A- I 02-87
Lin Trading Co. Ltd. (Appellant)
v.
CBM Kabushiki Kaisha also trading as Japan
CBM Corporation and Registrar of Trade Marks
(Respondents)
INDEXED AS: LIN TRADING CO. v. CBM KABUSHIKI KAISHA
(C.A.)
Court of Appeal, Urie, Stone and MacGuigan
JJ.—Toronto, October 3; Ottawa, October 14,
1988.
Trade marks — Registration — Appeal from trial judgment
upholding decision appellant not entitled to registration of
trade marks "Q & Q Design" and "Q and Q" for use in
association with watches — Foreign trade mark owner (corpo-
rate respondent) selling goods bearing mark to Canadian
wholesaler or distributor (appellant) — Whether such sales
amounting to use in light of phrase "in the normal course of
trade" in Trade Marks Act, s. 4(1) — Appeal dismissed — If
any part of chain from manufacturer to end user taking place
in Canada, there is use in Canada within s. 4.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Trade Marks Act, R.S.C. 1970, c. T-10, ss. 2, 4(1),
16(1)(a).
CASES JUDICIALLY CONSIDERED
APPLIED:
Manhattan Industries Inc. v. Princeton Manufacturing
Ltd. (1971), 4 C.P.R. (2d) 6 (F.C.T.D.).
DISTINGUISHED:
Mayborn Products Limited v. Registrar of Trade Marks,
[1984] 1 F.C. 107; (1983), 70 C.P.R. (2d) 1 (T.D.).
COUNSEL:
Roger T. Hughes, Q.C. and Donald M. Cam-
eron for appellant.
Joseph A. Day for respondents.
SOLICITORS:
Sim, Hughes, Dimock, Toronto, for appellant.
Cowling & Henderson, Ottawa, for CBM
Kabushiki Kaisha also trading as Japan CBM
Corporation.
The following are the reasons for judgment
rendered in English by
STONE J.: This is an appeal from the judgment
of Joyal J. in the Trial Division,' whereby he
rejected an appeal from a decision of a hearing
officer 2 acting pursuant to the Trade Marks Act,
R.S.C. 1970, c. T-10 to the effect that the appel
lant was not the person entitled to registration of
the trade marks "Q & Q Design" and "Q AND Q",
based upon asserted use since January, 1981 in
association with watches, clocks, time pieces and
timing devices.
The corporate respondent, csM Kabushiki
Kaisha (referred to hereinafter as "csM"), is a
subsidiary of another Japanese corporation, Citi
zen Tokei Kabushiki Kaisha, sometimes referred
to in the evidence as "Citizen Watch Company".
CBM's president created the "Q & Q Design"
trade mark in April of 1976, shortly after which it
filed an application for registration of that mark in
Japan. It has since sought registration of the mark
in sixty different countries, and has been success
ful in acquiring registration in a number of these
including the United States. The evidence shows
these watches are manufactured by the parent
corporation, that this mark is impressed on the
front dial and back case at the time of manufac
ture and that the name of the country of manufac
ture i.e. Japan, Korea or Hong Kong, is also
stamped on the back case at that time.
In the fall of 1980, CBM became interested in
entering the Canadian market. With the assistance
of its Japanese bankers and their Canadian corre
spondent, a contact was established with Micro-
sonic Digital Systems Ltd. of Toronto as a poten
tial distributor of the watches. This resulted in
CBM shipping an aggregate of 14 "Q & Q
I [1987] 2 F.C. 352; 14 C.P.R. (3d) 32 (T.D.).
2 CBM Kabushiki Kaisha v. Lin Trading Co. Ltd. (1985), 5
C.P.R. (3d) 27.
Watches" to Microsonic in December 1980 in
response to a request for samples and in Microson-
ic being invoiced in the aggregate of Yen 18,810.
However, no distributorship arrangement resulted.
CBM's initial contact with the appellant appears
to have been made by letter of October 18, 1980 in
which appears the following:
Our Q & Q branded watches have been produced by Citizen in
Japan and started to compete with HK made watches with
better quality than them. Until now, we have had a good
success in the U.S.A. and Europe.
That letter led to an exchange of telex messages in
which the appellant indicated interest in acting as
Canadian distributor as well as in the possibility of
establishing an assembly plant in Toronto. Sixty-
two "Q & Q Brand Watches" were sent to the
appellant in January 1981 for which CBM issued
an invoice in the aggregate of Yen 94,480. They
were received in Toronto on January 26, and were
paid for during the following month. This ship
ment included some digital watches individually
packaged in a vinyl pouch and an instructional
sheet featuring the "Q & Q" design trade mark and
IBM's business name. Other shipments followed
including one consisting of a very large number of
Q & Q watches that were sent out from Japan to
the appellant in March 1981, for which the appel
lant was invoiced Yen 4,222,200. That shipment
also included instructional sheets in respect of
digital watches, which sheets carried the "Q & Q"
design trade mark.
The broad question before the Trial Judge was
whether the appellant was entitled to registration
of the "Q & Q" design and "Q AND Q" trade
marks. In deciding as he did, the learned Judge
expressed concern that allowing the appellant to
succeed would be to endorse an attempt to appro
priate CBM'S property, something he regarded as
unconscionable having regard to the relationship
which existed between the parties in the months
leading up to the making of the applications. The
sum of his views seem well crystallized in the
following passage appearing at pages 5 and 6 of
his reasons for judgment (at pages 357-358):
I need to repeat again that the issue before me arises out of the
special relationships between the parties where not only were
contracts made to buy and sell Q & Q watches in Canada but
communications were exchanged with respect to the possibility
of appointing the appellant exclusive distributor of Q & Q
watches and of setting up a system for the assembly of watch
parts in Canada. I should doubt in such circumstances that the
appellant can successfully argue that the trade mark had not
been made known in Canada by any other person. Nor can the
appellant successfully establish that it is the person entitled to
registration. To find otherwise would be to gloss over the cloud
under which the appellant purported to adopt the trade mark in
the first place. To find otherwise would make a virtue of
questionable conduct and give legitimacy to what I consider to
be dubious commercial practice.
He concluded by fully approving the findings of
fact and the legal conclusions of the hearing offi
cer and by dismissing the appeal.
I agree that the case falls to be decided upon the
facts as viewed in light of the provisions of para
graph 16(1)(a) of the Act and of related provi
sions. That paragraph reads:
16. (1) Any applicant who has filed an application in accord
ance with section 29 for registration of a trade mark that is
registrable and that he or his predecessor in title has used in
Canada or made known in Canada in association with wares or
services is entitled, subject to section 37, to secure its registra
tion in respect of such wares or services, unless at the date on
which he or his predecessor in title first so used it or made it
known it was confusing with
(a) a trade mark that had been previously used in Canada or
made known in Canada by any other person;
The word "use" in relation to a trade mark is
defined in section 2 as meaning "any use that by
section 4 is deemed to be a use in association with
wares or services". The provisions of subsection
4(1) are relevant. They read:
4. (1) A trade mark is deemed to be used in association with
wares if, at the time of the transfer of property in or possession
of such wares, in the normal course of trade, it is marked on the
wares themselves or on the packages in which they are dis
tributed or it is in any other manner so associated with the
wares that notice of the association is then given to the person
to whom the property or possession is transferred.
The narrow issue thus becomes whether, as CBM
asserts, it "had ... previously used" the Q & Q
design mark "in Canada". It contends that the
sales made to Microsonic in December, 1980 and
to the appellant in January, 1981 established that
it was the first to use the mark in this country. The
appellant counters that these activities did not
amount to use in the sense required by the statute.
Much emphasis is placed on the phrase "in the
normal course of trade" appearing in subsection
4(1), the argument being that the only use made of
the mark in Canada was by the appellant itself
when it distributed Q & Q watches to chain stores
in Canada and, in consequence, agreed to be
bound to ultimate purchasers by written guaran
tees. The point was addressed as follows in para
graphs 20 and 24 of the written argument:
20. The Appellant's position it [sic] that because the Appellant
is the only entity whose name was presented to the Canadian
consumer when the Q & Q & Design watches were sold in the
normal course of trade in Canada, then it was the first and only
entity to "use" the trade mark Q & Q & Design in Canada as
defined in s. 4 of the Trade Marks Act and as such is entitled to
registration of the trade mark Q & Q & Design.
24. The Appellant was the entity that completed the chain of
transactions in the normal course of trade by selling the Q & Q
& Design watches to the consumers in Canada via retail stores.
It is the Appellant's position that until such a chain had been
completed, from manufacturer to end user, there was no trans
action in "the normal course of trade". It is the Appellant's
position that it is not proper to isolate one link in the chain to
determine who has used the trade mark. The chain in its
entirety must be examined.
It is not argued that a transfer of property or
possession did not occur in Canada when watches
were sold to Microsonic in December, 1980 and to
the appellant in January, 1981. The "Q & Q"
design mark was clearly marked on the watches
and appeared in accompanying material at that
time of these transfers. The question remains
whether these transfers were made "in the normal
course of trade" so as to constitute use of the mark
in Canada by cBM or, as the appellant contends,
that they were not so made.
With respect, I think the appellant's argument
proceeds on a mis -reading of the judgment which
is invoked to support it, namely, Manhattan
Industries Inc. v. Princeton Manufacturing Ltd.
(1971), 4 C.P.R. (2d) 6 (F.C.T.D.). At pages
16-17, Mr. Justice Heald (sitting in the Trial
Division) discussed the meaning of the phrase "in
the normal course of trade" in the following way:
I think that those words must surely mean that s. 4 contem
plates the normal course of trade as beginning with the manu
facturer, ending with the consumer and with a wholesaler and
retailer or one of them as intermediary. When the applicant
sold to the retailer and the retailer sold to the public, the public
came to associate applicant's mark with the HARNESS
HOUSE belt; s. 4 contemplates that the use between the
retailer and the public enures to the benefit of the manufactur
er and its use in Canada. In other words—if any part of the
chain takes place in Canada, this is "use" in Canada within the
meaning of s. 4. If this interpretation is correct, then the sale by
the retailers in Toronto and Montreal to the public of HAR
NESS HOUSE wares marked with applicant's trade mark is a
"use" in Canada and it matters not whether property or
possession passed to the retailer in the United States. [Empha-
sis added.]
The words I have underscored plainly show that
Mr. Justice Heald was not excluding from his
appreciation of the phrase "in the normal course of
trade" a sale by a foreign trade mark owner of
goods bearing his mark to a Canadian wholesaler
or distributor. This is precisely what occurred in
the present case. The watches were obviously sold
to Microsonic and to the appellant with a view to
advancing CBM'S legitimate business objective of
gaining access to the Canadian market, even
though that company was not directly involved in
sales beyond supplying the goods from Japan. I
simply cannot agree with the appellant's position
that sales "in the ordinary course of trade" can
exist only if shown to have occurred along the
entire chain referred to by Mr. Justice Heald,
ending with an ultimate consumer. As I have
already said, the Manhattan Industries case does
not appear to lay down any such requirement. In
my opinion, the Q & Q watches were sold to the
appellant "in the normal course of trade" and
resulted in the "use" by CBM of the Q & Q design
trade mark in Canada.
It is argued that a contrary conclusion was
arrived at by Cattanach J. in Mayborn Products
Limited v. Registrar of Trade Marks, [1984] 1
F.C. 107, at pages 118-119; (1983), 70 C.P.R.
(2d) 1 (T.D.), at page 11, but, with respect, I do
not agree. Unlike the case at bar, that decision did
not involve a sale by the foreign trade mark owner
to a Canadian wholesaler of wares impressed with
his mark. The sale into Canada was made by an
English subsidiary which was not registered to use
the trade mark in Canada, and resulted in a
finding that the foreign trade mark owner had not
used the mark in this country in the sense required
by the statute. That is the only point of the
decision and it renders the case entirely distin
guishable. On the other hand, if any of the words
of the learned Judge can be interpreted as requir
ing that the chain must remain intact throughout
its full length between the foreign supplier (the
trade mark owner) and the Canadian consumer in
order to constitute a sale by that supplier "in the
normal course of trade", I would not consider it to
be in accord with the principle laid down in the
Manhattan Industries case, which I accept as
correctly stating the law on the question.
In summary, I think the learned Trial Judge
correctly decided that the trade mark here in
question was previously used in Canada by CBM
within the meaning of paragraph 16(1)(a) of the
Act. That use came about when CBM sold its
watches, with the "Q & Q" mark impressed there
on and in accompanying material, to Microsonic in
December, 1980 and to the appellant in January,
1981. These sales, in my view, furnish clear evi
dence of use of the trade mark in Canada by CBM
"in the ordinary course of trade" and as such
constituted a "use" within the meaning of the Act.
For the foregoing reasons, I would dismiss this
appeal with costs.
URIE J.: I agree.
MACGUIGAN 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.