Canadian Intellectual Property Bulletin

Volume 7 - June, 1999

This newsletter is not intended to constitute a legal opinion on any of the issues discussed. Readers should seek professional legal advice on issues of concern to them - we would be pleased to elaborate on any of the articles herein and discuss how it might apply to specific problems. Contact us for more information.

IP Under Construction: Cases and Commentary

Courts construing a patent -- Federal Court of Appeal dismisses Flexi-Coil’s appeal and offers insight into patent interpretation:  Bourgault Industries Ltd. v. Flexi-Coil Ltd., [1999] F.C.J. No. 315, Federal Court of Appeal, Décary J.

FACTS: This was an action for patent infringement between two of the leading farm implement manufacturers in Canada. Both had developed a new kind of packer for use with an air seeder, allowing one-pass seeding with the added ease of fold-up wings for transportation. The inventions were similar - when Bourgault Industries Ltd. was granted letters patent for the mechanism, it commenced this patent infringement action. Bourgault was successful at trial in the Federal Court of Canada - Bourgault, by a tight margin of two months, had been the first to develop a prototype.

A mere two months separated the dates of invention, but it was long enough to make a huge difference for Flexi-Coil. In the Court of Appeal decision, released in March of this year, the decision was upheld - the appellate decision revolved around issues of patent interpretation. The court affirmed that reference can and will be made to the description of the invention as a whole where the words in a claim are ambiguous or unclear. Quoting the Consolboard case heard by the Supreme Court, the decision affirmed that the "court must not be ‘too astute or technical’ and it must approach the patent ‘with a judicial anxiety to support a really useful invention’". Good news for inventors!

It’s a fact of life in Canada that the province of Quebec is a unique part of this - this is evident in the business world, where companies and corporations that include "Canada" in their trade name in the rest of the country substitute "Quebec" when they do business in that province. The Petro-Canada case is a recent example that brings this reality back to our minds.

A Quebec numbered company that provided services through an automotive service station attempted to obtain trade-mark protection based on proposed use of the mark "Petro-Quebec". Petro-Canada, a well-known corporation and owner of numerous "Petro-Canada" and "Petrocan" trade-marks for use in association with similar services, opposed the application on grounds including the likelihood of confusion among consumers. They believed that customers would think that Petro-Quebec was simply a branch of Petro-Canada, or at least an affiliate. The Registrar of Trademarks decided against Petro-Canada.

The case came before the Trial Division of the Federal Court in the Fall of last year. While the court recognized and stressed the fact that a decision by the Registrar is to be accorded great deference, Justice Teitelbaum nevertheless allowed the appeal. The Registrar erred both in his interpretation of the law and in his appreciation of the facts of the situation. The court found that the facts clearly supported Petro-Canada’s position: the similar services, evidence of substitutions of "Quebec" in business names (including the use of "Quebec" in the name of the provincial affiliate of a large federal corporation), and even a newspaper article mistakenly referring to the Quebec company’s service station as a Petro-Canada station.

This case is an excellent reminder that consumer confusion isn’t always the result of a similar-sounding name. We also need to be aware of the cultural and business setting in which the mark is used.

FACTS: Duffy-Mott (whose shares were later acquired by Cadbury Schweppes) licensed the right to use the trade-mark and formula for the juice product "Clamato" to Caesar Canning. The latter passed on this confidential information, the recipe, to a third party, FBI Foods, so that FBI could manufacture the juice for them. Cadbury, upon obtaining control of Duffy-Mott, notified Caesar that the license agreement would be terminated in 12 months time, after which they would be free to compete at will. There was one limitation: Caesar would not be allowed to manufacture or distribute any product incorporating tomato and clam juices for a period of 5 years. Caesar developed a new product, using information about the "Clamato" ingredients and manufacturing process, that did not contain clam juice, and proceeded to market it upon termination of the license agreement. Cadbury eventually brought an action against FBI, since Caesar had gone bankrupt in the interim and FBI had acquired Caesar’s assets while continuing to market the new product. Cadbury was awarded "head start" damages at trial for the unfair advantage gained by FBI in this competitive market, but the Court of Appeal was even more generous in awarding a permanent injunction restraining FBI from ever using the confidential information. FBI appealed to the Supreme Court.

DECISION: Liability no longer being contested, the remedy was the only issue. Justice Binnie, speaking for the Court, found that the remedies at both lower levels of court were inappropriate. He said that, while it is true that the courts will follow confidential information into the hands of third parties (where they are aware of the breach of confidence) and impose remedies, the appropriate remedy can vary greatly according to the circumstances. The Court found that this was clearly an arms-length business relationship, so no trust-like concerns arose. They also held that the information was "nothing very special" and that it could easily have been reproduced by a skilled person. An injunction would inflict unnecessary harm on FBI, but damages would be appropriate. The goal of the damages award, said Justice Binnie, is to restore Cadbury to the competitive position they would have enjoyed but for the breach of confidence, the compensable period being the 12 months before termination of the agreement. A Referee would be given the task of assessing an appropriate level for the award.

FACTS: A former lower-level employee went to work for a competitor upon terminating her employment. Using her memory alone, she was able to gather the names of approximately 230 former clients, and she began soliciting them; no actual client list was taken. Her former employer sued both her and her new employer for breach of fiduciary duty and the duty of good faith.

DECISION: The action had been dismissed at trial, and the Court of Appeal dismissed the appeal by the employer. Placing great emphasis on the general public interest in free competition, the Court stated that, while more senior employees might be subject of such a relationship requiring protection, lower-level employees were not. An agreement in the form of a restrictive covenant might have resulted in liability, but such an agreement did not exist in this case. The key was the degree of control exercised by the employee over their working environment and their role in the company. The greater the degree of control, the greater the amount of protection to be afforded the company. In the words of Justice of Appeal Hall, "the difficulty is in the details and it is often difficult to know where to draw the line."

On the international front - points of interest to Canadian clients:

From the United States Supreme Court:

The Court rejected the Appeal of West Publishing in a very significant copyright case regarding digital compilations. A subsidiary of West that maintained a database of judicial opinions was refused protection from electronic copying of that database.

From the World Intellectual Property Organization:

The abuse of trade-marks on the Internet is widespread, and WIPO has released a statement strongly condemning the practice. Such activities as "cybersquatting" are confronted and a dispute resolution procedure initiated.

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