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A-34-83
Syntex Inc. and Syntex (U.S.A.) Inc. (Respond- ents) (Plaintiffs)
v.
Apotex Inc. (Appellant) (Defendant)
Court of Appeal, Urie, Stone JJ. and Cowan D.J.—Toronto, June 22; Ottawa, July 10, 1984.
Trade marks — Interim injunction — Appeal from grant of interim injunction pending outcome of action for infringement — Whether "serious issue" or "prima facie case" test appro priate — Appellant failing to meet either test — Furthermore, grant of interim injunction having effect of disposing of action finally — Appeal allowed, interim injunction discharged — Trade Marks Act, R.S.C. 1970, c. T-10, ss. 2, 4(1), 22(1) — Patent Act, R.S.C. 1970, c. P-4, s. 41(4) — Food and Drugs Act, R.S.C. 1970, c. F-27, s. 3 — Health Disciplines Act, R.S.O. 1980, c. 196, s. 155.
The appellant, a drug manufacturer, was selling the drug Naproxen in Canada under its own brand name. To promote its sales, the appellant distributed to pharmacists throughout Canada a one-page flyer with a tear-off order form. The flyer suggested that when a client presented a prescription for "Naprosyn", the trade mark used by the respondents to sell Naproxen, the pharmacist could, subject to provincial regula tions, substitute the appellant's brand for the respondents'.
After bringing an action for infringement of the trade mark, the respondents applied for and obtained an interim injunction restraining the appellant from using their trade mark.
This is an appeal from that decision. The appellant argues that the flyer cannot be said to contravene subsection 22(1) of the Trade Marks Act, that the wrong threshold test was applied in granting the injunction and that the respondents would not have suffered irreparable harm had the injunction not issued.
Held, the appeal should be allowed and the interim injunc tion discharged.
Based on Clairol International Corporation et al. v. Thomas Supply & Equipment Company Limited, et al., [1968] 2 Ex. C.R. 552, where the presence of the plaintiffs' marks on comparative shade charts of the defendants' brochures were held not to constitute "use", it is difficult to see how the argument of a "use" contrary to subsection 22(1) could be sustained at trial. The argument that the presence of the respondents' name on the appellant's flyer infringes the right to exclusive use (section 19) or amounts to advertising a product in association with a confusing trade mark (section 20) is not likely to convince a trial judge since the trade mark "Napro- syn" is clearly used so as to identify the respondents' product for purposes of comparison.
There remains to be determined which of the "serious issue" and the more demanding "prima facie case" test is the appro priate threshold test to be applied in a case of this kind before an interim injunction will issue. The "serious issue" test pro pounded in American Cyanamid may not be suitable in all situations, such as where the granting of the interim injunction would have the effect, as it has had in this case, of disposing of the action finally.
Although the "prima facie case" test seems to be the proper one to be applied in this case, in any event, there is not here either a "serious issue" nor a "prima facie case" for an injunction to be tried based upon the alleged violation of the relied-upon provisions of the Trade Marks Act.
CASES JUDICIALLY CONSIDERED
APPLIED:
Clairol International Corporation et al. v. Thomas Supply & Equipment Company Limited, et al., [1968] 2 Ex.C.R. 552; Chitel et al. v. Rothbart et al. (1982), 39 O.R. (2d) 513 (C.A.).
REFERRED TO:
Yule Inc. v. Atlantic Pizza Delight Franchise (1968) Ltd. et al. (1977), 17 O.R. (2d) 505 (I-I.C.); General Mills Canada Ltd. v. Maple Leaf Mills Ltd. (1980), 52 C.P.R. (2d) 218 (Ont. H.C.); Source Perrier (Société Anonyme) v. Canada Dry Ltd. (1982), 64 C.P.R. (2d) 116 (Ont. H.C.); Tarra Communications Ltd. et al. v. Corn- municomp Data Ltd. et al. (1973), 1 O.R. (2d) 682 (H.C.); Fellows & Son v. Fisher, [1976] Q.B. 122 (C.A.); N.W.L. Ltd. v. Woods, [1979] 1 W.L.R. 1294 (H.L.); Fruit of the Loom, Inc. v. Chateau Lingerie Mfg. Co. Ltd. (1982), 63 C.P.R. (2d) 51 (F.C.T.D.); Hoff- man-LaRoche Ltd. v. Apotex Inc., Supreme Court of Ontario, White J., April 25, 1983 (unreported); Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197 (Ont. H.C.); Syntex Inc. v. Novop- harm Ltd. et al. (1983), 74 C.P.R. (2d) 110 (Ont. H.C.); American Cyanamid Co. v. Ethicon Ltd. (1975), A.C. 396 (H.L.).
COUNSEL:
R. G. McClenahan, Q.C. and R. S. Jolliffe for respondents (plaintiffs).
W. A. Kelly, Q.C. and M. Johnston, Q.C. for appellant (defendant).
SOLICITORS:
Gowling & Henderson, Ottawa, for respond ents (plaintiffs).
Fasken & Calvin, Toronto, for appellant (defendant).
The following are the reasons for judgment rendered in English by
STONE J.: This appeal is against a judgment of the Trial Division [order dated December 23, 1982, T-9100-82, not reported] which granted an interim injunction restraining the appellant, its servants and agents, from using the trade mark "Naprosyn" in connection with the promotion, use or sale of the appellant's product. A second appeal [Smith Kline & French Canada Ltd. v. Apotex Inc.], in Court No. A-509-83, was heard at the same time as this appeal. In that case, the Trial Division [order dated April 11, 1983, T-223-83, not reported] followed the decision below and issued an interim injunction in the same terms. These reasons, to the extent applicable, will apply equally to the appeal in Court No. A-509-83 and a copy will be filed in that case.
The appellant distributes and sells pharmaceuti cal products in Canada. Since June of 1974 the first respondent has distributed and sold in Canada the drug Naproxen under the brand name "Napro- syn". The second respondent is the registered owner of the trade mark "Naprosyn" as registered under the Trade Marks Act.'
On June 30, 1981 the appellant was granted a licence by the Commissioner of patents pursuant to subsection 41(4) of the Patent Act 2 to import Naproxen into Canada and to manufacture it into dosage form for sale. The licence required the appellant to pay a 4% royalty to the second respondent. In August of 1982 the Health Protec tion Branch of the Department of National Health and Welfare issued to the appellant a "Notice of Compliance" pursuant to the Food and Drugs Act 3 thereby clearing the way for it to sell and distribute Naproxen in Canada. The appellant took "Apo-Naproxen" as the brand name of its
' R.S.C. 1970, c. T-10.
2 R.S.C. 1970, c. P-4.
3 R.S.C. 1970, c. F-27.
product and also registered it as a trade mark in Canada.
In October of 1982 the appellant distributed a one-page flyer to hospital and retail pharmacists throughout Canada designed to promote the sale of Naproxen under the "Apo-Naproxen" brand name. By law advertising of the product to the public was prohibited. 4 In its flyer, introduced by the words "the obvious choice", two containers of Apo-Naproxen tablets, size 125 mg and 250 mg, are depicted in juxtaposition with a note with "Naprosyn 250 mg" written on it. There then follows a message reading:
Now pharmacists have a choice* when filling a prescription for Naprosyn.
Apotex is proud to have once again set the pace in development and distribution of an alternative for a major brand. Apo- Naproxen-125 mg pale green oval biconvex tablet, engraved APO-125 and 250 mg yellow oval biconvex tablet, engraved APO-250—provides substantial savings—without compromise.
Available now from Apotex, Canada's fastest growing leader in prescription drugs.
*Subject to Provincial Regulations.
The words "special introductory offer" appear to the right of this message together with pricing details as well as addresses and telephone numbers in Ontario, Quebec, British Columbia, Manitoba and Newfoundland. The appellant's name is prominently displayed at the foot of the flyer. A perforated line extends across the page. Below it appears a tear-off order form for the obvious convenience of the reader.
To better appreciate the purpose of the flyer, it is necessary to understand the purport of certain provincial legislation calling for the filling of pre scriptions, whether written generically or by brand name, by pharmacists with a drug deemed by such legislation to be therapeutically interchangeable with the one prescribed. Such legislation exists in one form or other in most provinces. In 1974 the Province of Ontario enacted the Health Disci plines Act. 5 It allows [section 155] a pharmacist to select and dispense an interchangeable product, if such product was listed in the provincial Formu-
4 Ibid., section 3.
5 R.S.O. 1980, c. 196.
lary, at a lower cost than the drug prescribed. Where a drug is prescribed by its generic name, the pharmacist is required to substitute a lower priced therapeutically interchangeable drug; where it is prescribed by a brand name, the pharmacist may do likewise. Legislation in Manitoba, New Brunswick, Newfoundland and Saskatchewan is to like effect. In British Columbia and Alberta phar maceutical products become therapeutically inter changeable upon issuance of a notice of compli ance by the Health Protection Branch in respect of a new drug. No legislation on the subject existed in Nova Scotia or Prince Edward Island. Under the Ontario Drug Benefit plan the Government of Ontario pays pharmacists the price of a drug dispensed to a senior citizen or a welfare recipient provided it is the lowest priced therapeutically interchangeable product.
In November of 1982 the respondents com menced this action. They allege that through much effort and expenditure of much money the respondents had acquired and enjoyed a valuable goodwill and reputation for its brand of Naproxen tablets with physicians, pharmacists and consum ers. They further allege that use by the appellant of the trade mark "Naprosyn" put the reputation and goodwill associated with it at great risk. In particular, they allege in paragraphs 12-15 of the statement of claim:
12. The Defendant, without the authority of the Plaintiffs, or either of them, has improperly and unlawfully used the trade mark NAPROSYN in its advertising in a generic manner without in any way identifying it as a trade mark or as the property of the Plaintiff Syntex (U.S.A.) Inc.
13. The Defendant in its said advertising has improperly and unlawfully used the trade mark NAPROSYN in conjunction with false or misleading statements to pharmacists across Canada informing then [sic] that they can legally fill prescriptions written for NAPROSYN with the Defendant's naproxen product, when it would be contrary to the laws of eight of the ten Canadian provinces to do so.
14. By reason of its aforesaid actions the Defendant has unlawfully made use of the registered trade mark NAPROSYN in a manner likely to have the effect of depreciating the value of the goodwill attaching thereto.
15. By reason of its aforesaid actions the Defendant has infringed the right of the Plaintiff Syntex (U.S.A.) Inc. to the exclusive use of its registered NAPROSYN trade mark to the detriment of the registered owner and the registered user of the said trade mark and has unlawfully advertised its naproxen product in association with the registered trade mark
NAPROSYN.
The respondents claimed a declaration as well as an injunction and an interim injunction. By its notice of motion dated November 29, 1982, it requested an order:
1. Restraining the Defendant until the final disposition of this action, by itself, its servants, agents and workmen or otherwise
(a) from using the trade mark NAPROSYN in connection with the promotion, use-or sale of the Defendant's products;
(b) from using any of Plaintiffs' trade marks, including the trade mark NAPROSYN, in a headline, sub-headline or graph ics in any of the Defendant's advertising, packaging or labelling material;
(c) from distributing or otherwise using any advertisement or other literature
(i) that makes reference to or use any of the Plaintiffs' trade marks, including the trade mark NAPROSYN;
(ii) that has the effect of damaging, diluting or otherwise depreciating the value of the goodwill in the Plaintiffs' trade marks, including the trade mark NAPROSYN; and
(iii) that uses any of the Plaintiffs' trade marks, including the trade mark NAPROSYN, in a generic manner;
(d) from distributing or otherwise using any advertisement or other literature that promotes, directly or indirectly, the substitution of Apo-Naproxen in filling a prescription for the Plaintiffs' NAPROSYN
(i) in any province that does not authorize such substitution;
(ii) in any province that requires listing in a provincial formulary before allowing such substitution until such listing occurs; and
(iii) in any province that prohibits such substitution;
(e) from using any of the Plaintiffs' trade marks, including the trade mark NAPROSYN, as part of a scheme or plan designed to promote the sale or use of the Defendant's products as and for those of the Plaintiffs.
In granting the interim injunction on December 23, 1982, the learned Judge below, after quoting the provisions of subsection 22(1) of the Trade Marks Act, gave as his reasons:
The implications of that provision were canvassed by Thurlow J., as he then was, in Clairol International Corporation et al. v.
Thomas Supply & Equipment Company Limited, et al., [1968] 2 Ex.C.R. 552, at pages 569 to 576. Nothing in the provisions of the Patent Act authorize a compulsory licensee to appropriate the licensor's trade mark or to otherwise use it in a manner prohibited by the Trade Marks Act.
There is a clearly serious issue to be tried and the damages suffered by the plaintiffs, if the defendant is permitted to continue its present promotion will be difficult, if not impos sible, to assess. The balance of convenience lies in favour of an interim injunction issuing.
The appellant takes issue with the correctness of these conclusions. It says that they disclose three separate errors. First, it says that the content of the flyer cannot be said to contravene subsection 22(1) of the Trade Marks Act; secondly, that the wrong threshold test was applied in granting the interim injunction and thirdly that the respondents would not have suffered irreparable harm had the interim injunction not issued. The respondents contend that the learned Trial Judge correctly concluded that the appellant had used the trade mark "Naprosyn" in its flyer contrary to subsec tion 22(1) of the Trade Marks Act and according ly that he was correct in granting the interim injunction on the basis that there is a "serious issue to be tried".
These arguments call for an examination of subsection 22(1) of the Trade Marks Act. It reads:
22. (1) No person shall use a trade mark registered by another person in a manner likely to have the effect of depreciating the value of the goodwill attaching thereto.
The presence in that subsection of the word "use" might, on surface, lend some support to respond ents' argument that a violation had occurred. On the other hand, that word is defined in section 2 of the Act:
2. In this Act
"use" in relation to a trade mark, means any use that by section 4 is deemed to be a use in association with wares or services;
In turn, subsection 4(1) of the statute reads:
4. (1) A trade mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of such wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
In my view, there is substance to the appellant's argument that it will not be found at trial to have contravened subsection 22(1) of the Trade Marks Act. It is not contended the presence of the trade mark "Naprosyn" in the appellant's flyer is cov ered by the first part of subsection 4(1). That being so, in order to succeed in its claim for a permanent injunction based upon contravention of subsection 22(1), the respondents will have to bring their claim under the second part of the same provision, "or it is in any manner so associat ed with the wares that notice of the association is then given to the person to whom the property or possession is transferred." In addition, they will have to show that there was use of the trade mark "in a manner likely to have the effect of depreciat ing the value of the goodwill attaching thereto."
The respondents put their case that the flyer constitutes a "use" of the trade mark "Naprosyn" in this way in paragraph 18 of their memorandum of fact and law.
18. (a) The flyer is not simply an advertisement; it is a binding `offer' made by the Appellant pursuant to which its customers are expected to purchase and effect delivery to them of the Appellant's product.
(b) The order form at the bottom of the flyer is the means by which the pharmacist accepts the offer and, when completed and mailed, obtains the product.
(c) The flyer is an integral part of the act or method of transferring both property and possession and constitutes notice of the association referred to in s. 4 of the Trade Marks Act.
It therefore says that "use" of the trade mark was made within the meaning of subsection 22(1) and that such use should be restrained.
I have difficulty in seeing how this argument could be sustained at trial, but must desist from offering a final view on the merits. It is not necessary in a case of this kind that the respond ents should show at this stage that they are bound to succeed on this point at trial, but only that they
should make out a "serious" or "prima facie" case depending on which of those two tests applies. In order to show that the appellant has made use of the trade mark "Naprosyn" within the meaning of the second part of subsection 4(1) and, therefore, as prohibited by subsection 22(1), the respondents will have to show that the trade mark is so associated with the appellant's wares in the flyer that notice of such association would be given to the person to whom property in or possession of wares is transferred at the time of the transfer. In my view that part of subsection 4(1) must not be read in isolation and an attempt made to arrive at the meaning of the words in which it is couched without reference to the remainder of subsection 4(1). Use of a trade mark is deemed to have occurred if at the time property in or possession of the wares is transferred, in the normal course of trade, it is "marked on the wares themselves or on the packages in which they are distributed". The mark thus may come to the attention of the trans- feree in a direct way at the time of transfer which is the critical point in time. Similarly, for there to be a deemed use, notice of any other manner of association is likewise to be given at that same point in time. It might well be, for example, that the appearance of a trade mark in written material inserted in a package containing the wares even though not marked on the package or on the wares themselves would fall within the second part of subsection 4(1), but it is not necessary to decide the point.
Notwithstanding the dual purpose of the flyer as a piece of promotional material and as an order form, it seems to me that the presence of the trade mark in it is no more a "use" in association with the appellant's wares than was the presence of the plaintiffs' marks on comparative shade charts of the defendants' brochures in the Clairol case. 6 There, Thurlow J. [as he then was] rejected the contention of a "use" within the meaning of sub section 4(1) of the Trade Marks Act. He said (at pages 564-565):
6 Clairol International Corporation et al. v. Thomas Supply & Equipment Company Limited, et al., [1968] 2 Ex.C.R. 552.
Pausing here it is I think apparent that the presence of the plaintiffs' marks on the defendants' packages is a use of those marks "in association with" the wares in the defendants' pack ages within the meaning of section 4(1) because, and as I see it, simply because it is marked on the packages. The purpose for which it is there is, I think, irrelevant on this point which, as I read section 4 raises only the question of association or no association and states that association is to be deemed to exist in the three defined cases. To my mind, however, the presence of the plaintiffs' marks on the comparative shade charts of the defendants' brochures is not a use of such marks within the meaning of section 4(1) since the brochures are neither the wares themselves nor the packages in which the wares are distributed and nothing that I would regard as notice to any person purchasing the defendants' wares of any association of the plaintiffs' marks with those wares, so far as I am aware, ever occurs in any use to which the brochure or its chart can be put at the time of the transfer of the property or possession of the defendants' goods to their purchaser.
It seems to me that the respondents face consider able difficulty in establishing at trial that the presence of the trade mark "Naprosyn" in the appellant's flyer constituted a "use" that is con trary to subsection 22(1) of the Trade Marks Act.
The respondents also rely upon the provisions of sections 19 and 20 of the Trade Marks Act as affording an alternative base upon which to rest the granting of the interim injunction. It is not necessary to discuss this contention at any length. In essence, the respondents say that the flyer infringed the exclusive right of the registered owner to the use of the trade mark "Naprosyn" throughout Canada. I am unable to accept this argument. It asserts that the flyer constituted a deemed infringement because the appellant there by advertised his "wares ... in association with a confusing trade mark" in such manner as was likely to have the effect of depreciating the value of the goodwill attaching to that mark. I do not agree that the presence of the trade mark "Napro- syn" in the flyer amounted to the advertising of "Apo-Naproxen" in association with a confusing trade mark. To so hold would be to ignore the reality of the situation. The flyer quite clearly used the trade mark "Naprosyn" so as to identify the respondents' product for the purpose of compari son with the appellant's product in promoting sale of the latter. In my view, the respondents, here again, will face considerable difficulty in convinc ing a trial judge of the soundness of its argument.
I turn next to consider the appropriate threshold test to be applied in a case of this kind before an interim injunction will issue. The learned Motion Judge thought that the existence of a "serious issue" to be tried was sufficient. That test was developed in England' and has been applied by courts in this country. 8 The appellant contends that it is not the proper test and that the proper one is the "prima facie" case test. 9 That test, of course, is a higher one than the "serious issue" test. No case has been brought to our attention in which it has been authoritatively decided in Canada as to which of these two tests is to be applied in a case of this kind. Nevertheless, my review of these cases leads me to accept as appro priate the following view of the law expressed by MacKinnon A.C.J.O. in Chitel et al. v. Rothbart et al. 1 ° ( at page 522):
Although the American Cyanamid case has been followed in this province, it has been properly emphasized by Cory J., speaking for the Divisional Court in Yule Inc. v. Atlantic Pizza Delight Franchise (1968) Ltd. et al. (1977), 17 O.R. (2d) 505, 80 D.L.R. (3d) 725, 35 C.P.R. (2d) 273, that the remedy must remain flexible and that the American Cyanamid test may not be a suitable test in all situations. That there are exceptions to or qualifications of the test is noted by Lord Diplock himself in N.W.L. Ltd. v. Woods, [1979] 3 All E.R. 614 at 625:
My Lords, when properly understood, there is in my view nothing in the decision of this House in American Cyanamid Co. v. Ethicon Ltd. to suggest that in considering whether or not to grant an interlocutory injunction the judge ought not to give full weight to all the practical realities of the situation to which the injunction will apply. American Cyanamid Co. v. Ethicon Ltd., which enjoins the judge on an application for an interlocutory injunction to direct his attention to the balance of convenience as soon as he has satisfied himself
' American Cyanamid Co. v. Ethicon Ltd. (1975), A.C. 396 (H.L.).
See e.g. Yule Inc. v. Atlantic Pizza Delight Franchise (1968) Ltd. et al. (1977), 17 O.R. (2d) 505 (H.C.); General Mills Canada Ltd. v. Maple Leaf Mills Ltd. (1980), 52 C.P.R. (2d) 218 (Ont. H.C.); Source Perrier (Société Anonyme) v. Canada Dry Ltd. (1982), 64 C.P.R. (2d) 116 (Ont. H.C.).
9 See e.g. Tarra Communications Ltd. et al. v. Com- municomp Data Ltd. et al. (1973), 1 O.R. (2d) 682 (H.C.); Fellows & Son v. Fisher, [1976] Q.B. 122 (C.A.); N.W.L. Ltd. v. Woods, [1979] I W.L.R. 1294 (H.L.); Fruit of the Loom, Inc. v. Chateau Lingerie Mfg. Co. Ltd. (1982), 63 C.P.R. (2d) 51 (F.C.T.D.).
10 (1982), 39 O.R. (2d) 513 (C.A.).
that there is a serious question to be tried, was not dealing with a case in which the grant or refusal of an injunction at that stage would, in effect, dispose of the action finally in favour of whichever party was successful in the application, because there would be nothing left on which it was in the unsuccessful party's interest to proceed to trial.
Is this a case of the kind referred to by Lord Diplock as one "in which the grant or refusal of an injunction at that stage would, in effect, dispose of the action finally in favour of whichever party was successful in the application, because there would be nothing left on which it was in the unsuccessful party's interest to proceed to trial"? Counsel for the appellant contends that it is such a case. He rests his contention on the basis that use of the flyer during the period of its maximum impact, that is, prior to listing of "Apo-Naproxen" in provincial formularies during 1983 would have had the effect of getting the new drug into the hands of pharmacists and thus enable them to substitute it for a drug prescribed. He said that once the listing occurred, application of the provincial legislation would be sufficient to bring about substitution. Be that as it may, I think it is significant that the respondents have not, since December 23, 1982, taken any steps to bring this action on for trial, having succeeded in securing the interim injunc tion on that day. It appears to me that the effect of the interim injunction has been "to dispose of the action finally".
Although I am inclined to the view that the prima facie case test is the proper one to be applied," I have concluded that there is not here either a "serious issue" or a "prima facie" case for an injunction to be tried based upon the alleged violation of the relied upon provisions of the Trade Marks. Act. That being so, I find it unnecessary to consider the respondents' argument also based upon subsection 22(1) of that statute that the trade mark "Naprosyn" was used "in a manner likely to have the effect of depreciating the value of the goodwill attaching" to it, or to take up the question of irreparable harm. I do not see how the
" Hoffman-LaRoche Ltd. v. Apotex Inc., Supreme Court of Ontario, White J., April 25, 1983 (unreported); Smith, Kline & French Canada Ltd. v. Novopharm Ltd. (1983), 72 C.P.R. (2d) 197 (Ont. H.C.); Syntex Inc. v. Novopharm Ltd. et al. (1983), 74 C.P.R. (2d) 110 (Ont. H.C.).
interim injunction can stand.
For the above reasons, I would set aside the judgment below with costs and would direct that the interim injunction dated December 23, 1982, be discharged.
URIE J.: I concur.
COWAN D.J.: I concur.
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