Kraft settles candy wrapper dispute

Kraft Foods Inc., the world's second-largest food company, agreed to settle an infringement dispute that had divided Canada's highest court over the sale of Cote D'Or chocolates packaged in copyrighted artwork.

Closely held Euro-Excellence Inc., based in Ville Lasalle, Quebec, agreed it won't import or sell in Canada the Cote D'Or chocolates in wrappers showing a copyrighted white elephant image without Kraft's consent, Kraft said today in a statement.

The dispute leading to Kraft's 2007 lawsuit arose because Euro Excellence was able to undercut Kraft's prices in North America by buying the chocolate at a discount from an undisclosed source in Europe, according to court documents. Euro-Excellence, which describes itself as "the specialist of confectionary," will sell the chocolates in Quebec for Kraft under the settlement, whose financial terms weren't disclosed.

"It is a win-win for everyone," Jean-Francois Dery, a Kraft vice president, said in the statement.

The Supreme Court of Canada rejected a Kraft's suit in a rare three-way split in July 2007, ruling that infringement of copyrighted artwork on the candy packaging couldn't be enforced under the country's laws.

The nine judges on the high court split in their ruling, with two favoring Kraft, three saying copyright doesn't protect ancillary works and four deciding the copyright couldn't be enforced because the art wasn't registered in Canada.

Kraft transferred the copyright to its Canadian unit from Europe and filed a new suit Dec. 4, 2007. Kraft had also sued over Toblerone chocolate bars that show a bear image hidden within a mountain. The Northfield-based company's didn't pursue that claim in the latest action.

Euro Excellence imports Kraft's Cote D'Or Belgian chocolate and Toblerone Swiss chocolate from an undisclosed source in an undisclosed European country and distributes them across Canada. Kraft didn't dispute the products were genuine. It asked the court to order Euro Excellence to cover up art on the packaging, according to court documents.

Kraft accused Euro Excellence at trial of "piggy- backing" on its advertising, giving it a market advantage. Euro Excellence argued that a copyright can't be used to create a monopoly that would infringe upon the free exchange of goods.

The case is Kraft Canada Inc. vs. Euro Excellence Inc., T- 2103-07, in Federal Court of Canada (Toronto).