Tommy Hilfiger Licensing Inc. v. International Clothiers Inc., 2003 FC 1087

Date: 20030919

Docket: T-2036-95

Citation: 2003 FC 1087

BETWEEN:

                                              TOMMY HILFIGER LICENSING, INC.,

                                                 TOMMY HILFIGER CANADA INC.

                                                                                                                                                        Plaintiffs

                                                                                 and

                                                INTERNATIONAL CLOTHIERS INC.

                                                                                                                                                      Defendant

                                                        REASONS FOR JUDGMENT

MacKAY J.

[1]                 The plaintiffs allege passing-off of the defendant's wares for those of the plaintiffs and infringement by the defendant of two of their registered trade-marks, both for the same Crest design but each in relation to different wares, articles of clothing. They also allege infringement of their copyright, registered, for the same Crest design. For the alleged infringements they seek declaratory relief, an injunction, damages and an accounting of profits, pre-judgment and post judgment interest, and an order for delivery up or destruction of any offending wares and related materials in the defendant's possession, and costs.

[2]                 The defendant denies any infringement. It claims any rights of the plaintiffs were not violated. Moreover, the registrations of the trade-marks and of the copyright in issue are said to be invalid. The defendant seeks not only that the action be dismissed with costs, but also, by counterclaim, that the Crest trade-mark registrations and the Crest copyright registration be expunged from the respective registries, and they seek solicitor-client costs.

[3]                 For purposes of this action the parties agreed upon an extensive Statement of Facts. That statement is relied upon substantially in these Reasons in describing the general background or in relation to particular issues. Where it seems important to note that a fact is agreed upon, I so indicate.

The plaintiffs, their wares and sales

[4]                 The plaintiffs are wholly-owned subsidiaries of Tommy Hilfiger USA Inc. ("THUSA"), a New York corporation. The plaintiff, Tommy Hilfiger Licensing Inc., ("THLI"), a corporation incorporated and based in the State of Delaware, is the owner of intellectual property rights of the Hilfiger group of companies, which it licenses for use by others, including the plaintiff, Tommy Hilfiger Canada Inc. ("THC"), a company incorporated under the laws of Canada with its principal office in Montreal. THC distributes to and sells, through other retailers, articles of clothing in association with trade-marks of THLI including the plaintiffs' Crest Design.

[5]                 The registered interests of THLI, in suit in this action, licensed to THC for use in Canada, include the plaintiffs' Crest Design trade-marks TMA 426,595 registered April 29, 1994 for use in association with clothing for men and boys, namely shirts, sweaters, sport coats, pants, shorts, sport jackets, parkas, overcoats and turtlenecks, and TMA 430,112 registered July 8, 1994 for use in association with hats, caps, blazers, bathing suits, sweat shirts, socks. THLI also owns and has licensed THC to use in Canada the same Crest Design, which is the subject of Canadian Copyright Registration No. 448012, registered November 29, 1995. That registration simply described an artistic work under the title "Crest Design" without depiction or reproduction. The author of the work is certified to be Tommy Hilfiger, "c/o THUSA, New York", the corporation of which Mr. Hilfiger was an employee, and the work is certified as owned by Tommy Hilfiger Licensing Inc. and as first published in August 1986 in New York. THLI has other trade-marks but only those two registered trade-marks and the Crest Design copyright work are at issue in this action.

[6]                 The plaintiffs' Crest Design is depicted in its registered trade-marks as:

[7]                 Under agreements among various companies in the Tommy Hilfiger group, THUSA works with licensees, including THC, specifying in detail the design and manufacturing of wares to be sold under the Hilfiger trade-marks, approving samples of all wares before authorizing their sale, and authorizing their manufacture only by contractors who adhere to a contractor compliance program supervised by THC and THUSA. THC is obliged by its license to protect the Canadian marketplace against counterfeit or infringing garments, and its employees are expected to forward any suspicious products to THC head office.

[8]                 In January 1990, THC commenced selling wares, including shirts, bearing the plaintiffs' Crest Design, for delivery to its retail customers in Canada. That clothing also generally displayed labels bearing the plaintiffs' trade-mark TOMMY HILFIGER, and also it often displayed the plaintiffs' Flag Design trade-mark on hang tags or packaging (agreed statement para. 21).

[9]                 The plaintiffs' sales are made partly through its own stores but primarily though major department stores or other retailers who meet the plaintiffs' standards for high-end marketing, in quality, price and presentation. Many stores selling the plaintiffs' wares do so using special fixtures or signs arranged with or by the plaintiffs, featuring the trade-mark TOMMY HILFIGER and one or both of the Flag Design or the Crest Design trade-marks. The fixtures or signs are intended to attract customers when they come into stores looking for clothing sold by the plaintiffs.

[10]            The plaintiffs and their licensees have advertised the plaintiffs' wares and their trade-marks not only by in-store signage, displays and videos, but also in print, on billboards and television. By 1995 the trade-marks TOMMY HILFIGER and Flag Design had become well-known in association with articles of clothing sold in Canada by the plaintiffs. The trade-mark Crest Design has been and continues to be a major trade-mark of THC's men's sportswear business, and it appears on many best-selling basic articles of clothing, including men's piqué polo shorts, the single biggest selling item in Canada of the Hilfiger brand, and also on Oxford and denim shirts, crew neck sweaters, jeans, jackets, t-shirts, chinos and swim trunks, on apparel which the plaintiffs consider to be classic men's and boys' clothes, intended for all ages of customers.

[11]            Despite widespread use of the Crest Design by the plaintiffs, they are not aware of anyone purchasing their wares because of the appearance of the Crest Design. Yet it has been a feature on many of the articles of clothing and accessories sold under the Tommy Hilfiger brand, as estimates of the share of THC's sales indicate: from 50% in the period 1990-93, to 35% in 1994-96, and 20% in 1997-2000. Total sales in that period have increased from $10 million in 1994 to $25 million in 1996 and $90 million in 1998.

The defendant, its wares and sales

[12]            The defendant, International Clothiers Inc. ("INC"), incorporated under the laws of Canada, with its principal office in Toronto, sells clothing to members of the public only at its own retail stores, which numbered 94 in 1999. Those stores, operating under various trade names, are found in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia and Newfoundland. INC sells trendy, up-to-date, fashionable merchandise through its International Clothiers and other named retail clothing stores. INC buys articles of clothing from suppliers who generally supply goods manufactured at its direction, and basic design. In addition it buys stock lots, available when suppliers' arrangements for sales to third parties have not worked out.

[13]            INC does not sell garments through other retailers. It seeks to serve a young group of consumers who seek trendy clothing but who are price conscious. Its wares are considered by the parties as sold at different price points, to a different segment of the consumer market, less up-scale and expensive than that of the plaintiffs. The plaintiffs do not consider INC's sales to be competitive with theirs, a view shared generally by the defendant.

[14]            INC is the owner of the Canadian trade-mark "GARAGE U.S.A.". It is not licensed to sell the plaintiffs' wares or wares associated with the plaintiffs' trade-marks or its registered copyright.

[15]            In November 1994 INC issued a purchase order for a stock lot of 7,200 men's shirts. These had vivid coloured stripes, and bore an embroidered crest design on the front chest. The garments were not made or designed by INC. Originally they bore a label, "Ash Creek", known by the defendant's buyer to be that of Wal-Mart. INC arranged for those labels to be cut out and to have the supplier affix labels and hang-tags with INC's GARAGE U.S.A. trade-mark. When the shirts were purchased INC's buyer did not recognize the crest design as more than a generic heraldic crest and did not associate it with the plaintiffs' wares or those of any other merchant.

[16]            The defendant's crest design on those shirts is said by plaintiffs to be comprised of an oval insignia containing a lion figure with laurel branches and leaves to the right and left and a banner below the oval, embroidered in gold, red and blue colours, similar to that in THLI's Trade-mark Crest Design. INC's Crest on the shirts did not contain a crown at the top, an element visible in the plaintiffs' Crest Design trade-marks and presumably a feature of its copyright Crest Design.

[17]            The crest design on INC's shirts is depicted in the agreed statement of facts as:

[18]            The shirts in issue were received by INC early in 1995 and were sold through its International Clothiers stores between February or March and September 1995. Those sales continued despite a letter received April 18, 1995 from THLI's United States attorneys claiming that the shirts infringed THLI's trade-mark rights in and to the plaintiffs' trade-mark Crest Design. Until then INC's buyer and staff had not perceived that the embroidered crest on the shirts was a design trade-mark of the plaintiffs', though the plaintiffs' TOMMY HILFIGER and their Flag Design trade-marks were acknowledged to be well known then by the buyer for INC.

[19]            The letter demanded that INC immediately discontinue sales of the shirts. In June 1995 counsel for INC replied to the letter advising that the goods were innocently purchased from a foreign supplier, that INC would not again order any garments bearing the crest design trade-mark, and would refrain from using that mark once the stock lot of shirts was sold. INC's counsel suggested the scope of the plaintiffs' Crest Design trade-mark was narrow, that any prospect of confusion was avoided by the display, on labels on its shirts, of INC's own GARAGE U.S.A. trade-mark. Further, any profits that might be derived from the sale of the shirts were expected to be de minimus, and in any event it was said they would not arise from the inclusion of the heraldic emblem, or design, on the shirt.

[20]            On June 30, 1995 THLI's Canadian solicitors wrote to INC's solicitors reiterating the demand made by the U.S. solicitors in mid-April. On July 27, 1995 INC's counsel replied, advising that the remaining inventory of shirts was minimal and would soon be depleted.

[21]            As an aside, I note the shirts in issue had previously come to the attention of THLI's U.S. attorney when in early 1994 he was advised that polo shirts were being manufactured in Pakistan marked with the plaintiffs' Crest Design and with price tickets for Wal-Mart. Shortly thereafter, ASH CREEK shirts, bearing an "ASH CREEK" label, i.e., a trade name of Wal-Mart, were purchased in the United States, made with a crest design on the chest and of striped patterns virtually identical to those used by the Tommy Hilfiger group in the previous season.

[22]            THLI and THUSA initiated an action against Wal-Mart in the Federal Court of the Southern District of New York. They also sought and obtained a preliminary injunction enjoining the sale of the Wal-Mart shirts. The matter was not tried but a confidential settlement was reached between the parties and a permanent injunction was issued on consent, by the Court, against further sales of the shirts by Wal-Mart.

[23]            Subsequently, those shirts originally produced for Wal-Mart became the stock lot acquired by INC, after the latter had instructed the supplier to replace the ASH CREEK label with INC's own GARAGE U.S.A. label. Soon after the shirts were received by INC in the spring of 1995, INC's senior buyer who had placed the order learned there was a legal problem with the crest design on the shirts. No internal notice of the problem was issued to advise INC staff generally of the problem. INC continued to sell the shirts, despite the demands of THLI and of the plaintiff THC, until the inventory was fully sold in September 1995.

[24]            On September 27, 1995 the plaintiffs' Statement of Claim in this action was filed. It was subsequently amended, on two occasions before the defendant's Statement of Defence and Counterclaim was filed on February 7, 1996 and that was amended on August 1, 1996.

[25]            It was after sales of the shirts by INC and commencement of this action that the plaintiffs' THLI's copyright in its Crest Design, was registered as an artistic work in November 1995 and it identifies Tommy Hilfiger as the author of the Crest Design and THLI as the owner of the copyright. That registration certifies the work was first published in New York in 1986. The copyright registration certificate does not depict the design, rather it describes the artistic work as "Crest Design".    After registration of the copyright, the statement of claim in this action was amended in December 1995 to include, for the first time, the claim for copyright infringement.

[26]            In 1998, after the action was under way, an agent for the plaintiffs purchased at one of the defendant's stores, a boys' zippered polo shirt with a flag design pieced in across the chest, a design similar to the plaintiffs' trade-mark Flag Design. He also purchased a second polo shirt with red painted stripes, the name "Tommy Sports" and a big "T" and "H" affixed to the shirt, and a little girl's dress in navy blue with a red and white pieced flag across the chest.

[27]            At about the same time, boys' short sets, referred to by INC as pyjamas, were purchased at a store of INC. Those short sets featured a crest design perceived by the plaintiffs as similar to their trade-mark Crest Design and their copyright Crest Design. The crest design on INC's short sets was:

[28]            After having been acquired by INC earlier in the year, the short sets were sold by the defendant before mid-1998, despite the action already under way by the plaintiffs. The purchase of the short sets, some hundreds in number, for sale through the defendant's International Kids stores, was made by a buyer employed by INC after this action had begun and he is reported to have died since the sales in 1998. It is said he was not aware of the plaintiffs' claims in this action.

[29]            The sales by INC of shirts in 1995 and of short sets in 1998, are the causes of the plaintiffs' claims for infringement of their trade-marks and of their copyright. I turn to those claims, dealing first with the claims in relation to trade-marks and for alleged passing-off, including the defendant's defence and counterclaim to those claims, and then dealing with the claims and defences in relation to the plaintiffs' claims for copyright infringement.

The plaintiffs' claims for trade-mark infringement

[30]            The plaintiffs' claims in relation to trade-mark infringement are fourfold:

i)           that the defendant infringed the plaintiffs' rights under s. 19 of the Trade-marks Act, R.S.C. 1985, c. T-13 (the "Act");

ii)          that the defendant infringed their trade-mark interests under s. 20 of the Act by use of its confusing crest design;

iii)          that the defendant's use of its crest design is likely to have the effect of depreciating the value of the goodwill attaching to plaintiffs' trade-marks contrary to s. 22 of the Act;

iv)         that the defendant, by use of its crest design, is responsible in damages for loss suffered by the plaintiffs as a result of the defendant's passing-off of its wares as those of the plaintiffs.

[31]            Before considering these individual claims, it is useful to consider the defence and counterclaim by INC, which says that THLI's Crest Design is not validly registered as a trade-mark because it has not been used to distinguish the plaintiffs' wares from those of others. Rather the plaintiffs are said to use their marks TOMMY HILFIGER and the Flag Design marks for this purpose. Moreover, since the Crest Design was not distinctive when the proceedings questioning their validity commenced, i.e., upon filing of the defence and counterclaim in this action, the registrations are invalid pursuant to paragraph 18(1)(b) of the Act.

[32]            In my opinion, the considerations raised by the defendant in support of their submissions do not warrant the conclusions they would have the Court draw. Thus, the circumstances that the plaintiffs use other trade-marks, and generally do so with the Crest Design trade-marks, and even that the plaintiffs do not give notice on their wares, and do not feature in advertising that the Crest Design is claimed as a trade-mark do not lead to the conclusion that the plaintiffs do not use that design as a trade-mark. It has long been used and is still affixed to a substantial portion of the plaintiffs' wares, not as mere ornament but as a means of distinguishing their wares from those of others. Further, as indicated elsewhere, despite the existence of other crest designs, used as trade-marks or simply as crests or ornaments by others, at the time of the plaintiffs' action and when the defence and counterclaim was filed, the plaintiffs' Crest Design through continual, extensive use had acquired distinctiveness.

[33]            Thus, I am not persuaded that the plaintiffs' Crest Design trade-marks were invalidly registered or had lost distinctiveness when the validity of their registration was questioned by the defence and counterclaim of INC. In the result, that counterclaim is to be dismissed.

[34]            Section 19 of the Act confers on the owner of a registered trade-mark, unless it be shown to be invalid, the exclusive right to the use throughout Canada of the trade-mark in respect of the wares or services associated with the trade-mark. Section 19 of the Act applies in an action where it is established that a person other than the registered owner or his or her licensee uses a trade-mark as registered for similar wares or services to those associated with the registered trade-mark. In this case, the defendant argues that the design mark on its wares particularly on its shirts is not identical to the registered Crest Design trade-mark of the plaintiffs.

[35]            I am persuaded that the defendant's crest design, as it appeared on the shirts of INC, is not identical, though it may be similar to the plaintiffs' registered Crest Design. The crest on INC's polo shirts does not have a crown above the oval and the lion or animal in the centred oval does not have a sword held high, both details of the plaintiffs' trade-marks. The defendant cannot be said to have used the plaintiffs' registered trade-mark at least on its shirts (see Mr. Submarine Ltd. v. Amandista Investments Ltd., (1987), 19 C.P.R. 3d (3) (F.C.A.)). The crest on the short sets or pyjamas has a year expressed in Roman numerals within the banner at the base, a feature not found in the plaintiffs' Crest Design, but it does have an animal brandishing a sword not unlike that in the plaintiffs' trade-marks. That crest, on the short sets, is generally similar to that of the plaintiffs.    

[36]            The defendant further urges that it did not infringe the plaintiffs' interests under s. 19 or s. 20 because it did not use its crest as a trade-mark; rather, the crest was mere ornamentation on INC's wares. This was not a use, the defendant says, as defined in the Act, by ss. 2 and 4, that is, the crest was not on its wares as a trade-mark, it was not intended to distinguish the defendant's wares from those of others. Use of the crest as a trade-mark by INC must be established for there to be infringement under both s. 19 and s. 20 (see Cie Générale des Etablissements Michelin-Michelin & Cie v. C.A.W.-Canada et al. (1996) 71 C.P.R. (3d) 348 at 357 - 362 (F.C.T.D.) Per Teitelbaum J.).

[37]            Section 20 of the Act provides that infringement of a registered trade-mark shall be deemed to occur where "a person not entitled to its use ... sells, distributes or advertises wares or services in association with a confusing trade-mark or trade name" (with certain exceptions not here applicable). For that section to apply the defendant INC must have used its crest, said to be confusing with the registered mark, as a trade-mark, that is, used it as a mark for the purpose of distinguishing or so as to distinguish INC's wares from those sold ... by others" (the Act, s. 2 so defines a trade-mark).

[38]            In my opinion there is no evidence that INC used its crest design as a trade-mark, to distinguish its wares from those of others. Any conclusion that they intended the design to be a trade-mark can only be inferred from the facts that both the shirts purchased for sale in 1995 and the short sets purchased in 1998 had a crest design similar to that used by the plaintiffs on generally similar articles of men's shirts and boys' short sets. That inference is not supported by other considerations.

[39]            By the Amended Agreed Statement of Facts INC was not involved in the creation or design of the men's shirts or of the embroidered crest, and it arranged for the supplier to have labels and hang tags marked with INC's own trade-mark GARAGE U.S.A. applied to the shirts after the trade name owned by Wal-Mart was removed. No marks, other than the crest, comparable to other marks of the plaintiffs' were used by the defendant. There is no evidence that any other wares sold by INC, apart from the two lots, of shirts and short sets, had embroidered or fixed upon them the Crest Design of the plaintiffs or a crest design that might be considered to be confusing with that used by the plaintiffs.

[40]            I conclude that the crests appearing on the shirts and short sets here in issue were not included on those wares and were not used in sale of those wares by INC for the purpose of distinguishing them from the wares of others. The marks were not used by the defendant as trade-marks.

[41]            If I had determined otherwise, that is that INC had used its crest design as a trade-mark, the issue to be resolved, with reference to the claim for infringement under s. 20, would be whether the use of that mark would cause confusion with the plaintiffs' trade-mark. That issue was fully argued and, in case my finding is in error and INC's crest design were found to be used as a trade-mark, I deal summarily with the matter of confusion.

[42]            The Act provides the meaning of "confusion", i.e. trade-marks are confusing if the use of both trade-marks in the same area would be likely to lead to the inference that the wares associated with the trade-marks are manufactured or sold by the same person whether or not the wares are of the same general class (see s-s. 6(2)). In determining that matter, the Court has regard to all the surrounding circumstances including those specified in clauses (a) to (e) of s-s. 6(5). That subsection provides:

[43]            As to the factors set out by s.-s. 6(5) my analysis and conclusions are follows.

1)          The trade-marks can hardly be said to be inherently distinctive in light of the multitude of marks and symbols of heraldic coats of arms containing some of the same elements as those of the plaintiffs' mark. Nevertheless, by 1995, when the first incident arose, i.e. INC's purchase and sale of shirts bearing the INC crest, in my opinion the plaintiffs' Crest Design marks had acquired distinctiveness through continual use in the marketplace for a decade, in particular on polo shirts, its largest selling wares for nearly 20 years before 1995. The evidence is that those shirts and many other wares of the plaintiffs bore the plaintiffs' embroidered crest design since 1985 in the United States and since the early 1990's in Canada. Those wares were widely sold in a rapidly expanding market.

2)          While the buyer for INC testified that when the shirts were ordered and received the crest design on the shirts did not recall to her mind the registered Crest Design trade-marks of the plaintiffs, that is not the test. Rather, the test is whether the consumer in the marketplace, aware of the plaintiffs' trade-mark but remembering it with less than precision, would have found the marks confusing. In my opinion the answer to that is yes, for the marks on the shirts, while differing in some minor details, were about the same size, embroidered in similar colours and placed on the front of the shirts in about the same position. Any early impression of such a consumer, without further study of the two marks, would have been, in my view, that the two marks were confusing in the sense that they would give the initial impression that the wares were from the same source or supplier. The same conclusion I infer from inclusion of a crest, similar to that of the plaintiffs' trade-mark Crest Design, on the short sets purchased in 1998 for that crest on the short sets, though it included Roman numerals within the scroll at the bottom, when considered as a whole, did not differ significantly from the plaintiffs' trade-mark Crest Design.

3)       The wares associated with the crest designs of the parties did differ in quality and apparently they were intended and priced for different segments of the market for men's and boys' clothing, but the two marks in my opinion, when considered as a whole, are not visually distinctive one from the other. Rather, they are generally similar, and each is not dissimilar from other crest designs. In a generic sense the wares to which they related, men's polo shirts in particular, and boys' short sets, are within the general class of wares, i.e., articles of clothing for men and boys, the general market that the plaintiffs and INC both served. Those markets may have differed in the comparative wealth or purchasing interests of prospective consumers. The plaintiffs' goods are described as "high-end" products, intended for all age groups, those of the defendant are described as trendy, up-to-date, fashionable and moderately priced. The parties do not consider their wares to be comparable in quality or design and they do not consider themselves to be direct competitors, but in my opinion, the nature of the wares are generally similar, and the parties are engaged in a single trade, i.e., sales of men's and boys' clothing among the wares both sold. The use of the defendant's crest design, if it were used as a trade-mark, in the circumstances here would be confusing, in my opinion.

[44]            By the agreed statement of facts neither of the plaintiffs is aware of any instance of actual confusion arising from the defendant's sales of the shirts or of the boys' short sets. Nor is there any evidence of actual confusion known to the defendant. However, evidence of actual confusion is not necessary, for the Court to find a likelihood of confusion. The defendant urges there is no evidence of that likelihood for the plaintiffs did not file any survey evidence to indicate that likelihood, but the absence of such evidence does not lead to the conclusion that there was not a likelihood of confusion. The Court's task is to reach its determination of the likelihood of confusion on all the evidence before it, not in the absence of particular evidence.

[45]            I repeat my conclusion that in light of all the circumstances, if the defendant's use of its crest design was as a trade-mark in relation to the shirts and short sets, that use would have created the likelihood of confusion in the mind of the consumer, who was aware of the plaintiffs' Crest Design trade-mark but remembered it imprecisely. In my opinion that consumer would, at least initially, consider that the wares of the defendant came from the same source as those of the plaintiffs.

[46]            I turn to the plaintiffs' claim that the defendant's crest designs, on its polo shirts and short sets had the effect of depreciating the value of the goodwill attached to the plaintiffs' registered trade-marks under s-s. 22(1) of the Act. That subsection provides:

The plaintiffs acknowledge that the weight of jurisprudence limits the application of s-s. 22(1), as in the case of claims under ss. 19 and 20, to situations where the defendant has used the plaintiffs' registered trade-mark as provided by ss. 2 and 4, though there is no need to prove that use is as a trade-mark to distinguish the defendant's wares from those of others (see Clairol International Corp. et al. v. Thomas Supply & Equipment Co. Ltd. et al., (1968) 55 C.P.R. 176 (Ex. Ct.) Per Thurlow, J. At pp. 195 - 196 with reference to an earlier version of s. 22, and Cie Générale des Etablissements Michelin-Michelin & Cie, supra per Teitelbaum J., at 71 C.P.R. (3d) pp. 362 - 364 affirming the application of Clairol, supra to situations under the current version of s. 22).

[47]            I conclude on the basis of the jurisprudence that s-s 22(1) does not include this case where the defendant, it is said, has used the plaintiffs' registered Crest Design trade-mark on the defendant's wares but there is no evidence to support that was done to distinguish the defendant's wares from those of others, even in the case of the crest design affixed on the defendant's short sets.

[48]            The plaintiffs' final claim in trade-mark infringement is with relation to s-s. 7(b) of the Act, on the ground alleged that the defendant has directed "public attention to its wares, services or business in such a way as to be likely to cause confusion in Canada", at the time the defendant "commenced so to direct attention to them, between his wares, services or business and the wares, services or business" of the plaintiffs.

[49]            The elements of the offence of passing-off that the plaintiffs must establish are that the plaintiffs had a measure of goodwill or reputation in the mind of the purchasing public, in relation to their wares associated with their trade-mark Crest Design, that the defendant in the sale of its wares, marked with the crest design, would be likely to cause confusion to the purchasing public in Canada; and that the plaintiffs thereby suffered or are likely to suffer damage. The parties differ about whether these elements are established. The plaintiffs further urge that post-sale confusion, arising among viewers after sale of the defendant's wares bearing the crest design, a recognized basis for action under law of the United States, is actionable in Canada.

[50]            The defendant urges that the plaintiffs have not proven that by 1995 they and their wares had established any significant goodwill or reputation in the mind of the purchasing public. I am not so persuaded. In my opinion the evidence clearly supports a conclusion that the plaintiffs had indeed established significant goodwill or reputation for their various registered trade-marks, by reason of their substantial sales in Canada, as well as in the United States, in the market for life-style clothing for men and boys. Those sales had been rapidly increasing, including sales of wares bearing the trade-mark Crest Design. The defendant urges that since that design was not affixed by itself, i.e., without other registered trade-marks of the plaintiffs, TOMMY HILFIGER or the Flag Design, it cannot be said that the Crest Design had any particular significance in itself. In my view, clearly it was used by the plaintiffs, and used extensively in relation to wares they considered to be "classic". That use cannot be ignored merely because it was a use in association with other trade-marks on the designated wares. If it were otherwise, affixing of more than one trade-mark on wares would effectively negate their use as trade-marks.

[51]            Further, in my opinion, the defendant, by a crest design generally similar to the Crest Design of the plaintiffs on polo shirts acquired and sold in 1995, and similar to the plaintiffs' registered Crest Design trade-mark on short sets acquired and sold in 1998, was likely to cause confusion in the mind of the consumer in the marketplace who was aware of the plaintiffs' Crest Design trade-mark but remembered it imprecisely. That opinion, I reach for the reasons set out earlier in considering the likelihood of confusion in relation to alleged infringement under s. 20.

[52]            Finally, the defendant urges there is no evidence of damage caused to the plaintiffs by the sale of its wares bearing the defendant's crest design. I agree the evidence is not extensive but there is evidence of the plaintiffs' perceived damage. It was provided by THC's officer responsible for Hilfiger sales in Canada, who had reports from retail vendors of Hilfiger product. They sought to restrain sales of wares that appeared similar to Hilfiger wares and were similarly marked, because such wares undercut the market and caused confusion in the marketplace. No evidence quantifying the damage to the plaintiffs' interests was adduced, but in the circumstances of this case, where the passing-off was limited to sales of relatively few wares, i.e., sales of 7,200 polo shirts and "some hundreds" of short sets, calculation of damages would not be a major problem.

[53]            The plaintiffs' claim in relation to passing-off by the defendant arising because of post-sale confusion, a claim recognized under United States law, is not one I consider. It seems clear to me that s-s. 7(b) of the Act speaks to the likelihood of confusion at the time the defendant commenced its sales. That precludes a claim for loss arising from confusion arising at a later time, after sale of the defendant's wares.

[54]            I conclude that the plaintiffs' claim is established, that the defendant, at the time it commenced to sell its shirts in 1995, or if not then, when it continued to sell its shirts after receipt of the cease and desist letter from THLI in April of that year, and later by sale of the boys' short sets in 1998, directed public attention to its wares, services or business in such a way as to be likely to cause confusion in Canada between those wares, services or business and the wares, services or business of the plaintiffs. By so doing, the defendant violated the prohibition established by s-s. 7(b) of the Act.

The plaintiffs' claim for infringement of copyright

[55]            Pursuant to s-s 3(1) of the Copyright Act, R.S.c. 1985, c. C-42, as amended, the plaintiffs' claim the sole right to produce or reproduce their Crest Design, the artistic work registered and certified under registration No. 448012. In accord with paragraph 34.1(1)(a), copyright is presumed to exist in the work, and the originality of the work, an essential element of copyright, is also presumed to exist (see Blue Crest Music Inc. v. Canusa Records Inc. (1974) 17 C.P.R. (2d) 149 at 155 (F.C.T.D.). Copyright may subsist in trade-mark logos (see Canadian Tire Corporation Ltd. v. Retail Clerks Union Local 1518 of United Food and Commercial Workers Union et al., (1985), 7 C.P.R. (3d) 415, (F.C.T.D.); Cie Générale des Établissements Michelin - Michelin & Cie v. C.A.W.-Canada, supra).

[56]            Section 27 of the Copyright Act, supra, as amended in 1997 provides:

[57]            While s-s. 27(1) does not require intention or knowledge for infringement to occur, under s-s. 27(2) only a person who has knowledge or constructive knowledge of copyright infringement is responsible for infringement of the work. The defendant INC says that its crest is not a copy of the plaintiffs' copyright Crest Design, that there is no evidence of knowledge of the plaintiffs' copyright, either with respect to shirts sold before registration of the copyright, or a knowledge on the part of its buyer of the boys' short sets in 1998, and finally that there is no evidence that Tommy Hilfiger, the person, created the Crest Design.

[58]            I agree that sale of the shirts bearing the defendant's crest in 1995 did not constitute copyright infringement. However, upon the amendment of the statement of claim by the plaintiffs in 1995 to include a claim for infringement of copyright, INC, the defendant, had notice of the existence of the plaintiffs' Crest Design copyright. Whether or not the buyer responsible for purchase on behalf of INC had knowledge of the plaintiffs' copyright design, that knowledge clearly is attributed to INC either directly or constructively.

[59]            The plaintiffs' ownership of the copyright is not affected by the absence of evidence on their part concerning the authorship of the design. The registration certifies that Mr. Hilfiger is the author. The certificate must be considered to be valid on its face and in respect of the evidence it contains unless there is evidence adduced to contradict the basis on which it was issued as reflected in the information contained in the registration certificate (see s. 34.1 of the Copyright Act, supra).

[60]            The crest design appearing on the short sets is substantially similar to the plaintiffs' Crest Design copyright and my conclusion is that by the sale of the short sets, INC sold or distributed copies of the work that it should have known infringed the plaintiffs' copyright Crest Design. Copyright subsists in the plaintiffs' Crest Design as evidenced by the certificate of registration.

[61]            In the result the defendant's defence against copyright infringement and its counterclaim for an order striking its registration, from the records of the Copyright office, are unsuccessful.

Conclusions and Remedies

[62]            I sum up my conclusions as follows.

1)          The plaintiffs' claims are allowed in part, in respect of their claim against the defendant for passing-off, that is, by directing public attention to its wares, shirts in 1995 and short sets in 1998, by its crest designs affixed to those wares, in a manner to cause or be likely to cause confusion in Canada between its wares and those of the plaintiffs.

2)          The plaintiffs' claim against the defendant for infringement of copyright is allowed with respect to INC's sales of boys' short sets in 1998.

3)          The request of the plaintiffs for a declaration that its two trade-marks here in issue, for its Crest Design, is allowed, and further, I find that copyright subsists in the plaintiffs' Crest Design, owned by THLI, as registered by the certificate issued as No. 448012, dated November 29, 1995.

4)          The defendant's counterclaims for orders dismissing the plaintiffs' action and for costs on a solicitor and client basis are dismissed, as are the defendant's requests for orders declaring that the plaintiffs' trade-mark registration Nos. 426,595 and 430,112 are invalid and should be expunged from the Register of trade-marks, and a declaration that the copyright registered as No. 448012 is invalid and should be expunged from the records of the Canadian Copyright Office. In my opinion, none of the claims of the defendant for relief are established.

5)          The plaintiffs' request for an injunction, I am prepared to grant with effect from the date of judgment herein, September 16, 2003, on terms to be settled as the parties may agree or failing agreement, as the Court may direct after considering further submissions by counsel on appropriate terms, all to preclude the defendant or its agents from directing public attention to its wares in a manner likely to cause confusion in Canada between its wares and those of the plaintiffs.

6)          The plaintiffs' claim for damages is allowed, for injury caused by the defendant in an amount to be settled by the Court by supplementary order, on the basis of agreement or, failing agreement, on the respective submissions of counsel, unless the Court is persuaded by the plaintiffs that an accounting of profits made by the defendant is warranted.

7)          The plaintiffs shall have pre-judgment and post-judgment interest in accord with s-ss. 36(2) and 37(2) of the Federal Court Act, R.S.C. 1985, c. F-7, as amended, as the Court may determine by further order after consideration of submissions on behalf of the parties.

8)          The plaintiffs' request for an order directing the defendant to deliver up to the plaintiffs, or destroy under oath all wares and associated materials, use of which would violate the rights of the plaintiffs is dismissed for no case is made out that it is appropriate where the offending sales by the defendant, of two particular lots of wares were completed in 1995 and 1998, i.e., five or eight years ago.

[63]            I note that with respect to the injunction claimed the defendant argued it would be inappropriate where there is no evidence or complaint concerning on-going activities of the defendant and the wrongs here found were terminated years ago. Yet an injunction is normal relief where passing-off or infringement of trade-marks or copyright is established. Its significance is that any further activities of the defendant adversely affecting the plaintiffs' trade-mark or copyright interests may be dealt with as a matter of contempt of the Court's injunction order without the necessity of establishing the full details of alleged infringement. In my opinion, the circumstances here, in particular the defendant's sale of short sets in 1998 while this action was under way and after notice was given of the plaintiffs' claim for copyright infringement, warrant the award of a permanent injunction on appropriate terms.

[64]            Finally, on the matter of costs, originally requested by both parties on a solicitor and client basis, a basis expressly withdrawn from the plaintiffs' request at trial, costs of the action on a party and party basis are awarded to the plaintiffs, in an amount to be determined by the Court, or to be taxed in accord with the Court's Rules on a basis to be settled, after consideration of submissions on behalf of the parties.

[65]            The judgment issued September 16, 2003, will be supplemented, after submissions of counsel, with respect to the terms of the injunction awarded, damages or an accounting of profits, pre-judgment and post-judgment interest, and the amount or method of assessing costs awarded to the plaintiffs.

                                                                                                                                 "W. Andrew MacKay"                 

                                                                                                                                                          J.F.C.C.                      

Ottawa, Ontario

September 19, 2003

                                                    FEDERAL COURT OF CANADA

                                                                 TRIAL DIVISION

                              NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                             T-2036-95

STYLE OF CAUSE:                           TOMMY HILFIGER LICENSING, INC.,

TOMMY HILFIGER CANADA INC.

- and -

INTERNATIONAL CLOTHIERS INC.

PLACE OF HEARING:                     Toronto, Ontario

DATE OF HEARING:                       Monday, November 4, 2002

REASONS FOR ORDER OF MacKAY J.

DATED:                                                Friday, September 19, 2003

APPEARANCES:

Glen A. Bloom

Jennifer A. Ross-Carriere

                                                                                                       FOR PLAINTIFFS

John R. Morrisey

Mark K. Evans

Arnold T. Ceballos         

FOR DEFENDANT

SOLICITORS OF RECORD:

Osler Hoskin & Harcourt

50 O'Connor Street

Suite 1500

Ottawa, Ontario

K1P 6L2

FOR PLAINTIFFS

Smart & Biggar

438 University Avenue

Suite 1500, Box 111

Toronto, Ontario

M5G 2K8

FOR DEFENDANT