T-1398-8`
Lin Trading Co. Ltd. (Appellant)
v.
CMB Kabushiki Kaisha also trading as Japan
CBM Corporation and Registrar of Trade Marko
(Respondents)
INDEXED AS: LIN TRADING CO. v. CBM KABUSHIKI KAISHA
Trial Division, Joyal J.—Ottawa, December 8,
1986 and January 26, 1987.
Trade marks — Registration — Opposition — Responder:,
Japanese company marketing watches under trade mark "Q &
Q" owned by it since 1976 — Contracts to buy and sel,
watches in Canada entered into between respondent and appel
lant Canadian trading company — Appellant subsequently
applying for Canadian registration of trade mark "Q & Q" for
use in relation to identical wares — Respondent's opposition
upheld — Technical compliance with statutory provisions
cannot justify thwarting object and purposes of Act — Appel
lant's conduct unconscionable in view of special relationship
between parties — Conduct making it inequitable to rely or
statute— Trade Marks Act, R.S.C. 1970, c. T-10, ss. 16, 29.
The respondent corporation is a Japanese company which
markets watches domestically and abroad. The watches are
sold under the trade mark "Q & Q" owned by the respondent
since 1976. In 1980, the appellant, a Toronto trading company.
in reply to inquiries made by a bank on behalf of the respon
dent, which had decided to penetrate the Canadian market.
indicated interest in selling the watches in Canada. Shipments
of the wares were thereupon sent and invoiced to the appellant.
In 1981, the appellant applied for registration in Canada of the
mark "Q & Q" for use in relation to wares identical to those of
the respondent. The respondent's opposition to the registration
was upheld. The appellant claims first use in Canada of the
trade mark and argues that whatever use may have been made
of the trade mark by the respondent, it did not constitute "use"
in accordance with the Trade Marks Act.
Held, the appeal should be dismissed.
The purpose of the Trade Marks Act is to prevent unfair
competition and the misappropriation of intellectual property.
To recognize the appellant's claim based on statutory provisions
and selected authorities would be to endorse the proposition
that technical compliance with statutory procedures could
thwart the object of the Act and the purposes it was meant to
achieve. It would be tantamount to imposing artificial mean
ings to sections 16 and 29 of the Act.
That is not to say that the ownership in the trade mark
enjoyed by the respondent in other countries bars an applicant
from securing the registration of an identical mark in Canada.
The issue before the Court arises out of the special relationship
between the parties, in which contracts to buy and sell the
watches in Canada were executed and the possibility of
appointing the appellant exclusive distributor discussed. Having
regard to that relationship, the appellant's conduct was uncon
scionable. Such conduct would normally make it inequitable for
a person to rely on a statute for justification.
The residual discretion left to a Registrar or a Court to
resolve the issue whether the appellant can claim first use in
Canada on the ground it was the person who first made the
mark known to the ultimate retailer or consumer should not, in
the circumstances, be resolved in favour of the appellant.
CASE JUDICIALLY CONSIDERED
REFERRED TO:
Applegate v. Moss, [1971] 1 Q.B. 406 (C.A.).
COUNSEL:
Donald M. Cameron for appellant.
Joseph A. Day for respondent CBM Kabu-
shiki Kaisha.
SOLICITORS:
Sim, Hughes, Toronto, for appellant.
Ogilvy, Renault, Ottawa, for respondent
CBM Kabushiki Kaisha.
The following are the reasons for judgment
rendered in English by
JOYAL J.: The appellant is a trading company
operating out of Toronto. The respondent corpora
tion is a Japanese company engaged in the busi
ness of selling watches and other time pieces under
the trade marks "Q & Q" (Design) and "Q and
Q ,, .
These products are manufactured in Japan by
Citizen Watch Company, the parent company of
the corporate respondent. They are manufactured
on orders from the respondent. The manufacturer
makes them to the respondent's specifications and
affixes the trade mark "Q and Q" or "Q & Q" to
the products. They are then delivered in a pack
aged state to the respondent who then proceeds to
market them domestically and abroad.
The marks themselves were coined by the presi
dent of the respondent company, Mr. Taijiro
Futagami and were first used in April 1976. These
marks were soon after registered in Japan. The
letters Q & Q, according to the evidence, stand for
Quality and Quantity.
Since that time, the respondent company has
applied for the registration of these marks in some
sixty-six countries. Registration has actually been
secured in some thirteen of them including the
United States of America.
During the course of the year 1980, the respon
dent company decided to penetrate the Canadian
market. It made enquiries through its Japanese
bankers who in turn communicated with the Royal
Bank of Canada. From these enquiries, two
Canadian firms, namely Microsonic Digital Sys
tems Ltd. and Lin Trading, the appellant, both of
Toronto, indicated interest in selling these
watches.
In response to Lin Trading's enquiry of October
3, 1980, the respondent replied as follows:
Dear Mr. Lin:
We have had your company name from the Royal Bank of
Canada through Fuju Bank Limited, Tokyo.
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.
We hereby enclose you with our price lists and leaflets which
show our current range of products. From January, 1981, we
will have more than 30 new models including Analogue Quartz
at Yen 4,000. Those new models shall be introduced by photos
or new leaflets by the end of this year.
We thank you for your kind attention to review the enclosed
and return with your comments as soon as possible.
Very truly yours,
CITIZEN BUSINESS MACHINES INC.
Hideaki Jinno
International Division
Ends.
This was followed by telex messages from Lin
Trading dated November 3, 1980 and November
25, 1980 as well as telex replies from the respon
dent dated November 5, 1980 and December 6,
1980.
A similar enquiry was received by the respon
dent from Microsonic Digital Systems Ltd. dated
October 6, 1980 which asked that certain samples
of "Q and Q" branded watches be forwarded to
them. The respondent's reply dated November 11,
1980 is as follows:
Dear Mr. Gross:
We have received your letter dated October 6th, with many
thanks.
Per your request, we are now arranging samples of ladies
models and expect to ship those samples in one week. As the
production for ladies models have just been started, please
kindly accept our partial shipment to your order.
In regard to Analog Quartz, we have the pleasure in sending
you with our price list and photographs for our new products
starting from January, 1981. We would appreciate if you could
note that the attached price list is based on your purchase of
10,000 units as minimum quantity due to very special price.
We thank you for your attention in this matter.
Very truly yours,
JAPAN CBM CORPORATION
Hideaki Jinno
International Division
In due course, according to the evidence various
batches of Q & Q watches were delivered to the
Canadian firms. Three shipments containing a
total of sixteen watches were shipped and invoiced
to Microsonic Digital Systems Ltd. on December
8, 9 and 10, 1980. Larger shipments of Q & Q
watches were sent and invoiced to Lin Trading. On
January 19, 1981, some 62 watches as well as
descriptive literature were shipped and invoiced to
Lin Trading. A further shipment totaling some
2,380 "Q & Q" brand wrist watches was made on
March 27, 1981 and a smaller shipment on Octo-
ber 19, 1981.
It was on April 24, 1981 that Lin Trading
applied to the Registrar of Trade Marks for regis
tration of the trade mark "Q & Q" for use in
relation to identical wares. The applicant stated
that it had used the mark in Canada since January
1981 in association with watches, clocks, time
pieces and timing devices and that it was satisfied
that it was entitled to use the mark. The applica
tion was given Serial No. 469,134. Several months
later, namely on February 17, 1982, the applica
tion was advertised in the Trade Marks Journal.
On March 12, 1982, the respondent filed its
opposition.
After the parties had jousted through pleadings,
affidavits, cross-examinations and oral arguments,
the Hearing Officer on behalf of the Registrar,
upheld the respondent's opposition and declared
that the appellant Lin Trading was not the person
entitled to registration pursuant to paragraph
16(1)(a) of the Trade Marks Act [R.S.C. 1970, c.
T-10] .
In his decision which is reported at 5 C.P.R.
(3d) 27, Hearing Officer Troicuk traversed all the
substantive issues facing him. He found that the
opponent had made prior use of the trade mark in
Canada in the normal course of business, that it
had not abandoned its trade mark and that it had
a reputation in the mark. He ruled that the ship
ment of watches to the applicant was part of an
overall activity with all the necessary commercial
ingredients to make of the sale or transfer of the
watches to the applicant a sale or transfer in the
normal course of trade.
The appellant before me disagrees with this
decision. Its counsel argues that the use of the
mark by the respondent in Canada prior to Janu-
ary 31, 1981 was not in the normal course of trade.
He argues in fact that there was no evidence
before the Hearing Officer as to what was the
normal course of trade for those wares. Generally
speaking, he says, the normal course of trade is the
commercial sale of goods from the manufacturer
to the wholesaler and to the retailer. He submits
that these ingredients, however, are not present in
the case at bar and therefore whatever use may
have been made of the trade mark by the respon
dent, it could not have constituted "use" in accord
ance with the Trade Marks Act.
The approach of appellant's counsel to the issues
indicates to what extent artful dodges may be
applied to further a party's interests. Without
inferring any disrespect for counsel and for his
cause, the situation before me smacks of an
attempt by somebody to appropriate someone
else's property.
The facts themselves cannot be seriously disput
ed. The respondent has owned the Q & Q design
since 1976. It has marketed watch pieces in many
countries of the world for many years. It has
secured statutory trade mark protection in some
thirteen of them. In its initial negotiations with the
appellant Lin Trading, as well as with Microsonic
Digital Systems Ltd., its wares were clearly identi
fied as Q & Q watches. Its invoices also identified
the wares as covering that particular segment of
the market for inexpensive wrist watches.
The respondent forwarded to the appellant illus
trations and catalogs and specifications, all of
which identified the respondent's whole range of
watches under the Q & Q label.
It surely does not require an over-abundance of
common sense for anyone to conclude that the
respondent's wares were being marketed under the
Q & Q design and that property in that design
rested, at least at common law, with the respon
dent. It does not require any more common sense
to conclude that the action taken by the appellant
to obtain Canadian registration for the mark,
having regard to the relationships between the
parties over several months, was unconscionable.
Such conduct would normally make it inequitable
for a person to rely on a statute for justification
(see Applegate v. Moss, [1971] 1 Q.B. 406
(C.A.)).
It would seem to me to be evident that the
purpose of the Trade Marks Act is to prevent
unfair competition and the misappropriation of
intellectual property. To accept appellant's argu
ment on both the statutory provisions and on
selected passages from precedents would be to
endorse the proposition that technical compliance
with statutory procedures could thwart the very
object of the Act and the purposes it was meant to
achieve. It would be using the rules of the statute
to subvert the rights of the owner.
I would not wish to suggest that the kind of
ownership in the trade mark enjoyed elsewhere
than in Canada by the respondent is necessarily a
bar to an applicant securing the registration of an
identical trade mark in Canada. 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 suc
cessfully 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 other
wise 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.
For those who subscribe to the Kelsen school of
law and who might object to any moralistic flavour
to statute interpretation, I may add that recogniz
ing the appellant's claim would, in my respectful
view, go against public policy and impose artificial
meanings to the provisions of sections 16 and 29 of
the Trade Marks Act.
The prime legal issue before me is whether the
appellant can claim first use in Canada of the
trade mark on the grounds that is was the person
who first made the mark known to the ultimate
retailer or consumer. Assuming that, on the evi
dence, this is a borderline case, I should think that
the residual discretion left to a Registrar or to a
Court to resolve the issue should not, in the cir
cumstances, be resolved in favour of the appellant.
I should perhaps go further. Were I to adopt a
more benign or lenient view of the appellant's
conduct and give it full marks for its entre
preneurial flair, I would nevertheless subscribe to
the findings of fact and the conclusions of law
drawn in careful terms by Hearing Officer Troi-
cuk in rejecting the application.
The appeal is dismissed with costs.
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.