Woodpecker Hardwood Floors (2000) Inc. v. Wiston International Trade Co.

Court of Appeal for British Columbia

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Reasons for Judgment of the Honourable Mr. Justice Chiasson:

 Introduction

[1] The applicants apply for leave to appeal the granting of an interlocutory injunction prohibiting them from using the name “Woodpecker” in the course of selling their wares.

 Background

[2] The parties are in the business of selling hardwood flooring products. The chambers judge noted that the respondent has done so “[f]rom at least the year 2000 and arguably since 1987” using the name “Woodpecker”. It did not register the name as a trade-mark.

[3] The applicants were incorporated in 2009 and until 2013 operated using the name “Wiston”. The judge described the applicants’ initial involvement with the name “Woodpecker” as follows:

[6] On January 15, 2013, the defendants obtained a trademark registration from the Canadian Intellectual Property Office for a variety of logos, insignias and/or wordmarks, some of which include the word “Woodpecker” and some of which do not. The registration process obviously started some months before that date.

[7] The ultimate action in this matter addresses more than logos that actually contain the word “Woodpecker”. However, as oral argument evolved on this interlocutory application, it became clear that the interlocutory injunction now sought relates only to those items where the defendant has the word “Woodpecker” in use.

[4] The respondent sent a “cease and desist” letter to the applicants, but they refused to do so. The respondent then initiated the present action on August 13, 2013. The judge referred to the respondent’s allegation that the applicants were passing off, or attempting to pass off, their wares “in such a way as to cause confusion between their wares and services and those of the [respondent].” At the hearing before me, the respondent stated that it also seeks a declaration that the applicants’ trade-mark is invalid.

[5] On August 23, 2013, the respondent filed its application for an interlocutory injunction.

 Chambers judge’s reasons

[6] In para. 9, the judge set out the respondent’s position:

1. Its 13-year use of the word “Woodpecker” gives it priority over the registered trademark that the [appellant] obtained 13 years later.

2. The [appellants] obtained their formal registration with the full knowledge of the prior use and therefore prior rights of the [respondent].

3. The [appellants] knew or ought to have known they were not entitled to the registration of the “Woodpecker” marks.

4. The [appellants’] use of those marks has caused and will continue to cause confusion for consumers.

5. The [appellants’] use of the marks has caused and will continue to cause the respondent to suffer loss and damage, including damage to its good will and its reputation amongst consumers and in the industry.

[7] He then referred to the three-pronged test applicable to determining whether to grant an interlocutory injunction, as stated in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311:

1. Is there a serious question to be tried?

2. Will there be irreparable harm to the plaintiff if the interlocutory injunction is not granted?

3. Where does the balance of convenience lie as between the parties?

[8] The judge began his analysis with whether there was a serious question to be tried. The applicants contended there is no serious question to be tried for three reasons:

1. This Court, the Supreme Court of British Columbia, has no jurisdiction to deal with this matter, and that is an end of the action. This matter should be in Federal Court.

2. Even if there was jurisdiction in this Court, a registered trademark, which the defendants indisputably have, is a complete defence to a passing-off action. The only way the plaintiff can succeed is to seek out and obtain a Federal Court order expunging the registered trademark.

3. There is no evidence at all of several of the requirements necessary in order to succeed in a passing-off action.

[9] The applicants’ contention that the Supreme Court does not have jurisdiction is based s. 57(1) of the Trade-marks Act, R.S.C. 1985, c. T-13, which states:

The Federal Court has exclusive original jurisdiction, on the application of the Registrar or of any person interested, to order that any entry in the register be struck out or amended on the ground that at the date of the application the entry as it appears on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the mark.

[10] The judge rejected the applicants’ position on the basis that s. 57(1) deals only with striking out or amending an entry in the register and that was not what the respondent was seeking. The judge also stated:

[14] Further, I have jurisdiction which flows from s. 39(1) of the Law and Equity Act [R.S.B.C. 1996, c. 253] of this Province, which says:

An injunction … may be granted … by an interlocutory order of the court in all cases in which it appears to the court to be just or convenient that the order should be made.

  As a third basis for jurisdiction, the judge relied on his inherent jurisdiction.

[11] The applicants’ position that their registration is a complete defence to the respondent’s passing off claim was based on s. 19 of the Trade-marks Act. It states:

… the registration of a trade-mark in respect of any wares or services, unless shown to be invalid, gives to the owner of the trade-mark the exclusive right to the use throughout Canada of the trade-mark in respect of those wares or services.

[12] The judge distinguished between a mark being “expunged” and “shown to be invalid”. He stated in para. 19:

And last, this is an interlocutory injunction application only. It is not necessary that I determine with certainty that the registered trademark is invalid, but only that with respect to its validity, there is a serious question to be tried. I am satisfied of that, and consequently I reject that argument.

[13] The judge then turned to the third proposition of the applicants:

[20] The third of the defendant’s argument[s] is that there is no proof of components necessary to prove a passing-off action. Those components generally are:

(a) the existence of good will;

(b) deception of the public; and

(c) actual or potential damage.

[21] The defendant argues that there is no evidence with respect to some, arguably all of those, but I reject that notion. It is not necessary that I scrutinize the evidence in detail, either in coming to my decision or in providing these Reasons. I am not able to say with certainty that the plaintiff will be successful in a passing-off action at trial, but I am satisfied from the affidavit evidence before me that it is sufficient to rise above the level necessary to establish that there is a serious question to be tried.

[22] One of the more hotly contested arguments among those components before me was the submission by the defendant that it is in a wholesale business, while the plaintiff is in the retail business, and consequently, there is no misrepresentation and no possibility for the public to be deceived or confused. But again, I am satisfied that both factually, based on the evidence before me, and from a legal point of view, that is a serious question yet to be determined.

[23] It follows that I reject that third argument, and having rejected all three of the defence arguments, [it] follows that with respect to the first prong of the RJR-MacDonald case, I am satisfied that there is a serious question to be tried.

[14] The applicants contended that the respondent had not established that it will suffer irreparable harm if the injunction were not granted. They argued delay and asserted that any damages sustained by the respondent could be compensated with money. The judge stated:

[27] I reject those arguments by the defence. I am satisfied that the plaintiff would suffer irreparable harm if the interlocutory injunction was not granted. I am also satisfied that this is not speculative. There is a difference between saying that damages in the future are speculative and saying that they are not quantifiable.

[28] The longer the defendants are permitted to use marks confusingly similar to the “Woodpecker” marks, the more their use becomes prevalent amongst the public – exacerbating the harm, and making it more difficult to unscramble what business losses are due to this confusion and what losses are due to the traditional kinds of business considerations and competition in the marketplace.

[15] The judge reviewed the history of the proceeding and concluded that delay had not contributed to the possible irreparable harm. The judge then turned to the balance of convenience:

[32] The third prong is balance of convenience. There are relevant factors which are commonly referred to under that, and in this particular case, those relevant factors are, and some of these have already been dealt with by me:

1. The strength of the applicant’s case.

2. The adequacy of damages for either party, depending upon the result of this application and of the ultimate action.

3. Irreparable harm and the likelihood that if damages are awarded, they will be paid.

4. The altering of the status quo and the balance of the relationship.

5. Factors affecting public interest.

  He considered each of these factors in turn and concluded that the balance of convenience favoured the respondent.

 Points in issue

[16] In their motion book, the applicants state two points which they contend are in issue on the proposed appeal:

It will be submitted on appeal that the Learned Chambers Judge erred in finding that there was a serious question to be tried on the issue of passing off, having regard to the fact that the appellants have registered the trade-mark WOODPECKER under the Trade-marks Act, which registration is in good standing and provides a full defence to a passing off action.

It will be further submitted on appeal that the Learned Chambers Judge erred in finding that the respondent would suffer irreparable harm arising from the alleged passing off if the interlocutory injunction were not granted, given that no damages for passing off can be suffered so long as the appellants have a subsisting registration of the trade-mark WOODPECKER under the Trade-marks Act, so there would be no future damages for passing off to “unscramble”. As a result it will be submitted that there was no clear and non-speculative evidence of irreparable harm.

[17] The respondent asserts that the chambers judge properly exercised his discretion and states that “absent a clear, palpable and overriding error: an error in principle, misconstrual of the evidence, or where the injunction leads to a clear injustice”, leave to appeal should not be granted.

 Discussion

[18] In Goldman, Sachs & Co. v. Sessions, 2000 BCCA 326 at para. 10, Saunders J.A. (in Chambers) stated:

[10] The criteria for leave to appeal are well known. As stated in Power Consolidated (China) Pulp Inc. v. B.C. Resources Investment Corp. (1988), 19 C.P.C. (3d) 396 (C.A.) they include:

(1) whether the point on appeal is of significance to the practice;

(2) whether the point raised is of significance to the action itself;

(3) whether the appeal is prima facie meritorious or, on the other hand, whether it is frivolous; and

(4) whether the appeal will unduly hinder the progress of the action.

[19] The “overarching concern is the interests of justice”: Hanlon v. Nanaimo (Regional District), 2007 BCCA 538 at para. 2 (Saunders J.A. in Chambers). The four factors are “all considered under the rubric of the interests of justice”: Vancouver (City) v. Zhang, 2007 BCCA 280 at para. 10 (Saunders J.A. in Chambers). Even where the applicant has met all four criteria, leave may be denied where it is not in the interests of justice:Movassaghi v. Aghtai, 2010 BCCA 175 at para. 27, Smith J.A. (in Chambers).

 Merits of the proposed appeal

[20] It is important to remember that the proposed appeal is from the grant of an interlocutory injunction. The chambers judge correctly stated the factors he had to consider, the first of which was whether there is a serious question to be tried.

[21] Although the parties, understandably, are concerned with the underlying merits of the dispute, particularly the extent of a superior court’s jurisdiction and the interpretation of s. 19 of the Trade-marks Act as it relates to a passing off action, those are, as the chambers judge held, serious questions to be tried.

[22] The issue for this Court on the proposed appeal would be whether the judge erred in finding that these are serious issues to be tried. In my view, it is unlikely that a division of this Court would venture to resolve these substantive questions on the proposed appeal and is not likely to determine that the judge erred in concluding that they are serious issues to be tried.

[23] The judge’s determinations that the respondent was likely to suffer irreparable harm and that the balance of convenience favoured granting an injunction largely were based on findings of fact. There was evidence before the judge on which he could make those findings. In my view, a division of this Court is unlikely to interfere with the judge’s conclusions on the second and third factors for granting an interlocutory injunction.

[24] In my view, the proposed appeal is not meritorious. I see no basis on which to conclude the judge erred in his application of principle to the facts. The applicants seek to have this Court address serious substantive issues of statutory interpretation and jurisdiction on an appeal from granting an interlocutory injunction that is grounded on the conclusion of the chambers judge that these are serious issues to be tried. I consider that determination of these issues by this Court to be premature.

 Significance to the practice and the parties

[25] The applicants contend that the proposed appeal is important to the public and to the practice of trade-mark law generally “since it is an opportunity for this Court to clarify the protection afforded by a registered trade-mark.” In their submissions, they continue:

The issue of whether the use of a registered trademark can be enjoined on the basis of passing off of an unregistered trademark by interlocutory injunction has not been judicially decided.

[26] This proposition is rooted in the relationship between a registered mark and passing off, that is, a serious question to be tried in the action. The issue is somewhat more complicated in this case because the respondent seeks a declaration of invalidity, which directly engages the language of s. 19 of the Trade-marks Act.

[27] The applicant also asserts that the proposed appeal will give this Court an opportunity to address “an area of apparently conflicting case law on the issue of showing irreparable harm arising from confusion.” The respondent deals with this issue in its submissions, stating:

Wiston suggests that clarification of competing lines of irreparable harm authority is important to the practice generally, contrasting the Federal Court (Centre Ice Ltd. v. National Hockey League et al. (1994), 53 C.P.R. (3d) 34 (F.C.A.) - proof of irreparable harm must be clear and not speculative) with BC (AGBC v. Wale, 1986 CarswellBC 413 - irreparable is a matter of common sense).

There is no conflicting authority in BC to be clarified. Further, these authorities can be interpreted consistently as seen in the reasons of the chambers judge. Evidence of loss of control of one’s own trade-name and goodwill is distinct from merely asserting there is a loss of goodwill to be inferred from confusion. This loss of control [of] one’s own trade-name and goodwill is recognized at law as an impairment of goodwill and reputation, and the damages arising from such an impairment may be presumed.

Toronto Cricket Skating and Curling Club v. Cricket Club Townhouses Inc., [2003] O.J. No. 3558 at para. 8 (Sup. Ct.-Div. Ct.)

As noted by the chambers judge, speculative is not the same as not quantifiable. Silverman J. assessed the affidavit evidence, and accepted there was sufficiently clear proof of Woodpecker’s loss of control over its name and associated goodwill, which gave rise to unquantifiable damages. In doing so, the chambers judge considered both lines of authorities and interpreted them in a consistent manner.

Even if these authorities are conflicting, the chambers judge may prefer one line of authorities to another, so long as his discretion is exercised judicially: Chaube v. Campbell, 2004 BCCA 85 at paras. 17-18. Further, this appeal will not settle the law as between this court and the Federal Court of Appeal. Thus, the proposed appeal is of little importance to the practice.

[28] I tend to agree with the respondent. I also observe that in para. 29 of his reasons, the judge stated:

… The [respondent] would be unable to quantify the loss of reputation, consumer confidence and good will as a result of confusion in the marketplace.

  There was evidence to support this finding of fact.

[29] The applicants contend that the appeal is important to them because they may suffer business losses and loss of customer confidence due to the need to repackage their products and delay in an advertising campaign. The respondent was required to provide the usual undertaking as to damages (reasons at para. 39), although the entered order of the judge does not refer to this. The judge addressed the potential negative impacts of an injunction when considering the balance of convenience in the context of an alteration to the status quo.

[30] He noted that the applicants obtained their trade-mark “knowing that the [respondent] was already using that name.” The judge continued:

… Whatever interim negative consequences may have to be borne, those should be borne by the party altering the status quo. This factor weighs heavily in favour of the [respondent].

 Significance to the action

[31] In my view, the real issue on the proposed appeal – whether the judge erred in granting an interlocutory injunction – is not substantively significant to the action. The applicants assert that with an interlocutory injunction in hand the respondent “will not need to press its case for a permanent injunction”. In my view, the respondent would be unwise to rest on the interlocutory injunction in lieu of proceeding efficiently with this action.

 Progress of the action

[32] In my view, there is a potential that the proposed appeal would hinder the progress of the action. Although I do not know what plans the parties have for organizing the action and, of course, that is a matter for the Supreme Court, there appear to be a number of specific legal issues that could be determinative of the action or could establish its legal framework and that might be addressed summarily. They engage many of the issues the applicants seek, in my view prematurely, to bring to this Court.

 Conclusion

[33] In my view, it is not in the interests of justice to grant leave to appeal in this matter. I see no error in the judge’s statement of the legal criteria he was to take into account when determining whether to grant an interlocutory injunction. There was evidence on which he was entitled to make his findings of fact. The legal issues raised by the applicants should be addressed in the Supreme Court before they are considered by this Court.

[34] The application for leave to appeal is dismissed.

“The Honourable Mr. Justice Chiasson”

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