Record damages awarded in Louis Vuitton Case

In Louis Vuitton Malletier SA v Lin Pi-Chu (2007 FC 1179, November 14 2007), the Federal Court of Canada has issued a default judgment against a purveyor of counterfeit Louis Vuitton merchandise, awarding precedent-setting damages against the defendants in an undefended trademark and copyright infringement proceeding. Following in the wake of the Microsoft Corporation v Cerrelli (2006 FC 1509) decision rendered by the Federal Court in January of this year, in which the court granted the highest monetary award to date under Canada's statutory damages for copyright infringement (for further details, please see "Microsoft chalks up a win in software piracy battle"), this is a welcome decision for IP owners in their battle against counterfeiting in Canada.

The defendants included two individuals, Tim Yang Wei-Kai and Lin Pi-Chu Yang (both also known under various aliases), who operate a retail store from Parker Place Mall in Richmond, British Columbia, under the name K2. In December 2001, and again in December 2003, Louis Vuitton executed 'John Doe' Anton Piller orders against the K2 store, seizing large amounts of counterfeit Louis Vuitton purses. The counterfeiters failed to defend the actions and default judgment was obtained. Notwithstanding these judgments, the defendants continued to sell counterfeit Louis Vuitton merchandise.

In March 2006, agents for Louis Vuitton made another attempt to put an end to the illegal activities of the defendants. They delivered a cease-and-desist letter and had a substantial amount of counterfeit Louis Vuitton merchandise (approximately $15,000 in price-tag value) voluntarily delivered up from the store. However, follow-up correspondence, warnings sent by mall management at the request of Louis Vuitton and a second visit to the store by Louis Vuitton agents in March 2007 (where approximately $23,000 in price-tag value of counterfeit goods was voluntarily delivered up) failed to curb the sale of counterfeit goods by the defendants. In addition to the two voluntary deliveries-up of counterfeit goods, Louis Vuitton had evidence of four other instances where counterfeit merchandise was purchased or seen at K2.

Louis Vuitton commenced a Federal Court action against the defendants in July 2007, claiming trademark infringement and passing off of its famous trademarks, as well as copyright infringement of its monogram prints. The defendants failed to defend and, accordingly, a motion was brought for default judgment, seeking substantial damages (including punitive and exemplary damages) against the defendants for their blatant and recidivist infringing activities.

The court had no issue in finding that the activities constituted passing off and infringement of both trademark and copyright, and in awarding injunctive relief and delivery up. However, the court paid particular attention to the award of damages.

The 'traditional' damages awarded by the court in relation to matters of purveyance of counterfeit goods by fixed retail premises, and where a lack of records or a failure to defend makes determination of damages difficult, has been $6,000. This award was originally set in 1997 in relation to judgments linked to the execution of Anton Piller orders, and has since been awarded in numerous similar cases. Given the recidivist nature of the defendants' activities and their blatant disregard for the court's process, Louis Vuitton sought a significantly higher award of damages to deter the continuing activities of the defendants.

Following in the footsteps of Microsoft, the court awarded full statutory damages for copyright infringement of $20,000 per work in relation to the two works infringed by the defendants, totalling $40,000. The court cited the bad faith of the defendants and the need for deterrence in the reasons for applying the maximum statutory damages. The court also awarded $87,000 in damages for trademark infringement, applying the 'traditional' $6,000 award on a per-plaintiff basis to each of the six proven instances of infringement, allowing for inflation of the $6,000 set in 1997 to $7,250 in 2006.

Further, recognizing that Louis Vuitton was likely to be "suffering in the award of damages through no fault of their own" based on the refusal of the defendants to participate in the proceedings, and following the test set out by the Supreme Court of Canada in Whiten v Pilot Insurance Company, the court also granted an award of $100,000 in punitive and exemplary damages. Finally, the court granted solicitor-and-client costs of $36,699 based on the defendants' continued flagrant activities and "dismissive attitude towards this proceeding and past judgments of [the] court".

The total award of $263,399 appears to be the highest of its kind granted by the court in relation to an undefended action for counterfeiting activities. It is hoped that, in conjunction with the Microsoft decision, a strong message will be sent to counterfeiters in Canada, and that IP rights holders will now have a stronger position to seek enhanced damages in similar cases. The court appears to be ready to take a strong stance against the recidivist activities of counterfeiters, particularly those in flagrant disregard of previous orders of the court.

Interestingly, in awarding damages for trademark infringement, the court applied the 'traditional' damages against the defendants on a per instance of infringement basis, notwithstanding that only two of those instances related to the delivery-up of large volumes of counterfeit goods and the other instances involved small purchases of single items. Based on the findings of the court in this case, it appears that repeated purchases of counterfeit products can lead to enhanced damages, even where such purchases are small and there are no actual records of sales. As the number of repeated buys of counterfeit items increases, there seems to be an increased potential for larger awards of damages in an attempt to reflect accurately the damages likely to have been suffered by the IP rights holders.

Mark Evans and Karen MacDonald, Smart & Biggar/Fetherstonhaugh, Toronto and Vancouver