Ciba-Geigy Canada Ltd. v. Apotex Inc.

Ciba-Geigy Canada Ltd. v. Apotex Inc.
Collection
Supreme Court Judgments
Date
1992-10-29
Report
[1992] 3 SCR 120
Case number
22251, 22252
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Gonthier, Charles Doherty; Stevenson, William; Iacobucci, Frank
On appeal from
Ontario
Subjects
Torts
Notes
SCC Case Information: 22251, 22252
Decision Content
Ciba‑Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120
Ciba‑Geigy Canada Ltd. Appellant
v.
Apotex Inc. Respondent
and between
Ciba‑Geigy Canada Ltd. Appellant
v.
Novopharm Limited Respondent
Indexed as: Ciba‑Geigy Canada Ltd. v. Apotex Inc.
File Nos.: 22251, 22252.
1992: March 27; 1992: October 29.
Present: La Forest, L'Heureux‑Dubé, Gonthier, Stevenson*, and Iacobucci JJ.
* Stevenson J. took no part in the judgment.
on appeal from the court of appeal for ontario
Torts ‑‑ Passing‑off ‑‑ Prescription drug ‑‑ Customers of pharmaceutical laboratories ‑‑ Products having similar appearance ‑‑ Whether patients included in pharmaceutical laboratories' clientele for purposes of a passing‑off action concerning the get‑up of a prescription drug.
The appellant is a pharmaceutical laboratory which since 1977 has manufactured and sold metoprolol tablets in Canada under the trade name "Lopresor". The respondents some years later also obtained licences to manufacture and sell metoprolol in Canada, and since 1986 the tablets sold by the respondents have had the same get‑up as those sold by the appellant. Metoprolol is a prescription drug prescribed by doctors for hypertension. Since the products sold by the parties have been designated interchangeable pharmaceutical products by Ontario law, a pharmacist may give a patient the products of either of the respondents in place of Lopresor when the prescription does not bear the notation "no substitution".
The appellant brought passing‑off actions against the respondents, alleging that its metoprolol tablets have a unique get‑up by reason of their size, shape and colour and that this get‑up has become associated with its product. The respondents' response was to file motions for summary judgment dismissing the actions or, in the alternative, for a ruling on a point of law. The court denied the motions for summary judgment but granted the alternative application. Relying on Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366 (C.A.), the court held that in an action for the alleged passing‑off of a prescription drug, a plaintiff must establish that the conduct complained of is likely to result in the confusion of physicians or pharmacists in choosing whether to prescribe or dispense either the plaintiff's or the defendant's product. The Court of Appeal affirmed this order. These appeals are to determine whether, in a passing‑off action dealing with the get‑up of a prescription drug, the public affected by the risk of confusion includes not only health care professionals but also the patients who consume the drugs.
Held: The appeals should be allowed.
A manufacturer that wishes to succeed in a passing‑off action must show that its product has acquired a secondary meaning with its customers and that the competing product is likely to create a risk of confusion in the public mind. The approach is the same when the producer or manufacturer is a pharmaceutical laboratory. For the purposes of a passing‑off action the customers of pharmaceutical laboratories do not consist exclusively of physicians, dentists and pharmacists. The patient who uses the product is also included. There is no reason in law to depart from the well‑established rule that the final consumer of a product must be taken into account in determining whether the tort of passing‑off has been committed. The prescription pharmaceutical products field is not so fundamentally different from other areas of commercial activity that special rules should apply to it and that pharmaceutical laboratories should be deprived of means of proof available to other industries. Proof of secondary meaning and of misrepresentation is thus not limited merely to direct customers of the pharmaceutical laboratory.
Ayerst, McKenna & Harrison should not be followed. Following the reasoning applied in that case would lead to treating the patient as a special kind of consumer: yet the patient needs information and protection just as other consumers do. Not including him in the clientele covered by the passing‑off action would divest him of part of his rights as an individual by depriving him of the means of protecting himself. Moreover, that decision was rendered three years before the Ontario Prescription Drug Cost Regulation Act, 1986 came into effect, giving the patient increased control over the brand of drug he wishes to obtain where the product is interchangeable.
Cases Cited
Not followed: Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366; Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197; Syntex Inc. v. Novopharm Ltd. (1983), 74 C.P.R. (2d) 110; Hoffmann‑La Roche Ltd. v. Apotex Inc. (1982), 72 C.P.R. (2d) 183; Smith, Kline & French Canada Ltd. v. Apotex Inc. (1985), 12 C.P.R. (3d) 479; Syntex Inc. v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129; referred to: Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351; Hoffmann‑La Roche & Co. v. D.D.S.A. Pharmaceuticals Ltd., [1972] R.P.C. 1; Ciba‑Geigy Corp. v. Bolar Pharmaceutical Co., 224 USPQ 349 (1984); Par Pharmaceutical, Inc. v. Searle Pharmaceuticals, Inc., 227 USPQ 1024 (1985); Merck & Co. v. Par Pharmaceutical, Inc., 227 USPQ 489 (1985); Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., [1982] 1 S.C.R. 494; Roche Products Ltd. v. Berk Pharmaceuticals Ltd., [1973] R.P.C. 473; Perry v. Truefitt (1842), 6 Beav. 66, 49 E.R. 749; Singer Manufacturing Co. v. Loog (1880), 18 Ch. D. 395 (C.A.), aff'd (1882), 8 App. Cas. 15 (H.L.); Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1980] R.P.C. 31; Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873; Consumers Distributing Co. v. Seiko Time Canada Ltd., [1984] 1 S.C.R. 583; Pinard v. Coderre, [1953] Que. Q.B. 99; General Baking Co. v. Gorman, 3 F.2d 891 (1925); Scandinavia Belting Co. v. Asbestos & Rubber Works of America, Inc., 257 F. 937 (1919); Henry Thorne & Co. v. Sandow (1912), 29 R.P.C. 440; Saville Perfumery Ld. v. June Perfect Ld. (1941), 58 R.P.C. 147; République française v. S. Hyman Ltd. (1920), 31 Que. K.B. 22.
Statutes and Regulations Cited
Food and Drugs Act, R.S.C., 1985, c. F‑27 [formerly R.S.C. 1970, c. F‑27], s. 9.
Food and Drug Regulations, C.R.C. 1978, c. 870.
O. Reg. 690/86.
Ontario Drug Benefit Act, 1986, S.O. 1986, c. 27.
Patent Act, R.S.C., 1985, c. P‑4 [formerly R.S.C. 1970, c. P‑4].
Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28, ss. 1 "interchangeable product", 4(1), (2), (3), (6).
Authors Cited
Chenevard, Charles. Traité de la concurrence déloyale en matière industrielle et commerciale, t. 1. Paris: L.G.D.J., 1914.
Drysdale, John, and Michael Silverleaf. Passing Off: Law and Practice. London: Butterworths, 1986.
Fleming, John G. The Law of Torts, 7th ed. Sydney: Law Book, 1987.
Lilkoff, Lubin. "Rapport sur la protection du consommateur en droit pénal canadien". Dans Travaux de l’association Henri Capitant des amis de la culture juridique française, t. 24, La protection des consommateurs. Paris: Dalloz, 1975, 331.
Mermillod, Louis. Essai sur la notion de concurrence déloyale en France et aux États‑Unis. Paris: Pichon & Durand‑Auzias, 1954.
Nadeau, André, et Richard Nadeau. Traité pratique de la responsabilité civile délictuelle. Montréal: Wilson & Lafleur, 1971.
Salmond on the Law of Torts, 17th ed. By R. F. V. Heuston. London: Sweet & Maxwell, 1977.
Wadlow, Christopher. The Law of Passing‑off. London: Sweet & Maxwell, 1990.
APPEALS from a judgment of the Ontario Court of Appeal (1990), 75 O.R. (2d) 589, 45 O.A.C. 356, 32 C.P.R. (3d) 555, affirming an order of Fitzpatrick J. determining a point of law in a passing‑off action. Appeals allowed.
James D. Kokonis, Q.C., and John R. Morrissey, for the appellant.
H. B. Radomski, for the respondent Apotex Inc.
Malcolm Johnston, Q.C., for the respondent Novopharm Ltd.
The judgment of the Court was delivered by
Gonthier J.‑‑This case involves determining, in the context of a passing‑off action, who are the customers of pharmaceutical laboratories manufacturing prescription drugs. Do those customers consist only of physicians, dentists and pharmacists or are the patients to whom the drugs are dispensed also included?
I ‑‑ Facts and Proceedings
The plaintiff Ciba‑Geigy Canada Ltd. ("Ciba‑Geigy") is a pharmaceutical laboratory which since 1977 has manufactured and sold metoprolol tartrate ("metoprolol") in Canada under a licence from AB Hässle of Sweden. Metoprolol is included in the list contained in Schedule F of the Food and Drug Regulations of drugs which can only be sold on prescription. Since 1977 this beta-blocker product, the trade name of which is “Lopresor”, has been prescribed by doctors in Ontario and Canada for low or moderate hypertension; since 1981 it has been prescribed in Ontario for patients suffering from angina. Hypertension is one of the diseases and disorders listed in Schedule A of the Food and Drugs Act, R.S.C., 1985, c. F-27 (formerly R.S.C. 1970, c. F-27), for which the advertising and sale of therapeutic products are prohibited. The drug is given in two doses, each of which has a specific get-up. Fifty mg Lopresor is an oblong pink tablet and 100 mg Lopresor is a tablet of the same shape, only blue.
The respondents, Apotex Inc. (“Apotex”) and Novopharm Limited (“Novopharm”), obtained licences under the Patent Act, R.S.C., 1985, c. P-4 (formerly R.S.C. 1970, c. P-4), to manufacture and sell metoprolol in Canada.
From July 1984 to June 1986, the product sold by Apotex, the trade name of which is “Apo-metoprolol”, took the form of white circular, biconvex 50 mg and 100 mg tablets. Since June 1986 the tablets sold by Apotex have had the same get-up – shape, size and colour – as those of the plaintiff.
The drug manufactured and sold by Novopharm since 1986, “Novo-metoprolol”, available in two doses – 50 mg and 100 mg – also has the same get-up as that of the plaintiff.
The parties’ metoprolol tartrate tablets have been designated interchangeable pharmaceutical products pursuant to the Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28. Accordingly, a pharmacist may give a patient the products of either of the respondents in place of Lopresor when the prescription does not bear the notation “no substitution”.
In June 1986 the plaintiff brought two passing-off actions, one against Apotex and the other against Novopharm, alleging that its metoprolol tartrate tablets have a unique get-up by reason of their size, shape and colour and that this get-up has become associated with its product.
As often happens in such a case, the plaintiff sought an interlocutory injunction to prevent Novopharm from manufacturing and marketing blue capsule-shaped and pink capsule-shaped metoprolol tablets. The injunction was denied by J. Holland J. of the Supreme Court of Ontario on September 8, 1986 as Ciba-Geigy had not shown there was any “serious issue to be tried”: (1986), 12 C.P.R. (3d) 76. Leave to appeal to the Ontario Divisional Court was refused by Osler J. on November 21, 1986.
The respondents filed motions for summary judgment in the Supreme Court of Ontario in response to the plaintiff’s actions. They submitted that there was no genuine issue for trial as Ciba-Geigy was unable to establish that physicians and pharmacists prescribe or dispense metoprolol tartrate on the basis of its appearance or that physicians and pharmacists were confused in choosing the brand of metoprolol to give patients because of the similar appearance of the parties’ tablets.
In the alternative, the respondents asked the court to rule on the following question of law:
... with respect to the marketing of prescription drugs, a plaintiff in an action for the alleged passing-off of a prescription drug must establish that the conduct complained of is likely to result in the confusion of physicians and pharmacists in choosing whether to prescribe or dispense either the plaintiff’s or the defendant’s product.
In February 1989 Fitzpatrick J. denied the motions but answered the question of law in the affirmative. Ciba-Geigy appealed to the Ontario Court of Appeal as, it argued, the trial judge had erred in excluding patients, who are consumers of the drugs, from those affected by the confusion. The Ontario Court of Appeal dismissed the appeal: (1990), 75 O.R. (2d) 589, 45 O.A.C. 356, 32 C.P.R. (3d) 555.
On May 16, 1991, leave to appeal to this Court was granted, [1991] 1 S.C.R. vii.
II -- Judgments Below
Supreme Court of Ontario (interlocutory injunction)
Holland J. refused to issue an interlocutory injunction because the appellant had not shown there was a “serious issue” to be tried. Reviewing the case law on passing-off in the pharmaceutical field, Holland J. considered that the plaintiff had to show that its product’s get-up had acquired a secondary meaning for its customers, consisting exclusively of physicians, dentists and pharmacists. Even assuming that Ciba-Geigy had shown this, it was not able to prove that those customers were likely to be misled by the similarity of the products.
Supreme Court of Ontario (motions for summary judgment)
Novopharm and Apotex argued in their motions for a summary judgment that only confusion in the minds of physicians, dentists or pharmacists was relevant to a passing-off action and that the plaintiff had not established such confusion.
Fitzpatrick J. accepted the first part of the argument relying on the opinion of Cory J.A., as he then was, in Ayerst, McKenna & Harrison, Inc. v. Apotex Inc. (1983), 41 O.R. (2d) 366:
With respect to the marketing of prescription drugs, a plaintiff in an action for the alleged passing-off of a prescription drug must establish that the conduct complained of is likely to result in the confusion of physicians and pharmacists in choosing whether to prescribe or dispense either the plaintiff’s or the defendant’s product.
Fitzpatrick J. refused to rule on the evidence of confusion in the minds of physicians and pharmacists, however, and he accordingly dismissed the motions for summary judgment.
Court of Appeal (Morden A.C.J.O. and Tarnopolsky and Krever JJ.A.)
The appellant argued that the Supreme Court of Ontario had erred in considering that the ultimate consumer of the prescribed drug should be excluded from the customers affected by the passing-off. It submitted that Fitzpatrick J. should not have relied on the remarks of Cory J.A. in Ayerst, McKenna & Harrison because they were merely obiter dicta, or alternatively, because they were wrong.
The Court of Appeal rejected these two arguments, and Morden A.C.J.O. wrote (at p. 591 O.R.):
As far as the appeal itself is concerned, we do not think that the statements of Mr. Justice Cory can be considered to be obiter dicta in the sense that they do not carry binding force. In our view, they were carefully considered statements which were intended by the court to declare the law applicable to that case and to govern the trial judge conducting the new trial. See R. v. Govedarov (1974), 3 O.R. (2d) 23 (C.A.), at p. 36.
With respect to the alternative argument, the Court of Appeal, at p. 592 O.R., distinguished Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351, cited by the appellant:
The court in that case did refer . . . to the judgment of the Supreme Court of Canada in Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351, . . . on which the appellant relies and which at p. 358 approved a statement in the judgment there under appeal which made reference to “the public who consumes its goods”. Accordingly, it cannot be said that the court in Ayerst was ignorant of this decision, nor can it be said that the judgment involved a manifest slip or error. Having regard to the governing legal framework, the court specifically considered who the “customers of the plaintiff” (p. 376 O.R.) were and defined the relevant market accordingly. In so doing we do not think it erred in not regarding Parke Davis as dispositive of the decision on the point. That case was concerned with other matters, primarily the lack of distinctiveness of the plaintiff’s capsules, related to the acquisition of a secondary meaning.
III – Issue and Arguments
This Court must determine whether, in a passing-off action dealing with prescription drugs, a plaintiff may argue that the public affected by the risk of confusion includes, in addition to physicians, dentists and pharmacists, the patients who consume the drugs, or is instead limited exclusively to the health care professionals in question.
The appellant Ciba-Geigy puts forward four arguments. First, it considers that, contrary to what was held by the lower courts, the tort of passing-off always concerns the ultimate consumer of goods or services.
Second, the appellant submits that, in relation to a passing-off action in the specific field of pharmaceutical products, the Supreme Court admitted in Parke, Davis & Co. that the testimony of those who consume the prescribed drugs is relevant. Ciba-Geigy adds that in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., [1982] 1 S.C.R. 494, at p. 502, the Supreme Court cited with approval the decision of the English Court of Appeal in Roche Products Ltd. v. Berk Pharmaceuticals Ltd., [1973] R.P.C. 473, which recognized that in the case of pharmaceutical products passing-off can be established by proving reputation and confusion among the public or consumers.
Thirdly, the appellant argues that Morden A.C.J.O. of the Ontario Court of Appeal erred when he considered that Cory J.A.’s judgment in Ayerst, McKenna & Harrison laid down a rule of law, since in its submission the passage quoted is only obiter dictum.
Finally, the appellant submits that if Cory J.A. laid down a rule of law in Ayerst, McKenna & Harrison, he erred because: (1) the rule contradicts this Court’s opinion in Parke, Davis & Co. which recognizes that patient evidence is relevant; (2) the rule is based on misapprehension of the
relevant legislation: although advertising of prescription drugs is restricted, the legislation does not go so far as to totally prohibit advertising aimed at the general public of products such as metoprolol; in any event, in the appellant’s submission, the question of advertising is not significant or determinative of the outcome of the present case; (3) there is nothing in the relevant legislation that sanctions passing-off at the consumer or patient level; (4) the rule disregards the fact that under the Prescription Drug Cost Regulation Act, 1986, patients have a choice among interchangeable drugs; and (5) the rule disregards the fact that passing-off may actually have occurred.
One of the respondents, Apotex, argues that the reference clientele for passing-off in the particular field of this case includes only physicians or pharmacists, as was stated in Ayerst, McKenna & Harrison. Prescription drugs are not sold to the public as other consumer products are and the customer cannot simply obtain them from the pharmacy shelf, by comparing similar products and finally selecting one of them. The choice of brand is determined pursuant to legislated interchangeability rules. According to Apotex, given this regulatory framework Ontario courts and the Federal Court have properly recognized that in a passing-off action based on the appearance of products the customers of prescription drugs were the health care professionals who prescribe it and dispense those drugs to patients. The customers are thus the persons who buy the products from the manufacturers.
Apotex further submits that Cory J.A.’s comments in Ayerst, McKenna & Harrison are not obiter dicta.
Finally, Apotex argues that in Ayerst, McKenna & Harrison the Ontario Court of Appeal did not distinguish Parke, Davis & Co. and did not have to do so.
The other respondent, Novopharm, states that the pharmaceutical products market differs considerably from that of other consumer goods and that, as noted in Ayerst, McKenna & Harrison, the “market” is made up of pharmacists, physicians and dentists. In the submission of Novopharm, neither Cory J.A. in Ayerst, McKenna & Harrison nor Morden A.C.J.O. in the present case erred in their conclusions and Cory J.A.’s opinion does not conflict with this Court’s decision in Parke, Davis & Co.
Novopharm considers that given the present legislation, if there is no misrepresentation, if the patient has no possibility of choice and there is no damage to the plaintiff, there is no passing-off. It argues that pharmacists buy and sell its products because of their interchangeability and cost, not because of their appearance. The Prescription Drug Cost Regulation Act, 1986, which came into force three years after Ayerst, McKenna & Harrison, gives patients outside hospitals the right to request an interchangeable product. The fact that the patient has a choice, however, does not mean he is part of the clientele: he remains subject to the physician’s prescription and the pharmacist purchases and dispenses the drug because of the price and interchangeability.
IV – Analysis
A. Passing-off Action
(1) General Principles Developed by the Courts
The concept of passing-off was developed in 1842 in Perry v. Truefitt (1842), 6 Beav. 66, 49 E.R. 749, which seems to have been the first case in which the expression “passing-off” appeared: “A man is not to sell his own goods under the pretence that they are the goods of another man” (p. 752 E.R.). In Singer Manufacturing Co. v. Loog (1880), 18 Ch. D. 395 (C.A.), aff’d (1882), 8 App. Cas. 15 (H.L.), James L.J. described passing-off and its origins, at pp. 412-13:
. . . no man is entitled to represent his goods as being the goods of another man; and no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false representation himself to a purchaser who purchases from him, he enables such purchaser to tell a lie or to make a false representation to somebody else who is the ultimate customer. . . . [H]e must not, as I said, make directly, or through the medium of another person, a false representation that his goods are the goods of another person.
The House of Lords has set out the requirements for a passing-off action on many occasions. In Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1980] R.P.C. 31, Lord Diplock identified five conditions, at p. 93: there must be (1) misrepresentation (2) by a trader in the course of trade (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader, and (5) which causes actual damage to the business or goodwill of the trader bringing the action.
More recently, in Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873, Lord Oliver reaffirmed, at p. 880:
The law of passing off can be summarised in one short general proposition, no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying “get-up” (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services. Second, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. . . . Third, he 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. [Emphasis added.]
The three necessary components of a passing-off action are thus: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.
In Canada the Supreme Court has also had occasion to rule on a passing-off action, in particular in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., supra, in which the issue turned primarily on the similar get-up of the parties’ products. In that case this Court stated that in any passing-off action the plaintiff, in order to succeed, must establish that its product has acquired a secondary meaning.
In Consumers Distributing Co. v. Seiko Time Canada Ltd., [1984] 1 S.C.R. 583, this Court noted at p. 601 that the requirements of a passing-off action have evolved somewhat in the last hundred years:
. . . attention should be drawn to the fact that the passing off rule is founded upon the tort of deceit, and while the original requirement of an intent to deceive died out in the mid-1800's, there remains the requirement, at the very least, that confusion in the minds of the public be a likely consequence by reason of the sale, or proffering for sale, by the defendant of a product not that of the plaintiff’s making, under the guise or implication that it was the plaintiff’s product or the equivalent.
A manufacturer must therefore avoid creating confusion in the public mind, whether deliberately or not, by a get-up identical to that of a product which has acquired a secondary meaning by reason of its get-up.
Outside the common law countries passing-off has no exact lexicological equivalent and in general is not a delict as such. In France, for example, it is one aspect of unfair competition to which civil liability sanctions apply. The passing-off rules in Quebec are derived largely from the common law. Remedies may be sought in federal as well as provincial law:
[translation] Unlawful or unfair competition causing an unjust injury to another person falls within civil liability under art. 1053 C.C. Actions for damages for unfair competition are heard under not only the federal legislation but also the general principles of delictual civil liability.
(Nadeau and Nadeau, Traité pratique de la responsabilité civile délictuelle (1971), at p. 221.)
(2) Purposes of the Passing-off Action and Target Clientele
In considering those upstream and downstream of the product, two separate aspects must be distinguished. I refer in this regard to the persons who manufacture or market the products, on the one hand (“the manufacturers”), and on the other to those for whom the products are intended, the persons who buy, use or consume them (“the customers”).
It is clear that however one looks at the passing-off action, its purpose is to protect all persons affected by the product.
(a) Protection of Manufacturers
This corresponds to the third point mentioned by Lord Oliver. The right to be protected against the “pirating” of a brand, trade name or the appearance of a product is linked to a kind of “ownership” which the manufacturer has acquired in that name, brand and appearance by using them.
In Pinard v. Coderre, [1953] Que. Q.B. 99, Marchand J.A. of the Quebec Court of Appeal noted at p. 103:
[translation] It would seem that the first occupant of this name or these words acquired a right to use them exclusive of all other persons, comparable in many ways to a true right of ownership. [Emphasis added.]
Accordingly, to begin with, from what might be called the individual or manufacturer’s standpoint, the passing-off action is intended to protect a form of ownership.
There is also the concept of ownership, protected by the passing-off action in relation to goodwill, a term which must be understood in a very broad sense, taking in not only people who are customers but also the reputation and drawing power of a given business in its market. In Consumers Distributing Co. v. Seiko Time Canada Ltd., supra, Estey J., at p. 598, cites Salmond on the Law of Torts (17th ed. 1977), at pp. 403-4:
The courts have wavered between two conceptions of a passing-off action -- as a remedy for the invasion of a quasi-proprietary right in a trade name or trade mark, and as a remedy, analogous to the action on the case for deceit, for invasion of the personal right not to be injured by fraudulent competition. The true basis of the action is that the passing off injures the right of property in the plaintiff, that right of property being his right to the goodwill of his business.
. . .
Indeed, it seems that the essence of the tort lies in the misrepresentation that the goods in question are those of another; . . . [Emphasis added.]
It will then be necessary to look at the relationship between the various merchants or manufacturers, and it is at that point that questions of competition have to be considered. As Chenevard says (Traité de la concurrence déloyale en matière industrielle et commerciale (1914), vol. 1, at pp. 6-7), [translation] “[c]ompetition is the soul of commerce; it requires unceasing effort and as such is the chief factor in economic progress”. Drysdale and Silverleaf (Passing Off: Law and Practice (1986)) are substantially of the same opinion, at p. 1:
In countries with a free market system the proper functioning of the economy depends upon competition between rival trading enterprises. It is the mechanism of competition which controls the price, quality and availability of goods and services to the public.
However, merchants must observe certain rules which, quite apart from being legal, are ethical at the least:
[translation] Just as an effort made to dislodge an opponent from the position he occupies, to attract sales to oneself by offering better goods on better terms, is legitimate when only fair methods are used, so such conduct is objectionable when it infringes the rules of honesty and good faith that underlie commercial transactions.
(Chenevard, supra, at p. 11.)
The author describes at p. 10 certain situations which, if the manufacturer succumbs to temptation, will easily lead him to commit the tort of passing-off:
[translation] Seeing the success of his competitor’s product, he had the idea of profiting from it: since this article, this shape, this packaging had met with public favour, why not copy it?‑‑since this trade name had made its way in the world, why not adopt a similar one?
The purpose of the passing‑off action is thus also to prevent unfair competition. One does not have to be a fanatical moralist to understand how appropriating another person's work, as that is certainly what is involved, is a breach of good faith.
Finally, another more apparent, more palpable aspect, a consequence of the preceding one, must also be mentioned. The "pirated" manufacturer is very likely to experience a reduction in sales volume and therefore in his turnover because of the breaking up of his market. When such a situation occurs in the ordinary course of business between rival manufacturers that is what one might call one of the rules of the game, but when the rivalry involves the use of dishonest practices, the law must intervene.
(b) Protection of Customers
In the Anglo‑Saxon legal systems, [translation] "the person chiefly concerned is the competitor affected by the unfair act" (Mermillod, Essai sur la notion de concurrence déloyale en France et aux États‑Unis (1954), at p. 176). He is frequently in fact the first party affected by the practice or aware of it.
However, "[i]t should never be overlooked that . . . unfair competition cases are affected with a public interest. A dealer's good will is protected, not merely for his profit, but in order that the purchasing public may not be enticed into buying A's product when it wants B's product" (General Baking Co. v. Gorman, 3 F.2d 891 (1st Cir. 1925), at p. 893). Accordingly, "the power of the court in such cases is exercised, not only to do individual justice, but to safeguard the interests of the public" (Scandinavia Belting Co. v. Asbestos & Rubber Works of America, Inc., 257 F. 937 (2d Cir. 1919), at p. 941). The ordinary customer, the consumer, is at the heart of the matter here. According to the civilian lawyer Chenevard, supra, at p. 20, in a case of unfair competition it is [translation] "the buyer who is the first to be injured".
The customer expects to receive a given product when he asks for it and should not be deceived. It often happens that products are interchangeable and that a substitution will have little effect. However, the customer may count on having a specific product. There are many reasons for such a choice: habit, satisfaction, another person's recommendation, the desire for change, and so on. I have no hesitation in using the classic saying, taken from popular imagery: "the customer is always right". Merchants must respect his wishes, choices and preferences as far as possible. Where this is simply not possible, no substitution must be made without his knowledge. That is the minimum degree of respect which manufacturers and merchants, who we should remember depend on their customers, should show.
There is no shortage of fraudulent or simply misleading practices: one may think, for example, of products having a similar get‑up, the use of similar labelling, use of the same trade name, counterfeiting, imitation of packaging. These are all possible ways of attempting, deliberately or otherwise, to mislead the public. The courts and authors have unanimously concluded that the facts must be weighed in relation to an "ordinary" public, "average" customers:
. . . you must deal with the ordinary man and woman who would take ordinary care in purchasing what goods they require, and, if desiring a particular brand, would take ordinary precautions to see that they get it.
(Neville J. in Henry Thorne & Co. v. Sandow (1912), 29 R.P.C. 440 (Ch. D.), at p. 453.)
The average customer will not be the same for different products, however, and will not have the same attitude at the time of purchase. Moreover, the attention and care taken by the same person may vary depending on the product he is buying: someone will probably not exercise the same care in selecting goods from a supermarket shelf and in choosing a luxury item. In the first case, the misrepresentation is likely to "catch" more readily.
In The Law of Passing‑off (1990), Wadlow gives the following definition at p. 351:
The term "get‑up" is normally used in passing‑off to mean the whole visible external appearance of goods in the form in which they are likely to be seen by the public before purchase. If the goods are sold in packages, then their get‑up means the appearance of the pack taken as a whole. If they are sold or displayed unpackaged, then the get‑up relied on can only be that inherent in the goods themselves.
The look, the appearance, the get‑up of a product play a crucial role in the purchase process since they are the chief means at the manufacturer's disposal to attract customers. The importance of visual impact is well known: what appeals to the eye is crucial.
The product's appearance or its packaging‑‑ shape, size or colour‑‑may be characteristic of a particular manufacturer and have the effect of marking out the product or making it recognizable as his own. In the mind of the customer appearance is not always linked to a trade mark, that is, the consumer may rely on the appearance rather than the trade mark to indicate the use of the product. For example, when he needs removable self‑stick notes, he will look for small blocks of yellow paper. He may not know the name of the product or manufacturer, but he does not need to in order to recognize what he wants to buy. What he has noticed and what he has retained is the specific colour of the merchandise; or he will know that a particular product contained in a tin with an exotic bird on the lid is polish, without necessarily having to know the trade name or brand, and when he wishes to purchase that polish it is the image of the bird on the packaging that will assist him in recognizing the product. With a few exceptions, the external features of a product are not sought for themselves, but because they are the means of recognizing the satisfactory product, for example. They are a source of information associated with reputation for a consumer or a group of customers. Appearance is thus useful not only in product recognition but also to distinguish one product from another with the same uses.
Of course, it may be that appearance is associated with a specific brand in the consumer's mind. When he wishes to have a product of that brand he will look for that get‑up.
The question now is as to who lies beyond the product, that is who must be protected, who must not be confused by manufacturers, for example, by a similar appearance. As business is organized at present, it is very seldom that an individual deals directly with the manufacturer or producer: he is not generally the immediate customer. The route taken by a product between the time of its manufacture, to use a broad term, and the time it reaches the consumer can be compared to a chain made up of several links which must all be there and be in a particular order. Manufacturer, wholesaler, retailer and consumer are all links in this chain.
The first person who buys the product is not generally the one for whom it is ultimately intended. Assuming that there are three links in the chain, with the producer and the consumer at the two ends, the "retailer" (grocer, bookseller, garage owner and so on) is an intermediary between the producer and the consumer. I would without hesitation describe him as a "trade customer", that is a person who obtains a product not for his own use but with a view to passing it on to a third person in the course of his business. There is little need to dwell at length on the case of such merchant intermediaries, who are in fact part of the manufacturer's or producer's clientele. There may at times be some question whether the passing‑off action really affects them as customers. The closer they are, that is the more direct contact they have with the manufacturer or producer, the less likely they are to be misled. This is indeed what Viscount Maugham found in Saville Perfumery Ld. v. June Perfect Ld. (1941), 58 R.P.C. 147 (H.L.), at pp. 175‑76: "It is, for example, quite a common occurrence . . . to find that retail traders are not misled while ordinary customers are".
Outside the field of pharmaceutical products, the courts and authors have unquestionably recognized that the consumer, or the person who might be called the ordinary customer‑‑the last link in the chain‑‑is also part of the "clientele" in whose minds any confusion must be avoided.
The English common law has long recognized this principle very explicitly. I shall again quote a passage from James L.J. mentioned above to emphasize the use of certain terms:
. . . no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false misrepresentation himself to a purchaser who purchases from him, he enables such purchaser to tell a lie or to make a false representation to somebody else who is the ultimate customer. [Emphasis added.]
(Singer Manufacturing Co. v. Loog, supra, at p. 412.)
Further, when Lord Diplock in Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., supra, set out the conditions for the passing‑off action at p. 93,