Kirkbi AG v. Ritvik Holdings Inc.

Kirkbi AG v. Ritvik Holdings Inc.
Court (s) Database
Federal Court of Appeal Decisions
Date
2003-07-14
Neutral citation
2003 FCA 297
File numbers
A-395-02
Notes
Reported Decision
Decision Content
Date: 20030714
Docket: A-395-02
Citation: 2003 FCA 297
CORAM: ROTHSTEIN J.A.
SEXTON J.A.
PELLETIER J.A.
BETWEEN:
KIRKBI AG and LEGO CANADA INC.
Appellants/Plaintiffs
and
RITVIK HOLDINGS INC./GESTIONS RITVIK INC.
(now operating as MEGA BLOKS INC.)
Respondent/Defendant
Heard at Toronto, Ontario, on March 5, 2003.
Judgment delivered at Ottawa, Ontario, on July 14, 2003.
REASONS FOR JUDGMENT BY: SEXTON J.A.
CONCURRED IN BY: ROTHSTEIN J.A.
DISSENTING REASONS BY: PELLETIER J.A.
Date: 20030714
Docket: A-395-02
Neutral citation: 2003 FCA 297
CORAM: ROTHSTEIN J.A.
SEXTON J.A.
PELLETIER J.A.
BETWEEN:
KIRKBI AG and LEGO CANADA INC.
Appellants/Plaintiffs
and
RITVIK HOLDINGS INC./GESTIONS RITVIK INC.
(now operating as MEGA BLOKS INC.)
Respondent
REASONS FOR JUDGMENT
Sexton J.A.
[1] This is an appeal from the decision of Gibson J., which dismissed the Appellants' trade-mark infringement ("passing off") action, pursuant to paragraph 7(b) of the Trade-marks Act, R.S.C. 1985, c. T-13, as amended ("the Act") because the "LEGO Indicia trade-mark" in issue was not a valid trade-mark due to the doctrine of functionality. This decision is reported at (2002), 20 C.P.R. (4th) 224; [2002] F.C.J. No. 793.
[2] The issue in this case, therefore, is whether a trade-mark which is primarily functional in nature can sustain an action for passing-off under paragraph 7(b) of the Act.
Facts
[3] The Appellant, KIRKBI AG, is a Swiss corporation with its head office in Switzerland. It is a holding company whose business is the management of assets, including trade-marks. It was a plaintiff in the trial action.
[4] The Appellant, LEGO Canada Inc., was incorporated under the laws of Ontario in May 1988, and has its head office in Richmond Hill, Ontario. It, too, was a plaintiff in the main action.
[5] Both Appellants are members of the LEGO Group of Companies, a world-wide group of which KIRKBI AG and LEGO Canada Inc. are but two. The LEGO Group also includes INTERLEGO A.G., INTER LEGO A/S, and LEGO Systems Inc. KIRKBI AG is owned by Mr. Kjeld Kirk Kristiansen and his sister, and LEGO Canada Inc. is owned by INTERLEGO A.G., which is wholly owned by Mr. Kjeld Kirk Kristiansen.
[6] The Respondent, Ritvik Holdings Inc., is a company incorporated under the laws of Canada with its head office in St. Laurent, Quebec. Ritvik Toys Inc., once on the style of cause of this action and since deleted and discontinued, made and sold the MICRO line of MEGA BLOKS toys in Canada until its dissolution in 1998. Since Ritvik Toys Inc.'s dissolution, Ritvik Holdings Inc. has made and sold the MICRO line of MEGA BLOKS toys in Canada. All of the assets and liabilities, including the liability in this action, of Ritvik Toys Inc. have been assumed by Ritvik Holdings Inc. ("Ritvik").
[7] The first generation of LEGO bricks were derived from construction toys with cylindrical knobs, designed, manufactured and sold by Mr. Henry Page under the brand name KIDDICRAFT. Mr. Page patented his self-locking bricks in the United Kingdom, Canada, and France. A historical examination of this patent protection is necessary, as it demonstrates the extent to which the Appellants, LEGO, have successfully extended their patent monopoly through the years. LEGO retained a monopoly on the interlocking functions or system for construction bricks for approximately 50 years - from the 1940s until 1988, when the last patent expired. While an improvement patent legally only protected the patentee for the improvement and not for the original invention, as a practical matter, it may be difficult to separate the two. The Page UK Patent No. 529,580 was issued on November 25, 1940. This patent related "to toy building blocks and like constructional elements and has for its object to improve the interlocking between the assembled blocks and the stability of the built up structure". The Page UK Patent No. 587,206 was issued on April 17, 1947, and was in force for 16 years. This patent related "to toy building blocks and consist[ed] in an improvement in or modification of the invention claimed in the Specification of my prior Patent No. 529,580". The Page Canadian Patent No. 443,019 was issued on July 22, 1947, and described at one point the patent claims as follows:
Toy building block comprising a hollow parallel-sided thin walled body with the cavity open at the face of the block, symmetrically disposed spaced apart projections on the face opposite the open face with said projections in pairs in one direction and at least two projections in each row, with the overall dimension of the bosses in either direction closely approximately the dimension of the cavity in that direction.
The Page UK Patent No. 633,055 was issued on December 12, 1949 and claimed "to provide an improved form of building block" with windows and doors. The Page UK Patent No. 673,857 was issued on June 11, 1952, and modified the invention by providing for a supporting sheet or base to make the lowest row of bricks rigid. These Page patents were acquired by LEGO. In fact, LEGO toys were sold in Canada during the term of the Page Canadian Patent No. 443,019. The Christiansen Canadian Patent No. 629,732 for LEGO was issued on October 24, 1961, and the Christiansen Canadian Patent No. 880,418 was issued on September 7, 1971. This 1971 patent was for "box-shaped building elements, each of which is provided on the upper surface with coupling studs serving to couple the element to a corresponding element by engagement between the side walls of the latter element". The studs were "spaced equally" and were of the "same dimensions". According to subsection 45(1) of the Patent Act, R.S.C. 1985, c. P-4, the term for patents based on applications filed on or before October 1, 1989 was limited to "seventeen years from the date on which the patent was issued". Therefore, the last LEGO patent issued in 1971 expired in 1988.
[8] As it will appear later, when this patent expired, LEGO began attempting to acquire another form of protection through the law relating to trade-marks. This is referred to as the "Lego Indicia trade-mark".
[9] In 1991, Ritvik began making and selling its MICRO line of MEGA BLOKS construction toys. The toys comprise oversized bricks intended specifically for infants, each brick having cylindrical projections or knobs on one side which connect into the opposite side of another brick without clutch power. It is this MICRO line that is the subject matter of this action. This line of building blocks now represents about one-half of Ritvik's world sales, and in 2001 Ritvik was the largest toy maker in Canada.
[10] It should be noted that LEGO brand construction toys and MEGA BLOKS brand construction toys are sold through the same channels of trade. Large retailers usually display all the construction toys together, and both brands in issue are usually found in the same section of a store.
[11] The "LEGO Indicia trade-mark" is usually described as the upper surface of the LEGO toy building block, having eight (8) protuberances or studs on the surface. All or some of the knobs or studs of one LEGO piece may be connected to all or some part of the underside of another LEGO piece. The "clutch power" between connecting pieces is developed by the friction between the knobs on the one piece and the tubes and/or walls of the underside of the other piece.
[12] The studs of the upper surface of the LEGO brick have remained an unmodified prominent feature of all LEGO bricks since 1949. Since at least 1958, "LEGO" has been inscribed on the top surface of each stud. The studs and their pattern are widely featured in promotional materials used by LEGO Canada in Canada, including television advertisements, point-of-sale materials and packaging.
[13] The Appellants assert that this shaping of the knob configuration of LEGO products constitutes a "distinguishing guise" and thus a trade-mark under the Act. The trade-mark is not registered.
Decision Below
[14] The Trial Judge held that KIRKBI AG has a proprietary interest in the LEGO Indicia. He also held that KIRKBI AG and LEGO Canada Inc. each have a sufficient "ownership" interest, in Canada, in the LEGO Indicia to qualify as plaintiffs in this action, and that if the LEGO Indicia is a trade-mark, then paragraph 7(b) of the Act is a valid legislative provision conferring on this Court jurisdiction to entertain this action.
[15] The Trial Judge further concluded that the LEGO Indicia is primarily functional and, therefore, not a valid trade-mark under the Act. He came to this conclusion in the following manner. The LEGO Indicia is a functional element of LEGO bricks, contributing to the "clutch power" that could be said to be the essence of the LEGO building block system. All the features of the LEGO Indica Mark are dictated by function, and the shape of the top surface of the LEGO basic brick is purely utilitarian.
[16] Explaining Remington Rand Corp. v. Philips Electronics N.V. (1995), 64 C.P.R. (3d) 467 (F.C.A.); leave to appeal refused (1996), 67 C.P.R. (3d) VI (S.C.C.), the Trial Judge went on to state that the essence of a trade-mark is to distinguish the wares of an owner from those sold by others. Every form of trade-mark, including a distinguishing guise upon which the alleged LEGO Indicia trade-mark is based, is characterized by its distinctiveness. The Trial Judge agreed that a distinguishing guise may possess a functional element or component, but to the extent that such functionality relates primarily or essentially to the wares themselves it will invalidate the trade-mark. The following statement from Remington Rand was approved: "A mark which goes beyond distinguishing the ware of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade-mark."
[17] The Trial Judge rejected the arguments of the LEGO Appellants that functionality in the scheme of the Act goes only to the issues of registrability and expungement under section 13, and that the changes from the Unfair Competition Act, 1932 S.C. 1932, c. 38 (the predecessor to the current Act) demonstrate that it was Parliament's intention to eliminate functionality as a bar to a mark constituting a "distinguishable guise". At para. 58-59, he stated:
Put another way, counsel for the plaintiffs urged that I should reject the reasoning of the Federal Court of Appeal in Remington Rand, notwithstanding the long line of case authorities on which it is based and notwithstanding the fact that Remington Rand was decided while the current Trade-marks Act was extant.
I decline the urgings of counsel for the plaintiffs.
[18] The Trial Judge then noted at para. 59 that paragraph 7(b) of the Act does not expressly mention "trade-mark" or "distinguishing guise" - the definition terms set out in section 2 - and thus is disconnected from the overall trade-mark scheme of the Act. As a result, he thought he could examine the common law sense of the term "distinguishing guise" and not the statutory definition. He stated in para. 122 of his judgment, "we are not here dealing with a trade-mark as defined in the Act".
[19] The Trial Judge concluded that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud. That functionality relates primarily or essentially to the wares themselves. Therefore, he stated that "the LEGO Indicia cannot be a distinguishing guise in the common law sense of that term, as opposed to the sense provided by s. 2 of the Act."
[20] Therefore, based on functionality, the Trial Judge concluded that to the extent that Ritvik has adopted and used the LEGO Indicia, it has not contravened paragraph 7(b) of the Act and the action must be dismissed.
[21] Anticipating an appeal, the Trial Judge went on to address the rest of the issues in the case, despite dismissing the action on the basis of functionality. Therefore, the rest of his judgment is technically obiter dicta, and primarily deals with the application of the facts to the test for passing-off. Because, in my view, this case turns on the issue of the applicability and validity of the doctrine of functionality, it is unnecessary to comment on those parts of the reasons of the learned Trial Judge which deal with other issues.
Issue
[22] This appeal raises two questions:
1. Did the Trial Judge, in concluding that the LEGO Indicia were primarily functional, make a palpable and overriding error?
2. Can a mark which is primarily functional be a trade-mark within the meaning of the Trade-marks Act?
Relevant Statutory Provisions
[23] The relevant provisions of the Trade-marks Act are as follows:
2. "distinguishing guise" means
(a) a shaping of wares or their containers, or
(b) a mode of wrapping or packaging wares
the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others;
2. « signe distinctif » Selon le cas_:
a) façonnement de marchandises ou de leurs contenants;
b) mode d'envelopper ou empaqueter des marchandises,
don't la présentation est employée par une personne afin de distinguer, ou de façon à distinguer, les marchandises fabriquées, vendues, données à bail ou louées ou les services loués ou exécutés, par elle, des marchandises fabriquées, vendues, données à bail ou louées ou des services loués ou exécutés, par d'autres.
"trade-mark" means
(a) a mark that is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others,
(b) a certification mark,
(c) a distinguishing guise, or
(d) a proposed trade-mark;
« marque de commerce » Selon le cas_:
a) marque employée par une personne pour distinguer, ou de façon à distinguer, les marchandises fabriquées, vendues, données à bail ou louées ou les services loués ou exécutés, par elle, des marchandises fabriquées, vendues, données à bail ou louées ou des services loués ou exécutés, par d'autres;
b) marque de certification;
c) signe distinctif;
d) marque de commerce projetée.
4. (1) A trade-mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
4. (1) Une marque de commerce est réputée employée en liaison avec des marchandises si, lors du transfert de la propriété ou de la possession de ces marchandises, dans la pratique normale du commerce, elle est apposée sur les marchandises mêmes ou sur les colis dans lesquels ces marchandises sont distribuées, ou si elle est, de toute autre manière, liée aux marchandises à tel point qu'avis de liaison est alors donné à la personne à qui la propriété ou possession est transférée.
6. (1) For the purposes of this Act, a trade-mark or trade-name is confusing with another trade-mark or trade-name if the use of the first mentioned trade-mark or trade-name would cause confusion with the last mentioned trade-mark or trade-name in the manner and circumstances described in this section.
6. (1) Pour l'application de la présente loi, une marque de commerce ou un nom commercial crée de la confusion avec une autre marque de commerce ou un autre nom commercial si l'emploi de la marque de commerce ou du nom commercial en premier lieu mentionnés cause de la confusion avec la marque de commerce ou le nom commercial en dernier lieu mentionnés, de la manière et dans les circonstances décrites au présent article.
(2) The use of a trade-mark causes confusion with another trade-mark if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.
(2) L'emploi d'une marque de commerce crée de la confusion avec une autre marque de commerce lorsque l'emploi des deux marques de commerce dans la même région serait susceptible de faire conclure que les marchandises liées à ces marques de commerce sont fabriquées, vendues, données à bail ou louées, ou que les services liés à ces marques sont loués ou exécutés, par la même personne, que ces marchandises ou ces services soient ou non de la même catégorie générale.
(3) The use of a trade-mark causes confusion with a trade-name if the use of both the trade-mark and trade-name in the same area would be likely to lead to the inference that the wares or services associated with the trade-mark and those associated with the business carried on under the trade-name are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.
(3) L'emploi d'une marque de commerce crée de la confusion avec un nom commercial, lorsque l'emploi des deux dans la même région serait susceptible de faire conclure que les marchandises liées à cette marque et les marchandises liées à l'entreprise poursuivie sous ce nom sont fabriquées, vendues, données à bail ou louées, ou que les services liés à cette marque et les services liés à l'entreprise poursuivie sous ce nom sont loués ou exécutés, par la même personne, que ces marchandises ou services soient ou non de la même catégorie générale.
(5) In determining whether trade-marks or trade-names are confusing, the court or the Registrar, as the case may be, shall have regard to all the surrounding circumstances including
(a) the inherent distinctiveness of the trade-marks or trade-names and the extent to which they have become known;
(b) the length of time the trade-marks or trade-names have been in use;
(c) the nature of the wares, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trade-marks or trade-names in appearance or sound or in the ideas suggested by them.
(5) En décidant si des marques de commerce ou des noms commerciaux créent de la confusion, le tribunal ou le registraire, selon le cas, tient compte de toutes les circonstances de l'espèce, y compris_:
a) le caractère distinctif inhérent des marques de commerce ou noms commerciaux, et la mesure dans laquelle ils sont devenus connus;
b) la période pendant laquelle les marques de commerce ou noms commerciaux ont été en usage;
c) le genre de marchandises, services ou entreprises;
d) la nature du commerce;
e) le degré de ressemblance entre les marques de commerce ou les noms commerciaux dans la présentation ou le son, ou dans les idées qu'ils suggèrent.
7. No person shall
(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another;
7. Nul ne peut_:
b) appeler l'attention du public sur ses marchandises, ses services ou son entreprise de manière à causer ou à vraisemblablement causer de la confusion au Canada, lorsqu'il a commencé à y appeler ainsi l'attention, entre ses marchandises, ses services ou son entreprise et ceux d'un autre;
13. (1) A distinguishing guise is registrable only if
(a) it has been so used in Canada by the applicant or his predecessor in title as to have become distinctive at the date of filing an application for its registration; and
(b) the exclusive use by the applicant of the distinguishing guise in association with the wares or services with which it has been used is not likely unreasonably to limit the development of any art or industry.
13. (1) Un signe distinctif n'est enregistrable que si, à la fois_:
a) le signe a été employé au Canada par le requérant ou son prédécesseur en titre de façon à être devenu distinctif à la date de la production d'une demande d'enregistrement le concernant;
b) l'emploi exclusif, par le requérant, de ce signe distinctif en liaison avec les marchandises ou services avec lesquels il a été employé n'a pas vraisemblablement pour effet de restreindre de façon déraisonnable le développement d'un art ou d'une industrie.
(2) No registration of a distinguishing guise interferes with the use of any utilitarian feature embodied in the distinguishing guise.
(2) Aucun enregistrement d'un signe distinctif ne gêne l'emploi de toute particularité utilitaire incorporée dans le signe distinctif.
(3) The registration of a distinguishing guise may be expunged by the Federal Court on the application of any interested person if the Court decides that the registration has become likely unreasonably to limit the development of any art or industry.
(3) L'enregistrement d'un signe distinctif peut être radié par la Cour fédérale, sur demande de toute personne intéressée, si le tribunal décide que l'enregistrement est vraisemblablement devenu de nature à restreindre d'une façon déraisonnable le développement d'un art ou d'une industrie.
53.2 Where a court is satisfied, on application of any interested person, that any act has been done contrary to this Act, the court may make any order that it considers appropriate in the circumstances, including an order providing for relief by way of injunction and the recovery of damages or profits and for the destruction, exportation or other disposition of any offending wares, packages, labels and advertising material and of any dies used in connection therewith.
53.2 Lorsqu'il est convaincu, sur demande de toute personne intéressée, qu'un acte a été accompli contrairement à la présente loi, le tribunal peut rendre les ordonnances qu'il juge indiquées, notamment pour réparation par voie d'injonction ou par recouvrement de dommages-intérêts ou de profits, pour l'imposition de dommages punitifs, ou encore pour la disposition par destruction, exportation ou autrement des marchandises, colis, étiquettes et matériel publicitaire contrevenant à la présente loi et de toutes matrices employées à leur égard.
Standard of Review
[24] In my opinion, whether the LEGO Indicia are primarily functional is a plain finding of fact, and thus, according to Housen v. Nikolaisen 2002 SCC 33 [now reported 211 D.L.R. (4th) 577] the standard of review of palpable and overriding error must apply. An appellate Court will only intervene where it is satisfied that the Trial Judge made a palpable and overriding error, which affected the assessment of the facts. A finding is a palpable and overriding error, or clearly wrong, only if there is no evidence to support the inference or if the inference is contrary to the overwhelming weight of evidence.
[25] In Housen, the Court said at paragraph 23 that:
it is not the role of appellate courts to second-guess the weight to be assigned to the various items of evidence. ... The appellate court is not free to interfere with a factual conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts.
[26] Further comments from the decision in Housen are helpful in describing the strict standard of review that should be applied to the Trial Judge's decision about the LEGO Indicia being primarily functional. In Housen at paragraph 25, the Court stated:
Although the trial judge will always be in a distinctly privileged position when it comes to assessing the credibility of witnesses, this is not the only area where the trial judge has an advantage over appellate judges. Advantages enjoyed by the trial judge with respect to the drawing of factual inferences include the trial judge's relative expertise with respect to the weighing and assessing of evidence, and the trial judge's inimitable familiarity with the often vast quantities of evidence. This extensive exposure to the entire factual nexus of a case will be of invaluable assistance when it comes to drawing factual conclusions. In addition, concerns with respect to cost, number and length of appeals apply equally to inferences of fact and findings of fact, and support a deferential approach towards both. As such, we respectfully disagree with our colleagues's view that the principal rationale for showing deference to findings of fact is the opportunity to observe witnesses first-hand. It is our view that the trial judge enjoys numerous advantages over appellate judges which bear on all conclusions of fact, and, even in the absence of these advantages, there are other compelling policy reasons supporting a deferential approach to inferences of fact. We conclude, therefore, by emphasizing that there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge - that of palpable and overriding error.
Thus, a highly deferential approach must be applied to the factual findings and inferences made by the Trial Judge in his decision on this matter - it is he who had the advantages described above.
[27] A recent judgment by Rothstein J.A. in Canwell Enviro-Industries Ltd. et al. v. Baker Petrolite Corp. et al. (2002), 17 C.P.R. (4th) 478 (F.C.A.) succinctly describes the ratio in Housen. He states at paragraph 47-49:
The recent decision of the Supreme Court of Canada in Housen v. Nikolaisen, 2002 SCC 33 [now reported 211 D.L.R. (4th) 577], provides a thorough analysis of the standard of review to be applied by appellate courts to decisions of trial judges. I summarize my understanding of the principles relevant to this case as follows.
The standard of review on a question of law is correctness. At para. 9, Iacobucci and Major JJ., for the majority, state:
Thus, while the primary role of trial courts is to resolve individual disputes based on the facts before them and settled law, the primary role of appellate courts is to delineate and refine legal rules and ensure their universal application. In order to fulfill the above functions, appellate courts require a broad scope of review with respect to matters of law.
The appellate court may only intervene in conclusions of fact, including inferences of fact, in cases of palpable and overriding error.
[28] Although the finding of the Trial Judge that the LEGO Indicia are primarily functional is a question of fact and therefore reviewable on the basis of whether there is a palpable and overriding error, the question of whether a trade-mark is valid when it is primarily functional is a question of law and, therefore, the standard of review on that issue should be that of correctness. As stated in Housen, the appellate court is free to replace the legal opinion of the Trial Judge with its own. Thus, the Trial Judge's application of the functionality doctrine must be assessed on a correctness standard.
Appellants' Arguments
[29] The Appellants asserted that the LEGO Indicia is a "distinguishing guise" and thus a "trade-mark" as defined in section 2 of the Act. According to the Appellants, a "distinguishing guise" may have utilitarian features, as the language of section 2 of the Act does not expressly or impliedly limit the definitions of "trade-mark" or "distinguishing guise" by reason of functionality.
[30] Specifically, the Appellants argued that the Act demonstrates that the innate character or quality of a mark or a guise does not limit the basic definitions of "trade-mark" or "distinguishing guise". Rather, character and quality are only raised in the sections for registration or enforcement, particularly section 13 of the Act.
[31] Further, the Appellants submitted that a comparison of the present definitions in the Act with those in the Unfair Competition Act, 1932 supports this interpretation of the importance of functionality. The Appellants argued that in the Unfair Competition Act, 1932, the definition of "distinguishing guise" was explicitly limited by function by reason of the words "independently of any element of utility or convenience it may have". In the current Act, a "distinguishing guise" is not expressly required to be independent of any element of utility or convenience. Thus, the Appellants argued that the limitation of functionality has been eliminated from the definitions of "distinguishing guise" and "trade-marks" in the current Act, and is confined to the provisions of section 13 of the current Act.
[32] According to the Appellants, Parliament removed the language about functionality (utility or convenience) from the definition of a "distinguishing guise", and adopted a different strategy by enacting the special registration procedure under section 13. Section 13 does not bar registration based on the mere existence of functionality in a guise - even after registration, the public may use any utilitarian feature embodied in a distinguishing guise. Thus, a "distinguishing guise" may have utilitarian features.
[33] The Appellants attempted to distinguish the case followed by the Trial Judge, Remington Rand, supra. The Appellants argued that Remington Rand is not an authority for the proposition that functionality is relevant to the definition of "distinguishing guise" in the current Act. I have summarized the Appellants' points below:
(1) Remington Rand is concerned with registered trade-marks and the effect of exclusive use on competition, and the LEGO Indicia is not a registered trade-mark. The policy concerns don't arise to the same extent.
(2) The Court in Remington Rand erred in holding that there was no statutory basis for the invalidity of a trade-mark registration, on the basis of functionality. The Appellants LEGO assert that section 13 can provide that statutory basis.
(3) The Court in Remington relied on Imperial Tobacco Co. v. Registrar of Trade-Marks, [1939] 2 D.L.R. 65 (Ex. Ct.) as the leading case for this alleged non-statutory public policy regarding functionality, but Imperial Oil was decided under the Unfair Competition Act, 1932 and not the current Trade-marks Act. At this time, section 13 had not been enacted, so there was not a test at registration to preserve competition. Therefore, the reasoning in Imperial Oil was based on the definitions in, and policy behind, the Unfair Competition Act.
(4) In Remington Rand, there was no discussion of the differences in the definitions in the Unfair Competition Act, 1932 and the current Trade-marks Act.
(5) The Court in Remington Rand followed Parke Davis & Co. Ltd. v. Empire Laboratories Ltd. (1964), 43 C.P.R. 1 (S.C.C.), a case that, the Appellants claim, was decided under the Unfair Competition Act, 1932. The Court in Parke, Davis held that functionality invalidated the registrations - that the trade-marks were not valid trade-marks "within the contemplation of the statute", the Unfair Competition Act. The Appellants, therefore, argue that Parke, Davis supports the argument that functionality may have vitiated a trade-mark under the Unfair Competition Act, but no longer prevents it from being considered a "trade-mark" under the Trade-marks Act.
[34] Therefore, the Appellants submitted that if functionality is not a limitation, then the LEGO Indicia is, indeed, a trade-mark and paragraph 7(b) of the Act applies. But, if functionality is a limitation, then the Appellants submitted that the LEGO Indicia is not invalidated as a trade-mark as a result of the reasoning of this Court in Samann v. Canada's Royal Gold Pine Tree Mfg. Co. (1986), 9 C.P.R. (3d) 223 (F.C.A.).
Analysis
[35] The following important findings of fact made by the Trial Judge at paragraphs 61 and 163 regarding functionality should be noted:
In sum then, I conclude on the basis of the totality of the evidence before me that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud. That functionality, in the words of Mr. Justice MacGuigan in Remington Rand that are quoted above, "... relates primarily or essentially to the wares themselves ...". By reason of that conclusion, and that conclusion alone, the LEGO Indicia cannot be a distinguishing guise in the common law sense of that term, as opposed to the sense provided by section 2 of the Act. Therefore, to the extent that Ritvik has adopted and used the LEGO Indicia, it has not contravened paragraph 7(b) of the Trade-marks Act.
...
The LEGO Indicia is not a valid trade-mark, primarily because it is purely functional except in respect of the inscription "LEGO" on the top surface of each stud.
[36] The finding of the Trial Judge that the LEGO Indicia are purely functional is a finding of fact, and is not contested by the Appellants. In any event, there is no palpable and overriding error in this finding.
[37] Before embarking on the analysis as to the validity of the functionality doctrine, I must comment on the way in which the Trial Judge interpreted the definitions of "distinguishing guise" and "trade-mark" in paragraph 7(b) of the Act, as it relates to the rest of the trade-marks scheme. He stated at paragraph 59 that:
I have previously noted that the terms "distinguishing guise" and "trade-mark" are defined in section 2 of the Act for the purposes of that Act. Thus, wherever they are used in that Act , they must be given the defined meanings. But neither the term "distinguishing guise" nor the term "trade-mark" appears in paragraph 7(b) of the Act when it would not have been beyond the wit of qualified legislative drafters and of Parliamentarians, to incorporate one or both such terms in the paragraph in order to ensure that, as part of an over-all or comprehensive scheme relating to trade-marks, paragraph 7(b) only extended to the direction of public attention to wares, services or businesses, when such direction was accomplished through the medium of a distinguishing guise, as defined in section 2 of the Act.
As a result, at paragraph 61 he adopted the common law definition of "distinguishing guise", rather than the statutory definition under the Act: "the LEGO Indicia cannot be a distinguishing guise in the common law sense of that term, as opposed to the sense provided by section 2 of the Act".
[38] In my opinion, this separation of paragraph 7(b) from the rest of the trade-marks statutory scheme is incorrect statutory interpretation. In Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd., [1987] 3 F.C. 544 (F.C.A.), this Court determined that paragraph 7(b) was intra vires Parliament because it fitted into the overall trade-marks scheme, an area over which Parliament had jurisdiction to legislate. The Court stated at paragraph 28:
In paragraph 7(b) Parliament has chosen to protect the goodwill associated with trade marks. In this way, as Chief Justice Laskin put it, it "rounds out" the statutory scheme of protection of all trade marks. ... It has, in sum, a rational functional connection to the kind of trade marks scheme Parliament envisaged, in which even unregistered marks would be protected from harmful misrepresentation.
Therefore, I cannot endorse the separation of paragraph 7(b) from the definition of "trade-mark" and "distinguishing guise" in section 2 of the Act. Paragraph 7(b) is the equivalent statutory expression of the common law tort of passing off, with one exception: in order to use paragraph 7(b) a person must prove that they have a valid and enforceable trade-mark, whether registered or unregistered. The thing that distinguishes the common law action of passing-off from a passing- off action under paragraph 7(b) of the Act is that in the common law action a litigant need not rely on a trade-mark to make use of the action. To bring a passing-off action under the Act, one must have a valid trade-mark within the meaning of the Act. The definitions in section 2 of the Act are integral to any trade-mark passing-off action under paragraph 7(b), such as the Appellants' action.
[39] However, as will be seen, this error of law with respect to the interpretation of paragraph 7(b) does not affect the result of the case, and thus cannot be a ground upon which this appeal can succeed. The Appellants' action is grounded in paragraph 7(b) and hence, to succeed, the Appellants must establish that they have a trade-mark within the meaning of the Act. If the doctrine of functionality prevents a mark from being a trade-mark under the Act, then the Appellants cannot prevail.
[40] Turning now to the functionality analysis, it is my conclusion that to be a valid trade-mark within the Act, the trade-mark cannot be primarily functional. A Court must determine whether or not a trade-mark is primarily functional and, therefore, invalid.
[41] The purpose or policy behind applying this doctrine of functionality is to ensure that no one indirectly achieves the status of patent holder through the guise of a trade-mark. If the mark has a primarily functional use and is granted trade-mark protection, which can be perpetual, then it is providing something which a patent for the same product could not provide because patent protection cannot be perpetual. The protection of function and design is what a patent does. It would be abusive and unfair to the public and to competitors to allow a person to gain the benefits of a patent and a monopoly when merely holding a trade-mark, especially when the person otherwise could not obtain a patent or when the person merely holds a patent that has expired. A person could achieve this patent-like monopoly because a trade-mark gives to its holder the right of exclusive use in association with the wares in order to highlight the source of those wares. It should be explained what I mean by "exclusive use" - the holder of a trade-mark can exclusively use the mark to distinguish its goods. This "exclusive use", however, does not mean that the holder of the trade-mark can use the mark to stop others from using the mark for all other purposes besides highlighting the source of the wares. Other persons can still use the mark, for instance, in advertising to compare their wares to those of the holder of the mark.
[42] In Canadian Shredded Wheat Co., Ltd. v. Kellogg Co. of Canada, Ltd., [1938] 1 All. E.R. 618 (P.C.); [1938] 2 D.L.R. 145, the Privy Council espoused this policy of preventing an extension of a patent monopoly in the passing-off context regarding registering the descriptive name "shredded wheat" as a trade-mark. Lord Russel of Killoween stated at page 626:
There can be little doubt that, had the plaintiff company, when the patent expired, attempted to register the words "shredded wheat" as a trade mark for the sale of biscuits and crackers, the application would have met with short shrift. It would be attempting, by registering the name of the patented product, to prolong the patent monopoly, and this may not be done. [my emphasis]
This exact quote was repeated with approval by Hall J. of the Supreme Court of Canada in Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351 at page 356.
[43] In Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067, the Supreme Court of Canada recognized the process of prolonging a patent monopoly as the concept of "evergreening". This case involved the patented development by Whirlpool of an ingenious dual action agitator for clothes washing machines. Mr. Justice Binnie stated at pages 1086-7, on behalf of the Court:
It is common ground that the bargain between the patentee and the public is in the interest of both sides only if the patent owner acquires real protection in exchange for disclosure, and the public does not for its part surrender a more extended monopoly than the statutory 17 years from the date of the patent grant (now 20 years from the date of the filing of the patent application). A patentee who can "evergreen" a single invention through successive patents by the expedient of obvious or uninventive additions prolongs its monopoly beyond what the public has agreed to pay. [my emphasis]
Although Justice Binnie was speaking about an "obvious or uninventive addition" to prolong a patent monopoly, I would suggest that the same policy principles apply to prevent "evergreening" a patent by means of a trade-mark, as suggested in the Shredded Wheat, supra case.
[44] The existence of this policy has been recognized in other cases. For instance, Consumers Distributing Company Limited v. Seiko Time Canada Ltd., [1984] 1 R.C.S. 583 (S.C.C.) involved a claim by Seiko Time Canada Ltd., the authorized distributor of Seiko watches in Canada, that Consumers Distributing Co., an unauthorized distributor, had committed the tort of passing-off, contrary to paragraph 7(c) of the Trade-marks Act. Paragraph 7(c) of the Trade-marks Act states:
7. No person shall
(c) pass off other wares or services as and for those ordered or requested;
7. Nul ne peut:
(c) faire passer d'autres marchandises ou services pour ceux qui sont commandés ou demandés
The argument under paragraph 7(c) was that, by marketing the bare watch without the instruction booklet, the warranty, and the after sale service, Consumers Distributing Limited was creating confusion in the market place and damage to Seiko Time Canada Ltd.'s goodwill. "Seiko" was a registered trade-mark owned by the Japanese manufacturer, K. Hattori & Company Limited, who was not a party to the proceeding. Seiko Time Canada Ltd. was an authorized distributor, for which the Japanese manufacturer indemnified repairs. Seiko Time Canada Ltd.'s parent company was Seiko Time Corporation, which performed the same role in the Seiko distribution system in the United States. Seiko Time Corporation is, in turn, a wholly-owned subsidiary of Hattori. Consumers Distributing purchased genuine Seiko watches from an authorized distributor outside of Canada, and then imported and resold the watches without approval from Seiko Time Canada Ltd. The Supreme Court of Canada refused the injunction demanded by Seiko Time Canada Ltd. on the basis that Consumers Distributing had committed no wrong against it. Estey J. stated, on behalf of an unanimous court, at pages 599-600:
It is difficult, at first blush, to bring the conduct of the appellant within the concept of passing off. The appellant is selling precisely the same watch, coming from the same source, as the respondent. The watch is protected by a guarantee not in the respondent's name but in the name of the maker, Hattori. The quality of the product must have some bearing on the respondent's success and consequent development of business and goodwill in the trade. The watches sold in each branch of the trade, of course, were only and always those of Hattori. The Respondent [Seiko] purports to bring itself within the classic definition of the [passing off] doctrine by associating with the watch features which are unique to the selling technique employed by the respondent. The respondent is able to do this, so the argument goes, because of its contractual relationship with the supplier of Seiko watches, Hattori, which in turn supplies the respondent with the power of limiting the manufacturer's warranty to watches sold by dealers authorized by the respondent. Axiomatically, the appellant and persons (such as Woolco and K-mart) who, according to the evidence, carry on a like business, are unable to merchandise the watches in this manner [in the complete package with the warranty], as they are not authorized dealers. The problem facing the respondent [Seiko] is that the logical extension of this proposal grants to a vendor, in the position of the respondent, a monopoly on the sale in Canada of a product to the same extent as it would enjoy if the product were subject to a patent of invention issued to the respondent under the Patent Act of Canada. [my emphasis]
[45] This Court has recognized these public policy concerns in Thomas & Betts, Ltd. v. Panduit Corp. et al. (2000), 4 C.P.R. (4th) 498 (F.C.A.), where Décary J.A. stated at paragraphs 23-24:
On the other hand, it would be unfair to the public if a patentee could, after the expiry of its patent, use the Trade-marks Act to give itself a monopoly over the shape of its invention when that shape is so closely related to the invention as to be for all practical purposes an element essential to making full use of the invention.
It is precisely to solve this dilemma that the Trade-marks Act comes into play and this is precisely why this Court, in interpreting that Act, has ensured that it not be used to perpetuate a patent monopoly that would otherwise have expired. The solution retained by this Court is the doctrine of functionality. [my emphasis]
In my opinion, the Appellants have contravened this policy which underlies the doctrine of functionality, and the Trial Judge was correct in finding that the LEGO Indicia was invalid for this purpose.
[46] An historical analysis of the relevant case law supports the above propositions regarding the application of the functionality doctrine to trade-marks and the policy behind this doctrine. First, in Imperial Tobacco Co. v. Registrar of Trade Marks, [1939] 2 D.L.R. 65 (Ex. Ct.), the Exchequer Court of Canada dealt with the definition of a distinguishing guise and the registrability of a mark under the Unfair Competition Act, 1932. In Imperial Tobacco, the principle features of the design mark submitted for registration were "a transparent outer wrapper with a coloured band extending around the package". The Registrar refused registration of the mark on the ground that the coloured band served the function of indicating where the tear strip was located and facilitated the opening of the outer wrapper. The Court stated at page 67 with respect to the patents in question that: "One cannot read the specifications of those two patents without concluding that they describe precisely the principal features of the trade mark for which the appellant now seeks registration". The Court concluded, that the functionality of the wrapper invalidated it as a trade-mark, and stated at page 67:
One may safely say that the band was primarily designed and adopted for the purpose of opening the outer wrapper, and it is unlikely that if the outer wrapper were not moisture proof and the band did not function as a tearing strip, they, in combination, would ever be suggested as a trade mark. It seems to me that the trade mark applied for was intended to replace the patents referred to, if they should be found to be invalid, as they were. In my opinion any combination of elements which are primarily designed to perform a function, here, a transparent wrapper which is moisture proof and a band to open the wrapper, is not fit subject-matter for a trade mark, and if permitted would lead to grave abuses. [my emphasis]
Likewise, the Trial Judge in our case found that the LEGO Indicia are primarily functional and not a fit subject-matter for a trade-mark. In fact, the expired LEGO patents, as set out in the facts section of these reasons, describe the principal features of the alleged trade-mark in issue. The patents sound remarkably like the LEGO Indicia which the Appellants attempt to argue is a trade-mark. The Trial Judge stated at paragraph 67:
In essence, this issue of "evergreening" is nothing more than a sub-set of adoption of a functional element. There is no question but that the LEGO Indicia is claimed or disclosed in an expired patent, the expired Page Canadian Patent. Given my conclusion that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud, I need not go further.
Thus, in my opinion, were the Appellants to acquire a trade-mark for the LEGO Indicia, they would acquire a patent-like monopoly even though their patent has expired.
[47] In Parke, Davis & Co. v. Empire Laboratories Ltd. (1963), 41 C.P.R. 121 (Ex. Ct.); affirmed by [1964] S.C.R. 351 (S.C.C.), the plaintiff had registered trade-marks for coloured gelatin bands which it used to seal the halves of gelatin capsules containing a pharmaceutical preparation. The defendant used similar bands, and the plaintiff brought an action for infringement and a claim for passing-off. The case involved the issue of whether or not the registration of the trade-mark was valid. At the time, paragraph 18(1)(a) of the Trade Marks Act, 1952-53 (Can.), c. 49 stated that registrations are invalid if the marks were not registrable at the date of registration, which in Parke, Davis was under the Unfair Competition Act, 1932 (the Act in force at the time of registration). At the trial level, Noël J. concluded that the defendant's argument - that the plaintiff's trade-marks perform functions and are, therefore, incapable of constituting valid trade-marks - should prevail. Noël J. stated at pages 140-141:
A trader can, however, obtain a valid trade mark on a distinctive form of the functional part or parts such as in the Haig case providing that by so doing he does not hold a monopoly of all the forms of the functional part or parts.
....
However, this extensive coverage of the various colours and shades together with the utilitarian use of the coloured bands around the middle of the capsules ... brings me to the conclusion that the plaintiff by using its trade marks as it does ... undoubtedly monopolizes ... all the forms of the functional parts of the colour banded sealed capsules and because of this I cannot but find that the plaintiff's trade marks are invalid.
[48] The Supreme Court of Canada upheld Noël J.'s decision and stated at pages 354-355 that:
The validity of the trade marks may, in my view, be disposed of on the ground that the coloured bands have a functional use or characteristic and cannot, therefore, be the subject of a trade mark.
The law appears to be well settled that if what is sought to be registered as a trade mark has a functional use or characteristic, it cannot be the subject of a trade mark. With respect, I agree with Maclean J. when, in Imperial Tobacco Company of Canada, Limited v. The Registrar of Trade Marks, he said:
In my opinion any combination of elements which are primarily designed to perform a function, here, a transparent wrapper which is moisture proof and a band to open the wrapper, is not fit subject matter for a trade mark, and if permitted would lead to grave abuses.
Noel J. found as a fact that the gelatin band performed a function. There was ample evidence to support that finding. [my emphasis]
Not only did the Supreme Court agree that Noël J. had sufficient evidence on which to base his opinion regarding functionality, but it also found that there was further evidence of functionality because the appellant at one time held a United States patent on sealed capsules with similar bands from 1932 until it expired in 1949. After the patent expired, the appellant registered its trade-marks in Canada. The Court had this to say about what the appellant did at page 355:
In this way it sought to perpetuate its monopoly of the patent by applying for registration of the trade marks which, if regularly renewed, may be perpetuated.
Therefore, the Supreme Court of Canada, in Parke, Davis, makes an evidentiary link between a prior patent and a trade-mark claim. The Court stated at pages 355-356 that a prior patent for the thing claimed as a mark is "surely some evidence" of functionality:
In the present case the appellant's patent was not a Canadian but a United States patent, and the learned trial judge held that the fact of the appellant having obtained the Untied States patent was not relevant to the question regarding Canadian trade mark rights and he declined to give any weight to the fact that, the appellant had had the Untied States patent from 1932 to 1949. In the circumstances, it seems to me that the evidence was relevant. We are dealing here with what is essentially a question of fact, namely, have these coloured bands a functional use or characteristic? Evidence that the appellants so considered its bands when it applied for the United States patent in 1932 is surely some evidence that the bands have in fact a functional use. [my emphasis]
[49] The United States jurisprudence in this area is perhaps of little significance. However, it is interesting to note that the United States Supreme Court in TrafFix Devices, Inc. v. Marketing Displays, Inc. (2001), 532 U.S. 23; 121 S. Ct. 1255 stated that a utility patent is "strong evidence" of functionality. In TrafFix, an inventor obtained two utility patents for a mechanism built upon two springs to keep outdoor signs upright despite adverse wind conditions. This litigation followed after the patents expired and TrafFix, a competitor, sold sign stands with a visible spring mechanism that looked like those of Marketing Displays, Inc. The Court found that Marketing Displays Inc.'s trade dress infringement claim was precluded because the patent claims and prior patent infringement litigation concerning this dual-spring sign stand design indicated that the design was functional. In fact, the Court even went so far as to suggest a reverse-onus situation: the person claiming trade dress infringement bears the onus of showing, when an expired patent is in existence, that the trade dress features are not functional. Justice Kennedy stated at page 29-30:
The principal question in this case is the effect of an expired patent on a claim of trade dress infringement. A prior patent, we conclude, has vital significance in resolving the trade dress claim. A utility patent is strong evidence that the features therein claimed are functional. If trade dress protection is sought for those features the strong evidence of functionality based on the previous patent adds great weight to the statutory presumption that features are deemed functional until proved otherwise by the party seeking trade dress protection. Where the expired patent claimed the features in question, one who seeks to establish trade dress protection must carry the heavy burden of showing that the feature is not functional, for instance by showing that it is merely an ornamental, incidental, or arbitrary aspect of the device. [my emphasis]
[50] In Elgin Handles Ltd. v. Welland Vale Manufacturing Co. Ltd. (1964), 43 C.P.R. 20 (Ex. Ct.), the applicant sought to expunge a trade-mark registration. The mark on the register consisted of "darker colouring of the grain of the wood of tool handles accomplished by fire hardening". At the time, the Exchequer Court of Canada had the jurisdiction to expunge a registered trade-mark if it did not fit within the definition of trade-mark found in s. 2(t) of the Trade Marks Act, 1952-1953 (Can.), c. 49. The Court broadly applied the decision of Parke, Davis, supra and took it as standing for the following proposition: "This decision establishes that that which has "a functional use or characteristic" cannot be a trade-mark." (page 23). The Court came to the conclusion that the fire hardening process is primarily designed to improve wooden handles as objects of commerce and therefore has a functional use or characteristic: "where a change in appearance of the goods in relation to which the alleged trade mark is to be used is the normal result of a process that has a functional use or characteristic, such a change in appearance cannot be a trade mark" (page 23-24).
[51] In Samann, supra, this Court dealt with registered trade-marks consisting of a car air freshener in the shape of an evergreen tree with writing on it. The first trade-mark was registered under the Unfair Competition Act, 1932 and the second trade-mark was registered pursuant to the provisions of the Trade Marks Act, 1952-1953. Citing Imperial Tobacco, Parke, Davis, and Elgin Handles, supra, the Trial Judge in Samann found that the trade-marks were not valid trade-marks as defined under the Trade Marks Act, 1952-1953, nor as defined under the Unfair Competition Act, 1932 because the registered marks were primarily used in wares for a utility purpose, partly ornamental and partly functional. This Court allowed the appeal. The Court stated at pages 229-230:
While it is apparent, as noted, supra, that the three decisions principally relied on by the respondent were all cases where the mark or marks there in issue contained functional elements or components, it is equally clear that the marks in issue in this case, do not contain functional elements. This seems evident from the finding of the learned trial judge (A.B. vol. 9, p. 1101 [p. 319 C.P.R.]) that it was the wares of the appellant, in their pine tree shape with rectangular base "when used in combination with the packages ..." (emphasis added) (which he earlier described as sealed plastic envelopes with the characteristics I have summarized, supra), that had the numerous functions referred to by him. ...
For these reasons, it is my view, that the three decisions relied on by counsel for the respondent, supra, have no application to the situation in the case at bar. It follows, in my view, for the reasons expressed, supra that the respondent was not entitled to a declaration of invalidity on the basis of physical functionality.
The Appellants argued that Samann supports their position. I disagree. In my opinion, Samann can be distinguished from the case at hand because in Samann if the branches were cut off the evergreen tree mark, it would still function as an air freshener. In other words, the functional aspect was not the evergreen tree per se. What was functional was the air-freshener package. It could have been any shape. In contrast, in our case if the knobs were cut off the LEGO bricks, the brick would not function - it would not fasten together with another brick.
[52] This Court's decision in Pizza Pizza Ltd. v. Canada (Registrar of Trade Marks) (1989), 26 C.P.R. (3d) 355 (F.C.A.) involved an appeal from the Registrar's refusal to register Pizza Pizza's telephone number as a trade-mark (the numerical combination "967-1111") which was used on all products and in all advertising. This Court concluded that despite the functional aspect of the phone number, the mark was registrable as a trade-mark. Pratte J.A. stated at pages 356-357:
Counsel for the respondent tried to support the decision of the Trial Division [7 C.P.R. (3d) 428, 6 C.I.P.R. 229] on only one ground, namely, that a telephone number is not registrable as a trade mark because, according to the jurisprudence, a mark that is primarily designed to perform a function cannot be the subject of a trade mark. This position, in my view, reveals a complete misunderstanding of that jurisprudence. In those cases, the marks that were held to be functional were, in effect, part of the wares in respect of which registration was sought so that the registration of those marks would have granted the applicants a monopoly on functional elements or characteristics of their wares; the applicants would, in effect, have obtained patents under the guise of trade marks. The situation here is entirely different. The trade mark applied for by the appellant is not functional in that sense; for that reason, its functional character does not make it "not registrable". [my emphasis]
In my opinion, Pratte J.A. distinguished the case before him in Pizza Pizza from the line of jurisprudence discussed above in these reasons because the phone number was not an element or part of the wares. The wares were pizza. The phone number was a mark which was intended to distinguish or call attention to the existence of the wares. In contrast, in the jurisprudence dealing with functionality discussed above, the marks were functional elements of the wares, just as is the LEGO Indicia. In other words, the marks were an integral part of the operating process of the wares. Without the knobs on the LEGO Indicia, the bricks do not connect. Without the wrapper in Imperial Tobacco, the package would not open easily. Without the gelatin band in Parke, Davis, the pills would not be sealed. In this case, the Court explained the functionality test. A mark must be primarily functional, not just functional in some aspect, to invalidate a trade-mark. If that functionality is merely peripheral to the wares, then that is not sufficient to invalidate a trade-mark.
[53] Urie J.A. agreed with Pratte J.A. in Pizza Pizza, supra, finding at page 361 that Parke, Davis, supra and Elgin Handles, supra are "readily distinguishable":
All four judgments are readily distinguishable, in my view. First, it was not alleged in this case that the numerical combination was used for the purpose of ornamentation. Secondly, neither could it be said, as counsel pointed out, to be solely functional. ... As I see it, while undoubtedly there is a functional element in its use by the appellant, in that to place a telephone order for any of the appellant's products the numerical combination that is the telephone number allotted by the telephone company to the appellant must be utilized, that is not its sole function. Rather, it is totally unrelated to the wares themselves in the sense that, for example, a numbered part of some product would be so related which is purely a functional use. [my emphasis]
Thus, Pizza Pizza stands for the proposition that the fact that an item has some functional aspect is not sufficient to render a trade-mark invalid; the item must be primarily functional as related to the wares themselves to have this effect.
[54] In Remington Rand, supra, the appellants wanted to market a Remington triple-head rotary electric shaver which had three cutting heads arranged in an equilateral triangular configuration, the same configuration as Philips' rotary shaver. The question was whether a pictorial description of a manufactured article, and some of its working parts, could be the subject of a trade-mark registration. This Court rejected the Trial Judge's conclusion in Remington Rand of validity and infringement, and expunged the trade-mark, despite the Trial Judge's finding that the shavers were virtually indistinguishable from each other because they had identical head assembly. MacGuigan J.A. discussed at page 474 the decision in Pizza Pizza, supra:
I believe that Pizza Pizza Limited v. Registrar of Trade Marks, [1989] 3 F.C. 379, which follows the same approach, gives a clearer indication of what functionality is permissible. ...
The most focussed reasons for judgment were the concurring ones of Pratte J.A., who held that the only kind of functionality that was alien to the registration of a trade mark was that which made a mark part of the wares.
Thus, MacGuigan J.A. also interpreted Pratte J.A.'s judgment in Pizza Pizza as further clarifying the test for functionality, such that peripheral functionality that allows a mark to stay separate from the functions and operations of the wares is not sufficient to invalidate a trade-mark. MacGuigan J.A. in Remington Rand then went on at page 475 to reject the respondent's allegation that Urie J.A.'s judgment in Pizza Pizza supports the idea that functionality has no relevance to what is otherwise a valid trade-mark:
I do not so read Urie J.A. ... In my opinion, both sets of reasons in Pizza Pizza rather endorsed the view that what is determinative is the kind of functionality in question. If functionality goes either to the trade mark itself (Imperial Tobacco, and Parke, Davis) or to the wares (Elgin Handles), then it is essentially or primarily inconsistent with registration. However, if it is merely secondary or peripheral, like a telephone number with no essential connection with the wares, then it does not act as a bar to registration.
At page 476, MacGuigan J.A. explained that if a mark is primarily functional as "part of the ware", the effect would be the creation of a patent of industrial design rather than a trade-mark: "the applicants would, in effect, have obtained patents under the guise of trade marks". MacGuigan J.A. concluded at page 476 that "the design mark, by depicting those functional elements, is primarily functional":
The trial judge may have been correct in stating that "a distinguishing guise necessarily possesses a functional element or component" ... but, to the extent that such functionality relates primarily or essentially to the wares themselves it will invalidate the trade mark.
The distinguishing guise in the case at bar is in my opinion invalid as extending to the functional aspects of the Philips shaver. A mark which goes beyond distinguishing the wares of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade mark. (478)
[55] In Thomas & Betts, supra, the appellants successfully appealed from the decision of a Motions Judge who had granted summary judgment. The facts of Thomas & Betts are very similar to the case at hand. Thomas & Betts developed a cable tie which was the subject of a patent which expired in 1984. In 1994, Panduit Corp. introduced a cable tie which was virtually identical to Thomas & Betts' cable tie, including the oval shape of the cable tie head. Thomas & Betts commenced an action that alleged infringement of its unregistered trade-mark consisting of a distinctive oval shape for the head of a cable tie. Décary J.A. concluded that the doctrine of functionality must be considered when examining an infringement action involving an unregistered trade-mark, and explained the rationale behind the idea that the doctrine of functionality can provide the solution to the trade-mark dilemma. Décary J.A. quoted MacGuigan J.A.'s comments in Remington Rand, supra at page 506-7:
In my opinion any combination of elements which are primarily designed to perform a function ... is not fit subject-matter for a trade mark, and if permitted would lead to grave abuses. ...
A mark which goes beyond distinguishing the wares of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade-mark.
At page 507, Décary J.A. went on to explain the necessity of examining the doctrine of functionality when determining whether something fits into the definition of a distinguishing guise:
The issue in the action is whether the oval-shaped head was a distinguishing guise within the meaning of the Trade-marks Act. In addressing that issue, which is partly and perhaps essentially one of fact, the Motions Judge would have had to examine the very facts of the case in the light of trade-marks principles, including the doctrine of functionality. It may be that at the end of a trial a judge would reach the conclusion, with respect to the specific issue of functionality, that the description or depiction of the oval-shaped head as a preferred embodiment of the invention was evidence, perhaps conclusive evidence, of functionality, but any such conclusion would be premature in this case at the stage of a motion for summary judgment.
[56] The LEGO Appellants argued in this case that the statutory changes of the definition of "distinguishing guise" from the Unfair Competition Act, 1932 to the current Trade-marks Act demonstrate that Parliament intended to eliminate the doctrine of functionality; otherwise, subsection 13(2) of the Trade-marks Act would be redundant. Paragraph 2(d) of the Unfair Competition Act, 1932 defined "distinguishing guise" as follows:
"Distinguishing guise" means a mode of shaping, moulding, wrapping or packing wares entering into trade or commerce which, by reason only of the sensory impression thereby given and independently of any element of utility or convenience it may have, is adapted to distinguish the wares so treated from other similar wares and is used by some person in association with his wares in such a way as to indicate to dealers in and /or users of similar wares that the wares so treated have been manufactured or sold by him; [my emphasis]
The definition of "distinguishing guise" in section 2 of the current Trade-marks Act is as follows:
"distinguishing guise" means
(a) a shaping of wares or their containers, or
(b) a mode of wrapping or packaging wares
the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others;
The two definitions essentially say the same thing - that the shape or mode of wrapping the wares is used for the purpose of distinguishing the wares from others - but for the deletion from the current Act of the one phrase "independently of any element of utility or convenience it may have". That phrase, in and of itself, does not suggest that a mark is invalid by reason of it being primarily functional. It just suggests that in assessing distinctiveness, you do not consider functionality. That situation continues to pertain to the present statute in section 13 - that is - you look at the distinguishing guise to see if it distinguishes the goods themselves.
[57] The doctrine that provides that a trade-mark is invalid if it is primarily functional clearly did not arise from the wording in the Unfair Competition Act, 1932. It arose as a necessary part of trade-mark law as interpreted by the courts over the last 60 years. Its purpose was to prevent the obvious abuse of permitting a person to effectively obtain perpetual patent protection by means of a trade-mark.
[58] The Appellants relied on the express mentioning of functionality in subsection 13(2) of the Trade-marks Act (a provision that has no precedent in the Unfair Competition Act, 1932) to support their submission that functionality has been eliminated as a factor from the analysis of trade-mark validity and the definition of a trade-mark under section 2 of the Act:
13. (2) No registration of a distinguishing guise interferes with the use of any utilitarian feature embodied in the distinguishing guise.
13. (2) Aucun enregistrement d'un signe distinctif ne gêne l'emploi de toute particularité utilitaire incorporée dans le signe distinctif.
According to the Appellants, the consideration of functionality has now been shifted to the registration and expungement analysis under section 13 and is only important at that stage. The Report of the Trade Mark Law Revision Committee to the Secretary of State of Canada (Edmond Cloutier, C.M.G., O.A., D.S., Ottawa: Queen's Printer and Controller of Stationary, 1953), drafted January 20, 1953, sheds some light on the reason for the enactment of subsection 13(2).
Attached to this Report is the Bill that we recommend for your consideration and, if it meets with your approval, for introduction in Parliament. The following remarks will serve to explain the reasons that prompted us to propose the changes that we advise should be made in the present law relating to trade marks, fair trading and unfair competition. (page 5)
According to this report, section 13 was enacted to make clear that a distinguishing guise can become registrable only after proof of distinctiveness by use. The functionality in issue related specifically to the fact that others can still use the utilitarian features of a distinguishing guise.
We have, however, concluded that a distinguishing guise should not, as it is under the Unfair Competition Act, 1932, be registrable in the same way as an ordinary trade mark, but ought to be registered only after proof has been made of its distinctiveness by use in Canada and, in addition, only if the Registrar is satisfied that the exclusive use following upon its registration will not be likely unreasonably to limit the development of any art or industry. We have also taken care to ensure that the registration of a distinguishing guise shall give no right to the registrant to prevent others from using any of its utilitarian features. [my emphasis]
Clearly, section 13 was not intended to revoke the established legal concept of functionality which can invalidate a trade-mark.
[59] Indeed, in my view, section 13(2) reinforces the concept that the doctrine of functionality invalidates a mark which is primarily functional. It makes clear that the public is not constrained from using any utilitarian features of a distinguishing guise. It follows that if a distinguishing guise is wholly or primarily functional, then the public is not constrained from using the distinguishing guise in its entirety. Thus a distinguishing guise which is primarily functional provides no rights to exclusive use and hence no trade-mark protection. In other words the fact that the distinguishing guise is primarily functional means that it cannot be a trade-mark. The appellants have simply misconstrued section 13(2).
[60] The Appellants argued that, because functionality is not expressly mentioned in the definition of "distinguishing guise" in section 2 of the Trade-marks Act, it is not part of the definition. However, the mere fact that the existing definition of "distinguishing guise" expressly says nothing to suggest the importance of functionality is inconsequential. This silence is not a clear enough indication to warrant the removal of the well established doctrine of functionality with respect to trade-mark analysis.
[61] The Appellants further argued, however, that the functionality doctrine only applies to registered trade-marks and not to unregistered trade-marks, such as the LEGO Indicia. However, I fail to see the logic in this argument, as the Trade-marks Act does not provide any different criteria for defining trade-marks, whether they be unregistered or registered. As outlined specifically in Asbjorn, supra, sections 1 to 11 of the Act - that do not refer to the process of registration - are concerned with both registered and unregistered trade marks. Paragraph 7(b) is part of this overall scheme of the Act, and thus deals with both registered and unregistered trade-marks. MacGuigan J.A. stated in Asbjorn at page 328:
The Canadian Act, as the statutory history set out by Laskin C.J.C. in the MacDonald case, supra, showed, has traditionally been concerned with the protection of unregistered as well as registered trade marks. In this it is like the Copyright Act [R.S.C. 1970, c. C-30], whose coverage is broader than registered copyright. In both Acts what registration does is to provide additional benefits over and above those available at common law.
In reviewing the scheme of the Act in Royal Doulton Tableware Limited v. Cassidy's Ltd., [1986] 1 F.C. 357, at page 374; (1984), 1 C.P.R. (3d) 214 (T.D.) at page 228, Strayer J. said that "the Trade Marks Act in sections 1 to 11 defines and prescribes a number of rules concerning trade marks and the adoption thereof, without reference to registration. Thereafter, the Act only deals with registered trade marks." He adds: "Parliament by sections 1 to 11 of the Trade Marks Act has prescribed a regime concerning what constitutes a trade mark and the adoption thereof, whether registered or not." [my emphasis]
No reason has been suggested as to why the doctrine of functionality should apply to registered trade-marks in passing off actions under paragraph 7(b), but not to unregistered trade-marks in passing off actions under paragraph 7(b).
[62] I have reviewed the draft reasons of my learned colleague Pelletier J.A. He says at paragraph 5 that the appellants argue that, "the owner of an unregistered trade mark is not entitled to exclusive use of that mark. Since exclusive use can only be obtained by registration, the appellants say that they cannot insist that the respondent cease using the Lego indicia; they can only insist that the respondent take steps to ensure that its use of the Lego indicia does not lead consumers to believe that the respondent's goods are the appellants ." [my emphasis]. Based on his subsequent paragraphs, Pelletier J.A. seems to agree with this argument, especially when he states at paragraph 27, "[s]ince one only acquires monopoly rights by registration, there is no need to apply the policy [of functionality] against monopolies to unregistered trade-marks". With respect, I must disagree.
[63] Further, in rejecting the notion that the doctrine of functionality applies to unregistered trade-marks, Pelletier J.A. says at paragraph 74, "The jurisprudence dealing with registered trade-marks is not useful in considering the position of unregistered trade-marks since registration confers rights not available to the owners of unregistered trade-marks". Pelletier J.A. explains in his reasons that unregistered trade-marks cannot confer monopoly rights because only a registered trade-mark has the unqualified right to enjoin the use of the mark by another as an indication of origin. The owner of an unregistered trade-mark has only a qualified right to enjoin the use of his mark by another because a defendant can avoid liability by showing that he used additional material to distinguish his goods and to indicate the true source of the goods.
[64] Again, I do not agree. In my view, the right to exclusive use of a trade-mark is not limited in this sense to registered trade marks. It applies to unregistered trade-marks as well.
[65] Pelletier J.A. relies upon an English case, Singer Manufacturing Company v. Loog (1880), 18 Ch. D. 395 (C.A.); aff'd (1882-1883), 8 App. Cas. 15 (H.L.) ["Singer"], to attempt to illustrate the point that an unregistered trade-mark has merely a qualified exclusive use as compared with an registered trade-mark. With respect, in my opinion the Singer case does not provide support for this proposition.
[66] The facts in Singer were largely uncontested, and much of the legal issues were already settled before the case reached the House of Lords. A brass plate or label with the word "Singer", similar in form, size and position to the brass plates or labels engraved with the plaintiff's trade-mark, had been attached to some of the machines manufactured by the defendant (also exactly similar in form, pattern and construction to some of the plaintiff's machines). It was not contested that some people might mistake that plate or label for the plaintiff Singer's trade-mark, and believe that those machines sold by Loog were really that of the plaintiff's. Therefore, as explained by Lord Selborne L.C. of the House of Lords at page 18 of the judgment, the plaintiffs Singer had already obtained "an injunction to the full extent necessary to protect their trade-mark" in the court below. This part of the injunction was not appealed and Loog undertook to follow it. Thus, it was not in issue before the House of Lords that the defendant Loog had infringed Singer's unregistered trade-mark, and that Singer could prevent Loog from using the trade-mark on the Sewing machines in association with the wares. However, what was in issue before the House of Lords was the idea that Singer could prevent the defendant Loog from using the word "Singer" in any way whatsoever. The Court of Appeal had held that the Trial Judge went "further" than the full injunction by also prohibiting "the defendant (in effect) from using the word "Singer" in any way whatever, with respect to any machines not manufactured by the plaintiffs' company" (page 18), and reversed this aspect of the trial judgment. The House of Lords affirmed this decision.
[67] Lord Selborne L.C. for the House of Lords explained that Singer challenged Loog's use of the word "Singer" on four documents, consisting of an advertisement (broad sheet), a price list comparing the two parties' sewing systems, a title-page of directions for use, and an invoice. He agreed with the Court of Appeal that the defendant Loog was free to use the name "Singer" in this sense and concluded th