Canada: "High Quality" Replicas, Low Quality Defences: Federal Court Awards Injunction And Damages In Lululemon Summary Trial

In the recent Federal Court decision of Lululemon Athletica Canada Inc. v. Campbell, 2022 FC 194, the court awarded an injunction, compensatory damages, and punitive damages following a summary trial involving Lululemon Athletica and an importer/seller of counterfeit products. While the court found in favor of Lululemon, noting that the evidence of infringement was "overwhelming" and that the infringer's conduct deserved punishment, the court carefully considered the appropriate remedies for the plaintiff and provided guidance on calculating compensatory and punitive damages.

Factual Background

The main defendant in this case is an individual named Katelyn Campbell who, along with others, advertised and sold counterfeit LULULEMON products through various Facebook pages from October 2019 through March 2021. These products were supplied by a foreign supplier and bore the plaintiff's registered trademarks, including LULULEMON and the plaintiff's well-known logo designs:

The defendants sometimes used terms such as LULU, L*LU, and LU*LU to describe the counterfeit goods. After discovering the defendants' activities, Lululemon sent two cease-and-desist letters to Ms. Campbell and began discussions with Ms. Campbell and the other defendants. While Ms. Campbell made multiple assurances that the Facebook pages had been deleted, she continued her activities by creating different private Facebook pages. After settling with the other defendants, Lululemon brought a motion for summary trial against Ms. Campbell. Although Ms. Campbell did not oppose the motion, she filed a statement of defence.

Motion for Summary Trial

Justice Grammond held that a summary trial based on affidavit evidence was appropriate. As per rule 216(6) of the Federal Court Rules, SOR/98-106, the court may render judgement following a summary trial if there is sufficient evidence and it would not be unjust to decide the issues on the motion. Here, the issues were not overly complex, and Lululemon led evidence in the form of sworn statements from the other defendants, details from investigators retained by Lululemon, and screenshots of posts from Ms. Campbell's Facebook pages. The court also noted that a summary trial may be especially appropriate in certain counterfeiting cases (para 14).

Infringement and Defences to Infringement

The court easily found that Ms. Campbell had infringed on Lululemon's trademark rights. It also found that Ms. Campbell's use of the LULU, L*LU, and LU*LU marks contravened section 20 of the Act, noting the distinctive character of the LULULEMON mark and the identical nature of the goods (para 17).

While Ms. Campbell admitted to the importation, advertisement, and sale of the goods, she denied that her acts constituted trademark infringement and submitted two arguments in her defence, namely, that she did not actually sell or import the goods in question, but simply facilitated a "group purchase," and that the goods were advertised as "high quality replicas."

Justice Grammond dismissed both arguments. With respect to the first defence, Ms. Campbell offered the goods for sale, received payment for them, and charged her customers a price that included a mark-up over and above the supplier's price. Her advertisement of the goods alone was sufficient to contravene section 20(1)(a) of the Act (para 21). In response to the second defence, the court noted that information intended to warn the consumer that the goods are not those of the plaintiff cannot insulate a defendant from liability, and that the addition of distinguishing features provides no defence if the defendant uses an identical or confusing trademark (para 22).

Remedies

The plaintiff sought several remedies including declarations affirming the ownership and validity of Lululemon's registrations and Ms. Campbell's breach, as well as an injunction, compensatory and punitive damages, interest and solicitor-client costs.

The court found that the declarations were "unnecessary" and with respect to a finding of infringement, not a remedy per se. The fact that the validity of Lululemon's marks were not at issue made it improper to issue a declaration.

The injunction, however, was necessary to prevent Ms. Campbell from selling counterfeit LULULEMON merchandise in the future given Ms. Campbell's history of repeatedly deleting Facebook pages and creating new ones. Although the court declined to issue a broadly worded injunction that would prevent Ms. Campbell from "further infringing the lululemon Trademarks" (as sought by the plaintiff), the court awarded an injunction that prevented Ms. Campbell from using, importing, advertising and selling merchandise bearing or trademarks that are identical to or confusing with Lululemon's registered trademarks.

To address the risk of future harm to the plaintiff, the court awarded the plaintiff $8,000 in compensatory damages based on the eight Facebook posts adduced by the plaintiff and an estimate of $1,000 per infringement as an appropriate lump sum (paras 47-52). The court refused to assume that other instances of infringement had occurred even though there was evidence that suggested Ms. Campbell may had sold hundreds of items.

The court also awarded $30,000 in punitive damages. Justice Grammond emphasized that Ms. Campbell's conduct was deliberate, evasive, and deserving of punishment. He noted that individuals in Ms. Campbell's situation must be deterred from believing that the potential profits associated with selling counterfeit goods will outweigh any compensatory damage awards (para 62).

Takeaways

This case demonstrates a continuing trend towards resolving trademark disputes through summary proceedings. Where there is obvious and indisputable evidence of infringement, brand owners may wish to proceed by motion for a summary trial – a generally faster, cheaper, and more efficient alternative to a full trial. Where a third party promises to stop its sale of counterfeit goods but then deliberately continues those activities, including at different premises or through a different online location, a claim for punitive damages may be appropriate. To maximize a plaintiff's compensatory relief, all instances of infringement should be carefully documented and described.