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TRADE-MARKS - Infringement

Friday, April 06, 2018 @ 8:54 AM  

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Appeal by defendants, Bemco, GPAE and Ebert, from a summary judgment declaring them liable for breach of a settlement agreement. The respondent, Mars, was an Ontario corporation that made and sold food products. Bemco and GPAE, were private corporations controlled by the Ebert. Through Bemco and GPAE, the Ebert bought Mars products in the US, imported them to Canada and sold them at a lower price then offered by Mars. In 2006, Mars discovered that Bemco was selling its products in Toronto. It brought an action in the Federal Court and the parties settled. To avoid paying damages, Bemco agreed to cease grey marketing goods bearing Mars' trade-marks. The minutes of settlement mistakenly identified Bemco Cash & Carry, Ebert's business, as Bemco Confectionary Sales, an error that Mars sought to rectify. Upon implementing the settlement agreement, Bemco disclosed that it was GPAE that imported the foreign grey market goods into Canada. Mars and GPAE also agreed to settle, with GPAE undertaking not to import Mars-branded products into Canada for sale or distribution without Mars' consent. In 2010, Mars discovered that foreign products were again being sold in Canada. It brought an application to enforce the settlement agreement and for damages. The appellants defended on the ground that the settlement agreements were void as being in restraint of trade. Mars brought a motion for summary judgment. It sought declaratory relief and damages and it also sought rectification of the Bemco agreement to correct Bemco's name. The motion judge allowed the motion. It found that both parties intended that the agreement be in the name of Bemco. The motion judge also found that both Bemco and GPAE had breached the settlement agreements as Bemco continued to engage in grey marketing and GPAE continued to import Mars products into Canada. He found that the agreements were not void as a restraint on trade as they were reasonable and made to settle litigation, Mars was entitled to enforce its trademarks and the products did not conform to Canadian packaging laws. He directed a reference as to damages. Finally, he awarded Mars substantial indemnity costs. Bemco, CPAE and Ebert appealed arguing that the motion judge erred in giving effect to the settlement agreements, erred in directing a reference as to damages and that the judge erred in awarding substantial indemnity costs.

HELD: Appeal dismissed. The agreement was not void as a restraint of trade. The settlement of litigation was reasonable in the interests of the parties. It resolved their dispute and defined the scope of the parties' rights. The settlement was also reasonable in the public interest. It prevented confusion between the Mars' trademarked products and the appellants' improperly labelled grey market products. There was evidence before the motion judge to support a conclusion that the respondent sustained some damage. Furthermore, having established a valid contract and a breach, Mars was entitled to damages. Given the motion judge's finding that the appellants brazenly breached the settlements and engaged in tactics that increased costs, the award of substantial indemnity costs was appropriate.

Mars Canada Inc. v. Bemco Cash & Carry Inc., [2018] O.J. No. 1340, Ontario Court of Appeal, G.R. Strathy C.J.O., C.W. Hourigan and B. Miller JJ.A., March 13, 2018. Digest No. TLD-April22018010