Published May 11, 2007
This case pertains to sentencing for a charge under Sec. 42(1)(a) of the Copyright Act. This Section states, in part, that ‘Every person who knowingly …makes for sale or rental an infringing copy of a work or other subject-matter in which copyright subsists ….is guilty of an offence’. The Crown proceeded in this case by indictment, to reflect the more serious nature of this particular charge, making the maximum penalty a fine of $1 million or five years in jail, or both.
AFC Soccer was a family-owned business operating two retail outlets in Winnipeg as well as a web site. The police investigation was triggered by a complaint from Umbro that AFC Soccer was selling counterfeit jerseys through its web site. The investigation revealed that AFC Soccer was also selling knock-offs of Nike, adidas and Fubu brand sport clothing and had been doing so for a period of several years. These knock-offs were being manufactured in Thailand at a cost of about $1 per jersey, and were being sold in Winnipeg for about $55 per jersey, when brand-name soccer jerseys were selling for about $140. The owner of AFC Soccer pled guilty to the charge and the matter of sentencing was put before a Judge. The Crown favoured a fine of $50,000 to $70,000 while the Defendant argued for a fine of $2,500 to $3,500.
In the absence of precedent and with the two sides so far apart in their claims, the Judge turned to the principles of sentencing for guidance. She concluded that the case represented a serious instance of copyright infringement that was deliberate, sophisticated and ongoing, with economic harm caused to more than one copyright holder. Aggravating factors were that AFC Soccer had lied to those purchasers who inquired as to whether the apparel was licensed, and that AFC had also directed the manufacturer in Thailand to create false labels for the garments. The Defendant countered that anyone buying a jersey would be a soccer fan, and any soccer fan would know that a $55 jersey must be a replica – therefore, it was unlikely that any customers were in fact deceived.
The Judge stated that inappropriately low fines such as those being proposed by the Defendant amounted to little more than a cheap, after-the-fact licensing fee, and that any fine ought to bear some relationship to the scope of profit of the offending activity. In this case, there was no dispute that AFC earned gross revenues of approximately $180,000 on the knock-off jerseys – there was disagreement about the net profits, but using a standard retail mark-up as a benchmark, the Judge concluded that net profits to the Defendant likely ranged from $60,000 to $120,000.
The Judge also considered mitigating circumstances, including the fact that AFC Soccer had pled guilty to the offense, this was a first offense, the police had already seized a large inventory, and all the negative publicity had caused serious hardship to the small family business. The Judge conceded that the Crown’s request of a $50,000 to $70,000 fine could be justified, but settled on a figure of 25 percent of gross revenues as being appropriate and imposed a fine of $45,000. The Judge also stated that the fine proposed by the Defendant was ‘manifestly inadequate and would clearly amount to nothing more than a nominal licensing fee’.
Originally published: Centre for Sport and Law Newsletter (2007) Vol. 3(2)