Passing off in Canadian law

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In Canada, passing off is both a common law tort and a statutory cause of action under the Canadian Trade-marks Act referring to the deceptive representation or marketing of goods or services by competitors in a manner that confuses consumers. The law of passing off protects the goodwill of businesses by preventing competitors from passing off their goods as those of another.

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The protection afforded by the law of passing off protects only the association between a product and its producer and not to the product itself - primarily, it protects a producer's investment in making a product or service distinguishable in the marketplace through the use of distinctive features such as marks, letters, advertising material or slogans, colours, and sounds.

Basis of passing off claims

Common law tort of passing off

As a common law action, the tort of passing off was developed by courts to protect a plaintiff from harm to their business caused by unfair competition through deceptive marketing or representation. [1] It also protects the public at large by enabling consumers to make informed choices about goods available on the market. [2]

Statutory action under the Trade-marks Act

Section 7(b) and 7(c) of the Trade-marks Act provides a statutory cause of action parallel to the common law tort of passing off. It can be asserted by a plaintiff whether or not a mark in question has been registered. In particular, the Act states:

7. No person shall ...

(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another;
(c) pass off other wares or services as and for those ordered or requested; [3]

Elements of passing off

Despite their different origins, both the common law and statutory action for passing off share the same general legal analysis. [4] The Supreme Court of Canada held in Ciba-Geigy Canada Ltd v Apotex Inc [5] that there are three necessary elements in a passing off action:

  1. The existence of goodwill,
  2. Deception of the public due to a misrepresentation, and
  3. Actual or potential harm to the plaintiff

Existence of goodwill

The first element requires a plaintiff establish that its wares, services or business enjoy a reputation or goodwill in the minds of consumers, that consumers directly associate the plaintiff's wares with a distinctive selling, marketing or identifying feature and that purchasers rely on the feature to distinguish the plaintiff's wares from competitor's wares. [6]

At common law, the nature or form of a distinctive feature is virtually unrestricted: name, slogan, logo, smell, personality, shape, [7] packaging, visual imagery, none of which necessarily have to be a trademark. At this stage of the analysis courts instead focus on the existence and strength of the reputation and the potential for cognitive associations between reputation, feature and wares.

Passing off did not develop to protect monopolies in respect of products but of guises, get-ups, names and symbols which identify the distinctiveness of the source. [8]

Deception due to misrepresentation

The second element, a misrepresentation that leads to confusion, need not arise from willful misrepresentation or deceit. [9] It may also arise from careless or negligent misrepresentation. [10] The analysis at this stage involves assessing visual and auditory resemblances between the two distinctive features, [11] geographical overlap of reputations, [12] and the degree to which the plaintiff and defendant directly compete in a market or trade. [13]

In Ciba-Geigy, the Supreme Court recognized that the evaluation of the likelihood of confusion ought to be in relation to ordinary purchasers, including all purchasers along the supply chain affected by the passing off, but that purchasers nearer to the source may be less likely to be confused. [14]

Actual or potential harm

The third element requires a plaintiff show either actual loss or a real prospect of loss in order to obtain proper redress from a passing off claim. A plaintiff in a passing off action does not have to prove any customer was actually misled or any actual damages sustained; an attempt to mislead the public and potential damage to reputation or goodwill may suffice. [15] The reputation and goodwill enjoyed by a brand or business are considered valuable commercial assets and if damaged may cause commercial and financial harm.

Differences between common law and statutory passing off

The statutory action under section 7 of the Trade-marks Act has been described by Chief Justice Bora Laskin of the Supreme Court of Canada as "a statutory statement of the common law action of passing off". [16] However, although the statutory action shares the same elements as the common law action, there are important differences in the scope of protection, applicability, jurisdiction, and remedies available to plaintiffs depending on the choice of action.

Applicability to subject matter

A statutory action under section 7 of the Trade-marks Act requires that the subject matter in question be a "trade-mark" as defined in section 2 of the Trade-marks Act. [17] A "trade-mark" is defined in the Act as:

(a) a mark that is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others,
(b) a certification mark,
(c) a distinguishing guise, or
(d) a proposed trade-mark; [18]

While trademarks can be protected whether they are registered or unregistered, subject matter that does not fall within the definition of "trade-mark" in the Act cannot be protected by the statute. Thus, certain distinguishing features such as sounds, scents, and holograms that may not traditionally fall under the definition of "trade-mark" in Canadian law can still be protected through a common law passing off claim provided the elements of the tort are satisfied. [19]

Jurisdiction

A common law passing off claim, as a matter relating to property and civil rights, can only be brought in a provincial superior court. As such, a successful common law action is only enforceable within the province where the claim was heard.

An action under section 7 of the Trade-marks Act can be brought in either Federal Court or in a provincial superior court due to the concurrent jurisdiction granted in section 20(2) of the Federal Courts Act. [20] A judgment rendered by the Federal Court is enforceable throughout Canada.

Effect of trademark registration

Registration under the Trade-marks Act affirms, recognizes and extends registrants' positive rights to use the registered marks and provides registrants with an absolute defence to a passing off cause of action. It was held in Molson Canada v Oland Brewery Ltd that a plaintiff's only recourse against a registered mark is to attack the validity of the registration. [21]

Critics of the Ontario Court of Appeal's interpretation of the Act in Molson argue that giving priority to registration strays from a fundamental precept of trade-mark law that owners' rights derive from use, not registration. [22]

However, even under the Act it is not correct to say that registration makes a person the owner of a trademark. Registration procedures require that at the time of registration the applicant already own the rights to use the unregistered mark. The administrative hurdles for a trademark application serve as a screening mechanism for ensuring only eligible and owned marks are registered. A registered mark effectively creates a presumption that the mark is distinctive, valid and owned by the registered owner. Post-registration proceedings to have registration expunged are available under section 57 and 18 of the Act.

Justification for protection against passing off

The purpose of the tort and statutory protection against passing off is twofold: first, it protects the plaintiffs' proprietary rights in the goodwill of their business; and second, it protects the public interest in ensuring that consumers are not misled as to the source of goods or services. In this respect, passing off encroaches on both competition law and consumer protection law.

Professor David Vaver suggests generally that "[t]he basic theory of the tort is to prevent the disruption of economic relations by deliberate or innocent misrepresentations that deceive or confuse consumers in their marketplace decisions." [23] Vaver also notes the centrality and complementarity of both purposes in the tort of passing off and trade-mark law:

The role of passing-off is therefore to rectify the likely harms one trader suffers from the acts of another that mistakenly deflect consumers from dealing with the former or his products or services. Although the tort grew up to protect the interests of traders rather than consumers, the less it works to prevent consumer confusion, the more it becomes merely a law protecting traders from unfair competition. That goal may be what other torts, such as conspiracy or unlawful interference with economic relations, and Competition Act provisions regulating false and misleading advertising practices aim at. Passing-off need not replicate their aspirations. [24]

Protection against competition

In Ciba-Geigy the Supreme Court of Canada explained the purpose of the law. In exploring the function of passing off as an action against competition, the Court cited Salmond on Torts with endorsement:

[t]he courts have wavered between two conceptions of a passing off action — as a remedy for the invasion of a quasi-proprietary right in a trade name or trade mark, and as a remedy, analogous to the action on the case for deceit, for invasion of the personal right not to be injured by fraudulent competition. The true basis of the action is that the passing off injures the right of property in the plaintiff, that right of property being his right to the goodwill of his business. [25]

The Court went on to say:

The purpose of the passing‑off action is thus also to prevent unfair competition. One does not have to be a fanatical moralist to understand how appropriating another person's work, as that is certainly what is involved, is a breach of good faith. [26]

However, the action of passing off (and the law of trademarks in general) is not a substitute for unfair competition laws. The Supreme Court noted in a subsequent case, Kirkbi AG v. Ritvik Holdings Inc. (popularly known as the Lego/Mega Bloks case), that "the purpose of a trade-mark ... is the protection of the distinctiveness of the product, not of a monopoly on the product." [27] Furthermore, "trade-marks law is not intended to prevent the competitive use of utilitarian features of products, but ... fulfills a source-distinguishing function." [28]

Protection for consumers

While the law of passing off historically developed to protect sellers of goods and services, it has also taken on a dimension of consumer protection. In Mattel Inc v 3894207 Canada Inc (a case involving the Barbie trademark), the Supreme Court commented on this aspect:

However, whatever their commercial evolution, the legal purpose of trade-marks continues (in terms of s. 2 of the Trade-marks Act, R.S.C. 1985, c. T-13) to be their use by the owner "to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others". It is a guarantee of origin and inferentially, an assurance to the consumer that the quality will be what he or she has come to associate with a particular trade-mark (as in the case of the mythical "Maytag" repairman). It is, in that sense, consumer protection legislation. [29]

Due to the nature of trademark law as a consumer protection measure, there is some debate as to whether "post-sale confusion" (as in the case of a consumer knowingly purchasing counterfeit goods but fooling others into thinking they are the real thing) should be an actionable trademark infringement or considered under the tort of passing off.

Some observers suggest that trademark law would be better served and more consistent by making post-sale confusion an actionable infringement. [30] Others suggest that post-sale confusion should not be actionable, or that other laws may be better suited to protect manufacturers from counterfeit goods. [31] In Canada, post-sale confusion is not a cause for action under either the Trade-marks Act or the common law tort of passing off. [32]

Related Research Articles

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A trademark is a word, phrase, or logo that identifies the source of goods or services. Trademark law protects a business' commercial identity or brand by discouraging other businesses from adopting a name or logo that is "confusingly similar" to an existing trademark. The goal is to allow consumers to easily identify the producers of goods and services and avoid confusion.

The right of publicity, sometimes referred to as personality rights, is the right of an individual to control the commercial use of one's identity, such as name, image, likeness, or other unequivocal identifiers. It is generally considered a property right as opposed to a personal right, and as such, the validity of the right of publicity can survive the death of the individual.

In common law countries such as the United Kingdom, the Philippines and New Zealand, passing off is a common law tort which can be used to enforce unregistered trade mark rights. The tort of passing off protects the goodwill of a trader from misrepresentation.

Lanham Act United States trademark law

The Lanham (Trademark) Act (Pub.L. 79–489, 60 Stat. 427, enacted July 5, 1946, codified at 15 U.S.C. § 1051 et seq. is the primary federal trademark statute of law in the United States. The Act prohibits a number of activities, including trademark infringement, trademark dilution, and false advertising.

Trademark dilution is a trademark law concept giving the owner of a famous trademark standing to forbid others from using that mark in a way that would lessen its uniqueness. In most cases, trademark dilution involves an unauthorized use of another's trademark on products that do not compete with, and have little connection with, those of the trademark owner. For example, a famous trademark used by one company to refer to hair care products might be diluted if another company began using a similar mark to refer to breakfast cereals or spark plugs.

Economic torts, which are also called business torts, are torts that provide the common law rules on liability which arise out of business transactions such as interference with economic or business relationships and are likely to involve pure economic loss.

Canadian trademark law

Canadian trademark law provides protection to marks by statute under the Trademarks Act and also at common law. Trademark law provides protection for distinctive marks, certification marks, distinguishing guises, and proposed marks against those who appropriate the goodwill of the mark or create confusion between different vendors' goods or services. A mark can be protected either as a registered trademark under the Act or can alternately be protected by a common law action in passing off.

Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1979] AC 731, [1980] R.P.C. 31, – also known as the Advocaat case – is a leading decision of the House of Lords that further developed the common law tort of extended passing off for the Commonwealth as originally established in Bollinger v. Costa Brava. Prior to this case "collective goodwill", as required for an action in passing off, only applied to names indicating geographic origin. The Court held that wares whose name falsely suggests its character or quality can be prevented from selling the product under that name.

<i>Kirkbi AG v Ritvik Holdings Inc</i> Supreme Court of Canada case

Kirkbi AG v. Ritvik Holdings Inc., popularly known as the Lego Case, is a decision of the Supreme Court of Canada. The Court upheld the constitutionality of section 7(b) of the Trade-marks Act which prohibits the use of confusing marks, as well, on a second issue it was held that the doctrine of functionality applied to unregistered trade-marks.

<i>Mattel Inc v 3894207 Canada Inc</i> Canadian Supreme Court case about trademark names

Mattel Inc v 3894207 Canada Inc[2006] 1 S.C.R. 772, 2006 SCC 22 is a leading decision of the Supreme Court of Canada on the infringement of famous trade-mark names. The Court found that Mattel Inc. could not enforce the use of their trade-marked name "BARBIE" against a restaurant named "Barbie's".

Trademark Trade identifier of products or services

A trademark is a type of intellectual property consisting of a recognizable sign, design, or expression which identifies products or services of a particular source from those of others. The trademark owner can be an individual, business organization, or any legal entity. A trademark may be located on a package, a label, a voucher, or on the product itself. Trademarks used to identify services are sometimes called service marks.

Trademark infringement is a violation of the exclusive rights attached to a trademark without the authorization of the trademark owner or any licensees. Infringement may occur when one party, the "infringer", uses a trademark which is identical or confusingly similar to a trademark owned by another party, in relation to products or services which are identical or similar to the products or services which the registration covers. An owner of a trademark may commence civil legal proceedings against a party which infringes its registered trademark. In the United States, the Trademark Counterfeiting Act of 1984 criminalized the intentional trade in counterfeit goods and services.

Under Canadian trade-mark law, the "doctrine of functionality" provides that features that are primarily functional in nature cannot be registered as trade-marks. The doctrine of functionality reflects the purpose of trade-mark, which is the protection of the distinctiveness of the wares and services associated with a trade-mark. Unlike patents, trade-marks do not protect the utilitarian features of products. The doctrine of functionality is reflected in section 13(2) of the "Trade-marks Act", which provides that: "No registration of a distinguishing guise interferes with the use of any utilitarian feature embodied in the distinguishing guise". On the basis of functionality, courts have denied trade-mark protection for such features as the pattern of knobs on LEGO blocks and the shape of the head of an electric razor.

Under Canadian trade-mark law, "confusion" is where a trade-mark is similar enough to another trade-mark to cause consumers to equate them. Likelihood of confusion plays a central role in trade-mark registration, infringement and passing-off. Whether a trade-mark or trade-name is confusing is a question of fact. The role of confusion in trade-mark law is analogous to the role of substantial infringement in patent law.

<i>Satyam Infoway Ltd. v. Sifynet Solutions Pvt. Ltd.</i>

Satyam Infoway Ltd. v. Sifynet Solutions Pvt. Ltd. was the first case to be decided by the Supreme Court of India on the issue of domain name protection, and dealt with two businesses employing variations on the same mark in their respective domain names.

<i>Ciba-Geigy Canada Ltd v Apotex Inc</i> Supreme Court of Canada case

Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 SCR 120, is a Supreme Court of Canada judgment on trademark law and more specifically the issue of passing off. Ciba-Geigy brought an action against Apotex and Novopharm, alleging that their versions of the prescription drug metoprolol were causing confusion to the public due to their similar appearance to Ciba-Geigy's version of the drug Lopresor. On appeal to the SCC, the issue was whether a plaintiff is required to establish that the public affected by the risk of confusion includes not only health care professionals but also the patients who consume the drugs in a passing off action involving prescription drugs of a similar appearance. The Supreme Court held affirmatively on this question.

Intel Corporation v. CPM United Kingdom Ltd., Case 252/2007 was a case of the European Court of Justice in which the ECJ interpreted the meaning of Article 4 (4)(a) of the EU Trade Marks Directive. The ECJ considered what elements are required to show that a later mark was causing dilution to an earlier mark. The case laid out a clear basis on which grounds a court can find that trademark dilution has occurred.

<i>Masterpiece Inc. v. Alavida Lifestyles Inc.</i> Supreme Court of Canada case

Masterpiece Inc. v. Alavida Lifestyles Inc. [2011] 2 S.C.R. 387, is a Supreme Court of Canada decision concerning the relevant criteria and basic approach to be undertaken by the Court in analyzing the likelihood of confusion in Canadian trademark law under the Trade-marks Act, 1985 The test adopted by the Supreme Court of Canada is whether, as a matter of first impression, the "casual consumer somewhat in a hurry" who encounters the Alavida trade-mark, with no more than an imperfect recollection of any one of the Masterpiece Inc. trade-marks or trade-name, would be likely to think that Alavida was the same source of retirement residence services as Masterpiece Inc. Furthermore, Rothstein J. affirmed a consumer protection principle of trade-marks as an indication of provenance, "providing consumers with a reliable indication of the expected source of wares or services." Rothstein J. delivering the majority judgment of the Court held that Alavida's proposed trade-mark "Masterpiece Living" was confusing with at least one of Masterpiece Inc.’s trade-marks when the registration application was filed on December 1, 2005. Alavida was therefore deemed to be not entitled to registration of its proposed marks, allowing then for the Registrar of Trade-marks to expunge Alavida’s registration from the registrar.

References

  1. ↑ Consumers Distributing Co v Seiko Time Canada Ltd, [1984] 1 SCR 583.
  2. ↑ Scandecor Developments AB v Scandecor Marketing AB, [2001] UKHL 21.
  3. ↑ Trade-marks Act, s 7.
  4. ↑ Crowne, Emir and Nassabi, Sepideh, Parsing Off the Elements of Passing Off in Canada (April 2012). Advocates' Quarterly, Vol. 39, No. 4, April, 2012. Available at SSRN: http://ssrn.com/abstract=2061025
  5. ↑ Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120.
  6. ↑ Reckitt & Colman Products Limited v Borden Inc, [1990] 1 All ER 873.
  7. ↑ Ray Plastics Ltd et al v Dustbane Products Ltd (1994), 57 CPR (3d) 474 (Ont CA).
  8. ↑ Kirkbi AG v Ritvik Holdings Inc, 2005 SCC 65.
  9. ↑ Ciba-Geigy.
  10. ↑ Ciba-Geigy at 133; Kirkbi at para 68.
  11. ↑ Cadbury Schweppes v Pub Squash Co, [1981] 1 All ER 213 (PC).
  12. ↑ Orkin Extermination Co Inc v Pestco Co of Canada Ltd (1985), 5 CPR (3d) 433 (Ont CA).
  13. ↑ Ray Plastics Ltd et al v Dustbane Products Ltd.
  14. ↑ Ciba-Geigy.
  15. ↑ Ray Plastics Ltd.
  16. ↑ MacDonald et al v Vapor Canada Ltd , [1977] 2 SCR 134.
  17. ↑ Dumont Vins & Spiritueuex Inc v Celliers du Monde Inc, [1992] 2 FC 634 (FCA).
  18. ↑ Trade-marks Act, s 2.
  19. ↑ Teresa Scassa, Canadian Trademark Law (Markham: LexisNexis, 2010), Chapter 7, Section 1.
  20. ↑ Federal Courts Act, RSC 1985, c F-7.
  21. ↑ Molson Canada v Oland Brewery Ltd (2002), 214 DLR (4th) 473.
  22. ↑ Marcel Naud, "Trade-Mark Registration As A Valid Defence To A Passing-Off Action" (2003) Leger Robic Richard, 173.13 at 5. http://www.robic.ca/admin/pdf/536/173.13.pdf
  23. ↑ David Vaver, Intellectual Property Law: Copyright, Patents, Trade-Marks, 2nd ed (Toronto: Irwin Law, 2011) at 431.
  24. ↑ Vaver at 432.
  25. ↑ Ciba-Geigy at 134.
  26. ↑ Ciba-Geigy at 135.
  27. ↑ Kirkbi AG v. Ritvik Holdings Inc. , 2005 SCC 65 at para 42.
  28. ↑ Kirkbi at para 43.
  29. ↑ Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22 at para 2.
  30. ↑ Anne M. McCarthy, "The Post-Sale Confusion Doctrine: Why the General Public Should Be Included in the Likelihood of Confusion Inquiry" (1999) 67 Fordham L Rev 3337.
  31. ↑ Vaver at 433.
  32. ↑ Tommy Hilfiger Licensing, Inc v International Clothiers Inc, 2003 FC 1087.
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