Date: 20060213
Docket: T-1473-91
Citation: 2006 FC 188
Ottawa, Ontario, February 13 2006
PRESENT: THE HONOURABLE MR. JUSTICE BLAIS
BETWEEN:
REMO IMPORTS LTD.
Plaintiff
and
JAGUAR CARS LIMITED
AND
FORD MOTOR COMPANY OF CAMADA, LIMITED/
FORD DU CANADA LIMITÉE
carrying on business as JAGUAR CANADA
Defendants
REASONS FOR ORDER AND ORDER
[1] This is a motion seeking an order pursuant to Rule 398(1)(a) and (2) of the Federal Court Rules, for a stay of the judgment rendered against Remo Imports Ltd. (the plaintiff or Remo) on January 16, 2006, by Justice Shore, and in particular paragraphs 2, 3, 4 and 5 thereof, pending the disposition of the plaintiff's appeal.
RELEVANT FACTS
[2] This motion is the result of an action dated June 5, 1991 by the plaintiff against Jaguar Cars Limited and Ford Motor Company of Canada Limited (the defendants) for infringement and passing off of Remo's trademark JAGUAR, registration No. 263,924, registered on October 30, 1981. The aforementioned trademark was for tote bags and luggage, and on January 11, 1984 for hand bags and school bags. The plaintiff accused the defendants of trademark infringement because the latter began selling the following: driving licence cases, wallet cases, business card holders, belts, credit card holders, key cases, address books, note books, passport holders, beauty cases, document cases, pocket wallets (Objected Wares) in association with the trademark JAGUAR. The plaintiff also sought to expunge the Objected Wares from the defendants' registrations Nos. 378,643 and 378,644 for JAGUAR and for JAGUAR AND LEAPER DESIGN.
[3] The defendantscounterclaimed on March 6, 1992, for expungement of Remo's registration. The justification for such action was that Remo's adoption of the trademark JAGUAR in 1980 was and continues to be invalid because it was likely to depreciate the value of the goodwill attaching to Jaguar Cars Limited registration No. UCA21,618. The defendants argued that the plaintiff's trademark was confusing and deceived the public, and was not distinctive. The defendants also claimed relief for depreciation, infringement and passing off.
[4] On January 16, 2006, Justice Shoreissued his judgment. The Court ordered and declared that:
1. Plaintiff's action is dismissed and Defendants' counterclaim is allowed.
2. Plaintiff's Registration No. 263,924 is and always has been invalid, and shall be expunged on the bases that at all material times:
(1) Use of Plaintiff's JAGUAR mark in association with Luggage Wares is likely to depreciate the value of the goodwill attaching to Jaguar Cars Limited's Registrations for JAGUAR marks for automobiles contrary to Section 22 of the Trade-marks Act.
(2) Use of Plaintiff's JAGUAR mark in association with Luggage Wares could potentially deceive and mislead the public.
(3) Use of Plaintiff's JAGUAR Mark in association with Luggage Wares is likely to cause confusion with Defendants' trademark JAGUAR for automobiles and JAGUAR for Luggage Wares, and therefore:
(a) Plaintiff's JAGUAR mark has never been registrable, and
(b) Plaintiff was never entitled to register the JAGUAR mark; and
(4) Plaintiff's JAGUAR mark has never been distinctive of Remo.
3. Jaguar Cars Limited's JAGUAR Registration Nos. 378,643 and 378,644 is valid, including the Objected Wares: driving licence cases, wallet cases, business card holders, belts, credit card holders, key cases, address books, note books, passport holders, beauty cases, document cases, pocket wallets.
4. Plaintiff, by itself, its directors, officers, servants, agents, workmen or through any entity directly or indirectly owned or controlled by it or otherwise is restrained and permanently enjoined from:
(1) selling, advertising or otherwise using in Canada in association with consumer products any trade-mark which includes the word JAGUAR or a Leaping Jaguar Design, or any trade-mark or trade name which depreciates the value of the goodwill attaching to the JAGUAR family of trademarks owned by the Defendants as defined in the Amended Statement of Defence and Counterclaim;
(2) using the trademark JAGUAR or a Leaping Jaguar Design so as to deceive and mislead the public;
(3) selling, advertising or otherwise using in Canada in association with consumer products any trademark which includes the word JAGUAR or a Leaping Jaguar Design, or any trademark or trade name confusingly similar to the JAGUAR family of trademarks owned by the Defendants;
(4) infringing the exclusive rights of the Defendant, Jaguar Cars Limited, to use its JAGUAR family of trademarks;
(5) directing public attention to its wares by using in association therewith the trademarks JAGUAR or Leaping Jaguar Design or any trademark, trade name or corporate name confusingly similar to the JAGUAR family of trademarks; and
(6) passing off or enabling others to pass off its wares as and for those of the Defendants.
5. Plaintiff is required to destroy or deliver up under oath to the Defendants for destruction all products, packaging, promotional materials, sales literature, printed matter, labels, advertising copy, videotapes, film, art work or any other materials as may be in the possession or within the power, custody or control of the Plaintiff which bear a trademark, trade name or corporate name which is contrary to the injunction granted herein.
6. Plaintiff shall not pay to the Defendants any exemplary, punitive or other monetary damages because until now, no monetary damages have been proven. The respective clienteles and markets of the respective parties have been separate until now; however, that may not be the situation for the future.
7. The parties shall make written submissions to this Court concerning costs within 2 months of the date of this Judgment. A reply in writing, if any, shall be filed within two weeks of receipt of the initial submissions.
ISSUE
[5] Are the three criteria serious issue, irreparable harm and balance of convenience, present in the current matter, to warrant the ordering of a stay?
ANALYSIS
[6] In RJR-MacDonald Inc. v. A.G. Canada, [1994] 1 S.C.R. 311, 54 C.P.R. (3d) 114, the Supreme Court of Canada set out the test for granting a stay by stating the following at paragraph 43:
Metropolitan Stores adopted a three-stage test for courts to apply when considering an application for either a stay or an interlocutory injunction. First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. It may be helpful to consider each aspect of the test and then apply it to the facts presented in these cases.
(i) Serious Issue
[7] This Court has recognized that the threshold to be met by a plaintiff regarding the "serious issue" branch of the tripartite test for granting a stay is low (see North American Gateway Inc. v. Canada(Canadian Radio-Television and Telecommunications Commission) (1997), 47 Admin. L.R. (2d) 24, at paragraph 10). It is not the job of the Court at this early stage of the proceedings to evaluate the merits of the issue but to establish, upon review of the record and submissions of parties, that the issue is not frivolous or vexatious.
[8] The plaintiff intends to appeal this Court's decision on the grounds that Justice Shore committed palpable and reversible errors in relation to various documentary evidence led by the defendants which formed the basis for his finding that the plaintiff's trademark was not valid. As such, I find that this motion meets the low threshold for establishing a serious issue. The merits of the motion are not frivolous and vexatious.
(ii) Irreparable Harm
[9] As noted by Justice Noël in Bristol-Myers Squibb Co. v. Canada (Attorney General) [2002] F.C.J. No. 1799 , the Supreme Court of Canada in RJR- MacDonald, supra, described the test for irreparable harm in the following manner:
At this stage the only issue to be decided is whether a refusal to grant relief could so adversely affect the applicants' own interests that the harm could not be remedied if the eventual decision on the merits does not accord with the result of the interlocutory application.
"Irreparable" refers to the nature of the harm suffered rather than the magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. . . .
[10] Remo's JAGUAR branded line of products constitutes 80% of its annual gross sales. Justice Shore's decision in the present matter will in effect prevent the plaintiff from selling its inventory if it contains the JAGUAR mark.
[11] The plaintiff claims that Justice Shore's decision will cause a permanent loss of market share and irrevocable damage to its business reputation. The plaintiff further claims that if the stay is not granted, it will not be in a position to both post security and also to continue to finance its business. In other words, the plaintiff claims irreparable harm because it will default on its contractual obligations, not fulfill its orders and in effect go out of business. All of the aforementioned factors have been recognized as causing irreparable harm in the case law (see Brystol-Myers, supra, Merck v. Nu-Pharm [2000] F.C.J. No. 534).
[12] The defendants claim that the plaintiff submitted no evidence, aside from speculation, to illustrate that it will permanently loose its market share and that irrevocable damage will be caused to its business reputation if a stay is not ordered. In Merk v. Nupharm, supra, the Federal Court of Appeal, at paragraph 25, stated that irreparable harm cannot be proven on mere speculation:
Fourth, evidence of irreparable harm must be clear and not speculative. See Centre Ice Inc. v. National Hockey League, [1994] F.C.J. No. 68, 53 C.P.R. (3d) 50, at 55 (F.C.A.). Here, the inference the applicant asks the Court to draw from the evidence is that it will go out of business if the stay is not granted. Nu-Pharm's evidence refers to its survival as a going concern being precarious and that Nu-Pharm's continued existence remains precarious. Precariousness is, by definition, a state of uncertainty, i.e. that Nu-Pharm may or may not survive. While I accept that the inability to market Nu-Enalapril will have a negative financial effect on Nu-Pharm, I am not satisfied that the evidence is such that I can infer that, on a balance of probabilities, it will go out of business if it is not able to do so. Further, Nu-Pharm identifies means of dealing with its cash-flow difficulty, including terminating some employees and closing a depot. Downsizing, while not a preferred option, is not irreparable harm. If downsizing is an option, then it cannot be inferred that Nu-Pharm will go out of business if the stay is not granted. The purpose of a stay is not to alleviate the financial difficulties of a firm or to sustain it in its current form when other options for survival are available.
[my emphasis]
[13] In Merck v. Nu-Pharm, supra, the Court of Appeal found that the defendant had proceeded, even after a stay by the trial judge, in a manner that was not restricted to trying to work itself out of a difficulty but rather to "carry on business as usual":
First, Nu-Pharm admitted that after the December 6, 1999 order of McGillis J. staying her judgment, Nu-Pharm purchased an additional $1.5 million of bulk raw material for use in making Nu-Enalapril tablets.
Nu-Pharm gave no explanation justifying this acquisition, which apparently is still on order in raw material form and which, of course, increased its current liabilities. As I read her reasons, McGillis J. issued a stay because of the evidence before her that Nu-Pharm needed to remain in the market in order that it not have to take back product that it had already sold and in order that it might continue to market the Nu-Enalapril it already had in inventory.
In the absence of evidence to the contrary, it would appear that Nu-Pharm treated McGillis J.'s stay as an invitation to carry on business as usual, even though her November 23, 1999 decision determined that the notice of compliance under which Nu-Pharm was selling Nu-Enalapril should not have been issued. Nu-Pharm did not restrict itself to working itself out of its difficulty. It added to its liabilities by acquiring additional raw material and now makes the same argument in this Court as it made in the Trial Division. To some degree at least, Nu-Pharm appears to be the author of its current cash crisis by action it took during the period of the stay granted by the Trial Division. Nu-Pharm must have known of the risk of failure in its appeal in this Court and yet it does not seem to have acted with a view to that outcome.
[my emphasis]
[14] The defendants allege that the plaintiff is proposing to this Court that it be permitted to carry on "business as usual". I must stress that if a stay is ordered in the present matter, the applicant will not be permitted to carry on "business as usual". The plaintiff needs to prepare for the possibility that its appeal will fail. If a stay is granted in the present matter it will be done in a way that will penalize the plaintiff if it refuses to adapt or adjust its business to take into consideration the eventuality that it might loose its appeal. I would not be doing the plaintiff any favours by permitting it to carry on "business as usual".
[15] The defendants argue that the plaintiff has given no evidence as to any financial difficulties it might have in keeping its business afloat and on cross-examination it refused to provide any such information. The defendants claim that the aforementioned factors illustrate that the criteria for irreparable harm has not been met. In Merck v. Nu-Pharm supra, the Court of Appeal said the following regarding a failure to demonstrate financial hardship and be forthcoming with financial records:
Third, I am not satisfied that Nu-Pharm has been sufficiently forthcoming in its cross-examination on affidavits about its possible sources of financing [...]
I can appreciate that private corporations wish to keep their financial affairs private. However, when they seek the extraordinary remedy of a stay, they must be forthcoming with such information if it is relevant to their claim of irreparable harm. [...] A party cannot make a claim to irreparable harm based on creditors at the door and then take a technical position refusing to disclose information which may provide an indication of the extent to which such creditors pose a realistic threat to the continued existence of the business, particularly when steps have been taken satisfactory to the party to protect the confidentiality of its information.
[my emphasis]
[16] The defendants mention that the plaintiff relies on jurisprudence dealing with patent cases in which the infringing party had one product and the Court found that the inability to sell such product would put the company out of business. However, the defendants argue that the aforementioned situation does not apply to the plaintiff. That is, the issue in the present matter touches upon trademarks and not patents. Further, this Court did not restrain the plaintiff from selling its products (it only enjoined it from using the trademark JAGUAR). The defendants mention that there is nothing in the evidence to suggest that the plaintiff is prevented from changing its trademark and carrying on its business.
[17] The defendants doubt the characterization of the plaintiff's products. That is, the plaintiff claims that its products are fashion related and that they become almost worthless if not sold quickly. The defendants claim that the plaintiff's product has a longer shelf life than claimed. That is, the trademark on existing stock could be changed and sold in a timeframe that will not greatly reduce the value of the item. The defendants claim that if the plaintiff changed the trademark and ordered new products now it would receive those products from its suppliers within three to six months.
[18] I find it highly unlikely that it would be as easy as the defendants claim for the plaintiff to order all new products with a different trademark within three to six months. Further, it seems improbable that the plaintiff's customers would be willing to tolerate a delay in receiving their ordered product, especially if that new product was to contain a different trademark. If the plaintiff is accused of speculating as to the damage it will suffer if a stay is not granted, I find that the defendants are oversimplifying how easy it would be for the plaintiff to adapt to not being allowed to use the JAGUAR trademark.
[19] Although the evidence before me is weak, I am satisfied that a substantial part of the plaintiff's business and products use the trademark JAGUAR. Even the defendants have acknowledged that the exact figure hovers around 80% of the plaintiff's total sales. Further, I doubt that it would be as easy as the defendants claim for the plaintiff to renegotiate contracts with its existing clients so as not to use the infringing trademark. I am also convinced that the relationship the plaintiff has with its clients could be permanently tarnished if a stay is not ordered. Even though the plaintiff's business may not go under if a stay is not granted, I am satisfied that ceasing to use the trademark pending the appeal would cause significant damage to the point of causing irreparable harm.
(iii) Balance of Convenience
[20] The Supreme Court of Canada, in Re: Attorney General of Manitoba v. Metropolitan Stores (MTS), [1987] 1 S.C.R. 110 described the balance of convenience test in the following way at paragraph 35:
The third test, called the balance of convenience and which ought perhaps to be called more appropriately the balance of inconvenience, is a determination of which of the two parties will suffer the greater harm from the granting or refusal of an interlocutory injunction, pending a decision on the merits.
[21] In the present matter, Justice Shore noted, at paragraph 5, that it was readily apparent through the evidence that the respective clienteles of the respective parties were different, as was the marked separation in the marketplace for the respective products of both parties.
[22] In Baker Petrolite v. Canwell [2001] F.C.J. No. 1491, Justice Sharlow discusses the balance of convenience in light of a situation whereby one party profits immensely from an infringement and the opposing party is hardly affected. She states the following at paragraph 14:
If the stay is granted and the trial judgment is upheld on appeal, Baker Petrolite will have been deprived temporarily of the benefit of the trial judgment. Baker Petrolite's decision to seek an accounting of profits rather than damages suggests that Baker Petrolite believed that Canwell's profits from its infringing activities exceeded any loss caused to Baker Petrolite by the infringement. From that I infer that further infringement by Canwell pending the disposition of the appeal would be compensable although, for the reasons explained below, any further amount that may be owed to Baker Petrolite from the continuation of Canwell's infringing activities may be uncollectible. The risk of uncollectibility may be lessened but cannot be eliminated. In my view, however, if the stay is granted and the appeal fails, any irreparable harm to Baker Petrolite would be on a minor scale considered against all the remedies granted by the Trial Judge. This leads me to conclude that the balance of convenience would favour granting a stay subject to conditions that will mitigate to a reasonable extent the diminution of Canwell's assets in the event the appeal fails.
[23] In the present matter, as was the case in Baker Petrolite, supra, any profits the plaintiff made from its infringing activities exceeded exponentially any loss caused to the defendants. Any harm a stay would cause to the defendants would be on a minor scale in comparison to the irreparable harm caused the plaintiff.
[24] Even though the plaintiff's business may not go under if a stay is not granted, I am satisfied that ceasing to use the trademark pending the appeal would cause significant damage to the point of causing irreparable harm. Further, I am of the opinion that the failure to grant the stay would cause infinitely greater harm to Remo than to the defendants.As such, the balance of convenience favours granting a stay. However, such a course of action must be subject to conditions, so as to permit the appeal to proceed and to mitigate a diminution of the plaintiff's assets in the event the appeal fails.
[25] At paragraph 6 of his judgement, Justice Shore held that: the "Plaintiff shall not pay to the Defendants any exemplary, punitive or other monetary damages because until now, no monetary damages have been proven [...]; however, that may not be the situation for the future." Given that Justice Shore's decision has clarified which party is now entitled to use the trademark JAGUAR, I believe the situation has changed since January 16, 2006 and that damages could be awarded. Further, I find that paragraphs 1, 2 and 3 of Justice Shore's judgement are a clear indication that damages could now be demonstrated if the plaintiff goes on "business as usual".
[26] Despite the weakness of the evidence submitted in the present matter, I am satisfied that the products that infringe the JAGUAR trademark correspond to 80% of the plaintiff's total sales.
[27] Given that I was not provided recent financial statements outlining the plaintiff's total sales and profits, I find it reasonable to require the plaintiff to deposit 20% of the gross sales value of all JAGUAR branded products, with counsel for Jaguar Cars Limited, to be held in trust pending resolution of the appeal. This will provide the plaintiff with the flexibility to continue ordering products to supply its clients while at the same time providing an incentive for it to diversify its sales through the use of other trademarks or by any other means that it deems useful, pending the resolution of the appeal.
ORDER
THIS COURT ORDERS that:
1. This application for a stay is partially granted.
2. Remo shall keep a full accounting of all sales and profits of all JAGUAR branded products since January 16, 2006 and provide Jaguar Cars Limited's counsel with a report of such sales and profits, in a sworn affidavit, on the 15th day of each month starting on February 15, 2006. Jaguar Cars Limited has the right to cross-examine on the affidavit.
3. Remo shall deposit 20% of the gross sales value of all JAGUAR branded products, with counsel for Jaguar Cars Limited, to be held in trust pending resolution of the appeal. I leave the manner in which the aforementioned trust is to be disbursed to the discretion of the Court of Appeal.
4. Remo shall not transfer any property or make any payments to others including its shareholders out of the ordinary course of business until the appeal has been completed.
5. Remo shall pay out creditors only in the ordinary course of business.
6. Remo shall deliver to counsel for Jaguar Cars Limited in trust the sum of $100,000.00 as security for costs of the appeal.
7. Costs of this motion in the amount of $4,000, be payable forthwith to the defendants.
"Pierre Blais"
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