Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd. et al.

Supreme Court of Canada

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The judgment of the Court was delivered by ESTEY J.–

The appellant brought an action against the respondents founded in the tort of passing-off and, having failed at trial and in the Court of Appeal of Ontario, now seeks in this Court an injunction and an accounting on two principal grounds:

1. The judge at trial misconstrued the evidence and thereby failed to appreciate that at all material times the product of the appellant came to the Canadian market from a single source operated by a series of owners culminating in the appellant; and the learned trial judge was led into error by confusing the names under which the product was sold by the appellant and its predecessors with the get-up, including design, of the appellant’s product;

2. The courts below both required the appellant, in order to establish that its product had acquired a secondary meaning in the market, must prove that “the purchaser of the [appellant’s] product associated the get-up of this product with the appellant as its source”, and not merely that this product with its characteristic get-up came from a single source.

The product in question is a tray commonly used on desks in offices and elsewhere to hold letters and documents. The history of the appellant’s product and its sale in Canada began in the mid-1960’s when an American company, which had been manufacturing and marketing this tray in the United States, exported it to Canada through a manufacturer’s agent. The tray sold under the name “Contempo Tray”. Sometime thereafter the importation into Canada was conducted through a company jointly owned by the American manufacturer and the Canadian manufacturer’s agent. Later, the manufacturer’s agent bought out the United States company’s interest in the Canadian venture which thereupon changed its name to Starmark of Canada Limited and proceeded to manufacture the identical tray and to market it in this country. Thus by 1968 the tray was marketed in western Canada under the Starmark name (which was later registered under the Trade Marks Act) and which name is still used by the appellant in the marketing of this product. The U.S. company continues to manufacture and market its trays in the United States, now under the name Con-Tempo-Tray. The foregoing evidence is imprecise as to dates and sometimes as to names used by the marketing companies.

Subsequently (in 1973), the appellant acquired the shares of Starmark of Canada Limited and from that time forward has manufactured and marketed these trays under the name Starmark. Prior to this acquisition of the Starmark company, the appellant manufactured and marketed a tray under the name “Index Card”. This tray was identical in shape and appearance to the Starmark tray except that it was made of heavier material and the stacking holes along the sides of the tray were located in a slightly different position than in the Starmark tray. The manufacture of this Index Card tray was discontinued in 1974 when the appellant commenced to make and market the Starmark tray. The Index Card tray was, however, still being sold at the retail level in 1978.

When asked how the appellant came to acquire the Starmark tray the chairman of the board of the appellant stated:

In 1973 determining into which product lines we should extend in order to complement our existing line one of the areas that was most attractive was desk accessories and, looking at the market, apart from very large corporations like Borden there was a tray on the market particularly in western Canada being sold by Mr. Michaelson under the name of Starmark. He had been selling that tray for approximately eight years and had established the name Starmark in western Canada and to a very limited degree in Ontario.

The only way to be in that business with that successful tray was to buy the Starmark company and I approached Mr. Michaelson in 1973 and we purchased his company in September of 1973.

Thus the appellant and its predecessors have marketed their present tray under different names since the mid-1960’s, the trays being provided first by importation from the American manufacturer, and since 1968 by manufacture in this country. It is also evident that a very similar tray was marketed in Canada by the appellant itself prior to 1974; and that the U.S. manufacturer who apparently originated this tray continues to make and to market it in the United States but under a different name. None of the trays are the subject of any registration under statute.

The respondents consist of three companies, apparently commonly owned and operated, and Mitchell Plastics Limited who are the makers of the mould and the manufacturers of the tray sold by the respondent group. The Mitchell company has simply submitted its rights to the Court and has not participated in these proceedings. When reference is made to the respondents herein, the reference does not include, unless the context otherwise requires, Mitchell Plastics Limited.

The respondents indeed had been selling the appellant’s trays for its predecessor, Starmark of Canada Limited, until 1973 when its right to do so was terminated by the then owner of Starmark of Canada Limited. In fact the respondents or their shareholders at one time sought to buy Starmark of Canada Limited. In 1978, after selling other trays and studying the market, the respondents took a sample of the appellant’s tray to a plastics manufacturer (the Mitchell company) and had a mould made from which the respondents produced the identical product which the respondents proceeded to market in 1978. Apparently the respondents also market this tray in the United States. The only difference between the trays is the lighter plastic used by the respondents and a slightly less ruffled surface on the floor of the respondents’ tray. As the learned trial judge Hughes J. put it:

When displayed by a retailer without the plastic envelope, only a discerning eye and curiosity sufficient to examine the stamping on the bottom of the tray turned upside down, or the higher finish of the Starmark tray, could detect any difference.

As to why the respondents copied the appellant’s tray, the evidence is clear:

Q. And it was your intention, I put it to you, to produce a tray that looked the same as the Star-mark tray but could sell at a lower price because it was made of less costly material.

A. Yes.

Q. And you chose, I suggest to you, the Starmark shape because you knew from your experience that it was a successful product and that it was known by consumers and office supply dealers throughout Canada?

A. Yes.

Q. In fact, Mr. Pirie, isn’t it true that letter trays all perform the same function, that is to hold pieces of paper?

A. That’s correct.

Q. And the two things which distinguish trays one from another are the design, the get-up and the method of stacking?

A. Yes.

Q. And in those two particulars your tray is exactly the same as the Starmark tray?

A. Yes. I would have to say so.

  (The testimony of the President of the respondents.)

The operations of the respondents in this connection are summarized in the judgment at trial:

The witness, Ronald George Pirie, principal officer apparently of all the defendants [respondents] except Mitchell Plastics Limited and their only witness at trial, made no secret of the fact that he took a Starmark tray to the defendant Mitchell Plastics and requisitioned an exact copy which would be lighter and cheaper. Twenty-eight thousand of these trays were produced of which little less than 24,000 have been sold to wholesalers and large retailers at prices under $3, for sale to the public at somewhat under $5 per tray. Both the plaintiff’s and the defendants’ trays are sold in the same or nearly the same number of colours and are individually wrapped in a clear plastic envelope on which the labelling is, however, markedly different.

It is apparent from the record that the appellant has enjoyed large sales of its trays in Canada, with over a million sold in the past five years. The sales of its trays by the respondents have been very much smaller.

The appellant in this Court submitted that the conclusion reached by the learned trial judge on the facts relating to the origin of the appellant’s trays is wrong and has influenced the later application of the law (which will be discussed shortly) to the evidence at trial. This submission springs largely from the following comment contained in the judgment at trial:

There is evidence, however, that the peculiar shape and stacking features of the Starmark and Korr trays have also been known to the public as features of the “Contempo” tray produced in the United States at the present time by Stemple Manufacturing Co. of Dallas and Los Angeles. An example of this tray, marked with the trademark “Stempco”, the name of the manufacturer and the name “Con-Tempo-Tray” with a raised encircled “R” immediately following the hyphenated word, was entered in evidence for the defendants.

The judgment shortly thereafter referred to the names under which the appellant’s product has been marketed in Canada:

Before 1973 Michaelson’s Starmark Company of Canada Limited had, according to the evidence of George Tuffin, chairman of the board of the plaintiff company, sold his tray under the name of “Starmail” (?“Starmaid”). Heeney’s evidence was to the effect that the name “Contempo” was used by the first company which had imported the tray of this shape and design into Canada and that the name “Starmark” as applied to the tray has only been in use for five years or since the acquisition of Michaelson’s company by the plaintiff.

Before dealing further with this first submission of the appellant, it will be helpful to set out the appellant’s second point. This was stated at the outset and refers to the burden on a plaintiff in a passing-off action. Specifically, the question raised by the appellant is put in its factum this way:

Reputation associated with a get-up or distinguishing guise which is sufficient to support an action for passing-off has come to be called “secondary meaning”. It is submitted that the specific issue before this Court is whether such a secondary meaning requires it to be shown that the relevant portion of the public recognize the get-up or distinguishing guise as the product of a particular manufacturer or whether it is sufficient that it be demonstrated that the get-up has a reputation or goodwill attaching to it, recognized by the consumer independent of its maker.

In amplification of this submission the appellant stated:

Specifically, it is unclear whether the reputation must be such that it identifies the source of the product or whether it is sufficient to show that the product has a reputation because of, and is distinguished by reason of, its get-up or distinguishing guise.

The appellant on this second ground takes exception to the conclusion reached by the learned trial judge:

If I were satisfied that the plaintiff’s tray had by name or get-up acquired a secondary meaning in this province, so that that section of the public which is concerned with the matter would be misled as to the origin of the defendants’ tray, attributing it to the plaintiff, I would have no hesitation in finding against them.

Similar objection is taken to the endorsement on the record by the Court of Appeal when dismissing the appeal:

We have not been persuaded that the trial judge erred in declining to find that the desk tray of the plaintiff had acquired in Ontario, a secondary meaning or secondary reputation so that purchasers in the market in which it sold associated the design, shape, configuration, or get-up of the plaintiff’s tray as being the plaintiff’s product. Without such a finding the plaintiff could not succeed in this action.

The character of the action of passing-off in the law of tort is succinctly described in Fleming, The Law of Torts,4th ed., 1971, at p. 626:

Yet another form of misrepresentation concerning the plaintiff’s business–unfair competition par excellence–is the tort of passing-off, which differs from injurious falsehood in prejudicing the plaintiffs goodwill, not by deprecatory remarks, but quite to the contrary by taking a free ride on it in pretending that one’s own goods or services are the plaintiff’s or associated with or sponsored by him.

(Adopted in MacDonald et al. v. Vapor Canada Ltd., [1977] 2 S.C.R. 134 at p. 147.) By the fifth edition (1977) of this work this reference was subtly altered to read, at p. 700:

Yet another form of misrepresentation concerning the plaintiffs business–unfair competition par excellence–is the tort of passing-off. While it is injurious falsehood for a defendant to claim that your goods are his, it is passing-off for him to claim that his goods are yours.

The learned author continues, at pp. 701-02:

The scope of the tort has been increasingly expanded to reach practices of “unfair trading” far beyond the simple, old-fashioned passing-off, consisting of an actual sale of goods accompanied by a misrepresentation as to their origin, calculated to mislead the purchaser and divert business from the plaintiff to the defendant. Today, any misrepresentation for any business purpose as to the origin of goods or services which the defendant proposes to or does deal in or employs in the course of business, constitutes an actionable wrong.

As to the immediate issue here, some guidance is to be found in the comment by Russell L.J. in Roche Products Ltd. v. Berk Pharmaceuticals Ltd., [1973] R.P.C. 473 at p. 482:

Now, in this as in all other passing off cases the basic question is whether, directly or indirectly, the manner in which the goods of the defendant are presented to the relevant consumers is such as to convey to the minds of the latter the impression that they are the goods of the plaintiff. In an “appearance” or get-up case it is not enough simply to say that the former are very like the latter. It must be established that consumers have, by reason of the appearance of the goods of the plaintiff, come to regard them as having some one trade source or provenance, whether manufacturing or marketing, though it matters not that they have no idea at all of the identity of that trade source or provenance.

It is to be noted that in the first part of the observation of Russell L.J. there seems to be a requirement that the purchasing public be left with the impression that the goods of the defendant are the goods of the plaintiff. The next part of the paragraph makes it clear, however, that all that need be left in the mind of the purchaser is the idea that all of the pills (in that case), by reason of their shape, size and mode of marking, came from “one trade source”. There is in that standard no need for the plaintiff to take the next and difficult step of showing that the customer must have known or believed that the only source of the product was the plaintiff. The Roche rule is but a refinement or detailed application of the general requirement for success in a passing-off action as pronounced by Cozens-Hardy M.R. in J.B. Williams Company v. H. Bronnley & Co. Ld. (1909), 26 R.P.C. 765 at p. 771:

What is it necessary for a trader who is plaintiff in a passing-off action to establish? It seems to me that in the first place he must, in order to succeed, establish that he has selected a peculiar–a novel–design as a distinguishing feature of his goods, and that his goods are known in the market, and have acquired a reputation in the market, by reason of that distinguishing feature, and the unless he establishes that, the very foundation of his case fails.

(Cited with approval by Hall J. in Parke, Davis & Company v. Empire Laboratories Limited,[1964] S.C.R. 351 at p. 358.)

More precise to our issue are the words of Lord Herschell in Birmingham Vinegar Brewery Company v. Powell,[1897] A.C. 710 at p. 715:

I think that the fallacy of the appellants’ argument rests on this: that it is assumed that one trader cannot be passing off his goods as the manufacture of another unless it be shewn that the persons purchasing the goods know of the manufacturer by name, and have in their mind when they purchase the goods that they are made by a particular individual. It seems to me that one man may quite well pass off his goods as the goods of another if he passes them off to people who will accept them as the manufacture of another, though they do not know that other by name at all.

Lord Gorell spoke to the same effect in William Edge & Sons, Limited v. William Niccolls & Sons, Limited, [1911] A.C. 693 at p. 705:

It is not necessary, in my opinion, for the plaintiffs to prove that the ultimate purchasers, who are likely to be misled, know the name of the plaintiffs’ firm. Buyers of the plaintiffs’ goods, without any label at all, might, if they bought the defendants’ goods and noticed the label, still think, having regard to the appearance of the goods, that they were goods which had been long on the market, and that the name of the manufacturer was now disclosed to those who did not previously know it.

That there may be cases where the distinctive presentation of the product will stamp it in the minds of the intended public as being that of the specific supplier, there is no doubt. John Haig and Company Limited v. Forth Blending Company Limited and W.R. Paterson Limited (1953), 70 R.P.C. 259. That is not to say that where the actual activity of the single or common source is not notorious, the proprietor of the original and unique product will fail. The fundamental requirement for success, however, must always be (whatever else may be required in each instance) something akin to the imitation of a “unique or distinctive dress” which is recognized by the buying public. In the words of the learned author of Fox, The Canadian Law of Trade Marks and Unfair Competition,3rd ed., 1972, at p. 552:

No trader, however honest his personal intentions, has a right to adopt and use so much of his rival’s established get-up as will enable any dishonest trader or retailer into whose hands the goods may come to sell them as the goods of his rival.

The learned trial judge recited the general test for a successful action for the tort of passing-off relying on authorities which did not require the plaintiff to prove that the product which had acquired “a secondary meaning” was known by the purchasing public to be the goods of the plaintiff. The expression used in the trial judgment “…would be misled as to the origin of the defendants’ tray” and the succeeding reference to the plaintiff (appellant) follow after a discussion of the evidence concerning the eminent position of the appellant in the market for interlocking trays. The judgment at trial then continues:

But I think the evidence is the other way and that the products of both are examples, if anything, of “Contempo” trays in the minds of those witnesses who were called to represent the public in this respect.

It is perhaps, unhappily, a close association between the two ideas, firstly of the misleading implication of the origin of the trays of the defendants-respondents, and the pre-eminent position of the plaintiff-appellant as the supplier of these trays in the market. Nonetheless, in my view, the learned trial judge has correctly expressed himself on the law and has not put upon the appellant a burden not required of a plaintiff in a passing-off action.

In this connection, the appellant has drawn the attention of this Court to the judgment of the Ontario Court of Appeal in Eldon Industries Inc. et al. v. Reliable Toy Co. Ltd. et al., [1966] 1 O.R. 409 where Schroeder J.A. stated at p. 419:

In order to succeed in this claim the plaintiffs must establish that the design of the Eldon truck had acquired in Ontario a “secondary meaning” signifying its source and identifying it as the plaintiff’s product.

This excerpt must be read in the context of earlier language in the judgment, including the observation at p. 418–

A claim founded on the alleged marking or appearance of wares contrary to s. 7(b)is doomed to failure unless the claimant establishes that the marking or appearance has become recognized by the public as having a particular origin.

–referring in that connection to the decision of this Court in Parke, Davis & Co., supra. On the facts of that case the failure of the claim was not due to the lack of proof of association of the plaintiff with the product or the lesser standard of proof of a common source. This issue was not addressed by the Court. Rather than being at variance with the law as already examined on the issue now before this Court, the Eldon case simply did not concern itself with that issue but rather with ss. 7 (a) to (e) of the Trade Marks Act, 1952-53 (Can.), c. 49; the Copyright Act,R.S.C. 1952, c. 55; breach of confidence and breach of an implied term in a contract. Indeed, the common law tort of passing-off is not discussed.

This brings us back to the first issue, namely the evidence concerning the alleged distinctiveness acquired by the tray marketed by the appellant. The trial judge reviewed the history of this type of tray and while there may be some lack of precision in articulating the origin and linear development of the product, this in my view was occasioned by the sketchy and incomplete oral evidence on this aspect of the issue. By his careful review of the testimony of the customers of the appellant and others associated at one level or another in the market, it is clear that the trial judge took full advantage of his opportunity in trial to assess the conflicting evidence. Indeed, the trial judge, at several points in the trial, was required to press for clarification by the witnesses of their evidence relating to the marketing of the several trays produced here and in the United States. In the end the trial judge concluded, and rightly if I may say so, that all these stacking trays had a common origin in the aforementioned American manufacturer, that nothing had been adapted or created by any of the suppliers, including the appellant, which made any of these trays distinctive, and consequently no secondary meaning had been acquired by the product of the appellant in the market. Hughes J. concluded his assessment of the claims of the appellant:

In its unprotected state and without name or get-up having acquired a secondary meaning, it is fair game for any competitor…

This finding of fact of lack of the acquisition of secondary meaning is concurrently found in the Court of Appeal, and this Court would not, save on the existence of some special circumstance or unusual element, disturb such a concurrent finding.

Complaint is raised by the appellant of what might be said to be an inferred or added requirement imposed by the trial judge upon the appellant in order to establish the prerequisite secondary meaning upon which an action for passing-off may be founded, namely that either by name or get-up used in the marketing of its trays by the appellant, such a secondary meaning in the province had been established. These references to name no doubt sprang from the rather complex origin of these trays in the first instance and the changing names under which they have been marketed, first by the American manufacturer and then by the predecessors of the appellant and finally by the appellant itself. It is true that the learned trial judge does make reference to “name or get-up” in the same context or phraseology in the course of his reasons for judgment. However, in what might be termed the operative parts of those reasons there does not appear to be, in my view, anything approaching a fatal imposition of such an element on the applicable tests to determine whether or not a secondary meaning has indeed been established by the appellant in connection with its trays.

The Court of Appeal, in its short judgment already set out, appears to have repeated the phrase used at trial to which objection has been taken by the appellant, and with which I have already dealt. The reference in the Court of Appeal judgment must be read as part of a cryptic summary of the trial judgment, the essential part being a concurring conclusion that the appellant had failed to establish the fundamental prerequisite, that a “secondary meaning or secondary reputation had been acquired by the product of the appellant”.

The claim of the appellant originally sounded in both tort and statute (s. 7(b) of the Trade Marks Act, supra). I adopt the view of the learned trial judge:

Since the plaintiff is content to alternate between the common law tort and the provisions of s. 7(b) I must decline the defendants’ invitation to embark on an inquiry as to whether it should likewise be declared unconstitutional.

In this Court no issue as to constitutionality arose and the argument was confined to the action of passing-off as it exists in the common law.

For these reasons I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Fraser & Beatty, Toronto.

Solicitors for the respondent Mitchell Plastics Limited: McKay, Kirvan, Guy, Kitchener.

Solicitors for the respondents Korr Marketing Limited, Pirie-McKie Limited and Pirham Manufacturing Inc.: Weir & Foulds, Toronto.

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