Judgments

Decision Information

Decision Content

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.
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