Federal Court Weighs In On Motion To Strike Claims For Imported Grey Market Toyota Car Parts

On November 7, 2024, the Federal Court of Canada (the Court) issued its decision in Toyota Jidosha Kabushiki Kaisha (Toyota Motor Corporation) v Marrand Auto Inc., 2024 FC 1776, partially granting a motion by Marrand Auto Inc. (the Defendant) to strike the statement of claim of Toyota Canada Inc. et al. (collectively, Toyota) in relation to the grey market resale of automotive parts.

Toyota received notice from the Canada Border Services Agency that they detained a shipment of TOYOTA branded automotive parts on suspicion of being counterfeit. The Defendant was the owner and consignee of the shipment. Following inspection, Toyota took the position that the merchandise was “unauthorized” because it was not shipped and handled in an approved manner, and did not include the Toyota Canada warranty since the Defendant was not an authorized Toyota dealer. Toyota brought a lawsuit alleging that the Defendant, among other things: (i) breached the Competition Act by failing to disclose all material information relating to the Toyota merchandise, which prevented a purchaser from making a sound decision; and (ii) was passing off the unauthorized merchandise as authentic products with applicable warranty, thereby infringing Toyota’s rights under the Trademarks Act. 

Regarding Toyota’s allegations under the Competition Act, the Court found that the Defendant must make a false or misleading representation to establish a breach; Toyota’s argument that the Defendant omitted to tell customers a material fact about the goods in issue was not sufficient. Therefore, the Court struck Toyota’s Competition Act allegations in its statement of claim without leave to amend.

Although the Court struck many of Toyota’s trademark claims, it granted Toyota leave to amend certain allegations, including with respect to passing off under Section 7(b) of the Trademarks Act. The Court found it arguable that the Defendant misrepresented its goods to the public in a way that harms Toyota’s trademark rights by selling TOYOTA branded parts that: (a) were damaged and would be presented to a consumer expressly or by implication as being of the same quality as products sourced from an authorized Toyota dealer; and (b) would be sold to customers who were unaware that the parts do not have the Toyota warranty.

Summary By: Imtiaz Karamat