Transportation Companies Beware: Shipping to Counterfeiters With Notice Could Result in Criminal Sanctions

The Federal Court's (the “Court”) recent decision in Burberry Limited v. Ward^[1] provides a new enforcement mechanism for rights holders and affirms rights holders’ claims for substantial damages. 

The Court ordered a novel remedy – the decision also binds shipping and delivery companies, restraining them from knowingly assisting in the importing, exporting and selling of the infringing products, potentially exposing shipping companies to criminal sanctions for contempt of court if they are not obeyed.

The Defendants sold counterfeit Burberry and Chanel luxury fashion merchandise through a changing and expanding online presence, which involved the use of multiple names, aliases and Facebook pages. The Plaintiffs, Burberry and Chanel, became aware of the Defendants' activities when the Canada Border Services Agency notified them of intercepted counterfeit product shipments.

Despite an agreement to cease their infringing activities, the Defendants continued to import and sell counterfeit goods. The Plaintiffs moved for default judgment. The Court granted the motion, satisfied that the Plaintiffs had established trademark infringement, copyright infringement and passing off. 

The Court awarded significant damages, as well as a novel injunction against third parties.

The Novel Injunctive Relief

The online “whack-a-mole” behaviour of the Defendants was key to the granting of the novel relief. The Court granted a third-party order in the nature of a Norwich or Mareva injunction, applicable whenever the Plaintiffs had a bona fide belief that a third party possessed information related to the Defendants and their counterfeit activities, and provided notice to that third party.

The Third-Party Order

Third-party shipping and delivery companies transported the counterfeit merchandise as common carriers.

Despite the customary common carrier protections, the Plaintiffs sought an injunction prohibiting the shippers from delivering counterfeit goods once given notice.

The Plaintiffs successfully argued that third-party co-operation was essential for identifying any new aliases and addresses that the Defendants might use. The Court granted the third-party order, but with conditions similar to those accompanying a Norwich order. Specifically, the Plaintiffs are required to demonstrate that the targeted third parties possess relevant information related to the Defendants' illegal activities before they can request such information, by way of summary motion with attached affidavit evidence.

The shippers were not represented at the hearing, at which on the Plaintiffs’ lawyers were present. It remains to be seen if they will appear at the informal motions to contest the relief given.

Significant Monetary Relief for Counterfeit Products

In contrast to numerous trademark and copyright cases, this particular instance resulted in substantial damages, exceeding $900,000.

Calculating the actual damages suffered by the Plaintiffs was virtually impossible because the Defendants did not participate in the proceeding. Instead, the Court awarded a “standard” anti-counterfeiting damage award on a per incidence basis, as updated for inflation. This resulted in a very large damages award, including maximum statutory damages for copyright infringement of the Burberry tartan.

Please contact a member of our Intellectual Property Group for further updates and advice on enforcement mechanisms for rights holders.