T-1109-91
Nestle Enterprises Limited (Plaintiff)
v.
Edan Food Sales Inc. (Defendant)
INDEXED AS.' NESTLE ENTERPRISES LTD. V. EDANFOOD SALES
INC. (Ti).)
Trial Division, Strayer J.—Toronto, July 31; Ottawa,
August 9, 1991.
Trade marks — Passing off — Infringement not arguable as
not mentioned in notice of motion — Application for interlocu
tory injunction by registered user in Canada of "Nescafe" in
connection with pure instant coffee blends against importer of
chicory blend bearing same mark and similar packaging —
Imported product made and packaged by mark's registered
user in U.S.A. — Delay in commencing action — Irreparable
harm not compensable in damages not established = Principle
infringement of trade mark establishing irreparable harm not
applicable as: (I) defendant entitled to assume infringement
not at issue as not raised in notice of motion; (2) no presump
tion of validity as defence challenging validity of mark; (3)
mark lawfully applied by American registered user; (4) plain
tiff not registered owner.
Injunctions — Application for interlocutory injunction by
registered user in Canada of "Nescafe" in connection with
pure instant coffee blends against importer of chicory blend
bearing same mark and in similar packaging — Imported
product made and packaged by mark's registered user in
U.S.A. — Serious issues raised ("grey marketing" or "parallel
importation"), but no evidence of irreparable harm not com-
pensable in damages — Defendant's product different, not
inferior — Significant difference in labels and jar tops lessen
ing potential for consumer confusion.
Foreign trade — Application for interlocutory injunction to
prohibit defendant importing chicory-coffee blend from U.S.A.
— Imported product made and packaged by registered user in
U.S.A. of trade mark "Nescafe" — Plaintiff registered user in
Canada of same mark — Defendant applying for order solicit
ing views of Canadian Government on effect of Canada-U.S.A.
Free Trade Agreement on right of Canadian purchaser of
authentic brand name goods on U.S.A. market to resell goods
in Canada free of interference by trade mark owner or those
having trade mark rights therefrom — Injunctive relief denied
— Unnecessary to decide defendant's application — Inappro
priate to withhold decision on injunction pending possible
agreement on interpretation of Agreement due to time required
and uncertain relevancy — Defendant required to show: proce
dure under Agreement, art. 1808 part of domestic law of
Canada; interpretation of Agreement pertinent, and why Court
ought to "solicit" views of executive branch.
This was an application for an interlocutory injunction to
restrain the defendant from directing public attention to its
wares so as to cause confusion, contrary to the Trade-marks
Act, section 7. The plaintiff is the registered user in Canada of
the trade marks "Nescafe" and "Nescafe & Design". The
defendant has, since April 1990, been importing into Canada
for sale a blend of instant coffee bearing the plaintiff's trade
mark. The imported product is made by the trade mark's regis
tered user in the United States and is actually a mixture of cof
fee and chicory. Its packaging is virtually identical to that of
the plaintiff s pure coffee blends. Although the plaintiff was
aware of the defendant's activities in September 1990, it did
not commence these proceedings until April 1991. The plain
tiff's complaint was that the packaging causes confusion and it
alleged passing off.
At the same time, the defendant applied pursuant to article
1808 of the Canada-U.S.A. Free Trade Agreement for an order
soliciting the views of the Government of Canada on the effect
of the Agreement on the right of a Canadian purchaser of
authentic brand name goods on the U.S.A. market to resell
such goods in Canada free of interference by the trade mark
owner and anyone deriving trade mark rights therefrom. Such
an order would require the Canadian and American Govern
ments to attempt to reach an agreement, failing which either
Government could make submissions as to the proper interpre
tation of the Agreement.
Held, the application for an interlocutory injunction should
be dismissed on condition that the defendant keep an account
ing of Canadian sales of its coffee until after trial. The defend
ant's application should be adjourned sine die.
The plaintiff was disentitled to an interlocutory injunction
because of the delay in seeking it.
The plaintiff also failed with respect to the substance of the
injunction application. Although important issues of "grey
marketing" or "parallel importation" had been raised, the evi
dence did not establish irreparable harm not compensable in
damages. The evidence did not establish significant potential
consumer confusion between the two products, or that if there
was, that it would enure to the significant detriment of the
plaintiff. There are significant differences between the labels
and the jars have different coloured tops. Furthermore, the
defendant's label clearly states that it contains chicory or has a
chicory flavour and the source of the respective blends. The
defendant's coffee is not an inferior product, simply a different
product, and that difference is adequately stated on the label.
The principle that an obvious infringement of a registered
trade mark itself establishes irreparable harm did not apply.
The defendant was entitled to assume that infringement was
not an issue in this proceeding because infringement was not
raised in the notice of motion. Furthermore, doubt has recently
been cast on the principle that the registered owner of a trade
mark is entitled to its exclusive use until the mark is shown to
be invalid. In Syntex Inc. v. Novopharm Ltd., the Federal Court
of Appeal held that if the validity of the trade mark is chal
lenged as part of the defence, there is no presumption of valid
ity. Assuming that the same principle should apply to the regis
tration of a user of a trade mark, the defendant has challenged
the validity of the "Nescafe" and the "Nescafe & Design" trade
marks, alleging that they are incapable of distinguishing the
wares of the plaintiff from those of the registered owner of the
trade marks which the defendant says are "house marks" of an
international group of Nestlé companies. Moreover, the trade
mark on the goods sold by the defendant was lawfully applied
by the American registered user to its own wares which were
subsequently purchased by the defendant and resold in Canada.
Finally, the plaintiff was not the registered owner of the trade
mark, but a registered user in Canada.
An injunction having been denied, it was unnecessary to
consider whether the Free Trade Agreement would have pro
vided a further defence. In any case, it would be inappropriate
to withhold the decision on the injunction application pending
possible agreement by the Canadian and American Govern
ments on the interpretation of the Free Trade Agreement. Such
a procedure would take so long as to render futile the applica
tion for an injunction. Such a matter goes to the merits and
should be postponed until trial. The relevancy of this applica
tion to either an interlocutory injunction or the final disposition
of the case was not clear and would require extensive argu
ment. The defendant would have to show that (1) the extraordi
nary procedure contemplated by article 1808 of the Free Trade
Agreement has become part of the domestic law of Canada so
as to require this Court to entertain such motions; (2) there is
an issue of interpretation of the Free Trade Agreement perti
nent to the case at bar; and (3) the Court ought to "solicit" the
views of the executive branch of government on the legal
interpretation of the Free Trade Agreement, a decision which
even article 1808 leaves to the Court's discretion.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Canada-United States Free Trade Agreement Implementa
tion Act, S.C. 1988, c. 65, s. 2.
Trade-marks Act, R.S.C., 1985, c. T-13, s. 7.
CASES JUDICIALLY CONSIDERED
APPLIED:
Turbo Resources Ltd. v. Petro Canada Inc., [1989] 2 F.C.
451; (1989), 22 C.I.P.R. 172; 24 C.P.R. (3d) 1; 91 N.R.
341 (C.A.); Syntex Inc. v. Novopharm Ltd. (1991), 36
C.P.R. (3d) 129 (F.C.A.).
DISTINGUISHED:
H.J. Heinz Co. of Canada Ltd. v. Edan Foods Sales Inc.
(1991), 35 C.P.R. (3d) 213 (F.C.T.D.).
REFERRED TO:
Imperial Chemical Industries PLC v. Apotex, Inc., [1990]
1 F.C. 221; (1989), 26 C.I.P.R. 1; 27 C.P.R. (3d) 345; 28
F.T.R. 240 (note); 101 N.R. 147 (C.A.); Maple Leaf Mills
Ltd. v. Quaker Oat Co. of Can. (1984), 2 C.I.P.R. 33; 82
C.P.R. (2d) 118 (F.C.T.D.); Joseph E. Seagram & Sons
Ltd v. Andres Wines Ltd. (1987), 16 C.I.P.R. 131; 16
C.P.R. (3d) 481; (1987), 11 F.T.R. 139 (F.C.T.D.); Jercity
Franchises Ltd. v. Foord (1990), 34 C.P.R. (3d) 289; 39
F.T.R. 315 (F.C.T.D.).
COUNSEL:
John R. Morrissey and Alistair G. Simpson for
plaintiff.
Timothy J. Sinnott for defendant.
Jonathan Keene for Attorney General of
Canada.
SOLICITORS:
Smart & Biggar, Toronto, for plaintiff.
Barrigar & Oyen, Toronto, for defendant.
Deputy Attorney General of Canada for Attor
ney General of Canada.
The following are the reasons for order rendered in
English by
STRAYER J.:
Relief Requested
This is an application by the plaintiff for an inter
locutory injunction to prohibit the defendant from
directing public attention to its wares so as to cause
confusion between its wares and those of the plain-
tiff, contrary to paragraph 7(b) of the Trade-marks
Act [R.S.C., 1985, c. T-13]; from passing off its
wares for those ordered or requested, contrary to par
agraph 7(c) of the Trade-marks Act; and performing
an act or adopting a business practice contrary to
honest industrial usage in Canada, contrary to para
graph 7(e) of the Trade-marks Act. At the hearing of
this application the latter two aspects of the injunc
tion were not seriously pressed for nor argued.
Instead, counsel for the plaintiff sought to add to the
relief sought an injunction to prohibit infringement of
trade marks of which the plaintiff is registered user in
Canada. Counsel for the defendant did not consent to
the notice of motion being amended and specifically
objected to the injunction application being extended
to cover infringement as well. I find his objection to
be well taken.
The defendant also filed a notice of motion, which
was not argued at this time, for an order of the Court
seeking the views of the Government of Canada on
the effect on this matter of allegedly relevant articles
of the Canada-U.S. Free Trade Agreement [Canada-
United States Free Trade Agreement Implementation
Act, S.C. 1988, c. 65, Schedule, Part A].
Facts
The plaintiff company is incorporated in Ontario.
It is the registered user in Canada of several trade
marks of which Société des Produits Nestlé S.A. of
Switzerland is the registered owner in Canada. These
include the trade marks "Nescafe" and "Nescafe &
Design" (the design being the familiar horizontal bar
commencing at the top of the right stem of the letter
"N" and proceeding to the right above the slightly
smaller letters "Escaf', stopping short at the last "E"
over which an acute accent appears). For present pur
poses, the instant coffee blends made or packaged
and sold in Canada by the plaintiff include Colombia,
Rich Blend, Viva, and Encore. The first three are sold
in the familiar squarish jar with a cylindrical fluted
top. There is a degree of similarity among their labels
as they each depict coffee beans somewhere on the
label. Each is a pure coffee. Encore on the other hand
is sold in a round jar with a more rounded top. Coffee
beans are not depicted on the Encore label but instead
it alone has a depiction of the sun. Encore is not a
pure coffee blend but is a mixture of coffee with chic
ory and this is clearly stated on the label.
It is not disputed that the defendant has, since
April, 1990, been purchasing in the United States and
importing into Canada for sale a blend of instant cof
fee bearing the trade mark "Nescafe" with design
apparently identical to the mark of which the plaintiff
is registered user in Canada. The instant coffee being
imported by the defendant is made by the Nestlé Bev
erage Company of San Francisco, California which is
licensed by Société des Produits Nestlé S.A. as user
of this trade mark in the United States. The particular
blend being imported is named "Mountain Blend"
and is packaged in a squarish jar with a cylindrical
top virtually identical to those used by the plaintiff
for its pure instant coffee blends. There is a certain
similarity in the packaging of "Mountain Blend" to
the pure coffee blends of the plaintiff in that there are
a few coffee beans depicted on the label. However
the "Mountain Blend" label clearly states that this is
"Instant Coffee With Natural Flavor Extracted From
Chicory".
The plaintiff's complaint is that the "Mountain
Blend" packaging is confusing with the packaging of
its pure blends, particularly "Rich Blend" because
both "Mountain Blend" and "Rich Blend" have some
red on their labels. In its statement of claim the plain
tiff has alleged infringement of its exclusive rights
flowing from its status as registered user of a trade
mark or trade marks (it appears to me that the only
registered trade marks relevant for present purposes
are "Nescafe" and "Nescafe & Design"). It also
alleges passing off and other conduct by the defen
dant contrary to paragraphs 7(b),(c) and (e) of the
Trademarks Act . But as noted earlier, in its notice of
motion it only sought an injunction with respect to
the conduct allegedly prohibited by section 7, essen
tially that of passing off.
Conclusions
I have concluded that no interlocutory injunction
should be granted. First, I believe the plaintiff is dis-
entitled to an injunction because of the delay in seek
ing it. The evidence indicates that the defendant
started to sell "Mountain Blend" coffee in Canada in
April, 1990. I am also satisfied that the plaintiff was
aware of this by at least September, 1990. There then
followed casual conversations between employees of
the plaintiff and the President of the defendant. While
there were some expressions of disapproval by an
employee of the plaintiff as early as September, 1990
as to the defendant selling "Nescafe" brands in
Canada, no formal steps were taken to demand a ces
sation of such sales. Instead the plaintiff proceeded in
a very deliberate fashion to arrange meetings to dis
cuss a settlement of the issue, which meetings did not
commence until February, 1991. The statement of
claim was not filed until April 25, 1991 and the
notice of motion was not filed until April 29. In the
meantime the defendant had proceeded to move into
a larger warehouse, in part because of the significant
amount of its business which "Mountain Blend" sales
represents, and to take and place orders for "Moun-
tain Blend". The plaintiff states that it was difficult to
ascertain which traders were bringing specific blends
of coffee into Canada and indeed it thought that the
defendant was importing several blends which it now
concedes was not the case. As the plaintiff seems to
have been aware as early as September, 1990 that the
defendant was bringing in one or more "Nescafe"
blends, it could have sent a cease and desist letter in
respect of all blends and made it clear to the defen
dant that it would take legal action if any of "Nes-
cafe's" blends were being imported and sold under
the "Nescafe" trade mark. This it did not do. There
fore the plaintiff is disqualified on that ground alone
from obtaining an interlocutory injunction.
I also believe that the plaintiff must fail with
respect to the substance of the injunction, applying
the tests laid down by the Federal Court of Appeal in
Turbo Resources Ltd. v. Petro Canada Inc.' I believe
that the plaintiff has raised a serious issue, having
regard inter alia to the fact that it is the registered
user in Canada of the trade mark "Nescafe & Design"
which undisputedly appears on the product being sold
by the defendant in this country. There are important
issues here of "grey marketing" or "parallel importa
tion" involving legal questions which are far from
settled.
However, I do not believe that the plaintiff has
established that any irreparable harm not compensa-
ble in damages will be caused to it if the defendant
continues to sell "Mountain Blend" until the disposi
tion of this action. I am not satisfied from the evi
dence that there is significant potential confusion on
the part of consumers between the defendant's
"Mountain Blend" and the "Rich Blend" or other
pure coffee blends of the plaintiff, or that if there is it
will enure to the significant detriment of the plaintiff.
Firstly, there are substantial differences between the
labels of "Mountain Blend" and "Rich Blend", and
their jars have different coloured tops. Secondly, it is
clearly stated on the "Mountain Blend" label that it
contains chicory or is of a chicory flavour. Moreover,
the source of these respective blends is stated on the
label as well, "Mountain Blend" being labelled "Nes-
tlé Foods Corporation, Purchase, N.Y. 10577", and
"Rich Blend" being labelled "Nestlé, Don Mills, Ont.
M3C 3C7". A shopper who has any serious interest
in the kind of coffee blend he is buying can readily
perceive that "Mountain Blend" is a chicory mix
before he purchases it. If he does not notice this and
is disappointed in the taste when he makes a cup of
coffee, he can readily examine the label and realize
that he has bought a coffee blend containing chicory,
a blend not of the plaintiff's manufacture. The evi
dence does not satisfy me that "Mountain Blend" is
an "inferior" product. It is simply different from the
1 [1989] 2 F.C. 451 (C.A.).
plaintiffs pure coffee blends and that difference is
adequately stated on the label. I am therefore unable
to find on the basis of the evidence before me that the
continued sale of "Mountain Blend" in Canada will
cause irreparable harm to the good will of the plain
tiff associated with its products. Mere speculation is
not adequate. 2
I am aware, of course, of a series of cases in the
Trial Division, to which I have contributed, in which
it has been found that an obvious infringement of a
registered trade mark of itself establishes irreparable
harm. 3 I do not consider it appropriate to apply that
principle in this case. As indicated above, the plain
tiff did not in its notice of motion seek an injunction
to prevent infringement of the trade marks of which it
is the registered user in Canada. This probably
reflected a deliberate decision based on the uncer
tainty of the jurisprudence concerning the rights of
registered users. The defendant was entitled to
assume that infringement was not an issue in this
injunction proceeding. Further, the recent decision of
the Federal Court of Appeal in Syntex Inc. v.
Novopharm 4 has cast serious doubt on the principle
adopted in several Trial Division decisions, as
referred to above, that the registered owner of a trade
mark is entitled to exclusive use of that trade mark
pursuant to section 19 of the Trade-marks Act unless
and until the trade mark is shown to he invalid, and
that the registered owner ought not to be obliged to
share that trade mark against his will in the
meantime. The Court of Appeal in the Novopharm
case took the view that if the validity of the registra
tion of the trade mark is questioned in an action, then
the trial judge hearing an application for an interlocu
tory injunction to prevent infringement of that trade
2 See e.g. Imperial Chemical Industries PLC v. Apotex, Inc.,
[1990] 1 F.C. 221 (C.A.), at p. 228; Syntex Inc. v. Novopharm
Ltd. (1991), 36 C.P.R. (3d) 129 (F.C.A.), at p. 135.
3 See e.g. Maple Leaf Mills Ltd. v. Quaker Oat Co. of Can.
(1984), 2 C.I.P.R. 33 (F.C.T.D.); Joseph E. Seagram & Sons
Ltd. v. Andres Wines Ltd. (1987), 16 C.I.P.R. 131 (F.C.T.D.);
Jercity Franchises Ltd. v. Foord (1990), 34 C.P.R. (3d) 289
(F.C.T.D.); H.J. Heinz Co. of Canada Ltd. v. Edan Foods Sales
Inc. (1991), 35 C.P.R. (3d) 213 (F.C.T.D.).
4 Supra, note 2.
mark pending the trial of the action would, in assum
ing the validity of the trade mark until it is success
fully challenged, be "deciding the very issue which is
to be determined at trial". In other words, if a defen
dant raises as part of its defence the alleged invalidity
of the trade mark, then there can be no presumption
that the trade mark is valid. I assume that the same
principle should apply to the registration of a user of
a trade mark. In the present case the defendant has in
its statement of defence challenged the validity of,
among others, the "Nescafe" and the "Nescafe &
Design" trade marks, alleging that they are not dis
tinctive because they are incapable of distinguishing
the wares of the plaintiff from those of Société des
Produits Nestlé S.A., the registered owner of these
trade marks which the defendant says are "house
marks" of an international group of Nestlé compa
nies.
Moreover I do not think that the principle as enun
ciated in various Trial Division decisions, assuming
irreparable harm where there is substantial evidence
of infringement of a registered trade mark, would be
applicable in this case. That principle has normally
been resorted to in cases where some facsimile of the
plaintiff's mark was applied by the defendant to his
wares without any authorization. The present case is
quite different: it is not disputed that the trade mark
on the goods sold by the defendant was lawfully
applied by the Nestlé Beverage Company of the
United States to its own wares which were subse
quently purchased by the defendant and resold in
Canada. Further the plaintiff is not the registered
owner of the trade mark but a registered user in
Canada. These circumstances raise issues which
would make any presumption of irreparable harm
inappropriate.
In reaching these conclusions I have given careful
regard to the recent decision of my colleague Cullen
J. in the Heinz case, 5 where he issued an interlocu
tory injunction against this same defendant in respect
of the sale in Canada of U.S.-made Heinz ketchup. I
believe the cases are distinguishable in that the plain
tiff there sought an injunction to prevent infringe
ment, and it was the registered owner in Canada of
the trade mark. Further, the packaging of the U.S.
product was virtually indistinguishable from the
plaintiff's Canadian-made product, yet the taste was
substantially different.
I am therefore dismissing the application for an
interlocutory injunction, but on condition that, as the
President of the defendant has agreed to do, the
defendant keep an accounting of all sales of "Moun-
tain Blend" chicory-based coffee in Canada until the
final disposition of this action.
As noted above, the defendant also filed a notice of
motion for hearing at the time of the injunction appli
cation which, as amended, sought an order
Soliciting the views of the government of Canada concerning
the effect of Articles 102, 105, 501 and 2004 of the Canada
U.S. Free Trade Agreement, and any other applicable provi
sions thereof, upon the right of a Canadian purchaser of
authentic name brand goods placed on the United States mar
ket by the trade mark owner or with his consent, to resell such
goods in Canada without interference by the trade mark owner
or any Canadian subsidiaries thereof, or any other companies
which are related to the trade mark owner, or which otherwise
derive any trade mark rights therefrom.
This motion is based in part on Article 1808 of the
Canada-United States Free Trade Agreement 6 which
provides:
Article 1808: Referrals of Matters from Judicial or
Administrative Proceedings
1. In the event an issue of interpretation of this Agreement
arises in any domestic judicial or administrative proceeding of
a Party which either Party considers would merit its interven
tion, or if a court or administrative body solicits the views of a
5 Supra, note 3.
6 As defined in the Canada-United States Free Trade Agree
ment Implementation Act, S.C. 1988, c. 65, s. 2.
Party, the Parties shall endeavour to agree on the interpretation
of the applicable provisions of this Agreement.
2. The Party in whose territory the court or administrative
body is located shall submit any agreed interpretation to the
court or administrative body in accordance with the rules of
that forum. If the Parties are unable to reach agreement on the
interpretation of the provision of this Agreement at issue,
either Party may submit its own views to the court or adminis
trative body in accordance with the rules of that forum.
I understand the defendant's motion, therefore, to be
for an order whereby I would solicit the views of the
Government of Canada as to whether certain articles
of the Free Trade Agreement govern or affect the
rights of the parties in this case. If I were to make
such an order soliciting the views of the Government
of Canada, that government would endeavour to
reach agreement with the U.S. Government on this
matter and, failing such agreement, either govern
ment could make submissions to this Court as to the
proper interpretation of the agreement.
At the end of the hearing of the injunction applica
tion, counsel and I agreed that I would adjourn this
application for an order soliciting the views of the
Government of Canada and would give appropriate
directions as to the further hearing of this application
when I had determined how I would dispose of the
injunction application.
The defendant is invoking the Free Trade Agree
ment in support of the proposition that trade mark
law should not create a barrier to the defendant
importing goods from the United States for sale here.
As I have decided not to issue the injunction, there is
no need to consider whether the Free Trade Agree
ment would have provided a further defence for the
defendant in respect of the injunction. In any case it
appears to me that, at the hearing of an application
for an interlocutory injunction in such matters, it
would not be appropriate to withhold the decision on
the injunction application pending possible agree
ment by the Canadian and U.S. governments on the
interpretation of the Free Trade Agreement or, failing
that, the making of submissions by either or both
governments to the Court. Such a procedure would
take so long as to render futile the application for an
injunction. In accordance with the law and practice
concerning interlocutory injunctions such a matter,
which might conceivably affect the ultimate disposi
tion of the case in influencing the determination of
certain questions of law concerning the respective
rights of the parties, goes to the merits and should be
postponed until trial and final disposition of the case.
It is now accepted that in normal cases the trial judge
hearing an application for an interlocutory injunction
ought not to try the merits. I would only add that the
relevancy of this application to either the interlocu
tory injunction or the final disposition of the case is
far from clear and would require extensive argument:
the defendant will have to show, for example, that the
extraordinary procedure contemplated by article 1808
of the Free Trade Agreement has become part of the
domestic law of Canada so as to require this Court to
entertain such motions. Further, the defendant will
have to show that there is some issue of interpretation
of the Free Trade Agreement pertinent to the present
case, a matter which is far from clear to me. If and
when the matter is considered by the Court at some
other stage the defendant will also have to persuade
the Court that it ought to "solicit" the views of the
executive branch of government on the legal interpre
tation of the Free Trade Agreement, a decision which
even Article 1808 leaves to the Court's discretion.
I am therefore adjourning sine die the defendant's
application for an order soliciting those views. The
parties are at liberty to bring this application on for
hearing prior to trial or at the trial itself, subject to
further direction by the Court.
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.