Falsely claiming to be an “exclusive distributor” may infringe manufacturer’s trademark rights

The Federal Court granted a rare interlocutory injunction recently, in TFI Foods Ltd. v. Every Green International Inc., against a seller of packaged foods who put stickers on products claiming, falsely, that the seller was an “Exclusive Distributor” of the products in Canada. The Court found that there was a serious issue for trial that the stickers infringed the manufacturer’s rights in its trademark under section 7(b) of the Trademarks Act. Section 7(b) of the Trademarks Act codifies the common law tort of passing off. A typical passing off case is where the defendant creates confusion in the marketplace between its goods and the plaintiff’s goods by using the plaintiff’s trademark or a similar trademark to sell the defendant’s goods. However, passing off has also been established in cases where the defendant is selling goods originating from the plaintiff and bearing the plaintiff’s trademark, but is otherwise mispresenting the defendant’s relationship with the plaintiff. This may occur, for instance, where the defendant is selling the plaintiff’s goods through an unauthorized distribution channel, or “grey market”, where they will not be covered by the plaintiff’s warranty. In TFI Foods Ltd. v. Every Green International Inc., the Court found that the defendant was selling goods that were “likely grey market goods”, manufactured by one of the plaintiffs but without that plaintiff’s approval to sell them in Canada. The other plaintiff was the actual exclusive Canadian distributor of the goods who had discovered the goods in stores with stickers falsely identifying the defendant as the “Exclusive Distributor of Canada” [sic]. The two plaintiffs commenced a lawsuit, claiming infringement of section 7(b) of the Trademarks Act among other things, and brought a motion for an order enjoining the defendant from selling the manufacturer plaintiff’s products with the stickers at issue until trial. There was no basis to order the defendant to stop selling the goods at issue since selling “grey market” goods without a manufacturer’s approval is not, in and of itself, unlawful. The Court granted the plaintiffs’ motion, finding that each of the requirements to obtain an interlocutory injunction had been satisfied, namely: 1) there was a serious issue that the defendant was infringing section 7(b) of the Trademarks Act; 2) this was causing irreparable harm to the manufacturer since the “damages are likely to be not only very difficult to quantify but difficult to collect”; and 3) the balance of convenience favoured the granting the injunction. It is significant that the defendant did not respond to the plaintiffs’ motion and that many of the court’s findings were made “in the absence of evidence to the contrary…” Interlocutory injunctions for trademark infringement are difficult to obtain in the Federal Court. Far more often than not, they are unsuccessful - even where infringement and irreparable harm are easier to prove than they were here. Had the defendant responded in this case, it might have had a good argument that the manufacturer suffered no harm from the defendant’s infringement, let alone irreparable harm.