.C. 220 at p. 222, 6 C.I.P.R. 263:
However, in matters of clear violations of copyrights registered under the Copyright Act, R.S.C. 1970, c. C-30, the jurisprudence of the Federal Court has been to grant interlocutory injunctions without concerning itself with irreparable injury or the balance of convenience.
The rationale behind this was explained by Cattanach J. in Horn Abbot Ltd. v. W.B. Coulter Sales ltd. (1984), 77 C.P.R. (2d) 145 at pp. 155-6, 1 C.I.P.R. 97 at pp. 107-8:
In the case of copyright actual damage need not be proved. This is because the right of the owner of a copyright is not measured by the amount of the actual damage suffered. Copyright being a species of property the owner is entitled to protection of that property. If infringement is proven an injunction will issue without proof of actual damage.
[58] I therefor conclude that the plaintiffs are entitled to the Order which they seek. The motion shall therefor be allowed and an Order will be made, authorizing a bailiff in the province of Quebec to seize before judgment from the defendant at 7760 Grenache Street, Anjou, Quebec, H1J 1C3, the following products,
(i) Bead Bungees;
(ii) Beaded Hair Fun;
(iii) Candle Art;
(iv) Clay Pot Creations;
(v) Color-In Tattoos;
(vi) Creative Candles;
(vii) Dot Art;
(viii) Mosaic Boxes;
(ix) Soap Factory;
(x) Soft Soft Art; and
(xi) Sand Art
and any other products bearing or containing any of the plaintiffs' copyrighted works set out in Schedule "A" of the Notice of Motion, along with any plates, CD Roms, and all other material associated with the aforementioned products of the Defendant and bearing or containing the Plaintiffs' copyrighted works as aforesaid; and permitting the bailiff to remove said products and other materials seized from the aforementioned location and place them under the custody of a guardian to be designated by the bailiff.
[59] A bailiff of the province of Quebec shall also be authorized to seize before judgment from the following parties at the following locations:
(i) Jean Coutu, 4930 Saint-Jean, Pierrefonds, Quebec;
(ii) Wal-Mart, Kirkland Plaza, Kirkland, Quebec;
(iii) Jean Coutu, Sources Centennial Plaza, Montreal;
(iv) Toys R Us, 7125 Newman Blvd., Lasalle, Quebec,
the following products of the defendant:
(i) Bead Bungees;
(ii) Beaded Hair Fun;
(iii) Candle Art;
(iv) Clay Pot Creations;
(v) Color-In Tattoos;
(vi) Creative Candles;
(vii) Dot Art;
(viii) Mosaic Boxes;
(ix) Soap Factory;
(x) Soft Soft Art; and
(xi) Sand Art
and any other products bearing or containing any of the plaintiffs' copyrighted work set out in Schedule "A" of the Notice of Motion; and permitting the bailiff to remove said products and other materials seized from the aforementioned locations and place them under the custody of a guardian to be designated by the bailiff.
[60] The defendant shall be directed to take all necessary steps and provide all reasonable assistance to the bailiff in order to permit the bailiff to fully carry out this Order.
[61] Costs shall be in the cause.
Marc Nadon
JUDGE
O T T A W A, Ontario
April 5, 2002
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1676-01
STYLE OF CAUSE:
Diamant Toys Ltd. and Soltron Realty Inc.
v.
Jouets Bo-Jeux Toys Inc.
PLACE OF HEARING: Montréal, Québec
DATE OF HEARING: January 10, 2002
REASONS FOR ORDER OF THE HONOURABLE JUSTICE NADON
DATED: April 5, 2002
APPEARANCES:
François Guay FOR PLAINTIFFS
Steven Garland
Harold W. Ashenmil FOR DEFENDANT
Harry Dikranian
SOLICITORS OF RECORD:
Smart and Biggar FOR PLAINTIFFS
Montréal, Québec
Phillips, Friedman, Kotler FOR DEFENDANT
Montréal, Québec
[1] I wish to note here that the document produced as Exh. A to the Affidavit of Avi Sochaczevski, dated December13, 2001, is not a complete document.
[2] Hereinafter, I shall refer to AMAV ERO as AMAV Industries Ltd.
[3] Superior Court proceedings, District of Montreal, No. 500-05-063540-015.
[4] Exh. A to the affidavit of Ms. Sylvie Paulhus, sworn January 8, 2002, is a document entitled "État des informations sur une personne morale, informations générales", which Ms. Paulhus found on the website of the Inspecteur général des institutions financières. The document contains information concerning AMAV Industries Ltd. It shows that on February 15, 1996, ERO Canada changed its name and became AMAV Industries Ltd.
Exh. B and C to Ms. Paulhus' affidavit are also relevant. They contain the annual declarations made by ERO Canada and, as of 1996, by AMAV Industries Ltd.