In 9038-3746 Quebec Inc. v. Microsoft Corporation the Federal Court of Appeal upheld a sentence for contempt, one of several court decisions and orders arising from trademark and copyright infringements dating back to the 1990’s.

In the 2006 decision, Microsoft Corporation  v. 9038-3746  Quebec Inc., two corporate defendants and an individual found to be the controlling mind, Carmello Cerrelli, were ordered, jointly and severally, to pay statutory damages under the Copyright Act of $500,000 and punitive damages of $100,000 each.  Permanent injunctions were also issued enjoining the defendants from directly or indirectly infringing Microsoft’s trademarks or selling, distributing or advertising counterfeit copies of the twenty-five computer programs that were at issue in the proceedings.  Subsequently, Microsoft was also awarded costs of $1,410,000 plus the Canadian equivalent of $175,715.23 USD.

Notwithstanding these significant awards, the defendants violated the injunctions and continued to sell the software.  Microsoft brought contempt of court proceedings and Cerrelli plead guilty to: (1) violating the Court Order by selling seven counterfeit copies bearing the trademark MICROSOFT and possessing for the purpose of selling 545 counterfeit units bearing the trademark MICROSOFT; and (2) possessing for the purposes of selling 88 counterfeit units that constituted a breach of copyright.

In oral reasons the Federal Court ordered Cerrelli to pay $50,000 for each offence within 120 days, failing which he would serve a 60 day term of imprisonment.  Cerrelli appealed, but the Federal Court of Appeal found no reason to overturn the lower Court’s order, finding that there was no error in principle, failure to consider a relevant factor or overemphasis of the appropriate factors.  Moreover, the sentence was not demonstrably unfit.  The Court of Appeal referred back to the original judgment and the finding that Cerrelli “had little regard for the truth at discovery or trial” and “acted in bad faith”.  It was also noted that Cerrelli had sought to transfer his residential property for $1.00 following the judgment.  In upholding the sentence the Court of Appeal sought to “deter the offender from repeating his unlawful behaviour as well as other persons who would be tempted to commit the same offences”.