T-2832-96
BETWEEN:
SPECIALTY SPORTS LIMITED
Plaintiff
- and -
KIMPEX INTERNATIONAL INC.,
KIMPEX ACTION INC., and JOHN RAMSAY
Defendants
REASONS FOR ORDER
LUTFY J.
This is a motion for an interlocutory injunction in an action for copyright infringement, trademark infringement and passing off with respect to motorcycle and snowmobile clothing and accessories. The plaintiff alleges that the defendants have: (1) infringed the plaintiff's copyright in the design of a rainsuit, jacket and gloves; (2) directed public attention to the defendants' rainsuits jackets and gloves in a way which is likely to cause confusion with those of the plaintiff; (3) offered for sale, sold or passed off the defendants' rainsuits, jackets, and gloves for and as identical products of the plaintiff; and (4) infringed a registered trademark with respect to gloves.
The plaintiff Specialty Sports Ltd. ("Specialty Sports") manufactures motorcycle and snowmobile clothing and accessories, distributing these wares through over 75 of the largest motorcycle and snowmobile retail stores in Canada. It is also involved in the promotion of races and sponsorship of racers.
For some two years prior to October 1994, Specialty Sports marketed its products in Canada through its distributor Action Accessories Ltd. ("Action"). In 1994, the defendants Kimpex ("Kimpex") acquired Action. The principal of Action, the defendant John Ramsay, continued his involvement as a senior officer of one of the Kimpex companies.
From October 1994 until the autumn of 1995, Kimpex acted as the Canadian distributor for Specialty Sports in respect of its clothing and accessories products, including those presently in dispute. Since the fall of 1995, Specialty Sports has been represented in Canada by Motovan Motorsport Inc. ("Motovan"). Shortly thereafter, Kimpex imported and began to market in Canada motorcycle rainsuits, snowmobile gloves and winter jackets which Specialty Sports alleges are identical to or substantially similar copies of its products.
It is submitted that Kimpex used the knowledge acquired through its acquisition of Action and its role as distributor for Specialty Sports in 1994-95 to market lower-priced copies of the latter's products to a larger network of Canadian dealers.
There are three products in dispute. The parties raised no issues to warrant a different disposition of this motion in respect of the advertising catalogues.
a) The Otisca Rainsuit
Specialty Sports registered a copyright in the artistic work which it describes as the design of the "Otisca Rainsuit" on June 17, 1996. The style in question was first sold at the retail level during the 1994 summer season and subsequently in the 1995 and 1996 seasons. In addition to claiming a copyright, Specialty Sports argues that the design and colour of the rainsuit was so distinctive as to constitute a trademark. The design of the motorcycle rainsuit bearing the name Otisca for 1997 will be substantially modified.
In June 1996, Kimpex began to market 7,000 rainsuits under the trademark Drycell which are strikingly similar in design and colour to the Otisca rainsuit sold in the 1994 to 1996 seasons. Kimpex has acknowledged that its graphics department did not create any designs for the Drycell rainsuit.
b) The Sno Star Glove
Specialty Sports' second copyright is in the artistic work described as the design of the "Sno Star Glove" registered on August 29, 1996. The style in question sold at the retail level during the 1995-96 and 1996-97 winter seasons. It is alleged that the design of the gloves is also sufficiently distinctive as to constitute a trademark.
Since April 1996, Kimpex has marketed motorcycle gloves of a similar although not identical design under the trade name "CKX Prostar". Specialty Sports also objects to the name of the "CKX Prostar" glove on the grounds that it constitutes a trademark infringement. In 1992, Action distributed Specialty Sports' "Pro Star" leather gloves, the former name of the Sno Star gloves for which the copyright is claimed. Kimpex's evidence is that it did not realize that the plaintiffs had previously used the trade-mark Pro Star. Kimpex has a line of "Pro-" products and, in 1995, had produced a glove with a star on the cuff. Kimpex submits that the trademark "Pro Star" is not sufficiently distinctive to be registered.
c) The Cold Wave Jacket
Thirdly, Specialty Sports registered a copyright in the artistic work which it describes as the design of the "Cold Wave Jacket" on October 10, 1996. The snowmobile jacket which it claims has been copied was on the retail market for the 1995-96 winter season only. The design of the jacket for that single season is also alleged to be sufficiently distinctive as to constitute a trademark and it is with respect to this product that there is some evidence of confusion in support of a claim for passing off.
Kimpex has been marketing a jacket for the 1996-97 season under the name "HJC Cirolux" which bears some resemblance to the Cold Wave Jacket from the previous season.
Analysis
The test for the granting of an interlocutory injunction is set out in RJR-MacDonald1 and Manitoba (A.G.) v. Metropolitan Stores2. In the context of intellectual property, this test is set out in Turbo Resources Ltd. v. Petro-Canada Inc.3 The onus is on the plaintiff to demonstrate that the action raises a serious issue, that it will suffer irreparable harm should the injunction not be granted and that the balance of convenience favours the granting of the injunction.
For the purposes of this motion, Kimpex does not seriously dispute that there is a substantial resemblance in the rainsuits and the gloves. Both parties acknowledge, although not to the same extent, that the competing jackets are not as similar as their respective rainsuits and gloves. On the basis of the cursory examination of the evidence available at this stage of the proceedings, I find that there exists sufficient resemblance in appearance for each of the three items to satisfy the threshold for an interlocutory motion.
Kimpex challenges the allegation of copyright infringement principally on the ground that each design subject to copyright has been applied to a useful article of which more than fifty copies have been reproduced and thus is not entitled to copyright protection pursuant to subsection 64(2) of the Copyright Act.4 In response, Specialty Sports relies on the exception in subsection 64(3) concerning the protection of copyright in an artistic work used as a trade-mark or for material that has a woven or knitted pattern or that is suitable for piece goods or for making wearing apparel.
The interpretation of this relatively new provision of the Copyright Act5 is likely to be an important issue in the resolution of this action. Without commenting on the relative strength of the parties' positions, I am satisfied that the reliance by Specialty Sports on subsection 64(3) of the Copyright Act raises a serious issue in this action within the meaning of R.J.R. MacDonald and Metropolitan Stores.6 Accordingly, I need not consider further the merits of the submission by Specialty Sports that the design of articles can constitute a trade-mark.
The real issue in this motion arises with respect to the irreparable harm branch of the Turbo Resources test. Specialty Sports suggests that it will suffer irreparable harm by reason of a reduction in sales, loss of market share, confusion and loss of the price point, all of which are said to constitute an unquantifiable loss of goodwill.
The evidence concerning the reduction of sales since 1994 of the Otisca Rainsuit, the Sno Star Glove and the Cold Wave Jacket is, at best, equivocal. Even if one accepts that there has been a reduction in sales of the products, however, there appears to be a corresponding reduction in the sales volume of the entire line of Specialty Sports' motorcycle and snowmobile products. In particular, Specialty Sports incurred a substantial reduction in the total sales of all its rainsuit styles even prior to the introduction in 1996 of Kimpex's Drycell competing product. Kimpex suggests that any drop in sales could be attributed to market saturation or Motovan's smaller distribution network. In my view, the material available at this stage does not establish that reduction in sales of the products of Specialty Sports has been caused directly by the competing products of Kimpex.
Similarly, Specialty Sports' evidence on loss of market share is, in my view, wanting. In the words of its affiant:
| I am of the opinion that if the Court enjoins the defendants from selling their three (3) products, we stand the only chance available of ever regaining our market share so taken from us. In any event, if the Court enjoins the Defendants from selling these three (3) infringing designs now, we have, in any event, only a very small chance of regaining at least half to three quarters of the market share for these items and hopefully 90% of our OTISCA rainsuit market share. This is an important reason why the Defendants must be stopped now. If we cannot stop the Defendants now, based on my knowledge of the marketplace, Specialty Sports will never be able to regain any of the market share we lost because of the Defendants' blatant copying and acts of infringement of the three (3) items of clothing apparel. |
With respect, I find that "...such a vague and self-serving statement..."7 by a representative of Specialty Sports cannot alone satisfy the evidentiary burden it must meet.
On the question of confusion in the minds of consumers, Specialty Sports is offering a different style of rainsuit and jacket this year and both parties display different trade names on the products and in the catalogues. There is no evidence from Motovan, the current Canadian distributor of Specialty Sports. The only sworn evidence from a retailer8 attempts to suggest that, despite the different trade names, there is likely to be some confusion in the minds of consumers. However, the retailer states that one-third of his customers who purchase the Otisca Rainsuit asks for it specifically. For three years, he had marketed Otisca Rainsuits but, in September 1996, he chose instead to purchase Drycell rainsuits on the assumption that they were identical to the Otisca Rainsuit except for the lower price. If there were evidence that this occurred throughout the industry, it would represent a significant loss in sales and quantifiable damage but I do not find that it establishes any confusion in the minds of the consumer.
Similarly, there is evidence that Specialty Sports has been asked at two trade shows whether it manufactured the HJC Cirolux jacket which its former distributor is now selling. This evidence suggests that retailers are considering buying the cheaper products knowing full well that they are not Otisca rainsuits or Cold Wave Jackets. This may represent a loss of sales which is compensable in damages but does not establish confusion.
Finally, Specialty Sports suggests that it will suffer irreparable harm as a result of Kimpex quickly selling its entire inventory of infringing products at drastically reduced prices within the next few months. This is said to result in market saturation which will prevent any future sales and will irreparably lower their price point on these products. A review of the evidence, including the cross-examination of the Kimpex affiant, does not, in my view, support this apprehension. Kimpex does have inventory of the allegedly infringing products but insists that this will be sold according to standard industry practice and on a regular pricing programme.
Specialty Sports relies on an early line of jurisprudence that the court need not concern itself with the question of irreparable harm where there exists clear violations of copyright.9 The Court of Appeal has since repeatedly stated that where the validity of the copyright is the central issue in the action, "...a conclusion that mere infringement of a proprietary right in a trade- mark constitutes, of itself, irreparable harm is somewhat contradictory since it is the very "proprietary right" which is at issue."10
The Court of Appeal has often stated that the evidence as to irreparable harm must be "clear and not speculative."11 For the reasons given above, I find that Specialty Sports has not met this threshold. The only harm which Specialty Sports may suffer is a loss of sales which is compensable in damages.
Counsel for Kimpex gave an undertaking to maintain a separate accounting of inventory and sales of its alleged infringing products until the final disposition of this action. This accounting is necessary to ascertain the proper measure of damages if any of Specialty Sports' claims succeed at trial. The undertaking by counsel for Kimpex is acknowledged.
On the basis of the evidence, the balance of convenience does not favour the plaintiff. In my view, the potential harm to Specialty Sports on the refusal of the interlocutory order is no greater than that which would be caused to Kimpex if the relief sought were granted. Although the products in question represent a greater proportion of the overall sales of Specialty Sports than that of Kimpex, the survival of the company is not in issue. There is no suggestion on the record that Kimpex will not be able to pay damages if it is unsuccessful at trial.
Conclusion
For these reasons, Specialty Sports' motion for an interlocutory injunction will be dismissed. One of the counsel suggested that representations concerning costs would be in order. If this is still necessary, counsel may arrange through the registry for a conference call to take place on or before March 21, 1997. Otherwise, an Order will issue on that date.
"A. Lutfy"
______________________
Judge
Toronto, Ontario
March 17, 1997
FEDERAL COURT OF CANADA
Names of Counsel and Solicitors of Record
COURT NO: T-2832-96
STYLE OF CAUSE: SPECIALTY SPORTS LIMITED
- and -
KIMPEX INTERNATIONAL INC.,
KIMPEX ACTION INC., and JOHN RAMSAY
DATE OF HEARING: FEBRUARY 19, 1997
PLACE OF HEARING: OTTAWA, ONTARIO
REASONS FOR ORDER BY: LUTFY, J.
DATED: MARCH 17, 1997
APPEARANCES:
Mr. J. Guy Potvin
For the Plaintiff
Ms. Barbara A. McIsaac, Q.C.
For the Defendants
SOLICITORS OF RECORD:
Potvin Law Office
1000-141 Laurier Avenue West
Ottawa, Ontario
K1P 5J3
Fax: (613) 234-7529
For the Plaintiff
McCarthy Tétrault
1000-275 Sparks Street
Ottawa, Ontario
K1R 7X9
Fax: (613) 563-7813
For the Defendants
FEDERAL COURT OF CANADA
Court No.: T-2832-96
Between:
SPECIALTY SPORTS LIMITED
Plaintiff
- and -
KIMPEX INTERNATIONAL INC.,
KIMPEX ACTION INC., and JOHN RAMSAY
Defendants
REASONS FOR ORDER
__________________
4 Copyright Act, R.S.C. 1985, c. C-42. Subsections 64(2) and (3), as amended, state: (2) Where copyright subsists in a design applied to a useful article or in an artistic work from which the design is derived and, by or under the authority of any person who owns the copyright in Canada or who owns the copyright elsewhere, (a) the article is reproduced in a quantity of more than fifty, or (b) where the article is a plate, engraving or cast, the article is used for producing more than fifty useful articles, it shall not thereafter be an infringement of the copyright or the moral rights for anyone (c) to reproduce the design of the article or a design not differing substantially from the design of the article by (i) making the article, or (ii) making a drawing or other reproduction in any material form of the article, or (d) to do with an article, drawing or reproduction that is made as described in paragraph (c) anything that the owner of the copyright has the sole right to do with the design or artistic work in which the copyright subsists.
(3) Subsection (2) does not apply in respect of the copyright or the moral rights in an artistic work in so far as the work is used as or for (a) a graphic or photographic representations that is applied to the face of an article; (b) a trade-mark or a representation thereof or a label (c) material that has a woven or knitted pattern or that is suitable for piece goods or surface coverings or for making wearing apparel; (d) an architectural work that is a building or a model of a building; (e) a representation of a real or fictitious being, event or place that is applied to an article as a feature or shape, configuration, pattern or ornament; (f) articles that are sold as a set, unless more than fifty sets are made; or (g) such other work or article as may be prescribed by regulation of the Governor in Council.
5 Section 64 was adopted by S.C. 1988, c. 15, s. 11. Prior to the amendment, the case law as to whether functional articles were subject to registration under the Copyright Act or the Industrial Design Act, R.S.C. 1985, c. I-9 was unsettled. Parliamentary debate during the adoption of section 64 focussed on this issue (House of Commons Debates (1987 and 1988), at pp. 7669, 7689-90, 7692, 12586-7, 15522). See Doral Boats v. Bayliner Marine, [1986] 3 F.C. 421; 10 C.P.R. (3d) 289 (F.C.A.) for a review of the conflicting jurisprudence prior to the amendment. See also U & R Tax Services v. H & R Block (1995), 62 C.P.R. (3d) 257 (F.C.T.D.) for some consideration of the new legislative provision.
7 Eli Lilly and Co. v. Novopharm Ltd. (1996), 69 C.P.R. (3d) 455 at 458 (F.C.A.).
8 There is also an unsworn affidavit on the file from a second retailer which was included by reference in the plaintiff's affidavit. Although hearsay evidence is admissible in interlocutory proceedings under Rule 332(1), I have not given this evidence much weight: Lumonics Research Ltd. v. Gould et al. , [1983] 2 F.C. 360, 70 C.P.R. (2d) 11 (F.C.A.); Alex Wilson Coldstream Ltd. v. Lapaco Paper Products Ltd. (1994) 74 F.T.R. 293; 55 C.P.R. (3d) 45 (T.D.).
9 Overseas Enterprises v. Feathers Publishing & Marketing (1990), 34 C.P.R. (3d) 78 (F.C.T.D.); Thinkway Toys v. Vicki Collections (1989), 28 C.P.R. (3d) 572 (F.C.T.D.); Horn Abbot v. W.B. Coulter Sales Ltd. (1984), 77 C.P.R. (2d) 145 (F.C.T.D.); Duomo Inc. v. Giftcraft Ltd. (1985), 1 C.P.R. (3d) 165 (F.C.T.D.).
10 Syntex Inc. v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129 at 138 (F.C.A.), leave to appeal to S.C.C. ref'd [1991] 3 S.C.R. xi. See also Syntex Inc. v. Apotex Inc. (1991), 36 C.P.R. (3d) 139 (F.C.A.); Nature Co. v. Sci-Tech Educational Inc. (1992), 41 C.P.R. (3d) 359 (F.C.A.). Although these cases dealt with questions of trade-mark rather than copyright infringement, this Court has already stated that the distinction is not a relevant one: Titan Linkabit Corp. v. S.E.E. See Electronic Engineering Inc. (1993), 62 F.T.R. 241; 48 C.P.R. (3d) 62 (F.C.T.D.).
11 Imperial Chemical Industries PLC v. Apotex Inc. (1989), 27 C.P.R. (3d) 345 at 351 (F.C.A.); Syntex v. Novopharm Ltd. (1991), 36 C.P.R. (3d) 129 at 135 (F.C.A.); Nature Co. v. Sci-Tech Educational Inc. (1992), 41 C.P.R. (3d) 359 at 367 (F.C.A.); Centre Ice Ltd. v. National Hockey League (1994), 53 C.P.R. (3d) 34 at 52-53 (F.C.A.).