TRADE-MARKS AND UNFAIR COMPETITION

THEORETICAL BASIS OF TRADE-MARK LAW

 Source Theory – The purpose of trade-mark law is to enable the public to identify the source of the wares or services
and to stake out a claim by the owner of the trade-mark on the use of the mark in respect of similar wares or services.
The notion or quality of a single source thus becomes less important.
 Guarantee Theory – Trade-marks should serve to help ensure that the public was receiving the quality of goods that
they have come to expect.
 Economic Theory – A trade-mark makes a consumer’s search more efficient and allows people to get specifically what
they want, sooner. The consumer doesn’t need to research the attributes of a brand they are about the purchase
because the trade-mark is a shorthand way of telling them that the attributes are the same as that of the brand they
enjoyed earlier. The value of a trade-mark is the saving in search costs made possible by the information or
reputation that the trade-mark conveys or embodies about the brand (or the firm that produces the brand).
 Functional Theory – A trade-mark was an attempt to protect the consumer against the “passing-off” of inferior goods
under misleading labels. Courts have largely departed from this theory and have come to view trade-marks as
protection of property rights in divers economically valuable sale devices.
 Current “Property Theory” – One who, by the ingenuity of his advertising or the quality of his product has induced
consumer responsiveness to a particular name, symbol, form of packaging, etc. has thereby created a thing of value.
A thing of value is property, and the creator of property is entitled to protection against third parties who seek to
deprive him of his property. The problem with this argument is it bases legal protection upon economic value, when
actually the economic value of a sales device depends upon the extent to which it will be legally protected.

WHAT IS A TRADE-MARK?
 Trade-marks are indicators of trade-source. They embody the good-will and reputation that is associated with the
trade-source in the marketplace. They are also powerful cultural signifiers that can efficiently communicate a myriad
of messages and associations to others on the basis of shared public recognition.
 The foundation of a trade-mark is its distinctiveness, because only a distinctive mark will allow the consumer to
identify the source of the goods. A mark is a symbol of the connection between a source of a product and the
product itself (Kirkbi AG v Ritvik Holdings Inc)
 A trade-mark is a guarantee of origin and quality. Trade-marks’ claim to monopoly rests in serving an important
public interest in assuring consumers that they are buying from the source from whom they think they are buying,
and receiving the quality which they associate with that particular trade-mark (Mattel USA v 3804207 Canada Inc)
 The purpose of trade-marks is to function as a symbol of the source and quality of the wares and services, to
distinguish those of the merchant from those of another, and thereby to prevent “confusion” in the marketplace.
(Veuve Clicquot v Boutiques Cliquot Ltee)
 Trade-marks provide a short-cut to get where they want to go. Where the trade-marks of different businesses are
similar, a consumer may be unable to discern which company stands behind the wares or services. Confusion
between trade-marks impairs the objective of providing consumers with a reliable indication of the expected source
of wares or services (Masterpiece Inc v Alavida Lifestyles)

THE SPECTRUM OF DISTINCTIVENESS

1. Generic (not registrable);
 2. Descriptive (not registrable);
a. If a person uses words which simply describe the kind of goods he makes or sells, it would be intolerable
to confer upon him the right to prevent other persons from honestly using the words to describe what they
make or sell. (Yorkshire Relish)
b. A man cannot be restrained by injunction from telling in the course of business the simple truth. We must
be careful to ensure that people don’t monopolize words, which is a more serious burden. (Yorkshire
Relish)
3. Secondary meaning
a. The words of a person, or words forming part of the common stock of language, may become so far
associated with the goods of a particular maker that it is capable of proof that the use of them by
themselves without explanation or qualification by another manufacturer would deceive a purchaser into
the belief that he was getting the goods of A, when he was really getting the goods of B. In this case, mere
proof by the plaintiff that the defendant was using a name, word or device the plaintiff had adopted to
distinguish his goods would not entitle him to any relief. He would only get relief if he could prove the
defendant was using it under such circumstances as to put off his goods as the goods of the plaintiff.
(Yorkshire Relish)
4. Suggestive
5. Inherently distinctive

UNFAIR COMPETITION AND THE RESTRAINT OF TRADE

THE TORT OF CONSPIRACY
 Simple Conspiracy – Two or more parties agree to cause economic harm to another by lawful means. While the
means are lawful, acting in concert with a harmful purpose is what makes this wrongful.
 Conspiracy – An agreement of two or more parties to cause loss by unlawful means. The intention to harm doesn’t
really matter, it is the use of unlawful means that makes it wrongful.
 Damages are necessary to plead conspiracy.

THE TORT OF INJURIOUS FALSEHOOD

 The tort of injurious falsehood seeks to protect the plaintiff’s pecuniary interest against deceptive market practices.
The difference between defamation and injurious falsehood lies in their remedies: defamation compensates for loss
of personal remedies, whereas injurious falsehood protects the plaintiff’s ability to sell its services, property, goods or
business.
 Injurious falsehood is also distinct from passing-off. Injurious falsehood is a direct attack on the quality of the
plaintiff’s goods, services, business or the like. Passing-off is a false representation that the goods of the defendant
originate with the plaintiff. In other words, injurious falsehood distinguishes competing products by disparagement,
and passing off confuses the origin of the products by imitation.
 A plaintiff may maintain an action in injurious falsehood if they can show: (Ratcliffe v Evans)
1. That the defendant published to third parties words that are false;
a. Not all falsehoods are actionable – lying about how good your own products are, resulting in
other businesses losing customers to you, is not actionable.
2. That they refer to the plaintiff’s property or business;
3. That they were published maliciously (they knew they were false or were reckless as to the truth of them,
constructed intent to result in pecuniary loss);
a. If you publish a statement you believe to be true for the purposes of doing another business
harm, and it turns out that the statement you believed to be true is false, then notwithstanding
the bona fides of your belief, and because the object that you had in mind was to injure him
and not advantage yourself, you would be liable for an injurious falsehood. (Wilt’s Dairy)
b. If you publish a false statement you know to be false, albeit your only objet is your own
advantage and with no intention or desire to injure the person in relation to whose goods the
falsehood is published, then provided it is clear from the nature of the falsehood that it is
intrinsically injurious, then the defendant is responsible, the malice consisting in the fact that
what he published he knew to be false. (Wilt’s Dairy)
4. Special damage followed as a result of their publication.
a. Nature of the harm can be varied and can include loss of custom, sale and good reputation.
b. Can include a “general loss of business, as distinct from the loss of this or that known customer”.
Evidence of a general decline in business is admissible (Ratcliffe v Evans)
 Ex. A competitor passed off Wilk’s Dairy’s old milk as being its good milk.
  For other protections, see s 17, Ontario Libel and Slander Act and s 52, Competitions Act.

MISAPPROPRIATION (NOT AS WELL DEFINED IN CANADA)

 Passing off protects the business interests of proprietors who have established market reputation in certain indicia. A
plaintiff must establish that the defendant’s misrepresentation has led, or is likely to lead, to consumer confusion and
harm. The doctrine of misappropriation protects against ‘free-riding’ as unfair competition and is not concerned with
protecting consumers from confusion or condition of proof of misrepresentation.
 The action is based on the legal recognition of a form of proprietary interests in the underlying intangibles, or ‘quasi-
property’.
 Ex. To prevent another news source from simply re-hashing the information collected by the Associated Press, the
court found a quasi-property right in the labour that went into collecting that information, but not the information
itself. INS could not benefit from that labour for free. The court found that this right existed to the extent necessary
to prevent unfair competition and sustain incentives to engage in news-making. (INS v Associated Press)

IS THERE A TORT OF UNFAIR COMPETITION?

 Unfair competition does not, in itself, provide a sufficient basis for relief under the law of this country.
 Unfair competition can be used in three-ways: (Moorgate Tobacco Co Ltd v Philip Morris Ltd & Ors)
1. As a synonym for passing-off;
2. As a generic grab bag for a bunch of different actions that help protect one business from another’s wrongful
actions (unlawful appropriation of confidential information, injurious falsehood) and;
3. As an unfair competition tort, as in the INS case – a separate cause of action and a wrong available in itself.
This use is wrong. When we don’t know what to call something, we should refrain from throwing the label
“property” at it.
 Malice itself is not a cause of action – one may do a lawful act with every intention to harm one’s neighbour; the act
remains lawful so long as it is in itself proper. The unattractive nature of the motive does not make actionable that
which is not actionable in itself. (Swedac Ltd & Ors v Magnet & Southerns Plc)
 Unfair competition is not a description of a wrong known to the law. Competition that causes some loss may also be
unfair because it breaks existing legal rights, but competition which is effective is not thereby unfair (Swedac Ltd &
Ors v Magnet & Southerns Plc)
 SEE ALSO s 16, 17, Ontario Libel and Slander Act and s 52, Competition Act

MISAPPROPRIATION OF PERSONALITY
 In most instances in which litigants invoke personality rights, economic loss is the main consideration: those with
greater notoriety and publicity are more handsomely rewarded and fervently protected.
 The commercial use of someone’s distinctive indicia without their consent can amount to an invasion of their
exclusive right to market and can constitute an appropriation of personality. (Athans) One cannot commercially
exploit another’s name or likeness without his permission (Baron Phillipe de Rothschild SA) )
 Show: (Krouse)
1. The plaintiff’s image was used in a fashion recognizable to the public;
a. The cause of action is proprietary in nature and the interest protected is that of the individual in
the exclusive use of his own identity insofar as it is represented by his name, reputation or other
valuable (Gould Estate)
2. The image was used for the defendant’s commercial advantage;
a. The court must be mindful of the public interest. The purpose of the portrayal must be examined
to determine if it predominantly serves a social function valued by the protection of free speech. If
the portrayal merely serves the purpose of contributing information, which is not false or
defamatory, to the public debate of political or social issues or of providing the free expression of
creative talent which contributes to society’s cultural enrichment, then the portrayal generally will
be immune from liability. If, however, the portrayal functions primarily as a means of commercial
exploitation, then such immunity will not be granted. (Gould Estate)
b. Sales versus subject distinction: Sales constitute commercial exploitation and invoke
misappropriation of personality. The activity uses celebrity for commercial gain, but is not about
the celebrity. This is in contrast to things like biographies where the celebrity is the actual subject
of the work or enterprise. The subject of the activity is the celebrity and the work is an attempt to
provide some insights about the celebrity. (Gould Estate)
3. It is likely individuals would be confused into thinking the person was supporting whatever the image was
used for;
 a. This is an important contextual factor. Does it seem like the celebrity is endorsing the activity of
the defendant? Does it have the effect of establishing any connection in the minds of the relevant
public between the celebrity and the defendant? (Gould Estate)
b. Even without this association, the commercial use of a representational image by the defendant
without the plaintiff’s consent can constitute an invasion and impairment of his exclusive right to
market his personality (Athans)
4. Any evidence of damage.
 The right of publicity is descendible and devisable. The right of publicity protects the commercial value of a person’s
celebrity status. As such, it is a form of intangible property, akin to a patent or copyright, that is descendible.
Whatever statutory restrictions there may be on rights of action for privacy violations and unauthorized use of
personality, they should not be applied to the common law tort of appropriation of personality. (Gould Estate)
 The right of publicity, being a form of intangible property under Ontario law akin to copyright, should descend to
the celebrity’s heirs. Reputation and fame can be a capital asset that one nurtures and may choose to exploit, and it
may have a value much greater than any tangible property. (Gould Estate)

COMMON LAW PASSING-OFF

RATIONALE
 Passing off is a form of deceptive market practice that makes competition unfair.
 Manufacturers who have built up goodwill have acquired quasi-proprietal rights in that goodwill, and are entitled to
be protected against unfair practices that could harm it. Consumers making choices in the marketplace are entitled to
protection against dishonest trade practices that could confuse or deceive them. In this way, trade-mark law also
serves a public interest and consumer protection function.
 Although it protects the consumer by extension, the law is primarily concerned with unfair competition between
traders (Consumers Distributing Co Ltd v Seiko Time Canada Ltd)
 By limiting free-riding, trade-mark law also provides an incentive for traders to invest in the development of a mark
and so to maintain the quality of the products associated therewith. The consumer benefits from this improved
quality, as well as from the reduced search costs that flow from the mark’s capacity to identify the trade-source in the
marketplace.

CLASSIC PASSING OFF

 Remember to ask: What is the mark? What are the indicia you are laying claim to? To what does the goodwill
attach?

Diplock Test (Warnink v J Townend & Sons)

1. Misrepresentation;
2. By a trader in the course of trade;
3. To prospective customers of his or ultimate consumers of the goods or services supplied by him;
4. Which is calculated to injure the business or goodwill of another trader; and
5. Which causes actual damage to the business or goodwill of the trader bringing the action.

Show: (Ciba-Geigy)
1. Existence of goodwill attached to the goods or services which he supplies, in the mind of the public by association
with the identifying “get-up”;
a. What are the relevant indicia? To be relevant, the indicia must come into play before making the
purchasing decision (this is the psychological function of trade-marks). What is the plaintiff seeking to
protect?
b. Is the get-up distinctive? Do they distinguish the product or article manufactured by the plaintiff from a
similar product or article manufactured by anyone else? (Shredded Wheat). If a person makes or sells an
article and gives it a certain name by which the article comes to be known in the market, anyone who can
make the same kind of article can call it by the name by which it is known, if in fact he can do so without
passing off his goods for those of the original makers. (Yorkshire Relish, but see also Camelhair Belting)
i. A word is not registrable under the act which is merely descriptive of the character or quality of
the goods in connection with which it is used. (Shredded Wheat)
ii. A man who takes it upon himself to prove that words, which are merely descriptive of the quality
of goods, have acquired a secondary meaning, assumes a much greater burden than that of a
man who undertakes to prove the same thing of a word not significant and not descriptive, but
which has been compendiously called a “fancy” word. (Westfair Foods Ltd v Jim Pattison
Industries, Shredded Wheat)
 c. Common field of activity? (Walt Disney Formulation)
2. Deception of the public due to a misrepresentation;
a. Consider whether the natural and probable result of the defendant’s acts will be to mislead purchasers,
and so deprive the plaintiff of business intended for him (Yorkshire Relish)
b. It is the duty of the person who introduces articles of his manufacture into the market under the same
name as that employed by another manufacturer to distinguish the goods so newly introduced from those
previously in the market. (Yorkshire Relish)
c. The basis of a PO action being a false representation by the defendant, it must be proved in each case as a
fact that the false representation was made. (AG Spalding Bros v AW Gamage Ltd)
d. Common field of activity? (Harrods Formulation)
3. Actual/potential damage to the plaintiff as a result of the erroneous belief engendered by the defendant’s
misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by
the plaintiff.

EXTENDED PASSING-OFF
 Extended passing-off recognizes the concept of shared goodwill. The goodwill or reputation is not relegated to the
domain of one to the exclusion of all others, but is accessible by all those who legitimately manufacture the product,
offer the service, or operate the type of business whose common characteristics are distinctive of such use.
(Warnink)
 Extended passing-off includes any situation where goodwill is likely to be injured by a misrepresentation. It covers
not only indicia describing the locality where a particular product originates, but indicia describing the character or
composition of the product. (Warnink)
 If a product of a particular character or composition has been marketed under a descriptive name and under that
name has gained a public reputation which distinguishes it from competing products of different composition, the
goodwill in the name of those entitled to make it should be protected by law against deceptive use of the name by
competitors. If it denotes a product of which the ingredients come from a particular locality but should lose

Show:
1. That there were two classes;
a. It is sufficient that the existence of the two classes is known to people, though they might not be aware of
the dividing line between the two classes. There can be no passing-off unless the classes are of susceptible
definition. (Wilt’s Dairies)
2. That the goods were in fact class B;
3. And they were being passed off as class A.
 Ignorance is irrelevant, and the defendants are liable whether they knew or whether they didn’t know they were
passing something off as being something other than what in fact it was. (Wilt’s Dairies)
o However, in assessing damages, the Court should take into account the fact that in passing off the goods
improperly, the D’s knew what they were doing. If the misrepresentation is not innocent, the damages
should be increased. (Wilt’s Dairies)