Canadian Trademarks year in review 2021 - Grey goods

5 minute read
28 February 2022

Looking for more insights? This resource is part of a five-installment series. Click here to read our Canadian trademark law year in review for 2021.

Grey goods

TFI Foods Ltd. v. Every Green International Inc., 2021 FC 241

This decision is a good reminder that the sale of grey goods does not constitute trademark infringement.

In this case, I-MEI successfully brought a motion for default judgement against Every Green, who was selling I-MEI grey goods with a label that stated that it was I-MEI's exclusive Canadian distributor, when, in fact, TFI Foods was I-MEI's exclusive Canadian distributor. When Every Green did not comply with an interlocutory injunction, TFI Foods and I-MEI brought this motion for default judgment for infringement and passing off contrary to ss. 20 and 7(b) of the Trademarks Act.

On the issue of infringement, the moving parties lost. The Court held that Every Green was selling grey market goods and that this, on its own, did not constitute trademark infringement:

TFI and I-MEI filed no evidence that the goods being sold by Every Green in association with the I-MEI Design were not in fact sourced from I-MEI […] In such circumstances, I have insufficient evidence to establish on a balance of probabilities that the goods being sold by Every Green are counterfeit. Rather, I conclude the goods are likely genuine goods manufactured by I-MEI that have entered the Canadian market elsewhere, and have been imported into Canada without the approval of I-MEI or its Canadian distributor TFI. Such goods are commonly known as "parallel imports" or "grey market goods."

The sale in Canada of grey market goods does not itself infringe a trademark.

On the issue of passing off, the Court began by addressing two preliminary standing issues. The first was whether I-MEI, as the owner of a registered TM, could bring a claim for passing off. This stemmed from the Federal Court of Appeal's latest Travelway decision, where the Court observed that "Kirkbi suggests, but does not decide, that the owner of a registered trademark cannot have recourse to subsection 7(b) of the Act".

On this point, the Court held that owners of registered marks can bring claims for passing off and provided the following reasons in support:

  1. The FCA Travelway decision states that a registered trademark is an absolute defence to a passing off claim, but it does not state that a registered trademark owner cannot bring a passing off claim;
  2. The Court notes that the requirements for passing off and infringement are different, though there are substantive overlaps in many respects; and
  3. The Court points out that the granting of a trademark registration does not extinguish an owner's rights in the underlying mark or an owner's ability to enforce those rights.

The second preliminary "standing issue" was whether TFI, as the exclusive distributor, had standing. On this point, the Court held that TFI did not have standing to bring a passing off action and that the trademark owner "alone owns the trademark and the goodwill associated with it and the statutory passing-off action, like its common law counterpart, can only be brought by it as the owner of such goodwill".

After addressing these issues, the Court found that there was goodwill in the marks, that the "exclusive distributor labels" were a false statement of association" that caused a misrepresentation, and that there were damages (e.g., harm to I-MEI's reputation).

As a result, the Court issued a permanent injunction, compensatory damages in the amount of $55,000 ($5,000 for each retail store at which Every Green was selling products with the misleading labels), punitive damages in the amount of $35,000, and costs in the amount of $45,000.

If you would like to discuss this article further or have any specific questions about it, please contact a member of our Trademarks, Brands & Designs Group.

The authors would like to thank Melissa Cheng, Richard Du, YooJung Jung, Luke Robert and Chloe Ilagan.

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