Corocord Raumnetz GMBH v. Dynamo Industries Inc.

Corocord Raumnetz GMBH v. Dynamo Industries Inc.
Court (s) Database
Federal Court Decisions
Date
2016-12-14
Neutral citation
2016 FC 1369
File numbers
T-339-14
Decision Content
Date: 20161214
Docket: T-339-14
Citation: 2016 FC 1369
Ottawa, Ontario, December 14, 2016
PRESENT: The Honourable Madam Justice St-Louis
BETWEEN:
COROCORD RAUMNETZ GMBH AND KOMPAN A/S
Plaintiffs
AND
DYNAMO INDUSTRIES INC.
Defendant
JUDGMENT AND REASONS
I. Facts (1) The Parties [1] The plaintiff Corocord Raumnetz GmbH (Corocord) is a company incorporated under the laws of Germany. It is owned by Kompan Holding Flensburg GmbH, who in turn is owned by Kompan A/S. The plaintiff Kompan A/S (Kompan) is a company incorporated under the laws of Denmark. The plaintiffs specialize in the design, development, manufacture, marketing and branding of playground equipment. They developed a line of what they call “playground sculptures” which includes the Performer Arch, the Performer Dome and the Explorer Dome. The Court may refer to the design of those three playground structures as the Performer Designs and may refer to the actual structures as the Performer Structures.
[2] Corocord presents itself as the owner of all copyright in the Performer Designs and Performer Structures, while Kompan as holder of a worldwide license to produce and reproduce them.
[3] The defendant, Dynamo Industries Inc. (Dynamo), is a company incorporated under the laws of Ontario. It is in the business of manufacturing playground equipment, including the Nebula Mini (DX-912), Nebula (DX-910) and Nebula II (DX-913) playground structures, which the Court may refer to collectively as the Nebula Structures.
(2) Background [4] In 2008, the plaintiffs initiated the process towards the design and production of a new line of playground structures and, in 2009, the Performer Designs and Performer Structures were designed and created by Ms. Samantha Jeffery, Mr. Andreas Aschmann, and Mr. Torsten Frank, employed by Corocord, and by Mr. Michal Larris, employed by Kompan.
[5] Since their launch in the spring of 2011, and until August 2016, the plaintiffs sold one Performer Arch, five Performer Dome and 22 Explorer Dome structures in Canada (P-54). They sold more than 50 of each structure worldwide, reaching that threshold in September 20, 2013 for the Performer Arch; in June 8, 2011 for the Performer Dome; and in December 9, 2011 for the Explorer Dome.
[6] The plaintiffs submit that shortly after the launch of their Performer Structures, Dynamo, with its Nebula Structures, imitated, copied and reverse engineered the Performer Designs, Performer Structures as well as what they allege to be a distinguishing guise, or get up, hereinafter referred to as the Performer Trade Dress. In particular, they submit that the defendant, with its Nebula Mini (DX-912), Nebula (DX-910) and Nebula II (DX-913) playground structures, started to manufacture, market, sell, offer for sale, distribute and export copy-cat playground structures confusingly similar to the plaintiffs’ Performer Arch, Performer Dome, and Explorer Dome, respectively. By doing so, the defendant would have depreciated and would continue to depreciate the value of the goodwill attached to the Performer Trade Dress, which is defined further below.
[7] The present case raises issues of the existence of an enforceable trade-mark, of false and misleading statement, and of passing off, engaging mainly sections 2, 7(a) and 7(b) of the Trade-marks Act, RSC 1985, c T-13 (Trade-marks Act). It also raises issues of copyright infringement, defences, and counter defences, and engages mainly sections 3, 27, 32.2, 64 and 64.1 of the Copyright Act, RSC 1985, c C-42 (Copyright Act).
II. Issues [8] On December 23, 2015, Case Management Judge Aalto issued a bifurcation Order determining the liability and the quantification issues arising from this action, and stating that the quantification issues shall be determined separately from, and after, the liability issues, and only if necessary. On September 6, 2016, the parties submitted a joint Statement of Issues, which the Court will follow, although in a different order.
III. General submissions of the parties (1) The plaintiffs [9] Regarding the trade-mark issues, the plaintiffs claim they possess an enforceable trade-mark in the form of a distinguishing guise, as per the definition of section 2 of the Trade-marks Act, i.e. the Performer Trade Dress. The plaintiffs also claim that the defendant made false and misleading statements tending to discredit the plaintiffs’ playground equipment and business, contrary to subsection 7(a) of the Trade-marks Act; and that it directed public attention to its wares and business in such a way as to cause or be likely to cause confusion between the two lines of playground structures, contrary to subsection 7(b) of the Trade-marks Act.
[10] Regarding the copyright issues, the plaintiffs claim that the defendant infringed Corocord’s copyright in the Performer Sculptures and the Performer Designs, contrary to sections 3 and 27 of the Copyright Act.
(2) The defendant [11] The defendant first contends generally that the plaintiffs’ omission to seek protection under the Industrial Designs Act is fatal to their case, and that they have, in any event, no relief available under the Trade-marks Act or the Copyright Act.
[12] In relation to the trade-mark issues, the defendant submits that the plaintiffs have no enforceable trade-mark, as what they allege to be a distinguishing guise, i.e. their Performer Trade Dress, has not been used as such.
[13] In the event that trade-mark rights subsist in the Performer Trade Dress, which they deny, the defendant submits that (1) it has not engaged in questionable business practices as per subsection 7(a) of the Trade-marks Act as the plaintiffs have not establish any of its statement or representation to have been false or misleading; and (2) it has not contravened the statutory passing off provision of subsection 7(b) of the Trade-marks Act as there is no likelihood of confusion arising from the marketing, manufacture or sale of the defendant’s Nebula Structures since the plaintiffs have not proven their Performer Trade Dress to have any reputation or goodwill.
[14] In relation to the copyright infringement allegation, the defendant conceded after having heard the evidence, that copyrights subsist in the design of the Performer Structures, and that Corocord is the owner of said rights.
[15] Although copyright subsists, the defendant responds that there is no infringement, that it has valid defences. It relies on (1) subsection 64(2) of the Copyright Act as the plaintiffs’ Performer Structures and Performer Designs are useful articles and have been reproduced in a quantity of more than fifty in Canada or elsewhere; (2) section 64.1 of the Copyright Act since the Performer Structures and Performer Designs are useful article features that are dictated solely by a utilitarian function of the article; and (3) section 32.2 of the Copyright Act as the Performer Structures are permanently situated in a public place and/or are an architectural work.
IV. Evidence [16] The evidence before the Court comprised examination and cross-examination of witnesses appearing in person before the Court as well as read-ins from discovery, and the numerous documents they introduced as evidence such as employment contracts, sketches, catalogs, photos, specifications, and playground safety requirements.
[17] Five fact witnesses and one expert witness appeared in person before the Court, although the expert witness was heard under objection from the defendant.
Fact witnesses [18] Mr. Torsten Frank is director of Corocord. He provided background on Corocord and its acquisition by the Kompan group, and testified as to the ownership and licensing of the intellectual property rights in the Performer Designs and Performer Structures. He introduced evidence regarding the events surrounding the development of the Performer line, the employment contracts of Ms. Samantha Jeffery and Mr. Andreas Aschmann, which he signed on behalf of Corocord, as well as Mr. Michael Larris’s employment contract with Kompan and his own employment contract with Corocord. These contracts were filed before the Court in their original language, German, and in their English translation (P-2 to P-9).
[19] Mr. Kerrin Smith is the president of Kompan Inc., the North American sales and marketing arm of Kompan. He testified as to Kompan’s corporate structure, as to the manufacture and sales of the Performer Structures in North America by Kompan’s distributors and sales agents, as well as to the marketing and advertising of these products. He also testified regarding interaction with Dynamo and the company’s knowledge regarding Dynamo’s activities and communications. Mr. Smith introduced as evidence several catalogs and a “Google Analytics” document (P-30) which provides Kompan’s website activities for Canada from 2013 to 2016.
[20] Mr. David Parker, a Kompan sales representative in Southern Ontario since 1998, provided evidence related to the marketing and promotion of the Performer Structures in Canada. He also testified as to interactions between Kompan and Dynamo, and more particularly regarding events surrounding the sale of a playground structure in the town of Richmond Hill, Ontario.
[21] Ms. Samantha Jeffrey is designer manager. Her employment contract, as filed with the Court, is with Corocord. She provided evidence in relation to the creative efforts involved in the development and creation of the Performer Designs.
[22] Mr. Richard Martin is chief executive officer and owner of Dynamo. He testified as to the background of the company, the intellectual property it owned, its innovative products, the biding process in the playground industry and the substitution requests received by the company.
Expert witness [23] Mr. David Wagner is a landscape architect with over 36 years of experience and whose work encompasses over 150 projects dealing with recreational parks and playground designs. His clients include municipalities, school boards, land developers and daycare centers which have sites for the installation of playgrounds. Mr. Wagner provided his opinion regarding the playground structure industry and the role of aesthetics in the design of playgrounds, and he compared the products at issue, among other things. His expert report and his testimony have been received under objection from the defendant.
[24] The Court will address the defendant’s objection to Mr. Wagner’s expert report and testimony.
[25] The defendant argues that Mr. Wagner’s expert report does not meet the requirement of necessity set out in R v Mohan, [1994] 2 SCR 9 [Mohan], reaffirmed in Masterpiece Inc v Alavida Lifestyles Inc., 2011 SCC 27. According to the defendant, the observations of Mr. Wagner concerning the shape and appearance of the playground structures are observations that are not outside the experience and knowledge of a judge. Moreover, the defendant argues that the proposed expert’s conclusions regarding the “confusing similarity” between the parties’ respective structures and how the “average consumer” is likely to react when presented with the trade dress of those structures are unnecessary and constitute an attempt to usurp the function of the judge in determining one of the ultimate issues in this case (British Drug Houses Ltd v Battle Pharmaceuticals, [1944] Ex CR 239, aff’d [1946] SCR 50). The defendant also referred, after the hearing, to a decision recently rendered by the Court in Association of Chartered Certified Accountants et al v Canadian Institute of Chartered Accountants et al, 2016 FC 1076, currently under appeal, where two reports were struck out.
[26] On the contrary, the plaintiffs submit that the requirement of necessity should not be judged “by too strict a standard”, here referring to Mohan at para 22. They also submit that the goods in question are sophisticated goods, for which an expert opinion is necessary in order to provide the perspective of the average consumer (Masterpiece at para 80, 88).
[27] The Court sides with the defendant in that Mr. Wagner’s report and testimony is not necessary for assessing the resemblance between the structures at issue, a question that is not even at stake. However, the report and testimony address other issues which assist the Court to better understand the playground structures’ Canadian market and the plaintiffs’ place in the market. Therefore, the Court sides with the plaintiffs and dismisses the objection of the defendant.
V. Analysis [28] The present analysis will address the issues set out by the parties in their joint Statement of Issues although in a slightly different order. Since the analysis pertaining to the existence of a trade-mark in the form of a distinguishing guise is necessary to determine issues both under the Trade-marks Act and under the Copyright Act, the Court will begin with this determination.
(1) Do the Performer Arch, Performer Dome and Explorer Dome have a protectable trade-mark in the form of a distinguishing guise/trade dress under the Trade-marks Act? [29] The Court must first start by determining if the plaintiffs have proven possession of a valid and enforceable trade-mark, in this case unregistered, as defined in section 2 of the Trade-marks Act.
[30] The enforceable trade-mark the plaintiffs claim to hold, in the form of a distinguishing guise, is represented by the three-dimensional shape and the visible external appearance of each of the Performer Structures, which comprises the elements listed at paragraph 15 of their Further Amended Statement of Claim :
• Round arch(es) spanning over an inner net structure;
• The inner net structure comprising a geometry of both vertical and horizontal net arrangements, with net platforms or levels;
• Various net, pole or rope constructions tensioned onto and/or between the arches;
And the following additional elements in the case of the Performer Arch and Performer Dome:
• Vertical, coloured panels integrated into the net structure and placed relative to the arch(es), rope and netting in a distinctive and interesting way; and/or,
• Climbing walls and/or discs attached directly onto the arches.
[31] It is those aesthetic elements which are referred to as the Performer Trade Dress. It is presented by the plaintiffs as a unique and distinctive look that sets them apart from their competitors. Likewise, they argue that their Performer Structures are recognized by customers as originating from a single source and as having the same high-quality characteristics. They further submit that the Performer Trade Dress has acquired a significant reputation in Canada and has become distinctive of the plaintiffs because of the considerable amount of time, money and resources they spent to promote and advertise them.
[32] According to the Trade-marks Act, the definition of a trade-mark comprises, inter alia, a “distinguishing guise”, which is in turn also defined in same section 2 as “a shaping of goods […] the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish goods or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others” (emphasis added).
[33] As the use of the appearance is central to the definition of a distinguishing guise, subsection 4(1) of the Trade-marks Act provides guidance in that “[a] trade-mark is deemed to be used in association with goods if, at the time of the transfer of the property in or possession of the goods, in the normal course of trade, it is marked on the goods themselves or on the packages in which they are distributed or it is in any other manner so associated with the goods that notice of the association is then given to the person to whom the property or possession is transferred” (emphasis added).
[34] The plaintiffs contend that the appearance of the Performer Structures became recognized by the public as having a particular source; that the visible external appearance and three dimensional shape of each of the Performer Structure constitute a distinguishing guise, i.e. the Performer Trade Dress, and can thus be covered by trade-mark rights. Furthermore, the plaintiffs contend that in fact, the purpose of the Performer Trade Dress is not for children play but for aesthetic. The protection they seek is thus in respect of aesthetic elements that form the visual appearance of the Performer Structures, not their function. They rely in that regards to Mr. Wagner’s testimony that identified their coloured panels and the intricate netting within the structures as unique and distinctive elements indicative of a specific source.
[35] The plaintiffs also assert that the Performer Trade Dress has been properly “used” as per subsection 4(1) of the Trade-marks Act. They base this assertion on the fact that sales of the Performer Structures were first made in 2011, and an association between the distinguishing guise and the Performer Structures was thus allegedly well in place in the mind of the consumers when Dynamo started selling its products in 2013. They also base this assertion on the fact that the transfer of the goods referred to in subsection 4(1) actually occurs once the structures are installed, and are thus then clearly visible to the customer, and that the installation manuals also bear depiction of the structures.
[36] The Court sides with the defendants in that regard, in that the plaintiffs tendered no evidence that the relevant market had begun to recognize the shape of the Performer Structures has having a single source. Furthermore, the evidence does not show the shape or aesthetics elements having been used particularly to market the Performer Structures. The Court notes that even Mr. Wagner, the plaintiffs’ expert, confirmed having never seen the Performer Structures before they were shown to him by the plaintiffs in 2016, in connection with these proceedings. Mr. Wagner attributed the Performer Structures to Kompan and Corocord based on their coloured panels and intricate netting, but specifically excluded the round arch surmounting the structures.
[37] Furthermore, there is no evidence that the plaintiffs used the shaping of the structures for the purpose of identifying and distinguishing its goods from those sold by others. There is no evidence that the appearance of the Performer Structures was used in the catalogs in any other manner than the appearance of all the other structures sold by the plaintiffs. On the contrary, the evidence points to the fact that the source of their products was rather indicated by the use of the KOMPAN or of the COROCORD logo, be it affixed on the packaging, in their promotional material, and on the Performer Structures themselves.
[38] As stated in Kirbi AG v Ritvik Holdings Inc, 2005 SCC 65 at para 39 [Kirkbi], “despite its connection with a product, a mark must not be confused with the product – it is something else, a symbol of a connection between a source of a product and the product itself”.
[39] In this case, absent any evidence to the contrary, the Court can only conclude that the plaintiffs have not successfully proven possession of a valid and enforceable trade-mark in the form of a distinguishing guise. However, should the Court be wrong on this aspect, it will nonetheless consider the claims of false and misleading statement and of passing off under subsections 7(a) and 7(b).
(2) Has the defendant made false or misleading statements tending to discredit the plaintiffs’ goods, business or services, contrary to subsection 7(a) of the Trade-marks Act? [40] Three elements must be proven to successfully claim contravention to subsection 7(a) of the Trade-marks Act: (i) a false or misleading statement; (ii) which tends to discredit the business, wares or services of a competitor; and (iii) resulting damage (S & S Industries Inc v Rowell, [1966] SCR 419 [S & S Industries Inc] at 424).
[41] However, the scope of subsection 7(a) is “limited to creating a cause of action relating to false and misleading statements made about a trade-mark or other intellectual property owned by the claimant” (Canada (Canadian Copyright Licensing Agency) v Business Depot Ltd., 2008 FC 737 at para 27, referring to MacDonald v Vapor Canada Ltd, [1977] 2 SCR 134). For example, subsection 7(a) was applied when the lawyer of a patentee sent “cease and desist” letters to customers of a competitor threatening to take patent infringement proceedings against them if they purchased product from the competitor, but that no such action was taken (S & S Industries Inc v Rowell, [1966] SCR 419).
[42] The plaintiffs submit that the defendant has approached the plaintiffs’ customers or potential customers, and made representations to members of the public about the plaintiffs and their products, such statements being false and misleading in a material respect. These statements would have tended to discredit the playground equipment, services and business of the plaintiffs for the purpose of dissuading potential customers from purchasing the plaintiffs’ products, while promoting the purchase of the defendant’s products.
[43] More precisely, according to the plaintiffs, the defendant used comparisons between its products and those of the plaintiffs in promotional materials and in correspondence involved in bid requests, such comparisons being false and misleading “as they are biased, inaccurate and/or incomplete and are not based on any actual physical tests conducted by the defendant” (plaintiffs’ closing submissions at para 104). The defendant was involved in a substitution request in Hawaii where it compared the properties of its products with those of the plaintiffs, asserting that they were of equal or better value, resulting that even if the plaintiffs still won the bid, they were forced to lower their price to maintain the sale. The plaintiffs also submit that this was not an isolated event as the defendant admitted that it employs a similar course of conduct with respect to other bids.
[44] Regarding the statements made by the defendant’s representatives to its distributor in Hawaii, the defendant submits that these statements are not actionable because the plaintiffs “failed to prove that the statements were false or that anyone was misled; the statements were made to someone outside Canada; the statements were not directed to the alleged intellectual property owned by the plaintiffs; and, as the plaintiffs won the bid, they suffered no harm and did not prove that any reduction in price negotiated with the entity in Hawaii was the direct result of any such statements” (defendant’s closing submissions at para 134).
[45] The Court previously established that the plaintiffs owned no enforceable trade-mark right with regards to the Performer Structures. Moreover, the defendant made no statements about intellectual property rights owned by the claimant, and the Court is satisfied the plaintiffs adduced no evidence proving that the statements made by the defendant were false or misleading. The plaintiffs’ claim can therefore not succeed.
(3) Has the defendant directed public attention to its Nebula Mini (DX-912), Nebula (DX-910), and Nebula II (DX-913) playground structures in such a way as to cause or be likely to cause confusion in Canada, at the times the defendant commenced so to direct public attention to them, between such goods and the plaintiffs’ Performer Arch, Performer Dome and Explorer Dome playground structures, contrary to subsection 7(b) of the Trade-marks Act? [46] Under the common law tort of passing off, a plaintiff bears the burden of establishing (i) existence of goodwill or reputation; (ii) deception of the public due to misrepresentation, and (iii) actual or potential damage (Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120 at para 33).
[47] Subsection 7(b) of the Trade-marks Act, for its part, can be read as follows:
7 No person shall
[…]
(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;
[48] Under the statutory passing off provided at subsection 7(b) of the Trade-marks Act, the criteria are different whereas the plaintiff must encounter: (i) a conduct test: “direct public attention the [the defendant’s] wares”; (ii) a confusion test: “in such a way as to cause or be likely to cause confusion in Canada”, and (iii) a timing test: “at the time [the defendant] commenced so to direct attention to them” (Roger T. Hughes, Hughes on Trade-marks (Toronto: LexisNexis) (2016, release 48), at 989).
[49] It appears that the Courts have usually followed the methodology established by the Supreme Court of Canada in Ciba-Geigy Canada Ltd and Kirkby for both the common law tort of passing off and the statutory passing off claim under subsection 7(b). For example, the Federal Court of Appeal recently wrote:
In a claim of passing off, either at common law or under subsection 7(b) of the Trade-marks Act, a plaintiff must establish three elements: first, that it possesses goodwill in the trade-mark; second, that the defendant deceived the public by misrepresentation; and, third, that the plaintiff suffered actual or potential damage through the defendant's actions. (Sadhu Singh Hamdard Trust v Navsun Holdings Ltd, 2016 FCA 69)
[50] However, it appears prudent to consider the passing off claim under subsection 7(b) as different from the common law tort of passing off in two aspects: the timing test, as assessed above, and the necessity of the possession of an enforceable trade-mark, whether registered or unregistered (Kirkbi at para 26; BMW Canada Inc v Nissan Canada Inc, 2007 FCA 255). Apart from these distinctions, both require proof of goodwill in respect of the distinctiveness of the product at stake (Kirbi at paras 66-67).
[51] The Court concluded above that the plaintiffs had no enforceable distinguishing guise, and thus no trade-mark. Hence, given this conclusion, it flows that they cannot claim any remedy under subsection 7(b) of the Trade-marks Act.
[52] Even if the Court had concluded otherwise, the plaintiffs’ claim must fail as they failed to demonstrate goodwill in relation to the Performer Structures at the time the defendant commenced to direct attention to its Nebula Structures. It is agreed by the parties that the defendant commenced to direct such public attention to its goods when it started to offer them for sale in Canada, being no later than January 2012 for its Nebula Mini (DX-912) and Nebula (DX-910), and no later than March 2013 for its Nebula II (DX-913).
[53] The plaintiffs bore the burden of establishing goodwill in respect of the distinctiveness of their products (Kirkbi at para 67). Goodwill, even though not defined in the act, “connotes the positive association that attracts customers towards its owner's wares or services rather than those of its competitors” (Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 at para 50). As the defendant puts it, this requires the demonstration that consumers have, by reason of the appearance of the goods of the plaintiffs, come to regard them as having one trade source of provenance (Apotex Inc v Canada (Registrar of Trade-marks), 2010 FC 291 at para 13, aff’d 2010 FCA 313; Kirkbi at para 69). The plaintiffs have tendered into evidence marketing and sales efforts through email campaigns, distribution of catalogs and the likes, but have tendered nothing pertaining to the shape of the Performer Structures and nothing establishing that the Performer Trade Dress is identified as having one trade source.
[54] As the Court noted already, the plaintiffs’ expert himself had never seen or heard about the Performer Structures prior to his involvement in these proceedings in 2016 although presented as a leader in this field. Therefore, the plaintiffs’ expert did not know about the Performer Structures in 2012-2013, despite the sales efforts pleaded by the plaintiffs. Furthermore, he did not identify the shape of the Performer Structures as leading to the source, but limited said identification to the colored panels and the netting systems.
(4) Does copyright exist in the Performer Arch, Performer Dome and Explorer Dome structures or designs – are they protectable “artistic” works? [55] The defendant conceded, in its closing statement, that copyright subsists in the design of the Performer Structures, and that Corocord is the owner of said copyright. The Court is satisfied the evidence establishes as much, that the Performer Designs and Performer Structures are copyrighted works owned by Corocord.
(5) Has the defendant reproduced, in whole or substantial part, the Performer Arch, Performer Dome and Explorer Dome structures or designs by its alleged production in Canada of the Nebula Mini (DX-912), Nebula (DX-910), and Nebula II (DX-913) structures respectively, contrary to sections 3 and 27 of the Copyright Act? [56] Copyright will be infringed where there is reproduction of “the work or any substantial part thereof” (Copyright Act, ss 3(1) and 27; Cinar Corporation v Robinson, 2013 SCC 73 at para 25). Copying can also be inferred by a combination of substantial similarity and a proof of access to the protected work (Atomic Energy of Canada Ltd v Areva NP Canada Ltd, 2009 FC 980 at para 35).
[57] In the case at hand, Mr. Richard Martin confirmed, during his cross-examination, that the Nebula Structures were engineered to be equivalents of each of the Performer Structures. These Nebula Structures were produced following the defendant’s receipt of requests for substitution from its distributors. It was not contested that the defendant made four reproductions of playground structures which were sold in Canada. Indeed, the Nebula (DX-910) was first sold in Canada in September 2012 and the Nebula II (DX-913) in September 2013. At the time of the trial, the Nebula Mini remained unsold. All these sales were made after the plaintiffs authorized the 51st reproduction of their structures, as it will be discussed further below.
(6) If so, does subsection 64(2) of the Copyright Act apply? [58] As the defendant’s manufacture and sale of the Nebula (DX-910) and Nebula II (DX-913) in Canada occurred after the 51st reproduction of the Performer Structures, it relies on subsection 64(2) to submit that there is no liability on the defendant arising from the manufacturing sale of these four structures. This subsection is applicable where copyright subsists in a design applied to a useful article or in an artistic work from which the design is derived and, by or under the authority of any person who owns the copyright in Canada or who owns the copyright elsewhere, the article is reproduced in a quantity of more than fifty.
[59] The Court must thus determine if the Performer Structures are indeed useful articles or not, and if they have been reproduced in a quantity of more than fifty or not.
(a) Are the plaintiffs’ structures “useful articles” within the meaning of section 64 of the Copyright Act? [60] A “useful article” is defined in section 64 of the Copyright Act as “an article that has a utilitarian function”. “Utilitarian function” is in turn defined as “a function other than merely serving as a substrate or carrier for artistic or literary matter”. Regarding the usefulness of an article, the Federal Court of Appeal, in an obiter, provided some insight in regards to the usefulness of a jewel or a sculpture:
It is doubtful whether the usefulness of a work of art can be determined solely by its existence; there must be a practical use in addition to his esthetic value. Some items of jewellery that are worn may be useful whereas others may not be. For example, a tie pin or cuff links may be useful types of jewellery holding clothing together, while other objects such as a brooch or an earring may be purely ornamental and not useful at all, valuable only for their own intrinsic merit as works of art. Further, a sculpture may be created merely to be observed and admired or it may be made to be used as a paper weight. (Pyrrha Design Inc v 623735 Saskatchewan Ltd, 2004 FCA 423 at para 14)
[61] Here, despite the plaintiffs’ assertion that the Performer Structures are not useful, it appears evident that they are. The Court is convinced they were designed and built first as playgrounds for children, hence to be played upon, climbed on, etc., which is clearly useful, and that they are thus more than just a work of art to be merely observed and admired.
[62] As reflected in Mr. Frank, Ms. Jeffrey, Mr. Smith and Mr. Parker’s testimonies, the plaintiffs’ Performer Structures needed to be aesthetic, and the Court accepts this proposition. However, they also needed to be climbed and played on; to be playful and safe. As such, they were subject to technical safety aspects such as arm reach and rope sizes, that were not guided by aesthetic purposes, but by security concerns and safety standards precisely because the initial purpose of the structures was not merely to serve as art work, but as playgrounds for children.
[63] Based on the evidence, the Court concludes that the plaintiff’s Performer Structures are indeed “useful articles” within the meaning of section 64 of the Copyright Act.
(b) Have the plaintiffs’ structures met the reproduction requirement of subsection 64(2)? [64] The defendant invokes subsection 64(2) of the Copyright Act and submits that the plaintiffs have reproduced each of their useful articles in a quantity of more than fifty. It is worthy to reproduce this subsection:
(2) Where copyright subsists in a design applied to a useful article or in an artistic work from which the design is derived and, by or under the authority of any person who owns the copyright in Canada or who owns the copyright elsewhere,
(a) the article is reproduced in a quantity of more than fifty, or
(b) where the article is a plate, engraving or cast, the article is used for producing more than fifty useful articles,
it shall not thereafter be an infringement of the copyright or the moral rights for anyone
[65] It is undisputed that the plaintiffs have authorized more than 50 reproductions of each of their Performer Structures worldwide. This occurred no later than June 8, 2011 for the Performer Dome; December 9, 2011 for the Explorer Dome; and September 20, 2013 for the Performer Arch. As discussed previously, the Nebula (DX-910), an equivalent of the Performer Dome, was first sold in Canada in September 2012, and the Nebula II (DX-913), an equivalent of the Explorer Dome, was first sold in Canada in September 2013.
[66] However, they have not been reproduced more than fifty times each in Canada. Between 2010 and 2016, the plaintiffs concluded one sale of the Performer Arch, five sales of the Performer Dome, and 22 sales of the Explorer Dome in Canada. Prior to 2013, when the selling and manufacturing of the Nebula II (DX-913) occurred, these numbers are even smaller, respectively none, one and eight (P-54).
[67] The Court must thus assess whether the reproduction requirement of subsection 64(2) refers to the number of reproductions in Canada or to the number of reproductions worldwide.
[68] The plaintiffs submit that only the number of reproductions in Canada must be considered as “[s]ubsection 64(2) is specific to rights that can be enforced in Canada and addresses the interplay between industrial design and copyright in Canada. As such, the Copyright Act should not concern itself with the actions of the owner outside of Canada, where the applicable laws and protection afforded to intellectual property differ” (Plaintiff’s Closing Submissions at para 63).
[69] On the other hand, the defendant submits that “[b]y the enactment of ss. 64(2) of the Act, Parliament has decided that the owners of copyright who permit their designs to be applied to useful articles for industrialization on a commercial scale are not entitled to a lengthy, exclusive monopoly under copyright law. Such designs are only protectable for a considerably reduced monopoly duration of 10 years if protection is sought under the provisions of the Industrial Design Act” (Defendant’s Closing Submissions at para 42). The defendant submits that there is no ambiguity in the intention of the Parliament and that a plain reading of this subsection “confirms that copyright subsisting in designs applied to industrial articles of manufacture […] become unenforceable once the copyright owner, in Canada or elsewhere, authorizes the reproduction of the useful articles bearing the designs in a quantity of more than 50” (Defendant’s Closing Submissions at para 43). The defendant relies on the wording of subsection 64(2) itself, that refers to Canada and elsewhere to state:
Moreover, the plaintiffs ignore the fact that just as copyright may subsist in the design of an article in Canada without the owner ever setting foot in Canada, and without the owner ever having produced or reproduced the work in Canada, copyright may also be justifiably limited in Canada by the worldwide reproduction of a useful article. Just as copyright rights may arise as a result of the actions of the author or owner of the copyright anywhere within a treaty country – those rights should thus be limitable by the same measure.” (Defendant’s Closing Submissions at para 48)
[70] It is well established that Canadian law cannot be enforced in another state's territory without that state's consent (R v Hape, 2007 SCC 26). The question here, however, is whether an event that happened outside Canada can affect the outcome of a dispute in Canada. To answer this question, it is relevant to take a look at the applicability of the Copyright Act with regards to activities outside our borders.
[71] The Supreme Court of Canada in Society of Composers, Authors and Music Publishers of Canada v Canadian Assn of Internet Providers, 2004 SCC 45, discussed the extraterritorial effects of the Copyright Act. It stated that while the Parliament of Canada “has the legislative competence to enact laws having extraterritorial effect, it is presumed not to intend to do so, in the absence of clear words or necessary implication to the contrary” (at para 54). With regards to communications originating abroad but received in Canada, the Supreme Court however concluded that the Act could be applicable as it is “not only consistent with our general law […], but with both national and international copyright practice” (at para 76).
[72] Conversely, in Layette Miniôme Inc v Jarrar, 2011 QCCS 1743, where infringing articles were produced in China following the request of a resident of Dubai and were distributed in the Middle East, it has been decided that the Copyright Act could not be applicable because the infringement of the copyright took place outside Canada.
[73] In Magasins Greenberg Ltée v Import-Export René Derhy (Canada) Inc, [2004] JQ no 2705, the Quebec Court of Appeal applied subsection 64(2) as it found that the article at issue had been reproduced more than 50 times in Canada and elsewhere. The Court wrote, in French: “le modèle Barbital a été reproduit au Canada et à l’étranger à plus de 50 exemplaires avec l’autorisation du titulaire du droit d’auteur”, which can be translated as: “the Barbital model has been reproduced in Canada and elsewhere in a quantity of more than fifty with the authorization of the owner of the copyright” [emphasis added]. In that situation, however, it was not contested that the article had been reproduced more than 50 times in Canada alone.
[74] From the wording of subsection 64(2), it is clear that the scope of at least part of this subsection is w