Date: 19990811
Docket: T-1040-99
BETWEEN:
HUGO BOSS A.G.
Plaintiff
AND
CHATEAU LINGERIE MFG. INC.
Defendant
REASONS FOR ORDER AND ORDER
BLAIS, J.
1 This is a motion on behalf of Plaintiff for an Interim Preservation Order, preserving the BOSS Inventory from destruction or modification;
[2] The Respondent suggests that this Honourable Court does not have jurisdiction to hear Plaintiff's motion since Plaintiff's motion is purely and simply an attempt by Plaintiff to enforce a contractual right which Plaintiff claims in its motion to have, rather than an attempt to prevent an infringement of Plaintiff's trademarks and copyrighted design.
[3] The Plaintiff suggests that, pursuant to Section 38 of the Copyright Act, the Federal Court has jurisdiction:
| 38. Recovery of possession of copies, plates. - Subject to subsection (2), the owner of the copyright in a work or other subject matter may
(a) recover possession of all infringing copies of that work or other subject-matter, and of all plates used or intended to be used for the production of infringing copies, and
(b) take proceedings for seizure of those copies or plates before judgement if, under the law of Canada or of the province in which those proceedings are taking place, a person is entitled to take such proceedings,
as if those copies or plates were the property of the ccopyright owner.
(2) Powers of court. - On application by
(a) a person from whom the copyright owner has recovered possession of copies or plates referred to in subsection (1),
(b) a person against whom proceedings for seizure before judgment of copies or plates referred to in subsection (1) have been taken. or
(c) any other person who has an interest in those copies or plates.
a court may order that those copies or plates be destroyed, or may make any other order that it considers appropriate in the circumsntaces.
(3) Notice to interested persons ...
(4) Circumstances court to consider ...
(5) Limitation ...
|
38. Propriété des planches - Sous réserve du paragraphe (2), le titulaire du droit d'auteur peut, comme s'il en était le propriétaire, recouvrer la possession de tous les exemplaires contrefaits d'oeuvres ou de tout autre objet de ce droit d'auteur et de toutes les planches qui ont servi ou sont destinées à servir à la confection de ces exemplaires, ou engager à leur égard des procédures de saisie avant jugement si une loi fédérale ou une loi de la province où sont engagées les procédures le lui permet.
38(2). Pouvoir du tribunal - Un tribunal peut, sur demande de la personne qui avait la possession des exemplaires et planches visés au paragraphe (1), de la personne contre qui des procédures de saisie avant jugement ont été engagées en vertu du paragraphe (1) ou de toute autre personne ayant un intérêt dans ceux-ci, ordonner la destruction de ces exemplaires ou planches ou rendre toute autre ordonnance qu'il estime indiquée.
38(3). Autres personnes intéressées ...
38(4). Facteurs ...
38(5). Limite ...
|
[4] The Plaintiff's motion is not, as suggested by the Respondent,
"merely an attempt to enforce a contractual right which it alleges to have under the licence agreement with the Respondent to purchase the HUGO BOSS Inventory owned and in the possession of Respondent at a hugely discounted price"
[5] The Plaintiff's right to purchase the inventory, in my view, is much more than simply a contractual right, but rather an ancillary right attached to the inventory, directly related to the Trade mark.
[6] Section 16 of the licence Agreement between the parties said:
16. Consequences of Termination of the Agreement
16.1Notwithstanding any expiration of termination of this Agreement, except as specifically provided herein, the expiration or termination of this Agreement shall not release either party from any liability or obligation arising prior to the date of expiration or termination.
Upon the regular expiration or termination of this Agreement, either party shall not under any circumstances be entitled to and hereby waives any claim for any compensation or indemnification (i) for its loss of business or goodwill, (ii) based on unjust enrichment to the other party, or (iii) with respect to any damage incurred by it as a result of the termination of its rights hereunder. Notwithstanding the foregoing, a party which is the subject of a termination other than in accordance with the terms of this Agreement or of a termination without legal basis shall be entitled to recover from the other party all direct damages resulting from such termination.
16.2On the date of termination of this Agreement, all rights of Licensee to use the Trademarks and/or any other rights belonging to Hugo boss will expire. Licensee shall also cease making any reference to Hugo Boss and/or its Trademarks and any reference to its previous relationship with Hugo Boss as Licensee of Hugo Boss.
Further, Licensee shall, no later than as of the date of termination of the Agreement, initiate the procedures to extinguish or withdraw all "Registered User" registrations at its own cost or - upon the request and at the cost of Hugo Boss - transfer them, to the extent legally possible, to third persons designated by Hugo Boss. Licensee hereby grants to Hugo Boss a power of attorney to take such actions in the name of and on behalf of Licensee.
16.3Notwithstanding the provisions in Sections 16.1 and 16.2 of this Agreement, Hugo Boss has the right to elect:
-to purchase at 50% of the average net sales price, but no less favorable than the net sales price made available to any third party within the last 6 months, completely or in part, existing inventory of Licensed Products, or
-to permit Licensee to distribute its remaining Licensed Products, other than inventory of styles which were cancelled more than six months prior to the termination of the Agreement ("Obsolete Inventory") provided that Licensee may sell at most a three-month amount determined according to the average volume of sales of the six months preceding the termination of the Agreement (after deduction from such three months amount of that amount of inventory which Hugo Boss has purchased pursuant to its aforesaid election) - within six months after the termination of the Agreement upon the previously customary conditions and through the previously utilized or mutually agreed-upon channels of distribution. Licensee shall account for these sales and pay the computed license fees to Hugo Boss no later than within seven months after the termination of the Agreement.
-If the Licensee terminates this Agreement in accordance with the terms of this Agreement, Hugo Boss may only exercise said right to purchase inventory after Licensee has been given the option to sell 3 (three) months' inventory as stated above.
-Hugo Boss shall not take any willful action to interfere with these sell-off rights of the Licensee.
-Any inventory, including Obsolete Inventory, remaining with Licensee after such six month period (the "Unsold Inventory") will, at the option of Hugo Boss, be sold to either Hugo Boss or a third party designated by Hugo Boss on terms to be mutually agreed upon with Hugo Boss. These sales will not be subject to the payment of license fees. If Hugo boss avails itself of neither of the options with respect to the Unsold Inventory and if a mutual agreement as to disposition cannot be made, then the Unsold Inventory must be debranded to the satisfaction of Hugo Boss, failing which it must be destroyed.
-In order to enable Hugo Boss to exercise its right of election, Licensee shall promptly inform Hugo Boss as to the existing inventory of Licensed Products and the average net sales price charged within the last 6 months, broken down by style and color. Upon receipt of the information about the inventory, Hugo Boss shall decide within four weeks the manner in which its right of election will be exercised, failing which it shall be deemed to have elected to permit Licensee to distribute such inventory in accordance with the first paragraph of this Section.
[7] Section 16.3 is protective of the Respondent's rights given that, when the licence is terminated, the Respondent cannot sell the HUGO BOSS Inventory on the market, as it is, but rather has the obligation to sell back this inventory to the Plaintiff, if the Plaintiff elects to do so. Both parties are aware of those conditions from the signature of the Agreement.
[8] To decide whether this commercial contract between the parties was terminated in April 1999 or in June 1999, and whether section 16.3 of the contract should apply is for the Trial Judge.
[9] I am convinced that this Court has jurisdiction to hear this motion.
[10] To make a decision relating to the remedies asked by the Plaintiff, this Court has to consider the three elements of the test established by the jurisprudence.
SERIOUS ISSUE:
[11] The Plaintitff has convinced the Court that there is a serious issue and I will not comment further on this element.
IRREPARABLE HARM:
[12] The Plaintiff tried unsuccessfully to demonstrate that it will suffer irreparable harm if this Interim Preservation Order is not issued by the Court. I am rather convinced that the Respondent is more in a situation to suffer a substantial harm if the Preservation Order is issued by this Court. Indeed the estimate value of the inventory of HUGO BOSS garments presently in Respondent's hands represent 1.3 million dollars on the market and pursuant to
the cross-examination, Mr. Kenneth Khoury, Director of finance at Chateau Lingerie Mfg. Inc. said:
"However, the fact that we've got money tied up in this Hugo Boss inventory, obviously when you expand, you need financing and the money that is frozen in this Hugo Boss inventory is substantial and is hampering the growth in these other areas. This is frozen money."
[13] Consequently I am not convinced that the Plaintiff will suffer an irreparable harm.
BALANCE OF CONVENIENCE:
[14] The Respondent has to support the BOSS Inventory for a certain period of time and this is already a burden that is much more heavy for the Respondent than for the Plaintiff. So the balance of convenience favors the Respondent.
[15] This Court is also convinced that the Respondent has demonstrated its good faith, and that it has no intention whatsoever to put those garments on the market with the HUGO BOSS design but rather that it is contemplating even to destroy this inventory or to sell it after this inventory has been debranded.
[16] It is clear in my mind that, whatever damages suffered by any of those two parties, they could be compensated by an amount of money and an Interim Preservation Order is not the right mean in the circumstances; that mean could only reduce the market value of the garments.
[17] For those reasons this motion is dismissed with costs.
MONTREAL, QUEBEC
THIS 11TH DAY OF AUGUST 1999
Pierre Blais
Judge
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