John Stagliano Inc. v. Elmaleh

John Stagliano Inc. v. Elmaleh
Court (s) Database
Federal Court Decisions
Date
2006-05-12
Neutral citation
2006 FC 585
File numbers
T-1779-05
Decision Content
Date: 20060510
Docket: T-1779-05
Citation: 2006 FC 585
Ottawa, Ontario, May 10, 2006
PRESENT: The Honourable Madam Justice Gauthier
BETWEEN:
JOHN STAGLIANO, INC., JULES JORDAN VIDEO, INC. and ASHLEY GASPER
Plaintiffs
and
ALAIN ELMALEH, JACKY ELKESLASSY,
GERALD OUZZAN, 144942 CANADA INC.
(cob KAYTEL VIDEO DISTRIBUTION), LEISURE TIME CANADA INC.,
TRANSWORLD SALES AGENCY LTD., JACKY'S ONE STOP DISTRIBUTION INC.,
SYLNET DISTRIBUTION INC., JOHN DOE, JANE DOE and OTHER PERSONS,
NAMES UNKNOWN, WHO DEAL IN UNAUTHORIZED
OR COUNTERFEIT EA MERCHANDISE
Defendants
and
ALAIN ELMALEH and 144942 CANADA INC.
(cob KAYTEL VIDEO DISTRIBUTION)
Plaintiffs by Counterclaim
and
JOHN STAGLIANO, INC., JULES JORDAN VIDEO, INC., ASHLEY GASPER, SABIN BRUNET and JACKY ELKESLASSY
Defendants by Counterclaim
REASONS FOR ORDER AND ORDER
1. Overview
[1] This is a motion brought by the plaintiffs in respect of an Anton Piller order that this Court granted in their favour on October 17, 2005, and which was executed on October 18, 2005 and October 20, 2005 (Anton Piller Order).
[2] The plaintiffs now ask the Court to review the matter and to confirm that the Anton Piller Order was properly granted and that it was executed in accordance with its terms against the defendants Alain Elmaleh (Elmaleh), 144942 Canada Inc. (cob Kaytel Video Distribution) (Kaytel) and Leisure Time Canada Inc. (Leisure Time). They also seek permission to use the evidence produced by or obtained from those defendants in these proceedings as evidence in two pending actions in the United States District Court for the Central District of California, provided such use is permitted by the law of that forum.[1]
[3] In response, Kaytel and Elmaleh, who have filed a defence and a counterclaim against the plaintiffs, seek an order vacating the Anton Piller Order as well as the return of all documents and materials seized. They also ask for damages (most of which are costs incurred in contesting the Anton Piller Order) and solicitor and client costs.
2. Factual Background
[4] In view of the procedural history of this proceeding and the volume of material placed before the Court, a detailed review of the factual background is required.
A. The Plaintiffs
[5] The plaintiffs are in the adult film business.
[6] John Stagliano, Inc. is a corporation incorporated under the laws of California. John Stagliano, Inc. carries on business as EA Productions in association with the trade mark EVIL ANGEL, which is registered in the United States but not in Canada.
[7] Jules Jordan Video, Inc. (Jules Jordan) is also a California corporation. Ashley Gasper (Gasper) is an individual who resides in Los Angeles, California. In addition to being the President and Chief Executive Officer of Jules Jordan, Gasper produces, directs and performs in Jules Jordan productions.
[8] John Stagliano, Inc. markets adult films bearing the EVIL ANGEL name, including Jules Jordan productions, in Canada, the United States and internationally. Although EVIL ANGEL is not registered as a trade mark in Canada, the plaintiffs state that they have developed extensive goodwill and reputation in Canada in association with the EVIL ANGEL name.
B. The plaintiffs' ex parte motion for the Anton Piller Order
[9] On October 12, 2005, the plaintiffs filed their notice of motion in this Court seeking, on an ex parte basis, an "order in the nature of an Anton Piller Order ... authorizing the search and seizure of the Defendants' premises to secure evidence of the nature and extent of the Defendants' copyright infringement" as well as an order that the evidence obtained may be used in the U.S. proceedings referred to above.
[10] The evidence placed before the Court at that time consisted of three affidavits. I will briefly describe some of the most pertinent facts they refer to.
(i) The Brunet affidavit
[11] The principal affidavit relied on by the plaintiffs was that of Sabin Brunet (Brunet). Brunet states that he was the president and majority shareholder of Diadem Digital Inc. (Diadem) and the vice-president and one-third shareholder of Distribution L.H. Inc. (L.H.).
[12] Diadem and L.H., prior to Diadem's bankruptcy in June of 2005, were in the business of "commercial replication of motion pictures on DVDs".
[13] Exhibit A to Brunet's affidavit was a Solemn Affirmation (Affirmation) dated August 17, 2005. The Affirmation is expressed to have been made "freely in accordance with the provisions of the Letter Agreement in Principle signed on June 6, 2005." By the terms of the Letter Agreement in Principle, appended to the Affirmation as an exhibit, Diadem and Brunet agreed to "[c]ooperate fully ... for the purpose of assisting [the plaintiffs] in determining the party [that] requested, ordered and purchased the infringing Titles" and to "act as a witness if necessary in any action initiated in Canada or United States based on the unauthorized replication of titles by Diadem."
[14] In his Affirmation, Brunet recounts how, "approximately three (3) years ago", Diadem and L.H. "began taking orders" from the defendant Sylnet Distribution Inc. (Sylnet), of which Brunet believed the defendant Gerald Ouzzan (Ouzzan) "to be the owner, principal or manager", on behalf of Kaytel. Brunet states:
22. Sylnet placed replication orders for, what I have now been informed were Evil Angel DVDs, including Jules Jordan DVDs, with Diadem and L.H. from about 2002[2] through approximately November 2003[3] on behalf of its customer, [Kaytel][4]. Thereafter, from approximately November 2003[5] to the present, Kaytel directly placed orders with us for the replication of, for what I now know are, Evil Angel DVDs, including Jules Jordan DVDs.
[15] Brunet then lists 12 EVIL ANGEL and Jules Jordan titles that Sylnet allegedly ordered to be replicated (1250 each). In the corresponding exhibits, one finds invoices from October 2003 to Sylnet, as well as packing slips said to indicate that "LH was instructed to ship DVDs to Kaytel Video".
[16] Brunet also lists a total of 47 Jules Jordan and EVIL ANGEL "DVDs"[6] allegedly replicated "without their authorization" by Diadem and L.H. "from approximately October 2003 until May 2005".
[17] According to Brunet, the DVDs replicated by Diadem and/or L.H. were made using "stampers" purchased from Media Mastering Services, LLC (MMS), simply identified by Brunet as "a California Limited Liability Company". He further explains that:
18. Based on my personal knowledge of the business operations of Diadem and L.H., I noticed that the alphanumeric code that was assigned by Philips Electronics to MMS is IFPI LV11. Thus, any Stamper made by MMS, and each DVD produced or replicated using the MMS Stamper, would contain on its face, embedded into the DVD, the alphanumeric code IFPI LV11. There are other codes that are embedded into DVDs manufactured by Diadem and L.H. These embedded codes are: "CID-002" and a ten digit, or so, number which starts "D050 xxxxxxx." and which are assigned to Diadem and L.H. by the mastering facility, in this case MMS. DVDs on the market that have these codes are in all likelihood DVDs manufactured by Diadem or L.H., or at the very least with Stampers ordered by Diadem or L.H.
[18] Brunet also indicates that DVDs replicated by Diadem and/or L.H. based on orders from Sylnet, and allegedly shipped to Kaytel, were assigned a code beginning with "KT" followed by a four-digit number.[7]
[19] With respect to DVD replication by Diadem and/or L.H. based on orders from Sylnet, and allegedly shipped to Kaytel, Brunet describes the procedure as follows:
30. When we dealt with Sylnet, the practice was that Sylnet would send to us the DVD Masters, and sometimes the Stampers. ...
31. However, the more frequent practice was for Sylnet to not provide Diadem or L.H. with Stampers, but Sylnet would provide the Masters, including Masters of Jules Jordan DVDs. I would then send the Masters my company had received from Sylnet of Jules Jordan DVDs to MMS. My recollection is that this was the procedure that was followed from October 2003 until May 2004.[8] (My emphasis.)
[20] Brunet goes on to say that Diadem and/or L.H. began dealing directly with Kaytel "some time in the Spring of 2004"; that "[t]he contact person for Kaytel has always been Mr. Alain Elmaleh"; and that "[i]n May, 2004 Kaytel signed an indemnity and hold harmless Agreement and became my direct client for the replication of Jules Jordan Videos and Evil Angel products as appears from a copy of same which I attach as Exhibit G to my Affidavit."
[21] Exhibit G is a copy of a general "Reproduction authorization, representations and warranties". It states, among other things:
The Client authorizes the Manufacturer ... to reproduce the audio or audiovisual program described in each order Form of the Client transmitted to the Manufacturer (hereinafter: the "Program") ...
The Client represents and warrants that it holds all the rights and authorizations from any person owning rights relative to the Program including owners of intellectual property rights giving it the right to grant the present reproduction authorization. ...[9]
[22] Brunet also refers to the defendant Transworld Sales Agency Ltd. (Transworld). He describes Transworld as "an import-export company domiciled in Gibraltar" and states:
38. ... I know from my dealings with Transworld, that Mr. Alain Elmaleh of Kaytel appears to have been authorized to be my contact with Transworld. I have reviewed the business records of Diadem kept in the regular course of business and based upon such review determined that Transworld, through Mr. Elmaleh, ordered the following titles to be duplicated by Diadem: ...[10] (My emphasis.)
Brunet then lists eight EVIL ANGEL titles, and states that while "[t]he DVDs replicated by Diadem for Transworld[11] were label[led] to be shipped to locations outside of North America ... I know that we actually shipped the Transworld products to Kaytel's premises".
[23] Brunet states that "[a]nother company, that has ordered from Diadem the replication of Evil Angel DVDs is Software Entertainment Ltd."[12]
[24] Brunet's evidence concludes with the following:
43. I can safely estimate that Diadem and L.H. have replicated at least twenty-five (25) titles of Evil Angel and Jules Jordan without their authorization as a result of orders from and on behalf of Alain Elmaleh, Kaytel, Sylnet and Transworld, Timeline [another Canadian DVD replicator] and Software Entertainment.[13]
(ii) The Norman affidavit
[25] The second affidavit was that of Chris Norman (Norman), vice-president of operations for John Stagliano, Inc.
[26] Norman stated:
31. Further investigation of records obtained by our attorneys in the US and Canada, from [Diadem], and as subsequently authenticated in the Affidavit of Sabin Brunet ... confirms that [Diadem], and its sister entity [L.H.] ... had replicated/manufactured the counterfeit DVDs based upon orders from the defendants Elmaleh, Kaytel, [Transworld], [Sylnet] and/or [Ouzzan].
32. Records provided by Diadem appear to establish that Diadem, acting as an agent for the defendants, manufactured approximately sixty-four thousand (64,000) counterfeit DVD copies of not less than forty-seven (47) different EA copyrighted titles.[14] (My emphasis.)
[27] Regarding the quality of the alleged counterfeit copies, Norman stated:
21. In January of 2005, EA began receiving shipments of (ostensible) EA DVDs which were being returned by end-users who claimed they were defective.[15] The DVDs appeared, at first glance, to be authentic EA DVDs. Each had what appears to be the original artwork, including the EVIL ANGEL trade-mark; however, a closer inspection reveals that they are, in fact, counterfeit.
22. The printed box inserts are high quality colour reproductions of the authentic box inserts; however, EA affixes gold foil stickers on the original EA inserts. The counterfeit copies do not have gold foil stickers[,] but rather have the stickers printed as part of the insert. (The stickers appear as a dull grey instead of gold.)[16] Additionally, the authentic DVDs manufactured by EA are produced in DVD-9 format. The counterfeit DVDs are all DVD-5 format[17] which holds significantly less material.
23. Because of the inferior nature of DVD-5, the counterfeit DVDs are missing various content that appears in the authentic units[18]. Further, the advanced and highly specialized interactive menus employed by EA in the production of our DVDs are non-functional on the counterfeit product. ...[19]
[28] With respect to damages, Norman further adds:
24. EA is one of the few production and distribution companies in the adult entertainment business that does not discount its productions. ...
He also states that it is crucial to remove the copies from the market and that, "[d]ue to the highly portable nature of DVDs", "it is all but certain" that once the defendants are aware of the proceedings, the DVDs will be "removed from their premises and either destroyed, or, worse yet, dumped on the market to unsuspecting consumers."[20]
(iii) The Gasper affidavit
[29] The third affidavit was that of Gasper.
[30] Gasper also describes the quality of the allegedly counterfeit copies. He says:
20. In or about March 2005, I discovered that counterfeit copies of my adult movie "Ass Worship I" and "Ass Worship II" were showing up on online retail distribution websites and being returned to my exclusive worldwide distributor, EA. The counterfeit copies appeared to be legitimate but for the packaging lacking the pull strip bottom on the bottom, the artwork raised on the DVD... Further, the counterfeit copies did not have the functioning menus and the additional materials, but otherwise looked identical to the untrained eye...
...
23. Authentic Jules Jordan DVDs are manufactured in DVD-9 format, and feature extensive additional materials and interactive menus. I have discovered that the counterfeit copies[21] are recorded in the inferior DVD-5 format[22] which does not have the storage capacity to include the additional materials (out-takes, photo shoots, and behind the scenes) and which is incapable of supporting the intricate menu system of my legitimate product. (My emphasis.)
[31] Gasper goes on to state:
27. Records provided by Diadem ... and authenticated in the Brunet affidavit establish that Diadem, acting as an agent of the defendants, manufactured not less than twelve hundred fifty counterfeit DVD copies (each) of not less than fifteen Jules Jordan copyrighted works from approximately 2002and November 2003, by the defendants Ouzzan and Sylnet, acting as agents for the defendants Elmaleh, Kaytel and Leisure Time.
[32] With respect to the impact those copies have had or will have on the plaintiffs' business, he adds:
34. Jules Jordan has suffered an economic decline in the last year that had been difficult to explain prior to the discovery of this operation. It is apparent that the defendants' counterfeit operation is directly competing with Jules Jordan through the sale of stolen content which I nor any legitimate competitor could ever match....
35. The continuing sale of these inferior counterfeit copies could damage Jules Jordan's market share in the adult entertainment arena. If not enjoined will continue to harm Jules Jordan business.
36. ... It is unlikely that a damage award would be adequate to repair the goodwill lost between Jules Jordan and its customers due to the counterfeit copies being available in the marketplace.
(iv) The plaintiffs' allegations
[33] The plaintiffs alleged that Elmaleh "personally devised, and carried out" the "scheme to manufacture counterfeit DVDs, to hide the actual source of the counterfeit DVDs and to launder the funds[23] derived from the sale of the counterfeit DVDs." In addition, the plaintiffs alleged that payments for the counterfeit DVDs were forwarded to "off-shore accounts controlled by Elmaleh."[24]
[34] In their written submissions, the plaintiffs stated that Elmaleh is at the centre of "an unlawful conspiracy". To support this view they stated in their notice of motion:
Records provided by Diadem include a "Reproduction authorization, representations and warranties" document, dated May 5, 2004, executed personally by the Defendant Elmaleh, in which he fraudulently represents that Kaytel holds the necessary intellectual property rights to authorize the reproduction of the EA Productions." [25] (My emphasis.)
[35] The plaintiffs also alleged that Kaytel, Leisure Time and Transworld[26] were "shell corporations which Elmaleh and one or more of the Doe Defendants used as conduits for their personal business, property and affairs."
[36] It was on the basis of the above that the Anton Piller Order was issued.
[37] The evidence referred to in the various notes included in this summary was not before the Judge who heard the ex parte motion. These notes indicate that many important assertions have now been challenged by Kaytel and Elmaleh.
[38] There is little or no evidence as to the specific role of Leisure Time, if any, in the alleged conspiracy. Although the name of that defendant seems to be added as a matter of course to many of the allegations found in various affidavits, none of the supporting documentation or detailed factual assertions establish that Leisure Time was involved in any duplication or sale of any of the titles in which the plaintiffs hold intellectual property rights. Elmaleh is not the majority shareholder of Leisure Time. Although Elmaleh acknowledged that he is involved in Leisure Time, he stated that it was created for legitimate business and tax purposes.
C. The execution of the Anton Piller Order
[39] The Anton Piller Order was executed on October 18, 2005 against the defendants Sylnet, Ouzzan, Jacky's One Stop Distribution Inc. (Jacky's), Jacky Elkeslassy (Elkeslassy), Kaytel and Elmaleh.
[40] A further execution of the Anton Piller Order against Sylnet took place on October 20, 2005.
[41] No proper address for service was ever identified for Transworld. As such, Transworld was not served with the Anton Piller Order and related documentation, including the complaints and temporary restraining orders issued in the two American proceedings.
[42] In addition, no affidavit was filed indicating that the Anton Piller Order was executed against Leisure Time.
(i) Sylnet
[43] When the plaintiffs attended at Sylnet's registered head office on October 18, 2005, they discovered that it was also Ouzzan's residence. Patrick J. Cotter, who attended on behalf of the plaintiffs' Canadian counsel, along with independent counsel, stated in his affidavit:
7. As set out in greater detail below, Mr. Ouzzan initially denied knowing anything about the proceedings, about the parties to the proceedings, and about counterfeit DVD's or the Infringing Works. He later provided information that confirmed that at least some of these representations were false. He also initially stated that neither he nor Sylnet carried on business anywhere other than the Premises. He later provided information that confirmed that this representation was also false.
...
22. I have since had an opportunity to review the issue of any "negotiations" with U.S. counsel for the plaintiffs, Mr. Sean Macias and Mr. Allan Gelbard, and have been advised by them and do verily believe that an approach was made to Mr. Ouzzan in the summer of 2005, with a view to having him and Sylnet cooperate with the plaintiffs in the prosecution of the U.S. actions only ... Thereafter, negotiations ensued between Mr. Ouzzan's counsel and the plaintiffs' [former Canadian counsel]. I am also advised by Mr. Macias and Mr. Gelbard and do verily believe that while he initially indicated that he would be prepared to co-operate, Mr. Ouzzan subsequently delayed and then refused to provide any assistance in the prosecution of the U.S. actions on terms acceptable to the U.S. plaintiffs. I am advised by Mr. Macias and Mr. Gelbard and do verily believe that they formed the opinion that Mr. Ouzzan was simply stalling the plaintiffs in their efforts. ... (My emphasis.)
[44] Later on October 18, 2005, and only after evidence of this fact was discovered, Ouzzan acknowledged that he carried on Sylnet business at a location other than his residence. Ouzzan also, then with his former counsel present, stated that he had dealt with Kaytel but that he "only played a small part".
[45] Ouzzan indicated that because of his observance of the Jewish holiday Sukkot, he could not provide access to Sylnet's business premises as he could not drive there. Ouzzan indicated that it would take him approximately two hours to walk there and, after some discussion, he said he was prepared to do so.
[46] Ouzzan indicated, however, that he could not carry the key to Sylnet's business premises because of his observance of Sukkot. Ouzzan initially agreed with Mr. Cotter's suggestion that the attending sheriff carry the key, but then stated that he would carry the key himself.
[47] When Mr. Cotter and the executing parties arrived at Sylnet's business premises, approximately one hour and thirty minutes later, Ouzzan and his then counsel were already present. They indicated that they could not provide access to the building because neither could operate the electronic key pad in light of their observance of Sukkot. Ouzzan's then counsel refused to provide the code to the electronic key pad, stating that he and Ouzzan would only provide it to a sheriff (whom they knew was no longer available) or to a police officer. The police were called, but an officer was not dispatched in sufficient time.
[48] No materials were seized on October 18, 2005.
[49] Ouzzan provided the plaintiffs access to Sylnet's business premises two days later, on October 20, 2005.[27] It was at Sylnet's business premises that Ouzzan kept all documentation relating to its sales, including those allegedly pertaining to the events at issue in this proceeding.
[50] Again on October 20, 2005, Ouzzan's former counsel objected to the execution being conducted on a Jewish holiday (although Ouzzan was at work and, apparently, had himself suggested that date). Ouzzan's former counsel then indicated that it was a "half day holiday".
[51] During the execution of the Anton Piller Order against Sylnet on October 20, 2005, some documents were photocopied and others were seized.
(ii) Jacky's
[52] When the plaintiffs attended at the registered head office of Jacky's, they discovered that it was also Elkeslassy's residence. Patrick Ferland, who attended on behalf of the plaintiffs' Canadian counsel, along with independent counsel, indicates in his affidavit that Elkeslassy cooperated fully with them and spoke at length about Kaytel's and Elmaleh's involvement with "Evil Angel and/or Evil Empire" DVDs.
[53] During the execution of the Anton Piller Order against Jacky's, some documents were seized.
(iii) Kaytel
[54] David Joanisse, who attended at Kaytel's business premises on behalf of the plaintiffs' Canadian counsel, notes in his affidavit that those premises consisted of a "two-storey industrial building"; that the "signage on the front of the building and on the door ... advertises Kaytel Video"; and that the premises included "a large warehouse area located in the back of the building which contained numerous copies of movies on DVD and VHS format stored either in boxes or put on shelves, and which also served as a manufacturing facility".
[55] Mr. Joanisse's affidavit discloses that Gasper and Karen Stagliano, apparently the wife of the principal of John Stagliano, Inc., were actively involved in the search of Kaytel's premises. The Anton Piller Order allowed them to attend.
[56] Mr. Joanisse's affidavit refers generally to "the finding of some material [at Kaytel] related to the 'Infringement Works' as defined in the Order, including some DVDs".[28]
[57] Mr. Joanisse also stated in his affidavit that the executing parties' attendance at a nearby rental storage facility was based on information provided by Elkeslassy. Mr. Joanisse stated that Elmaleh opened both lockers, which Elkeslassy had identified by number. The first locker contained approximately 25 boxes of DVDs, "[n]one of [which] contained counterfeit material related to this case". The second locker was empty.[29]
[58] Surprisingly, Mr. Joanisse's affidavit does not expressly refer to the DVD entitled "Feeding Frenzy 2", which was allegedly found by Karen Stagliano and which, according to the representations of the plaintiffs' counsel at the hearing of this motion, constitutes - along with the DVDs purchased by Gasper in October 2005 (see paragraph 77 and following, below) - their strongest evidence of infringement.[30]
[59] The Court requested that the plaintiffs file this DVD, along with certain other evidence, as described later in these reasons.
D. Consent orders concerning Sylnet, Ouzzan, Jacky's and Elkeslassy
[60] On November 2, 2005, this Court ordered on the consent of Sylnet and Ouzzan that: (i) they are enjoined from infringing copyright in any of the works described in the motion material filed in support of the Anton Piller Order; and (ii) the evidence seized from them pursuant to the Anton Piller Order may be used in the pending actions in the United States, provided such use is permitted by the law of that forum.
[61] On November 9, 2005, a similar consent order was issued in respect of Jacky's and Elkeslassy.[31]
[62] In view of the above orders, there is no need to comment further on whether the execution of the Anton Piller Order was conducted in conformity with its terms as against Sylnet and Jacky's.
[63] With respect to the execution of the Anton Piller Order against Kaytel, it appears to have been conducted in accordance with the terms of the Order and that Elmaleh cooperated fully in all respects.
E. Elkeslassy's affidavit in support of the plaintiffs
[64] On November 4, 2005, prior to the issuance of the consent order in respect of Jacky's and Elkeslassy, Elkeslassy swore an affidavit in this proceeding that attached a transcript of his "examin[ation] under oath by Mr. Sean Macias, attorney for the plaintiffs [Jules Jordan and Gasper] in the California Action". That examination was conducted on October 19, 2005, the day after the Anton Piller Order was executed against Jacky's. The transcript discloses that the only other party who was present was Gasper, Elkeslassy having waived his right to be represented by counsel.
[65] In his examination by Mr. Macias, Elkeslassy provides additional information as to his role in handling "Jules Jordan and Evil Empire" DVDs as a Kaytel warehouse employee and as the sole director of Jacky's.
[66] Asked by Mr. Macias to "tell us in your own words your understanding and your relationship regarding Kaytel and the counterfeiting operation", Elkeslassy stated:
I started working for Mr. Alain Elmaleh in two thousand and three (2003) ... and six (6) months later, we started receiving new, new DVDs which they were not with Kaytel Video, had nothing to do with Kaytel Video. And then, Mr. Elmaleh rented storage under his wife's name,[32] and we put shelves over there, he put shelves and then, he told me to move all the goods, all the goods to the, to the [rental storage facility], which is a warehouse. ...
[67] Elkeslassy indicates that all the EVIL ANGEL and Jules Jordan titles sent to the rental storage facility were in "red boxes", that "he had sixty (60) titles",[33] and that "[t]hey were reproduced by the same guy who did for Kaytel Video all these DVDs, which is Diadem Digital".
[68] Asked by Mr. Macias "who was aware of the selling of the Jules Jordan and Evil Empire DVDs from that locker", Elkeslassy says:
Most people at Kaytel Video, most employees at Kaytel Video, they all knew that Mr. Elmaleh kept stuff over the... the lockers over there. Most of them. Everybody knew. If you go ask anybody there, they knew, since they were putting them in the boxes themselves. And I had to go pick them up and bring them, they had to wait for me sometimes.
F. Elmaleh's affidavit
[69] On November 21, 2005, Elmaleh swore an affidavit in which he vehemently challenged the allegations made against him and Kaytel - which, he stated, had been in business for 21 years, duly acquiring the necessary rights to deal in adult films in the ordinary course of that business.
[70] Elmaleh challenged Brunet's credibility as well as the veracity of documents provided, including the "Reproduction authorization, representations and warranties" allegedly executed by him. Elmaleh alleged that his purported signature on that form had been forged.
[71] Elmaleh also attacked the credibility of Elkeslassy, stating that Elkeslassy had attempted to extort $50,000 from him and that, like Brunet, he had given false evidence.
[72] Elmaleh stated that Kaytel only dealt in the plaintiffs' titles to the extent that it lawfully purchased those titles from the plaintiffs' licensed Canadian distributors.[34] He also attests that some of those titles were purchased from wholesalers overseas, such as Silver Media.
[73] Elmaleh and Kaytel put forward a considerable volume of documentary evidence[35] pertaining to their business operations including the purchase and sale of the plaintiffs' films.
G. Ouzzan's affidavit
[74] On December 7, 2005, Ouzzan swore an affidavit in which he detailed how he had arranged for the replication by Diadem of DVD titles belonging to the plaintiffs on the basis of a "special order" allegedly placed by Elmaleh in or about August 2003.[36]
[75] Ouzzan also referred to how he received "'Evil Angel' and 'Evil Angel/Jules Jordan' adult DVDs in red packages" from Elmaleh and forwarded 21 such DVDs directly to MMS. [37]
[76] The numerous exhibits to Ouzzan's affidavit include copies of FedEx waybills[38]said to evidence the shipment of DVDs and materials required to prepare infringing copies thereof; lists prepared by Ouzzan purportedly of the DVDs that Elmaleh ordered replicated; e-mails between Ouzzan and both Kaytel[39] and Diadem; and Sylnet invoices[40] said to evidence the shipment from Diadem to Kaytel of infringing DVDs.
H. Gasper's supplementary affidavit
[77] The same day that Ouzzan swore his affidavit, Gasper stated that, on October 3, 2005, he had attended at two Ottawa stores owned and operated by Elmaleh.
[78] Gasper stated that he found two "pirated copies of two Evil Angel Adult DVD titles" at one of the stores, and "another Evil Angel Adult DVD title that had been pirated" at the second store. Gasper stated that he purchased the three "pirated" DVDs, and attached the receipts as exhibits to his supplementary affidavit.[41]
[79] Gasper also stated that, "[i]n or about July, 2005", he "purchased what turned out to be pirated Evil Angel Adult DVDs on the internet from Shots Video BV, a Dutch adult entertainment retailer."[42] Gasper went on to state that, also in July, 2005, he spoke with a representative of Shots Video who "advised [Gasper] that he had purchased the Evil Angel Adult DVDs from Mr. Elmaleh while attending a trade show in Las Vegas, Nevada, in January of 2005."[43]
I. Brunet's supplementary affidavit
[80] On December 8, 2005, Brunet attested to having been "advised by Mrs. Micheline Charbonneau, then of Diadem Digital Inc.'s accounting department ... that on May 5, 2004, pursuant to my request of Mr. Alain Elmaleh of Kaytel Video ... Diadem received through its fax machine[44] a Reproduction authorization, representations and warranties letter from Kaytel". He also confirmed that he could not locate the original of this document.
J. Expert reports
[81] To his affidavit dated December 9, 2005, Jacques Bourdeau - a Security Engineer employed by ESI Technologies Inc., retained by the plaintiffs - attached his report analysing "the information and documents found on various computers located on Kaytel's premises".
[82] In his report, Mr. Bourdeau made the following statements regarding alleged "subversion of evidence" on Kaytel's computer system: (i) "The password of the Administrator account ... was changed" three minutes after "[t]he persons who were serving the order met ... in front of Kaytel's premises"; (ii) "logging was interrupted at the same time as the Administrator password was changed", meaning that "any actions taken on the computer can no longer be traced or documented"; and (iii) "ESI found that the one and only partition left a large portion of the disk unused", which "is a sign of a deleted or hidden partition".[45]
[83] On December 12, 2005, Marco Ghirotto - a handwriting expert - swore an affidavit to which he attached his report concluding that the signature on the "Reproduction authorization, representations and warranties" document is not Elmaleh's.
[84] After the filing of this report, the plaintiffs changed the position they had taken on the ex parte motion. Brunet stated in cross-examination that the form may well have been signed by Alain Richer, the General Manager of the warehouse at Kaytel.
[85] Elmaleh filed a supplementary affidavit on December 16, 2005, in which he raised many of the points that have been described in the notes to the above summary. Largely, Elmaleh put forward evidence directly challenging Ouzzan's account of the "special order", as well as the report of Jacques Bourdeau. Elmaleh also questioned Gasper's account of his purchase of allegedly "pirated" DVDs from two of Elmaleh's stores in October 2005.
[86] The same day, Jacques Amar - maintenance manager of Kaytel's computer system for the past eight years - swore an affidavit attesting that the system's password has been the same for the past seven years. This supported Mr. Castonguay's conclusion contained in his report (see note 45).
[87] Prior to the hearing of the present motion, and one can only assume having considered the responding expert report filed on behalf of Elmaleh and Kaytel, the plaintiffs advised counsel for Elmaleh and Kaytel that they would not be relying on Mr. Bourdeau's evidence pertaining to the alleged "subversion of evidence" on Kaytel's computer system. There is no need, therefore, to go into any further detail in respect of this issue.
[88] The parties filed the transcripts of the cross-examinations of the following affiants: Brunet, Norman, Gasper, Elkeslassy, David Joanisse, Jacques Bourdeau, Allan Gelbard (of the plaintiffs' U.S. counsel), Elmaleh, Robert Castonguay and Jacques Amar. Several answers to undertakings were also filed.
[89] This (albeit rather long) summary of the extensive evidence presented by the parties is just that - a summary. But the parties can rest assured that the Court has reviewed it all, as well as their written submissions which, in the case of Kaytel and Elmaleh, were too extensive (462 paragraphs).
3. Material Evidence
[90] As noted earlier, on the hearing of this motion the plaintiffs provided to the Court, at its request, two of the three allegedly "pirated" DVDs purchased by Gasper on October 3, 2005.
[91] Counsel for the plaintiffs undertook to provide to the Court the third DVD purchased by Gasper, as well as the "Feeding Frenzy 2" DVD seized at Kaytel and related materials referred to in Mr. Joanisse's affidavit (as listed in the bailiff's notes appended thereto).
[92] Along with the exhibits that counsel agreed to provide, the plaintiffs purported to submit a number of additional items. The tendering of those items was not discussed or agreed to during the hearing of this motion and Elmaleh objected, stating that they were not properly before the Court. I agree. The Court will not consider the additional items in disposing of this motion. They will be returned to the plaintiffs.
[93] I now turn to the material evidence that is before the Court.
[94] The two allegedly infringing DVDs tendered during the hearing of this motion (which Gasper purchased) are entitled "Jules Jordan's Trained Teens 2" and "John Leslie's Fresh Meat 10". Embedded into both disks are the following: (i) "IFPI LV11"; (ii) "CID-D002" and a number that starts with "D050"; and (iii) a four-digit number with a "KT" prefix.
[95] As noted above, according to Brunet's Affirmation, these codes respectively denote: (i) the alphanumeric code that was assigned by Philips Electronics to MMS, which would be embedded into any DVD produced or replicated using an MMS stamper; and (ii) the codes "assigned to Diadem and L.H. by the mastering facility, in this case MMS". In respect of (iii), above, Ouzzan explained in his affidavit that he "randomly assigned a Kaytel serial number" to each DVD provided to him by Elmaleh as part of the "special order".
[96] The "IFPI LV11", "CID-D002", "D050" and "KT" codes embedded into "Jules Jordan's Trained Teens 2" and "John Leslie's Fresh Meat 10" correspond to the codes identified for those titles in Brunet's Affirmation.
[97] The third allegedly "pirated" DVD purchased by Gasper, which was provided subsequent to the hearing, is a Jules Jordan production entitled "Lex the Impaler 2".[46] This DVD, while containing the embedded "IFPI LV11" code purportedly assigned by Philips Electronics to MMS, has embedded into it the code "DDI-0012" - not "CID-D002", nor is there a "KT" number embedded into this third disk.
[98] The fourth allegedly infringing DVD before the Court is the "Feeding Frenzy 2" DVD which, while seized during the execution of the Anton Piller Order at Kaytel, was not specifically identified in Mr. Joanisse's affidavit as being infringing, nor were the circumstances in which it was found attested to until March 7, 2006, in the course of Gasper's cross-examination.
[99] Unlike the other three allegedly infringing DVDs referred to above, this DVD was copied onto a "DVD-R" disk. As with "Lex the Impaler 2", there is no "KT" number embedded into it. Embedded into this DVD is the code "IFPI FG99" - not "IFPI LV11", the code Brunet stated was assigned by Philips Electronics to MMS. Finally, on the cover of the box is a sticker that states: "Maritime XXX Classified / Classifié Explicit Material Adults 18 and over".[47]
[100] In respect of the other materials listed in the bailiff's notes, the plaintiffs advised the Court at the hearing that they do not allege that they are infringing or relevant to the determination of the issues before the Court.
4. Analysis
Legal principles applicable to Anton Piller orders
[101] In Adobe Systems Inc. v. KLJ Computer Solutions Inc., [1999] 3 F.C. 621 (T.D.), Chief Justice John Richard stated at paragraph 31:
As noted by the Federal Court of Appeal in Indian Manufacturing Ltd. v. Lo (1997), 75 C.P.R. (3d) 338 at 341-342:
An Anton Piller order takes its name from that of the plaintiff in Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. 55, a decision of the English Court of Appeal. The purpose of such an order is to preserve property as to which there is strong prima facie evidence that it consists of articles infringing the plaintiff's copyright, trade-mark or other rights. The order is obtained ex parte because the essence of the exercise of judicial power "is surprise, so that the defendant should not have advance knowledge of the application or the order and so have the opportunity of destroying or disposing of relevant materials or documents". (My emphasis.)
[102] The Court has consistently held that an Anton Piller order is an "extraordinary remedy": Titan Sports Inc. v. Mansion House (Toronto) Ltd.,[1989] F.C.J. No. 805 (T.D.) (QL) at paragraph 15; Adobe, above, at paragraph 42; WIC Premium Television v. Levin, [1999] F.C.J. No. 652 (T.D.) (QL) at paragraph 21; Proctor & Gamble Inc. v. John Doe (c.o.b. Clarion Trading International), [2000] F.C.J. No. 61 (T.D.) (QL) at paragraph 48.
[103] The nature of the Anton Piller remedy has also been