Judgments

[1996] 3 F.C. 565

A-683-94

Smith & Nephew Inc. (Respondent)

v.

Glen Oak Inc. and Dylex Limited, carrying on business as “Bi-Way” and/or “Bi-Way Stores” (Appellants)

and

Beiersdorf AG (Necessary Party)

Indexed as: Smith & Nephew Inc. v. Glen Oak Inc. (C.A.)

Court of Appeal, Hugessen, Desjardins and Linden JJ.A.—Toronto, May 7 and 8; Ottawa, June 4, 1996.

Trade marks — Infringement — Appeal from F.C.T.D. decision enjoining appellants from selling, distributing products bearing “Nivea” trade-marks — Respondent registered user, licensee of trade-marks — Marks, goodwill sold to Beiersdorf AG — Respondent could not assert rights other than those flowing from Act, status as licensee of registered “Nivea” marks — Appellants free to compete with respondent in Canadian market — Respondent’s only rights as licensee, not as owner of trade-marks — Action in passing off under Trade-marks Act, s. 7 not available — Case law on passing off reviewed — Respondent failing to establish serious case.

This was an appeal from a Trial Division decision granting respondent’s application for an interlocutory injunction to enjoin the appellants from selling and distributing products bearing the “Nivea” trade-marks. The appellants are importers and distributors of beauty products bearing the “Nivea” trade-mark, namely facial cream which is manufactured and put on the market by a Mexican affiliate of a German company, Beiersdorf AG (BDF). The respondent also markets in Canada goods bearing the “Nivea” trade-mark which are manufactured in the United States by a wholly owned subsidiary of BDF. At one time, the respondent had been the owner of the Canadian trade-marks, as well as of the goodwill associated with the Nivea name and distinctive get-up, but that situation ceased in 1992 when the marks and goodwill were sold to BDF and the respondent became a registered user and licensee of BDF’s marks. The issue on appeal was whether the respondent as licensee of Canadian registered trade-marks could assert any rights against persons importing, distributing and selling goods bearing those same trade-marks which the owner thereof has put into the stream of commerce.

Held, the appeal should be allowed.

The respondent could not assert rights other than those which may flow to it from the Trade-marks Act and its status as licensee of the registered Nivea marks. Neither could it bring a common law action for passing off. The purpose of a trade-mark is to distinguish and identify the origin of goods to which it is affixed. The respondent, as Canadian licensee and importer of goods bearing BDF’s trade-marks, could not complain of the sale in Canada of other goods which are also manufactured by or under license from BDF and bear the same trade-marks. There could be no deception as to the origin of the goods, which are exactly what they purport to be, Nivea facial cream and soap, the quality and character of which are controlled by BDF. There was no evidence that the appellants have obtained the goods illegally and they had no obligation either in contract or under the provisions of the Trade-marks Act not to compete with the respondent in the Canadian market. The respondent’s only rights were as licensee and not as owner of the trade-marks in question. It could not assert rights as a licensee against goods which, directly or indirectly, originate with its licensor.

The respondent could not assert rights to a statutory action in passing off under section 7 of the Trade-marks Act even if paragraph 7(b) had the reach contended for by it and created protection for other than unregistered trade-marks. The wares sold by the appellants and the respondent were not theirs but rather those of BDF. The latter alone owned the trade-mark and the goodwill associated with it and the statutory passing-off action, like its common law counterpart, could only be brought by it as the owner of such goodwill. The specific statutory rights which registration of a trade-mark vests in the owner or registered user thereof could not avail the respondent against goods emanating from the registered owner of the marks. In its application for an interlocutory injunction the respondent failed to establish that it had advanced a serious case to be met and such application should therefore have been dismissed.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Federal Court Rules, C.R.C., c. 663, Tariff B (as am. by SOR/95-282, s. 5).

Trade-marks Act, R.S.C., 1985, c. T-13, ss. 2 “trade-mark”, 7, 50 (as am. by S.C. 1993, c. 15, s. 69).

CASES JUDICIALLY CONSIDERED

APPLIED:

Imperial Tobacco Co. of India v. Bonnan, [1924] A.C. 755 (P.C.); Revlon Inc. and Others v. Cripps & Lee Ltd. and Others, [1980] F.S.R. 85 (C.A.); Bousquet v. Barmish Inc. (1993), 46 C.P.R. (3d) 510; 150 N.R. 234 (F.C.A.).

DISTINGUISHED:

Remington Rand Ltd. v. Transworld Metal Co. Ltd. et al., [1960] Ex. C.R. 463; (1960), 32 C.P.R. 99; 19 Fox Pat. C. 204; H.J. Heinz Co. of Canada Ltd. v. Edan Foods Sales Inc. (1991), 35 C.P.R. (3d) 213; 44 F.T.R. 1 (F.C.T.D.).

NOT FOLLOWED:

Mattel Canada Inc. v. GTS Acquisitions Ltd., [1990] 1 F.C. 462 (1989), 25 C.I.P.R. 150; 27 C.P.R. (3d) 358 (T.D.); McCabe v. Yamamoto & Co. (America) Inc., [1989] 3 F.C. 290 (1989), 23 C.I.P.R. 64; 23 C.P.R. (3d) 498; 25 F.T.R. 186 (T.D.).

CONSIDERED:

Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd., [1987] 3 F.C. 544 (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.); Dumont Vins & Spiritueux Inc. v. Celliers du Monde Inc., [1992] 2 F.C. 634 (1992), 42 C.P.R. (3d) 197; 139 N.R. 357 (C.A.); Consumers Distributing Company Ltd. v. Seiko Time Canada Ltd. et al., [1984] 1 S.C.R. 583; (1984), 10 D.L.R. (4th) 161; 29 C.C.L.T. 296; 3 C.I.P.R. 223; 1 C.P.R. (3d) 1; 54 N.R. 161.

REFERRED TO:

American Cyanamid Co. v. Ethicon Ltd., [1975] 1 All E.R. 504 (H.L.).

APPEAL from a Trial Division decision granting respondent’s application for an interlocutory injunction to enjoin the appellants from selling and distributing products bearing the “Nivea” trade-marks. Appeal allowed.

COUNSEL:

Frank Farfan and Robert Nakano for appellants.

D. Doak Horne and Ferne Cohen for respondent.

SOLICITORS:

MacBeth & Johnson, Toronto, for appellants.

Gowling, Strathy & Henderson, Toronto, for respondent.

The following are the reasons for judgment rendered in English by

Hugessen J.A.: This is a classic case of “grey marketing.” The appellants Glen Oak and Dylex are respectively the importer/distributor and the retailer of certain products, particularly facial cream and facial soap, bearing the well-known trade-mark “Nivea”. That trade-mark is the subject of several registrations in Canada all of which are owned by the German company Beiersdorf AG (widely known, described and hereinafter referred to as BDF) which is shown in the style of cause as the “necessary party”. The respondent (plaintiff) Smith & Nephew Inc. (Smith & Nephew) was the registered user[1] and is now a licensee of those trade-marks.

The facial cream imported and distributed by Glen Oak and retailed by Dylex bearing the “Nivea” trade-mark is manufactured and put on the market by a Mexican affiliate or subsidiary of BDF. Its packaging and labelling indicate that Nivea is a “marca registrada” and that the goods originate with “BDF”. The label also indicates that one of the ingredients is “sol. formaldehido y acido citrico”.

As far as concerns the facial soap imported, distributed and retailed by the appellants, the packaging and labelling indicates that some of it was manufactured and put on the market by “Smith + Nephew”, (the respondent’s British parent is Smith & Nephew PLC) and some by Beiersdorf U.K. Ltd. The package indicates as well that the trade-mark “Nivea” is owned by Beiersdorf AG (BDF).

The goods which are marketed in Canada by the respondent as a licensee of the various Nivea trade-marks are imported by it from the United States where they are manufactured by Beiersdorf Inc. a wholly owned subsidiary of BDF. The facial cream imported from the United States does not contain any formaldehyde.

The present appeal is from a judgment of the Trial Division granting respondent’s application for an interlocutory injunction to enjoin the appellants from selling and distributing products bearing the Nivea trade-marks together with various ancillary conclusions, including an order for delivery up.

The Motions Judge gave no reasons to support his order. To make it, however, he had to be satisfied that the plaintiff had met the classic three-part test and established that it had a serious case, would suffer irreparable harm, and that the balance of convenience tilted in its favour.[2] While the appellants took issue with all three branches of the test,[3] their only serious point is with regard to the first branch. That, in its turn, since the essential facts are not in issue, comes down to a pure question of law namely whether the plaintiff as licensee of Canadian registered trade-marks can assert any rights against persons importing, distributing and selling goods bearing those same trade-marks which the owner thereof has put into the stream of commerce. Counsel were able to refer us to only one decision,[4] an interlocutory order by the Trial Division, which directly answers that question in the affirmative. In my view, and for reasons which I shall develop more fully, that case was wrongly decided.

At the outset it is clear, and counsel for the respondent acknowledged as much during argument, that Smith & Nephew, as plaintiff in the Trial Division, asserts and can assert no rights other than such as may flow to it from the Trade-marks Act and its status as licensee of the registered Nivea marks. It can bring no purely common law action for passing off in this Court. It is not necessary to decide if such an action could be brought in another court, but I would note that whereas, at one time, the respondent had been the owner of the Canadian marks, as well as of the goodwill associated with the Nivea name and distinctive get-up, that situation ceased in 1992 when the marks and goodwill were sold to BDF and the respondent became a registered user and licensee of BDF’s marks. It is solely in that capacity that it comes before us.

As a licensee of the Nivea trade-marks, the respondent’s rights are governed by section 50 of the Trade-marks Act:

LICENCES

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.

(2) For the purposes of this Act, to the extent that public notice is given of the fact that the use of a trade-mark is a licensed use and of the identity of the owner, it shall be presumed, unless the contrary is proven, that the use is licensed by the owner of the trade-mark and the character or quality of the wares or services is under the control of the owner.

(3) Subject to any agreement subsisting between an owner of a trade-mark and a licensee of the trade-mark, the licensee may call on the owner to take proceedings for infringement thereof, and, if the owner refuses or neglects to do so within two months after being so called on, the licensee may institute proceedings for infringement in the licensee’s own name as if the licensee were the owner, making the owner a defendant.

Subsection 50(3) is of particular interest in the context of the present case for it makes it plain that the only rights that the respondent can exercise as a licensee of the Nivea trade-marks are those of the owner of those marks. From that, of course, it follows that any defences which would be available to the appellants against BDF in an action for trade-mark infringement launched by the latter is equally available to them against the respondent. To put the matter another way, the respondent, as a licensee of BDF, can assert no higher rights flowing from the latter’s registered trade-marks than could its licensor.

The purpose of a trade-mark is to distinguish and identify the origin of goods to which it is affixed. This is made quite plain by the definition in section 2 of the Act:

2. In this Act,

…

“trade-mark” means

(a) a mark that is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others,

Goods which originate in the stream of commerce with the owner of a trade-mark are not counterfeit or infringing goods simply because they may have arrived in a particular geographical market where the trade-mark owner does not wish them to be distributed. A classic statement of the law in this respect is found in the judgment of the Privy Council in Imperial Tobacco Co. of India v. Bonnan:[5]

There is nothing to prevent a tradesman acquiring goods from a manufacturer and selling them in competition with him, even in a country into which hitherto the manufacturer or his agent has been the sole importer. It is not likely to be a successful business operation, unless in some exceptional case. This is just such an exceptional case. The British American Tobacco Company, Ld., might, when they sold this large consignment to the British Army canteen authorities, have required an undertaking that they should not be resold in India or to any one who could lawfully resell in India. This it appears not to have done; and then there arose the question of the disposal after the war of this large surplus stock.

The respondents, being unhampered by covenant, are selling goods manufactured by the British American Company as being what they are namely, Wills’ Gold Flake cigarettes manufactured by that company. There is no untruth and no attempt to deceive. The appellant company says that all genuine Wills’ Gold Flake cigarettes sold in India must be their goods. It may be answered that this has been so in times past as a mere matter of fact, and because the appellant company was protected by a covenant with the manufacturers; but not because it had a title to a monopoly which it could enforce against strangers to the covenant.

The present case also bears many similarities to the decision of the English Court of Appeal in Revlon Inc. and Others v. Cripps & Lee Ltd. and Others,[6] where the imported goods differed in some respects, as they do here, from those distributed in the domestic United Kingdom market and had originated with another member of the corporate family of the trade-mark owner. In the words of Templeman L.J.:

A company which manufactures products in different countries cannot complain of infringement of the British trade mark in respect of goods manufactured abroad by that company. In Champagne Heidsieck v. Buxton (1930) 47 R.P.C. 28, the plaintiffs held a British trade mark and sold their products in England under the name Champagne Dry Monopole. They produced a Champagne Dry Monopole, distinguished by the addition of the word “Brut,” intended for the continental market. Clauson J. held that the plaintiffs were not entitled to succeed in an action for infringement of trade mark against the defendants who purchased the champagne intended for the continent and imported that champagne into England. The learned judge accepted at page 36, line 37, the principle that

“The use of a mark by the defendant which is relied on as an infringement, must be a use upon goods which are not the genuine goods, i.e. those upon which the plaintiff’s mark is properly used, for anyone may use the plaintiff’s mark on the plaintiff’s goods since that cannot cause the deception which is the test of infringement.”

And likewise, at pages 115-116:

In my judgment where a parent company chooses to manufacture and sell wholly or partly through a group of subsidiary companies in different parts of the world, products which bear the same trade mark and attract an international reputation, neither the parent nor any subsidiary can complain in the United Kingdom if those products are used, sold and re-sold under that trade mark. A purchaser of a Revlon product from a Revlon company in the United States or the United Kingdom or in any other part of the world, whether a Revlon company operates in that part of the world or not, is at least entitled to assume that he will not be sued by a Revlon company in the United Kingdom, or in Delaware or Venezuela or New York or anywhere else, merely because of the place of manufacture of the product which he has acquired under the name of REVLON. The purchaser may have no idea of the place of manufacture of the Revlon product or of the name of the company responsible for production or distribution, and he will only know that he is buying a Revlon product derived from a Revlon company. The legal ownership of the trade mark enables the proprietor in the interests of the Revlon group in general and Revlon Inc. in particular to protect in the United Kingdom the group Revlon reputation and goodwill by ensuring that no goods are sold under the name REVLON unless they are produced and labelled by a Revlon company. The legal ownership of the trade mark does not go further and enable a Swiss, American or Bermudan subsidiary Revlon company to ensure that the Revlon products of its American parent or other Revlon company are not sold within the territory of the United Kingdom.

In my view, the law in Canada is no different. Smith & Nephew as Canadian licensee and importer of goods bearing BDF’s trade-marks cannot complain of the sale in Canada of other goods which are also manufactured by or under license from BDF and bear the same trade-marks. There can be no deception as to the origin of the goods, which are exactly what they purport to be, Nivea facial cream and soap whose quality and character is controled by BDF. If the respondent is distressed that the goods imported by appellants are different in quality or character from those which it imports and obtains from BDF, or that they are in the Canadian marketplace at lower prices in direct competition with it, its complaint must surely be with BDF itself. There is no evidence that the appellants have obtained the goods illegally and they have no obligation either in contract or under the provisions of the Trade-marks Act not to compete with the respondent in the Canadian market.

Before leaving this aspect of the case, I wish to emphasize the importance of the fact that the respondent’s only rights are as licensee and not as owner of the trade-marks in question. Decisions in such cases as Remington Rand Ltd. v. Transworld Metal Co. Ltd. et al.[7] and H.J. Heinz Co. of Canada Ltd. v. Edan Foods Sales Inc.,[8] while perhaps open to question, turned on the fact that the Canadian subsidiaries of the multinationals concerned were the registered owners in Canada of the various trade-marks. That fact gives rise to different considerations and different problems. The question as to whether a Canadian subsidiary of a multinational can sufficiently distance itself from its parent so as to assert rights in a Canadian trade-mark owned by the subsidiary against persons importing similarly marked goods originating with the parent offshore is a difficult one which we do not have to answer here. Our situation is far simpler, and it is in my view manifest that the respondent cannot assert rights as a licensee against goods which, directly or indirectly, originate with its licensor.

This brings me, if I understand counsel correctly, to the respondent’s assertion that quite apart from its right to sue for infringement as a licensee pursuant to subsection 50(3) it can assert rights to a statutory action in passing off under section 7 of the Trade-marks Act. That section reads:

7. No person shall

(a) make a false or misleading statement tending to discredit the business, wares or services of a competitor;

(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;

(c) pass off other wares or services as and for those ordered or requested;

(d) make use, in association with wares or services, of any description that is false in a material respect and likely to mislead the public as to

(i) the character, quality, quantity or composition,

(ii) the geographical origin, or

(iii) the mode of the manufacture, production or performance

of the wares or services; or

(e) do any other act or adopt any other business practice contrary to honest industrial or commercial usage in Canada.

The only relevant paragraphs for our purposes are 7(b) and 7(e).

Paragraph 7(e), however, is not available since it has been found to be unconstitutional by the Supreme Court of Canada, and this Court has recently confirmed, in Bousquet v. Barmish Inc.,[9] that there is no room for any residual validity:

In MacDonald v. Vapour Canada Ltd. (1976), 22 C.P.R. (2d) 1, 66 D.L.R. (3d) 1, [1977] 2 S.C.R. 134, Laskin C.J.C., for the majority, said [at p. 34]:

The position which I reach in this case is this. Neither s. 7 as a whole, nor s.7(e), if either stood alone and in association only with s. 53 [s. 53 gives a right of action for any act done contrary to the Trade-marks Act.], would be valid federal legislation in relation to the regulation of trade and commerce or in relation to any other head of federal legislative authority. There would, in such a situation, be a clear invasion of provincial legislative power. Section 7 is, however, nourished for federal legislative purposes in so far as it may be said to round out regulatory schemes prescribed by Parliament in the exercise of its legislative power in relation to patents, copyrights, trade marks and trade names. The subparagraphs of s. 7, if limited in this way, would be sustainable, and, certainly, if s. 7(e) whose validity is alone in question here, could be so limited, I would be prepared to uphold it to that extent. I am of the opinion, however … that there is no subject-matter left for s. 7(e) in relation to patents, copyright, trade marks and trade names when once these heads of legislative power are given effect under the preceding paragraphs of s. 7.

(My emphasis.) In Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. (1987), 14 C.P.R. (3d) 314, 38 D.L.R. (4th) 544, [1987] 3 F.C. 544(F.C.A.), MacGuigan J.A., for the court, in upholding the constitutionality of s. 7(b) and applying it in the case of a trade mark infringement, discussed that judgment. He said [at p. 323]:

I believe that a close reading of the Chief Justice’s over-all analysis will also support the constitutionality of s. 7 (apart from s-s. 7(e)) when applied to “round out” the regulatory scheme of the Act.

(Again my emphasis.)

It is, in our view, clear that the trial judge in McCabe v. Yamamoto& Co. (America) Inc. (1989), 23 C.P.R. (3d) 498 at p. 507, [1989] 3 F.C. 290 23 C.I.P.R. 64 (F.C.T.D.), misunderstood these decisions when he said, after reciting the above passage from MacDonald v. Vapour Canada Ltd.:

This finding, it may be suggested, possibly leaves open the argument that s. 7(e) may nevertheless be valid in respect of subject-matters which may not be dealt with under the other subsections of s. 7, so long as its application is in relation to patents, trade marks or copyrights.

I note that the Trial Division Judge, whose error in the McCabe [McCabe v. Yamamoto & Co. (America) Inc., [1989] 3 F.C. 290(T.D.)] case is quoted and commented on in the last paragraph of the cited passage, is the same Trial Division Judge who decided the case of Mattel, supra, and that his decision in the latter case appears to turn largely on his own previous decision and on his view of the validity and applicability of paragraph 7(e). As I have already indicated, Mattel, like McCabe, was for that reason wrongly decided.

There remains paragraph 7(b). Its validity has been upheld by this Court but only with reference to the protection which it can give to an unregistered trade-mark. In Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd.,[10] MacGuigan J.A., speaking for the Court, said:

What is at issue is Parliament’s right to create a civil remedy in relation to a trade mark not registered under the Act.

Paragraph 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.

Halsbury’s Laws of England (4th ed.), vol. 48, at page 99 states that “The action for passing off may have been recognised at common law as long ago as during the reign of Elizabeth I.” However, only in equity was the exclusive right to use a trade name or mark protected in the absence of fraud, and in England the common law courts continued to require fraudulent intent until the fusion of the court of common law and equity. Halsbury further states, at p. 108:

155. Nature of goodwill. A passing-off action is now recognised as being a remedy for the invasion of a right of property, the property being in the business or goodwill likely to be injured by the misrepresentation rather than in the mark, name or get-up improperly used. “Goodwill” has been defined as the benefit and advantage of the good name, reputation and connection of a business, the attractive force which brings in custom, and the one thing which distinguishes an old-established business from a new business at its first start.

At common law the right to a trade mark thus arose through the use of a mark by a business to identify its products to the public. There was no need for the business to register its mark in order to protect its right to use the trade mark and prevent the misuse of its trade mark by other businesses. The passing off action was the enforcement mechanism available for the protection of trade mark rights. Without the passing off action, common law trade mark rights would have little value.

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 this it is like the Copyright Act… , whose coverage is broader than registered copyright. In both Acts what registration does is to provide additional benefits over and above those available at common law.

In reviewing the scheme of the Act in Royal Doulton Tableware Limited v. Cassidy’s Ltd., [1986] 1 F.C. 357 at page 374; (1984), 1 C.P.R. (3d) 214 (T.D.), at page 228, Strayer J. said that “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. Thereafter, the Act only deals with registered trade marks.” He adds: “Parliament by sections 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.”

In paragraph 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 section 53 is “genuinely and bona fide integral with the overall plan of supervision”: Attorney General of Canada v. Québec Ready Mix Inc. , supra, at pages 79 F.C.; 226 N.R.; 172 C.P.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.

In Dumont Vins & Spiritueux Inc. v. Celliers du Monde Inc.,[11] Décary J.A., for the Court, after quoting at length from the Asbjorn case, concluded:

It seems to me to follow from these reasons that paragraph 7(b) is valid in so far as the passing off action is connected to a trade mark, registered or not, but that it would not be valid in a case such as the one at bar in which the passing off action, as a result of the fact that the absence of an unregistered trade mark is res judicata, is not connected to any trade mark.

Furthermore, a reading of paragraph 7(b) indicates that it is of little assistance to the respondent in the circumstances of this case. No doubt the appellants, by the use of the Nivea trade-marks, are directing attention to the wares they sell in a way which may cause confusion with the wares sold by the respondent. But that is because in both cases the wares in question are not those of the appellants or the respondent respectively, but rather those of BDF. The latter alone owns the trade-mark and the goodwill associated with it and the statutory passing-off action, like its common law counterpart, can only be brought by it as the owner of such goodwill.

Thus, even if paragraph 7(b) had the reach contended for by respondent and created protection for other than unregistered trade-marks the respondent could not sustain such an action in this case.

Indeed, the action in passing off, whether statutory or common law, has not met with marked success as a weapon against grey marketing. In Consumers Distributing Company Ltd. v. Seiko Time Canada Ltd. et al.,[12] Estey J., speaking for the Court said:

It is difficult, on first blush, to bring the conduct of the appellant within the concept of passing off. The appellant is selling precisely the same watch, coming from the same source, as the respondent. The watch is protected by a guarantee not in the respondent’s name but in the name of the maker, Hattori. The quality of the product must have some bearing on the respondent’s success and consequent development of business and goodwill in the trade. The watches sold in each branch of the trade, of course, were only and always those of Hattori. The respondent purports to bring itself within the classic definition of the doctrine by associating with the watch features which are unique to the selling technique employed by the respondent. The respondent is able to do this, so the argument goes, because of its contractual relationship with the supplier of Seiko watches, Hattori, which in turn supplies the respondent with the power of limiting the manufacturer’s warranty to watches sold by dealers authorized by the respondent. Axiomatically, the appellant and persons (such as Woolco and K-Mart) who, according to the evidence, carry on a like business, are unable to merchandise the watches in this manner, as they are not authorized dealers. The problem facing the respondent is that the logical extension of this proposal grants to a vendor in the position of the respondent, a monopoly on the sale in Canada of a product to the same extent as it would enjoy if the product were subject to a patent of invention issued to the respondent under the Patent Act of Canada. A second cul-de-sac into which such a submission necessarily leads is that the common law, in its personal property sector, would thereby be recognizing a right to entail and control the sale of personal property, however legitimately acquired, where another person, in the position of the vendor, was also marketing the identical item of personal property. Such a principle is foreign to our law. This right to control resale would, it follows, flow not only to the respondent and all others upon whom the manufacturer wishes to bestow this protection, but to the manufacturer Hattori which, on terms presumably satisfactory to itself, released these watches into the distribution stream which eventually carried them to the appellant. Ironically, the manufacturer, with the profits from its sale of these watches in its pocket, could then, if this is the law, restrain the appellant from reselling these watches. A third consequence would be an inevitable collision between such a result, on one hand, and the common law doctrine with respect to restraint of trade and free competition, on the other hand.

Likewise, in Revlon v. Cripps, supra, Templeman L.J. said, at page 112:

In any event, in my judgment there can be no passing off when products manufactued, named, labelled and put into circulation by a Revlon company are sold by the defendants without any alteration to the contents, name or label. The products sold by the defendants are what the defendants say they are.

In the same case the following comments of Buckley L.J., at page 101, are also instructive in the light of the respondent’s contention that the goods imported and sold by the appellants, although originating with BDF, are of a different composition, character and quality from those which the respondent imports and sells:

The United States products in question have not hitherto been marketed here. They are, as the appellants say, of a different quality and class from the United Kingdom products. They have different ingredients. They serve, at least to some extent, a different function, being medicated preparations designed for the treatment of dandruff, whereas the United Kingdom products are non-medicated products designed to impart flexibility to the hair. The appellants say that manifestly the United States products in question are not the goods which have attracted the reputation associated with the mark in this country. Therefore, they contend, the use of the mark upon the United States products in question is a misrepresentation.

And later, at page 103:

The United States products in question are products of that multi-national group produced in the United States. They appear to me to fall within the ambit of the relevant reputation. They are, like the United Kingdom products, preparations for imparting flexibility to the hair. They are further members of the group of products, designed for the washing and conditioning of various types of hair, to which the United Kingdom products and the identical American products belong. It has not been found inappropriate to deal in them in the United States for a period of about two years under the REVLON FLEX mark. In my judgment, the sale of the United States products in question in this country under that mark involves no more than a representation that those products are goods of the Revlon Group, as indeed they are. I consequently agree with the learned judge that the use of the mark in the United Kingdom on the United States products in question involves no misrepresentation of their commercial origin.

In the Consumers Distributing Co. Ltd. v. Seiko, case, supra, at pages 612-613, Estey J. specifically noted and left open the question of the possible impact of a registered trade-mark on the result:

I do not want to leave this subject, dealing as it does with the marketing of manufactured goods identified by a registered trade mark, without stating that nothing was advanced herein by the respondent with reference to any rights flowing to it by way of a trade mark registered in the name of Hattori under the Trade Marks Act of Canada…. Indeed, Hattori would be a requisite plaintiff if any such claim were made. Perhaps the respondent, if it held an appointment as a registered user of the registered trade mark, registered under the Trade Marks Act of Canada, would have the requisite status: see Fox on Copyright, 2nd ed. 1967, at pp. 440-41. Neither condition here exists. We therefore are not confronted with the situation before the Exchequer Court in Remington Rand Ltd. v. Transworld Metal Co., [1960] Ex. C.R. 463.

I do not read those comments as opening the door to some kind of extended statutory passing-off action. On the contrary, I think that Estey J. was simply drawing attention to the fact that the case before him was not concerned with the specific statutory rights which registration of a trade-mark vests in the owner or registered user thereof. For the reasons that I have already indicated, those rights cannot avail the respondent against goods emanating from the registered owner of the marks.

I conclude accordingly that as a matter of law the respondent’s action could not succeed against the appellants who were importing and selling goods originating with the owner of the trade-marks, and clearly so marked. It follows that in its application for an interlocutory injunction the respondent failed to establish that it had advanced a serious case to meet and that such application should therefore have been dismissed.

Before leaving this matter, I wish to say a word on the question of costs. I have earlier in these reasons referred to the fact that the appellants did not hesitate to advance a number of arguments which were wholly unfounded in law or unsupportable on the factual record. Amongst the most egregious examples:

1) It was argued that BDF might not have been given the full two months’ notice required by subsection 50(3). Manifestly, that notice requirement is in the Act to protect the interests of the registered owner not those of the alleged infringer and the latter cannot be heard to argue its inadequacy;

2) It was argued that the respondent had merely alleged and not proven that it was a licensee of the BDF trade-marks. The affidavit filed in support of the original application for an injunction clearly states that the respondent is “the exclusive Canadian distributor and licensee of the Nivea product line and related trade-marks.”[13] That is not a mere allegation; it is evidence;

3) It was argued that it had not been shown that the facial cream imported and sold by the appellants contained formaldehyde, one of the differences between the American and Mexican products which was complained of by the respondent. Not only do the labels on the product imported from Mexico show that it contains a small quantity of formaldehyde, but some of the materials produced by the appellants themselves so indicate as well;[14]

4) It was argued that the interlocutory injunction went beyond what had been asked for. The words of the injunction order itself track to the comma the words of the application.

This scattergun approach and lack of discrimination in the presentation of arguments causes a waste of judicial time and effort and unnecessarily slows down an already overloaded court system. It calls for a reaction. I would accordingly direct that the appellants’ costs be taxed only in accordance with column II of Part II of Tariff B [Federal Court Rules, C.R.C., c. 663 (as am. by SOR/95-282, s. 5)].

I would allow the appeal with costs, set aside the order of the Trial Division and dismiss the application for an interlocutory injunction with costs.

Desjardins J.A.: I concur.

Linden J.A.: I agree.

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