T-1793-92
Eye Masters Limited (Plaintiff)
v.
Ross King Holdings Ltd., carrying on business as
Shopper's Optical (Defendant)
INDEXED AS: EYE MASTERS LTD. V. ROSS KING HOLDINGS
LTD. (T.D.)
Trial Division, Reed J.—Vancouver, September 2 and
9, 1992.
Injunctions — Application for interlocutory injunction in
action for trade mark infringement — Defendant's advertising
comparing plaintiff's optical service unfavourably with own —
Threshold tests of serious issue to be tried, irreparable harm
Plaintiff's argument advertisement infringing use of trade
mark associated with services, whereas trademark on goods
not so protected, giving rise to serious issue — Applicant need
only raise doubt whether damages adequate remedy, need not
prove irreparable harm will actually result — Woods excep
tion, requiring strong prima facie case where injunction dis-
positive of issue in principal action, not applying where situa
tion created by respondent — That advertising campaign to
expire before trial defendant's own decision — Damage to
plaintiff's goodwill greater than defendant's increased sales,
as some customers likely to go elsewhere.
Trade marks — Infringement — Comparative advertising of
optical services naming competitor by trade mark, implying
inferior value — Whether infringement of right to exclusive use
under Act, s. 19 Whether depreciating goodwill of mark
contrary to s. 22(1) — Comparative advertising not infringe
ment of trade mark used in association with goods — Where
trade mark used in association with services, comparative
advertising may constitute infringing use — Serious issue to be
tried.
This was an application for an interlocutory injunction in an
action for infringement of a trade mark. The plaintiff and the
defendant are competing retail opticians. The defendant took
out advertisements in which a model is depicted, frowning,
wearing the plaintiff's glasses, the price of which is stated to
be $208 and, smiling, wearing the defendant's glasses at a
price of $107. The plaintiff argues that, in naming it by its
trade mark, "Eye Masters," the defendant infringes that mark,
contrary to section 19 of the Trade-marks Act. It further argues
that the advertisement depreciates the value of the goodwill
attaching to the mark, contrary to subsection 22(1), and that it
constitutes a false or misleading statement under paragraph
7(a).
Held, an interlocutory injunction should issue.
The first test an application for an interlocutory injunction
must pass is that there be a serious issue to be tried. The adver
tisement could be said to be directed at the goodwill of the
plaintiff's business, not the goodwill of the mark itself. Fur
ther, it is clear that trade marks can be used in comparative
advertising of goods without infringement of the mark. How
ever, subsection 4(2) of the Act provides that, where the mark
relates to services, advertising is a use; and it has been held
that the question whether this protects a mark used with ser
vices, as contra-distinguished from a mark used on goods,
gives rise to a serious issue to support the grant of an interlocu
tory injunction. The Woods exception, which requires, for situ
ations in which the disposition of the application for injunction
will be dispositive of the issue between the parties, that there
be a strong prima facie case, does not apply where that situa
tion is created by the respondent. That the advertising cam
paign here is to end after three months is the defendant's
choice. The Court assumes, for the purpose of an interlocutory
proceeding, the constitutionality of the statutory provisions
upon which the application is based.
To pass the second test, irreparable harm not compensable in
damages, the applicant need not prove that irreparable harm is
bound to occur. It is sufficient if there is doubt as to the ade
quacy of damages as a remedy. Here, both parties are in a posi
tion where damages are an unsatisfactory remedy, as it is diffi
cult to quantify either the monetary effect of an advertising
campaign or that of not having the campaign. In such a case, if
the effect of an injunction is to postpone the date upon which a
person is able to embark on a course of action not previously
open to him, the status quo should be preserved. The damage
done to plaintiffs goodwill by defendant's campaign is likely
to exceed the benefit to defendant, as there will be some cus
tomers, dissuaded from dealing with the plaintiff, who will go
to other opticians.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Rules, C.R.C., c. 663, RR. 321.1 (as
enacted by SOR/88-221, s. 7; SOR/92-43, s. 4), 474 (as
am. by SOR/79-57, s. 14).
Trade-marks Act, R.S.C., 1985, c. T-13, ss. 4, 7(a), 19,
22(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396
(H.L.); 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.); B.C. (A.G.) v. Wale, [1987] 2 W.W.R.
331; (1986), 9 B.C.L.R. (2d) 333; [1987] 2 C.N.L.R. 36
(C.A.).
CONSIDERED:
Clairol International Corp. et al. v. Thomas Supply &
Equipment Co. Ltd. et al., [1968] 2 Ex.C.R. 552; (1968),
38 Fox Pat. C. 176.
DISTINGUISHED:
NWL Ltd y Woods, [1979] 3 All ER 614 (H.L.).
REFERRED TO:
Purolator Courier Ltd. v. Mayne Nickless Transport Inc.
(1990), 33 C.P.R. (3d) 391; 37 F.T.R. 215 (F.C.T.D.);
Purolator Courier Ltd. v. Canadian Pacific Express &
Transport Ltd., Court file No. 33310/88, Sirois J., judg
ment dated 25/11/88, Ont. H.C., not reported.
AUTHORS CITED
Field-Marsham, M. "Limitations on the Use of Trade
Marks in Comparative Advertising" Intellectual Prop
erty News, Spring 1991.
APPLICATION for interlocutory injunction in
principal action for infringement of trade mark.
Application allowed.
COUNSEL:
Robert A. Millar and Keith E. Spencer for plain
tiff.
R. A. Easton and Lance A. Turlock for defen
dant.
SOLICITORS:
Russell & DuMoulin, Vancouver, for plaintiff.
Swinton & Company, Vancouver, for defendant.
The following are the reasons for order rendered in
English by
REED J.: The plaintiff seeks an interlocutory
injunction to prevent the defendant referring to its
trade mark in comparative advertising. The plaintiff
and the defendant are both engaged in the retail sale
of eyeglasses, contact lens and related optical prod-
ucts. The defendant formed the opinion that as
between it and the plaintiff, the plaintiff charged
much higher prices for the products being sold.
The defendant purchased advertising which is
designed to call attention to this alleged state of
affairs. The advertising shows the same model, in
two photographs which are placed side by side. In
one of the photographs the model is frowning and the
printing at the top of the photograph reads: "Eye
Masters [Ltd.], $208 Reg. Price ...." In the other
photograph the model is smiling and the printing at
the top of the photograph reads: "Shopper's Optical,
$107 Reg. Price ...." Above the two photographs in
large letters is "COMPARE THE VALUE—SHOP-
PER'S OPTICAL". The model is wearing similar-
looking eyeglasses in the two photographs. The eye
glasses are not identical and there is considerable dis
pute between the parties as to their respective quality.
The plaintiff seeks an interlocutory injunction to
prevent the defendant using its trade mark "Eye Mas
ters" in this advertisement on the ground that it is an
infringement of the plaintiff's right to the exclusive
use of its trade mark. This it enjoys pursuant to sec
tion 19 of the Trade-marks Act, R.S.C., 1985, c. T-13.
It is also argued that the advertisement offends sub
section 22(1) of the Act:
22. (1) No person shall use a trade mark registered by
another person in a manner that is likely to have the effect of
depreciating the value of the goodwill attaching thereto.
And the plaintiff alleges that the defendant's actions
are an infringement of paragraph 7(a) of the Act:
7. No person shall
(a) make a false or misleading statement tending to discredit
the business, wares or services of a competitor ....
The argument on this interlocutory application
focused on sections 19 and 22. Indeed it would be
difficult, on the basis of the material filed, to make an
assessment as to whether or not the statements in the
advertisement are false. They are not obviously so
from the information filed but that information, in so
far as it relates to the value consumers can expect
from the respective retail businesses, relates primarily
to only two particular models of similar-looking eye
glasses.
The tests for the granting of an interlocutory
injunction application are well known: American
Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396
(H.L.) as adopted in Turbo Resources Ltd. v. Petro
Canada Inc., [1989] 2 F.C. 451 (C.A.). The first fac
tor to consider is the strength of the plaintiffs case.
In so far as an infringement of the plaintiffs right
to exclusive use of its trade mark is concerned, my
initial view was to think that the activity in question
would not infringe that right. In addition, it is at least
arguable that the advertisement is directed at the
goodwill of the business not the goodwill of the trade
mark. It is clear that trade marks and trade names
associated with wares can be used in comparative
advertising and that such use is not considered an
infringement of the trade mark.
Counsel for the plaintiff argues, however, that the
scope of protection conferred on trade marks which
are associated with services is broader than that
which relates to trade marks associated with wares.
This argument is based on the "deemed use" provi
sions of section 4 of the Act:
4. (1) A trade-mark is deemed to be used in association with
wares if, at the time of the transfer of the property in or posses
sion of the wares, in the normal course of trade, it is marked on
the wares themselves or on the packages in which they are dis
tributed or it is in any other manner so associated with the
wares that notice of the association is then given to the person
to whom the property or possession is transferred.
(2) A trade-mark is deemed to be used in association with
services if it is used or displayed in the performance or adver
tising of those services. [Emphasis added.]
The argument that the scope of protection afforded
to trade marks which are associated with services is
broader than that accorded to those associated with
wares is based on the decision in Clairol Interna
tional Corp. et al. v. Thomas Supply & Equipment
Co. Ltd. et al., [1968] 2 Ex.C.R. 552. That decision
held that colour comparison charts, which referred to
a competitor's trade mark, when affixed to a pack
aged hair dye was an infringement of the exclusive
right to use granted by section 19 of the Act. At the
same time, the replication of the same charts in an
advertising brochure was not. This distinction as I
understand it was based on the wording of subsection
4(1) of the Act. It was held [at pages 564-565] that:
... the presence of the plaintiff's mark on the defendants'
packages is a use of those marks "in association with" the
wares in the defendants' packages .... The purpose for which
it is there is, I think, irrelevant on this point .... [T]he pres
ence of the plaintiff's marks on the comparative shade charts
of the defendants' brochures is not a use of such marks within
the meaning of section 4(1) since the brochures are neither the
wares themselves nor the packages in which the wares are dis
tributed ....
In the case of services there are of course no wares
or packages to which trade marks can be affixed and
thus subsection 4(2) speaks of trade marks "in associ
ation with" services, being used, "if displayed in
the ... advertising of those services." By analogy
then it is argued that the use of another's trade mark
in comparative advertising when association of the
trade mark is to a service is an invasion of the trade
mark holder's right to exclusive use. I must say, I
find the conclusion somewhat bizarre. At the same
time, I recognize that this possible interpretation has
been held to give rise to a sufficiently serious issue to
meet the American CyanamidlTurbo Resources test
required for the issuance of an interlocutory injunc
tion: Purolator Courier Ltd. v. Mayne Nickless Trans
port Inc. (1990), 33 C.P.R. (3d) 391 (F.C.T.D.);
Purolator Courier Ltd. v. Canadian Pacific Express
& Transport Ltd. (Sirois J., November 25, 1988,
Court file No. 33310/88, Ont. H.C., not reported).
See also M. Field-Marsham, "Limitations on the Use
of Trade-Marks in Comparative Advertising" Intel
lectual Property News (Spring 1991). Indeed it is my
understanding that amendments to the Trade-marks
Act are proposed which would clarify the issue. In the
circumstances, then, I must conclude that a serious
issue exists with respect to the infringement of the
plaintiff's right to the exclusive use of its trade mark
and thus the "threshold test" has been met.
Counsel for the defendant argues that in the cir
cumstances of this case the appropriate test is not that
of a "serious question to be tried" but that a demon
stration of a "strong prima facie case" is required. It
is argued that the disposition of this interlocutory
application will effectively dispose of the issue
between the parties. The defendant's advertising
campaign is scheduled to expire, in any event, on
October 4, 1992. Thus it is argued that the Woods 1
exception applies. I have not been persuaded that the
Woods exception applies where the circumstances
which make the interlocutory injunction application
dispositive of the issue are within the control of the
respondent. It is the defendant's decision to terminate
its advertising campaign on the October 4th date. The
respondent cannot, therefore, use that factor as a rea
son for increasing the burden on the plaintiff with
respect to what must be proven in order to obtain an
interlocutory injunction.
The defendant argues that the plaintiff's mark is, in
any event, invalid because it has lost its distinctive
ness as a result of being used in association with a
lens cleaner manufactured by another company. The
affidavit of Audrey Reed, dated September 2, 1992
answers that concern to some extent, at least to suffi
cient degree to prevent the allegation of invalidity
being a reason for finding that the plaintiffs case is
too weak to justify the issuing of an injunction.
The defendant has also raised arguments about the
unconstitutionality of some of the provisions of the
Trademarks Act which are being relied upon. This is
not a matter to be dealt with on this application. As
1 NWL Ltd y Woods, [1979] 3 All ER 614 (H.L.).
Associate Chief Justice Jerome decided in the Puro-
lator case, it is appropriate for the Court to assume
the constitutionality of those provisions for the pur
pose of an interlocutory injunction application in a
case such as the present.
A major issue raised in this application is the
appropriate formulation of the "irreparable harm" test
and an assessment as to whether such is likely to be
suffered by the plaintiff if an injunction is not
granted.
Counsel for the plaintiff argues that the American
Cyanamid and Turbo Resources cases do not use the
verbal formulation "irreparable harm", when assess
ing whether an injunction should be granted. He
argues that what is really meant by that phrase is
whether damages would be an adequate remedy. He
argues that it is almost always virtually impossible on
an interlocutory injunction application to prove that
irreparable harm will occur if an injunction is not
granted. The damage being assessed is always pro
spective in nature. He argues that, at the very least, if
one is going to use the words "irreparable harm" as
the correct verbal formulation of the test, the require
ment can be no stronger than that there may be or that
there is a likelihood of irreparable harm arising. Ref
erence was made to B.C. (A.G.) v. Wale, [1987] 2
W.W.R. 331 (B.C.C.A.), at pages 343-345:
The traditional test for the granting of an interim injunction
in British Columbia is two-pronged. First, the applicant must
satisfy the court that there is a fair question to be tried as to the
existence of the right which he alleges and a breach thereof,
actual or reasonably apprehended. Second, he must establish
that the balance of convenience favours the granting of an
injunction.
The decision in Amer. Cyanamid Co. v. Ethicon Ltd., [1975]
A.C. 396, [1975] 2 W.R.L. 316, [1975] 1 All E.R. 504 (H.L.),
may be read as suggesting a three-stage test for the granting of
interlocutory injunctions rather than the two-stage test to
which I have referred, the requirements being (1) a fair ques
tion to be tried, (2) irreparable harm, and (3) balance of conve
nience favouring the injunction. While I prefer to view the
requirement of irreparable harm as integral to the assessment
of the balance of convenience between the parties, the practical
effect of the two approaches is the same.
The first step in determining where the balance of conve
nience lies is to examine the adequacy of damages as a remedy
for the respective parties. In most cases, an interlocutory
injunction should not be granted unless there is doubt whether
damages would be an adequate remedy in the event the appli
cant succeeds at trial. In other words, it must be shown that the
applicant may suffer irreparable harm in the sense that "the
remedy by damages is not such a compensation as will in
effect, though not in specie, place the parties in the position in
which they formerly stood": Kerr on Injunctions, 6th ed.
(1927), at pp. 17-18, applied in MacMillan Bloedel Ltd. v.
Mullin, 61 B.C.L.R. 145, [1985] 3 W.W.R. 577, [1985] 2
C.N.L.R. 28 (C.A.), per Seaton J.A. The requirement that there
be doubt as to whether damages will be an adequate remedy is
basically a matter of common sense. If damages will be an ade
quate remedy, and if it appears that the alleged offender can
pay them, the court is generally not justified in giving one
party his remedy to the detriment of the other before the issues
have been tried.
In many cases, assessing where the balance of convenience
lies is a simple matter. Where there is a fair question to be tried
and the applicant demonstrates that damages may not provide
an adequate remedy, an interlocutory injunction may be justi
fied. Similarly, if the only irreparable harm would be to the
party against whom the injunction is sought, an injunction
would not normally be granted.
More difficult is the case where both parties demonstrate
that damages might not be an adequate remedy—the applicant
if no injunction is granted, the respondent if an injunction
goes. In Amer. Cyanamid Co. v. Ethicon Ltd., considerations
are discussed which may assist the court. One factor which
may assist the court in assessing where the balance of conve
nience lies when the parties' interests are relatively evenly bal
anced is the fact that one side bases his claim on existing
rights, while enforcement of the other's rights would change
the status quo. To put it another way, where the only effect of
an injunction is to postpone the date upon which a person is
able to embark on a course of action not previously open to
him, it is a counsel of prudence to preserve the status quo: Pac.
Northwest Ent. Inc. v. Ian Downs & Assoc. Ltd. (1982), 42
B.C.L.R. 126, 73 C.P.R. (2d) 159 (C.A.). Another factor which
may be considered at this stage is the strength of the appli
cant's case. Finally, there may be special factors to be consid
ered in the particular circumstances of the case.
It is important to note that clear proof of irreparable harm is
not required. Doubt as to the adequacy of damages as a remedy
may support an injunction: Amer. Cyanamid Co. v. Ethicon
Ltd. [Emphasis added.]
Counsel for the defendant argues that in the pre
sent case the damage which will be suffered by the
plaintiff if an injunction is not granted is not appreci
ably different than the damage which will be suffered
by the defendant if one is granted. If an injunction is
not granted, the plaintiff will lose the business of
those customers who would have bought from it in
the absence of the defendant's advertising campaign.
If an injunction is granted, the defendant will lose the
business of those customers who would have bought
from it if the advertising campaign continues. In
addition, counsel argues that the loss to the plaintiff
can be quantified, in an approximate fashion, while
that which would exist for the defendant, cannot. It is
argued that the effect of an advertising campaign on
one's competitors can be assessed but there is no way
of assessing the effect of the absence of an advertis
ing campaign. I do not find this argument convinc
ing. The advertising campaign has been running for
two months. If its effect can be assessed with some
degree of specificity, then, that could be done by ref
erence to the two past months and extrapolated to the
coming month. The results of such extrapolation as
compared to what, in fact, happens, if an injunction is
granted, would give an assessment of the effect of the
absence of the advertising campaign.
I have considerable difficulty however with the
expert report which has been filed in support of the
position that the effect of an advertising campaign
can be determined with an appropriate degree of
specificity so as to make an award in damages ade
quate. An affidavit by Kristian Palda was filed which
asserts that this can be done. I will quote the conclu
sion of Mr. Palda's report:
Published research over the last half a century established the
feasibility of measuring short and long run effects of advertis
ing outlays and changes in advertising message on the sales of
both the advertiser and his rivals. Confidence in the quantita
tive estimates of such effects is conditional upon two aspects.
First, there must be a decent sample size of observations avail
able. Second, since not only advertising outlays and copy may
change, but also prices, distribution outlets and other market
ing instruments of both competitors, these changes must be
considered in a "multivariate" context.
In the case under consideration the opinion was emitted that
data on all these aspects are available and so the potential for
measurability exists. Of course, in order to establish that dam
age was done by A to B through advertising it should be shown
that:
1. A has changed his advertising tack and increased his sales;
2. A's increase was not caused by other actions of A or by
market growth;
3. B has lost sales or suffered a slowdown in his sales increase;
4. B's sales loss was not caused by his own change in market
ing tactics or a general market decline
and
it was caused solely by the change in A's advertising mes
sage and not by A's other marketing actions, such as increased
advertising outlays or lowered price.
These relationships may sound complicated, but they have
been tackled in various permutations so often that we may be
confident that they can also be estimated in the present case.
This is a very theoretical approach. The first ques
tion that leaps to one's mind is how is it going to be
demonstrated that "B's sales loss ... was caused
solely by the change in A's advertising message."
How could one expect to isolate the other variables
which might have affected, during the time in ques
tion, the respective sales of the two parties. Such fac
tors, as is indicated in the expert report, would need
to be identified and their effect discounted.
Without some straightforward explanation, for
example, as to what kind of data would be needed for
such an analysis, where one could expect to find it
and the manner in which it would be used to achieve
the assessment required, I am not persuaded that the
effect is reasonably quantifiable. It is not sufficient
for an expert to simply assert that it can be done. Sec
ondly, even if such an exercise could be undertaken
one has to ask: at what cost? I have not been con
vinced that a practical method of assessing the effect
of the advertising campaign has been demonstrated.
To turn then to the argument that in any event the
damage which would be suffered by each is equally
unquantifiable and approximately equal in degree. I
am not convinced that this is the case. The advertis
ing leaves a very negative impression. Its objective
and probable effect is to create a lasting and negative
impression in the mind of the public as to the lesser
value obtained in shopping at Eye Masters. The focus
of its attack is the goodwill of Eye Masters' business.
Presumably this effect will result in more than just
increased sales for the defendant. It is likely also to
result in customers turning to other sellers of the
optical products in question. I cannot conclude that
the respective damage to the plaintiff and defendant
is approximately equal as between an injunction
being granted and one being denied.
Counsel for the defendant argues that there is a
public interest that must also be factored into the
equation. He argues that if an injunction is granted
the public will be denied the information being con
veyed to them through the comparative advertising.
In order to find that there is a public interest involved
I have to assume that the message being carried by
the advertising is accurate. On the basis of the infor
mation before me I cannot make any judgment con
cerning that fact. As has been noted, there is informa
tion concerning the relative quality and price of two
pairs of eyeglasses but the advertisement's message
is directed at the overall value received by consumers
from the two businesses respectively. It is not
directed at the two pairs of eyeglasses alone. In the
circumstances, I am not prepared to give much
weight to the argument that the public will suffer
damage as a result of being deprived of the informa
tion contained in the advertisement.
The defendant will suffer some damage as a result
of having spent money on advertising copy and mate
rial which it will no longer be able to use. This will
not be a large amount, however, given the fact that it
plans to replace the present advertisements on Octo-
ber 4 in any event.
In my view, the damage which will be suffered by
the plaintiff if an injunction is not granted outweighs
that which will be suffered by the defendant if an
injunction is granted. This is a situation in which the
defendant is being required to postpone a recently
initiated course of action until the question of that
action's lawfulness is adjudicated.
Counsel for the defendant argues that there is one
other consideration in this case which tips the balance
of convenience in the defendant's favour: delay and
the imminent expiration of the advertising campaign.
The advertising in question commenced on June
29, 1992. The plaintiff was aware of it immediately.
An application was brought in this Court on July 21,
1992, seeking an interim injunction. That application
was heard on July-24, 1992. It was dismissed for not
having been brought in a timely fashion and because
insufficient evidence of irreparable harm had been
produced. The Court noted that by that time it was
more appropriate for the plaintiff to be seeking an
interlocutory rather than an interim injunction.
The plaintiff was subsequently offered the date of
August 4, 1992, for the hearing of an application for
an interlocutory injunction. The plaintiff declined
because it would have been difficult to marshall all
its material by that date particularly given the fact
that it needed additional evidence respecting the
inadequacy of damages. On August 12, 1992, the
plaintiff and the defendant were advised that the
application could be heard on September 2, 1992.
Rule 321.1 of the Federal Court Rules [C.R.C., c.
663, as enacted by SOR/88-221, s. 7; SOR/92-43, s.
4] requires a plaintiff to file and serve a motion
record at least 10 days before the date of the hearing
of an application such as this. The plaintiff did not
file and serve its motion record until August 27,
1992, and, even then, it was not complete. The defen
dant had some difficulty preparing its motion record
in response. This was not filed until mid-way through
the hearing of the application on September 2, 1992.
Both parties filed additional last-minute affidavits.
The advertising campaign, as has been noted, expires
on October 4, 1992. There is no doubt that, in the cir
cumstances, the suggestion by counsel for the defen
dant that an injunction should be refused, largely
because it will have such a limited practical life, is
attractive.
While much is to be said for refusing an injunction
in this case because it will have a limited practical
life, I realize that there may be future advertising
campaigns in the offing. The defendant has given a
commitment not to undertake further comparative
advertising but that commitment only extends to the
summer of 1993. It is unfortunate that the legal issue
which underpins the dispute in this case has not been
resolved. It is a fairly straightforward legal issue
which could easily be determined by reference to the
Court of a question of law alone, pursuant to Rule
474 [as am. by SOR/79-57, s. 14]. In any event,
refusing to grant an injunction in the present case
may merely lead to further applications at a later
date. Accordingly, I have come to the conclusion that
the plaintiff will be granted the injunction sought. An
order will go in accordance with these reasons.
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.