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05 May 2015
Another milestone has been reached in a case between Imperial Tobacco Canada Limited and Philip Morris and its Canadian subsidiary Rothmans, Bensons & Hedges (collectively Philip Morris). On March 23 2015 the Federal Court confirmed that Imperial Tobacco is entitled to elect an accounting of Philip Morris's profits resulting from the infringement of its rights in the MARLBORO trademark in Canada. This decision will likely become significant precedent for Canadian litigants, as this was the first opportunity in decades for the Federal Court to conduct an in-depth assessment of the issue of entitlement to profits in the trademark context.
Marlboro has been the best-known and top-selling cigarette brand in the world since the mid-1970s. It is sold by Philip Morris in more than 160 countries – except for Canada, where the MARLBORO trademark was assigned to Imperial Tobacco in the 1920s. In 2006 Philip Morris introduced on the Canadian market the first cigarette packaging in worldwide history to be sold without any brand name, intentionally designed to emulate the design elements of its international Marlboro brand packaging but without the 'Marlboro' name.
Trademark infringement proceedings were initiated in the Federal Court in 2006 and concluded with a decision of the Federal Court of Appeal, which
In his detailed reasons, Mr Justice de Montigny noted that the Trademarks Act provides for damages and accounting of profits as alternative remedies. While both remedies are designed to compensate the rights holder for the wrongful use of its intellectual property, the underlying principles are very different. An accounting of profits is an equitable remedy, the purpose of which is to compel the wrongdoer to divest earnings to the party which has been wronged. This is to be contrasted to damages, the aim of which is to put the injured party in the position it would have occupied had the infringement not occurred.
The court found that while Imperial Tobacco has no presumptive right to an accounting of profits, it should not be denied that option in the absence of any compelling reasons. Referring to well-established equitable defences, the court reviewed the following considerations:
In addition, the court addressed two arguments raised by Philip Morris that were essentially found to be ill founded as lacking legal and evidentiary support:
Ultimately, the trial judge found that none of the factors considered precluded an accounting of profits and granted Imperial Tobacco the right to elect either remedy after discovery of Philip Morris.
With this legal issue having been determined by the court, the parties can now proceed to a reference for the determination of the damages or profits to be paid by Philip Morris. Beyond the immediate effect on the parties, this decision will provide considerable guidance for litigants involved in trademark infringement proceedings and considering the issues of monetary remedies and entitlement in the future.
For further information on this topic please contact Jean-Sébastien Dupont at Smart & Biggar/Fetherstonhaugh's Montreal office by telephone (+1 514 954 1500) or email (email@example.com). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
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