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20 November 2000
For companies such as Nike, Rolex and Louis Vuitton, the market in counterfeit goods (copying their designs and applying their trademarks to inferior goods) is a constant problem. This is compounded by the fact that these counterfeit goods are frequently sold by itinerant sellers with no fixed place of business.
By the time a particular vendor has been identified and proof of the counterfeit nature of the goods has been collected, the seller is likely to have moved on. In addition, many vendors of counterfeit goods are aware of the illegal nature of their activities and are tempted, if not likely, to destroy incriminating evidence if they become aware that their activities have attracted the attention of the owner of the copyright they are infringing.
In these circumstances, litigation can be a frustrating experience. Time and effort are expended identifying those involved and gathering proof of the infringing activity. Once the vendors are served with the proceedings, any incriminating evidence is likely to be destroyed, with the vendors moving on and not appearing in court. A default judgment is useless if the party has disappeared and is unlikely to have any substantial assets that can be located on which to levy execution.
In 1975 a German electrical manufacturer, Anton Pillar KG, discovered that its English distributor planned to provide drawings and confidential information that belonged to Anton Pillar to its competitors. This was in the hope of getting similar machines built at a better price. Two employees of the English distributor came to Anton Pillar with evidence of what their employer was planning.
The trial judge refused to grant an ex parte order to Anton Pillar requiring the English distributor stop its actions and deliver up evidence of its improper conduct. Anton Pillar's lawyers then made an ex parte appeal to the Court of Appeal. The court decided that in the circumstances of the case, such an order should be granted. The court determined that a search warrant could not be issued, but that it was appropriate to grant an order which, while it did not authorize the plaintiff's lawyers or anyone else to enter the defendant's premises against the defendant's will, did authorize entry and inspection with the permission of the defendant. If the defendant did not grant its permission, the plaintiff could not enter. However, if the defendant refused permission, it could be held in contempt of court. Furthermore, the defendant risked a finding that permission to inspect had been refused because it wanted to destroy the documents to avoid being found guilty of some improper or unlawful conduct.
The Court of Appeal further said that in the enforcement of such an order, the plaintiff must act with due circumspection. The plaintiff must be accompanied by its solicitor, as an officer of the court. It was part of the solicitor's duty to ensure that the order was executed in strict accordance with its terms. The solicitor should give the defendant the opportunity to consider the order and consult with his or her solicitor. If the defendant should wish to apply to discharge the order as having been improperly obtained, he or she must be allowed to do so.
However, the court did stress that such an order was to be used only in extreme cases where there was a serious danger of property being smuggled away or of vital evidence being destroyed.
This type of order is referred to as an Anton Pillar injunction. When properly used, it is a very powerful means by which justice can be served.
In the 25 years since the original Anton Pillar injunction, its use has become more common and enhancements have been made. Unlike Anton Pillar KG, which at least had the benefit of a known person with an established place of business, manufacturers who are attempting to deal with counterfeit copies of their goods face the problem that they often do not know the name of the parties selling those counterfeit goods. These parties are not anxious to have such information known and may actively attempt to conceal their identity. To deal with this problem, the 'rolling' Anton Pillar order was developed. Where the identity of the defendant(s) is not known at the time the order is granted, the proceeding is commenced against John and Jane Doe.
It is also possible that the particulars of the alleged infringing activity are not known. A general statement is therefore made in the affidavit filed to support the issuance of the rolling order, that the plaintiff is suffering irreparable harm because of the manufacture and sale of counterfeit merchandise. The affidavit also states the facts that establish the basis of the right it claims. Once granted, a rolling Anton Pillar order usually lasts for approximately one year, and is executed during that time against numerous individuals and corporate entities identified by the plaintiff's agents from time to time. The plaintiff's agents are usually one or more solicitors, an investigator and possibly an off-duty police officer. (The orders usually contain a term either requiring, or allowing for, the assistance of the police in the execution of the order, which may involve on-duty officers as well.)
In practice, the individuals served with rolling Anton Pillar orders, and from whom goods are seized, frequently do not appear in court and judgments are obtained against them by default. In some cases, defendants in these actions are encouraged to agree to consent orders. Although the primary purpose of the Anton Pillar injunction is to preserve evidence for trial, in the majority of cases in which they are granted, a trial never takes place.
The practical result has been that a trademark or copyright owner is able to go to court, and without anyone else being present (or even named), can obtain an order requiring the defendant to cooperate. Cooperation may include turning over the counterfeit merchandise and any documentation that might serve to prove their involvement. If the defendant does not cooperate, it faces a charges of contempt of court. The plaintiff is then able to arrange for the order to be executed and to seize the goods in evidence whenever it sees a seller, in the reasonably strong expectation that nothing will be heard of the defendant again. While the plaintiff is required to appear in court to obtain the court's sanction for what has been done, it is common that in the absence of opposition, these actions are not subjected to scrutiny. The plaintiff is therefore happy - for the cost of two relatively short court appearances (which are generally unopposed), it obtains possession of all the counterfeit goods they were able to find, the defendant disappears and a judgment including a permanent injunction is obtained.
However, while the rolling Anton Pillar order has been a powerful tool, plaintiffs and their lawyers have begun to be careless in its use. A practice began to develop of having such reviews done en masse. In one instance in June 1999, a judge was asked to sign in excess of 80 orders approving the execution of 10 separate Anton Pillar orders. In Nike Canada v Doe, Justice Reed reviewed nine of the orders placed before her. She drew attention to the fact that the orders (in common with most Anton Pillar orders) required the plaintiff's solicitors to prepare a list of all merchandise, related equipment and records that had been seized or delivered pursuant to the order, and to serve a copy of that list on the defendant. The orders further required that the merchandise and equipment, together with records seized, were to be either (i) deposited for safekeeping with the Registry of the Federal Court, or (ii) retained by counsel for the plaintiff, provided that a copy of the list and a complete photographic or video record of the merchandise, equipment and records seized were filed with the court. The purpose of these provisions was to ensure that a complete record of the evidence was available to all parties.
In the Nike Case, counsel took the position that the goods had in fact been seized pursuant to a search warrant issued in parallel criminal trademark proceedings, and that the requirement to prepare the list and either retain possession of the seized items or deposit them in court did not apply because they were in the possession of the police (pursuant to the search warrant). Nevertheless, counsel wished the injunction against continued infringement contained in the Anton Pillar order to be binding upon the defendant. Reed held that she would not approve the execution of an Anton Pillar order that attempted to 'piggy-back' on a search and seizure of goods in criminal proceedings, when the terms of the Anton Pillar order expressly stated that the seizure of the goods was for civil purposes only. She also declined to approve the execution because no list or description of the seized goods was provided either to the respondents or to the court, as required by the terms of the order. The entire order including the injunction was dissolved.
At the same hearing, there were an additional five executions of a tenth Anton Pillar order. This tenth order raised further troubling issues, and specifically raised the issue of the plaintiff's obligation to make full and fair disclosure of all facts to the court when obtaining an Anton Pillar order. This is particularly important because such an order is obtained in the absence of the other party. In these circumstances, the court relies heavily on the plaintiff's solicitors to carry out their duties as officers of the court.
In Havana House v John Doe and Jane Doe, Justice Reed was concerned because she knew of other proceedings in the Federal Court, in which the plaintiff had been unsuccessful in asserting its alleged trademark rights. Reed was also concerned that she was expected to review so many orders on that particular day. When she learned that the plaintiff's counsel had advised the registry that the review of the five executions under the Havana House order was expected to take about 10 minutes, she decided to look into the facts more thoroughly.
Reed released her decision in August 1999. Some of the trademarks being asserted had now been expunged. However, she also discovered that the trademark that was primarily at issue in the action ('COHIBA') had been the subject of two unsuccessful interlocutory injunction motions in another action. The judge in the second unsuccessful application was concerned that instead of the plaintiff proceeding to trial rapidly once it had been refused the first injunction, it instead attempted to again obtain an interlocutory injunction. Reed found that the affidavit in support of the application for an Anton Pillar order was practically the same as that used in the first unsuccessful application for the interlocutory injunction. She was also concerned when she learned that after having obtained the rolling Anton Pillar order, the plaintiff had discontinued the action in which it had twice been refused. In effect, that action was no longer necessary because the Anton Pillar order gave the plaintiff everything it needed without the burden of a trial. She noted that the Anton Pillar order in the John Doe and Jane Doe Case had been used at least 116 times, to seize cigars from individuals and to obtain interlocutory injunctions against them.
It became clear that counsel in the interlocutory proceeding was different from counsel that had obtained the rolling Anton Pillar order. Nevertheless, Reed found that the plaintiff must have known of the other proceedings and had failed in its duty to the court to bring those proceedings to the attention of the court. She refused to add the persons against whom the order had been executed as defendants. She also refused to order injunctions against them. The plaintiff was ordered to return any cigars seized to the respondents and to compensate them for any damage incurred as a result of the search and seizure.
After these decisions in 1999, it was expected that parties wishing to use an Anton Pillar order would ensure that the provisions of the court order would be strictly complied with. However, this appears not to be the case.
In July 2000 investigators of the plaintiff (Louis Vuitton) became aware of sales of counterfeit goods in the Chinatown night market in Vancouver. An Anton Pillar order was obtained on July 10 2000, against a number of persons, including John Doe and Jane Doe "operating a market stall at a street market located in or about Pender and Keefer Streets in Vancouver, BC". On July 15 2000 the order was executed, but the attending solicitors failed to properly serve those in charge of the stalls with copies of the order. Some days later, it was discovered that confidential information had inadvertently been included in the draft of the order counsel had submitted to the court, which the court had then issued. Counsel for the plaintiff persuaded a different judge to hear them on an emergency basis and on July 18 2000 an order was issued that was substantially the same as the earlier one, but with the confidential information deleted. Copies of this second order were left at the addresses of the two persons who had been the subject of the seizure at the market. The second order was stated to be effective until August 1 2000. On July 31 2000 the plaintiff attempted to continue the injunction in the second order.
The judge before whom this application came was concerned about the absence of a review of the execution that had taken place July 15. On review of the seizure, Justice Pelletier emphasized that the order had been obtained ex parte:
"Courts would not issue such orders if they could not rely upon those obtaining them to make full disclosure in obtaining them, and to comply with them strictly in executing them. This obligation to the court is not displaced by anything done or not done by those upon whom the order is executed. The obligation is owed to the court."
Pelletier also noted that the orders required the plaintiff to seek review of execution within 14 days of service of the order. He held that the obligation could not be avoided by failing to serve the order at the time of the execution (also required by the order). It was the seizure which necessitated review and the time ran from that date. He noted that the plaintiff only moved for review of the seizure when it had been ordered to do so by the court. Failure to seek timely review of the execution amounted to both a breach of the order and a breach of the confidence of the court. As a result, the plaintiff's motion to extend the motion was refused and the plaintiff was ordered to return the goods to the persons from whom they had been seized.
The court further directed that a copy of the reasons for the order were to be served on the two defendants, who were added to the action. These reasons contained a specific note that the court did not endorse the right of the defendants to sell the goods that were the subject of the motion. There was evidence that the goods were counterfeit, but an order had not been made because of the failure of the plaintiff to abide by the terms of the order which had earlier been granted. In the event the defendants attempted to sell the goods that had been returned, the court left open the possibility that the plaintiff could apply on the basis of fresh evidence for an order requiring delivery of those goods.
Anton Pillar orders are a powerful legal tool, but they must be used with care or they may cause severe injury to the user or others. Parties who obtain an Anton Pillar order, but do not comply with its terms, can expect little sympathy from the courts. A condition of obtaining such an order is that the plaintiff must give the court an undertaking to answer in damages if the order ought not to have been granted. Therefore, a party obtaining an order on the basis of an invalid intellectual property right is at risk.
In addition to being at risk for compensatory damages, a party that callously disregards the terms of the granted order would be at risk of a punitive damages claim. In Lubrizol v Imperial Oil, the federal Court of Appeal held that callous disregard of a court order could be the basis of a punitive damages award. In that case, C$15 million had been awarded against the defendant. In sending the matter back to the trial division for further consideration, the Court of Appeal held that such an amount was not excessive and suggested that after further inquiry, a greater amount may be required. The Lubrizol Case settled before the further inquiry took place.
If it appears that a significant number of Anton Pillar orders are not being used as intended (ie, to preserve evidence for trial) but are in fact serving as a form of summary ex parte trial, it is likely they will become much more difficult to obtain.
For further information on this topic please contact Peter Wells at Lang Michener by telephone (+1 416 360 8600) or by fax (+1 416 365 1719) or by e-mail (firstname.lastname@example.org).
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