Federal Court Partially Allows Appeal on Copyright and Trademark Issues

OUTCOME: Allowed in Part

Date: 20260612 Dockets: T-2111-23 T-1125-24 Citation: 2026 FC 792 Ottawa, Ontario, June 12, 2026 PRESENT: The Honourable Mr. Justice Fothergill Docket: T-2111-23 BETWEEN: [COMPANY]. doing business as [NAME] [NAME] Plaintiff/ Defendant by [COMPANY]. Defendant/ Plaintiff by Counterclaim Docket: T-1125-24 AND BETWEEN: [COMPANY]. doing business as [NAME] [NAME] Plaintiff/ Defendant by [COMPANY] Defendant/ Plaintiff by Counterclaim

REASONS AND

JUDGMENT I. Overview [ 1 ] [COMPANY], doing business as [NAME] Canada [Plaintiff], appeals two Orders of Associate Judge Kathleen Ring issued in her capacity as Case Management Judge [CMJ]. In separate Orders, [NAME] struck portions of the Statements of Defence of [NAME] and [COMPANY] [collectively, [NAME]] that asserted the defence of misuse of copyright, but granted leave to amend. [NAME] also dismissed the Plaintiff’s motion to strike [NAME]’ Counterclaims for false and misleading statements under s 7(a) of the Trademarks Act , RSC 1985, c T-13. [ 2 ] The appeal is allowed in part. [NAME] properly struck [NAME]’ defences of misuse of copyright with leave to amend. Misuse of copyright is a novel but arguable defence. However, [NAME] failed to plead sufficient material facts in support. The defects in [NAME]’ pleadings were potentially curable, and accordingly [NAME] was right to grant leave to amend. [ 3 ] [NAME] should have granted the Plaintiff’s motion to strike [NAME]’ Counterclaims for false and misleading statements under s 7(a) of the Trademarks Act , with leave to amend. [NAME] failed to plead that the allegedly misleading statements were about their intellectual property. This is fatal to a cause of action under s 7(a) of the Trademarks Act , but the defect may be curable by amendment.

II. Background [ 4 ] The Plaintiff is a manufacturer and wholesale distributor of smoking accessory products. For more than two decades, the Plaintiff has distributed smoking accessory products for the “roll your own” or “make your own” market in Canada, with products such as rolling papers, hemp wraps, rolling tips, rolling machines, rolling trays, lighters, ashtrays, grinders, electronic smoking, storage, odour neutralizers, cleaners, etc . These products are used for smoking tobacco, cannabis and other herbs. [ 5 ] On March 25, 2025, [NAME] ordered that the actions in Court File Nos T-2111-23 and T-1125-24 proceed in tandem. In each action, the Plaintiff alleges that [NAME] ([NAME] in T-2111-23 and [COMPANY] in T-1125-24) infringed its copyright, trade dress, and trademark rights in marks and artwork appearing on smoking accessory product wrappers. A. T-2111-23 ([NAME]) [ 6 ] In T-2111-23, [NAME] filed a Statement of Defence on November 28, 2023, and an Amended Statement of Defence and Counterclaim on April 16, 2024. On April 26, 2024, the Plaintiff brought a motion to strike: (a) the defence of misuse of copyright based on violations of Part VIII of the Competition Act , RSC 1985, c C-34, and improper extension of the Plaintiff’s monopoly contrary to the public policies underlying the Copyright Act , RSC 1985, c C-42; and (b) the Counterclaim for false and misleading letters sent by the Plaintiff to the Defendant’s customers contrary to s 7(a) of the Trademarks Act . [ 7 ] On December 20, 2024, [NAME] granted the Plaintiff’s motion in part [2024 CMJ Order]. [NAME] struck the allegations based on Part VIII the Competition Act without leave to amend for lack of jurisdiction. The allegations of improperly extending the Plaintiff’s monopoly and violating the public policies of the Copyright Act were struck for failing to plead material facts, with leave to amend. The Counterclaim based on s 7(a) of the Trademarks Act was also struck for failing to plead material facts, with leave to amend. Neither party appealed the 2024 CMJ Order. [ 8 ] On March 28, 2025, the Defendant filed a Second Amended Statement of Defence and Counterclaim with a revised defence of misuse of copyright and a revised Counterclaim based on s 7(a) of the Trademarks Act . The Plaintiff brought a motion to strike both revisions on May 8, 2025. [NAME] granted the motion in part. This is one of the Orders under appeal. B. T-1125-24 ([COMPANY]) [ 9 ] In T-1125-24, [COMPANY] filed a Statement of Defence on July 2, 2024. Many assertions are the same as [NAME]’s Amended Statement of Defence filed in T-2111-23. Following the 2024 CMJ Order in T-2111-23, the Defendant filed an Amended Statement of Defence and Counterclaim on March 28, 2025. The pleading contained the same revisions as those in the Second Amended Statement of Defence and Counterclaim filed in T-2111-23. On May 8, 2025, the Plaintiff filed a motion to strike the Amended Statement of Defence and Counterclaim. [NAME] granted the motion in part. This is the other Order under appeal.

III. Orders under Appeal A. T-2111-23 ([NAME]) [ 10 ] In T-2111-23, [NAME] struck the Defendant’s defence of misuse of copyright with leave to amend, and dismissed the Plaintiff’s motion to strike the Defendant’s Counterclaim based on s 7(a) of the Trademarks Act . [ 11 ] [NAME] rejected the Plaintiff’s argument that the defence of misuse of copyright is not recognized in Canada and should be struck without leave to amend. [NAME] provided three reasons for rejecting the Plaintiff’s position. [ 12 ] First, [NAME] held that the Plaintiff was prevented by the doctrine of issue estoppel from contesting the validity of the defence of misuse of copyright. Although the 2024 CMJ Order did not squarely address the question of whether the defence of misuse of copyright exists in Canada, this was implicitly determined by the decision to grant leave to amend. The Plaintiff could have challenged the validity of the defence in its first motion to strike, but instead “assum[ed] that such a defence is available under Canadian law” ( [NAME] v [COMPANY] (February 11, 2026), T-2111-23 (FC), citing Plaintiff’s Motion Record dated April 26, 2024 at para 40). [ 13 ] Second, [NAME] found that the Plaintiff was prevented from contesting the validity of the defence of misuse of copyright pursuant to the doctrine of abuse of process. [NAME] reasoned that a party should not be permitted to “litigate by instalments in piecemeal fashion” ( [COMPANY] v [COMPANY] , 2023 FCA 253 [ [NAME] ] at para 19, citing [COMPANY] v [NAME] , 1999 CanLII 7874 (FC) [ [NAME] 1999 ] at para 25). [ 14 ] Third, even if neither issue estoppel nor abuse of process applied, the Plaintiff’s argument failed because novel but arguable claims should be allowed to proceed to trial ( R v [COMPANY]. , 2011 SCC 42 [ [NAME] ] at para 21). [NAME] followed the decision of Justice Angelo Furlanetto in [COMPANY] v [NAME] , 2023 FC 764 [ [NAME] ], in which she held that the defence of misuse of copyright defence has not been definitively rejected in Canada (citing [COMPANY] v [COMPANY] , 2007 SCC 37 [ [NAME] ]. [ 15 ] In [NAME] , the Supreme Court of Canada ( per [NAME] J) described misuse of copyright as a “developing doctrine” in the United States and declined to comment further on its potential application in Canada ( [NAME] at para 31, citing [NAME] at para 98). The Federal Court of Appeal agreed with Justice Furlanetto’s analysis in [NAME], but found that leave to amend the pleading should have been granted ( [NAME] v [COMPANY]. , 2025 FCA 153 [ [NAME] ] at para 49). [ 16 ] [NAME] nevertheless held that the Defendant had failed to plead the requisite material facts to ground a misuse of copyright defence. [NAME] noted that the Defendant’s pleadings largely comprised bald allegations that were devoid of material facts to inform the Plaintiff who within its organization was involved in the alleged wrongdoing, how the Defendant was prevented from obtaining an adequate supply of products, where and when this conduct occurred, or why the conduct was illegal. [ 17 ] [NAME] was of the view that the defects in the pleading of misuse of copyright were potentially curable by amendment. She therefore granted leave to amend. [ 18 ] With respect to the Defendant’s Counterclaim brought pursuant to s 7(a) of the Trademarks Act , [NAME] held it was not plain and obvious that there was no reasonable cause of action. A claim pursuant to s 7(a) requires that the allegedly misleading statements identify the trade-mark holder’s competitor ( [COMPANY] v [COMPANY] , 2023 FC 804 at para 192). However, [NAME] found that the law is unsettled regarding whether a competitor must be expressly identified in the false or misleading statement (citing Immigration Consultants of Canada Regulatory Council v [NAME] [COMPANY] , 2020 FC 1191 at para 73; [COMPANY] v [COMPANY] ([NAME]) , 2023 FC 1749 at para 204). [NAME] therefore dismissed the Plaintiff’s motion to strike the Defendant’s Counterclaim based on s 7(a) of the Trademarks Act . B. T-1125-24 ([RESPONDENT]) [ 19 ] In T-1125-24, [NAME] struck the Defendant’s defence of misuse of copyright with leave to amend, and dismissed the Plaintiff’s motion to strike the Defendant’s Counterclaim based on s 7(a) of the Trademarks Act . [ 20 ] Because there was no previous motion to strike in T-1125-24, [NAME] did not base her decision on the doctrine of issue estoppel. Instead, [NAME] found it was an abuse of process for the Plaintiff to advance this argument, because it amounted to a collateral attack on the 2024 CMJ Order and was contrary the doctrine of judicial comity. [ 21 ] Even if the doctrines of abuse of process and judicial comity did not apply, [NAME] would have permitted the defence of misuse of copyright to stand for the same reasons she provided in the 2024 CMJ Order. [NAME] relied on [NAME] and [NAME] , together with other jurisprudence, to conclude that the defence was novel but arguable. [ 22 ] For the same reasons provided in the 2024 CMJ Order, [NAME] held that the Defendant had failed to plead the requisite material facts to support a defence of misuse of copyright, but also found that the defects were potentially curable. The defence was therefore struck with leave to amend. [ 23 ] For the same reasons provided in the 2024 CMJ Order, [NAME] dismissed the Plaintiff’s motion to strike the Defendant’s Counterclaim based on s 7(a) of the Trademarks Act .

IV. Issues [ 24 ] This appeal raises the following issues: [NAME] err by granting leave to amend the misuse of copyright defences? [NAME] err by dismissing the Plaintiff’s motion to strike the Counterclaims based on s 7(a) of the Trademarks Act ? V. Analysis [ 25 ] A discretionary order of a CMJ is subject to appeal in accordance with the standards articulated by the Supreme Court of Canada in [NAME] v [NAME] , 2002 SCC 33 ( [COMPANY] v [NAME] , 2016 FCA 215 [ [NAME] ] at para 2). Questions of law are reviewed against the standard of correctness, and findings of fact or mixed fact and law may be revisited only where there is palpable and overriding error ( [NAME] at paras 66, 79). [ 26 ] The test on a motion to strike is whether, assuming the facts to be true, it is plain and obvious that the pleadings disclose no reasonable cause of action or defence ( [NAME] at para 17). Although the facts pleaded are assumed to be true, “this presumption does not extend to matters which are manifestly incapable of being proven, to matters inconsistent with common sense, vague generalization, opinion, conjecture, bare allegations, bald conclusory legal statements, or speculation that is unsupported by material facts” ( [NAME] [COMPANY] , 2023 FCA 89 [ [NAME] ] at para 52). [ 27 ] Rule 174 requires parties to plead the requisite material facts on which they rely. The pleadings must tell [NAME] who, when, where, how, and what gave rise to liability ( [NAME] v Canada ([NAME]) , 2015 FCA 227 at para 19). [ 28 ] Novel but arguable claims should be allowed to proceed to trial to allow the common law to develop ( [NAME] at para 21). However, a novel claim will not survive a motion to strike just because it is novel ( [COMPANY] v [NAME] , 2020 SCC 19 at para 19). A. [NAME] err by granting leave to amend the misuse of copyright defences? (1) Issue estoppel [ 29 ] [NAME] found that the Plaintiff was barred from arguing that the defence of misuse of copyright does not exist in Canada. In T-2111-23, [NAME] relied, in part, on the doctrine of issue estoppel. [ 30 ] Issue estoppel, together with cause of action estoppel, is an element of the doctrine of res judicata ( [NAME] v [NAME] , 1974 CanLII 168 (SCC), [1975] 2 SCR 248 [ [NAME] ] at 254). Issue estoppel seeks to preclude the re-litigation of an issue that has been decided conclusively and finally in previous litigation between the same parties ( [COMPANY] v [NAME] ([COMPANY]) , 2002 FCA 210 [ [NAME] 2002 ] at para 26). There are three preconditions: (1) the same question has been decided, (2) the judicial decision which decided the question was final, and (3) the parties to the prior judicial decision (or their privies) are the same as those in the proceeding where issue estoppel is being raised ( [NAME] at 254). [ 31 ] Issue estoppel also precludes “arguments that could have been raised by a party in exercise of reasonable diligence” ( [NAME] 2002 at para 26, citing [COMPANY] [NAME] [NAME] , [1966] 1 QB 630 (UK)). It does not matter if a party did not in fact raise the issue in the previous decision, only whether it could have done so ( [NAME] 1999 at para 25, emphasis original). Nevertheless, the issues decided in the first decision must be fundamental steps in the logic of the prior decision, and must not arise collaterally or incidentally in the earlier decision ( [NAME] 2002 at para 26). This does not mean, however, that the issue must be the ratio decidendi of the first decision ( [NAME] 2002 at para 27, citing [NAME] v [NAME] (Minister of the Environment and Public Safety) , 1993 CanLII 6744 (SK [COMPANY]) at para 23). [ 32 ] Shortly after these appeals were argued, the Supreme Court of Canada issued its decision in [COMPANY] [NAME] [COMPANY] , 2026 SCC 15 [ [NAME] ]. The parties sought and were granted leave to make supplementary written submissions regarding the application of [NAME] to the issues raised in these appeals. [ 33 ] According to the Plaintiff, [NAME] distils several relevant principles. First, issue estoppel precludes a litigant from rearguing an issue that was “fundamental to the decision arrived at in a prior proceeding” (at paras 33, 234-235). Second, cause of action estoppel applies reciprocally to bar either a claim or a defence where it was or could have been raised in prior proceedings (at paras 92-95). Third, abuse of process through relitigation should be applied “sparingly and only in the clearest cases” as a “last resort to protect the repute of the administration of justice” (at paras 242-244). Fourth, even where the tests for estoppel or abuse are met, courts have a residual discretion not to apply the doctrines to prevent unfairness. The discretion is wider for issue estoppel (at paras 78-91, 129-133, 167-171, 245-253). [ 34 ] [NAME] maintain that [NAME]’s analysis and findings were perfectly consonant with [NAME] . First, res judicata is motivated by the idea that a litigant is entitled to “only one kick at the can” (at para 39). Second, res judicata bars the relitigation of points “raised in” a prior proceeding, along with those points that the parties “might have raised had they exercised reasonable diligence” (at para 66). Third, abuse of process applies “based on a judge’s appreciation of the impact of relitigation on the repute of the administration of justice” (at para 43). [ 35 ] The Plaintiff says that the doctrine of issue estoppel does not apply because the same question was not decided in the 2024 CMJ Order, and the 2024 CMJ Order was not final. [ 36 ] The Plaintiff maintains that the misuse of copyright defence that was struck in the 2024 CMJ Order was based upon entirely different facts. [NAME]’ initial misuse of copyright defence was premised on Part VIII of the Competition Act . The Plaintiff was successful in challenging this defence on the grounds of this Court’s lack of jurisdiction and [NAME]’ failure to plead material facts. [ 37 ] The Plaintiff submits that it did not challenge the broader validity of the misuse of copyright defence in the 2024 motion to strike because this would more appropriately be addressed once [NAME] had pleaded a defence that was within the Court’s jurisdiction (citing [NAME] v Canada , 2016 FC 467 [ [NAME] ] at paras 20-21). [NAME]’ revised defences of misuse of copyright have a new factual foundation that encompasses restraint of trade, prevention of supply, and violating public policies on disseminating works and compensating authors. [ 38 ] The Plaintiff notes that the 2024 CMJ Order did not explicitly rule on the viability of the misuse of copyright defence. This was, at most, referenced in obiter , and was neither necessary to [NAME]’s disposition nor fundamental to her reasoning. It argues that [NAME]’s decision to grant leave to amend a bare pleading did not imply that the defence is legally viable; it was merely out of respect for procedural fairness (citing [NAME] at paras 20-21). [ 39 ] The Plaintiff also submits that the 2024 CMJ Order was interlocutory, rather than final (citing [NAME] v [COMPANY] , 2004 FC 223 [ [NAME] ] at para 31). The fact that leave was granted to amend the Defendant’s pleadings confirms that the 2024 CMJ Order was interlocutory in nature (citing [COMPANY] v [COMPANY] , 2004 FCA 368 at para 7). [ 40 ] The Plaintiff’s reliance on [NAME] is misplaced. In [NAME] , the plaintiff was released from the Canadian Armed Forces [CAF]. He had previously sought judicial review of this decision, but the application was discontinued. He then brought a civil action for damages. The plaintiff’s statement of claim was struck by Justice Peter Annis ( [NAME] v Canada , 2015 FC 1265). A revised statement of claim sought damages according to common law principles of labour law, and also referenced the Charter of Rights and Freedoms , Part I of the Constitution Act, 1982 , being Schedule B to the Canada Act 1982 (UK), 1982, c 11 [ Charter ]. Justice Sean Harrington considered himself bound by appellate jurisprudence holding that CAF members serve at pleasure and have no cause of action for wrongful and unfair dismissal at common law. He nevertheless granted leave to permit the plaintiff to plead the requisite material facts to sustain the Charter allegation. [ 41 ] [NAME] does not support the Plaintiff’s position that it had the option of deferring a broader challenge to the viability of the misuse of copyright defence until the requisite material facts were pleaded. Unlike in [NAME] , the defence challenged in both motions to strike in T-2111-23 was the same: misuse of copyright. [ 42 ] The viability of the misuse of copyright defence was implicitly determined in the 2024 CMJ Order. In ruling that [NAME] should be given an opportunity to amend its pleading respecting a defence of misuse of copyright, [NAME] necessarily determined that such an amendment was possible, at least in the context of a motion to strike. [NAME] did not grant leave out of respect for procedural fairness, as suggested by the Plaintiff. There is nothing procedurally fair about granting leave to amend a defence that has no prospect of success. [ 43 ] I am not persuaded that the Plaintiff had the option of deferring its challenge to the viability of the misuse of copyright defence until the Defendant had pleaded sufficient material facts in support. The Plaintiff was in a position to challenge the viability of the defence even in the absence of material facts. The argument it advances on this appeal, namely that the Supreme Court of Canada has definitively determined that the defence of misuse of copyright does not exist in Canada, was equally available in advance of the 2024 CMJ Order. Then, as now, it does not depend on [NAME] pleading the requisite material facts. [ 44 ] The 2024 CMJ Order was final and determined conclusively whether it was plain and obvious that the defence of misuse of copyright was available in Canada. Her conclusion was independent of the facts that were pleaded in the initial Statement of Defence. [ 45 ] Issue estoppel may be applied in relation to interlocutory orders (see, e.g ., [COMPANY] v [NAME] , 2003 ABQB 1067 at paras 15-22; [COMPANY] v [COMPANY] , 1986 CarswellOnt 509 at para 11). [NAME] concerned an interlocutory injunction and is distinguishable on this basis. The key question is whether the 2024 CMJ Order conclusively resolved the issue between the parties. I am satisfied that it did. Neither party appealed the 2024 CMJ Order, and it was therefore final. (2) Abuse of process [ 46 ] In the alternative, [NAME] held that the doctrine of abuse of process barred the Plaintiff from challenging the legal viability of the misuse of copyright defence. In T-2111-23, [NAME] found that the doctrine of abuse of process prevented a party from “litigating by instalments” . In T-1125-24, she found that it was an abuse of process for the Plaintiff to seek to re-litigate matters that were previously determined, contrary to the doctrine of judicial comity. [ 47 ] Abuse of process engages the inherent power of the Court to prevent the misuse of its procedure ( [NAME]) v [NAME], Local 79 , 2003 SCC 63 [ [NAME] ] at para 37). The doctrine is flexible and unencumbered by specific requirements, and in this respect differs from res judicata and issue estoppel ( [COMPANY] [NAME] v [NAME] , 2022 SCC 29 [ [COMPANY] [NAME] ] at para 35). Courts have applied the abuse of process doctrine to preclude re-litigation when it would be contrary to the principles of judicial economy, consistency, finality, and integrity of the administration of justice ( [NAME] at para 37). [ 48 ] In [NAME] , the Federal Court of Appeal considered abuse of process in the context of patent litigation. [ADDRESS] cited a passage from [NAME] 1999 that concerned res judicata , but applies equally to abuse of process (at para 25, citations omitted): Should a party choose to drop certain issues for reasons of tactics, strategies, or otherwise, the party seals its fate with regard to those decisions. Parties must bring forward their whole case, and will not be permitted to litigate by instalments in piecemeal fashion. It is a principle of law and also of policy that there be finality to court decisions. Parties to litigation must be able to rely on the finality of final judgments so that they can adjust their affairs, if necessary, and conduct themselves accordingly. [ 49 ] For the reasons explained in the analysis of issue estoppel, above, whether the defence of misuse of copyright exists in Canada was implicitly determined in the 2024 CMJ Order. The Plaintiff’s attempt to challenge the viability of the defence in the second motion to strike, having chosen not to do so in the first motion to strike and having refrained from appealing that Order, undermines the principles of finality and judicial economy. It is an abuse of process. [ 50 ] The doctrine of judicial comity seeks to prevent the same legal issue from being decided differently by members of the same Court. It is a manifestation of the principle of stare decisis ( Canada (Citizenship and Immigration) v Kassab , 2020 FCA 10 at para 35). [ 51 ] These proceedings are case managed in tandem and [NAME] are represented by the same counsel. [NAME]’ pleadings are largely the same. The Plaintiff should have expected a similar outcome regarding its challenge to the misuse of copyright defence in T-1125-24 as resulted from the 2024 CMJ Order. [ 52 ] The doctrine of abuse of process is flexible and principally concerned with the integrity of the courts’ adjudicative function and the proper administration of justice ( [COMPANY] [NAME] at para 36). While these proceedings have not been consolidated and remain distinct, in the particular circumstances of these cases it was open to [NAME] to apply the doctrine in both proceedings to ensure the most efficient use of judicial resources, and to promote consistency and finality. (3) Defence of misuse of copyright [ 53 ] The Plaintiff challenges [NAME]’s finding that it was neither plain nor obvious that the defence of misuse of copyright was doomed to fail. It argues that remedies under the Copyright Act are exhaustive ( [NAME] at para 3, citing [COMPANY] v [COMPANY] Upper Canada , 2004 SCC 13 at para 9). The Copyright Act does not mention a defence of misuse of copyright. According to the Plaintiff, a majority of the Supreme Court of Canada in [NAME] rejected the existence of a broad doctrine of misuse of copyright in Canada. [ 54 ] [NAME] respond that [NAME] did not definitively determine whether the defence of misuse of copyright exists in Canada. They rely on [NAME] for the proposition that the defence of misuse of copyright can, at a minimum, survive a motion to strike. They note that the Federal Court of Appeal in [NAME] did not interfere with this conclusion. [ 55 ] The defence of misuse of copyright is a developing doctrine in the United States that serves as an “equitable defence when a copyright holder attempts to extend [its] copyright beyond the scope of [its] exclusive rights in a manner that violates antirust law or the public policy embodied in copyright law” ( [NAME] at para 31, citing [NAME] at para 98). [ 56 ] [NAME] concerned secondary copyright infringement over logos on wrappers of grey-market chocolate bars from a legitimate source. The Supreme Court of Canada was asked to determine whether asserting copyright on a chocolate bar wrapper was improper where it had the effect of preventing the sale of those chocolate bars. [ 57 ] [NAME] is not a model of clarity. Seven of the nine judges allowed the appeal. [NAME] J dissented, with [NAME] concurring, and would have dismissed the appeal. [ 58 ] [NAME], with whom Binnie and Deschamps JJ agreed, found that the case turned entirely on the application of s 27(2)(e) of the Copyright Act . These judges determined that this provision permits an exclusive licensee to sue third parties for infringement, but not the owner-licensor of the copyright. [NAME] agreed with [APPELLANT] reasons but added that he may have sided with the appellant in any event, because intellectual property rights should not be transformed into an instrument of trade control. [ 59 ] [NAME], with whom [NAME] and [NAME] concurred, found that the mere “incidental presence” of copyrighted works on the wrappers did not bring the chocolate bars within copyright protection. [ 60 ] The reasons of [NAME] J include the following ( [NAME] at para 98): Similarly, the appellant argued that the newly developing American doctrine of “copyright misuse” applies to parallel importation of consumer goods. This doctrine is meant to act as a sort of equitable defence when “a copyright holder attempts to extend his copyright beyond the scope of the exclusive rights granted by Congress in a manner that violates [federal antitrust law or] the public policy embodied in copyright law”: see K. Judge, “Rethinking Copyright Misuse” (2004), 57 Stan. L. Rev. 901, at pp. 904. The doctrine has been adopted by some Federal Circuit Courts of Appeal, but has not as of yet found favour at the United States Supreme Court (Judge, at pp. 902-3). As with the concept of abus de droit , my analysis renders an appeal to this developing doctrine unnecessary to deal with parallel importation of consumer goods. However, this is not to comment on the possible application of this doctrine in Canada; a determination on that issue is best left for another day. [ 61 ] [NAME] did not rule definitively on the viability of the defence of misuse of copyright in Canada. Neither did [NAME]. [ 62 ] [NAME] expressed the view that the statutory interpretation favoured by [NAME] strayed too far from the grammatical and ordinary meaning of the Copyright Act , and substituted policy preferences for Parliamentary intention ( [NAME] at para 3). [NAME] was also critical of [NAME]’s reliance on [NAME] v [COMPANY] , 2005 SCC 65 [ Kirkbi ]. [NAME] found that [NAME] emphasized distinctions between different forms of intellectual property. He then concluded that a trademark “cannot be leveraged to extend protection to products themselves” , because this would undermine the distinction between trademarks and patents ( [NAME] at para 82, citing [NAME] at paras 37-39). He continued (at para 83): Trade-mark law protects market share in commercial goods; copyright protects the economic gains resulting from an exercise of skill and judgment. If trade-mark law does not protect market share in a particular situation, the law of copyright should not be used to provide that protection, if that requires contorting copyright outside its normal sphere of operation. The protection offered by copyright cannot be leveraged to include protection of economic interests that are only tangentially related to the copyrighted work. [ 63 ] [NAME] J’s disagreement with [NAME] J’s conclusion was premised on s 64(3)(b) of the Copyright Act , which affirms that copyright subsists in a trademark or a representation thereof ( [NAME] at para 10). He continued (at para 12): I do not read [NAME] as underpinning a broad doctrine of copyright misuse. Although the Court in [NAME] cautioned against interpreting trade-mark law in a way that undermined the Patent Act , […] the decision in that case was anchored in the language of the Trade‑marks Act , […] itself and not in a vague notion of trade-mark misuse. In [NAME] , this Court held that the Trade‑marks Act had expressly incorporated the “doctrine of functionality” in s. 13(2) of the Act (para. 42). [NAME]., writing for the Court, held that “[t]his doctrine recognizes that trade-marks law is not intended to prevent the competitive use of utilitarian features of products, but that it fulfills a source‑distinguishing function”: [NAME] , at para.

43. By incorporating the doctrine of functionality, s. 13(2) of the Trade‑marks Act had precluded the granting of trade-mark protection to functional works, which are the subjects of patent law. [ 64 ] The Plaintiff says that [NAME] J expressly rejected “a broad doctrine of copyright misuse” . But [NAME] was not referring to a potential defence of copyright misuse. He was merely expressing disagreement with [NAME]’s conclusion, based on [NAME] , that copyright should not be misused to extend protection beyond what is provided by trademark law. [ 65 ] I agree with Justice Furlanetto that “the full merits and intricacies of the doctrine [of misuse of copyright] are beyond the scope of a motion to strike” ( [NAME] at para 45). I also share her conclusion that the Supreme Court of Canada has not definitively ruled on whether the defence of misuse of copyright exists in Canada. [ 66 ] [NAME] properly determined that a novel but arguable defence should not be struck ( [NAME] at para 21). The Federal Court of Appeal’s decision in [NAME] to vary Justice Furlanetto’s ruling by granting leave to the defendant to amend its pleading reinforces this conclusion. (4) Leave to amend [ 67 ] The Plaintiff submits that, even if a defence of misuse of copyright can survive a motion to strike, [NAME] should not have granted leave to amend [NAME]’ pleadings. The Plaintiff says that [NAME] cannot advance a defence of misuse of copyright, because the alleged conduct is not contrary to the Copyright Act and its policy arguments are without merit. The Plaintiff argues that [NAME] cannot plead the necessary condition of illegality, because their only allegations of illegality pursuant to the Competition Act were struck without leave to amend by the 2024 CMJ Order. The Plaintiff also maintains that [NAME] have admitted that they cannot provide further particulars or plead additional facts. [ 68 ] [NAME] respond that [NAME] applied the correct legal test for granting leave to amend. They say that their defence of misuse of copyright is supported by s 32(1) of the Competition Act , which authorizes this Court to impose remedies where exclusive intellectual property rights are used to restrain trade or lessen competition. According to [NAME], it is an open question whether a copyright owner can invoke s 32(1) as a defence to a claim of copyright infringement (citing [COMPANY] v [COMPANY] ([COMPANY]) , 2001 FCA 79 at para 20). [ 69 ] Whether to grant leave to amend a pleading is discretionary and, absent an error of law or principle, is reviewable against the standard of palpable and overriding error ( [NAME] v Canada (Attorney General) , 2025 FCA 58 [ [NAME] ] at para 79). [NAME] identified the right test for granting leave to amend: whether it is plain and obvious that the defence cannot be cured by amendment ( [NAME] v Canada , 2011 FCA 6 at paras 8, 15). This is a high bar ( Millenium Funding FCA at para 47). Where the defect concerns the failure to plead sufficient material facts, leave to amend should be granted unless a party has “already been granted so many chances to amend that the court concludes they are unable to plead the required facts” ( [NAME] at para 47, citing [NAME] at para 79). [ 70 ] There is no reviewable error in [NAME]’s decision to grant [NAME] leave to amend their pleadings respecting the defence of misuse of copyright. The revised misuse of copyright defence is distinct from the one that was struck in the 2024 CMJ Order. This is not a case where [NAME] have been given multiple opportunities to amend their pleadings and have shown themselves to be incapable of doing so. [ 71 ] The Plaintiff’s assertion that [NAME] have admitted that the defects in their pleadings are incurable is unconvincing. During the hearing of the second motion to strike, [NAME] took the position that their Statements of Defence disclosed sufficient material facts, and also argued that the full material facts are within the knowledge of the Plaintiff, and further particulars would be provided in the course of litigation. This cannot reasonably be taken as an admission that the defects in the Statements of Defence are incurable. B. [NAME] err by dismissing the Plaintiff’s motion to strike the Counterclaims based on s 7(a) of the Trademarks Act? [ 72 ] The Plaintiff says that [NAME] made two errors in finding that the revised Counterclaims based on s 7(a) of the Trademarks Act disclose a reasonable cause of action. [ 73 ] First, the Plaintiff submits that [NAME] limited her analysis to whether [NAME] were identified in the allegedly false and misleading statements without considering whether the statements were about [NAME]’ intellectual property. The constitutional validity of s 7(a) of the Trademarks Act requires that it be “limited to creating a cause of action relating to false and misleading statements made about a trade-mark or other intellectual property owned by the claimant ” ( Canadian Copyright Licensing Agency v [APPELLANT] , 2008 FC 737 [ [NAME] ] at para 27, emphasis added). A failure to plead a nexus between the allegedly false and misleading statements and [NAME]’ trademarks or intellectual property is therefore fatal to a claim under s 7(a) of the Trademarks Act . [ 74 ] Second, the Plaintiff submits that [NAME] failed to consider the text of the letters that were sent to [NAME]’ customers with the allegedly false and misleading statements. The Plaintiff says that a plain reading of the letters cannot support the assertion that [NAME] or their intellectual property were referenced in the letters, either directly or indirectly. Moreover, the same letters are relied upon to advance the Counterclaims in both T-2111-23 and T-1125-24, confirming that they are not specific to either Defendant. [ 75 ] According to the Plaintiff, [NAME] are claiming that the allegedly false and misleading letters merely “evoke” their intellectual property, which is insufficient ( [NAME] at para 29). The Plaintiff says that the letters have been incorporated by reference into [NAME]’ pleadings, and allegations that are inconsistent with documents referred to in pleadings cannot be treated as material facts ( [NAME] at para 52). [ 76 ] [NAME] respond that each has a trademark and tradename identical to their corporate names: [NAME] claims to own the trademark and tradename “[NAME]” , and [COMPANY] claims to own the trademark and tradename “[NAME]” . They therefore argue that references to them and to their intellectual property are “one and the same” . [ 77 ] [NAME] respond that [NAME] considered the letters and properly concluded that it was not her role on a motion to strike to decide the merits of the Counterclaims. Furthermore, [NAME]’s Orders did not have to be perfect, particularly considering that they were issued in the context of case management ( [COMPANY] v Canada (Commissioner of Competition) , 2026 FCA 68 at para 21). [ 78 ] Subsection 7(a) of the Trademarks Act has three essential elements: (1) a false or misleading statement, (2) which tends to discredit the business, wares, or services of a competitor, and (3) resulting damage ( [COMPANY] v Rowell , [1966] SCR 419 at 424). The provision is limited to false and misleading statements made about a trademark or other intellectual property owned by the claimant ( [NAME] at para 27). [ 79 ] [NAME], the Plaintiff argued that [NAME] had failed to plead that they were the Plaintiff’s competitors, and also that they had failed to plead that the allegedly false and misleading statements were made about their intellectual property. [NAME] acknowledged the latter argument at paragraphs 64 and 65 of the Order in T-2111-23, and at paragraphs 53 and 54 of the Order in T-1125-24. [NAME] also recognized the requirement to plead material facts to identify the intellectual property right [NAME] claimed to own in the 2024 CMJ Order (at paras 69-75). Indeed, these deficiencies in [NAME]’ initial Statements of Defence and Counterclaims caused [NAME] to strike the s 7(a) allegations with leave to amend. [ 80 ] In the second motion to strike, [NAME] considered whether [NAME] had pleaded that they were the Plaintiff’s competitors. She found that the jurisprudence was unsettled respecting the manner in which a competitor must be identified. She therefore allowed the revised Counterclaims to proceed to trial. [ 81 ] [NAME] was satisfied that [NAME] had amended their Statements of Defence and Counterclaims to plead that the allegedly false and misleading statements discredited their trademarks and tradenames. But this does not resolve the question of whether the statements were made about [NAME]’ intellectual property. [ 82 ] There is an important difference between “discrediting” a claimant’s intellectual property and making statements “about” the intellectual property. A claim under s 7(a) of the Trademarks Act requires the latter. The impugned letters sent by the Plaintiff to [NAME]’ customers contained, at most, statements about [NAME]’ businesses. While any negative statement about a business may also have the effect of discrediting its associated intellectual property, this is not sufficient to bring the claim within the Trademarks Act . Subsection 7(a) of the Trademarks Act must be construed narrowly to ensure that it respects the constitutional division of powers between Parliament and the provincial legislatures ( [NAME] at para 27. See also [COMPANY] v [NAME] , 2023 FC 1286 at para 24; [COMPANY] v 6034799 [COMPANY] , 2022 FC 425 at para 136; [COMPANY] v [COMPANY] , 2020 FC 81 at para 48; [COMPANY] v [COMPANY] , 2016 FC 1369 at para 41). [ 83 ] I disagree with [NAME] that references to their corporate names and their intellectual property are “one and the same” . Neither the Statements of Defence and Counterclaims, nor the allegedly false and misleading letters, refer to specific corporate entities by name or, by implication, to their trademarks or tradenames. [ 84 ] In the 2024 CMJ Order, [NAME] recognized that [NAME]’ pleadings were deficient because they did not claim that the allegedly false and misleading statements were made about [NAME]’ intellectual property. [NAME]’ revisions did not rectify this fundamental flaw. [ 85 ] Considering the principles that inform the Court’s discretion whether to grant leave to amend a pleading, [NAME] should be granted leave to amend their Counterclaims. It is not plain and obvious that the deficiencies in the Counterclaims cannot be cured by amendment. Nor have [NAME] been given multiple opportunities to amend their pleadings or shown themselves to be incapable of doing so.

VI. Conclusion [ 86 ] The appeals are allowed in part. [ 87 ] [NAME] properly granted leave to amend to [NAME]’ defences of misuse of copyright. [ 88 ] [NAME] erred in dismissing the Plaintiff’s motion to strike [NAME]’ Counterclaims based on s 7(a) of the Trademarks Act . [NAME] should have granted the Plaintiff’s motions with leave to amend. [ 89 ] The allegations contained in [NAME]’s Counterclaim in T-2111-23 at subparagraph 18(a)(i), and the references to the Trademarks Act in paragraphs 18(b) and 18(c), will be struck with leave to amend. [ 90 ] The allegations contained in [COMPANY] in T-1125-24 at subparagraph 19(a)(i), and the references to the Trademarks Act in paragraphs 19(b) and 19(c), will be struck with leave to amend. [ 91 ] As success on the appeal is divided, each party will bear its own costs.

JUDGMENT THIS COURT’S

JUDGMENT is that : The appeals are allowed in part. The allegations contained in [NAME]’s Counterclaim in T-2111-23 at subparagraph 18(a)(i), and the references to the Trademarks Act in paragraphs 18(b) and 18(c), are struck with leave to amend. The allegations contained in [COMPANY] in T-1125-24 at subparagraph 19(a)(i), and the references to the Trademarks Act in paragraphs 19(b) and 19(c), are struck with leave to amend. No costs are awarded. “[NAME]” Judge FEDERAL COURT SOLICITORS OF RECORD DOCKETS: T-2111-23 T-1125-24 STYLE OF CAUSE: [COMPANY]. doing business as [NAME] [NAME] v [COMPANY]. [COMPANY]. doing business as [NAME] [NAME] v [COMPANY] OF HEARING: Vancouver, British Columbia DATE OF HEARING: May 4, 2026

REASONS AND

JUDGMENT: FOTHERGILL J. DATED: June 12, 2026 APPEARANCES : [NAME] For The Plaintiff/ DEFENDANT BY [NAME] For [NAME]/ PLAINTIFFS BY COUNTERCLAIM SOLICITORS OF RECORD : [NAME] ([NAME]) [RESPONDENT], British Columbia For The Plaintiff/ DEFENDANT BY [NAME] [RESPONDENT] and Solicitors Toronto, Ontario For [NAME]/ PLAINTIFFS BY COUNTERCLAIM