Canada: Claim Under Section 7(a) Failed Where False And Misleading Statements Made Out But No Causal Link To Alleged Damages (Intellectual Property Weekly Abstracts Bulletin — Week Of September 5)

Last Updated: September 9 2016
Article by Beverley Moore, Chantal Saunders, Adrian J. Howard and Jillian Brenner

Most Read Contributor in Canada, September 2016


Claim under section 7(a) failedwhere false and misleading statements made out but no causal link to allegeddamages

E. Mishan & Sons, Inc. v. Supertek Canada Inc., 2016 FC 986

This decision relates to the second part of the bifurcated proceeding, namely whether the plaintiffs engaged in conduct contrary to the provisions of section 7(a) of the Trade-marks Act in their dealings with Canadian Tire in the years 2013 and 2014.

The principal issue in this action was the validity and infringement of the '882 patent. The Federal Court had previously found the plaintiffs' asserted patent to be invalid and dismissed the infringement action (2014 FC 326 and summarized the week of April 14, 2016; affirmed 2015 FCA 163 and summarized the week of July 27, 2015). In the second part of the bifurcated proceeding, the Federal Court had granted a summary judgment motion and declared an industrial design invalid (2016 FC 613 and summarized the week of June 20, 2016). The Court also ordered a summary trial for the defendant's claim under section 7(a) of the Trade-marks Act.

The Court concluded that, while the plaintiffs made false and misleading statements, no causal link to the defendant's alleged damages has been established and thus, the section 7(a) claim failed. The defendant claimed three sorts of damages with respect to its dealings with the retailer Canadian Tire: cancelled orders by Canadian Tire, lack of access to individual Canadian Tire dealerships, and Canadian Tire never placed any further orders for the defendant's product. However, the evidence established that the purchase of the defendant's product was a one-time only buy and Canadian Tire did not want to have an inventory problem by handling two product lines. As a result, there was no causal link between the false and misleading statements made by the plaintiffs and the damages alleged to have been suffered by the defendant.

Further, the Court noted that even if the defendant had been successful, it had not satisfactorily established a quantification of its damages.

On the issue of costs, the Court found that each party should bear its own costs, noting that more rational persons would have settled the matter once the patent issue had been finally determined.

Individuals found personally liable eor company's infringing activities of the Applicant's trademark rights

Trans-High Corporation v. Conscious Consumption Inc., 2016 FC 949

In this trademark infringement action, the Court found that there was sufficient evidence to show that there was a likelihood of confusion between the Applicant's use of its trademark HIGH TIMES and the Respondents' previous prominent use of HIGH TIMES on its storefront, their continued use of the cannabis motif and HIGH TIMES mark in association with the sale of counterculture wares in the store, and their continued use of HIGH TIMES on their website and online advertising.

The Court also found that the Respondents passed off their business and wares as being associated or connected with the Applicant's business and wares, contrary to subsection 7(b) of the Trade-marks Act; and that the Respondents used the Applicant's registered trademarks in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto, contrary to subsection 22(1) of the Trade-marks Act.

Finally, the Court concluded that each individual Respondent was personally liable for the infringing activities outlined above. The evidence clearly indicated that the two individual Respondents are the owners and directing minds of the corporate Respondent. The Court ultimately found the individual Respondents personally liable as the willful infringement of the Applicant's trademarks rights cannot be a legitimate exercise of their corporate duties as officers, directors or the controlling minds of the corporate Respondent.

Re-determination changes nothing – individual defendant is still jointly and severally liablefor $64,000 in damages and $250,000 in punitive damages for selling knock-off Chanel products

Chanel S. de R.L. v. Lam Chan Kee Company Ltd., 2016 FC 987

The Federal Court has completed its re-determination of a motion for summary trial as presented by the plaintiffs, with the same end result.

In September 2015 the Federal Court in 2015 FC 1091 ( previously summarized here) awarded judgment against the defendants A. Lam and LCK Company and 2133694 Inc., for the infringement of several Chanel trademarks. The defendants were selling knock-off Chanel merchandise out of their condominium unit and in a strip mall. The defendants were ordered to pay, jointly and severally, $64,000 in damages, plus $250,000 as punitive and exemplary damages, plus $66,000 in costs.

On April 11, 2016, the Federal Court of Appeal in 2016 FCA 111 set aside the trial judge's decision as it related to the personal defendant and remitted the summary trial motion for re-determination. The Court of Appeal wanted the Judge to resolve the ambiguity in the decision related to whether the individual defendant was liable for three or four acts of infringement. This affected the quantum of damages and costs awarded and this defendant's joint and several liabilities.

The end result following the re-determination is the same because the Federal Court confirmed the original judgment, including the compensatory damages award, the punitive damages award and the costs award. The Federal Court expressly confirmed that the individual defendant was personally liable for all four infringements.

Of interest in this decision is the fact that the Court cited the awards in two unreported judgments to justify the damages award. The first, Guccio Gucci SPA and Gucci America Inc v Bobby Bhatia et al (Unreported) Federal Court File No T-1556-14, awarded $696,000 to the plaintiff as punitive damages, being $29,000 (minimal compensatory damages for wholesaler) for each of the 24 occasion of infringements, in addition a $1,392,000 as compensatory damages. The second, Louis Vuitton Malletier SA and Louis Vuitton Canada Inc v Bobby Bhatia et al (Unreported) Federal Court File No. T-1536-14, awarded the plaintiffs $609,000 in punitive damages, in addition to compensatory damages of $2,436,000 for trademark infringement and passing off, and additional damages of copyright infringement.

Appeal of Motion to Enforce Settlement Dismissed

Beam Suntory Inc. v. Domaines Pinnacle Inc., 2016 FCA 212

In the underlying action, as the parties approached trial, settlement discussions resulted in an offer to settle. That offer was accepted, but the parties disputed whether the offer also included the discontinuance of a Superior Court Action. The Federal Court concluded that the Federal Court action and counterclaim was settled, but the Superior Court action was not settled. Beam appealed. The FCA dismissed the appeal.

The Federal Court held that the only reasonable interpretation of the object and effect of the offer to settle is that which appears from the clear words used by Beam. As Beam had refused to discontinue its counterclaim, the Federal Court ordered a permanent stay of proceedings. The Federal Court also increased costs awarded to Domaines as it held that certain elements of Beam's conduct were reprehensible.

The FCA held that contractual interpretation is a question of mixed fact and law. Thus it would not intervene unless a palpable and overriding error was identified. The FCA considered all of the facts, and was not persuaded the Judge made any error that could justify intervention.


Court of Appeal Abandons Standard of Review in Aqua-Gem for Discretionary Decisions of Prothonotaries in Favour of Standard in Housen

Hospira Healthcare Corporation v. Kennedy Institute of Rheumatology, 2016 FCA 215

The case management Prothonotary issued an Order that additional discovery of two witnesses was limited to one half day per witness by teleconference. This decision was appealed to the Court and dismissed. On appeal to the Court of Appeal, a five judge panel considered whether the standard of review of discretionary orders made by prothonotaries should be reviewed. The Court of Appeal concluded that the applicable standard review is that set out in Housen v. Nikolaisen, and no longer that established in Canada v. Aqua-Gem Investments.

Two inventors were discovered each for one day, after Hospira's request for two days of discovery of each inventor was refused. Discovery was not completed at the end of the day. Hospira brought a motion to conduct a further one day of discovery for each inventor in Toronto at the inventors' own expense. Both inventors live in the UK.

The Court of Appeal determined that "it is not in the interests of justice to continue with a plurality of standards when one standard, i.e., the Housen standard, is sufficient to deal with the review of first instance decisions." The Court of Appeal noted that the Ontario Court no longer follows the Ontario equivalent to Aqua-Gem and instead applies that set out in Housen. The Court of Appeal provided a number of reasons why the Federal Court should do the same, including recognizing that the question of whether a question is vital to the final issue of the case is confusing for a reviewing Court. Further, as noted by the Ontario courts, there is no basis for distinguishing, for the purposes of the standard of review, decisions of masters in the Ontario Court/prothonotaries in the Federal Court, and judges.

The Court of Appeal concluded that there was nothing in the legislation that prevents adoption of the standard in Housen. In terms of whether the Court of Appeal was able to reconsider the Aqua-Gem standard in the motion before it, the Court of Appeal addressed and rejected the Respondents' argument that the decision in Miller v. Canada allows the Court of Appeal to reconsider its decisions "if they are manifestly wrong in the sense that they overlook relevant authority" on the basis that the decision in Aqua-Gem was not manifestly wrong. However, the Court of Appeal did agree that the decision of the Supreme Court of Canada in Carter v. Canada (Attorney General) namely that there is an exception to stare decisis that allows lower courts to not follow the decisions of higher courts in certain situations, applied. The Court of Appeal considered that there has been a change in the circumstances that changed the parameters of the debate in that standards of review have evolved, and in particular the role of prothonotaries. Thus, the Court of Appeal was free to adopt the standard of review set out in Housen for discretionary decisions made by prothonotaries as it applies to similar orders by motions judges. The Court of Appeal concluded that it should apply the Housen standard to discretionary decisions of prothonotaries and judges.

With respect to the appeal on its merits, the Court of Appeal accepted Hospira's argument that the Respondents should have brought a motion pursuant to Rule 243 when the parties could not agree on the length of time for the discoveries. However, the Court of Appeal also found that it was only the Court that could have made the determination as to the proper duration of the examinations, which was ultimately done by the case management Prothonotary. Discovery is not unlimited, including that of inventors, and the court must consider that, as well as Rule 3, when making determinations relating to discovery. These factors were considered by the Prothonotary in reaching her decision, and the Court of Appeal concluded that it had no basis to intervene with respect to the Motions Judge's decision to dismiss the appeal.

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