Copyright, Competition, Free Trade & Chocolate Bars

The Supreme Court of Canada today granted leave to appeal in the very important case of Kraft v. Euro Excellence - in which Kraft had succeeded below in using s. 27(2)(e) of the Canadian Copyright Act to block the parallel importation of legitimate Toblerone chocolate bars contained in packaging for which Kraft was the exclusive Canadian licensee of certain copyrighted elements - unless the defendant covered up the offending elements with a sticker, which was done in this case. The defendant also had to pay substantial damages. One can easily imagine the ruling below being used in future cases to effectively stop parallel importation altogether of an enormous variety of consumer goods - on the basis of copyright in some artwork on a package. If this were to happen, it would be very bad news for competition and free trade.

Today, the Supreme Court of Canada granted leave to appeal to the defendant, Euro Excellence. As usual, no reasons were given.

Here is the order from the Court and the Court’s summary of the case:

Euro-Excellence Inc. c. Kraft Canada Inc., Kraft Foods Schweiz AG et Kraft Foods Belgium SA (C.F.) (31327)

The application for leave to appeal is granted with costs to the applicant in any event of the cause.)
Coram: Bastarache / LeBel / Fish

SCC Summary:

Property law – Copyright – Parallel importation of consumer products – Whether courts below erred in interpreting s. 27(2)(e) of Copyright Act, R.S.C. 1985, c. C-42.

Kraft Foods Belgium S.A. ("KFB") and Kraft Foods Schweiz AG ("KFS") manufactured Côte d'Or and Toblerone confectionery products in Belgium and Switzerland, respectively. Euro Excellence imported those products into Canada and distributed them here. KFB authorized Euro Excellence to distribute its Côte d'Or confectionery products in the Canadian market in 1993, but the contract was not renewed when it expired three years later. Kraft Canada Inc. ("Kraft") has been distributing Toblerone chocolates in Canada since 1990. It began distributing Côte d'Or products pursuant to contract in 2001. In October 2002, KFB and KFS registered copyrights on the product wrappers in Canada in the artistic category. They also entered into and registered a licence agreement with Kraft that, among other things, gave Kraft the right to use and publicly present the works in association with the distribution or sale in Canada of confectionery products.

After Euro Excellence refused to stop distributing the products, the Respondents brought an action in the Federal Court seeking an injunction and damages. Kraft alleged that the distribution of Côte d'Or and Toblerone chocolates by Euro Excellence in Canada violated copyright in the artwork on the product wrappers. Under s. 27(2)(e) of the Copyright Act, it is an infringement of copyright for any person to import into Canada, for the purpose of sale, a copy of a copyrighted work that the person knows or should have known infringes copyright or would infringe copyright if it had been made in Canada by the person who made it. The Federal Court issued the injunction and ordered Euro Excellence to pay damages. The Federal Court of Appeal allowed the appeal, but only on the issue of damages.

I should disclose that I act for the Retail Council of Canada - who sought leave to intervene in the leave application.

HK