Grey Market Toyota Car Parts Case: Part II

On June 18, 2025, the Federal Court of Canada (the Court) issued its decision in Toyota Jidosha Kabushiki Kaisha (Toyota Motor Corporation) v. Marrand Auto Inc., 2025 FC 1105, dismissing an appeal by Marrand Auto Inc. (the Defendant) of a previous decision granting leave to Toyota Canada Inc. et al. (collectively, Toyota) to amend its statement of claim regarding a limited subset of allegations under the Trademarks Act (the Act) for the sale of grey market goods.

As previously reported in the E-TIPS® Newsletter here, the Canada Border Services Agency detained a shipment of TOYOTA branded automotive parts imported into Canada by the Defendant. Toyota alleged that the merchandise was unauthorized because it was not shipped and handled in an approved manner, and did not include the Toyota Canada warranty since the Defendant was not an authorized Toyota dealer. Toyota sued the Defendant, who then brought a motion to strike Toyota’s statement of claim. The Court struck Toyota’s entire statement of claim but granted Toyota leave to file a fresh statement of claim limited to allegations relating to passing off and depreciation of goodwill. The Defendant appealed.

The Defendant argued, among other things, that the Associate Judge erred by holding that:

1. Passing Off. The “use” of a trademark is not required to establish infringement; and the sale of alleged damaged grey goods with TOYOTA branding amounted to an implied representation of warranty constituting misrepresentation under section 7(b) of the Act.
2. Depreciation of Goodwill. The sale of grey goods differed from a resale and constituted “use” that could depreciate the goodwill associated with a trademark contrary to section 22(1) of the Act.

Although the Court agreed that the Associate Judge failed to consider “use” in the legal test for passing off, this did not warrant the Court’s interference on appeal. Instead, the Court reasoned that the Associate Judge’s finding on “use” merely informed its conclusion that Toyota’s claim, alleging the Defendant’s misrepresentation of damaged car parts with TOYOTA branding as being the same as parts sourced from Toyota dealers violates Section 7(b) of the Act, was novel but arguable. The Court did not reverse this conclusion, noting that the issue should be dealt with at trial.

Similarly, the Court was not persuaded that the Associate Judge made a reversible error with respect to its finding relating to depreciation of goodwill, holding that the current matter did not simply involve the resale of goods but potentially damaged goods that could, if proven, depreciate the goodwill associated with a trademark.

We will closely monitor this decision since, if it proceeds to trial and a final decision rendered, it will be very pertinent to the enforcement of the rights of trademark owners when addressing unauthorized importation and distribution of their goods in Canada.

Summary By: Imtiaz Karamat