Obtaining Evidence in a Counterfeiting Case

Obtaining a Sample

Purchasing or otherwise obtaining samples is the first step in any anti-counterfeit enforcement action. Typically, rights holders will have received a call, email or otherwise been notified about someone selling, advertising for sale or manufacturing something that they believe infringes upon their intellectual property rights.

In undertaking a purchase, the following is recommended whenever possible:

• Retain a licensed private investigator (or at a minimum someone who is not employed by or connected to the rights holder or law firm) to discretely purchase and/or obtain the evidence, remembering that the more independent the person, the less risk the purchase will be discredited.
• If a receipt is obtained, preserve it.
• If video is taken, preserve it.
• Mark, seal, bag, tag and date evidence purchased. Specifically, set out the particulars of the entity from whom or from which the item was purchased (name, date, location, price, etc.) and the name, date and contact information of every person in the chain of custody of the evidence. Each person referenced needs to sign the evidence bag and make sure it is sealed before they receive it and, if they open it, that it is re-sealed after they are done with it.
• Ensure the secured evidence is delivered to a pre-determined location (e.g., lawyers' office or investigators office), where it should remain securely stored until delivered to a person making an authentication or preserved for trial or other disposition;
• Select a person to authenticate the sample, preferably someone who is familiar with the authentic product in the market where the item was purchased, such as the rights holder representative. (Note, often goods from the same intellectual property owner may differ in different markets).
• Often a seasoned authenticator only requires a photograph (or series of photographs) to permit the authenticity analysis to be done, if that is the case, email the photographs to the person making the authentication, and keep the physical samples secured.
• If the physical goods are subsequently required then, ship them, as directly as possible to the person making the authentication;
• provide instructions respecting handling procedures, chain of custody forms and the form of report required (e.g., sworn affidavit or signed will-say statement) to the person preparing the authentication report.

The Authentication Report should include:

• credentials and experience of the person making the authentication (sometimes a full CV is preferable);
• particulars of the registered trademark/copyright owned by the rights holder;
• confirmation that one or more of those rights appear on the item in issue;
• confirmation that the intellectual property rights holder did not make or authorize the making of the item in issue;
• two to three reasons why the item is counterfeit - the reasons should be:
• not confidential; and
• preferably verifiable based upon a visual inspection of the item in issue;
• pictures of the counterfeit product compared to the authentic product focusing on two or three indicators to “show” the differences (as applicable).

Evidence linking the Sample Purchased to the Prospective Defendant

Often transactions respecting counterfeit goods are made for cash and no independent record of the sale exists. In order to counter denials that the commodity in issue was purchased from a particular defendant, vigilance in the execution of the chain of custody protocols, as detailed above is key.

In addition, it is recommended that covert video be taken of the sale transaction, in appropriate cases, and subject to applicable privacy legislation.

Video can disclose the quantum of counterfeit goods available for sale and may include date and time information, as well as witnesses who may or may not have been present at the time of sale. While presumably this same information will be contained within the purchaser’s affidavit (preferably an investigator), the covert video can be relied upon to corroborate the testimony, if challenged.

In addition, if the premise has its own video or other recorded surveillance system, a written demand can be made to preserve all such video or other electronically stored information, intact and unmodified in its original electronic form.

Depending upon the nature and size of the enterprise, consideration should also be given to making multiple discrete purchases over a period of time to determine inventory turnover or volume of sales, all with a view to ascertaining the nature and size of the counterfeiting enterprise and the quantum of profit/revenue/damages.

Evidence to identify the Prospective Defendant

The traditional searches undertaken prior to commencement of any lawsuit are appropriate in the context of a counterfeiting case and include:

• searches regarding the legal status of the defendant, i.e., sole proprietorship, corporation, partnership, etc.;
• real property searches;
• motor vehicle searches;
• bankruptcy/execution searches;
• PPSA searches; and
• HST # searches.

In the context of a counterfeiting case, however, often the target is not carrying on business in a traditional, transparent and traceable manner, making the searches set forth above less reliable than in the context of other types of litigation. Accordingly, open source internet searching is often used to learn more about the target. Facebook, Google, Instagram as well as other social media platforms are vital in the development and investigation of the target through its online presence.

Preservation of Evidence

The Federal Courts Rules expressly provide for the preservation of the subject-matter of litigation (r. 377). One type of preservation order used in the context of counterfeiting cases is the Anton Piller Order.

In British Columbia (Attorney General) v. Malik, [2011] S.C.J. No. 18, Binnie J described the Anton Piller Order at para. 29, as follows:

An Anton Piller order is, as our Court emphasized in Celanese Canada Inc. v. Murray Demolition Corp., a thoroughly "draconian" measure equivalent to a private search warrant reserved for "exceptional circumstances" (para. 30) where "unscrupulous defendants" may if forewarned make "relevant evidence disappear" (para. 32).

Notwithstanding this description, it has been a remedy available to intellectual property rights holders to combat the sale of counterfeit goods, in appropriate circumstances. Typically obtained without notice, the element of surprise is believed to be necessary, to obtain and preserve the counterfeit goods that are the subject matter of the lawsuit and in order to obtain and preserve other evidence relating to the infringement of a plaintiff's intellectual property rights. The Court justifies the legitimate use of an Anton Piller Order when the plaintiff can demonstrate that, absent such an order, there is a real possibility that relevant evidence will be destroyed or otherwise made to disappear.

The requirements for an Anton Piller Order were set out by the Supreme Court of Canada in Celanese Canada Inc. v. Murray Demolition Corp., [2006] S.C.J. No. 35,, and include:

1. a strong prima facie case;
2. serious damage to the plaintiff as a result of the defendant's alleged misconduct, potential or actual;
3. convincing evidence that the defendant has in its possession incriminating documents or things; and 
4. a real possibility that the defendant may destroy such material before the discovery process can do its work.

One of the most significant challenges in obtaining an Anton Piller Order has been proffering evidence of a "real possibility" of anticipated destruction. Speculative evidence is insufficient.

In Malik, the Supreme Court of Canada also confirmed that risk of dissipation or destruction can be inferred from surrounding circumstances at para. 59, as follows:

It will often be difficult or perhaps impossible for a plaintiff to show that a defendant will actually destroy evidence, but it is always open to the court to draw inferences reasonably compelled by the surrounding circumstances. As Paperny J. (as she then was) observed in Capitanescu v. Universal Weld Overlays Inc.:

"Generally, courts have inferred a risk of destruction when it is shown that the defendant has been acting dishonestly, for example where matter has been acquired in suspicious circumstances, or where the defendant has knowingly violated the applicant’s rights." (para. 22)

This passage was cited with approval by the Alberta Court of Appeal in Catalyst Partners Inc. v. Meridian Packaging Ltd..

To protect against the intrusive nature of the Order, Binnie J. stated that the protection of the party against which an Anton Piller Order is issued ought to be threefold:

1. a carefully drawn order which identifies the material to be seized and sets out safeguards to deal with, amongst other things, privileged documents;
2. a vigilant court appointed supervising solicitor who is independent of the parties; and
3. a sense of responsible self restraint on the part of those executing the order with a focus on its limited purpose namely to preserve relevant evidence not to rush to exploit it.

It should be remembered that compliance with an Anton Piller Order is voluntary and parties executing such orders cannot breach the peace if the person served refuses to cooperate. However, refusals may be sanctioned by contempt proceedings for failing to comply with the terms of the order.

In addition, the role of the independent supervising solicitor is key to ensure the Anton Piller Order is properly explained and executed in compliance with its terms, ensuring that any potentially privileged documents are preserved in a manner that allows the party served to assert privilege before they are disclosed. Typically, off-duty paid law enforcement accompanies the independent supervising solicitors to keep the peace.

In White (Beast IPTV) v. Warner Bros Entertainment Inc., 2022 FCA 34, the Federal Court of Appeal reaffirmed the correct test for an Anton Piller Order. On appeal, the defendants argued that the party seeking the order must establish "an extremely strong prima facie case." However, the Federal Court of Appeal is clear that the threshold for the seeking party is a "strong prima facie case," not an "extremely strong prima facie case."

Historically Canadian courts have also issued rolling John Doe/Jane Doe actions in cases in which the identity of the infringers are not yet ascertained. These orders are most helpful when the intellectual property rights holder has an extensive problem with counterfeiting, across multiple jurisdictions and/or involving multiple unknown vendors, and seeks recourse on an expedited basis from the courts.

Following any execution of an Anton Piller Order, Courts mandate a review of the execution of the order and, in the context of a rolling order, the addition of the now identified and named defendant as a party defendant to the action.

The popularity of the Anton Piller Order in intellectual property cases appears to be in decline, but it remains a useful tool. One reason for the decline may be that the cost to obtain and enforce the order outweighs the relatively modest recoveries associated with the minimum compensatory damage awards. An additional reason for the decline may be that the jurisprudence has displayed a disinclination to find serious harm in the context of counterfeiting cases, particularly when the commodities in issue are relatively inexpensive (by way of example, pirated DVDs) (Vinod Chopra Films Priate Ltd. v John Doe, [2010] F.C.J. No. 303). Finally, another reason for the decline in use of the Anton Piller Order may be because more evidence is publicly available to identify the counterfeiter including, open-source searches, social media profiles and proprietary or public database searches. The rise of Internet and e-commerce sites that act as resellers, such as Amazon, Alibaba and even Walmart, are providing new venues for the online sale of counterfeit goods that defies easy identification and legal pursuit of storefronts that are permitted to sell almost anonymously through these more legitimate big box resellers, making the use of a variation of an Anton Piller Order that could address situations where the sales have been moved online, but such an Order has not yet been granted. The closest case is Google Inc v Equustek Solutions Inc., [2017] S.C.J. No. 34, where the Court was willing to grant an injunction with broad application to prevent the re-sale of counterfeit goods through the Internet.

Materials reproduced with the permission of LexisNexis Canada. http://www.lexisnexis.ca/en-ca/products/practice-advisor.page