December 22, 2021
In 2011, Vincent Lam founded Ark Platforms Inc., which developed and marketed map-based project management software under the name “Arkit”. In 2017, Mr. Lam resigned as an executive of Ark Platforms. Prior to his departure, he retained copies of the Arkit source code and certain promotional materials, including client case studies (collectively, the “Arkit Works”).
Mr. Lam subsequently developed another map-based project management software called “Matidor” using the Arkit source code. Mr. Lam and his new company, Matidor Technologies Inc., marketed the Matidor software to prospective customers as a rebranded version of Arkit and used the Arkit promotional materials as part of their marketing efforts.
Following Mr. Lam’s departure in 2017, Ark Platforms’ successor, Ark Innovation Technologies Inc., acquired Ark Platforms’ intellectual property, including the copyright subsisting in Arkit. Ark Innovation sued Matidor Technologies and Mr. Lam for copyright infringement and passing off.
The defendants conceded that the use of certain of the Arkit promotional materials infringed the copyright in the Arkit Works. They also conceded that earlier versions of the Matidor software from 2018 and 2019 infringed the copyright subsisting in the Arkit software. However, the defendants argued that the source code in the Matidor software after June 2020 was rewritten such that it was non-infringing.
With reasons reported at Ark Innovation Technology Inc. v. Matidor Technologies Inc., 2021 FC 1336, The Federal Court found that the defendants had infringed the copyright in the Arkit Works. With respect to the software in particular, the Court found that the original version of the Matidor software from 2018, as well as the 2019 version, June 2020 version and all subsequent versions, infringed copyright in the Arkit software.
The Court held that, while the plaintiff bears the onus of establishing copyright infringement, the Court may make inferences on the basis of evidence of prior infringement, admissions, and the defendants’ failure to demonstrate that the software ceased infringing at any point:
Absent evidence that later versions of the Matidor software did not infringe … I infer that the Matidor software continued to infringe after the June 2020 Version. If the defendants wished the Court to limit its infringement finding to the June 2020 Version, it was open to them to file evidence on the summary trial motion to show the software changed enough that the Court could no longer infer it infringed based on the admission and earlier evidence. The defendants did not do so. 
The Court emphasized that “[t]he need to be able to draw such inferences is of particular importance in the context of software, where numerous changes, updates, and versions may be issued over time, and it may be difficult, expensive, or even impossible to have experts analyse every version of source code.” 
The Court also found that the defendants had engaged in passing off by misrepresenting the Matidor software as being associated with the ARKIT trademark, and suggesting that the Matidor software was a “rebranded” version of the Arkit software.
To establish passing off under paragraph 7(b) of the Trademarks Act, a plaintiff must establish (1) goodwill; (2) deception of the public due to a misrepresentation; and (3) actual or potential damage to the plaintiff.
For purposes of a claim in passing off, goodwill requires that a mark “be distinctive and possess reputation.”  The Court found that the Arkit mark was distinctive. The Court also held that the mark possessed reputation at the relevant time on the basis of evidence tendered by the plaintiffs regarding sales, customer contracts, advertising and promotional displays.
With respect to the second prong, the Court accepted that the defendants had made misrepresentations to potential customers by implying an association between Matidor and Ark Platforms. However, the Court concluded that the defendants ceased making those misrepresentations after receiving a demand letter from the plaintiffs in December 2019, and therefore limited its finding of passing off to the period prior to December 2019.
As for actual or potential damage, while the Court was not satisfied that the misrepresentations created any specific instances of uncertainty in the marketplace, it accepted that the misrepresentations caused some degree of “loss of control” over the reputation, image or goodwill of the Arkit mark, which was sufficient to satisfy the third prong of the test.
The Court ordered the defendants to pay the plaintiffs $277,400. The Court also granted an injunction preventing the defendants from further infringing the copyright in the Arkit Works.
Authors: Eran Rubman and Larissa Fulop