Orkin Exterminating Co. Inc. v. Pestco Co.

Court of Appeal for Ontario

MORDEN J.A.: This is a passing-off action in which Orkin Exterminating Company, Inc., an American company which does not carry on business in Canada, was granted an injunction against the defendants restraining them from using in Canada its trade name "Orkin Exterminating Company" and the trade marks Orkin and "Orkin" in a logo (called Orkin & Design) and, also, judgment for nominal damages of $1,000. The defendant, The Pestco Company of Canada Limited, which carries on business in the Metropolitan Toronto area, and its president and manager, the defendant Emanuel Valder, appeal from this judgment. The major issue in the appeal, described in its most general terms, is concerned with what facts must exist for the plaintiff Orkin, which is not in competition with Pestco in Ontario, or elsewhere, to be entitled to the relief obtained at trial. (Whether the injunction should have covered the whole of Canada is not an issue raised by the defendants; accordingly, I express no opinion upon it.) More specifically, the question is what connection with Ontario must Orkin have to succeed in this passing-off action. The reasons for judgment of the trial judge, Mr. Justice Fitzpatrick, are reported in 47 O.R. (2d) 265, 11 D.L.R. (4th) 84, 80 C.P.R. (2d) 153.

Before stating the issues in more detail, I shall set forth the facts. It can be said at the outset that Orkin and Pestco are in the same business, that of providing pest control and exterminating services to residential and commercial customers. I shall deal first with the history and activities of Orkin.

Orkin, and its predecessors, have been carrying on business in the United States since 1901, and the name Orkin has been associated with the business since that time. The founder of the business was Otto Orkin. The name Orkin Exterminating Company, Inc., as already indicated, is the company’s corporate name and trading style and has been used by it and its predecessor since the 1920s. The Orkin logo, which is a red diamond with "Orkin" in capital letters inside it, has been used in connection with the company’s business as the primary trade mark and logo of the business since the 1930s.

Orkin is now, and at all times material to this proceeding has been, one of the largest pest control companies in the world. It is highly regarded by its customers, which include Canadian customers, for the "excellent" and dependable service which it provides. The trial judge said. [at p. 266 O.R., p. 85 D.L.R., p. 155 C.P.R. ] that:

The evidence is uncontradicted that Orkin enjoys an outstanding reputation for reliability and competence. Its integrity is such that many of its customers have left keys to their residences with the company so those residences can be serviced in their absence.

The company has gone to great lengths over the years to establish and maintain a high standard of service through its employee training and product development programmes and its service guarantees.

Orkin’s business has expanded steadily over the past 80 years. It began in Georgia in 1901. By 1967 (which is an important year for this proceeding since it was then that Pestco began using the name Orkin) it was carrying on business in the southern United States as well as in some northern central states – Ohio, Indiana, Illinois, Wisconsin, Iowa and Michigan. It had at that time estab­lished operations in Cincinnati, Columbus, Cleveland, Detroit, Grand Rapids, Jackson, Kalamazoo, Saginaw and Milwaukee.

Orkin spent substantial sums of money advertising its name, logo and business in the United States through radio, television, newspapers and billboards. The following are basic figures respecting these expenditures:

Period	Advertising expenditures
1954 – 1966	$15 million
1967 – 1975	$34 million
1976 – 1980	Over $7 million a year

According to the evidence of Earl F. Geiger, a director of Orkin, these expenditures did not cover the advertising on branch signs, on automobiles, in brochures, and through direct mail delivery.

As far as Orkin’s reputation in Canada is concerned the following matters may be noted. Canadians travelling in the United States are exposed to Orkin’s extensive advertising and use of its trade marks in that country. There was evidence adduced that millions of Canadians travel in the United States every year, particularly in the southern vacation states, where Orkin’s operations are extensive. Canadians in Canada are exposed to Orkin’s advertising and articles appearing in American publications which circulate here. Examples of publications in which such articles and advertisements have appeared are: Fortune, 1952; Newsweek, 1964; Business Week, 1964; Time, 1964; United States News and World Report, 1964; Supermarket News, 1975, 1977 and 1978; and National Geographic, 1977.

Mr. Geiger estimated that over the past three or five years, thousands of Canadians have used Orkin services on a regular basis in connection with property owned or rented by them in the United States. Some of these received the bills for the service at their homes in Canada. Advertising material accompanied the bills.

Orkin provides services to companies which have operations in Canada including Burger King, McDonald’s, Coca-Cola, Howard Johnson, Ponderosa, Sheraton Hotels and Hilton Hotels as well as carriers such as Delta, Eastern and United Airlines and Amtrak.

Orkin’s international reputation in the pest control field resulted in the Canadian government seeking its advice as a consultant respecting the control of pests for the Exposition in Montreal in the mid-1970s.

As far as advertising is concerned the trial judge said [at p. 266 O.R., p. 85 D.L.R., p. 155 C.P.R.]:

Orkin advertises extensively in the United States by signs on its trucks and logos on the uniforms of its servicemen, in magazines and on billboards, by radio and television. Canadians travelling in the United States see its trucks, servicemen and billboards. At home they read American magazines and see and hear Orkin advertising on radio and television, which is broadcast from American stations but received in Canada. The only advertising Orkin has had done in Canada is some radio advertising in Windsor, but that was admittedly for the Detroit market.

I have already mentioned Orkin’s Canadian customers. Eight of them from the Toronto area gave evidence with respect to their familiarity with Orkin, its business and the Orkin name and trade marks. They all said that if they were to see the Orkin name or logo in use in Canada they would assume that they represented the Orkin company with which they were familiar or some business that was affiliated with it.

Mr. Geiger testified that since 1965, Orkin has been looking for a "suitable vehicle" with which to carry on business in Canada. In 1964 it had given instructions to its counsel to register the Orkin trade mark in Canada. It assumed that this had been done although in fact, for some reason, it was not. At the time of trial, according to Mr. Geiger, Orkin was engaged in an ongoing dialogue with a company with a view to establishing an operation in Canada.

In 1976 Pestco filed an application in Canada under the Trade Marks Act, R.S.C. 1970, c. T-10, indicating that it proposed to use the identical logo that Orkin had used since the 1930s. Mr. Valder admitted that he took the design from one of Orkin’s brochures. Also in 1976 Pestco began using the Orkin logo on invoices which it sent to customers after performing services for them under the Pestco name. Orkin and Pestco became involved in opposition proceedings in the Canadian Trade Marks Office. It was daring these proceedings, which are still pending, that Orkin was informed for the first time that Pestco had been using the Orkin name since 1967. In 1978 Pestco applied under the Trade Marks Act to register the name, Orkin, alone. Shortly after it found out about Pestco’s use of its name, Orkin commenced this action.

As far as the number of Orkin’s Canadian customers is concerned Pestco refers to an Orkin computer listing of addresses of Canadian customers to whom Orkin has mailed billings. Pestco submits that it shows two to four customers in the Metropolitan Toronto area in 1967, and at least 14 in 1976. However, Mr. Geiger testified that the listing by no means includes all of Orkin’s Canadian customers. It does not contain customers who are billed at U.S. addresses, those who are part of a condominium group, or those who take the Orkin service on something less than an annual cycle. Furthermore, the listing does not contain past customers who are not current customers. It is not possible to determine with any degree of precision the number of Canadian customers in the years 1967 and 1976 but, in any event, as I shall indicate, the existence of customers in Ontario is one factor only in determining the extent of Orkin’s goodwill in Ontario.

I turn now to Pestco. It carries on business in the Metropolitan Toronto and surrounding area and has done so since 1961. It is the third largest pest control company in Ontario. In 1967 Mr. Valder decided to adopt the names "Orkin Exterminating Company" and "Orkin" in association with Pestco’s business. Mr. Valder at this time knew of Orkin, the plaintiff, and of its business in the United States. Pestco used the Orkin name in the following ways:

(1) It filed a declaration of intention to carry on business under the name of "Orkin Exterminating Company", apparently under the Partnerships Registration Act, R.S.O. 1980, c. 371.

(2) It obtained an operator’s licence under the Pesticides Act of Ontario, R.S.O. 1980, c. 376, in order to carry on a pest control business under the name "Orkin Exterminating Company".

(3) It placed a listing in the yellow pages of the telephone directory for the City of Toronto for "Orkin Exterminating Company".

(4) It placed a listing in the white pages of the telephone directory for the City of Toronto for "Orkin Exterminating Company".

(5) It commenced marking salesmen’s forms by means of a rubber stamp with the word "Orkin" for service calls made by employees of Pestco.

As far as the continuation of these acts is concerned, Pestco did the following:

(1) It registered the name "Orkin Exterminating Company" under the Partnerships Registration Act, R.S.O. 1970, c. 340, in 1977 and, on the brink of trial, under the Corporations Information Act, R.S.O. 1980, c. 96, in 1984. Apparently both of the first two registrations lapsed before they were renewed. The application form for the 1984 registration contains the following: "The registration does not confer on the corporation any right to the name or style that it does not otherwise have."

(2) It remained registered under the Pesticides Act of Ontario to be permitted to carry on a pest control business under the name "Orkin Exterminating Company" every year from 1967 to 1984.

(3) It placed listings for "Orkin Exterminating Company" in the yellow pages of the telephone directory of the City of Toronto from 1967 to 1970 and from 1976 to the time of trial (in 1984). The reason for the failure to list the name during the period between 1971 and 1975, according to Mr. Valder, was a turnover in Bell Canada yellow-page salesmen.

(4) It placed a listing in the white pages of the City of Toronto telephone directory for "Orkin Exterminating Company" every year from 1967 to the time of the trial, except for 1975.

(5) It ceased using the rubber stamp marked with the word "Orkin" some time in 1972-73.

Apart from the use of "Orkin Exterminating Company" in the telephone directories, Pestco made no public use of the name. Specifically, the name was never used on Pestco’s brochures, business cards, contracts, invoices, letter-head, signs, uniforms or trucks. In fact, Pestco has conducted all of its business under the trade name "Pestco" and its own name "The Pestco Company of Canada Limited". All of its contracts, letterhead, business cards, brochures, uniforms, and signs on its trucks prominently display the name "Pestco". It also uses a logo in connection with all of its business. It is a horizontal oval with "Pestco" in capital letters inside it. It appears on all of Pestco’s brochures, business cards, contracts, letter-head, uniforms and trucks.

Pestco has never actually carried on business under the name "Orkin Exterminating Company". This "company" has no assets, no employees, and no bank account. It has never entered into any contracts, nor has it ever had any income. "Orkin Exterminating Company" is listed by the appellants in the telephone book as nothing more than a name. In fact, Mr. Valder admitted in evidence that it was just a name in the telephone directory used to attract the attention of potential customers.

For some time Pestco’s Orkin telephone number was different from that of Pestco itself. When a potential customer called using the Orkin number, the Pestco employee taking the call would answer, simply, "Pest control". On his examination for discovery Mr. Valder said that there were at times as many as three calls a week for the Orkin Exterminating Company. He subsequently sought to qualify this statement saying that he could not say how many there were since the calls came in on a shared line.

In any event, after a customer called in on the Orkin line he or she would be served by Pestco employees with trucks, uniforms, business cards, brochures and contracts all bearing the Pestco name and logo. The customer would never have any further contact with the name Orkin Exterminating Company after initially being attracted by the name in the telephone book.

In 1976, as indicated earlier in these reasons, Pestco began to place the Orkin logo, the red diamond with "Orkin" in it, on its invoices along with "The Pestco Company of Canada Limited" and the Pestco logo. Mr. Valder knew that it was the logo that had been used by Orkin in the United States. It was taken from an Orkin brochure. Also, as I have said, in 1976, Pestco filed a trade mark application in Canada indicating that it proposed to use this logo. The Pestco invoices carrying the logo are seen by customers after services have been performed under the Pestco name.

In 1972, Pestco sought to use the trade mark of another large international pest control company, an English company, called "Rentokil Limited". Pestco filed a trade mark application to register the exact logo of this company. Mr. Valder admitted that his purpose in attempting to register this trade mark was to hamper or delay Rentokil from setting up business in Canada. The application was withdrawn on counsel’s advice.

Mr. Valder, of course, did not adopt the Orkin Exterminating Company name or logo in ignorance of their use by the plaintiff. He knew of these uses. However, he gave evidence to the effect that his purpose in using the name was not to take advantage of the plaintiff ’s name or to deceive the public but rather to gain some advantage over one of Pestco’s largest competitors, "PCO", by having the name "Orkin" appear just above it in the yellow pages of the telephone directory. With respect to the logo, he testified that he thought that Orkin had discontinued its use. The trial judge said [at p. 270 O . R. , p. 89 D.L.R., p. 159 C.P.R.] with respect to Mr. Valder’s credibility:

Because of the way he gave his evidence, because of the implausibility of his story, and because he attempted to adopt the name and logo of an English exterminating company to impede that company’s coming into Canada, I do not accept Mr. Valder’s evidence.

I shall return to some of the facts in more detail later in these reasons in the course of applying what I consider to be the appro­priate principles.

Pestco submitted to the trial judge that any goodwill in Ontario in the Orkin name and in the Orkin logo belong to Pestco and that because Orkin has not carried on business in Canada it has no protectable goodwill here. The trial judge rejected this submis­sion. He held that Orkin was entitled to protection on the basis that it had a reputation and customers here and intended to carry on business here in the future. Near the end of his reasons he made the following findings of fact [at pp. 270-1 O.R., pp. 89-90 D.L.R., p. 159 C.P.R.]:

(1) At the time of the commencement of this action the plaintiff had goodwill and customers in Canada;

(2) It is the present intention of the plaintiff to carry on business in Canada at some time in the future;

(3) The defendants acted deliberately to deceive and create confusion to make people believe that there was an association between Pestco and the plaintiff and to attract customers in that way. They also intended to impede the plaintiff from benefiting from its goodwill when it came to Canada;

(4) During the time it used the name Orkin Exterminating Company, the defendant Pestco did not create any significant amount of goodwill for that name or for the diamond logo.

The three issues raised by Pestco in this appeal are phrased on its behalf as follows:

(1) Did Orkin have "goodwill" in the market of Pestco to succeed in a passing-off action at common law?

(2) Was the date of the commencement of the action a relevant date for determining whether Orkin had goodwill to protect?

(3) Should damage to the property in the goodwill, if any, be presumed to have been incurred by Orkin and, if so, was that presumption rebutted?

It was agreed in the argument before us that there was substantial overlapping in the considerations which relate to these issues.

A fundamental principle upon which the tort of passing off is based is that "nobody has any right to represent his goods [or services] as the goods [or services] of somebody else": A. G. Spalding & Bros. v. A. W. Gamage Ltd. (1915), 32 R.P.C. 273 at p. 283 (H.L.), quoted in Hughes v. Sherriff, [1950] O.R. 206 at p. 212, 12 C.P.R. at p. 81 at p. 86, 10 Fox Pat. C. 175 (Ont. H.C.J.); affirmed [1950] O.W.N. 483, 12 C.P.R. 79, 11 Fox Pat. C. 49 (Ont. C.A.). The statement of this simple principle does not, of course, amount to a statement of all the essential ingredients of the cause of action. As may be gathered from the issues raised by the appellants, this appeal is concerned not so much with the misrepresentation aspect of the claim (in fact there is no challenge raised on this appeal to the trial judge’s finding that Pestco acted deliberately to deceive and create confusion) as with the nature of the connection the plaintiff must have with Ontario to obtain relief against Pestco. Pestco submits that Orkin must prove that it has "goodwill" with respect to its business in Pestco’s market area in Ontario. It submits that in order to have goodwill in this area Orkin must have carried on business here or, at least, have been involved in some form of business activity here. The main author­ities upon which Pestco relies to support the proposition that Orkin must be carrying on business in Ontario to have protectable goodwill here are: Star Industrial Co. Ltd. v. Yap Kwee Kor (trading as New Star Industrial Co.), [1976] F.S.R. 256 (P.C.); Alain Bernardin et Cie y. Pavilion Properties, Ltd., [1967] R.P.C. 581 (Eng. H.Ct.), and Anheuser-Busch Inc. v. Budejovicky Budvar N.P. (trading as Budweiser Budvar Brewery) et al., [1984] F.S.R. 413 (Eng. C.A.).

If the proposition that for Orkin to succeed it must have carried on business in Ontario fails, then Pestco submits that some cases concerned with goods, as opposed to services, have held that sales of the goods which result in the goods finding their way into the defendant’s market can be the "something more" than "mere reputation" that constitutes the necessary goodwill. Two Canadian authorities cited in support of this proposition are Levitz Furniture Corp. et al. v. Levitz Furniture Ltd. et al. reflex, (1972), 5 C.P.R. (2d) 13, [1972] 3 W.W.R. 65 (B.C.S.C.), and Seagoing Uniform Corp. v. US Dungaree Seafarers Ltd. et al. reflex, (1977), 34 C.P.R. (2d) 240, [1977] 4 W.W.R. 122 (B.C.C.A.). Pestco says that there is no evidence of any goods of Orkin marked with the name Orkin or Orkin Exterminating Company or the Orkin logo finding their way into the Canadian market.

Further, Pestco submits that in some cases concerned with services the goodwill has been based on some business activity in the defendant’s market such as a sales or booking office. Sheraton Corp. of America v. Sheraton Motels Ltd., [1964] R.P.C. 202 (Eng. H. Ct.), is cited in support of this submission.

Orkin, on the other hand, submits that goodwill should not be defined so narrowly as to require that the plaintiff carry on business or have a place of business within a particular locality. It submits that Canadian courts have consistently afforded protection to foreign traders whose trade marks have become known in Canada, even though no business activity has actually been carried on here. The protection is against misrepresentation and deception. Orkin cites in support of this proposition the following decisions which, it may be noted, are all British Columbia decisions: Hilton Hotels Corp. et al. v. Belkin et al. reflex, (1955), 24 C.P.R. 100, 17 W.W.R. 86, 15 Fox Pat. C. 130 (B.C.S.C.); Sund et al. v. Beachcombers Restaurant Ltd. et al. (1960), 25 D.L.R. (2d) 54, 34 C.P.R. 225, 20 Fox Pat. C. 163 (B.C.S.C.); reversed on another point 27 D.L.R. (2d) 434, 36 C.P.R. 2, 21 Fox Pat. C. 107 (B.C.C.A.); Levitz Furniture Corp. et al. v. Levitz Furniture Ltd. et al., supra (B.C.S.C.); Browning-Ferris Industries Inc. v. Browning-Ferris Industries Inc. et al. reflex, (1976), 25 C.P.R. (2d) 284, [1976] 3 W.W.R. 759 (B.C.S.C.), and Seagoing Uniform Corp. v. US Dungaree Seafarers Ltd. et al., supra (B.C.C.A.).

Many more decisions than those to which I have referred were cited to us and all of the cases were subjected to detailed analysis from varying perspectives in the course of the able submissions which were made to us by counsel on each side. Undoubtedly, there is ample room for debate on what the exact ratio of some of these judgments is. However, I do not think it is of any practical use to repeat these exercises of wide and narrow interpretation in these reasons because none of the authorities are binding on us and so the issues before us should turn on considerations of principle and policy. The insights and approaches in the cases are, of course, valuable guides in this respect.

In my respectful view, Fitzpatrick J. was right in concluding that Orkin was entitled to relief on the basis that it had a reputation (built up in several different ways including having customers) in Ontario and intended to expand its business into Ontario. In saying this I do not intend to indicate that a case such as this could not be decided on more general grounds. This is an evolving field of law and I think it the better course to resolve the competing contentions on relatively narrow grounds which are responsive to the particular facts rather than, unnecessarily, on broader grounds.

I have said that the issue before us is not governed by any binding authority. However, it has been dealt with in the five British Columbia judgments cited by Orkin. None of these requires the plaintiff to be carrying on business in the jurisdiction to succeed in a passing-off action. The fact that these are Canadian decisions entitles them to favourable consideration in this Court, if, for no other reason, than the desirability of uniformity in this country in this branch of the law of trade regulation.

As far as basic principles are concerned I would begin with a consideration of the nature of Orkin’s interest which is affected by Pestco’s conduct. If Orkin had been carrying on business in Ontario before Pestco then, of course, the parties would be in direct competition with each other and the nature of Orkin’s damage would be the immediate diversion of customers from it to Pestco and, accordingly, lost sales and business.

However, a plaintiff does not have to be in direct competition with the defendant to suffer injury from the use of its trade name by the defendant. If the plaintiff ’s trade name has a reputation in the defendant’s jurisdiction, such that the public associates it with services provided by the plaintiff, then the defendant’s use of it means that the plaintiff has lost control over the impact of its trade name in the defendant’s jurisdiction. The practical conse­quence of this is that the plaintiff is then vulnerable to losing the Ontario customers it now has as well as prospective Ontario customers, with respect to services provided in the United States. Also, it can result in Orkin being prevented from using its trade name in Ontario when it expands its business into Ontario.

Both of the considerations I have mentioned are covered in the following passage from the judgment of Buckley J. in Sheraton Corp. of America v. Sheraton Motels Ltd., supra, at p. 204:

It seems to me that when the matter comes to trial the position may well be that the plaintiff company may be able to say that they have got a reputation and a goodwill which would be exposed to risk resulting from the confusion between the plaintiffs and the defendants notwithstanding that they are carrying on business in different parts of the world; and that, moreover, the plaintiff company are entitled to retain the possibility of exploiting their own goodwill in this country by opening hotels here, and that that possibility ought not to be diluted by anything done by the defendant company meanwhile.

With respect to the first consideration, it has been recognized in both England (see, e.g., Harrods Ltd. v. R. Harrods Ltd. (1923), 41 R.P.C. 74 (Eng. C.A.)) and in the United States (Yale Electric Corp. v. Robertson (1928), 26 F. 2d 972 (2nd Cir., C.A.), that a trade name associated with services or goods deserves protection from another party using it in connection with services or goods which are not in competition with the plaintiff’s. In Yale Electric, supra, Learned Hand J. described the rationale as follows at pp. 973-4:

The law of unfair trade comes down very nearly to this – as judges have repeated again and again – that one merchant shall not divert customers from another by representing what he sells as emanating from the second. This has been, and perhaps even more now is, the whole Law and the Prophets on the subject, though it assumes many guises. Therefore it was at first a debatable point whether a merchant’s good will, indicated by his mark, could extend beyond such goods as he sold. How could he lose bargains which he had no means to fill? What harm did it do a chewing gum maker to have an ironmonger use his trade-mark? The law often ignores the nicer sensibilities.

However, it has of recent years been recognized that a merchant may have a sufficient economic interest in the use of his mark outside the field of his own exploitation to justify interposition by a court, His mark is his authentic seal; by it he vouches for the goods which bear it; it carries his name for good or ill. If another uses it, he borrows the owner’s reputation, whose quality no longer lies within his own control. This is an injury, even though the borrower does not tarnish it, or divert any sales by its use; for a reputation, like a face, is the symbol of its possessor and creator, and another can use it only as a mask. And so it has come to be recognized that, unless the borrower’s use is so foreign to the owner’s as to insure against any identification of the two, it is unlawful.

I refer also to the well-known case of Stork Restaurant Inc. v. Sahati (1948), 166 F. 2d 348 (9th Cir., C.A.), where the plaintiff, which owned and operated a café and night club in New York City under the name "The Stork Club", obtained relief in California against defendants who were operating a small bar, tavern and cocktail lounge in San Francisco under the name "Stork Club". At p. 356 the court said:

We reach now what is perhaps the controlling principle in the instant case – that of "confusion of source", with its corollary, "dilution of goodwill". This doctrine has been adumbrated in the excerpts from some of the decisions that we have already quoted: a direct inquiry into the problem is now in order.

In a situation where there is no direct competition between the parties, confusion of source may be defined as a misleading of the public by the imitation of "An attractive, reputable trade-mark or trade name … not for the purpose of diverting trade from the person having the trade-mark or trade name to the imitator, but rather for the purpose of securing for the imitator’s goods some of the good-will, advertising and sales stimulation of the trade-mark or trade name". Restatement Id., at page 597.

"One’s interest in a trade-mark or trade name came to be protected, there­fore, not only on competing goods, but on goods so related in the market to those on which the trade-mark or trade name is used that the good or ill repute of the one type of goods is likely to be visited upon the other. Thus one’s interest in a trade-mark or trade name is protected against being subjected to the hazards of another’s business". Restatement, Id., at pages 597-598.

Further, it appears that the necessity for competition in the same market which is stressed in Pestco’s basic submission is not required by some decisions which do require, if not the carrying on of business in the jurisdiction, at least some business presence or activity there. In the Sheraton case, from which I have quoted, it was held that the plaintiff, who owned and operated a chain of hotels in the United States and other countries, was entitled to an interlocutory injunction in England to restrain the defendants from advertising in a way calculated to suggest an association with the plaintiff. The plaintiff had no hotel facilities in England but had a booking-office there and, also, bookings were made for its facilities through travel agencies in England. The existence of the booking-office and the fact that bookings were made in England has been referred to in some cases as a significant feature of the case in favour of the plaintiff: see, e.g., Alain Bernardin et Cie v. Pavilion Properties, Ltd., supra, at p. 587 (Eng. H.C.). Pestco submits that Sheraton has no application to this case because Orkin, unlike the plaintiff in Sheraton, carries on no similar business activity in Pestco’s market area.

I am not satisfied that the judge in Sheraton regarded the booking-office as being important but, assuming that he did, what is its significance? It really had no bearing at all with respect to the plaintiff ’s competing with the defendant for hotel customers in England because the plaintiff had no hotel facilities there. If it was a feature of the case it seems to have been a purely symbolic one. This inclines me to the view that the case must have turned on the grounds contained in the passage from Buckley J.’s judgment which I have set forth above; the plaintiff ’s reputation would be exposed to risk and, also, the plaintiff was entitled to retain the possibility of exploiting its goodwill in England.

If it is not direct competition that is required, and I do not think that it is, then it seems to me that the answer cannot logically lie in some form of presence in the jurisdiction falling short of actual competition. This point is clearly made in the judgment of Finlay P. in C. & A. Modes et al. v. C. & A. (Waterford) Ltd. et al., [1978] F.S.R. at p. 128 (Ir. H. Ct.), whose judgment was upheld on appeal by the Supreme Court of Ireland, [1978] F.S.R. loc. cit., p. 126 at p. 137. In this case the plaintiff carried on its retail drapery shop business in the United Kingdom. Its stores included a large branch shop in Belfast in Northern Ireland to which large numbers of citizens from the Irish Republic travelled to buy the plaintiff’s goods. The defendant’s "competing" business in the republic used the plaintiff’s name and symbol "C. & A." Finlay P., after referring to the Sheraton case, said at p. 134:

In my opinion, it becomes necessary to consider whether there is a distinction in principle which justifies the grant of relief to a person or firm who, though providing a service such as the Sheraton hotels entirely outside the jurisdiction of the court, has maintained within the jurisdiction an office for securing orders and bookings for that service but which compels the refusal of relief to a firm that maintains a retail shop outside the jurisdiction (which shop, on the evidence, is substantially frequented and used by persons travelling from within the jurisdiction) and advertises that retail shop and the products sold in it in a manner which reaches a substantial number of members of the public within the jurisdiction of the court but which does not have a selling or booking agency within the jurisdiction.

To answer this question it is necessary to consider the fundamental principles applicable to the action of passing off. On the authorities, the funda­mental ingredients of the action for passing off are that the plaintiff has a name applicable to his goods or business which is known to the public in the area in which the defendant seeks to carry on his business to an extent that the name, brand or mark proposed to be used or being used by the defendant is likely to deceive and to cause confusion. If that be an adequate general statement of the fundamental ingredients of the action of passing off, then it does not appear to me to imply necessarily the recognition of territorial boundaries. In an age when the purchase of ordinary consumer goods by members of the public outside the territorial boundaries of their own State is a common and increasing activity, and in the particular situation of the Republic of Ireland where, as has been proved to my satisfaction in this particular case, the purchase of goods in Northern Ireland by residents and citizens of the Republic of Ireland is a usual and frequent occurrence. I can see no sound reason why the court should absolve itself from the responsi­bility to prevent deception and what, in effect, is dishonest trading merely upon the grounds that the attraction to persons of the name and business and reputation of the plaintiff company operating in Belfast has occurred through advertisements in papers and magazines and through the broadcasting media and not through a booking or selling agency operating within the Republic of Ireland.

Still concerned with principle and policy, the affected interests which must be considered are, in addition to the interests of Orkin in not having its reputation exposed to the risk resulting from Pestco’s activities and in being able to use its trade name in Ontario, those of Pestco and the public in the absence of unrea­sonable restraints on freedom of trade, and the additional interest of the public not to be confused with respect to the source of the services which they buy. In the recent judgment of the Supreme Court of Canada in Consumers Distributing Co. Ltd. v. Seiko Time Canada Ltd., 1984 CanLII 73 (SCC), [1984] 1 S.C.R. 583 at pp. 595 and 598, 10 D.L.R. (4th) 161 at pp. 171 and 173, 1 C.P.R. (3d) 1 at pp. 11 and 13, Estey J. said for the court:

The common law principles relating to commerce and trade generally proceed on the basis of a recognition of perceived benefits to the community from free and fair competition.

The role played by the tort of passing off in the common law has undoubtedly expanded to take into account the changing commercial realities in the present-day community. The simple wrong of selling one’s goods deceit-fully as those of another is not now the core of the action. It is the protection of the community from the consequential damage of unfair competition or unfair trading. a

Bearing in mind that Pestco has a virtually infinite range of names and symbols from which to choose, it is difficult to see the enjoining of it from using the name and logo of a well-established company in the same business as an unreasonable restraint on its freedom to carry on business as it sees fit. The public are entitled t to be protected from such deliberate deception and Orkin, which has laboured long and hard and made substantial expenditures to create the reputation which it now has, which reputation has spread to Ontario, is entitled to the protection of its name from misappropriation. The spectre of Orkin having a monopoly in Ontario in its name and distinctive logo, even though it is not now carrying on business here, is considerably less troubling than the deceptive use of its name and symbol by another.

Pestco submits that if it is guilty of deliberate deception this is irrelevant and, in particular, that its deception cannot create a right in the plaintiff which the plaintiff, apart from the deception, ’ does not already have. While I shall deal later with Orkin’s position in Ontario in more detail than I have thus far in order to show what facts exist, apart from Pestco’s conduct, which bear on Orkin’s entitlement to relief, I think that in the assessment of the competing interests the defendant’s conduct is highly relevant. As far as freedom of trade and the reasonable expectations of business people are concerned, the interests of a dishonest defendant are entitled to less weight than those of a defendant who has acted in good faith. This has been recognized by the Supreme Court of the United States in the common law of unfair competition with respect to a use of the same trade mark as that of the plaintiff in an area remote from where the plaintiff carries on business. In Hanover Star Milling Co. y. Metcalf (1916), 240 U. S. 403 at p. 415, Mr. Justice Pitney said the following for the court:

In the ordinary case of parties competing under the same mark in the same market, it is correct to say that prior appropriation settles the question. But where two parties independently are employing the same mark upon goods of the same class, but in separate markets wholly remote the one from the other, the question of prior appropriation is legally insignificant, unless at least, it appear that the second adopter has selected the mark with some design inimical to the interests of the first user, such as to take the benefit of the reputation of his goods, to forestall the extension, of his trade, or the like.

(Emphasis added.)

In the later case of United Drug Co. y. Theodore Rectanus Co. (1918), 248 U.S. 90 at p. 100, Mr. Justice Pitney, once again for the court, said:

Undoubtedly, the general rule is that, as between conflicting claimants to the right to use the same mark, priority of appropriation determines the question. [Cases cited.] But the reason is that purchasers have come to under­stand the mark as indicating the origin of the wares, so that its use by a second producer amounts to an attempt to sell his goods as those of his competitor. The reason for the rule does not extend to a case where the same trade-mark happens to be employed simultaneously by two manufacturers in different markets separate and remote from each other, so that the mark means one thing in one market, and an entirely different thing in another. It would be a perversion of the rule of priority to give it such an application in our broadly extended country that an innocent party who had in good faith employed a trade-mark in one state, and by the use of it had built up a trade there, being the first appropriator in that jurisdiction, might afterwards be prevented from using it, with consequent injury to his trade and good will at the instance of one who theretofore had employed the same mark, but only in other and remote jurisdictions, upon the ground that its first employment happened to antedate that of the first-mentioned trader.

(Emphasis added.)

I need not, and do not, say that the defendant’s bad faith alone will confer a cause of action on a foreign plaintiff (see Comment, "The Scope of Territorial Protection of Trademarks", 65 Nw. U.L. Rev. 781 at pp. 794-5 (1970)) but it surely must be a relevant factor to take into account in adjusting competing interests. The significance of a defendant’s state of mind has for some time been an important factor with respect to several different torts: see Ames, "How Far an Act May be a Tort because of the Wrongful Motive of the Actor", 18 Harv. L. Rev. 411 (1905).

It might be nothing more than speculation to attempt to account for the differences between the English decisions, which appear to require some business activity by the foreign plaintiff in the juris­diction of the court, and the Canadian and U.S. authorities (see, e.g., Vaudable and Maxim’s Ltd. v. Montmartre Inc. et al. (1959), 193 N.Y.S. 2d 332 (N.Y. Sup. Ct.), and Stork Restaurant Inc. v. i Sahati, supra, which do not. However, it may be that the various North American jurisdictions where the plaintiffs and defendants, in most of the cases, carry on business, have substantially more in common with respect to language and other cultural features, including consumer attitudes, than do the places from which the parties in the English cases come. Having regard to the travel patterns of the population and mass advertising through televi­sion, radio and various publications, the flow of trans-border goodwill is almost inevitable in North America. The English cases involve foreign plaintiffs who are separated from England by the Atlantic Ocean or the English Channel and it is possible that this is an underlying factor in the developments of the relatively "hard line" (see Athletes Foot Marketing Associates Inc. v. Corba Sports Ltd. et al., [1980] R.P.C. 343 at p. M9 (Eng. H. Ct.)) which has generally been followed in the English cases.

I should say a word about the term "goodwill". Pestco strongly argued, as I have indicated, that a plaintiff ’s goodwill cannot exist outside the area where it carries on business. That this reflects the "meaning" of goodwill has been affirmed in several cases, the most recent of which is Anheuser-Busch Inc. v. Budejovicky Budvar N.P. (trading as Budweiser Budvar Brewery) et al., [1984] F.S.R. 413 (Eng. C.A.). This meaning would appear to be based on definitions assigned to the word in a tax case, Com’rs of Inland Revenue v. Muller & Co.’s Margarine Ltd., [1901] A.C. 217 at p. 224, but particularly at p. 235 (H.L.).

Virtually no words have a single fixed meaning, particularly goodwill, and, with respect, I do not think that the meaning appropriate in the Muller case is necessarily appropriate in a passing-off case which involves issues of remote territorial use. In this kind of case I think that the main consideration should be the likelihood of confusion with consequential injury to the plaintiff. Generally, where there is such confusion there is goodwill deserving of protection.

In the United States "goodwill" in the law of unfair competition does not have the narrow meaning urged by Pestco. In 3 Callman, The Law of Unfair Competition: Trademarks and Monopolies, 4th ed. (1983), in s. 19.20 it is recognized that actual goodwill zones (compared to potential goodwill, or expansion, zones) comprise what the author calls selling zones, advertising zones and reputation zones.

Of course, as I have implied, the issue should not, in any event, sensibly turn on one of the accepted meanings of the word "good­will" and the applicable principles can and have been framed without using the word. I refer to the following:

This article intends to explore the growing tendency throughout the world to recognize the protection of a mark which has not yet been used or registered in a given country.

Trademark protection based upon reputation alone is in the interest of fairness to the trademark owner. It prohibits others from pirating well-known marks which have benefited from the creative efforts and financial nurturing of the trademark owner. Encouragement of international trade and the peaceful interaction between countries is a further benefit. Finally, protection serves the interests of consumers for it protects them against deception in the market place. More and more countries are recognizing the benefits of discouraging the growth of a local industry that relies upon the misappropri­ation of trademarks,

Generally, the facts which must be proven are that the trademark owner has an established reputation in the subject country, the local infringer has usurped the trademark in bad faith, and deception of the public is likely to occur. The theories for recognizing such protection vary slightly from country to country although common threads run throughout the decisions.

(Hoffman and Brownstone, "Protection of Trademark Rights Acquired by International Reputation without use or Registra­tion, 71 The Trademark Reporter 1 at pp. 1-2 and 4 (1981).)

In each case the issue is whether, in the territory in which the actor’s desig­nation is used, there are or are likely to be a considerable number of prospective purchasers of the goods or services in connection with which the trademark and the designation are used, who are likely to be confused or misled by the actor’s designation.

(American Law Institute, Restatement of the Law, Torts, Tentative Draft No. 8 (1963), at p. 113).

I now consider the facts of the present case in light of the principles I have discussed. Orkin concedes that the competing rights of the parties have to be determined as of 1967, when Pestco started using the Orkin name in Ontario, but submits that the trial judge’s reference to the "time of the commencement of this action" is an immaterial error because of the goodwill that Orkin has enjoyed in Ontario from at least 1967 to the present. (Anheuser-Busch Inc. v. Budejovicky Budvar N.P. (trading as Budweiser Budvar Brewery) et al., supra, contains useful state­ments on the relevant time for determining the competing interests of the parties at pp. 462, 471 and 476). I accept 1967 as the time for determining the competing rights with respect to "Orkin Exterminating Company" and "Orkin" and 1976 with respect to the logo.

In 1967 Orkin’s reputation in Ontario, based on its customers in Ontario and advertising of various kinds was, in the circum- stances, of sufficient strength to make Orkin’s rights superior to those of Pestco. Its reputation has grown steadily since 1967.

What are the circumstances? A very cogent circumstance is Pestco’s decision in 1967 to use the Orkin name in Ontario. This is evidence from which it may be inferred that the name Orkin had commercial value at that time in Ontario and is a circumstance that has been observed in several cases to be an important indication of goodwill in a "foreign" territory: see, e.g., Athletes Foot Marketing Associates Inc. v. Cobra Sports Ltd. et al., supra, at p. 351 (Eng. H. Ct.); C. & A. Modes et al. v. C.A. (Waterford) Ltd. et al., supra, at p. 139 (Sup. Ct. Ireland), and Levitz Furniture Corp. et al. v. Levitz Furniture Ltd. et al. reflex, (1972), 5 C.P.R. (2d) 13 at p. 15, [1972] 3 W.W.R. 65 (B.C.S.C.). And see Restatement of the Law of Torts, Tentative Draft No. 8 (1963), at p. 113: "If he imitates the other’s trademark or tradename knowingly and acts in other ways to convey the impression that his business is associated with the other, the inference may reasonably be drawn that there are prospective customers to be misled."

Related to the foregoing is the evidence of the telephone calls that came in on Pestco’s Orkin line. There may not have been many of them but they were steady. There is a reasonable basis for inferring that these calls came from Ontario customers who knew the plaintiff and thought they were calling the plaintiff. I say this because, since Pestco has never advertised or otherwise publicly used the name Orkin Exterminating Company, the only way in which a customer would have been attracted to Pestco under this name would have been to look up the name in the telephone directory. The use of the name in the white pages of the directory requires prior knowlege and familiarity with the name so that it could be located alphabetically. This prior knowledge could only have resulted from Orkin’s reputation and goodwill previ­ously imbued in the mind of the customer. The alphabetical location of the name in the yellow pages, in the years that it did appear there, would most likely have been used mainly by people with some prior knowledge of Orkin.

There was no noticeable drop in the number of calls for Orkin received by Pestco during the seven-year period from 1970 to 1976 when there was no yellow page listing of Orkin by Pestco. (Mr. Valder testified that "hopefully" there would not have been such a drop. In fact, he said, there should have been an increase because of the exposure of the name of another company that shared the same line.) The only way that a customer could have called Pestco during this period would have been to look up the name Orkin Exterminating Company alphabetically in the white pages which, as I have indicated, would have required a prior knowledge of Orkin and sufficient goodwill to attract the customer.

All of the consumer witnesses who gave evidence at trial testified that if they required pest control services in Toronto they would likely look in the telephone directory for the name of a company, if not specifically for Orkin’s name. Without exception, these witnesses said that if they saw the Orkin name they would immediately connect it with the plaintiff.

A further circumstance which I think is important is the way in which Pestco used Orkin’s name. Not only was it dishonest because it was intended to deceive customers into thinking that there was some connection with Orkin, it was also not a bona fide use in that no real steps were taken to create in the public mind any association between "Orkin" and Pestco. The only public use of "Orkin" to attract business was that in the telephone directories and even this use was not one which connected the name with Pestco but rather merely served as a trap for the unwary customer who, after being initially attracted by the name Orkin Exterminating Company in the directory, was thereafter served by Pestco. The evidence given by Mr. Valder on cross-examination made Pestco’s position clear in this regard:

Q. The name Pestco is both part of your corporate name and the trademark of your company?

A. Yes.

Q. You have a registered trademark for the name Pestco in a design?

A. Yes.

Q. This is the name and the trademark which appears on all of your liter­ature and brochures and business cards?

A. Yes.

Q. This is also the name that you want your customers to see as being your name and as identifying your business?

A. Yes.

Q. Orkin is just a name you use to get people’s attention in the telephone directory; is that correct?

A. Yes.

Q. You don’t advertise the name. You don’t have business cards or uniforms or trucks with the name Orkin on them?

A. No. I said earlier I think we did advertise the name in a small home directory, but I couldn’t swear to that. I couldn’t recall.

The trial judge was right in finding that Pestco: "During the time it used the name `Orkin Exterminating Company’, the defendant Pestco did not create any significant amount of goodwill for that name or for the diamond logo." This, in fact, is an under­statement. For all practical purposes Pestco has always carried on its business under the Pestco name and logo. In short, from the very beginning of Pestco’s use of Orkin in Ontario it could not be said that Orkin meant one thing in the United States market and an entirely different thing in Ontario: see United Drug Co. v. Theodore Rectanus Co., supra.

In the light of all these considerations, I am satisfied that from the beginning of its "use" of Orkin in 1967 Pestco acquired no rights against Orkin and that in 1967 Orkin, if it had known of the misappropriation, could have obtained an injunction against Pestco to protect its rights in Ontario. Orkin’s rights, because of its steadily increasing reputation in Ontario, were even more solidly based in 1976 when Pestco began to use the Orkin logo.

As I have said, the three issues raised by the appellant substan­tially overlap. I have dealt with the first two. The third issue raised by the appellants is framed as follows: should damage to the property in the goodwill, if any, be presumed to have been incurred by Orkin and if so, was that presumption rebutted? Pestco submits, quite simply, that no damage to Orkin’s goodwill has occurred in Canada because Pestco and Orkin are not competi­tors. Without damage there is no passing off. This argument is completely answered by the assertion that Orkin has suffered damage, sufficient to support a cause of action against Pestco, by virtue of its loss of control over the impact of its trade name in Ontario and the creation of a potential impediment to its using its trademark upon entering the Ontario market – both arising from Pestco’s use of the name "Orkin" in Ontario.

For these reasons I would dismiss this appeal with costs.

Appeal dismissed.

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