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Trademarks - 'Passing Off'. Dragona Carpet Supplies Mississauga Inc. v. Dragona Carpet Supplies Ltd.
In Dragona Carpet Supplies Mississauga Inc. v. Dragona Carpet Supplies Ltd. (Fed CA, 2023) the Federal Court of Appeal considered (and dismissed) an appeal from a denied claim that sought: "a declaration that the respondents had passed off its trademark, contrary to both the common law and subsection 7(b) of the Trademarks Act, R.S.C., 1985, c. T-13 (Act), an injunction and damages".
In these quotes the court considered 'passing off' [aka 'misrepresentation', here under TA 7(b)], as opposed to 'competition':Misrepresentation
[41] There are three components that must be established to succeed in a passing off action under subsection 7(b) of the Act (set out in Annex A at the end of these reasons): the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage (Ciba-Geigy at para. 33). Again, in light of the finding that all goodwill resided with Dragona Scarborough under the licence, Dragona Mississauga cannot establish the existence of its own goodwill, and its claim fails at the outset. However, even if there were no licence in place and the appellant established its own goodwill, it is readily apparent that the misrepresentation argument cannot succeed, and the passing off claim still fails.
[42] Given Dragona Scarborough’s goodwill in Mississauga, though, there can be no misrepresentation—even if there were no licence found. Dragona Scarborough had every right to use the mark west of the illusory Yonge Street boundary. Any resulting confusion from the use of the DRAGONA trademark in Mississauga is just the result of the respondents “making a truthful statement of fact which [they] ha[ve] a legitimate interest in making” (J.A. McMillan Ltd. v. McMillan Press Ltd., 1989 CanLII 7816 (N.B.C.A.), 27 C.P.R. (3d) 390 at 397 [J.A. McMillan] at para. 25, citing Turton v. Turton (1889), 42 Ch.D. 128, 38 W.R. 22 (C.A.) at para. 153).
[43] The conflict in this case arises from the use of overlapping marks and the legitimate use of the mark by its owner, Dragona Scarborough. The resulting conflict is not misrepresentation, but competition. Competition and passing off are two discrete concepts.
[44] Competition is two parties (lawfully) acting independently to secure the business of a third party and passing off is representing your goods as those of another (J.A. McMillan at paras. 16-17). Where as here, a party has a right to use a name it is not its responsibility if some misapprehend its legitimate use. By using the DRAGONA trademark in Mississauga, Dragona Scarborough was making a truthful statement of fact, arising from its ownership right and its right to use its goodwill associated with the DRAGONA trademark throughout the GTA.
[45] The appellant attempts to distinguish the misrepresentation cases cited by the Federal Court mainly on the ground that the respondents in this case have changed the nature of their use of the DRAGONA trademark by opening a physical location in Mississauga. However, the concurrent use of a mark, creating some confusion, is not sufficient to establish passing off. A misrepresentation does not arise in the absence of “improper filching” of another’s business (J.A. McMillan at paras. 22-23). That did not arise here—Dragona Scarborough was simply exercising its right to use the DRAGONA trademark in Mississauga, a location where it had existing goodwill. Misrepresentation requires more than mere confusion; a party must misrepresent their goods to be that of another.
[46] The appellant contends that the judge erred in his understanding of the law governing concurrent, overlapping uses. I do not agree. Relying on Edward Chapman Ladies' Shop Limited v. Edward Chapman Limited, 2007 BCCA 370, 72 C.P.R. (4th) 45 at para. 50 (Chapman), the judge concluded that where the parties have jointly used and jointly benefited from the use of a mark, neither can exclude the other from using it in association with their respective business (Federal Court decision at para. 157).
[47] Chapman held that a joint owner of a name cannot take steps that increase the risk of confusion, which in Chapman arose when there were changes to the trade name that made it more similar to the other competing name (Chapman at para. 23). Chapman is distinguishable as there were no changes in trade name, the name was associated with the same services and critically, Dragona Scarborough had an existing right to use the DRAGONA trademark in Mississauga due to its standing goodwill in Mississauga.
[48] Given the Federal Court’s finding that Dragona Scarborough was known throughout the GTA prior to 1992, and continued to sell throughout the GTA, it was entitled to the use of the DRAGONA trademark throughout the GTA. The Federal Court did not limit its findings of Dragona Scarborough’s use of the DRAGONA trademark to some “distant point in the past”, rather assessing its “longstanding and continuous use… throughout the GTA” (Respondents’ Memorandum of Fact and Law at para. 56). Given this continuing ability to use the DRAGONA trademark in Mississauga and beyond, there was, and could be, no misrepresentation by the respondents that their goods or services were those of the appellant.
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