Date: 20090422
Docket: T-306-06
Citation: 2009 FC 401
Ottawa, Ontario, April 22, 2009
PRESENT: The Honourable Mr. Justice Mandamin
BETWEEN:
MICROSOFT
CORPORATION
Plaintiff
and
PC VILLAGE CO. LTD, 1445687 ONTARIO
LIMITED,
PC VILLAGE (MARKHAM) INC., 1558346
ONTARIO CORP.,
PC TODAY INC., PC TODAY COMPUTE CO LTD.,
PC VILLAGE (R.H.) CO. LTD., TSIN KIT MAN,
LAP SUN MA,
JOHNY MA, LAP-CHEUNG MA, ELIZA MA,
LAP-SUN ELIZA MA,
FUK CHUEN MA, JENNY YUEN, JOHNSON YE,
SYED AZIZ AND ALEX MA
Defendants
REASONS FOR JUDGMENT
Introduction
[1]
Since
2000 the Plaintiff, Microsoft Corporation (Microsoft), has been attempting to
stop the sale of Microsoft Software and unauthorized use of Microsoft
trademarks by Defendants involved in businesses operated under variations of
the name “PC Village”. Currently there are seven PC Village locations in the Greater
Toronto Area and two of those locations and individuals associated with them
have been selling and distributing unlicensed copies of Microsoft computer software
along with the computer systems. The infringing activities at issue in this
action occurred in 2005 and 2006 and relate to two locations described as PC
Village Markham and PC Village Downtown.
[2]
This
judgment relates to 1445687 Ontario Limited, 1558346 Ontario Corp., Syed Aziz
and Johnson Ye (collectively referred to as the named Defendants).
[3]
Initially
the majority of Defendants in this action were represented by legal counsel and
aggressively defended the action. A Statement of Defence was eventually served
on behalf of this group of the Defendants but that Statement of Defence was
never filed in Federal Court. There was a settlement meeting among counsel
which resulted in an agreement in principle to settle but the Defendants never
finalized the settlement documentation. Subsequently, the Defendants’ counsel
brought a motion to be removed as solicitor of record. The named Defendants
not only abandoned their defence but also their participation in the Court
proceedings. In addition, two of the three corporations, 1445687 Ontario
Limited and 1558346 Ontario Corp., were voluntarily dissolved. Nevertheless,
the PC Village stores continue to operate at the PC Village Markham and PC
Village Downtown locations.
[4]
The
Plaintiff, Microsoft, is the owner of the copyright of various computer software
programs and the Microsoft registered trademark. This action is for copyright and
trademark infringement by PC Village businesses and certain individuals
associated with the businesses.
[5]
Microsoft
is a corporation incorporated and subsisting under laws of the State of Washington in the United
States of America having its head office at 1 Microsoft Way, Redmond, Washington, USA. At
all relevant times Microsoft has been engaged in the business of developing,
marketing and distributing a range of computer software programs, with licenses
for personal, business and professional use, including the Microsoft programs.
[6]
The
Defendant, 1445687 Ontario Limited, was a corporation incorporated and
subsisting under the laws of Ontario as Ontario Corporation
Number 1445687 having its registered office and mailing address at 3229 Highway
7 East, Unit 7, Markham, Ontario L3R 3P3. The business name of
the Corporation is PC Village Markham.
[7]
The
Defendant, 1558346 Ontario Corp., is a corporation incorporated and subsisting
under the laws of Ontario as Ontario Corporation Number 1558346, having its
registered office address at 684 Yonge Street, Toronto, Ontario, M4Y 2A6.
[8]
The
Defendant, Syed Aziz, is an employee of one or more of the named corporate
Defendants and works primarily at the location of PC Village Markham at 3229
Highway 7 East, Unit 7, Markham, Ontario.
[9]
The
Defendant, Johnson Ye, is an employee of one or more of the corporate
Defendants and works primarily at the location of PC Village Downtown at 684 Yonge
Street,
Toronto, Ontario.
[10]
The
Plaintiff’s motion is for default judgment on the Statement of Claim pursuant
to Rule 210 of the Federal Court Rules and seeking the following relief:
a. statutory
damages in the total amount of $150,000 pursuant to section 38.1 of the Copyright
Act, R.S.C. 1985, c. C-42, as amended, being $10,000 per work for each of
the 15 computer software works involved;
b. punitive
damages in the amount of at least $50,000; and
c. a permanent
injunction against the following Defendants:
i.
1445687
Ontario Limited;
ii.
1558346
Ontario Corp.;
iii.
Syed
Aziz; and
iv.
Johnson
Ye
[11]
The
Plaintiff also seeks costs of this action including this motion on a solicitor
and client basis.
Proof for
Default Judgment
[12]
On
a motion for default judgment, where no Statement of Defence has been filed, every
allegation in the Statement of Claim must be treated as denied. The Plaintiff
must establish that the Defendants were served with a Statement of Claim and
that they have not filed a defence within the deadline specified in Rule 204 of
the Federal Courts Rules, SOR/98-106. The Plaintiff must lead evidence
upon which the Court can find on the balance of probabilities that infringement
has occurred within the meaning of the statute being the Copyright Act
and the Trademarks Act. Louis Vuitton Malletier S.A. and Louis
Vuitton Canada Inc. v. Lin Pi-Chu Yang, et al., 2007 FC 1179 at para. 4; McInnes
Natural Fertilizers Inc. v. Bio-Lawncare Services Inc., 2004 FC 1027 at
para. 3; Ragdoll Productions (UK) Ltd. v. Jane Doe, 2002 FCT 918 at
paras. 23 and 25.
Service of Statement of
Claim and Time to File New Statement of Defence
[13]
The
Affidavits of Nelson Paesch, Process Server, establish that the Defendants
1445687 Ontario Limited (also referred to as PC Village Markham) and Syed Aziz
were served with the Statement of Claim on February 17, 2006. The Affidavit of
Marco de Lucia, Process Server, establishes that the Defendant 1558346 Ontario
Corp. (also referred to as PC Village Downtown) was served with the Statement
of Claim on February 21, 2006. The Affidavit of Justin R. Petrillo establishes
that Bereskin and Parr acting as counsel for Johnson Ye endorsed the acceptance
of service of the Statement of Claim on April 11, 2006. I am satisfied that
the named Defendants were served with the Statement of Claim.
[14]
The
defence lawyers, Bereskin and Parr served on the Plaintiff a Statement of
Defence on behalf of the Defendants Syed Aziz and Johnson Ye on June 16, 2006.
They did not serve a Statement of Defence on behalf of PC Village Markham and
PC Village Downtown. Further, on May 18, 2007, Bereskin and Parr advised that
they were no longer acting for the Defendants and were subsequently removed as
solicitors of record by the Order of Prothonotary Aalto dated August 20, 2007.
The Statement of Defence was never filed with the Court. Accordingly, I am
satisfied that no Statement of Defence has been filed with the Court on behalf
of the Defendants 1445687 Ontario Limited, 1558346 Ontario Corp., Syed Aziz and
Johnson Ye.
Infringement
[15]
The
evidence indicates that the Plaintiff’s investigators attended at PC Village
Markham and PC Village Downtown on 13 different occasions between June 28, 2000
and January 20, 2006. The Defendant Syed Aziz was present on several occasions
as PC Village Markham and, in particular, on January 13, 2006. The Defendant
Johnson Ye was present at PC Village Downtown also on several occasions and, in
particular, on January 17, 2006.
[16]
The
conversations the Plaintiff’s investigators had with the sales people in the
store and the activity they observed is suggestive of repeated infringements of
the Plaintiff’s copyrights and trademarks. The evidence indicates that fifteen
clear infringements of the Plaintiff’s copyrights and trademarks occurred, seven
at PC Village Markham on January 20, 2006 and eight at PC Village Downtown on
January 20, 2006.
[17]
On
January 20, 2006 the investigator picked up the computer he ordered from PC
Village Markham. That computer contained the following Microsoft computer
programs which had been copied onto the hard drive:
1. Microsoft
Office 2000 (Premium Edition)
2. Microsoft
Access 2000
3. Microsoft
Excel 2000
4. Microsoft
FrontPage 2000
5. Microsoft
Outlook 2000
6. Microsoft
PowerPoint 2000
7. Microsoft
Word 2000
[18]
The
circumstances of the computer purchase at PC Village Markham and the
conversations the investigator had with Syed Aziz together with the absence of
an official Microsoft CD-ROM and certificate of authenticity label establish
that the computer software program copies were unauthorized.
[19]
Similarly
the computer system purchased at PC Village Downtown on January 20, 2006, also
contained unauthorized software namely:
1. Microsoft
Office Professional Edition 2003
2. Microsoft
Office Access 2003
3. Microsoft
Office Excel 2003
4. Microsoft Office
Outlook 2003
5. Microsoft
Office PowerPoint 2003
6. Microsoft
Office Publisher 2003
7. Microsoft
Office Word 2000
[20]
The
conversation between the investigator and Johnson Ye and the absence of an
official Microsoft CD-ROM and certificate of authenticity label confirm that
the computer software programs copies were unauthorized.
[21]
The
above unauthorized software contained the Microsoft Marks within.
[22]
I
find on the balance of probabilities that the Defendants 1445687 Ontario
Limited and Syed Aziz infringed on the Plaintiff’s copyrights and trademarks in
respect of seven Microsoft software programs and the Defendants 1558346 Ontario
Corp. and Johnson Ye infringed upon the Plaintiff’s copyrights and trademarks
in respect of eight unauthorized software programs.
[23]
The
Defendants 1445687 Ontario Limited and 1558345 Ontario Corp. did not serve or
file a Statement of Defence at any time. Counsel for the Defendants Syed Aziz
and Johnson Ye never filed the Statement of Defence with the Court. Counsel
subsequently withdrew from the record and the Defendants Aziz and Ye did not
file the Statement of Defence at any subsequent time.
Entitlement to Default
Judgment
[24]
The
time for filing a Statement of Defence has long expired. Pursuant to Rule 210
of the Federal Court Rules the Plaintiff Microsoft is entitled to
default Judgment.
Entitlement
to Relief Requested
[25]
The
Plaintiff is entitled to the relief requested as stated above. The Plaintiff
also seeks costs of this action on a solicitor/client basis.
Damages for
Copyright Infringement
[26]
The
Plaintiff holds the copyright to the 15 unauthorized works found in the hard
drives of the computers purchased from the Defendants. Section 38.1 of the Copyright
Act permits the Plaintiff to elect an award of statutory damages. The
provision permits the Plaintiff as copyright owner to elect an award of statutory
damages “in a sum not less than $500 or more than $20,000 as the Court
considers just”.
[27]
Subsection
38.1(5) of the Copyright Act provides a list of relevant factors for the
Court to consider in exercising its discretion in awarding statutory damages.
Those relevant factors include:
a. The good or
bad faith of the Defendants;
b. The conduct
of the parties before and during the proceedings; and
c. The need to
deter other infringements of the copyright in question.
The cases of Louis Vuitton Malletier
S.A. and Louis Vuitton Canada Inc. v. Lin Pi-Chu Yang, et al. doing business as
K2 Fashions, 2007 FC 1179 and Microsoft Corp. v. 9038-3746 Quebec Inc.,
2006 FC 1509 are directly relevant.
[28]
In
Microsoft Corp. the Defendant was found to have breached the Plaintiff’s
intellectual property rights by distributing CD’s containing Microsoft,
Windows, Office and Outlook Software. Justice Harrington awarded the Plaintiff
$20,000 for each of the 25 copyrighted works which had been infringed after
concluding that:
a. The
Defendants had not shown they had reasonable grounds to believe that they had
not infringed the copyright.
b. The minimum
amount of $500 for each of the infringed works would be grossly out of
proportion to the infringement.
c. The
Defendants had demonstrated bad faith in their general dismissive attitude to
the Court.
d. The
Defendants failed to provide adequate records despite a Court order.
e. Deterrence is
necessary to prevent other infringements of the works in question (Microsoft
Corp. at paras. 106–115).
[29]
In
Louis Vuitton, Justice Snider concluded that the maximum statutory award
of $10,000 for each of the discrete acts of infringement of the copyrighted
works was appropriate. The factors of good or bad faith of the Defendants and
conduct of the Defendants were as follows:
1.
The
Defendants have been aware since December 2001, when an Anton Pillar order was
executed, that the sale of the counterfeit products was in violation of the
Plaintiffs’ intellectual property rights. Nevertheless they have persisted in
selling infringing products.
2.
The
Plaintiffs has obtained two previous judgments, the first on April 26, 2002,
the second on June 8, 2004, restraining the sale of infringing products in the
K2 Fashions store. The infringing activity has continued.
3.
The
Defendants have been advised numerous times to stop the sale of products
infringing on the Plaintiffs’ intellectual property rights since the June 8,
2004 judgment, but have nevertheless persisted in their infringing activities.
4.
The
Defendants have attempted to conceal and cover-up their actions by placing the
counterfeit products in hidden displays and drawers.
[30]
Justice
Snider concluded that these actions demonstrated bad faith and conduct that
warranted a higher award of statutory damages.
[31]
Justice
Snider also considered the need to deter others. She noted that continuing
infringement of Louis Vuitton products eroded the value of legitimate
copyrighted products in the marketplace. She also considered the need for
deterrence because of the behaviour of the Defendants. In her view, a high
award was necessary to deter future infringement and secondly to deter open
disrespect for Canada’s copyright protection laws.
[32]
Justice
Snider was satisfied the maximum award of statutory damages in the amount of
$20,000 for each of the two copyright works was appropriate for a total amount
of $40,000
[33]
In
this case, the bad faith of the Defendants is apparent given the candid
discussion of copyright violations by the Defendant corporations sales
personnel and the Defendants Aziz and Ye. This behaviour and attitude was
displayed during the period 2001 to 2006 and can not be seen as isolated
occurrences.
[34]
The
Defendants’ conduct is also a factor. They were put on notice regarding the
infringing nature of their activities including:
a. a consent
judgment in T-703-97 on July 14, 1999 which related in part to PC Village
Downtown and which included a permanent injunction;
b. cease and
desist letters sent to PC Village Markham on July 19, 2000 and September 1,
2005;
c. cease and
desist letters sent to PC Village Downtown on November 16, 2000 and May 11,
2001; and
d. discussions
that the manager of PC Village Downtown and Johnson Ye had with the Plaintiff’s
counsel in 2001.
[35]
The
Defendants were well aware their conduct was illegal as appeared from the
statements made to investigators. Johnson Ye stated that loading software was
illegal and therefore could not be listed on the quote. Sayed Aziz stated that
no one buys Microsoft Office because of the cost but that he usually loaded it
onto computer systems to save the customer money because it does not have to be
registered with Microsoft.
[36]
The
Defendants Aziz and Ye participated in reaching an agreement in principle to
settle the matter with the Plaintiff and then abandoned their defence
ultimately resulting in their solicitors bringing a motion to be removed as
solicitors of record.
[37]
The
Defendant corporations were voluntarily dissolved after the Plaintiff commenced
its action. The Articles of Dissolution for 1445687 Ontario Limited and
1558346 Ontario Corp. falsely stated that each corporation had no debts,
obligations or liabilities and that there were no proceedings in any court
against the corporation, a statement which was untrue.
[38]
The
Defendants showed total disregard for the Plaintiff’s copyright and trademark
rights. They also demonstrated a disregard for the Court and its processes.
[39]
I
conclude that the amount of statutory damages must reflect not only the bad
faith of the Defendants and their disregard for the rights of the Plaintiff.
It must also deter the Defendants from continuing their course of action. In
my view, the amount for statutory copyright damages must be sufficiently high
to serve a salutary message and deter future infringements on the part of the named
Defendants and other parties.
[40]
The
Plaintiff does not seek additional damages for the trademark infringement or
damages for depreciation of goodwill and loss of direct sales. Such damages
would be very difficult to assess.
Punitive and Exemplary
Damages
[41]
Subsection
38.1(7) of the Copyright Act as well as the aforementioned jurisprudence
makes it clear that punitive and exemplary damages can be awarded in addition
to the statutory damages. In Microsoft, Justice Harrington ordered a
total of $300,000 in punitive damages, $100,000 against the individual
defendant and $100,000 against each of the corporate defendant in addition to
statutory damages. In Louis Vuitton Malletier S.A. v. Yang, Justice
Snider awarded $100,000 in punitive damages on a motion for default judgment in
addition to the maximum statutory damages award.
[42]
The
law with respect to the award of punitive and exemplary damages was summarized
by Justice Boyd in Louis Vuitton Malletier S.A. v. 486353 B.C. Ltd.,
2008 BCSC 799 at paras. 84 to 86. After reviewing general principles Justice
Boyd stated:
[86] Punitive and exemplary damages
have been awarded in cases of trade-mark and copyright infringement, where, for
example, the conduct of the defendants was “outrageous” or “highly
reprehensible”, or where the defendant’s actions constituted a callous
disregard for the rights of the plaintiff or for injunctions granted by the
Court. Similarly, in determining whether punitive and exemplary damages ought
to be awarded, the Court will consider whether the defendant has little regard
for the legal process, thus requiring the plaintiff to expend additional time
and money in enforcing its rights.
The Plaintiff submits that it is
appropriate to award punitive damages of at least $50,000. Given the conduct
of the Defendants it is appropriate that that conduct be condemned by means of
a significant punitive damage award.
[43]
The
individuals involved with the Defendant numbered corporations attract personal
liability for infringing activities of the corporation by their direct
participation in activities knowing they likely constitute infringement. Microsoft
v. 9038-3746 Quebec Inc., supra at paras. 91, 92 and 98. The Defendants
Aziz and Ye were certainly aware of the infringing activity and actively
promoted such by offering to provide unauthorized copies of the software at
reduced or no cost as part of the computer system sales by the Defendant
numbered corporations.
[44]
Even
though 1445687 Ontario Limited and 1558346 Ontario Corp. have been dissolved,
the action can be continued against them and any property that would have been
available to satisfy the judgment had not the corporation been dissolved
remains available to satisfy the judgment as per sections 242 and 243 of the Business
Corporations Act, R.S.O. 1990, c. B-16.
Injunctive Relief
[45]
The
evidence indicates the named Defendants knowingly and deliberately infringed on
the Plaintiff’s copyright and trade-mark in circumstances that are suggestive
of a continuing pattern of infringement. The named Defendants business
practices do not disclose any effort to avoid or curtail future infringement.
I am satisfied injunctive relief is also appropriate.
Solicitor/Client
Costs
[46]
The
Plaintiff proposes a lump sum award be granted in respect of solicitor/client
costs. The award would compensate for legal fees incurred by the Plaintiff to
date including legal fees for preparing and arguing this motion for default
judgment. The award would also cover disbursements. Counsel has advised that
the costs of investigation, legal proceedings and providing particulars to the
Defendants were substantial. Accordingly, I am satisfied that a lump sum award
of $50,000 inclusive of solicitor/client costs and disbursements is appropriate.
Conclusion
[47]
Default
judgment in favour of the Plaintiffs will issue, in the form issued
concurrently with these Reasons. The following will be reflected in the award:
·
$10,000
per copyright violation against the Defendant 1445687 Ontario Limited and Syed
Aziz jointly and severally in respect of statutory damages for each of seven
copyright violations for a total of $70,000;
·
$10,000
in respect of each copyright violation against the Defendant 1558346 Ontario
Corp. and Johnson Ye for each of eight copyright violations for a total of
$80,000;
·
$50,000
in punitive or exemplary damages against all Defendants 1445687 Ontario
Limited, 1558346 Ontario Corp., Syed Aziz and Johnson Ye, jointly and
severally; and
·
a
lump sum of $50,000 in respect of solicitor/client costs and disbursements
against all Defendants 1445687 Ontario Limited, 1558346 Ontario Corp., Syed
Aziz and Johnson Ye, jointly and severally.
[48]
Further,
injunctive relief against infringement activity by the named Defendant will
issue as set out in the concurrent Judgment.
“Leonard
S. Mandamin”
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