Date: 20080214
Docket: T-161-05
Citation: 2008
FC 188
Ottawa, Ontario, February 14, 2008
PRESENT: The Honourable Mr. Justice Hugessen
BETWEEN:
CROCS
CANADA INC. and CROCS, INC.
Plaintiffs
and
HOLEY
SOLES HOLDINGS LTD.
Defendant
REASONS FOR ORDER AND ORDER
I. Introduction
[1]
This is a motion for summary judgment brought by the defendant Holey
Soles Holdings Ltd. (Holey Soles) against the plaintiff, Foam Creations Inc.
(now Crocs Canada Inc.) and Crocs, Inc. (herein after jointly referred to as
Crocs), seeking dismissal of Crocs’ claims for passing off under the Trade-marks
Act, R.S.C. 1985, c.T-13 (Trade-marks Act) and for alleged
infringement of copyright. It is the defendant's contention that Crocs' claims
disclose no triable issue because they are barred by the doctrine of
functionality and because Crocs is attempting to create a monopoly in respect
to design elements contrary to subsection 64(2) of the Copyright Act,
R.S.C. 1985, c.C-42 (Copyright Act).
II. Facts
[2]
Crocs’ was the first company in North America to specialize in
uniquely formulated expanded ethylene based footwear which are now widely known
as Crocs clogs. Holey Soles began purchasing three models of shoes from Crocs
in September 2002 for distribution and sale. Those models included the Aqua
Clog, the Garden Clog and the Aqua Slide. These shoes bore Crocs’ REBOUND
trade-mark on the bottom of the shoe. Holey Soles sold the shoes under their
own brand and gave the shoes different names “Holey Sole”, “Unholey Sole” and
the “Sole Mate”. Prior to 2004, other distributors, including Holey Soles were
permitted by Crocs to sell the shoes under their own brand and names.
[3]
Six features or designs are said to be present in the various
models of Crocs’ footwear and to make up Crocs’ trade dress or distinguishing
guise. These include:
1. The crown design is the raised and bumpy
part at the upper edge of the top of the clog;
2. The
circles design are the holes on the top of the upper portion of the clog
which total 13;
3. The
semi-circles design refers to the vents on the side of the upper portion
of the clog and total 7;
4. The
nubs design are plastic nubs found in the heel of the shoe;
5. The
tread design which is found on the sole; and
6. The
composite design in which Crocs claims copyright.
[4]
Because they are the most prominent and permit a discussion of
all the questions of law raised by the present motion, I shall largely limit my
comments to the circle and semi circle designs.
[5]
In August of 2003 Holey Soles inquired of Crocs as to whether
they could put the HOLEY SOLES name on the bottom of the Crocs shoes being sold
to Holey Soles. Crocs refused but agreed to place the name on the bottom of any
moulds of Holey Soles’ own designs. No new footwear design was ever received by
Crocs from Holey Soles.
[6]
In April of 2004 Holey Soles began selling two models of foam
shoes that had been manufactured for it in China. These shoes were sold as
“Holey Soles Original” and the “Holey Soles with Strap” to Mountain Equipment
Co-op in Canada. These shoes, like the Aqua Clog have holes in the upper
surface and vents on the side, raised nubs on the interior of the clog, a crown
shaped design and a similar tread to those of Crocs. Crocs claims that the
shoes are virtually identical to their products, the only difference being that
“Holey Soles” was inscribed on the sole where “REBOUND” use to be found.
[7]
On January 28, 2005 this action was commenced. Later in 2005,
Holey Soles stopped selling Crocs’ products and has not purchased, distributed
or sold any of Crocs’ products since. Holey Soles did begin selling a new line
of footwear in the summer of 2005 consisting of three models: the Explorer, the
Provider and the Social. Crocs’ claims that the modifications to these shoes
are so minor that they are still confusingly similar to Crocs’ designs.
[8]
Crocs has applied for a patent over “Footwear Pieces and Methods
for Manufacturing Such” but no patent has been issued to date.
III. Issues
[9]
1. Are Crocs’ claims in passing off under paragraph 7(b) and (c)
of the Trade-marks Act defeated by application of the doctrine of
functionality?
2. Is Crocs barred from
claiming copyright rights by subsection 64(2) of the Copyright Act, or
can Crocs benefit from the exception at paragraph 64(3)(c)?
[10]
There is no issue on the present motion as to the proper test to
be applied on a motion for summary judgment. It appears to be common ground
that the motion can only be granted if the Court is satisfied that there is no
genuine issue of fact for trial.
IV. Analysis
1. Are Crocs' claims in
passing off barred by application of the doctrine of functionality?
[11]
At the outset let me say that in my view there is an extremely
high degree of similarity between the pattern or design formed by the circles
and semi circles on the tops and sides of many of the defendant's clogs and
what is found on the plaintiff's models. Not to put too fine a point on it, the
defendant seems to have produced rather obvious “knock-offs” whose only purpose
can be to induce consumers into thinking that they are buying genuine Crocs
clogs. There are also other less obvious similarities in the get up or
appearance of some of defendant's products but it is not necessary at this
stage of the action to go into them in any detail.
[12]
It is also clear to me, and not contested seriously by the
plaintiff, that the circles and semi circles have a functional role, namely
that of allowing air and/or water to flow in and out of the shoe. The question
thus becomes, in my view, to know whether the pattern of the circles and semi
circles can qualify as a distinguishing guise or get up so as to receive
protection under the Trade- marks Act in that their functional role can
properly be viewed as separate and different from the distinguishing role of
the pattern in which they are built into the clogs.
[13]
Both parties, of course, rely heavily on the recent decision of
the Supreme Court in Kirkbi AG v. Ritvik Holdings Inc., [2005] 3
S.C.R. 302 (the Lego case.) In that case the Court denied trade
mark protection to the plaintiff's well-known toy building blocks on the ground
that the alleged distinguishing guise claimed by plaintiff was purely
functional in nature.
[14]
The Court said:
[42]
The doctrine of functionality appears to be a logical principle of trade-marks
law. It reflects the purpose of a trade-mark, which is the protection of the
distinctiveness of the product, not of a monopoly on the product. The Trade-marks
Act explicitly adopts that doctrine, when it provides, at para. 13(2), that
the registration of a mark will not interfere with the use of the utilitarian
features it may incorporate:
13.
...
2)
No registration of a distinguishing guise interferes with the use of any
utilitarian feature embodied in the distinguishing guise.
[43]
In these few words, the Act clearly recognizes that it does not protect the
utilitarian features of a distinguishing guise. In this manner, it acknowledges
the existence and relevance of a doctrine of long standing in the law of
trade-marks. This doctrine recognizes that trade-marks law is not intended to
prevent the competitive use of utilitarian features of products, but that it
fulfills a source-distinguishing function. This doctrine of functionality goes
to the essence of what is a trade-mark.
[15]
The Court went on to
confirm, at paragraph 67, that
“the doctrine of passing off did not develop to protect monopolies in respect
of products but guises, get-ups, names and symbols which identify the
distinctiveness of a source”.
[16]
Also of particular relevance for present purposes is the
following passage and the quotation with evident approval of the Reasons of
Justice Sexton in the Federal Court of Appeal:
[59]
The second part of the argument raised by the appellant, which is based on
changes to the statute, also fails. Kirkbi first asserts that The Unfair
Competition Act, 1932, S.C. 1932, c. 38, included a definition at s. 2(d)
which expressly mentioned functionality:
(d)
"distinguishing guise" means a mode of shaping, moulding, wrapping or
packing wares entering into trade or commerce which, by reason only of the
sensory impression thereby given and independently of any element of utility
or convenience it may have, is adapted to distinguish the wares so treated
from other similar wares and is used by some person in association with his
wares in such a way as to indicate to dealers in and/or users of similar wares
that the wares so treated have been manufactured or sold by him; [emphasis in
original]
Kirkbi
then submits that the present definition of a distinguishing guise no longer
includes any reference to functionality:
“distinguishing
guise” means
(a) a shaping of wares or their
containers, or
(b) a mode of wrapping or
packaging wares
the appearance of which is used by a
person for the purpose of distinguishing or so as to distinguish wares or
services manufactured, sold, leased, hired or performed by him from those
manufactured, sold, leased, hired or performed by others;
Kirkbi
argues that the present law limits the application of the doctrine to
registered marks only, under s. 13(2).
[60]
This interpretation of the legislative changes is clearly wrong. The changes in
the drafting of the statute did not signal any intention to remove a doctrine
of long standing, with the strange result that unregistered marks might have
been granted broader protection than marks registered under the Trade-marks
Act. The purpose of s. 13(2) was rather to make sure that the public or
competitors might keep on using utilitarian features of an otherwise
distinguishing guise, as Sexton J.A. found:
Indeed, in my view, subsection 13(2) reinforces
the concept that the doctrine of functionality invalidates a mark which is
primarily functional. It makes clear that the public is not constrained from
using any utilitarian features of a distinguishing guise. It follows that if a
distinguishing guise is wholly or primarily functional, then the public is not
constrained from using the distinguishing guise in its entirety. Thus a
distinguishing guise which is primarily functional provides no rights to
exclusive use and hence no trade-mark protection. In other words the fact that
the distinguishing guise is primarily functional means that it cannot be a
trade-mark. The appellants have simply misconstrued subsection 13(2). [para.
59]
[17]
Finally, I think that
it is important to remember that in Lego the Supreme Court was not
concerned with an alleged mark that was both functional in part and
distinguishing in part:
On
the facts, the trial judge found that the LEGO indicia and the asserted
unregistered mark were purely functional. The mark was the product (see Gibson
J., at para. 61). Those findings were accepted by the Federal Court of Appeal
and were not challenged in our Court. (at p. 330)
[18]
Thus, the Lego
decision confirmed that trade mark protection was not available for a mark or
get up that was “purely” functional. It did not, in my view, exclude from
protection any and every mark which displayed some functional features. Indeed,
the text of subsection 13(2) quoted above in my opinion clearly suggests a
policy choice to permit some functional (or utilitarian) features in a mark so
long as they do not create a monopoly of the function. I believe that that same
policy choice is reflected in s. 5.1 of the Industrial Design Act,
R.S.C. 1985, c. I-9 (Industrial Design Act) which reads:
5.1 No protection afforded by this Act shall
extend to
(a) features applied to a useful
article that are dictated solely by a utilitarian function of the article; or
(b) any method or principle of
manufacture or construction.
[19]
Returning to the
present motion for summary judgment, it is my view that the question of whether
the design and pattern of the circles and semi circles on the plaintiff's clogs
is primarily functional is one of fact which cannot and should not be decided
at this stage. There is certainly ample evidence that the circles and semi
circles perform a function; there is no evidence however clearly linking that
function, or indeed any function, to their pattern and arrangement on the tops
and sides of the shoes and it will certainly be open to the Court at trial to
find that that pattern and arrangement constitute in themselves a
distinguishing guise. I leave to another day and to heads wiser than mine, the
teasing out of the distinctions, if any, between “primarily”, “purely” and “solely”,
as well as between “functional” and “utilitarian” and other variations in the
language used in the various cases and the two quoted statutes. I think,
however, that the underlying policy is the prevention of the obtaining of a
monopoly by means of a trade mark in circumstances where a patent either cannot
be granted or has expired and it is not without significance that the evidence
on the present motion shows that other manufacturers, including the defendant, have
been able to use some of the purely functional features of the plaintiffs'
clogs without mimicking their get up. This, too, is a matter which must be
further examined at trial.
[20]
The first leg of the
defendant's motion accordingly fails.
2. Is Crocs’ barred from claiming copyright rights by subsection
64(2) of the Copyright Act, or can Crocs benefit from the exception at paragraph
64(3)(c)?
[21]
Subsection 64(2) of the Copyright Act states that there
will be no copyright infringement where:
(2) Where copyright subsists in a
design applied to a useful article or in an artistic work from which the design
is derived and, by or under the authority of any person who owns the copyright
in Canada or who owns the copyright elsewhere,
(a) the
article is reproduced in a quantity of more than fifty, or
(b) where the
article is a plate, engraving or cast, the article is used for producing more
than fifty useful articles.
[22]
The defendant claims that Crocs’ shoes are clearly useful
articles, produced in numbers far exceeding 50 and that the claim in copyright
is therefore barred on its face by subsection 64(2).
[23]
Paragraph 64(3)(b) and (c) of the Copyright Act state that
subsection 64(2) of the Act does not apply in respect of the copyright or moral
rights in an artistic work in so far as the work is used as a trade-mark or a
representation or a label or for material suitable for making wearing apparel.
In order to benefit from the protection of subsection 64(3), the designs in
question must be used as or for a trade-mark. Crocs’ designs alone or in
combination form its distinctive trade dress and therefore qualify as a
trade-mark pursuant to the section 2 definition in the Trade-marks Act.
At the very least, the defendant's contention that the designs are not a trade
mark, as I have just decided, is not a question which should be determined on
summary judgment.
[24]
Shoes are clearly wearing apparel (as was admitted by defendant's
representative on discovery) and Crocs’ shoes are created by injecting a
material into a mold, a process which incorporates the designs into the
material.
[25]
Here again, in my view, Crocs’ have raised sufficient evidence
that there is a serious issue to be tried on their right to claim the benefit
of subsection 64(3).
V. Conclusion
[26]
For the reasons above, I would conclude that this motion for
summary judgment should be dismissed.
VI. Costs
[27]
In circumstances such as this I would normally award cost in a
lump sum approaching a solicitor and client scale. Plaintiff shall file written
representations on the matter of costs within ten days and defendant shall
respond thereto within a further ten days.
ORDER
THIS COURT ORDERS that the motion be
dismissed. Costs reserved.
“James
K. Hugessen”
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