Digests

Tommy Hilfiger Licensing Inc. v. Produits de Qualité I.M.D. Inc.

T-2235-99

2005 FC 10, Beaudry J.

7/1/05

64 pp.

Trade-mark infringement action--Plaintiffs say defendants infringed marks consisting of rectangles with red, white, blue colours and words "Tommy Hilfiger" and also infringed mark "Tommy Hilfiger"--Also alleged: passing-off, depreciation of goodwill--Seeking injunction, accounting of profits, damages, exemplary damages, pre- and post-judgment interest, delivery up, costs--Defendants' position: trade-marks invalid, seek expungement--By counterclaim, individual defendant, Rosen (president of defendant corporation) seeking $1,000,000 damages for lost profits in sales, reduced value of shares in defendant corporation--Plaintiff, Tommy Hilfiger Licensing Inc. (THLI), Delaware company, owns "Hilfiger flag trade-marks"--Its licensed products advertised in Canada in such foreign publications as The New York Times, Vanity Fair, such Canadian magazines as Macleans, Toronto Life as well as by billboards, in-store posters, sponsorship of performances by musical groups such as Rolling Stones, sponsorship of events (Toronto Film Festival)--Defendant, Quebec corporation, makes souvenirs, including clothing, in association with term "Explore Canada"--Product line includes: t-shirts, golf shirts, sweatshirts, toques, duffel bags, mugs, hockey pucks, beer steins--Its customers include: tourist shops, duty free stores, United Cigar Stores--Rather than consumer advertising, it advertises in trade magazines, at trade shows in major cities--In 1999, plaintiffs warned two of defendants' important customers would be subjected to litigation unless ceased selling "Explore Canada" goods--In 1998, defendant had received cease and desist letter as "Explore Canada" logo in breach of trade-marks--Issue (1): Tommy Hilfiger marks not invalid--Registered trade-mark presumed valid so onus of proof borne by one seeking expungement--But invalidity of registration complete defence to infringement action--Trade-marks Act, s. 18 lists four grounds of invalidity: (1) unregistrability; (2) non-distinctive-ness; (3) abandonment; (4) non-entitlement to secure registration--Defendants principally rely on ground (2)--In rectification of register matters, Court acts in public interest, to preserve purity of register--Matter considered one between public, owner of mark--Grounds (1), (3), (4) considered briefly, found inapplicable--Act, s. 2 defining "distinctive"--Trade-mark's function: indicate source of goods--Must remain distinctive of single source--Two types of distinctiveness: inherent and acquired--Mark distinctive if nothing about it refers customers to multitude of sources--If mark unique or invented name so could refer only to one thing, inherently distinctive--Mark lacking inherent distinctiveness can acquire same by continual use in marketplace--But, must be established mark has become known to consumers as originating from one particular source --To establish mark invalid under s. 18(1)(b), must be non-distinctive at date proceeding commenced rather than at time of registration--Distinctiveness question of fact, test being whether clear message given to public wares with which mark associated, used are those of mark's owner, not of another--Court must consider all circumstances, improper to dissect mark, examine component parts for it is combination of elements that constitutes trade-mark--Defendants' argument: Hilfiger marks have lost distinctiveness as can happen due to genericism, multiple users, change of product origin, as result of functional or ornamental use--Distinction between transfer, licence: licence confers no property right but merely right to use during certain period of time or/and under specified conditions; transfer is assignment of all or part of owner's rights, interest to new owner--Here, there were two transfers: in 1992 between Tommy Hilfiger Inc. (THI) and THLI and in 2001 between Tommy Hilfiger Canada (THC) and THC Retail--Defendants' argument: due to plaintiff Tommy Hilfiger Canada's 2001 reorganization, whereby parts of its business transferred to THC Retail and THC Sales, none of trade-marks were, at commencement of these proceedings, distinctive of plaintiffs' wares--That is, since transfer was "untrammelled", marks lost distinctiveness--Became impossible to know who trade-mark owner was--Court agreeing that due to transfer, right to use mark may subsist in two or more persons, thereby creating some confusion as to product source and this may interfere with mark's distinctiveness--But, in case at bar, transfer between subsidiaries of same parent company--Transfer between THC and THC Retail not creating confusion or causing marks to lose distinctiveness--Also no evidence of confusion adduced by defendants--Defendants further argued that as 1992 assignment to THLI did not transfer goodwill, transfer invalid--But, to be valid, transfer need not include goodwill --At common law, trade-mark transferable only with goodwill of business as mark could not stand alone--But, under Act, assignment valid without transfer of goodwill--Under s. 50, trade-mark owner may allow another to use mark and distinctiveness not impaired if other a licensee in accordance with this section--Two conditions for use, advertisement, display of trade-mark to be deemed by owner: (1) existence of licence; (2) some control over character, quality of wares-- Licence granted to THC in 1990 by THI (geographical licence), as amended by THLI in 1995 (Canadian Retail Licence), of particular interest--Defendants' argument: THI licensed THC only to use unregistered trade-mark, "Tommy Hilfiger" mark; use by THC of other marks without proper consent caused Tommy Hilfiger's marks to lose distinctiveness as misled public as to source--Plaintiffs say used shorthand "Tommy Hilfiger" in reference to trade-marks to include all Hilfiger's marks--Court accepting shorthand "Tommy Hilfiger" to define all marks then registered makes sense--At date of licensing, no mark had been registered for name "Tommy Hilfiger"--Shorthand's use simplified licensing--When, in 1994, "Tommy Hilfiger" was registered, definition of trade-mark in geographical licence had to be modified to avoid misinterpretation of geographical licence-- Court not believing public confused as to source, origin of wares--Regardless which subsidiary has licence, still Tommy Hilfiger product--Defendant suggests quality control done on behalf of THLI by parent company insufficient to satisfy Act, s. 50--THUSA entered service agreement with THLI to ensure control--Delegation of obligation not fatal to licence, registration--Defendants failed to prove marks not distinctive at outset of proceeding--Flag design integral part of all Tommy Hilfiger brand promotion--By mid-2001, Hilfiger logo had gained sufficient notoriety in Canada in association with clothing that use of logo, perceived variation thereof for clothing capable of causing statistically significant misap-prehension among clothing purchasing public such goods made or licensed by Tommy Hilfiger--Hilfiger marks are presumptively strong marks--Issue (2): Infringement under s. 19--"Use as a trade-mark" issue--In determining whether mark used as trade-mark, user's intention or public recognition sufficient to demonstrate use as trade-mark-- Court concluding: there is confusion between Explore Canada logo, Hilfiger trade-marks; defendants did use Explore Canada logo as a trade-mark--Explore Canada logo not identical to any of plaintiff's trade-marks, which includes neither words "Explore Canada" nor name of city or province nor maple leaf symbol in middle--No infringement under s. 19--Issue (3) Whether infringement under s. 20--Whether use of Explore Canada logo would cause confusion with Hilfiger's trade-marks--Under s. 20(1), infringement occurs if there is use of "confusing trade-mark"--Concept of confusion, proof required, described in Tommy Hilfiger Licensing, Inc. v. International Clothiers Inc. (2003), 239 F.T.R. 260 (F.C.) --Court must consider all surrounding circumstances including factors enumerated under s. 6(5)--Inherent distinctiveness refers to originality--Original design is inherently distinctive, considered strong mark--Hilfiger flag design is inherently distinctive as not descriptive of line of goods it designates but consists of arbitrary combination, spatial relationship of blocks of colour--Explore Canada logo inherently distinctive for same reasons--Hilfiger trade-marks have acquired great distinctiveness through extensive publicity campaigns--Hilfiger Canadian sales $125 million in 2001-- Total sales of defendants' Explore Canada goods to 2001 only $2 million--Distinctiveness factor favours plaintiffs--Length of time trade-marks in use also favours plaintiffs with respect to some of trade-marks--As to nature of wares, need not find businesses of plaintiffs, defendants actually overlap to find likelihood of confusion: s. 6(2)--But obvious overlap in nature of some Hilfiger products with Explore Canada goods --As to nature of trade, Hilfiger goods sold by upscale retailers such as large department stores, chosen for image, location while Explore Canada items are for purchase at low-end tourist shops, but overlap does exist as both are offered for sale at duty free shops, specialty stores--As to degree of resemblance between marks in appearance, sound or ideas suggested, Explore Canada logo bears high degree of visual resemblance, in light of "consumer's imperfect recollection" test--No adverse inference drawn from defendants' failure to put in evidence results of privileged legal advice sought in 1996 re: use of Explore Canada logo--Consumer survey in another Hilfiger infringement case not helpful since it did not target tourists, target population herein--Product compared, jeans, not even sold by defendant--Plaintiffs presented no evidence of actual confusion--Considering five factors in s. 6(5), in four cases, one factor precludes likelihood of confusion finding--Due to visual difference between plaintiffs' mark TMA [acute ]291, Explore Canada logo ([acute ]291 only word, not rectangle with colours), logo not infringing [acute ]291 --Same conclusion re: [acute ]827 (rectangle with colours, words "Tommy Hilfiger")--Because of obvious difference between wares in association with [acute ]283, [acute ]082 (cosmetics, suntan lotion etc.) and defendant's goods, no likelihood of confusion--But defendant's logo does create likelihood of confusion with Hilfiger's [acute ]095 (rectangle with colours without words "Tommy Hilfiger")--Some of wares of both parties exactly same (t-shirts, sweaters)--Some overlap of stores where sold --Very high degree of visual resemblance-- Explore Canada logo likely to cause confusion with [acute ]095, infringes Act, s. 20 --Consumer in tourist shop who sees Explore Canada t-shirt would think, as matter of first impression, looking at Tommy Hilfiger shirt on sale at good price--Issue (4): Depreciation of value of goodwill (Act, s. 22) not requiring trade-mark be used as a trade-mark under s. 22(2)--Question was whether defendant's use likely to have effect of depreciating value of goodwill attached to plaintiffs' trade-marks--Goodwill is reputation built up by trade-mark's owner over years of honest work or substantial expenditure of money so that wares become associated with trade-mark-- Depreciation occurs due to reduction of esteem in which mark itself held or by direct enticing of customers who would otherwise continue to purchase trade-marked goods--Need not show likelihood of confusion--Still, potential for confusion may have effect of depreciating value of goodwill--Can't just say if customers make mental connection that will reduce esteem in which Hilfiger trade-marks held--Depreciation of value of goodwill is somewhat intangible concept, at times hard to prove--Court needs either proof of likelihood negative impression left in consumer's mind or proof of likelihood of direct persuasion, enticement-- Plaintiffs presented no such evidence so Court concluded goodwill not depreciated, s. 22 not infringed-- Issue (5): Act, s. 7(b) is codification of common law tort of passing-off--Plaintiff must prove: (1) existence of goodwill; (2) deception of public; (3) actual or potential damage to plaintiff--Evidence plaintiffs had established significant goodwill by extensive advertising, substantial sales-- Likelihood of confusion--But no evidence of negative impact on plaintiffs' business--Defendants not guilty of passing-off --Issue (6): As to personal liability of defendant's President, Ont. C.A. held, in Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97 "directing minds of corporations cannot be held civilly liable for the actions of the corporations they control and direct unless there is some conduct on the part of those directing minds that is either tortious in itself or exhibits a separate identity or interest from that of the corporations such as to make the acts or conduct complained of those of the directing minds"--Must be circumstances from which Court can reasonably conclude director's purpose is to deliberately, wilfully, knowingly pursue course of conduct that will incite infringement or indifference to risk of infringement--No evidence of such herein--No personal liability on President's part--Issue (7): Counterclaim by President--Prior to plaintiffs' campaign to terminate "Explore Canada" logo, appropriate red, white and blue colour scheme, these goods represented 8% of defendant's sales--In anticipation of even greater demand, fixed costs, including inventory, had increased--Defendant President says plaintiffs' exorbitant claims, interference with defendant's contractual relationships breached Act, s. 7(a), reduced value of President's shares-- Counterclaim dismissed for want of evidence--Trade-marks Act, R.S.C., 1985, c. T-13, ss. 2 "distinctive", 6(2), (5), 7(a),(b), 12 (as am. by S.C. 1990, c. 20, s. 81; 1994, c. 47, s. 193), 13, 14 (as am. idem, s. 194), 15, 18, 19 (as am. by S.C. 1993, c. 15, s. 60), 20 (as am. by S.C. 1994, c. 47, s. 196), 22, 48, 50 (as am. by S.C. 1993, c. 15, s. 69).