Breck’s Sporting Goods Co. Ltd. v. Magder et al., [1976] 1 SCR 527

Supreme Court of Canada

Breck’s Sporting Goods Co. Ltd. v. Magder et al., [1976] 1 S.C.R. 527

Date: 1975-01-28

Breck’s Sporting Goods Co. Ltd. (Plaintiff) Appellant;

and

Jesse Magder, trading as Sportcam or Sportcam Co. (Defendant) Respondent;

and

Breck’s Sporting Goods Co. Ltd. (Plaintiff) Appellant;

and

Sportcam Co. Ltd. (Defendant) Respondent.

1974: November 14, 15, 19; 1975: January 28.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Dickson, Beetz and de Grandpré JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Trade marks—Registration—Validity—Distinctiveness—Assignments of manufacturer’s trade mark to assignor, and from assignor to registered owner—Trade mark affixed by manufacturer to product assembled by owner—Agreement with manufacturer assigning to owner exclusive distribution rights to the product with certain restrictions—Assigned trade mark does not identify goods as those of the assignee owner—Trade Marks Act, 1952-53 (Can.), c. 49, ss. 2(f), 18 and 47.

Appellant is the registered owner of the trade mark “Mepps” used in association with fishing tackle and, in the main, lures of various types. These lures are imported from France, assembled and packaged in Canada by appellant, and bear the “Mepps” trade mark as stamped on the parts by the French manufacturer.

Rights to the trade mark, together with the goodwill of the business symbolized thereby, were assigned to appellant’s predecessor in 1959 by an American company which, in 1956, had itself obtained from the French manufacturer assignment of all rights to the trade mark together with the goodwill of the business which it symbolized and the application for registration of the word “Mepps” on the Canadian trade mark register. This application was filed by the manufacturer in 1955 and obtained by the American company in

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1956, after the assignment. Prior to 1959, appellant’s predecessor obtained its “Mepps” lures from the French manufacturer through an agreement with the American company and developed a large business in Canada. After obtaining the assignment from the American company, appellant signed a five-year contract with the French manufacturer guaranteeing appellant exclusive distribution rights to the lures in Canada, and forbidding it any dealing with products competitive to “Mepps” without the French company’s written permission. This agreement was renewed twice. Respondent sold “Mepps” lures in Canada in competition with appellant, obtaining its lures elsewhere than from appellant or from the French manufacturer. An infringement action was brought by appellant against respondent. The latter attacked the validity of the trade mark as not sufficiently distinctive within the meaning of the Trade Marks Act.

The Federal Court of Appeal concluded, contrary to the trial judge, that the trade mark lacked distinctiveness at the time when the action was begun, and that it was invalid. Hence the appeal to this Court.

Held: The appeal should be dismissed.

Section 47 of the Trade Marks act does not permit untrammelled assignment in gross without regard to the associative character of the assigned trade mark in identifying the goods as those of the assignee owner. Protection against public deception resides in the definition of distinctiveness in s. 2(f) and in the application of s. 18 of the Trade Marks Act, The appellant’s contention that it can obtain an assignment in gross of a trade mark indicative of a certain manufacturing origin and use it as a seller’s mark in respect of wares which it does not manufacture but which it has continued to obtain from the very manufacturer with the mark attached thereto by the latter, cannot be accepted. It would not satisfy the requirement of distinctiveness under the Canadian legislation, especially in view of the agreements between appellant and Mepps.

A. Bourjois & Co., Inc. v. Katzer (1923), 260 U.S. 689; R.J. Reuter Coy. Ltd. v. Mulhens (1953), 70 R.P.C. 235; Wilkinson Sword (Canada) Ltd. v. Juda, [1968] 2 Ex.C.R. 137; Great Atlantic and Pacific Tea Co. Ltd. v. The Registrar of Trade Marks, [1945] Ex.C.R. 233; Leather Cloth Co. v. American Leather Cloth Co. (1865), L.R. 11 H.L.C. 522; Imperial Tobacco Co. of India Ltd. v. Bonnan, [1924] A.C. 755, referred to.

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APPEAL from a judgment of the Federal Court of Appeal[1] reversing a judgment of the Trial Division, which held valid the registration of a trade mark. Appeal dismissed.

Weldon F. Green and James G. Fogo, for appellant.

G.F. Henderson, Q.C., and Kent H.E. Plumley, for respondents.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—The central issue in this appeal is the validity of the registration of the trade mark “Mepps”, used by the appellant as registered owner in association with certain wares consisting of fishing tackle and, in the main, lures of various types. The trade mark “Mepps” is made up of the initials of the name of the French manufacturer of the various lures and it is common ground that these lures, imported from France by the appellant and assembled and packaged by it in Canada, bear the trade mark in question as stamped on the parts by the manufacturer. The respondent in this appeal, the defendant in an infringement action brought by the appellant, sold “Mepps” lures in Canada in competition with the appellant, obtaining its lures elsewhere than from the appellant or from Mepps and it was this activity that precipitated the litigation out of which this appeal arises.

Gibson J. who tried the action, concluded on the evidence that the prima facie validity of the registration had not been successfully overcome by the respondent which had attacked the registration on the ground that the trade mark lacked distinctiveness, as that term is defined in the Trade Marks Act, and on the further ground that the other requirements of s. 18 for valid registration had not been met. In this latter connection it was urged in defence that the applicant for registration, the appellant’s assignor Boehm-Sheldon Inc., an American company, was not entitled to registration at the time it was sought and obtained. This company’s predecessor had, in 1954, obtained from the French manufacturer the sole distributorship of “Mepps” lures in the United States and

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Canada. It was through the American company, which itself never sold Mepps lures in Canada, that the appellant obtained, albeit directly from France, Mepps lures for sale in Canada, developing a substantial business through advertising and other forms of promotion. The French manufacturer which had itself never done business in Canada (although its lures had been sold there since about 1951 or 1952 by the chief officer of the appellant, then in business as a sole proprietor) applied, in 1955, to register the word “Mepps” for fishing tackle on the Canadian trade mark register, and in 1956 it assigned to the American company all rights to the trade mark, together with the goodwill of the business which it symbolized and also the application for registration. Boehm-Sheldon Inc. obtained registration on June 29, 1956, and on July 7, 1959, it assigned its rights to the registered trade mark to the appellant’s predecessor, together with the goodwill of the business symbolized thereby.

Gibson J. came to his conclusion in favour of the appellant in the following words:

In my view, on an examination of the whole of the evidence, from November 1951, until 1956, the trade mark “MEPPS” distinguished within the meaning of section 2(f) of the Trade Marks Act the lures of the Mepps Company in France which it sold in Canada from the lures of others; from 1956 until July 7, 1959, the Canadian trade mark “MEPPS” distinguished within the meaning of section 2(f) of the Trade Marks Act the lures sold in Canada by the plaintiff Company (manufactured in France) from the lures of others, even though the plaintiff was not a registered user of the said trade mark; and from July 7, 1959, to date, the Canadian trade mark “MEPPS” similarly distinguished the lures sold by it in Canada.

In my view, it is sufficient that the origin in Canada of these lures be established. The fact that the origin of manufacture in France of the lures was known by some persons in Canada in this case, is irrelevant, in that this is a claim in respect to a trade mark used only in selling wares in Canada.

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In the result, none of the defences have been established so as to even rebut the prima facie validity of the original registration and of all the subsequent assignments and transmissions thereof by reason of the fact the plaintiff is registered as the owner of trade mark registration number 103,702; and certainly not to rebut the proof adduced by the plaintiff.

The Federal Court of Appeal took a different view of the case. It concluded that the trade mark in question lacked distinctiveness, within the definition in s. 2(f) and within the terms of s. 18(1)(b), and found it unnecessary to consider any other grounds of attack. Jackett C.J. summed up as follows:

In my view, a reading of the evidence given in this case shows that the trade mark “Mepps” was used in Canada, prior to its registration, to show that lures sold under that name came from a certain French manufacturer and that those in Canada who came to know that trade mark so understood it; and that, notwithstanding its registration in the name of distributors, it never had any other significance in fact.

If I am right in so appraising the evidence, it follows that, at the time the actions in question were instituted, the trade mark “Mepps” did not actually distinguish “wares” in association with which it was used by the respondent (its “owner” by virtue of the registration) from “wares” of persons other than the respondent. In particular, use by the respondent at that time of the trade mark “Mepps” in association with goods would not have distinguished such goods from goods of the French manufacturer. I conclude, therefore, that the trade mark was “not distinctive” (within the meaning of the word “distinctive” as defined by the Act) at the time the proceedings bringing the validity of the registration into question were commenced and that the registration is therefore “invalid” by virtue of section 18(1)(b).

I have reached the conclusion that the trade mark “Mepps” was not, at the relevant time, “distinctive” only after anxious consideration of the learned trial judge’s finding on this aspect of the case. He made a finding that “from 1956 until July 7, 1959, the Canadian trade mark ‘MEPPS’ distinguished within the meaning of section 2(f) of the Trade Marks Act the lures sold in Canada by the plaintiff company (manufactured in France) from the lures of others, even though the plaintiff was not a registered user of the said trade mark; and from July 7, 1959, to date, the Canadian trade mark ‘MEPPS’ similarly distinguished the lures sold by it in

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Canada”. When he finds that, as of the times to which he refers, the trade mark distinguished, within the meaning of section 2(f), the lures sold in Canada by the respondent from the lures of others, he makes a finding that that trade mark was at those times a trade mark that “actually distinguishes the wares… in association with which it is used by its owner from the wares… of others or is adapted so to distinguish them”. In other words his finding would seem to be that, when the “Mepps” mark appeared on lures during the relevant time, it conveyed to the buying public the message that such lures were lures sold by the respondent. Starting with the fact, as found by the learned trial judge and as amply supported by the evidence, that, prior to 1956, the trade mark “Mepps” distinguished, within the meaning of section 2(f), the lures of the French manufacturer from the lures of others, I can find no evidence that, commencing in 1956, anything was done to make it convey to the market some other message….

I agree with the Federal Court of Appeal that the trade mark lacked distinctiveness as that requirement is found in ss. 2(f) and 18 of the Trade Marks Act which read as follows:

2. (f) “distinctive” in relation to a trade mark means a trade mark that actually distinguishes the wares or services in association with which it is used by its owner from the wares or services of others or is adapted so to distinguish them;

18. (1) The registration of a trade mark is invalid if

(a) the trade mark was not registrable at the date of registration;

(b) the trade mark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced; or

(c) the trade mark has been abandoned;

and subject to section 17, it is invalid if the applicant for registration was not the person entitled to secure the registration.

(2) No registration of a trade mark that had been so used in Canada by the registrant or his predecessor in title as to have become distinctive at the date of registration shall be held invalid merely on the ground that evidence of such distinctiveness was not submitted to the

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competent authority or tribunal before the grant of such registration.

It is not enough for the appellant to rely on its registration and on the fact that it has promoted, by assiduous cultivation of the market in Canada, the widespread sale of Mepps lures if it be the case that at the material date or dates, those wares, so marked by the French supplier, have not become identified with the appellant as its wares either as their manufacturer or seller. It was on this issue that the appellant contended that the trial judge’s findings of fact should be sustained and that the Federal Court of Appeal had wrongly interfered with them.

A number of other facts relevant to this issue must be brought into account in order to determine it. The appellant’s predecessor obtained its lures from the French manufacturer between 1954 and 1959 through an arrangement with the American company which held the exclusive distributorship for Canada. The American company took its commission on the business without doing anything significant to earn it, and this was a factor in the successful effort of the appellant to obtain an assignment of the registered Canadian trade mark. About a week after obtaining the assignment to it of the registered trade mark, the appellant entered into an arrangement with the French manufacturer for the exclusive distribution rights to Mepps lures in Canada under a five year contract which forbade any dealing by the appellant with products competitive to Mepps without the French company’s written permission. The arrangement, which called for the importation of a minimum number of Mepps lures, was renewed for another five year period in 1964, and there was a further five year renewal in 1969. The appellant paid a ten per cent commission on its purchases to a person in France to whom such a commission had been paid before 1959 by the American company and this commission plus another ten per cent payable to the American company, was collected from the appellant on its purchases between 1954 and 1959.

Conflicting views were taken by the parties on the relative level of retail prices in Canada and in France for Mepps lures, it being the submission of

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the respondent that the Canadian prices charged by the appellant were much higher for the same product. The respondent’s evidence was that it was able to sell the Mepps lures in Canada at lower prices. I do not think that price as such has any bearing on the issues in this case. What was urged by the respondent, however, was that the course of dealing between the American company and Mepps, between the appellant and the American Company and, subsequently, between the appellant and Mepps showed that the trade mark in question was in truth owned by Mepps, that its use was a part of the five year exclusive distributorship arrangements, and that it would go back to the French manufacturer upon the termination of the contracts. In short, the submission was that the trade mark was an element in the control of the importation of Mepps lures into Canada for the benefit of both the appellant and Mepps and that it did not represent any market association in Canada of wares other than those of Mepps as manufacturer.

The appellant contended that this submission took too narrow a view of the trade mark protection provided under the present Trade Marks Act in contradistinction to predecessor legislation, and it pointed particularly to s. 47(1) of the Act reading as follows:

47. (1) A trade mark, whether registered or unregistered, is transferable, and deemed always to have been transferable, either in connection with or separately from the goodwill of the business and in respect of either all or some of the wares or services in association with which it has been used.

Moreover, it contended that on the findings of the trial judge it was entitled to the protection of the registered Mepps trade mark on the basis of product differentiation of Mepps lures sold by it in Canada. Having regard to the evidence of its course of dealing in Mepps lures and the findings thereon at the trial, the appellant invoked, in the main, in support of the validity of its registered trade mark certain principles derived from the

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cases of A. Bourjois & Co., Inc. v. Katzel[2], and R.J. Reuter Coy. Ltd. v. Mulhens[3].

Throughout the periods of the dealings with the French manufacturer, the imported lures continued to be stamped “Made in France”, but the evidence established that assembling came to be done by the appellant which also did packaging to prepare the Mepps lures for the Canadian market. If this is relied on, as it appeared to be, to establish that the use of the trade mark “Mepps” in association with these lures entitled the appellant to claim that a different message was being conveyed to the public after 1956 than before that time I cannot accept this to be so. On this point, Wilkinson Sword (Canada) Ltd. v. Juda[4] is instructive.

The Bourjois and Reuter cases can best be understood by an exposition of the underlying principles of our trade mark legislation as it affected assignment of trade marks prior to the enactment of s. 47 and by an examination of the effect of s. 47. Prior to its introduction, the requirement of distinctiveness, in the sense of identification of the source or origin of the goods with which the trade mark was associated, was supported by a requirement that there be no deception or confusion of the public in the message conveyed by the trade mark. Thus it was that an assignment of a trade mark could only be valid if it was assigned together with the entire goodwill of the business in the goods for which the trade mark was registered. It is enough to refer here to the judgments in Great Atlantic and Pacific Tea Co. Ltd. v. The Registrar of Trade Marks[5] and Wilkinson Sword (Canada) Ltd. v. Juda, supra, in which the various considerations affecting the validity of an assignment were considered. It is important to notice that an assignment as aforesaid would not invariably support the assignee’s claim to trade mark protection if there was a deception of the public in the message that the trade mark conveyed in its use by the assignee, that is, if the public would

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take from it that the trade mark was still distinctive of the origin of the goods being in the assignor rather than being distinctive merely of the place of manufacture. As was said by Lord Cranworth in Leather Cloth Co. v. American Leather Cloth Co.[6], at p. 534:

The question in every such case must be whether the purchaser in continuing the use of the original trade mark would, according to the ordinary usages of trade, be understood as saying more than that he was carrying on the same business as had been formerly carried on by the person whose name constituted the trade mark. In such a case I see nothing to make it improper for the purchaser to use the old trade marks, as the mark would, in such a case, indicate only that the goods so marked were made at the manufactory which he had purchased.

I would refer also in this connection to Imperial Tobacco Co. of India Ltd. v. Bonnan[7], where Lord Phillimore said (at p. 760):

…It is possible for an importer to get a valuable reputation for himself and his wares by his care in selection or his precautions as to transit and storage, or because his local character is such that the article acquires a value by his testimony to its genuineness; and if therefore goods, though of the same make, are passed off by competitors as being imported by him, he will have a right of action.

The Bourjois case, relied on by the appellant, falls within the acceptable limits of assignment reflected in the foregoing authorities. It was one where a French manufacturer, which carried on business in the United States as well as in France, sold its American business to the plaintiff along with the goodwill and two trade marks registered in the United States relating particularly to face powder. The trade marks were registered again by the plaintiff and it continued the business it had purchased, importing its face powder from France and using substantially the same form of box and label which its vendor had used. Like the appellant here, the plaintiff in the Bourjois case built up a

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flourishing business. The narrative of facts in that case discloses, however, that the labels had come to be understood by the public as meaning goods coming from the plaintiff. In holding that there was infringement by the defendant which bought the same powder in France and sold it in the United States in the genuine French boxes, Holmes J. noted also that the plaintiff had acquired the trade mark with the goodwill of the business it had purchased and that the trade mark could only be sold with the goodwill. What distinguishes that case from the present one, apart from the fact that it cannot be said here that there was any goodwill to be acquired of any business of the American company or of Mepps itself in Canada, is that the plaintiff there had changed the message so that the trade mark was distinctive of his product. This is not so in this case.

This brings me to s. 47 and to the effect which it has on assignment of trade marks beyond what was permitted under the pre-existing law. I do not read s. 47 as permitting untrammelled assignment in gross without regard to the associative character of the assigned trade mark in identifying the goods as those of the assignee owner. Section 47 is distinguishable from the comparable English provision, s. 22(1) of the Trade Marks Act, 1938, which was considered in the Reuter case. The proprietary aspect of a trade mark as assignable in gross is fortified under the English Act by providing for the intervention of the Registrar to approve the assignment as not contrary to the public interest, and by providing further that an assignment not made in connection with the goodwill of the business shall not take effect unless the assignee within a prescribed time has applied to the Registrar for directions respecting the advertisement of the assignment and advertises it accordingly. The protection given by these provisions against public deception is not found in the Canadian legislation, and the burden of such protection still resides in the definition of distinctiveness in s. 2(f) and in the application of s. 18. The Reuter case involved as one of its elements the effect of trading with the enemy legislation and certain orders thereunder

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but, in its relevant trade mark aspect, it exhibited the case of an English company which had for many years manufactured certain products under a label indicating their English origin although it also indicated in its business a German source of its products for which there were registered trade marks in England which the English company had obtained by assignment from the Custodian of Enemy Property. There are two passages in the reasons of Evershed, M.R. to which I wish to refer and I should note that it is upon the second of them that the appellant herein strongly relies. The two passages are as follows:

It may well be that it is still true to say that a mark which is on the face of it distinctive of goods made by “A” cannot be assigned or transferred so as to be applied to goods made by “B”; for a trade mark is still distinctive of origin. (See Aristoc Ld. v. Rysta Ld. (1945), 62 R.P.C. 65, which decided that a trade mark could not be validly registered in respect of goods which was not distinctive of the business origin of the goods, but only of the fact that a repairing process had been applied to them). A mark on the face of it distinctive of one origin, if applied to goods of a different origin, would prima facie be deceptive and therefore subject to the terms of Sec. 11 of the Act.

It was not, however, suggested by the Defendant in the present case that the marks, if registered in the name of the Plaintiff Company, would be so deceptive. They still indicate their manufacturing origin, which is in fact the Plaintiff Company’s business; and in my judgment it is now clear that by virtue of Sec. 22(1) of the 1938 Act a mark may be validly assigned by one manufacturer to another without any assignment of the business or goodwill of the assignor, and so as thenceforth to be distinctive of a manufacturing origin different in fact from the previous manufacturing origin, so long, at any rate, as the mark is not deceptive. It is also no doubt true that since the Act a mark distinctive of a manufacturing origin, which is in fact the business of “A” may be assigned by “A” to “B” and will thenceforth be applied by “B” to goods originating from “A” so that the mark still remains distinctive of the same manufacturing origin….

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This second passage must be related to the particular legislation on which it rests. Moreover, what is significant in the passage relied on by the appellant is the reference to manufacturing origin and to the fact that it is a manufacturer’s mark that is being considered. If the reference is to a mark already established as distinctive of the goods of a particular trader in a particular market, that is not this case. Further, if the appellant’s contention is in truth that it can obtain an assignment in gross of a trade mark indicative of a certain manufacturing origin and use it as a seller’s mark in respect of wares which it does not manufacture but which it has continued to obtain from the very manufacturer with the mark attached thereto by the latter, I do not see how in this respect the requirement of distinctiveness under the Canadian legislation is satisfied, especially in view of the distributorship agreements between the appellant and Mepps.

Gibson J. appears to have taken a different view on the facts, if not on the law, on this matter in a passage in his reasons already quoted but which I repeat here. It is as follows:

In my view, it is sufficient that the origin in Canada of these lures be established. The fact that the origin of manufacture in France of the lures was known by some persons in Canada in this case, is irrelevant, in that this is a claim in respect to a trade mark used only in selling wares in Canada.

If this passage is meant to convey that there was a basis in the Canadian market for supporting the validity of the trade mark as a seller’s mark indicative of goods sold by the appellant, I agree with Jackett C.J. that it is not supported by the record.

This is sufficient to dispose of the appeal which, in my opinion, fails and must be dismissed with costs. In view of this conclusion I refrain from any decision on the submission of the respondent that the initial registration of the trade mark by the American company was invalid because that company was not a qualified applicant for registration or a qualified registrant. I would add that I agree

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with the Federal Court of Appeal that there is no basis in this case for a claim by the appellant for relief under ss. 7 and 22 of the Trade Marks Act.

Appeal dismissed with costs.

Solicitor for the plaintiff, appellant: Weldon F. Green, Toronto.

Solicitors for the defendant, respondent: Gowling & Henderson, Ottawa.