Ragdoll Productions (UK) Ltd. c. Doe, 2002 FCT 918

                                                                                                                               Date: 20020828

Neutral Citation: 2002 FCT 918

Ottawa, Ontario, this 28^th day of August 2002

PRESENT: THE HONOURABLE MR. JUSTICE PELLETIER

Docket: T-551-99

BETWEEN:

RAGDOLL PRODUCTIONS (UK) LIMITED and

THE ITSY BITSY ENTERTAINMENT COMPANY and

THE ITSY BITSY ENTERTAINMENT COMPANY (CANADA), INC.

Plaintiffs

- and -

JANE DOE and JOHN DOE and OTHER PERSONS, NAMES

UNKNOWN, WHO OFFER FOR SALE, SELL, IMPORT,

MANUFACTURE, DISTRIBUTE, ADVERTISE, OR DEAL IN

UNAUTHORIZED OR COUNTERFEIT TELETUBBIES MERCHANDISE,

AND THOSE PERSONS LISTED IN SCHEDULE "A" HERETO

Defendants

Docket: T-823-99

BETWEEN:

NINTENDO OF AMERICA INC. and

NINTENDO OF CANADA LTD.

Plaintiffs

- and -

JANE DOE and JOHN DOE and OTHER PERSONS, NAMES

UNKNOWN, WHO OFFER FOR SALE, SELL, IMPORT,

MANUFACTURE, DISTRIBUTE, ADVERTISE, OR DEAL IN

UNAUTHORIZED OR COUNTERFEIT POKÉMON MERCHANDISE,

AND THOSE PERSONS LISTED IN SCHEDULE "A"

TO THE STATEMENT OF CLAIM

Defendants

Docket: T-1058-98

BETWEEN:

THE WALT DISNEY COMPANY (CANADA) LIMITED and

DISNEY ENTERPRISES, INC.

Plaintiffs

- and -

JANE DOE and JOHN DOE and OTHER PERSONS, NAMES

UNKNOWN, WHO OFFER FOR SALE, SELL, IMPORT,

MANUFACTURE, DISTRIBUTE, ADVERTISE, OR DEAL IN

UNAUTHORIZED OR COUNTERFEIT DISNEY MERCHANDISE,

AND THOSE PERSONS LISTED IN SCHEDULE "A"

TO THE STATEMENT OF CLAIM

Defendants

REASONS FOR ORDER

The facts

[1]                 On October 10, 1999, a team of lawyers and others executed three "rolling" Anton Piller orders on the defendants Knowing Collections Inc. and Tzym Yin Alice Wang. The orders were in favour of The Walt Disney Company (Canada) Limited and Disney Enterprises Inc. ("the Disney plaintiffs"), Ragdoll Productions (UK) Limited, the Itsy Bitsy Entertainment Company, and The Itsy Bitsy Entertainement Company (Canada) Limited ("the Ragdoll plaintiffs") and Nintendo of America Inc and Nintendo of Canada Ltd ("the Nintendo plaintiffs)(collectively "the plaintiffs"). The plaintiffs' agents identified and took away a number of goods claiming that they infringed the plaintiffs' rights in trade marks and copyrights. The review of the execution of the orders occurred on October 25, 1999 when a judge of this court converted the interim injunction enjoining the defendants from dealing in counterfeit goods to an interlocutory injunction and added the defendants to the Schedule of Defendants to the Statement of Claim issued by each of the plaintiffs. The defendants did not appear at the review motion to contest the lawfulness of the execution of the orders.

[2]                 In time, a motion for default judgment was made on behalf of each of the plaintiffs. The defendants became aware of the motion for default judgment, and filed material challenging the plaintiffs' entitlement to the relief which they sought. This was done by filing a responding record to the plaintiffs' motion record for default judgment. No affidavit as to the merits was filed nor did the defendants file a Statement of Defence or seek an extension of time to file a Statement of Defence.    Since the same arguments were raised in respect of each of the plaintiffs, these reasons will apply to the three motions for default judgment.

The Issues

[3]                 The issues raised by the defendants are the following:

1) whether the plaintiffs have made out a cause of action by putting before the court satisfactory evidence of the infringement of the rights claimed by the plaintiffs.

            2) whether the plaintiffs can claim damages as a remedy after having seized the defendants' goods pursuant to an Anton Piller order.

            3) whether the plaintiffs can claim damages in an arbitrary amount without proof of actual damage by calling them minimal nominal damages.

The parties' submissions

[4]                 As to the first issue, the evidence of infringement in this case consists of the affidavit of service of Lorne Lipkus, one of the plaintiffs' solicitors, to which are attached a Solicitor's Report and Solicitor's Comments. The Solicitor's Report sets out a list of goods seized from the defendants, a portion of which is reproduced below to convey the type information provided in the Report.

NUMBER OF COUNTERFEIT ITEMS SEIZED:

[TELETUBBIES]    7 keychains

[DISNEY]                                  3 novelty items

[NINTENDO]                          7 model kits

[NINTENDO]                         4 toy sets

[NINTENDO]                          1 water bottle

[NINTENDO]                          214 keychains w/ figures

...

[5]                 All in all, there are 25 entries on the list, of which one relates to the Ragdoll plaintiffs, one relates to the Walt Disney plaintiffs and the balance relate the to Nintendo plaintiffs.

[6]                 The evidence as to the counterfeit nature of these goods is found in the Solicitor's Comments. The following extract appears in each of the motions for default judgment:

-              When I [Lorne Lipkus] first approached the defendant I asked if the plush Pikachu was the one from Nintendo. She said that it was not from Nintendo. She said the real ones with the tags cost more. She said it was less money for these but they are made in the same factory as the real Nintendo ones. She had substantial quantities of legitimate licensed merchandise.

-              I confirmed that the goods seized were counterfeit, as particularized in the Solicitor's Report for one or more of the following reasons:

a) There was no valid packaging, as required by the plaintiffs;

b) the products were clearly of inferior quality to similar authentic products;

c) There was no indication of the manufacturer or the importer or the licensee;

d) The Plaintiff does not manufacture that particular product;

e) The plush products seized had no valid labels, tags or packaging and, in addition, did not comply with packaging laws requiring the insides to be made of "New Material Only".

[7]                 Subsequently, the plaintiffs filed the Affidavit of Gary Osmond, a former member of the R.C.M. Police who is now employed in the offices of the plaintiffs' solicitors. His affidavit includes reproductions of digital photographs of the goods which were seized together with a list of each plaintiff's intellectual properties. Then comes this paragraph:

8.      I have reviewed the content of the digital photographs attached at Exhibit "A". I confirm that the digital photographs of the designs and logos on the seized goods have been copied or made subject to confusion by virtue of their similarity to one or more of the Plaintiff's Intellectual Property rights, as particularized in the Chart attached hereto and marked as Exhibit "C".

[8]                 In the case of the Walt Disney plaintiffs, three items were seized from the defendants' premises. Exhibit A consists of a printed copy of a digital image of a Mickey Mouse figurine. Exhibit C refers to the Walt Disney plaintiffs' interest in Mickey Mouse copyright registration nos. 419531, 419532 and R321298 and Mickey Mouse trade mark registration nos. TMDA50760 and TMDA50892. The basis for the conclusion as to counterfeiting or infringement is set out as follows:

Plaintiffs require all products sold by it contain a copyright notice on the wares and/or packaging and/or labelling. Reason: Non-existent on items seized - Key chains.

[9]                 Similar material is provided for each of the plaintiffs.

[10]            The defendants note that the plaintiffs have listed the trade marks in which they are interested without providing a copy of the trade marks registration. Given that trade marks are associated with wares, the material before the court does not permit the court to confirm that the goods to which the trade marks are affixed are wares in which the plaintiffs have claimed the right to exclusive use of their trade marks. Furthermore, there is no evidence to show that the goods seized are not second hand or grey market goods. The defendants refer to the case of Tommy Hilfiger Licensing Inc. v. Jane Doe, [2000] F.C.J. No. 1267 as authority for the test to be met in proving infringement and say that the evidence submitted by the applicants does not meet that standard.

[11]            The plaintiffs' position is that the defendants are not entitled to put the issue of liability in issue when they have not filed a Statement of Defence and have not asked for leave to file a Statement of Defence. The defendants failure to defend the claim is an admission of the truth of the allegations in the Statement of Claim. Furthermore, the defendants cannot fail to lead evidence to show that they have the right to use the trade marks and then argue that the plaintiffs have not negatived possible legitimate uses of the trade marks.

[12]            The plaintiffs take the position that the test set out in Tommy Hilfiger, supra, is limited to the evidence required on the review of the execution of an Anton Piller order. In any event, the affidavit of Gary Osmond satisfies the test set out in Tommy Hilfiger, if it is found that the test applies in these circumstances.

[13]            If the plaintiffs are found to have established infringement, the defendants take the position that the plaintiffs are not entitled to damages. Anton Piller orders include an interim injunction which is binding upon the person served from the time of service. The test for issuance of such an injunction includes the requirement that the plaintiff show that it will suffer irreparable harm not compensable in damages if the injunction is not granted. In the absence of some evidence that the injunction has not been complied with, the only damage which a plaintiff could have suffered is that which occurred before the execution of the order. It is contradictory to claim entitlement to injunctive relief on the basis of the inadequacy of damages as a remedy, and then, following the grant of the injunction, to claim damages.

[14]               Furthermore, the issuance of rolling Anton Piller orders is justified by reference to the immunity, in practical terms, of street vendors from the ordinary enforcement measures available to the court. Their identities are not ascertainable in advance, they have no fixed premises from which they carry on business and if they have assets to satisfy a money judgment, it is impossible to find them because they are transients or persons of little attachment to any given location. Having obtained a "rolling" Anton Piller order on the strength of such considerations, it is inappropriate for plaintiffs to then argue that they should be awarded damages after all. Finally the amount of damages typically awarded bears no resemblance to the plaintiffs' loss. The amount does not vary with the goods seized so that, for example, the Disney plaintiffs seek damages of $6,000 as a result of the seizure of three key chains, whose total value is likely less than $15.

[15]            The plaintiffs say that the defendants have misstated the nature of an Anton Piller order. It is an "interim preservation order issued in the context of existing or pending civil proceedings between private parties (not restricted to intellectual property cases) to enable the preservation of evidence otherwise producible in the context of discovery". Such orders are granted to ensure that documents and materials that are the subject of an action are safeguarded where there is strong prima facie evidence of infringement. The plaintiffs say that a defendant's inability to satisfy a future money judgment is not and has not been a factor in this court's consideration of the irreparable harm issue. The irreparable harm not compensable in damages is seen in the loss of actual and potential customers.

[16]            The plaintiffs' position is that the courts have recognized that the holders of intellectual property rights are faced with a practical problem. They credit the courts with being prepared to infer that "if an infringer has notice of an action for infringement, the infringing merchandise will be dispersed and steps taken to conceal the identity of suppliers customers and confederates". The fact that the sale of infringing products takes place from a retail location rather than from a transient vendor is "a distinction without a difference".

[17]            The plaintiffs argue that both the Copyright Act, R.S.C. 1985, c. C-42 and the Trademarks Act, R.S.C. 1985, c. T-13 provide for damages (or accounting) as well as injunctive relief, consequently there is no statutory basis for treating the remedies as mutually exclusive.

[18]            As for the quantum of damages, the current practice of assessing what has been described as "minimum nominal damages" has developed as a result of the time and expense involved in the previous practice of directing a reference in applications for default judgment. The defendants rarely attended with the result that the plaintiffs and the court were left to assess damages on a minimum of information without the participation of the defendants. It was thought that this was simply a waste of resources. The current practice has been in place since 1997 and was recently reviewed in Oakley Inc v. John Doe, [2000] F.C.J. No. 1388 (QL). There is nothing untoward about the award of nominal damages where no actual damages are shown.

Proof of infringement

[19]            The first issue raised by the defendants is the adequacy of the proof of infringement. The plaintiffs argue that the onus of proof is largely satisfied by the admission of liability which can be inferred from the failure to defend the claim:

12.      By virtue of the absence of a defence and any substantive Affidavit evidence disputing the Plaintiff's allegations and evidence, particularly in circumstances where counsel is involved on their behalf, the Defendants are deemed to have admitted that they were offering for sale and selling counterfeit merchandise in knowing contravention of the Plaintiff's copyright and trademark rights.

Reference: Viacom Ha! Holding Company et al. v. Jane Doe et al., unreported decision, Court file No. : T-550-99 (F.C.T.D. December 20, 2000 ...

[20]            This passage is based upon a paragraph in a prior decision of mine where I said:

[para4]      If one starts from the proposition that it is the activity of selling counterfeit goods which creates the liability for damages, and that by failing to appear at the review motion and not defending the claim, the defendants can be presumed to have admitted that they were engaged in the sale of counterfeit goods, it follows therefore they ought to be liable in damages.

[21]            Unfortunately, that opinion is based upon a misunderstanding of the requirements of the Federal Court Rules, 1998, SOR/98-106. The Rules of Court in some jurisdictions treat a failure to defend as an admission of liability and permit the entry of judgment without proof of the underlying facts. The example with which I am most familiar is the Queen's Bench Rules of the Province of Saskatchewan. For example:

156. All allegations of fact which are not denied or stated in the pleadings not to be admitted shall be deemed to be admitted.

[22]            The Federal Court Rules, 1998, do not proceed on the same basis:

[23]            Consequently, in the Federal Court, the absence of a Statement of Defence means that none of the allegations are admitted, so that all must be taken as denied. As a result, the Federal Court Rules, 1998, require a plaintiff to establish its entitlement to the relief claimed by affidavit evidence. See Chase Manhattan Corp. v.3133559 Canada Inc., [2001] F.C.J. No. 1626 (T.D.) where Hugessen J. identified the issues in a motion for default judgment in the following terms:

[para5]      The upshot is that on a motion for default judgment, the Court has two questions before it. First, is the defendant in default and second, is there evidence to support the plaintiff's claim.

[24]            It would therefore appear that in commenting as I did in Viacom Ha! Holdings Company, supra, I was being more faithful to my prairie roots than I was to the text of the Federal Court Rules, 1998. The plaintiffs cannot succeed upon the bare fact of the defendants' failure to defend the claim.

[25]            This leads to question of the adequacy of the proof offered by the plaintiffs. The defendants say that the plaintiffs have not met the standard of proof set out in Tommy Hilfiger, supra. The plaintiffs argue that the standard of proof set out in Tommy Hilfiger is applicable only to the review of the execution of the Anton Piller order. While Tommy Hilfiger dealt with a review motion, the issue in such a motion is the same as it is in the case of judgment in default: has the plaintiff established the facts which would entitle it to the relief it seeks. It is not helpful to characterize such proof as "prima facie" or to use other phrases which suggest a standard other than the balance of probabilities. The fact of the matter is that proof which is not challenged in adversarial proceedings is always prima facie proof, because it is always susceptible of being set aside by proof to the contrary. This is why a default judgment can be opened up and is not to be accorded the finality of a judgment on the merits. See Montres Rolex S.A. v. M.N.R., [1988] 2 F.C. 39 at para. 31. Consequently, the proof required is simply that which will persuade a judge on a balance of probabilities that the plaintiff is entitled to the relief which it seeks.

[26]            Have the plaintiffs met the requisite standard in this case? In their submissions, the plaintiffs rely upon the Solicitor's Report and Solicitor's Comments which are attached to the affidavit of service.    They also rely upon the review order which they say must be taken to include a finding as to infringement since there would be no basis for continuing the injunction against the defendants if infringement were not proved. Finally they rely upon the additional material filed by Mr. Osmond, the particulars of which were set out above.

[27]            The current practice with respect to the execution of Anton Piller orders proceeds on the basis that the persons executing the orders have the expertise to identify counterfeit goods. One can see the logic of this since those executing the order must be sufficiently familiar with the plaintiffs' marks and wares to be able to identify goods which infringe the plaintiffs' rights. On the other hand, it is not acceptable, as a matter of proof, to put the court in the position of having to rely upon the judgment of the persons executing the order. But this is what the court must do when the only evidence before it is the assertion by the person executing the order that the goods seized are counterfeit "for any one or more of the following reasons" followed by a list of conditions which may or may not be relevant to specific goods. While the plaintiffs are represented by counsel of ability and integrity, the court cannot be left to rely solely on their assertion that the goods are counterfeit. It is for this reason that the nature of the evidence required to establish infringement on the return of the review motion was set out in Tommy Hilfiger, supra. I can see no reason why the standard of proof on applications for judgment in default would be any lower than it is on review motions where verifiable evidence of infringement is required.

[28]            If the standard of proof is no lower, is it also no higher? It is difficult to see the logic of exacting a higher standard of proof in circumstances where the proof is unchallenged. The test is whether the judge, having considered the evidence before the court, is satisfied that, on a balance of probabilities, infringement has occurred. Setting a higher standard simply requires the judge to do for the defendant that which it has declined to do for itself.

[29]            If that is so, having met that standard of proof once on the review motion, are the plaintiffs bound to meet it again on an application for default judgment? If the standard is the same, is there any logic in putting the same evidence before a different judge to get a fresh answer as to whether the standard has been met? There is no advantage in multiplying situations where judges can come to different conclusions on the same evidence. Such a practice does not advance certainty and predictability, and undermines the authority of the court's interlocutory orders. Consequently, a plaintiff ought to be able to rely upon the review order to prove entitlement to default judgment. In other words, the review order is a judicial determination that infringement has occurred and, in the absence of evidence to the contrary, is conclusive of that issue.

[30]            This is a motion for default judgment which is opposed, an unusual circumstance. Typically a challenge to a plaintiff's entitlement to judgment would be brought in a Statement of Defence or in an application to set aside judgement in default. In the latter application, the onus is upon the moving party to show, among other things, a positive defence to the claim. In this case, the defendants have filed no material and have simply argued the insufficiency of the plaintiffs' materials. Given my conclusion that the plaintiffs are entitled to rely upon the review order, the onus is on the defendants to make out a positive defence. Consequently, in the absence of evidence upon which to set aside the conclusion as to infringement inherent in the review order, the defendants are bound by that conclusion. The question of whether the defendants could seek to open up a judgment in default made as a result of the present proceedings by putting such evidence before the court is a question which will have to be answered if and when it arises.

Availability of damages as a remedy

[31]            The next issue which arises is whether the plaintiffs' seizure of the defendants' goods and the issuance of an injunction restraining the latter from dealing in counterfeit goods is either inconsistent with the plaintiff's claim for damages or amounts to an election of remedies. It is true that one element of the test for the issuance of an interlocutory injunction is that the failure to issue the injunction will expose the plaintiff to irreparable harm not compensable in damages. Having obtained the injunction, one what basis does the plaintiff then ask for damages? And, if the defendants' immunity from the court's conventional remedies is the justification for the issuance of "rolling" Anton Piller orders, what is the sense of granting money judgments against individuals who are effectively judgment proof?

[32]            Both of these arguments are essentially based on estoppel. Having persuaded the court to grant it an exceptional remedy based upon certain representations as to the ineffectiveness of conventional remedies, can the plaintiffs now come to the court and claim the very remedies whose alleged ineffectiveness justified the granting of the Anton Piller order? The question is a good one, and the answer, while valid, cannot match the cartesian logic of the question. It is essentially an answer based on legal entitlement. A defendant's ability to pay (or, to put it another way, a plaintiff's ability to collect) is not a factor in deciding whether a plaintiff is entitled to damages. As to entitlement, the legislation governing copyright and trademarks expressly provides for the availability of both remedies:

[33]            No authority was cited to me which would support the conclusion that these provisions must be read disjunctively so that a plaintiff could claim either injunction or damages but not both. And while it is true that injunctions have been refused where damages have been shown to be an adequate remedy (see for example, Cutter J Ltd. v.Baxter Travenol Laboratories of Canada, Ltd. (1980), 47 C.P.R. (2d) 53 (F.C.A.)), I have not found any instances where damages were refused because an injunction had been awarded.

[34]            To the extent that the granting of an injunction deals with prospective damages (whose occurrence the injunction seeks to prevent), it does not preclude recovery of past damages whose existence and scope must be proven by the plaintiffs. As for the immunity of certain defendants from the law's conventional remedies, it would be poor policy to exempt from liability those who seek to escape its consequences. While the plaintiffs' position has an air of having-your-cake-and-eating-it-too, it is, upon reflection, neither unfair nor bad policy.

Quantum of damages

[35]            This leads to the third issue raised by the defendants, which is the quantum of damages sought. The plaintiffs seek damages in accordance with the scale which is applied in this court and which was reviewed in Oakley Inc. v. Jane Doe, [2000] F.C.J. No. 1388. In uncontested cases, plaintiffs have been awarded damages of $3,000 in the case of street vendors and flea market operators, $6,000 in the case of sales from fixed retail premises, and $24,000 in the case of manufacturers and distributors.

[36]            The defendants challenge this on the ground that the amounts awarded have nothing to do with the quantity or value of the goods seized. The Solicitors Comments contains the following paragraphs:

8. The defendant was asked but could produce no invoices to evidence the purchase of the counterfeit goods. The defendant said she had documentation, including customs documents evidencing the importation of the counterfeit goods. I requested these documents, however, they have not been produced to date.

9. The defendant confirmed the business had no record keeping identifying the quantity of similar counterfeit goods sold by them.

[37]            It is always open to a defendant to prove the extent of its trade in counterfeit goods and to seek to have damages assessed on the basis of its actual sales. But where vendors keep no records, it does not lie in their mouths to say that the plaintiff has no evidence by which to prove the damages flowing from their business operations.

[38]            In the absence of business records, the quantity of goods seized is unreliable as an indicator of the level of a defendant's business activity. The case of an unsuccessful infringer who is simply unable to move his stock, so that his entire inventory is seized, does not support the "obvious" conclusion that he caused the plaintiff more damage because he had more goods in his possession. Damages due to sales would be nil for there were no sales, notwithstanding the amount of stock seized. If the same operator sold out his entire stock save for one T-shirt, the "obvious" conclusion that little harm was caused because only 1 shirt was seized would be equally false. The evidence of the harm caused would be on the backs of the purchasers. Consequently, the quantity of goods seized tells the court nothing about the scope and scale of a defendant's operations.

[39]            What does the evidence before the court show about the plaintiffs' damages. The evidence in the Solicitor's Reports and Solicitor's Comments as well as the Affidavit of Gary Osmond would only go so far as to prove confusion between the goods sold by the defendants and the plaintiffs' trademarks, which is infringement. The description of the wares to which the trade marks apply is found in the affidavits submitted in support of the issuance of the Anton Piller orders on these files, and is before the Court by virtue of Rule 363. As for copyright, there is no opinion evidence which would support a finding of infringement of copyright. There is nothing which would allow the judge to compare the plaintiffs' original works to the goods which were seized. Furthermore, there is no evidence that the defendants attempted to pass their goods off as the plaintiffs' so that passing off has not been proved. In fact, in the case of Nintendo, such evidence as there is negatives passing off.

[40]            Given that infringement of trade marks has been proved, how are damages to be determined? This is how the question was addressed inAluminum Co. of Canada Ltd. et al. v. Tisco Home Building Products (Ontario) Ltd. et al. (1977), 33 C.P.R. (2^nd) 145 (F.C.T.D.) where the following appears at pp. 163-164:

I believe that the proper basis of assessment is set out in Fox's Canadian Law of Trade Marks and Unfair Competition, at pp. 648-9, where he states:

On the question of the measure of damages it has ben held that the defendant is liable for all loss    actually sustained by the plaintiff that is the natural and direct consequence of the unlawful acts of the defendant, including any loss of trade actually suffered by the plaintiff, either directly from the acts complained of or properly attributable thereto, that constitute an injury to the plaintiff's reputation, business, goodwill or trade. Speculative and unproven damages must be deleted from the calculation. The court will estimate the damages on the same basis as would a jury and damages may take into contemplation injury to the plaintiff's goodwill, for the court, acting as a jury and applying ordinary business knowledge and common sense, is entitled to consider that    there cannot be deceptive trading without inflicting some measure of damage on the goodwill. Difficulty in assessing damages does not relieve the court from the duty of assessing them and doing the best it can. The court is entitled to draw inferences from the actions of the parties and the probable results that they would have. If damages cannot be estimated with exactitude, the best reasonable estimate must be made.

[41]            What is the evidence as to damages suffered by the plaintiffs.    Each of the Motion records for default judgment refers to affidavit evidence on file as to the damage caused to the plaintiffs' interests by the sale and distribution of infringing goods. In the case of the Ragdoll defendants, the evidence, in its material part, is as follows:

The distribution of unauthorized or counterfeit merchandise bearing the Plaintiff's Intellectual properties damages the Plaintiffs' reputation and goodwill, impairs its licensing programs, and reduces revenues that would otherwise be generated by the sale of authorized adidas [sic] merchandise. ...

The evidence on which the Disney plaintiffs rely is as follows:

The sale of inferior and inexpensive counterfeit merchandise bearing DISNEY INTELLECTUAL PROPERTY is extremely damaging to the Plaintiffs and the reputation that they enjoy for quality merchandise. It also damages the sales legitimate retailers who have purchased the authorized merchandise bearing DISNEY INTELLECTUAL PROPERTY in good faith attempting to make an honest profit.

I believe that the public's confidence in DISNEY INTELLECTUAL PROPERTY and the value of goodwill in same will be seriously harmed by the sale of authorized [sic] merchandise by street vendors and others

Finally, the material submitted with respect to the Nintendo plaintiffs contains the following evidence as to damages:

The distribution of unauthorized or counterfeit merchandise bearing the Plaintiffs' Intellectual Properties damages the Plaintiffs' reputation and goodwill, impairs its licensing programs and reduces revenues that would otherwise be generated by the sale of authorized merchandise.

[42]            In cases where damage is understood to have occurred, but proof of the amount of the damages is lacking, nominal damages are sometimes awarded. In Institut National Des Appellations D'Origine Des Vins et Eaux-de-Vie v. Andres Wines Ltd. (1987) 16 C.P.R. (3d) 385 (Ont. H.C.J.) the trial judge dealt with the issue of quantum of damages as follows:

As I have concluded, the defendants did violate the plaintiffs' rights under the 1933 Act. If the plaintiffs had been prepared to admit that the damages thereunder be limited to nominal damages, I would, on the evidence, have fixed them at $5,000 for each plaintiff, excluding the I.N.A.O. This amount would reflect the infringement of the plaintiffs' legal rights without any need for proof of the actual quantum of damages. Even if it were not so limited by plaintiffs' admission, I would have reached the same result, that is, the sum of $5,000 fixed against each defendant as compensatory damages, on the basis of the evidence, or lack of it, relating to actual losses suffered by the plaintiffs in sales or to its reputation.

[43]            The trial judge's reasons were approved by the Ontario Court of Appeal in Institut National Des Appellations D'Origine Des Vins et Eaux-de-Vie et al v. Andres Wines Ltd. (1990) 30 C.P.R. (3d) 279. Of particular interest is the trial judge's assertion that he would have ordered $5,000 in compensatory damages on the basis of the evidence "or lack of it" for actual losses suffered by the plaintiffs in relation to sales and its reputation. Other cases where damages were awarded in the absence of specific evidence as to damages include British Columbia Automobile Assn. v. O.P.E.I.U., Local 378 ( 2001), 10 C.P.R. (4^th) 423 (B.C.S.C.) ($2,500), Rose v. Interprovincial Brotherhood of Electrical Workers (1984), 1 C.P.R. (3^rd) 34 (F.C.T.D.) ($3,500), Société pour l'expansion des tissus fins v. Marimac Inc. (1984), 78 C.P.R. (2^nd) 112 (Que. S.C.) ($25,000), Marc-Aurele v. Ducharme (1976), 34 C.P.R.(2nd) 155 (F.C.T.D.) ($3,000).

[44]            These were not necessarily treated as nominal damages. In Société pour l'expansion des tissus fins v. Marimac, supra, Gomery J. of the Quebec Superior Court prefaced his award of damages with the following comments:

It must be assumed, in the light of the findings already made, that some members of the Canadian public during the past five years have purchased defendant's curtains in the mistaken belief that they were buying a fabric manufactured by plaintiff. In the absence of confusing trade marks these purchases would ordinarily have been made of fabric imported into Canada by plaintiff. The loss of these sales entailed a loss of profits for which plaintiff is entitled to be indemnified. A calculation of the quantum of such loss in a precise fashion is not possible. It is not fair to the plaintiff to penalize it for a failure to prove facts which are not, by their nature, provable. A difficulty in assessing damages does not justify the court in failing to award them. As stated by Dube J., in Marc-Aurele v. Ducharme (1976), 34 C.P.R. (2d) 155 at p. 162:

                 It is not necessary to prove actual damages with certainty, as a matter of fact it would be impossible in the case at bar. Once the Court is satisfied that the goodwill has been interfered with and there has been confusion, then damages are presumed at law ...

The court must take into consideration the decision made by defendant to continue to market its merchandise after receiving formal notification that plaintiff was unwilling to tolerate further infringement of its trade mark, and the volume of sales and profits made by defendant in the period of more than five years since that time, including the time taken for this action to come to trial and be decided.

In all the circumstances the court conservatively fixes damages in the sum of $25,000.

[45]            The learned trial judge clearly intended the damages which he awarded to be compensatory and not merely nominal. The conclusion which I draw from these cases is that once the plaintiffs have proven infringement and that damages have occurred, they are entitled to the court's best estimate of those damages without necessarily being limited to nominal damages.

[46]            This then brings us to the use of the scale of damage awards which has been in place in this court for the past number of years. It is said that this practice is unfair because it fails to distinguish between the activities of individual defendants and the damages assessed against them. When defendants keep no records and the quantity of goods seized is not a reliable indicator of the scale of the defendants' commercial activities, it is not obvious how plaintiffs are to bring fine gradations of proof as to the extent of the damages caused by particular defendants.

[47]            The fact that the awards are in an arbitrary amount is said to suggest that they are punitive in nature and neither nominal nor compensatory. The amounts involved may be arbitrary but they are not without some historical precedent (see the cases cited above). Furthermore, the fact that the assessment of damages has an element of arbitrariness does not mean that those damages are not compensatory. For example, there has always been an element of arbitrariness in the assessment of non-pecuniary damages. The damages payable for an injury to an eye are determined by reference to a scale which is essentially arbitrary (one cannot calculate the value of an eye) but which has become the standard by convention. The courts have decided that such an injury will generally result in an award in a given range.

[48]            In these cases, the court is dealing with pecuniary as opposed to non-pecuniary damages. Does this preclude recourse to the use of a conventional scale of damages? The unadorned fact of the matter is that without access to detailed accounting records, plaintiffs cannot be expected to show their losses with mathematical precision. It would be very poor policy to reward the suppression of business records by raising it as a bar to the assessment of damages.    Where a defendant's business methods and failure to defend a claim have made the calculation of damages impossible, the use of conventional awards is fairer to that defendant than would be a system in which each case was treated as sui generis and damages assessed without reference to like cases. The present system distinguishes between flea market and transient vendors, fixed retail operations and manufacturers and distributors and to that extent treats like cases alike. It may be that finer gradations are possible, a matter which the court can consider when it arises.

[49]            The use of the phrase "minimum nominal damages" in this context is unfortunate and misleading. The Dictionary of Canadian Law, 2^nd ed., (Toronto: Carswell, 1995) defines nominal damages as follows:

...[A] technical phrase which means that you have negatived anything like real damages, but that you are affirming by your nominal damages that there is an infraction of a legal right, which though it gives you no right to any real damages at all, yet gives you a right to the verdict or judgment because your legal right has been infringed. Mediana (The) [1900] A.C. 113 at 116 (U.K. H.L.) Lord Halsbury L.C.

[50]            If the only purpose of damage awards in these cases is to establish the plaintiffs' right to them, an award of $1 would represent "minimum nominal damages". The amount of the awards, particularly when they are stacked (multiple awards against the same defendants) as they will be in this case, exceeds any reasonable notion of "nominal" damages, let alone "minimum nominal" damages. Damage awards in these amounts can only be justified as compensatory damages whose amount is determined by convention.

[51]            It is an imperfect system but the imperfections are not the fault of the plaintiffs. It is always open to a defendant to defend the claim brought against it and to put damages in issue. In such a case, the court will assess damages on the basis of the evidence before it. In the alternative, a defendant who kept adequate business records could request a reference for the purpose of assessing damages.

[52]            In the end, the plaintiffs have shown that they are entitled to the relief sought. The defendants' objections cannot be sustained. Judgment will issue in each of these files against the defendants jointly and severally in the amount of $6,000 plus costs of $750. The plaintiffs are also entitled to the usual declaratory relief as well as a permanent injunction against the defendants.

           "J.D. Denis Pelletier"           

Judge                         

                                              FEDERAL COURT OF CANADA

                                                            TRIAL DIVISION

                       NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                 T-551-99, T-823-99 & T-1058-98

STYLE OF CAUSE: Ragdoll Productions (UK) Et Al v.

Jane Doe and John Doe Et Al    (T-551-99)

Nintendo of America Inc. Et Al v.

Jane Doe and John Doe Et Al    (T-823-99)

Walt Disney Company (Canada) Et Al

Jane Doe and John Doe Et Al    (T-1058-98)

PLACE OF HEARING:         Toronto, Ontario

DATE OF HEARING:           June 25^th, 2001

REASONS FOR Order : The Honourable Mr. Justice Pelletier

DATED:                                   August 28^th, 2002

APPEARANCES:

Lorne Lipkus &                                                                              FOR PLAINTIFFS

Tom Slatha

Susan D. Beaubien                                                                         FOR DEFENDANTS

SOLICITORS OF RECORD:

Kestenberg Siegal Lipkus                                                              FOR PLAINTIFFS

Toronto, Ontario

Borden Ladner Gervais                                                     FOR DEFENDANTS

Ottawa, Ontario