Unfounded Allegations of Online Intellectual Property Infringement: A Potential Backfire!

In early 2024, the Supreme Court of British Columbia in Keezio Group, LLC v. The Shrunks’ Family Toy Company Inc. provided a fine example of the application of section 7(a) of the Trademarks Act, which prohibits “false or misleading statements tending to discredit the business, goods or services of a competitor.” 

The implications of this decision are of particular interest to all companies that conduct business on online sales platforms.

In this case, the defendant, The Shrunks, had posted an unfounded negative comment against the plaintiff, Keezio, on Amazon, a platform both parties use to sell their products. The comment accused Keezio of copying The Shrunks’ products, infringing intellectual property rights. In addition, The Shrunks had lodged complaints against Keezio and requested that its products be removed from Amazon’s platform as per its terms and conditions. The complaints alleged that Keezio had encroached on The Shrunks’ trademark and copyright rights, which led to the temporary removal of Keezio’s products from the platform. Subsequently, the Court found these allegations to be false.

In its legal action, Keezio argued that it had lost profits because of the baseless complaints. It stated that removing of its products from the Amazon platform resulted in lost sales opportunities.

It is worth noting that, in his decision, the judge considered that the removal of Keezio’s products by Amazon constituted sufficient evidence of discredit for paragraph 7(a) of the Trademarks Act to apply. On this basis, Keezio was awarded damages of close to US$25,000. The Court, however, did not award the punitive damages sought by the plaintiff as it had not been shown that the defendant knew that its allegations of intellectual property infringement were false (the allegations were rooted in a misunderstanding of the scope of the intellectual property rights in question).

From this decision, we learn that it is possible to punish false online allegations that have a real impact on a competitor’s business. The consequences of such statements may be costly, particularly if it can be demonstrated that the allegations were knowingly false. Hence, before any company requests that a competitor’s product be removed from an online platform due to potential infringement, we strongly recommend that it seek an assessment from a qualified professional. 

If you have any questions or would like personalized advice on this matter, please do not hesitate to contact our Intellectual Property team.

Learn more here.