In Kirkbi AG v. Ritvik Holdings Inc. (“Kirkbi”) the Supreme Court of Canada (“SCC”) dealt with the functionality doctrine and the constitutionality of s. 7(b) of the Trade-marks Act.
The Kirkbi case involved litigation over the well-known Lego bricks. Kirkbi AG, the makers of Lego bricks, claimed unregistered trade-mark rights in the geometrical pattern of the raised studs on the top of the bricks. Kirkbi AG argued that Ritvik Holdings Inc., who operate under the name of Mega Bloks Inc. (“Mega Bloks”), were guilty of passing off under s. 7(b) of the Trade-marks Act. In other words, the argument was that consumers were likely to be confused as to the source of the bricks they were buying. Kirkbi AG introduced evidence of confusion at the trial.
Kirkbi AG originally held patents related to its Lego bricks. These patents prevented competition in the marketplace for similar bricks. After the expiry of the last Lego patent in Canada, Mega Bloks entered the marketplace and competed with Kirkbi AG by selling “similar if not identical products.” Kirkbi AG unsuccessfully attempted to register its pattern of studs as a trade-mark. Kirkbi AG commenced this action arguing that it owned unregistered trade-mark rights in the raised studs pattern on the bricks.
Mega Bloks was successful at trial and at the Federal Court of Appeal. The unanimous 9-member panel of the SCC upheld the decision of the Federal Court of Appeal. However, the SCC dismissed the alternative argument put forward by Mega Bloks that s. 7(b) of the Trade-marks Act was unconstitutional as being ultra vires Parliament. While not argued below, the SCC had allowed Mega Bloks to advance this argument subsequent to it granting leave to appeal.
Unlike patents and copyrights, which are explicitly within federal jurisdiction under sections 91(22) and 91(23) of the Constitution Act, 1867, respectively, trademarks are not explicitly included within federal or provincial legislative power. The federal government has legislated with respect to trade-marks using their power under s. 91(2) with respect to trade and commerce. The argument against this federal exercise of power was that s. 7(b) of the Trade-marks Act was ultra vires Parliament because it encroached on provincial jurisdiction with respect to property and civil rights. Section 7(b) of the Trade-marks Act creates a civil cause of action that essentially codifies a form of the common law tort of passing off .
To determine the constitutional validity of s. 7(b) the SCC applied the three-part test outlined in Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture). The Court found only minimal intrusion into the provincial power to legislate with respect to property and civil rights. Secondly, the SCC found that the Trade-marks Act was a valid exercise of Parliament's general trade and commerce power. The Court stated that the Trade-marks Act established a regulatory scheme for both registered and unregistered trade-marks. The inclusion of unregistered trade-marks in the regulatory scheme was necessary to ensure the protection of all trade-marks. Finally, the Court found that the form of passing off action in s. 7(b) played a clear role in the federal trade-mark scheme. Without it, there would be a gap in the legislative protection of trade-marks which would “ create inconsistencies in the protection of registered and unregistered trade-marks and lead to uncertainty.” As a result, s. 7(b) had the appropriate “fit” within the federal scheme. The SCC concluded that s. 7(b) of the Trade-marks Act lay within the federal government's legislative competence.
The SCC reiterated the “source theory” of trade-marks, which states that the foundation of a trade-mark is its ability to allow consumers to identify the source of the goods. In so doing, the Court was careful to distinguish between the mark and the product itself.
In this case, the mark, a distinguishing guise, was the product. This required the application of the functionality doctrine. The SCC described the doctrine of functionality as follows: “This doctrine establishes that a mark which goes beyond distinguishing the wares of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade-mark.
The doctrine reflects the purpose of a trade-mark, which is the protection of the distinctiveness of the product, and applies equally to registered and unregistered marks.” The SCC clarified that the functionality doctrine applied to both registered and unregistered trademarks. Notably, the SCC found that changes to the wording of the Trade-marks Act did not result in the functionality doctrine being applied differently to registered and unregistered trade-marks. The Court commented that it would be a “strange result” if unregistered trade-marks were given broader protection than registered trade-marks.
The SCC also discussed generally the tort of passing off. The Court reaffirmed that the correct test was the tripartite test articulated in Ciba-Geigy Canada Ltd. v. Apotex Inc. The components of this test are: the existence of goodwill or reputation; misrepresentation creating confusion in the public; and proof of damages. The Court clarified that misrepresentation may arise through deceit but also through negligence or carelessness. The fact of the misrepresentation is critical not the intent behind it. As a result, a plaintiff need not prove any element of deceit or intentional misrepresentation to make out its case for statutory passing off under s. 7(b).
Kirkbi is notable for its clarification of the test for passing off , its validation of s. 7(b) of the Trade-marks Act, and its discussion regarding the rights that attach to both registered and unregistered trade-marks. Kirkbi also draws a principled line between patent rights and trade-mark rights, with the functionality doctrine standing at the intersection.