A-304-86
Asbjorn Horgard A/S (Appellant) (Plaintiff)
v.
Gibbs/Nortac Industries Ltd. (formerly known as
Northwest Tackle Manufacturing Limited) and
Gibbs Fishing Tackle Inc. (formerly known as
Gibbs Tool and Stamping Works Ltd.) (Respon-
dents) (Defendants)
INDEXED AS: ASBJORN HORGARD A/S v. GIBBS/NORTAC
INDUSTRIES LTD.
Court of Appeal, Urie, Stone and MacGuigan
JJ.—Toronto, February 10, 11 and 12; Ottawa,
March 16, 1987.
Trade marks — Expungement — Appeal against finding
Act s. 7(b) constitutionally invalid and cross-appeal against
finding of infringement — S. 7(b) valid as rounding out
regulatory scheme of Act — Scheme of Act to protect trade
marks from harmful misrepresentation — Purpose of s. 7(b)
to protect goodwill — Civil remedy provided therein and in s.
53 part of "overall plan of supervision" — Rational, function
al connection placing s. 7(b) within federal jurisdiction —
Appeal allowed, cross-appeal dismissed — Trade Marks Act,
R.S.C. 1970, c. T-10, ss. 6(2),(5), 7, 16(1)(a), 18(1), 53 —
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 52 —
The Trade Mark and Design Act of 1868, S.C. 1868, c. 55 —
Copyright Act, R.S.C. 1970, c. C-30.
Constitutional law — Distribution of powers — Validity of
s. 7(b) Trade Marks Act — Supreme Court of Canada decision
in MacDonald et al. v. Vapor Canada Ltd. not authority for
proposition s. 7 constitutionally invalid in its entirety — S.
7(b) valid as rounding out regulatory scheme of Act — S. 7(b)
having rational, functional connection to scheme of protection
envisaged by Parliament for registered and unregistered trade
marks — Scheme satisfying indicia of validity under "general
regulation of trade" branch of trade and commerce power
under s. 91(2) Constitution Act, 1867 — Trade Marks Act,
R.S.C. 1970, c. T-10, s. 7 — Constitution Act, 1867, 30 & 31
Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II, No. 51 (as am. by
Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Consti
tution Act, 1982, Item 1), s. 91(2),(22),(23).
This is an appeal against the decision of the Trial Judge
expunging the respondents' trade mark "Norse Silda" used in
association with fishing lures. The Trial Judge found that the
appellant, a manufacturer of fishing lures under the mark
"Stingsilda", had proven a case of passing off under paragraph
7(b) of the Trade Marks Act but held that provision to be ultra
vires the Parliament of Canada under subsection 91(2) of the
Constitution Act, 1867 pertaining to the "Regulation of Trade
and Commerce". The appeal challenges the finding of unconsti-
tutionality of paragraph 7(b) whereas the cross-appeal puts in
question the finding of infringement under that paragraph.
Held, the appeal should be allowed and the cross-appeal,
dismissed.
The argument on appeal focussed on the Supreme Court of
Canada decision in MacDonald et al. v. Vapor Canada Ltd. In
that case, the Court held, inter alia, that paragraph 7(e) of the
Trade Marks Act was ultra vires the Parliament of Canada on
the ground that it was totally unrelated to patents, copyrights,
trade marks and trade names. Contrary to the respondents'
argument, the MacDonald case does not demonstrate that
section 7 is constitutionally invalid in its entirety. The effect of
the MacDonald case is to support the constitutionality of
paragraph 7(b) "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" as observed by Laskin C.J.C. in
MacDonald.
The scheme of the Trade Marks Act satisfies all the indicia
of validity under the "general regulation of trade" branch of
the trade and commerce power of subsection 91(2) of the
Constitution Act, 1867. Those indicia were set out by Dickson
J. (as he then was) in the Supreme Court of Canada decision in
Attorney General of Canada v. Canadian National Transport,
Ltd. et al.: the presence of a national regulatory scheme, the
oversight of a regulatory agency (the Registrar of Trade
Marks), a concern with trade in general rather than with an
aspect of a particular business, the incapability of the provinces
to establish such a scheme, and that a failure to include one or
more provinces would jeopardize the scheme's operation in
other parts of the country. However, for any separate provision
to be constitutionally valid, it must be tied to the whole.
Paragraph 7(b) must have a "rational, functional connection"
to the trade marks scheme envisaged by Parliament.
The Trade Marks Act has traditionally been concerned with
the protection of all trade marks, whether registered or unregis
tered, from harmful misrepresentation. It provides in its section
53 broad remedies, including civil remedies. In paragraph 7(b)
Parliament has chosen to protect the goodwill associated with
trade marks. In this way, it "rounds out" the statutory scheme
of protection of all trade marks. The civil remedy which it
provides in conjunction with section 53 is "genuinely and bona
fide integral with the overall plan of supervision" as stated by
the Federal Court of Appeal in Attorney General of Canada v.
Québec Ready Mix Inc. It has a rational, functional connection
to the scheme envisaged by Parliament. It is therefore within
federal jurisdiction under subsection 91(2) of the Constitution
Act, 1867.
CASES JUDICIALLY CONSIDERED
APPLIED:
MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R.
134; (1976), 66 D.L.R. (3d) 1; Attorney General of
Canada v. Québec Ready Mix Inc., [1985] 2 F.C. 40;
(1986), 64 N.R. 209 sub nom. Rocois Construction Inc.
v. Quebec Ready Mix Inc. et al.; (1985), 8 C.P.R. (3d)
145 (C.A.); Attorney General of Canada v. Canadian
National Transport, Ltd. et al., [1983] 2 S.C.R. 206; 3
D.L.R. (4th) 16; (1983), 49 N.R. 241.
CONSIDERED:
Royal Doulton Tableware Limited v. Cassidy's Ltd.,
[1986] 1 F.C. 357; (1984), 1 C.P.R. (3d) 214 (T.D.).
REFERRED TO:
S. & S. Industries Inc. v. Rowell, [1966] S.C.R. 419;
Novopharm Ltd. v. Wyeth Ltd. (1986), 64 N.R. 144; 8
C.P.R. (3d) 448 (F.C.A.); Riello Canada, Inc. v. Lam-
bert (1986), 9 C.P.R. (3d) 324 (F.C.T.D.); Imperial Dax
Co., Inc. v. Masco!! Corp. Ltd. et al. (1978), 42 C.P.R.
(2d) 62 (F.C.T.D.); Motel 6, Inc. v. No. 6 Motel Ltd.,
[1982] 1 F.C. 638; (1981), 56 C.P.R. (2d) 44 (T.D.);
Seiko Time Canada Ltd. v. Consumers Distributing Co.
Ltd. (1980), 29 O.R. (2d) 221; 112 D.L.R. (3d) 500; 50
C.P.R. (2d) 14 (H.C.); City National Leasing Ltd. v.
General Motors of Canada Ltd. (1986), 54 O.R. (2d)
626; 28 D.L.R. (4th) 158; 9 C.P.R. (3d) 134 (C.A.);
BBM Bureau of Measurement v. Director of Investiga
tion and Research, [1985] 1 F.C. 173; (1984), 9 D.L.R.
(4th) 600; (1984), 52 N.R. 137 (C.A.); Multiple Access
Ltd. v. McCutcheon et al., [1982] 2 S.C.R. 161; 138
D.L.R. (3d) 1; (1982), 44 N.R. 181; Attorney-General
for Ontario v. Attorney-General for Canada, [1937]
A.C. 405 (P.C.); Oshawa Holdings Limited v. Fjord
Pacific Marine Industries Ltd. (1981), 36 N.R. 71; 55
C.P.R. (2d) 39 (F.C.A.).
COUNSEL:
R. E. Dimock and K. D. McKay for appellant
(plaintiff).
G. S. Clarke and D. A. Allsebrook for
respondents (defendants).
G. R. Garton for intervendr Attorney General
of Canada.
SOLICITORS:
Sim, Hughes, Dimock, Toronto, for appellant
(plaintiff).
Gordon S. Clarke, Toronto, for respondents
(defendants).
Deputy Attorney General of Canada for inter-
venor Attorney General of Canada.
EDITOR'S NOTE
The Executive Editor has chosen to abridge the
reasons for judgment herein. The reasons dealing
with the constitutionality of Trade Marks Act,
paragraph 7(b) are reported in full while a sum
mary has been prepared covering some 14 pages
of the decision with respect to the application of
the paragraph to the facts of this case.
The following are the reasons for judgment
rendered in English by
MACGUIGAN J.: This case puts in question both
the constitutionality and the proper application of
paragraph 7(b) of the Trade Marks Act, R.S.C.
1970, c. T-10 ("the Act").
The appelant Norwegian company, having been
engaged in the manufacture and sale of fishing
lures in Canada since 1969 under the trade mark
"Stingsilda", brought an action against the
respondents on September 19, 1980, for expunge -
ment of their trade mark "Norse Silda", registra
tion no. 216,708 in association with fishing lures
made, sold or distributed in Canada, and for other
relief. Collier J. on April 18, 1986 [(1986), 3
F.T.R. 37; 8 C.I.P.R. 232; 9 C.P.R. (3d) 341
(F.C.T.D.)], granted the expungement sought, and
also found that the appellant had proved a case of
passing off against the respondents under para
graph 7(b) of the Act, but held that this subsection
was ultra vires the Parliament of Canada under
subsection 91(2) of the Constitution Act, 1867 [30
& 31 Vict., c. 3 (U.K.) [R.S.C. 1970, Appendix II,
No. 5] (as am. by Canada Act 1982, 1982, c. 11
(U.K.), Schedule to the Constitution Act, 1982,
Item 1)] ("The Regulation of Trade and Com
merce"). The appeal challenges this holding of
ultra vires, whereas the cross-appeal puts in ques
tion the finding of an infringement of paragraph
7(b), if that paragraph is constitutional.
Section 7 of the Act is as follows:
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;
(e) 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 such wares or services; or
(e) do any other act or adopt any other business practice
contrary to honest industrial or commercial usage in Canada.
Since much of the argument on the appeal
centered on the Supreme Court of Canada deci
sion in MacDonald et al. v. Vapor Canada Ltd.,
[1977] 2 S.C.R. 134; (1976), 66 D.L.R. (3d) 1, it
will be necessary to look very closely at that case.
I
In the MacDonald case the appellant had worked
for the respondent in the heating equipment busi
ness for several years, but during this time set up a
company of his own. The respondent contended
that the appellant, in his own company, made use
of knowledge he had acquired as the respondent's
employee, and that he also used confidential infor
mation in breach of his contract of employment,
contrary to paragraph 7(e) of the Act.
Laskin C.J.C. delivered the reasons for judg
ment of the majority of the Court (5 Judges) at
pages 141-167 S.C.R.; 7-27 D.L.R.:
Section 7 of the Trade Marks Act is the first of five sections
of the Act (ss. 7 to 11) that are subsumed under the sub-title
"Unfair Competition and Prohibited Marks". It stands alone,
however, among those sections in not being concerned with
trade marks or trade names. It alone gives any substance to the
"Unfair Competition" portion of the sub-title ....
It is evident from a comparison of s. 7 of the present Trade
Marks Act and s. 11 of the Act of 1932 that the former has
expanded the acts proscribed by the latter and indeed has
added in s. 7(c) and (d) provisions not found in s. 11. Section
7(e) differs from its predecessor equivalent s. 11(c) in three
respects. It has added the words "do any other act" to what is
proscribed, it has introduced the disjunctive in place of the
conjunctive when referring to "honest industrial or commercial
usage" and it has added the qualifying words "in Canada".
There is, however, a more significant difference between the old
s. 11 and the present s. 7. There was no provision in the 1932
Act for civil enforcement of the proscriptions of s. 11 at the suit
of persons injured by their breach ....
I think it fair to look upon s. 7 as embodying a scheme, one
limited in scope perhaps but nonetheless embodying an array of
connected matters. I shall come later to what appeared to be a
fundamental underpinning of the respondent's position and that
of the Attorney-General for Canada, namely, that s. 7 or at
least s. 7(e) must not be construed in vacuo, but must itself be
brought into account as a segment or a piece of a tapestry of
regulation and control of industrial and intellectual property.
It was not disputed that the common law in the provinces
outside of Quebec and the Civil Code of Quebec governed the
conduct or aspects thereof now embraced by s. 7 and embraced
earlier by s. 11 of the Act of 1932. 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, is not included as it is in the
common law action: see Fleming on Torts (4th ed. 1971), at p.
623. Section 7(b) is a statutory statement of the common law
action of passing off, which is described in Fleming on Torts,
supra, at p. 626 as "another form of misrepresentation concern
ing the plaintiffs business ... which differs from injurious
falsehood in prejudicing the plaintiffs goodwill not by depreca
tory remarks but quite to the contrary by taking a free ride on
it in pretending that one's own goods or services are the
plaintiff's or associated with or sponsored by him". It differs
from injurious falsehood in that "it is sufficient that the
offensive practice was calculated or likely, rather than intend
ed, to deceive".
Section 7(e) is, in terms, an additional proscription to those
enumerated in subparagraphs (a) to (d) of s. 7. Its vagueness is
not, of course, a ground of constitutional invalidity, but I am
satisfied that it does have subject matter, as the facts of this
very case demonstrate. It would encompass breach of confi
dence by an employee by way of appropriating confidential
knowledge or trade secrets to a business use adverse to the
employer. So too, it would appear to be broad enough to cover
the fruits of industrial espionage ....
Overall, whether s. 7(e) be taken alone or, more properly, as
part of a limited scheme reflected by s. 7 as a whole, the net
result is that the Parliament of Canada has, by statute, either
overlaid or extended known civil causes of action, cognizable in
the provincial courts and reflecting issues falling within provin
cial legislative competence. In the absence of any regulatory
administration to oversee the prescriptions of s. 7 (and without
coming to any conclusion on whether such an administration
would in itself be either sufficient or necessary to effect a
change in constitutional result), I cannot find any basis in
federal power to sustain the unqualified validity of s. 7 as a
whole or s. 7(e) taken alone. It is not a sufficient peg on which
to support the legislation that it applies throughout Canada
when there is nothing more to give it validity.
The cases to which I have referred indicate some association
of s. 7(a), (b) and (d) with federal jurisdiction in relation to
patents and copyrights arising under specific heads of legisla
tive power, and with its jurisdiction in relation to trade marks
and trade names, said to arise (as will appear later in these
reasons) under s. 91(2) of the British North America Act. If,
however, this be enough to give a limited valid application to
those subparagraphs it would not sweep them into federal
jurisdiction in respect of other issues that may arise thereunder
not involving matters that are otherwise within exclusive feder
al authority. Certainly, it would not engage s. 7(e) which, as
interpreted in the cases which have considered it, does not have
any such connection with the enforcement of trade marks or
trade names or patent rights or copyright as may be said to
exist in s. 7(a), (b) and (d). Even if it be possible to give a
limited application to s. 7, in respect of all its subparagraphs, to
support existing regulation by the Parliament of Canada in the
fields of patents, trade marks, trade names and copyright, the
present case falls outside of those fields because it deals with
breach of confidence by an employee and appropriation of
confidential information.
It was emphasized again and again by counsel for the
respondent that s. 7(e) deals with predatory practices in compe
tition, in a competitive market, that it postulates two or more
aspirants or competitors in business and that it involves misap
propriation and a dishonest use, in competition, of information
or documents so acquired. This may equally be said of the tort
of conversion where it involves persons in business or in compe
tition. The fact that Parliament has hived off a particular form
of an existing tort or has enlarged the scope of the liability does
not determine constitutionality. The relevant questions here are
whether the liability is imposed in connection with an enterprise
or an activity, for example, banking or bills of exchange, that is
itself expressly within federal legislative power; or, if not,
whether the liability is dealt with in such a manner as to bring
it within the scope of some other head of federal legislative
power.
This depends not only on what the liability is, but as well on
how the federal enactment deals with its enforcement. What is
evident here is that the predatory practices are not under
administrative regulation of a competent federally-appointed
agency, nor are they even expressly brought under criminal
sanction in the statute in which they are prohibited. It is, in my
opinion, difficult to conceive them in the wide terms urged upon
the Court by the respondent and by the Attorney-General of
Canada when they are left to merely private enforcement as a
private matter of business injury which may arise, as to all its
elements including damage, in a small locality in a Province or
within a Province. I do not see any general cast in s. 7(e) other
than the fact that it is federal legislation and unlimited (as such
legislation usually is) in its geographic scope. Indeed, the very
basis upon which s. 7(e) is analyzed by the respondent, namely,
that it postulates two or more competitors in business, drains it,
in my opinion, of the generality that would have been present if
the legislation had established the same prescriptions to be
monitored by a public authority irrespective of any immediate
private grievance as to existing or apprehended injury.
No attack has been made on the Trade Marks Act as a whole,
and the validity of its provisions in so far as they deal with
trade marks is not in question. Since s. 7(e) is not a trade mark
provision, its inclusion in the Trade Marks Act does not stamp
it with validity merely because that Act in its main provisions is
quantitatively unchallenged. 1 come back to the question
whether s. 7, and particularly s. 7(e), can stand as part of the
scheme of the Trade Marks Act and other related federal
legislation. If it can stand alone, it needs no other support; if
not, it may take on a valid constitutional cast by the context
and association in which it is fixed as complementary provision
serving to reinforce other admittedly valid provisions.
Having regard to the way in which the issue of validity came
to this Court, I think the proper approach is to inquire whether
s. 7(e), taken alone, can be supported as valid federal legisla
tion, and, if not, whether it can be supported as part of a
scheme of legislative control that Parliament may establish. In
this connection I would not characterize the Trade Marks Act
as the Federal Court of Appeal did in associating ss. 7 to 11 of
the Act as representing "a set of general rules applicable to all
trade and commerce in Canada, including a statutory version of
the common law rule against passing off'. I have already noted
that ss. 8 to 11 belong to trade mark enforcement, and if we are
left with s. 7 to represent general rules applicable to all trade
and commerce in Canada, the generality resides only in the fact
that s. 7 has no geographic limitation. This is the beginning of
the problem not the end.
I do not find anything in the case law on s. 91(2) that
prevents this Court, even if it would retain a cautious concern
for stare decisis, from taking the words of the Privy Council in
the Parsons case, previously quoted, as providing the guide or
lead to the issue of validity that arises here. I think the Federal
Court of Appeal was correct in doing so, but 1 do not agree
with its use of the Parsons criteria to sustain s. 7(e). I repeat
the relevant sentence in the Parsons case:
The words "regulation of trade and commerce" ... would
include political arrangements in regard to trade requiring
the sanction of Parliament, regulation of trade in matters of
interprovincial concern, and it may be that they would
include general regulations of trade affecting the whole
dominion.
It is the last mentioned category that is to be considered here. I
take it as it is phrased, or as paraphrased by Duff C.J. in the
Natural Products Marketing Act reference ([1936] S.C.R.
398), at p. 412 where he spoke of "general regulations of trade
as a whole or regulations of general trade and commerce within
the sense of the judgment in Parsons case".
The plain fact is that s. 7(e) is not a regulation, nor is it
concerned with trade as a whole nor with general trade and
commerce. In a loose sense every legal prescription is regulato
ry, even the prescriptions of the Criminal Code, but I do not
read s. 91(2) as in itself authorizing federal legislation that
merely creates a statutory tort, enforceable by private action,
and applicable, as here, to the entire range of business relation
ships in any activity, whether the activity be itself within or
beyond federal legislative authority. If there have been cases
which appeared to go too far in diminution of the federal trade
and commerce power, an affirmative conclusion here would, in
my opinion, go even farther in the opposite direction.
What is evident here is that the Parliament of Canada has
simply extended or intensified existing common and civil law
delictual liability by statute which at the same time has pre
scribed the usual civil remedies open to an aggrieved person.
The Parliament of Canada can no more acquire legislative
jurisdiction by supplementing existing tort liability, cognizable
in provincial Courts as reflective of provincial competence, than
the provincial legislatures can acquire legislative jurisdiction by
supplementing the federal criminal law ....
One looks in vain for any regulatory scheme in s. 7, let alone
s. 7(e). Its enforcement is left to the chance of private redress
without public monitoring by the continuing oversight of a
regulatory agency which would at least lend some colour to the
alleged national or Canada-wide sweep of s. 7(e). The provision
is not directed to trade but to the ethical conduct of persons
engaged in trade or in business, and, in my view, such a
detached provision cannot survive alone unconnected to a gen
eral regulatory scheme to govern trading relations going beyond
merely local concern. Even on the footing of being concerned
with practices in the conduct of trade, its private enforcement
by civil action gives it a local cast because it is as applicable in
its terms to local or intraprovincial competitors as it is to
competitors in interprovincial trade.
It is said, however, that s. 7, or s. 7(e), in particular, may be
viewed as part of an overall scheme of regulation which is
exemplified by the very Act of which it is a part and, also, by
such related statutes in the industrial property field as the
Patent Act, R.S.C. 1970, c. P-4, the Copyright Act, R.S.C.
1970, c. C-30 and the Industrial Design Act, R.S.C. 1970, c.
I-8.
The Trade Marks Act and the Patent Act, as the keystones
of the arch, are characterized by public registers and adminis
trative controls which are not applied in any way to s. 7. This is
also true of copyright legislation but, of course, both patents
and copyrights are expressly included in the catalogue of
enumerated federal powers and the exclusive federal control
here excludes any provincial competence. That is not so in the
case of unfair competition as it is dealt with in s. 7 of the Trade
Marks Act. Trade mark legislation (and industrial design
legislation, also providing for a registration system, would come
under the same cover) has been attributed to the federal trade
and commerce power in a cautious pronouncement on the
matter by the Privy Council in Attorney-General of Ontario v.
Attorney-General of Canada ([1937] A.C. 405). That case,
which is relied on here by the respondent and by the Attorney-
General of Canada, was concerned with certain provisions of
the Dominion Trade and Industry Commission Act, 1935
(Can.), c. 59 (repealed by 1949 (Can. 2nd Bess.), c. 31, s. 9).
The Act provided for a national mark, Canada Standard or
C.S., which was vested in the Crown in right of Canada, and
which could be applied to goods which met the requirements
for its use established by the legislation. No one was compelled
to use it even if the standards for its use were met. It was a
form of non-compulsory regulation, inviting a sanction only if
the mark was used without satisfying the qualifying conditions.
In the course of sustaining this aspect of the Act, the Privy
Council took the opportunity to comment on the validity of
existing federal trade marks legislation saying (at p. 417) that
"no one has challenged the competence of the Dominion to pass
such legislation. If challenged, one obvious source of authority
would appear to be the class of subjects enumerated in s. 91(2),
the regulation of trade and commerce".
s. 7 has not only [not] been focussed on interprovincial or
external trade but has not been brought under a regulatory
authority in association with the scheme of public control
operating upon trade marks. To refer to trade mark regulation
as a scheme for preventing unfair competition and to seek by
such labelling to bring s. 7 within the area of federal compe
tence is to substitute nomenclature for analysis.
The Chief Justice went on to hold that section 7
cannot be supported as federal legislation in imple
mentation of an obligation assumed by Canada
under an international treaty or convention, in the
absence of an express declaration in the Act that
either the whole Act or section 7 was so enacted.
He then concluded, at pages 172-173 S.C.R.;
31-32 D.L.R., with a final summation of his
analysis:
The position which I reach in this case is this. Neither s. 7 as
a whole, nor section 7(e), if either stood alone and in associa
tion only with s. 53, 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 legisla
tive 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 opinion, however (and here I
draw upon the exposition of s. 7(e) in the Eldon Industries
case), 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 an effect under the
preceding subparagraphs of s. 7. In any event, in the present
case the facts do not bring into issue any question of patent,
copyright or trade mark infringement or any tortious dealing
with such matters or with trade names. There is here merely an
alleged breach of contract by a former employee, a breach of
confidence and a misappropriation of confidential information.
It is outside of federal competence to make this the subject of a
statutory cause of action.
The three concurring Judges came to the same
conclusions with respect to justification of the
federal legislation. Their total commentary on the
trade and commerce issue is as follows (de Grand -
pré J., at pages 175 S.C.R.; 34 D.L.R.):
As to the trade and commerce power, I share the view that the
facts of this case do not permit its application, the contract
between the individual appellant and respondent being of a
private nature and involving essentially private rights.
After the MacDonald decision it might be hard
to argue that paragraph 7(e) had any constitution
al validity, but it would appear that the remaining
paragraphs of section 7 were not found unconstitu
tional by the Chief Justice.
The respondents argued that, in his final sum
mation, where Chief Justice Laskin referred to
section 7 as being "nourished" for federal legisla
tive purposes, this is nourishment short of actual
constitutional validity, and that if read with the
qualification "if limited in this way" contained in
the next sentence, it would be seen to be condition
al. In other words, they contended that the Chief
Justice is to be interpreted as setting out guide-
posts for Parliament as to how it might in a future
reenactment legitimize section 7 apart from para
graph 7(e), but that the whole of his reasons for
judgment demonstrate that the present section 7 in
its totality is ultra vires Parliament.
I find myself unable to accept such a strained
interpretation of the late Chief Justice's final sum
mation. To my mind, his use of the present tense is
decisive against the respondents' argument: "Sec-
tion 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"
(emphasis added). I believe that a close reading of
the Chief Justice's overall analysis will also sup
port the constitutionality of section 7 (apart from
paragraph 7(e)) when applied to "round out" the
regulatory scheme of the Act.
The Attorney General of Canada as intervenor
drew the Court's attention to three distinct lines of
judicial thought in the MacDonald case. First,
neither paragraph 7(e) nor section 7 as a whole
can be sustained as standing alone (at pages 165
S.C.R.; 25-26 D.L.R.):
One looks in vain for any regulatory scheme in s. 7, let alone
s. 7(e). Its enforcement is left to the chance of private redress
without public monitoring by the continuing oversight of a
regulatory agency which would at least lend some colour to the
alleged national or Canada-wide sweep of s. 7(e). The provision
is not directed to trade but to the ethical conduct of persons
engaged in trade or in business, and, in my view, such a
detached provision cannot survive alone unconnected to a gen
eral regulatory scheme to govern trading relations going beyond
merely local concern. Even on the footing of being concerned
with practices in the conduct of trade, its private enforcement
by civil action gives it a local cast because it is as applicable in
its terms to local or intraprovincial competitors as it is to
competitors in interprovincial trade.
Second, neither paragraph 7(e) nor section 7 as a
whole can be regarded as valid as part of an
overall scheme relating to unfair competition
beyond the domain of patents and trade marks (at
pages 167 S.C.R.; 27 D.L.R.):
s. 7 has not only [not] been focussed on interprovincial or
external trade but has not been brought under a regulatory
authority in association with the scheme of public control
operating upon trade marks. To refer to trade mark regulation
as a scheme for preventing unfair competition and to seek by
such labelling to bring s. 7 within the area of federal compe
tence is to substitute nomenclature for analysis.
Third, paragraphs 7(a)-7(d) are constitutionally
valid in so far as they merely round out the trade
mark scheme of the Act, because this is not an
expansion of federal jurisdiction but merely a com
pletion of an otherwise incomplete circle of juris
diction. Hence the Court's favorable reference to
its previous decision in the S. & S. Industries case
[S. & S. Industries Inc. v. Rowell, [1966] S.C.R.
419] (at pages 156 S.C.R.; 18 D.L.R.):
The Court in the S. & S. Industries case did not pronounce
upon s. 7(e), and its concern with damages under s. 7(a) was in
the context of a patent issue, and hence in respect of a matter
on which Parliament is expressly authorized to legislate.
The Chief Justice referred again to this "limited
validity" concept, at pages 157 S.C.R.; 19 D.L.R.:
The cases to which I have referred indicate some association
of s. 7(a), (b) and (d) with federal jurisdiction in relation to
patents and copyrights arising under specific heads of legisla
tive power, and with its jurisdiction in relation to trade marks
and trade names, said to arise (as will appear later in these
reasons) under s. 91(2) of the British North America Act. If,
however, this be enough to give a limited valid application to
those subparagraphs it would not sweep them into federal
jurisdiction in respect of other issues that may arise thereunder
not involving matters that are otherwise within exclusive feder
al authority. Certainly, it would not engage s. 7(e) which, as
interpreted in the cases which have considered it, does not have
any such connection with the enforcement of trade marks or
trade names or patent rights or copyright as may be said to
exist in s. 7(a), (b) and (d). Even if it be possible to give a
limited application to s. 7, in respect of all its subparagraphs, to
support existing regulation by the Parliament of Canada in the
fields of patents, trade marks, trade names and copyright, the
present case falls outside of those fields because it deals with
breach of confidence by an employee and appropriation of
confidential information.
The "limited validity" of section 7 here referred to
fits in also, of course, with the apparent meaning
of the Chief Justice's final summation.
I am persuaded that this is the correct interpre
tation of the majority's reasons for judgment in the
MacDonald case. It alone explains all parts of
those reasons. It is also consistent both with
Supreme Court precedent and with principle, as
will be further explored.
Moreover, it is in accord with the view this
Court took in Novopharm Ltd. v. Wyeth Ltd.
(1986), 64 N.R. 144, at page 149; 8 C.P.R. (3d)
448 (C.A.), at page 454, that the issue is still open,
and with that taken by Strayer J. in Riello
Canada, Inc. v. Lambert (1986), 9 C.P.R. (3d)
324 (F.C.T.D.), at page 340, and by Walsh J. in
Imperial Dax Co., Inc. v. Mascoll Corp. Ltd. et al.
(1978), 42 C.P.R. (2d) 62 (F.C.T.D.), at page 64.
It is not in accord with that taken by Addy J. in
Motel 6, Inc. v. No. 6 Motel Ltd., [ 1982] 1 F.C.
638, at page 676; (1981), 56 C.P.R. (2d) 44
(T.D.), at pages 77-78, by Holland J. in Seiko
Time Canada Ltd. v. Consumers Distributing Co.
Ltd. (1980), 29 O.R. (2d) 221; 112 D.L.R. (3d)
500; 50 C.P.R. (2d) 147 (H.C.), or by the learned
Trial Judge in the case at bar.
In sum, the effect of the MacDonald case, in my
opinion, is that paragraph 7(b) is intra vires of the
Parliament of Canada, "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".
However, since this is a dictum of the Chief
Justice rather than the ratio decidendi of the case,
the matter must be looked at more closely in
relation to precedent and principle.
II
This Court in Attorney General of Canada v.
Québec Ready Mix Inc., [1985] 2 F.C. 40; (1986),
64 N.R. 209 sub nom. Rocois Construction Inc. v.
Quebec Ready Mix Inc. et al.; (1985), 8 C.P.R.
(3d) 145 (C.A.), since followed by the Ontario
Court of Appeal in City National Leasing Ltd. v.
General Motors of Canada Ltd. (1986), 54 O.R.
(2d) 626; 28 D.L.R. (4th) 158; 9 C.P.R. (3d) 134,
in upholding under the federal trade and com
merce power the civil remedy in section 31.1 of the
Combines Investigation Act [R.S.C. 1970, c.
C-23] for loss or damage as a result of an offence
in relation to competition, applied the reasoning of
Dickson J. (as he then was) in Attorney General of
Canada v. Canadian National Transport, Ltd. et
al., [1983] 2 S.C.R. 206; 3 D.L.R. (4th) 16;
(1983), 49 N.R. 241, interpreting the trade and
commerce power, as it had also done in BBM
Bureau of Measurement v. Director of Investiga
tion and Research, [1985] 1 F.C. 173; (1984), 9
D.L.R. (4th) 600; (1984), 52 N.R. 137 (C.A.).
Dickson J. there enumerated five possible
indicia of validity under the general regulation of
trade branch of the trade and commerce power, at
pages 267-268 S.C.R.; 62 D.L.R.; 276-277 N.R.:
The line of demarcation is clear between measures validly
directed at a general regulation of the national economy and
those merely aimed at centralized control over a large number
of local economic entities ... .
In approaching this difficult problem of characterization it is
useful to note the remarks of the Chief Justice in MacDonald v.
Vapor Canada Ltd. in which he cites as possible indicia for a
valid exercise of the general trade and commerce power the
presence of a national regulatory scheme, the oversight of a
regulatory agency and a concern with trade in general rather
than with an aspect of a particular business. To this list I would
add what to my mind would be even stronger indications of
valid general regulation of trade and commerce, namely (i) that
the provinces jointly or severally would be constitutionally
incapable of passing such an enactment and (ii) that failure to
include one or more provinces or localities would jeopardize
successful operation in other parts of the country.
The above does not purport to be an exhaustive list, nor is the
presence of any or all of these indicia necessarily decisive ....
Although neither exhaustive as a group nor
necessary individually, these five criteria will be
extremely helpful, and probably decisive, with
respect to the constitutionality of an overall statu
tory scheme, but it will still be requisite for any
separate statutory provision to be tied to the whole
for it to be constitutionally valid. The character of
this link is spelled out, again by Dickson J., in
Multiple Access Ltd. v. McCutcheon et al., [1982]
2 S.C.R. 161, at page 183; 138 D.L.R. (3d) 1, at
page 18; (1982), 44 N.R. 181, at page 202, as "a
rational, functional connection". It is on these
bases, then, that paragraph 7(b) of the Act here
must be judged.
Parliament's authority to legislate with respect
to trade marks is not explicitly set out in section 91
of the Constitution Act, 1867 as it is with respect
to "Patents of Invention and Discovery" (subsec-
tion 91(22)) and "Copyrights" (subsection
91(23)). It has, however been accepted as a pri
mary deduction from subsection 91(2) at least
since Lord Atkin's comment in Attorney-General
for Ontario v. Attorney-General for Canada,
[1937] A.C. 405 (P.C.), at page 417:
No one has challenged the competence of the Dominion to pass
such [trade mark] legislation. If challenged, one obvious source
of authority would appear to be the class of subjects enumer
ated in s. 91 (2), the Regulation of trade and commerce ...
All of the criteria of Chief Justice Dickson are
verified in the Act: a national regulatory scheme,
the oversight of the Registrar of Trade Marks, a
concern with trade in general rather than with an
aspect of a particular business, the incapability of
the provinces to establish such a scheme, and the
necessity for national coverage. The scheme pro
vides in section 53 for broad remedies, including
civil remedies:
53. Where it is made to appear to a court of competent
jurisdiction that any act has been done contrary to this Act, the
court may make any such order as the circumstances require
including provision for relief by way of injunction and the
recovery of damages or profits, and may give directions with
respect to the disposition of any offending wares, packages,
labels and advertising material and of any dies used in connec
tion therewith.
Indeed, from its inception in 1868 the Act has
always made provisions for a civil remedy: see
section 12 of The Trade Mark and Design Act of
1868, S.C. 1868, c. 55.
None of this, not even the civil remedy (in any
event, analogous to that upheld in the Attorney
General of Canada v. Québec Ready Mix Inc.
case, supra) is controversial. 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 page 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 con
nection of a business, the attractive force which brings in
custom, and the one thing which distinguishes an old-estab
lished 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 enforce
ment 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 Copy
right Act [R.S.C. 1970, c. C-30], 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 "genu-
inely 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 harm
ful misrepresentations.
In my view, paragraph 7(b) is clearly within
federal constitutional jurisdiction under subsection
91(2) of the Constitution Act, 1867.
III
EDITOR'S NOTE
It was urged by the respondents in their cross-
appeal that the phrase "would be likely to lead" in
subsection 6(2) of the Act means that confusion
has to be probable and that the evidence had not
demonstrated that there was more than a 50%
chance of confusion among buyers. That effect
could not be given to this argument was clear in
view of the analysis of Heald J. in the leading
case Oshawa Holdings Limited v. Fjord Pacific
Marine Industries Ltd. (1981), 36 N.R. 71; 55
C.P.R. (2d) 39 (F.C.A.). The test was not an
empirical one. The statute deals not with what has
happened but rather with the inference that would
likely be drawn if the marks were used in the
same area. So long as there was some evidence
of actual confusion, that would support an infer
ence of the likelihood of confusion regardless of
the evidence on the other side. In the instant
case, it had been found by the Trial Judge that all
five kinds of surrounding circumstances men
tioned in subsection 6(5) were present. In addi
tion, the packaging and get-up used by the
respondents were found to be confusing.
A further argument was that under paragraph
16(1)(a) only the circumstances prevailing at the
date of first use were to be considered. It was
submitted that Collier J. had erred in taking into
account a subsequent form of packaging. But His
Lordship had already concluded, on the basis of
subsection 6(5) considerations, that a likelihood
of confusion existed and it was only then that he
looked at the later packaging and actual confu
sion on the part of retail customers.
Finally, it was argued that there was no evi
dence that the respondents' mark was not, under
subsection 18(1), distinctive of its owner or that it
had been abandoned on the day the action was
commenced. The evidence was that in 1977 the
respondent, Gibbs, had ceased using its mark
which was thereafter utilized by Northwest
Tackle. The Judge accordingly concluded that
from 1977 the trade mark was no longer distinc
tive of Gibbs' wares. Although Gibbs was a whol-
ly-owned subsidiary of Gibbs/Northwest Tackle,
the fact that one company controls another is
insufficient to establish that the controlled com
pany carries on business as agent of the control-
ling company. There was evidence to support the
finding as to abandonment.
IV
I would therefore dismiss the cross-appeal in its
entirety and uphold the judgment of the learned
Trial Judge that the entry on the Register of
Trade Marks, No. 216,708, presently in the name
of Gibbs/Nortac Industries Ltd., be struck out.
However, I would allow the appeal and set aside
the judgment of the Trial Judge that the appel
lant's prayer for relief except in relation to
expungement be denied.
Under section 52 of the Federal Court Act
[R.S.C. 1970 (2nd Supp.), c. 10] which allows this
Court to give the judgment the Trial Judge should
have given, in his amplitude of powers under sec
tion 53 of the Trade Marks Act, I would grant as
against both respondents:
(a) a declaration that the respondents, at the ma
terial times, have contravened paragraph 7(b) of
the Act by using the trade mark "Norse Silda"
which is confusingly similar to "Stingsilda";
(b) an injunction restraining the use of the trade
mark "Norse Silda" or any trade mark confusingly
similar to "Stingsilda";
(c) a declaration that the respondents have con
travened paragraph 7(b) of the Act by using pack
aging and get-up as exemplified by Trial Exhibits
4D and E which are confusingly similar to the
packaging and get-up of Trial Exhibit 4F of the
appellant;
(d) an injunction restraining the use of packaging
and get-up as exemplified by Trial Exhibits 4D
and E respectively or any package and get-up
confusingly similar to the appellant's;
(e) damages or an accounting of profits, at the
election of the appellant;
(f) delivery up to the appellant or, in the alterna
tive, destruction of all packaging, labelling or
other material in the possession, custody or control
of the respondents that would offend the injunc
tions in (b) and (d) supra.
The appellant should have costs both on the
appeal and on the cross-appeal, as well as in the
Court below.
URIE J.: I agree.
STONE J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.