Euro-Excellence Inc. v. Kraft Canada Inc.

Euro-Excellence Inc. v. Kraft Canada Inc.
Collection
Supreme Court Judgments
Date
2007-07-26
Neutral citation
2007 SCC 37
Report
[2007] 3 SCR 20
Case number
31327
Judges
McLachlin, Beverley; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie; Fish, Morris J.; Abella, Rosalie Silberman; Charron, Louise; Rothstein, Marshall
On appeal from
Federal Court of Appeal
Subjects
Intellectual property
Notes
SCC Case Information: 31327
Decision Content
SUPREME COURT OF CANADA
Citation: Euro‑Excellence Inc. v. Kraft Canada Inc., [2007] 3 S.C.R. 20, 2007 SCC 37
Date: 20070726
Docket: 31327
Between:
Euro‑Excellence Inc.
Appellant
and
Kraft Canada Inc., Kraft Foods Schweiz AG and
Kraft Foods Belgium SA
Respondents
‑ and ‑
Retail Council of Canada and Alliance of Manufacturers
& Exporters Canada
Interveners
Coram: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.
Reasons for Judgment:
(paras. 1 to 51)
Concurring Reasons:
(paras. 52 to 56)
Reasons Concurring in the Result:
(paras. 57 to 106)
Dissenting Reasons:
(paras. 107 to 130)
Rothstein J. (Binnie and Deschamps JJ. concurring)
Fish J.
Bastarache J. (LeBel and Charron JJ. concurring)
Abella J. (McLachlin C.J. concurring)
______________________________
Euro‑Excellence Inc. v. Kraft Canada Inc., [2007] 3 S.C.R. 20, 2007 SCC 37
Euro‑Excellence Inc. Appellant
Euro‑Excellence Inc. Appellant
v.
Kraft Canada Inc., Kraft Foods Schweiz AG and
Kraft Foods Belgium SA Respondents
and
Retail Council of Canada and Alliance of Manufacturers
& Exporters Canada Interveners
Indexed as: Euro‑Excellence Inc. v. Kraft Canada Inc.
Neutral citation: 2007 SCC 37.
File No.: 31327.
2007: January 16; 2007: July 26.
Present: McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Abella, Charron and Rothstein JJ.
on appeal from the federal court of appeal
Intellectual property — Copyright — Infringement — Secondary infringement — Exclusive licences — Exclusive Canadian distributor of imported chocolate bars bringing copyright infringement action against unauthorized distributor of bars after logos were registered in Canada as copyrighted artistic works — Whether Canadian distributor can establish hypothetical primary infringement — Whether chocolate bar can be copyrighted because of protected works appearing on its wrapper — Whether accessories or incidental works exempted from copyright protection — Copyright Act, R.S.C. 1985, c. C‑42, s. 27(2) (e).
KCI is the exclusive Canadian distributor of Côte d’Or and Toblerone chocolate bars in Canada for its parent companies KFB and KFS. Notwithstanding the exclusivity agreements, Euro continued to import and distribute Côte d’Or and Toblerone bars which it had acquired in Europe. In 2002, in order to allow KCI to mount the present case, KFB registered three Côte d’Or logos in Canada as copyrighted artistic works and granted KCI an exclusive licence in the works as used in association with confectionary products. KFS did the same with two Toblerone logos. KCI then called upon Euro to cease and desist distribution of any product to which the copyrighted works were affixed. When Euro refused, KCI brought an action against Euro alleging that it had engaged in secondary infringement under s. 27(2) of the Copyright Act by importing copies of KFS and KFB’s copyrighted works into Canada for sale or distribution. KCI does not rely on its rights as a trade‑mark holder. At trial, KCI was awarded $300,000 in damages and Euro was restrained from selling, distributing, exposing or offering for sale any copies of the copyrighted logos. It was also ordered to render the product non‑infringing. KCI’s motion for reconsideration was refused. The Federal Court of Appeal refused an appeal on the merits, but referred the matter of damages back to the trial judge. On hearing further submissions, the trial judge confirmed his original award.
Held (McLachlin C.J. and Abella J. dissenting): The appeal should be allowed.
Per Binnie, Deschamps and Rothstein JJ.: The Copyright Act does not exempt incidental works from the protection of copyright, and it is not for this Court to create such an exemption. The rights and remedies provided by the Copyright Act are also exhaustive. All artistic works, including logos, receive the protection of copyright if they meet the requisite standards of “skill and judgment”, and there is no dispute in this case that the logos in question are legitimate subjects of copyright. The Copyright Act does not support the introduction of a new equitable doctrine of “legitimate economic interest” to read down the legislation and to exclude logos on wrappers from the domain of copyright. In enacting s. 64(3)(b) of the Act, Parliament has authorized concurrent copyright and trade‑mark protection for labels. Until Parliament provides otherwise, the courts are bound to conclude that a logo on a chocolate bar wrapper can receive concurrent trade‑mark and copyright protection. [4‑5] [8] [13]
This case turns on a straightforward application of s. 27(2) (e) of the Copyright Act . For KCI to succeed, it must show that Euro imported works that would have infringed copyright if they had been made in Canada by the persons who made them. However, this hypothetical primary infringement cannot be established in this case. KFB and KFS made the impugned copies of the works in Europe. They would not have infringed copyright if they had produced the Côte d’Or and Toblerone logos in Canada because they are, respectively, the owners of the Canadian copyright in those logos. Because a copyright owner cannot be liable to its exclusive licensee for infringement, there is no hypothetical infringement, and thus no violation of s. 27(2) (e) in this case by Euro. [14‑15] [20] [23‑24]
Section 27(2) (e) of the Copyright Act , read in context with the definitional and liability provisions, leads to the necessary conclusion that an exclusive licensee may sue third parties for infringement, but not the owner‑licensor of the copyright. The exclusive licensee’s only remedy against the owner‑licensor lies in contract. Although the Act elevates exclusive licensees above mere licensees and permits exclusive licensees to acquire a limited property interest in the copyright, the treatment of exclusive licensees and assignees under the Act clearly manifests Parliament’s intent to treat exclusive licensees differently from copyright owners and assignees. First, express statutory language puts assignees on an equal footing with copyright owners, but no similar language applies to exclusive licensees. Second, unlike assignees, the exclusive licensee lacks the capacity to sue for infringement without joining the owner‑licensor as a party. Third, the language of s. 2.7 defining “exclusive licence” as an “authorization” suggests an interest short of ownership. Had Parliament wanted exclusive licensees to be able to sue the owner‑licensor for infringement, it would have put exclusive licensees on an equal footing with assignees or given exclusive licensees this right in the words of the legislation. [15] [31] [40‑41] [48] [50]
Per Fish J.: There is agreement with Rothstein J.’s reasons, but, without so deciding, grave doubt was expressed as to whether the law governing the protection of intellectual property rights in Canada can be transformed into an instrument of trade control not contemplated by the Copyright Act , as KCI seeks to do. [56]
Per Bastarache, LeBel and Charron JJ.: The merely incidental presence of the copyrighted works on the wrappers of the chocolate bars does not bring the chocolate bars within the protections offered by the Copyright Act . Section 27(2) of the Act, which prohibits parallel importation into Canada of copyrighted works, cannot be used to prevent Euro from importing genuine Côte d’Or and Toblerone chocolate bars into Canada for the purpose of selling, renting, distributing or trading, on the basis that the logos are copyrighted. [57]
The Copyright Act ought to be interpreted with an eye to the internal coherence of its own scheme and consistently with the Trade‑marks Act . Trade‑mark law protects market share in commercial goods, whereas copyright protects the economic gains resulting from an exercise of skill and judgment. The law of copyright should not be used to protect market share if that requires contorting it outside its normal sphere of operation where the economic interest at stake is only tangentially related to the copyrighted work. [83]
Section 27(2) is meant to protect authors from the unauthorized appropriation of the gains of their authorship, but this protection does not extend to include any and all economic gains claimed by an author or copyright owner. If the work in question is merely incidental to another consumer good, and it is that consumer good which is being sold or distributed, or dealt with by way of trade, s. 27(2) cannot be invoked. It is only when it is the work itself which is the subject of the sale or other commercial dealing that it can properly be said that the section applies and its protection becomes available. Section 27(2) is not meant to protect manufacturers from the unauthorized importation of consumer goods on the basis of their having a copyrighted work affixed to their wrapper, this work being merely incidental to their value as consumer goods. The rights transferred to a licensee must be limited in the same way as those of the original creator of the work to the legitimate economic interests resulting from the exercise of skill and judgment. [80] [90] [97]
Liability under s. 27(2) (e) relies on a finding that the defendant intended to commit an act enumerated in s. 27(2) (a) to (c): selling or renting out copies of a work, distributing copies of a work with prejudicial effect, or dealing with copies of a work by way of trade. If a reasonable consumer undertaking a commercial transaction does not think that the copyrighted work is what he or she is buying or dealing with, it is likely that the work is merely incidental to the consumer good and that s. 27(2) cannot be invoked. [90] [93‑94]
There is agreement with the minority that, had s. 27(2) of the Copyright Act been applicable in this case, the exclusive licensee would have been able to sue the owner‑licensor of the copyright. [75]
Per McLachlin C.J. and Abella J. (dissenting): KCI has the right to seek remedies under the Copyright Act to prevent Euro from selling or distributing the copyrighted works (the logos). First, the copyrighted work is being “sold” or “distributed” when it is printed on the wrapper of a consumer product. There is nothing in the Act to endorse a restrictive definition of “sell” and s. 64(3)(b) of the Act extends copyright protection to trade‑marks and labels. Once a work falls within s. 27(2) (a) to (c) and is otherwise entitled to copyright protection, the Act grants no scope for judicially created limits to that protection based on whether the logos on the wrapper are “incidental” or whether the copyright holder has a “legitimate economic interest”. Second, an exclusive licensee in Canada can claim protection against secondary infringement when the copyrighted work was produced by the owner‑licensor. Where the owner of a copyright has granted an exclusive licence, it has temporarily granted a proprietary interest in the copyright itself to the exclusive licensee (s. 13(7) ). The scope of the precise interest granted is shaped by the terms of the licensing agreement. Here, the agreement grants KCI the sole and exclusive right, in Canada, to produce, reproduce, use, distribute, and sell the products. These terms, read together with the rights granted to an exclusive licensee in ss. 2.7 and 13(7) of the Copyright Act , as well as the rights in s. 36(1) to protect and enforce its rights and interests through remedies provided by that Act, give the exclusive licensee the right to invoke the Act for copyright infringement not only against third parties, but also against the owner‑licensor. An owner‑licensor is, technically, still the owner of the copyright, but it is nonetheless liable to an exclusive licensee if it breaches the copyright interest it has granted. [108‑109] [118] [121‑123] [128]
Cases Cited
By Rothstein J.
Distinguished: Théberge v. Galerie d’Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34; Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 302, 2005 SCC 65; referred to: Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42; CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13; Bishop v. Stevens, [1990] 2 S.C.R. 467; Compo Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357; Dictionnaires Robert Canada S.C.C. v. Librairie du Nomade Inc. (1987), 11 F.T.R. 44; A & M Records of Canada Ltd. v. Millbank Music Corp. (1984), 1 C.P.R. (3d) 354; Fly by Nite Music Co. v. Record Wherehouse Ltd., [1975] F.C. 386; Clarke, Irwin & Co. v. C. Cole & Co. (1960), 33 C.P.R. 173; Thomas v. Sorrell (1673), Vaughan 330, 124 E.R. 1098; Robertson v. Thomson Corp., [2006] 2 S.C.R. 363, 2006 SCC 43; Ritchie v. Sawmill Creek Golf & Country Club Ltd. (2004), 35 C.P.R. (4th) 163; United States Naval Institute v. Charter Communications, Inc., 936
F.2d 692 (1991); Architectronics, Inc. v. Control Systems, Inc., 935 F.Supp. 425 (1996); Griggs Group Ltd. v. Evans, [2004] F.S.R. 31, [2003] EWHC 2914.
By Fish J.
Referred to: Robertson v. Thomson Corp., [2006] 2 S.C.R. 363, 2006 SCC 43.
By Bastarache J.
Referred to: R. & A. Bailey & Co. v. Boccaccio Pty. Ltd. (1986), 84 F.L.R. 232; CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13; Théberge v. Galerie d’Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34; Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, [2004] 2 S.C.R 427, 2004 SCC 45; Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 302, 2005 SCC 65; AstraZeneca Canada Inc. v. Canada (Minister of Health), [2006] 2 S.C.R. 560, 2006 SCC 49; British Leyland Motor Corp. v. Armstrong Patents Co., [1986] 1 All E.R. 850; Houle v. Canadian National Bank, [1990] 3 S.C.R. 122; Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701.
By Abella J. (dissenting)
Théberge v. Galerie d’Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34; Compo Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357; Bishop v. Stevens, [1990] 2 S.C.R. 467; CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13; Bouchet v. Kyriacopoulos (1964), 45 C.P.R. 265; Robertson v. Thomson Corp., [2006] 2 S.C.R. 363, 2006 SCC 43; Éditions de la Table ronde s.a. v. Cousture, [1995] Q.J. No. 1519 (QL); Dynabec Ltée v. Société d’informatique R.D.G. Inc. (1985), 6 C.P.R. (3d) 322; Fonds Gabrielle Roy v. Éditions internationales Alain Stanké ltée, [1993] Q.J. No. 2525 (QL); British Actors Film Co. v. Glover, [1918] 1 K.B. 299.
Statutes and Regulations Cited
17 U.S.C. § 101.
Copyright Act, R.S.C. 1985, c. C‑42, ss. 2 “copyright”, “infringing”, 2.7, 3, 13(4), (5), (6), (7), 27, 36(1), (2), 64.
Copyright Act, 1911 (U.K.), 1 & 2 Geo. 5, c. 46.
Copyright Act, 1921, S.C. 1921, c. 24.
Copyright Act 1968 (Cth.), No. 63, s. 10(1).
Copyright Amendment Act (No. 1) 1998 (Cth.), No. 104, Schedule 2.
Copyright, Designs and Patents Act 1988 (U.K.), 1988, c. 48, ss. 90(1), 92(1), 101(1).
Patent Act, R.S.C. 1985, c. P‑4 .
Trade‑marks Act, R.S.C. 1985, c. T‑13, s. 13(2) .
Authors Cited
Bently, L., and B. Sherman. Intellectual Property Law, 2nd ed. Oxford: Oxford University Press, 2004.
Côté, Pierre‑André. The Interpretation of Legislation in Canada, 3rd ed. Scarborough, Ont.: Carswell, 2000.
Drassinower, Abraham. “Taking User Rights Seriously”. In Michael Geist, ed., In the Public Interest: The Future of Canadian Copyright Law. Toronto: Irwin Law, 2005, 462.
Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.
Judge, Kathryn. “Rethinking Copyright Misuse” (2004), 57 Stan. L. Rev. 901.
Laddie, Hugh, et al. The Modern Law of Copyright and Designs, vol. 1, 3rd ed. London: Butterworths, 2000.
McKeown, John S. Fox on Canadian Law of Copyright and Industrial Designs, 4th ed. Toronto: Thomson/Carswell, 2003 (loose‑leaf updated 2007, release 1).
Megarry, Robert Edgar. A Manual of the Law of Real Property, 8th ed. by A. J. Oakley. London: Sweet & Maxwell, 2002.
Nimmer, Melville B., and David Nimmer. Nimmer on Copyright, vol 3. New York: Matthew Bender, 1981 (loose‑leaf updated December 2002, release 59).
Scassa, Teresa. “Using Copyright Law to Prevent Parallel Importation: A Comment on Kraft Canada, Inc. v. Euro Excellence, Inc.” (2006), 85 Can. Bar Rev. 409.
Tamaro, Normand. The 2006 Annotated Copyright Act. Toronto: Thomson Carswell, 2006.
Vaver, David. “The Exclusive Licence in Copyright” (1995), 9 I.P.J. 163.
Ziff, Bruce H. Principles of Property Law, 4th ed. Toronto: Thomson Carswell, 2006.
APPEAL from a judgment of the Federal Court of Appeal (Desjardins, Noël and Pelletier JJ.A.), [2006] 3 F.C.R. 91, 265 D.L.R. (4th) 555, 346 N.R. 104, 47 C.P.R. (4th) 113, [2005] F.C.J. No. 2082 (QL), 2005 FCA 427, reversing in part a decision of Harrington J., [2004] 4 F.C.R. 410, 252 F.T.R. 50, 33 C.P.R. (4th) 246, [2004] F.C.J. No. 804 (QL), 2004 FC 652. Appeal allowed, McLachlin C.J. and Abella J. dissenting.
François Boscher and Pierre‑Emmanuel Moyse, for the appellant.
Timothy M. Lowman and Kenneth D. McKay, for the respondents.
Howard P. Knopf and Elizabeth G. Elliott, for the intervener the Retail Council of Canada.
R. Scott Jolliffe and James H. Buchan, for the intervener the Alliance of Manufacturers & Exporters Canada.
The reasons of Binnie, Deschamps and Rothstein JJ. were delivered by
1 Rothstein J. — I have read the reasons of Bastarache J. While I agree with his conclusion, I am respectfully unable to agree with his analysis. I have three main concerns with his reasons.
(1) The Concerns
2 This Court has repeatedly adopted Driedger’s approach to statutory interpretation:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
(E. A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 87; see also Bell ExpressVu Limited Partnership v. Rex, [2002] 2 S.C.R. 559, 2002 SCC 42, at para. 26; CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, 2004 SCC 13, at para. 9.)
3 I am concerned that Bastarache J.’s approach in this case is inconsistent with this Court’s approach to statutory interpretation. The “modern” or “purposive” approach requires that the words of the statute “in their grammatical and ordinary sense” be read harmoniously with the objects of the Act. It does not, however, give judges licence to substitute their policy preferences for those of Parliament. This Court has consistently held that “copyright is a creature of statute and the rights and remedies provided by the Copyright Act are exhaustive”: see CCH, at para. 9; Théberge v. Galerie d’Art du Petit Champlain inc., [2002] 2 S.C.R. 336, 2002 SCC 34, at para. 5; Bishop v. Stevens, [1990] 2 S.C.R. 467, at p. 477; Compo Co. v. Blue Crest Music Inc., [1980] 1 S.C.R. 357, at pp. 372-73. In my respectful view, Bastarache J.’s reasons depart from this doctrine.
4 Throughout his reasons, Bastarache J. relies on a distinction between copyrighted works that are sold and works that are “merely incidental” to the item being sold. He concludes that since the Toblerone and Côte d’Or logos are merely incidental to the thing being sold (the chocolate bar), they do not receive copyright protection. I understand this distinction to be the crux of his analysis. However, I see no statutory authority for the proposition that “incidental” works are not protected by the Copyright Act, R.S.C. 1985, c. C-42 . This Court’s holding in CCH confirms that all artistic works receive the protection of copyright if they meet the requisite standards of “skill and judgment”: CCH, at para. 16. The Copyright Act does not exempt so‑called “incidental” works from its protection. Neither Bastarache J. nor any of the parties contest that the Côte d’Or and Toblerone logos resulted from exercises of skill and judgment. As such, they are legitimate subjects of copyright.
5 I note that the “incidental” approach is similar to the Australian approach to this issue. However, the Australian approach was prescribed by statute and not by judges. In 1998, the Australian Parliament made a deliberate policy decision to amend its Copyright Act 1968, (Cth.), No. 63, to exclude “accessories” from the domain of copyright for the purposes of parallel importation (Copyright Amendment Act (No. 1) 1998 (Cth.), No. 104, Schedule 2). Under s. 10(1) of the Australian Copyright Act 1968, as amended, an infringing work includes a work that was “imported without the licence of the owner of the copyright, [and] would have constituted an infringement of that copyright if the article had been made in Australia by the importer, but does not include: . . . (g) a non‑infringing accessory whose importation does not constitute an infringement of that copyright”. The Australian Act defines “accessory” so as to include the labels and packaging that accompany an article. The Canadian Copyright Act, in contrast, has not exempted accessories or incidental works from the protection of copyright, and it is not for this Court to create such an exemption.
6 Even if one were to accept that “incidental” works are not protected under Canadian copyright law, it is not apparent from Bastarache J.’s reasons when a work will be considered “merely incidental”. The “reasonable consumer” test proposed at para. 94 offers little guidance on how to determine whether a work is “merely incidental”. Paragraph 95 draws a distinction between a small logo and a larger painting of that same logo on a t‑shirt. However, according to Canadian copyright law, it is skill and judgment — not the size of the work — that determines whether a work receives protection under the Copyright Act .
7 To support his argument for the “incidental” approach to copyright law, Bastarache J. introduces a concept of “legitimate economic interests” to read down rights expressly granted by the Copyright Act . The term “legitimate economic interest” was used by this Court in Théberge, but in a different context. The legitimate economic interest described in Théberge was the right of the creator of an artistic work to receive a reward for that work. The issue in Théberge was whether the transferring of an artistic work from a paper backing to a canvas backing constituted reproduction contrary to the “legitimate economic interests” of the artist. Binnie J., for the majority, found that reproduction did not occur on the facts of that case. Binnie J.’s holding relied on the concepts of originality and reproduction, which are firmly rooted in the words of the Copyright Act .
8 In this case, Bastarache J. expands the concept of “legitimate economic interest” to exclude logos on wrappers from the domain of copyright. I find no authority in the Act or in our jurisprudence for Bastarache J.’s theory of “legitimate economic interests”. As this Court has often stated, “the rights and remedies provided by the Copyright Act are exhaustive”: CCH, at para. 9. I would not depart from this approach by introducing a new equitable doctrine of “legitimate economic interest” to read down the legislation.
9 I accept, of course, that the Copyright Act is to be given a purposive interpretation. However, I distinguish between an approach that is rooted in the words of the Act and the approach taken by my colleague Bastarache J. that involves reading words into the legislation that are at odds with Parliament’s intent. Section 64 of the Copyright Act , which can be found, along with the other relevant provisions of the Copyright Act , in the Appendix, addresses the very issue that is fundamental to my colleague’s approach: can a work of art appearing on a label and receiving trade-mark protection also be the subject of copyright protection? Parliament concluded that works can receive concurrent copyright and trade-mark protection.
10 To that end, Parliament adopted s. 64 of the current Act, which excludes certain functional articles from copyright protection, but affirms that copyright shall subsist in “a trade-mark or a representation thereof or a label”. Parliament enacted this provision after having turned its mind to the possibility of overlap between trade-mark and copyright law. Were the Court to hold that the Kraft labels cannot be subjects of trade-mark and copyright concurrently, we would be substituting a different policy preference from that chosen by Parliament.
11 It is for this reason that I must respectfully disagree with Bastarache J.’s attempted analogy between the present case and Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 302, 2005 SCC 65. In Kirkbi, this Court held that trade-mark law cannot be leveraged to extend protection to subjects that are ordinarily the domain of patent law. Bastarache J. suggests that Kirkbi stands for the further proposition that the subjects of copyright law and trade-mark law must not overlap and that because it is trade-mark law that ordinarily protects market share and goodwill, copyright holders cannot use copyright to protect their market share or the goodwill associated with their brand.
12 I do not read Kirkbi as underpinning a broad doctrine of copyright misuse. Although the Court in Kirkbi cautioned against interpreting trade-mark law in a way that undermined the Patent Act, R.S.C. 1985, c. P-4 , the decision in that case was anchored in the language of the Trade‑marks Act, R.S.C. 1985, c. T-13 , itself and not in a vague notion of trade-mark misuse. In Kirkbi, this Court held that the Trade‑marks Act had expressly incorporated the “doctrine of functionality” in s. 13(2) of the Act (para. 42). LeBel J., writing for the Court, held that “[t]his doctrine recognizes that trade-marks law is not intended to prevent the competitive use of utilitarian features of products, but that it fulfills a source‑distinguishing function”: Kirkbi, at para. 43. By incorporating the doctrine of functionality, s. 13(2) of the Trade‑marks Act had precluded the granting of trade-mark protection to functional works, which are the subjects of patent law.
13 The difficulty in attempting to analogize this case and Kirkbi is that the Court in Kirkbi relied on a provision of the Trade-marks Act in order to find that there could be no overlap between trade-mark and patent. In contrast, s. 64(3) (b) of the Copyright Act permits a single work to be the subject of both copyright and trade-mark protection. In other words, Parliament has authorized an overlap between copyright and trade-mark. I do not doubt the wisdom of LeBel J.’s general statement, at para. 37 of Kirkbi, that it is important to bear in mind the “basic and necessary distinctions between different forms of intellectual property and their legal and economic functions”. However, this guiding principle must be qualified by the proviso: except where Parliament provides otherwise. Parliament has authorized concurrent copyright and trade-mark protection for labels. Until it provides otherwise, the courts are bound to conclude that a logo on a chocolate bar wrapper can receive concurrent trade-mark and copyright protection.
(2) The Purposive Approach to the Copyright Act
Overview
14 In my view, this case turns on a straightforward application of s. 27(2) (e) of the Copyright Act . The Kraft companies allege that Euro-Excellence Inc. is liable for secondary infringement under s. 27(2) (e). However, Kraft Canada Inc. has failed to establish “hypothetical infringement”, which is one of the three constitutive elements required to ground a claim under s. 27(2) (e). For Kraft Canada to succeed, it must show that Euro-Excellence imported works that would have infringed copyright if they had been made in Canada by the persons who made them. It fails to do so.
15 Under the Kraft companies’ argument, the putative “hypothetical infringers” (the persons who would have infringed copyright if they made the impugned works in Canada) are the Kraft parent companies, Kraft Foods Belgium SA (“KFB”) and Kraft Foods Schweiz AG (“KFS”). But KFB and KFS are also, respectively, the owners of the Côte d’Or and Toblerone copyrights at issue in this case. The copyright itself was not assigned to Kraft Canada. Therefore, to accept the Kraft companies’ argument, this Court would have to find that copyright owners can infringe their own copyright if they have licensed copyright to an exclusive licensee despite their retention of the copyright. In my view, the Copyright Act does not permit exclusive licensees to sue the copyright owner-licensor for infringement of its own copyright. If KFS or KFB had reproduced Kraft labels in Canada in violation of its licensing agreement with Kraft Canada, Kraft Canada’s only remedy would lie in breach of contract and not in copyright infringement. Because a copyright owner cannot be liable to its exclusive licensee for infringement, there is no hypothetical infringement and thus no violation of s. 27(2) (e) in this case by Euro-Excellence.
16 Bastarache J., at para. 75, suggests that on my reading of the Act, the Kraft companies could have circumvented the purposes of the Act by calling their agreements “assignments” rather than “exclusive licences”. However, the distinction between assignments and exclusive licences is important and meaningful. By granting an assignment, the copyright owner intends to bestow upon the assignee the full panoply of rights and interests reserved for copyright owners. An exclusive licence, by contrast, permits owners to convey to licensees a more limited interest in the copyright. In my respectful view, an approach that conflates exclusive licences and assignments must be rejected. By enabling copyright owners to grant an interest in copyright either by assignment or exclusive licence, Parliament intended to provide copyright owners with two qualitatively different mechanisms by which to transfer their interests in whole or in part. Disregarding the distinctions between the two would lead to an unjustifiable narrowing of the owner’s options in dealing with its interest.
Why there is no hypothetical infringement by KFS and KFB and therefore no secondary infringement by Euro-Excellence
17 Section 27 of the Copyright Act describes infringement under the Act. Section 27(1) describes what is known as “primary infringement”. It provides that:
It is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that by this Act only the owner of the copyright has the right to do.
Section 3 sets out the catalogue of rights that the copyright owner possesses under the Act. These rights include the sole right to produce and reproduce copies of the copyrighted work. For the purposes of this case, primary infringement would have arisen if Euro‑Excellence had produced copies of the Toblerone or Côte d’Or logos.
18 But Euro‑Excellence does not want to produce labels with the Toblerone or Côte d’Or logos, and the Kraft companies have not alleged that it has done so. The Kraft companies seek to enjoin Euro‑Excellence from importing into Canada works that have been produced lawfully in Europe by the Kraft parent companies, KFS and KFB.
19 The Kraft companies thus allege that Euro‑Excellence has engaged in “secondary infringement” by importing for sale or distribution copies of KFS and KFB’s copyrighted works into Canada. Secondary infringement is dealt with under s. 27(2) of the Act. In CCH, at para. 81, this Court held that three elements must be proven to establish secondary infringement: (1) a primary infringement; (2) the secondary infringer should have known that he or she was dealing with a product of infringement; and (3) the secondary infringer sold, distributed or exposed for sale the infringing goods. Perhaps the most straightforward form of secondary infringement arises when one sells a copy of an infringing work. Under s. 27(2)(a), “[i]t is an infringement of copyright for any person to . . . sell . . . a copy of a work . . . that the person knows or should have known infringes copyright”.
20 Section 27(2)(e) stands out as an apparent exception to the rule in CCH that secondary infringement first requires primary infringement because, unlike s. 27(2)(a) to (d), it does not require actual primary infringement. Instead, it requires only hypothetical primary infringement. Under s. 27(2)(e),
It is an infringement of copyright for any person to . . . import . . .a copy of a work . . . that the person knows . . . would infringe copyright if it had been made in Canada by the person who made it.
Section 27(2)(e) substitutes hypothetical primary infringement for actual primary infringement. It is possible that the infringing imports may have been lawfully made outside of Canada. Still, they are deemed to infringe copyright if the importer has imported into Canada works that would have infringed copyright if those works had been made in Canada by the persons who made the works abroad.
21 The apparent purpose of s. 27(2)(e) is to give Canadian copyright holders an added layer of protection where the Canadian copyright holder does not hold copyright in that work in foreign jurisdictions. Section 27(2)(e) protects Canadian copyright holders against “parallel importation” by deeming an infringement of copyright even where the imported works did not infringe copyright laws in the country in which they were made. Without s. 27(2)(e), the foreign copyright holder who could manufacture the work more cheaply abroad could flood the Canadian market with the work, thereby rendering the Canadian copyright worthless. Section 27(2)(e) thus represents Parliament’s intention to ensure that Canadian copyright holders receive their just rewards even where they do not hold copyright abroad: see, e.g., Dictionnaires Robert Canada S.C.C. v. Librairie du Nomade Inc. (1987), 11 F.T.R. 44; A & M Records of Canada Ltd. v. Millbank Music Corp. (1984), 1 C.P.R. (3d) 354 (F.C.T.D.); Fly by Nite Music Co. v. Record Wherehouse Ltd., [1975] F.C. 386 (T.D.); Clarke, Irwin & Co. v. C. Cole & Co. (1960), 33 C.P.R. 173 (Ont. H.C.).
22 On the facts of this case, the Kraft companies have not made out all of the constitutive elements of a claim under s. 27(2)(e). Hypothetical infringement has not been established. The Kraft companies cannot prove that the impugned works imported and distributed by Euro‑Excellence would have infringed copyright if they had been made in Canada by the persons who made them in Europe.
23 The persons who made the impugned copies of the works in Europe were the Kraft parent companies, KFB and KFS. However, KFB and KFS would not have infringed copyright if they had produced the Côte d’Or and Toblerone logos in Canada.
24 This is because KFB and KFS are, respectively, the owners of the Canadian copyright in the Côte d’Or and Toblerone logos. On the Kraft companies’ argument, KFB and KFS would be the hypothetical copyright infringers. The Kraft companies argue that KFB and KFS would have infringed copyright if they produced the copyrighted works in Canada because they had licensed the Toblerone and Côte d’Or copyrights to Kraft Canada. Accepting this argument would mean that KFB and KFS have infringed their own copyrights — a proposition that is inconsistent with copyright law and common sense. Under s. 27(1), infringement arises when a person, without the consent of the owner, does something that under the Act only the owner has the right to do. By definition, no person can simultaneously be owner and infringer of copyright: see also CCH, at para. 37.
25 The Kraft companies allege that KFB and KFS can, hypothetically, infringe copyright because they had licensed the exclusive rights to produce and reproduce the copyrighted works in Canada to Kraft Canada, their Canadian subsidiary. The Kraft companies thus assume that an exclusive licensee becomes the owner of the copyright and able to sue the licensor for infringement. This assumption is incorrect. Under the Copyright Act , exclusive licensees are not able to sue the owner-licensor for infringement. I arrive at this conclusion after considering the Copyright Act ’s provisions on copyright ownership and licensing.
Licensing Under the Copyright Act
26 This case turns on the nature and scope of an exclusive licensee’s rights under the Copyright Act . An exclusive licence under copyright law exists when the following conditions are met: (a) the copyright owner (the licensor) permits another person (the licensee) to do something within the copyright; (b) the licensor promises not to give anyone else the same permission for the duration of the licence; and (c) the licensor itself promises not to do those acts that have been licensed to the licensee for the duration of the licence: Copyright Act, s. 2.7 ; see also D. Vaver, “The Exclusive Licence in Copyright” (1995), 9 I.P.J. 163, at pp. 164-65. The parties agree that the agreements between Kraft Canada and the Kraft parent companies are exclusive licence agreements.
27 Under the common law, a licensee does not enjoy property rights: “A licence is merely a permission to do that which would otherwise amount to trespass” (B. H. Ziff, Principles of Property Law (4th ed. 2006), at p. 270). In contrast, an assignee receives a property interest from the original owner and steps into the shoes of the owner with respect to those rights assigned. As the recipient of a property interest, the assignee enjoys a right against the world, including the right to sue others (including the assignor) in trespass. The licensee’s rights, on the other hand, are contractual, and the licensee is empowered only to sue the owner for breach of contract; it cannot sue in trespass: Ziff, at p. 270; R. E. Megarry, A Manual of the Law of Real Property (8th ed. 2002), at p. 475; see also Thomas v. Sorrell (1673), Vaughan 330, 124 E.R. 1098, at p. 1109.
28 A contextual reading of the Copyright Act reveals that Parliament has preserved the traditional distinction between assignees and licensees with some modification. Under the present Act, there is a distinction between “assignee”, “licensee” and “exclusive licensee”. An assignee possesses full ownership rights in the copyright with respect to the rights assigned. A non-exclusive licensee has no property rights in the copyright, and enjoys only contractual rights vis‑à‑vis the owner-licensor. As a result, it cannot sue for infringement. An exclusive licensee, on the other hand, has a limited property interest in the copyright. For reasons explained below, this limited property interest enables the exclusive licensee to sue third parties for infringement but precludes the exclusive licensee from suing the owner‑licensor for infringement.
29 Under the Act, the nature of the assignee’s interest in the copyright is clear. Section 13(5) states expressly that assignees of copyright are, with the exception of moral rights, on equal footing with the original copyright owner:
Where, under any partial assignment of copyright, the assignee becomes entitled to any right comprised in copyright, the assignee, with respect to the rights so assigned, and the assignor, with respect to the rights not assigned, shall be treated for the purposes of this Act as the owner of the copyright, and this Act has effect accordingly.
The assignee of an interest in copyright is a copyright owner, and thus enjoys rights against the world, including the right to sue the assignor for infringement. This is beca