Date: 20070712
Docket: A-3-07
Citation: 2007 FCA 255
CORAM: RICHARD
C.J.
LINDEN J.A.
PELLETIER
J.A.
BETWEEN:
NISSAN CANADA INC.
Appellant
and
BMW CANADA INC. and
BAYERISCHE MOTOREN WERKE
AKTIENGESELLSCHAFT
Respondents
REASONS FOR JUDGMENT
RICHARD C.J.
[1]
This is an
appeal from the judgment of MacKay D.J. of the Federal Court dated March 7, 2007,
with respect to claims made by the respondents’ pursuant to sections 7(b), 20
and 22 of the Trade-marks Act, R.S.C. 1985, c. T-13 as amended (the “Act”) (2007 FC 262).
RELEVANT FACTS
[2]
The
appellant, Nissan Canada Inc. (“Nissan”), is in the business of selling,
distributing and promoting automobiles, parts and accessories in Canada. Nissan is the owner of a
number of registered Canadian trade-marks, including registration No. 612,708
for M45 and registration No. 640, 144 for M35, both for use in association
with motor vehicles. The two marks are used for two series of Infiniti
vehicles, Infiniti being the luxury division of Nissan. Nissan uses the
unregistered marks M and M6 for promoting and advertising its automobiles,
parts and accessories.
[3]
The
respondents, BMW Canada Inc. and Bayerische Motoren Werke Aktiengesellschaft
(“BMW”), are also in the business of manufacturing, selling, distributing and
promoting automobiles, parts and accessories throughout the world. BMW Canada
Inc. sells, distributes and promotes automobiles, parts and accessories in Canada under the authority of BMW
AG. BMW AG is the owner of the registered Canadian trade-marks, including registration
No. 544, 922 for M3, registration No. 561, 482 for M5 and registration No. 336,
985 for M & Design. These trade-marks are registered for use in association
with automobiles and their parts. BMW AG claims to also be the owner of the
unregistered marks M and M6. Both marks were, at the time of trial, the
subjects of applications for registration by BMW.
[4]
On August
12, 2005, BMW commenced this action against Nissan claiming passing off of
BMW’s trade-marks M, M3, M5, M6 and M & Design contrary to paragraph 7(b)
of the Act; trade‑mark infringement of BMW’s trade-marks M3, M5 and M
& Design contrary to section 20 of the Act; and depreciation of goodwill of
BMW’s trade-marks M3, M5 and M & Design contrary to section 22 of
the Act.
[5]
In a
judgment dated March 7, 2007, the trial judge dismissed BMW’s claim of
infringement under section 20 of the Act on the basis that there was no
likelihood of confusion as to the sources of the wares, or as to the wares
themselves, among the relevant group of prospective purchasers in the market.
The trial judge also dismissed BMW’s claim for depreciation of the value of
goodwill under section 22 because there was insufficient evidence to support a
conclusion that the Nissan used BMW’s marks or other closely similar marks in a
manner likely to depreciate the value of BMW’s goodwill in its registered
marks.
[6]
The trial
judge did, however, allow the respondents’ passing off claim pursuant to
paragraph 7(b). He found that Nissan’s use of the marks M and M6 caused a
likelihood of confusion between the sources of its wares and of BMW’s wares
associated with BMW’s marks and therefore violates BMW’s proprietary rights in
the trade-marks M, M3, M5, M6 and M & Design.
[7]
Of the
various claims made by BMW, the appeal before this Court relates solely to the
portion of the trial judge’s judgement allowing the passing off claim under paragraph
7(b) of the Act.
[8]
On appeal,
Nissan alleges that the evidence in this case did not support a finding that
Nissan is liable under paragraph 7(b) of the Act for use of the M and M6 marks
in relation to automobiles and their parts. The appellant further alleges that
the trial judge erred in fact and law in failing to apply the proper
requirements for passing off set out in section 7(b) of the Act.
ISSUE
[9]
This
appeal raises two questions:
a)
Did the
trial judge err in proceeding on the basis that the letter M and the descriptor
M6 are unregistered trade-marks within the meaning of section 2 of the Act?
b)
Did the
trial judge err in allowing the claim for passing off pursuant to paragraph 7(b)
of the Act?
RELEVANT STATUTORY PROVISIONS
[10]
The
relevant statutory provisions of the Trade-marks Act are as follows:
|
2. In this
Act,
…
"trade-mark"
means
(a)
a mark that is used by a person for the purpose of distinguishing or so as to
distinguish wares or services manufactured, sold, leased, hired or performed
by him from those manufactured, sold, leased, hired or performed by others,
(b)
a certification mark,
(c)
a distinguishing guise, or
(d)
a proposed trade-mark;
…
"use"
, in relation to a trade-mark, means any use that by section 4 is deemed to
be a use in association with wares or services;
|
2. Les
définitions qui suivent s’appliquent à la présente loi.
«marque de
commerce » Selon le cas :
a) marque
employée par une personne pour distinguer, ou de façon à distinguer, les
marchandises fabriquées, vendues, données à bail ou louées ou les services
loués ou exécutés, par elle, des marchandises fabriquées, vendues, données à
bail ou louées ou des services loués ou exécutés, par d’autres;
b) marque de
certification;
c) signe
distinctif;
d) marque de
commerce projetée.
…
«emploi
» ou «usage » À l’égard d’une marque de commerce, tout emploi qui, selon
l’article 4, est réputé un emploi en liaison avec des marchandises ou
services.
|
|
When deemed to be used
4. (1) A trade-mark is deemed to be used in association
with wares if, at the time of the transfer of the property in or possession
of the wares, in the normal course of trade, it is marked on the wares
themselves or on the packages in which they are distributed or it is in any
other manner so associated with the wares that notice of the association is
then given to the person to whom the property or possession is transferred.
|
Quand une marque de commerce est réputée
employée
4. (1)
Une marque de commerce est réputée employée en liaison avec des marchandises
si, lors du transfert de la propriété ou de la possession de ces
marchandises, dans la pratique normale du commerce, elle est apposée sur les
marchandises mêmes ou sur les colis dans lesquels ces marchandises sont
distribuées, ou si elle est, de toute autre manière, liée aux marchandises à
tel point qu’avis de liaison est alors donné à la personne à qui la propriété
ou possession est transférée.
|
|
When mark or name confusing
6. (1)
For the purposes of this Act, a trade-mark or trade-name is confusing with
another trade-mark or trade-name if the use of the first mentioned trade-mark
or trade-name would cause confusion with the last mentioned trade-mark or
trade-name in the manner and circumstances described in this section.
…
What to be considered
(5) In
determining whether trade-marks or trade-names are confusing, the court or
the Registrar, as the case may be, shall have regard to all the surrounding
circumstances including
(a)
the inherent distinctiveness of the trade-marks or trade-names and the extent
to which they have become known;
(b)
the length of time the trade-marks or trade-names have been in use;
(c)
the nature of the wares, services or business;
(d)
the nature of the trade; and
(e)
the degree of resemblance between the trade-marks or trade-names in
appearance or sound or in the ideas suggested by them.
|
Quand une marque ou un nom crée de la
confusion
6. (1) Pour
l’application de la présente loi, une marque de commerce ou un nom commercial
crée de la confusion avec une autre marque de commerce ou un autre nom
commercial si l’emploi de la marque de commerce ou du nom commercial en
premier lieu mentionnés cause de la confusion avec la marque de commerce ou
le nom commercial en dernier lieu mentionnés, de la manière et dans les
circonstances décrites au présent article.
…
Éléments d’appréciation
(5) En
décidant si des marques de commerce ou des noms commerciaux créent de la
confusion, le tribunal ou le registraire, selon le cas, tient compte de
toutes les circonstances de l’espèce, y compris :
a) le
caractère distinctif inhérent des marques de commerce ou noms commerciaux, et
la mesure dans laquelle ils sont devenus connus;
b) la période
pendant laquelle les marques de commerce ou noms commerciaux ont été en
usage;
c) le genre
de marchandises, services ou entreprises;
d) la nature
du commerce;
e) le degré
de ressemblance entre les marques de commerce ou les noms commerciaux dans la
présentation ou le son, ou dans les idées qu’ils suggèrent.
|
|
7. No
person shall
…
(b)
direct public attention to his wares, services or business in such a way as
to cause or be likely to cause confusion in Canada, at the time he commenced
so to direct attention to them, between his wares, services or business and
the wares, services or business of another;
…
|
7. Nul
ne peut :
…
b) appeler
l’attention du public sur ses marchandises, ses services ou son entreprise de
manière à causer ou à vraisemblablement causer de la confusion au Canada,
lorsqu’il a commencé à y appeler ainsi l’attention, entre ses marchandises,
ses services ou son entreprise et ceux d’un autre;
…
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STANDARD OF REVIEW
[11]
The
standards of review on an appeal are those set out by the Supreme Court of
Canada in decision of Housen v. Nikolaisen, [2002] 2 S.C.R. 235. The
standard of review on a question of law is correctness. A standard of palpable
and overriding error applies to findings and inferences of fact. A standard of
palpable and overriding error also applies to questions of mixed fact and law
unless it is clear that the trial judge made an extricable error in principle
with respect to the characterization of the standard or its application, in which
case the error may amount to an error of law and the standard of correctness
would apply.
[12]
In the
circumstances of this case, the
trial judge’s finding that the appellant’s wares contravene paragraph 7(b) of
the Act is a question of mixed fact and law that involves the proper
interpretation of the relevant statutory provisions of the Act, including
sections 2, 4, 6 and 7. These are extricable questions of law reviewable on
the standard of correctness. Whether the evidence established that the proper
legal test has been met is a question of fact reviewable on the standard of
palpable and overriding error.
[13]
Justice Bastarache in
Van de Perre v. Edwards, [2001] 2 S.C.R. 1014 at paragraph 15, defined a
palpable and overriding error as one that “gives rise to the reasoned belief
that the trial judge must have forgotten, ignored or misconceived the evidence
in a way that affected his conclusion.” In Elders Grain Co. v. Ralph
Misener (The), [2005] 3 F.C.R. 367 at paragraph 10, this Court summarized a
palpable and overriding error as “an obvious deficiency in the trial judge’s
findings of fact that affects the outcome of the trial.”
ANALYSIS
[14]
Paragraph
7(b) of the Act prohibits a person from directing public attention to his
wares, services or business in such a way as to cause or be likely to cause
confusion, at the time he commenced the activity in question, with the wares,
services or business of another. As stated by this Court in Kirkbi AG v.
Ritvik Holdings Inc., [2004] 2 F.C.R. 241 at page 245, (2003) FCA 297,
aff’d [2005] 3 S.C.R. 302, paragraph 7(b) is the equivalent statutory
expression of the common law tort of passing off with one exception: for resort
to that paragraph, a plaintiff must prove possession of a valid and enforceable
trade-mark, whether registered or unregistered.
[15]
Accordingly,
the first issue to be determined on this appeal is whether the evidence
supports a finding that BMW had valid and enforceable trade-marks in the M and
M6 marks.
[16]
The term
“trade-mark”, as defined in section 2 of the Act, requires that a mark be used
by a person for the purpose of distinguishing or so as to distinguish wares or
services manufactured, sold, leased, hired or performed by him from those
manufactured, sold, leased, hired or performed by others. As such, in order to
obtain trade-mark rights, the trade-mark must be “used” by the person for the
purpose of distinguishing their wares or services from those of others. As
stated by the Supreme Court of Canada, “the gravaman of trade-mark entitlement
is actual use”: Mattel, Inc. v. 3894207 Canada Inc., [2006] 1 S.C.R. 772
at paragraph 5.
[17]
“Use” is a
defined term in the Act. Section 2 provides that “use” in relation to a
trade-mark means any use that by section 4 is deemed to be a use in association
with wares or services. At issue are BMW’s automobiles, parts and accessories
and, as such, we are dealing with wares, not services.
[18]
In
accordance with subsection 4(1) of the Act, a trade-mark is deemed to be used
in association with wares, if, at the time of the transfer of the property in
or possession of the wares, in the normal course of trade, it is marked on the
wares themselves or on the packages in which they are distributed or it is in
any other manner so associated with the wares that notice of the association is
then given to the person to whom the property or possession is transferred.
[19]
In Syntex Inc. et al. v. Apotex Inc., [1984] 2 F.C. 1012 at page 1020, this
Court explained the requirements of subsection 4(1) in the following way:
Use of a
trade mark is deemed to have occurred if at the time property in or possession
of the wares is transferred, in the normal course of trade, it is “marked on
the wares themselves or on the packages in which they are distributed”. The
mark thus may come to the attention of the transferee in a direct way at the
time of transfer which is the critical point in time. Similarly, for there to
be a deemed use, notice of any other manner of association is likewise to be
given at that same point in time. It might well be, for example, that the
appearance of a trade mark in written material inserted in a package containing
the wares even though not marked on the package or on the wares themselves
would fall within the second part of s. 4(1)….
[20]
Here, there
is no evidence that the alleged M and M6 trade-marks were marked on BMW’s wares
themselves or on the packages in which they were distributed. Therefore, the
only remaining question is whether the evidence establishes that, at the time
of the transfer of the property in or possession of the wares, the M and M6
marks were so associated with BMW’s wares that notice of the association was
given to the person to whom the property or possession was transferred.
[21]
With
respect to the M mark, the trial judge found at paragraph 14 that BMW cars are
not marked with any stand alone M mark. He further noted that BMW uses the M
mark in advertising and promotional items. In his words, at paragraph 36:
The
trade-mark M, by itself, has appeared in Canada only in limited
BMW M car advertising, in magazines, on television, in brochures, promotional
banners, occasional books, tickets and other items, generally with a companion
trade-mark of BMW, i.e. the BMW roundel or one of its other trade-marks.
[22]
The trial
judge appears to have assumed that BMW’s limited use of the M mark was
sufficient to amount to “use” of a trade-mark under subsection 4(1) without
providing any analysis on the issue. In doing so, I believe the trial judge
erred. In my view, there was no probative evidence on the record demonstrating
an association at the time of transfer of the property in or possession of the
wares.
[23]
The
evidence indicates that the letter M is used in many BMW trade-marks in
association with numbers, letters or words. In addition to the registered
trade-marks M3, M5, M & Design owned by BMW, the trial judge noted BMW’s
interest in other marks containing the letter M at paragraphs 9 to 11:
¶ 9
BMW AG also owns other registered marks in Canada which include as one element the letter M. These are
the marks: M SERIES (Registration TMA 614,701, issued July 13, 2004) for
automobiles and their constituent parts; M POWER design (Registration
TMA 329,972, issued July 10, 1987) (with horizontal color bars in blue, purple and
red for the design M POWER) for automobiles and their constituent parts,
namely engines; M-THE MOST POWERFUL LETTER IN THE WORLD (Registration
TMA 664,704 dated May 19, 2006), and M-THE MOST POWERFUL LETTER
(Registration TMA 664,875 dated May 24, 2006), both for automobiles and their
constituent parts, and for services: organization of car racing and car club
events.
¶ 10
In 2005 and 2006 BMW applied for registration for additional marks including: M
NIGHT (Application 1,269,440, filed August 22, 2005 and revised February 6,
2006) for retail services in the field of automobiles, motorcycles, and parts
and accessories therefore, retail services in the field of fashion accessories,
life style articles, sporting articles and clothing, organizing and hosting of
automobile theme parties and celebrations; M (Application No. 1,271,794
filed September 13, 2005) in relation to automobiles and their parts and to
automotive retail services; M ROADSTER and M COUPE (Applications
1,273,588 and 1,273,589, both filed September 27, 2005) both for automobiles
and parts; M SPORT PACKAGE and M EXECUTIVE PACKAGE and M
PERFORMANCE EDITION (Application numbers 1,274,093 and 1,274,092 and
1,274,333 respectively, all filed September 30, 2005) all for automobiles and
their parts; and M6 (Application No. 1,244,305 filed April 6, 2006
revised May 2, 2006) for automobiles and parts. All of these applications for
registration by BMW, including those for M alone and M6 which are
specifically at issue in this case, were filed after commencement of this
action by BMW.
¶ 11
BMW has also used the letter M in association with certain automobile parts and
accessories, including 16 different "M parts", e.g., M Suspension, M
Sports Seats, M steering wheel, M wheels, and with the special packages known
as M Sport Package, M Performance Edition, and M Executive Package. Each
package consists of M parts and accessories to "dress" a regular BMW
car to look, or to perform, in some respects like an M car.
[24]
I agree
with the trial judge, as held at paragraph 37, that use of the M mark in
association with numbers, letters or words is not equivalent to use of M alone
as a trade-mark. I also agree with the trial judge’s conclusion at paragraph
59 that use of the M & Design mark cannot be considered use by BMW of the M
mark.
[25]
Based on
the evidence, BMW’s use of the M mark was limited to advertisements and
promotional type materials. Such use of a mark is not in itself sufficient to
constitute “use” under subsection 4(1) of the Act. For the use of a mark in
advertisement and promotional material to be sufficiently associated with a
ware to constitute use, the advertisements and promotional material would have
to be given at the time of transfer of the property in or possession of the
wares: see Clairol International Corp. et al. v. Thomas Supply &
Equipment Co. Ltd. et al. (1968), 55 C.P.R. 176 at 190 (Can. Ex. Ct.) and General
Mills Canada Ltd. v. Procter & Gamble Inc. (1985), 6 C.P.R. (3d) 551
(T.M. Opp. Bd.).
[26]
In this
case, some of the evidence in itself was problematic. For instance, the BMW
Product Guide 2003, although it contained the M mark, was intended for use
within the BMW organization, i.e. for retailer sales personnel, and therefore
would not have been given to purchasers. There were other types of promotional
material which were apparently intended for wide-spread distribution; however, there
is no evidence indicating when the advertisements and promotional materials
containing the M mark were distributed in Canada, if at all, such that notice
of the association was given at the time of transfer.
[27]
Similarly,
with respect to the M6 mark, the only evidence is that M6 was used in an
owners’ handbook (date unknown), a 1989 owners’ manual and a 1988 technician
bulletin. Again, there was no evidence as to how many, if any, of these
handbooks, manuals or bulletins were distributed in Canada and when, if at all, and if they were
available at the time of transfer of property or possession.
[28]
Quite
simply, in the absence of evidence indicating whether the advertisements or
promotional materials were given to purchasers at the time of transfer of BMW’s
wares, there is no evidence to support a finding of use of the M and M6 marks
as that term is defined in the Act.
[29]
In light
of the foregoing and on the basis of the record, I find there is no evidence of
use on which the trial judge could rely to conclude that the M and M6 marks are
unregistered trade-marks in accordance with section 2 of the Act and for the
purposes of determining the passing off claim under subsection 7(b) of the
Act. I find the trial judge erred in law in pursuing a paragraph 7(b) analysis
without first establishing the existence of the M and M6 marks as
trade-marks.
[30]
In any
event, one of the essential elements of the claim of passing off under
paragraph 7(b) was not established. The three necessary components of a
passing-off action are: (a) the existence of goodwill; (b) deception of the
public due to a misrepresentation; and (c) actual or potential damage to the plaintiff:
Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120 at paragraph 33.
[31]
In this case,
the trial judge accepted the three required components to establish a claim of
passing off and was satisfied that all three were met. With respect to the
existence of goodwill, the trial judge referred to the evidence of Mr. Kenzie
and of individual BMW car enthusiasts and, at paragraph 106, concluded that:
BMW is known among auto
journalists and luxury high performance car enthusiasts, particularly BMW owners,
for its wares advertised by the M trade-mark, including its automobile the M6.
This awareness of special interest groups in a relatively small market of
consumers is sufficient in this case to establish BMW’s goodwill in the two
common law trade-marks it claims and has used.
[32]
With
respect to the second requirement, the trial judge concluded that there was a
likelihood of confusion in respect of the marks M and M6. In his words, at
paragraph 108:
In considering the
likelihood of confusion in this claim there is a significant difference from
the circumstances considered for the claim of infringement under s-s. 20(1)
where the M and M6 marks used by Nissan are not the same as BMW’s registered
trade-marks. In my opinion, use by Nissan in 2005 of the letter M, as a
trade-mark, and of the descriptor M6, as a trade-mark, both similar in form to
the same trade-marks of BMW, for generally similar wares, automobiles and
parts, in essentially the same trade or business as BMW, created a likelihood
of confusion between the sources of the wares of the defendant and of the
plaintiffs. Whether intentional or not, that confusion was likely because of
Nissan’s actions.
[33]
With respect to the
third component, i.e. damages, the trial judge accepted the respondents’ argument
that, once the first two elements are shown to exist, damages are presumed. At
paragraph 109 of his decision, the trial judge stated the following:
In the absence of
evidence of damages which, in accord with the Court’s pre-trial bifurcation
order will be settled after submissions to be made by the parties, I assume,
subject to further consideration, that there will be damages, whether nominal
or substantial.
[34]
As indicated by the
trial judge, the Bifurcation Order dated October 5, 2006, orders that the
issues of liability be severed from the issues of extent of damages and
accounting of profits, and that the production of documents, oral discovery on
the issues of extent of damages and accounting of profits be postponed until
after judgment on the issues of liability.
[35]
Without commenting on
the first two elements, I find the trial judge erred in law in assuming that
there would be damages. Actual or potential damage is a necessary element in
finding liability under paragraph 7(b). In the absence of evidence in this
regard, the Court cannot conclude that there is liability: Tommy Hilfiger
Licensing Inc. et al. v. Quality Goods I.M.D. Inc. et al. (2005), 267
F.T.R. 259 at paragraphs 137-138 (F.C.). A plaintiff must “demonstrate that he suffers or, in a quia timet action, that
he is likely to suffer damage by reason of the erroneous belief engendered by
the defendant's misrepresentation that the source of the defendant's goods or
services is the same as the source of those offered by the plaintiff”: Ciba-Geigy Canada Ltd. v. Apotex Inc., supra, at paragraph 32 citing Reckitt
& Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873
(H.L.) at page 880. See also Pro-C Ltd. v. Computer City, Inc. (2001),
55 O.R. (3d) 577 at paragraph 24.
[36]
A bifurcation order
does not relieve the appellant from the necessity of proving the existence of
damage as an element of his cause of action. It simply defers proof of the
extent of the damage pending a determination as to the respondents’ liability.
[37]
In this case, there
was no evidence before the trial judge demonstrating damages and no finding of
damages. It was not open to the trial judge to presume damages. In the
absence of such evidence, this Court finds that the trial judge erred in law by
allowing the claim for passing off of the M and M6 marks under paragraph 7(b)
of the Act.
[38]
Accordingly,
the appeal will be allowed with costs.
"J. Richard"
“I
agree
A.M. Linden J.A.”
“I
agree
J.D. Denis Pelletier J.A.”
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