Tommy Hilfiger Licensing Inc. v. Produits de Qualité I.M.D. Inc.

Tommy Hilfiger Licensing Inc. v. Produits de Qualité I.M.D. Inc.
Court (s) Database
Federal Court Decisions
Date
2005-01-07
Neutral citation
2005 FC 10
File numbers
T-2235-99
Notes
Digest
Decision Content
Date: 20050107
Docket: T-2235-99
Citation: 2005 FC 10
Ottawa, Ontario, January 7, 2005
PRESENT: The Honourable Mr. Justice Beaudry
BETWEEN:
TOMMY HILFIGER LICENSING INC.,
TOMMY HILFIGER CANADA INC.
Plaintiffs
and
PRODUITS DE QUALITÉ I.M.D. INC.
AND HAROLD ROSEN
Defendants
REASONS FOR JUDGMENT AND JUDGMENT
[1] Quality Goods I.M.D. Inc. (Quality Goods), also called Produits de Qualité I.M.D. Inc., is a company that manufactures and sells souvenir products. In 1996, it created the "Explore Canada" logo and has been since then displaying it on its T-shirts, hats, mugs, key chains and on a variety of other items that are usually found in tourist stores. In August 1999, Tommy Hilfiger Licensing Inc. (THLI) and Tommy Hilfiger Canada Inc. (THC) indicated to two of the most important customers of Quality Goods that they would be the subject of legal proceedings unless they stopped selling the "Explore Canada" products. Both of these customers stopped ordering these products and one even returned such products. THLI and THC are now alleging that Quality Goods and Harold Rosen, as the company's President, Director and Officer, have infringed four Hilfiger trade-marks consisting of rectangles with red, white and blue colours in it and with the words "Tommy Hilfiger" in two of those trade-marks, and have also infringed the trade-mark "Tommy Hilfiger". THLI and THC are also alleging passing-off and depreciation of the value of the goodwill attached to their trade-marks. They are seeking an injunction, an accounting of profits, damages, exemplary damages, pre-judgment and post-judgment interest, an order for delivery of any offending wares in the defendants' possession, and their costs. If the plaintiffs are successful, there is a consent that those matters will be dealt with after further submissions by counsel or settled between the parties.
[2] The defendants deny any infringement. Moreover, they argue that the registered trade-marks are invalid. The defendants seek the dismissal of the action with costs, as well as the expungement of the registered trade-marks. By counterclaim, the defendant Rosen also seeks damages in the amount of $1,000,000 for reductions in sales and profit margins in the fiscal years 2000 and 2001 and in the value of his shares in Quality Goods, pre-judgment and post-judgment interest. If the defendants are successful, there is a consent that the question of cost, pre-judgment and post-judgment interest will be dealt with after further submissions by counsel or settled between the parties.
ISSUES
[3] The issues are as follows:
1. Are the registered Hilfiger trade-marks invalid?
2. Did the defendants infringe the plaintiffs' rights under section 19 of the Trade-marks Act, R.S.C. 1985, c. T-13 (Act)?
3. Did the defendants infringe the plaintiffs' rights under section 20 of the Act?
4. Was the defendants' use of his marks likely to have the effect of depreciating the value of the goodwill attaching to plaintiffs' trade-marks contrary to section 22 of the Act?
5. Was there passing-off of the defendants' wares as those of the plaintiffs in contravention of paragraph 7(b) of the Act?
6. Should the defendant Rosen be personally held liable/responsible for the wrongdoing, if any, of the defendant Quality Goods?
7. Is the defendant Rosen entitled to damages in the amount of one million dollars for the reduction in sales and profit margins and in the value of his shares?
BACKGROUND
[4] I will rely substantially on the Agreed Statement of Facts submitted by the parties to describe the general background and more specific issues.
The plaintiffs, their wares and sales
[5] The plaintiff THLI is a company incorporated and based in the State of Delaware. It owns the trade-marks relating to the Tommy Hilfiger brand in Canada and elsewhere and licenses these trade-marks to others in return for royalty payments.
[6] The plaintiff THC is a company incorporated and based in Canada. THC manufactures, sells, distributes and advertises articles of clothing and accessories in association with trade-marks under licence from THLI.
[7] THLI owns the following trade-marks, that it registered in Canada:
1. trade-mark TMA 375,827 (TMA '827) registered November 16, 1990 in association with clothing for men, namely pants, jackets, shorts, suits, sweaters, sweatpants, sweatshorts, bathing suits, robes, coats, jackets, raincoats, undershirts;
2. trade-mark TMA 432,095 (TMA '095) registered August 26, 1994 in association with clothing for men and women, namely shirts, pants, jackets, sweaters, shorts, belts, vests, sport jackets, coats, raincoats, parkas; luggage; overnight bags; make-up kits and shaving kits;
3. trade-mark TMA 482,283 (TMA '283) registered September 9, 1997 in association with cosmetics; perfumery; toiletries; suntan lotions; bronzing sticks; soap products and hair care products;
4. trade-mark TMA 482,082 (TMA '082) registered September 5, 1997 in association with cosmetics; perfumery; toiletries; suntan lotions; bronzing sticks; soap products and hair care products.
5. trade-mark TMA 446,291 (TMA '291) registered August 18, 1995 in association with blazers, coats, jackets, jeans, overcoats, pants, parkas, shirts, shorts, sportcoats, sportjackets, sweaters, turtlenecks, vests, bathing suits, caps, socks, suits, sweatpants, sweatshirts, ties, undershirts, underwear.
[8] For ease of reference, the first four trade-marks will be referred to as the "Hilfiger flag trade-marks". These Hilfiger flag trade-marks look like this:
Trade-mark: TOMMY HILFIGER & DESIGN
Registration No.: TMA375827
Trade-mark: TAG (RECTANGLES) DESIGN
Registration No.: TMA432,095
Trade-mark: RECTANGLES DESIGN
Registration No.: TMA482283
Trade-mark: TOMMY HILFIGER & DESIGN
Registration No.: TMA482,082
and
Registration No.: TMA446,291
for the trade-mark TOMMY HILFIGER
[9] Since the early nineties, THC commenced selling wares bearing TMA '827 and in 1993, 1994 and 1995, wares bearing TMA '095 and TMA '291 (Mr. Green and Abramowitz testimonies); the other two trade-marks bearing TMA '082 and '283, in 1997.
[10] In 1996 and throughout the years, THC has sold or distributed promotional items marked with the Hilfiger trade-marks such as pins, candles, calculators, carrying bags, coffee thermoses, key chains, bags, mouse pads, coffee mugs, pens, t-shirts, soccer balls, basketballs, water bottle and umbrellas.
[11] THC's sales of Tommy Hilfiger clothing in Canada are as follows: $8 million (1992), $8 million (1993), $10 million (1994), $16 million (1995), $25 million (1996), $50 million (1997), $90 million (1998), $125 million (1999), $125 million (2000), $125 million (2001). THC sells in chain stores, specialty stores and large department stores such as The Bay and Eaton's. THC is selective with respect to its retail customers. It considers the image of the retailer, the location of the stores and the retailer's brand selection in determining whether the retailer will be permitted to sell Hilfiger products. The plaintiffs target the middle to the higher end market.
[12] The Tommy Hilfiger brand and THLI licensed products have been advertised in Canada using different means: advertisements placed in foreign magazines and other publications circulated in Canada including Vanity Fair, GQ, Men's Journal, Details, Rolling Stone, Men's Health, The New York Times and the New York Times Magazine; advertisements placed in Canadian magazines including Macleans, Toronto Life Fashion, Toronto Life and Elle Québec; co-operative advertisements placed in Canadian magazines with Canadian retailers including The Bay and Eaton's department stores; billboards; in-store posters, signs and videos; sponsorship of tours or performances of musical groups including Pete Townsend, The Who and the Rolling Stones; sponsorships of events including the Toronto Film Festival and the Montreal Grand Prix; and contests.
The defendants, their wares and sales
[13] The defendant Quality Goods is a company incorporated and based in Quebec. Quality Goods designs, manufactures, arranges for the manufacturing, sells, distributes and advertises souvenir products, including clothing, in association with the term "Explore Canada".
[14] The defendant Harold Rosen is the President, a Director and Officer and the sole shareholder of the defendant Quality Goods.
[15] In the summer of 1996, Quality Goods created the "Explore Canada" logo and subsequently created regional variations of the Explore Canada logo in which the name of a city or province was substituted for the word "Explore" in the Explore Canada logo. For ease of reference, the Explore Canada logo and its regional variations will be called "Explore Canada logo". The Explore Canada logo is depicted as follows:
[16] The Explore Canada logo was created by Harold Rosen and Allan Rosen, from the merchandising department, with the participation of Joel Noden, Quality Goods' Sales Manager, and Angelica Muntigal, Quality Goods' Artistic Director. Quality Goods has manufactured, or caused to be manufactured articles of clothing and accessories and novelty items marked with the Explore Canada logo it designed.
[17] Quality Goods used the Explore Canada logo for a line of souvenir products (Explore Canada products): soft goods, namely t-shirts, golf shirts, sweatshirts, caps, toques, scarves, headbands, backpacks, waist bags, duffel bags and shopping bags, and hard goods, namely mugs, pens, key chains, licence plates, playing cards, magnets, hockey pucks, lapel pins, coasters, ashtrays, beer steins, shooters and shot glasses. Quality Goods first began to offer for sale and sell these Explore Canada products in Canada in 1996.
[18] Total sales by Quality Goods of Explore Canada products were as follows:
Date Hard Goods Soft Goods Total
As of May 30, 2001 $581,015.05 $1,431,306.60 $2,012,321.65
From May 30, 2001
to August 4, 2003 $11,849.02 $22,840.45 $34,689.47
From August 5, 2003
to May 13, 2004 $761.88 $635.45 $1,397.33
Although Quality Goods discontinued the sale of Explore Canada products as an active line of products as of October 15, 2001, it continued to sell the existing inventory and intends to continue to sell such inventory.
[19] Quality Goods' customers for its Explore Canada products are tourist shops, duty free shops and specialty stores such as United Cigar Stores.
[20] Quality Goods advertises its products in catalogues (distributed to retail customers), in trade magazines and at trade shows. Its advertising is not extensive and did not comprise any consumer advertising in the 1990s. Quality Goods promoted the sale of Explore Canada products at semi-annual gift trade shows in Montreal, Toronto, Vancouver and Edmonton by having product samples available and catalogues.
[21] In August 1999, THLI and THC indicated to two of the most important customers of Quality Goods, HDS who operates United Cigar Stores, and the Niagara Park Commission, that they would be subjected to legal proceedings unless they stopped selling the Explore Canada products. Both of these customers stopped ordering these products after the summer of 1999 and HDS even returned such products.
[22] Quality Goods received a cease and desist letter dated October13, 1998 from THLI's solicitors demanding that it discontinue the sale of the Explore Canada products on grounds that the Explore Canada logo was in breach of THLI's trade-marks. In a letter dated November 13, 1998, Quality Goods denied infringing THLI's rights and demanded that THLI not interfere with its customers' sales of such products.
[23] The plaintiffs' Statement of Claim was filed on December 21, 1999.
ANALYSIS
Issue 1: Validity of the Hilfiger trade-marks registrations
[24] I cannot conclude that the Tommy Hilfiger trade-marks are invalid for the following reasons.
Background
[25] THI is a company incorporated on April 15, 1982, its principal office and place of business being in New York, New York. THI carried on the business of owning the trade-marks and other intellectual property rights relating to the Tommy Hilfiger brand, of licensing such rights to others in return for royalty payments and designing articles of clothing to be sold under the Tommy Hilfiger brand.
[26] THUSA is an American company incorporated in 1989 under the laws of the State of New York under the name Tommy Hilfiger Sportswear, Inc. The name was changed in 1992 to its current name.
[27] THC is a Canadian company incorporated on December 19, 1989, under the laws of Canada. THC has its principal office and place of business in Montreal, Quebec.
[28] On January 1st, 1990, THI granted a geographical licence to THC.
[29] THLI is a company incorporated on July 23, 1992, under the laws of the State of Delaware, United States of America. THLI has its principal office and place of business in Wilmington, Delaware.
[30] On August 3, 1992, THI assigned its rights to THLI. This agreement was reiterated on September 28, 1993. On June 19, 1994, THI merged into THUSA.
[31] On May 24, 1995, THLI amended its licence with THC. The amendment enlarged the definition of trade-mark and permitted the use of each Hilfiger Flag Trade-marks in Canada in association with articles of clothing and accessories under the strict control of THLI as to the character and quality of such use (Canadian Retail Licence).
[32] In January 2001, THC was reorganized. The operation of THC's retail stores was transferred to a new corporation, THC Retail. A new corporation, THC Sales, assumed the position of a sales agent for THC in Canada outside of Québec. Both THC Retail and THC Sales are subsidiaries of THC and have its principal office and place of business in Toronto, Ontario.
[33] TH Corp. is a holding company. It directly or indirectly owns or controls all of the above listed companies.
Onus of Proof
[34] A registered trade-mark is presumed to be valid. Therefore, the onus of proof is on the person seeking expungement to establish the invalidity of the registration (Richard, Hugues G., Canadian Trade-marks Act Annotated, loose-leaf, binder 2, Thomson Carswell Edition, Toronto, page 18-3; also see J.C. Penney Co. v. Gaberdine Clothing Co. (2001), 16 C.P.R. (4th) 151 at 170 (F.C.T.D.)).
[35] Section 19 of the Trade-marks Act (Act) provides that:
Rights conferred by registration
19. Subject to sections 21, 32 and 67, the registration of a trade-mark in respect of any wares or services, unless shown to be invalid, gives to the owner of the trade-mark the exclusive right to the use throughout Canada of the trade-mark in respect of those wares or services.
Droits conférés par l'enregistrement
19. Sous réserve des articles 21, 32 et 67, l'enregistrement d'une marque de commerce à l'égard de marchandises ou services, sauf si son invalidité est démontrée, donne au propriétaire le droit exclusif à l'emploi de celle-ci, dans tout le Canada, en ce qui concerne ces marchandises ou services.
[36] Pursuant to this section, the registration of a trade-mark gives the owner of the trade-mark the exclusive right to the use throughout Canada. However, it clearly appears that the invalidity of a trade-mark registration would be a complete defence in an action for infringement of sections 19, 20 and 22 (PRV Co. Ltd. v. Decosol (Canada) Ltd. (1972), 10 C.P.R. (2d) 203 (F.C.T.D)).
[37] Section 18 of the Act provides that a registration may be invalid on the basis of:
1. unregistrability;
2. non-distinctiveness;
3. abandonment; or
4. subject to section 17, non entitlement to secure registration.
[38] Section 18 of the Act reads as follows:
18. (1) The registration of a trade-mark is invalid if
(a) the trade-mark was not registrable at the date of registration,
(b) the trade-mark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced, or
(c) the trade-mark has been abandoned,
and subject to section 17, it is invalid if the applicant for registration was not the person entitled to secure the registration.
Exception
(2) No registration of a trade-mark that had been so used in Canada by the registrant or his predecessor in title as to have become distinctive at the date of registration shall be held invalid merely on the ground that evidence of the distinctiveness was not submitted to the competent authority or tribunal before the grant of the registration.
18. (1) L'enregistrement d'une marque de commerce est invalide dans les cas suivants:
a) la marque de commerce n'était pas enregistrable à la date de l'enregistrement;
b) la marque de commerce n'est pas distinctive à l'époque où sont entamées les procédures contestant la validité de l'enregistrement;
c) la marque de commerce a été abandonnée.
Sous réserve de l'article 17, l'enregistrement est invalide si l'auteur de la demande n'était pas la personne ayant droit de l'obtenir.
Exception
(2) Nul enregistrement d'une marque de commerce qui était employée au Canada par l'inscrivant ou son prédécesseur en titre, au point d'être devenue distinctive à la date d'enregistrement, ne peut être considéré comme invalide pour la seule raison que la preuve de ce caractère distinctif n'a pas été soumise à l'autorité ou au tribunal compétent avant l'octroi de cet enregistrement.
[39] Of the four potential grounds of invalidity, the arguments of the defendants are, for the vast majority, confined to paragraph 18(1)(b) of the Act, which deals with distinctiveness. However, Fox clearly indicates in Canadian Law of Trade-marks and Unfair Competition (3rd ed.) Toronto, Carswell Co. Ltd, 1972 at page 309, that the Court does have the power to consider potential grounds of invalidity even if not expressly raised by one of the parties.
[40] In matters concerning rectification of the register, the Court acts in the interest of the purity of the register and in the public interest. In so acting, the Court has inherent jurisdiction and a duty to expunge in a proper case exproprio motu even though the point on which expungement is ordered has not been raised in the pleadings. But even though the Court might so act, although no person appeared as a person interested to ask for expungement, it ought to do so only in a case where it clearly appears that the mark is wrongly on the register. The public interest is of paramount importance, and the equities in favour of or against the applicant for rectification are of little relevance, for the matter is one between the public and the owner of the mark.
[41] Having said that, I am of the view that this is not the case where the marks clearly appear to be wrongly on the register. Therefore, I will limit my analysis to the issue of distinctiveness and will only analyse briefly the other grounds of invalidity.
Unregistrability: section 18(1)(a)
[42] The registration of a trade-mark is invalid if the trade-mark was not registrable at the date of registration. In order to determine if a trade-mark was registrable, we need to refer to sections 12 to 15 of the Act which deal with registrable trade-mark (see Annex I).
[43] In summary, it can be said that according to sections 12, 13, 14, and 15, a trade-mark which falls into the following five categories is not registrable:
(1) a word that is merely the name or a surname of an individual who is living or has died within the preceding thirty years, with the exception at subsection 12(2) and sections 13, 14 and 15;
(2) a descriptive or deceptively misdescriptive trade-mark, with the exception at subsection 12(2) and sections 13, 14 and 15;
(3) the name of wares or services, with the exception at sections 14 and 15;
(4) a trade-mark confusing with a registered trade-mark; with the exception at
sections 14 and 15; and
(5) a prohibited mark.
[44] In the present case, after having considered all of the evidence, I do not believe that the Tommy Hilfiger's trade-marks enter in any of those five categories. Therefore, I conclude that the Hilfiger trade-marks were registrable at the date of registration.
Abandonment: section 18(1)c)
[45] The abandonment of a trade-mark is a question of fact that must be decided case by case based on the particular circumstances. The non-use of a trade-mark is not sufficient to create abandonment. The absence of use must also be accompanied by an intention to abandon the trade-mark. Such an intention can be inferred from a long period of non-use (Richard, Hugues G., supra at page 18-3).
[46] In the present case, I do not believe that it is necessary to spend a lot of time on this particular ground of invalidity. It is fairly obvious that the Tommy Hilfiger's trade-marks have not been abandoned since they are used to distinguish Tommy Hilfiger's product. Tommy Hilfger's wares are still advertised and sold everywhere in Canada. Therefore, I conclude that a claim of invalidity based on this ground could not stand.
Non-entitlement: last part of section 18
[47] If the person or company that registered a trade-mark was not entitled to secure the registration, the registration of the trade-mark will be invalid. In the present case, at paragraph 103 of the defendants' Statement of Fact and Law, the defendants submit that the transfer between THI and THLI in 1992 and its restatement in 1993 refer only to marks for which there are registrations or applications. Consequently, they wonder how THLI became "entitled to register the mark "TOMMY HILFIGER" based on use in Canada from a prior date to the existence of the company".
[48] After reviewing the Assignment Agreement between THI and THLI and after having taken into consideration the intention of the parties I must say that I disagree with the defendants. I am of the view that the purpose of the assignment was to transfer all of THI's intellectual property rights to THLI. The defendants recognized the effect of the transfer in the Agreed Statement of Facts (paragraph 6). Consequently, if THLI acquired every interests of Tommy Hilfiger's intellectual property rights, I conclude that THLI acquired the right to register the Tommy Hilfiger's trade-marks. I believe that THLI, as the owner of all Tommy Hilfiger's trade- marks, acquired the right to register new trade-marks.
[49] Following this assignment THI merged with THUSA. THUSA's functions, which had previously been established through a Service Agreement (Exhibit P-15) with THLI, are to provide services to THLI and to facilitate the licencing of the TH Intellectual Property. The nature of the services provided by THUSA to THLI have not changed since the merger. Therefore, it demonstrates that THI really transferred all of its rights to THLI including the capacity of registering trade-marks since it is not exercising any of its past functions.
[50] In summary, all of the trade-marks registered by THLI cannot be expunged pursuant to the last part of section 18 of the Act because THLI acquired the right to register Tommy Hilfiger's trade-marks through the transfer that occurred in 1992.
Non distinctiveness : paragraph 18(1)(b)
A. Introduction
[51] The registration of a trade-mark is invalid if the trade-mark is not distinctive. The definition of "distinctive" in section 2 of the Act reads as follows:
"distinctive", in relation to a trade-mark, means a trade-mark that actually distinguishes the wares or services in association with which it is used by its owner from the wares or services of others or is adapted so to distinguish them;
"distinctive" Relativement à une marque de commerce, celle qui distingue véritablement les marchandises ou services en liaison avec lesquels elle est employée par son propriétaire, des marchandises ou services d'autres propriétaires, ou qui est adaptée à les distinguer ainsi.
[52] The function and the purpose of a trade-mark is to indicate the source of the goods. A trade-mark by definition must be and remain distinctive of a single source. In Labatt Brewing Co. v. Molson Breweries, a Partnership (1992), 42 C.P.R. (3d) 481 (F.C.T.D.), Dubé J. stated that distinctiveness requires that:
1. a mark and a product be associated;
2. the owner uses this association between the mark and its product and is manufacturing and selling this product; and
3. this association enables the owner to distinguish its product from that of others (Philip Morris Incorporated v. Imperial Tobacco Ltd. et al (1985), 7 C.P.R. (3d) 254 (F.C.T.D.)).
[53] There are two types of distinctiveness : inherent distinctiveness and acquired distinctiveness. A mark is distinctive when nothing about it refers the customers to a multitude of sources. Consequently, when a mark is a unique or invented name, such that it could only refer to one thing, it is possible to conclude that it is inherently distinctive. When a trade-mark does not have inherent distinctiveness, it may still acquire distinctiveness through continual use in the marketplace. However, to establish that distinctiveness has been acquired, it must be shown that the mark has become known to consumers as originating from one particular source.
[54] In order to successfully establish that a trade-mark is invalid under this section, the trade-mark must be non-distinctive at the date of the commencement of the proceeding when the question of validity of the registration is alleged (Parke, Davis & Co., Ltd. v. Empire Laboratories Ltd. (1963), 41 C.P.R. 121 at 134 (F.C.T.D.), affirmed by the Supreme Court of Canada [1964] S.C.R. 351).
[55] Fox states in Canadian Law of Trade-marks and Unfair Competition (3rd ed.) Toronto, Carswell Co. Ltd, 1972 at page 24:
[...] No registration is invalid under s.18 merely because the trade mark was not distinctive at the time of registration. It may have acquired distinctiveness at the time proceedings bringing the validity of the registration into question are commenced, in which case it cannot be expunged on the ground of invalidity based upon non-distinctiveness because not only does s. 18(1)(b) provide otherwise but s. 56(1) [now s. 57(1)] allows consideration of validity only at the date of the application to strike out or amend.
[56] As I understand this paragraph, it confirms the test of "distinctiveness" as of the date of commencement of the action for expungement. Consequently, it can be held that a mark, which was not distinctive at registration may have become distinctive in the meantime through the nature of its use by its owner.
[57] Therefore, even if the defendants could demonstrate that the Hilfiger trade-marks were not distinctive at the date of its registration, they would still be required to demonstrate that the trade-marks were still not distinctive at the time the action was brought or that they have lost their distinctiveness.
[58] Distinctiveness is a question of fact with the test being whether a clear message has been given to the public that the wares with which the trade-mark is associated and used are the wares of the trade-mark owner and not those of another party (White Consolidated Industries, Inc. v. Beam of Canada Inc. (1991), 39 C.P.R. (3d) 94 at 109-111 (F.C.T.D.)).
[59] The determination of whether a trade-mark is distinctive is a question that can only be settled by considering the whole of the circumstances of the case (Fox, supra, at page 27):
In considering distinctiveness it is not proper to dissect a mark and to examine its component parts. It is the combination of the elements that constitutes a trade mark and gives distinctiveness to it and it is the effect of the trade-mark as a whole - the totality - rather than any particular element in it that must be considered. [...]
B. Parties Submissions
i) Plaintiffs
[60] The plaintiffs allege that the defendants have the onus to establish that the trade-marks were invalid:
a) at the date of registration if the defendant is claiming that the trade-marks were not registrable; or
b) at the date of the commencement of the counterclaim if the defendant is claiming that the trade-marks are not distinctive.
[61] They submit that the distinctiveness of a trade-mark depends on all the surrounding circumstances. They refer to the decision of the Federal Court of Appeal in John Labatt Ltd. et al v. Molson Breweries, a Partnership (2000), 5 C.P.R. (4th) 180 at 203 (F.C.A.) to establish that the exclusive use of a trade-mark may be compelling evidence of its distinctiveness but that exclusive use is not required to prove distinctiveness.
[62] They conclude that the defendants have not adduced any evidence to demonstrate as a fact that the Tommy Hilfiger trade-marks are not distinctive or have lost their distinctiveness.
ii) Defendants
[63] The defendants argue that the Hilfiger trade-marks have lost their distinctiveness and consequently, that they should be expunged. They contend that a trade-mark may lose distinctiveness as a result of genericism, multiple users, change of product origin and as a result of functional or ornamental use (Heintzman v. 751056 Ontario Ltd. (1990), 34 C.P.R. (3d) 1 (F.C.T.D.) and Santana Jeans Ltd. v. Manager Clothing Inc. (1993), 52 C.P.R. (3d) 472) (F.C.T.D.)).
[64] I believe that the relevant facts regarding the loss of distinctiveness can be summarized as follows. A first licence was granted to THC by THI in 1990 (the geographical licence). Then, in 1992, THI transferred its right to THLI. Following this transfer, THLI became the owner of all intellectual property rights and licences previously detained by THI. In 1994 THI merged with THUSA. In 1995 THLI amended its licence with THC (the Canadian Retail Licence). After a reorganization of THC in January 2001, the Canadian Retail Licence was transferred to a new division of the THC: THC Retail.
[65] Before getting into the analysis of the distinctiveness, it is important to understand that there is a clear distinction between a transfer and a licence. This distinction can easily be acknowledged from the wording used in sections 48 and 50 of the Act. Accordingly, a licence does not confer any property right in the property that is subject to the licence; it is merely a right to use someone else's property for a certain period of time or/and upon certain conditions. On the other hand a transfer consist of the assignment of all or part of the previous owner's rights and interest to the new owner.
a) Transfer
[66] In the case at hand, two transfers occurred. The first one happened in 1992 between THI and THLI and the second one in 2001 between THC and THC Retail. The 1992 transfer was reiterated in 1993 in respect of the Canadian Tommy Hilfiger's trade-marks and their goodwill.
- Transfer between THC and THC Retail (2001)
[67] The defendants argue that because of the reorganization of THC in January 2001, where portions of its business were transferred to THC Retail and THC Sales, none of the trade-marks at issue were, at the time of the commencement of the proceeding, distinctive of the plaintiffs' wares. In other words, the defendants argue that because the transfer was "untrammeled", it caused the marks to lose distinctiveness. The defendants allege that because of the transfer, it was impossible to know who the owner of the trade-marks was. Section 48 of the Act reads as follows:
TRANSFER
Trade-mark transferable
48. (1) A trade-mark, whether registered or unregistered, is transferable, and deemed always to have been transferable, either in connection with or separately from the goodwill of the business and in respect of either all or some of the wares or services in association with which it has been used.
Where two or more persons interested
(2) Nothing in subsection (1) prevents a trade-mark from being held not to be distinctive if as a result of a transfer thereof there subsisted rights in two or more persons to the use of confusing trade-marks and the rights were exercised by those persons.
TRANSFERT
Une marque de commerce est transférable
48. (1) Une marque de commerce, déposée ou non, est transférable et est réputée avoir toujours été transférable, soit à l'égard de l'achalandage de l'entreprise, soit isolément, et soit à l'égard de la totalité, soit à l'égard de quelques-uns des services ou marchandises en liaison avec lesquels elle a été employée.
Dans le cas de deux ou plusieurs personnes intéressées
(2) Le paragraphe (1) n'a pas pour effet d'empêcher qu'une marque de commerce soit considérée comme n'étant pas distinctive si, par suite de son transfert, il subsistait des droits, chez deux ou plusieurs personnes, à l'emploi de marques de commerce créant de la confusion et si ces droits ont été exercés par ces personnes.
[68] I admit that it is possible that as a result of a transfer that the right to use a trade-mark may subsist in two or more person, therefore, creating some confusion as of what is the source of the product. Such confusion may have the effect of interfering with the trade-mark distinctiveness.
[69] In the case at bar, I disagree with the defendants for the following reason. The transfer was not made between companies that had absolutely no link. Those companies are all subsidiaries of TH Corp. This transfer occurred following the reorganization of THC. The company to which the licence was transferred is still a Tommy Hilfiger company. Therefore, I cannot conclude that it could or had created confusion regarding the source of the wares.
[70] I am of the view that the transfer between THC and THC Retail has not caused the marks to lose distinctiveness. In order for a mark to lose its distinctiveness, the transfer must create a confusion in the customer's mind regarding the source of the product. In the present case, the source of the wares is Tommy Hilfiger and because the transfer was made to a subsidiary of Tommy Hilfiger, I do not believe that a customer would have been confused about the origin of the wares. In addition, the defendants did not present any evidence to establish that a confusion in regard of the source of the product occurred.
- Transfer between THI and THLI (1992)
[71] The defendants also contend that because the 1992 assignment to THLI did not transfer the goodwill that the transfer was not valid (paragraph 106 of the defendants' Statement of Fact and Law).
[72] To be valid a transfer does not have to include goodwill. Historically, at common law, a trade-mark was only transferable together with the goodwill of the business with respect to which it had been used, since a trade-mark could not stand alone (Richard, Hugues G., supra at 48-2 referring to Lacteosote Ltd.v. Alberman (1927), 44 R.P.C. 211, Clauson J. (H.C.J. - Ch. D.), at 222). Since the function of a trade-mark was to indicate the source or origin of the goods to which it was attached, the mere assignment of a trade-mark, unrelated with any business, was not permitted, and was deemed to impair its distinctiveness (Dubiner v. Cheerio Toys and Games Ltd., [1965] 1 Ex. C.R. 524 at 539). However, since the coming into force of the present Act, the assignments may now be valid even though the goodwill is not transferred (subsection 48(1) of the Act).
b) Licencing
[73] Section 50 of the Act provides that the owner of a trade-mark may allow another person to use his trade-mark and such use will not impair the distinctiveness of the trade-mark provided that the other person is a licensee in accordance with this section. Such licensed use is deemed to be used by the owner.
[74] Section 50 reads as follows:
LICENCES
Licence to use trade-mark
50. (1) For the purposes of this Act, if an entity is licensed by or with the authority of the owner of a trade-mark to use the trade-mark in a country and the owner has, under the licence, direct or indirect control of the character or quality of the wares or services, then the use, advertisement or display of the trade-mark in that country as or in a trade-mark, trade-name or otherwise by that entity has, and is deemed always to have had, the same effect as such a use, advertisement or display of the trade-mark in that country by the owner.
Idem
(2) For the purposes of this Act, to the extent that public notice is given of the fact that the use of a trade-mark is a licensed use and of the identity of the owner, it shall be presumed, unless the contrary is proven, that the use is licensed by the owner of the trade-mark and the character or quality of the wares or services is under the control of the owner.
Owner may be required to take proceedings
(3) Subject to any agreement subsisting between an owner of a trade-mark and a licensee of the trade-mark, the licensee may call on the owner to take proceedings for infringement thereof, and, if the owner refuses or neglects to do so within two months after being so called on, the licensee may institute proceedings for infringement in the licensee's own name as if the licensee were the owner, making the owner a defendant.
LICENCES
Licence d'emploi d'une marque de commerce
50. (1) Pour l'application de la présente loi, si une licence d'emploi d'une marque de commerce est octroyée, pour un pays, à une entité par le propriétaire de la marque, ou avec son autorisation, et que celui-ci, aux termes de la licence, contrôle, directement ou indirectement, les caractéristiques ou la qualité des marchandises et services, l'emploi, la publicité ou l'exposition de la marque, dans ce pays, par cette entité comme marque de commerce, nom commercial -- ou partie de ceux-ci -- ou autrement ont le même effet et sont réputés avoir toujours eu le même effet que s'il s'agissait de ceux du propriétaire.
Licence d'emploi d'une marque de commerce
(2) Pour l'application de la présente loi, dans la mesure où un avis public a été donné quant à l'identité du propriétaire et au fait que l'emploi d'une marque de commerce fait l'objet d'une licence, cet emploi est réputé, sauf preuve contraire, avoir fait l'objet d'une licence du propriétaire, et le contrôle des caractéristiques ou de la qualité des marchandises et services est réputé, sauf preuve contraire, être celui du propriétaire.
Action par le propriétaire
(3) Sous réserve de tout accord encore valide entre lui et le propriétaire d'une marque de commerce, le licencié peut requérir le propriétaire d'intenter des procédures pour usurpation de la marque et, si celui-ci refuse ou néglige de le faire dans les deux mois suivant cette réquisition, il peut intenter ces procédures en son propre nom comme s'il était propriétaire, faisant du propriétaire un défendeur.
[75] This section requires that two conditions be met in order for the use, the advertisement and the display of the trade-mark by the licensee be deemed made by the owner. Those two conditions are: (1) the existence of a licence and (2) the existence of a certain control over the character and the quality of the wares.
[76] In the present case, there is one licence that is of high interest. This licence was granted to THC in 1990 by THI (the geographical licence) and was latter amended by THLI in 1995 (the Canadian Retail Licence). The defendants argue that the evidence concerning the geographical licence demonstrate that THI only licenced THC to use a trade-mark that was not registered; the "TOMMY HILFIGER" trade-marks. They submit that the use by THC of other Tommy Hilfiger trade-marks without proper consent caused the Tommy Hilfiger's trade-marks to have lost their distinctiveness because it misled the public in regard of the source (paragraph 106 of the defendants' Statement of Fact and Law).
[77] In response, the plaintiffs allege that they have used the shorthand "TOMMY HILFIGER" when referring to the trade-marks in order to include all of the Tommy Hilfiger's trade-marks. The plaintiffs submit that their intention was not to limit the licensee from using the trade-marks.
[78] On the first point, I must say that I favour the plaintiffs' submissions. I believe that the shorthand "TOMMY HILFIGER" to define all of the Tommy Hilfiger's trade