T-882-74
Motel 6, Inc. (Plaintiff)
v.
No. 6 Motel Limited and John Van Edmond
Beachcroft Hawthorne (Defendants)
Trial Division, Addy J.—Vancouver, February 17,
18, 19, 20, 23, 24 and 25; Ottawa, April 3, 1981.
Trade marks — Passing off and non-distinctiveness —
Plaintiff is owner of United States service mark "Motel 6"
under which it operates a chain of motels frequented by
Canadian motorists — Defendant obtained a similar logo-type
mark incorporating the words 'Motel 6" — Plaintiffs action
seeks to strike out the defendant's trade mark, a declaration
that the plaintiff is the owner of the copyright and an injunc
tion to, inter alla, restrain the defendant from directing public
attention to its services in such a way as to cause or be likely
to cause confusion in Canada between its services and those of
the plaintiff contrary to s. 7(b) of the Trade Marks Act —
Whether plaintiff established ownership of copyright —
Whether defendant's mark lacked distinctiveness — Whether
s. 7(b) is ultra vires — Action dismissed in part with the
plaintiffs claim under s. 7(b) being dismissed solely for want
of jurisdiction — Trade Marks Act, R.S.C. 1970, c. T-10, ss.
4, 5, 7, 16, 17, 18, 49 — Copyright Act, R.S.C. 1970, c. C-30,
ss. 4, 12, 20.
The plaintiff operates a chain of motels in the United States
under the name of "Motel 6". Many of its customers are
Canadian motorists. It operates no motel in Canada. The
defendant obtained a logo-type mark in Canada which it
allegedly copied from the plaintiff's service mark. The plaintiff
seeks an order that the defendant's trade mark be struck out, a
declaration stating that the plaintiff is the owner of the copy
right and that the corporate defendant has infringed the copy
right, and an injunction to prevent future copyright infringe
ment, future use of the mark in association with motel services
and to restrain the defendant from directing public attention to
its services or business in such a way as to cause confusion in
Canada between its services and those of the plaintiff contrary
to section 7(b) of the Trade Marks Act. The defendant requests
a declaration that the plaintiff has no copyright in its mark and
also denies the jurisdiction of the Court to hear any claim based
on section 7(b) of the Trade Marks Act.
Held, the action is dismissed in part, with the plaintiff's
claim under section 7(b) being dismissed solely on the ground
of lack of jurisdiction. The defendant's trade mark is to be
struck from the register on the ground that it did not distin
guish the defendant's services from those of the plaintiff.
Because the plaintiff failed to establish ownership of any right
or licence to the work, the plaintiff's claim for copyright
infringement is dismissed. On the issue of lack of distinctiveness
of a mark, although it must be shown that the rival or opposing
mark must be known to some extent at least, it is not necessary
to show that it is well known or that it has been made known
solely by the restricted means provided for in section 5. It is
sufficient to establish that the other mark has become known
sufficiently to negate the distinctiveness of the mark under
attack. The attack based on non-distinctiveness may be founded
on evidence of knowledge or reputation of the opposing mark
spread by means of word of mouth and evidence of reputation
and public acclaim and knowledge by means of newspaper or
magazine articles as opposed to advertising. All relevant evi
dence may be considered which tends to establish non-distinc
tiveness. There was evidence that residents of British Columbia
have been regularly deceived into believing that the defendant's
motels are those of the plaintiff. There was also evidence that
managers of automobile association offices and travel agencies
were themselves deceived. One of the defendant's principal
officers was fully aware of the existence of the plaintiff's motels
mark. Several years before the defendant made application for
registration of its mark in 1972 the plaintiff's motels had
acquired substantial reputation and goodwill in British
Columbia and such reputation had been maintained throughout
the whole period until the present time and its signs bearing its
name, mark and logo had become known to sections of the
British Columbia motoring public. The defendant's mark was
not distinctive at the time the present proceedings were institut
ed. On the issue of passing off, if section 7(b) is to be given any
limited validity, it must have "some association ... with federal
jurisdiction ... in relation to trade marks and trade names"
arising under head 2 of section 91 of The British North
America Act. Even though the wording of section 7(b) has to
some limited extent broadened the scope of the common law
action of passing off, it has not changed the nature of the action
or any of its other essential elements. The right which is the
subject-matter of the action is still the property in the business
and goodwill likely to be injured. The action still concerns an
invasion of a right in that property and not of a right in the
mark or name improperly used. The fact that the statutory
provision might be broader in its scope than the common law
action would not tend to relate it more intimately to "the
general regulatory scheme governing trade marks." Federal
legislative power with respect to trade marks draws its constitu
tional validity from the general power of the federal authority
to regulate trade and commerce in the areas of interprovincial
and external trades (head 2 of section 91). Section 7(b) itself
certainly does not focus on interprovincial or external trade or
on the regulation of trade throughout Canada and therefore if
it is to be considered as having any constitutional validity
whatsoever that validity must be founded somehow on trade
mark law. In order for the federal authority, pursuant to head 2
of section 91, to validly exercise its power on any subject which
is also clearly within the field of property and civil rights
normally reserved to provincial legislatures, the subject-matter
must be necessarily incidental to the power to regulate trade
and commerce. It seems to follow that, in order for any
supplementary legislation which does not directly deal with
trade marks but which must find its validity in the area of trade
mark legislation, it must be essentially or fundamentally
required for or, at the very least, be necessarily or intimately
related to the regulation or control of trade marks. In a passing
off action, the "enforcement is left to the chance of private
redress without public monitoring by the continuing oversight
of a regulatory agency" and it is "unconnected to a general
regulatory scheme to govern trading relations". The areas
where there are substantial differences between a passing off
action under section 7(b) and an action to invalidate a trade
mark might be summed up as follows: the "chose" or right
protected, the cause of action, the grounds on which the action
is founded, the nature of the evidence to be adduced and the
time to which the evidence must be related. An action under
section 7(b) or section 7(b) itself cannot be said to "round off
federal legislation regarding trade marks." When a trade mark
is declared to be invalid, this constitutes a decision in rem. A
judgment in a passing off action can never be considered an in
rem decision. Section 7(b) is ultra vires the federal legislative
authority and the Court is without jurisdiction to try the issue
either on the basis of that section or on the basis of the common
law action of passing off.
King Features Syndicate Inc. v. O. and M. Kleemann, Ltd.
[1941] 2 All E.R. 403 (H.L.), referred to. Collins v.
Rosenthal (1974) 14 C.P.R. (2d) 143, referred to. Porter
v. Don The Beachcomber [1966] Ex.C.R. 982, referred to.
Williamson Candy Co. v. W. J. Crothers Co. [1924]
Ex.C.R. 183 [affirmed [1925] S.C.R. 377], referred to.
Moore Dry Kiln Co. of Canada Ltd. v. U.S. Natural
Resources Inc. (1977) 30 C.P.R. (2d) 40, referred to.
Dubiner v. Cheerio Toys and Games Ltd. [1965] 1
Ex.C.R. 524, referred to. Aluminum Co. of Canada Ltd. v.
Tisco Home Building Products (Ontario) Ltd. (1978) 33
C.P.R. (2d) 145, referred to. Adidas (Canada) Ltd. v.
Colins Inc. (1979) 38 C.P.R. (2d) 145, referred to.
Imperial Dax Co., Inc. v. Mascoll Corp. Ltd. (1979) 42
C.P.R. (2d) 62, referred to. McCain Foods Ltd. v. C. M.
McLean Ltd. (1980) 45 C.P.R. (2d) 150, referred to.
Balinte v. DeCloet Bros. Ltd. (1979) 40 C.P.R. (2d) 157,
referred to. De Cloet Bros. Ltd. v. Balinte [1980] 2 F.C.
384, referred to. Weider v. Beco Industries Ltd. [1976] 2
F.C. 739, referred to. Dominion Mail Order Products
Corporation v. Weider [1977] 1 F.C. 141, referred to. S.
C. Johnson & Son, Ltd. v. Marketing International Ltd.
(1978) 32 C.P.R. (2d) 15, referred to. Marketing Interna
tional Ltd. v. S.C. Johnson & Son, Ltd. [1979] 1 F.C. 65,
referred to. Seiko Time Canada Ltd. v. Consumers Dis
tributing Co. Ltd. (1981) 29 O.R. (2d) 221, referred to.
Valle's Steak House v. Tessier [1981] 1 F.C. 441, applied.
Marineland Inc. v. Marine Wonderland and Animal Park
Ltd. [1974] 2 F.C. 558, applied. E. & J. Gallo Winery v.
Andres Wines Ltd. [1976] 2 F.C. 3, applied. MacDonald
v. Vapor Canada Ltd. [1977] 2 S.C.R. 134, applied.
Armstrong Cork Canada Ltd. v. Domco Industries Lim
ited [1981] 2 F.C. 510, applied. Sund v. Beachcombers
Restaurant Ltd. (1960) 34 C.P.R. 225, agreed with. Re
Hansard Spruce Mills Ltd. [1954] 4 D.L.R. 590, agreed
with. Erven Warnink B.V. v. J. Townend & Sons (Hull)
Ltd. [1980] R.P.C. 31, agreed with. Great Lakes Hotels
Ltd. v. The Noshery Ltd. [1968] 2 Ex.C.R. 622, distin
guished. The Noshery Ltd. v. The Penthouse Motor Inn
Ltd. (1970) 61 C.P.R. 207, discussed.
ACTION.
COUNSEL:
D. Morrow for plaintiff.
R. H. Barrigar and L. Turlock for defend
ants.
SOLICITORS:
Smart & Biggar, Ottawa, for plaintiff.
Barrigar & Oyen, Vancouver, for defendants.
The following are the reasons for judgment
rendered in English by
ADDY J.:
GENERAL
The plaintiff, incorporated in 1968 under the
laws of the State of Delaware, U.S.A., operates a
large chain of some 300 motels under the name of
"Motel 6" throughout most of the United States
with the greatest concentration of motels in the
western portion of that country. Many of its cus
tomers are Canadian motorists. It operates no
motel in Canada.
It is the owner by legal assignment in 1969 of a
United States service mark covering the name
"Motel 6" and a logo which is roughly in the shape
of a four leaf clover with the word "Motel" and a
larger figure "6", both placed in the centre of the
clover leaf (refer to annex "A" for illustration).
The mark was registered in the United States on
the 17th of January, 1967 as number 822,563 for
use in conjunction with motel services on the basis
of use from the 1st of July, 1961.
The plaintiff also claims that the logo shown in
annex "A" is an artistic work, that it now is the
owner of a valid copyright to the said artistic work
and that the rights conferred by the copyright
extend to and subsist in Canada by virtue of
section 4 of the Copyright Act' and of a notice
published in the Canada Gazette 2 which stipulates
that the United States is to be treated as if it were
a country to which the Copyright Act extends. The
legal effect of these last-mentioned provisions was
not contested by the defendants at trial.
The corporate defendant is a British Columbia
company which, on the 4th of February, 1972,
applied for and, on the 23rd of August, 1974,
obtained, under registration number 201,351, a
logo-type trade mark to be used in association with
motel services. The application was based on
intended use. The mark consists of a large circle
with, in the centre, the word "Motel" and the
larger figure "6" (refer annex "A" for illustra
tion). It presently has an interest in three motels in
Canada which operate under the mark. It actually
owns one and has a half interest in another. The
third one is being operated under franchise grant
ed by the corporate defendant. It also had previ
ously granted a Motel 6 franchise to two other
motels, one in Hope and one in Summerland, B.C.,
and had been party to a form of agreement with
another motel operator in Cambridge, north of
Victoria, providing, among other things, for the
use by the latter of the mark and name, subject to
certain provisions and conditions. The three motels
in which the corporate defendant is presently inter
ested, as well as the Hope Hotel, have for some
years used the logo and the mark covered by trade
mark registration 201,351. The Summerland and
Cambridge motels did likewise but no longer do so.
The plaintiff alleges that its mark and trade
name were extensively used in the United States
by it and its predecessor in title in connection with
motel services, that they became well known in
Canada by advertisements in printed publications
circulated here among potential dealers and users
of its motel services and that the name and mark
were extensively and continuously used here in
association with the making of reservations for its
' R.S.C. 1970, c. C-30.
2 Volume 57, No. 26 at page 2157 on December 29, 1923.
motels by individuals and travel agents since prior
to November 1968.
The individual defendant, Hawthorne, had
obtained the registration in Canada in August
1970 of another trade mark involving Motel 6 with
a hexagonal design under number 170,826. This
last-mentioned trade mark had subsequently been
assigned to the corporate defendant. However,
immediately before trial, a confession to judgment,
covering the abandonment of this mark, was filed
by the corporate defendant. It was concurred in by
the defendant Hawthorne and accepted by the
plaintiff. Pursuant to this, and also by reason of a
subsequent discontinuance of the action against
the defendant Hawthorne (subject to certain terms
as to costs and as to the adherence by him to the
terms of any injunction which might be granted
against the corporate defendant), and order will
issue expunging that mark from the register. Nei
ther it nor any claims against the individual
defendant are any longer in issue and the corpo
rate defendant shall hereinafter be referred to as
the defendant.
The plaintiff at trial elected to rely on its
remedy by way of damages and abandoned any
claim for an accounting.
CLAIMS
The claims now remaining to be tried might be
summarized as follows:
1. An order that the entry of the defendant's trade
mark number 201,351 in the register of trade
marks be struck out.
2. A declaration that the plaintiff is the owner of a
copyright in the artistic work consisting of its logo
and the name Motel 6, as illustrated in annex "A",
and that the corporate defendant has infringed this
copyright.
3. Injunctive relief:
(a) to prevent future copyright infringement by
reproducing its logo and mark;
(b) to prevent future use of the mark or trade
name in association with motel services;
(c) to restrain the defendant from directing
public attention to its services or business in
such a way as to cause or be likely to cause
confusion in Canada between its services or
business and those of the plaintiff, contrary to
section 7(b) of the Trade Marks Act'.
4. The normal order for the delivery up of all
offending signs, literature, labels and other such
materials.
5. Damages pertaining to the alleged passing off
contrary to section 7(b) of the Trade Marks Act.
The defendant denies that the plaintiff is en
titled to any of the relief claimed and requests a
declaration that the plaintiff has no copyright in
its mark and also denies the jurisdiction of this
Court to hear any claim based on section 7(b) of
the Trade Marks Act on the basis that this para
graph is ultra vires the Parliament of Canada.
COPYRIGHT
I shall first deal with the claim of copyright
infringement.
The name "Motel 6" was first used by a part
nership or joint venture of two California private
corporations: Todric Inc. and Marano Motels
Inc., both incorporated in 1961. The joint venture
operated under the name of Motel 6 of California.
Tc was formed on the 1st of January, 1964.
Previous to the existence of the joint venture,
one Richard E. Barnes, whilst in the employ of one
Paul A. Greene of California, trading under the
business name of Paul A. Greene Company, made
the logo design which incorporated the name
"Motel 6." Barnes had been instructed by Greene
to create a design incorporating the words "Motel
6" for use in association with the latter's motel
business that he intended to start under the name
of "Motel 6 of California." There is no evidence of
the existence of any assignment of the copyright
by Barnes to Greene nor any direct evidence of a
subsequent assignment from Greene to the joint
3 R.S.C. 1970, c. T-10.
venture Motel 6 of California in 1964 or
subsequently.
In 1968, the plaintiff company, which had been
incorporated in that year, absorbed by merger ten
California corporations including the two private
companies forming the joint venture Motel 6 of
California, thus acquiring all of their assets.
The Barnes design became the basis of and was
embodied in the logo which was used in association
with the first Motel 6, which opened in California
in 1962, and has been used continuously since then
in the United States by all motels operated by
Motel 6 of California and its successor the plain
tiff corporation. This use included not only motel
signs but use on a variety of materials and articles
such as map guides, soap wrappers, match box
covers, cards, forms for reservations and various
advertisements. The logo itself was the subject of
the previously-mentioned U.S. trade mark No.
822,563 registered in 1967 which was assigned to
the plaintiff in 1968 by Motel 6 of California.
The title of the plaintiff to the copyright has
been put in issue by the defendant. The following
provisions of the Copyright Act are relevant:
20....
(3) In any action for infringement of copyright in any work,
in which the defendant puts in issue either the existence of the
copyright, or the title of the plaintiff thereto, then, in any such
case,
(a) the work shall, unless the contrary is proved, be presumed
to be a work in which copyright subsists; and
(b) the author of the work shall, unless the contrary is
proved, be presumed to be the owner of the copyright;
and where any such question is at issue, and no grant of the
copyright or of an interest in the copyright, either by assign
ment or licence, has been registered under this Act, then, in any
such case,
(c) if a name purporting to be that of the author of the work
is printed or otherwise indicated thereon in the usual manner,
the person whose name is so printed or indicated shall, unless
the contrary is proved, be presumed to be the author of the
work; and
(d) if no name is so printed or indicated, or if the name so
printed or indicated is not the author's true name or the
name by which he is commonly known, and a name purport
ing to be that of the publisher or proprietor of the work is
printed or otherwise indicated thereon in the usual manner,
the person whose name is so printed, or indicated shall,
unless the contrary is proved, be presumed to be the owner of
the copyright in the work for the purpose of proceedings in
respect of the infringement of copyright therein.
12. (1) Subject to this Act, the author of a work shall be the
first owner of the copyright therein.
(3) Where the author was in the employment of some other
person under a contract of service or apprenticeship and the
work was made in the course of his employment by that person,
the person by whom the author was employed shall, in the
absence of any agreement to the contrary, be the first owner of
the copyright; but where the work is an article or other
contribution to a newspaper, magazine, or similar periodical,
there shall, in the absence of any agreement to the contrary, be
deemed to be reserved to the author a right to restrain the
publication of the work, otherwise than as part of a newspaper,
magazine, or similar periodical.
The name of the plaintiff is not printed or
otherwise indicated in any way on the work as
purporting to be its owner and it, therefore, in my
view, cannot claim the benefit of the presumption
of ownership arising out of section 20(3)(d) above.
Although the words "Motel 6" form part of the
mark, no name whatsoever of any person purport
ing to be either the owner or proprietor is used on
the mark. One must, therefore, examine the evi
dence to see who was the original owner and
determine whether a chain of title exists from the
original owner to the plaintiff.
Since the author Barnes was employed by
Greene in 1961, and since it was in the course of
that employment and as a result of Mr. Greene's
specific request that the design was created and
since there is no evidence to the contrary, it seems
obvious that the employer Greene must, pursuant
to the provisions of section 12(3), be considered as
the first owner of the copyright: the presumption
in section 20(3)(b), to the effect that the author of
the work is the owner has clearly been rebutted, as
the contrary has been fully proven.
The next step is to consider whether Motel 6 of
California acquired a legal title of any kind to the
design from Greene. "Motel 6" was first used by
Greene and one William W. Becker. They felt that
there was a need for good, simple but reliable
motel accommodation available at a low nightly
rate of $6 per night, hence, the name "Motel 6."
The first motel complex was opened in Santa
Barbara in 1962. They had formed the two previ-
ously-mentioned private corporations in 1961 and,
in 1964, caused these companies to form the joint
venture known as "Motel 6 of California" which
took over all the motels operating under the name
of "Motel 6" at that time. Motel 6 of California
continued to use the design and mark exclusively
until the two corporations, together with their joint
venture, were absorbed by the plaintiff in 1968, at
which time all assets were assigned to the plaintiff.
At least, three conclusions could be drawn from
these facts: Greene, in 1964, either formally trans
ferred by assignment his right in the design to the
joint venture or simply allowed the latter to take
over the use and benefit of the design without
bothering with a formal assignment, assuming per
haps that it was not necessary, or, simply neglected
or forgot to assign the right. There is no evidence
whatsoever of any document of assignment having
ever existed.
On the mere fact that Greene had an interest as
a principal in the companies forming the joint
venture, I cannot conclude, as I have been invited
to do by counsel for the plaintiff, that a formal
assignment was executed by Greene either to the
joint venture Motel 6 of California or to one or the
other or both of the companies forming that ven
ture. There would, in fact, be a greater likelihood
of an assignment having been executed if Greene
had been dealing at arm's length with the joint
venture and had retained no interest whatsoever in
the companies forming the joint venture.
Section 12(4) of the Copyright Act reads as
follows:
12....
(4) The owner of the copyright in any work may assign the
right, either wholly or partially, and either generally or subject
to territorial limitations, and either for the whole term of the
copyright or for any other part thereof, and may grant any
interest in the right by licence, but no such assignment or grant
is valid unless it is in writing signed by the owner of the right in
respect of which the assignment or grant is made, or by his duly
authorized agent. [The underlining is mine.]
I quite accept the proposition of counsel for the
plaintiff that section 12(4) is a substantial legal
requirement and not a rule of evidence. Therefore,
the assignment itself need not necessarily be pro
duced if the evidence establishes that it existed and
conformed to that section. The evidence, however,
falls far short of establishing on a balance of
probabilities that an assignment in writing ever
existed, much less one that was signed by Greene
or his agent or of establishing who the assignee
might have been. It has merely established the
possibility of at least the three equally consistent
conclusions to which I have already referred. Evi
dence, which merely raises this type of speculation
without weighting the scale in favour of the actual
existence of an assignment conforming to the stat
ute, is not sufficient to satisfy the requirements of
section 12(4).
Had the plaintiff established ownership as
claimed, I would have had no difficulty in finding
that the work was susceptible of protection under
the Copyright Act: it is not by any means devoid of
subject-matter as claimed by the defendant. The
latter has also completely failed to rebut the pre
sumption raised by section 20(3)(a). I would also
have concluded that the copying of that mark done
by the defendant, although not an exact replica,
was sufficiently close to constitute an infringe
ment. The mere fact that the cloverleaf design was
avoided and replaced by a circle would not have
been sufficient to avoid a finding of infringement.
There is substantial similarity. This constitutes
prima facie evidence of copying and no satisfacto
ry evidence of independent creation was adduced.
(See King Features Syndicate Inc. v. O. and M.
Kleemann, Ltd. 4 followed in Collins v.
Rosenthal')
However, because it has failed to establish own
ership of any right or licence to the work by means
of a valid assignment, the plaintiff's claim for
copyright infringement will be dismissed.
VALIDITY OF DEFENDANT'S MARK
General:
The plaintiff attacks the validity of the registra
tion of the defendant's trade mark No. 201,351 on
three grounds:
1. Alleged prior use in Canada by the plaintiff
of its own mark and trade name.
2. That the plaintiff's name and mark was previ
ously made known in Canada; and,
4 [1941] 2 All E.R. 403 (H.L.) at page 414.
5 (1974) 14 C.P.R. (2d) 143 at page 147.
3. Non-distinctiveness based on the usual evi
dence to that effect and, in addition, on alleged
unregistered licensing of the mark to others.
A further ground of attack that a false affidavit
was presented to the Trade Marks Office in order
to obtain registration was abandoned at trial.
The following statutory provisions are particu
larly relevant to the question of validity of the
defendant's patent on grounds 1 and 2 above.
Sections 4(2), 16(3) and 5 of the Trade Marks
Act read as follows:
4....
(2) A trade mark is deemed to be used in association with
services if it is used or displayed in the performance or advertis
ing of such services.
16....
(3) Any applicant who has filed an application in accordance
with section 29 for registration of a proposed trade mark that is
registrable is entitled, subject to sections 37 and 39, to secure
its registration in respect of the wares or services specified in
the application, unless at the date of filing of the application it
was confusing with
(a) a trade mark that had been previously used in Canada or
made known in Canada by any other person;
(b) a trade mark in respect of which an application for
registration had been previously filed in Canada by any other
person; or
(c) a trade name that had been previously used in Canada by
any other person.
5. A trade mark is deemed to be made known in Canada by a
person only if it is used by such person in a country of the
Union, other than Canada, in association with wares or ser
vices, and
(a) such wares are distributed in association with it in
Canada, or
(b) such wares or services are advertised in association with
it in
(i) any printed publication circulated in Canada in the
ordinary course of commerce among potential dealers in or
users of such wares or services, or
(ii) radio broadcasts, as defined in the Radio Act, ordinar
ily received in Canada by potential dealers in or users of
such wares or services,
and it has become well known in Canada by reason of such
distribution or advertising.
Previously Made Known:
A registration resulting from an application for
proposed use is invalid if, at the date of the filing
of the application, the mark was confusing with
another that had been previously used in Canada
or made known in Canada. The concepts of using
and of making known in this context are subject to
certain specific statutory limitations.
A U.S. service mark is made known in Canada
by a person if it is used by that person in the
United States in association with services and if
such services are advertised in any printed publica
tion circulated in Canada in the ordinary course of
commerce or is made known in radio broadcasts,
and if the mark has become well known in Canada
as a result of such advertising. It is thus important
that only the reputation acquired as a result of the
advertising mentioned in section 5 can be con
sidered and such reputation must result in the
mark being "well known" in Canada.
There was no evidence of any radio broadcast.
The only printed publications containing advertis
ing were certain map guide brochures with infor
mation such as addresses and telephone numbers
of the motels. These were sent from time to time to
certain local offices of the DAA and the BCAA
and to a limited number of travel agencies, in
answer to specific requests from these associations
and agencies for brochures. These requests were
made because of certain enquiries by Canadian
motorists, who, having travelled in the United
States or having heard from friends of the exist
ence of Motel 6's in the United States, were
seeking information as to the location of the
motels, their rates, methods of reservations, etc. In
some instances, the agency would only retain one
copy of the brochure for information purposes.
It has been established to my satisfaction that
by the late 1960's the plaintiff's motels had
become well known in British Columbia because of
the number of Western Canadian motorists who
travelled to the United States on a restricted
budget and used its motels. That reputation appar
ently continued up to the date of trial. But it was
as a result of such exposure of Canadian motorists
to the plaintiff's motels in the United States and
the spreading of that reputation by word of mouth
and the recommendations made by certain agen-
cies and associations in Canada, that the plaintiff's
motels were known and not by reason of circula
tion of the brochures. Furthermore, the plaintiff
did not actively promote the sending of the bro
chures or take any initiative in this respect in so
far as Canadian customers were concerned but
merely responded to requests from certain agencies
or individuals.
A mark that becomes "well known in Canada"
by word of mouth, by reason of its reputation and
use in the United States, does not satisfy the
requirement of section 5 of the Trade Marks Act.
The requirement in that section to the effect that
the mark become well known by reason of "such
distribution or advertising" is peremptory and is a
matter of substantive law and not of evidence, as
stated by my brother Marceau J. in Valle's Steak
House v. Tessier 6 . The plaintiff therefore fails on
this ground of attack.
Previous Use:
As in the case of making known, when deter
mining whether the mark of the plaintiff has been
previously used, the crucial date before which use
is to be considered is the date of filing of the
application of the trade mark in issue, in this case
the 4th of February, 1972 (refer section 16(3),
supra) and not any previous date as argued by the
defendant.
The evidence establishes that the mark was
never used in Canada in association with motel
services per se. It was used, however, in association
with motel reservations. It was never used in
Canada by the plaintiff who had no agents or
place of business in Canada nor any reservation
facilities or services here. It did not in fact operate
any central reservation service in the United
States. One could phone or write to a particular
Motel 6 from any point in Canada and reserve a
room in that motel. The room would then be
reserved until 6:00 p.m. on the day indicated. One
had to arrive before that time or the reservation
was liable to be cancelled unless the room had
been prepaid. If the reservation was made by mail,
or, if by phone and time permitted, a confirmation
card would be returned to the prospective Canadi-
6 [1981] 1 F.C. 441 at pages 449-450.
an client bearing the Motel 6 mark and logo as
well as the details of the reservation. Any cheques
sent were made payable to Motel 6.
In the case of two automobile association
offices, at least, a phone call would be made by the
association when the member requested it. No
commissions of any kind were paid by the plaintiff
for the directing of any customers to its motels.
Correspondence or communication by phone
with customers, prospective customers or their
agents in Canada, for the sole purpose of receiving
and confirming reservations for motel accommoda
tion in the U.S.A. does not constitute use of the
mark in Canada in association with motel services.
This is all the more true where the contact was not
initiated by the person or firm furnishing the motel
services. There must, at the very least, be some
business facility of some kind in Canada in
such circumstances. (See Porter v. Don The
Beachcomber' and also Marineland Inc. v. Marine
Wonderland and Animal Park Ltd. S ) The plain
tiff, therefore, cannot succeed on this ground of
attack.
Lack of Distinctiveness:
The provisions affecting the issue of distinctive
ness are the following (Trade Marks Act):
2. In this Act
"distinctive" in relation to a trade mark means a trade mark
that actually distinguishes the wares or services in association
with which it is used by its owner from the wares or services
of others or is adapted so to distinguish them;
18. (1) The registration of a trade mark is invalid if
(b) the trade mark is not distinctive at the time proceed
ings bringing the validity of the registration into question
are commenced; or
The registration of a trade mark is invalid if the
mark is not distinctive at the time the proceedings
7 [1966] Ex.C.R. 982.
8 [1974] 2 F.C. 558 at pages 572-573.
bringing the registration into question are com
menced. In the case at bar, this would be the 2nd
of November, 1979. The definition of "distinctive"
is to be found in section 2, supra. A trade mark
can neither distinguish nor be adapted to distin
guish the services of a person if another person has
used the mark in a foreign country and it has
become known in Canada as the latter's mark in
respect of similar services. On the issue of lack of
distinctiveness of a mark, although it must be
shown that the rival or opposing mark must be
known to some extent at least, it is not necessary to
show that it is well known or that it has been made
known solely by the restricted means provided for
in section 5, supra. It is sufficient to establish that
the other mark has become known sufficiently to
negate the distinctiveness of the mark under
attack. Thurlow J., as he then was, stated, when
delivering the judgment of the Federal Court of
Appeal in E. & J. Gallo Winery v. Andres Wines
Ltd. 9 at page 7:
The question to be determined on this attack is, therefore,
whether the mark, "SPANADA" was, at the material time,
adapted to distinguish the wine of the respondent from that of
others and as the mark appears to have an inherent distinctive
ness the question, as I see it, becomes that of whether it has
been established by the evidence that this inherently distinctive
mark is not adapted to distinguish the wine of the respondent.
The basis put forward for reaching a conclusion that the mark
is not adapted to distinguish the respondent's wine is that it is
already known as the trade mark of the appellant in respect of
similar wares. But for this purpose it is not necessary, in my
opinion, that the evidence should be sufficient to show that the
mark is well known or has been made well known in Canada
within the meaning of section 5, or by the methods referred to
in that section. Such proof, coupled with use in the United
States, would be sufficient to entitle the appellant to registra
tion and to a monopoly of the use of the mark. But that is not
what is at stake in this proceeding. Here the respondent is
seeking to monopolize the use of the mark and the question is
that of his right to do so, which depends not on whether
someone else has a right to monopolize it, but simply on
whether it is adapted to distinguish the respondent's wares in
the marketplace. Plainly it would not be adapted to do so if
there were already six or seven wine merchants using it on their
labels and for the same reason it would not be adapted to
distinguish the respondent's wares if it were known to be
already in use by another trader in the same sort of wares. [The
underlining is mine.]
He quoted also with approval the case of William-
son Candy Co. v. W. J. Crothers Co. 10 Refer also
9 [1976] 2 F.C. 3.
10 [1924] Ex.C.R. 183, affirmed [1925] S.C.R. 377.
Moore Dry Kiln Co. of Canada Ltd. v. U.S. Natu
ral Resources Inc."
The attack based on non-distinctiveness is not
restricted to actual performance of services in
Canada as in the case of a claim of prior use
pursuant to section 4. It also may be founded on
evidence of knowledge or reputation of the oppos
ing mark spread by means of word of mouth and
evidence of reputation and public acclaim and
knowledge by means of newspaper or magazine
articles as opposed to advertising. All relevant
evidence may be considered which tends to estab
lish non-distinctiveness.
There is a concentration of the plaintiff's motels
along the two main north-south highways used by
Canadians travelling south from British Columbia
and Alberta, namely, Interstate Highway No. 5
and Coastal Highway No. 101. Residents of Brit-
ish Columbia have for many years attended the
plaintiff's motels and have informed other resi
dents of British Columbia about them. Many of
these were members of the British Columbia and
Canadian automobile associations and would make
enquiries through the local offices of these organi
zations. Information pertaining to plaintiff's
motels was regularly disseminated by automobile
associations and travel agencies dealing with the
motoring public. Some of these agencies and asso
ciations, because of the enquiries made, would,
from time to time, phone or write to the plaintiff
for supplies of their map guide brochures in order
to have them on hand and available for those of
their members or clients who would be enquiring
about such matters as the location of the various
motels of the plaintiff, the rates, the conditions of
reservations, etc.
The motels catered mostly to families and
individual motorists who were interested in using
good reliable accommodation available at a
modest price. The plaintiff's motels were undoubt
edly very popular among that section of the
Canadian motoring public since late 1960's. There
was evidence which I accept that, at the height of
the season, at some of these motels, approximately
" (1977) 30 C.P.R. (2d) 40 at page 49.
50% of the guests were and are Canadian
motorists.
Reservations were frequently made from
Canada by phone or by letter by individuals and
by the BCAA, the DAA or a travel agency on
behalf of their members or clients. In these com
munications the trade name was used and in
replies by Motel 6 the name and the mark were
employed. Cheques were made payable to Motel 6.
There is also very convincing evidence that resi
dents of British Columbia have been regularly
deceived into believing that the defendant's motels
are those of the plaintiff. There was evidence,
which I accept, that managers of automobile asso
ciation offices and travel agencies were themselves
deceived. This is important evidence as one would
naturally expect persons engaged in and, therefore,
with some special knowledge of and with particu
lar experience in the field of the motoring tourist
business, to be much more likely to be aware of the
differences between name and mark of the plain
tiff and of the defendant and to be less likely to be
deceived than members of the general public. Sec
tion 5 of the Act speaks of "potential dealers in or
users of such wares or services." I fully agree with
the statement of Ruttan J. in the case of Sund v.
Beachcombers Restaurant Ltd. 12 quoted at page
228 of the report:
In considering whether a deception is probable, account is to
be taken not of the expert customer, but of the ordinary,
ignorant and unwary member of the public: Singer Mfg. Co. v.
Loog (1882), 8 App. Cas. 15 at p. 18, per Lord Selborne L.C.
But the case must be much stronger if the expert also has been
deceived.
There is also evidence which I accept that one of
the defendant's principal officers was fully aware
of the existence of the plaintiff's motels mark and
logo because, when issuing instructions to the
person who was to design the defendant's logo, he
cautioned him against using the same colours as
those contained in the plaintiff's logo.
Articles on the plaintiff's motels were published
in the following periodicals and newspapers:
12 (1960) 34 C.P.R. 225.
1. Saskatoon Star-Phoenix —May 27, "1972
2. Winnipeg Free Press —May 20, 1972
3. Newsweek —October 9, 1967
and February 19, 1973
4. New York Times —January 15, 1967
5. Business Man's Week —August 27, 1965
6. Advertising Age —December 4, 1972
7. Wall Street Journal —December 26, 1972
8. Hospitality —February 1973
9. Advertising Age —February 11, 1971
The first two publications are, of course, Canadian
newspapers. Although there is no specific evidence
that the other publications are circulated in
Canada, judicial notice can be taken that at least
the New York Times, Newsweek and the Wall
Street Journal enjoy a general circulation in
Canada since they are to be found on practically
every large newsstand in the country.
I find that several years before the defendant
made : application for registration of its mark in
1972, on the basis of intended use, the plaintiff's
motels had acquired substantial reputation and
goodwill in British Columbia and that such reputa
tion had been maintained throughout the whole
period until the present time and that its signs
bearing the name, mark and logo had become
known throughout sections of the British
Columbia motoring public.
The defendant's design and mark is very similar
to that of the plaintiff with the words "Motel 6"
being identical.
The defendant raised the issue of local distinc
tiveness based mainly on the testimony of wit
nesses in the immediate vicinity of its motels who
did not know of the existence of the plaintiff's
chain of motels. It is quite obvious that certain
persons in the immediate vicinity of a motel of the
defendant might not know of the existence of
Motel 6's in the United States. But the real ques
tion to be determined is whether the persons in
British Columbia who, as travelling motorists, gen
erally use motels of that type would be deceived
into believing that they would belong to the plain
tiff rather than to the defendant. This has been
amply established to my satisfaction by witnesses
on behalf of the plaintiff.
The factual situation is quite distinguishable
from that governing the decision of my brother
Cattanach J. in the case of Great Lakes Hotels
Limited v. The Noshery Limited". In that case,
Cattanach J. allowed a dining and catering restau
rant called "The Penthouse" in Toronto to retain
its mark on the basis of local distinctiveness not
withstanding an objection by The Penthouse
Motor Inn also in the Toronto area. He held that
on the facts, in the restricted area of the City,
where The Penthouse restaurant operated, it was
capable of acquiring, and did in fact acquire,
distinctiveness.
Local distinctiveness obviously is capable of
being acquired and recognized at law in certain
cases. But the factual situation before me is quite
different. We are not dealing with local customers
but with the travelling public. The area from
where the plaintiff draws its market is the whole of
British Columbia or, at least, the whole of the
southern portion of that Province and its mark was
well known there. There is no room for distinctive
ness within a restricted part of that whole area in
respect of the defendant's services which are iden
tical to those of the plaintiff and are addressed to
the same category of Canadian motorist living
there. The Great Lakes case is, thus, readily distin
guishable on the facts. By a strange coincidence
the following year I heard in the Supreme Court of
Ontario a case of passing off under section 7(b) of
the Trade Marks Act between the same parties as
in the Great Lakes case heard by my brother
Cattanach J., then of the Exchequer Court of
Canada. Before me The Noshery was the plaintiff.
I found the defendant Great Lakes liable for pass
ing off. The case is cited as The Noshery Ltd. v.
The Penthouse Motor Inn Ltd. 14
On the basis of the above evidence and conclu
sions and on the basis of the additional evidence
referred to, in dealing with the allegations of previ
ous use and of previous making known, I conclude
that the defendant's mark was not distinctive of its
services either at the time when the present pro
ceedings were instituted nor would it have been
13 [1968] 2 Ex.C.R. 622.
14 (1970) 61 C.P.R. 207.
distinctive at any time from a period of several
years before the date when the mark was applied
for.
The plaintiff also pleaded that the defendant's
mark had lost its distinctiveness by reason of the
licensing of the mark to other users without any
registration. Unregistered user results in the mark
losing its distinctiveness. This is inherent to the
entire scheme of our Trade Marks Act 15 which
differs in this respect from the British Act.
The provisions as to registration must be strictly
complied with. (Refer Fox, The Canadian Law of
Trade Marks and Unfair Competition, Third Edi
tion, 1972, at pages 283 and 284.) As Urie J.
stated in Moore Dry Kiln Co. of Canada Ltd. v.
U.S. Natural Resources Inc. 16 at page 49:
Since distinctiveness of a mark is, inter alla, related to source,
when the trade mark is related to more than one source, it
cannot be distinctive.
Section 49(2) and (3) of the Trade Marks Act
reads as follows:
49....
(2) The use of a registered trade mark by a registered user
thereof in accordance with the terms of his registration as such
in association with wares or services manufactured, sold, leased,
hired or performed by him, or the use of a proposed trade mark
as provided in subsection 39(2) by a person approved as a
registered user thereof, is in this section referred to as the
"permitted use" of the trade mark.
(3) The permitted use of a trade mark has the same effect
for all purposes of this Act as a use thereof by the registered
owner.
The permitted use under section 49(3) of the
Trade Marks Act is an exception to the former
rule that a mark could only be used by its owner
and the section therefore must be strictly con
strued both as to substantive law and as to the
procedures laid down therein. (Refer the history of
the concept of registered user detailed by Noel J.,
as he then was, at pages 538 to 541 of the report of
the case of Dubiner v. Cheerio Toys and Games
Ltd. 17 )
15 R.S.C. 1970, c. T-10.
16 (1977) 30 C.P.R. (2d) 40.
17 [1965] 1 Ex.C.R. 524.
In view of my finding of non-distinctiveness of
the mark on the other grounds with which I have
just dealt, I shall refrain from commenting in any
detail on the evidence on the issue of non-licensed
users. However, certain findings of fact will be
made which are applicable to the issue. The fol
lowing motels, in addition to the three in which the
defendant has an interest, operated under the
name and mark of "Motel 6" during the periods
indicated:
1. On the 30th of November, 1975, the defendant
sold one-half interest in its Courtenay Motel to
four individuals and, since then, has continued to
operate it for the owners under a management
contract. Those four individuals and the defendant
were registered as users in April 1976 as carrying
on business under the firm name of "Courtenay
No. 6 Motel." There is no evidence that the users
carried on business in that name or style.
2. A motel at Summerland, B.C., was operated by
two individuals from the 28th of June, 1973 until
the 6th of April, 1974 under the "Motel 6" mark
and name pursuant to a licence or franchise from
the defendant. They were never registered as users.
However, an application for user was made in
October 1973 and was abandoned when the motel
was sold in April 1974. The new owner was regis
tered as a user in September of that year.
3. Three individuals have owned a motel in Hope,
B.C., from November 1975 to the present day. It
has been managed by the defendant under a man
agement contract and entered into with its owners.
There has been no user registration.
4. From 1971 to 1976, one Maurice Laprise oper
ated at Cambridge, B.C., a motel and used the
mark and name "Motel 6," presumably under
trade mark No. 170,826 which is now being aban
doned. The defendant permitted this use and from
time to time inspected the motel.
5. All of the above uses were allowed with the full
knowledge, consent and permission and, except for
the Summerland Motel, with the participation of
the defendant in some supervisory or managerial
capacity.
One cannot, of course, impute to the user or
owner of a mark any delays caused by the Trade
Marks Office in processing a request for registra
tion, but, the application must be made forthwith
after the owner and user have agreed upon the
granting of a use.
My findings of fact, regarding at least the Hope
Motel and the Cambridge Motel (refer paragraphs
3 and 4 above), fully support the contention that
the defendant's mark must be struck out as
non-distinctive.
The question of whether the defendant's mark
should be struck out from the register, however,
was made the subject of a procedural objection
raised by the defendant to the effect that the
proceedings to have its trade mark expunged were
not brought by the plaintiff within the time limited
by section 17(2) of the Act. That section reads as
follows:
17....
(2) In proceedings commenced after the expiry of five years
from the date of registration of a trade mark or from the 1st
day of July 1954, whichever is the later, no registration shall be
expunged or amended or held invalid on the ground of the
previous use or making known referred to in subsection (1),
unless it is established that the person who adopted the regis
tered trade mark in Canada did so with knowledge of such
previous use or making known.
The present action was instituted on the 1st of
March, 1974. The defendant's trade mark had not
yet been registered. As a result, proceedings to
expunge the mark could not be commenced at the
time. Registration was effected on the 23rd of
August, 1974. The statement of claim was eventu
ally amended to include a claim to have the mark
struck out, but only on the 2nd of November,
1979, that is, more than five years after the regis
tration of the mark. Up until that time, the action
consisted only of the claim for breach of copyright
and a claim of passing off under section 7(b) of the
Trade Marks Act. Notwithstanding the fact that
there existed an action between the parties previ
ously, the claim to have the mark expunged is an
entirely different cause of action from either copy-
right or passing off and it can, therefore, be con
sidered as having been instituted only at the time
of the amendment of the statement of claim in
November 1979.
Subject to the determination of the question of
whether or not the defendant, when it adopted its
trade mark, had knowledge of the previous use or
making known of the plaintiff's mark, section
17(2) would be a bar to the validity of the mark
being impugned on the grounds of previous use or
making known. However, the mark is not being
declared invalid on either of those two grounds but
on the ground of lack of distinctiveness. Section
17(2) does not apply in such a case because of the
very clear wording of the section which confines
the limitation to cases of previous use and making
known and also because in the case of lack of
distinctiveness the relevant time is the time of
institution of the proceedings (refer section
18(1)(b) above) and not the time of registration of
the mark as provided for in the limitation period of
section 17(2). Had I not found the section to be
inapplicable for the above reason, I would have
ruled against the defendant on the merits in any
event. The defendant, through its officer Harrison,
did know of the existence of the plaintiff's mark
before adopting its own mark.
The plaintiff will, therefore, be entitled to have
the defendant's trade mark No. 201,351 struck
from the register on the grounds that it did not, at
the relevant time, distinguish the defendant's ser
vices from those of the plaintiff's or from those of
other non-registered users.
PASSING OFF
The plaintiff claims that the defendant, contrary
to section 7(b) of the Trade Marks Act, has
directed the public's attention to its services or
business in such a way as to be likely to cause
confusion in Canada between its services and those
of the plaintiff.
Constitutionality of section 7(b):
The defendant disputes this Court's jurisdiction
to hear this portion of the action on the grounds
that section 7(b) of the Trade Marks Act is uncon
stitutional. If section 7(b) is, in fact, unconstitu-
tional, it is evident that this Court would not have
jurisdiction to try the issue of passing off since the
common law tort of passing off is undoubtedly a
matter of civil rights involving a dispute between
private citizens and is not a cause of action found
ed on any federal statute law. It can only be tried
in a provincial forum. The Attorneys General of
Canada and of British Columbia were, at my
direction, given notice that they might intervene
and be heard on the constitutionality issue but
they declined to do so.
Section 7 of the Trade Marks Act reads as
follows:
7. No person shall
(a) make a false or misleading statement tending to discredit
the business, wares or services of a competitor;
(b) direct public attention to his wares, services or business in
such a way as to cause or be likely to cause confusion in
Canada, at the time he commenced so to direct attention to
them, between his wares, services or business and the wares,
services or business of another;
(e) pass off other wares or services as and for those ordered
or requested;
(d) make use, in association with wares or services, of any
description that is false in a material respect and likely to
mislead the public as to
(i) the character, quality, quantity or composition,
(ii) the geographical origin, or
(iii) the mode of the manufacture, production or
performance
of such wares or services; or
(e) do any other act or adopt any other business practice
contrary to honest industrial or commercial usage in Canada.
The leading case on the question, which con
signed to oblivion several former decisions of lower
courts, was the unanimous decision of the Supreme
Court of Canada in MacDonald v. Vapor Canada
Ltd.' In that case section 7(e) of the Trade
Marks Act was declared to be ultra vires the
Parliament of Canada, at least in cases where it
cannot be said to "round out regulatory schemes
prescribed by Parliament in the exercise of its
legislative power in relation to patents, copyrights,
trade marks and trade names." In deciding that
issue, however, the Court dealt to some extent with
the whole section or, at least, commented on it
18 [1977] 2 S.C.R. 134.
rather extensively. Chief Justice Laskin's extensive
reasons were concurred in by four other Justices of
that Court and since there remains some consider
able difference of opinion as to whether the same
fate would befall section 7(b), it might, as a
starting point, be useful to quote, albeit at some
length, from Chief Justice Laskin's reasons:
at page 147:
Section 7(b) is a statutory statement of the common law action
of passing off, which is described in Fleming on Torts, supra, at
p. 626 as "another form of misrepresentation concerning the
plaintiffs business ... 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". It differs from injurious
falsehood in that "it is sufficient that the offensive practice was
calculated or likely, rather than intended, to deceive".
at pages 156 and 157:
Overall, whether s. 7(e) be taken alone or, more properly, as
part of a limited scheme reflected by s. 7 as a whole, the net
result is that the Parliament of Canada has, by statute, either
overlaid or extended known civil causes of action, cognizable in
the provincial courts and reflecting issues falling within provin
cial legislative competence. In the absence of any regulatory
administration to oversee the prescriptions of s. 7 (and without
coming to any conclusion on whether such an administration
would in itself be either sufficient or necessary to effect a
change in constitutional result), I cannot find any basis in
federal power to sustain the unqualified validity of s. 7 as a
whole or s. 7(e) taken alone. It is not a sufficient peg on which
to support the legislation that it applies throughout Canada
when there is nothing more to give it validity.
The cases to which I have referred indicate some association
of s. 7(a), (b) and (d) with federal jurisdiction in relation to
patents and copyrights arising under specific heads of legisla
tive power, and with its jurisdiction in relation to trade marks
and trade names, said to arise (as will appear later in these
reasons) under s. 91(2) of the British North America Act. If,
however, this be enough to give a limited valid application to
those subparagraphs it would not sweep them into federal
jurisdiction in respect of other issues that may arise thereunder
not involving matters that are otherwise within exclusive feder
al authority. Certainly, it would not engage s. 7(e) which, as
interpreted in the cases which have considered it, does not have
any such connection with the enforcement of trade marks or
trade names or patent rights or copyright as may be said to
exist in s. 7(a), (b) and (d). Even if it be possible to give a
limited application to s. 7, in respect of all its subparagraphs, to
support existing regulation by the Parliament of Canada in the
fields of patents, trade marks, trade names and copyright, the
present case falls outside of those fields because it deals with
breach of confidence by an employee and appropriation of
confidential information.
at pages 158 and 159:
No attack has been made on the Trade Marks Act as a whole,
and the validity of its provisions in so far as they deal with
trade marks is not in question. Since s. 7(e) is not a trade mark
provision, its inclusion in the Trade Marks Act does not stamp
it with validity merely because that Act in its main provisions is
quantitatively unchallenged.
at pages 165 and 166:
One looks in vain for any regulatory scheme in s. 7, let alone
s. 7(e). Its enforcement is left to the chance of private redress
without public monitoring by the continuing oversight of a
regulatory agency which would at least lend some colour to the
alleged national or Canada-wide sweep of s. 7(e). The provision
is not directed to trade but to the ethical conduct of persons
engaged in trade or in business, and, in my view, such a
detached provision cannot survive alone unconnected to a gen
eral regulatory scheme to govern trading relations going beyond
merely local concern. Even on the footing of being concerned
with practices in the conduct of trade, its private enforcement
by civil action gives it a local cast because it is as applicable in
its terms to local or intraprovincial competitors as it is to
competitors in interprovincial trade.
It is said, however, that s. 7, or s. 7(e), in particular, may be
viewed as part of an overall scheme of regulation which is
exemplified by the very Act of which it is a part and, also, by
such related statutes in the industrial property field as the
Patent Act, R.S.C. 1970, c. P-4, the Copyright Act, R.S.C.
1970, c. C-30 and the Industrial Design Act, R.S.C. 1970, c.
I-8.
The Trade Marks Act and the Patent Act, as the keystones
of the arch, are characterized by public registers and adminis
trative controls which are not applied in any way to s. 7. This is
also true of copyright legislation but, of course, both patents
and copyrights are expressly included in the catalogue of
enumerated federal powers and the exclusive federal control
here excludes any provincial competence. That is not so in the
case of unfair competition as it is dealt with in s. 7 of the Trade
Marks Act. Trade mark legislation (and industrial design
legislation, also providing for a registration system, would come
under the same cover) has been attributed to the federal trade
and commerce power in a cautious pronouncement on the
matter by the Privy Council in Attorney-General of Ontario v.
Attorney-General of Canada ([1937] A.C. 405).
at page 167:
The Supreme Court of Canada, when the foregoing case was
before it (In re Dominion Trade and Industry Commission Act,
l935 ([1936] S.C.R. 379)) considered not only ss. 18 and 19 of
the 1935 Act respecting the C.S. mark (which it held was ultra
vires but on which it was reversed by the Privy Council), but
also s. 14 which provided for government approval of agree
ments between persons engaged in any specific industry, in
which there was wasteful or demoralizing competition, for
controlling and regulating prices. This provision was held to be
ultra vires because it contemplated application to individual
agreements which might relate to trade which was entirely
local. The Supreme Court of Canada added this (at p. 382):
If confined to external trade and interprovincial trade, the
section might well be competent under head no. 2 of section
91; and if the legislation were in substance concerned with
such trade, incidental legislation in relation to local trade
necessary in order to prevent the defeat of competent provi
sions might also be competent; but as it stands, we think this
section is invalid.
No appeal was taken on this provision to the Privy Council,
and, in my view, the Supreme Court did not consider that s. 14
could be saved on the basis of being part of a scheme of
regulation.
I think that in the present case this is a fortiori so when s. 7
has not only not been focussed on interprovincial or external
trade but has not been brought under a regulatory authority in
association with the scheme of public control operating upon
trade marks. To refer to trade mark regulation as a scheme for
preventing unfair competition and to seek by such labelling to
bring s. 7 within the area of federal competence is to substitute
nomenclature for analysis.
at pages 172 and 173:
The position which I reach in this case is this. Neither s. 7 as
a whole, nor section 7(e), if either stood alone and in associa
tion only with s. 53, would be valid federal legislation in
relation to the regulation of trade and commerce or in relation
to any other head of federal legislative authority. There would,
in such a situation, be a clear invasion of provincial legislative
power. Section 7 is, however, nourished for federal legislative
purposes in so far as it may be said to round out regulatory
schemes prescribed by Parliament in the exercise of its legisla
tive power in relation to patents, copyrights, trade marks and
trade names. The subparagraphs of s. 7, if limited in this way,
would be sustainable, and, certainly, if s. 7(e) whose validity is
alone in question here, could be so limited, I would be prepared
to uphold it to that extent. I am of opinion, however (and here I
draw upon the exposition of s. 7(e) in the Eldon Industries case
[Eldon Industries Inc. v. Reliable Toy Co. Ltd. (1965) 48
C.P.R. 109, 54 D.L.R. (2d) 97, [1966] 1 O.R. 409]), that there
is no subject matter left for s. 7(e) in relation to patents,
copyright, trade marks and trade names when once these heads
of legislative power are given an effect under the preceding
subparagraphs of s. 7. In any event, in the present case the facts
do not bring into issue any question of patent, copyright or
trade mark infringement or any tortious dealing with such
matters or with trade names. There is here merely an alleged
breach of contract by a former employee, a breach of confi
dence and a misappropriation of confidential information. It is
outside of federal competence to make this the subject of a
statutory cause of action. [All the underlining in these passages
is mine.]
On reading the above, it appears clear that not
only has section 7(e) been struck down but the
Court has held that section 7, when taken as a
whole, cannot be given unqualified validity and
that, if section 7(b) is to be given any limited
validity, it must have "some association ... with
federal jurisdiction ... in relation to trade marks
and trade names," arising under head 2 of section
91 of The British North America Act, 1867, 30 &
31 Victoria, c. 3 (U.K.) [R.S.C. 1970, Appendix
II], namely The Regulation of Trade and Com
merce. There certainly can be no question of
attempting to justify its validity solely by virtue of
the power of the federal government to regulate
trade and commerce without associating it, in
some essential and fundamental manner, with
trade mark legislation.
The matter of the constitutionality of section
7(b) has never been decided by the Federal Court
of Appeal. The Trial Divison is divided in its views
on the subject.
In three separate decisions Walsh J., with some
hesitation held the section to be constitutional and
within the jurisdiction of this Court. They are
Aluminum Co. of Canada Ltd. v. Tisco Home
Building Products (Ontario) Ltd. 19 ; Adidas
(Canada) Ltd. v. Colins Inc."; and Imperial Dax
Co., Inc. v. Mascoll Corp. Ltd. 21 In the Adidas
case, he stated at page 174 of the report:
I had occasion to analyze and comment on the Vapour
Canada judgment in the case of Aluminum Co. of Canada Ltd.
et al. v. Tisco Home Building Products (Ontario) Ltd. et al.
(1977), 33 C.P.R. (2d) 145 and, with some hesitation, conclud
ed that it does not remove the jurisdiction of this Court over a
passing off action brought under the provisions of s. 7(b) of the
Trade Marks Act. I therefore conclude that plaintiffs action
for passing off with respect to the garments in question is
well-founded and that an injunction lies with respect to the said
garments.
In the Imperial Dax case, he stated at page 64:
19 (1978) 33 C.P.R. (2d) 145.
20 (1979) 38 C.P.R. (2d) 145.
21 (1979) 42 C.P.R. (2d) 62.
Until the Supreme Court has pronounced itself again therefore
on the other paragraphs of s. 7, I conclude that proceedings
brought in this Court based on such paragraphs will not be
dismissed for want of jurisdiction.
On the other hand, in the more recent case of
McCain Foods Ltd. v. C. M. McLean Ltd. 22 , on a
motion under Rule 474 to determine the matter as
a preliminary point of law, he declined to decide
the question and left it to be determined by the
Trial Judge. This course, however, was adopted
mainly on the ground that both parties preferred,
apparently for their own reasons, to have the valid
ity of the section upheld.
Dubé J., in an interlocutory application to strike
out a paragraph in a statement of claim made
pursuant to section 7(e), refused the application on
the grounds that there appeared to be some reser
vation as to the validity of that section expressed
by Chief Justice Laskin in the MacDonald v.
Vapor Canada Ltd. case, supra, where patents and
trade marks are concerned. Dubé J. preferred to
leave the question to be decided at trial (see
Balinte v. DeCloet Bros. Ltd. 23 ). The Court of
Appeal upheld his decision stating that statements
of claim should be struck on interlocutory motions
only in plain and obvious cases (see De Cloet Bros.
Ltd. v. Balinte 24 for the report of appeal).
On the other hand, Mahoney J. in the case of
Weider v. Beco Industries Ltd. 25 struck out the
portion of the plaintiffs' statement of claim based
on section 7(b) on the grounds that it was ultra
vires the federal government and, therefore, not
within the jurisdiction of this Court. He stated at
pages 742-743 of the above report:
As applied to the facts alleged in the statement of claim, it
cannot be said that section 7(b) of the Trade Marks Act rounds
out the regulatory scheme prescribed by Parliament in the
exercise of its power, under section 91(22) of the British North
America Act, to legislate in respect of patents. The Patent Act
[R.S.C. 1970, c. P-4] provides the plaintiffs with causes of
action and remedies for the enforcement and protection of the
rights granted them under it. It is entirely unnecessary to the
scheme of the Patent Act for them to go outside it, to section
7(b) of the Trade Marks Act for such a cause of action or to
section 53 for a remedy.
22 (1980) 45 C.P.R. (2d) 150.
23 (1979) 40 C.P.R. (2d) 157.
24 [1980] 2 F.C. 384.
25 [1976] 2 F.C. 739.
In the subsequent case of Dominion Mail Order
Products Corporation v. Weider 26 , although he did
not decide the point directly, he expressed his
reservations regarding section 7(b) in the following
terms at page 142 of the report:
The Ontario action seeks damages for passing off which, in my
view, in the light of the decision of the Supreme Court of
Canada in MacDonald v. Vapor Canada Ltd., would not likely
be available in this Court.
My brother, Cattanach J. also expressed some
serious reservation as to section 7(b) in S. C.
Johnson & Son, Ltd. v. Marketing International
Ltd. 27 where he stated at page 31:
In view of the remarks of the Chief Justice in MacDonald
and Vapour, I have reservations if this Court has jurisdiction to
entertain an action for passing off under s. 7(b) and (c). I have
difficulty in following how a passing off action which is avail
able at common law can be part of a regulatory scheme
particularly when the remedy of infringement is available under
the statute. However, this question and its implications were
not argued before me. I do not decide the matter.
He then declined to grant the injunction requested
under section 7(b), although the plaintiff did suc
ceed and an injunction was granted to restrain use
of its mark.
In the case of Valle's Steak House v. Tessier 28 ,
my brother Marceau J. allowed a claim under
section 7(b) but the question of the constitutional
ity of that section was never raised before him at
trial nor touched upon in his reasons. On the other
hand, if one examines his decision in the case of
Rocois Construction Inc. v. Quebec Ready Mix
Inc. 29 , which was not a patent matter but an action
based on section 31.1 of the Combines Investiga
tion Act 30 , he expresses the clear view that very
strict limitations should be put on legislation
founded on head 2 of section 91 of the B.N.A. Act.
Chief Justice Jackett, when sitting in the Feder
al Court of Appeal in the case of Marketing
26 [1977] 1 F.C. 141.
27 (1978) 32 C.P.R. (2d) 15.
28 [1981] 1 F.C. 441.
29 [1980] 1 F.C. 184.
30 R.S.C. 1970, c. C-23.
International Ltd. v. S.C. Johnson & Son, Ltd." is
quoted as saying at page 70 of the report:
With reference to section 7(b), I do not think that it is
necessary to discuss the evidence. It is largely of the kind that
speaks for itself. I should say, however, that, if it were conclud
ed that the evidence establishes a case that falls within the
words of section 7(b), I should have thought that, having
regard to the reasoning on which the decision in MacDonald v.
Vapor Canada Limited ([1977] 2 S.C.R. 134) is founded, the
claim based thereon might have to be dismissed on the ground
that section 7(b) is ultra vires. As, however, we did not have
full argument on that aspect of the matter, I should have been
inclined, in that event, to offer the parties an opportunity of
further argument with regard thereto before disposing of this
branch of the case on that basis.
In the case of Seiko Time Canada Ltd. v.
Consumers Distributing Co. Ltd. 32 , J. Holland J.
of the Supreme Court of Ontario, following a
detailed review of the MacDonald v. Vapor
Canada case, supra, was of the view that the
Supreme Court of Canada had held the whole of
section 7 to be completely ultra vires. However, as
stated by the Trial Judge himself, his opinion on
this point was clearly obiter dictum as he disposed
of the matter on other grounds.
Not by reason of any application of the principle
of stare decisis, but as a matter of sound judicial
administration, I should follow the previous deci
sion of members of the Trial Division of this
Court, save in exceptional circumstances, which to
a large extent have been carefully defined in juris
prudence dealing with the subject. I, therefore,
agree with Wilson J. in the case of Re Hansard
Spruce Mills Ltd. 33 and consider myself bound by
the principles mentioned by Urie J. in delivering
judgment on behalf of our Court of Appeal in the
case of Armstrong Cork Canada Limited v.
Domco Industries Limited 34 in so far as they are
applicable to a trial court. However, since there
presently exists quite divergent publicly expressed
views and contrary decisions of the Trial Division
on the very point in issue before me, I feel at
liberty to deal with the matter without being mor
ally limited by those sound principles of judicial
administration.
31 [1979] 1 F.C. 65.
32 (1981) 29 O.R. (2d) 221.
33 [1954] 4 D.L.R. 590.
34 [1981] 2 F.C. 510.
In order to decide whether the action of passing
off is properly part of or attributable to trade mark
legislation, it is of some use to examine to some
extent the nature of that action and, more particu
larly, the principles on which it is founded as well
as the rights which are being protected. After a
careful and very interesting review of the history
and development of passing off actions in the case
of Erven Warnink B.V. v. J. Townend & Sons
(Hull) Ltd. 35 Lord Diplock had this to say at page
92:
This was left to be provided by Lord Parker in Spalding v.
Gamage (1915) 32 R.P.C. 273. In a speech which received the
approval of the other members of this House, he identified the
right the invasion of which is the subject of passing-off actions
as being the "property in the business or goodwill likely to be
injured by the misrepresentation". The concept of goodwill is in
law a broad one which is perhaps expressed in words used by
Lord MacNaghten in C.LR v. Muller [1901] A.C. 217, 223:
"It is the benefit and advantage of the good name, reputation
and connection of a business. It is the attractive force which
brings in custom". [The underlining is mine.]
In that same case Lord Fraser of Tullybelton had
this to say at pages 102 and 103 of the same
report:
As my noble and learned friend, Lord Diplock, said in Star
Industrial Co. Ltd. v. Yap Kwee Kor [1976] F.S.R. 256 at 269.
"Whatever doubts there may have previously been as to
the legal nature of the rights which were entitled to protec
tion by an action for passing off in courts of law or equity,
these were laid to rest more than 60 years ago by the speech
of Lord Parker of Waddington in A. G. Spalding & Bros. v.
A. W. Gamage Ltd. with which the other members of the
House of Lords agreed. A passing-off action is a remedy for
the invasion of a right of property not in the mark, name or
get-up improperly used, but in the business or goodwill likely
to be injured by the misrepresentation made by passing off
one person's goods as the goods of another. Goodwill as the
subject of proprietary right is incapable of subsisting by
itself. It has no independent existence apart from the busi
ness to which it is attached. It is local in character and
divisible; if the business is carried on in several countries a
separate goodwill attaches to it in each. So when the business
is abandoned in one country in which it has acquired a
goodwill the goodwill in that country perishes with it
although the business may continue to be carried on in other
countries". [The underlining is mine.]
The provisions of the common law have been
given statutory effect by section 7(b) but those
provisions have in fact been extended to some
35 [1980] R.P.C. 31.
extent by the section and also by its predecessor
section 11 of the late Unfair Competition Act 36 . As
stated in Fox, The Canadian Law of Trade Marks
and Unfair Competition 37 at pages 504 and 505:
The Statutory Action: The cause of action under s. 7(b) and
(c) of the Trade Marks Act, as in the case of s. 11(b) of the
Unfair Competition Act, is the statutory substitute for the
common law action for passing off. (Canadian Converters Co.
Ltd. v. Eastport Trading Co. Ltd. (1968), 39 Fox Pat. C. 148 at
150.) The essential criterion of s. 7(b) is the directing of public
attention to a person's wares, services or business in such a way
as to cause or be likely to cause confusion between them and
those of another. (... Old Dutch Foods Ltd. v. W. H. Malkin
Ltd. et al. (1969), 42 Fox Pat. C. 124 at 131.) Everything that
would amount to a passing off in England would fall within the
prohibitions of the section. Thorson P., in Coca-Cola Co. of
Canada Ltd. v. Bernard Beverages Ltd., (8 Fox Pat. C. 194 at
209, [1949] Ex. C.R. 119 at 135, 9 C.P.R. 121) thought that it
might even be wider in scope. He pointed out that the cause of
action under the section is wider than for infringement in that
infringement is only one of the forms of unfair competition
against which the section is directed. There may be other
branches of it that do not involve infringement of trade mark at
all. Consequently even if a plaintiff were to fail on an infringe
ment issue he might succeed in an action under s. 7. Converse
ly, the fact that a defendant was guilty of infringement does not
ipso facto make him liable under the section for he might be
able to show that his conduct, notwithstanding the infringe
ment, had been such as not to fall within the prohibition of the
section.
In this respect I quote from page 214 of my
judgment in the case of The Noshery Ltd. v. The
Penthouse Motor Inn Ltd., supra:
It is also important to bear in mind that actions of passing-off,
which are brought under the statute today, differ from actions
of passing-off formerly brought under the common law. The
coincidence of the wares or services is not of such a critical
importance in the statutory action as it was at common law. At
common law the parties had to be considered as competitors. In
the modern action under the Trade Marks Act, as it exists
since 1953, the complaint is made in respect of the confusion
between the wares and services of the plaintiff and the wares
and services of another. In this respect the replacing of the
words "of a competitor", which at one time were found in s.
11(b) of the Unfair Competition Act, R.S.C. 1952, c. 274, by
the words "of another" in what is now s. 7(b) of the Trade
Marks Act, was a most important amendment. Confusion,
leading to deception of the public, is the vital element to be
considered; there is no longer a restrictive requirement of
coincidence of wares or services. Such confusion leading to
deception might at times occur even where the services are not
of the same general class.
36 R.S.C. 1952, c. 274.
37 1972, Third Edition.
The above remarks are quite relevant to the
issue. However, I have taken the rather unusual
step of quoting from my own reasons because the
Supreme Court of Canada, when commenting on
the Noshery case in the MacDonald v. Vapor
Canada case, supra, quite erroneously attributed
to me a diametrically opposed view of the effect of
section 7(b). Chief Justice Laskin, at page 152
made the following statement on the subject:
In The Noshery Ltd. v. The Penthouse Motor Inn Ltd. ((1969),
61 C.P.R. 207), Addy J., then in the Ontario Supreme Court,
differed from both of the foregoing cases* in holding that s.
7(b) applied only as between competitors.
( * NOTE: The two cases referred to were Building
Products Ltd. v. B.P. Canada Ltd. (1959) 31
C.P.R. 29, (1962) 21 Fox Pat. C. 130 and Green-
glass v. Brown (1964) 40 C.P.R. 145, (1963) 24
Fox Pat. C. 21.)
Nowhere in the Noshery case is it stated or
implied that section 7(b) applies only as between
competitors. I have read the Greenglass decision
and, far from disagreeing with Kearney J.'s view
of section 7(b), I was in full accord with it in the
Noshery case. I have also read the Building Prod
ucts case. Cameron J., in that case, was not deal
ing with a passing off action under section 7(b) but
with a demand for an injunction to prohibit the use
of a trade name and of a trade mark and to
prohibit continued infringement of a registered
mark. The action was not directed to the wares or
services themselves, but solely to the mark or
name. There was no reference to section 7(b). The
precise question being considered by the Court was
whether a statement of evidence and a report, both
pertaining to an entirely different proceeding
under the Combines Investigation Act, R.S.C.
1952, c. 314, could be used as evidence in the
action regarding the plaintiff's trade mark and
trade name.
It is not every day that the shoe is on the other
foot and that a Trial Judge can enjoy the rare
luxury of having the last word on any point.
Although it might, at first glance, appear to be of
comparatively minor importance, the change
effected in 1953 by substituting "services of anoth
er" for "services of a competitor" might, if the
section is ultimately found to be constitutional,
prove to have a very direct bearing on the outcome
of the present case, since all of the plaintiff's
motels are in the U.S.A. and all of the defendant's
are in Canada and, therefore, the parties could
not, in my view, be considered as competitors.
Even though the wording of section 7(b) has to
some limited extent broadened the scope of the
common law action of passing off, it has not
changed the nature of the action or any of its other
essential elements nor is any suggestion to that
effect to be found in any reported case that I know
of. The right which is the subject-matter of the
action is still the property in the business and
goodwill likely to be injured. The action still con
cerns an invasion of a right in that property and
not of a right in the mark or name improperly
used. The fact that the statutory provision might
be broader in its scope than the common law
action would not tend to relate it more intimately
to "the general regulatory scheme governing trade
marks." On the contrary, the broader the brush
the less suitable it would be to fill in the fine lines
of the narrow and carefully circumscribed provi
sions of trade mark registration and control, even
if used by a skillful artist.
Having dealt with the nature of an action under
section 7(b), one must examine its place in the
context of our constitution.
Patents and copyrights are specifically enumer
ated subjects of federal jurisdiction under heads 22
and 23 of section 91 of the B.N.A. Act. Trade
marks, however, are in a completely different cate
gory. As previously stated, federal legislative
power on this subject draws its constitutional
validity from the general power of the federal
authority to regulate trade and commerce in the
areas of interprovincial and external trades (head
2 of section 91). Section 7(b) itself certainly does
not, in any way, focus on interprovincial or exter
nal trade or on the regulation of trade throughout
Canada and, therefore, in the factual situation of
the case at bar, if it is to be considered as having
any constitutional validity whatsoever that validity
must be founded somehow on trade mark law.
In order for the federal authority, pursuant to
head 2 of section 91, to validly exercise its power
on any subject which is also clearly within the field
of property and civil rights normally reserved to
provincial legislatures, the subject-matter must be
necessarily incidental to the power to regulate
trade and commerce.
It seems to follow that, in order for any supple
mentary legislation which does not directly deal
with trade marks but which must find its validity
in the area of trade mark legislation, it must be
essentially or fundamentally required for or, at the
very least, be necessarily or intimately related to
the regulation or control of trade marks. I feel that
it is in this sense that the Supreme Court of
Canada stated that the provision must be "con-
nected with a general regulatory scheme to govern
trade marks" or "support existing regulation by
the Parliament of Canada in the fields of patents,
trade marks, trade names and copyright ..." or
possess "some association . .. with federal jurisdic
tion ... in relation to trade marks and trade
names ...." The , connection' must be ! intimate and
important, the support, real and substantial and
the association that of blood brothers for I dare
not, in this day and age, qualify the association as
that of intimate bedfellows. A mere incidental
relationship or a matter which is nothing more
than an accessory, adjunct, appendage or adorn
ment will not meet the required test. Otherwise,
the uniform would enjoy a more favourable legal
status than the body it has been tailored to clothe.
As to the validity of the trade mark legislation
itself, I believe that the remarks of Chief Justice
Laskin in the MacDonald v. Vapor Canada case,
supra, are of considerable help. After reviewing
many of the Privy Council decisions, which fol
lowed the well-known Parsons case, and where the
power of the Canadian Parliament to legislate for
the regulation of trade and commerce appeared to
be alternately extended and then truncated, he had
this to say at pages 163-164:
The bearing they [the Privy Council decisions] do have, how
ever, is in indicating that regulation by a public authority,
taking the matter in question out of private hands, must still
meet a requirement, if federal regulatory legislation is to be
valid, of applying the regulation to the flow of interprovincial or
foreign trade; or, if considered in the aspect of regulation of
credit (to adopt views expressed by Duff C.J. in Reference re
Alberta Statutes ([1938] S.C.R. 100)) it must be such as to
involve a public res_ulation thereof applicable to the conduct of
trading and commercial activities throughout Canada. [The
emphasis is mine.]
In a passing off action, again to quote Chief
Justice of Canada [at page 165], the "enforcement
is left to the chance of private redress without
public monitoring by the continuing oversight of a
regulatory agency" and it is "unconnected to a
general regulatory scheme to govern trading rela
tions," while the Trade Marks Act is character
ized by a public registry and administrative con
trols not applicable in any way to section 7(b).
In the case at bar, the passing off action is taken
by a party who is also attacking the defendant's
trade mark. Not only is the action unnecessary in
order to invalidate the registration of the mark but
it would be incapable of doing so if the evidence
were restricted solely to the bare question of pass
ing off of services. A mark can only be declared
invalid on the specific grounds and subject to the
specific nature of the evidence authorized in sec
tions of the Act dealing with the validity of marks
and on no other grounds or evidence. It is also of
some importance to note that the time to which the
evidence is to be related is different. When the
validity of a mark is attacked on the basis of prior
use, or prior making known, the crucial time is the
date of filing of the application of registration (see
section 16(3) of the Trade Marks Act, supra),
when it is attacked on the basis of lack of distinc
tiveness it is the time when the proceedings are
commenced (see Trade Marks Act, section
18(1)(b), supra) while in the case of a passing off
action it is the period dating from the time when
the acts complained of first took place.
The three main grounds on which a mark may
be attacked were discussed in the earlier portions
of these reasons. They are quite different from
those on which an action of passing off under
section 7(b) or at common law can be maintained.
Similarly, even though a passing off action should
fail on the merits, the mark could still be found to
be invalid on any one or all of the three main
grounds of attack provided for in the Act, and the
registration ordered to be vacated.
The areas where there are substantial differ
ences between a passing off action under section
7(b) and an action to invalidate a trade mark
might be summed up as follows: the "chose" or
right protected, the cause of action, the grounds on
which the action is founded, the nature of the
evidence to be adduced and the time to which the
evidence must be related. On the other hand, I
cannot find any real common denominator of a
passing off action under section 7 in any of the
above-mentioned actions. I, therefore, fail to see
how an action under section 7(b) or how section
7(b) itself can be said to "round off federal legisla
tion regarding trade marks." Finally, when a trade
mark is declared to be invalid, this constitutes a
decision in rem. A judgment in a passing off action
on the other hand, by its very nature, can never,
under any circumstances, be considered an in rem
decision.
I conclude that section 7(b) of the Trade Marks
Act is ultra vires the federal legislative authority
and this Court is without jurisdiction to try the
issue either on the basis of that section or a fortiori
on the basis of the common law action of passing
off. That portion of the plaintiff's claim will,
accordingly, be dismissed.
FINDINGS OF FACT RE SECTION 7(b)
Counsel for both parties stated that whatever
might be my decision on the issue of constitution
ality of section 7(b), it would be appealed. For that
reason, they requested that I make the findings of
fact, which wou'd allow a finding on the merits to
be made in order to avoid a new trial, should it
ultimately be found that the section is intra vires.
I have reviewed my reasons and I am of the view
that with the exception of a few minor findings
which I will now make, all of the findings of fact
required to deal with the merits of an action of
passing off under section 7(b) were made when I
dealt with the various other issues in this action.
I find that the defendant acted scienter through
out: the defendant, through its officer Harrison,
fully knew of the existence of the plaintiff's mark,
name and business before the decision to adopt its
own name and mark was arrived at, and, on all of
the evidence, I find on a balance of probabilities
that it was precisely because of the existence of the
plaintiff's name, mark and reputation that the
defendant adopted the name "Motel 6" as part of
its mark and that the mark chosen is so similar to
that of the plaintiff. One might well conclude that
the defendant's conduct approached reprehensible
business practice, as I am satisfied that it intended
to create the impression with the motoring public
that the two companies were somehow connected.
It wished to benefit from the good reputation
developed by the plaintiff in that market. From the
1st of June, 1973, being the date when the defend
ant first opened its motel in Vernon, there existed
a great likelihood that some members of the
motoring public believed that the motel was part
of the U.S. chain. There is some evidence of the
existence of "Big 6 Motel" in Revelstoke, B.C.,
but, apparently no other evidence affecting the use
of the figure "6" in relation to motels in Canada.
As to the issue of the defendant's name and its
intention to benefit by the plaintiff's goodwill, the
former attempted originally to obtain incorpora
tion under exactly the same name as that of the
plaintiff. The name "No. 6 Motel Ltd." was
adopted because the incorporating authorities of
the Province refused to authorize "Motel 6 Ltd."
as a corporate name. I attach little importance and
little credence for that matter, to the evidence that
the public would not be deceived as to the identity
of the plaintiff because the defendant's telephone
operators were instructed to and do in fact identify
its motels as "No. 6 Motel" and not as "Motel 6"
when answering the telephone. Finally, I am cer
tainly not prepared to find that the plaintiff's mark
is a weak one. It was blatantly imitated by the
defendant.
The above findings together with those I have
made in deciding the other issues in this matter
are, I believe, all the pertinent ones required to try
the issue of passing off. I am deliberately refrain-
ing from arriving at a finding on the merits, as
there always remains the possibility of a common
law action of passing off being taken by the plain
tiff before the Supreme Court of British Columbia
should it ultimately be unsuccessful after appeals
have been exhausted in the present action. If such
action were taken there would, of course, arise the
very important question of whether the common
law action has evolved to the point where the
parties need not be competitors and, should that
issue be answered in the affirmative, the further
question of whether the action would still lie when
the plaintiff has no physical presence, representa
tion, organization or system whatsoever in
Canada.
DAMAGES
The only damages claimed, or which in fact
could be successfully claimed having regard to the
factual situation of this action, are those related to
the alleged tort of passing off.
No special damages have been established and
there is no actual proof of any general damage to
the plaintiff's goodwill. There is no evidence for
instance that the quality of the services and
accommodation furnished by the defendant is
inferior to that of the plaintiff and would thereby
cause the former damage to its goodwill. Since
they are operating in different markets, that is,
different countries, there can be no question of the
plaintiff losing any customers to the defendant.
The defendant company, when it acquired "Motel
6" from the three individuals, Hawthorne, Harri-
son and Mitchell, in 1973, set a value of $75,000
on its goodwill in the prospectus issued for the sale
of shares in the corporation. This figure, however,
was a purely arbitrary one and the prospectus
issued at the time bears the following notation:
These shares were issued at an arbitrary value of $0.10 per
share for a total of $75,000.00, which amount does not neces
sarily bear any relation to the value of the trade mark originally
acquired by the vendors at an estimated cost of $5,000.00.
I also find that the plaintiff filed an application
to register its trade mark in Canada in November
1972. The application was neither based on actual
use or intended use in Canada but was based upon
use and registration in the U.S.A.
JUDGMENT
A judgment will issue ordering the corporate
defendant's trade mark registered on the 23rd of
August, 1974 as No. 201,351 and also the defend
ant Hawthorne's trade mark registered on the 28th
of August, 1970, as No. 170,826 to be struck from
the register of trade marks. All other claims of the
plaintiff will be dismissed, with the claim under
section 7(b) of the Trade Marks Act, however,
being dismissed solely on the grounds of lack of
jurisdiction. The defendant's request for a declara
tion that the plaintiff has no copyright in its mark
will not be granted, as it would have been granted
only as between the parties and would be redun
dant in view of the grounds on which the plaintiffs
claim against the defendant for breach of copy
right is being dismissed.
COSTS
Formal judgment will issue accordingly but I
am nevertheless reserving my decision as to costs,
as both counsel had requested the opportunity of
speaking further to the matter of costs in the event
of success being divided.
ANNEX "A"
Plaintiff's mark
Defendants' mark
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.