Trademarks, Copyright, ... and Punitive Damages?

It is an axiom of Canadian law that damages are intended to put parties in the place they would have been but for the wrongful acts of the defendants. Punitive damages have a different purpose — they are intended to punish defendants rather than compensate plaintiffs.

In a recent Federal Court decision involving the sale of counterfeit goods that infringed both trademarks and copyrights belonging to the plaintiffs, the trial judge referenced a leading Supreme Court of Canada decision on punitive damages: “Punitive damages may be appropriate where compensatory damages would amount to nothing more than a cost of doing business or a ’licence fee’ to disregard the rights of others.”   

The judge listed the factors to be considered in assessing the appropriateness and quantum of a punitive damages award, holding they include:

• Whether the misconduct was planned and deliberate;
• The defendants' intent and motive;
• Whether the conduct was persistent and/or concealed;
• The defendants' awareness that what they were doing was wrong; and
• Whether they profited from the misconduct.

The judge found that the defendants in the case sold counterfeit fashion goods in a planned and deliberate manner, for financial gain, with disregard for the plaintiffs’ intellectual property rights.

Further, the conduct was persistent, continuing over the course of two full years: “Importantly, it continued long after they had been served with a letter clearly explaining [the plaintiffs’] rights and demanding they cease violating those rights.” 

The judge dismissed the defendants’ claim that they did not know that selling counterfeit goods was wrong.

Based on particulars of their respective conduct, the judge ordered some of the defendants to pay the plaintiffs $50,000 in punitive damages and others to pay $100,000 in punitive damages.  The defendants were also to pay the plaintiffs' proven damages of over $100,000.

Those who knowingly act badly be warned — in addition to damages, punishment by way of punitive damages may flow from intentional wrongful conduct.