T-443-85
Terrill Ross McCabe (Appellant)
v.
Yamamoto & Co. (America) Inc. (Respondent)
T-444-85
Terrill Ross McCabe (Appellant)
v.
T-Line Golf Corporation (Respondent)
INDEXED AS: MCCABE V. YAMAMOTO & CO, (AMERICA) INC.
(T.D.)
Trial Division, Joyal J.—Ottawa, October 12,
1988; January 24, 1989.
Trade marks — Registration — Appeal from refusal to
register trade mark "T-Line" for use in association with golf
clubs — Application based on use in Canada since /975 and
prior use and registration in U.S.A. — Hearing Officer finding
alleged prior use in Canada by opponents barring registration
— Error in law — Opponents' use violation of territorial
restrictions in distributor agreements — As purpose of Trade
Marks Act to promote and regulate lawful use of trade marks,
implied condition use relied upon to defeat application for
registration must be lawful — Trade Marks Act, s. 7(e)
applicable in limited circumstances notwithstanding held ultra
vires in MacDonald et al. v. Vapor Canada Ltd. — Unlawful
use cannot support application for registration — Appellant
entitled to registration as statutory requirements, based on use
and registration abroad, complied with.
This was an appeal from the refusal to register the appel
lant's trade mark "T-Line" for use in association with golf
clubs and golf club covers, based on use in Canada since 1975
and also on prior use and registration in the United States. The
respondents opposed the application based on non-compliance
with the Trade Marks Act, paragraphs 29(b) (requiring the
applicant to include in his application the date of first use in
Canada), and (i) (requiring the applicant to file a statement
that he is satisfied that he is entitled to use the trade mark),
and denial of use in Canada since 1975.
McCabe obtained a patent for a new putter in 1970 and
began selling it under the name "T-Line" in the United States.
He entered into a distributorship agreement with Yamamoto,
doing business under the name of Rainbow Sales in 1973, but
the territory did not include Canada. In 1974 T-Line Golf
Corporation was licensed to manufacture and sell T-Line golf
clubs. T-Line appointed Yamamoto/Rainbow Sales its distribu
tor, but again the territory did not include Canada. The trade
mark was registered in the United States in 1976. At the same
time, the agreements between McCabe and T-Line, and be
tween T-line and Yamamoto, were cancelled. Yamamoto con
tinued to market T-Line golf clubs until 1978. In the trade
mark application, McCabe listed the date of first use as "at
least June 1975". There were some sales of T-Line golf clubs in
Canada in 1974 and 1975 by Rainbow Sales. The Hearing
Officer found that the alleged prior use by the opponents was a
bar to McCabe's application. The issues were (1) whether
unlawful use can constitute good use and (2) whether McCabe
was entitled to registration under subsection 16(2), which
permits registration of a mark based upon registration in
applicant's country of origin.
Held, the appeal should be allowed.
The Hearing Officer erred in finding that the alleged prior
use by the opponents was a bar to McCabe's application.
Where the Trade Marks Act speaks of "use" by an opponent as
grounds to defeat an owner's application for registration, the
statute imposes an implied condition that such use, as against
the applicant, be lawful use. As a general proposition, when a
statute's purpose is to provide protection to the owners of both
registered and unregistered trade marks, that statute should not
be set up to legitimate unlawful use of these same trade marks.
This proposition is supported by the distributor cases, in which
registration was refused when it was found that applicants were
attempting to appropriate the property of another in a territory
in which the property had yet to receive the full protection
which the law provided to registered marks; by section 8; and
by paragraph 7(e). Although that paragraph was declared ultra
vires in MacDonald et al. v. Vapor Canada Ltd., it may have
continued limited application in respect of subject-matters
which are not dealt with under the other paragraphs of section
7, and provided it is strictly related to some breach in respect of
intellectual property. Any act prohibited thereby must be ejus-
dem generis with those acts proscribed by the other paragraphs
of section 7. Given the restrictive territorial provisions in the
distributorship agreements, both T-Line Golf and Rainbow
Sales were in violation of their contractual obligations when the
T-Line golf clubs were sold in Canada in association with
McCabe's trade mark. The illegal acts of the opponents were
close enough in substance to those prohibited under paragraphs
7(a) through (d) to come within the prohibition of paragraph
7(e), at least to the extent of precluding the opponents from
establishing a strong defence to McCabe's application on the
grounds of their own misfeasance. The opposition based upon
non-compliance with paragraph 29(b) must fail, but so too
must an application for registration based upon unlawful use.
McCabe also asserted entitlement to registration under sub
section 16(2). Apart from requiring proof of registration
abroad, subsection 16(2) requires that the trade mark not be
confusing with a trade mark that had been previously used in
Canada. The opponents' unlawful use cannot be relied upon to
prove non-compliance with subsection 16(2). McCabe was
entitled to registration since he had complied with all statutory
requirements based on use and registration abroad, and there
being no tenable grounds of opposition.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Trade Marks Act, R.S.C. 1970, c. T-10, ss. 5, 7, 8,
16(1)(a),(2), 29(b),(0, 30(1), 33.
Unfair Competition Act, R.S.C. 1952, c. 274.
CASES JUDICIALLY CONSIDERED
APPLIED:
Asbjorn Horgard AIS v. Gibbs/Nortac Industries Ltd.,
[1987] 3 F.C. 544 (C.A.); Balinte et al. v. DeCloet Bros.
Ltd. et al. (1978), 40 C.P.R. (2d) 157 (F.C.T.D.); affd.
[1980] 2 F.C. 384 (C.A.); Flexi-Coil Ltd. v. Smith-
Roles Ltd., [ 1982] 1 F.C. 827; (1981), 59 C.P.R. (2d) 46
(T.D.); Argenti Inc. v. Exode Importations Inc. (1986), 8
C.P.R. (3d) 174 (F.C.T.D.); Waxoyl AG v. Waxoyl
Canada Ltd. (1984), 3 C.P.R. (3d) 105 (F.C.T.D.);
Wilhelm Layher GmbH v. Anthes Industries Inc. (1986),
8 C.P.R. (3d) 187 (F.C.T.D.); Aktiebolaget Manus v.
Fullwood & Bland Ld. (1948), 66 R.P.C. 71 (C.A.).
CONSIDERED:
MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R.
134.
REFERRED TO:
Manhattan Industries Inc. v. Princeton Manufacturing
Ltd. (1971), 4 C.P.R. (2d) 6 (F.C.T.D.); Saxon Indus
tries, Inc. v. Aldo Ippolito & Co. Ltd. (1982), 66 C.P.R.
(2d) 79 (F.C.T.D.); Lin Trading Co. Ltd. v. CBM Kabu-
shiki Kaisha, [1987] 2 F.C. 352 (T.D.); affd. (1988), 20
C.I.P.R. 1 (F.C.A.).
COUNSEL:
Robert D. Gould for appellant.
H. Roger Hart for respondents.
SOLICITORS:
Smart & Biggar, Ottawa, for appellant.
Rogers, Bereskin & Parr, Toronto, for
respondents.
The following are the reasons for judgment
rendered in English by
JOYAL J.: The Court has before it the issue of a
trade mark application filed by the appellant Ter-
rill Ross McCabe for the registration in Canada of
the trade mark "T-Line" in association with golf
clubs and golf club head covers.
The application by Mr. McCabe is dated June
8, 1976, is based on use in Canada since at least
June 1975 and also based on prior use and regis
tration in the United States under No. 1,044,969.
After Mr. McCabe's application was advertised
in the Trade Marks Journal on May 3, 1978, two
opponents, namely the respondents Yamamoto &
Co. (America) Inc. (Yamamoto) and the T-Line
Golf Corporation (T-Line Golf), filed opposition
statements. Both opponents alleged that there was
non-compliance by Mr. McCabe with paragraphs
29(b) and 29(i) of the Trade Marks Act [R.S.C.
1970, c. T-10] and they denied that Mr. McCabe
had used the mark in Canada since June 1975.
Furthermore, it was argued that Mr. McCabe
was aware of prior use of the mark in Canada by
both T-Line Golf and its distributor Yamamoto
and pleaded paragraph 16(1)(a) of the Trade
Marks Act.
The opposition proceedings took a long time.
Counter statements and affidavits were filed by
each of the three parties and lengthy cross-exami
nations took place. It was not until January 11,
1985 that the Hearing Officer on behalf of the
Registrar of Trade Marks issued his decision. He
rejected Mr. McCabe's application to register the
mark "T-Line".
The Hearing Officer gave meticulous reasons
for his decision and I should find very little in his
findings of fact with which I can quarrel. Never
theless, the issues facing the Hearing Officer raise
some vexing problems relating to the interpreta
tion of the Trade Marks Act as a whole, of its
object and purpose and of Parliament's intentions
in adopting it. They are issues which, in my
respectful view, deserve more thorough analysis.
THE FACTS
The history of this litigation dates back to 1970
when Mr. McCabe developed a new design for a
golf putter, obtained patent protection for it, creat
ed the name T-Line for it and began selling T-Line
putters in the United States.
In August 1971, Mr. McCabe and others incor
porated McCabe Golf Company and Mr. McCabe
granted a licence to that company to manufacture
and sell T-Line golf clubs.
Some two and a half years later, i.e. December
1973, McCabe Golf Company entered into a dis-
tributorship agreement with Yamamoto doing
business under the name of Rainbow Sales. This
distributorship was exclusive in certain territories
including Japan and the United States. The dis-
tributorship, however, did not include Canada.
In August 1974, another company, T-Line Golf
Corporation was formed. Mr. McCabe and Mr.
Yamamoto were equal partners in that venture.
The licence to McCabe Golf Company was ter
minated and Mr. McCabe licensed T-Line Golf to
manufacture and sell T-Line golf clubs. In turn,
T-Line Golf appointed Yamamoto/Rainbow Sales
its distributor. Again, the territory granted to the
distributor did not include Canada.
A year later, on August 13, 1975, Mr. McCabe
applied in the United States for registration of his
trade mark "T-Line". The application was
approved and the mark was registered on July 17,
1976 under No. 1,044,964.
In January of 1976, while the United States
trade mark application was pending, T-Line Golf
was wound up and the agreements between Mr.
McCabe and T-Line Golf as well as between
T-Line Golf and Yamamoto were cancelled. Mr.
McCabe and others then incorporated McRim Inc.
to which Mr. McCabe granted a manufacturing
and selling licence for his line of golf clubs. In
turn, McRim Inc. granted world-wide distribution
rights to Rainbow Sales.
This latest arrangement had a short life. Six
months later, in June 1976, McRim Inc. declared
Rainbow Sales in default and terminated all the
rights and obligations it had acquired. A couple of
days later, McRim Inc. licensed Victor Golf Divi
sion to manufacture and sell T-Line clubs in the
United States, Canada and elsewhere.
Nevertheless, Yamamoto through Rainbow
Sales continued to market golf clubs under the
T-Line mark until following an infringement
action, the United States District Court of the
Central District of California on December 15,
1978, found that McCabe's mark "T-Line" was a
valid trade mark which had been infringed by
Yamamoto.
THE FINDINGS OF THE HEARING OFFICER
The relevant sections of the Trade Marks Act
relied on by the opponents were section 29 and
section 16.
Section 29 lists some nine particulars which
must be included in a trade mark registration
application. Included in this list is the requirement
that the applicant, with respect to a trade mark
that has been used in Canada, disclose the date of
first use. Mr. McCabe had fixed this date as "at
least June 1975".
Paragraph 29(i) in turn provides that the appli
cant must state that he is satisfied that he is
entitled to use the trade mark in Canada in asso
ciation with his described wares or services.
Finally, paragraph 16(1)(a) of the statute pro
vides that an applicant is entitled to registration of
a registrable mark used or made known in Canada
unless on the date when first used or made known,
it was confusing with a trade mark which had been
previously used or made known in Canada by
anyone else.
The Hearing Officer found as a fact that there
were some sales of T-Line golf clubs in Canada in
later 1974 and early 1975. Such evidence as to
sales related to Rainbow Sales or identified T-Line
Golf. The Hearing Officer decided that evidence
of sales or use of the mark in Canada by Rainbow
Sales accrued to the benefit of T-Line Golf but
that Mr. McCabe, being one step removed from
those transactions, could not avail himself of that
experience to his benefit. As a consequence, the
Hearing Officer found that Mr. McCabe had
failed to comply with paragraph 29(b) of the Act.
He also found, however, that on the basis of Mr.
McCabe's reliance on use and registration in the
United States, Mr. McCabe had complied with
paragraph 29(i) of the Act.
It is of course not particularly important to the
issues before me that, according to the Hearing
Officer, Yamamoto had failed to establish any use
of the trade mark in Canada or that T-Line Golf
had failed to establish prior entitlement under
paragraph 16(1) (a). The Hearing Officer simply
remarked that T-Line Golf had effectively aban
doned the mark as of the date of advertisement of
the trade mark application, namely May 3, 1978.
THE ISSUES
The Court is therefore faced with two critical
issues relating to the foregoing decision. The first
issue is that, in his reasons for decision, the Hear
ing Officer was dealing with "use in Canada"
unqualified as to whether or not such use was
lawful. The second issue relates to the Hearing
Officer's failure to deal with Mr. McCabe's claim
for registration based on subsection 16(2) of the
Act, i.e. Mr. McCabe's prior registration of the
mark "T-Line" in the United States.
(a) The Question of "Use"
In applying the normal rule with respect to
"use", there was evidence before the Hearing Offi
cer to support his decision that use by Rainbow
Sales in Canada inured to the benefit of T-Line
Golf. Such reasoning is ostensibly well-founded
when one examines the many decisions dealing
with use of a foreign-owned trade mark in Canada
by a distributor, i.e. Manhattan Industries Inc. v.
Princeton Manufacturing Ltd. (1971), 4 C.P.R.
(2d) 6 (F.C.T.D.); Saxon Industries, Inc. v. Aldo
Ippolito & Co. Ltd. (1982), 66 C.P.R. (2d) 79
(F.C.T.D.); and Lin Trading Co. Ltd. v. CBM
Kabushiki Kaisha, [1987] 2 F.C. 352 (T.D.),
upheld on appeal, (1988), 20 C.I.P.R. 1 (F.C.A.).
What these cases make clear to me is that the
law will preclude a distributor from appropriating
and registering the trade mark of another, usually
a manufacturer, who is the owner of the mark in
the country of origin. In the case before me,
T-Line Golf was a manufacturer with a licence to
use the trade mark. Thus, any use of the mark in
Canada by the distributor could only be to the
benefit of that person who owned or was licensed
to use the trade mark. On that basis, the Hearing
Officer's determination appears perfectly proper.
A constant theme, however, in the line of decid
ed cases to which I have referred, is that the
manufacture and distribution of articles, together
with the use of any trade mark associated with
them, were lawful. The only issue before the Court
was to determine who should get the benefit of the
lawful use of the trade marks.
With respect, it seems to me that whether or not
the use of the trade mark in Canada was lawful
was either not raised with or seized by the Hearing
Officer. According to the evidence, T-Line Golf's
licence was to manufacture T-Line golf clubs for
sale in the Uni , ed States and other specified terri
tories but n t Canada. Similarly, Yamamoto,
under the guise of Rainbow Sales, was granted
distribution rights for the United States and other
designated countries but not Canada. On the face
of these restrictive territorial provisions, both
T-Line Golf and Rainbow Sales were in violation
of their contractual obligations when, through the
agency of Rainbow Sales, the T-Line golf clubs
were sold in Canada in association with Mr.
McCabe's trade mark. I should find on the evi
dence that such violation was unknown at the time
by Mr. McCabe and that he did not sanction it.
In the light of this, the question may be asked as
to whether or not such an unlawful use of a trade
mark can be good "use" of a trade mark in
Canada under the provisions of the Trade Marks
Act or may otherwise constitute a use which would
defeat the rights of its ostensible owner.
In the background of all this is the aberration
which may be created by a purely technical
application of section 29 of the Act and where the
emphasis tends to be too much on who has used a
mark in Canada and not enough on whose mark is
being used.' It seems obvious to me that the trade
mark being used in Canada by either Yamamoto
' The source of this somewhat beguiling approach is in an
editorial comment in the Manhattan Industries case (op. cit.).
or T-Line Golf was Mr. McCabe's mark and no
one else's.
It is perhaps in that light that a proper sense
may be given to the statute and to the application
of its several provisions to meet particular cases.
I interpret the whole scheme of the Trade
Marks Act as continuing the policy and purpose of
its predecessor statute, the Unfair Competition Act
[R.S.C. 1952, c. 274], to bring some semblance of
order in the market place and to codify or struc
ture in statute form the rights, duties and privi
leges of intellectual property owners at common
law. Its whole thrust is to promote and regulate
the lawful use of the trade marks. On proper
grounds, a person may be given a statutory (i.e.
lawful) monopoly for the exclusive use of a trade
mark in association with specified wares or ser
vices. In the event, can it be seriously argued that
by specific intendment, or by implication, the stat
ute would not also prohibit unlawful use? At first
blush, the answer to that question would appear
obvious.
I recognize, however, that what might be unlaw
ful for some purposes, as in the breach of a
licensing or distributorship agreement giving rise
to ordinary civil remedies, would be beyond the
ken of the Trade Marks Act unless it is in viola
tion of an expressed or implied provision of it. If
such a violation occurs, the unlawful use of a trade
mark could not be raised by an opponent to defeat
its owner's rights.
As a general proposition, it may be stated that
when a statute's purpose is to provide protection to
the owners of both registered and unregistered
trade marks, that same statute should not obvious
ly be set up to give legitimacy to unlawful use of
these same trade marks. Again, as a general
proposition, denying an opportunity to an unlawful
user to do this does not frustrate the overall pur
pose of the Act. If public protection is one of its
purposes, then a phrase like "previously used in
Canada" might very well be interpreted to mean
"previously lawfully used in Canada".
The line of distributor cases to which I have
referred already provide a window to the adoption
of the general propositions I have stated. These are
cases where persons, who would otherwise appear
to be entitled to the registration of a mark because
they can prove valid use, are refused the privilege
when it is found that they are attempting to appro
priate the property of another in a territory in
which the property has yet to receive the full
protection which the law provides to registered
marks.
The provisions of section 8 of the Trade Marks
Act may also be cited in support. Section 8 says:
8. Every person who in the course of trade transfers the
property in or the possession of any wares bearing, or in
packages bearing, any trade mark or trade name, shall, unless
before the transfer he otherwise expressly states in writing, be
deemed to warrant, to the person to whom the property or
possession is transferred, that such trade mark or trade name
has been and may be lawfully used in connection with such
wares. [The underline is mine.]
By its very wording, section 8 seems to provide a
remedy for the transferee against the transferor
when the latter has breached his warranty of
lawful use. I admit that the section alone, which
incidentally would not appear to have ever been
judicially noted nor challenged on its constitution
ality, does not provide a conclusive answer to the
whole question, nevertheless it does reflect on the
overall tenor of the Act that unlawful use should
not be allowed.
A more strongly worded prohibition of unlawful
use of a trade mark is found in paragraph 7(e) of
the Trade Marks Act. Section 7 states that:
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;
(c) 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 perform
ance
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.
It seems evident to me that the acts of both
opponents in making unauthorized sales in Canada
would violate paragraph 7(e) as such conduct
could be said to be contrary to honest industrial or
commercial usage in Canada. I am mindful in this
respect that the Supreme Court of Canada in
MacDonald et al. v. Vapor Canada Ltd., [1977] 2
S.C.R. 134, has ruled paragraph 7(e) ultra vires of
Parliament. The Court's reasoning in that case,
however, might appear to allow continued limited
application of that particular paragraph.
It must be remembered that in MacDonald et
al. v. Vapor Canada Ltd., the issue between the
parties was the alleged breach by a former
employee of his contractual undertaking to keep
confidential certain information obtained in the
course of his employment. It had nothing to do
with trade marks, nevertheless paragraph 7(e) of
the Act was raised as a statutory ground for relief.
The then Chief Justice Laskin, after examining
other cases where the application of paragraph
7(e) had been considered and analyzed, said this at
page 156:
... the Parliament of Canada has, by statute, either overlaid or
extended known civil causes of action, cognizable in the provin
cial courts and reflecting issues falling within provincial legisla
tive competence .... 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 .... [The underline is mine.]
The Chief Justice then made the following find
ings at page 172:
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 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.
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.
A careful reading of this passage indicates to me
a purposefully qualified approach by the Chief
Justice in his ruling as to the constitutionality of
paragraph 7(e). He concedes that section 7 is
nourished for federal legislative purposes as a
means to round out Parliament's regulatory
schemes in relation to patents, trade marks and
copyrights. He further acknowledges that if para
graph 7(e) could, like the other paragraphs of
section 7 be limited to that same head of federal
legislative competence, it would be sustainable like
the others. Finally, the Chief Justice has to note
that the case before the Court had nothing to do
with patents, trade marks or copyrights. The case
was one of breach of trust or breach of contract
and paragraph 7(e) could not be used to frame a
statutory cause of action.
This finding, it may be suggested, possibly
leaves open the argument that paragraph 7(e) may
nevertheless be valid in respect of subject-matters
which may not be dealt with under the other
paragraphs of section 7, so long as its application
is in relation to patents, trade marks or copyrights.
The Federal Court of Appeal took a somewhat
similar view in Asbjorn Horgard AIS v. Gibbs/
Nortac Industries Ltd., [1987] 3 F.C. 544, that
section 7 is valid federal legislation in so far as it
relates to the protection of both registered and
unregistered marks.
In Balinte et al. v. DeCloet Bros. Ltd. et al.
(1978), 40 C.P.R. (2d) 157 (F.C.T.D.), Mr. Jus
tice Dubé refused to strike out a patent infringe
ment claim based on paragraph 7(e) because in his
opinion, the Supreme Court of Canada had not
ruled the section absolutely ultra vires but only in
so far as the case before it did not deal with
patents or trademarks or other heads of federal
legislative competency. His reasoning was
approved by the Federal Court of Appeal ([ 1980]
2 F.C. 384) and followed by Mr. Justice Mahoney
in Flexi-Coil Ltd. v. Smith-Roles Ltd., [1982] 1
F.C. 827; (1981), 59 C.P.R. (2d) 46 (T.D.).
Accordingly, the prohibition in paragraph 7(e)
must be strictly related to some breach in respect
of intellectual property. Furthermore, any act pro
hibited thereby must be an act that is ejusdem
generis with those acts proscribed by the other
paragraphs of section 7. This is to say that the acts
must be of a dishonest nature tending to cause
some sort of harm or prejudice to a person who
might otherwise appear to be, at least as against
the opponents, properly vested with the rights to
that piece of intellectual property.
It would be futile to attempt to categorize the
behaviour of the opponents as coming within the
terms of paragraphs (a) through (d) of section 7.
Nevertheless, their illegal acts are close enough in
substance to those prohibited under these para
graphs as to come within the prohibition of para
graph 7(e), at least to the extent of precluding the
opponents from establishing a strong defence to
Mr. McCabe's application on the grounds of their
own misfeasance. Any contrary finding would only
bring disrespect to the rule of law generally and to
the intended application of the Trade Marks Act
in particular.
Generally speaking, the purposes behind section
7 and section 8 of the Trade Marks Act would
therefore indicate that whether or not it is directly
expressed in the statute, "use", on the issue of
contending claims, implies a lawful "use" by the
parties. This would mean, in the application of an
old common law principle, that an opponent, as
against the ostensible owner, would be estopped
from alleging prior use of a particular trade mark
if it should be found on the facts that such use was
unlawful in the first place.
The principle that the Trade Marks Act should
not be construed as providing support to unlawful
use is indirectly or obliquely endorsed by any
number of decided cases.
Pinard J. in Argenti Inc. v. Exode Importations
Inc. (1986), 8 C.P.R. (3d) 174 (F.C.T.D.),
expunged a trade mark from the register when it
was found that the registered owner, being a new
distributor of the wares, had registered it to the
prejudice of its rightful owner.
In Waxoyl AG v. Waxoyl Canada Ltd. (1984),
3 C.P.R. (3d) 105 (F.C.T.D.), Madame Justice
Reed gave short shrift to a distributor who, upon
obtaining an assignment of the owner's rights in a
trade mark for purposes of Canadian distribution
of the owner's products, proceeded to use the trade
mark for other purposes.
The same fate was meted out by McNair J. in
Wilhelm Layher GmbH v. Anthes Industries Inc.
(1986), 8 C.P.R. (3d) 187 (F.C.T.D.). Again, a
distributor attempted to appropriate an owner's
trade mark when he knew full well it belonged to
the manufacturer. The distributor's registration
was expunged.
In an English case, Aktiebolaget Manus v.
Fullwood & Bland Ld. (1948), 66 R.P.C. 71, the
Court of Appeal clearly stated that a party is
precluded from relying upon his own wrongful use
of a mark. At page 75, Lord Evershed L.J., said
this:
... there can, in my judgment, be no answer to the Plaintiffs'
contention and the judge's conclusion that the Defendants
cannot rely upon their own actions since September, 1941—
done, as the judge found, without the Plaintiffs' knowledge—as
effective to appropriate to themselves what had been before the
Plaintiffs' property or as having been effective to destroy the
distinctive character of the name as indicating the Plaintiffs'
business and so to put an end to the Plaintiffs' proprietary right
to the name in this country.
The foregoing cases, although arriving at the
same conclusions through various statutory paths
dictated by a consideration of all the facts and
circumstances in each of them, would all appear,
in my respectful view, to endorse the principle of
lawfulness or legality whenever rights are asserted
or rights are defended under the Trade Marks
Act.
The upshot of this lengthy digression into the
meaning of "use" as it appears in the Trade
Marks Act is that the opposition based on the
applicant's non-compliance with paragraph 29(b)
must fail. By virtue of the territorial limitations
imposed by the distributorship agreements, any
dealing in Canada by the opponents with the trade
mark "T-Line" was unlawful. While the civil
remedy for such a breach of contract is not within
the jurisdiction of this Court, the Trade Marks
Act does empower the Court to prevent such
unlawful use from being used to frustrate the
legitimate exercise of intellectual property rights
by the rightful owner of the trade mark. The
opponents relied on a purely technical application
of the Act to further their disingenuous scheme
with the result that the legality of their use or the
question of whose mark was being used was not
traversed. Moreover, the claim by the opponents
that the applicant's mark lacks distinctiveness,
based as it is on this unlawful use, must equally
fail. However, if the unlawful use cannot support
an opposition claim in these types of proceedings,
neither can it serve as the basis for Mr. McCabe's
application. Therefore, if the applicant is to suc
ceed, it must be on some other basis.
(b) Application Based on Subsection 16(2)
Throughout these proceedings, Mr. McCabe has
asserted an alternative entitlement to registration
based on subsection 16(2) of the Trade Marks
Act. Because the Hearing Officer found in favour
of the opponents on the question of prior use, he
did not choose to comment on this alternative
ground of entitlement. In light of the foregoing
analysis, however, I must now proceed to examine
this alternative submission.
An application based on subsection 16(2)
requires the examination of several related provi
sions of the Act which it may be helpful to set out
in some detail.
PERSONS ENTITLED TO REGISTRATION OF
TRADE MARKS
16. ...
(2) 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 duly
registered in his country of origin and has used in association
with wares or services is entitled, subject to section 37, to
secure its registration in respect of the wares or services in
association with which it is registered in such country and has
been used, unless at the date of filing of the application in
accordance with section 29 it was confusing with
(a) a trade mark that had been previously used in Canada or
made known in Canada by any other person;
(b) a trade mark in respect of which an application for
registration had been previously filed in Canada by any other
person; or
(c) a trade name that had been previously used in Canada
by any other person.
29. An applicant for the registration of a trade mark shall
file with the Registrar an application containing
(d) in the case of a trade mark that is the subject in another
country of the Union of a registration or an application for
registration by the applicant or his predecessor in title on
which the applicant bases his right to registration, particulars
of such application or registration and, if the trade mark has
neither been used in Canada nor made known in Canada, the
name of a country in which the trade mark has been used by
the applicant or his named predecessor in title, if any, in
association with each of the general classes of wares or
services described in the application;
30. (I) An applicant whose right to registration of a trade
mark is based on a registration of such trade mark in another
country of the Union shall, before the date of advertisement of
his application in accordance with section 36, furnish a copy of
such registration certified by the office in which it was made,
together with a translation thereof into English or French if it
is in any other language, and such other evidence as the
Registrar may require fully to establish his right to registration
under this Act.
At first blush, it would appear (and indeed it
was argued by the opponents) that a person is not
entitled to registration under subsection 16(2)
until the registration in the country of origin has
been perfected. Notwithstanding this limitation,
paragraph 29(d) clearly allows for an application
to be filed in Canada, when registration has been
applied for, but is still pending, in the country of
origin. However, in that event, subsection 30(1)
precludes the Registrar from proceeding to adver
tise the application until proof that the foreign
registration is completed has been filed. In essence,
a person can apply for registration in Canada
based on an application for registration in his
country of origin, but he does not become entitled
to have his application proceed until the foreign
registration is perfected. While it is not relevant to
the present application, it is noteworthy that sec
tion 33 of the Act preserves an applicant's priority
in Canada in the interim provided he files his
Canadian application within six months of his
application in the country of origin.
This is precisely what happened to Mr.
McCabe's application. The Registrar took his ini
tial application, but did not proceed with it until
evidence of the U.S. registration was filed. How
ever, apart from requiring proof of the registration
abroad to establish entitlement, subsection 16(2)
sets out other criteria which an applicant must
satisfy. For the purposes of this case, only para
graph (a) is relevant, and given my findings on the
unlawful character of the opponents' use, it cannot
be relied upon by them to prove non-compliance
with subsection 16(2) any more than it could to
prove non-compliance with paragraph 29)(b).
It may be salient at this point to refer to one
final argument raised by the opponents. It was
their position that, failing all else, T-Line Golf or
Rainbow Sales had made known the trade mark
"T-Line" in Canada by means of advertisements
placed in magazines which, while published in the
United States, received some circulation in
Canada. If this had been proven it might well have
been a successful ground of opposition. However,
section 5 of the Act requires that a mark become
well-known in Canada by reason of such advertis
ing. On the basis of the scanty evidence filed in
relation to this issue, I am unable to make such a
finding and therefore this ground of opposition
must fail as well.
CONCLUSION
The Hearing Officer found that the alleged
prior use by the opponents was a bar to the
application by Mr. McCabe. With respect, I con
sider this to be an error of law which justifies my
intervention. In the face of the particular facts
before me, I must conclude that where the Trade
Marks Act speaks of "use" by an opponent as
grounds to defeat an owner's application for regis
tration, the statute imposes an implied condition
that such use, as against the applicant, be lawful
use.
Having proven his compliance with all the statu
tory requirements for a registration based on use
and registration abroad and there being no tenable
grounds of opposition to such registration, Mr.
McCabe's application must succeed.
For these reasons, the appeal is allowed with
costs and the Registrar is directed to register the
appellant's trade mark.
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.