Link to the original Supreme Court decision (July 26, 2007).
Case summary: KFB and KFS manufacture chocolate bars in Europe. KCI has an exclusive agreement to import those bars and sell them in Canada. Euro was buying the same chocolate bars in Europe from KFB and KFS, and importing them and selling them without the permission of KFB, KFS, and KCI. KCI sued for copyright infringement of the logos printed on the wrappers (which copyrights KFB and KFS had registered in Canada and licensed to KCI, in order to support the lawsuit). KCI did not make trademark claims. The trial judge awarded KCI $300,000 in damages and ordered Euro to "make the product non-infringing" - but they could still sell the chocolate bars if they did so. KCI applied for reconsideration, which was denied, then the Federal Court of Appeal declined to hear an appeal on the facts, but directed the case back to the lower-level court to re-examine the damage award. No single majority opinion, but seven of the nine justices voted to allow Euro's appeal.
Opinions:
(Rothstein, Binnie, and Deschamps): The existing copyright law does not make such distinctions as "incidental" use or "legitimate economic interest" and we should not read them in. Parliament did clearly intend that copyright and trademark could both apply to the same things. The logos were covered by copyright. However, that copyright was not infringed. The copyrighted works were legitimately printed on the wrappers of genuine candy bars by the copyright holders or their licensees; these were not the pirated imitations contemplated by the statute. "By definition, no person can simultaneously be owner and infringer of copyright[.]" Even the exclusive license granted to KCI does not mean that KFB and KFS are capable of infringing their own copyrights, which is what it would take for the goods they manufactured to be infringing goods on import.
(Fish): The other decision saying that copyright applied but was not infringed because the bars were genuine is correct, but to go further: "[w]ithout so deciding, I express grave doubt whether the law governing the protection of intellectual property rights in Canada can be transformed in this way into an instrument of trade control not contemplated by the Copyright Act."
(Bastarache, LeBel, and Charron): In order to correctly interpret the Act we must examine the purposes it is designed to serve: in this case, to protect legitimate economic interests in the creation of artistic works. Exclusive distribution of chocolate bars is a very different kind of economic interest, and the artistic works embodied in the wrappers are only incidental to it. People who buy the chocolate bars are paying for the chocolate, not the wrappers. Thus, although the logos are subject to copyright, the interest claimed here is not covered by copyright.
(Abella and McLachlin): Copyright does apply fully to the artistic works printed on the candy bar wrappers, and selling the bars includes selling those works. Importing them for the purposes of sale, against KCI's exclusive license, does infringe copyright, even if the bars were originally manufactured by the copyright holders themselves.
Comments
Matt from 67.158.74.7 at Fri, 01 Aug 2008 17:07:35 +0000:
See also my article "The law is not magic," http://ansuz.sooke.bc.ca/lawpoli/not-magic.php . The Court should not allow parties to get away with playing silly games, and that's what this "register some copyrights and then sue for infringement" routine looks like. I think that's the point Mister Justice Fish is getting at - saying that KCI look like playing a silly game - and his is the opinion I'd vote with from among the four available. I'd rather have mentioned "first sale" explicitly, but the "the candy was genuine" thing (i.e. the first sale had been made with no infringement) seems to be as close to acknowledging first sale as anyone came in this case.
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Matt from 67.158.74.7 at Fri, 01 Aug 2008 16:46:31 +0000:
This would be a great time to invoke the "first sale" doctrine. Under "first sale," the copyright holders get to restrict who can buy and sell the candy bars when they are first sold, in Canada or Europe, but then they can't control the secondary market at all, and someone who legitimately bought them under "first sale" could be free to re-sell them elsewhere. That would allow us to distinguish between the genuine candy and pirated fakes (as Rothstein, Binnie, Deschamps, and Fish want to do), while also letting the artistic works on the labels enjoy the full extent of copyright protection (which I want to do, without the hokey limitations introduced by Bastarache, LeBel, and Charron [*]). We could simply tell KCI that their exclusive license is only exclusive as to first sale, because that is the extent of copyright, and Euro is operating in the secondary market and outside the scope. Then there's much less "interpretation" required.
I'm surprised and disappointed that "first sale" didn't come up in this case. It's a US thing and the Court wouldn't necessarily be required to follow it, but if they had chosen to follow it they could have supported their majority decision a lot better, and importing "first sale" to Canada would be a Good Thing for consumers' rights.
I don't know whether the omission was because neither of the parties mentioned it (then they should have had better lawyers) or because it was raised and the Canadian court system rejected it at some level that didn't make it into the Supreme Court's decision. It's not trivial that they wouldn't reject it. We do generally have a much weaker history than the USA as to the things that support "first sale." For a long time Canadian publishers were allowed to sell books on the "This book is sold subject to the condition that it shall not be re-sold, lent, rented..." boilerplate imported from Britain. I don't think that's still allowed here (possibly forbidden by the Berne Converntion) but it was never allowed in the USA. At least not until publishers started trying to sneak it in via shrink-wrap licenses on included software, and I'm not sure that has been tested or found acceptable. It may be that the Canadian courts would refuse to import "first sale" simply because of not wanting to align our copyright system too closely to the US model.
Wanting to avoid the USA's mistakes is a Good Thing too, of course, and I'm quite heartened that seven out of nine Canadian Justices were willing to tell KCI to take a flying leap in this case, even if I think they could have supported that better had they imported "first sale."
[*] Some people do buy candy bars for the wrappers, and the courts shouldn't make a determination on how plausible such a thing may be. What test would they use, artistic merit? Yeah, we haven't had any problems with THAT one recently.