Judgments

[1995] 1 F.C. 380

A-174-92

Les Éditions JCL Inc. (Defendant) (Appellant)

v.

91439 Canada Ltée (Plaintiff) (Respondent)

Indexed as: Éditions JCL Inc. v. 91439 Canada Ltée (C.A.)

Court of Appeal, Hugessen, Desjardins and Décary JJ.A.—Montréal, September 13; Ottawa, September 23, 1994.

Copyright — Damages — Appeal from award of damages for conversion in copyright infringement action — Under Copyright Act, s. 38 appellant ordered to pay value of copies of infringing work printed, but not sold — Appeal allowed in part — Infringing copies having no value at time of destruction as (1) purpose of proceedings to remove them from circulation; (2) no evidence of use to copyright holder; (3) relief requested destruction of copies at appellant’s expense — As respondent suffering no detriment, appellant receiving no benefit, conversion caused by destruction not creating right to damages — Value of sold copies not established in proportion to plagiarism — Remainder after infringing portions deleted of no value — Expenses incurred to promote copies sold reducing damages awarded for conversion — In accordance with duty to ensure damages awarded for conversion not duplicating damages awarded to recover profits, latter deducted from amount awarded for conversion.

Civil Code — Art. 1056c permitting compound interest — Trial Judge erred in concluding awarded only in extraordinary circumstances — Transforming rule into exception — As appellant’s good faith factor considered in exercise of discretion, no reason to intervene.

This was an appeal from an award of damages for conversion. The Trial Judge found that Louise Denis-Labrie had infringed a “substantial part” of two literary works by Marcelyne Claudais, for which the respondent was the assignee of the copyright. The infringement resulted from the unauthorized use of words, phrases, names of characters, rhythm, format and paragraphing. The Trial Judge allowed a small amount in respect of profits from sales during the period when the infringing work was being withdrawn from the market and, under Copyright Act, section 38, a substantial amount equivalent to the value of copies printed but not sold. The appellant argued that the destruction of the copies taken off the market did not constitute conversion within the meaning of section 38. It further argued that the value of each of the copies should be established in proportion to the plagiarism, a proportion which it set at 2.41% based on the passages which were actually plagiarized, but which it was prepared to set at 10%. Finally, it suggested that in determining the value of the copies $.78 a copy should be deducted for promotion costs.

Held, the appeal should be allowed in part.

The importation into the field of copyright of the well-defined common law concept of “conversion” has generated concern that the amount of damages may prove to be excessive because conversion is available in addition to those damages permitted by section 35 for infringement and reimbursement of a just and proper proportion of the profits. Courts have attempted to mitigate the rigours of conversion by ensuring that the damages awarded under section 38 did not duplicate those awarded under section 35.

Anywhere outside the field of copyright, destruction entails conversion. However, if damage is to have been caused by the destruction, it is necessary for the thing to have had some value at the time of destruction. Where the proceedings, as here, are brought by the copyright holder for the very purpose of having the copies removed from circulation, and no evidence is presented of the use the holder could have made of the copies had they been returned to it, the destroyed copies do not have any value. The respondent could not sell, under the signature of Marcelyne Claudais, a work that purported to be the autobiography of Louise Denis-Labrie and would have no interest in returning to circulation a text infringing the copyright of Marcelyne Claudais. Finally, the relief actually requested by the respondent was to be allowed to destroy the copies at the appellant’s expense. Although it might have been better for the appellant not to have acted on the respondent’s behalf, it believed in good faith that it was acting in the respondent’s interests in taking the initiative of destruction. As the respondent suffered no detriment and the appellant received no benefit, the conversion caused by the destruction did not create a right to any damages.

The proposition that the value of the copies sold for the purpose of determining the damages for the conversion should be determined in accordance with the percentage of plagiarism, was untenable. Although the infringement was not the plagiarism of another person’s entire work, but involved using words, phrases, characters, rhythm and style, what would remain of the work once the infringing portions are removed would have no value. The plagiarism could not be separated from the original portions. The courts should not undertake to calculate to the very word the injury done to an author’s rights. The expenses incurred by the appellant to promote the copies sold ($.78 a copy) must, however, be taken into account as reducing the damages for conversion.

In accordance with the Court’s duty to ensure that the damages awarded for conversion do not duplicate those awarded to recover profits, the amount awarded for reimbursement of profit was deducted from that awarded for conversion.

The Trial Judge erred in concluding that the compound interest provided for in Civil Code, Article 1056c should only be awarded in extraordinary circumstances. He transformed what should be the rule into an exception. The appellant’s good faith was, however, a factor which could be taken into account in exercising his discretion and there was no reason for intervention by this Court.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Civil Code of Lower Canada, Art. 1056c.

Copyright Act, R.S.C., 1985, c. C-42, ss. 35, 38.

Copyright, Designs and Patents Act 1988 (U.K.), 1988, c. 48, s. 18, Sch. 1, s. 31(2).

CASES JUDICIALLY CONSIDERED

APPLIED:

Mawman v. Tegg (1826), 38 E.R. 380.

DISTINGUISHED:

Hopkins (Tom) International, Inc. v. Wall & Redekop Realty Ltd. (1985), 20 D.L.R. (4th) 407 (B.C.C.A.).

CONSIDERED:

Lewis Trusts v. Bambers Stores Limited, [1983] F.S.R. 453 (C.A.).

REFERRED TO:

Infabrics Ltd. v. Jaytex Ltd., [1982] A.C. 1 (H.L.); Caxton Publishing Co., Ld. v. Sutherland Publishing Co., [1939] A.C. 178 (H.L.); Pro Arts, Inc. v. Campus Crafts Holdings Ltd. et al. (1980), 28 O.R. (2d) 422; 110 D.L.R. (3d) 366; 10 B.L.R. 1; 50 C.P.R. (2d) 230 (H.C.); Ash v. Dickie, [1936] Ch. 655 (C.A.); Wham-O Manufacturing Co. v. Lincoln Industries Ltd., [1985] R.P.C. 127 (N.Z.C.A.); Beauchemin & Cadieux (1900), 10 B.R. 255 (Que. K.B.); affd (1901), 31 S.C.R. 370; Cardwell, Raymond Philip v. Leduc, Philippe et al., [1963] Ex.C.R. 207; Cartwright v. Wharton (1912), 25 O.L.R. 357 (H.C.); Ravenscroft v. Herbert and Another, [1980] R.P.C. 193 (Ch. D.); W H Brine Co v Whitton (1981), 37 ALR 190 (Aust. F.C.); Girard c. Lavoie, [1975] C.A. 904 (Que.); Voyageur (1969) Inc. c. Ally, [1977] C.A. 581 (Que.); Trottier c. British American Oil Co. Ltd., [1977] C.A. 576 (Que.); Godin c. Trempe (August 14, 1985), Montréal 500-09-000894-790, J.E. 85-822 (C.A.), not reported.

AUTHORS CITED

Baudouin, J.-L. La responsabilité civile délictuelle, 3e éd. Cowansville (Qué.): Yvon Blais, 1990.

Copinger and Skone James on Copyright, 13th ed. by E. P. Skone James et al. London: Sweet & Maxwell, 1991.

Dictionary of Canadian Law. Toronto: Carswell, 1991.

APPEAL from an award of damages for conversion in a copyright infringement action [91439 Canada Ltée v. Éditions JCL Inc. et al. (1992), 52 F.T.R. 61 (F.C.T.D)] in regard to copies of an infringing work that were destroyed. Appeal allowed in part.

COUNSEL:

Vivianne de Kinder and Doris Thibault for defendant (appellant).

Laurent Carrière and Philippe Van Eeckhout for plaintiff (respondent).

SOLICITORS:

Simard, Thibault, Gagnon, Chicoutimi, Quebec, for defendant (appellant).

Léger Robic Richard, Montréal, for plaintiff (respondent).

The following is the English version of the reasons for judgment rendered by

Décary J.A.: Of the trial judgment [(1992), 52 F.T.R. 61] which made against Les Éditions JCL Inc. (the appellant) the usual orders in a case of copyright infringement,[1] only the portion dealing with the awarding of damages is at issue in this Court.

Due to a lack of evidence the Trial Judge refused to award 91439 Canada Ltée (the respondent) damages resulting directly from infringement of its copyright (section 35 of the Copyright Act [R.S.C., 1985, c. C-42] (the Act) and did not think it advisable to award non-pecuniary damages. There was no appeal from this part of the judgment.

However, the Trial Judge ordered the appellant to pay the respondent:[2]

… as an equitable proportion of the profits which the defendant realized by infringing the plaintiff’s copyright, the minimal sum of $273.40, the equivalent of a profit fixed at $2.90 for each of the 94 copies sold after December 31, 1987 only, that is, during the seven months when the infringing copies were being gradually withdrawn from the market.

The respondent filed a cross-appeal from this conclusion, submitting that in its opinion there was no reason to only take into account the 94 copies of “On m’a volé mon fils” sold after the infringement was discovered and the notification given to terminate it. At the hearing the appellant admitted the justice of the respondent’s claim and agreed that the calculation should be made on the basis of a profit of $2.90 for each of the 1,378 copies sold, which makes a total of $3,996.20, and that this should be substituted for the $273.40 awarded by the Trial Judge. The cross-appeal will accordingly be allowed on this point.

Additionally, the Trial Judge allowed “[the] proceedings … in respect of the conversion” authorized by section 38 of the Copyright Act (the Act).[3] He did so as follows:[4]

D. A judgment ordering the defendant JCL to pay to the plaintiff, taking into account the choice expressed by the plaintiff at trial, the value of the copies of the infringing work On M’a Volé Mon Fils which the defendant JCL has printed and which it did not sell; on this point, I find that the plaintiff is entitled to the amount claimed, $51,929.50, which represents the admitted retail price of $12.95 for each of the 4,010 infringing copies printed and not sold. It is important to recall that the infringing copies became the property of the plaintiff at the moment they were produced; the plaintiff is now therefore entitled to be in the same financial situation as it would be in if the infringing copies had not been destroyed, but had been delivered or given to it. Moreover, the damages to which it is entitled are determined on the basis of the full value of those copies at the time when the plaintiff’s copyright in respect of them was usurped (see Tom Hopkins International Inc. v. Wall and Redekop Realty Ltd., 6 C.P.R. (3d) 475, at page 479).

The appellant objected to this conclusion. It admitted that the sale of the 1,378 copies of “On m’a volé mon fils” constituted conversion within the meaning of section 38, but argued that the destruction by the appellant itself of the 3,513 copies taken off the market did not constitute conversion within the meaning of the section.[5] The appellant further argued that the value of each of the copies, the selling price of which was $12.95, should be established in proportion to the plagiarism by Louise Denis-Labrie of the works of Marcelyne Claudais, a proportion which it set at 2.41% after an informed calculation of the passages which actually were plagiarized, but it said at the hearing that it was prepared to set this proportion at 10%. Finally, it suggested that in determining the value of the copies a deduction should be made for promotion costs, amounting to $0.78 a copy.

The conversion referred to in section 38 derives from the presumption of ownership of the copies of the infringing work which that section makes in favour of the holder of the copyright.

As that holder is deemed to be owner of the copies, section 38 states that he or she may seek to regain possession of them or may take “proceedings… in respect of the conversion thereof.”

The importation into the special field of copyright of such a well-defined common law concept as that of “conversion” has generated considerable discussion. The courts have been concerned about the possibility of abuse resulting from this importation. To the extent that this relief is available in addition to those permitted by section 35 of the Act—damages for the infringement and reimbursement of a just and proper proportion of the profits—and to the extent that, in keeping with settled case law on the question of conversion, if the infringer has disposed of the copies of the work infringed this relief allows the holder to recover the full market value of such copies at the time of conversion, the amount of the damages may prove to be excessive. This is in any case what Lord Scarman had to say about the equivalent section of the U.K. statute, namely section 18, shortly before the latter was repealed by the 1988 Copyright, Designs and Patents Act 1988:[6]

A more troublesome point on section 18 is the measure of damages. In cases, like the present, on industrial design, damages for infringement under section 17 are often small. Limited (in the absence of special circumstances) to the depreciation in value of the copyright, they can be minimal. In the present case Infabrics paid only a few pounds for the design. But damages for conversion can be very great. If the industrial application of the infringing copy is a success, damages are recoverable as if the owner of the copyright was the owner of every infringing copy sold: section 18(1). And what if the infringing copy be engraved upon a silver chalice or a gold medallion? The language of the subsection is, I think, clear: it bestows upon the owner of the copyright the rights and remedies to which at common law an owner of goods is entitled for their conversion. It treats the owner of the copyright as if he were the owner of the infringing copies. Since at common law the damages for conversion are ordinarily measured by reference to the value of the goods converted, I would not think it legitimate to construe the subsection otherwise, though the result will be injustice in some cases. If the possibility of excessive damages is to be eliminated, legislation will be needed: for the language of the subsection permits of no other construction.[7]

I hasten to add that the courts have attempted to mitigate the rigours of conversion by ensuring that the damages they awarded under section 38 did not duplicate those they had awarded under section 35.[8]

There is no doubt that the sale of the 1,378 copies of “On m’a volé mon fils” by the appellant constitutes conversion. In its submission, the appellant agreed to this without demur. I will return below to the question of the value that should be assigned to these 1,378 copies.

In support of its arguments that the destruction of the 3,513 copies taken off the market by the appellant also constitutes conversion within the meaning of section 38, the respondent referred the Court to the judgment of the British Court of Appeal in Hopkins (Tom) International, Inc. v. Wall & Redekop Realty Ltd.,[9] in which damages were awarded for conversion in respect of videocassettes which the infringer had eventually erased, and to these comments by Lawton J.A. in Lewis Trust:[10]

As long as the copied blousons were under their control, the defendants were not doing anything with them which was inconsistent with the rights of the plaintiffs as the notional owners. As such, theoretically, the plaintiffs could have demanded that the defendants should deliver up to them the garments which they were making at whatever stage of manufacture they had reached. Had they been handed over to them there would have been no conversion. But when the defendants sold, or otherwise parted with possession of the copied blousons they did acts which were inconsistent with the rights of the notional owners and rendered themselves incapable of delivering them up if asked to do so. In my judgment this is when they converted them. [My emphasis.]

I do not feel that Tom Hopkins has the meaning suggested for it by the respondent. At most, as I see it, that case indicates that destruction and conversion are not mutually exclusive: the facts of that case were such that it appears the use made by the infringer of the videocassettes before erasing them, rather than the erasing as such, is what constituted the conversion. Additionally, the observations of Lawton J.A. on the words “or otherwise parted with possession” are only obiter and do not expressly deal with destruction of the items in question.

However, anywhere outside the field of copyright there is no doubt that destruction entails conversion. There is no more brutal and irreversible means of disposing of a thing we own than to destroy it. In The Dictionary of Canadian Law,[11] there is the following description:

CONVERSION … 2. Includes intentionally changing the identity of a chattel by destruction, consumption or other physical alteration. John G. Fleming, The Law of Torts, 6th ed. (Sydney: The Law Book Company Limited, 1983) at 56.

However, if damage is to have been caused by the destruction, it is still necessary for the thing to have had some value at the time of the destruction. In a case like the one at bar, in which the proceedings were brought by the holder of the copyright for the very purpose of having the copies then in circulation removed from the market and in which no evidence was presented by the holder of the use it could have made of the copies if the infringer had returned them to it, I have sought in vain for any value which the 3,513 destroyed copies might have had in the marketplace.

I find it difficult to see how the alleged ownership right conferred on the respondent by section 38 could be so absolute as to enable it to sell over the signature of Marcelyne Claudais a work which purported to be the autobiography of Louise Denis-Labrie, and I do not see what interest the respondent would have had in returning to circulation over the signature of Louise Denis-Labrie a text infringing the copyright of Marcelyne Claudais. Further, and this seems to me to be conclusive, the relief actually requested by the respondent in conclusion (D) of its statement of claim was to be allowed to proceed to destroy the copies in question at the appellant’s expense. From the standpoint of principle, it would have been better for the appellant not to have chosen to act on the respondent’s behalf and instead to have given into its possession the copies taken off the market. In the facts of the case at bar, however, I cannot blame it for doing so and the respondent, which was about to do so itself, is not in a position to object. The appellant believed in good faith that it was acting in the respondent’s interests in taking the initiative of destruction. As the respondent suffered no detriment and the appellant received no benefit whatever, I do not see how I could conclude that the conversion caused by the destruction created a right to any damages whatever.

What then is the value of the 1,378 copies sold, for the purpose of determining damages for the conversion?

The appellant’s proposition that the value should be determined in accordance with the percentage of plagiarism contained in the work “On m’a volé mon fils” is untenable. It is true that the infringement in question is not the plagiarism of another person’s entire work. Instead, it involves using words, phrases, characters, rhythm and style. The infringing work has its share of originality, but that originality has no independent existence and what remains of the work once the infringing portions are taken out is of no value.

To use the words of the writer herself whose rights were infringed, at the very end of her testimony:[12]

[translation] … we are talking here about someone who had an idea but did not have the words to express it and who took words she needed from the books of a writer who had them.

Accordingly, to talk of a percentage would amount to giving the work “On m’a volé mon fils” a value which it did not possess. I think these observations by Lord Eldon in Mawman v. Tegg are relevant here:[13]

As to the hard consequences which would follow from granting an injunction, when a very large proportion of the work is unquestionably original, I can only say, that, if the parts, which have been copied, cannot be separated from those which are original, without destroying the use and value of the original matter, he who has made an improper use of that which did not belong to him must suffer the consequences of so doing. If a man mixes what belongs to him with what belongs to me, and the mixture be forbidden by the law, he must again separate them, and he must bear all the mischief and loss which the separation may occasion. If an individual chooses in any work to mix my literary matter with his own, he must be restrained from publishing the literary matter which belongs to me; and if the parts of the work cannot be separated, and if by that means the injunction, which restrained the publication of my literary matter, prevents also the publication of his own literary matter, he has only himself to blame.

In short, this is not a case where the plagiarism can be divided in some way and the infringing portions separated from the original portions and the latter used in any way. In this regard, I do not feel it is either possible or desirable to have any recourse to the rule rusticum judicium.[14] It would be most ill-advised for the courts to undertake, in cases like the one at bar, to calculate to the very word the injury done to an author’s rights.

Having said that, the expenses incurred by the appellant to promote the copies sold must be taken into account as reducing the damages for conversion.[15] According to the evidence presented, these expenses amount to $0.78 a copy.

I therefore conclude that the damages for conversion to which the respondent is entitled should be calculated as follows: 1,378 x $12.17 ($12.95—$0.78) = $16,770.26.

However, the Court has a duty as I noted above to ensure that the damages for conversion do not duplicate the damages to recover profits which are also awarded to the respondent. In the case at bar, there would be duplication if the Court did not take into account in the damages awarded for conversion based on the value of each copy sold (a value allowing for profit made) the profit of $2.90 a copy which the appellant must reimburse the respondent. Accordingly, I would deduct from the amount I would have awarded for conversion what I awarded for reimbursement of profit. The amount to which the respondent is entitled as damages for conversion will therefore be the following: $16,770.26 - $3,996.20 = $12,774.06.

Accordingly, I would award the respondent the sum of $16,770.26 ($3,996.20 (profits) + $12,774.06 (conversion)) instead of the amount of $52,202.90 awarded by the Trial Judge.[16]

One final word on the second aspect of the cross-appeal filed by the respondent: in its statement of claim the latter had asked that damages awarded to it bear “interest at the legal rate from the date of service plus since that date the special compensation provided for by art. 1056c C.C.L.C.”.[17]

In his reasons the Trial Judge disposed of this application as follows:[18]

… moreover, the nature of the circumstances is far from the extraordinary circumstances required, given the good faith of the defendant JCL, in order for … compound interest to be awarded.

In my opinion the Trial Judge erred in concluding, contrary to the principles stated in the Quebec Court of Appeal,[19] that the benefit of the additional compensation was only to be awarded in extraordinary circumstances. He transformed what should be the rule into an exception. Having said that, the appellant’s good faith is a factor which could be taken into account in exercising his discretion and I do not think there is any reason for intervention by this Court.

DISPOSITION

The principal appeal should be allowed in part, the cross-appeal should be allowed in part and paragraph D of the trial judgment varied to read as follows:

D The Court orders the defendant JCL to pay the plaintiff the total amount of $16,770.26 with interest at the legal rate from the date of service.

Each party should pay its costs on appeal.

Hugessen J.A.: I concur.

Desjardins J.A.: I concur.

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