Federal Court dismisses Section 7(a) Trade-marks Act claim over lack of causal link

Federal Court dismisses Section 7(a) Trade-marks Act claim over lack of causal link

E Mishan & Sons, Inc v Supertek Canada Inc, 2016 FC 986

Even if false and misleading statements are proven, that alone will not guarantee successful damage claims if a causal link cannot be established between the statements and damages.

In this Federal Court (“FC”) decision, Supertek Canada Inc. (“Supertek”) unsuccessfully brought a claim that E. Mishan & Sons (“Mishan”) engaged in conduct contrary to section 7(a) of the Trade-marks Act in its dealings with Canadian Tire in 2013 and 2014. [2] The decision primarily concerned Canadian Patent No. 2,779,882 (“the ‘882 Patent”), entitled “Expandable and Contractible Hose” (“Pocket Hose”), which had previously been declared null and void by the FC. [10]

The FC had also previously dismissed an infringement action of the ‘882 Patent in E Mishan & Sons, Inc v Supertek Canada Inc, 2014 FC 326 (covered by PCK Reporter Here), which was affirmed in E Mishan & Sons, Inc v Supertek Canada Inc, 2015 FCA 163. Later, the FC had granted a summary judgment motion and declared an industrial design invalid in E Mishan & Sons, Inc v Supertek Canada Inc, 2016 FC 613. The FC also ordered a summary trial for Supertek’s claim under section 7(a) of the Trade-marks Act, leading to this decision.

Issues

The issues before the FC were:

  1. Has Supertek made out its claim that the Defendants by Counterclaim have engaged in conduct contrary to the provisions of section 7(a) of the Trade-marks Act in their dealings with Canadian Tire in the years 2013 and 2014 and, if so,
  2. Did Supertek suffer damage as a result of that conduct, and
  3. What is the measure of damages suffered by Supertek, if any, as a consequence of such conduct? [4]

Basis for a Section 7(a) Claim and Damages Sought

The essential elements required to establish a claim under section 7(a) of the Trade-marks Act were set out by the Supreme Court of Canada in S & S Industries Inc v Rowell, 1966 CanLII 53 (SCC), namely that there must be established in evidence:

  1. A false and misleading statement;
  2. Tending to discredit the business wares or services of a competition; and
  3. Resulting damages. [7]

The FC stated that damages are an essential element in a claim under section 7(a) of the Trade-marks Act. [28] Supertek claimed three sorts of damages:

  1. Cancelled orders: The evidence showed that Canadian Tire cancelled two orders with Supertek totalling 9,996 units of the Pocket Hose.
  2. Lack of access to individual Canadian Tire dealerships: The evidence showed that an Orillia dealer did order 300 units of Pocket Hose from Supertek and that the transaction was handled manually. No other dealer had ordered the Pocket Hose.
  3. Canadian Tire never placed any further orders for Pocket Hose with Supertek: Supertek supposed that it would have sold 64,500 units of 50 foot Pocket Hoses for each of the years 2013 and 2014. [28]

Analysis

No Causal Link between the Statements and the Damages Allegedly Suffered

The evidence showed that Canadian Tire’s purchase of the Pocket Hose was a “one time” offer. [19] This, coupled with the testimony of a manager at Canadian Tire, [32] convinced the FC that there was no causal link between the false and misleading statements made by the Mishan and the damages alleged to have been suffered by the Supertek. [33]

Failure of the Claim

While Mishan had made false and misleading statements, the FC found that the absence of a causal link between the statements and Supertek’s alleged damages would result in the failure of the claim under section 7(a). [36] Furthermore, Supertek was not found to even have satisfactorily established quantification of its damages, which would have been a crucial aspect even it had been successful in bringing the claim. [35] Each party was ordered to bear its own costs. [37]

Commentary

Damages under section 7(a) of the Trade-marks Act is frequently used in in patent-related claims. This section codified the common law tort of slander of title, also known as injurious falsehood. While found in the Trade-marks Act, it is applicable to false allegations of patent infringement directed at competitors’ products. These types of claims are among several which are germane to the “complete code” argument – an argument that states that the Canadian patent regime is all-encompassing, providing not only rights but also remedies for when those rights are breached, therefore making reaches into other legislation unnecessary. While Supertek was unsuccessful on these facts, claims for damages under section 7(a) are not subject to any complete code restrictions.

Federal Court Section 7