Quebec civil code provides additional support in intellectual property dispute

July 31, 2009

The Superior Court of Quebec recently granted an interim injunction preventing the continued sale of Husqvarna Corp. (Husqvarna) outdoor power tools by a former authorized dealer whose authorization had been revoked. Although the manufacturer's motion for the injunction included grounds based on the federal Trade-marks Act, the Court granted the injunction on the sole basis of Quebec principles of civil responsibility, namely article 1457 of the Civil Code of Quebec (CCQ), which article acts as a functional equivalent to the common-law tort of passing off.

Husqvarna had authorized the defendants to sell, distribute and provide after-sale services for Husqvarna products between 1998 and 2004. After this agreement ended, the defendants continued to sell products bearing the Husqvarna trademarks and logos, but they obtained such products either through the Internet or from other distributors. The products sold by the defendants did not benefit from Husqvarna's guarantee, nor from Husqvarna's after-sale services.

In order to obtain an interlocutory injunction against the defendants, Husqvarna had to establish three things: (1) that there was a serious issue to be tried (in other words, that the case was not a frivolous or vexatious one), (2) that the injunction was required to prevent serious or irreparable harm, and (3) that the balance of convenience favoured granting the injunction.

In support of its argument that there was a serious case to be tried, Husqvarna cited not only sections 20(1) and 7(b) of the Trade-marks Act, but also alleged a contravention of article 1457 of the CCQ.  Section 20(1) of the Trade-marks Act prohibits trademark infringement by a person selling, distributing or advertising wares or services in association with a mark that can be confused with another person's registered trademark. Section 7(b) of the Trade-marks Act is a codification of the common law tort of passing off.  It prohibits directing public attention to wares, services or business so as to cause confusion between those wares, services or business and those of another. As noted by the Superior Court, the civil law's equivalent to passing off is the delict of confusion, part of a broader category of unfair competition and breach of confidence, all of which fall within the regime of civil responsibility established by article 1457 of the CCQ.

Without considering whether the case raised any serious issue under the Trade-marks Act, the Court found that there was such an issue raised under article 1457 of the CCQ. The Court noted that Husqvarna appeared to have the right to prevent a party from selling Husqvarna products, displaying them on the store shelves and thus benefiting from the goodwill attached to the Husqvarna trademarks, without being an authorized dealer and without being able to offer the same guarantee and after-sales services offered by Husqvarna. In doing so, the defendants permitted the public to believe, falsely, that the products they were selling possessed all the attributes normally associated with Husqvarna products. 

In considering whether there was a risk of serious and irreparable harm, the Court accepted that it was not necessary to prove that actual harm had occurred.  Instead, it accepted that, since there was no question that the reliability and quality of the Husqvarna products, as well as the guarantees associated with them, were well-known, there was sufficient harm implicit in misleading consumers to believe that the defendants were authorized by the manufacturer when they were not, in fact, so authorized. 

Finally, the Court found that the balance of convenience favoured Husqvarna, since the defendants had admitted that only ten to fifteen per cent of their annual revenue derived from product sales, without indicating of what portion of these represented sales of the Husqvarna products.

This case highlights the applicability of article 1457 of the CCQ to unfair competition and intellectual property disputes in Quebec, as well as the close connection between the analysis of common-law passing off and the civil-law delict of confusion.
 

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