[1996] 2 F.C. 694
T-1078-93
Enterprise Rent-A-Car Company and Enterprise Rent-A-Car Limited (Plaintiffs)
v.
Herbert Singer, Rhoda Singer, Enterprise Car and Truck Rentals Ltd., Enterprise Car and Truck Rentals (Scarborough) Ltd., Horizon Car and Truck Rentals (Canada) Ltd., 720074 Ontario Limited, Discount Car & Truck Rentals Ltd., Discount Car & Truck Rentals (North York) Ltd., 2313-7292 Quebec Inc., 2631-6935 Quebec Inc., 819854 Ontario Limited and 401127 B.C. Ltd. (Defendants)
T-397-93
Enterprise Car and Truck Rentals Limited (Plaintiff)
v.
Enterprise Rent-A-Car Company and 1009329 Ontario Limited, c.o.b. as Enterprise Rent-A-Car (Defendants)
Indexed as: Enterprise Rent-A-Car Co. v. Singer (T.D.)
Trial Division, McKeown J.—Toronto, October 17, 1995; Ottawa, March 15, 1996.
Trade-marks — Passing off — Plaintiffs in each action companies in car rental business — Seeking injunctions under Trade-marks Act, s. 7(b), alleging passing off against each other with respect to use of name “Enterprise” — Law of passing off intended to protect goodwill attached to trade-mark — Plaintiff in passing off action must establish prior goodwill where defendants operating — Minimal level of goodwill established by Enterprise U.S. in association with trade-mark “Enterprise” in Canada based on reputation with Canadians — Enterprise U.S. directing activities of all subsidiary operating companies as single entity — Defendants in first action misrepresenting themselves to public, trying to thwart competition — Misrepresentation causing or likely to cause damage to plaintiffs — Enterprise U.S. suffering loss of control over name, mark sufficient to ground passing off action — Enterprise Canada not making use of “Enterprise” name, mark to generate significant amount of goodwill — Statement by plaintiffs’ officer, use of — designation not discrediting business, wares, services of Enterprise Canada — No damages to Enterprise Canada under Act, s. 7(a) — Not appropriate to make declaration as to ownership of trade-mark “Enterprise” in Canada — Permanent injunction against defendants in first action.
These were actions in passing off brought by an American company (Enterprise U.S.) and a Canadian company (Enterprise Canada) against each other under paragraph 7(b) of the Trade-marks Act. The facts of the case are summarized in the Editor’s note. The relief sought in each action was the same.
Held, the action brought by the American company should be allowed in part; the Canadian company’s action should be dismissed.
Under paragraph 7(b) of the Trade-marks Act, no person is entitled to misrepresent his goods and services as being those of another and thereby appropriate the other’s goodwill. The law of passing off is intended, therefore, to protect the goodwill which is attached to a trade-name or mark. In an action for passing off, the plaintiff must prove three elements: 1) a requisite degree of goodwill or reputation, 2) a misrepresentation to the public by the defendant and 3) damage resulting from the misrepresentation. Goodwill can be created as a result of the use of a trade-mark in Canada and in another country where that trade-mark comes to the attention of Canadians. By the time Enterprise Canada adopted the trade-name “Enterprise” in 1991, and the trade-mark “Enterprise” in 1992, Enterprise U.S. had already established a minimal level of goodwill in association with that trade-name and trade-mark in Canada based on its reputation with Canadians which began in the 1980s and continued and grew in the early 1990s. Many Canadians travelling in the southern United States every year are exposed to Enterprise U.S.’s considerable advertising and use of its trade-mark in that country. Prior to March 6, 1991, Enterprise U.S. had rented cars to over 4,800 Canadian residents and as of December 31, 1993, it had rented to over 26,700 Canadian residents. By these dates, there was goodwill associated with Enterprise U.S.’s business and use of the “Enterprise” trade-mark and name in Canada by virtue of its reputation in this country. In a passing-off action the plaintiff must establish prior goodwill in the very area where the defendants are operating. Enterprise U.S. has directed the activities of all of its subsidiary operating companies as a single entity. The use of the “Enterprise” trade-name and mark by Enterprise U.S.’s closely held subsidiaries was use which accrued to Enterprise U.S. as it retained control of both. Enterprise U.S. has established a sufficient level of goodwill in Canada and Enterprise Canada has appropriated that goodwill. The second element of a passing-off claim is the misrepresentation to the public by the defendants, which occurs where the use of a mark or name is likely to cause confusion in the public’s mind as it suggests some form of business association between the plaintiffs and the defendants. Bad faith on the part of the defendants is a factor in a passing-off action, although it is not necessary for a plaintiff to prove it. Mr. Singer’s explanation for the change of name from Watermark Investments Inc. to Enterprise Canada was not credible. The defendants’ actions as to the use of the name “Enterprise” were more consistent with an effort to thwart competition than with an intention to simply change corporate names. The third element of a passing-off action requires that the misrepresentation by the defendants has caused, or was likely to cause, damage to the plaintiffs. Where there is harm to the plaintiffs’ goodwill, damages will be intangible. Enterprise U.S. has suffered a loss of control over its name and mark, having shown that it had a reputation in Canada which was worthy of protection and that the improper use of the “Enterprise” name and mark by Enterprise Canada has been such as to cause confusion in the public’s mind with respect to that reputation. This type of damage was sufficient to ground a passing-off action. Enterprise U.S. has met all three of the elements required to make a successful claim in passing off as against Enterprise Canada.
The only significant use of the “Enterprise” trade-name and mark by the defendants was in Yellow Pages advertising and at the seven free-standing Enterprise Canada outlets. Enterprise Canada has not proved on a balance of probabilities that it has made use of the “Enterprise” name and mark in a manner which would generate any significant amount of goodwill in that name and mark; accordingly, it has not proved its claim against Enterprise U.S. under paragraph 7(b) of the Act. The statement of an Enterprise U.S.’s officer to the effect that the “Enterprise” name was being used illegally in Toronto and that Enterprise U.S. had obtained a court order to stop that illegal use did not have the effect of discrediting the business or services of Enterprise Canada. The reputation of Enterprise Canada was in no way affected by that statement. Enterprise U.S’s use of the ® designation could not be said to be a misleading statement which had the effect of discrediting the business, wares or services of Enterprise Canada. The latter has proved no damages under paragraph 7(a) of the Act. Both Enterprise U.S. and Enterprise Canada sought virtually identical relief in the form of a declaration that it is the owner in Canada of any trade-mark or trade-name which includes the word “Enterprise” for use in association with vehicle rental, leasing services or any similar services. A distinction had to be made between a declaration that a party is entitled to ownership of a trade-mark and a declaration that a party is entitled to registration of a trade-mark. This is not an appropriate case in which to make a declaration as to ownership of the trade-mark “Enterprise” in Canada. Such a declaration would fetter the discretion of the Registrar of Trade-marks to determine the outcome of the pending applications for registration in Canada of the trade-mark “Enterprise”.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 20.
Federal Court Act, R.S.C., 1985, c. F-7, s. 20 (as am. by S.C. 1990, c. 37, s. 34).
Trade Marks Act, R.S.C. 1970, c. T-10, ss. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11.
Trade-marks Act, R.S.C., 1985, c. T-13, ss. 4(2), 5, 7(a),(b), 19 (as am. by S.C. 1993, c. 15, s. 60), 50(1) (as am. idem, s. 69).
CASES JUDICIALLY CONSIDERED
APPLIED:
Erven Warnink B.V. and Another v. J. Townend and Sons (Hull) Ltd. and Another, [1980] R.P.C. 31 (H.L.); Reckitt & Colman Products Ltd. v. Borden Inc. and others, [1990] R.P.C. 341 (H.L.); Orkin Exterminating Co. Inc. v. Pestco Co. of Canada Ltd. et al. (1985), 50 O.R. (2d) 726; 19 D.L.R. (4th) 90; 30 B.L.R. 152; 34 C.C.L.T. 1; 5 C.P.R. (3d) 433; 10 O.A.C. 14 (C.A.); Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd., [1987] 3 F.C. 544(abridged); (1987), 38 D.L.R. (4th) 544; 17 C.I.P.R. 263; 14 C.P.R. (3d) 314; 12 F.T.R. 317; 80 N.R. 9 (C.A.); Westfair Foods Ltd. v. Jim Pattison Industries Ltd. (1989), 59 D.L.R. (4th) 46; 24 C.I.P.R. 70; 26 C.P.R. (3d) 28 (B.C.S.C.); affd (1990), 68 D.L.R. (4th) 481; [1990] 5 W.W.R. 482; 45 B.C.L.R. (2d) 253; 30 C.P.R. (3d) 174 (B.C.C.A.); Mentmore Manufacturing Co., Ltd. et al. v. National Merchandising Manufacturing Co. Inc. et al. (1978), 89 D.L.R. (3d) 195; 40 C.P.R. (2d) 164; 22 N.R. 161 (F.C.A.); Copperhead Brewing Co. v. John Labatt Ltd. (1995), 61 C.P.R. (3d) 317 (F.C.T.D.).
DISTINGUISHED:
Bousquet v. Barmish Inc. (1991), 37 C.P.R. (3d) 516; 48 F.T.R. 122 (F.C.T.D.); affd (1993), 46 C.P.R. (3d) 510; 150 N.R. 234 (F.C.A.); Marineland v. Marine Wonderland & Animal Park Ltd., [1974] F.C. 558; (1974), 16 C.P.R. (2d) 97 (T.D.).
CONSIDERED:
MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R. 134; (1976), 66 D.L.R. (3d) 1; 22 C.P.R. (2d) 1; 7 N.R. 477; Levitz Furniture Corp. and Levitz Furniture Co. of Washington Inc. v. Levitz Furniture Ltd., Value Industries Ltd. and Silver, [1972] 3 W.W.R. 65; (1972), 5 C.P.R. (2d) 13 (B.C.S.C.); Royal Doulton Tableware Limited v. Cassidy’s Ltd., [1986] 1 F.C. 357 (1984), 5 C.I.P.R. 10; 1 C.P.R. (3d) 214 (T.D.); Slazenger & Sons v. Feltham & Co. (2) (1889), 6 R.P.C. 531 (Ch. D.); S. & S. Industries Inc. v. Rowell, [1966] S.C.R. 419; (1966), 56 D.L.R. (2d) 501; 48 C.P.R. 193; 33 Fox Pat. C. 56; Riello Can. Inc. v. Lambert (1986), 8 C.I.P.R. 286; 9 C.P.R. (3d) 324; 3 F.T.R. 23 (F.C.T.D.); Brewster Transport Co. Ltd. v. Rocky Mountain Tours & Transport Co. Ltd., [1931] S.C.R. 336; [1931] 1 D.L.R. 715.
REFERRED TO:
Gastebled v. Stuyck, [1973] F.C. 24; (1973), 10 C.P.R. (2d) 48 (T.D.); Centre Ice Ltd. v. National Hockey League et al. (1993), 71 F.T.R. 5; 53 C.P.R. (3d) 34, at p. 35 (F.C.T.D.); revd Centre Ice Ltd. v. National Hockey League et al. (1994), 166 N.R. 44; 53 C.P.R. (3d) 34, at p. 50 (F.C.A.); HQ Network Systems, Inc. v. HQ Office Supplies Warehouse Inc. (1990), 30 C.P.R. (3d) 558; 34 F.T.R. 219 (F.C.T.D.); Cheerio Toys & Games Ltd. v. Samuel Dubiner et al., [1965] 1 Ex. C.R. 579; (1964), 44 C.P.R. 134; 28 Fox Pat. C. 34; Steinberg Inc. v. J. L. Duval Ltée, [1993] 1 F.C. 145 (1992), 44 C.P.R. (3d) 417; 58 F.T.R. 156 (T.D.); Walt Disney Productions v. Triple Five Corp. et al. (1994), 149 A.R. 112; 113 D.L.R. (4th) 229; [1994] 6 W.W.R. 385; 17 Alta. L.R. (3d) 225; 53 C.P.R. (3d) 129; 63 W.A.C. 112 (C.A.); M & I Door Systems Ltd. v. Indoco Industrial Door Co. (1989), 25 C.I.P.R. 199; 25 C.P.R. (3d) 477; 28 F.T.R. 267 (F.C.T.D.).
AUTHORS CITED
Bereskin, D. “The Source Theory of Trade Mark Law and its Effect on Trade Mark Licensing” (1987), 3 Can. Intell. Prop. Rev. 322.
Restatement of the Law of Torts, Tentative Draft No. 8. St. Paul, Minn.: American Law Institute, 1963.
ACTIONS by American and Canadian companies seeking injunctions under paragraph 7(b) of the Trade-marks Act and alleging passing off against each other with respect to the use of the name “Enterprise”. Action by the American company allowed in part, action by the Canadian company dismissed.
COUNSEL:
Daniel R. Bereskin, Q.C., Michael E. Charles and Mark L. Robbins for plaintiffs (T-1078-93) and for defendants (T-397-93).
Kenneth D. McKay and Arthur B. Renaud for defendants (T-1078-93) and for plaintiff (T-397-93).
SOLICITORS:
Bereskin & Parr, Toronto, for plaintiffs (T-1078-93) and for defendants (T-397-93).
Sim, Hughes, Ashton & McKay, Toronto, for defendants (T-1078-93) and for plaintiff (T-397-93).
EDITOR’S NOTE
The Executive Editor has determined that His Lordship’s 50 page reasons for judgment herein should be reported as abridged. Deleted from the report are the initial 23 pages which set out the facts. This case was selected for publication as a valuable review and exposition of the law of passing off.
In these actions, American and Canadian car rental businesses sought injunctions under Trade-marks Act, paragraph 7(b) and alleged passing off against each other with respect to the use of the name “Enterprise”. Further, each sought a declaration of ownership in Canada of any trade-mark or trade-name including that word in association with the renting or leasing of motor vehicles. Both sides asked for an order for delivery up and destruction of signage. Finally, the Canadian company alleged that its opponent had made or condoned the making of false or misleading statements tending to discredit it, contrary to Act, paragraph 7(a). The actions were consolidated. The question was as to whether, when the Canadian company began using the name “Enterprise”, the American company had established a sufficient reputation here to succeed in an action for passing off.
The American company had been in the car rental business in the United States since the early 1960s. It has used the name “Enterprise” since the early 1970s. By 1993 it had 1,600 branches in the United States. In that year it opened a subsidiary at Windsor, Ontario. The American company was well-established in the “sun belt” states, where Canadians often vacation. Many Canadian customers use its services upon referrals by sun belt area hotels. Six Canadian resident customers and a Canadian travel agent testified as to their belief that a car rental company using the name “Enterprise” in Canada would be the American company or one related to it. Hundreds of thousands of people in the Toronto, Hamilton or Niagara areas have been exposed to the American company’s advertising on the ABC, CBS and NBC television networks. Even so, no witness testified to having rented from the American company due to seeing an advertisement.
The defendants, Herbert and Rhoda Singer, founded the Discount car rental business in 1980. By the trial date their business had 175 branches. By 1992 the defendants were using the name “Enterprise”. Their Discount rental contracts bore the words “Operated by Enterprise Car and Truck Rentals Ltd.”. The Trial Judge went along with the submission of plaintiffs’ counsel that Mr. Singer “was simply trying to create paper trade name use … in the belief it would aid him in stopping” the American company from using the name “Enterprise” in Canada. In 1992 Singer made application for the trade-mark “Enterprise” and that is currently in opposition proceedings. By 1993, defendants had advertised the “Enterprise” name in the Yellow Pages across Canada.
The following are the reasons for judgment rendered in English by
McKeown J.
ANALYSIS
Paragraph 7(b) of the Act [Trade-marks Act, R.S.C., 1985, c. T-13] reads:
7. No person shall
…
(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another;
Laskin C.J. in MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R. 134 stated, at page 147 that this paragraph is a codification of the common law of passing off. Under this law, no person is entitled to misrepresent his or her goods and services as being those of another and thereby appropriate the other’s goodwill. The law of passing off is intended, therefore, to protect the goodwill which is attached to a trade-name or mark. The law of passing off, as it is expressed in paragraph 7(b), protects a trade-mark or name where there is attached to that mark or name, the requisite goodwill; this is in contrast to a registered trade-mark or name which is afforded protection by virtue of registration alone. Lord Diplock in Erven Warnink B.V. and Another v. J. Townend and Sons (Hull) Ltd. and Another, [1980] R.P.C. 31 (H.L.) sets out the history of passing off, at pages 91-93:
The action for what has become known as “passing off” arose in the nineteenth century out of the use in connection with his own goods by one trader of the trade name or trade mark of a rival trader so as to induce in potential purchasers the belief that his goods were those of the rival trader. Although the cases up to the end of the century had been confined to the deceptive use of trade names, marks, letters or other indicia, the principle had been stated by Lord Langdale M.R. as early as 1842 as being: “A man is not to sell his own goods under the pretence that they are the goods of another man”: Perry v. Truefitt, 6 Beav. 66. At the close of the century in Reddaway v. Banham [1896] A.C. 199, it was said by Lord Herschell that what was protected by an action for passing off was not the proprietary right of the trader in the mark, name or get-up improperly used. Thus the door was opened to passing-off actions in which the misrepresentation took some other form than the deceptive use of trade names, marks, letters or other indicia; but as none of their Lordships committed themselves to identifying the legal nature of the right that was protected by a passing-off action it remained an action sui generis which lay for damage sustained or threatened in consequence of a misrepresentation of a particular kind.
Reddaway v. Banham, like all previous passing-off cases, was one in which Banham had passed off his goods as those of Reddaway, and the damage resulting from the misrepresentation took the form of the diversion of potential customers from Reddaway to Banham. Although it was a landmark case in deciding that the use by a trader of a term which accurately described the composition of his own goods might nevertheless amount to the tort of passing off if that term were understood in the market in which the goods were sold to denote the goods of a rival trader, Reddaway v. Banham did not extend the nature of the particular kind of misrepresentation which gives rise to a right of action in passing off beyond what I have called the classic form of misrepresenting one’s own goods as the goods of someone else nor did it provide any rational basis for an extension.
This was left to be provided by Lord Parker in Spalding v. Gamage (1915) 32 R.P.C. 273. In a speech which received the approval of the other members of this House, he identified the right the invasion of which is the subject of passing-off actions as being the “property in the business or goodwill likely to be injured by the misrepresentation”. The concept of goodwill is in law a broad one which is perhaps expressed in words used by Lord MacNaghten in C.I.R. v. Muller [1901] A.C. 217, 223: “It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom”.
The goodwill of a manufacturer’s business may well be injured by someone else who sells goods which are correctly described as being made by that manufacturer but being of an inferior class or quality are misrepresented as goods of his manufacture of a superior class or quality. This type of misrepresentation was held in Spalding v. Gamage to be actionable and the extension to the nature of the misrepresentation which gives rise to a right of action in passing off which this involved was regarded by Lord Parker as a natural corollary of recognising that what the law protects by a passing-off action is a trader’s property in his business or goodwill.
The significance of this decision in the law of passing off lies in its recognition that misrepresenting one’s own goods as the goods of someone else was not a separate genus of actionable wrong but a particular species of wrong included in a wider genus of which a premonitory hint had been given by Lord Herschell in Reddaway v. Banham when, in speaking of the deceptive use of a descriptive term, he said:
“I am unable to see why a man should be allowed in this way more than in any other to deceive purchasers into the belief that they are getting what they are not, and thus to filch the business of a rival”.
I quote this passage, in which I have supplied the emphasis, because it was Lord Herschell who gave the leading speech in an earlier decision of this House in Native Guano Co. v. Sewage Manure Co. (1889) 8 R.P.C. 125 at 129 that was principally relied on by the Court of Appeal as justifying their reversal of the judgment of Goulding J. in the instant case.
Spalding v. Gamage led the way to recognition by judges of other species of the same genus, as where although the plaintiff and the defendant were not competing traders in the same line of business, a false suggestion by the defendant that their businesses were connected with one another would damage the reputation and thus the goodwill of the plaintiff’s business. There are several cases of this kind reported of which Harrods Ltd. v. R. Harrod Ltd. (1924) 41 R.P.C. 74, the moneylender case, may serve as an example.
Lord Parker’s explanation of the nature of the proprietary right protected by a passing-off action also supplied a new and rational basis for the two nineteenth-century decisions of Page Wood V.C. in Dent v. Turpin (1861) 2 J. & H. 139, and Southorn v. Reynolds (1865) 12 L.T.(N.S.) 75, in which one of two traders, each of whom had by inheritance acquired goodwill in the use of a particular trade name, was held entitled, without joining the other, to obtain an injunction restraining a third trader from making use of the name, despite the fact that the plaintiff’s right of user was not exclusive. The goodwill of his business would be damaged by the misrepresentation that the defendant’s goods were the goods of a limited class of traders entitled to make use of it, of whom the plaintiff was one and the defendant was not.
My Lords, Spalding v. Gamage and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off: (1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so.
In Reckitt & Colman Products Ltd. v. Borden Inc. and others, [1990] R.P.C. 341 (H.L.) at page 406, Lord Oliver of Aylmerton refined the five characteristics of passing off identified by Lord Diplock into a test of three elements; the plaintiff must satisfy these three elements:
1) that the plaintiff has the requisite degree of goodwill or reputation in the mind of the purchasing public;
2) that the defendant has made a misrepresentation to the public; and
3) that the plaintiff, as a result of the misrepresentation, has suffered, or is likely to suffer, damage.
I turn now to the first element to be proven in a passing-off claim, the existence of goodwill. In Orkin Exterminating Co. Inc. v. Pestco Co. of Canada Ltd. et al. (1985), 50 O.R. (2d) 726 (C.A.) it was stated that the law exists not only to protect the interests of traders but also to protect the public. This must be borne in mind when determining the level of goodwill which a plaintiff must establish in order to be successful in a passing-off claim. If a plaintiff has generated a reputation with a segment of the public, those members of the public may be adversely affected by the act of passing off, and their interests should be protected, even if those interests are not shared by each member of the public. Goodwill can be of just a local nature as opposed to being Canada-wide. See for example, Gastebled v. Stuyck, [1973] F.C. 24 (T.D.) and Centre Ice Ltd. v. National Hockey League et al. (1993), 71 F.T.R. 5 (F.C.T.D.); revd on other grounds (1994), 166 N.R. 44 (F.C.A.).
As both the plaintiffs and the defendants have claimed passing off as against the other, I must address the claim of each. I will deal now with the claim made by Enterprise U.S. On the evidence before me, Enterprise U.S. is the fifth largest car rental company in the United States, and since 1991, it has been first in the replacement car market. It is particularly strong in the “sun belt” states. While it is true that many Canadians visit the “sunshine” states, none of the Canadians who testified before me had heard of Enterprise U.S. prior to renting a car in the United States from Enterprise U.S. Furthermore, the survey prepared by Dr. Mayer, although not conclusive on the subject, shows that very few Canadians between the ages of 25 to 60 years had ever heard of “Enterprise”.
Forty-one vehicles were leased from Enterprise U.S. between 1984 and 1992 by American companies, all of which, with the exception of five, had American addresses. The cars, however, were purchased in Canada, were driven in Canada and, at the end of the leases, were sold in Canada. Canadian travel agents book cars for Canadian customers through computer airline reservation systems; since 1986, Enterprise U.S. has been a member of several of these reservation systems. The Canadian customers who testified were all most satisfied with the service provided by Enterprise U.S. Since 1990, Enterprise U.S. has a 1-800 number in Canada through which car rental reservations could be placed. Although Enterprise U.S. advertised on the three major U.S. networks and one would expect spillover advertising in Canada, I am not satisfied that Enterprise U.S. was able to show that this occurred. It is my finding that by the time Enterprise Canada adopted the trade-name “Enterprise” in 1991, and adopted the trade-mark “Enterprise” in 1992, Enterprise U.S had already established a minimal level of goodwill in association with that trade-name and trade-mark in Canada based on its reputation with Canadians which began in the 1980s and continued and grew in the early 1990s.
Goodwill can be created as a result of the use of a trade-mark in Canada and the use of a trade-mark in another country where that trade-mark comes to the attention of Canadians, either through use or through advertising which reaches Canadians. The facts in the present case are very similar to Orkin, supra. In that case, Orkin Exterminating Co. Inc. was a U.S. company which had been in the pest control business for many years. The name, which had been used since the 1930s, came from the surname of the founder. Morden J.A. (as he then was) stated, at page 730:
As far as Orkin’s reputation in Canada is concerned the following matters may be noted. Canadians travelling in the United States are exposed to Orkin’s extensive advertising and use of its trade marks in that country. There was evidence adduced that millions of Canadians travel in the United States every year, particularly in the southern vacation states, where Orkin’s operations are extensive. Canadians in Canada are exposed to Orkin’s advertising and articles appearing in American publications which circulate here.
The case then goes on to refer to a number of publications in which Orkin had been mentioned, either in articles, or through advertising. In the case at bar, there was evidence that many Canadians travelling in the United States are exposed to Enterprise U.S.’s considerable advertising and use of its trade-mark in that country. There was also evidence that many Canadians travel in the southern United States every year where Enterprise U.S.’s operations are extensive. There was also evidence of Enterprise U.S.’s advertising in the Wall Street Journal and on TV stations. The evidence of Enterprise U.S.’s goodwill in the instant case is comparable to the evidence adduced in Orkin, supra. The similarities between the two cases continue. Again in Orkin, supra, Morden J.A. stated, at page 731:
I have already mentioned Orkin’s Canadian customers. Eight of them from the Toronto area gave evidence with respect to their familiarity with Orkin, its business and the Orkin name and trade marks. They all said that if they were to see the Orkin name or logo in use in Canada they would assume that they represented the Orkin company with which they were familiar or some business that was affiliated with it.
Similar evidence was available in the case at bar from six customers of Enterprise U.S. Like the witnesses in Orkin, supra, these witnesses stated that if they were to see the “Enterprise” name or logo in use in Canada in connection with the car rental company, they would assume that it represented Enterprise U.S. or some business which was affiliated with Enterprise U.S.; this was similar to the testimony of the witnesses in Orkin , supra. As in Orkin, supra, there is evidence that Enterprise U.S. had Canadian customers to whom it has mailed billings. Also, as was the case in Orkin, supra, Enterprise U.S. had a number of Canadian customers by the end of 1993. Prior to March 6, 1991, Enterprise U.S. had rented cars to over 4,800 Canadian residents. By June 1992, the number of Canadian customers had reached about 11,800 and by February 1993, the Canadian rental figure was about 15,600. As of December 31, 1993, Enterprise U.S. had rented to over 26,700 Canadian residents. As was the case with the defendant in Orkin, supra, the defendant Enterprise Canada placed Yellow Pages and white pages telephone directory listings in Toronto for Enterprise Canada. Also, as in Orkin, supra, the adoption of the name “Enterprise” by the principal of Enterprise Canada was not done in ignorance of the use of that name by the plaintiff, Enterprise U.S. It was also argued by the defendant in Orkin, supra, that any goodwill attached to the Orkin name in Ontario belonged to the defendant on the basis that as the plaintiff had not carried on business in Canada, the plaintiff did not have any goodwill in Canada to protect. Morden J.A. rejected that submission and stated, at page 737:
In my respectful view, Fitzpatrick J. was right in concluding that Orkin was entitled to relief on the basis that it had a reputation (built up in several different ways including having customers) in Ontario and intended to expand its business into Ontario. In saying this I do not intend to indicate that a case such as this could not be decided on more general grounds. This is an evolving field of law and I think it the better course to resolve the competing contentions on relatively narrow grounds which are responsive to the particular facts rather than, unnecessarily, on broader grounds.
The Ontario Court of Appeal in canvassing the English law, chose not to follow the branch of English law that declined to give relief to foreign traders who had no actual business establishment in England. Orkin, supra, was adopted by inference by Reed J. in HQ Network Systems, Inc. v. HQ Office Supplies Warehouse Inc. (1990), 30 C.P.R. (3d) 558 (F.C.T.D.).
In the case at bar, Enterprise U.S. had established a reputation in Canada by March 6, 1991, and has maintained a reputation in Canada since that date. It has Canadian customers from across the country; since 1990 it has had a 1-800 number which is accessible to Canadians; and, since as early as 1989 or 1990, Canadian travel agents have made reservations with Enterprise U.S. Furthermore, there was evidence from Enterprise U.S that from 1990 it intended to open and expand its business in Canada. The goodwill established in Canada by Enterprise U.S. was, by March 6, 1991, minimal and the level of goodwill remained minimal by June 1992; however, there is no doubt that by these dates, there was goodwill associated with Enterprise U.S.’s business and use of the “Enterprise” trade-mark and name in Canada by virtue of its reputation in this country.
While Enterprise U.S.’s reputation in Canada was limited, it is not necessary for the plaintiff to be famous in order for it to enjoy the protection of its goodwill. This was the finding made in Levitz Furniture Corp. and Levitz Furniture Co. of Washington Inc. v. Levitz Furniture Ltd., Value Industries Ltd. and Silver, [1972] 3 W.W.R. 65 (B.C.S.C.) where it is stated, at page 67:
Though the plaintiffs do not have the reputation enjoyed by the plaintiffs in Hilton Hotels Corpn. et al. v. Belkin et al., 17 W.W.R. 86, 24 C.P.R. 100 (B.C.) (McInnes J.) and Hyatt Corpn. et al. v. Hyatt House Hotels Ltd., B.C. Macfarlane J., 17th December 1969 (not yet reported), they none the less have a reputation in this jurisdiction. They may not be famous but they are known to some members of the public.
I also refer to the Restatement of the Law of Torts, Tentative Draft No. 8 (1963), at page 113 as it was cited in Orkin, supra, at page 746:
If he imitates the other’s trademark or tradename knowingly and acts in other ways to convey the impression that his business is associated with the other, the inference may reasonably be drawn that there are prospective customers to be misled.
I take from what the defendants were doing that Mr. Singer was directing them in a calculated way to prevent the expansion of Enterprise U.S. in Canada. I infer from the defendants’ activities that Enterprise U.S. had goodwill in Canada from which the defendants could potentially benefit.
Accordingly, as the evidence clearly indicates that it is known by some members of the Canadian public, Enterprise U.S. has established a sufficient level of goodwill and reputation in this country to be protected by the law.
Counsel for the defendants submit that unless Enterprise U.S. can show that it uses the trade-mark “Enterprise” in Canada within the definition of use in the Trade-marks Act or unless it can show that it has made it well known within the definition of section 5, paragraph (b) is not applicable. He relies on Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd., [1987] 3 F.C. 544(abridged); (1987), 38 D.L.R. (4th) 544 (C.A.) which he submits deprives this Court of jurisdiction in the common law of passing off. However, in my view, the Asbjorn case, supra, supports paragraph 7(b) as defined in Orkin, supra, and does not require compliance with section 5 as a prerequisite to a finding of passing off.
MacGuigan J.A. stated, at page 556 D.L.R.:
What is at issue is Parliament’s right to create a civil remedy in relation to a trade mark not registered under the Act.
Subsection 7(b) is a statutory statement of the common law action of passing-off, which consisted of a misrepresentation to the effect that one’s goods or services are someone else’s, or sponsored by or associated with that other person. It is effectively a “piggybacking” by misrepresentation.
Then he stated, at page 557 D.L.R.:
The Canadian Act, as the statutory history set out by Laskin C.J.C. in the MacDonald case, supra, showed, has traditionally been concerned with the protection of unregistered as well as registered trade marks ….
…
In s-s. 7(b), Parliament has chosen to protect the goodwill associated with trade marks. In this way, as Chief Justice Laskin put it, it “rounds out” the statutory scheme of protection of all trade marks. As such, the civil remedy which it provides in conjunction with s. 53 is “genuinely and bona fide integral with the over-all plan of supervision”: Rocois Construction, supra, at p. 172 C.P.R., p. 79 F.C., p. 226 N.R. It has, in sum, a rational functional connection to the kind of trade marks scheme Parliament envisaged, in which even unregistered marks would be protected from harmful misrepresentations.
MacGuigan J.A. also stated at page 557 D.L.R.:
In reviewing the scheme of the Act in Royal Doulton Tableware Ltd. et al. v. Cassidy’s Ltd.—Cassidy’s Ltée (1984), 1 C.P.R. (3d) 214 at p. 228, [1986] 1 F.C. 357at p. 374, 5 C.I.P.R. 10, Strayer J. said that “the Trade Marks Act in ss. 1 to 11 defines and prescribes a number of rules concerning trade marks and the adoption thereof, without reference to registration. Thereafter, the Act only deals with registered trade marks.” He adds: “Parliament by ss. 1 to 11 of the Trade Marks Act has prescribed a regime concerning what constitutes a trade mark and the adoption thereof, whether registered or not.”
I note that Strayer J. (as he then was) in the Royal Doulton case [Royal Doulton Tableware Limited v. Cassidy’s Ltd., [1986] 1 F.C. 357(T.D.)], did not make the above-quoted comment in reference to a passing-off claim. Rather, Strayer J. was dealing with the Court’s jurisdiction to make a declaration that a party is the owner of a trade-mark in Canada. At issue was the Court’s jurisdiction over an unregistered trade-mark. He found that jurisdiction in sections 1 to 11 of the Act [Trade Marks Act, R.S.C. 1970, c. T-10] which, in the context of section 20 of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, as amended, gave the Federal Court jurisdiction over both registered and unregistered trade-marks. I do not interpret Strayer J. to mean that when dealing with trade-marks under sections 1 to 11 consideration cannot be given to common law principles. Nor do I interpret MacGuigan J.A.’s adoption of Strayer J.’s remarks as being a prohibition on the application of common law principles to actions arising out of paragraph 7(b) of the Act. In Asbjorn Horgard A/S, supra, the plaintiff was a foreign company with a foreign trade-mark not registered in Canada. There was no suggestion that the plaintiff must meet the requirements of section 5 of the Act. Parliament set up a scheme in which unregistered marks would be protected from harmful misrepresentation.
The basic scheme of the Act as set out in sections 5 and 19 [as am. by S.C. 1993, c. 15, s. 60] is that if one gets a valid trade-mark registration one has enforceable rights throughout Canada and one gets a valid registration even if one only has use in a small locality. The advantage of registration is that the owner of a registered trade-mark does not have to prove local goodwill. However, as I stated earlier, in a passing-off action the plaintiff must establish prior goodwill in the very area where the defendants are operating.
Pursuant to the International Convention for the Protection of Industrial Property, section 5 is designed to permit the owner of a trade-mark in a foreign jurisdiction to obtain a registration so that the foreign trader is on the same footing as a local trader with one important distinction; since there is no use in Canada the statute requires that the trade-mark be made known within the meaning of the definition in section 5. The jurisprudence has interpreted “known” as “well known” and if this standard is met then the foreign trade-mark owner is entitled to registration of that trade-mark, and thereby acquires rights across Canada. However, this has nothing to do with passing off under paragraph 7(b). There is no reference in paragraph 7(b) to use or making known.
This is made clear by Gibbs J. in Westfair Foods Ltd. v. Jim Pattison Industries Ltd. (1989), 59 D.L.R. (4th) 46 (B.C.S.C.); affirmed by the B.C. Court of Appeal at (1990), 68 D.L.R. (4th) 481 when he stated, at page 61:
Registered trade mark cases are not of much assistance where passing-off is the issue, because the legal incidents are different.
In my view, compliance with section 5 is not a prerequisite to a passing-off action under paragraph 7(b). In the event section 5 of the Act applies I find that Enterprise U.S. was not well known in Canada in March 1991 nor in June 1992. Although Dr. Mayer’s survey should have been limited to licensed drivers, in terms of recognition “Enterprise” is still well below 10%. This survey was conducted in 1995 after both Enterprise U.S. and Enterprise Canada had been in the market in Canada for up to four years.
The defendants submitted that none of what Enterprise U.S. did before Enterprise Canada came on the scene constitutes use in Canada. However, subsection 4(2) reads as follows:
4. …
(2) A trade-mark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services.
There is no reference made as to where the association must be made.
Enterprise Canada submitted that since Enterprise U.S. had not entered into any registered user agreements with its subsidiaries, Enterprise U.S. could not benefit from the use of the trade-mark in Canada. This may have been true prior to the 1993 enactment of subsection 50(1) [as am. by S.C. 1993, c. 15, s. 69] of the Trade-marks Act which dealt with licensing. Subsection 50(1) reads as follows:
50. (1) For the purposes of this Act, if an entity is licensed by or with the authority of the owner of a trade-mark to use the trade-mark in a country and the owner has, under the licence, direct or indirect control of the character or quality of the wares or services, then the use, advertisement or display of the trade-mark in that country as or in a trade-mark, trade-name or otherwise by that entity has, and is deemed always to have had, the same effect as such a use, advertisement or display of the trade-mark in that country by the owner.
Thus, if it can be shown that the use of a trade-mark is under the control of the owner, directly or indirectly, then for all purposes of the Act, including for the issue of goodwill, the use, advertisement, or display of the trade-mark in that country is use which is deemed to have the same effect as use by the owner. In my view, the new section 50 and the one which existed prior to 1993 apply with respect to the provisions concerning use of a trade-mark by a person or business who is the trade-mark owner. The case law provides that any goodwill that results from the use of a trade-mark by controlled licensees is deemed to ensure to the benefit of the trade-mark owner for the purposes of the Act. (See Noël J. in Cheerio Toys & Games Ltd. v. Samuel Dubiner et al., [1965] 1 Ex. C.R. 579.) This principle can be applied to passing off. As I have set out above, Enterprise U.S. has directed the activities of all of its subsidiary operating companies. The exceptions in the control exerted by Enterprise U.S. relate to local advertising only and do not affect the control of the mark. The public thinks of Enterprise U.S. as a single entity. Furthermore, the Canadian courts interpreted the registered user provisions which existed prior to 1993 as being permissive and not mandatory. As stated by Daniel R. Bereskin in “The Source Theory of Trade Mark Law and its Effect on Trade Mark Licensing” (1987), 3 Can. Intell. Prop. Rev. 322:
The argument of this essay is that although the source theory unquestionably is the foundation of trade mark law in Canada, the mere use of a trade mark by a licensee in a typical modern licensing situation does not in itself result in a second “source”.
This principle was approved in Steinberg Inc. v. J. L. Duval Ltée, [1993] 1 F.C. 145(T.D.), at pages 151-153.
In my view, the use of the “Enterprise” trade-name and mark by Enterprise U.S.’s closely held subsidiaries is use which accrues to Enterprise U.S. as it retained control of both.
On the basis of the foregoing, I am of the view that Enterprise U.S. has successfully established the first of the three elements required to ground a successful claim in passing off. Enterprise U.S. has established a sufficient level of goodwill in Canada and Enterprise Canada has appropriated that goodwill.
The second element which must be established in this passing-off claim is that the defendants have misrepresented themselves to the public. Misrepresentation to the public may be found where the use of a mark or name is likely to cause confusion in the mind of the public as it suggests some form of business association between the plaintiffs and the defendants. This was the finding in Walt Disney Productions v. Triple Five Corp. et al. (1994), 149 A.R. 112 (C.A.). Clearly, in the case at bar, there is no issue as to whether or not the use of the mark and name “Enterprise” will cause confusion as the parties in these actions are using the identical mark and name and each side has pleaded that the other’s use of the trade-name and mark is confusing.
While it is not necessary for a plaintiff to prove bad faith on the part of the defendants in order to prove passing off, bad faith is obviously a factor. Lord Lindley in Slazenger & Sons v. Feltham & Co. (2) (1889), 6 R.P.C. 531 (Ch. D.), at page 538 states:
One must exercise one’s common sense, and, if you are driven to the conclusion that what is intended to be done is to deceive if possible, I do not think it is stretching the imagination very much to credit the man with occasional success or possible success. Why should we be astute to say that he cannot succeed in doing that which he is straining every nerve to do?
As I stated earlier, Mr. Singer’s explanation for the change of name from Watermark Investments Inc. to Enterprise Canada is not credible. The actions taken by Mr. Singer’s companies in terms of the use of the name “Enterprise” were, in my view, more consistent with an effort to thwart competition, than with an intention to simply change corporate names. While it is not necessary for me to make any finding with respect to the motives of Enterprise Canada, it is clear from the evidence that the defendants’ actions in this case are at the very least suspect. This case is different from Bousquet v. Barmish Inc. (1991), 37 C.P.R. (3d) 516 (F.C.T.D.); affirmed (1993), 46 C.P.R. (3d) 510 (F.C.A.) and Marineland v. Marine Wonderland & Animal Park Ltd., [1974] 2 F.C. 558(T.D.) where a foreign trade mark-owner had to demonstrate that the Canadian company’s trade-mark should be cancelled. It was irrelevant in that case that the Canadian company acted in bad faith to obtain the trade-mark. The foreign trade-mark owner must still prove a reason to cancel the trade-mark. In passing-off cases intention to pass off is irrelevant. What is important is the existence of prior goodwill or reputation.
The third element which must be demonstrated in order to make a successful claim in passing off is that the misrepresentation by the defendants has caused, or is likely to cause, damage to the plaintiffs. In this type of case, where the harm incurred by the plaintiffs is harm to the plaintiffs’ goodwill, damages will be intangible. In Orkin, supra, at page 748, Morden J.A. had this to say on the issue of damages:
Without damage there is no passing off. This argument is completely answered by the assertion that Orkin has suffered damage, sufficient to support a cause of action against Pestco, by virtue of its loss of control over the impact of its trade name in Ontario and the creation of a potential impediment to its using its trademark upon entering the Ontario market—both arising from Pestco’s use of the name “Orkin” in Ontario.
In the case at bar, as Enterprise U.S. has shown both that it has a reputation in Canada which is worthy of protection and that the improper use of the “Enterprise” name and mark by Enterprise Canada has been such as to cause confusion in the mind of the public with respect to that reputation, it follows that, as a result of those actions, Enterprise U.S. has suffered a loss of control over its name and mark. This type of damage is sufficient to ground a passing-off action. The quantum of damages as a result of this infringement of Enterprise U.S.’s rights will not be determined herein as it is the subject of a reference. However, the limited reputation of Enterprise U.S. in Canada will be a major factor in determining damages.
Based on the preceding, it is my conclusion that Enterprise U.S. has met all three of the elements required to make a successful claim in passing off as against Enterprise Canada. To use the language of paragraph 7(b), Enterprise U.S. has proved that the defendants have directed public attention to their services or business in such a way as to cause confusion in Canada, at the time they commenced to so direct attention, between their services or business and the services or business of Enterprise U.S.
The lawsuit also included allegations of liability against Herbert and Rhoda Singer in their personal capacities. However, as stated in Mentmore Manufacturing Co., Ltd. et al. v. National Merchandising Manufacturing Co. Inc. et al. (1978), 89 D.L.R. (3d) 195 (F.C.A.), at pages 204-105:
But in my opinion there must be circumstances from which it is reasonable to conclude that the purpose of the director or officer was not the direction of the manufacturing and selling activity of the company in the ordinary course of his relationship to it but the deliberate, wilful and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it. The precise formulation of the appropriate test is obviously a difficult one. Room must be left for a broad appreciation of the circumstances of each case to determine whether as a matter of policy they call for personal liability. Opinions might differ as to the appropriateness of the precise language of the learned trial Judge in formulating the test which he adopted—“deliberately or recklessly embarked on a scheme, using the company as a vehicle, to secure profit or custom which rightfully belonged to the plaintiffs”—but I am unable to conclude that in its essential emphasis it was wrong. Nor am I able to conclude that the facts of this case are such as clearly to give rise to personal liability on a proper application of the law.
In my view, the standard set out in the Mentmore, supra, case has not been met with respect to the allegations against Rhoda Singer and Herbert Singer. There is no evidence that they have done anything outside an officer’s or director’s ordinary course of activity. Accordingly, the actions are dismissed against Herbert and Rhoda Singer.
I will now turn to the defendants’ case. Discount was started by Mr. Singer in 1980 and he rapidly made a success of it. It later became the leader in the replacement market in Canada. Mr. Singer testified that he had not heard the name “Enterprise” in connection with car rental companies in the United States until 1990. I am unable to accept this testimony since it is not reasonable that someone who kept track of his competitors as closely as Mr. Singer did would be unaware of the number one replacement car company in the United States market, particularly, since Discount is the number one replacement car company in the Canadian market. Prior to 1993, Enterprise Canada only stamped the “Enterprise” name on Discount contracts. However, as the “Enterprise” name was stamped on below the “Discount” name, in the place where the franchisee usually puts its company name, little attention would be paid to the “Enterprise” name; customers would have believed that they were dealing with Discount. The fact that there were decals bearing the “Enterprise” name on the front of Discount locations would not be sufficient to make the name “Enterprise” known at these locations. Mr. Singer attempted to explain that putting “Enterprise” on the door of the Discount dealers was similar to Budget affixing the “Sears” name at various places in its outlets, such as on the outlet doors. However, in that situation, it is the intention of Budget to solicit Sears credit card customers; it is not intended to indicate that Sears is in the car rental business.
The only significant use of the “Enterprise” trade-name and mark by the defendants was in Yellow Pages advertising and at the seven free-standing Enterprise Canada outlets, at least one of which, was in existence during the period from February 1993 to October 1994; not all of the seven free-standing locations were open during that entire period. I note that the opening of the free-standing locations did not occur until well after Mr. Singer had received a cease and desist letter from Mr. Taylor of Enterprise U.S. dated May 19, 1992. In my view, Enterprise Canada has not proved on a balance of probabilities that it has made use of the “Enterprise” name and mark in a manner which would generate any significant amount of goodwill in that name and mark; accordingly, I am unable to find that Enterprise Canada has succeeded in proving its claim against Enterprise U.S. under paragraph 7(b), particularly since I have found that Enterprise U.S had, by the time Enterprise Canada started using the “Enterprise” name and mark, already generated minimal goodwill in Canada.
Enterprise Canada has alleged that Enterprise U.S. has violated paragraph 7(a) of the Act. This paragraph reads:
7. No person shall
(a) make a false or misleading statement tending to discredit the business, wares or services of a competitor;
In MacDonald, supra, Laskin C.J. stated the following, at page 147:
To illustrate, s. 7 (a) is the equivalent of the tort of slander of title or injurious falsehood, albeit the element of malice, better described as intent to injure without just cause or excuse ….
In S. & S. Industries Inc. v. Rowell, [1966] S.C.R. 419, a case which is relied upon in MacDonald, supra, Martland J., at page 425, stated the following with respect to paragraph 7(a):
In my opinion, the natural meaning of s. 7(a) is to give a cause of action, in the specified circumstances, in respect of statements which are, in fact, false, and the presence or absence of malice would only have relevance in relation to the assessment of damages.
In the case at bar, Enterprise Canada has alleged that Enterprise U.S. has violated paragraph 7(a) in two distinct ways. The first involves the encounter between Mr. Brugger and Mr. Nevedal in 1993 when Mr. Nevedal informed Mr. Brugger that the “Enterprise” name was being used illegally in Toronto and that Enterprise U.S. had obtained a court order to stop this illegal use. Enterprise Canada relies on the following excerpt from the decision of Strayer J. in Riello Can. Inc. v. Lambert (1986), 8 C.I.P.R. 286 (F.C.T.D.), at page 304:
It is clear that notwithstanding the receipt by him of unequivocal statements from the plaintiff as to its position that its patent did not infringe the defendant’s, the defendant did make statements in his letter of September 26, 1983 (see Ex. P-13) to at least two of the plaintiff’s customers, i.e., Les Pétroles Motico Inc. and Kalil Pétroles Inc. which clearly stated to these distributors that the plaintiff’s burners infringed the defendant’s patent and that they would be obliged to pay reasonable royalties to the defendant in respect of any sales of Riello burners. The defendant has admitted that such a letter was sent. Having regard to the foregoing, it is clear that those statements were false or misleading as required by para. 7(a) of the Trade Marks Act. While I believe it would be possible to say that the defendant had no reasonable grounds for believing these statements to be true, it was in any event held by the Supreme Court of Canada in S. & S. Industries Inc. v. Rowell, [1966] S.C.R. 419, 33 Fox Pat. C. 56, 48 C.P.R. 193 at 202-03, 56 D.L.R. (2d) 501, that it is not necessary for the plaintiff in an action under this paragraph to prove mala fides or the lack of a reasonable belief on the part of the defendant.
Nor do I have any difficulty in finding that these statements made by the defendant would tend to discredit the business and wares of the plaintiff.
Enterprise Canada submits that the case at bar deals with the same situation as that which existed in the Riello case, supra, as in both cases damages were made the subject of a reference. In Riello, supra, the Court further stated, at page 305:
To establish liability for damages, of course, it is (as noted in the S.& S. case, supra at p. 197) necessary to prove some loss resulting from the wrongful act. As the question of proof of damages in this case has been left for determination on a reference, I have no basis upon which I could decide at this point that damages had occurred. This therefore represents a finding that the defendant has made false or misleading statements within the meaning of para. 7(a) of the Trade Marks Act and if, on a reference, actual loss by the plaintiff is proven, then such loss must be compensated by the defendant in the form of damages payable pursuant to s. 53 of that Act.
On the evidence provided, I am of the view that the exchange between Mr. Nevedal and Mr. Brugger did not constitute a statement which would have the effect of discrediting the business or services of Enterprise Canada. I note that the conversation between Mr. Nevedal and Mr. Brugger was a casual one and Mr. Nevedal was not speaking on behalf of the corporate mind of Enterprise U.S. Further, I am of the view that, while the statement made by Mr. Nevedal was not correct, since no court order had been obtained by Enterprise U.S., the content of that statement spoke to the nature of the legal relationship between Enterprise Canada and Enterprise U.S. and did not discredit the business, wares or services of a competitor as required by paragraph 7(a). The reputation of Enterprise Canada was in no way affected by this statement, on the evidence of Mr. Brugger, since Mr. Brugger continued to deal with the company as he always had.
The second basis upon which Enterprise Canada alleges that Enterprise U.S. violated paragraph 7(a) is through Enterprise U.S.’s use of the ® designation at its locations in Windsor, Edmonton, Calgary and Vancouver. The ® designation was used in association with the use of the “e logo” on exterior signs. Since the fall of 1994, Enterprise U.S. has used the ® designation on exterior signage in close association with the “e logo” and sometimes in close association with the name “Enterprise” at four locations in British Columbia. The rental contracts used and distributed by Enterprise U.S.’s Windsor location from February 1993 to October 1993 bore the ® designation in close association with the “e logo”. The key fobs used at this location also bore the ® designation. Neither the name “Enterprise” nor the “e logo” are registered in Canada. Mr. Smith, the advertising manager of Enterprise U.S., admitted that he knew that Enterprise U.S. should not be using the ® symbol in Canada. Enterprise Canada submits that this is an improper use of the ® designation as it has the effect of indicating to the public that the mark was registered in Canada. Since the defendants have no right to the name “Enterprise” their business, wares or services are not damaged by Enterprise U.S.’s use of the ® symbol. Enterprise Canada led no evidence to show it was damaged by Enterprise U.S.’s use of the ® symbol. In my view, Enterprise U.S.’s use of the ® designation cannot be said to be a misleading statement which has the effect of discrediting the business, wares or services of Enterprise Canada. Under paragraph 7(a) a plaintiff must prove damages (see M & I Door Systems Ltd. v. Indoco Industrial Door Co. (1989), 25 C.I.P.R. 199 (F.C.T.D.)). Enterprise Canada has proved no damages under paragraph 7(a).
In the alternative, Enterprise Canada submits that in the event that Enterprise U.S. is successful in its claim under paragraph 7(b), it is not entitled to an injunction on the grounds that Enterprise U.S. is invoking an equitable remedy when it has come to this Court with unclean hands as is evidenced by the misleading statements made under paragraph 7(a). Enterprise Canada relies on the decision in Brewster Transport Co. Ltd. v. Rocky Mountain Tours & Transport Co. Ltd., [1931] S.C.R. 336 in support of this submission. The plaintiff in that case sought an injunction to restrain the defendants from making use of a trade-name also used by the plaintiff; the injunction was refused on the basis that the plaintiff had come to the Court with unclean hands. As is the situation in the case at bar, the primary issue in Brewster, supra, was which of the plaintiff or defendant had the right to the use of the trade name in question. In Brewster, supra, Anglin C.J.C. stated [at page 339]:
… the evidence seems to establish that the plaintiff took this name for trade purposes knowing that it was already in use by the American company, and its affiliated corporations, in a large way, both in the United States and Canada, and that the reputation of the American Royal Blue Line would be quite likely to result in a large body of trade coming to the plaintiff through the use of this name, which it could not otherwise look for. This, in my opinion, amounts to a use of the name calculated to mislead the public to such an extent that its use by the plaintiff cannot be said to have been proper.
In my view, on the basis of the evidence before me, the Brewster case, supra, is more consistent with a characterization of Enterprise Canada’s behaviour than with that of Enterprise U.S. The defendants attempted to obstruct the entry of Enterprise U.S. into Canada by taking the action previously set out to appropriate the “Enterprise” name for themselves. The two matters raised by the defendants were matters which arose subsequent to the defendants’ actions. In my view, it is Enterprise Canada which has not come to Court with clean hands.
Both Enterprise U.S. and Enterprise Canada seek virtually identical relief in the form of a declaration that it is the owner in Canada of any trade-mark or trade-name which includes the word “Enterprise” for use in association with vehicle rental and/or leasing services or any similar services. The Federal Court’s jurisdiction to make such a declaration is derived from section 20 of the Federal Court Act [R.S.C., 1985, c. F-7 (as am. by S.C. 1990, c. 37, s. 34], concurrent with its jurisdiction to deal with trade marks under the Act. This was the decision in Royal Doulton, supra, where Strayer J. wrote, at page 374:
The plaintiffs further request a declaration that Paragon “is the owner of the trade mark ‘Victoriana Rose’ for use in association with china tableware”. It is to be noted that as framed the relief requested does not involve entitlement to registration. In my view it would be open to this Court to make such a declaration if it had before it all the necessary evidence. I believe that this Court has jurisdiction to make such a declaration pursuant to section 20 of the Federal Court Act which gives it concurrent jurisdiction “in all other cases in which a remedy is sought under the authority of any Act of the Parliament of Canada or at law or in equity, respecting any … trade mark …” Here the Trade Marks Act in sections 1 to 11 defines and prescribes a number of rules concerning trade marks and the adoption thereof, without reference to registration.
On the basis of the evidence before the Court, Strayer J. refused to make the requested declaration.
A distinction must be made between a declaration that a party is entitled to ownership of a trade-mark and a declaration that a party is entitled to registration of a trade-mark. Parliament has, through the Act, established a detailed procedure whereby the Registrar of Trade-marks may determine whether a trade-mark should be registered in the name of a person or a business. Again in Royal Doulton, supra, Strayer J., in discussing whether he could substitute one party for another as the owner of a registered mark wrote, at pages 373-374:
If one examines the scheme of the Trade Marks Act, particularly the procedure by which registration of trade marks is obtained, it is clear that Parliament contemplated a process of examination to be carried out with respect to any registrant which process has not taken place here with respect to Paragon China Limited. In particular section 29 of the Act requires a considerable amount of information to be provided by an applicant to the Registrar which has not happened in this case with respect to Paragon China Limited. There is of course also the process of advertising under section 36 and the process of considering opposition to registration under section 37, none of which has happened here. In my view any specific proposed registration should go through these processes and it matters not that another applicant, Cassidy’s Ltd. has undergone this process with respect to the same trade mark. I can find nothing in the Act nor in the jurisprudence which would support an interpretation of the Court’s power of amendment of the register so as to include ordering the involuntary substitution—as compared to a transfer consented to by the registrant—of one registrant for another.
It is clear that any declaration made as to entitlement to ownership of the trade-mark “Enterprise” in Canada can have no influence on the determination of the entitlement to registration of that trade-mark. This position is confirmed by the recent decision in Copperhead Brewing Co. v. John Labatt Ltd. (1995), 61 C.P.R. (3d) 317 (F.C.T.D.), where the plaintiff in a passing-off case referred in its statement of claim and in the relief sought, to its pending application to register the trade-mark “Copperhead”. The Court was dealing with an application by the defendant to strike out certain paragraphs of the amended statement of claim. The plaintiff sought a declaration that as against the defendant, the plaintiff was first to adopt a trade-mark and/or trade-name including the word “Copper”, and a declaration that the plaintiff was entitled to state on its application to register the trade-mark “Copperhead” that it has used the trade-mark in Canada in association with beer since at least as early as October 8, 1993. Teitelbaum J., in deciding that the paragraphs should be struck, distinguished the case from Royal Doulton, supra, stating, at page 325:
Given Strayer J.’s comments I have no dispute with the concept that the plaintiff may, in certain circumstances, be entitled to a declaration as to ownership of the unregistered mark COPPERHEAD. However, it is also clear that such a declaration must not relate to the question of entitlement. After a closer reading of para. 18(b) it is my opinion that the plaintiff is seeking a declaration that he was first to adopt any trade mark or trade name with the element of “copper” as a finding of fact, which, in my view, is quite a different situation than in the one before Justice Strayer in the Royal Doulton case. Further, by seeking such a declaration, the plaintiff is in effect providing the Registrar with directions from the court as to facts which the Registrar is required to find or determine at the first instance with respect to the registrability of a trade mark. I agree, at this point in time, that it is not the place of this court to make such a finding or determination in a passing-off action, nor would such a finding serve a useful purpose to resolve the issue of alleged passing-off between the parties. Similarly with para. 18(c), the question of when the plaintiff was first to use the trade mark and/or trade name is a matter for the Registrar to determine at the first instance.
In my view, this is not an appropriate case in which to make a declaration as to ownership of the trade-mark “Enterprise” in Canada. I would note that both the plaintiffs and the defendants have pending applications for the registration in Canada of the trade-mark “Enterprise”. Given my conclusion with respect to the passing-off claims, the facts of this case do not support the making of a declaration that Enterprise Canada is entitled to ownership of the “Enterprise” trade-mark in Canada. Although Enterprise U.S. has been successful in its passing-off action, I am in agreement with Teitelbaum J. that to make a declaration as to ownership of a trade-mark in the context of a passing-off action would not serve a useful purpose in resolving the parties’ allegations of passing off as against one another. I acknowledge that the relief sought in the case before Teitelbaum J. differs substantially from the relief sought in the case at bar; nonetheless, I am of the view that in making a declaration as to ownership of the trade-mark “Enterprise”, the discretion of the Registrar of Trade-marks to determine the outcome of the pending applications for registration in Canada of the trade-mark “Enterprise”, would be fettered. I agree with Teitelbaum J. that the effect of such a declaration would be a direction to the Registrar to make a finding of fact consistent with the Court’s declaration. I am of the view that based on the facts of this case, and the nature of the proceedings before me, it would be preferable to leave it to the Registrar to make a determination as to who is entitled to registration, and therefore ownership, of the trade-mark “Enterprise” in Canada. Accordingly, I will not exercise my discretion to make any such declaration.
Pursuant to my findings in this case, I will grant as against the defendants:
(a) A declaration that the defendants are not entitled to use the trade-marks “Enterprise” or “Enterprise Rent-a-Car” or the trade-name “Enterprise Remt-a-Car”, or any confusingly similar variations in Canada in association with car and truck rental and leasing services, or any other similar services;
(b) A permanent injunction restraining the defendants and their officers, directors, servants, agents, employees, licensees, and all those over whom they exercise control from either directly or indirectly:
(i) advertising, offering or performing in Canada car and truck rental or leasing services, or similar services in association with any trade-mark or trade-name which includes the word “Enterprise”;
(ii) directing public attention to the defendants’ services or car and truck rental business in such a manner as to cause confusion between such services and the business and those of the plaintiffs under the trade-mark “Enterprise”;
(iii) passing off their services and business as those of the plaintiffs or either of them by using trade-marks and trade-names which include the word “Enterprise” and by intermingling trade-marks which include the word “Enterprise” with the “Discount” trade-marks;
(iv) acting in a way calculated to deceive customers and the public generally into believing that there is a connection or licensing relationship between the plaintiffs or either of them and the defendants or any of them by seeking to associate themselves with the plaintiffs through the use of trade-marks and by statements made by the defendants that they are associated with the company in the United States which uses the trade-mark “Enterprise”.
(c) An order that the defendants deliver up or destroy under oath any labels, signs, advertising materials, printed matter or any other materials in the possession or under the control of any of the defendants, bearing trade-marks or trade-names which include the word “Enterprise”, or any other material which would offend the injunction granted herein.
If counsel cannot agree as to costs they may speak to me.