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ARTICLE · 18 MARCH 2021

Costco Wholesale Canada Ltd. V Simms Sigal & Co.: No More Excuses For Grey Marketers That Knowingly Interfere With Exclusive Distribution Agreements

The recent appeal decision Costco Wholesale Canada Ltd. v Simms Sigal & Co. Ltd. constitutes a win for distributors whose rights under an exclusive distribution agreement are knowingly undermined...

CanadaIntellectual Property

The recent appeal decision Costco Wholesale Canada Ltd. v Simms Sigal & Co. Ltd.  constitutes a win for distributors whose rights under an exclusive distribution agreement are knowingly undermined by third parties selling grey market goods. The Quebec Court of Appeal confirmed that exclusive distributors can claim extra-contractual liability against grey marketers based on the civil law fault of "contractual inference" with an award of punitive damages in certain circumstances.

Background to Costco Wholesale Canada Ltd. v Simms Sigal & Co.

Simms Sigal & Co. Ltd. (Simms), a Canadian business specializing in the import and distribution of high-end clothes, had exclusive distribution agreements with American manufacturer R&R, owner of the ROCK & REPUBLIC trademark. Simms distributed the R&R products to first-class retail departments and clothing stores in Canada that sold R&R jeans for $250 to $325. In 2009, Costco Wholesale Canada Ltd. (Costco) agreed

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