Date: 20020524
Docket: T-2799-96
Neutral citation: 2002 FCT 585
BETWEEN:
KIRKBI AG and LEGO CANADA INC.
Plaintiffs/
Defendants by counterclaim
and
RITVIK HOLDINGS INC. / GESTIONS RITVIK INC.
Defendant /
Plaintiff by counterclaim
INTRODUCTION
[1] These reasons follow the trial of an action in which KIRKBI AG ("KIRKBI") and LEGO Canada Inc. ("LEGO Canada"), (collectively "the plaintiffs"), sought to prove that the defendant Ritvik Holdings Inc./Gestions Ritvik Inc. ("Ritvik") has directed public attention to its wares in such a way as to cause or to be likely to cause confusion in Canada, at the time it commenced so to direct attention to its wares, between its wares and the wares of the LEGO group of companies[1]. The foregoing is essentially a restatement of paragraph 7(b) of the Trade-marks Act[2] (the "Act") and, and more will be said of this later, of the common law concept of "passing off".
[2] The allegation of passing off relates particularly to the alleged adoption by Ritvik, and to the alleged extensive use in its promotion and marketing of its MICRO line of building blocks, of what the plaintiffs and their associated companies (the "LEGO group") refer to as the "LEGO Indicia trade mark". That mark is diagrammed and described as follows:
LEGO Indicia trade mark:
a rectilinear array of uniform, smooth-sided, flat-topped, cylindrical, co-planar protuberances, the proportions of height, diameter and center-to-center spacing of which are approximately 2 : 5 : 8. Where there is more than one row of protuberances, they are arranged in mutually orthogonal rows and columns.
It is best exemplified by what is usually described as the upper surface of the well-known LEGO toy building block in perhaps its most well-known configuration with eight (8) protuberances or studs on the surface. Throughout the trial, this configuration of the LEGO block was described as the 2 x 4 LEGO block since the studs are "arrayed" in two mutually "orthogonal" rows and columns, each consisting of four studs.
[3] More particularly, in their Second Amended Statement of Claim filed the 11th of January, 2002, the plaintiffs allege:
..., since approximately 1991, [Ritvik] has sold building bricks and other parts to which have been applied the LEGO Indicia trade mark. [Ritvik's] building bricks and other parts are characterized by the same features described above which characterize the LEGO Indicia trade mark, namely a rectilinear array of uniform, smooth-sided, flat-topped, cylindrical, co-planar protuberances, the proportions of height, diameter and center-to-center spacing of which are approximately 2 : 5 : 8. Where there is more than one row of protuberances, they are arranged in mutually orthogonal rows and columns.
[Ritvik's] building bricks and other parts are sold in containers and packages which display both the bricks and other parts and sets made from such bricks and other parts. At least some of [Ritvik's] packaging is formed with lids to which the LEGO Indicia trade mark has been applied. [Ritvik's] building bricks and other parts are also made with identical shades of red, white, blue, yellow, green and black as those of the LEGO Components.
[Ritvik] sells its toys, namely building bricks and other parts, in the same channels of trade as the Plaintiffs and in the same types of stores. In many cases, the toys of the Plaintiffs and [Ritvik] appear side by side on store shelves. The similarity in the toys and their packaging makes it difficult for consumers to distinguish between the toys of the Plaintiffs and those of [Ritvik]. Further, the "trade marks" adopted by [Ritvik] do not reduce the likelihood of confusion because they are highly suggestive, if not clearly descriptive expressions such as MEGA BLOKS, MEGA BLOKS +, MEGA WEE BLOKS, and MICRO MEGA BLOKS, which are lacking in inherent distinctiveness. The use of such words on packages which resemble those used by the Plaintiffs, to sell toys, namely building bricks and other parts, and to which the LEGO Indicia trade mark has been applied, increases rather than decreases the likelihood of confusion between the Plaintiffs'goods and those of [Ritvik].
[4] At the close of the trial, I reserved my decision and indicated that these reasons and the related judgment would follow. For ease of reference, an "index" to these reasons, by headings and subheadings referenced to both page and paragraph numbers, is attached as an annex.
BACKGROUND
[5] At the opening of trial, counsel formally presented to the Court, as a joint exhibit, an Agreed Statement of Facts[3]. It is in the following terms:
A The Plaintiffs:
1. The Plaintiff, KIRKBI AG is a Swiss corporation with its head office in Switzerland. It is a holding company whose business is management of assets including trade-marks.
2. The Plaintiff, LEGO Canada Inc. was incorporated under the laws of Ontario in May, 1988 and has its head office located in 45 Mural Street, Unit 7, Richmond Hill, Ontario.
3. The Plaintiffs are both members of the LEGO Group of Companies. The LEGO Group also includes INTERLEGO A.G., INTER LEGO A/S, [and] LEGO Systems Inc.
4. KIRKBI AG is owned by Mr. Kjeld Kirk Kristiansen and his sister. LEGO Canada Inc is wholly owned by INTERLEGO AG, which is wholly owned by Mr. Kjeld Kirk Kristiansen. Mr. Kjeld Kirk Kristiansen is Chairperson of the Board of Directors of the LEGO Foundation. The LEGO Foundation and the companies within the LEGO Group are all owned directly or indirectly by the Kirk Kristiansen family and in particular Mr. Kjeld Kirk Kristiansen.
B. The Defendants:
5. Ritvik Holdings Inc. is a company incorporated under the laws of Canada with its head office in St. Laurent, Quebec.
6. Ritvik Toys Inc. made and sold the MICRO line of MEGA BLOKS toys in Canada until its dissolution.[4]
7. Ritvik Toys Inc. was dissolved in 1998 and no longer exists. Since its dissolution, Ritvik Holdings Inc. has made and sold the MICRO line of MEGA BLOKS toys in Canada.
8. All the assets and liabilities of Ritvik Toys Inc., including any and all liability in this action, have been assumed by Ritvik Holdings Inc. (hereinafter referred to as "Ritvik"). A discontinuance of this action against Ritvik Toys Inc. does not affect the liability of Ritvik Holdings Inc. for the actions of Ritvik Toys Inc. during the period from 1991 to the date of dissolution of Ritvik Holdings Inc. continues in this action in the place of Ritvik Roys Inc.
C. LEGO Toys
9. Mr. Godtfred Kirk Christiansen (the father of Mr. Kjeld Kirk Kristiansen) and his father Mr. Ole Kirk Christiansen (the grandfather of Mr. Kjeld Kirk Kristiansen), the founder of The LEGO Group of Companies, obtained samples of KIDDICRAFT self-locking toys in 1947 or 1948.[5]
10. The samples of KIDDICRAFT self-locking toys led Godtfred Kirk Christiansen to make the first LEGO toys.
11. LEGO toys were sold in Canada during the term of the Page Canadian patent No. 443,019.[6]
12. Members of The LEGO Group have sold and continue to sell plastic construction toys under the trade-mark LEGO since 1949.
13. The trade-mark LEGO is registered in Canada.
14. The appearance of the exterior of 2 x 4 LEGO bricks sold in Canada has remained essentially the same since at least 1961.
15. Since 1961, the same shades of red, white, blue, yellow, green and black have been used for LEGO bricks. In addition many other colours have been used.
16. LEGO products have been sold in Canada in the form illustrated in the catalogs commencing in the year of the catalog.[7]
17. LEGO products have been sold throughout Canada in many retail outlets including many large chain stores such as Eaton's, The Bay, Zellers, Toys ‘R' Us, Sears, Wal-Mart and the Price Club.
18. Since 1961, many millions of LEGO sets have been sold in Canada. LEGO products are the highest selling construction toys in Canada.
19. LEGO products are advertised in television advertising, print advertising and trade shows in Canada.
20. Sales of LEGO products in Canada since 1989 are as follows:
1989 - $17,742,095 1990 - $21,509,799 1991 - $29,413,378 1992 - $37,634,235 1993 - $41,350,371 1994 - $37,682,728 1995 - $39,299,022 1996 - $44,712,879 1997 - $43,438,311 1998 - $44,092,846
D Ritvik's Toys:
21. Mr. Victor Bertrand Senior Founded Ritvik Toys Inc. in 1967.[8]
22. The trade-marks RITVIK, MEGA BLOKS and MICRO MEGA BLOKS are registered in Canada.
23. In 1985 Ritvik began making and selling in Canada construction toys under the trade-mark MEGA BLOKS comprising oversized bricks intended specifically for infants, each brick having cylindrical projections or knobs on one side which connect into the opposite side of another brick without clutch power. These construction toys were renamed MAXI MEGA BLOKS in 1991.[9]
24. In 1989, Ritvik introduced a second line of toys comprising bricks and parts that are smaller in size than the MAXI line, each having cored-out cylindrical projections or knobs on one side which connect into the opposite of another piece. This line was originally called MEGA "WEE" BLOKS and, in 1991, the name was changed to the MINI line of MEGA BLOKS.
25. In 1991, Ritvik began making and selling its MICRO line of MEGA BLOKS construction toys. The MICRO line is the subject matter of this action.
26. In 1997, Ritvik introduced the BABY SOFT BLOCKS line of MEGA BLOKS comprised of soft oversized bricks and parts for infants 3 to 18 months. This line has been rebranded as BABY MEGA BLOKS.
27. Ritvik's MICRO toys are made from high impact polystyrene plastic and other materials.[10]
28. LEGO brand construction toys and MEGA BLOKS brand construction toys are sold through the same channels of trade.
E Retail Market:
29. Large retailers generally display all construction toys together and LEGO brand construction toys and MEGA BLOKS brand construction toys are often found in the same section of a store.
F The LEGO INDICIA:
30. The plaintiffs assert in this case, as a "distinguishing guise", the shaping of the knob configuration of LEGO products.
G Functionality:
31. All or some of the knobs of one LEGO piece may be connected to all or some part of the underside of another LEGO piece. The "clutch power" between connecting pieces is developed by the friction between the knobs on the one piece and the tubes and/or walls of the underside of the other piece.
H Patents
32. Mr. Harry Fisher Page, a British citizen, designed, manufactured and sold toy brick construction sets with cylindrical knobs that were marketed under the brand, KIDDICRAFT.
33. Mr. Page patented his self-locking building bricks, in the United Kingdom, Canada and France. These patents have now expired. His patents include the following:
a. Canadian Patent No. 443,019 issued on July 22, 1947;
b. U.K. Patent No. 529,580 issued on November 25, 1940;
c. U.K. Patent No. 587,206 issued on April 17, 1947;
d. U.K. Patent No. 633,055 issued on December 12, 1949;
e. U.K. Patent No. 673,857 issued on June 11, 1952; and
f. French Patent No. 916,078.
34. The plaintiffs and their privies have obtained patents including:
a. Cdn Patent No. 629,732 to Godtfred Kirk Christiansen issued October 24, 1961, and
b. Cdn Patent No. 880,418 to Godtfred Kirk Christiansen issued September 7, 1971.[11]
[6] In supplementation of the foregoing, the following is derived from the testimony on behalf of the plaintiffs of Mr. Kjeld Kirk Kristiansen, the Chairperson of the Board of Directors of the LEGO Foundation, as noted in the foregoing Agreed Statement of Facts, Mr. Sten Juul Petersen, from 1974 to 1999, in-house counsel for the LEGO group, and Per Norgaard Randers, a long-time and current employee in the LEGO group, and resident in Hong Kong.
[7] The LEGO toys business was founded by Kjeld Kirk Kristiansen's grandfather in 1932 in Billund, Denmark, now the home of the LEGO group's world head office and of the LEGO-Land Park. Originally, the business produced wooden toys. "LEGO" is derived from two Danish words that are the equivalent of "play well".
[8] KIDDICRAFT self-locking toys or bricks were manufactured in Britain and marketed in the United Kingdom, and perhaps elsewhere, from 1947 to 1951. Those toys or bricks exploited the technology disclosed in the Page patents referred to in the Agreed Statement of Facts.
[9] In 1949, the LEGO group first ventured into plastic toys and, more particularly, into plastic building bricks. The first generation of LEGO bricks, produced in 1949, was derived from the KIDDICRAFT bricks. The LEGO group eventually acquired the Page intellectual property underlying the KIDDICRAFT bricks.
[10] A second generation of LEGO bricks was introduced in 1954. The third and current generation of LEGO bricks went into production in 1957 and exhibited for the first time the invention of the first LEGO basic patent, Canadian Patent No. 629,732, the tubes exhibited on the underside of LEGO bricks that enhance the "clutch power" of LEGO bricks.
[11] LEGO bricks have been marketed in Canada since at least as early as 1961. From 1961 until 1988, they were manufactured and marketed in Canada by Samsonite under license from the LEGO group. Late in 1988, Samsonite's license was terminated and LEGO Canada was formed to assume marketing responsibilities in Canada. Since the termination of the Samsonite license, LEGO bricks have not been manufactured in Canada. Today, the LEGO group has manufacturing facilities in Denmark, Switzerland, China and Enfield, Connecticut and, for a regional market, in Korea.
[12] The studs of the upper surface of the LEGO brick have remained an unmodified prominent feature of all LEGO bricks since 1949. Since at least as early as 1958, "LEGO" has been inscribed on the top surface of each stud. The studs and their pattern are widely featured in promotional materials used by LEGO Canada in Canada, including television advertisements, point-of-sale materials and packaging. In the normal course, the inscription "LEGO" is featured on the studs in such materials but this is not universally true.
[13] The LEGO group has been very aggressive in protecting and defending its "goodwill" including "goodwill" based on the configuration of its products. That being said, there was no evidence before the Court that the LEGO Indicia has been identified on packaging or promotional material in Canada as an unregistered but nonetheless claimed element of the "goodwill" of the LEGO group.
[14] The following brief additional background facts relating to Ritvik are derived largely from the testimony of Victor Bertrand Junior, the current chief operating officer of Ritvik.
[15] Ritvik, in whatever corporate form, was founded in 1967 by Victor Bertrand Senior and his wife Rita, the parents of the current chief officers of Ritvik. In its early days, Ritvik was a distributor of toys manufactured by others. In the mid-70s, it began manufacturing its own line of injection moulded pre-school-age toys including ride-on or -in products and plastic furniture.
[16] In the early 80s, Ritvik began to focus increasingly on its self-manufactured product line in an effort to assume greater control of its own destiny. Building blocks were chosen as a focus category, commencing with blocks directed to pre-school children.
[17] In the late 1980s or in 1990, Ritvik determined to "grow" with the children who had become familiar with its pre-school products and in 1991 it introduced its line of MICRO MEGA BLOKS derived from LEGO blocks and TYCO blocks. TYCO building blocks were also derived from LEGO blocks and were marketed extensively in the United States, where they were manufactured, and elsewhere, including in Canada. TYCO withdrew from the building block market at approximately the same time as Ritvik introduced its MICRO line of building blocks.
[18] Ritvik's MICRO line of building blocks now represents approximately one-half of Ritvik's world wide sales. In 2001, Ritvik marketed its toy products into more than 100 countries and was the largest toy maker in Canada both in terms of its number of employees and its volume of sales.
THE RELIEFS REQUESTED
[19] The reliefs requested by LEGO are set out in its Second Amended Statement of Claim in the following terms:
(1) A declaration that the Plaintiff Kirkbi is the owner of the LEGO Indicia trade mark;
(2) A declaration that the Defendant has, by the manufacture and sale of bricks and other parts bearing the LEGO Indicia trade mark, infringed the trade mark rights of the Plaintiff Kirkbi, contrary to law and Section 7(b) of the Trade-marks Act;
(3) A permanent injunction restraining the Defendant, its officers, directors, agents, servant [sic], employees, successors, assigns and licensees, or any related or affiliated company of the Defendant from directly or indirectly
(a) making, using, selling or offering for sale any product in association with the LEGO Indicia trade mark, or any trade mark or representation which is confusingly similar thereto or a colourable imitation thereof; and
(b) directing public attention to their wares or business in such a way as to cause or be likely to cause confusion with the wares or business of the Plaintiffs;
(4) A mandatory injunction requiring the Defendant to deliver up under oath, or under the supervision of the Court, all toys, including building bricks and other parts, moulds for producing same, and all packages, labels, advertising or other materials, the use of which would offend any injunction granted herein, and to take steps to discontinue all other use of the LEGO Indicia trade mark, including on software or on the Internet, or in the alternative, an Order that such materials be destroyed under oath, or under the supervision of this Honourable Court;
(5) Damages in the amount of $25,000,000.00 for the Defendant's unlawful use of the Plaintiff Kirkbi's LEGO Indicia trade mark, for passing off, and actions contrary to Section 7(b) of the Trade-marks Act, or alternatively, an accounting of the Defendant's profits, as the Plaintiffs may elect;
(6) Prejudgment and postjudgment interest;
(7) All applicable taxes, including the Goods and Services Tax, to which the Plaintiffs may be entitled; and
(8) such further and other relief as to this Honourable Court may seem just.
[20] During the course of trial, by agreement, paragraph (7) quoted above, was modified to reflect a request for costs as well as for applicable taxes.
[21] In its counterclaim, Ritvik seeks the following reliefs:
(a) a declaration that the Plaintiff by Counterclaim is entitled to continue to make, offer for sale and sell in Canada its MICRO and MINI lines of toy construction bricks and related parts currently sold in Canada under the trade-mark MEGA BLOKS;
(b) costs of this Counterclaim on a solicitor and client basis, or in the alternative, according to the higher end of Column V of Tariff B of the Federal Court Rules, together with all applicable taxes, including the goods and services tax, to which the Plaintiff by Counterclaim may be entitled;
(c) such further and other order as to this Honourable Court may seem just.
STATEMENT OF ISSUES
[22] At the opening of trial, counsel filed the following joint statement of issues:[12]
Title
1. Do the Plaintiffs have a legal interest in any trade-mark rights that the Plaintiffs assert in Canada in respect of the "Lego Indicia"? This issue does not include quality control of licensees or challenge the authenticity of any of the documents relating to licensing or assignments.
Section 7(b)
2. Which of the following is correct:
(a) the Plaintiffs allege that the "Lego Indicia" is a trade-mark and thus able to support an action under s. 7(b); or
(b) the Defendants allege that it is not a valid trade-mark because it is one or more of the following:
(i) functional;
(ii) claimed and/or disclosed in expired patents,
(iii) non-distinctive, or
(iv) never used by the Plaintiffs as a trade-mark.
3. Have the Defendants contrary to s. 7(b) directed public attention to their "MICRO" construction toys products by using the "Lego Indicia" in such a way as to cause or to be likely to cause confusion in Canada, at the time the Defendants commenced so to direct attention to them, between their "MICRO" toy construction products and the "LEGO" construction toy products of the Plaintiffs?
4. What is the "time the Defendants commenced so to direct attention to them"?
Note: The issue of the extent of infringement and quantification of monetary relief is deferred pursuant to the Order of July 9, 1999.
Estoppel
5. Are the Plaintiffs disentitled to any or all the relief claimed as a result of estoppel, laches or acquiescence?
Limitations
6. Are the Defendants able to claim a limitation period, and if so, what is the applicable limitation period.
[23] While the foregoing statement of issues is admirable for its brevity and simplicity it belies the complexity of the arguments relating to contravention of paragraph 7(b) of the Act. In my analysis, I will deal separately with the various elements of that issue.
RELEVANT STATUTORY LAW
[24] The opening words of section 7 of the Act and paragraph (b) of that section read as follows:
7. No person shall
...
(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;
...
7. Nul ne peut_:
...
b) appeler l'attention du public sur ses marchandises, ses services ou son entreprise de manière à causer ou à vraisemblablement causer de la confusion au Canada, lorsqu'il a commencé à y appeler ainsi l'attention, entre ses marchandises, ses services ou son entreprise et ceux d'un autre;
...
[25] Subsections 6(1), (2), (3) and (5) of the Act read as follows:
6. (1) For the purposes of this Act, a trade-mark or trade-name is confusing with another trade-mark or trade-name if the use of the first mentioned trade-mark or trade-name would cause confusion with the last mentioned trade-mark or trade-name in the manner and circumstances described in this section.
(2) The use of a trade-mark causes confusion with another trade-mark if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.
(3) The use of a trade-mark causes confusion with a trade-name if the use of both the trade-mark and trade-name in the same area would be likely to lead to the inference that the wares or services associated with the trade-mark and those associated with the business carried on under the trade-name are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.
...
6.(1) Pour l'application de la présente loi, une marque de commerce ou un nom commercial crée de la confusion avec une autre marque de commerce ou un autre nom commercial si l'emploi de la marque de commerce ou du nom commercial en premier lieu mentionnés cause de la confusion avec la marque de commerce ou le nom commercial en dernier lieu mentionnés, de la manière et dans les circonstances décrites au présent article.
(2) L'emploi d'une marque de commerce crée de la confusion avec une autre marque de commerce lorsque l'emploi des deux marques de commerce dans la même région serait susceptible de faire conclure que les marchandises liées à ces marques de commerce sont fabriquées, vendues, données à bail ou louées, ou que les services liés à ces marques sont loués ou exécutés, par la même personne, que ces marchandises ou ces services soient ou non de la même catégorie générale.
(3) L'emploi d'une marque de commerce crée de la confusion avec un nom commercial, lorsque l'emploi des deux dans la même région serait susceptible de faire conclure que les marchandises liées à cette marque et les marchandises liées à l'entreprise poursuivie sous ce nom sont fabriquées, vendues, données à bail ou louées, ou que les services liés à cette marque et les services liés à l'entreprise poursuivie sous ce nom sont loués ou exécutés, par la même personne, que ces marchandises ou services soient ou non de la même catégorie générale.
...
(5) In determining whether trade-marks or trade-names are confusing, the court or the Registrar, as the case may be, shall have regard to all the surrounding circumstances including
(5) En décidant si des marques de commerce ou des noms commerciaux créent de la confusion, le tribunal ou le registraire, selon le cas, tient compte de toutes les circonstances de l'espèce, y compris_:
(a) the inherent distinctiveness of the trade-marks or trade-names and the extent to which they have become known;
(b) the length of time the trade-marks or trade-names have been in use;
(c) the nature of the wares, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trade-marks or trade-names in appearance or sound or in the ideas suggested by them.
a) le caractère distinctif inhérent des marques de commerce ou noms commerciaux, et la mesure dans laquelle ils sont devenus connus;
b) la période pendant laquelle les marques de commerce ou noms commerciaux ont été en usage;
c) le genre de marchandises, services ou entreprises;
d) la nature du commerce;
e) le degré de ressemblance entre les marques de commerce ou les noms commerciaux dans la présentation ou le son, ou dans les idées qu'ils suggèrent.
[26] The opening words of section 2 of the Act and the definitions "distinguishing guise" and "trade-mark" in that section read as follows:
2. In this Act,
...
2. Les définitions qui suivent s'appliquent à la présente loi
...
"distinguishing guise" means
(a) a shaping of wares or their containers, or
(b) a mode of wrapping or packaging wares
the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others;
...
« signe distinctif » Selon le cas_:
a) façonnement de marchandises ou de leurs contenants;
b) mode d'envelopper ou empaqueter des marchandises,
dont la présentation est employée par une personne afin de distinguer, ou de façon à distinguer, les marchandises fabriquées, vendues, données à bail ou louées ou les services loués ou exécutés, par elle, des marchandises fabriquées, vendues, données à bail ou louées ou des services loués ou exécutés, par d'autres.
...
"trade-mark" means
(a) a mark that is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others,
(b) a certification mark,
(c) a distinguishing guise, or
(d) a proposed trade-mark;
...
« marque de commerce » Selon le cas_:
a) marque employée par une personne pour distinguer, ou de façon à distinguer, les marchandises fabriquées, vendues, données à bail ou louées ou les services loués ou exécutés, par elle, des marchandises fabriquées, vendues, données à bail ou louées ou des services loués ou exécutés, par d'autres;
b) marque de certification;
c) signe distinctif;
d) marque de commerce projetée.
...
[27] In relation to the question of appropriate reliefs, subsections 4(1) and (3) and section 53.2 of the Act read as follows:
4. (1) A trade-mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
...
4. (1) Une marque de commerce est réputée employée en liaison avec des marchandises si, lors du transfert de la propriété ou de la possession de ces marchandises, dans la pratique normale du commerce, elle est apposée sur les marchandises mêmes ou sur les colis dans lesquels ces marchandises sont distribuées, ou si elle est, de toute autre manière, liée aux marchandises à tel point qu'avis de liaison est alors donné à la personne à qui la propriété ou possession est transférée.
...
3) A trade-mark that is marked in Canada on wares or on the packages in which they are contained is, when the wares are exported from Canada, deemed to be used in Canada in association with those wares.
...
(3) Une marque de commerce mise au Canada sur des marchandises ou sur les colis qui les contiennent est réputée, quand ces marchandises sont exportées du Canada, être employée dans ce pays en liaison avec ces marchandises.
...
53.2 Where a court is satisfied, on application of any interested person, that any act has been done contrary to this Act, the court may make any order that it considers appropriate in the circumstances, including an order providing for relief by way of injunction and the recovery of damages or profits and for the destruction, exportation or other disposition of any offending wares, packages, labels and advertising material and of any dies used in connection therewith.
53.2 Lorsqu'il est convaincu, sur demande de toute personne intéressée, qu'un acte a été accompli contrairement à la présente loi, le tribunal peut rendre les ordonnances qu'il juge indiquées, notamment pour réparation par voie d'injonction ou par recouvrement de dommages-intérêts ou de profits, pour l'imposition de dommages punitifs, ou encore pour la disposition par destruction, exportation ou autrement des marchandises, colis, étiquettes et matériel publicitaire contrevenant à la présente loi et de toutes matrices employées à leur égard.
THE EVIDENCE - A GENERAL STATEMENT
[28] The plaintiffs called seventeen (17) witnesses, nine (9) of whom testified to the history, growth and development and the current status of the LEGO group, its engineering, research, design, development and marketing practices, its focus on the quality, safety and reliability of its products and its concern in developing, maintaining and protecting its goodwill, including its goodwill as represented by its intellectual properties. Others within this group of witnesses testified more broadly as to circumstances surrounding the LEGO group's operations in Canada and this lawsuit. Three (3) expert witnesses were called on behalf of the plaintiffs, two (2) of whom testified as to surveys conducted for the purposes of this litigation and the third of whom testified as to the marketing practices in Canada of the LEGO group and Ritvik, and more particularly as to those practices since Ritvik introduced its line of MICRO MEGA BLOKS, and to the impact of those practices. The remaining five (5) witnesses called on behalf of the plaintiffs testified as to their experiences in the purchase of a toy building block product, and in turning to LEGO Canada for advice or assistance, or simply to make a complaint, when the product in question was not a LEGO product but rather a Ritvik product. This testimony as to "confusion" in the market place was supported by substantial documentary evidence on the same issue.[13]
[29] Ritvik called ten (10) witnesses, five (5) of whom testified as to background and surrounding circumstances in relation to Ritvik in much the same way that equivalent witnesses for the plaintiffs testified on their behalf. The remaining (5) witnesses put forward by Ritvik provided expert testimony as to marketing and brand identification or brand management, surveys conducted for the purposes of this litigation on behalf of Ritvik and responses to the plaintiffs' survey evidence, engineering and development of the TYCO block briefly referred to earlier in these reasons, and the application of Gestalt principles to the LEGO Indicia to determine its distinctiveness and the relationship between the expert's conclusion in that regard and the various survey results that were before the Court.
[30] Early in the trial, counsel presented to the Court a joint book of documents, running to seventeen (17) volumes. Most of the documents were taken into evidence following identification by one or more of the witnesses. Certain of the documents, though jointly filed, were objected to on behalf of the plaintiffs on the basis of an alleged litigation or settlement privilege. More will be said later in these reasons about those documents and that objection.
[31] Finally, the plaintiffs filed one hundred and one (101) exhibits in addition to the volumes of documentary exhibits that were jointly filed. One hundred and forty (140) exhibits were filed on behalf of Ritvik.
[32] In my analysis, I will refer in greater detail as required to the evidence that was before me.
ANALYSIS
1) The Legal Interest of the Plaintiffs in the Rights in Canada that they Assert in Respect of the LEGO Indicia
[33] The first three (3) paragraphs of the Agreed Statement of Facts, as reproduced earlier in these reasons, identify KIRKBI as a holding company whose business is management of assets including trade-marks. I am satisfied that the evidence before me establishes that KIRKBI has a proprietary interest and a royalty interest in the LEGO Indicia.
[34] LEGO Canada is the exclusive licensee in Canada of intellectual property of the LEGO group.
[35] Both KIRKBI and LEGO Canada are members of the LEGO group.
[36] In Enterprise Rent-A-Car Co. v. Singer[14], Mr. Justice Pratte, for the Court, wrote at paragraph [5]:
It is now established that paragraph 7(b) [of the Trade-marks Act] is constitutionally valid only insofar as it protects trade-marks. In spite of the generality of its terms, that provision must, therefore, be read as referring only to the protection of trade-marks, registered or unregistered. The plaintiff, in an action under paragraph 7(b) must, therefore, prove that he "owns" a trade-mark that is in need of protection. It is well known that a trade-mark is "acquired by adoption and use". [citations omitted]
[37] I am satisfied that the concept of "ownership" in the foregoing quotation is a flexible one. I am further satisfied on the totality of the evidence before me that KIRKBI and LEGO Canada each have a sufficient "ownership" interest, in Canada, in the LEGO Indicia, to qualify as plaintiffs in this action. Finally on this issue, I am satisfied that my conclusions in this regard are not one that were seriously contested on behalf of Ritvik.
2) The Jurisdiction of this Court
[38] The Federal Court is a statutory Court, not a Court of inherent jurisdiction[15]. Section 20 of the Federal Court Act[16] reads as follows:
20. (1) The Trial Division has exclusive original jurisdiction, between subject and subject as well as otherwise,
(a) in all cases of conflicting applications for any patent of invention, or for the registration of any copyright, trade-mark, industrial design or topography within the meaning of the Integrated Circuit Topography Act; and
(b) in all cases in which it is sought to impeach or annul any patent of invention or to have any entry in any register of copyrights, trade-marks, industrial designs or topographies referred to in paragraph (a) made, expunged, varied or rectified.
20. (1) La Section de première instance a compétence exclusive, en première instance, dans les cas suivants opposant notamment des administrés_:
a) conflit des demandes de brevet d'invention ou d'enregistrement d'un droit d'auteur, d'une marque de commerce, d'un dessin industriel d'une topographie au sens de la Loi sur les topographies de circuits intégrés;
b) tentative d'invalidation ou d'annulation d'un brevet d'invention, ou d'inscription, de radiation ou de modification dans un registre de droits d'auteur, de marques de commerce, de dessins industriels ou topographies visées à l'alinéa a).
(2) The Trial Division has concurrent jurisdiction in all cases, other than those mentioned in subsection (1), in which a remedy is sought under the authority of any Act of Parliament or at law or in equity respecting any patent of invention, copyright, trade-mark, industrial design or topography referred to in paragraph (1)(a).
(2) La Section de première instance a compétence concurrente dans tous les autres cas de recours sous le régime d'une loi fédérale ou toute autre règle de droit non visés par le paragraphe (1) relativement à un brevet d'invention, un droit d'auteur, une marque de commerce, un dessin industriel ou une topographie au sens de la Loi sur les topographies et circuits intégrés.
[39] Clearly subsection 20(2) as quoted immediately above vests this Court with concurrent jurisdiction if a remedy is sought, as here, in respect of an alleged trade-mark under the authority of a constitutionally valid provision of the Trade-marks Act.
[40] The provision of the Act here at issue is paragraph 7(b), quoted earlier in these reasons but repeated here for ease of reference:
7. No person shall
...
(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;
...
7. Nul ne peut_:
...
b) appeler l'attention du public sur ses marchandises, ses services ou son entreprise de manière à causer ou à vraisemblablement causer de la confusion au Canada, lorsqu'il a commencé à y appeler ainsi l'attention, entre ses marchandises, ses services ou son entreprise et ceux d'un autre;
...
[41] In Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. et al.[17], Mr. Justice MacGuigan, for the Court, wrote at pages 323-4 by reference to MacDonald et al. v. Vapor Canada Ltd. et al.[18]:
The Attorney-General of Canada as intervener drew the court's attention to three distinct lines of judicial thought in the MacDonald case. First, neither s-s. 7(e) nor s. 7 as a whole can be sustained as standing alone...
...
Second, neither s-s. 7(e) nor s. 7 as a whole can be regarded as valid as part of an over-all scheme relating to unfair competition beyond the domain of patents and trademarks...
...
Third, s-ss. 7(a) to (d) are constitutionally valid insofar as they merely round out the trademark scheme of the Act, because this is not an expansion of federal jurisdiction but merely a completion of an otherwise incomplete circle of jurisdiction... [citations and quotations omitted]
Mr. Justice MacGuigan continued at page 325:
In sum, the effect of the MacDonald case, in my opinion, is that s-s. 7(b) is intra vires of the Parliament of Canada, "in so far as it may 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".
Finally on this aspect of the matter before the Court, Mr. Justice MacGuigan concluded at page 328:
In s-s. 7(b), Parliament has chosen to protect the goodwill associated with trade marks. In this way, as Chief Justice Laskin put it, it "rounds out" the statutory scheme of protection of all trade marks. As such, the civil remedy which it provides in conjunction with s. 53 is "genuinely and bona fide integral with the over-all plan of supervision": ... . It has, in sum, a rational functional connection to the kind of trade marks scheme Parliament envisaged, in which even unregistered marks would be protected from harmful misrepresentations.
In my view, s-s. 7(b) is clearly within federal constitutional jurisdiction under s-s. 91(2) of the Constitution Act, 1867. [citation omitted]
[42] In Ital-Press Ltd. v. Sicoli[19], after citing more extensively from Asbjorn Horgard than I have here, I wrote at paragraphs [155] and [156]:
...I conclude that section 7 of the Trade-marks Act can only be invoked where a "trade marks scheme" is pleaded and established by evidence. On the material and evidence before me, no "trade-marks scheme" is either pleaded or established in evidence.
It was not argued before me, certainly not with any conviction, that this Court has any jurisdiction with respect to the common law action of passing off. I am satisfied that it does not.
My colleague Mr. Justice O'Keefe, reached the same conclusion in Top-Notch Construction Ltd. v. Top-Notch Oilfield Services Ltd.[20]
[43] Thus, if the LEGO Indicia is a trade-mark, albeit unregistered, and it is unregistered, then paragraph 7(b) of the Act is a valid legislative provision conferring on this Court jurisdiction to entertain this action.
3) "Functionality" and the LEGO Indicia
[44] There was extensive evidence before me to the effect that the LEGO Indicia is a functional element of LEGO bricks contributing to the "clutch power" that could be said to be the essence of the LEGO building block system. Paragraph 31 of the Agreed Statement of Facts quoted earlier in these reasons, under the heading "Functionality", reads as follows:
All or some of the knobs of one LEGO piece may be connected to all or some part of the underside of another LEGO piece. The "clutch power" between connecting pieces is developed by the friction between the knobs on the one piece and the tubes and/or walls of the underside of the other piece.
[45] Mr. Donald E. Martin gave expert evidence at trial on behalf of Ritvik. In 1960, he obtained a bachelor of science in mechanical engineering. From 1977 to 1997 when he retired, he was employed by Tyco Industries Inc. ("TYCO") as Vice-President, Engineering. By the time Mr. Martin retired, TYCO had become the third largest toy maker in the United States of America (the "U.S."). One of Mr. Martin's achievements while employed at TYCO was the design and implementation of the manufacture of TYCO's interlocking toy construction bricks referred to earlier in these reasons.
[46] In paragraph 1 of his expert statement filed at trial[21], Mr. Martin defined his mandate from Ritvik in the following terms:
In particular, I was asked to consider whether the shape of the top surface of the LEGO basic brick [the two by four brick] as defined by Lego as the Lego Indicia Mark... is functional.
Mr. Martin continued in the same paragraph of his statement.
These are my observations and conclusions on why, in my opinion, all the features of the Lego Indicia Mark are dictated by function.
[47] At paragraph 35 of his statement, Mr. Martin wrote:
As a result of the work I did at Tyco with interlocking toy bricks, I identified five factors to be considered when designing and manufacturing interlocking toy bricks. They are:
(a) Product durability and safety;
(b) Mold design and construction;
(c) Cycle times and mold maintenance;
(d) Clutch power; and
(e) Playability.
[48] After considering each of the five factors in turn, Mr. Martin concluded at paragraph 55 and following of his statement:
I have carefully considered the so-called Lego Indicia Mark and, in my opinion, all its features are dictated by functional considerations and are necessary to achieve the required function of an interlocking brick. The shape of the top surface of the Lego basic brick is purely utilitarian. It is this feature that allows complex structures to be built.
All the features of the so-called Lego Indicia Mark are basic, rudimentary and functional. There is nothing arbitrary about the Lego Indicia Mark, or indeed to the basic brick. The Lego Indicia Mark embodies the simplest and most basic geometrical shape to achieve the desired functional result. Cylinders are the obvious engineering choice for the connecting knobs and are the first shapes that come to mind to a competent engineer.
The connecting knobs are continuous, completed cylinders, which is the most basic shape to use in molding a post. The height and diameter of the connecting knobs are such as to provide the desired clutch power. The number and layout of the connecting knobs permit versatility in how two blocks can be connected.
[49] I found Mr. Martin to be a competent, confident and persuasive expert witness. His testimony in support of his expert statement was clear and consistent. He was not shaken on cross-examination. No evidence was adduced on behalf of the plaintiffs to contradict or otherwise put into question his expert statement or his testimony although the plaintiffs did adduce evidence of alternative configurations of the upper surface of a construction brick that "would work". That alternative configurations "would work" was not the burden of Mr. Martin's statement and testimony. Rather, the burden of his statement and testimony was that all the features of the LEGO Indicia "are dictated by function" and constitute the preferred configuration.
[50] Counsel for Ritvik urged that the uncontradicted evidence of functionality of the upper surface of each LEGO construction brick, other than the mark LEGO inscribed on each stud, was conclusive of this action. He urged that a purely functional feature such as the alleged LEGO Indicia simply cannot be a trade-mark. For this proposition, he cited substantial authority including Remington Rand Corp. v. Philips Electronics N.V.[22], a case involving a "distinguishing guise". It was not in dispute before me that if the LEGO Indicia is a trade mark at all, either in the statutory or common law sense of that term, then it is such by reason of the fact that it is a distinguishing guise. Mr. Justice MacGuigan wrote at pages 477-8:
...It is therefore clear from the definition section of the Act [the Trade-marks Act], from the holding of Urie J.A. [in Pizza Pizza Ltd. v. Canada (Registrar of Trade Marks (1989), 26 C.P.R. (3d) 355] and indeed from all the case law, that the essence of a trade mark is to distinguish the wares of a registered owner from those sold by others.
"Distinguishing guise" is a distinct kind of trade mark, and is itself defined by s.2 of the Act as follows:
(a) a shaping of wares or their containers, or
(b) a mode of wrapping or packaging wares
the appearance of which is used by a person for the purpose of distinguishing or so as to diminish [sic, should read distinguish] wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others;
The essence of a distinguishing guise is thus identical with that of a design mark in that it serves to distinguish the wares of a registered owner from those sold by others.
It is clear that every form of trade mark, including a distinguishing guise, is characterized by its distinctiveness. A distinguishing guise, therefore, not being different in essence from a design mark, must be governed by the same considerations of functionality as a design mark, since the public policy basis is the same, viz., to distinguish wares from those of competitors, by monopolizing, not the wares, but the mark as used in relation to them. The trial judge may have been correct in stating that "a distinguishing guise necessarily possesses a functional element or component" (although I wonder about, say, a bottle shape which might not even be ornamental), but to the extent that such functionality relates primarily or essentially to the wares themselves it will invalidate the trademark.
The distinguishing guise in the case at bar is in my opinion invalid as extending to the functional aspects of the Philip Shaver. A mark which goes beyond distinguishing the ware of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trademark. [emphasis added]
Counsel for Ritvik urged that the foregoing reasoning and conclusion of the Court applies four-square on the facts before me on this matter.
[51] Counsel for the plaintiffs urged that the Remington-Rand decision is wrong in law, notwithstanding that leave to appeal to the Supreme Court of Canada was refused, and is inconsistent with a proper interpretation of the Trade-marks Act and subsequent cases in the Federal Court of Appeal.
[52] Section 2 of the Act defines both "distinguishing guise" and "trade-mark" for the purposes of the Act. Neither definition makes any reference to "functionality". The definition "trade-mark" extends to include a "distinguishing guise".
[53] Section 13 of the Act provides that a distinguishing guise is registrable only if, among other things, its exclusive use by the applicant in association with the wares or services with which it has been used "... is not likely unreasonably to limit the development of any art or industry." Counsel for the plaintiffs urged that the reference to unreasonable limitation of the development of any art or industry is tantamount to a reference to "purely or substantially functional". This interpretation is borne out by subsection 13(2) of the Act which is in the following terms:
(2) No registration of a distinguishing guise interferes with the use of any utilitarian feature embodied in the distinguishing guise.
(2) Aucun enregistrement d'un signe distinctif ne gêne l'emploi de toute particularité utilitaire incorporée dans le signe distinctif.
[54] Subsection 13(3) provides for expungement of the registration of a distinguishing guise that has become likely unreasonably to limit the development of any art or industry. Thus, counsel urged, functionality in the scheme of the Act goes only to the issues of registrability and expungement.
[55] Counsel for the plaintiffs pointed out that these elements of the scheme of the current Act contrast with the provisions of the Unfair Competition Act, 1932[23], the predecessor to the current Act. The definition "distinguishing guise" in the former Act referred to "...a mode of shaping, moulding, wrapping or packing wares entering into trade or commerce which, by reason only of the sensory impression thereby given and independently of any element of utility or convenience it may have, is adapted to distinguish ...". Thus, counsel urged, the concept of functionality was explicit in the definition of "distinguishing guise" in the former Act and the omitting of that concept from the current Act should be read as a clear indication of the intention of Parliament to eliminate functionality as a bar to a mark being a "distinguishing guise".
[56] Counsel noted that the Report of the Trade Mark Law Revision Committee[24], that gave rise to the enactment of the current Act, supports an interpretation that the elimination of functionality as a feature of a distinguishing guise was an intentional action of Parliament and was not merely a drafting slip, error or oversight.
[57] Counsel for the plaintiffs referred me to Harvard College v. Canada (Commissioner of Patents)[25] where Mr. Justice Rothstein, with Mr. Justice Linden concurring, wrote at paragraph [62]:
Canadian courts must not read into legislation conditions and limitations not expressed by Parliament.
At paragraph [92], Mr. Justice Rothstein further commented:
It is not up to the Court, for policy reasons, to place limits on the scope of legislation not supported by the words. That is the role of the legislative branch of Government.
Finally, at paragraph [117], Mr. Justice Rothstein expressed the same principle in the following terms:
The second and more fundamental point is that as already explained, such arguments are properly addressed to Parliament and not the Court. In this type of case, the Court is not the forum for a public policy debate.
[58] Counsel for the plaintiffs urged that precisely the same might be said on the facts of this matter. He urged that I reject the submissions on behalf of Ritvik to the effect that, notwithstanding the terminology of the Trade-marks Act, I should find the LEGO Indicia not to be a distinguishing guise, and therefore not a trade-mark because it is primarily, if not wholly, functional. Put another way, counsel for the plaintiffs urged that I should reject the reasoning of the Federal Court of Appeal in Remington Rand, notwithstanding the long line of case authorities on which it is based and notwithstanding the fact that Remington Rand was decided while the current Trade-marks Act was extant.
[59] I decline the urgings of counsel for the plaintiffs. I have previously noted that the terms "distinguishing guise" and "trade-mark" are defined in section 2 of the Act for the purposes of that Act. Thus, wherever they are used in that Act, they must be given the defined meanings. But neither the term "distinguishing guise" nor the term "trade-mark" appears in paragraph 7(b) of the Act when it would not have been beyond the wit of qualified legislative drafters and of Parliamentarians, to incorporate one or both such terms in the paragraph in order to ensure that, as part of an over-all or comprehensive scheme relating to trade-marks, paragraph 7(b) only extended to the direction of public attention to wares, services or businesses, when such direction was accomplished through the medium of a distinguishing guise, as defined in section 2 of the Act.
[60] In concluding as I am, I am satisfied that I am not only concluding in a manner consistent with the decision of the Federal Court of Appeal in Remington Rand, but also in a manner consistent with the guidance referred to above and provided by the same Court in Harvard College. I am, in fact, not reading into legislation conditions or limitations not expressed by Parliament. To the contrary, it is counsel for the plaintiffs who is inviting me to read in such conditions or limitations. Precisely the same as was said in Harvard College might be said regarding the placing of limits on the scope of legislation not supported by the words of that legislation. I am satisfied that it is the arguments on behalf of the plaintiffs, not Ritvik, that are properly addressed to Parliament and not to this Court.
[61] In sum then, I conclude on the basis of the totality of the evidence before me that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud. That functionality, in the words of Mr. Justice MacGuigan in Remington Rand that are quoted above, "...relates primarily or essentially to the wares themselves...". By reason of that conclusion, and that conclusion alone, the LEGO Indicia cannot be a distinguishing guise in the common law sense of that term, as opposed to the sense provided by section 2 of the Act. Therefore, to the extent that Ritvik has adopted and used the LEGO Indicia, it has not contravened paragraph 7(b) of the Trade-marks Act.
[62] In the result, this action must be dismissed. But on the assumption that my conclusions to this point might well be appealed, I will continue to consider the various other aspects of this case and to provide my conclusions with respect to each of them.
4) The Subject-Matter Claimed and/or Disclosed in an Expired Patent
[63] In Consolboard Inc. v. MacMillan Bloedel (Saskatchewan) Ltd.[26], Mr. Justice Dickson, as he then was, for the Court, adopted the following passage from Fox in Canadian Law and Practice relating to Letters Patent for Inventions[27]:
...first, there must be a new and useful invention, and secondly, the inventor must, in return for the grant of a patent, give to the public an adequate description of the invention with sufficiently complete and accurate details as will enable a workman, skilled in the art to which the invention relates, to construct or use that invention when the period of the monopoly has expired.
[64] Recently, in Whirlpool Corp. v. Camco Inc.[28], Mr. Justice Binnie, on behalf of the Supreme Court of Canada, expanded on the implications of the foregoing quotation. At pages 1086-7 he wrote:
It is common ground that the bargain between the patentee and the public is in the interest of both sides only if the patent owner acquires real protection in exchange for disclosure, and the public does not for its part surrender a more extended monopoly than the statutory 17 years from the date of the patent grant (now 20 years from the date of the filing of the patent application). A patentee who can "evergreen" a single invention through successive patents by the expedient of obvious or uninventive additions prolongs its monopoly beyond what the public has agreed to pay.
[65] That the concept of "evergreening" extends to "evergreening" by seeking protection beyond the expiration of a patent monopoly through a passing-off action was affirmed by the Privy Council in Canadian Shredded Wheat Co. v. Kellogg Co.,[29] where Lord Russell of Killowen wrote:
Some further observations their Lordships think it desirable to make. Their decision has been reached without basing it specifically upon the existence of patents which have expired. Their Lordships, however, find it difficult to conceive that a manufacturer could in such a case be held guilty of passing off, if he manufactured the goods in accordance with the expired patents, and the only similarity between the rival goods lay in the appearance of the goods so manufactured and the application to them of the name by which the patented goods had been known. It is conceivable that, in the case of a patent long ago expired, the evidence might possibly establish that the name had become distinctive of a particular manufacturer rather than descriptive of the goods, with the result that other manufacturers of the goods could be compelled to adopt some means of effectively distinguishing their goods from those of the particular manufacturer.
[66] The same might be said on the facts of this matter. However, we are not here concerned with circumstances where there is an allegation of adoption by Ritvik of a name, but only of the LEGO Indicia.
[67] In essence, this issue of "evergreening" is nothing more than a sub-set of adoption of a functional element. There is no question but that the LEGO Indicia is claimed or disclosed in an expired patent, the expired Page Canadian Patent. Given my conclusion that the LEGO Indicia is functional in all respects save for the inscription of the mark LEGO on each stud, I need not go further. I will, nonetheless, cite one further authority which I regard as apposite. In Kun Shoulder Rest Inc. v. Joseph Kun Violin and Bow Maker Inc.[30], Mr. Justice Rouleau wrote at pages 345-6:
During the course of the trial, this court had the opportunity of seeing a number of shoulder rests manufactured by various companies. It became readily apparent to me that all of these rests are basically designed in the same manner, with the same practical functional value and that the various manufacturers have merely taken what was common to the trade and was embodied in Joseph Kun's original patent that expired in 1987. This, in and of itself, does not constitute passing off.
Once again, I find nothing in the words from the Harvard College decision in the Federal Court Court of Appeal that are quoted earlier in these reasons that would compel or even encourage me to vary from a similar analysis and conclusion to that adopted by my colleague Mr. Justice Rouleau.
5) Distinctiveness and Use of the LEGO Indicia as a Trade-mark
[68] A distinguishing guise, like any other trade-mark, must distinguish the wares or services of its owner from the wares or services of all others. In Parke Davis & Company v. Empire Laboratories Limited[31], Mr. Justice Hall wrote at pages 357-8:
The learned trial judge, with respect, correctly stated the law and the burden that was on the appellant when he said, quoting from J.B. Williams Company v. H. Bronnley & Company[32]:
What is it necessary for a trader who is plaintiff in a passing off action to establish? It seems to me that in the first place, he must, in order to succeed, establish that he has selected a peculiar - a novel - design as a distinguishing feature of his goods and that his goods are known in the market, and have acquired a reputation in the market by reason of that distinguishing feature, and that unless he establishes that, the very foundation of his case fails.
[69] Distinctiveness may be inherent or acquired. Generally speaking, the shape of an article is not inherently distinctive. To become distinctive and achieve a reputation, the shape must acquire a secondary meaning in the minds of consumers and potential consumers so as to act as an indicator of source rather than as an indicator of product. In Oxford Pendaflex Canada Limited v. Korr Marketing Limited, et al[33], Mr. Justice Estey wrote at page 502:
As to the immediate issue here, some guidance is to be found in the comment by Russell L.J. in Roche Products Ltd. v. Berk Pharmaceuticals Ltd.,...:
Now, in this as in all other passing off cases the basic question is whether, directly or indirectly, the manner in which the goods of the defendant are presented to the relevant consumers is such as to convey to the minds of the latter the impression that they are the goods of the plaintiff. In an "appearance" or get-up case it is not enough simply to say that the former are very like the latter. It must be established that consumers have, by reason of the appearance of the goods of the plaintiff, come to regard them as having some one trade source or provenance, whether manufacturing or marketing, though it matters not that they have no idea at all of the identity of that trade source or provenance.
It is to be noted that in the first part of the observation of Russell L.J. there seems to be a requirement that the purchasing public be left with the impression that the goods of the defendant are the goods of the plaintiff. The next part of the paragraph makes it clear, however, that all that need be left in the mind of the purchaser is the idea that all of the pills (in that case), by reason of their shape, size and mode of marking, came from "one trade source". There is in that standard no need for the plaintiff to take the next and difficult step of showing that the customer must have known or believed that the only source of the product was the plaintiff. The Roche rule is but a refinement or detailed application of the general requirement for success in a passing-off action as pronounced by Cozens-Hardy M.R. in J.B. Williams Company v. H. Bronnley & Co. Ld. ... [citations omitted]
Mr. Justice Estey then goes on to quote the paragraph from Williams and Bronnley that is quoted in paragraph [68] of these reasons.
[70] In an appeal from a refusal by the United Kingdom Trademarks Office to register the LEGO brick as a trade-mark, Mr. Justice Neuberger wrote in Interlego A.G.'s Trademark Applications[34]:
...Here, there was, in light of the patent and in light of the evidence, a monopoly which was respectively both de jure and de facto up to the beginning of 1975; thereafter on the evidence filed on behalf of Interlego to which I have referred, there appears to have been a de facto virtual monopoly up to the time of the filing of the instant applications...
The evidence filed on behalf of Interlego does not suggest that a single member of the public has confused any of the toy building bricks brought onto the market (to a very limited extent) before 1988 or (to a much greater extent) after 1988 with Lego bricks. Thus, there is no evidence that members of the public or retailers, whether in this country or elsewhere, have been misled into thinking that Tyco (or other competitor) toy building bricks were in fact manufactured by the manufacturers of Lego bricks, or that they were in fact Lego bricks. There is simply no evidence of passing off, and, in my judgment, there is very little evidence of any risk of passing off, if other persons are allowed to place bricks on the market with the same knobs (or tubes) as those contained on (or in) bricks the subject of this appeal.
...
...The fact, which I have mentioned, that the public undoubtedly associates toy building bricks (with knobs on top and tubes on the underside) with Lego does not mean that either the knobs, whether taken alone or together with the tubes on bricks are trade marks.
[71] I turn, then, to the issue of use as a trade-mark.
[72] In Cie Générale des Établissements Michelin - Michelin & Cie v. C.A. W. - Canada[35], Mr. Justice Teitelbaum wrote at page 359:
To qualify as "use as a trademark", therefore, the mark must be used for the purpose of identifying or pinpointing the source of the goods and services. In other words, to use a mark as a trademark, the person who used the mark on the goods or in connection with the services must have intended the marks to indicate the origin of the goods or services.
[73] By subsection 4(1) of the Act, a trade-mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
[74] Wares that are exported from Canada are the subject of a separate rule as to use which is contained in subsection 4(3) of the Act, quoted earlier in these reasons.
[75] The evidence as to distinctiveness and use of the LEGO Indicia as a trade-mark will be dealt with in the element of the following analysis regarding passing-off entitled "Does the LEGO group's goodwill derive in whole or in part from the LEGO Indicia".
6) Passing-off
a) General principles
[76] It was not in dispute before me that the following passage from Reckitt & Colman Products Limited v. Borden Inc. and Ors[36] summarizes the general principles relating to the law of passing- off:
The law of passing off can be summarised in one short general proposition - no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying "get-up" (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff's identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. For example, if the public is accustomed to rely upon a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name. Thirdly, he must demonstrate that he suffers or, in a quia timet action that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or services is the same as the source of those offered by the plaintiff.
[77] In Ciba-Geigy Canada Ltd. v. Apotex Inc.[37], Mr. Justice Gonthier, for the Court, quoted the foregoing passage and summarized its essence in the following terms at page 132:
The three necessary components of a passing-off action are thus: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.
Ciba-Geigy was not an action under paragraph 7(b) of the Act, but rather a common law passing-off action.
[78] Paragraph 7(b) of the Act does not reflect precisely the foregoing language from Ciba-Geigy. Rather, it reflects the following elements:
No person shall:
- direct public attention to his wares, services or business;
- in such a way as to cause or be likely to cause confusion in Canada; and
- 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.
Paragraph 7(b) makes no direct reference to the existence of goodwill. The concept of directing public attention to wares, services or a business in such a way as to cause or be likely to cause confusion in Canada would appear to equate, in general terms, to deception of the public due to a misrepresentation. The reference in paragraph 7(b) to the time at which public attention is so directed would appear to have no equivalent in the common law test. The reference in the common law test to actual or potential damage to the plaintiff would appear to be only implicit in paragraph 7(b).
[79] In Asbjorn Horgard[38], at page 327, Mr. Justice MacGuigan wrote:
Subsection 7(b) [of the Act] is a statutory statement of the common law action of passing-off, which consisted of a misrepresentation to the effect that one's goods or services are someone else's, or sponsored by or associated with that other person. It is effectively a "piggybacking" by misrepresentation.
In what follows, I will review the evidence before me against the elements of the common law test for passing-off since I am satisfied that, if those elements are not all explicit in paragraph 7(b) of the Act, they are implicit with the exception of the reference to the time at which confusion might be likely to be caused. In looking at the issue of deception of the public due to a misrepresentation, I will make reference to the relevant time bearing in mind Mr. Justice MacGuigan's comments to the effect that confusion must first be examined at a particular time but that subsequent activity of the defendant could be used to "reinforce" a conclusion regarding confusion at the relevant time.[39]
b) Goodwill
[80] In Asbjorn Horgard[40], at page 327, Mr. Justice MacGuigan adopted the following quotation regarding "goodwill" from Halsbury's Laws of England[41]:
155. Nature of goodwill. A passing-off action is now recognised as being a remedy for the invasion of a right of property, the property being in the business or goodwill likely to be injured by the misrepresentation rather than in the mark, name or get-up improperly used. "Goodwill" has been defined as the benefit and advantage of the good name, reputation and connection of a business, the attractive force which brings in custom, and the one thing which distinguishes an old-established business from a new business at its first start.
i) The LEGO group has goodwill
[81] There was essentially no dispute on the evidence before me that the LEGO group has "goodwill" in the sense of benefit and advantage of the good name, reputation and connection of its business. Although the marketing experts who appeared as witnesses on both sides used terms such as "brand loyalty", "brand equity", "brand identity" and "brand loyalty management" rather than "goodwill" and "goodwill management", I am satisfied that they were speaking of essentially the same thing as "goodwill" and the management of goodwill.
[82] Mr. Fred Geyer, in his expert statement on behalf of the plaintiffs[42], wrote at paragraph 3:
I knew, as did others in the toy industry, that Lego had a world-class marketing communications program.
At paragraph 21, he wrote:
Lego is the market leader in this category [construction toys]... .
[83] Perhaps more importantly, Dr. Larry Light, the marketing expert who produced a statement and testified on behalf of Ritvik, stated in his testimony:
...we can't deny that Lego is a dominant brand, has huge market share, has high familiarity, has a reputation for quality and has done merchandising that very few others could even dream of doing. And has done it very well but there is another point, and that is that Lego has a high familiarity and high reputation on trust and quality that is correlated with its market share. This is a very important point and has become more important in marketing thinking recently.[43]
In his testimony, Dr. Light defined "brand" in the following terms:
...a distinctive identity that indicates a promise associated with a product, service or organization and a distinctive identity that is intended to differentiate a promise associated with a product, service or organization and indicates the source of the promise.[44]
At pages 2191 and 2192 of volume 14 of the transcript, Dr. Light testified as follows:
Q. I think you acknowledged in your evidence in chief that Lego is a market leader?
A. That's my impression, yeah. From everything I can see, it's certainly more than a market leader. It's a brand that is so predominant in the marketplace that it's earned the right to do things many marketers could only wish to do.
Q. And when you speak of a brand, you speak of it as not in terms of a particular trademark but rather as an image of a company, do you not, or as - -
A. We have a particular definition of a brand.
[84] But Dr. Light did not associate the LEGO group's brand and its brand equity with the LEGO Indicia. At paragraph 32 of his expert statement[45], Dr. Light wrote:
Lego is the market leader in the construction toy category. Lego has built a brand around the Lego name and the familiar Lego logo consisting of "LEGO" in white letters on a red background.
[85] At page 2199 of volume 14 of the transcript, Dr. Light testified:
...we have also advised our clients not to tie that brand identity - - you remember I said a distinctive idea which is associated with a promise - - to a functional feature of the brand.
He continued at page 2200:
...functional features will become commoditized, especially if they're table stakes features.
Dr. Light included the LEGO Indicia as a "table stakes" feature because of its functional nature.
[86] At page 2202 of volume 14 of the transcript, Dr. Light testified:
- - to build a durable brand you cannot tie yourselves to something that defines, is a core - - sorry. A core characteristic supporting a benefit.
At page 2203, he continued:
There are some companies who do poor brand management also. I agree. Not everybody practices the same view of brand management, but I do believe that if you look at the successful brand companies they try to establish their brand based on features that distinguish the brand identity, not features that deliver the benefit of the product.
ii) Does the LEGO group's goodwill derive in whole or in part from the LEGO Indicia?
[87] Professor Michael J. Tarr's expert statement on behalf of Ritvik was based upon his expertise as a professor of cognitive and linguistic science at Brown University in Providence, Rhode Island. His conclusions in relation to the LEGO Indicia are set out at page 22 in his expert statement[46] in the following terms:
Using my expertise in the areas of visual perception and shape recognition, I evaluated the question of whether the nub configuration or array of a Lego brick constitutes a distinctive visual form, both perceptually and in terms of how it is visually categorized. First, perhaps the most fundamental principles of perceptual processing - the Gestalt principles - indicate that all but one of the components of the nub configuration or array of a Lego brick, that is, nubs that are cylindrical, flat-topped, smooth-sided, of uniform shape, arranged in straight lines, and co-planar, are simply the most likely shape properties to be perceived and remembered. Moreover, the remaining component of the nub configuration or array of a Lego brick, the 2:5:8 spatial layout, has been empirically shown to be treated as equivalent to a 4:5:8 spatial layout and, therefore, is not distinctive. Thus, considered either singularly or in combination, the nub configuration or array of a Lego brick is not perceptually distinctive in that it is made up of the most likely forms for a construction brick with nubs on the top as well as a spatial layout that is not distinguished from other spatial layouts.
Second, empirical survey data indicates that the nub configuration or array of a Lego brick is part of a broadly-defined basic-level object category that does not represent a distinctive narrowly-defined identifying mark. That is, many differently shaped nub configurations or arrays on construction bricks fall into the visual concept "Lego". The nub configuration or array of a Lego brick is neither a distinctive category in and of itself nor has it acquired visual distinctiveness over time. Thus, I conclude that the nub configuration or array of a Lego brick is not distinctive in terms of how it is both visually perceived and visually categorized by consumers.
[88] I take from the foregoing, and I am satisfied that this conclusion is consistent with the totality of the evidence before me, that the LEGO Indicia is not inherently distinctive and thus inherently capable of contributing to the LEGO group's goodwill. But that is far from the end of the matter. The LEGO Indicia may have acquired distinctiveness through its long use, the dominant market position of the LEGO group and its extensive marketing activities in which it has prominently featured the LEGO Indicia. I turn then to the "distinctiveness" and "secondary meaning" survey evidence that was before me with but a short opening commentary on the utility of survey evidence.
[89] In The Law of Evidence in Canada[47], the learned authors wrote at paragraphs 12.116 and 12.117:
Surveys and public opinion polls conducted by experts have been received by Canadian courts even though such evidence consists of data compiled outside the court room. Appellate Courts in Manitoba and Ontario and a district court in Alberta have indicated a willingness to accept expert evidence of surveys relating to community standards in obscenity prosecutions as long as it can be demonstrated that approved statistical methods and social research techniques have been employed. With respect to this kind of evidence, the courts have been more concerned about the procedures and techniques utilized by the experts than they have been about the hearsay aspect of such evidence. However, the failure to follow proper methodology for survey research, for example failing to select the proper sample population, are grounds for excluding the results of the survey.
In civil cases in Canada, public opinion polls evidence has been tendered in actions involving trade marks to establish the public's familiarity with them and their associations with particular products. In Aluminium Goods Ltd. v. Canada (Registrar of Trade marks) a petition was issued for a declaration that the mark "Wear-Ever" was generally recognized by dealers and consumers as relating distinctively to the petitioner's cooking utensils and thus was entitled to registration. A survey of over 3,000 lay persons and 500 dealers of such wares in numerous and varied Canadian communities was conducted by a firm employed by the petitioner. Cameron J. admitted the survey data, stating that it was "the most important part of the evidence." In Building Products Ltd. v. B. P. Canada Ltd., however, public opinion poll evidence tendered by both parties on the question of whether the mark in issue would cause confusion in the minds of the consumers, was rejected as being purely hearsay and because the surveys that were conducted could not have created actual "market conditions" in the minds of those interviewed. In light of the decisions in the obscenity cases, the former objection to the evidence on the ground of hearsay would appear to be no longer valid. The second objection to the admissibility of the evidence would now appear to affect only the weight of such evidence. [citations omitted]
[90] In Canada Post Corp. v. Paxton Developments Inc.[48], Mr. Justice Pelletier, then of the Trial Division of this Court, wrote at paragraph 16:
The criteria for the use of survey evidence in trade-mark matters are reviewed in Walt Disney Productions v. Triple Five Corp., ... . They include certain structural criteria whose object is to ensure that the survey results are broadly representative of the general population and that the results are not skewed by inappropriate questions. Those criteria are satisfied in this case. In Joseph E. Seagram and Sons Ltd v. Seagram Real Estate Ltd...., the use to be made of survey evidence is described by MacKay J. as follows:
The question of admissibility and reliability of surveys of public opinion polls has been the subject of debate in numerous trade mark cases. However, after considering the jurisprudence concerning the matter, I understand the general principle to be that the admissibility of such evidence and its probative value are dependant upon the relevance of the survey to the issues before the court and the manner in which the poll was conducted; for example, the time period over which the survey took place, the questions asked, where they were asked and the method of selecting the participants: ...
[citations omitted]
[91] Against the foregoing authorities, I am satisfied that evidence regarding four (4) surveys, two (2) described as "distinctiveness surveys" and two (2) described as "secondary meaning" or "trade-mark significance" surveys is relevant to the "goodwill" issue and is therefore admissible, although the weight to be given to the evidence of each will vary.
[92] The first "distinctiveness survey" results introduced in evidence before me related to a small survey conducted by Contemporary Research Centre Limited in August of 1988 in the Eaton Centre Mall in downtown Toronto. This survey was referred to throughout the evidence before me as the "Svoboda survey". Respondents in the survey were shown a black and white photograph of a 2 x 4 LEGO brick with the inscription "LEGO" removed from the upper surface of each of the studs. Respondents were then asked: "Who do you think makes it [the brick shown in the photograph]?" 58% of 66 respondents, in approximately equal numbers of males and females, and divided among four age groups, identified the LEGO group as the maker.
[93] I find the Contemporary Research Centre Limited survey to be of very limited probative value. First, it was introduced through a fact witness, albeit the individual who designed the survey in conjunction with a representative of the LEGO group, and not a person qualified as an expert, although another witness so qualified but who was not in any way involved in the conduct or design of the survey did comment on it. Secondly, the survey was conducted before Ritvik's MICRO MEGA BLOK came on the market and at a time when the evidence before me was not at all clear as to the penetration of the TYCO block in the Canadian market. Finally, the survey was remarkably restricted geographically and suffered from other design and execution weaknesses.
[94] I find the sole utility of the Contemporary Research Centre Limited survey evidence to be to establish an unreliable benchmark as to recognition of the LEGO 2 x 4 brick in the downtown Toronto market at a time when the LEGO group was undoubtedly the dominant player in the construction toy market in Canada and when Ritvik had not entered that market for children of school-age.
[95] The second "distinctiveness survey" put before the Court was conducted in 1995 by "Canadian Facts" on behalf on Interlego A.G. Its purpose was "to measure the association or identification, if any, of the shape of a LEGO brand brick as shown in a black and white photograph and Lego."[49] The photograph in question was of a 2 x 4 LEGO brick and was quite similar to the photograph used in the Contemporary Research Centre Limited survey. Unlike the Contemporary Research Centre survey, the Canadian Facts survey included, in addition to the test cell, a "control" cell using a black and white photograph of another construction toy that was remarkably dissimilar in appearance to the LEGO 2 x 4 brick. The Canadian Facts survey was conducted in April and May of 1995, some four (4) years after the Ritvik MICRO MEGA BLOK entered the Canadian market, and was conducted in Toronto, Vancouver, Halifax and Montreal with 150 interviews being conducted in each city and with sex and age quotas imposed to ensure representation of males and females by various age groups proportionate to the population in each metropolitan area where the survey was conducted. Each respondent, after being shown the appropriate black and white photograph, was asked the following two (2) questions: first, "who do you think makes this product?" and second, after a response to the first question was provided, "why do you say that?"
[96] In her expert affidavit, Ms. Gillian Humphreys concluded at paragraph 25 in the following terms:
My analysis of the actual verbatim responses to both questions combined indicates that 51% of the respondents definitely associated the photograph of the LEGO brand brick with Lego and another 16% probably associated the photograph of the LEGO brand brick with Lego. In comparison, only 11% of the respondents definitely associated the control with Lego and another 2% probably associated the control with Lego. It is not appropriate to subtract the results for the control from the results for the LEGO brand block photograph, but comparing the two sets of results demonstrates that the results for the photograph of the LEGO brand brick are statistically significantly higher than the results for the control.
[97] While the structure and conduct of the Canadian Facts survey, and the analysis of the results of that survey, appear to be substantially more sophisticated, and certainly more geographically representative, than the equivalent aspects of the Contemporary Research Centre survey, I found the reliance on a substantially dissimilar control product to be problematic. Certainly Ms. Humphreys' expert affidavit that was adduced in evidence, and her testimony before me based on that affidavit and on her examination of the material relating to the Contemporary Research Centre survey, was much more authoritative than the evidence provided by an individual directly connected with the Contemporary Research Centre survey who was not qualified as an expert and who therefore provided no expert statement or affidavit.
[98] I find the evidence before me relating to the Canadian Facts survey to be of some, but limited, probative value in relation to the question of the distinctiveness of the LEGO Indicia and in relation to the question of whether or not the LEGO group's goodwill in Canada derives in whole or in part from the LEGO Indicia.
[99] Dr. Ivan Ross was retained by the solicitors for the plaintiffs to conduct a study to measure whether the design or appearance of the studs on LEGO toy construction blocks or bricks identify the LEGO group as the product source to Canadians who are prospective purchasers of construction toys. Dr. Ross' expert report in response to this retainer was before the Court[50] and Dr. Ross appeared as an expert witness. Dr. Ross is a consumer psychologist with extensive experience, having appeared as an expert witness in over ninety (90) cases involving legal and regulatory matters in the United States Federal Courts and before United States Federal Regulatory bodies. Dr. Ross certified in his expert statement that he personally oversaw all aspects of the study that he undertook on behalf of the LEGO group. Dr. Ross' study took the form of a survey conducted at malls in Oshawa, Ontario, Calgary, Alberta and Vancouver, British Columbia.
[100] The stimuli used in connection with the survey were a 2 x 4 LEGO brick and a Poly-M block of substantially larger size than the LEGO brick and with significantly different projections on its upper surface. The Poly-M block was used in a control cell or phase of the survey. All source indicators, such as the inscription "LEGO" on each of projections on the 2 x 4 LEGO brick, were removed from the stimuli. The survey was conducted between the 16th of August and the 20th of August, 2001 and the sample size in total was 107. The survey was "double blind" in nature. Validation of the field work was carried out. Each respondent was shown each stimulus but, in different blocks, the order in which the stimuli were shown to the respondents was changed for the purpose of determining any "order bias" that might arise.
[101] Each respondent was invited to look at one of the two stimuli and then the other, in order. After that opportunity, the respondent was asked:
If you have an opinion, just from thedesign or appearance of the knobs [identified by three of the knobs or projections being pointed to with a pencil] on this construction toy product, do you recognize this construction toy product as being made by one company, more than one company, or don't you know?[51]
[102] A respondent who indicated one company was asked if he or she happened to recall which one company was the manufacturer. If the respondent replied by indicating more than one company, he or she was asked to identify those companies.
[103] 73% of the 107 respondents perceived the design or appearance of the knobs or projections on the LEGO brick as indicating a single source, and among all respondents, 70% identified that source as the LEGO group. In comparison, 13% of the 107 respondents perceived the design or appearance of the knobs or projections on the Poly-M product as indicating a single source, and only 1% of all respondents indicated that the LEGO group was that single source.
[104] In his testimony, Dr. Ross identified his "secondary meaning survey" as involving as an issue, "conceptually", "one of distinctiveness, recognizability, secondary meaning, what we might say in the States which is independent of issues raised in the confusion study."[52]
[105] Further, in his testimony, Dr. Ross concluded:
... I advised that the results of the study showed that the percent who recognized the cleansed LEGO block as LEGO was so substantial that even with the error, plus or minus error factor, it would still be a fair conclusion that well over 60 percent of the respondents in the real world or in a larger sample or whatever would - - however you might want to characterize it would have said that LEGO in response to having been exposed to that product.[53]
[106] Dr. Ross also conducted a "confusion" survey about which more will be said later. I am satisfied that the "confusion" survey further supported Dr. Ross' conclusion regarding distinctiveness or secondary meaning.
[107] I found Dr. Ross' expert statements and his testimony before me to be persuasive and reliable. He was in no sense shaken during cross-examination. Notwithstanding the small sample size used in his secondary meaning survey, the limited number of locations at which the survey was conducted, and the marked contrast between the two stimuli used in the survey, I am satisfied that his evidence, in totality, should be determined to be of significant weight on the issue of distinctiveness. I reach this conclusion taking into account what I consider to be the positive design, results and impact of his "confusion" survey.
[108] Ritvik responded to the survey evidence provided on behalf of the plaintiffs with an expert statement of Professor Shari Seidman Diamond, a professor of law and psychology at Northwestern University and a Senior Research Fellow at the American Bar Foundation[54]. Professor Diamond was critical of the totality of the plaintiffs' survey evidence and most particularly of the Contemporary Research Centre survey. Without denigrating Professor Diamond's expert report and her testimony before me, I have taken her expert report and testimony into account in arriving at the evaluations of the plaintiffs' survey evidence that I have just summarized and that I will also comment on in relation to the issue of "confusion".
[109] Finally on the issue of survey evidence and distinctiveness, Ritvik presented the expert report of Dr. Gerald L. Ford, a partner in the marketing research and consulting firm of Ford Bubala & Associates of Huntington Beach, California. Dr. Ford presented impressive credentials and an equally impressive resume of his professional experience. I found him to be a highly effective and credible witness in his presentation of his report before me, including in his responses to cross-examination.
[110] In paragraph 2 of his expert statement[55], Dr. Ford states that, at the request of the solicitors for Ritvik, he:
...designed and caused to be conducted consumer surveys to address such issues as: (1) the trade-mark significance, if any, of the claimed Lego Indicia Mark; (2) the likelihood of at-sale confusion, if any, with respect to the source, authorization/approval, or business affiliation/connection of the Ritvik Mega Bloks building blocks, in their package, with the source Lego, due to the claimed Lego Indicia Mark; and (3) the likelihood of confusion, if any, with respect to the source, authorization/approval, or business affiliation/connection, of the Ritvik Mega Bloks building blocks, removed from their at-sale packaging, with the source Lego, due to the claimed Lego Indicia Mark. Additionally, [he was] asked to review the studies conducted by Dr. Ross, Ms. Humphreys, and Mr. Svoboda and to consider, among other things, the appropriateness of their controls or lack thereof. [footnote omitted]
[111] Dr. Ford's surveys included interviews in both English and French, among approximately 2,100 respondents, who were interviewed in shopping centres in 18 markets in all provinces of Canada other than Prince-Edward Island.
[112] I will not comment on the form, substance, conduct and analysis of Dr. Ford's survey evidence except to say that I found it to be the most impressive of the survey evidence that came before me. Dr. Ford adopted stimuli that I found to be the most realistic and useful, particularly in the case of control stimuli that were distinctive from the test stimuli but nonetheless similar enough to effectively challenge the respondents on the surveys to respond in a thoughtful way to the questions posed to them.
[113] With respect to distinctiveness, Dr. Ford concluded at paragraph 4 of his expert statement in the following terms:
The survey results clearly evidence that the claimed Lego Indicia Mark lacks distinctiveness and, as such, does not function as a source identifier (i.e., the claimed Lego Indicia Mark does not function as a trade-mark).
[114] As earlier indicated, Dr. Ford was asked to review the survey studies conducted on behalf of the plaintiffs "...and to consider, among other things, the appropriateness of their controls or lack thereof." Interestingly, Dr. Ford's expert statement reflects no commentary on the plaintiffs' survey evidence. Somewhat similarly, and perhaps even more markedly, the plaintiffs provided no expert report responding to Ritvik's survey evidence.
[115] The plaintiffs adduced substantial evidence of the use of the LEGO Indicia in its marketing activities in Canada. The evidence clearly established that the LEGO Indicia has been a central feature of point-of-sale display materials provided by the plaintiffs to retailers, television advertisements, catalogues, consumer oriented print material and packaging. But one indicia of use as a trade-mark has, in each case, been notably missing. The plaintiffs' packaging and other materials that were before the Court almost invariably very carefully noted the plaintiffs' claimed trade-mark rights, whether or not the trade-marks in respect of which such rights were claimed were registered. The evidence before the Court disclosed not one instance where the plaintiff gave notice of claimed trade-marks rights in association with the LEGO Indicia.
[116] I return to where I started my commentary on the issue of whether the LEGO group's goodwill derives in whole or in part from the LEGO Indicia, that is to say, with Professor Michael J. Tarr's expert report and his testimony. Professor Tarr commented on the survey results of Ms. Humphrey, Dr. Ross and Dr. Ford, as their surveys related to distinctiveness, in the following terms:
My evaluation of these surveys is not intended as methodological nitpicking. Rather, my goal was to evaluate the appropriateness of the experimental manipulations to the question at hand - how distinctive is the nub configuration or array of a Lego brick? Indeed, creating studies of shape recognition that clearly address a stated theoretical issue is perhaps the most difficult part of good experimental design in my area - basic experimental competence in terms of counterbalancing, adequate dependent measures, and other "nuts and bolts" of a study is to be expected, but does not guarantee an informative result. ...
The apparent purpose of all three of these surveys is to establish the distinctiveness of the nub configuration or array of a Lego brick by asking how often it is identified as Lego as compared to a non-Lego construction toy. All surveys employed a similar design and followed reasonable experimental methodologies with regard to counter-balancing, sample size, and other specific organizational issues necessary to ensure interpretable results. However, ... with regard to the "control" stimuli ("Poly-M" and "Krinkles"), the plaintiffs' surveys only addressed the visual distinctiveness of an overbroad perceptual category extending to all construction toys, a possibility not at issue in the present case.
Beyond the issue of using the appropriate basic methodology, the Ross survey attempted to have subjects focus exclusively on the nubs of the bricks by having the survey taker point to the nubs and state that subjects should make their judgment only on the basis of the nubs. Unfortunately, the horse was out of the barn so to speak. By the time the survey taker did this, the subject had already seen and certainly apprehended the entire brick. Indeed, although an observer might be able to focus attention on a single local region once prompted, the default perception of an object would be to see and interpret the entire object, including its global structure. That is, we automatically process and see complete objects rather than isolated parts - it is objects that form the "building blocks" of our visual experience. Thus, the manipulation highlighting the nubs would not remove the context of the entire brick or its potential effects on the subjects' responses and any results for this study should be considered in this light.[56]
[117] During his testimony, Professor Tarr commented that, if the surveys to which he refers in the foregoing quotation had not already been done, he would have felt compelled to do equivalent surveys, or to have them done, to support his expert statement. He expressed himself as relieved that he regarded the surveys to which he refers as entirely sufficient to obviate any need for further survey studies to support his conclusion. Further, in his testimony, Professor Tarr commented that he referred only to three (3) survey results as he regarded the Contemporary Research Centre survey results as being of little or no value.
[118] I conclude then, on the issue of whether the LEGO group's goodwill derives in whole or in part from the LEGO Indicia, that the answer to that issue is, in the Canadian market place, "yes", albeit that, on the totality of the evidence before me, I find it impossible to quantify that contribution. I conclude that it is unnecessary to do so; that any contribution, no matter how small, is sufficient to warrant my turning to the second element of the test for passing-off, that is to say, deception of the public due to a misrepresentation.
c) Deception of the Public due to a Misrepresentation
i) General Principles
[119] At least at common law, it is not enough to fulfil this second aspect of the test for passing-off to establish confusion. Rather, it must be shown that the confusion amounts to a deception of the public due to a misrepresentation. I have earlier commented on the relationship between the common law test and the words of paragraph 7(b) of the Act to explain why, in this analysis, I have equated the two.
[120] In Renwal Manufacturing Co. Inc. v. Reliable Toy Co. Ltd. et al[57], Mr. Justice Cameron wrote at pages 96-7:
The real question of importance is, when you look at the finished articles and the get-up of the packaging, are they things calculated to deceive? In my view they are not. Both parties hereto have merely taken what was common to the trade and the defendant has been careful throughout to indicate very clearly that the goods which it sold were made by it by fixing its trade name "Reliable" to all of the articles except one - the hamper - and its design is not that of the plaintiff's hamper, but follows very closely the design of ex. R15, a full size hamper purchased by the witness McGee in 1943. The boxes of the defendant company are marked on the top and on all four sides with the word "Reliable" and on two sides appear the full name and address of the defendant company.
The gravamen of the plaintiff's case is that the defendant made miniature imitations of certain articles, which imitations had been previously made by the plaintiff. As both imitations were of the same type of objects, they were necessarily similar to a certain extent and that similarity exists in the construction of the articles in question. The right to make a toy imitation of a natural or artificial object was common to all the trade. There was no attempt by the defendant and no reason for attempting to deceive the public as to the origin of manufacture of its articles.
[121] Earlier in his reasons, at page 93, Mr. Justice Cameron wrote:
...I recognize that the mere marking of goods with the name of the manufacturer would not by itself be sufficient in all cases to avoid a charge of passing-off, but it is an element to be considered and in this case an important element as indicating the good faith of the defendant.
[122] But without evidence of confusion, the question of whether confusion or deception derived from a misrepresentation does not arise. In considering the issue of confusion, in Asbjorn Horgard[58], Mr. Justice MacGuigan relied on section 6 of the Act notwithstanding that that section relates to trade-marks and trade-names, as defined in the Act and, as I have noted earlier in the reasons, as in Asbjorn Horgard, we are not here dealing with a trade-mark as defined in the Act, and certainly not with a trade-name.
[123] The relevant portions of section 6 of the Act are quoted earlier in these reasons and need not be repeated here. As in Asbjorn Horgard, I will be guided by those provisions in the analysis regarding confusion that follows.
[124] In Walt-Disney Productions v. Triple Five Corp.[59], Mr. Justice McFadyen, for the Court, commented on the standard or test to determine confusion in the following terms:
The learned trial judge applied the standard set out by Estey C.J.H.C.(as he then was) in Mr. Submarine Ltd. v. Emma Foods Ltd. ... :
"The test which is traditionally put to the Courts in a passing-off has been stated, restated and paraphrased in many cases and I find it convenient to refer to one or two authorities in establishing the test which I would seek to apply to the facts before this Court. Counsel has directed the Court's attention to a comment in this connection found in a case in the New Jersey Courts, Baker et al. v. Master Printers Union of New Jersey ... . Walker, D.J. states: " ‘There are also certain advantages which the defendant would obtain by copying Typographical's trade mark. Of course, few would be stupid enough to make exact copies of another's mark or symbol. It has been well said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of differences to confuse the courts.' "
"The English authorities have, in discussing the tort of passing off, generally sought to apply the standard of the ordinary person who is presented in a commercial background with a presentation of a product or a business which, on first impression, would leave that person, who has at best a general recollection of the product or business of the plaintiff, in a state of confusion as to whether the product or business of the defendant is that of the plaintiffs. The standard to be applied is not that of a person fully familiar with the detailed operations of a plaintiff and therefore capable of at once distinguishing those of the defendant from those of the plaintiff but rather that of a person who has a vague recollection or understanding of the business or product of the plaintiff and who, on being faced with that of the defendant, may well be confused or deceived as to the ownership or nature of the goods or the proprietor of the business in question."
The appellants submit that the learned trial judge erred in applying this test; that the proper test is set out by Gonthier J. in Ciba-Geigy Canada Ltd. v. Apotex Inc. ... as follows:
The courts and authors have unanimously concluded that the facts must be weighed in relation to an "ordinary" public, "average" customers: ". . . you must deal with the ordinary man and woman who would take ordinary care in purchasing what goods they require, and, if desiring a particular brand, would take ordinary precautions to see that they get it." ... The average customer will not be the same for different products, however, and will not have the same attitude at the time of purchase. Moreover, the attention and care taken by the same person may vary depending on the product he is buying: someone will probably not exercise the same care in selecting goods from a supermarket shelf and in choosing a luxury item. In the first case, the misrepresentation is likely to "catch" more readily.
It appears to me that both Estey C.J.H.C. and Gonthier J. are applying the same standard. Estey C.J.H.C. refers to the ordinary person test. He distinguishes the position of the ordinary person from a person who is fully knowledgable[sic] about the plaintiff's affairs. He describes the usual care which he believes an ordinary person would take in purchasing items such as those being offered for sale at the ordinary fast food outlet under consideration in that case.
The distinction is between an ordinary person using ordinary care, and the knowledgable [sic] consumer who has taken the time and trouble to study the matter. The learned trial judge made no error in accepting the test set out by Estey J. as that test is merely a paraphrasing of the ordinary person using ordinary care test. [citations omitted]
[125] In Park Avenue Furniture Corp. v. Wickes/Simmons Bedding Ltd.[60], Madame Justice Desjardins, for the Court, at page 426, cited substantial authority for the proposition that in assessing likelihood of confusion, the trade mark or alleged trade mark must be considered as a whole and should not be dissected or parsed into its constituent components.
ii) The Evidence of Confusion
[126] Both Dr. Ross, on behalf of the plaintiffs, and Dr. Ford, on behalf of Ritvik, conducted "confusion" surveys, and filed expert reports in relation thereto, and testified before me on the basis of their reports. I have earlier commented on "distinctiveness", "secondary meaning" or "trade-mark significance" surveys conducted by the same experts and, generally speaking, my conclusions regarding the reliability and utility of those surveys apply equally to their "confusion" surveys.
[127] Dr. Ross used three (3) stimuli: first, a Mega Bloks package consisting of a plastic bucket with a top which prominently incorporated the LEGO Indicia and which served as a base-plate on which structures could be constructed using the blocks within the bucket or other blocks; second, a K'NEX package consisting of a plastic case containing building components generally quite dissimilar from the LEGO brick and MICRO MEGA BLOK brick, the whole contained within cardboard packaging; and third, a LEGO Canada package which, like the first stimulus, took the form of a plastic bucket, in this case with a lid prominently displaying four (4) studs in the configuration of the LEGO Indicia but substantially larger in size and apparently performing no utilitarian purpose[61]. The K'NEX stimulus was utilized as a control.
[128] Dr. Ross determined that the survey demonstrated a 13.5 % difference between the level of confusion in the test cell and in the control cell. From this, he further concluded at page 14 of his expert report[62] that:
The 13.5% difference between "Micro" (17.2%) and K'NEX (3.7%) is statistically significant beyond the 99% confidence level. ...
Therefore, it can be concluded that there is confusion (approximately 14% net of control) between the Ritvik "Micro" MEGA BLOKS product and the LEGO product as to source of origin.
[129] Dr. Ford's confusion survey consisted of two (2) parts: first, an element directed to the likelihood of at-sale confusion, if any, with respect to the source, authorization/approval, or business affiliation/connection of the Ritvik Mega Bloks building blocks, in their package, with the source LEGO, due to the LEGO Indicia; and second, an element directed to the determination of the likelihood of confusion, if any, with respect to the source, authorization/approval, or business affiliation/connection, of the Ritvik MEGA BLOKS building blocks, removed from their at-sale packaging, with the source LEGO, due to the LEGO Indicia.
[130] In the at-sale confusion survey, respondents in the test cell were shown a Ritvik MICRO MEGA BLOK bucket, not the bucket with the lid displaying the LEGO Indicia, but rather a successor bucket in the market place[63]. Respondents in the control cell were shown a similar bucket bearing a similar label but with a fictitious source identifier "KIDI BRIX" replacing the "MEGA BLOKS" source identifier. The building blocks pictured on the "KIDI BRIX" bucket label displayed octagonal rather than round studs[64].
[131] Dr. Ford's brief conclusion with regard to the results of the first aspect of his confusion survey was in the following terms:
These survey results clearly evidence that there is no likelihood of confusion as to the source, authorization/approval, or business connection/affiliation of the Ritvik Mega Bloks product due to the claimed Lego Indicia Mark.[65]
[132] In the second element of Dr. Ford's confusion survey, respondents in the test cell were shown a red Mega Bloks Micro block bearing the name Mega Bloks mounted on a plain white base.[66] Respondents in the control cell were also shown a red block bearing the fictional name KIDI BRIX mounted on a similar plain white base.[67]
[133] On this aspect of his confusion survey, Dr. Ford concluded in the following terms:
These survey results clearly evidence that there is no likelihood of confusion as to the source, authorization/approval, or business connection/affiliation of the Ritvik Mega Bloks Micro block removed from their point-of-sale packaging due to the claimed Lego Indicia Mark.[68]
[134] Over and above the survey evidence with respect to confusion, the plaintiffs adduced the testimony of five (5) witnesses who spoke to four (4) incidents of confusion in the market place between the products of LEGO and Ritvik's MICRO MEGA BLOK line of products[69]. The testimony of each was straight-forward and credible.
[135] The joint book of documents that was before the Court included some 800 letters, records of telephone calls, and e-mails received by LEGO Canada, all testifying to a greater or lesser degree of consumer confusion. Like the testimony of the five "confusion" witnesses just referred to, generally speaking, the communications and records of communications related to missing or replacement parts or instructions and to mistaken product registration. The documentation[70] was identified by a witness, Mr. Michael Boland who, at the time he testified, was a Senior Brand Manager with LEGO Systems Inc. based in Enfield, Connecticut. As such, his duties included retail promotions, packaging, merchandising, advertising and media planning both for Canada and the United States. Mr. Boland joined LEGO Canada in 1993 and remained with the Canadian company until sometime in 1998[71]. At page 978 of the transcript, the following exchange is recorded:
MR. CHARLES [of counsel for the plaintiffs]: My Lord, we have, as we discussed this morning, a number of materials in the joint book relating to consumer feedback if you will, consumer complaints, consumer contacting and the agreement we have, I have with my friends, My Lord, is that we may put it in through Mr. Boland. It will be something that has been referred to in the joint book and I think the extent of the agreement is that my friends agree that these are genuine records of the company. They are what they purport to be, and if my friend has anything to add to that, I'm sure he will.
THE COURT: Nothing to add?
MR. LUE [of counsel for Ritvik]: No, My Lord.
MR. CHARLES: My Lord, these materials are found at volume 10, Tab B, Tabs 1 to 4.
Following the foregoing exchange, Mr. Boland testified generally as to the consumer confusion documentation.
[136] Much further testimony and evidence by way of exhibits spoke to the extensive point-of-retail sale promotional materials made available by LEGO Canada to major retail toy marketers. Some of that evidence demonstrated intermixing of LEGO products and Ritvik MICRO MEGA BLOK products at the point-of-sale and display of Ritvik MICRO MEGA BLOK products, in close proximity to LEGO Canada's point-of-sale retail promotional materials that prominently featured the LEGO Indicia.
iii) Conclusion regarding confusion
[137] Against the test of "...an ordinary person using ordinary care..." in the market for construction toys, and bearing in mind that consumer purchases in that market are heavily weighted to the pre-Christmas season, I am satisfied that the plaintiffs have met the onus on them to establish a likelihood of confusion, and indeed, actual confusion, in the Canadian market place, based upon the LEGO Indicia.
iv) Misrepresentation
[138] The plaintiffs rely on Reckitt & Colman Products Limited v. Borden Inc. & Ors[72] for the propositions that adoption of a get-up likely to create confusion constitutes a misrepresentation[73] and that a defendant which is a second-comer in a field should take steps to distinguish its products from those of a prior user with an established reputation and image[74]. Lord Oliver of Aylmerton, at page 414 of the report of Reckitt and Colman, wrote:
In the end, the question comes down not to whether the respondents are entitled to a monopoly in the sale of lemon-juice in natural size lemon-shaped containers but whether the appellants, in deliberately adopting, out of all the many possible shapes of container, a container having the most immediately striking feature of the respondents' get-up, have taken sufficient steps to distinguish their product from that of the respondents. As Romer L.J. observed in Payton & Co. Ltd. v. Snelling, Lampard & Co. Ltd.,... :
"when one person has used certain leading features, though common to the trade, if another person is going to put good on the market having the same leading features, he should take extra care by the distinguishing features he is going to put on his goods, to see that the goods can be really distinguished ..."
[citation omitted]
[139] In contrast, counsel for Ritvik cite the following passage from Kun Shoulder Rest Inc. v. Joseph Kun Violin and Bow Maker Inc.[75], where my colleague Mr. Justice Rouleau, relying on the same authorities, wrote at paragraphs [54] and [55]:
During the course of the trial, this court had the opportunity of seeing a number of shoulder rests manufactured by various companies. It became readily apparent to me that all of these rests are basically designed in the same manner, with the same practical, functional value and that the various manufacturers have merely taken what was common to the trade and was embodied in Joseph Kun's original patent that expired in 1987. This, in and of itself, does not constitute passing off. As stated in Payton and Co. v. Snelling, Lampard & Co. ..., cited in Stiga Aktiebolag v. S.L.M. Canada Inc. ...:
The real question of importance is, when you look at the finished articles and the get-up of the packaging, are they things calculated to deceive? In my view they are not. Both parties hereto have merely taken what was common to the trade and the defendant has been careful throughout to indicate very clearly that the goods which it sold were made by it fixing its trade name "Reliable" to all of the articles, except one . . . The boxes of the defendants company are marked on the top and all four sides with the word "Reliable" and on two sides appear the full name and address of the defendant company . . . There was no attempt by the defendant and no reason for attempting to deceive the public as to the origin of manufacture of its articles: The likeness was in the goods themselves.
That reasoning is equally applicable to the case at bar. [citations omitted]
I am satisfied that Mr. Justice Rouleau's reasoning, supported by the authorities he cites, is the preferred applicable authority on the facts of this matter.
[140] In Reckitt & Colman, the sole issue related to the get-up or packaging of lemon juice. That was not the case before Mr. Justice Rouleau and it is not the case here. Here, as with the fact situation in Kun Shoulder Rest where the issue related to a violin shoulder rest that Mr. Justice Rouleau found to be "...designed in the same manner, with the same practical, functional value..." as other shoulder rests, the issue relates to the LEGO Indicia which I have found to be a functional feature of both the LEGO group's and Ritvik's construction toys. It is true that both the LEGO group and Ritvik prominently feature the LEGO Indicia on much, if not all, of the packaging in which their construction toys are packaged. But that is a far cry from the facts that were before the House of Lord in Reckitt & Colman where, to repeat myself, the principle feature in issue was the get-up or packaging of lemon juice in a unique and non-functional form.
[141] Mr. Fred Geyer was the sole expert witness, and indeed the sole witness, expert or otherwise, to testify on behalf of the plaintiffs to the effect that he regarded Ritvik's marketing program as demonstrating a strong tendency, but also a deliberate intent, to confuse. In his first expert statement[76], Mr. Geyer examined the following factors: the LEGO appearance; and Ritvik's branding, product design, packaging, in-store displays and signs, and consumer communications and promotions practices. He concluded in the following terms at paragraph 82 and following of his expert statement:
I have considered the cumulative effect of all of the above factors of Ritvik's marketing program for its "micro" blocks. I have considered whether a consumer is likely to be persuaded to buy Ritvik's "micro" block products because of advantages, such as lower price, or whether a consumer is likely to buy Ritvik's "micro" block products because they confuse them with Lego.
At the outset I will say that I believe that some consumers will be persuaded and some will be confused, because Ritvik's marketing is not at either extreme of the continuum. [a continuum that Mr. Geyer describes as a "persuasion/confusion continuum".]
I think it is very important that Ritvik has adopted the Lego stud pattern or Lego Indicia because it is such an important part of Lego marketing and identification. This factor alone, particularly in the beginning of Ritvik's entry into the market with its "micro" block line, would be likely to confuse many people.
But I do not consider that alone to end the matter. Another competitor in the construction toy business uses the stud pattern used by Lego yet does much to establish a separate identity from Lego. Rokenbok is a Lego competitor that, in my opinion, makes a relatively unique construction toy offering although some Rokenbok plates are compatible with Lego bricks and have the LEGO Indicia pattern of studs. The marketing of this product is a type intended to persuade rather than confuse. I note the following:
• Rokenbok's branding is consistent and distinctive. The Rokenbok brand is prominently displayed in the upper left hand corner of packages; the theme name is located next to it. Rokenbok consistently uses this presentation across its range to establish prominent brand identification.
• Rokenbok has a different product design. The plates displaying the Lego Indicia stud pattern look different in that they have a muted gray, black and white color pallet in [sic] which differs from the Lego traditional color palette. Rokenbok's product design also differs in concept. Rokenbok has created a new product concept based on mechanizing activities using remote controllers and a series of ramps and unique connectors. Rokenbok allows a child to make things like elevators and monorails that one cannot make with Lego.
• Rokenbok's packaging has a distinctive colour scheme and distinctive graphic design using rectangles to divide the front and side panels. The pictures look different from Lego pictures and tend not [to] depict the Lego stud pattern.
• Rokenbok uses in-store headers and signs to identify the brand. ...
Unlike Rokenbok, Ritvik has not used its marketing to establish a clear distinction between its "micro" block products and Lego products. Ritvik has promoted the stud pattern; it has copied Lego product concepts including the shape and the look of Lego building elements; it has copied many of Lego product themes; it has also substantially copied Lego packaging styles; and it has not used advertising and promotion to separate itself from Lego. These factors in total have a cumulative effect that strongly weights the marketing program toward confusion. When one adds to this that Ritvik has over time diminished the significance of the Mega Bloks brand in relation to it [sic] "micro" brick products, the tendency of this marketing program to confusion not only appears to be strong but also deliberate.
I believe that in 1992 the tendency to confuse was primarily based on the fact that Ritvik adopted and promoted the same product design, having similar building brick elements with the well-known symbol of the Lego stud pattern in the traditional Lego colours. The first product packages clearly displayed the building elements to consumers. The likelihood of confusion would be moderated, however, because Ritvik's packages were different from those of Lego. Some consumers would see this as a differentiation while others would ignore the differences, or think it was a Lego line extension with different packaging. Ritvik used the words "Works with leading brand", but this was ambiguous. It could mean that the product was different from the leading brand (Lego); or it could imply some relationship or affiliation with Lego.
From 1993 to 1998 confusion was furthered by the introduction of theme sets that were similar in product concept to the Lego theme sets and had packaging that was similar to the Lego established packaging style. The 1995 introduction of the Ritvik bucket that was very similar to the Lego bucket would increase confusion. Overall the primary moderating factor during this period was the use of the Mega Blok brand on packaging.
In 1999 and thereafter upon the reduction, de-emphasis and change of the Mega Bloks brand on theme sets, I believe the Ritvik marketing program became quite confusing.
I am of the opinion that Ritvik's marketing strategy is likely to confuse a substantial number of consumers into believing that its "micro" blocks are either Lego products or associated with or sanctioned by Lego. [emphasis added]
[142] The expert statements and related testimony of Dr. Larry Light, Ritvik's marketing expert, Mr. Donald E. Martin, the retired Vice-president Engineering of TYCO Industries Inc., and Professor Michael J. Tarr all tended to a conclusion that, if confusion existed in the Canadian construction toy market, and I have concluded that it did, it was not a result of a deliberate strategy on the part of Ritvik. I prefer this evidence. I conclude that it was not a deliberate strategy on the part of Ritvik and that the plaintiffs have simply failed to establish that confusion in the market place results from a misrepresentation by Ritvik.
[143] I reach the foregoing conclusion on the following basis. Mr. Geyer urged that Ritvik has been inconsistent in its packaging design and in the branding on its packages and has thus failed, in Mr. Geyer's estimation, deliberately, to establish a strong separate branding of its MICRO MEGA BLOKS line. Dr. Light responds that it is not unusual for a new entrant to a market, such as Ritvik with its MICRO MEGA BLOKS line, to be inconsistent in its branding practices in its early years. He points to the fact that the LEGO group itself, in its early years, utilized a range of designs incorporating its word mark LEGO before it settled on the design that is now so familiar and so consistently used. In this regard, I once again favour the testimony of Dr. Light.
[144] I further conclude that, to a very real extent, the LEGO group is the author of its own misfortune in the Canadian marketplace in relation to the LEGO Indicia. Its marketing strategies and practices have been so good that it has left little room, if any, for a competitor such as Ritvik, adopting the purely utilitarian or functional features of the LEGO brick, and particularly the LEGO Indicia, a "table-stakes" feature in the words of Dr. Larry Light, to distinguish its MICRO MEGA BLOKS from LEGO's construction bricks, notwithstanding that Ritvik has consistently inscribed on its line of MICRO MEGA BLOKS the designation MEGA BLOKS.
[145] In summary then, I conclude that the plaintiffs have failed to meet the onus on them to establish deception of the public by Ritvik due to a misrepresentation on its part.
d) Damage to the Plaintiffs
[146] While the evidence before me as to damage to the plaintiffs resulting from Ritvik's entry into the Canadian construction toy market with its line of MICRO MEGA BLOKS was largely indirect, I am satisfied that it leads inevitably to the following two conclusions: first, LEGO remains the dominant brand in the Canadian construction toy market and has continued as such at all times since the entry into that market by Ritvik with its MICRO MEGA BLOKS line; and secondly, notwithstanding the LEGO group's dominant position, Ritvik has established itself as a significant brand in that market and has captured a market share, some or all of which would have gone to the LEGO group in the absence of Ritvik's entry into the market. In the result, I am satisfied that, on the totality of the evidence that was before me, it is beyond doubt that the plaintiffs, and more broadly the LEGO group, have suffered damage by reason of the entry of Ritvik into the Canadian construction toy market with its MICRO MEGA BLOKS line of construction toys.
e) Conclusion regarding contravention of paragraph 7(b) of the Act
[147] Based upon the foregoing analysis, I conclude that the plaintiffs have failed to discharge the onus on them with regard to all of the elements required to establish that Ritvik has contravened the statutory passing off scheme represented by paragraph 7(b) of the Trade-marks Act.
7) Estoppel, Laches and Acquiescence
[148] The statement of issues between the parties to this litigation that appears earlier in these reasons, identifies as a fifth issue:
Are the Plaintiffs disentitled to any or all the relief claimed as a result of estoppel, laches or acquiescence?
Based upon my findings to this point in these reasons, this issue is moot. I will nonetheless briefly consider it on the basis that another Court might find fault with my findings to this point.
[149] In White Consolidated Industries, Inc. v. Beam of Canada Inc.[77], my colleague Mr. Justice Teitelbaum wrote at pages 112-13:
The Federal Court of Appeal in Anheuser-Busch v. Carling O'Keefe, ..., adopted the statement of law with respect to estoppel by acquiescence and laches outlined in the English decision of Taylor Fashions Ltd. v. Liverpool Victoria Trustees Co., ...:
. . . estoppel by acquiescence. . . requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly or unknowingly, he has allowed or encouraged another to assume to his detriment rather than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.
The key factors to consider when applying the doctrine of acquiescence and laches outlined in the Institut National des Appellations d'Origine des Vins et Eaux-de Vie v. Andres Wines. . ., are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy. Mr. Justice Dupont further emphasizes at p. 443 that "mere delay is not enough to deprive a plaintiff of his legal rights. However, when combined with two other factors - length of delay and nature of intervening acts - it can be determinative of the issue". Mr. Justice Dupont then went on to explain at pp. 444-5:
The question for the court is, therefore, whether the plaintiffs acted in such a way as to encourage the defendants to believe that they would not enforce their legal rights against them; and, whether the defendants, relying on the plaintiffs' inaction, have acted to their detriment in the intervening period over the last 60 years. These factors, combined with the "inordinate delay" by the plaintiffs in enforcing their rights, will be determinative of the issue of the propriety of injunctive relief in this case.
[citations omitted]
[150] Certain evidence underlying this defence on the part of Ritvik is essentially not in dispute. By contrast, certain other evidence relevant to the issue is the subject of an objection on the part of the plaintiffs on the ground of settlement privilege, an objection that I will sustain for reasons that I will shortly come to. In light of my conclusion with regard to that objection, I will make no reference in this portion of my reasons with regard to that evidence.
[151] The plaintiffs knew of Ritvik's MICRO MEGA BLOKS at least from the time of their introduction to the Canadian market place in the spring of 1991. The following exchange between counsel for Ritvik and Mr. Kjeld Kirk Kristiansen is recorded in the transcript:
Q. In Canada you knew about... the Mega Bloks micro brick right from the beginning when it was introduced to the Canadian market place in 1991, isn't that right?
A. Yes, that's right.[78]
[152] Following the introduction of Ritvik's MICRO MEGA BLOKS into the Canadian market, the plaintiffs, or at least LEGO Canada, complained about some of Ritvik's activities or product packaging[79] but, on the evidence before the Court, never about the top surface configuration of the MICRO MEGA BLOKS until the Statement of Claim herein was issued and served[80]. It cannot be disputed that between the time of the introduction of Ritvik's MICRO MEGA BLOKS and the time the Statement of Claim herein was served on Ritvik, Ritvik expended substantial resources in the development, promotion and marketing of its micro block line.
[153] On the other side of the ledger, I am satisfied on the totality of the evidence before the Court that it was equally clear, from before 1991 that Ritvik was aware of the LEGO group's aggressive defence throughout the world, if not specifically in Canada, of its intellectual properties and more generally, of its market niche and share.
[154] On balance, and once again on the totality of the evidence before the Court, I conclude that Ritvik entered into direct competition with the LEGO group with its eyes wide open. By introducing its MICRO MEGA BLOKS line in the spring of 1991, I am satisfied that the evidence before me is insufficient to support a conclusion that the LEGO group made any representation to Ritvik on which Ritvik relied to its detriment. Despite the length of the delay between Ritvik's entry into the market and the institution of this action, a delay that largely went unexplained before me, I cannot conclude that the balance of justice or injustice is weighed in Ritvik's favour so as to justify its success on this defence. To return to the quotation from White Consolidated supra, and more particularly to a brief quotation from Justice Dupont therein "...mere delay is not enough to deprive a plaintiff of his legal rights." I am satisfied the mere delay is all that has been proven here.
8) Limitations
[155] The last issue raised in the Agreed Statement of Issues quoted earlier in these reasons is in the following terms:
Are the Defendants [Ritvik] able to claim a limitation period, and if so, what is the applicable limitation period?
[156] Section 39 of the Federal Court Act[81], reads as follows:
39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
39. (1) Sauf disposition contraire d'une autre loi, les règles de droit en matière de prescription qui, dans une province, régissent les rapports entre particuliers s'appliquent à toute instance devant la Cour dont le fait générateur est survenu dans cette province.
(2) Le délai de prescription est de six ans à compter du fait générateur lorsque celui-ci n'est pas survenu dans une province.
[157] It was not in dispute before me that the Trade-marks Act is silent with respect to limitation periods regarding actions for statutory passing-off, such as this action. Counsel did not cite any other Act of Parliament that could be said to "expressly provide" for prescription and the limitation of this action. The question therefore becomes whether this action is a cause of action arising in a particular province or does it arise "...otherwise than in a province". The question is of significant relevance because, if this cause of action arose within a province, it was not significantly in dispute before me that that province is Quebec. Quebec is the province in which Ritvik's manufacturing, marketing and distributing facilities for Canada are situated and the relevant limitation period in that province is either two (2) or three (3) years, a period much shorter than the period between the time when the plaintiffs became aware of the introduction into the Canadian market of Ritvik's MICRO MEGA BLOKS line and the time when this action was commenced. By contrast, if the cause of action arose otherwise than in a province, then by virtue subsection 39(2) of the Federal Court Act, the relevant limitation period is six (6) years after the cause of action arose and, once again, it was not substantially in dispute before me that this action was "taken" within that period.
[158] In Canada v. Maritime Group (Canada) Inc.[82], Mr. Justice Marceau, for the Court, wrote at pages 128-9:
On realizing that the expression "cause of action" is used as the point of reference, one cannot avoid being concerned at first by the various meanings the jurisprudence has attributed to that notion in cases of proceedings in tort according, as noted by the Motions Judge, to the purpose for which it had to be defined. I do not think, however, that the concern should persist. It does not appear to me that the interpretation of section 39 [of the Federal Court Act] can in any way be affected by the various definitions that have been given to the notion of "cause of action" in the case law. As I read the provision, the "cause of action" in a proceeding in tort, as the expression is used therein, must necessarily refer to the damage suffered as well as the act that caused the damage. I say that for two reasons.
The first and compelling reason is that the wording of the provision requires that interpretation. It would be inconceivable, it seems to me, that Parliament would have used the phrase "cause of action arising" three times in the two leading paragraphs of the provision, twice in the short second one, without attributing to it the same meaning and import. That would have been a breach of the most basic rules governing the art of legislating. Thus, if the meaning attributed to the expression is clear and indisputable in at least one of the three places where it appears, that meaning will govern throughout. This is precisely what we have here since, at one place, the phrase "when the cause of action arose" is used to identify the point in time when the prescription period begins running. In this context, "cause of action" obviously refers to the advent of damage since before such advent, there is no possible action.
The second reason for my conviction that the expression is meant to refer to the advent of the damage as well as the act of the tort-feasor is that the provision so read offers the most reasonable solution to the particular question of prescription in actions against the Crown. While respecting the idea of following local private law rules, section 39 introduces some unification and has the significant merit of discarding any possible conflict of law. In respect of prescription, the law of a province will govern when all the elements of the cause of action have arisen in that province; otherwise, the time within which the action must be commenced is, in all cases, six years. [emphasis added]
[159] While I am satisfied that the cause of action here is a statutory tort and that therefore the foregoing reasoning applies, we are not here dealing with "...the particular question of prescription in actions against the Crown."
[160] Against the conclusion reflected in the final sentence quoted from the reasons of Mr. Justice Marceau, the question becomes whether all of the elements of this cause of action arose within the province of Quebec. If so, the law of that province will govern. If not, the prescription period is six (6) years.
[161] Based on what follows, I am satisfied that the relevant prescription period is six (6) years. I am satisfied on the evidence before me that all sales by Ritvik of its MICRO MEGA BLOKS for further retail sale throughout Canada were made "f.o.b. Ritvik's facilities in the province of Quebec. But its advertising and promotional programs have been conducted throughout Canada, the point-of-retail-sale displays have been utilized throughout Canada and, if confusion between Ritvik's product and the product of the LEGO group has occurred with resultant damage, it has largely, if not entirely, been in the minds of retail purchasers throughout Canada rather than in the minds of those who purchase at wholesale from Ritvik. Thus, I am satisfied that it simply cannot be said that all of the elements of the cause of action before me arose in Quebec or in any other particular province.
[162] In the result, I conclude that the relevant limitation period is the six (6) year period prescribed by subsection 39(2) of the Federal Court Act and that this action is not barred by that limitation.
CONCLUSIONS
[163] For ease of reference, I will very briefly summarize my conclusions against the issues as stated by counsel in the joint statement of issues reproduced earlier in these reasons and reproduced again here:
1. Do the Plaintiffs have a legal interest in any trade-mark rights that the Plaintiffs assert in Canada in respect of the "Lego Indicia"? This issue does not include quality control of licensees or challenge the authenticity of any of the documents relating to licensing or assignments.
Answer: Yes.
2. Which of the following is correct:
(a) the Plaintiffs allege that the "Lego Indicia" is a trade-mark and thus able to support an action under s. 7(b); or
(b) the Defendants allege that it is not a valid trade-mark because it is one or more of the following:
(i) functional;
(ii) claimed and/or disclosed in expired patents,
(iii) non-distinctive, or
(iv) never used by the Plaintiffs as a trade-mark.
Answer: Ritvik's position is correct. The LEGO Indicia is not a valid trade-mark, primarily because it is purely functional except in respect of the inscription "LEGO" on the top surface of each stud.
3. Have the Defendants contrary to s. 7(b) directed public attention to their "MICRO" construction toys products by using the "Lego Indicia" in such a way as to cause or to be likely to cause confusion in Canada, at the time the Defendants commenced so to direct attention to them, between their "MICRO" toy construction products and the "LEGO" construction toy products of the Plaintiffs?
Answer: No.
4. What is the "time the Defendants commenced so to direct attention to them"?
Answer: In light of my answers to issue questions 2 and 3, I have not directly addressed this question.
5. Are the Plaintiffs disentitled to any or all the relief claimed as a result of estoppel, laches or acquiescence?
Answer: No.
6. Are the Defendants able to claim a limitation period, and if so, what is the applicable limitation period.
Answer: Yes. The applicable limitation period is six (6) years and has not been infringed.
[164] In the result, this action will be dismissed. Ritvik's counterclaim which, in its final iteration, is effectively addressed by dismissal of the plaintiffs' action, will also be dismissed.
RELIEFS
[165] During the course of the trial, counsel for the plaintiffs abandoned the claim for declaratory relief.[83]
[166] There was significant debate regarding the form of any injunction to which the plaintiffs would be entitled if they were to be successful. There was similar debate regarding the appropriateness and scope of any mandatory injunction requiring Ritvik to deliver-up and to discontinue use of, or destroy offending product and as to whether an accounting of profits was an appropriate alternative remedy to damages in all of the circumstances of this case.
[167] I advised counsel that, if I were to grant judgment in favour of the plaintiffs, and in the event, I will not, I considered an injunction to be an appropriate form of relief but rather than imposing on Ritvik an injunction in specific terms requested by the plaintiffs, or, worse still, in a form of my own drafting, I would invite counsel to attempt to agree on an appropriate form of injunction and, in the event they were unable to agree, I would then invite counsel to put to me their respective positions and a supplementary judgment would follow.[84] I am satisfied that a similar procedure relating to delivery-up and related matters and to profits in lieu of damages would equally be appropriate.
[168] This Court has previously ordered that any question in this action relating to the extent of the infringement of any right, the damages flowing from the infringement of any right and profits arising out of any infringement of any right should be determined separately and after a final determination of the action.[85] Discovery relating to the same questions was similarly deferred.
[169] As previously noted in these reasons, by counterclaim, Ritvik seeks a declaration that it is entitled to continue to make, offer for sale and sell in Canada its MICRO and MINI lines of toy construction bricks and related parts currently sold in Canada under the trade-mark MEGA BLOKS. Ritvik has been substantially successful in this action and the plaintiffs' action will be dismissed. I am satisfied that dismissal of the plaintiff's action is adequate remedy in favour of Ritvik, subject to the question of costs to which I will shortly turn. No declaration as requested in the counterclaim will issue.
COSTS
[170] At the level of principle, I am satisfied that costs of the action should follow the event. I am not satisfied that any order as to costs in respect of the counterclaim is warranted. Counsel agreed that questions as to the scale of costs should be left for another day, unless they are able to reach agreement.[86]
[171] I will defer my decision regarding costs on Ritvik's counterclaim and regarding the scale of costs arising out of the dismissal of the plaintiffs' action. Judgment will issue and these reasons for judgment will be distributed. Counsel will be provided a reasonable opportunity to review the judgment and reasons and to make written submissions on the question of costs, assuming they cannot agree on the issue, following which, if necessary, a supplementary judgment as to costs will issue.
INTERLOCUTORY ISSUES
[172] During the course of trial, I was called upon to make a number of interlocutory rulings that were not formerly recorded as orders. Rulings on certain other interlocutory issues, including an issue relating to settlement privilege to which I have earlier referred, were deferred. I will briefly record my analysis and conclusions with respect to the deferred issues.
1) Settlement privilege
[173] Earlier in these reasons, under the subheading "Estoppel, Laches and Acquiescence", I referred to certain oral and documentary evidence adduced during the course of trial to which counsel for the plaintiffs took objection on the grounds of settlement privilege or litigation privilege. The documentary evidence was in the form of correspondence between then counsel for the plaintiffs and, first, Ritvik Group Inc. and later Maître Jacques Léger, then acting as counsel for Ritvik. Maître Léger appeared as a witness at trial to identify the correspondence and to testify as to its substance. Much of the correspondence was marked "without prejudice". In my order made on oral motion during the last day of trial, the 7th of February, 2002, I directed that the correspondence at issue, as identified in an appendix to my order, and related elements of the trial transcript, remain confidential.
[174] In The Law Of Evidence In Canada[87], the learned authors wrote at page 807:
It has long been recognized as a policy interest worth fostering that parties be encouraged to resolve their private disputes without recourse to litigation, or, if an action has been commenced, encouraged to effect a compromise without resort to trial.
...
In furthering these objectives, the courts have protected from disclosure communications, whether written or oral, made with a view to reconciliation or settlement. In the absence of such protection, few parties would initiate settlement negotiations for fear that any concession they would be prepared to offer could be used to their detriment if no settlement agreement was forthcoming. ... [citation omitted]
[175] At page 810, the learned authors continued:
There are a number of conditions that must be present for the privilege to be recognized:
(a) a litigious dispute must be in existence or within contemplation;
(b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and,
(c) the purpose of the communication must be to attempt to effect a settlement. [citation omitted]
[176] I am satisfied that the correspondence here at issue was exchanged with litigation in contemplation, with the implied intention that it would not be disclosed to a court in the event negotiations failed, and for the purpose of attempting to effect a settlement.
[177] My Order of the 7th of February, 2002, will remain in force. The Registry is directed to ensure that the terms of that Order are respected.
2) Admissibility of Certain Foreign Transcripts
[178] In its read-ins from examinations for discovery, Ritvik sought to include portions of transcripts from proceedings involving members of the LEGO group in Hong Kong, the United Kingdom and Israel. Counsel for the plaintiffs noted that none of the proceedings were trade-mark proceedings, rather they related to copyright or industrial design rights. Counsel for the plaintiffs objected to my relying on them, albeit that they were produced before me and included in the record, subject to any ruling that I might make. I can assure counsel and the parties that, despite the fact that I have reviewed the portions of transcripts in question for the purpose of considering the objection of counsel for the plaintiffs, I determined to give them no weight and indeed have given them no weight. In the circumstances, I decline to deal in a more formal way with the objection of counsel for the plaintiffs.
3) Admissibility of a declaration by Mr. Per Randers
[179] Counsel for Ritvik tendered a 1991 declaration of a Mr. Per Randers made in the course of trade-mark proceedings involving members of the LEGO group in the United Kingdom. As counsel for the plaintiffs correctly pointed out, what I considered to be the most telling elements of the declaration were admitted to by Mr. Randers during the course of his testimony before me, and while under cross-examination.
[180] In the light of the objection of counsel for the plaintiffs, and the admissions of Mr. Randers before me, I have determined not to give consideration to the balance of the declaration in question. Any further elements of the declaration on which counsel for Ritvik wished to rely could have been put to Mr. Randers during the course of his testimony in this matter.
__________________________________
J. F.C.C.
Ottawa, Ontario
May 24, 2002
INDEX
Page Paragraphs
1 INTRODUCTION 1 - 4
4 BACKGROUND 5 - 18
12 THE RELIEFS REQUESTED 19 - 21
13 STATEMENT OF ISSUES 22 - 23
15 RELEVANT STATUTORY LAW 24 - 27
17 THE EVIDENCE - A GENERAL STATEMENT 28 - 32
19 ANALYSIS
19 1) The Legal Interest of the Plaintiffs in the
Rights in Canada that they Assert in
Respect of the LEGO Indicia 33 - 37
21 2) The Jurisdiction of this Court 38 - 43
24 3) "Functionality" and the LEGO Indicia 44 - 62
32 4) The Subject-Matter Claimed and/or Disclosed
in an Expired Patent 63 - 67
35 5) Distinctiveness and Use of the LEGO
Indicia as a Trade mark 68 - 75
Page Paragraphs
38 6) Passing-off
38 a) General Principles 76 - 79
41 b) Goodwill 80
41 i) The LEGO group has goodwill 81 - 86
44 ii) Does the LEGO group's goodwill
derive in whole or in part from the
LEGO Indicia? 87 - 118
57 c) Deception of the Public due to a
Misrepresentation
57 i) General principles 119 - 125
60 ii) The Evidence of Confusion 126 - 136
65 iii) Conclusion regarding confusion 137
65 iv) Misrepresentation 138 - 145
71 d) Damage to the Plaintiff 146
71 e) Conclusion regarding contravention of
paragraph 7(b) of the Act 147
72 7) Estoppel, Laches and Acquiescence 148 - 154
75 8) Limitations 155 - 162
78 CONCLUSIONS 163 - 164
80 RELIEFS 165 - 169
82 COSTS 170 - 171
Page Paragraphs
82 INTERLOCUTORY MATTERS 172
83 1) Settlement privilege 173 - 177
85 2) Admissibility of Certain Foreign Transcripts 178
85 3) Admissibility of a Declaration by
Mr. Per Randers 179 - 180
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-2799-96
STYLE OF CAUSE: KIRBI AG and LEGO CANADA INC.
Plaintiffs/Defendants by counterclaim
- and -
RITVIK HOLDINGS INC. / GESTIONS RITVIK INC.
Defendant / Plaintiff by counterclaim
DATES OF HEARING: January 14-18, 2002, January 20-25, 2002, January 28-31, 2002, February 1, 2002 and February 4-7, 2002
PLACE OF HEARING: TORONTO, ONTARIO
REASONS FOR ORDER BY: GIBSON J.
DATED: May 24, 2002
APPEARANCES BY:
Robert H.C. MacFarlane For the Plaintiffs/Defendants by counterclaim
Michael E. Charles
Christine M. Pallota
Adam Bobker
Ronald E. Dimock For the Defendants/Plaintiff by counterclaim
Dino P. Clarizio
Henry Lue
SOLICITORS OF RECORD:
Bereskin & Parr For the Plaintiffs/Defendants by counterclaim
Suite 4000, Box 401
40 King Street West
Toronto, Ontario
M5H 3Y2
Dimock Stratton Clarizio For the Defendants/Plaintiff by counterclaim
Barristers and Solicitors
Suite 3202, Box 102
20 Queen Street West
Toronto, Ontario
M5H 3R3
[1] The LEGO group of companies is apparently a world-wide group of which KIRKBI and LEGO Canada are but two.
[2] R.S.C. 1985, c. T-13.
[3] Exhibit J-2.
[4] Ritvik Toys Inc./Jouets Ritvik Inc. was, until shortly before the trial of this action, a co-defendant and co-plaintiff by counterclaim. By consent Order of the Court, its name was deleted from the style of cause in light of its dissolution.
[5] The change in spelling of the family name Christiansen to Kristiansen was explained on the record by Mr. Kjeld Kirk Kristiansen during his testimony at trial. The change is of absolutely no significance whatsoever for the purposes of this action.
[6] The Page Canadian Patent No. 443,019 underlay the KIDDICRAFT self-locking toys or bricks. See paragraphs 32 and 33 of the Agreed Statement of Facts.
[7] A number of catalogs directed to dealers in LEGO products and, in a much less elaborate form, intended for inclusion in packages of LEGO products, were before the Court as documentary exhibits.
[8] "Ritvik" is a derivation from the given names of Mr. Victor Bertrand Senior and his wife, Rita Bertrand.
[9] Throughout the trial, the terms "protuberances", "projections", "knobs", "nubs" and "studs" were used interchangeably. Throughout these reasons, the term "studs" will be used. The expression "clutch power" is briefly defined in paragraph 31 of the Agreed Statement of Facts.
[10] By contrast, the LEGO group's bricks and, it is alleged, most of its other components, are made from ABS plastic and demonstrate a higher gloss and, it is alleged, other characteristics contributing to the reputation of LEGO's toys for high quality, reliability and consistent clutch power.
[11] Canadian Patents Nos. 629,732 and 880,418 were described throughout the trial as the LEGO basic patents. While the studs of the LEGO brick are referred to in the claims of at least the 629,732 patent, they are not themselves the subject of either of the LEGO basic patents, since studs, as an interlocking feature, were disclosed and claimed in the Page Canadian Patent.
[12] Exhibit J-1.
[13] Exhibit J-3, Joint Book of Documents, Volume 10.
[14] (1998), 79 C.P.R. (3d) 45 (F.C.A.).
[15] See Ordon Estate v. Grail [1998] 3 S.C.R. 437 at 474.
[16] R.S.C. 1985, c. F-7.
[17] (1987), 14 C.P.R. (3d) 314 (F.C.A.); see also the quotation in paragraph [36] of these reasons from Enterprise Rent-A-Car Co.v. Singer, supra, note 14.
[18] (1977), 2 S.C.R. 134.
[19] (1999), 86 C.P.R. (3d) 129 (F.C.T.D.); Notice of Appeal filed on June 29, 1999, A-404-99.
[20] (2001), 13 C.P.R. (4th) 515 (F.C.T.D.) at paragraphs 30 and 31.
[21] Exhibit D-107.
[22] (1995), 64 C.P.R. (3d) 467 (F.C.A.); leave to appeal refused (1996), 67 C.P.R. (3d) VI (note) (S.C.C.).
[23] S.C. 1932, c. 38.
[24] January 20, 1953, Queen's Printer, Ottawa.
[25] (2000), 7 C.P.R. (4th) 1 (F.C.A.).
[26] (1981), 56 C.P.R. (2d) 145 at 154 (S.C.C.).
[27] Harold G. Fox, The Canadian Law and Practice relating to Letters Patent for Inventions, 4th ed. (Toronto: Carswell, 1969) at p. 163.
[28] [2000] 2 S.C.R. 1067.
[29] [1938] All E.R. 618 at 633.
[30] (1998), 83 C.P.R. (3d) 331 (F.C.T.D.).
[31] [1964] S.C.R. 351.
[32] (1909), 26 R.P.C. 765 at 771 (C. A.).
[33] [1982] 1 S.C.R. 494.
[34] [1998] R.P.C. 69 at 111-12 (H.C.J.- Ch. Div.).
[35] (1996), 71 C.P.R. (3d) 348 (F.C.T.D.).
[36] [1990] R.P.C. 341 at 406 (H.L.).
[37] [1992] 3 S.C.R. 120.
[38] Supra, note 17.
[39] See: Big Sisters Assn. of Ontario v. Big Brothers of Canada (1997), 75 C.P.R. (3d) 177 where, at page 223 following the heading "Issue No. 4", I adopted a similar form of analysis and my decision was affirmed in general terms by the Court of Appeal at (1999), 86 C.P.R. (3d) 504; Eli Lily and Co. v. Novopharm Ltd., (1997), 73 C.P.R. (3d) 371 commencing at page 419 (F.C.T.D.); affirmed, (2000), 10 C.P.R. (4th) 10 (F.C.A.); Enterprise Rent-A-Car Co. v.Singer (1996), 66 C.P.R. (3d) 453 (F.C.T.D.); affirmed (1998), 79 C.P.R. (3d) 45 (F.C.A.); Prince Edward Island Mutual Insurance v. Insurance Co. of Prince Edward Island (1999), 159 F.T.R. 112 and Top-Notch Construction Ltd. v. Top-Notch Oil Field Services Ltd. (2001), 13 C.P.R. (4th) 515 (F.C.T.D.). To somewhat the same effect see: Westfair Foods Ltd. v. Jim Pattison Industries Ltd.,(1989), 26 C.P.R. (3d) 28 (B.C.S.C.), affirmed (1990), 30 C.P.R. (3d) 174 (B.C.C.A.); and Molson Canada v. Oland Breweries Ltd., [2001] O.J. No. 431 (S.C.J.).
[40] Supra, note 17.
[41] 1984, 4th ed., vol. 48, p. 108; 2000 Reissue, 4th ed., vol. 48, p. 195, para. 308.
[42] Exhibit P-61.
[43] Transcript, vol. 14, page 2130, lines 18 to 25 and page 2131, line 1.
[44] Transcript, vol. 14, page 2275, lines 14 to 19.
[45] Exhibit D-125.
[46] Exhibit D-124.
[47] J. Sopinka, S.N. Lederman and A.W. Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1999).
[48] (2000), 9 C.P.R. (4th) 429 (F.C.T.D.).
[49] Exhibit P-33, Expert Affidavit of Gillian Humphreys, paragraph 2.
[50] Exhibit P-18
[51] Exhibit P-18, page 8.
[52] Transcript, vol. 4, page 590.
[53] Transcript, vol. 4, page 596.
[55] Exhibit D-113.
[56] Expert report of Professor Michael J. Tarr, Exhibit D-124, paragraphs 39 to 41.
[57] (1949), 9 C.P.R. 67 (Ex. C.C.).
[58] Supra, note 17.
[59] (1994), 53 C.P.R. (3d) 129 at 141-2 (Alta. C.A.).
[60] (1991), 37 C.P.R. (3d) 413 (F.C.A.).
[61] Exhibit P-17, Appendix C.
[62] Exhibit P-18.
[63] Exhibit D-118.
[64] Exhibit D-119.
[65] Exhibit D-113, paragraph 38.
[66] Exhibit D-120.
[67] Exhibit D-121
[68] Exhibit D-113, paragraph 49.
[69] Mr. Eric Gottlieb; transcript, vol. 4, pages 623 to 640; Ms. Pam Lahn and Mr. Larry Lahn; transcript, vol. 5, pages 736 to 740 and 741 to 748, respectively; Mr. Mike Gurin; transcript, vol. 6, pages 803 to 819; and Ms. Blanche Martin; transcript, vol. 8, pages 1069 to 1074.
[70] Exhibit J-3, vol. 10, tabs B-1 to 4.
[71] The relevant portion of Mr. Boland's testimony in chief appears in the transcript, vol. 7, pages 975 to 981.
[72] Supra, note 36.
[73] Reckitt & Colman, supra, at 407.
[74] Reckitt & Colman, supra, at 414, 416 and 425.
[75] Supra, note 30. A portion of this quotation appears at paragraph 67of these reasons but is repeated here for ease of reference. Similarly, the quotation adopted by Mr. Justice Rouleau, appears in part at paragraph 120 of these reasons.
[76] Exhibit P-61.
[77] (1991), 39 C.P.R. (3d) 94 (F.C.T.D.).
[78] Transcript, volume 1, page 130.
[79] Transcript, volume 13, page 2096.
[80] The Statement of Claim in this action was originally filed the 20th of December, 1996 but was not served on Ritvik until June, 1997.
[81] R.S.C. 1985, c. F-7.
[82] [1995] 3 F.C. 124 (C.A.).
[83] Transcript, volume 16, page 2559.
[84] Transcript, volume 18, page 2785.
[85] Revised Trial Record, tab 1; an Order of Prothonotary Lafrenière dated the 9th of July, 1999.
[86] Transcript, volume 19, pages 2954 and 2955.
[87] Supra, note 47.