Ark Innovation Technology Inc. v. Matidor Technologies Inc.

Ark Innovation Technology Inc. v. Matidor Technologies Inc.
Court (s) Database
Federal Court Decisions
Date
2021-12-01
Neutral citation
2021 FC 1336
File numbers
T-129-20
Decision Content
Date: 20211201
Docket: T-129-20
Citation: 2021 FC 1336
Ottawa, Ontario, December 1, 2021
PRESENT: Mr. Justice McHaffie
BETWEEN:
ARK INNOVATION TECHNOLOGY INC.
AND ARK PLATFORMS INC.
Plaintiffs
and
MATIDOR TECHNOLOGIES INC. AND
WING CHUEN LAM A.K.A. VINCENT LAM
Defendants
PUBLIC JUDGMENT AND REASONS
I. Overview
[1] Vincent Lam is a founder and former executive of Ark Platforms Inc, which developed and marketed map-based project management software under the name “Arkit.” A year or so after his departure from Ark Platforms in 2017, Mr. Lam and his new company, Matidor Technologies Inc, began marketing and licensing map-based project management software under the name “Matidor.” The plaintiffs, Ark Platforms and its successor Ark Innovation Technology Inc, claim Mr. Lam and Matidor have infringed copyright in the Arkit software and promotional materials contrary to the provisions of the Copyright Act, RSC 1985, c C‑42, and have engaged in passing off contrary to paragraph 7(b) of the Trademarks Act, RSC 1985, c T‑13.
[2] The defendants admit the Matidor software infringed copyright in the Arkit software but contest the passing off claim. They also dispute the plaintiffs’ claim for $900,000 in damages and $75,000 in punitive damages, and aspects of the injunctive relief sought. The plaintiffs’ action was heard by summary trial on these disputed issues.
[3] I conclude the defendants have infringed copyright and that they engaged in passing off for a period in 2019. I award damages of $277,400. I also order the defendants to deliver up infringing material and enjoin them from further infringement of copyright, on the terms described below. I decline to order punitive damages.
II. Issues and Areas of Dispute
[4] The following issues are raised by the parties’ memoranda of fact and law and their oral submissions at the hearing of the summary trial:
Is this a suitable case for summary trial?
Have the defendants infringed copyright and, if so, over what period?
Have the defendants engaged in passing off?
What remedies are appropriate and in particular:
(1) what damages, if any, should be awarded; and
(2) what is the appropriate scope of an injunction and order for delivery up?
[5] Some of these issues are not disputed. The parties agree summary trial is appropriate and ask the Court to decide the matter based on the evidence and arguments put forward at the summary trial. The defendants admit they have infringed copyright, although the scope and effect of that admission is in some dispute. In particular, the defendants admit the original version of the Matidor software, together with two subsequent versions that were the subject of expert evidence [the “December 2019 Version” and the “June 2020 Version”], infringe the plaintiffs’ copyright in the Arkit software. However, the defendants claim they continued to amend the Matidor software after June 2020 and that the plaintiffs have not established that later versions, and in particular the current version, are infringing. The defendants deny they engaged in passing off and seek dismissal of this aspect of the plaintiffs’ claim.
[6] With respect to remedies, the defendants dispute the plaintiffs’ claim for damages and punitive damages. They agree to the issuance of an injunction and an order requiring delivery up of any infringing copies of the relevant works, but argue the injunction and delivery up order should not refer to or prohibit them from using works “derived from” substantial reproductions of the works, as the plaintiffs request.
[7] With this brief overview of the issues in dispute, I will turn to a summary of the evidence filed before addressing the parties’ submissions in greater depth.
III. The Evidence Presented by the Parties on the Summary Trial
A. The Plaintiffs’ Evidence
[8] The summary trial motion proceeded on the written records filed by the parties. No order to require a witness to attend for cross-examination before the Court was sought pursuant to Rule 216(3) of the Federal Courts Rules, SOR/98-106.
[9] The plaintiffs filed seven affidavits: two from representatives of the plaintiffs, Christopher Kam and Linus Yuen; two from an expert witness, Juseop Lim, comparing the Arkit software with the December 2019 and June 2020 Versions of the Matidor software, respectively; two from private investigators, Sydney Hallmark and Paige Renout; and one from a legal assistant, Sylvia Li, regarding uncontested communications and documents in the case. The plaintiffs also filed the transcript of the examination for discovery of Mr. Lam, responses to undertakings given on that examination, and transcripts from cross-examinations of the defendants’ affiants, Mr. Lam and Jason Madar.
[10] I will discuss the substance of the plaintiffs’ evidence as it pertains to the relevant issues in my analysis below. However, I make two preliminary observations regarding the plaintiffs’ evidence.
[11] First, the plaintiffs filed the entirety of the transcript of the examination for discovery of Mr. Lam, in the apparent expectation that portions of that transcript would be “read in” at the summary trial, in the manner that discovery evidence is usually read in at trial pursuant to Rules 288 and 289. However, evidence on summary trial is not adduced in the same manner as evidence at trial. Evidence at trial is governed by Rules 271 to 291. Evidence on summary trial is governed by Rule 216(1), which stipulates the evidence to be included in a motion record for summary trial:
Motion record for summary trial
Dossier de requête en procès sommaire
216 (1) The motion record for a summary trial shall contain all of the evidence on which a party seeks to rely, including
216 (1) Le dossier de requête en procès sommaire contient la totalité des éléments de preuve sur lesquels une partie compte se fonder, notamment :
(a) affidavits;
a) les affidavits;
(b) admissions under rule 256;
b) les aveux visés à la règle 256;
(c) affidavits or statements of an expert witness prepared in accordance with subsection 258(5); and
c) les affidavits et les déclarations des témoins experts établis conformément au paragraphe 258(5);
(d) any part of the evidence that would be admissible under rules 288 and 289.
d) les éléments de preuve admissibles en vertu des règles 288 et 289.
[Emphasis added.]
[Je souligne.]
[12] It is thus the inclusion of portions of a discovery transcript in a motion record that makes them part of the record of evidence on the summary trial motion, without the need to read them in at the hearing of the summary trial. An opposing party may object to the inclusion of a discovery transcript or parts of it on grounds that, for example, the evidence is not admissible under Rules 288 or 289. But the inclusion of the transcript in the motion record is the party’s indication that it is “evidence on which the party seeks to rely.” I note that, while the issue did not result in a dispute between the parties in this case, in my view if a party includes the whole or a portion of the transcript of an adverse party’s examination for discovery in their motion record, that evidence is then part of the record and may be referred to and relied on by either party.
[13] Second, the plaintiffs filed as part of their motion record not only the entire examination for discovery transcript of Mr. Lam, but all of the defendants’ answers to undertakings given on that examination (including all of the documents produced in response to those undertakings, both separately and as an exhibit to Ms. Li’s affidavit), and all of the defendants’ productions as listed in their affidavit of documents (as an exhibit to Ms. Li’s affidavit). A fair number of these documents were not referred to in the plaintiffs’ written or oral submissions. While it may seem preferable to a party bringing a summary trial motion to file “everything” to avoid under-inclusion, particularly when documents are being filed electronically, it is important for parties to recall and recognize that Rule 216 calls on each party to include in their motion record the evidence, and only the evidence, on which they seek to rely.
B. The Defendants’ Evidence
[14] The defendants filed two affidavits from Mr. Lam, the second simply correcting an error in one of the exhibits to the first; and an affidavit from an expert, Jason Madar, comparing the Arkit software with the December 2019 and June 2020 Versions of the Matidor software. The defendants also filed the transcript of their cross-examination of Mr. Kam. The plaintiffs’ other affiants, Mr. Yuen, Mr. Lim, Ms. Hallmark, Ms. Renout, and Ms. Li, were not cross-examined.
[15] Neither party objected to the qualification of the other party’s expert. Given the defendants’ admission of copyright infringement, the parties placed less emphasis on the expert evidence at the summary trial.
IV. Analysis
A. This is a Suitable Case for Summary Trial
[16] The Court shall dismiss a motion for summary trial if “the issues raised are not suitable for summary trial” or if “a summary trial would not assist in the efficient resolution of the action”: Rule 216(5). Conversely, the Court may grant judgment if it is “satisfied that there is sufficient evidence for adjudication, regardless of the amounts involved, the complexities of the issues and the existence of conflicting evidence,” unless the Court considers “it would be unjust to decide the issues on the motion”: Rule 216(6).
[17] As the Court of Appeal confirmed recently, these provisions must be interpreted and applied consistently with the general principle in Rule 3, which seeks “to secure the just, most expeditious and least expensive determination of every proceeding on its merits”: Viiv Healthcare Company v Gilead Sciences Canada, Inc, 2021 FCA 122 at paras 35–37. In assessing whether summary trial is appropriate, issues such as the complexity of the matter, urgency, cost, time, expert evidence, and whether a summary trial risks “litigating in slices” are relevant factors: Viiv Healthcare at para 38 citing with approval Wenzel Downhole Tools Ltd v National-Oilwell Canada Ltd, 2010 FC 966 at para 38; Bosa v Canada (Attorney General), 2013 FC 793 at para 22; Tremblay v Orio Canada Inc, 2013 FC 109 at para 24.
[18] In this case, the parties consent to the summary trial process. In my view, while this cannot be determinative, it is an important factor in assessing whether it is “suitable” and “just” to proceed by summary trial: Tremblay at para 26; Boulangerie Vachon Inc v Racioppo, 2021 FC 308 at paras 8, 12. If all parties are prepared to proceed through the simplified and typically less expensive summary trial process, this suggests it is just to proceed in this manner. I believe the Court should be reluctant in such circumstances to require the parties to incur the further cost and delay of proceeding to a full trial.
[19] As to the other factors, the issues in the case are detailed but not overly complex, pertaining primarily to the existence of passing off and to remedies. There is sufficient evidence for adjudication of these issues, in the form of the affidavits and transcripts described above. The evidence does conflict in places, raising some credibility issues, particularly in respect of the plaintiffs’ decision to change its name. However, conflicting evidence and credibility issues do not preclude summary trial, unless it would be unjust to decide the issues without trial: Rule 216(6); Kwan Lam v Chanel S de RL, 2016 FCA 111 at para 16. Each party addressed the conflicting evidence in their submissions and neither suggested it made the matter unsuitable for summary trial. There is no risk of “litigating in slices,” as the summary trial addressed all issues in the case and will fully dispose of the action.
[20] I therefore agree with the parties that the matter is a suitable case for summary trial, that it would assist in the efficient resolution of the action, and that it would not be unjust to decide the issues in the case by summary trial.
B. The Defendants Have Infringed Copyright
(1) The works at issue
[21] The plaintiffs allege the defendants infringed copyright in five works: the Arkit software; two promotional documents in the form of case studies of Arkit customers; a product sheet for the Arkit software; and a promotional video [collectively, the Arkit Works]. They allege each of the Arkit Works was authored by employees of Ark Platforms (including, in some cases, Mr. Lam) in the course of their employment, and that Ark Platforms was therefore the first owner of copyright in the Arkit Works by operation of subsection 13(3) of the Copyright Act.
[22] Ark Platforms assigned its assets, including intellectual property rights, to Ark Innovation in February 2019. The plaintiffs therefore allege Ark Innovation owns copyright in the Arkit Works. The defendants admit Ark Innovation owns copyright, but has raised issues regarding the asset sale in another forum. I will address the asset sale and this litigation further below after describing the works in further detail.
(a) The Arkit software
[23] Arkit is map-based project management software, offered as a Software as a Service (SaaS) platform. As described in Mr. Kam’s affidavit and in the documentary and video evidence, Arkit allows clients who have multiple projects in different geographic locations to visualize those locations on a map and manage the projects through use of filterable geospatial data, participant collaboration, task and budget tracking, document collection, and in-app messaging. Clients pay annual subscription and license fees to access Arkit via a web browser. Arkit has been primarily marketed to the oil and gas, environmental, and energy services sectors.
[24] Arkit was first developed by Ark Platforms, a company founded by Mr. Kam and Mr. Lam in late 2011. Mr. Lam managed the software development, and during his tenure with Ark Platforms, Mr. Lam authored the Arkit code together with Mr. Yuen and others. The Arkit software was developed over time and continues to be developed and modified.
[25] The witnesses agree the Arkit software can be described as having a “front end,” which manages the user interface such as icons, menus, and images seen by the user, and a “back end,” which is the functional part of the program that organizes and manipulates project data, controls the functionality of the program, and cannot be accessed by a user. Within these general categories, the software is organized through numerous folders and files, totaling hundreds of thousands of lines of code. The parties agree, though, that the Arkit software as a whole constitutes a single “computer program” and “literary work” within the meaning of section 2 of the Copyright Act.
(b) The promotional materials
[26] The plaintiffs also plead infringement of copyright in four promotional works. The first two are case studies describing client use of the Arkit software, entitled “Medicine Hat – The Gas City” and “Summit Liability Solutions – A Customer Story” respectively. The case studies describe how Arkit was used by clients, the positive results achieved, and provide customer testimonials. The third promotional document is a one-page product sheet that gives an overview of the software and its features, while identifying a number of Arkit’s clients by including their logos. The fourth is a two-minute promotional video entitled “Say Hello to Arkit,” which gives prospective customers a demonstrated overview of the nature of Arkit and its capabilities.
(c) The asset sale
[27] As noted, Ark Platforms sold its assets, including its intellectual property, to Ark Innovation in February 2019. While the defendants admit Ark Innovation owns the copyright in the works at issue, the asset sale is the subject of litigation in the Supreme Court of British Columbia bearing Court File No. VLC-S-S-202384. The BC proceeding was commenced by Mr. Lam by way of petition against the plaintiffs, Mr. Kam, and others. It seeks a declaration that the asset sale was oppressive or unfairly prejudicial to Mr. Lam as a shareholder of Ark Platforms. It also seeks an order setting aside the asset sale and other relief. In Mr. Lam’s petition and in the response thereto from the plaintiffs and others, the parties raise a number of factual allegations regarding Mr. Lam’s former employment with Ark Platforms, the circumstances of his departure, his demands for unpaid salary and other debts, the relationship between the two Ark companies, and the purchase price of the asset sale.
[28] The issues in the BC proceeding are not at issue in this action. The defendants initially contested Ark Innovation’s ownership of copyright when this action was brought in the name of Ark Innovation alone. However, after the statement of claim was amended to add Ark Platforms as a plaintiff, the defendants conceded that ownership was no longer a relevant issue.
[29] While each party raised factual allegations regarding the history of the relationship between Mr. Lam, Mr. Kam, Ark Platforms, and Ark Innovation, this Court does not have jurisdiction to decide the oppression remedy issues raised in the BC proceeding and does not need to address those issues to decide this case. Nor does this Court have the evidence necessary to make any determinations regarding the asset sale purchase price, other than to note that it is contested. I will refer to this issue further below since the parties referred to the asset sale in their submissions on damages.
(2) The allegations of infringement
[30] Mr. Lam was a co-founder of Ark Platforms in 2011, became its Chief Technology Officer in 2014, and subsequently its Chief Executive Officer. He resigned from Ark Platforms on August 31, 2017 after a falling out with Mr. Kam.
[31] Citing concerns about possible retaliation and prejudice by Mr. Kam, Mr. Lam retained copies of his work at Ark Platforms, including a copy of the Arkit source code as of August 2017, and various Ark marketing materials. Near the end of 2018, Mr. Lam began developing the Matidor software, using the copy of the Arkit source code as a starting point given his belief that Ark Platforms was in “sun-setting mode.” In December of 2018, Mr. Lam had a version of the Matidor software that was effectively the August 2017 version of the Arkit software, but with the names Ark Platforms and Arkit changed to Matidor.
[32] Between December 2018 and December 2019, Matidor contacted numerous prospective clients. By the fall of 2019, the defendants released a publicly accessible version of the Matidor software. Mr. Lam admitted on his examination for discovery that the December 2019 Version of Matidor was “the Arkit code but rebranded as Matidor.” Mr. Lim’s first affidavit estimated that, leaving aside the name change from Arkit to Matidor in the code, about 98% of the lines of code were identical and all but nine of the 1,007 image files in the software were identical.
[33] Also in the December 2018 to December 2019 time frame, Matidor prepared marketing materials for the Matidor software that were simply copies of Arkit promotional materials with the name and logo of Arkit replaced by the name and logo of Matidor. This included the Medicine Hat and Summit Liability Solutions case studies, the product sheet, and the “Say Hello to Arkit” video retitled as “Say Hello to Matidor.”
[34] Ark Innovation became aware of Matidor and the “Say Hello to Matidor” video in April 2019. In December 2019, Ark Innovation hired Ms. Hallmark to record Mr. Lam giving a video demonstration of Matidor. Through Ms. Hallmark’s report and by visiting Matidor’s website, Ark Innovation also became aware of the other Matidor promotional materials. On December 23, 2019, counsel for Ark Innovation wrote to Mr. Lam asserting its copyright in the Arkit software and promotional material, alleging copyright infringement and passing off, and demanding the immediate discontinuance of the infringement.
[35] The defendants did not respond to the demand letter. However, they removed the promotional material from Matidor’s website and “accelerated” their development of the Matidor software. The lack of satisfactory response led to the filing of this action in January 2020.
[36] The defendants continued to market the Matidor software. In the course of this litigation, the defendants produced the June 2020 Version of the Matidor software which is the subject of Mr. Lim’s second affidavit. While Mr. Lim’s affidavits address the December 2019 Version and the June 2020 Version of the Matidor software, the plaintiffs’ allegations are not limited to these particular versions, and the plaintiffs seek both damages and injunctive relief on the basis that the defendants have continued to infringe copyright in the Arkit software after June 2020.
(3) The defendants’ admission of infringement
[37] As noted above, the defendants admit they have infringed copyright. In the defendants’ memorandum of fact and law, this admission was expressed as follows:
The defendants admit the following:
a. copyright subsists in the Arkit software, the Arkit promotional document entitled “Medicine Hat - The Gas City”, the Arkit promotional document entitled “Summit Liability Solutions”, the Arkit product sheet entitled “The Best Way to Manage and Share Location-Based Work” and the Arkit video entitled “Say Hello to Arkit” (collectively the “Arkit Works”) and that the Plaintiff Ark Innovation Technology Inc. is the owner of such copyright; and
b. the defendants have infringed copyright in the Arkit Works.
[38] The scope of this admission as it relates to the Arkit software was clarified at the summary trial hearing. As a first matter, the defendants confirmed the reference to the “defendants” having infringed copyright includes a concession that both defendants are liable for the infringement and any damages arising from that infringement.
[39] With respect to the software itself, the defendants confirmed they admit the December 2019 Version and the June 2020 Version of the Matidor software infringe copyright in the Arkit software. The admission that the June 2020 Version infringes does not signify that every line of code is the same as that in the Arkit software. Rather, it is an admission that the June 2020 Version reproduces a “substantial part” of the Arkit software: Copyright Act, ss 3(1), 27(1). In particular, the defendants contend that the June 2020 Version contained greater differences from the Arkit software in the front end than in the back end, an assertion borne out by the analysis in Mr. Lim’s second affidavit. Be this as it may, the parties agree the Arkit software is a single “literary work,” and the defendants admit the June 2020 Version of the Matidor software infringes that work by reproducing a substantial part of the Arkit software.
[40] The defendants do not admit that versions of the Matidor software subsequent to the June 2020 Version infringe copyright in the Arkit software. They claim Matidor continued to modify the software after June 2020 and continues to do so. They argue the plaintiffs have not established that any subsequent version of the Matidor software infringes copyright in the Arkit software. The defendants note that while they disclosed later versions of the software in the course of the litigation, including after Mr. Lam’s examination for discovery in December 2020, the plaintiffs did not request copies of those later versions and did not provide evidence demonstrating infringement by those later versions. They ask the Court to infer from the plaintiffs’ failure to request or file expert evidence with respect to the December 2020 version of the software that they have failed to prove infringement after that point. They further contend that the plaintiffs’ request for damages described as “springboard” damages amounts to an admission that the defendants are no longer infringing. However, they do not assert as a factual matter that the defendants stopped infringing at some point after June 2020 and before the summary trial.
(4) Findings regarding infringement
[41] It is an infringement of copyright for any person to do anything that only the owner of the copyright has the right to do, without the owner’s consent: Copyright Act, s 27(1). The defendants admit that Ark Innovation is the owner of copyright in the Arkit Works. The defendants do not allege that they had the consent of Ark Innovation or its predecessor in title, Ark Platforms. The owner of copyright has the sole right to produce or reproduce the work or any substantial part thereof including, in the case of a computer program, the right to rent out the computer program: Copyright Act, s 3(1).
[42] I find the defendants infringed copyright in the Arkit Works. With respect to the Arkit software in particular, as the defendants admit, I find the original version of the Matidor software from 2018, as well as the December 2019 Version and the June 2020 Version of the Matidor software, infringed copyright in the Arkit software.
[43] I further find that the Matidor software infringed copyright in the Arkit software through to September 15, 2021, the date of Mr. Lam’s final affidavit filed on the summary trial motion. I reach this finding based on the following reasoning and inferences from the evidence.
[44] I start with the fundamental premise that the onus is on the plaintiffs to prove their case of infringement on a balance of probabilities. This includes an onus to prove infringement as it relates to versions of the software asserted to have given rise to the plaintiffs’ claim for damages. The defendant does not have to disprove infringement; the plaintiff must prove infringement.
[45] That said, proof of infringement may be through direct evidence such as source code comparison, or through indirect evidence and inference. The need to be able to draw such inferences is of particular importance in the context of software, where numerous changes, updates, and versions may be issued over time, and it may be difficult, expensive, or even impossible to have experts analyse every version of source code.
[46] The defendants admit that as of the June 2020 Version, the Matidor software continued to infringe copyright in the Arkit software. The evidence shows that the defendants continued to use and market the Matidor software from late 2018 to the present. Having filed expert evidence on the December 2019 and June 2020 Versions sufficient to obtain an admission of infringement from the defendants, were the plaintiffs required to file further evidence to establish infringement by subsequent versions, however many there may have been? In my view, the answer to this question lies in the nature of the evidence presented and the inferences that can be drawn about the software from the admissions, the evidence, and the defendants’ failure to show that the software ceased infringing at any point.
[47] There is scant evidence regarding changes to the software after June 2020. At his examination for discovery in December 2020, Mr. Lam said that between December 2019 and the then current (December 2020) version, Matidor had “re-created the back and front end pretty much everything because this one is non-usable.” At the same time, though, Mr. Lam also said Matidor had a minimum viable product for “the rewrite project” in April 2020, prior to the June 2020 Version that is conceded to infringe. The defendants do not point to any direct evidence from Mr. Lam or any expert evidence regarding the nature or degree of changes to the software after June 2020.
[48] This is noteworthy in my view since the plaintiffs’ summary trial motion record was filed on July 15, 2021. That motion record contained Mr. Lim’s affidavits analysing the December 2019 and June 2020 Versions and the plaintiffs’ arguments that these versions each infringed. The defendants filed their motion record on September 7, 2021. In their motion record, the defendants admitted infringement, but filed no evidence sufficient to allow the Court to conclude the admitted infringement ceased at any time after June 2020, either through ceasing to use or sell the Matidor software or by rewriting it so that it does not infringe.
[49] Rather, while Mr. Lam’s affidavit filed in the defendants’ motion record directly addresses the development of the Matidor software, it largely speaks to changes up to June 2020. Despite any such changes, the defendants concede the Matidor software infringed at that date. While Mr. Lam states that a version of Matidor used in a presentation in September 2020 “used new front-end source code developed earlier in 2020,” he does not state whether this development was after June 2020. Nor does he say what, if any, further changes to the back end were made.
[50] Mr. Lam did include as Exhibit AE to his affidavit a summary of software developer time reports that extends to December 2020 and shows ongoing development in this period. However, there is neither information nor analysis about how this work changed the software. Given the extensive developer work that occurred before June 2020, all without changing the software sufficiently to make it non-infringing, I cannot conclude based on the developer hours that the Matidor software ceased infringing at some point after June 2020.
[51] Mr. Madar’s evidence also does not address any version after June 2020, even though that evidence was presented in the same motion record in which the defendants admitted that the June 2020 Version infringed copyright.
[52] The plaintiffs have established the June 2020 Version infringes and that the defendants continued to use the Matidor software after this date. Absent evidence that later versions of the Matidor software did not infringe, or were at least sufficiently different that conclusions about the June 2020 Version could no longer be relied upon, I infer that the Matidor software continued to infringe after the June 2020 Version. If the defendants wished the Court to limit its infringement finding to the June 2020 Version, it was open to them to file evidence on the summary trial motion to show the software changed enough that the Court could no longer infer it infringed based on the admission and earlier evidence. The defendants did not do so. In my view, it is insufficient in these circumstances for the defendants to rely on the plaintiffs’ onus and the general allegation that the software continued to be modified after June 2020. I find the plaintiffs have shown on a balance of probabilities based on the evidence and inferences drawn from that evidence that the Matidor software infringed copyright in the Arkit software from its inception through to September 15, 2021.
[53] I will address below how this conclusion affects the assessment of damages and the nature of the injunctive remedy sought.
C. The Defendants Engaged in Passing off
[54] Paragraph 7(b) of the Trademarks Act represents a codification of the common law cause of action in passing off: Kirkbi AG v Ritvik Holdings Inc, 2005 SCC 65 at para 23; Hidden Bench Vineyards & Winery Inc v Locust Lane Estate Winery Corp, 2021 FC 156 at para 32. The paragraph reads as follows:
Prohibitions
Interdictions
7 No person shall
7 Nul ne peut
[…]
[…]
(b) direct public attention to his goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his goods, services or business and the goods, services or business of another;
b) appeler l’attention du public sur ses produits, ses services ou son entreprise de manière à causer ou à vraisemblablement causer de la confusion au Canada, lorsqu’il a commencé à y appeler ainsi l’attention, entre ses produits, ses services ou son entreprise et ceux d’un autre;
[55] To establish passing off under paragraph 7(b) of the Trademarks Act, a plaintiff must establish (1) the existence of goodwill; (2) a deception of the public due to a misrepresentation; and (3) actual or potential damage to the plaintiff: Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120 at p 132; Sadhu Singh Hamdard Trust v Navsun Holdings Ltd, 2019 FCA 295 [Hamdard Trust (2019)] at para 38 citing Kirkbi at paras 66–69. In addition to this three-part test, a plaintiff must prove possession of a valid and enforceable registered or unregistered trademark: Hamdard Trust (2019) at para 39 citing Kirkbi at paras 3, 26.
[56] The plaintiffs’ passing off claim is based on the unregistered trademark ARKIT. They allege the defendants misrepresented their Matidor software as being associated with the ARKIT trademark by taking the Arkit product and marketing materials and using them with the “Matidor” name; through reference to the ARKIT trademark and the suggestion that Matidor software was a “rebranded” version of the Arkit software; and by assuming control of the Ark Platforms Twitter social media account, which included references to Arkit, and using that account to promote Matidor.
[57] The defendants deny these allegations, arguing the plaintiffs have not established the existence of goodwill at the relevant date; that the statements they made were not misrepresentations; and that the plaintiffs have not proven any damages arising from their statements.
[58] For the following reasons, I conclude that the defendants engaged in passing off in 2019.
(1) Goodwill
[59] Goodwill for purposes of a claim in passing off requires that a mark be distinctive and possess reputation. This may engage consideration of factors such as inherent and acquired distinctiveness, length of use, volume of sales, extent and duration of advertising, and intentional copying: Hamdard Trust (2019) at para 48. I agree with the defendants that the relevant date for purposes of a passing off claim is the time the defendants commenced directing public attention to their goods and services in a manner alleged to have been confusing: Trademarks Act, s 7(b); Badawy v Igras, 2019 FCA 153 at para 9. In other words, a plaintiff must have a valid and enforceable registered or unregistered trademark, and must show goodwill associated with that trademark, at the time of the alleged passing off.
[60] In their motion record, the plaintiffs argued that the “relevant date” for the assessment of goodwill was August 2017. This was when Mr. Lam left Ark Platforms and took or maintained copies of the Arkit software and promotional materials. The plaintiffs’ evidence regarding goodwill was therefore primarily directed at this date. In particular, Mr. Kam’s evidence referred to Google Ads displays, customer contacts, one-on-one demonstrations, and group demonstrations that occurred in the period up to August 2017. He also estimated 75,000 to 100,000 people were directly exposed to Arkit before August 2017.
[61] At the hearing of the summary trial, the plaintiffs recognized that the material date for assessing goodwill had to coincide with the conduct they claim amounts to passing off. They allege this began in December 2018, the date Mr. Lam began to contact potential clients, created the “Matidor” version of the Arkit software, and copied the Arkit materials. The defendants argue that even this is too early a relevant date, since the plaintiffs’ main passing off allegations relate to statements made in December 2019.
[62] As I set out in the next section, I find that the defendants engaged in misrepresentation in association with the ARKIT trademark in December 2019. I conclude that this is the relevant date for the assessment of whether there was goodwill in the ARKIT trademark. Although this is over two years after much of the evidence going to goodwill, I find the plaintiffs’ evidence establishes the existence of goodwill in the trademark ARKIT in December 2019.
[63] I agree with the plaintiffs that ARKIT is inherently distinctive, without any apparent meaning. While there was evidence that Apple had a product named ARKit (Augmented Reality Kit), I do not think this materially reduces the inherent distinctiveness of the ARKIT trademark. The ARKIT trademark was used in association with the Arkit software in marketing to potential customers since about mid-2012 and with paying customers since April 2013. These factors are relevant to the issue of goodwill and speak in the plaintiffs’ favour.
[64] As noted, much of Mr. Kam’s evidence relates to the period prior to August 2017. This weakens the strength of the evidence as it relates to the existence of goodwill in late 2019. Some of Mr. Kam’s evidence is also weakened by the fact that he provides only cumulative statistics over a period of many years, such as unique visits to Ark’s website, Google Ads displays and clicks, and marketing expenses. In some cases, such as for marketing expenses (provided for an eight-year period from 2011 to 2019) and customer interactions (for the period between 2012 and 2017), no yearly breakdown is provided, making it difficult to assess how this information shows goodwill at the relevant time. In other cases, such as for Google Ad displays, the breakdown shows that exposure spiked in 2015 or 2016.
[65] Nevertheless, I am satisfied Mr. Kam’s evidence as a whole demonstrates goodwill in the ARKIT trademark through at least December 2019. Goodwill in a trademark may fade and even disappear over time if that mark is no longer distinctive of the plaintiff or possesses no reputation. In the present case, however, the pre-2017 evidence of marketing and sales information is enough to show the ARKIT trademark had become known in the minds of the relevant public at that date. After that date, Ark Platforms and later Ark Innovation continued to offer Arkit to customers, including a number of subscribers who continue to pay fees for the use of the product.
[66] Further, Mr. Kam stated that after June 2018, Ark Platforms did less digital marketing and focused on direct sales efforts, face-to-face business development, and cold calling. This included about 50 live demonstrations between August 2017 and February 2019, the date of the asset sale. Mr. Kam’s affidavit also exhibited a marketing contact spreadsheet that shows thousands of calls and meetings with customers and prospective customers from 2016 through 2020. There is no direct evidence that these calls and meetings involved the use of the ARKIT trademark. However, since the Arkit software was the plaintiffs’ only product, I am prepared to infer that at least a portion of these calls and meetings referred to Arkit either by name or in context, contributing to awareness of the trademark in the minds of the relevant consuming public and thus to the goodwill in it.
[67] The plaintiffs’ marketing efforts significantly decreased after Mr. Lam left the company. This may well have resulted, as the defendants argue, in a reduction in goodwill in the ARKIT trademark. However, given the nature of the evidence and the time frames involved, I am satisfied on the evidence that the ARKIT trademark continued to have at least some protectable goodwill throughout this period. As this Court has said, it is not necessary for the plaintiffs’ mark to be famous in order for it to enjoy protection of its goodwill: Enterprise Rent-A-Car Co v Singer, [1996] 2 FC 694 at p 709, aff’d 1998 CanLII 7405 (FCA).
[68] I also agree with the plaintiffs that the defendants’ conduct in referring to itself as a “rebranded” version of the Arkit software supports a finding of goodwill. As the Court of Appeal has recognized, “intentional copying” may be a factor in assessing the existence of goodwill: Hamdard Trust (2019) at paras 48, 52; Orkin Exterminating Co Inc v Pestco Co of Canada Ltd et al, 1985 CanLII 157 (ON CA) at para 56. If a defendant has deliberately sou