SIDE WIND: THE RIGHT-HOLDER'S QUEST FOR INTELLECTUAL PROPERTY ENFORCEMENT.

• Author: Paonessa, Isaac

INTRODUCTION 309 I OBTAINING INJUNCTIVE RELIEF IS NOT WITHOUT ITS PROBLEMS 311 A. Brief Introduction to the Interlocutory Injunction 311 B. The Threshold for an Interlocutory Order--A Serious Issue to Be Tried or Strong Prima Facie Case? 312 C. The Second Test: The Slipperiness of Irreparable Harm 314 D. The Unnecessary Third and Fourth Tests: The Balance of Convenience and Public Interest 316 II CASE STUDY: SLEEP COUNTRY CANADA INC V SEARS CANADA INC 318 A. Sleep Country: Overview of the Dispute 319 B. Sleep Country: A Telling Application of the RJR Factors to Trademark 319 III INTERNATIONAL AGREEMENTS PROVIDE NEW OPTIONS FOR RIGHT-HOLDERS 325 A. Agreement on Trade-related Aspects of Intellectual Property Rights 325 B. Canada-EU Comprehensive Economic and Trade Agreement 326 C. The Canada-United States-Mexico Agreement 328 D. The Advent of the Canada Border Services Agency Request for Assistance Program 329 E. CBSA Officers Granted Ex Officio Authority to Search and Detain 330 F. RFA Program Experiencing Strong Uptake for Good Reason 331 G. Accessible IP Enforcement Mitigates Calculated Infringement 333 IV IMPROVING ACCESS TO INTERLOCUTORY ORDERS INSIDE CANADA 334 A. A Simplified Legal Test for Small Businesses 335 B. An Administrative Body to Hear IP Disputes from Small Businesses 336 C. Addressing Counterarguments against a Standalone ADM 338 V CONCLUSION 339 VI APPENDIX A 340 INTRODUCTION

Small businesses produce nearly forty percent of Canada's gross domestic product. (1) They navigate a fast-paced environment where intellectual property (IP) is critical to their success but remains vulnerable to infringement. The worldwide value of pirated and counterfeit goods is expected to reach $2.81 trillion USD in 2022 and will coincide with up to 5.4 million job losses. (2) This presents a challenge to the growth and long-term survival of a business.

Businesses may respond to alleged IP infringement by suing. But civil litigation is expensive and time consuming. Legal fees for a week-long trial can exceed $110,000. (3) If appealed, the litigation could exceed 8 years. (4)

Even if a plaintiff is successful and there is no appeal, the result is often a pyrrhic victory because common law damages do not necessarily put the plaintiff in the position they would have enjoyed but for the infringement.

Over the years, the legal system has devised alternative remedies to the common law damages generally awarded at trial. One such alternative is the interlocutory injunction. But in an attempt to balance plaintiff and defendant rights, the jurisprudence around interlocutory injunctions has become saddled with imprecise argot and procedural and philosophical barriers that create a bias towards money damages. In practice, this leads adjudicators to resist awarding interlocutory relief.

Adjudicators' penchant for money damages over the interlocutory injunction exposes a hierarchy of remedies and a lack of consideration for creating a forum that fits the needs of a small business facing infringement of its IP. (5) The general compensation principle for private law damage awards--i.e. that a plaintiff should be put in the same position as if the loss never happened (6)--is inadequate for IP disputes which often deal with names, slogans, designs, code, and value propositions--and increasingly in digital form in a networked environment. As legal practitioners have noted, IP law defines rights well, but leaves "the dirty work of enforcing those rights to its beleaguered distant cousin's civil procedure and remedies." (7)

Adjudicators often cite concerns of abuse by bad faith applicants to justify the status quo and their reluctance to grant injunctions, but these concerns have not materialized in IP cases. Instead, the prohibitive costs and time necessary for litigation in court and the reluctance of courts to grant interlocutory relief to IP right-holders create an environment that may incentivize calculated IP infringement by certain actors. (8)

Nevertheless, for some IP right-holders, things are changing from a side wind: international trade agreements. Three international trade agreements in particular have ushered in a new era of administrative tools that benefit Canadians who seek to protect their IP. These agreements include the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the Canada-EU Comprehensive Trade Agreement (CETA), and the Canada-US-Mexico Agreement (CUSMA).

To satisfy its obligations under these international trade agreements, Canada has developed new border programs and granted customs officials expansive ex officio powers to detain counterfeit goods. As a result, Canadian IP right-holders seeking to enforce their rights against businesses that engage in cross-border imports have better access to justice today. For those businesses that have been left out of these developments--in particular, small businesses facing entirely domestic IP infringement--this article will propose incremental, targeted changes to the current legal framework for interlocutory injunctions, along with the establishment of a standalone IP decision-maker.

This article proceeds in four parts. In Part I, I will introduce several problems with the law of interlocutory injunctions. Part II will illustrate these problems in practice with a case study of the IP dispute in Sleep Country Canada v Sears Canada. (9) In Part III, I will argue that international trade agreements have catalyzed the creation of alternative tools for IP enforcement that are effective in many circumstances for providing relief, making extensive reforms to the interlocutory injunction framework unnecessary. (10) In Part IV, I will propose that to the extent that more change is needed, reforms should be directed to scenarios where a small business applies for relief of infringement that occurs wholly within Canada.

I OBTAINING INJUNCTIVE RELIEF IS NOT WITHOUT ITS PROBLEMS

1. BRIEF INTRODUCTION TO THE INTERLOCUTORY INJUNCTION

   The interlocutory injunction is an equitable remedy and a tool for managing civil litigation, (11) but the substantive law related to this remedy is not well calibrated to IP disputes.

   Two interests compete at an interlocutory injunction application hearing. First, the interest in preserving the status quo until the matter is decided at trial. This interest favours the respondent or defendant. It aligns with the traditional value that litigants are free to act as they please prior to being judged liable for an injury. Second, the plaintiff or applicant has an interest in urgent and immediate relief. But urgent and immediate relief comes at a cost: The granting of an interlocutory injunction poses a heightened risk of judicial error because the application occurs before an adjudicator has examined all the evidence at trial. (12)

   In its modern iteration, ambiguity surrounds the criteria that an applicant must satisfy to receive an interlocutory injunction. The Supreme Court set out the modern test for granting an interlocutory injunction in RJR-MacDonald v Canada (Attorney General). (13) The case adopted innovations in the law of injunctions developed in English jurisprudence, in particular, American Cyanamid v Ethicon. (14) Cyanamid had lowered the threshold requirement for granting an interlocutory order to better address the risk of irreparable harm (15) and to avoid performing a trial before a trial.

   According to RJR-MacDonald, the test for granting an interlocutory injunction requires the applicant to establish:

   * The merits of the case show the existence of either a serious issue to be tried or a strong prima facie case;

   * The applicant will suffer irreparable harm if the injunction is not granted; and

   * The balance of convenience favours granting the injunction.

   In some cases, courts must also account for public interest considerations in determining where the balance of convenience falls.

2. THE THRESHOLD FOR AN INTERLOCUTORY ORDER--A SERIOUS ISSUE TO BE TRIED OR STRONG PRIMA FACIE CASE?

   The first stage of the test demonstrates the ambiguity and complexity surrounding the interlocutory injunction. At this stage, the applicant must pass one of two potential thresholds. The choice of threshold depends on the type of order sought: prohibitory or mandatory.

   If an applicant seeks a prohibitory order--an order to debar the respondent from acting--the applicant must cross a general threshold and show that there is a "serious issue to be tried." (16) The bar is relatively low (17) and can be surmounted if the applicant establishes that their case is "not frivolous or vexatious." (18) In contrast, if an applicant seeks a mandatory order--an order that directs the respondent to undertake a positive action--the applicant must demonstrate a "strong prima facie case." (19) In either case, the motions judge can only proceed to the second stage of the test if the application meets the appropriate threshold. Jurisprudence often confuses the two thresholds, especially where a potential order requires both a prohibition and a positive act. For example, in 2017, the Supreme Court applied the general threshold in Google Inc v Equustek Solutions Inc even though the appellant sought an interlocutory order that would require Google to perform a positive act. (20) Specifically, the interlocutory order being sought required Google--a "non-party" (21) to the action--to perform a positive act to remove a website from appearing in its search engine results. (22) As described below, such an order should theoretically require the higher threshold normally required for mandatory orders because it contains both prohibitory and mandatory qualities. (23) Indeed, Google failed to even argue that the higher threshold should apply.

   The much higher threshold for situations that require a positive act creates significant complexity in applying for an interlocutory order. The higher threshold compels an adjudicator to engage with the merits of...