Louis Vuitton is attempting to raise the bar in Canada for landlord liability in the sale of counterfeit goods, pursuing several flea market operators in the Ontario Superior Court for the sale of counterfeit Louis Vuitton merchandise taking place on their premises. In its action, Louis Vuitton claims that the landlords of the flea markets are directly liable, vicariously liable and/or contributorily liable for vendors’ sales of counterfeit Louis Vuitton merchandise at the market, alleging the landlords are aware that counterfeit merchandise was being offered for sale and sold at the flea markets.
The action has sustained an initial attack by the operators of Dr. Flea’s Flea Market in Toronto (see Louis Vuitton Malletier S.A. v. Zekria Wakilzada, 2017 ONSC 2409), who sought to strike certain paragraphs from the Statement of Claim relating to prior criminal search warrants executed at Dr. Flea’s Flea Market, which Louis Vuitton relies upon to support its arguments of vicarious liability, where knowledge by the landlord of the infringing activities appears to be a potentially important aspect. The claims were initially struck on the basis that the allegations of general knowledge of counterfeit merchandise, but not specifically the plaintiff’s merchandise, were irrelevant and, therefore, scandalous. However, on appeal, the Court set aside the order and reinstated the paragraphs regarding the landlord’s knowledge generally of counterfeiting activities: the Court agreed with the plaintiff’s submission that the necessary elements for a cause of action for vicarious liability of a landlord are unsettled, but that knowledge is an important element of the cause of action. As the law is unsettled on whether knowledge generally by a landlord is relevant, the Court confirmed that it was an error to strike the claim at this early stage.
This action by Louis Vuitton follows a recent judgment of the Federal Court in Chanel v. Lam Chan Kee Co., 2016 FC 987, aff’d 2017 FCA 38, which supports a finding of landlord liability for sale of counterfeit merchandise under certain circumstances. In that case, the following circumstances for indirect liability of a landlord were relevant: (a) the landlord’s continued control and profit derived from the business and as landlord of the premises; (b) the landlord’s personal knowledge of counterfeit activities taking place at the premises, and (c) the landlord’s failure to prevent counterfeit items from being sold or offered for sale at the premises. The Federal Court also commented in Lam Chan Kee on the landlord’s awareness of infringement of trademarks other than the plaintiff’s trademark, and considered this relevant, a fact which was relied upon by the Ontario Superior Court in allowing Louis Vuitton’s general claims of knowledge of counterfeiting to stand.
Going forward, it appears that Canada may be moving toward liability for landlords in counterfeiting cases in expanding circumstances, similar to the position in the United States, and hopefully this action by Louis Vuitton will pave the way to robust jurisprudence upon which brand owners can confidently seek landlord co-operation from flea markets and other hot-beds for the sale of counterfeit merchandise. The framework for such liability is still being built, but following the decision of the Ontario Superior Court, a plaintiff may be able to rely on the landlord’s knowledge generally of counterfeit activities taking place at the premises, rather than having to rely only on specific knowledge of the landlord of infringement of the plaintiff’s trademark.