Sign not used as trademark may amount to passing off, rules court

In Tommy Hilfiger Licensing Inc v International Clothiers Inc, the Federal Court has ruled that the defendant's use of a trademarked design that was confusingly similar to that of the plaintiff amounted to passing off, even though it was not used as a trademark.

Tommy Hilfiger Licensing Inc (THLI) and Tommy Hilfiger Canada Inc (THC) are wholly-owned subsidiaries of Tommy Hilfiger USA Inc. THLI owns the intellectual property rights of the Hilfiger group and licenses them to, among others, THC. THC distributes and sells, through retailers, clothing bearing THLI's trademarks.

International Clothiers Inc (INC) sells clothing at its own retail stores. It buys articles from suppliers who generally manufacture the goods following INC's direction and basic design. In addition, INC buys stock lots, which are available when suppliers' arrangements for sales to third parties have not worked out. INC is not a licensee of THLI.

In November 1994 INC purchased a stock lot of men's shirts that bore an embroidered crest design on the front. The design and colours were similar to THLI's crest design, although it did not contain a crown at the top. The original labels on the shirts were removed and replaced with INC's GARAGE USA trademark. THLI filed an action claiming that INC's crest infringed THLI's trademark and copyright, and amounted to passing off. INC subsequently began selling short sets featuring a crest design perceived by THLI as similar to its trademarked and copyrighted design.

Regarding the trademark infringement and passing off claims, the Federal Court found the following:

• There was no infringement under Section 19 of the Canadian Trademarks Act as the crest design used by INC was not identical to THLI's registered crest design.
  
  
• There was no infringement under Sections 20 and 22 of the act because INC did not use its crest as a trademark. Presumably, the court accepted INC's claim that the crest was mere ornamentation.
  
  
• INC was guilty of passing off its goods as THC's pursuant to Section 7(b) of the act. The court reasoned that:

  o THLI and THC had significant goodwill in the trademark associated with the wares;

  o INC's crest design was likely to cause confusion; and

  o THLI and THC had demonstrated that they had suffered damage as a consequence.

With regards to the copyright infringement claim, the court found INC guilty in relation to the sale of its short sets because (i) the crest design of these goods was substantially similar to THLI's and THC's design, and (ii) INC had knowledge of THLI's and THC's copyright in the design at the time of the sale.

This decision raises an interesting question: is it not a requirement that the alleged infringer use the mark as a trademark before passing off can be found? This case appears to answer the question in the negative.

Toni Polson Ashton and Jeilah Chan, Sim Hughes Ashton & McKay, Toronto