Date:
20120629
Docket:
A-463-10
Citation: 2012 FCA 201
CORAM: LÉTOURNEAU
J.A.
PELLETIER
J.A.
GAUTHIER
J.A.
BETWEEN:
MARLBORO CANADA LIMITED and
IMPERIAL
TOBACCO CANADA LIMITED
Appellants
and
PHILIP MORRIS PRODUCTS S.A. and
ROTHMANS,
BENSON & HEDGES INC.
Respondents
REASONS FOR JUDGMENT
GAUTHIER
J.A.
[1]
The
parties are each appealing from various portions of the trial judge’s decision
(reported as 2010 FC 1099) granting in part only the relief sought by
Philip Morris Products S.A. and Rothmans, Benson & Hedges Inc. (collectively
PM), and dismissing the claim of Marlboro Canada Limited and Imperial Tobacco
Canada Limited (collectively ITL) for infringement of their registered
Canadian trade-mark MARLBORO
(TMDA 55,988), as well as its request to strike out the registration of
six of PM’s trade-marks relating to its ROOFTOP design marks.
[2]
For
the reasons that follow, I am of the view that ITL’s appeal from the dismissal
of its trade-mark infringement counterclaim should be granted in respect of the
unregistered label (front and side) of PM’s no-name cigarette package (see
Schedule “A”). The appeal from the trial judge’s refusal to strike out PM’s
registered trade-mark TMA 670,898 should be dismissed.
[3]
PM’s
cross-appeal in respect of:
a. The trial
judge’s dismissal of its copyright infringement claim as well as for breach of
the 1952 Agreement;
b. The trial
judge’s ruling that ITL’s registration of MARLBORO is still valid;
c. The trial
judge’s ruling that ITL was not estopped from challenging the registration of
its various ROOFTOP design marks, particularly TMA 670,898;
should, in my view, also be dismissed.
BACKGROUND
[4]
As
will be explained in more detail, the trial judge had to address various issues
relating to ITL’s and PM’s trade-marks, as well as a claim of copyright
infringement of the Marlboro’s Red Roof Label with respect to ITL’s 1996, 2001
and 2007 cigarette packages, which are all reproduced at paragraph 309 and in
Annex C of the trial judge’s reasons (Reasons).
[5]
Most
of the unique facts of this case are not disputed. They are described in detail
in the Reasons, notably at paragraphs 8 to 65.
[6]
Suffice
it to say here that the parties have a long history with respect to the use of
the trade-mark MARLBORO in Canada, which was sold by a predecessor in title of
PM to a predecessor in title of ITL around 1930 and was then registered in Canada in 1932
under no. TMDA 55,988. It has since then been continuously used in Canada by ITL and
its predecessors in title in association with cigarettes.
[7]
Since
the late 1950’s, PM has made various attempts to reacquire the MARLBORO
trade-mark in Canada and put an
end to ITL’s use of it. That said, on the one hand, it unsuccessfully initiated
discussions to exchange it for one of its other marks or to buy it (from the
scant evidence produced, it is unclear what exactly was offered). On the other
hand, in 1981, it tried to register its Marlboro Red Roof Label and challenge
the validity of ITL’s registration (TMDA 55,988) by instituting a proceeding
under section 45 of the Trade-marks Act, R.S.C. T-10 (the “Act”)
before the Registrar of Trade-Marks. It also filed an action before the Federal
Court to strike ITL’s MARLBORO mark from the Registry on the basis that it
lacked distinctiveness because of the fame of its own Marlboro marks registered
in the United States and around the world, which fame was acquired decades
after its predecessors in title assigned the MARLBORO mark to ITL’s
predecessors in title in Canada. These efforts were also unsuccessful.
[8]
In
1987, in Philip
Morris Inc. v. Imperial Tobacco Ltd. (1987), 17 C.P.R. (3d) 289, 81 N.R. 28 (C.A.),
leave to appeal to S.C.C. refused, 20674 (December 17, 1987) [Philip Morris
(1987)],
this Court finally dismissed PM’s contestation, stating that even if the owner
of a trade-mark (a famous one in particular) registered outside of Canada had
been given special rights by the Canadian legislator under the Act (such
as the right to oppose the registration of a mark “made known” by it pursuant
to section 5 of the Act and the right to register certain marks pursuant
to section 17), the distinctiveness of a mark registered in Canada by a
legitimate assignee such as ITL could not be affected by the unilateral actions
(such as spill-over American advertising) of the assignor who does not use the
mark in Canada.
[9]
Between
1958 (date of the first registration of a ROOFTOP design mark by PM in Canada) and 2006
(date of the latest version of the ROOFTOP design mark registered by PM), PM
never used its ROOFTOP design marks in Canada in
association with an American blend cigarette. Canada being a special market
where consumers up until now generally preferred the so-called “Virginia blend”
cigarettes, PM used its various ROOFTOP design marks together with the word
mark MATADOR (and to a very modest extent MAVERICK) in association with Virginia
blend cigarettes.
[10]
In
2006, a few days after the registration of its latest silver version of the
ROOFTOP design mark (TMA 670,898), which for the first time, includes PM’s
crest, PM launched a new product – an American blend cigarette in Canada, which
was referred to at trial and before us as either the ROOFTOP brand or the
no-name package. The get-up or label of this product is unique in that, for the
very first time in the world, cigarettes were offered for sale in a package
with no brand name (or no word mark). Also, the no-name package refers, for the
first time in Canada, to the
“WORLD FAMOUS IMPORTED BLEND” (on the side of the package). Otherwise, the
label included the most popular design elements and tag line associated around
the world with PM’s Marlboro trade-marks that it had used for several decades
in Canada in
association with its MATADOR brand. Like the Marlboro brand sold by PM outside
of Canada, the new no-name cigarettes were offered in a red, silver and gold
version (allegedly different strength of tobacco).
[11]
Until
shortly before the trial, PM was seeking a declaration that its registered
“ROOFTOP Design Trade-mark”, as defined in paragraph 6 of its Further Amended
Statement of Claim by reference to several registrations, did not infringe any
of ITL’s trade-mark rights, as well as a declaration that the three latest
versions of ITL’s MARLBORO packages (1996, 2001 and 2007) infringed its
copyright in the Marlboro Red Roof label. One of PM’s defences to ITL’s
counterclaim of infringement of its MARLBORO mark by the no-name packages (red,
gold and silver version) was that the registration of PM’s various trade-marks
used on the said packages excludes a finding of infringement.
[12]
Thus,
two weeks before trial, ITL amended its counter-claim to directly challenge the
validity of the six ROOFTOP design marks of PM (Reasons, Annex “B”, reproduced
as Schedule “B” hereto). PM amended its Statement of Claim to challenge the
validity of ITL’s MARLBORO mark, once again on the basis that it was not
distinctive.
[13]
In
his 163-page decision, the trial judge thoroughly analysed the evidence and
made various findings as to its weight. The most relevant passages of the
Reasons and the submissions of the parties will be reviewed in the course of my
analysis.
THE ISSUES IN
APPEAL
[14]
ITL
challenges all of the trial judge’s adverse conclusions relating to its
infringement claim.
[15]
In
its memorandum, it submits that he made the following errors:
a. He failed to
hold that, in the particular context of the sales of cigarettes in Canada, relevant
consumers overwhelmingly call PM’s no-name product Marlboro at the time of
purchase. Here, ITL essentially challenges the assessment and the weight given
to the evidence.
b. He erred on
the question of mixed fact and law of whether the use of the word mark MARLBORO
by consumers at the time of purchase falls within the meaning of “in any other
manner so associated with the wares” in section 4 of the Act.
c. He erred in
law in failing to conclude that the use by consumers of the word mark MARLBORO
constitutes use by PM, pursuant to sections 19 and 22 of the Act.
d. He erred in
concluding that the various trade-marks registered by PM exclude a finding of
infringement by failing to appreciate that it is the get-up or label (front and
side) of the no-name package, an unregistered compilation of elements, that is
said to create the confusion and not the use of the individual registered
trade-marks.
e. He erred in
law in applying an improper test to assess confusion, particularly considering
extraneous factors and by misconstruing paragraph 6(5)(e) of the Act.
[16]
ITL
suggests that this Court can properly make the findings that the trial judge
should have made pursuant to sections 19, 22 and 20 and thus, should allow the
appeal and grant the judgment that should have been rendered in the first
place. Finally, in the alternative, ITL challenges the trial judge’s conclusion
that PM’s TMA 670,898 (silver version of the ROOFTOP Design registered in
2006) trade-mark registration is valid.
[17]
In
the cross-appeal, PM raises the following four issues:
a. In his
assessment of the validity of the MARLBORO trade-mark, the trial judge failed
to appreciate that a different set of circumstances and legal grounds (mixed
fact and law) warrant a different conclusion from that reached by the Federal
Court of Appeal in 1987.
b. With respect
to the defence of estoppel, the trial judge misapplied the legal test to the
facts of the case.
c. The trial
judge applied the wrong test or approach in evaluating whether the ITL packages
(1996, 2001 and 2007) infringed PM’s copyright in the Marlboro Red Roof Label.
d. The trial
judge improperly conflated the legal test for copyright infringement with that
applicable to a breach of the terms of the 1952 Agreement dealing with ITL’s
use of labels created by PM. According to PM, something less than the
substantial taking required for copyright infringement can amount to a breach
of the said agreement. It should thus have been treated separately.
[18]
I
note with respect to this last question (paragraph 17 (iv), above) that it was
not pursued at the hearing, as PM’s counsel could not explain on what basis the
Federal Court would have had jurisdiction to adjudicate a breach of contract
if, as argued, it involved something other than the infringement of copyright
under the Copyright Act, R.S.C. 1985, c. C-42. Thus, I will not
discuss it further in my reasons.
ANALYSIS
[19]
The
relevant legislative provisions are reproduced in Schedule “C” of these
Reasons.
[20]
The
resolution of the first issue raised by PM in its cross-appeal can be determinative
of ITL’s claim of infringement and would render the errors described in
paragraph 15 above moot. Thus, like the trial judge, I will examine this issue
before reviewing ITL’s arguments in the main appeal.
- The
validity of the MARLBORO trade-mark
[21]
PM
argues that the trial judge made two errors of law in reaching the conclusion
that the MARLBORO mark was still valid:
i) He incorrectly
interpreted the case law, in particular Philip Morris (1987) and
thereafter wrongly applied it to the current situation, even though the
non-distinctiveness of the mark in the present matter did not arise from events
originating outside of the Canadian market and beyond the Canadian trade-mark
owner’s control.
ii) He erroneously
required proof of deceptive behaviour by ITL.
[22]
I
will first summarize the tenor of the arguments advanced by PM before the trial
judge in respect of these issues so as to place his comments in the Reasons in
their proper context.
[23]
First,
PM had clearly acknowledged that the trial judge was bound by this Court’s
decision in Philip Morris (1987), unless he were to find that ITL
had since then failed to take steps to create its own separate distinctiveness
and goodwill and that it wrongfully used its packaging design and advertising
campaigns to falsely align its product with the PM Marlboro brand used outside
of Canada (Transcript of the Hearing, Appeal Book (AB), Volume 39, pages
10385-10386).
[24]
Second
at paragraph 19 of the Second Further Reply and Defence counter-claim, PM
expressly refers to the “intentionally false message given to the Canadian
public” by ITL.
[25]
Also,
PM submitted as follows in its Memorandum of Fact and Law before the Federal
Court (AB, Volume 2, page 605, paragraphs 177 to 179):
[…] A common feature of both Crothers
and Moore Dry Kiln was a finding of deception of the public by use
of the foreign mark in Canada.
Justices Rouleau and MacGuigan
distinguished both Crothers and Moore Dry Kiln decisions on the
basis that there was no evidence at the time in 1980s that ITL was engaged in
acts of deception.
The evidence before the Court
now, some 25 years after (…) presents a very different set of factual
circumstances (…) because the defendants have deceptively taken advantage of
the lack of distinctiveness of their MARLBORO trade-mark in Canada, allowing Canadian smokers to
associate the brand with the international Philip Morris MARLBORO product
rather than creating their own goodwill and brand identity.
[26]
It
is not disputed that in Philip Morris (1987), although the dates at
which the distinctiveness of the MARLBORO mark in Canada was to be assessed
were different, a fundamental question before this Court was clearly whether
the MARLBORO mark of ITL, the lawful assignee of the said mark for Canada, had
lost its distinctiveness due to the fact that PM’s Marlboro was, as the number
one selling cigarette brand in the world, known even in Canada despite being
used solely outside of Canada. The Federal Court had accepted that Canadian
consumers knew of PM’s foreign mark because of the spill-over effect of PM’s
American advertising and had acknowledged the fact that Canadians were exposed
to it when abroad (Philip Morris Inc. v. Imperial Tobacco Ltd. et al.
(1985), 7 C.P.R. (3d) 254 (F.C.), at paragraph 90, in fine).
[27]
Indeed,
PM had then presented even stronger expert evidence than in the present case,
for its survey was more extensive. This is not surprising, considering that
this aspect of the present proceeding was, as mentioned, added at the very last
minute and the parties did not file additional evidence after the amendment.
[28]
At
the time, the relevant provisions of the Act were essentially the same
and this Court had the opportunity to consider the case law cited by PM (Crothers
Co. Ltd. v. Williamson Canada Co., [1925] 2 D.L.R. 844 [Crothers]
and Moore Dry Kiln Co. of Canada Ltd. v. U.S. Natural Resources Inc.
(1976), 30 C.P.R. (2d) 40 [Moore Dry Kiln]) in the present case.
[29]
The
purpose of the doctrines of res judicata, issue estoppel, cause
of action estoppel and the rule against collateral attack is to
ensure the finality of decisions (Danyluk v. Ainsworth Technologies
Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at paragraphs 18 to 24).Generally
and in the absence of special circumstances, a party is not allowed to come to
court to re-litigate a matter especially if it raises facts that could have
been raised in the earlier litigation such as ITL’s Project Ranch, dating from
the 1970s.
[30]
In
my view, the trial judge had a clear understanding of the basis on which this
Court ruled in Philip Morris (1987) and of the above-mentioned
principles. He also had a clear understanding of the basis on which PM argued
that this Court’s prior decision should be distinguished (Reasons, paragraph
299).
[31]
The
trial judge was not satisfied that PM had established the factual basis upon
which it argued that the case before him was quite different from the one
finally decided by this Court in 1987 (Reasons, paragraphs 303-304).
[32]
In
that respect, the trial judge stated that the evidence on ITL’s so-called 2009 “Alternative
Product Guide” was mixed, unclear and far from conclusive (Reasons, paragraph
306). Then, he found (as discussed in more detail in the Reasons when dealing
with copyright infringement) that ITL’s cigarette packages were not mere
imitations or copies of PM’s American Marlboro package (Reasons, paragraph
307). The trial judge expressly noted that ITL used a red maple leaf and the
word “Canadian” to differentiate its product from the American product, and
that but for the word MARLBORO, there could be no confusion between ITL’s
packages and PM’s international package.
[33]
In
respect of ITL’s marketing strategy, the trial judge wrote that, contrary to
PM’s allegations, ITL has “consistently striven to differentiate [its] products
from that of [PM].” (Reasons, paragraph 305).
[34]
These
findings were open to the trial judge on the whole of the evidence and PM has
not established any palpable or overriding error.
[35]
Moreover,
even though, in my view, PM had not raised any valid ground that could call for
the exercise of his residual discretion, the trial judge re-examined the issue
already decided in Philip Morris (1987). He concluded at paragraph 300
of his Reasons that the legal policy and rationale adopted therein were still
relevant today, and that “the words of the Federal Court of Appeal apply with
equal force as they did at the time”.
[36]
Turning
to the second alleged error, I am not persuaded that the trial judge
misunderstood Crothers and Moore Dry Kiln. In my view, when he
refers to “deceptive behaviour”, he simply does so in order to deal with PM’s
argument that ITL’s behaviour was indeed deceptive. I agree with ITL that it is
disingenuous for PM to argue before us that the trial judge’s response to its
very arguments evidences a misunderstanding of the law.
[37]
In
view of the foregoing, the trial judge was bound to dismiss PM’s attack on the
validity of the MARLBORO mark. There is no reviewable error in his conclusion
that ITL’s MARLBORO word-mark is still valid.
- ITL’s
Appeal
1. Consumers’
use of the word Marlboro
[38]
Except
for the argument that one of the trial judge’s comments at paragraph 289 of his
Reasons is not supported by any evidence, ITL appears to be challenging the
weight given to the evidence presented as to what was going on at the time of
purchase of the parties’ products. In the absence of a palpable and overriding
error, this Court ought not to intervene in such factual matters.
[39]
Although
PM could not point to any evidence that would indeed support the trial judge’s
comment that “point of sale materials (lighters, match cases, ashtray, shelf
talkers, bin row inserts, etc) and retail items emphasized “Rooftop”, with
reference to the word […]” (Reasons, paragraph 289), I am not persuaded that
this would constitute an overriding error which calls for this Court’s
intervention. The trial judge’s other comments in that paragraph were open to
him on the evidence and he was discussing efforts made by PM to reduce the
likelihood of confusion among retailers.
[40]
Upon
close examination of the Reasons, I cannot agree that the trial judge did not
properly understand the differences between PM’s approach with retailers and
its strategy vis-à-vis consumers.
[41]
Contrary
to what was argued by ITL, the trial judge did not fail to make a finding in
respect of consumers’ use of the word Marlboro. He specifically states at
paragraph 282 of his Reasons:
[282] […]
I am prepared to accept that there is a significant degree of confusion [as to]
how to refer to the no-name product, especially among consumers. A large number
of respondents seem to associate the Plaintiffs’ product to the international
PM Marlboro, for a variety of reasons, although more commonly in the case of
the consumers than the retailers. […]
[42]
I
cannot agree either that it is clear that the trial judge made contradictory
findings. In that respect, ITL referred the Court to the following extract from
paragraph 232: “the
evidence does not entirely support the Defendants’ claim that a large
number of Canadians are familiar to the Philip Morris international Marlboro
brand and associate the no-name product to that brand because of their shared
features (…).”[My
emphasis]. To be fair, this sentence should be read in its entirety as the
trial judge adds “as we shall see, when examining the infringement claim based
on section 20 of the Act”. When it is read as a whole and in context, I
understand the trial judge to be saying two things. First, that not all the
evidence presented during the trial supports ITL’s position. Second that in the
end, after weighing the evidence, he was satisfied that there was enough to
make the finding described in paragraph 282 above.
[43]
Although,
this could have been expressed more clearly in paragraph 232, this ambiguity
does not, in my view, call for a reassessment by this Court of the weight to be
given to the various testimonies pertaining to this issue (consumers,
retailers, sales representatives, etc.).
2.
Use
pursuant to sections 19 and 22 of the Act
[44]
ITL
argues that the trial judge unduly relied on the Federal Court’s decision in Playboy Enterprises Inc. v. Germain (1987), 16 C.P.R. (3d) 517 (F.C.) [Playboy] and
unnecessarily limited the wide language of section 4 of the Act. This
section provides that a mark is used if it is “in any other manner so
associated with the wares at the time of the transfer of property”. According
to ITL, the trial judge erred by requiring that the trade-mark be visually
displayed in some way (Reasons, paragraph 237).
[45]
Whatever
the meaning of section 4, it is clear from the language of sections 4, 19 and
22 that, to be relevant, the mark must be used by the person who wishes to
distinguish its wares.
[46]
This
means that ITL had to establish that PM used the word Marlboro in association
with its no-name package at the time of the transfer of property to the said
retailers or that the retailers were acting on behalf of PM when they referred
to PM’s product as Marlboro.
[47]
As
mentioned earlier, at paragraph 232 of the Reasons, the trial judge found that:
[232] […] the evidence shows
not only that the Plaintiffs [PM] never display the name “Marlboro” in
association with the Rooftop products, let alone mark it on the wares, but that
they have instructed retailers not to call their no-name product “Marlboro”. In
addition to the launch letter sent to all retailers and Mr. Guile’s evidence on
this point, the Defendants’ own retailer witness, Mr. Hajjali, testified as to
the Plaintiffs’ sales representatives having told him that the brand was called
“Rooftop” and not to use the term “Marlboro”.
[48]
None
of the above findings has been challenged. In any event, I am satisfied that
they reveal no palpable and overriding error. Indeed, having carefully reviewed
the evidence, it would have been difficult for the trial judge to conclude that
there was sufficient evidence to establish that the retailers were indeed
authorized by PM to use the word Marlboro in association with PM’s no-name
package.
[49]
That
alone fully justifies the trial judge’s conclusion at paragraph 239 that since
“the Plaintiffs (PM) have not used the MARLBORO word-mark of the Defendants,
they cannot be held to have infringed either section 19 or section 22, since
“use” is a precondition for the application of both of these provisions.”
[50]
There
is no need to say anything further in respect of section 4, except that the decision
in Playboy was based on a very specific set of facts and the general
question raised by ITL has not directly been addressed previously by this
Court. It is also relevant to the use of non-traditional marks (sound, smell,
etc.), which is a topical issue around the world. It should thus be left for
another day and a more appropriate case. Obviously, nothing herein should be
understood as an endorsement of any of the trial judge’s comments on this
issue.
3.
Section
20 of the Act – Confusion
[51]
ITL’s
main arguments are that:
a.
the
trial judge erred in law in applying the test set out in subsection 6(5) of the
Act by relying on extraneous factors and focusing on its actual use of
its word-mark as opposed to its rights under the registration;
b. the trial
judge erred in law when he narrowly construed paragraph 6(5)(e) of the Act
as applying only to the resemblance between marks in the ideas inherently
suggested by them, thereby imposing a limitation not found in the Act.
[52]
ITL
also submits that the essence of the trial judge’s conclusion under section 20
is found in this passage of paragraph 291 of his Reasons:
[291] […] While
some consumers do refer to the no-name product of the Plaintiffs as “Marlboro”,
there is no confusion as to the source of the Plaintiffs’ product. The
“Marlboro” to which they refer to is the American PM Marlboro brand, and not to
the ITL Canadian Marlboro. Indeed, there is no evidence that Canadian consumers
mistakenly believe that the Defendants are the source of the Plaintiffs’
no-name product. Since section 20 of the Act seeks to prevent source
confusion and not name confusion, that provision is not engaged in the present
instance. […]
[53]
ITL argues that, in reaching such conclusion, the trial judge
failed to apply his mind to “reverse confusion”, that is, customers of
the senior mark mistakenly associating its source with the source of the junior
mark (Reasons paragraph 248). He also did not
appreciate that if PM’s no-name package continues to be referred to by a
significant number of consumers as Marlboro, this will jeopardize the
distinctiveness of its MARLBORO mark because two different products sold on the
Canadian market, emanating from two different and non-associated sources, will
be called Marlboro by Canadian consumers.
[54]
A few months after the trial judge’s decision, the Supreme Court
of Canada in Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27,
[2011] 2 S.C.R. 387 [Masterpiece Inc.] had an opportunity to review how
one should apply the test set out in section 6 of the Act to determine
if a trade-mark would likely cause confusion with another trade-mark.
[55]
Justice Marshall Rothstein, writing for the Court made it very
clear that, when considering the degree of resemblance between marks, the
approach differed depending on whether they were registered or not.
[56]
For unregistered marks, a court should only consider the manner in
which they have actually been used. However, for registered marks, a court must
consider the trade-mark registration according to its terms to reflect the entire
scope of the rights granted under the latter.
[57]
According to Justice Rothstein, the problem with an analysis which
takes into account the actual use by the owner of a registered trade-mark is
that nothing prevents such owner from changing how and for what he uses it, so
long as this change is within the ambit of the registration. Thus, he concludes
at paragraph 59:
[59] For this reason,
it was incorrect in law to limit consideration to Alavida’s post-application
use of its trade-mark to find a reduced likelihood of confusion. Actual
use is not irrelevant, but it should not be considered to the exclusion of
potential uses within the registration. For example, a subsequent use that is
within the scope of a registration, and is the same or very similar to an
existing mark will show how that registered mark may be used in a way that is
confusing with an existing mark.
[My emphasis]
[58]
Finally,
in Masterpiece Inc., Justice Rothstein noted that when confusion is
alleged in respect of several different marks, the Court should make an
individual comparison in respect of each rather than make an analysis based on
a composite of all the marks (paragraphs 43 to 48).
[59]
Before turning to what the trial judge did in this case, it is
worth noting a few other general principles that may be relevant here:
- A mark
symbolises a linkage between a product and its source. When assessing the
likelihood of confusion, the focus is on such mental link in the head of
the mythical consumer (Mattel, Inc. v. 3894207 Canada Inc., 2006
SCC 22, [2006] 1 S.C.R. 772 [Mattel]). The full factual context
including the factors set out in subsection 6(5) of the Act must be
considered.
- It is
not relevant that consumers are “unlikely to make choices based on first
impressions”. It is an error to discount the likelihood of confusion by
considering what actions the consumer might take after encountering the
mark in the market place (Masterpiece Inc., paragraphs 71,
73 and 74).
- Confusion
as to the source (no need for it to be precisely identified) will arise if
the public (mythical consumer) would likely infer that the source of the
two products (senior mark or junior mark) is the same (this includes in
appropriate circumstances associated sources such as licensor and
licensee).
- Steps
taken to avoid confusion are irrelevant in the context of an infringement
action pursuant to section 20 of the Act (David Vaver, Intellectual Property Law:
Copyright, Patents, Trade‑marks, 2nd
ed. (Toronto: Irwin
Law, 2011) [Vaver] at page 533, Pink
Panther Beauty Corp. v. United Artists Corp., [1998] 3 F.C. 534
(C.A.).
- Proof of
actual confusion or the absence of such confusion over a long period of
time is a very weighty factor that must be considered as part of the
surrounding circumstances pursuant to subsection 6(5) of the Act (Mr. Submarine Ltd. v.
Amandista Investments Ltd., (1987) 19 C.P.R. (3d) 3, [1988] 3 F.C.
91 (C.A.) [Mr. Submarine], at paragraph 34, Mattel,
at paragraph 55).
[60]
The determination of whether a likelihood of confusion exists is a
fact-finding exercise and this Court will defer to the trial judge’s findings
unless his assessment was based on an error of law or constituted a palpable
and overriding error of fact (Masterpiece Inc., paragraph 102).
[61]
As in Masterpiece Inc., where the Supreme Court of Canada
reversed the decision of the trial judge for errors of law in the
interpretation and application of the confusion analysis, I am of the view
that, in this case, the trial judge erred in his interpretation of the
confusion test and in its application to the facts by:
·
Reducing the likelihood of confusion on the basis of the fact that
ITL’s MARLBORO cigarettes are made with a Virginia
blend, whereas the no-name package product is an American blend (Reasons,
paragraph 287).
·
Reducing the likelihood of confusion based on the fact that
presently ITL distributed its cigarettes differently than PM (Reasons,
paragraph 286).
·
Considering the efforts made by PM to reduce the likelihood of
confusion as relevant (Reasons, paragraph 289) including by focusing on PM’s marketing
emphasis on the key distinguishing feature of its product – the American blend.
·
Considering that any initial confusion would be diminished as a
result of the interaction between the consumers and retailers. In effect, in
his view, the retailers would elicit clarification from the consumer as to the
product he/she seeks (PM’s product comes in three flavours while ITL’s comes in
one), making it unlikely that a consumer would, through confusion, actually
purchase a different brand of cigarette than the one he/she intended to
(Reasons, paragraph 287).
[62]
It
is not clear if the trial judge analysed each design mark individually or as a
composite (6 different ROOFTOP design marks were registered) in his subsection
6(5) analysis. To be fair, he did not have the benefit of Masterpiece Inc..
In our case, the problem is compounded by the fact that the trial judge
accepted PM’s argument that the presence of the many elements that do not
appear in each registered versions of these design marks did not have a material
effect on the dominant features and the distinctiveness of the registered
ROOFTOP design marks. Thus, he considered the get-up of the no-name package as
a whole as an illustration of the use of the registered ROOFTOP design marks
(Reasons, paragraphs 198-203).
[63]
ITL’s MARLBORO trade-mark is registered for use with cigarettes.
It is not restricted to any particular blend or flavour. There is also nothing
preventing ITL or PM from distributing their product differently, especially
considering that PM has sales representatives visiting the retailers regularly,
even if not as often as ITL sales representatives.
[64]
There
is no doubt in my mind that the above-mentioned errors in the interpretation
and application of the test had a material impact on the trial judge’s
conclusion that there was no likelihood of confusion.
[65]
In
similar circumstances, in Masterpiece Inc. (at paragraph 103) the
Supreme Court of Canada stated that the interest of justice would be served by
an appellate court deciding the matter and proceeded to make its own analysis
pursuant to subsection 6(5) of the Act.
[66]
In the present case, the trial judge gave little weight to most of
the evidence presented by either side with respect to confusion. This includes
the evidence of lay witnesses as well as expert evidence based on surveys,
which he found generally flawed. He stated precisely what could be made of the
survey evidence.
[67]
I
shall thus proceed to compare ITL’s registered word-mark MARLBORO with each
version (red, gold and silver) of PM’s no-name get-up as proposed by ITL. This
combination of elements on the package (the whole label including the sides of
the package) is used to distinguish PM’s wares from those of others offered on
the Canadian market and as such, falls within the definition of a trade-mark in
section 2 of the Act.
[68]
As
mentioned, PM takes the position that its no-name package is simply one
illustration of the many ways in which it can use its registered marks
particularly its ROOFTOP design marks. I will address this question later where
it will be of more importance, that is, in assessing PM’s defences based on its
registrations and on estoppel.
[69]
Starting
with paragraph 6(5)(a), like the trial judge, I find that these marks have
inherent distinctiveness. The trial judge also stated that they were both well
known, but did not explain on what basis he had come to that conclusion, other
than stating that there was no evidence to the contrary. At the hearing, PM did
not direct this Court to any specific evidence in response to ITL’s comment
that there was no evidentiary basis for such finding in respect of the Canadian
market, especially in respect of its own MARLBORO.
[70]
Even
though in this case this will ultimately be of no moment, I prefer to regard
these marks as known rather than well-known marks. Although ITL’s product has
only a small fraction of the Canadian cigarette market (PM’s MATADOR had even a
smaller fraction), ITL has been using its registered MARLBORO mark for more
than 80 years. PM has used most of the elements of the get-up of the no-name
package in Canada for a long
time (some, like the red version of the ROOFTOP design, since 1958) with the
word mark (brand name) MATADOR. However, the particular package label under
review, which adds unregistered elements and includes no brand name, has only
been on the market since July 2006 (a few months before the institution of the
present proceedings). The silver version of the ROOFTOP design was also not
used prior to 2006 (paragraph 6(5)(b)).
[71]
The
marks are used with the same wares (cigarettes) and in the same trade
(paragraphs 6(5)(c) & (d)).
[72]
Turning
to paragraph 6(5)(e), there is no resemblance in appearance between those
marks. As mentioned, the trial judge did not consider under that paragraph the
fact that a number of consumers did refer to the no-name packages as Marlboro
because, in his view, to consider such idea would be an unwarranted extension
of the breadth of paragraph 6(5)(e). He stated that the expression “ideas
suggested” should be restricted to those ideas that are inherent to the nature
of the trade-marks in question (for example, the design of a penguin giving the
idea of a penguin) (Reasons, at paragraph 290).
[73]
If
the examples used by the trial judge in paragraph 290 and in paragraph 249 of
his Reasons (the word Panda evoking the same idea as a design mark depicting
that animal) were meant to restrict the ambit of paragraph 6(5)(e) to ideas
suggested by the literal and common meaning of a word or design, I cannot agree
with this interpretation.
[74]
In
Rowntree Co. v. Paulin Chambers Co., [1968] S.C.R. 134, the Registrar
had refused to register “SMOOTHIES” because of a likelihood of confusion with
“SMARTIES”. He considered a resemblance in the ideas suggested because the
expressions were slang terms meaning ‘smart aleck’ or a ‘smooth operator’. The
Exchequer Court of Canada reversed the decision because the dictionary meaning
of those words was entirely dissimilar. The Supreme Court of Canada allowed the
appeal and confirmed that the registration should be refused. Justice Ritchie
noted:
[…] the essential
question to be determined is whether the use of the word SMOOTHIES by the
respondent would be likely to lead to the inference that the wares associated
with that word and those associated with the registered trade marks of the
appellant were produced or marketed by the same company and I do not think that
this necessarily involves a resemblance between the dictionary meaning of the
word used in the trade mark applied for and those used in the registered trade
marks. It is enough, in my view, if the words used in the registered and
unregistered trade marks are likely to suggest the idea that the wares with
which they are associated were produced or marketed by the same person. This is
the approach which appears to me to have been adopted by the Registrar of Trade
Marks.
[75]
Certainly,
the dictionary meaning or common meaning and the technical meaning of a word or
design are the most common suggestions considered when comparing marks, but I
see no reason to ignore other suggestions acquired through marketing or use in
a particular way. I will explain that with the following example: The word
“yogi” is registered as a mark in association with children’s toys and a third
party wishes to use a design mark for the same wares showing the thus-named
famous cartoon bear with the cap and the short tie. Should the Registrar or the
Court ignore the resemblance in the idea suggested simply because the word
“yogi” is generally understood and defined in dictionaries such as the Canadian
Oxford as a person proficient in the practice of yoga?
[76]
Keeping
in mind the need to adopt a purposive and contextual interpretation of
paragraph 6(5)(e), I cannot see how such resemblance could be ignored. That
being said, obviously when one invokes a resemblance based on something out of
the ordinary, evidence will be required to satisfy the Court that the
particular association or suggestion does indeed exist as a matter of fact
before it is considered in the analysis under paragraph 6(5)(e).
[77]
Even if I am in error and paragraph 6(5)(e)
calls for a more restrictive construction, resemblance in unusual ideas
suggested by any one of the marks once established would have to be considered
as part of the surrounding circumstances (opening words of subsection 6(5)).
Either way, it cannot be ignored.
[78]
Be that as it may, in the special circumstances
of this case, I prefer to consider the confusion as to the name of the product
sold in the no-name package as part of the surrounding circumstances (opening
words of subsection 6(5)) because of the particularities of the cigarette
retail market in Canada which
are dictated by Government regulations.
[79]
In Canada, except for a limited number of specialty shops that require a
special permit, the cigarettes market is a “dark market”. This means that the
products cannot legally be exposed to the public’s view. A consumer must
specifically ask for a product at the counter.
[80]
One can understand how in such context a label
that includes no brand name, or the sole use of design marks on a cigarette
package to identify its source, will prompt consumers to ask for the product by
using a word or words that is (are) not necessarily displayed on the product.
[81]
That explains why the trial judge said that
there was a significant degree of confusion among consumers (and to a lesser
extent retailers) “as to how they should refer to the no-name package”
(Reasons, paragraphs 282 and 291). That is also what prompted him to refer to
the need for interpretation and interaction with the retailers.
[82]
It is clear from the evidence accepted by the
trial judge that this association was intentionally conveyed by the compilation
of the various elements used by PM around the world in respect of its famous
Marlboro brand and the reference to the “world famous imported blend”. Here, I
am not considering whether PM intended to infringe, as intention is irrelevant
to infringement. Rather, I am considering this evidence as supporting the fact
that this combination of elements on no-name package suggests to some extent (a
significant number of consumers) an association with Marlboro.
[83]
I also note that the evidence is to the effect,
and this was admitted at the hearing by both sides, that the use of a brand
name on a PM package bearing most of the other elements of the no-name package
(like the MATADOR get-up) would likely be sufficient to sever the mental link
or association with Marlboro.
[84]
The result is that, as the trial judge found, a
number of consumers refer to the PM’s no-name product as Marlboro. This means
that, in a dark market where the trade-marks are not in view, consumers will
use the same name to refer to two different products offered by two different
manufacturers. This must necessarily result in confusion as to source since
consumers expect that products of the same kind, which they can refer to by the
same name and buy through the same channels, will come from the same source. It
matters little whether this situation is characterized as confusion or reverse
confusion, the result is the same.
[85]
Having now completed the analysis in the manner
prescribed in Masterpiece Inc., I conclude that there is a likelihood of
confusion between the sources of the products under review if both MARLBORO and
PM no-name package are used in Canada (subsection 6(2) of the Act).
[86]
Before examining ITL’s last argument, it is
worth noting that the question of confusion between two marks actually used in Canada is quite distinct from the issue
considered in Philip Morris (1987).
4. Do PM’s
registrations exclude a finding of infringement in this case?
[87]
At
trial, PM relied on the registration of its ROOFTOP design marks as a full and
complete answer to the allegation of infringement made by ITL (Remo
defence).
[88]
In
view of section 19 of the Act and having considered the decision of the
Ontario Court of Appeal in Molson Canada v. Oland Breweries Ltd. (2002),
59 O.R. (3d) 607, [2002] O.J. 2029 [Oland] whose reasoning was adopted
in Remo
Imports Ltd. v. Jaguar Cars Ltd., 2007 FCA 258, [2008] 2 F.C.R. 132 [Remo],
at paragraphs 111 to 113, the trial judge concluded that he was bound to accept
PM’s argument (Reasons, paragraph 209). Thus, in his view, in order to succeed
in its infringement claim, ITL had to attack the validity of PM’s registrations
and show that PM’s ROOFTOP design marks were confusingly similar to ITL’s
MARLBORO word-mark. ITL submits that the trial judge erred in law in so
concluding.
[89]
I
agree with ITL that in those cases (including the British Columbia Court of
Appeal decision in Chemicals
Inc. and Overseas Commodities Ltd. v. Shanahan’s Ltd. (1951), 15 C.P.R. 1 [Shanahan]
cited therein)
what was alleged to infringe was the use of a single trade-mark essentially as
registered. Indeed, it was not disputed before us that even in Oland,
the whole label on the beer bottle (the get-up referred to by the Court) had
been registered as such (Appendix A to ITL’s Memorandum of Fact and Law, Image
21).
[90]
However,
in the case at bar, the label of the no-name package has not been registered.
Also, ITL is adamant that none of the individual ROOFTOP design marks as
registered by PM is confusing with its word-mark MARLBORO. In fact, as
mentioned, although these marks (except for the one registered in 2006), have
been used in Canada in various
combinations for very many years, none appear to have created confusion among
Canadian consumers.
[91]
Before
the trial judge, the Remo defence only came into play because PM argued
that ITL’s attack on the no-name package was in fact an attack on a legitimate
use of PM’s registered ROOFTOP design marks (six different ones). In response,
ITL argued, among other things, that if the combination on the no-name package
is confusing, then the individual marks that are part of this combination must
also be confusing and their registration should be struck (Reasons, paragraph
216).
[92]
Although
he noted that this argument by ITL could not be easily disposed of (Reasons,
paragraph 221), the trial judge never discussed it further as he concluded that
there was no likelihood of confusion.
[93]
I
have already found that the combination on the no-name package is confusing.
Thus, I have to address the argument. In doing so, it becomes evident that the
following two aspects are intimately linked: i) whether a combination of
various registered and unregistered elements is regarded as a simple use of a
registered mark and ii) whether, when such a combination is found to be
confusing, it necessarily means that the registered marks included in it are
confusing.
[94]
Up
until now, this aspect of the use of a registered mark, alone or in combination
with other elements, has mostly, if not exclusively, been addressed in the case
law under section 45 of the Act. This provision pertains to the
expungement of marks that have not been used for the prescribed period. Its
main purpose is to “prune deadwood” (Vaver, page 546). This explains the
particular focus put on whether the dominant features of the mark as registered
were changed. It also explains why, when looking at use in a combination, the
Registrar and the Courts focused on the question of whether the registered mark
had not lost its distinctiveness per se.
[95]
It
is this case law that the trial judge used to determine if the no-name package
was simply a use of the individual ROOFTOP design marks as registered. It may
explain why he dealt so briefly with the impact of the additions in the special
combination on the no-name package that do not appear in the registration of
the individual ROOFTOP design marks.
[96]
Here,
it is not disputed that one can use a registered mark in combination with other
registered or unregistered elements or marks without that mark losing its
distinctiveness. It all depends on the circumstances. Hence, the real question
before us is whether this necessarily means that the protection of the
registration of each ROOFTOP design marks can be extended to the whole of the
combination in which they are used on the no-name package under review.
[97]
Under
section 45 of the Act, confusion with other registered trademarks
(paragraph 12(1)(d) of the Act) is not a relevant issue. In my view, one
cannot deal with the real question before us or the aspects mentioned in paragraph 93
above without
considering the issue of confusion at all.
[98]
In
effect, in my view, the basic reasoning behind this Court’s endorsement of Oland
and Shanahan is that when a mark is registered, it is presumed to meet
all the conditions set out in the Act at that time. This includes
distinctiveness but also that the mark as described is not confusing with
another registered mark (paragraph 12(1)(d) of the Act).
[99]
In
this case, the Registrar never considered whether the marks used in this
particular combination on the no-name package met the test for registration.
When the ROOFTOP design marks were individually registered, the Registrar did
not have, in my view, to consider the likelihood of confusion of a composite of
all PM’s registered marks. Nor was he required to speculate as to the effect of
the addition of unregistered elements on a particular label, which would
include the proposed design mark.
[100] If I were to
accept PM’s argument, I would be in effect accepting a defence that is not
available to PM since it has never submitted its label to the scrutiny of the
registration process.
[101] PM correctly
submits that it should not be forced to register its labels or every
combination of its marks. Again, this is not the issue. If one registers a
combination, one will have the benefit accruing from the said registration. If
one chooses to use a combination without going through the process of
registration, one will still have rights but not necessarily the same rights as
those accruing from registration. This is true for every trade-mark one uses to
distinguish one’s wares.
[102] In that
respect, I note that in the Nike and McDonald’s examples reproduced by the
trial judge (Reasons, paragraph 218) the combinations as well as the individual
elements were registered. PM did register the label for MATADOR. It is not
unusual in the cigarette industry for companies to register their whole label.
PM did try albeit unsuccessfully to register its Marlboro Red Roof Label in
1981. The choice to register or not is a commercial one that involves, among
other things, consideration of costs and the importance of the product.
[103] To answer the
real question before us, I must determine whether it is the unregistered
combination alone or the individual marks, used essentially as registered, that
are confusing. If the combination alone is confusing, in my view, it must
necessarily be conveying a different message to the consumers than the
individual registered marks. In such circumstances, the unregistered
combination cannot claim the benefit of the Remo defence since it is not
simply a use of the marks essentially as registered.
[104] Based on
their registration, I have to assume that these marks were not confusing at the
time of their registration. Is there any evidence that the situation had
changed at the time the relevant proceedings were instituted? Having completed
a subsection 6(5) analysis in respect of each individual mark, in my view, the
answer is no.
[105] In that
respect, I do not need to add to the comments I already made in paragraphs
69-71 above in respect of paragraphs 6(5)(a), (b), (c) and (d).
[106] There is no
resemblance in appearance and sound (paragraph 6(5)(e)).
[107] Turning to
the opening words of subsection 6(5), when the trial judge at paragraph 282
finds that there is confusion as to how to refer to the no-name package, he
simply says that this was so for a “variety of reasons”. In other words, he did
not find that consumers associated the word Marlboro to the no-name package
because of the presence of one individual registered mark included on the said
package.
[108] In any event,
the surveys filed in evidence were not specifically designed to test whether
consumers associated the name Marlboro to cigarette packages bearing only each
individual ROOFTOP design mark essentially as registered. What was presented to
the participants in the survey by both parties’ experts was the no-name package
as a whole.
[109] As mentioned,
what is clear is that PM used its registered design marks, except for the
silver version registered in 2006, in other combinations for many years without
apparent problems. What appears to be different here is the fact that the
combination at issue characterizes the source of the product further than any
of the trade-marks previously registered or used by PM by associating or
identifying it expressly to Marlboro.
[110] Indeed,
according to the evidence, PM’s marketing department rejected the idea of using
its registered word-mark ROOFTOP as part of the combination on the no-name
package because it thought that such use would lead the consumer to conclude
that the product was a fake, meaning that the no-name package was not from the
source of its Marlboro.
[111] Based on the
foregoing analysis, I conclude that the individual ROOFTOP design marks
including the latest silver ROOFTOP design (TMA 670,898) are not confusing with
the word-mark MARLBORO.
[112] This
conclusion means that, in the particular circumstances of the case, which, as
already mentioned, are quite unique, the registrations invoked by PM do not
constitute an absolute defence to ITL’s claim that the current combination of
elements used on the no-name package (front and side) constitutes an
infringement.
[113] There is no
need to add anything further in respect of ITL’s alternative argument (see
paragraph 16 above).
- PM’s
Cross-Appeal
[114] Having
addressed PM’s first argument in respect of the invalidity of the MARLBORO
trade-mark (see paragraph 21 and following), I will now examine the two remaining
arguments of PM (See paragraph 17 (ii) and (iii)).
i.
Is
ITL estopped from contesting PM’s ROOFTOP design registrations?
[115]
Considering
my previous conclusions, the validity of PM’s registrations is no longer in
play. It is therefore unnecessary to deal with this issue.
ii.
Copyright
Infringement
[116] As mentioned,
PM challenges the trial judge’s ultimate conclusion that ITL’s packages at
issue (1996, 2001 and 2007) did not infringe its copyright in its Marlboro Red
Roof Label nor did it result in a breach of the 1952 Agreement. For reasons
explained above (see paragraph 18), I will only review the arguments in respect
of the Marlboro Red Roof Label.
[117] More
particularly PM argues that:
a. The trial
judge applied the wrong approach to determine if ITL’s packages incorporated a
substantial part of its Marlboro Red Roof Label by a) focusing on the
differences, b) by restricting his review to only six elements of the Marlboro
label and c) by comparing the said elements on a piece-by-piece basis without
looking at the overall composition. The trial judge also failed to take into
consideration the essence of its copyrighted work (its label). Finally,
according to PM, the trial judge erred in law by disregarding the impact of the
word MARLBORO in the overall composition.
b. The trial
judge applied the wrong test to determine if a sufficient causal connection
existed and misunderstood the meaning of an “independent creation”.
[118] I am not
persuaded by PM’s argument that the trial judge applied the wrong test or a
mistaken approach to determine the factual question of whether or not the 1996,
2001 and 2007 packages of ITL incorporated a substantial part of its
copyrighted work (Marlboro Red Roof Label).
[119] Indeed, the
trial judge properly described the principles he was bound to apply (Reasons,
paragraphs 311 to 317) to determine what the most distinctive and memorable
elements of the package were, in order to assess the significance of each
element of the design. He came to an unchallengeable conclusion having regard
to the evidence in his summary found at paragraph 328.
[120] Moreover, it
is clear from paragraphs 333 and 362 that the trial judge not only looked at
the particular elements identified throughout his Reasons but also at the
overall arrangement and display before concluding that he was “unable to find
substantial similarity when viewing the works as a whole”.
[121] Turning to
the allegation that the trial failed to consider the impact of the word
MARLBORO on ITL packages as part of his analysis. I cannot agree. ITL has a
legal right to use that word on its cigarette package based on its Canadian
registration. Moreover, it does so with PM’s consent, considering the valid
assignment of this trade-mark between their predecessors.
[122] Thus, the
trial judge was correct in limiting his inquiry to the graphic or design
elements that ITL applied to its word mark (see paragraphs 318 and 335). His
discussion in that respect was thorough. It does not contain any palpable and
overriding error. There is sufficient evidence supporting the trial judge’s
overall assessment of the ITL’s packages (see particularly Reasons, paragraphs
350, 351 and 363).
[123] The trial
judge’s conclusion that ITL did not take a substantial part of PM’s copyrighted
work contains no reviewable error. Therefore, there is no need to address PM’s
remaining arguments.
[124] For the
reasons expressed above, the cross-appeal should be, in my view, dismissed with
costs.
CONCLUSION
[125] I would allow
ITL’s appeal in part with costs in this Court and at trial. I would set aside
the judgment of the Federal Court declaring that PM’s use of the “ROOFTOP
Design Trade-mark” in association with cigarettes does not infringe any rights
ITL may have under the Trade-marks Act to Canadian trade-mark
registration no. TMDA 55,988. Proceeding to render the judgment that should
have been rendered, I would declare that the no-name packages (red, gold and
silver version) described in Schedule “A” infringe ITL’s rights in the
registered trade-mark MARLBORO (no. TMDA 55,988) pursuant to section 20 of the Act.
[126] As remedies
to the said infringement, I would grant the following:
(a) a permanent
injunction restraining PM, by itself or by its officers, directors,
shareholders, representatives, agents or any person under its authority or
control, or by any company, partnership, business entity or person with which
it is associated or affiliated, from directly or indirectly selling,
distributing, and/or advertising in Canada, cigarettes or other tobacco
products in, or in association with, the no-name packaging described in Schedule
A;
(b) an order
requiring PM to deliver up, or to destroy under oath, all packaging described
in Schedule A, and all material of any nature, including all advertising
material, in the possession or control of PM, the use of which would offend the
injunction granted;
[127] Given that no
argument was presented to us in respect of ITL’s right to elect between damages
or an accounting of profits, pre-judgment interest and the appropriate amount
of ITL’s costs in the Federal Court, I would refer these matters back to the
trial judge for determination.
[128] I would
dismiss PM’s cross-appeal with costs.
“Johanne Gauthier”
“I
agree
Gilles Létourneau J.A.”
“I
agree
J.D. Denis Pelletier J.A.”
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