Judgments

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Decision Content

A-207-77
Marketing International Ltd. (Appellant) v.
S.C. Johnson and Son, Limited and S.C. Johnson & Son, Inc. (Respondents)
Court of Appeal, Jackett C.J., Urie and Ryan JJ.—Ottawa, February 13, 14 and 17, 1978.
Trade marks — Infringement — "Passing off' and distinc tiveness — Canadian respondent registered user of the trade mark "oFF!" owned by the American respondent — Product marketed under trade mark as product of Canadian respond ent — Appellant marketing product for similar use in Canada under trade mark "BUGG OFF" -- Whether or not appellant 'passing off' within meaning of s. 7(b) of the Trade Marks Act — Whether or not U.S. respondent's trade mark distinc tive within meaning of s. 18(1)(b), and effect of Canadian respondent's being a registered user — Trade Marks Act, R.S.C. 1970, c. T-10, ss. 7(b), 18(1)(b), 49.
This is an appeal and cross-appeal from a judgment of the Trial Division in an action for infringement of a registered trade mark and for breach of section 7(b) of the Trade Marks Act, and a counterclaim for expungement of the trade mark registration. The U.S. respondent, S.C. Johnson & Son, Inc., was registered under the Trade Marks Act as owner of the trade mark "oFF!" in respect of "a personal insect repellant", and the Canadian respondent was registered as user of that trade mark. The Canadian respondent marketed the product, under the trade mark, as its own product. In 1975, appellant began to market an insect repellant, under the trade mark "BUGG OFF", in Canada. The Trial Division dismissed appel lant's counterclaim for expungement, restrained appellant from further infringing the U.S. respondent's registered trade mark, and from selling in Canada an insect repellant in association with the trade mark "BUGG OFF", ordered up delivery of literature associated with that trade mark, ordered a reference as to damages or profits, and awarded costs to the United States respondent as against appellant. The cross-appeal is "to the extent that the judgment did not grant relief" to either respondent under section 7(b) of the Trade Marks Act and to the extent that the judgment did not grant relief to the Canadi- an respondent.
Held, the appeal is allowed. The trade mark was not "dis- tinctive" at the time that the counterclaim was launched within the meaning of section 18(1)(b) and there was no evidence that appellant was "passing off' within the meaning of section 7(b). The evidence with respect to section 7(b) speaks for itself. With respect to the issue of distinctiveness, it is necessary to consider the effects of the Canadian respondent being a registered user
vis-à-vis the situation if it were not a registered user. Section 49(3) provides that the "permitted use of a trade mark has the same effect for all purposes of this Act as use thereof by a registered owner". That section, however, does not expressly deem and must not be taken by implication to deem, the actual effect of the user of the trade mark by the licensee under its own name (when that effect is to educate the public to associate the trade mark with the licensee's wares) to be what it would be if such user had been by the owner of the trade mark under his own name (in which case, the effect would have been to educate the public to associate the trade mark with the owner's wares). Commencement of user, according to sections 39(2) and 49(2), may be by a registered user. It does not follow, however, that Parliament, without saying so expressly, is pro viding by necessary implication, that a message to the public that in fact indicates that wares associated with the trade mark originate with the licensee of the trade mark is deemed, as a matter of law, to be a message to the public, which it is not in fact, that wares associated with the trade mark originate with the owner of the trade mark. Section 49 does not authorize a registered user to use, in association with wares, both the trade mark and his own name as manufacturer in such a way as to carry a message to the public in direct contradiction to the Register. Despite the possible characteristics of "permitted use", under section 49, that section does not have the effect of deeming the activities of the Canadian respondent to have had the result of making that trade mark a mark that "actually distinguishes" the wares of the U.S. respondent from the wares of others. It is therefore clear that the registration of the trade mark "OFF!" is invalid by virtue of section 18(1)(b) of the Trade Marks Act.
Per Urie J. concurring: The evidence disclosing the surround ing circumstances indicates that the Trial Judge was clearly wrong in concluding that the marks were confusing. The onus is on the U.S. respondent to establish that the appellant is "not entitled" to use "BUGG OFF" in, association with its wares and that "BUGG OFF" as used with those wares is confusing or causes confusion with U.S. respondent's wares. Although it is not a crucial element, it is nevertheless not without significance that respondent adduced no evidence whatsoever of any actual confusion occurring in the market between the two marks. The U.S. respondent failed to discharge the onus imposed on it by section 20 to establish that "BUGG OFF" is a mark which is confusing with the mark "OFF!".
APPEAL. COUNSEL:
G. Henderson, Q.C., and K. Plumley for
appellant.
J. Kokonis, Q. C., for respondents.
SOLICITORS:
Gowling & Henderson, Ottawa, for appellant. Smart & Biggar, Ottawa, for respondents.
The following are the reasons for judgment delivered orally in English by
JACKETT C.J.: This is an appeal and cross- appeal from a judgment of the Trial Division in an action for infringement of a registered trade mark and for breach of section 7(b) of the Trade Marks Act, R.S.C. 1970, c. T-10, and a counterclaim for expungement of the trade mark registration.
The parties consist of the first respondent here- inafter referred to as the Canadian respondent, the second respondent hereinafter referred to as the U.S. respondent, and the appellant. The Canadian respondent is a wholly owned subsidiary of the U.S. respondent.
In 1957 the U.S. respondent was registered under the Trade Marks Act as the owner of the trade mark "OFF!" in respect of "a personal insect repellant" and the Canadian respondent was regis tered as a registered user of that trade mark.
From 1957 until 1975, the Canadian respondent sold in Canada insect repellant products, consist ing at various times of cans of liquids, sprays or foams intended for application to the user's skin, under the trade name of "oFF!" using its own name as manufacturer without any reference to the U.S. respondent as trade mark owner and, in the course of becoming the largest Canadian manufacturer and distributor of insect repellants, by the usual advertising and distributing methods, made its products, in fact, well known under that trade mark to the Canadian public.
The U.S. respondent has never used the trade mark "OFF!" in Canada and has sold no insect repellants in Canada.
In 1975, the appellant commenced to market in Canada, under the trade mark "BUGG OFF", an insect repellant product consisting of packages of small towels impregnated with an insect repellant
substance intended to be wiped on to the user's skin.
In August, 1975, the two respondents brought an action against the appellant in the Trial Divi sion for
(a) infringement of the registered trade mark,
(b) directing public attention to its insect repel lant and business in such a way as to cause or be likely to cause confusion in Canada between its wares and business and the wares and business of the Canadian respondent, and
(c) passing off its insect repellants as and for those of the Canadian respondent,
and claimed
(i) injunctions,
(ii) delivery up, and
(iii) damages or an accounting of profits.
By its defence, the appellant, inter alia,
(a) alleged that the trade mark registration was invalid, and
(b) denied infringement of the trade mark and denied allegations of directing public attention and passing off.
By a counterclaim, the appellant alleged that the trade mark registration was invalid
(a) in that the word "OFF" is clearly descriptive of an insect repellant contrary to section 12(1)(b) of the Trade Marks Act, and
(b) in that "OFF" is not and has not been distinctive contrary to section 18(1)(b) of the Trade Marks Act,
and asked that the trade mark registration be expunged.
After trial, by a judgment dated April 4, 1977, the Trial Division
(a) dismissed the counterclaim for expunge - ment,
(b) restrained the appellant from further infringing the U.S. respondent's registered trade mark and from selling in Canada an insect repellant in association with the trade mark
"BUGG OFF",
(c) ordered delivery up of literature, etc., con nected with the latter trade mark,
(d) ordered a reference as to damages or prof its, and
(e) awarded costs to the United States respond ent as against the appellant.
The appellant appealed; and the respondents cross-appealed "to the extent that the judgment did not grant relief" to either respondent under section 7(b) of the Trade Marks Act and to the extent that the judgment did not grant relief to the Canadian respondent.'
I have come to the conclusion that the appeal should be allowed with costs of the trial and the appeal payable by both respondents to the appel lant, that the judgment of the Trial Division should be set aside, that it should be ordered that the trade mark registration be struck out, and that the cross-appeal should be dismissed with costs. I have reached this result because
(a) I have concluded that the trade mark was not "distinctive" at the time that the counter claim was launched within the meaning of sec tion 18 (1) (b) of the Trade Marks Act, which reads:
18. (1) The registration of a trade mark is invalid if
(b) the trade mark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced; ...
' While, notwithstanding Rule 1203, the respondents filed a document purporting to "appeal and/or cross-appeal" and a separate court file was set up for the cross-appeal, in fact the appeal and cross-appeal have been treated as one proceeding. In my view, only one judgment should be given—on the appeal file—and a copy of that judgment and the reasons therefor should be placed on the second file.
when that provision is read with the definition of "distinctive" in section 2 of the Act, viz:
"distinctive" in relation to a trade mark means a trade mark that actually distinguishes the wares or services in asso ciation with which it is used by its owner from the wares or services of others or is adapted so to distinguish them;
and
(b) I have concluded that there was no evidence on which it could be held that the appellant, within the meaning of section 7(b) of the Trade Marks Act, directed attention to its "wares" or "business" in such a way as to cause or be likely to cause confusion in Canada between its "wares" or "business" and the "wares" or "busi- ness" of the Canadian respondent. 2
In view of those two conclusions it is not, in my view, necessary to consider the correctness of the learned Trial Judge's findings on the other matters dealt with by him or the merits of the other matters that were argued in this Court.
With reference to section 7(b), I do not think that it is necessary to discuss the evidence. It is largely of the kind that speaks for itself. I should say, however, that, if it were concluded that the evidence establishes a case that falls within the words of section 7(b), I should have thought that, having regard to the reasoning on which the deci sion in MacDonald v. Vapor Canada Limited' is founded, the claim based thereon might have to be dismissed on the ground that section 7(b) is ultra vires. As, however, we did not have full argument on that aspect of the matter, I should have been inclined, in that event, to offer the parties an opportunity of further argument with regard thereto before disposing of this branch of the case on that basis.
I turn finally to discuss my conclusion on the question of distinctiveness. I think it well to deal with the matter in two parts. In the first place, I find it helpful to consider what the situation would
2 While I can see that there is a tenable argument for the view that the one trade mark was confusing with the other (cf. section 6), I can find no basis in the evidence for holding that the appellant's wares or business were in fact passed off, intentionally or otherwise, as those of the Canadian respondent.
3 [1977] 2 S.C.R. 134.
be if the Canadian respondent were not a regis tered user of the trade mark. Then, I find it necessary to consider whether the fact that the Canadian respondent was such a registered user affects the result that would otherwise be reached.
On the first branch of the matter, the relevant portions of the Trade Marks Act would appear to be the following:
2. In this Act
"distinctive" in relation to a trade mark means a trade mark that actually distinguishes the wares or services in association with which it is used by its owner from the wares or services of others or is adapted so to distinguish them;
"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 manu factured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others,
(b) a certification mark,
(c) a distinguishing guise, or
(d) a proposed trade mark;
12. (1) Subject to section 13, a trade mark is registrable ...
18. (1) The registration of a trade mark is invalid if
(b) the trade mark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced; ..
These provisions must be read with section 19 which confers an exclusive right on the registered owner to the use of the registered trade mark (as such) and with section 20, which deems such right to be infringed by a "confusing trade mark".
In my view, looking only at these provisions, it is quite clear that the trade mark "OFF!" is not "distinctive" because, having regard to the way in which the Canadian mark has been developed by the Canadian respondent, that trade mark does not "actually distinguish" the wares in association with which it is used by its owner (the U.S. respondent) from the wares of others (which would include the Canadian respondent) nor is it "adapt- ed so to distinguish them". All the evidence would
appear to show that the message communicated to the Canadian public by "OFF!" is that the goods with which it is associated originate with the Canadian respondent and not the U.S. respondent. 4
At this point, I should say that, in my view, the provisions of the Trade Marks Act to which I have referred establish a system for protection of trade marks as an important means for protecting busi nessmen generally and the public from dishonest businessmen who would "defraud" the public by taking advantage of the good reputations of estab lished competitors. The basic scheme is the provid ing of legal protection to a person who has brought about a situation whereby a certain "mark" distin guishes his wares from the wares of others. He may register such a mark, and, having done so, he is entitled to protect it against infringers. It is, however, essential to the scheme that a person is only entitled to protection in respect of a mark if it does, in fact, distinguish his wares from the wares of others.
There are, however, commercially and legally acceptable exceptions to the strict application of such principles. For example, within limits a trade mark may be transferred. However, even though the provision that authorizes transfer (section 47) does not expressly say so, the validity of the regis tration of a trade mark after transfer is conditional on the trade mark being "distinctive" of the wares of the new owner.'
^ In my view, the use on the wares of the word "Johnson's", which is said to refer to the U.S. respondent, does not affect the matter inasmuch as the person clearly referred to by name on all the wares and advertisements in Canada is the Canadian respondent. However, if account is taken of the use of that word and its alleged reference to the U.S. respondent, the matter is not improved from the respondents' point of view. The result would then be that the public has been educated to associate the trade mark "OFF!" with both respondents and has not been educated to regard it as indicating the wares of the owner of the trade mark who is the U.S. respondent.
5 See Breck's Sporting Goods Co. Ltd. v. Magder [1976] 1 S.C.R. 527, and Wilkinson Sword (Canada) Limited v. Juda [1968] 2 Ex.C.R. 137.
The question that arises here is whether a new system of licensing of trade marks that was intro duced in 1953 by section 49 of the Trade Marks Act has created a system whereby a trade mark registration can be valid, notwithstanding section 18(1), even though at the time that the validity is attacked (as well as at all previous times) it "actu- ally distinguishes" the wares in association with which it is used by the licensee from the wares of others (and is adapted so to do) and does not "actually distinguish" the wares in association with which it is used by the owner of the trade mark from the wares of. others and is not adapted so to do.
As appears from a reading of section 49, it nowhere expresses, for the case where there is a registered user, such a fundamental change in the nature of trade mark as defined by the rest of the Act. The question is, therefore, whether such a consequence must be inferred from the provisions of that section.
The relevant portions of section 49 read:
49. (1) A person other than the owner of a registered trade mark may be registered as a registered user thereof for all or any of the wares or services for which it is registered.
(2) The use of a registered trade mark by a registered user thereof in accordance with the terms of his registration as such in association with wares or services manufactured, sold, leased, hired or performed by him, or the use of a proposed trade mark as provided in subsection 39(2) by a person approved as a registered user thereof, is in this section referred to as the "permitted use" of the trade mark.
(3) The permitted use of a trade mark has the same effect for all purposes of this Act as a use thereof by the registered owner.
(5) Concurrently with or at any time after the filing of an application for the registration of a trade mark, an application for the registration of a person as a registered user of the trade mark may be made to the Registrar in writing by such person and by the owner of the trade mark, and the applicants shall furnish the Registrar in writing with
(a) particulars of the relationship, existing or proposed, be tween them, including particulars of the degree of control by the owner over the permitted use which their relationship will confer;
(b) a statement of the wares or services for which registra tion is proposed;
(e) particulars of any conditions or restrictions proposed with respect to the characteristics of the wares or services, to the mode or place of permitted use, or to any other matter;
(d) information as to the proposed duration of the permitted use; and
(e) such further documents, information or evidence as may be required by the Registrar.
(7) The Registrar may approve a person as a registered user of the trade mark for any of the proposed wares or services, subject to any conditions or restrictions that he considers proper, if he is satisfied that in all the circumstances the use of the trade mark in association with such wares or services by the proposed registered user would not be contrary to the public interest.
Leaving aside for the moment the reference in section 49(2) to section 39(2), what section 49 does, as I understand it, is to provide for a con trolled system of licensing the use of a trade mark by a person other than the owner. This was obvi ously intended to provide for special situations where licensing could be permitted without detracting from the protection to the public pro vided for by the general scheme of the Trade Marks Act. For example, in the modern business world, there are groups of companies carrying on, under a single control, the same kind of business in many different countries. In some cases at least, these companies have their origin in the fact that, in the process of carrying its own particular type of product or service to other countries, the original company decided to do so by subsidiary companies which would use the trade mark or trade marks that it had developed and made known. In such kind of case, and probably others, there could be a licensing of the use of a trade mark to legal persons other than the one who has created and owned it without any departure from the funda mental idea of the function of a trade mark. In fact, such subsidiary companies may operate under the same control by the parent company as they would if they were merely branches of it. To meet the needs of such a case, and probably others, Parliament, it appears, saw fit to permit controlled licensing under which user of the trade mark by the licensee would not be a contravention of the right conferred by section 19 or fall foul of section 20. In effect, such a licensee would, with approval under the statute, be entitled, by the use of the trade mark, to indicate to the world that his goods
came from the owner of the trade mark. 6
Section 49(3) provides that the "permitted use of a trade mark has the same effect for all pur poses of this Act as a use thereof by the registered owner". For present purposes, the question is whether that provision not only permits user by the licensee without contravening the owner's rights but also, by implication, deems the actual effect of the user of the trade mark by the licensee under its own name (when that effect is to educate the public to associate the trade mark with the licen see's wares) to be what it would be if such user had been by the owner of the trade mark under his own name (in which case, the effect would have been to educate the public to associate the trade mark with the owner's wares). In my view, this question must be answered in the negative. The statute does not say any such thing expressly; and, in my view, Parliament should not be taken as completely changing, by inference, for this class of case, the character of a trade mark from that of a mark that distinguishes the owner's wares from the wares of others to a mark that distinguishes a licensee's wares from the wares of others.
However, there remains the question that I put to one side as to whether the cross-references between section 39(2) and section 49(2) constrain one to the conclusion to which, as I have indicated, I would not otherwise come.
This aspect of the matter requires some refer ence to another innovation in the 1953 statute [Trade Marks Act, S.C. 1952-53, c. 49]. Prior to 1953, as I understood counsel, registration systems were for trade marks that had, by user or other wise, already acquired the capacity to distinguish the owner's wares from the wares of others. The
6 The effect of a use of the trade mark by the registered owner is to distinguish the owner's wares from the wares of others and section 49(3) provides that the "permitted use" has the "same effect" for all purposes of the Act "as a use thereof by the registered owner".
1953 Act introduced the idea of applying for a "proposed trade mark" which, by definition, is "a mark that is proposed to be used by a person for the purpose of distinguishing ... wares ... manu factured ... by him from those manufactured ... by others". However, when an application for such a trade mark is allowed, the trade mark is not registered until the Registrar is supplied with a declaration of commencement of user. The rele vance of this to the problem in hand is that that commencement of user can, according to sections 39(2) and 49(2) be by a registered user.'
I find the problem so presented very difficult. A trade mark, by definition, distinguishes the own er's wares from the wares of others. On the other hand, the original use for trade mark purposes may, by virtue of sections 39(2) and 49(2), be by a licensee. Does it follow that Parliament, without saying so expressly, is providing, by necessary implication, that a message to the public that in fact indicates that wares associated with the trade mark originate with the licensee of the trade mark is to be deemed, as a matter of law, to be a message to the public, which it is not in fact, that wares associated with the trade mark originate with the owner of the trade mark?
I do not find any such necessary implication in the statute. In my view, the answer is to be found in what sort of user is authorized by section 49. As I read it, that section does not authorize a regis tered user to use, in association with wares, both the trade mark and his own name as manufacturer in such a way as to carry a message to the public in direct contradiction to the Register, which shows that the trade mark is used to distinguish
' Section 39(2) of the Trade Marks Act reads as follows:
39. ...
(2) When an application for registration of a proposed trade mark is allowed, the Registrar shall give notice to the applicant accordingly and shall register the trade mark and issue a certificate of its registration upon receipt of a declara tion that the applicant, his successor in title or a person approved as a registered user under subsection 49(7) has commenced the use of the trade mark in Canada in associa tion with the wares or services specified in the application.
the wares of the owner of the trade mark. As it seems to me, what must be contemplated is either
(a) user by the licensee of the trade mark with out any indication as to who is manufacturer,
(b) user by the licensee of the trade mark with an indication of the owner of the trade mark as manufacturer (which misrepresentation would be innocuous assuming that the controls contem plated by section 49 are properly applied), or
(c) user by the licensee of the trade mark with an indication that it is being used by a registered user and an indication of the name of the owner of the trade mark,
or some comparable use that is not inconsistent with the registration of the trade mark.
Whatever be the correct view as to the character of the "permitted use" under section 49, in my view, section 49 does not have the effect of deem ing the activities of the Canadian respondent (which in fact had the result of making the trade mark "OFF!" a mark that "actually distinguishes" the wares of the Canadian respondent from the wares of others) to have had the result of making that trade mark a mark that "actually distin guishes" the wares of the U.S. respondent from the wares of others. That being so, on the facts of this case, it is clear, in my view, that the registration of the trade mark "OFF!" is invalid by virtue of section 18(1)(b) of the Trade Marks Act.
â– 
The following are the reasons for judgment delivered orally in English by
URIE J.: I fully agree with the conclusions of the Chief Justice and the reasoning whereby he
reached those conclusions. However, I do not wish to leave this matter without first dealing, very briefly, with the respondents' contention that the trade marks "oFF!" and "BUGG OFF" are confus ing within the meaning of section 6(2) 8 of the Trade Marks Act.
Before doing so, however, I should point out that the learned Trial Judge found that the trade mark "OFF!" was not "clearly descriptive" of the nature and quality of the wares with which it was used and I am of the opinion that he was right in so finding.
However, he also found that the marks in ques tion were confusingly similar. Such a finding requires that regard shall be had to all the sur rounding circumstances including those set forth in section 6(5) 9 of the Act, not the least of which is the degree of resemblance in appearance or sound or in the ideas suggested by them. In my view, the voluminous evidence disclosing, as it does, the surrounding circumstances, indicates that the Trial Judge was clearly wrong in concluding that the marks were confusing.
8 6. ...
(2) The use of a trade mark causes confusion with another trade mark if the use of both trade marks in the same area would be likely to lead to the inference that the wares or services associated with such trade marks are manufactured, sold, leased, hired or performed by the same person, whether or not such wares or services are of the same general class.
9 6. ...
(5) In determining whether trade marks or trade naines are confusing, the court or the Registrar, as the case may be, shall have regard to all the surrounding circumstances including
(a) the inherent distinctiveness of the trade marks or trade names and the extent to which they have become known;
(b) the length of time the trade marks or trade names have
been in use;
(e) the nature of the wares, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trade marks or trade names in appearance or sound or in the ideas suggested by them.
Under section 20 10 of the Act, the onus is on the U.S. respondent, as owner of the mark, to establish that the appellant is "not entitled" to use "BUGG OFF" in association with its wares and further that "BUGG OFF" as used with those wares, namely a pre-treated insect repelling cloth, is "confusing" or "causes confusion" with the U.S. respondent's wares, namely a liquid, foam or spray insect repel lant marketed under its trade mark "oFF!".
Without reviewing the evidence here, suffice it to say that neither a visual examination of the packages, labelling or promotional material of each product upon which the respective marks appear, nor any reasonable aural appreciation of them nor the message or idea suggested by them, properly appreciated, could lead, in my opinion, to any confusion between them or the inference con templated by section 6(2). I may say that I reach this conclusion notwithstanding the fact that it is common ground that the product bearing the trade mark "OFF!" was widely distributed and sold in the market place for 18 years before "BUGG OFF" appeared therein in 1975.
Furthermore, for whatever weight it might be given bearing in mind the short period of time that the two products were sold concurrently in the market, and, while admittedly, in any event that it is not a crucial element, it is not entirely without significance that the respondents adduced no evi dence whatsoever of the occurrence of any actual confusion in the market between the two marks.
In my opinion, therefore, the U.S. respondent failed to discharge the onus imposed on it by
1 0 20. The right of the owner of a registered trade mark to its exclusive use shall be deemed to be infringed by a person not entitled to its use under this Act who sells, distributes or advertises wares or services in association with a confusing trade mark or trade name, but no registration of a trade mark prevents a person from making
(a) any bona fide use of his personal name as a trade name, or
(b) any bona fide use, other than as a trade mark,
(i) of the geographical name of his place of business, or
(ii) of any accurate description of the character or quality of his wares or services,
in such a manner as is not likely to have the effect of depreciat ing the value of the goodwill attaching to the trade mark.
section 20 to establish that "BUGG OFF" is a mark which is confusing with the mark "OFF!".
For these reasons, as well as those given by the Chief Justice, I would allow the appeal.
* * *
RYAN J. concurred.
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