Seizure of Intellectual Property to Enforce A Judgment

Posted in: Civil Litigation Law, Intellectual Property Law, Private International Law, US Judgments Law- Dec 01, 2010 No Comments

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by Gil Zvulony

Seizing Intellectual Property

This discussion will not focus on royalties received from intellectual property, presumably these can be seized by garnishment.  The discussion will focus on the seizure of the intellectual property itself.

Traditionally at common law the execution of judgments were limited to the seizure of tangible property.  The Execution Act represents an attempt to depart from the common law and to make intangible property exigible.  Section 17 specifically makes patents exigible.  Section 19(2) makes choses in action exigible.   In Re Attorney-General for Ontario and Royal Bank of Canada [1970] 2 O.R. 467-474 the Ontario Court of Appeal held that section 19(2) (formerly s. 16(2)) is not limited in application to a particular class of chose in action.

Patents

Section 17 of the Execution Act deems all rights under letters patent of invention to be personal property and may be seized and sold under execution as other personal property.

Copyrights

The Execution Act does not specifically deal with the exigible of copyrights and copyrighted materials.  In Planet Earth Productions Inc. v. Rowlands the court held that copyright is exigible property because it is “personal property” within the meaning of section 18 of the Execution Act and it is a “chose in action” within the meaning of section 19(2) of the Actet Earth Productions Inc. v. Rowlands. The court did not address the issue of limitations on the judgment creditor’s use of the copyright. Presumably the moral rights of the author are still intact.

Planet Earth is the only reported decision dealing with this issue. The case has sparked scholarly debate. Professor Vaver argues that Planet Earth was wrongly decided (Can Intellectual Property Be Taken to Satisfy a Judgment (1990-91) 6 B.F.L.R. 255).  His argument centres on the difficulty of valuing intellectual property.  He argues that intellectual property should be seized only through equitable execution where a judge can decide if the particular asset should be attached at all and, if so, how the remedy should be shaped to protect all interested persons.  Professor C.R.B. Dunlop disagrees.  In Creditor-Debtor Law in Canada (Thomson Canada, 1995)He argues that the Execution Act should be read to say that any kind of personalty that is not expressly exempted by legislation is exigible.

Trademarks

The law with respect to the exigibility of trademarks is unclear.  In Gegg v. Basset (1902) 3 O.L.R. 263 the trademark was not exigible because the right to a trademark was assignable only in connection with the goodwill of the business in which it had been used.  This is still the position in the United States (see Marshak v. Green, 746 F.2d 927 at 930 (2nd Cir. 1984))

It may be argued that Gegg v. Basset is not good law.  First, section 48 of the current Trade Marks Act ( R.S. 1985, c. T-13 ) allows a trademark to be transferred separately from the goodwill of the business.  However, the Supreme Court of Canada has said that this section does not permit:

untrammelled assignment in gross without regard to the associative character of the assigned trade mark in identifying the goods as those of the assignee owner.

Second, it could be argued that a trademark is a chose in action and the reasoning in Planet Earth applies. Professor Dunlop’s view that all personalty that is not exempted by legislation is exigible, supports this argument.

The problem with the exigibility of trademarks rests with estimating the value of the trademark separate from goodwill. A sheriff should be able to make a rough assessment of the value of what is being seized so as not to deprive the debtor of more than is necessary to satisfy the judgment debt and the cost of the seizure.  Moreover, the purpose of trademark legislation as a mechanism for consumer protection aspect of trademark law also weighs against the exigibility of trademarks.

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