[1] Nasser Dahoui and his corporation, Capish? Hip Hop Inc., face a motion in contempt of this Court for selling or otherwise trading in counterfeit "baseball" caps in violation of the order of Snider J., dated 3 March 2005. That order, which has injunction aspects to it, is commonly known as an Anton Piller order. The plaintiffs, whom I shall simply refer to as "New Era", filed action against "Jane Doe and John Doe and other persons, names unknown, who deal in unauthorized or counterfeit New Era merchandise..." They seek a declaration that the defendants manufacture, import, export, warehouse, distribute, sell or offer to sell merchandise which is not manufactured by, for or under licence to the plaintiffs, the whole in violation of their intellectual property rights in head gear, more particularly baseball-type caps, a beanie with a peak.

[2] They obtained an ex parte Anton Piller order from Snider J. which, among other things, requires the plaintiffs' solicitors to explain to defendants in everyday language the search and seizure authority set out in the order, allows for search and seizure of unauthorized or counterfeit merchandise and related materials and requires the defendants to disclose the whereabouts of all such unauthorized or counterfeit New Era merchandise, related equipment and records, including purchase and sale records. Such merchandise and related equipment are to be deposited for safe keeping with any Registry of the Federal Court, or may be retained in the custody of plaintiffs' counsel. It is important to keep in mind that the order also provides that where breach of the peace is apprehended, a peace officer may attend. The order does not prohibit the sale or other dealing in authentic New Era caps, only in unauthorized or counterfeit New Era caps.

[3] The statement of claim and Anton Piller order were served 13 April 2005. The plaintiffs, through their solicitors, formed the opinion that day that Mr. Dahoui and his corporation were in contempt of court. On 25 April 2005 they obtained a show cause order from Martineau J. which required the defendants to appear to hear proof of the acts with which they were charged. They did in fact appear before me. Evidence was heard on Monday, 13 June 2005 and Wednesday, 15 June 2005.

[4] They are charged with failing or refusing to comply with the Anton Piller order in the following six respects:

1. Failure to deliver up all unauthorized or counterfeit New Era merchandise, related equipment and records;

2. Refusing to permit plaintiffs' representatives to conduct a search;

3. Refusing to permit plaintiffs' representatives to conduct the seizure;

4. Refusing or failing to disclose the names and addresses of their suppliers of unauthorized or counterfeit New Era merchandise;

5. Refusing or failing to disclose the whereabouts of all unauthorized or counterfeit New Era merchandise, related equipment and records; and

6. Removing unauthorized or counterfeit New Era merchandise from display at their business premises and representing that they were going to return same to their supplier.

LAW OF CONTEMPT

[5] Contempt of court flows from our sense of the rule of law. No one is above the law, and no one is to flaunt court orders. Public order requires that court orders be respected until such time as they are successfully appealed, stayed or set aside. At all material times Madam Justice Snider's order was, and still is, in full force and effect. To disobey it is to be contemptuous of the Federal Court of Canada.

[6] Federal Courts Rule 468 provides that a finding of contempt shall be based on proof beyond a reasonable doubt. The case law was extensively reviewed by the Federal Court of Appeal in Merck and Co. v. Apotex Inc., [2003] F.C.J. No. 837 (QL), 25 C.P.R. (4^th) 289. Sexton J. concluded:

60 Therefore, the jurisprudence establishes that it is not necessary to show that the alleged contemnor intended, by doing the action, to "interfere with the orderly administration of justice or to impair the authority or dignity of the Court". This is too high a level of intent to require in civil contempt cases. Rather, it is sufficient to find that the Court's intention was clear and that the alleged contemnor knowingly committed the prohibited act. ..

[7] Mr. Dahoui and Capish? Hip Hop were personally served with the Anton Piller order issued by Snider J., the statement of claim and the show cause order. That is not disputed. The question is whether they "knowingly committed the prohibited act[s]". It has to be first established beyond a reasonable doubt that the caps which were in the defendants' store were unauthorized or counterfeit. Secondly, it has to be established beyond a reasonable doubt that the defendants knowingly sold unauthorized or counterfeit caps.

THE EVIDENCE

[8] The evidence was disjointed, largely because Mr. Dahoui was self-represented, and was also given leave to represent Capish? Hip Hop. It was only on Monday, 13 June, after the plaintiffs' witnesses had testified, that he informed plaintiffs' solicitors, and the Court, for the first time that he still had some New Era caps in his possession. This led to an order that he deliver them up the following day to New Era's counsel, which he did, and to an adjournment so that further evidence could be adduced by both parties on the Wednesday.

[9] I will relate the evidence in terms of baseball caps in the order in which they were first mentioned in court.

THE HAT WHICH WAS NOT BOUGHT

[10] On 13 April 2005, New Era's solicitor, Lorne Lipkus, a private detective, Mario Iafrate, and Constable Campbell of the RCMP attended Capish? Hip Hop's store in Niagara Falls. Mr. Dahoui was not then present. Mr. Lipkus examined three baseball caps and immediately concluded, based on his considerable experience and training (he even gives training courses to police officers), they were counterfeit. They were taken from stacks of New Era caps which were shelved. There were maybe 100 in all. In the solicitor's report he was required to give to the Court, he stated that two of the caps did not have a proper hologram and did not have a serial number. In addition, he noted that the logo on the front of the caps could be seen from the inside. Authentic New Era caps have a piece of material (buckram) inserted so that the logo cannot be seen from the inside of the cap. The third cap did not have a hologram but simply silver foil. All authentic New Era caps have holograms. He did not purchase any of the caps.

[11] The storekeeper suggested they had best deal with the owner. Mr. Dahoui was telephoned and immediately offered to come to the shop, which he did within 15 minutes or so. He spoke on the phone with Constable Campbell, but since he stated he intended to fully cooperate, Constable Campbell, who had other business to attend to, left before Mr. Dahoui arrived.

[12] There is a difference of opinion as to what happened after Mr. Dahoui arrived. He may or may not have been shown the caps that Messrs. Lipkus and Iafrate claimed were counterfeit. They repaired to a nearby restaurant, which was quieter, in order for Mr. Lipkus to explain the Anton Piller order. There is some difference of opinion as to who took the initiative to leave the store, whose suggestion it was that Mr. Iafrate accompany Mr. Lipkus and the length of the meeting. During the meeting, Mr. Dahoui took two or more calls on his cellular phone. He said at the time they were from his wife. He spoke in a language Mr. Lipkus and Mr. Iafrate did not understand. During at least one of those conversations, a number of brand names, including Nike, Rockawear and perhaps New Era Cap, were mentioned. Be that as it may, after the coffee, when they returned to the store, the New Era caps were nowhere to be seen. Mr. Lipkus asked "where are the caps" to which he received a reply, "what caps?".

[13] Although polite, perhaps exceedingly so, Mr. Dahoui's constant questioning and repetition of questions made Messrs. Lipkus and Iafrate ill at ease, and they left still followed down the street by Mr. Dahoui. As Mr. Iafrate put it:

It got to the stage where it was quite obvious the owner was not going to surrender the merchandise and comply with the terms of that court order. Finally, I said, We are just wasting our time. Let's go. So Mr. Lipkus and I left and the owner followed us down the street. He kept saying, I am not going to take another loss. I have been broken into and people steal from me. I am not going to take another loss.

[14] It is agreed that Mr. Lipkus explained the court order, although Mr. Dahoui claims he had trouble understanding it, after all, he says, Anton Piller is a man's name (the order comes from a company's name Anton Piller KG v. Manufacturing Processes Ltd., [1976] 1 Ch. 55, [1976] 1 All. E.R. 779), Mr. Dahoui denies that any of the hats in question were physically shown to him.

[15] It is, however, beyond debate that Messrs. Lipkus and Iafrate advised him to get a lawyer. It is also beyond debate that Mr. Dahoui did give the name of one supplier, although in vague terms "Lee" in Toronto's Chinatown, and although no invoices were then provided, Mr. Dahoui's explanation is that his business records were with his accountant.

[16] One final point. Messrs. Lipkus and Iafrate formed the view, based on Mr. Dahoui's silence, that he knew perfectly well the caps were counterfeit. However, that was not the case. Mr. Lipkus first recalled his initial telephone call with Mr. Dahoui as follows:

I then spoke with a gentleman, the gentleman in court, who ultimately was identified as Nasser Dahoui, and Mr. Dahoui discussed with me the fact that he said he did not know that the hats were counterfeit.

22 AUTHENTIC NEW ERA CAPS

[17] In his own defence, Mr. Dahoui produced an invoice for 49 New Era hats, purchased from Big Apples World.com Da Hip Hop Store, in Toronto.

[18] He said that he was assured the caps were authentic and continued to sell them after service of the order. However, he still had a number left, which he offered to produce. He was ordered to produce them and two days later New Era Cap's Canadian General Manager, Rick Baetz, who clearly is very knowledgeable in these matters, stated that they were genuine, even though Big Apple is not an authorized dealer.

[19] Although Mr. Dahoui says he has other suppliers of New Era caps, he has yet to produce invoices. Again, it must be kept in mind that the order only requires him to produce invoices with respect to unauthorized or counterfeit caps. Thus, he was never under an obligation to produce the invoice from Big Apple.

FAKE AND REAL LOS ANGELES LAKERS CAPS

[20] When the hearing resumed, Ryan Stevens, a New Era Cap salesman, produced a cap which he says he purchased on 5 April 2005 from Capish? Hip Hop's premises in Niagara Falls. He also produced an invoice and credit card slip.

[21] I am satisfied that the cap is counterfeit. New Era's General Manager, Rick Baetz, noted that the cap bore a Los Angeles Lakers logo. However, it is the current logo, which is only licensed to Reebok. He produced an authentic New Era cap with the Los Angeles Lakers older logo, which is quite different. In addition, the sweat band was different, there was a hologram instead of a piece of shiny paper, and buckram was inserted in such a way that the logo could not be seen from the inside of the cap.

[22] Mr. Dahoui disputed the timing of the production, which was only after he produced New Era caps which he said came from his shop. It is precisely because New Era was taken by surprise by the production of caps that they had to call Mr. Stevens. There is nothing suspicious about the timing. Mr. Dahoui also pointed out that the invoice was for a "NBA hat". He says that is another cap altogether. That may be so, but there is a logo on the back of the counterfeit hat with the shadow of a basketball player and the letters "NBA".

[23] Although this cap is relevant to the case on the merits, it is not relevant in this contempt of court hearing. It was purchased on 5 April, eight days before the statement of claim and Anton Piller order were served. There is no evidence whatsoever establishing that the defendants were aware of the Anton Piller order that day.

[24] Mr. Dahoui insinuates that Mr. Stevens came up with a counterfeit cap in order to bolster New Era's case. There is no basis for that remark. He also suggests that he could not have been selling counterfeit caps because a credit agency had approved him should a trading account be opened with New Era. This was done after the 13^th of April. I do not consider that argument relevant. New Era has not opened up an account with Capish? Hip Hop.

DISCUSSION

[25] Although the Anton Piller order is clear in that the defendants were not to deal in unauthorized or counterfeit caps, the order does not explain how one can know if a cap is unauthorized or counterfeit. The order identifies the plaintiffs' copyrights or trademarks. It does not deal with out of date logos, buckram or the quality of headbands. Although I am satisfied on the balance of probabilities that the three caps Mr. Lipkus examined were counterfeit, I am not satisfied beyond a reasonable doubt that the defendants were in contempt of court. By his own account, Mr. Lipkus has seen thousands of counterfeit New Era caps. He did not purchase a cap as Mr. Dahoui appeared to be cooperating. He may have had his caps confused.

[26] Mr. Dahoui is quite adamant that, although Mr. Lipkus explained the order, he did not demonstrate with the use of any hat why they were counterfeit. Mr. Lipkus says:

I specifically showed him the two of the digits on the fake hologram; on the baseball hats that I was shown, I believe the digits ended in '308'. I showed him that those two serial numbers were identical, that is not something that happens on authentic hats.

[27] However, in his earlier solicitor's report he said:

I noticed that of the three hats that Mr. Iafrate and I were looking at, that two of them did not have a proper hologram and did not have a numeric number ¼ I then noticed on the third hat provided to me that the silver foil identification "hologram"was not, in fact, a hologram, but just silver foil and clearly counterfeit as all authentic New Era caps have holograms.

[28] If two of the three caps did not have a serial number, he could not possibly have shown Mr. Dahoui two caps that had the same serial number.

[29] In Merck, supra, Sexton J.A. quotes what Cattanach J. had to say in another case in 1981.

I expressed the view at the hearing, and to which view I adhere, that the conduct of the defendant through its chief executive officer, has the stench of sharp and perhaps even misleading practice and that the defendant and its chief executive officer were devoid of standards of ethics but that in all likelihood such ethics are neither expected nor required in the jungle of the business world and the rewards may be greater to those vested with inherent predatory cunning.

[30] Messrs. Lipkus and Iafrate were lulled into a sense of false security by Mr. Dahoui's seeming willingness to cooperate, when that was the last thing on his mind. I am not satisfied beyond a reasonable doubt that Mr. Dahoui knew there were unauthorized or counterfeit New Era caps in his store. It would have been quite different had the order required him to deliver up all New Era merchandise, authentic or counterfeit. The rest of the allegations consequently fall as well. I should mention, however, that Mr. Dahoui is quite adamant that there was no request to take photographs or to conduct a search and seizure. As Mr. Iafrate informed the view that they were wasting their time, I have to give him the benefit of the doubt.

[31] If this case continues on the merits (the defendants have failed to file a statement of defence within the legal delays) the defendants, as part of their examination for discovery obligations, will have to produce all their invoices with respect to New Era merchandise, authorized or unauthorized, authentic or counterfeit. If they do not, they may find themselves charged with contempt of court again.

[32] Georgina Starkman-Danzig, Mr. Lipkus' law partner, testified that when Mr. Dahoui delivered the caps on Tuesday, 14 June, he threatened to tell others how to beat the system. She wrote him a letter that day in which she said:

You would ¼ identify all flea market vendors and business people who sell "branded"product and using the internet, communicate with them and others, to advise them what you did when served with an Anton Piller order, and how they too can keep brand owners from getting the counterfeit product. In response [I] specifically said to you, "you mean you are going to tell all flea markets and businesses how to circumvent this legal process?" And in reply you said, "yes".

[33] In the circumstances, there shall be no order as to costs. I am sure Mr. Lipkus will not be lulled into a false sense of security again. No doubt, Mr. Dahoui will advise "vendors and business people" who sell counterfeit product accordingly.

"Sean Harrington"

Judge

Ottawa, Ontario

June 30, 2005

FEDERAL COURT

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: T-798-05

STYLE OF CAUSE: NEW ERA CAP COMPANY INC.,

NEW ERA CAP COMPANY

AND

CAPISH? HIP HOP INC. AND

CAPISH? SILVER INC. AND

CAPISH? BLING BLING INC.

AND NASSER DAHOUI

PLACE OF HEARING: TORONTO, ONTARIO

DATE OF HEARING: JUNE 13 and 15, 2005

REASONS FOR ORDER : HARRINGTON J.

DATED: JUNE 30, 2005

APPEARANCES:

Kammy Dagambar FOR PLAINTIFFS

Georgina Starkman-Danzig

Nasser Dahoui FOR DEFENDANTS on his own behalf

SOLICITORS OF RECORD:

Lorne M. Lipkus FOR PLAINTIFFS

Toronto, ON

Nasser Dahoui FOR DEFENDANTS on his own

Niagara Falls, ON behalf

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New Era Cap Co. v. Capish? Hip Hop Inc., 2005 FC 918

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