Orkin Exterminating Co Inc v Pestco Co of Canada Ltd; 10 Jun 1985

References: (1985) 19 DLR (4th) 90, 50 OR (2d) 726, 30 BLR 152, 34 CCLT 1, 5 CPR (3d) 433, 1985] OJ No 2526 (QL), 10 OAC 14
Links: Canlii
Coram: Morden, Zuber, Robins JJA
Ratio: Canlii (Court of Appeal, Ontario) Torts — Passing off — Goodwill — Pest control company carrying on business in United States but not in Canada — Company having reputation among Canadian customers for services performed for them in United States — Company intending to expand its business into Ontario — Company having goodwill which Canadian court will protect in passing-off action.
The plaintiff was an American company which did not carry on business in Canada. The defendant was a Canadian company, carrying on business in Metropolitan Toronto. The defendant started using the plaintiff ‘s name in its business and later it began using the plaintiff ‘s logo on invoices it sent to customers under its own name. The plaintiff brought an action against the defendant for damages for passing off and an injunction. The trial judge gave judgment for the plaintiff. The defendant appealed to the Ontario Court of Appeal.
Held, the appeal should be dismissed. The trial judge was right in concluding that the plaintiff was entitled to relief on the basis that it had a reputation (built up in several different ways including having customers) in Ontario and intended to expand its business into Ontario. A plaintiff does not have to be in direct competition with the defendant to suffer injury from the use of its trade name by the defendant. If the plaintiff ‘s trade name had a reputation in the defendant’s jurisdiction, so that the public associated it with services provided by the plaintiff, then the defendant’s use of it would mean that the plaintiff had lost control over the impact of its trade name in the defendant’s jurisdiction. The practical consequence of this would be that the plaintiff would then be vulnerable to losing the Ontario customers it had as well as prospective Ontario customers, with respect to services provided in the United States. Also, it could result in the plaintiff being prevented from using its trade name in Ontario when it expanded its business into Ontario. Bearing in mind that the defendant had a virtually infinite range of names and symbols from which to choose, it is difficult to see the enjoining of it from using the name and logo of a well- established company in the same business as an unreasonable restraint on its freedom to carry on business as it sees fit. The public are entitled to be protected from such deliberate deception and the plaintiff, which had laboured long and hard and made substantial expenditures to create its reputation which had spread to Ontario, was entitled to the protection of its name from misappropriation. The spectre of the plaintiff having a monopoly in Ontario in its name and distinctive logo, even though it did not carry on business here, was considerably less troubling than the deceptive use of its name and symbol by another. As far as freedom of trade and the reasonable expectations of business people are concerned, the interests of a dishonest defendant are entitled to less weight than those of a defendant who has acted in good faith. That is not to say that the defendant’s bad faith alone will confer a cause of action on a foreign plaintiff, but it is a relevant factor to take into account in adjusting competing interests. The plaintiff ‘s goodwill existed outside the area where it carried on business. In this kind of case the main consideration should be the likelihood of confusion with consequential injury to the plaintiff. Generally, where there is such confusion there is goodwill deserving of protection. In any event, the applicable principles could be framed without using the word ‘goodwill’.
The competing rights of the parties had to be determined as of the date when the defendant started using the plaintiff ‘s name in Ontario. At the time the plaintiff ‘s reputation in Ontario, based on its customers in Ontario and advertising of various kinds, was of sufficient strength to make its rights superior to those of the defendant. Its reputation had grown steadily since. The defendant’s decision to use the plaintiff ‘s name in Ontario was evidence that the plaintiff ‘s name had commercial value at that time in Ontario and was an important indication of goodwill in a ‘foreign’ territory. The defendant argued that no damage to the plaintiff ‘s goodwill had occurred in Canada because the defendant and the plaintiff were not competitors. Without damage there can be no passing off. However, the plaintiff had suffered damage, sufficient to support a cause of action against the defendant, by virtue of its loss of control over the impact of its trade name in Ontario and the creation of a potential impediment to its using its trade mark upon entering the Ontario market — both arising from the defendant’s use of the plaintiff ‘s name in Ontario.
Although the plaintiff’s business was conducted in the USA, it enjoyed thousands of Canadian clients who used its pest control services for their properties in Canada. It sought an injunction in passing off.
Held: Morden JA granted the order, specifically relying on the fact that the plaintiff had goodwill ‘including having customers’ in Canada, although he did express disquiet about Lord Diplock’s notion in Star Industrial that goodwill had to be divided up nationally.
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Last Update: 28-Jun-16
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