Kirkbi AG et al. v. Ritvik Holdings Inc. et al., (2005) 341 N.R. 234 (SCC)

• Judge: McLachlin, C.J.C., Major, Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ.
• Court: Supreme Court (Canada)
• Case Date: March 16, 2005
• Jurisdiction: Canada (Federal)
• Citations: (2005), 341 N.R. 234 (SCC);2005 SCC 65

Kirkbi AG v. Ritvik Holdings Inc. (2005), 341 N.R. 234 (SCC)

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[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2005] N.R. TBEd. NO.036

Kirkbi AG and Lego Canada Inc. (appellants) v. Ritvik Holdings Inc./Gestions Ritvik Inc. (now operating as Mega Bloks Inc.) (respondent) and Attorney General of Canada and Attorney General of Quebec (intervenors)

(29956; 2005 SCC 65; 2005 CSC 65)

Indexed As: Kirkbi AG et al. v. Ritvik Holdings Inc. et al.

Supreme Court of Canada

McLachlin, C.J.C., Major, Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ.

November 17, 2005.

Summary:

Kirkbi AG owned patents for LEGO toy building blocks, the last of which expired in Canada in 1988. After the patents ex­pired, Mega Bloks Inc. began marketing a line of blocks identical in size to LEGO blocks which used the same geometrical pattern of studs on top coupled with tubes underneath as did the LEGO blocks. Subsequently, the plaintiffs, members of the LEGO Group of companies, commenced a passing off action under s. 7(b) of the Trade-marks Act against Mega Bloks Inc., asserting unregistered trademark rights with respect to its use of the "Lego indicia", being the distinctive geometrical pattern of raised studs on the upper surface of the block.

The Federal Court of Canada, Trial Divi­sion, in a decision reported 220 F.T.R. 161, dismissed the action. The court held that the unregistered Lego indicia trademark in issue was not a valid trademark due to the doc­trine of functionality (i.e., that purely func­tional features such as the Lego indicia could not form the basis of a trademark and that this rule applied to both registered and unregistered trademarks). The plaintiffs appealed, the issue being whether a trade­mark which was primarily functional in nature could sustain an action for passing off under s. 7(b) of the Act.

The Federal Court of Appeal, Pelletier, J.A., dissenting, in a decision reported 308 N.R. 1, dismissed the appeal. The court agreed that the doctrine of functionality applied to all trademarks, registered or unregistered, and remained a fundamental principle of the law of trademarks. Thus, a trademark that was primarily functional was not a valid trade­mark within the meaning of the Act and therefore could not support a passing off action. The court agreed that the Lego indicia trademark was primarily functional and therefore invalid. The plaintiffs were attempting to extend their expired patent protection through the guise of a trademark, which was contrary to the policy underlying the doctrine of functionality. The plaintiffs appealed. In addition to the issues raised by the infringement action (i.e., the issues of whether the doctrine of functionality applied to unregistered trademarks and whether an unregistered functional mark could form the basis of an action for passing off under s. 7(b) of the Trade-marks Act, the constitu­tionality of s. 7(b) was also in issue).

The Supreme Court of Canada dismissed the appeal. The court held that s. 7(b) cre­ated a federal statutory civil cause of action which was intra vires Parliament. However, the plain­tiffs' action under s. 7(b) should be dis­missed. A purely functional design could not be the basis of a trademark, registered or unregistered. Therefore, the plaintiffs' pass­ing off claim under s. 7(b) was barred by the appli­cation of the doctrine of func­tional­ity. Further, the plain­tiffs could not establish the common law tort of passing off because the plaintiffs could not establish the first element in the test for passing off (i.e., the existence of goodwill in respect of the dis­tinc­tiveness of the product).

Constitutional Law - Topic 5667

Federal jurisdiction (s. 91) - Regulation of trade and commerce - Matters of general na­tional interest or concern - The Supreme Court of Canada noted that there were two branches of federal power under s. 91(2) of the Constitution Act, 1867: (1) the power over international and interprovin­cial trade and commerce, and (2) the power over general trade and com­merce af­fecting Canada as a whole - The court stated that the following five non-exhaus­tive factors were hallmarks of a valid ex­er­cise of Parliament's general trade and com­merce power: "(i) the impugned legis­lation must be part of a regulatory scheme; (ii) the scheme must be monitored by the con­tinuing oversight of a regulatory agency; (iii) the legislation must be con­cerned with trade as a whole rather than with a particu­lar industry; (iv) the legisla­tion should be of a nature that provinces jointly or sever­ally would be consti­tutionally incapable of enacting; and (v) the failure to include one or more prov­inces or localities in a legis­lative scheme would jeopardize the suc­cess­ful operation of the scheme in other parts of the country ..." - The court noted that it was not neces­sary for federal legis­lation to satisfy all five criteria - See para­graphs 15 to 17.

Constitutional Law - Topic 5667

Federal jurisdiction (s. 91) - Regulation of trade and commerce - Matters of general na­tional interest or concern - [See Consti­tutional Law - Topic 5677 ].

Constitutional Law - Topic 5677

Federal jurisdiction (s. 91) - Regulation of trade and commerce - Trademarks legisla­tion - Section 7(b) of the Trade-marks Act provided that 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 ..." - The Supreme Court of Canada held that s. 7(b), which created a federal statutory civil action for passing off, was intra vires the Parliament of Can­ada (i.e., valid federal legislation) under Par­liament's general trade and com­merce power in s. 91(2) of the Constitution Act, 1867 - See paragraphs 14 to 36.

Torts - Topic 5141

Interference with economic relations - Un­fair competition - Passing off - General - The Supreme Court of Canada reviewed the components of the common law tort of passing off and how the tort had developed in Canadian law - See paragraphs 62 to 69.

Torts - Topic 5141

Interference with economic relations - Un­fair competition - Passing off - General - After patents for Lego toy building blocks expired, the plaintiff LEGO com­panies sued the defendant, Mega Bloks Inc., for pass­ing off (Trade-marks Act, s. 7(b)), re­lying on an unregistered trademark (the LEGO indicia), consisting of their geo­metrical pattern of raised studs on the top of their LEGO toy building blocks - That is, the claimed mark did not consist of a name, drawing or particular get-up of the product, rather the distinguishing guise consisted solely of the technical or func­tional characteristics formerly protected by patent - The Supreme Court of Canada held that a purely functional design could not be the basis of a trademark, registered or unregistered - Therefore, the plaintiffs' passing off claim under s. 7(b) which was grounded on the existence of a trademark could not succeed - Further, the plaintiffs could not establish a claim of passing off at common law as they could not meet the first condition of such an action, i.e., that there be good will in respect of the distinc­tiveness of the product - See paragraphs 42 to 69.

Trademarks, Names and Designs - Topic 264.1

Trademarks - What trademarks registrable - Prohibition - Functional trademarks - Ac­cording to the doctrine of functionality if what was sought to be registered as a trade­mark had a functional use or charac­teristic it could not be the subject of a trademark - The Supreme Court of Canada stated that the doctrine of functionality was a well established principle of Canadian trademarks law - The court stated that this doctrine was explicitly adopted by s. 13(2) of the Trade-marks Act, which provided that the registration of a mark would not interfere with the use of the utilitarian features it incorporated - The court stated that the doctrine applied to unregistered as well as to registered trademarks - See para­graphs 56 to 61.

Trademarks, Names and Designs - Topic 264.1

Trademarks - What trademarks registrable - Prohibition - Functional trademarks - [See second Torts - Topic 5141 ].

Trademarks, Names and Designs - Topic 3068

Trademarks - Unfair competition - Passing off - [See Constitutional Law - Topic 5677 and second Torts - Topic 5141 ].

Cases Noticed:

Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96 (P.C.), refd to. [para. 15].

Canadian National Transportation Ltd. and Canadian National Railway Co. v. Can­ada (Attorney General) et al., [1983] 2 S.C.R. 206; 49 N.R. 241; 49 A.R. 39, refd to. [para. 16].

City National Leasing Ltd. v. General Motors of Canada Ltd., [1989] 1 S.C.R. 641; 93 N.R. 326; 32 O.A.C. 332, refd to. [para. 16].

Vapor Canada Ltd. v. MacDonald et al., [1977] 2 S.C.R. 134; 7 N.R. 477, refd to. [para. 16].

Ontario (Attorney General) v. Canada (Attorney General), [1937] A.C. 405 (P.C.), refd to. [para. 18].

Good Humor Corp. of America v. Good Humor Food Products Ltd., [1937] Ex. C.R. 61, refd to. [para. 18].

Royal Doulton Tableware Ltd. v. Cassidy's Ltée, [1986] 1 F.C. 357 (T.D.), refd to. [para. 18].

Asbjorn Horgard A/S v. Gibbs/Nortac Indus­tries Ltd. (1986), 8 C.I.P.R. 232 (F.C.T.D.), revd. in part [1987] 3 F.C. 544; 80 N.R. 9 (F.C.A.), refd to. [para. 19].

Kitkatla Indian Band et al. v. British Columbia (Minister of Small Business, Tourism and Culture) et al., [2002] 2 S.C.R. 146; 286 N.R. 131; 165 B.C.A.C. 1; 270 W.A.C. 1; 2002 SCC 31, refd to. [para. 21].

Harvard College v. Commissioner of Pat­ents, [2002] 4 S.C.R. 45; 296 N.R. 1; 2002 SCC 76, refd to. [para. 37].

Monsanto Canada Inc. et al. v. Schmeiser et al., [2004] 1 S.C.R. 902; 320 N.R. 201; 2004 SCC 34, refd to. [para. 37].

Free World Trust v. Electro Santé Inc. et al., [2000] 2 S.C.R. 1024; 263 N.R. 150; 2000 SCC 66, refd to. [para. 38].

Whirlpool Corp. et al. v. Camco Inc. et al., [2000] 2 S.C.R. 1067; 263 N.R. 88; 2000 SCC 67, refd to. [para. 38].

Parke Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351, refd to. [para. 45].

Remington Rand Corp. et al. v. Philips Electronics N.V. (1995), 191 N.R. 204; 64 C.P.R.(3d) 467 (F.C.A.), refd to. [para. 46].

Pizza Pizza Ltd. v. Registrar of Tradem­arks, [1989] 3 F.C. 379; 101 N.R. 378 (F.C.A.), refd to. [para. 46].

Thomas & Betts Ltd. v. Panduit Corp. et al., [2000] 3 F.C. 3; 252 N.R. 371 (F.C.A.), refd to. [para. 46].

Imperial Tobacco Co. v. Registrar of Trade­marks, [1939] Ex. C.R. 141, refd to. [para. 46].

Elgin Handles Ltd. v. Welland Vale Manu­facturing (1964), 43 C.P.R. 20 (Ex. Ct.), refd to. [para. 46].

TrafFix Devices Inc. v. Marketing Displays Inc. (2001), 532 U.S. 23, refd to. [para. 48].

Wal-Mart Stores Inc. v. Samara Brothers Inc. (2000), 529 U.S. 205, refd to. [para. 48].

Koninklijke Philips Electronics NV v. Remington Consumer Products Ltd., [2002] E.C.R. I-5475, refd to. [para. 50].

Interlego AG's Trademark Applications, Re, [1998] R.P.C. 69 (Ch. Div.), refd to. [para. 53].

CIBA-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120; 143 N.R. 241; 58 O.A.C. 321, refd to. [para. 58].

Singer Manufacturing Co. v. Loog (1882), 8 App. Cas. 15, affing. (1880), 18 Ch. D. 395 (C.A.), refd to. [para. 58].

Erven Warnick B.V. v. Townsend (J.) & Sons (Hull) Ltd., [1979] A.C. 731, refd to. [para. 65].

Reckitt and Colman Products Ltd. v. Bor­den Inc. et al., [1990] 1 All E.R. 873; 107 N.R. 161 (H.L.), refd to. [para. 65].

Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd. et al., [1982] 1 S.C.R. 494; 41 N.R. 553, refd to. [para. 67].

Seiko Time Canada Ltd. v. Consumers Distributing Co., [1984] 1 S.C.R. 583; 54 N.R. 161, refd to. [para. 68].

Statutes Noticed:

Constitution Act, 1867, sect. 91(2); sect. 92(13) [para. 15].

Trade-marks Act, R.S.C. 1985, c. T-13, sect. 7(b) [para. 22]; sect. 13(2) [para. 42].

Authors and Works Noticed:

Bently, Lionel and Sherman, B., Intellec­tual Property Law (2nd Ed. 2004), pp. 707, 708, 709 [para. 65]; 794, 795, 796 [para. 49].

Cornish, William Rodolph, Intellectual Prop­erty: Omnipresent, Distracting, Ir­rele­vant? (2004), pp. 110 to 114 [para. 37].

Cornish, William Rodolph, and Llewelyn, David, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights (5th Ed. 2003), pp. 573 to 576 [para. 63].

Encyclopedia of European Community Law, First Council Directive 89/104, art. 3(1)(e) [para. 49].

Fox, Harold G., The Canadian Law of Trade Marks and Unfair Competition (4th Ed. 2002), pp. 2-4 [para. 15]; 2-22 [paras. 25, 35]; 3-19 [para. 39]; 4-13, 4-14 [para. 58].

Gill, A. Kelly, and Jolliffe, R. Scott, in Fox, Harold G., The Canadian Law of Trade Marks and Unfair Competion (4th Ed. 2002), pp. 2-4 [para. 15]; 2-22 [paras. 25, 35]; 3-19 [para. 39]; 4-13, 4-14 [para. 58].

Henderson, Gordon F., Trademarks Law of Canada (1993), pp. 197, 199 to 201 [para. 63].

Jolliffe, R. Scott, The Common Law Doc­trine of Passing Off, in Henderson, Gor­don F., Trademarks Law of Canada (1993), pp. 197, 199 to 201 [para. 63].

Nabhan, Victor, Mélanges (2004), p. 393 [para. 37].

Vaver, David, Intellectual Property Law: Copyright, Patents, Trade-marks (1997), p. 190 [para. 39].

Vivant, Michel, La fantastique explosion de la propriété intellectuelle: Une ration­alité sous le big bang? in Nabhan, Vic­tor, Mélanges (2004), p. 393 [para. 37].

Counsel:

Robert H.C. MacFarlane, Michael E. Charles, Peter W. Hogg, Q.C., Christine Pallotta and Catherine Beagan Flood, for the appellants;

Ronald E. Dimock, Bruce Ryder, Bruce W. Stratton and Henry Lue, for the respondent;

Peter Southey, for the intervener the Attor­ney General of Canada;

Alain Gingras, for the intervener the Attor­ney General of Quebec.

Solicitors of Record:

Bereskin & Parr, Toronto, Ontario, for the appellants;

Dimock Stratton, Toronto, Ontario, for the respondent;

Deputy Attorney General of Canada, Tor­on­to, Ontario, for the intervener the Attorney General of Canada;

Department of Justice, Sainte-Foy, Que­bec, for the intervener the Attorney General of Quebec.

This appeal was heard on March 16, 2005, before McLachlin, C.J.C., Major, Bastarache, Binnie, LeBel, Deschamps, Fish, Abella and Charron, JJ., of the Supreme Court of Can­ada. LeBel, J., delivered the following deci­sion for the court in both official lan­guages on November 17, 2005.