Trans-High Corporation v. Hightimes Smokeshop and Gifts Inc., 2015 FC 919 (Fothergill, J.)
July 27, 2015
James Green and Charlotte McDonald of Gowling Lafleur Henderson LLP for the Applicant Trans-High Corporation Alpesh Patel of AP Law for the Respondent Hightimes Smokeshop and Gifts Inc.
On November 26, 2013, Justice Manson of the Federal Court rendered a judgment in which he concluded that Hightimes Smokeshop and Gifts Inc. (the “Respondent”) had infringed the trademark HIGH TIMES of Trans-High Corporation (the “Applicant”) and had directed public attention to its goods, services or business in a manner likely to create confusion with the those of the Applicant. As such, Justice Manson issued an injunctive order prohibiting the Respondent from selling, distributing and advertising any goods, services or business in association with HIGH TIMES or with any other trademark or trade-name likely to be confusing therewith. Justice Manson awarded damages ($25,000) and costs ($30,000) to the Applicant (the “Judgment”).
Despite having been served with the Judgment more than once and having received explanations about the terms of the judgment, Respondent failed to comply with it and continued to use the Applicant’s trademark. On August 24, 2014 Prothonotary Aalto issued an order requesting that the Respondent and his directing mind, Amid Muhammad, appear before the Court and explain why they should not be found to be in contempt of the Judgment. The parties reached a settlement in which the Respondent was given more time to comply with the Judgment and pay the awarded damages and the Applicant’s leniency in any further contempt hearing.
The respondent finally took down the infringing sign shortly after the deadline agreed to between the parties but failed to pay the amounts due.
The respondent and Mr. Muhammad plead guilty of 5 counts of contempt at the hearing on June 18, 2015.
As such, the Court only needed to determine how to achieve the dual purposes of a contempt order: “enforcing the law and the temperance of justice”. The Court’s discretion to impose penalties is governed by Rule 466 and 472. The Court also noted that in intellectual property matters, general deterrence is important.
The Court reviewed the aggravating and mitigating factors to impose the right penalty. With respect to the aggravating factors, the Court found that the Respondent and Mr. Muhammad’s conduct was objectively and subjectively serious as their deliberate defiance of the Judgment undermined the authority of the Court. The Court also found that the fact that Respondent took 16 months to remove the signage, 15 months to change its corporate records, had not offered any reason for not paying the award of damages and costs and showed bad faith in negotiating additional time with the Applicant just as a technique to avoid complying with the Judgment favoured the imposition of severe penalties. On the other hand, the Court found that the absence of previous contempt orders, the small scale of the Respondent’s business as well as its low level of sophistication were mitigating factors.
The Court stated that there is no predetermined approach to imposing a penalty or remedy for contempt but the starting point should be the award of costs on a solicitor-client basis, in this case $62,500. Additional fines ought to depend on the aggravating and mitigating factors. The Court jointly and severally condemned the Respondent and Mr. Muhammad to a fine of $50,000, which would be reduced to $10,000 if the total amount owed under the Judgement, the costs on a solicitor-client basis of $62,500 as well as an additional $10,000 representing the costs of the contempt hearing were paid within 30 days. The Court found that a suspended sentence of imprisonment would be appropriate in this case taking into consideration that the Respondent had previously been condemned for trademark infringement but had never been found in contempt of a Court order.
As such, failure for the Respondent to pay the awarded amounts within 30 days would result in the imprisonment of Mr. Muhammad for at least 14 days or until the full amount of the fines and costs is paid. The Court declined the Applicant’s request to have the fine paid directly to them given that contempt is first and foremost an assault on the authority of the Court.
By: Cindy Bélanger, Legault Joly Thiffault