Trade mark owners should feel 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.
Mars Canada owns numerous well-known brands including Mars, M&M’s, Milky Way and Snickers. In 2006, Mars discovered that Bemco Cash & Carry was undercutting Mars’s Canadian business by purchasing Mars products in the United States and reselling them in 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’s 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 recognised that, “the law is unsettled as to whether a Canadian trade mark 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 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 trade mark owners.
Mars is also important because it further shows Canadian courts’ willingness to:
Canadian trade mark owners have not always been successful in preventing parallel importing and although it remains a grey area, there is recourse.