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Canada: Court enforces agreement to stop grey marketing

Trademark owners should be encouraged by the Ontario Court of Appeal's decision to enforce an agreement to prevent grey marketing (or parallel importing) in Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239.

Mars Canada Inc. owns numerous well-known brands including MARS, M&M's, MILKY WAY and SNICKERS. In 2006, Mars discovered that Bemco Cash & Carry Inc. was undercutting Mars' Canadian business by purchasing Mars products in the United States and reselling them into Canada. Mars sued and the action was settled with Bemco agreeing, on behalf of itself and its related companies, not to import Mars products into Canada without Mars' approval or a court order. Mars subsequently discovered that Bemco was using a different company to continue its grey market business. Mars sued to enforce the settlement agreement.

Although the court specifically recognized that, "The law is unsettled as to whether a Canadian trademark holder can prevent this [grey marketing] activity," it nevertheless found that the settlement agreement was enforceable and enjoined Bemco from continuing its grey marketing activities.

The motions judge awarded costs on a substantial indemnity basis because Bemco had brazenly breached the settlement agreement, contrived to avoid the settlement, raised trivial grounds of argument and made the litigation lengthier and more expensive than it ought to have been.

The Mars decision is the most recent setback for grey marketers in Canada. In 2013, the Federal Court of Appeal, in Beyond the Rack Enterprises Inc. v. Michael Kors, 2013 FCA 107, found that a defendant in a grey marketing action bears the onus of establishing that the exhaustion defence applies. Given that grey market products routinely travel in the same channels as counterfeit goods, this was a significant win for trademark owners.

Mars is also important because it further evidences Canadian courts' willingness to:

  • decide trademark disputes in a summary manner;
  • reduce costs by determining damages on a reference once liability has been established and the offending behaviour enjoined; and
  • sanction unacceptable behaviour with significant costs awards.

Canadian trademark owners have not always been successful in preventing parallel importing and although it remains a "grey" area, there is recourse.

Mark Edward Davis

Norton Rose Fulbright Canada LLP
Suite 3800, Royal Bank Plaza, South Tower, 200 Bay Street, P.O. Box 84Toronto  Ontario  M5J

Partner, Trade-mark Agent

* Certified Specialist in Intellectual Property (Patents/Trademarks/Copyright)

Norton Rose Fulbright Canada LLP / S.E.N.C.R.L., s.r.l.

About the author: Mark Davis is a litigator with significant experience in trademark and patent disputes, as well as in anti-counterfeiting, trade secret and breach of confidence, copyright and industrial design disputes. He has successfully argued numerous precedent-setting intellectual property cases at trial and on appeal. Mark is Certified as a Specialist in Intellectual Property (Patents/Trademark/Copyright) by the Law Society of Ontario and is consistently recognized by clients and peers for his litigation skills. Mark is a prolific writer, a popular speaker, and has taken active leadership roles in many important professional associations for intellectual property law in Canada and the United States.

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