Federal Court of Appeal Upholds $250,000 Punitive and Exemplary Damage Award in Trademark Case

On February 21, 2017, the Federal Court of Appeal (FCA) upheld awards for $250,000, $64,000, and $66,000, for punitive and exemplary damages, compensatory damages, and costs, respectively, in relation to a trademark infringement case regarding various counterfeit goods of the “CHANEL” fashion label (Lam v. Chanel S. de R.L, 2017 FCA 38). The decision is from an appeal of the re-determination of the original Federal Court (FC) decision of this case (for the original Federal Court decision see 2015 FC 1091 and for the re-determination see 2016 FC 987).

Only the awards issued by the FC were at issue on appeal. With respect to the punitive and exemplary damages award, while the FCA did state that the award was proportionately higher than in earlier cases, it acknowledged that the assessment for these types of damages is a highly contextual exercise which is influenced by a number of factors. In this case, in dismissing the appeal, the FCA stated:

[11]           I note, amongst other considerations, the judge’s findings that the defendants were motivated by profit; the vulnerability to, and erosion of, the plaintiffs trade-mark rights arising from counterfeiting and infringement; the defendants’ attempts to mislead the Court; the fraudulent transfer, after the filing of the Statement of Claim, of ownership of the defendants’ company to avoid liability; the defendants’ recidivist conduct in light of previous orders in respect of the same matter; the defendants’ awareness of the unlawful nature of the activity; the scope of the infringement; the sale of infringing articles after filing and service of the Statement of Claim; the defendants’ failure to produce any records; and, the judge’s conclusion that the infringement was continuous and deliberate. The judge also situated the award in light of relevant judicial precedent.

With respect to compensatory damages, since the issue of liability was not appealed, the FCA found that the doctrine of issue estoppel precluded the defendant from challenging the methodology for calculating compensatory damages. The FCA also held that cost awards are discretionary and, absent an error in principle, will not be altered on appeal.