ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-52596
DATE: 2012/03/22
BETWEEN:
SKIPPER ONLINE SERVICES (SOS) INC. d.b.a. BOATEREXAM.COM
Applicant
– and –
2030564 ONTARIO INC. d.b.a. BOATSMART CANADA
Respondent
Scott Miller and Jonathan Roch, for the Applicant
Mark L. Robbins and John H. Simpson, for the Respondent
COURT FILE NO.: 11-52746
ONTARIO
SUPERIOR COURT OF JUSTICE
AND BETWEEN:
2030564 ONTARIO INC. d.b.a. BOATSMART CANADA
Applicant
– and –
SKIPPER ONLINE SERVICES (SOS) INC. d.b.a. BOATEREXAM.COM
Respondent
Mark L. Robbins and John H. Simpson, for the Respondent
Scott Miller and Jonathan Roch, for the Applicant
HEARD: January 10, 2012 (Ottawa)
REASONS FOR DECISION
parfett j.
[1] In Application No. 11-52596, the Applicant, Skipper Online Services (SOS) Inc. (“Skipper”) seeks a declaration that the Respondent, 2030564 Ontario Inc. (“Boatsmart”) has breached, and continues to breach, s. 2(a) of a Settlement Agreement (“Agreement”) reached by the parties in settlement of an action started in the Federal Court of Canada. In Application No. 11-52746, the Applicant Boatsmart seeks a declaration that the Respondent Skipper has breached s. 3(k) of the same Agreement by accepting pre‑paid authorization numbers, cards or vouchers issued by the Boatsmart in payment of services rendered by Skipper.
[2] As both applications share the same factual background and relate to the same Agreement, they were heard jointly.
Background
[3] Skipper and Boatsmart are companies that administer online training and exams for boat operators to obtain their Pleasure Craft Operator Card as required by Transport Canada. Information and access to the courses and exams is primarily made through the Internet. In an effort to ensure that their company would appear first in the array of results that a prospective customer would obtain by searching online for the Pleasure Craft Operator Card exam, each company registered a variety of terms as trade‑marks pursuant to the Trade-marks Act.[^1]
[4] On August 4, 2010, Skipper commenced an action in the Federal Court of Canada against Boatsmart alleging, inter alia, trade‑mark infringement and passing off. Skipper alleged that Boatsmart used the term ‘boater exam’ and variations of that term in its metatags (hidden keywords describing the content of a website) thereby getting priority in Internet search results.
[5] On August 10, 2011 the Federal Court action was dismissed as both parties executed a settlement agreement. Two sections of the Agreement are particularly relevant to the current dispute.
[6] Section 2(a) reads:
Boatsmart! Canada, including its related companies and the officers, directors, agents, employees, affiliates, successor and assigns thereof, shall:
(a) Refrain from using or displaying the following exact phrases or words:
BOATER EXAM;
EXAMEN DE BATEAU;
EXAMEN BATEAU;
BOATEREXAM;
EXAMENBATEAU;
or any reversals, misspellings, translations or plurals thereof as or in a name or trade‑mark, or in any other manner, however:
(i) Skipper shall not object to Boatsmart! Canada’s use of EXAM BOATER, BATEAU EXAMEN or plurals thereof as part of a sentence in a descriptive manner provided that such use online is limited to one occurrence per webpage and a maximum of three occurrences per website; and
(ii) Skipper shall not object to Boatsmart! Canada’s bidding on any phrase or word as or as part of keywords for online paid search advertising, provided that none of the exact phrases and words mentioned in this subparagraph, or any reversals, misspellings, translations or plurals thereof appears in the title line, description or text of its online advertisements and provided that Boatsmart! Canada does not specifically target individuals using the phrases and keywords mentioned in this subparagraph for the purpose of offering them discounts on services that are not available to individuals using other keywords and phrases.
[7] Section 3(k) reads:
Skipper, including its related companies and the officers, directors, agents, employees, affiliates, successors and assigns thereof, shall:
(k) Not accept any form of pre-payment, including pre-paid authorization numbers, cards, or vouchers, issued by Boatsmart Canada, as payment for Skipper’s services.
[8] Boatsmart’s website continues to use the terms ‘boat exam’ and ‘boating exam’ in its metatags.
[9] During the period of August 10, 2011 to August 15, 2011, Skipper continued to honour pre‑paid cards issued by Boatsmart as payment for its services.
Issues
Should s. 2(a) of the Agreement be interpreted to include the phrases ‘boat exam’ and ‘boating exam’?
Did Skipper breach s. 3(k) of the Agreement by honouring Boatsmart’s pre‑paid cards in payment of its services between August 10 and 15, 2011?
Interpretation of Section 2(a) of the Agreement
[10] Skipper argues that s. 2(a) of the Agreement includes any translation of the specified terms. It has provided evidence of two interpreters who indicate that the term ‘examen de bateau’ can be translated by a number of terms in English, including ‘boat exam’ and ‘boating exam’. Furthermore, it states that s. 2(a) is clear and unambiguous and requires no extrinsic evidence to interpret it.
[11] Boatsmart contends that the section is ambiguous. It argues that only the use of the specified terms was intended to be prohibited by the section, and that the word ‘translations’ in the section refers to translations to any language other than English or French since the specified terms in the section are already translated. In addition, Boatsmart asserts that any other interpretation of the section results in a commercial absurdity and/or goes beyond what is necessary to accomplish the purpose of the Agreement.
[12] In Eli Lilly & Co. v. Novopharm Ltd.; Eli Lilly & Co. v. Apotex Inc.[^2], the Supreme Court of Canada dealt in part with the proper approach to be used in the interpretation of contracts and the evidence which may be considered. It stated:
The contractual intent of the parties is to be determined by reference to the words they used in drafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time. Evidence of one party's subjective intention has no independent place in this determination.[^3]
[13] Moreover, where a particular part of a contract is in dispute, it is a fundamental precept that contractual interpretation requires an examination of the contract as a whole, not just a consideration of the specific words in dispute. Instead, the specific words or phrases must be read in the context of the entire document.[^4]
[14] The circumstances surrounding the making of the agreement are relevant to the interpretation of the contract.[^5] But matters such as the conduct of the negotiations prior to signing the contract, or the post‑contracting conduct of the parties need not be considered if the ordinary and natural meaning of the words in the agreement outlines the parties’ intent.[^6]
[15] The context of the Agreement in this case is the settlement of an action in which each party was opposing the registration as trade‑marks by the other party of certain phrases or terms. Boatsmart contends that the Agreement reflects Skipper’s concern that any use of its trade‑marked term ‘boater exam’ would threaten or ‘dilute’ the trade‑mark. Furthermore, Boatsmart asserts that nowhere in the Statement of Claim or in correspondence between the parties does Skipper ever complain about Boatsmart’s use of ‘boat exam’ or ‘boating exam’. According to Boatsmart, this evidence makes it clear that the terms ‘boat exam’ and ‘boating exam’ were never intended to be included in the Agreement. I do not agree.
[16] Essentially, the Agreement is a reciprocal one. It limits or prohibits the use in one party’s website of terms and phrases trade‑marked by the other party. Both parties sought and received protection for certain terms and phrases that they considered essential to the conduct of their business. The effect of the prohibitions is to limit the Internet ‘hits’ that one party gets as opposed to the other. It also has the effect of impacting the Internet search priority of each company. In other words, if a potential customer uses search terms that are the same or similar to Skipper’s trade‑marked terms, then Skipper will be the company that will be first on the array of search results. The opposite will be true if Boatsmart’s trade‑marked terms are used.
[17] Boatsmart contends that by interpreting the Agreement to include ‘boat exam’ and ‘boating exam’, the Agreement will go beyond what the parties intended. According to Boatsmart, the inclusion of these terms is unnecessary as the use of those terms does not ‘divert’ Internet traffic from Skipper to Boatsmart. Instead, both parties’ websites surface when those terms are used as search terms. On the other hand, Skipper argues that it is the priority that matters, not just whether both parties’ websites appear. In my view, Skipper is correct.
[18] In my view, the intention of the parties as revealed by the language of the Agreement was to limit as much as possible the other party’s use of certain terms and phrases in their websites, so as to affect both the number of Internet ‘hits’ and the priority of search results. As noted earlier, the Agreement is drafted as a reciprocal Agreement – each party agrees to refrain from using terms trade‑marked by the other party. Throughout the Agreement, the phrase, ‘or any reversals, misspellings, translations or plurals thereof as or in a name or trade‑mark, or in any other manner’, is included. Translations of the terms are specifically included, whether they are Boatsmart’s terms or Skipper’s terms. A translation, unless it is specifically limited, necessarily includes any translation, whether to or from English or French or any other language. The Agreement also specifically outlines that the prohibited terms and phrases cannot be used in any way, whether as a ‘name’, ‘trade‑mark’ or ‘in any other manner’, which includes descriptive use.
[19] In my view, a plain reading of the Agreement indicates that any translation of any term whose use is prohibited by the Agreement is also prohibited. Therefore, Skipper is entitled to a declaration pursuant to s. 14.05(3)(d) and (g) of the Rules of Civil Procedure that Boatsmart uses on its website the terms ‘boat exam’ and ‘boating exam’ which are prohibited by the Settlement Agreement, and an order that Boatsmart be prohibited from the use and display of these phrases on the website in the future.
Breach of Section 3(k) of the Agreement
[20] Boatsmart contends that Skipper continued to honour Boatsmart’s pre‑paid vouchers after the signing of the Agreement in breach of s. 3(k) of that Agreement. Skipper acknowledges that between the signing of the Agreement on August 10, 2011 and August 14, 2011, that it did honour 10 such pre‑paid vouchers. However, Skipper contends that Boatsmart should have afforded it a reasonable time to amend its website.
[21] Where an agreement anticipates that one party will do something that only it can do, and the contract is silent as to when it should be done, the law will imply a term of performance within a reasonable time.[^7] What period of time is reasonable is a question of fact.[^8]
[22] In this application, it is clear that the Agreement set out time frames for a number of different actions that one or other of the parties was to undertake. However, s. 3(k) was silent on the issue of when Skipper had to stop honouring Boatsmart’s pre‑paid vouchers. The Agreement was signed on August 10, 2011 just before the weekend. For some highly technical reasons, the change that had to be made to the website was not simple. Skipper advised Boatsmart their IT expert was on vacation and would return on the Monday (August 15th). They also indicated that they were concerned that if someone else tried to amend the website, it would potentially damage the website.
[23] The issue to be determined therefore is whether in the context of this Agreement a period of five days taken to implement s. 3(k) was unreasonable. In my view, it was not. As a result, Boatsmart’s application is dismissed.
Costs
The parties should attempt to resolve the issue of costs of this motion themselves. However, if the parties cannot resolve the issue of costs, they can make written submissions. The written submissions should be no more than two pages in length, with attachments including Offers to Settle and a detailed Bill of Costs and should be provided within 30 days, with a right of reply within a further 10 days.
Madam Justice Julianne A. Parfett
Released: March 22, 2012
[^1]: Trade-marks Act, R.S.C. 1985, c. T-13, as amended.
[^2]: 1998 SCC 59.
[^3]: Ibid., at para. 54.
[^4]: Hall, G., Canadian Contractual Interpretation Law, (1st ed.) (LexisNexis Canada Inc., 2007) at p. 11.
[^5]: Eli Lilly at para. 54. See also Schneeberg v. Talon International Development Inc., 2011 ONCA 687 at paras. 38‑40.
[^6]: Ibid., at para. 55; Kornelson v. Buchan, 2004 BCSC 376 at para. 22.
[^7]: Sound Contracting Ltd. v. Comox-Strathcona (Regional District), 2005 BCCA 167 at para. 11. See also Ring Contracting Ltd. v. Aecon Construction Group Inc., 2006 BCCA 304 at para. 17.
[^8]: Halsbury’s Laws of England, vol. 97, 5th ed. (London, UK: LexisNexis, 2010) at para. 349.