Grey Marketing Continues to be a Gray Area in Canada

The question of so-called "grey marketing" or parallel imports continues to bedevil Canadian case law, having the potential to bring into play a challenging mixture of the law of contract, competition, trade-mark and copyright. Kraft Foods Belgium SA (KFB) makes Côte d'Or chocolate bars in Belgium and Kraft Canada Inc (KCI) is the exclusive authorized distributor for them in Canada. Euro-Excellence Inc (EuroEx Inc) lawfully buys the same bars in Europe and distributes them in Canada in competition with KCI, thus carrying on "grey marketing" or parallel importation of the product. In an attempt to stop this parallel importing, KFB granted an exclusive licence of its copyright in the logo used on the chocolate bar packages to KCI and KCI then brought a copyright infringement action against EuroEx Inc. EuroEx Inc never copied the logo, but merely imported the bars in their original packaging, and if the bars had originated in Canada, there could have been no infringement. KCI alleged that EuroEx Inc had engaged in "secondary infringement" and relied on section 27(2) of the Copyright Act which provides that it is an infringement for certain activities to take place regarding imported works if the person carrying on the activity "knows or should have known [the activity] infringes copyright… if [the work] had been made in Canada by the person who made it". Thus, there are two requirements in order for section 27(2) to apply: (i) the defendant sells or distributes a copy of a work, that (ii) would infringe copyright if it had been made in Canada by the person who made it. However, what made the fact situation here so challenging was that it was the parent corporation KFB itself, not some unauthorized party, who made the copies in Europe. And, in any event, the underlying activity complained of was not so much an unauthorized copying of the logo in which copyright subsisted, but the act of importation. When the question came on appeal to the Supreme Court of Canada, it was held by a 7-2 majority (with the majority writing three separate decisions), that on these facts KCI could not succeed in halting the parallel importation using copyright law. Apart from the potential for uncertainty created by the three separately written majority judgments, it appears that if KCI had been the recipient of an outright assignment of the copyright rather than becoming a licensee of the copyright, that alone may have produced a different outcome in the case. As a result, the waters of the law of grey marketing may now appear somewhat more muddied but, it is hoped, without any wider confusion in copyright law generally. For the full reasons for judgment, see: http://scc.lexum.umontreal.ca/en/2007/2007scc37/2007scc37.html and for commentary, visit: http://ualbertalaw.typepad.com/faculty/2007/07/euro-excellence.html Summary by: James Kosa and Oren Weichenberg