Northwest Territories v. Sirius Diamond Ltd., 2001 FCT 702

Date: 20010626

Docket: T-822-00

                                                                     Citation: 2001 FCT 702

BETWEEN:

     GOVERNMENT OF THE NORTHWEST TERRITORIES

                                                                                               Plaintiff

                                                                                          (Applicant)

                                                 - and -

SIRIUS DIAMONDS LTD. and SIRIUS DIAMONDS NWT LTD.

                                                                                         Defendants

                                                                                    (Respondents)

                                REASONS FOR ORDER

HANSEN J.

INTRODUCTION

[1]    In this motion, the applicant seeks an interlocutory injunction restraining the respondents from using a particular mark, namely a polar bear, pending trial. The plaintiff alleges the defendants' activities amount to copyright, trade-mark and official mark infringement, and passing off.

FACTS

The Parties

[2]    The applicant is the Government of the Northwest Territories (the "GNWT").

[3]    The first defendant, Sirius Diamonds Ltd., is a diamond wholesaling business, carrying on business since 1989. From 1989 to 1998, it purchased polished stones in Antwerp and sold them to jewellery manufacturers and retailers in Canada. In 1996, it opened a small diamond cutting facility in Victoria.

[4]    The second defendant, Sirius Diamonds NWT Ltd., is a company incorporated in the Northwest Territories on April 30, 1998 to cut, polish, and market diamonds mined in the Northwest Territories.

[5]    For ease of reference, I shall refer to the two defendants collectively as "Sirius".

The GNWT's Involvement in the Diamond Industry

[6]    In1991, significant diamond reserves were discovered in the Northwest Territories. By 2004, the Northwest Territories is expected to produce 10 to 15 per cent by value of the world's diamonds.

[7]                The GNWT viewed the discovery of significant diamond reserves in the Northwest Territories as an opportunity to provide an economic stimulus to its economy. While commercial development of these reserves provided employment and government revenues associated with the primary industry of resource extraction, the GNWT sought to ensure the Northwest Territories would benefit from the development of regional secondary industries associated with diamonds, namely, the diamond cutting and polishing industries. In the hopes of developing both employment and economic benefits to the Northwest Territories, the GNWT undertook initiatives and made investments in both the primary and secondary diamond industries

[8]                One of these initiatives is the GNWT's diamond monitoring and certification program. The GNWT certification program is a voluntary certification program in which the GNWT attests to the origin and quality of each of the diamonds mined and manufactured in the Northwest Territories pursuant to the certification program. The aim of the certification program is to enable consumers to purchase diamonds confident that the diamonds originated in the Northwest Territories and were mined, cut, and polished in accordance with the GNWT's environmental and labour laws. Particularly, the certification program seeks to differentiate Northwest Territories diamonds from so-called "conflict diamonds" sold to fund violent and bloody guerrilla wars. Once cut and polished, it is very difficult to identify a diamond's source. The GNWT employs technology, auditing, and tracking to offer manufacturers, retailers, and consumers confidence that certified diamonds in fact originate in the Northwest Territories. According to the GNWT, the ability to discriminate by source would grant commercial participants in the certification program a significant competitive advantage in the marketplace, which translates into the ability to charge a premium for diamonds certified pursuant to the certification program.

[9]                The GNWT has adopted various depictions of polar bears as marks indicative of itself and has used depictions of polar bears in association with its ventures into the diamond industry, and in association with its certification program.

The GNWT's Intellectual Property

[10]            The GNWT claims intellectual property rights in the following depictions of polar bears, which I shall refer to generically as the "GNWT polar bears":

[11]            In these reasons I will use the following shorthand references:

· the GNWT's registered copyrights will be the "GNWT copyrights";

· the GNWT's trade-marks, whether registered or unregistered, will be the "GNWT marks";

· the GNWT's registered trade-marks will be the "GNWT trade-mark registrations"; and,

· the GNWT's published official marks will be the "GNWT official marks".

The Relationship Between the Parties

[12]            As noted above, Sirius is active in the secondary industries associated with the diamond trade in Canada. Its working relationship with the GNWT began when the GNWT invited Sirius and other diamond manufacturers to begin operations in the NWT and provided certain incentives for them to do so. One such incentive was the opportunity to participate in the GNWT's certification program. Accordingly, in early 1998, Sirius and the GNWT began negotiating Sirius' participation in GNWT programs relating to the diamond industry. Upon development of the GNWT certification program in mid-1998, these negotiations included Sirius' participation in that program.

Background

[13]            Early in its collaboration with the GNWT, Sirius elected to adopt a trade-mark for use in association with its emerging Canadian diamond business. While it considered both a "Maple Leaf" and a "Northern Star", Sirius adopted the following outline of a polar bear:

[14]            Upon the GNWT's complaint, Sirius adopted the following revised polar bear design:

[15]            Sirius filed the following trade-mark applications in the Canadian Trade-marks Office with the following particulars:

[16]            Initially, Sirius' trade-mark application number 8971751 was for the following depiction of a polar bear:

[17]            Following an exchange with the GNWT, Sirius wrote the Trade-marks Office asking it to replace this depiction with the old Sirius polar bear design. Sirius stated that the submitted logo had mistakenly included the outline of an ice flow underneath the polar bear, and that the ice flow was not part of the trade-mark. The Trade-marks Office accepted this submission and made the requested change.

[18]            Since this application, Sirius claims to have adopted the revised Sirius polar bear design. However, Sirius is actually using the design shown below:

Sirius does not appear to distinguish between the revised Sirius polar bear design and the currently used Sirius polar bear design marks, and seems to take the position the designs are simply different iterations of the same mark. As the issues raised by the GNWT have equal relevance to both designs, I shall treat them identically and for ease of reference refer to them jointly as the "new Sirius polar bear design". I shall refer to all Sirius' marks, generally, as the "Sirius marks".

[19]            Finally, it should be noted that although Sirius' trade-mark application No. 1010635 for the revised Sirius polar bear design claims first use as of October, 1998, the evidence indicates that Sirius' adoption and use of the mark did not begin until March or April of 2000.

[20]            While still in negotiations with the GNWT over its participation in the GNWT's certification program, Sirius initiated its own diamond authentication program. Sirius laser-etched its logo onto the girdle of its diamonds and issued a certificate of origin, or "birth certificate", for such etched diamonds, certifying the etched diamond was mined, cut, and polished in Canada.

[21]            Sirius' diamond "birth certificate" is an official-looking document, which on its face includes the new Sirius polar bear design and a seal, but does not mention Sirius. The Sirius name is, however, mentioned on the back of the certificate.

[22]            The GNWT took exception to Sirius' adoption of the Sirius marks, and Sirius' attempts to register those marks in the Canadian Trade-marks Office. The GNWT also took exception to Sirius' "birth certificate".

[23]            The parties dispute entitlement to use of a polar bear trade-mark in association with the diamond industry in Canada. The GNWT takes the position that its long-standing use of the GNWT polar bears as trade-marks and official marks precludes Sirius' adoption and use of the Sirius marks. The GNWT also argues that in any event, its use of its NORTHWEST TERRITORIES & polar bear design trade-mark on materials promoting the Northwest Territories diamond industry in November of 1997 is prior in time to any use of the Sirius marks, and this use entitles the GNWT to a superior title to such marks in association with the diamond industry. The GNWT submits that at all times, it maintained that it would license Sirius' use of the GNWT marks pursuant to Sirius' participation in the GNWT certification program. Without such participation, the GNWT would not permit Sirius to use any trade-mark that the GNWT considered infringed its intellectual property rights in the GNWT marks.

[24]            The GNWT submits up until the final deterioration of relations between the parties, Sirius' use of a polar bear mark was done with the GNWT's tacit approval, under a non-exclusive license agreement, and on the understanding that Sirius was to participate in the GNWT certification program.

[25]            Sirius, for its part, disputes that the GNWT's use of the GNWT polar bears as trade-marks and official marks entitles it to exclusive use of such marks in any industry it should choose to enter. Sirius disputes the legal effect of the GNWT's November, 1997, publication bearing its NORTHWEST TERRITORIES & polar bear design trade-mark, and relies upon its claim to use of the old Sirius polar bear design trade-mark in October of 1998 as the first bona fide use of a "polar bear" trade-mark in association with the diamond industry.

[26]            Relations between the parties deteriorated following Sirius' adoption of the Sirius marks, although negotiations continued and did not finally break off until late July of 2000.

[27]            Three significant events occurred during that period.

[28]            First, on December 21, 1998, Sirius sold its first polar bear laser-etched diamonds to a Vancouver retail outlet. Upon learning of this sale in March of 1999, and also that Sirius had applied for a trade-mark for the old Sirius polar bear design, the GNWT wrote to Sirius requesting it to cease such use in the absence of the GNWT's permission.

[29]            Second, on January 11, 2000, Sirius wrote to two companies also in the business of cutting and polishing diamonds mined in the Northwest Territories, and which were also negotiating participation in the GNWT certification program. In those letters, Sirius asserted its exclusive right to use a polar bear as a trade-mark in association with the diamond industry and indicated any third party use of a polar bear trade-mark without Sirius' permission would be opposed by legal action. The GNWT swiftly protested Sirius' actions, and after some negotiation, Sirius again wrote the third parties, acknowledging the GNWT took a different view of Sirius' trade-mark rights.

[30]            Third, on May 5, 2000, the GNWT learned Sirius intended to hold a show at an Ottawa jewellery retailer at which Sirius would showcase its polar bear etched diamonds and its own authentication program. On May 9, 2000, the GNWT filed the present application for an interlocutory injunction to prevent Sirius from using the Sirius marks at that show. The parties adjourned the motion on consent, and on the condition that Sirius post prominent signs at the show acknowledging the GNWT as the owner of the polar bear trade-mark and that Sirius' use of the Sirius marks was pursuant to a license granted by the GNWT.    The GNWT filed its statement of claim on May 30, 2000, but consented to Sirius' not filing a Statement of Defence during negotiations.

[31]            Sirius, however, continues to maintain its entitlement to the Sirius marks, and questions the GNWT's entitlement to use the GNWT marks in association with its activities in the diamond industry.

[32]            In fact, on July 19, 2000, Sirius sent a letter to other Northwest Territories diamond producers stating that Sirius has common law rights to the use of a polar bear trade-mark in association with diamonds, and that it would "bring legal action against any party laser engraving the image of a polar bear on diamonds".

[33]            Negotiations between the parties broke down finally on July 28, 2000. Hence, the GNWT brings this application.

The Action

[34]            The GNWT alleges that Sirius' activities amount to, among other things:

a)         infringement of the GNWT copyrights, pursuant to sections 3 and 27 of the Copyright Act, R.S.C. 1985, c. C-42, as amended ( the "Copyright Act");

b)         infringement of the GNWT trade-marks, pursuant to section 19 of the Trade-marks Act, R.S.C. 1985, c. T-13, as amended (the "Trade-marks Act");

c)         infringement of the GNWT official marks, pursuant to paragraph 9(1)(d) and subparagraph 9(1)(n)(iii) of the Trade-marks Act; and

d)         passing off pursuant to subsection 7(b) of the Trade-marks Act.

This Interlocutory Injunction

[35]            In its notice of motion, the GNWT seeks to restrain Sirius from a variety of conduct, only some of which was pursued on hearing of the motion. At the hearing, the GNWT sought an interlocutory injunction restraining Sirius from:

a)         infringing the GNWT trade-mark registrations;

b)         using or adopting in connection with its business any mark consisting of or so nearly resembling as to be likely to be mistaken for the GNWT official marks;

c)         using or adopting in connection with its business any mark consisting or so nearly resembling of the GNWT marks as to be likely to be mistaken for any word or symbol likely to lead to the belief that the wares or services in association in which they are used have received or are produced, sold or performed under the approval or authority of the GNWT;

d)         using or adopting in connection with its business any mark consisting of or so nearly resembling the GNWT official marks as to be likely to be mistaken for any badge, crest, emblem or mark adopted and used in Canada as an official mark for wares or services;

e)         using any trade-mark likely to be confused with the GNWT marks;

f)          directing attention to its products or business in a manner causing or likely to cause confusion with the GNWT;

g)         passing off its wares, services and business as and for those of the GNWT;

h)         publishing, manufacturing, producing, reproducing, copying, warehousing, importing, exporting, selling, distributing, offering for sale, transferring, shipping, re-directing shipment, promoting, advertising, acquiring, having made, or printing anything which infringes the GNWT copyrights; and

i)          selling, letting for hire, or by way or trade exposing or offering for sale or hire, distributing, either for the purposes or trade or to such an extent as to affect prejudicially the GNWT, or by way of trade exhibiting in public, works which infringe the GNWT copyrights.

[36]            The GNWT also seeks an order requiring Sirius to deliver up all wares including "diamonds, stationary, catalogues, business cards and other promotional material or commercial documentation" bearing a mark that is confusing with the GNWT marks, which infringes the GNWT copyrights, or which consists of or so nearly resembles as to be mistaken for the GNWT official marks.

[37]            The GNWT argues it need not establish irreparable harm or the balance of convenience if it:

a)         establishes a prima facie case of "blatant copying" in relation to the GNWT copyrights;

b)         establishes a prima facie case of trade-mark infringement in relation to the GNWT trade-mark registrations; or

c)         at all, in relation to the GNWT official marks.

[38]            Sirius denies each of these claims and submits that should the Court grant the GNWT's application, this would be determinative of the main action. In those circumstances, Sirius argues the GNWT should show a strong prima facie case in addition to irreparable harm and a favourable balance of convenience.

[39]            Sirius also submits the Applicant's delay in coming to this Court precludes its success on this motion.

ANALYSIS

A          The Appropriate Test: The Tripartite Test or Prima Facie Case?

[40]            Since the decisions of the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 and the Federal Court of Appeal in Centre Ice Ltd. v. National Hockey League et al. (1994), 53 C.P.R. (3d) 34 (F.C.A.), the Federal Court has assessed the merit of interlocutory injunction applications on the basis of the following familiar tripartite test laid down by the House of Lords in American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396:

a)         Is there a serious question to be tried?

b)         Will the applicant suffer irreparable harm if the injunction is not granted? and

c)         Does the balance of convenience favour the applicant?

[41]            The GNWT says this Court may depart from this tripartite test and grant an interlocutory injunction without considering either irreparable harm or the balance of convenience where the Court is satisfied the GNWT has established a prima facie case of "blatant copying", trade-mark infringement, or infringement of its official marks.

[42]            Sirius submits the GNWT must establish each branch of the tripartite test before this Court may grant an interlocutory injunction, regardless of the nature of the intellectual property asset at issue and regardless of whether or not the GNWT has established a prima facie case of infringement. Sirius relies upon the so-called "Woods exception" to the general rule that a court should not engage in an extensive consideration of the merits on an interlocutory injunction application to argue the GNWT must establish a prima facie case in addition to showing irreparable harm and the balance of convenience.

[43]            Lord Diplock modified the Cyanamid, supra principle in N.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294 at 1307 stating as follows:

Where, however, the grant or refusal of the interlocutory injunction will have the practical effect of putting an end to the action because the harm that will have been already caused to the losing party by its grant or its refusal is complete and of a kind for which money cannot constitute any worthwhile recompense, the degree of likelihood that the plaintiff would have succeeded in establishing his right to an injunction if the action had gone to trial is a factor to be brought into the balance by the judge in weighing the risks that injustice may result from his deciding the application one way rather than the other.

In RJR-MacDonald, supra, (at para. 51) the Supreme Court of Canada accepted the soundness of this principle.

[44]            In my view, the Woods exception is not applicable on the present facts. There is no evidence the determination of this motion will have the practical effect of deciding the main action or cause either party to go out of business.

[45]            The Court's first task is to identify those circumstances in which it may, if ever, grant an interlocutory injunction without considering either irreparable harm or the balance of convenience. The jurisprudence relied upon by the GNWT for the proposition that this Court need consider neither irreparable harm nor the balance of convenience pre-dates the decisions of the Supreme Court in RJR-MacDonald, supra, and the Federal Court of Appeal in Centre Ice, supra. A number of post- RJR-MacDonald decisions of this Court have questioned the continuing relevance of much of the case law relied upon by the GNWT: see, e.g., Caterpillar Inc. et al. v. Chaussures Mario Moda Inc. (1995), 62 C.P.R. (3d) 338 (F.C.T.D.) and M.M. International Business Directories Ltd. v. International Business Index, [2000] F.C.J. No. 1338 (QL) (T.D.). These cases note that RJR-MacDonald has shifted the focus of interlocutory injunction determinations away from a close examination of the merits toward an inquiry into the nature of the alleged harm. Most recently, the Federal Court of Appeal in A. Lassonde Inc. c. Island Oasis Canada Inc., [2000] A.C.F. no 2123 (QL) (C.A.), declined to allow an interlocutory injunction on the basis of a prima facie case in the absence of a showing of irreparable harm:

[TRANSLATION]

[10] That said, I agree with the appellant that the facts of the case at bar, in which the registered trade mark is not disputed, allow it to distinguish Centre Ice Ltd., supra, and perhaps to dispense with the requirements made in that case regarding the burden of proof of irreparable harm. However, a fundamental question remains: is it proper to do so? After careful thought, I have come to the conclusion that it is not for the following reason.

[11] In determining this question we should not lose sight of the remedy sought and the purpose which the procedure in question seeks to achieve. The appellant applied for an interlocutory injunction, that is an injunction that would prevent it suffering irreparable harm while it is awaiting a final ruling on its rights. That is the very essence of the action taken and the remedy desired. In such circumstances, assuming that irreparable harm exists by exempting the party seeking the remedy from presenting evidence of it would be for all practical purposes to conclude that the remedy is appropriate and must be granted the moment a party alleging an infringement of its rights asks for it. This conflicts with the very nature and purpose of the interlocutory injunction, which is a discretionary and equitable remedy the obtaining of which depends on the likelihood of irreparable harm, which it would be unfair to assume in view of the drastic consequences, namely the prohibition of any commercial activity, that will result for the party against which the injunction is issued.

[46]            The Court of Appeal left open the possibility of granting an injunction in the absence of irreparable harm under certain circumstances, but did not detail those circumstances. There is nothing to suggest that the present facts warrant such an approach. My review of the evidence and the case law has not uncovered a sufficient basis on which to dispense with the requirement that the GNWT establish irreparable harm in respect of its copyright and trade-mark claims.

[47]            The GNWT's official mark claims, however, are another matter. The Applicant relies upon The Queen in Right of British Columbia and Expo 86 Corp. v. Mihaljevic et al. (1986), 10 C.P.R. (3d) 374 (B.C.S.C.), aff'd (1991), 36 C.P.R. (3d) 445 (B.C.C.A.), Canadian Olympic Association v. Donkirk International, Inc. (1987), 17 C.P.R. (3d) 299 (F.C.T.D.), and Stadium Corp. of Ontario Ltd. v. Wagon-Wheel Concessions Ltd. et al. (1989), 25 C.P.R. (3d) 293 (F.C.T.D.) for the proposition that an applicant need establish neither irreparable harm nor the balance of convenience to obtain an interlocutory injunction in respect of official marks. The only post-RJR-MacDonald decision to consider this issue, Big Sisters Association of Ontario et al. v. Big Brothers of Canada (1994), 56 C.P.R. (3d) 355 (F.C.T.D.), declined to grapple with the issue in light of its peculiar facts and applied the RJR-MacDonald test. The peculiar facts of that case have no corollary here.

[48]            That said, on the present facts, I see no reason to depart from the RJR-MacDonald test. In respect of subparagraph 9(1)(n)(iii) claim, in Canadian Olympic Association v. Allied Corp. (1989), 28 C.P.R. (3d) 161 at 165 - 166 (F.C.A.), the Court of Appeal established subparagraph 9(1)(n)(iii) operates prospectively only. Third parties are prohibited from adopting and using official marks, but those third parties who have previously adopted such marks may continue using those marks. On the present facts, the only relevant official marks are those published prior to Sirius' adoption and use of the new Sirius polar bear design. The evidence shows Sirius' adoption and use commencing in March or April of 2000, accordingly, the only relevant official mark of the GNWT is Official Mark No. 904774, for NORTHWEST TERRITORIES & polar bear design.

[49]            The test for infringement of an official mark is not one of confusion, as for trade-marks, but of resemblance: does the defendant's design consist of or so nearly resemble the official mark that a person would likely be deceived, confused or mistaken: Canadian Olympic Assn. v. Health Care Employees Union of Alberta (1992), 46 C.P.R. (3d) 12 at 19 (F.C.T.D.). In my view, the GNWT has not made out a prima facie case the new Sirius polar bear design infringes the GNWT's Official Mark No. 904774. The official mark at issue is a composite mark, comprising words and an image. The words, NORTHWEST TERRITORIES, feature prominently in the official mark. The image, of a bear on an ice flow, differs in both generality and detail from the new Sirius polar bear design. In my view of the evidence before me, the marks differ significantly in important features such that Sirius' mark cannot be said to consist of or so nearly resemble the GNWT's official mark that a person would likely be deceived, confused, or mistaken.

[50]            In respect of the GNWT's paragraph 9(1)(d) claim, I similarly conclude the GNWT has failed to make out a prima facie case that Sirius has adopted "any word or symbol likely to lead to the belief that the wares or services associated with its marks are produced, sold or performed under royal, vice-regal or governmental patronage, approval or authority". The GNWT relies heavily upon Sirius' "official" looking "birth certificate" for its diamonds, and upon the inference that Sirius' use of a polar bear trade-mark must be licensed or otherwise under authority of the GNWT. Sirius' "birth certificates" make no representation to the public that they originate with any public authority. Private parties may employ authoritative-looking documents; so long as the document does not deceptively invoke public authority, explicitly or implicitly, no action lies under paragraph 9(1)(d). With respect to Sirius' adoption of the new Sirius polar bear design trade-mark, I refer to my findings in respect of the GNWT's subparagraph 9(1)(n)(iii) claim, and similarly conclude on the evidence before me that no person would believe, by virtue of Sirius' adoption of the new Sirius polar bear design, that Sirius' wares or services are produced, sold or performed under GNWT patronage, approval, or authority.

[51]            Accordingly, the GNWT's application for an interlocutory injunction in respect of both its claims under section 9 of the Trade-marks Act should proceed pursuant to the RJR-MacDonald tripartite test.

[52]            In view of these authorities, and particularly on a close reading of RJR-MacDonald, supra, Centre Ice, supra, and Island Oasis, supra, I am of the view that, on the present facts, it is not appropriate to depart from RJR-MacDonald's tripartite test in respect of any of the claims raised by the GNWT.

B          The Tripartite Test

1           Serious Question

[53]            The evidence shows Sirius has ceased use of the old Sirius polar bear design. In my view, allegations of infringement with respect to this particular mark have been rendered moot for purposes of issuing an interlocutory injunction. While there is some evidence of continued use of this mark beyond the alleged date of abandonment, I am satisfied such use was inadvertent and that Sirius in fact has adopted and now uses the new Sirius polar bear design. While the trade-mark application corresponding to the old Sirius polar bear design remains pending in the Trade-marks Office, I see no basis for the Court's intervention at this time. That matter is properly left for resolution in that venue. Remedy for past use of the old Sirius polar bear design mark, if ultimately found wrongful, may be obtained at trial. Accordingly, this analysis will proceed in respect of the new Sirius polar bear design only.

[54]            The GNWT submits that it has made out a prima facie case of copyright, trade-mark and official mark infringement, and raised a serious issue in respect of passing off pursuant to subsection 7(b) of the Trade-marks Act. Sirius, for its part, did not seriously contest that the GNWT had raised a serious issue in regards to each of these claims. I am persuaded that at the very least, the GNWT has raised a serious issue in respect of all of these claims.

2           Irreparable Harm

(a)         The Law

[55]            The second element of the tripartite test for an interlocutory injunction is the requirement to show that the applicant would suffer irreparable harm should the injunction not issue. In RJR-MacDonald, supra, the Supreme Court of Canada characterized this determination as an assessment of [at para. 58]:

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.

[56]            As to the nature of such "irreparable" harm, the Court stated [at para. 59]:

"Irreparable" refers to the nature of the harm suffered rather than its 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. Examples of the former include instances where one party will be put out of business by the court's decision (R.L. Crain Inc. v. Hendry (1988), 48 D.L.R. (4th) 228 (Sask. Q.B.)); where one party will suffer permanent market loss or irrevocable damage to its business reputation (American Cyanamid, supra); or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined (MacMillan Bloedel Ltd. v. Mullin, [1985] 3 W.W.R. 577 (B.C.C.A.)). The fact that one party may be impecunious does not automatically determine the application in favour of the other party who will not ultimately be able to collect damages, although it may be a relevant consideration (Hubbard v. Pitt, [1976] Q.B. 142 (C.A.)).

[57]            The nature of irreparable harm has been the subject of considerable comment. In his text, Injunctions and Specific Performance (Toronto: Canada Law Book Inc., Looseleaf), Sharpe J.A. concedes that while it is easy to understand the need for an irreparable harm finding, it is not so straight-forward to define exactly what constitutes such a circumstance. As to what constitutes irreparable harm, Sharpe J.A. states at 2- 26:

Typical cases in which irreparable harm is likely to be found are those where the act complained of (or, where the defendant's interests are being considered, the effect of an injunction) would put the party out of business, prevent the gaining of livelihood or cause irrevocable damage to reputation or professional standing. [. . .] It has been held that the courts should avoid taking a narrow view of irreparable harm. The concept is not to be restricted to market loss or damage to business reputation and may include harm in the form of administrative disruption and inconvenience caused by dismantling a scheme of school administration. [. . .]

[58]            Irreparable harm generally refers to harm suffered by the applicant, not to third party harm. An exception to this principle arises where the government brings and application for an interlocutory injunction to prevent irreparable harm to the public interest. In his text, Injunctions and Specific Performance, supra, Sharpe J.A. states at 2-29 to 2-30:

Some cases involve interests which are obviously difficult to evaluate in money terms and yet the court may still be reluctant to grant injunctive relief. Where the public interest is at stake, the calculation of irreparable harm becomes more difficult, as interests in addition to those of the immediate parties must be considered. In many cases, consideration of the public interest may be a powerful influence, depending on the circumstances, either in favour of or against an interlocutory injunction.

. . .

Indeed it has been held that an interlocutory injunction may be granted even where "irreparable" harm has not been demonstrated.

[59]            In RJR-MacDonald, supra, the Supreme Court stated that in an interlocutory injunction application brought by a public authority, the public interest is an exceptional consideration which plays an expanded role at para. 81:

We would add to this brief summary that, as a general rule, the same principles would apply when a government authority is the applicant in a motion for interlocutory relief. However, the issue of public interest, as an aspect of irreparable harm to the interests of the government, will be considered in the second stage. It will again be considered in the third stage when harm to the applicant is balanced with harm to the respondent including any harm to the public interest established by the latter.

[60]            With respect to the burden of proof of irreparable harm, the GNWT submits that it is not required to establish loss beyond reasonable doubt or even on a balance of probabilities. The GNWT relies on Matrix Photocatalytic Inc. v. Purifics Environmental Technologies Inc. et al. (1994), 58 C.P.R. (3d) 289 at 302 (Ont. Gen. Div.) for the proposition that it merely needs to show a "real risk" of harm for which damages will be of little or no comfort. This submission does not accord with the jurisprudence of the Federal Court. In Syntex Inc. v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129 at 135 (F.C.A.), the Court of Appeal clarified that the applicant must establish that it "would" suffer irreparable harm in the absence of an injunction, not "likely" suffer such harm. The Federal Court of Appeal confirmed this standard in Centre Ice, supra.

[61]            With respect to the nature of the evidence required to show irreparable harm, the authorities state the applicant must provide "clear and not speculative" evidence that irreparable harm "would" flow from the respondent's actions should the requested relief not issue: Imperial Chemical Industries PLC et al. v. Apotex Inc. (1989), 27 C.P.R. (3d) 345 at 351 (F.C.A.); Centre Ice, supra. Proof of irreparable harm cannot be inferred. In Centre Ice, supra, the Federal Court of Appeal considered an interlocutory injunction application involving passing off and trade-mark infringement. The Court of Appeal accepted the applicant's evidence of consumer confusion, but on that evidence alone declined to find either a loss of goodwill or irreparable harm at para. 9:

It cannot be inferred or implied that irreparable harm will flow wherever confusion has been shown. Accordingly, the learned motions judge erred in basing his finding of irreparable harm on this passage from the Jones' affidavit. Likewise, I believe that the learned motions judge erred in the passage quoted, supra, when, in effect, he inferred a loss of goodwill not compensable in damages from the fact that confusion had been proven. This view of the matter runs contrary to this court's jurisprudence to the effect that confusion does not, per se, result in a loss of goodwill and a loss of goodwill does not, per se, establish irreparable harm not compensable in damages. The loss of goodwill and the resulting irreparable harm cannot be inferred, it must be established by "clear evidence". On this record, there is a notable absence of such evidence.

[62]            In Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (1994), 56 C.P.R. (3d) 289 (F.C.T.D.), Rothstein J. considered the Federal Court of Appeal's comments in Centre Ice at 325:

I acknowledge that I shall draw inferences from the evidence and, therefore, the observation of Heald J.A. in Centre Ice, supra, that proof of irreparable harm cannot be inferred, must be addressed. I interpret Heald J.A. in Centre Ice, supra, to be saying that there must be an evidentiary basis, individually, of distinctiveness, deception, loss of goodwill and irreparable harm not compensable in damages. It is not possible to infer loss of goodwill from evidence of confusion, or irreparable harm from evidence of loss of goodwill. There must be some evidence supporting each element.

I do not understand him to be saying that a motions judge may not make inferences that reasonably flow from the evidence. Indeed, the drawing of inferences is virtually always necessary because, in civil actions, evidence is not so detailed as to expressly deal with each minute aspect of a party's story.

[63]            It must be remembered that Rothstein J.'s comments arose in the context of consideration of an injunction brought quia timet. While I agree with Rothstein J.'s approach to the role of the motions judge in assessing evidence in quia timet injunctions, the present application is not brought quia timet. Here, in contrast to the facts inCiba-Geigy, the GNWT complains of the harmful consequences of past wrongful conduct. Accordingly, in the present case, the proper approach to assessing the evidence of irreparable harm is that articulated in Centre Ice, supra. I would expect that the GNWT would tender some evidence of the irreparably harmful consequences to date of the allegedly wrongful activities of Sirius.

(b)         Submissions and Analysis

[64]            The GNWT submits Sirius' actions will cause the GNWT to suffer irreparable harm on two broad grounds. The first harm is to the interests of the public of the Northwest Territories; the second is to the GNWT itself in the form of irreparable harm to the goodwill and reputation associated with both the GNWT and the GNWT marks. But, the GNWT offered no independent, clear evidence of irreparable harm. Rather, the GNWT effectively asks this Court either to accept allegations of such harm, or to infer the harm from Sirius' adoption of the Sirius marks, which, the GNWT submits, are strikingly similar to its own. For its part, Sirius submits the GNWT's evidence amounts to bald assertions unsupported by clear evidence of irreparable harm. I will consider each of the GNWT's broad grounds for alleged irreparable harm in turn.

i) The Public Interest of the Northwest Territories

[65]            The first ground of irreparable harm alleged by the GNWT relates to the interests of the public of the Northwest Territories in the development of a secondary diamond industry in the Northwest Territories. The Northwest Territories was hard hit by the vocal anti-fur lobby in the early 'nineties, which effectively wiped out a centuries-old industry. The demise of the fur industry had significant consequences for the Northwest Territories. The GNWT is striving to optimize the emergence of industry in the Territories to complement the new diamond mines. The emergence of this downstream diamond industry would mean enhanced tax revenues, skilled employment, and support for the Northwest Territories and its aboriginal communities.

[66]            In addition to Sirius, two new Northwest Territories diamond cutting and polishing businesses have opened their doors. The Deton'Cho and Arslanian cutting factories currently employ approximately 70 people, and, according to the GNWT's affidavit evidence, anticipate employing "in excess of 100 to 150 people" in the future. The Deton'Cho and Arslanian cutting factories participate in the GNWT certification program. The GNWT argues that these ventures are "depending upon" the success of the GNWT certification program "to ensure their growth and existing viability". The GNWT argues Sirius' use of the Sirius marks jeopardizes the growth of the secondary diamond industry in the Northwest Territories, and so jeopardizes all of the economic benefits the people of the Northwest Territories could expect from the emergence of a successful and profitable new industry.

[67]            I am satisfied that this potential harm is irreparable in nature. It is impossible to state at this juncture the magnitude of benefits the people of the Northwest Territories could expect from the development of a cutting and polishing industry in the Northwest Territories. This emerging industry offers hope to an aboriginal population that needs such economic opportunities.    The development of this industry promises education, training, and skilled employment to a population where such opportunities are rare. It is impossible to place a dollar figure on the cost of the failure of this opportunity to the people of the Northwest Territories.

[68]            However, I am not satisfied that the GNWT has provided the Court with evidence that this harm would occur should this Court decline to grant the requested injunction. The GNWT argues that consumers, retailers, and distributors will lose confidence in the GNWT certification program if they are faced with competing certification programs operating under near identical or confusingly similar trade-marks. The GNWT argues that consumers, retailers, and distributors all rely upon the integrity of the GNWT's certification program to distinguish GNWT certified diamonds from so-called "conflict" diamonds. The GNWT submits these persons rely upon the GNWT certification program to distinguish diamonds mined, cut, and polished in Canada from those mined, cut or polished elsewhere, and to certify diamonds as mined pursuant to the GNWT's environmental and labour standards. The GNWT suggests consumers who purchase GNWT certified diamonds are confident they support a Canadian industry operating to Canadian standards. I accept consumers, retailers, and distributors would value a trustworthy program by which they could be assured a given diamond is not a conflict diamond. The evidence tendered by the GNWT indicates a widespread industry concern with the problem of conflict diamonds, and indicates a strong consumer preference for diamonds not stained by the bloodshed in Sierra Leone and Angola.

[69]            Further, although the GNWT has tendered no clear evidence of consumer confusion, I accept that the use of similar trade-marks in association with competing diamond certification programs would cause some consumer confusion.

[70]            However, the GNWT's evidence is lacking in support of its proposition that if Sirius is permitted to continue using a polar bear trade-mark pending trial, consumer confusion would inevitably compromise the GNWT certification program. The evidence upon which the GNWT relies to suggest consumers would lose confidence in the GNWT certification program amounts to assertions, unsupported by any clear evidence. Given that Sirius has for some time now advertised and distributed its diamonds in association with a polar bear trade-mark, and done so independently of the GNWT certification program, I would have expected some direct evidence of consumer confusion harming the prospects of the GNWT certification program. None has been tendered. The evidence supporting the limited inference of consumer confusion falls far short of demonstrating that Sirius' activities, if permitted to continue pending trial, would result in irreparable harm.

[71]            Evidentiary questions also remain as to the effects of this consumer confusion on the GNWT and on the Northwest Territories' secondary diamond industry. The GNWT submits that Sirius' activities would irreparably harm the Northwest Territories' emerging secondary diamond industry.    The GNWT argues that the certification program offers its participants a significant competitive advantage over non-participants. The GNWT submits Sirius' activities, should they be permitted to continue until trial, would effectively eliminate this competitive advantage. Certification program participants would be unable to attract a premium price in the marketplace. The GNWT submits that a failure of consumer confidence in the GNWT certification program would endanger the Northwest Territories' emerging secondary diamond industry, which the GNWT characterizes as being in its infancy, and particularly vulnerable to the unethical behaviour of those seeking to take advantage of the GNWT's reputation.

[72]            Again, the GNWT's evidence in support of this allegation is speculative. While the GNWT offers extensive evidence of the importance of this new industry to the GNWT, its allegations of the importance of the GNWT certification program to this industry rest on bald assertion rather than clear evidence. Particularly, the GNWT fails to offer evidence of the detrimental affect Sirius' activities have had and, if permitted to continue pending trial, would have on Northwest Territories diamond industry participants

[73]            The GNWT filed affidavit evidence of the importance of the GNWT certification program to the Northwest Territories' diamond industry. David Elliot is the Managing Director of "Diamond Tenders", a consulting business operating out of Antwerp, Belgium. In 1998, the GNWT retained Mr. Elliot's consulting services to assist it in developing diamond industry strategies. Mr. Elliot was the primary author of the GNWT certification program, in which he variously describes the public's ability to distinguish Northwest Territories diamonds from diamonds originating elsewhere as "critical", "essential" and "crucial" to the success of the Northwest Territories' diamond industry. While I agree that such an ability may confer a strategic advantage, in my view, Mr. Elliot overstates his case, or at the very least provides no clear evidence that the success of this new industry hinges on this advantage. Further, nowhere does Mr. Elliot allege that Sirius' activities, if uninterrupted pending trial, would interfere with this advantage. Much less, Mr. Elliot's evidence does not speak to how Sirius' activities are in fact harming the GNWT, its certification program, participants in that program, or the Northwest Territories' secondary diamond industry generally.

[74]            Similarly, Robert McLeod, Deputy Minister of the Department of Resources, Wildlife and Economic Development for the Northwest Territories, attests to the central position of the GNWT certification program in the GNWT's diamond industry strategy. Similarly, Mr. McLeod states that it is:

... critical to the success of the Northwest Territories [sic] diamond industry and to the G.N.W.T. overall goals of maximum benefit to the Northwest Territories residents from resource development and economic self-sufficiency that this resource is properly developed and not put at risk by the unauthorized use by the Defendant Sirius of the G.N.W.T. polar bear trademark [sic].

Mr. McLeod offers no evidence beyond unsupported allegation of the harm Sirius' activities may inflict upon the diamond industry or the GNWT.

[75]            Unsupported affidavit evidence of this type cannot meet the burden of proof on those seeking interlocutory injunctions.

ii) Goodwill and Reputation Associated with the GNWT and the GNWT Marks

[76]            The second ground of irreparable harm the GNWT alleges relates to irreparable harm to the goodwill and reputation associated with both the GNWT and the GNWT marks. The GNWT argues that if Sirius continues to use the Sirius marks without GNWT authorization, it will suffer irreparable harm to the goodwill and reputation associated with both the GNWT and the GNWT marks. The GNWT particularizes the following five instances of irreparable harm:

a)         False Indication of GNWT Authentication – Sirius will falsely indicate to consumers that the GNWT has authenticated the source or quality of diamonds associate with the Sirius marks;

b)         Loss of Credibility – The GNWT will "lose all credibility";

c)         Loss of Control over Goodwill in the GNWT Marks – The goodwill of the GNWT in the GNWT marks will be appropriated by a third party outside the control of the GNWT ;

d)         Loss of Exclusive Use of the GNWT Marks – The GNWT will lose its ability to ensure only diamonds that have in fact been mined, cut, and polished in the Northwest Territories pursuant to the GNWT certification program are permitted to display the GNWT marks; and

e)         Loss of Benefit of Goodwill in the GNWT Marks – The GNWT will lose the ability to benefit from the goodwill it has developed with respect to its polar bear marks, and will lose its ability to convert this goodwill to the benefit of the local economy through enhanced employment opportunities and skilled training programs.

[77]            The first of these harms, the "false indication of GNWT authentication", describes a wrongful act allegedly committed by Sirius, not a harm that is irreparable in nature. Such conduct cannot by itself support a finding of irreparable harm, although clear, non-speculative evidence of the harmful consequences of this conduct may demonstrate irreparable harm.

[78]            The second of these harms, "loss of credibility", may amount to irreparable harm. "Loss of credibility" essentially refers to damaged reputation. While damage to reputation, if irreparable, is harm that may support the grant of an interlocutory injunction, the GNWT has tendered no independent, clear evidence that it has lost credibility with consumers, retailers, or distributors, or with the diamond industry generally. Neither has the GNWT tendered such evidence in relation to the likelihood that the GNWT would suffer such harm. Rather, the GNWT relies upon the bald assertion of Sonya Saunders, internal counsel to the GNWT, that it would "lose all credibility". Such evidence falls far short of meeting the evidentiary burden on the GNWT.

[79]             The final three harms, the GNWT's "loss of control over goodwill in the GNWT marks", "loss of exclusive use of the GNWT marks", and "loss of benefit of goodwill in the GNWT marks", all flow from Sirius' use of the Sirius marks in association with its diamond business. Undoubtedly, trade-mark confusion is harmful. As the Ontario Court of Appeal has noted:             

If the mark of one business is used by another, that other borrows the owner's reputation, whose quality no longer lies within his own control. This is an injury, even though the borrower does not harm the reputation or divert sales by its use.

Orkin Exterminating Co. Inc. v. Pestco Co. of Canada Ltd. et al. (1985), 5 C.P.R. (3d) 433 at 455 (O.C.A.), quoting Yale Electric Corp. v. Robertson (1928), 26 F. 2d 972 at 973 - 74 (2^nd Cir., C.A.). Similarly, confusion as to an association between the GNWT and Sirius could enhance the credibility of Sirius' product because of an assumption that the GNWT has endorsed Sirius' product. This could have the effect of injuring the goodwill attached to the GNWT marks: Interprovincial Lottery Corp. v. Lottery Jackpot Ltd. (1994), 59 C.P.R. (3d) 100 (F.C.T.D.). However, as noted by the Federal Court of Appeal in Centre Ice, supra, at para. 9, not all harm to goodwill amounts to irreparable harm. The inquiry at this stage of the application is to the nature of the harm. The question is whether Sirius' adoption of a polar bear mark in association with its business would irreparably harm the GNWT. The GNWT alleges it would.

[80]            In support of this allegation, the GNWT offers the affidavit evidence of GNWT employees, namely Sonya Saunders, internal counsel, and Martin Irving, Director of Diamond Projects of the Northwest Territories' Department of Resources, Wildlife and Economic Development. Both affiants offer assertions of damage to goodwill that substantially mirror the GNWT's allegations of irreparable harm. Neither affiant offers independent, clear evidence of irreparable harm. In the absence of such evidence, the GNWT asks this Court to infer harmed goodwill from a likelihood of consumer confusion, and further, that such inferred harm is irreparable in nature. This is precisely the improper logical leap with which the Federal Court of Appeal took exception in Centre Ice, supra, [at para. 9]:

It appears that the allegation of irreparable harm in paragraph 49 is nourished only by the confusion which was established by the evidence. It cannot be inferred or implied that irreparable harm will flow wherever confusion has been shown. [. . .] Likewise, I believe that the learned motions judge erred in the passage quoted supra, when, in effect, he inferred a loss of goodwill not compensable in damages from the fact that confusion had been proven. This view of the matter runs contrary to this court's jurisprudence to the effect that confusion does not, per se, result in a loss of goodwill and a loss of goodwill does not, per se, establish irreparable harm not compensable in damages. The loss of goodwill and the resulting irreparable harm cannot be inferred, it must be established by "clear evidence". On this record, there is a notable absence of such evidence.

[81]            There is a similar notable absence of clear evidence of irreparable harm on the present record.

3           Balance of Convenience

[82]            The third branch of RJR-MacDonald tripartite test is the balance of convenience.

[83]            The GNWT submits the balance of convenience strongly favours the GNWT. The GNWT argues Sirius adopted the Sirius marks in full knowledge of the GNWT's trade-marks, and in doing so, proceeded "with its eyes wide open". Accordingly, Sirius cannot complain now that it will be greatly inconvenienced if prohibited from continuing to use its confusing marks.

[84]            On the other hand, Sirius submits the balance of convenience is strongly in its favour, since Sirius' polar bear brand diamonds have received considerable media attention. Sirius submits an injunction would require it to use a different mark and effectively abandon the goodwill it has generated in its brand. In addition, Sirius asserts there is no need to restrain it from using the three legged bear mark, since it has already ceased such use. Sirius states it has been using the polar bear mark without having become a participant in the GNWT certification program, and the program has not failed as a result. Sirius submits that the GNWT has not demonstrated that it has "suffered any harm whatever". Sirius further submits that its use of the Sirius marks has nothing to do with whether unethical diamond producers elsewhere apply polar bears to their diamonds in an effort to misrepresent conflict diamonds as Canadian diamonds. Finally, Sirius states it is in a long-term commercial relationship with the GNWT and their dispute need not be resolved by way of interlocutory injunction.

[85]            At the same time, Sirius' long-term commercial relationship with the GNWT has not prevented it from adopting and using a contentious trade-mark. This Court notes the GNWT has also received considerable publicity in association with the GNWT marks for its role in fostering and nurturing the development and growth of the Northwest Territories' emerging diamond industry.

[86]            It is this Court's view that the balance of convenience weighs in favour of the GNWT. There is a significant public interest in the general success of the diamond industry in the NWT. A successful industry to replace the failed fur industry would promote economic vitality in the territory. Further, the GNWT is financially capable of compensating Sirius any losses Sirius might suffer, if in the final analysis, the Court concludes the injunctions should not have been awarded.

D          Defence – Delay

[87]            In light of my findings with respect of the GNWT's evidentiary shortcomings on irreparable harm, there is no need to deal with Sirius' complaint of delay. However, I will say that in light of the continuing negotiations between the parties, I can find no fault in the GNWT's actions in bringing this matter to this Court. The GNWT acted expeditiously to obtain a hearing date once it became clear a court application would be necessary. The delay between the breakdown in negotiations and the hearing of this application is due to the difficult schedule of this Court, not to any fault of the GNWT.

[88]            While this motion was under reserve, the GNWT asked the Court to hear another motion to: 1) amend this amended Notice of Motion to add additional parties as respondents; and 2) reopen the hearing to permit the applicant to aduce new evidence. I have heard the motion, however, none of the evidence introduced persuaded the Court that the outcome of the interlocutory injunction itself would be altered. Therefore, there is no need to grant the requested relief.

CONCLUSION

[89]            In summary then, I have arrived at the following conclusions:

1)         Sirius' abandonment of the old Sirius polar bear design renders it unnecessary for this Court to rule with respect to this mark;

2)         the GNWT failed to make out a prima facie case under either paragraph 9(1)(d) or subparagraph 9(1)(n)(iii) of the Trade-marks Act;

3)         the GNWT was obliged to meet the RJR-MacDonald tripartite test to obtain interlocutory relief; and

4)         the GNWT failed to meet the evidentiary burden of establishing of irreparable harm.

[90]            In light of these conclusions, no interlocutory injunction will issue in this matter. The motion is dismissed with costs in the cause.

                                                                           "Dolores M. Hansen"            

                                                                                               J.F.C.C.                     

Ottawa, Ontario

June 26 , 2001