Euro-Excellence v Kraft Canada revolves around an attempt to use copyright law to prevent grey marketing, but its broader interest is in way in which the various opinions address policy considerations in the context of statutory interpretation. Bastarache J. faced the policy issues head-on, while Abella J. stuck to a more narrowly textual approach. Both these approaches have their own merits and the two opinions provide an interesting contrast. The weakest opinion, in my view, was the majority decision of Rothstein J., which seems to be policy analysis in the guise of textual analysis. The result combines the weaknesses, not the strengths, of both the 'pure' approaches.
The basic facts are that Kraft Foods Belgium (KFB) makes Côte d’Or chocolate bars in Beligium. Kraft Canada Inc. (KCI) is the exclusive authorized Canadian distributor. Euro-Excellence buys Côte d’Or bars legitimately in Europe and imports and distributes them in Canada in competition with KCI. In order to stop this unauthorized distribution KFB granted an exclusive licence in its copyright in the Côte d’Or logo to KCI, which then brought an action against Euro-Excellence for copyright infringement. (The trial judge held that copyright did subsist in at least some of the logos, and this was accepted at the SCC level. Toblerone bars manufactured by Kraft Switzerland were also in issue on parallel facts.)
Euro-Excellence never made any copies of the logo, as it bought the bars in their original packaging. If the bars had originated in Canada there would clearly be no issue of copyright infringement. But KCI relied on s. 27(2) of the Copyright Act which relates to imported works and provides that infringement is made out on two conditions: the person (A) sell or distributes a copy of a work that (B) “would infringe copyright if it had been made in Canada by the person who made it.” The obvious context in which this section would apply is that if one party makes infringing copies of a work in Europe without licence, a second party who imports and sells those copies in Canada is liable for infringement. The twist in this case is that it was the European owner of the copyright, not an unauthorized party, who made the copies in Europe.
How can the provision apply if the owner of the copyright made the copies? The argument made by KCI is that even though KFB held the European copyright, it had granted an exclusive Canadian licence to KCI. So, if KFB had made the copies in Canada – which is the counter-factual “if” specified by s.27(2) – it would have violated KCI Canadian copyright, notwithstanding that because in fact KFB made the copies in Europe, it did not infringe any European.
Bastarache J. (LeBel and Charron JJ. concurring) held that condition (A) was not satisfied. A copyrighted work is not ‘sold’ for the purposes of s.27(2) if the transfer is incidental to the sale of some other work. That is, in common sense terms, consumers are buying the chocolate bar, they are not buying the Côte d’Or logo. The remaining members of the Court made the obvious objection that interpretation reads in to the Copyright Act limitations that are not present in the text, and that this should not be done if the words of the Act are clear. I’m very sympathetic to this argument, as the court very often gets the policy arguments wrong. And while I am not convinced that exclusive licencing arrangements are undesirable from a policy perspective, though I do think that it undesirable to use copyright law in the manner. Whether exclusive licensees should be protected against grey marketing shouldn’t turn on whether the product happens to have a copyrighted logo attached to it.
The other three opinions focussed on the second branch of s. 27(2). Rothstein J. for the majority held that notwithstanding the exclusive licence granted to KCI, KFB would not infringe copyright if it had made the copies in Canada rather than Europe, because (para. 15) “the Copyright Act does not permit exclusive licensees to sue the copyright owner-licensor for infringement of its own copyright.” The only remedy of an exclusive licensee is in contract. (Binnie, Deschamps JJ. concurring, Fish J. concurring separately with additional reasons) In dissent, Abella J (McLachin CJ concurring) held to the contrary, that an exclusive licensee can sue the licensor for copyright infringement. From that it follows that KCI’s argument is valid and Euro-Excellence is infringing.
Part of the disagreement between Rothstein J and Abella J. turns on the details of the Copyright Act and general principles of property law. My preliminary view is that Abella J. had the best of the technical argument. There are also two concerns about Rothstein J.’s opinion. First, as Bastarache J. expressly pointed out (para. 75), and Rothstein J. apparently accepted (para. 16), the result of the decision can be circumvented by KFB assigning the Canadian copyright to KCI, rather than merely granting an exclusive licence, as it is clear that an assignee can sue the assignor in copyright. I expect that this is what will happen. Euro-Excellence won the battle, all the way to the SCC, but it looks like it will lose the war. I also find it unfortunate that the question of whether an exclusive licensee can sue in copyright or only in contract has to be decided in this context. This holding will apply far outside the context of grey marketing, since it will apply even to purely domestic arrangements, where it may have significant remedial implications.
On the whole, I can see considerable merit in the opinions both Abella J. and Bastarache J., but I am less impressed with Rothstein J.’s opinion. When the courts do a policy analysis, they should do it openly, as was done by Bastarache J. so the real issues can be debated directly. If the courts are going to avoid a policy analysis, they should follow the textual analysis wherever it leads, as was done by Abella J., in order to protect the integrity of the statutory interpretation. My feeling is that Rothstein J.’s textual analysis was driven by a desire to get to the ‘right’ result in this case without admitting to the policy driven nature of the analysis. The result was obfuscation and unintended consequences.
