Wanakome Inc. v. Martin

Wanakome Inc. v. Martin
Court (s) Database
Federal Court Decisions
Date
2024-05-06
Neutral citation
2024 FC 688
File numbers
T-609-20
Decision Content
Date: 20240506
Docket: T-609-20
Citation: 2024 FC 688
Toronto, Ontario, May 6, 2024
PRESENT: The Honourable Madam Justice Furlanetto
BETWEEN:
WANAKOME INC.
Plaintiff
and
ERIC MARTIN, KARA MARTIN AND PARK ENTERPRISES WORLDWIDE INC.
Defendants
JUDGMENT AND REASONS
I. Overview [1] This is an action under subsections 7(b), (c) and (d) of the Trademarks Act, RSC 1985, c T-13 [Trademarks Act] relating to an unregistered trademark, WANAKOME, and a related challenge to a copyright registration for an artistic work used as the wanakome logo.
[2] The Plaintiff, Wanakome Inc., is a corporation incorporated under the Canada Business Corporations Act RSC, 1985, c C-44 [CBCA], which lists Kemel Hadad [Hadad] as its sole Director. Wanakome Inc. is the named Applicant on Canadian trademark application no. 1,919,381[Application] filed in respect of the trademark WANAKOME for use in association with the following goods, based on a claim of proposed use: 18(1) bags, namely carry-all bags and backpacks; and 25(2) clothing, namely, hosiery, shirts, blouses, tank tops, T-shirts, pants, leggings, shorts, dresses, casual wear, sweaters, sweatpants, sweatshirts, hoodies, athletic wear, loungewear, lingerie, sleepwear, underwear, jackets, sport coats, coats, parkas, vests, capes, scarves, belts; headwear, namely, hats, caps, sport caps, bandanas, and head scarves; footwear, namely casual footwear, athletic footwear, beach footwear, evening footwear, boots.
[3] The WANAKOME mark is not registered in Canada and the Application is under opposition by the Defendants.
[4] The Defendants Eric Martin and Kara Martin are spouses [collectively, the Martins], both of whom are residents of the United States [US]. The Defendant Eric Martin is the owner of the Defendant company, Park Enterprises Worldwide Inc. [Park], a California-based company. His wife Kara Martin was, at all material times, involved in all aspects of Park’s business operations. As relevant to this litigation, Park’s commercial activities included inter alia the sale and distribution of various lines of clothing at a wholesale level, including clothing bearing the WANAKOME trademark. Park operated showrooms and operated a separate public relations company and promotion business called Media Playground PR [Media PR].
[5] Park is the registered owner of Canadian copyright registration number 1170106, registered on May 27, 2020, for the artistic work titled “wanakome mountain” [Wanakome Logo], which was identified at trial as being depicted by the following trial exhibit (Exhibit 91, page 2):
[6] For over two years, Hadad and his company Double J Fashion Group 2013 [Double J] were in a business relationship with Park, which involved the conception of the WANAKOME brand, the incorporation of Wanakome Inc. and the manufacture, production, distribution and sale of clothing bearing the WANAKOME trademark and in some cases, the Wanakome Logo.
[7] The relationship ultimately soured in May 2020.
[8] At the heart of this litigation is a dispute over who has rights to the WANAKOME trademark and the copyright in the Wanakome Logo.
[9] For the reasons set out below, the action will be dismissed as I am unable to conclude that Wanakome Inc. as registered under the CBCA is the owner of all rights, title and interest to the WANAKOME trademark or that all use of the WANAKOME trademark is attributable to Wanakome Inc. Nor do I find that the section 7 allegations have otherwise been satisfied. In connection with these findings, it is my further view that there is insufficient evidence to expunge the copyright registration for the Wanakome Logo.
II. Background [10] On June 15, 2017, Park became the exclusive sales representative for a successful clothing brand NAKETANO in respect of its sales in the US and Canada. The NAKETANO clothing line focussed on designer hoodies that included nautical pull ties, cowl necks, and extremely soft fabric.
[11] On December 31, 2017, the owner of the NAKETANO brand advised Eric Martin that it would be ceasing its operations and as a consequence, its sales relationship with Park, effective December 31, 2018. As sales of NAKETANO clothing were an important part of Park’s business, Park was desirous of maintaining sales in this market space and sought to replace NAKETANO with a new brand for the same type of clothing. In connection with this objective, the Defendants began looking for a business partner who could handle production and distribution of the brand while they would be in charge of marketing, design, communication, customer relations, and sales.
[12] In early 2018, the Defendants approached Hadad who was the Chief Executive Officer [CEO] of Double J, a Canadian clothing distribution company based in Montreal, Quebec. Hadad had a long history in the clothing industry on the production and distribution side, both in Canada and internationally. He had met the Martins previously as Park had acted as sales representative for two other brands distributed by Double J (Song of Love and Bellfield) and had entered into a sales representation agreement with Double J for a third brand (Res Denim).
[13] From about March 2018 until late April 2020, Park and Hadad/Double J worked jointly and collaborated on the production and sale of the WANAKOME line of clothing. Hadad/Double J handled the finances, and were responsible for administration, arranging manufacture and production of the clothing line, while Park was responsible for sales, marketing, public relations and most aspects of design.
[14] The WANAKOME trademark was conceived in March 2018. While there was dispute as to whether Hadad was involved in its conception, the evidence was consistent that the name “wanakome” was largely inspired by a memorable trip the Martins took to Lake Wanaka in New Zealand; a place that made them feel like home. Promotion of the brand began in the summer of 2018, with its first orders taken in July 2018, manufacture starting in August 2018, and sales beginning in September 2018. Payments for sales were made to Double J, with commission paid to Park.
[15] On September 5, 2018, Hadad incorporated Wanakome Inc., naming himself as sole Director. The Application for the WANAKOME trademark was filed in Canada on September 11, 2018, followed by corresponding applications in the US, European Union, United Kingdom [UK], Switzerland, Turkey and China. On each application, the owner of the mark was identified as Wanakome Inc. The applications filed in the US, Turkey, UK and European Union were subsequently issued to registration.
[16] On March 1, 2019, Media PR entered into a short-term public relations agreement with Wanakome Inc. [PR Agreement], which provided that Media PR would handle all of WANAKOME’s public relations. This included a licence to intellectual property during the term of the agreement. Media PR was paid $1,000 US a month from March 2019 to December 2019 under the terms of the agreement.
[17] On March 29, 2019, Hadad provided Eric Martin with a draft shareholder agreement for Wanakome Inc., which identified Hadad, Eric Martin and Robert Carsley, a business associate of Hadad, as proposed shareholders. Over the Fall of 2019, Eric Martin reached out to Hadad on several occasions to discuss the draft agreement and in January 2020, sent Hadad a mark-up of the draft; however, the draft agreement was never finalized or executed.
[18] On April 14, 2020, Hadad requested Park provide the passwords to all online accounts for WANAKOME so that his team could build a website and link the brand’s Shopify account to its social media accounts. On April 18, 2020, Park refused the request on the basis of the existing Wanakome website. On April 28, 2020, a letter was sent to Eric Martin on behalf of Wanakome Inc., demanding that Eric Martin and Park cease and desist all use of the WANAKOME trademark, requesting transfer of all social media account passwords (Shopify, Instagram and Facebook), and a change of any online accounts that included the WANAKOME trademark. The letter asserted that Wanakome Inc. was the owner of the WANAKOME trademark and that Eric Martin and Park were using the WANAKOME trademark in an unauthorized manner.
[19] The request was refused by letter dated May 5, 2020. In their response, the Defendants asserted that they were the creators of the WANAKOME brand, and were the sole owner of any intellectual property involving “the word and/or name ‘Wanakome’ as well as the Wanakome logo, design and other visual representations.” The letter asserted that the Defendants had “tolerated” the incorporation of Wanakome Inc. under the “clear agreement” that the Martins would be equal shareholders in the company and that the Application had similarly been filed on the condition that the Martins were 50% shareholders in Wanakome Inc.
[20] On May 8, 2020, Hadad on behalf of Wanakome Inc. wrote to the Defendants terminating what it asserted was a functioning sales agency agreement between Wanakome Inc. and Eric Martin and demanding the return of all WANAKOME goods.
[21] For the remainder of May 2020, Park continued to send correspondence to Hadad/Double J in respect of orders for WANAKOME goods and to communicate with customers.
[22] At the same time, between May 19, 2020 and June 1, 2020, the parties exchanged further correspondence in which the Defendants reiterated the position set out in their May 5, 2020 letter. In this correspondence, the Defendants complained of further actions taken by Hadad to assert Wanakome Inc.’s proposed rights. This included filing takedown notices for social media and/or websites operated by the Defendants; creating separate social media accounts displaying the WANAKOME trademark and Wanakome Logo; communicating directly with Park’s customers; refusing orders for WANAKOME products; and making the dispute with the Defendants publicly known. The Defendants asserted that the Plaintiff had “preposterously misappropriated the Wanakome Brand” and was “abusively” claiming sole ownership. They contended that at the time the Application was filed they were reassured in writing that they “would be taken care of in the Wanakome Inc. shareholder agreement” and that shares were to be issued to their benefit.
[23] On May 27, 2020, Park obtained a copyright registration for the Wanakome Logo and on November 8, 2021, filed a statement of opposition, opposing the Application.
[24] This action was commenced on June 4, 2020.
[25] At some point thereafter, Eric Martin became associated with the sale of hooded sweatshirts under the brand, Local Interstellar Outfitters – LIO [LIO]. “Wanakome” was used in hashtags on social media posts and in the subject line of certain emails promoting the LIO brand. The Plaintiff amended its statement of claim on March 18, 2022 to include allegations relating to the activities involving the LIO brand.
III. Issues [26] The following issues are raised by this action:
1)Can the Court determine whether the Plaintiff is the owner of all rights, title and interest in and to the unregistered WANAKOME trademark, and that the use of the trademark is use by Wanakome Inc. and not by the Defendants?
2)Are the Defendants’ actions contrary to sections 7(b), 7(c) and/or 7(d) of the Trademarks Act?
3)Do Eric Martin and Kara Martin have any personal liability?
4)Is the “wanakome mountain” copyright registration invalid and should it be expunged pursuant to section 57(4) of the Copyright Act?
5)What remedies, if any, are available? and
6)Should costs be awarded and if so, to whom and in what form?
IV. Witnesses [27] Nine witnesses appeared at the trial: three on behalf of the Plaintiff, and six on behalf of the Defendants. A brief summary of these witnesses is set out below.
A. Plaintiff’s witnesses [28] The Plaintiff’s primary witness was Hadad. In his testimony, Hadad provided background on his experience in the clothing industry, the business of Double J, his relationship with the Defendants, the respective roles of Hadad/Double J and the Defendants with respect to the WANAKOME trademark, the development of the WANAKOME clothing line, the incorporation of Wanakome Inc., and the filing of the Application.
[29] It was Hadad’s evidence that all use of the WANAKOME trademark was for the benefit of Wanakome Inc.; a company that he created, controlled and registered. Hadad testified that the Defendants acted as sales representatives under a verbal agreement that involved commission payments, and that they did not have any ownership rights to the WANAKOME trademark.
[30] The remaining two witnesses for the Plaintiff were Rachel Snyder [Snyder] and Carol Adams [Adams].
[31] Snyder is an independent designer who began working with Park and Hadad in October 2018. Snyder was retained to help with upcoming designs for the WANAKOME clothing line, which was already in existence. She testified that her contract was with Park and while her initial invoices were with them, they were later directed to, and paid by, Double J.
[32] Adams is an employee of Double J. Her evidence was brief and covered her role as customer service account manager for WANAKOME and her interactions with the Defendants, whom she described as the former sales representatives for WANAKOME in the US. Adams testified about the wanakomeclothing.com website and its availability in Canada and the US and as to the sales of the WANAKOME clothing line in Canada, the US and Europe.
B. Defendants’ witnesses [33] Both Eric Martin and Kara Martin gave evidence on the development of the brand and the WANAKOME trademark, the nature of their relationship with Hadad and Double J, and the circumstances around its ultimate breakdown.
[34] Eric Martin was the primary defence witness. He testified that as of March 2018 the Defendants were operating as a 50:50 partnership with Hadad/Double J, each having an equal interest in the WANAKOME brand. In his evidence, he referred to several pieces of correspondence in which Hadad referred to their relationship as a “partnership” and spoke about their common interests.
[35] Both Eric Martin and Kara Martin gave evidence as to the conception of the WANAKOME trademark. Kara Martin also gave testimony and introduced a notebook page that included her sketches relating to the Wanakome Logo. She provided evidence relating to her work on the design of the WANAKOME clothing line, the preparation of the line sheets, and the promotion of the goods.
[36] There were also four other fact witnesses for the Defendants: Des Wilson [Wilson], Isaac Sabbah [Sabbah], Dave Durey [Durey] and Benjamin Talley Smith [Talley Smith].
[37] Wilson was a sales agent with Park from 2017 to March 2019. She was responsible for sales of the NAKETANO brand and was involved in securing initial sales accounts for WANAKOME for the west cost (west of Mississippi for the US and the west side of Canada). Wilson testified to her understanding that Park and Double J were 50:50 partners, and as to the breakdown of the roles within Park and at Double J. She testified that the Martins’ came up with the “wanakome” name, that Kara Martin was responsible for the development of the WANAKOME clothing line sheets, and as to Park’s work on the designs and with the designers. She spoke to her interactions with Hadad and Double J regarding production, sampling and invoicing.
[38] Sabbah was the credit manager of Double J between 2017 and January 2020. He testified to being advised by Hadad that Park and Double J were 50:50 partners. It was his understanding that Park took care of all sales and social media advertising and photography relating to the WANAKOME brand while Double J handled the back-end operations.
[39] Durey worked as an independent contractor and sales representative with Park, and became the head of sales for WANAKOME in June 2019. Between August 2020 and April 2021, he worked with Double J as an independent contractor for WANAKOME. At the time of trial, he was working with Eric Martin on the LIO brand. Durey testified to being advised that the Martins and Hadad co-owned the WANAKOME brand. He gave evidence about the design work conducted by the Martins for the brand and their handling of the social media accounts. He also testified about events in and around the time of the breakdown of the relationship between Hadad and Park and as to the design and the customer base for the LIO brand, including as compared to the WANAKOME brand.
[40] Talley Smith is a clothing designer. He was contacted by Hadad to work with Eric Martin to design a brand to replace NAKETANO. He spoke about the Martins’ conception of the WANAKOME mark, arising from their trip to Lake Wanaka and that he had pitched certain logo designs that ultimately were not used. He testified to working on some of the early design work associated with the clothing line.
V. Analysis A. Ownership and use of the unregistered WANAKOME trademark [41] The Plaintiff seeks a declaration that it is the owner of the WANAKOME trademark. It asserts that all rights, title and interest to the WANAKOME trademark has, and has always been, for the benefit of Wanakome Inc.
[42] The Plaintiff asserts that ownership can be inferred from the surrounding circumstances. It highlights the corporate registration of Wanakome Inc. on September 5, 2018 and the subsequent Application for the WANAKOME trademark which was filed in the name of Wanakome Inc., along with the corresponding applications in the US, European Union, UK, Switzerland, Turkey and China. It contends that the evidence from the Martins was consistent that once Wanakome Inc. was registered, all use of the WANAKOME trademark was intended to be for its benefit. It refers to intellectual property clauses in the PR Agreement and the draft shareholders agreement that identifies Wanakome Inc. as the owner of intellectual property.
[43] The Defendants assert that they conceived of the WANAKOME trademark and were equal partners with Hadad and Double J in a joint venture relating to the brand. They assert that despite Wanakome Inc.’s incorporation, they continued to operate under a common understanding with Hadad/Double J that they were 50:50 partners involved in a joint venture relating to the WANAKOME brand and thus remain as a joint owner of the WANAKOME trademark.
[44] They argue this is clear from the ongoing correspondence between Hadad and the Martins, Park’s continued role with the brand, and from the draft shareholder agreement, which was intended to outline the share structure in Wanakome Inc., of which Eric Martin was to be a shareholder.
[45] The issue of ownership raises two preliminary questions of jurisdiction. The first is with respect to the Court’s jurisdiction to address the commercial and contractual relationship between Hadad/Double J and the Defendants, including as it relates to their respective interests in Wanakome Inc. and the WANAKOME trademark. The second is with respect to the Court’s jurisdiction to issue a declaration of ownership when there is a pending opposition to the Application with an outstanding issue of Wanakome Inc.’s entitlement to registration of the WANAKOME trademark.
[46] As explained in Salt Canada Inc v Baker, 2020 FCA 127, the Federal Court can interpret contracts between private citizens as long as it is done under the sphere of valid federal jurisdiction that is vested in the Federal Court:
[24] The rule in Kellogg is simple: the Exchequer Court (and now the Federal Court) can interpret contracts between private citizens as long as it is done under a sphere of valid federal jurisdiction vested in the Federal Court. It is true that, absent a specific statutory grant of jurisdiction to the Federal Court, parties cannot assert a contractual claim in the Federal Court against another private party to obtain a damages remedy. But Kellogg tells us that where such a grant is present, parties can claim a remedy even if their entitlement turns on a matter of interpretation of an agreement or other instrument—for example, the remedy of correcting the records in the Patent Office to recognize one’s title to a patent under section 52 of the Patent Act.
[…]
[31] … The bounds of the Federal Court’s jurisdiction do not rest on the nebulous exercise of assessing whether something is “primarily a case in contract” or whether contractual interpretation will “dictate” the end result. To do this is to take a Goldilocks approach to jurisdiction, taste-testing each case for the appropriate amount of federal flavour and asserting jurisdiction only in cases where the federal content is, in the personal opinion of a judge, “just right”. Jurisdiction should not depend on the palate of individual judges. And for reasons of access to justice and minimization of litigation expense, Parliament does not set fuzzy tests for jurisdiction but rather adopts more certain, brighter lines. Courts should analyze jurisdictional issues with that front of mind. See Hupacasath First Nation v. Canada (Foreign Affairs and International Trade Canada), 2015 FCA 4, 379 D.L.R. (4th) 737, at paragraph 47, citing Steel v. Canada (Attorney General), 2011 FCA 153, [2011] 1 F.C.R. 143, at paragraphs 62–73; see also Steel, at paragraph 69.
[…]
[40] … Where contractual disputes arise within its jurisdiction, the Federal Courts are empowered to resolve these disputes just as any other court does, and they do so all the time.
[47] Pursuant to paragraph 20(1)(b) of the Federal Courts Act RSC 1985, c F-7 [Federal Courts Act], the Federal Court has exclusive jurisdiction in all cases where it is sought that an entry in any register of copyright or trademark be expunged, varied or rectified. The Federal Court also has concurrent jurisdiction in respect of a remedy sought under the authority of an Act of Parliament or at law or in equity for copyright and trademarks (subsection 20(2) of the Federal Courts Act).
[48] The Federal Court may also make a binding declaration of right in a proceeding in respect of any matter over which it has jurisdiction: Rule 64 Federal Courts Rules. This may include a declaration as to ownership of an unregistered trademark: section 55 Trademarks Act. As stated in Royal Doulton Tableware Ltd v Cassidy’s Ltd, [1986] 1 FC 357; 1 CPR (3d) 214 [Royal Doulton] at pages 374-376:
The plaintiffs further request a declaration that Paragon "is the owner of the trade mark `Victoriana Rose' for use in association with china tableware". It is to be noted that as framed the relief requested does not involve entitlement to registration. In my view it would be open to this Court to make such a declaration if it had before it all the necessary evidence. I believe that this Court has jurisdiction to make such a declaration pursuant to section 20 of the Federal Court Act which gives it concurrent jurisdiction “in all other cases in which a remedy is sought under the authority of any Act of the Parliament of Canada or at law or in equity, respecting any ... trade mark ...” Here 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. Within the context of section 20 of the Federal Court Act, the declaration is a remedy “in equity” and in this case is with respect to a trade mark. The requirements of section 101 of the Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K) [R.S.C. 1970, Appendix II, No. 5] (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1)] are also met since 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. The jurisdiction of Parliament with respect to trade marks has long since been recognized: Attorney-General for Ontario v. Attorney-General for Canada, [1937] A.C. 405 (P.C.). I believe a declaration with respect to ownership of an unregistered trade mark is distinguishable from the forms of relief sought, and refused, in Cellcor Corp. of Canada Ltd. v. Kotacka, [1977] 1 F.C. 227 (C.A.). The Court of Appeal held in that case that the declaration which was sought to the effect that the plaintiff was the person entitled to obtain letters patent to a certain invention was not obtainable under section 20 of the Federal Court Act because the Patent Act expressly confers on the Commissioner of Patents the authority to decide in the first instance on entitlement to patents. In the present case the Trade Marks Act provides, of course, no other procedure for determination of ownership of unregistered trade marks and, unlike the Patent Act, it does define entitlement to such industrial property even in the absence of recognition by an official such as the Registrar of Trade Marks or the Commissioner of Patents. Further, it may well be that the jurisdiction of Parliament over trade marks, depending as it does on federal authority over “the regulation of trade and com-merce” (see Attorney-General for Ontario v. Attorney-General for Canada, supra) is intrinsically broader than is Parliament's jurisdiction over “patents of invention and discovery”. As to the latter, it was argued in the Cellcor case supra that the word "patent" only gives jurisdiction over the issuance of patents for the protection of inventions, but not over property rights in an unpatented invention. The Court of Appeal does not appear to have found it necessary to deal with this issue, however.
While then it would in my view be legally possible to issue a declaration as to ownership of an unregistered trade mark, I believe in this case I should confine myself to the evidence before me relating to the use of the trade mark “Victoriana Rose”. Counsel for the plaintiffs requested that, if I could not give the broader declaration as to ownership, I declare that Paragon has been using this trade mark and that Cassidy's has not. The evidence and the legal principles referred to above with respect to the meaning of "use" would justify me in making such a declaration and I shall therefore do so. While for all practical purposes it may be that this is tantamount to a declaration of ownership, it is at least theoretically possible that other barriers to Paragon's ownership—barriers which were not canvassed before me—could preclude ultimate recognition of that ownership. I believe it is unnecessary for me to go further than this with a declaration but this should not be interpreted as a finding in any way that there is a barrier to full recognition of ownership by the plaintiff Paragon of an unregistered trade mark. At the same time I believe it could be useful that the use issue be clarified in this way for whatever relevance it may have to the future conduct of the parties. It may also provide assistance to the Registrar should Paragon seek registration of this mark, but it does not usurp the functions of the Registrar who must consider many other matters before reaching a decision as to registration.
[49] The Court’s jurisdiction does not extend, however, to the question of entitlement to registration of a trademark under the Trademarks Act, which question falls within the jurisdiction of the Registrar of Trademarks: Dumont Vins & Spiritueux Inc v Canadian Wine Institute, 2001 FCT 695 at paras 28-29. Nor is entitlement to registration a useful determination for an action under section 7 of the Trademarks Act: Copperhead Brewing Co v John Labatt Ltd/John Labatt Ltée, [1995] FCJ No 668; 61 CPR (3d) 317 at para 19.
[50] While the determination of ownership of a trademark should not have any influence on the determination of entitlement to registration of a trademark, any determination as to ownership may have the result of fettering the discretion of the Registrar of Trademarks to determine entitlement to registration: Enterprise Rent-A-Car Co v Singer, [1996] 2 FC 694; 66 CPR (3d) 453 at pp 47-48. As such, a request for a declaration as to ownership in the face of pending opposition proceedings before the Registrar of Trademarks must be approached with caution.
[51] In this case, the evidence from the Martins and Hadad establishes that until late April 2020, the Defendants and Hadad/Double J were working collaboratively with respect to the WANAKOME brand, with the Defendants handling the sales, promotion, marketing and most design aspects, and Hadad/Double J handling the financing, back office administration, arranging manufacture and production.
[52] It was not disputed by Hadad that early on both he and the Martins were making representations, including to clients, that they were in a partnership and that the WANAKOME brand was jointly owned. The Martins point to an exchange between Hadad and Eric Martin from March 21, 2018 where Eric Martin proposes a “50/50” arrangement to which Hadad acknowledges he did not take issue, “as long as [it was] fair”. They similarly refer to an early exchange on August 20, 2018 with the Boathouse, a Canadian retailer, involving the supply of product, where Hadad wrote: “… please note that Wanakome is a Canadian brand owned by us Double J and the park showroom” (Exhibit 3).
[53] The Martins understood that Hadad, as part of his back office duties, would set up the corporate structure, and complete the necessary filings to protect the WANAKOME brand. This included incorporating Wanakome Inc., filing the trademark applications, and preparing a draft of the shareholder agreement that was to set out the respective interests of Hadad and the Martins in Wanakome Inc. (Exhibits 5, 15, 61). However, the evidence from the Martins was consistent that they understood they would be equal partners with Hadad in Wanakome Inc. and on that basis, would be a joint owner of the WANAKOME trademark.
[54] Even after the incorporation of Wanakome Inc., Hadad’s messaging to the Martins remained consistent. In December 2018, when asked by the Buckle, one of the brand’s largest customers, what the relationship was “between Wanakome Inc., the owner of the WANAKOME trademark, and Double J. Fashion Group”, Hadad advised that there was no Wanakome Inc., but that the company that owned the brand Wanakome was Double J. He then clarified that “a company Wanakome” was in the process of being established “because of a new partnership” but that in the meantime Double J was the shipper and that invoices should be paid through Double J (Exhibit 11). In testimony, Hadad stated that the exchange was intended to confirm the entity for payment.
[55] Copied on the email chain, Eric Martin followed up with Hadad with a link to the corporate registration for Wanakome Inc. and asked if the details on that registration were referring to Hadad’s address. Hadad responded by indicating that it was “being set up as per our agreement” but because the shipper and bank contract was with Double J, the details could not be played with. While Eric Martin took no issue with this arrangement, stating in the communication that “he was satisfied as long as [it] was with one of them”, he reiterated his concern was “to make sure we/us are the ones behind Wanakome, Inc. and trademarks VS someone else!” (Exhibit 10).
[56] In and around the same time, there was further correspondence from the Martins to Hadad relating to the status of the partnership agreement for “Wanakome” that was followed in response with an indication from Hadad that his lawyers were preparing it and that it would be coming (Exhibit 61).
[57] The testimony from Sabbah, Wilson, and Durey was also consistent, each referring to their understanding that the Martins and Hadad/Double J were partners in the WANAKOME brand, with Wilson referencing instances where such relationship was conveyed to potential customers.
[58] However, Hadad testified that by June 2019, the relationship changed from one of partnership with an expectation of a shareholder agreement, to a sales representation relationship, while conceding that no sales representation agreement was ever signed. In testimony, he asserted that this change was prompted by two events: first, a realization that the Martins would not be contributing capital to the venture; and second, that the Martins had instead requested an increase in the commissions that they were being paid for their sales and promotional activities. He asserted that Park was in default of this agreement by selling a competing brand to WANAKOME called MAZINE.
[59] In testimony, Hadad described meeting with different investors proposed by the Martins, none of whom he found acceptable and to proposing instead, in response to requests from Eric Martin for an increase in Park’s commission rate, that the relationship turn into a sales agreement where Park would be responsible for the full US. The testimony, however, was vague and was not supported by documentation.
[60] The Martins did not corroborate this recollection either. Rather, Eric Martin testified that there was never a discussion of investment, that Park only had enough money to pay their commissioned employees, that providing an investment was never part of his commercial arrangement with Hadad, and that there was nothing in writing about the Martins needing to invest, with Hadad even bragging that he could handle the financing part himself. It was Eric Martin’s evidence that Hadad knew that Park did not have financing at the time of entering their relationship and understood that instead they offered other services as their part of the arrangement, and that nonetheless they did contribute financially to the development of the brand.
[61] From the outset of the relationship, the Defendants were compensated for the profits made in association with their sale of WANAKOME goods through the payment of commission (Exhibits 26, 66). The payments were made by Double J, who was responsible for all invoicing for the WANAKOME goods and were made out to Park.
[62] However, there was significant dispute between the parties as to the rate of commission that was paid. While it was agreed that 8% commission was paid as of June 2019, Hadad testified that this was an increase from the original commission rate, which was set at 2% and reflected the change in the parties’ relationship.
[63] The Martins presented a different story. It was Eric Martin’s evidence that the commission rate started at 10% and then stabilized at 8%. He testified that this was significantly less than the usual commission rate, which was in the 12 to 16% range, as with, for example, the NAKETANO and Res Denim brands (Exhibits 48, 49), both of which were accompanied by a sales agreement and clear delineation of territory, which was not in place for the WANAKOME goods.
[64] In support of their positions, the parties each adduced commission reports dating from December 2018 to December 2019. In their written submissions, the Plaintiff also produced an Annex summarizing commissions paid to Park along with corresponding cheque details. In oral argument, the Defendants contested the Annex’ admissibility, citing the inability to cross‑examine Hadad on the document as well as it referring to documents that had been refused and were not in evidence. As it relates to the cheque information, I agree with the Defendants, that this information was not properly in evidence and therefore I did not consider this part of the evidence in my examination of the commissions.
[65] On review of the remainder of the commission evidence, it is my view that the documents support an average commission rate of less than 10% from December 2018 to May 2019. Hadad/Double J’s reports indicate that an average commission rate of 10% was used to determine the commission amounts, but that this total was then reduced by 30% with a further adjustment made such that 2% commission was actually paid on sales during these months. While Park’s reports suggest a 10% commission rate during this time period, it did not account for the further 30% reduction and adjustment as shown in the proof of payment documents. The reason for the further 30% reduction and adjustment was never explained.
[66] However, even with a commission rate increase to 8%, the commission rate was still far lower than the 12-16% that was customary. In my view, the commission rate alone is insufficient to establish that the Defendants were in a sales-only relationship relating to the WANAKOME brand. As noted, commissions were paid from the outset when both Hadad and the Martins agreed that they were collaborating towards a partnership.
[67] I am also not persuaded that the events around the sale of the MAZINE goods served as a tipping point as there was limited evidence relating to this brand and what if any impact it had on the sale of WANAKOME goods. Further, Eric Martin testified that MAZINE was being sold by Park even before the NAKETANO brand.
[68] The transition to a sales-only relationship was also inconsistent with other surrounding circumstances, including Kara Martin’s continuing work on the line sheets and design elements of the brand. There was also later correspondence from September 2019 with Hadad in correspondence with Eric Martin continuing as he had before to refer to his relationship with the Martins as a “partnership” (Exhibit 27).
[69] Even if a sales relationship could be inferred, without a formal written sales agreement, there is little information as to the proposed terms of such relationship, including as it relates to a license for the Defendants’ use of the WANAKOME trademark, and what events would lead to termination of any such agreement.
[70] It bears emphasizing that “use” is at the heart of trademark rights, particularly for unregistered marks, and it is only through “use” that rights are obtained: Marlboro Canada Limited v Philip Morris Products SA, 2012 FCA 201 at para 56; Divine Hardwood Flooring Ltd. (Divine Flooring) v D Nine Flooring Ltd., (D Nine Flooring), 2008 FC 500 at para 20. As stated by the Supreme Court of Canada in Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22 at para 5, “the gravamen of trade-mark entitlement is actual use.”
[71] This raises the question of whether Wanakome Inc. was responsible for the use of the WANAKOME trademark, which is the issue that is relevant for the section 7 allegations.
[72] The Plaintiff asserts that it was conceded by the Martins that all use of the WANAKOME trademark by the Defendants was intended to inure to the benefit of Wanakome Inc. However, in my view, there is insufficient evidence to be able to conclude that the use by the Defendants of the WANAKOME trademark was under the control of Wanakome Inc. (section 50 of the Trademarks Act) or of Hadad operating as a Director or Officer of Wanakome Inc.
[73] There was no evidence of Wanakome Inc. being referred to in association with any of the sales information relating to the WANAKOME goods, or in connection with communications with customers. Rather, as noted earlier, even after the incorporation of Wanakome Inc. when the Buckle asked whether Wanakome Inc. was the owner of the WANAKOME brand, Hadad stated that instead the relevant entity was Double J with a new corporation yet to be formed (Exhibits 10 and 11).
[74] The evidence indicates that although Hadad was responsible for arranging for manufacture and production, Park continued to have input into the character and quality of the WANAKOME goods (i.e., choice of colours, fabric, placement of labels, logos and trademark). Further, the involvement of Hadad was provided through Double J. Indeed, all of the correspondence relating to production and correspondence with customers were from Hadad’s Double J email account.
[75] As set out in Dragona Carpet Supplies Mississauga Inc v Dragona Carpet Supplies Ltd, 2023 FCA 228 at para 33:
[33] Su