COURT FILE NO.: CV-09-382505
DATE: 20120816
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DENTEC SAFETY SPECIALISTS INC.
Plaintiff
- and -
DEGIL SAFETY PRODUCTS (1989) INC.
Defendant
Leo Klug, for the Plaintiff
John O’Sullivan, for the Defendant
HEARD: June 25-28, 2012
Kenneth L. Campbell J.
I
Introduction
[1] The plaintiff, Dentec Safety Specialists Inc., has launched a simplified procedure claim against the defendant, Degil Safety Products (1989) Inc. The corporate parties are competitors in the industrial safety products business. Each corporate party is owned and controlled by a Dente brother. The two siblings bear some animosity toward each other. In this action, Dentec claims that Degil wrongfully passed itself off as Dentec by registering and using the internet domain name, dentecsafety.ca, knowing full well that the plaintiff’s internet web address was dentecsafety.com, and by deliberately redirecting potential internet customers of Dentec to the Degil website at degilsafety.com. Conceding that it is unable to conclusively demonstrate that it lost any sales or customers as a result of the defendant’s actions, Dentec claims only $10,000 in compensatory damages. However, Dentec seeks $50,000 in punitive damages on the basis that Degil deliberately interfered with Dentec business by surreptitiously intercepting potential customers and sales, depriving Dentec of the opportunity to generate internet business, and dishonestly trading upon the good will and business reputation of Dentec and Claudio Dente.
[2] Degil admits that it registered the dentecsafety.ca domain name and, for the 5½ month period between approximately February 23 and August 6, 2009, redirected all internet traffic through the dentecsafety.ca website to the degilsafety.com website. Degil contends, however, that it did nothing wrong. The domain name was “available” and Degil had a legitimate claim to the name, given that it contained words associated with its business, namely, the words “dente” and “safety.” Accordingly, Degil contends that it was lawfully entitled to register the domain name and use it as it saw fit. Degil argues that, in any event, the plaintiff is unable to establish that it, in fact, lost any customers or sales through this redirection of internet traffic, and so there can be no compensatory damages payable. Moreover, Degil argues that this is simply not a case where punitive damages are appropriate because, even it is wrong about being able to register and employ the dentecsafety.ca domain name, there was nothing malicious, oppressive, or high-handed about its conduct.
[3] There are essentially two issues in this case, namely: (1) whether the plaintiff has been able to establish, on the balance of probabilities, all of the necessary components of the tort of passing-off; and (2) the quantum of any compensatory and punitive damages that are payable by the defendant.
II
The Factual Background
A. The Relationship of the Parties
[4] The essential facts of this case are not in serious dispute. Claudio Dente is the main individual behind the Dentec corporation. Indeed, the Dentec corporation got its name from a simple combination of his last name, Dente, and the first initial of his first name. Martino Dente is the main individual behind the Degil corporation. Claudio and Martino Dente are brothers. For many years they worked together, along with other members of the Dente family, in the business of selling industrial safety products. However, they now each have their own industrial safety products business and are in direct competition with each other. They each sell products such as safety goggles, face masks, air filters, safety gloves, body harnesses, and hard hats. Moreover, for reasons that are unnecessary to detail, the two brothers harbour considerable personal animosity toward each other. This is not the first time they have engaged each other in adversarial litigation. They now only speak to each other through their respective lawyers.
B. The Internet Address for Dentec
[5] After incorporating Dentec in March of 2004, Claudio Dente registered the internet domain name of dentecsafety.com. Accordingly, Dentec had the licensed right to the internet domain name employing the short name of the company “Dentec Safety” together with the common global suffix “.com.” He did not, however, at the same time register any other similar internet domain names with other common suffixes such as .ca, .net, .org, or .uk. From the very outset of its business operations, Dentec relied heavily upon its internet address as part of its business communications and advertising strategy. The company’s dentecsafety.com internet address was on all corporate correspondence, advertising and solicitations. As Claudio Dente explained, Dentec’s internet website was an inexpensive way to advertise its industrial safety products globally.
C. Degil Registers a Dentec Domain Name and Redirects Internet Traffic
[6] On February 23, 2009, Degil registered the internet domain name dentecsafety.ca. This was done by Riccardo Dente, Martino Dente’s son and the Director of Business Development and Operations for Degil. As Riccardo Dente explained, he registered this domain name because it was “available” and because it contained his family name and the word safety. While he was aware that the plaintiff used the domain name dentecsafety.com, he thought that Degil had a “legitimate claim” to the dentecsafety.ca domain name. Riccardo Dente set up this new domain name such that whenever internet users entered that website address into their browser they were automatically redirected, without notice, to the Degil website at degilsafety.com. This was done, according to Riccardo Dente, simply as a matter of “common practice.” In this way, however, potential customers of Dentec would, through the instant magic of the internet, be redirected to its competitor Degil. The defendant never intended to create an actual website on dentecsafety.ca. Rather, it was always intended that it would simply redirect internet traffic to the main Degil website.
[7] Claudio Dente became aware of this redirection in late May of 2009, when a customer advised him that he had personally been redirected in this way when he had tried to access the dentecsafety.ca web address. After confirming this internet reality for himself, Claudio Dente contacted his lawyer and this litigation was commenced on July 7, 2009. Claudio Dente checked the website a number of times throughout the summer of 2009, and the redirection continued. Approximately one month after the start of the action, on August 6, 2009, Degil voluntarily stopped this redirection and internet traffic on dentecsafety.ca ceased being redirected to degilsafety.com.
[8] Dentec eventually acquired the dentecsafety.ca internet domain address in September of 2011, when Claudio Dente learned that it was no longer registered to Degil.
III
Liability Analysis
A. The General Principles of the Tort of Passing-Off
[9] The tort of passing-off prevents people from selling their products to consumers after having led them to believe that they are the products of another. Said simply, a person may not pass off his or her goods as those of another. In Ciba-Geigy Canada Ltd. v. Apotex Inc., 1992 CanLII 33 (SCC), [1992] 3 S.C.R. 120, the Supreme Court of Canada thoroughly reviewed the law in this area, and concluded, at para. 33, that the tort of passing-off has three necessary components, namely, “the existence of good will, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.” These three elements have been called the “classic trinity” defining the tort. There is no requirement that the defendant’s actions be intentionally fraudulent, malicious, or even negligent. The tort of passing-off is complete without reference to the defendant’s state of mind. See: C. Wadlow, The Law of Passing-Off (4th ed., 2011) at §§ 1-014 et seq.
[10] The essence of the tort is deceit by the defendant suggesting that the defendant’s product is the plaintiff’s product, which thereby causes confusion in the minds of consumers as to whose products are being sold. It is not necessary for the plaintiff to establish that consumers were actually misled by the defendant’s conduct, but simply that the defendant made an attempt to mislead the public. It is important to avoid confusing anyone who has an actual or potential connection with the product. Such confusion may enable a competitor to secure a commercial advantage by effecting product sales it would not otherwise achieve, or it may result in a consumer purchase that might not otherwise have taken place. See also: Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873 (H.L.) at p. 880; Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., 1982 CanLII 45 (SCC), [1982] 1 S.C.R. 494; Consumers Distributing Co. v. Seiko Time Canada Ltd., 1984 CanLII 73 (SCC), [1984] 1 S.C.R. 583, at p. 601.
[11] Practically speaking, cases of passing-off typically fall into one of two broad categories, namely: (1) where competitors are engaged in a common field of activity and the defendant has named, packaged, or described its product or business in a manner likely to lead the public to believe that the defendant’s product or business is that of the plaintiff; or (2) where the defendant has promoted its product or business in such a way as to create the false impression that its product or business is in some way approved, authorized, or endorsed by the plaintiff or there is some business connection between them, thereby capitalizing on the plaintiff’s reputation and good will. See: National Hockey League v. Pepsi-Cola Canada Ltd. (1992), 1992 CanLII 2324 (BC SC), 92 D.L.R. (4th) 349 (B.C.S.C.) at p. 401; Affirmed: (1995), 1995 CanLII 2102 (BC CA), 122 D.L.R. (4th) 412 (B.C.C.A.).
B. Passing-Off in the Context of Internet Domain Names
[12] While the tort of passing-off originated hundreds of years ago, its application in the information age to the use of domain names is an issue of relatively recent origin. Many of the relevant authorities are helpfully collected and reviewed by Sigurdson J. in British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, [2001] B.C.J. No. 151 (S.C.). See also: British Telecommunications Plc. v. One in a Million Ltd., [1998] 4 All E.R. 476 (C.A.); Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (C.A., 9th Cir., 1999); Jews for Jesus v. Brodsky, 993 F.Supp. 282 (D.C.N.J., 1988); Affirmed: 159 F.3d 1351 (C.A., 3rd Cir., 1998); Law Society (British Columbia) v. Canada Domain Name Exchange Corp. (2004), 2004 BCSC 1102, 243 D.L.R. (4th) 746 (B.C.S.C.).
[13] A number of important principles can be gleaned from these authorities, which I would summarize as follows:
(1) Likelihood of Confusion Measured by the Ordinary Customer: The appropriate legal standard by which to measure whether or not the defendant’s conduct may have caused confusion in the minds of the public, is the standard of the “ordinary average customer” shopping for the products sold. See: British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 117; Jews for Jesus v. Brodsky, at p. 303.
(2) Factors to Consider: In considering the likelihood of potential confusion among customers, the court should consider all of the circumstances of the case, including: the degree of similarity of the secondary level domain names of the parties; the relatedness and similarity of the products sold by the parties; the strength of the plaintiff’s business name in the market place; the value of the goods being sold and the care and attention reasonably expected of consumers when purchasing such goods; the defendant’s intent in using the domain name; any evidence of actual confusion among members of the public; and whether the plaintiff and the defendant similarly sell their goods through the same channels and to the same market. This is not an exhaustive list of relevant factors, and the relative importance of each factor will depend on the circumstances of each case. See: British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 85-86, 103; Brookfield Communications Inc. v. West Coast Entertainment Corp., at pp. 1053-1054; Jews for Jesus v. Brodsky, at p. 301.
(3) Degree of Similarity to Competitor’s Name: In assessing the likelihood of confusion among customers, the degree of similarity between the plaintiff’s business name and the domain name used by the defendant will always be an important consideration. If the names are entirely dissimilar, customer confusion is not likely. The greater the degree of similarity between the names, the more likely there is to be customer confusion. The greatest likelihood of customer confusion exists, of course, when the defendant registers a secondary level domain name exactly matching a competitor’s business name. Such use of an exact business name weighs heavily in the “customer confusion” analysis. Indeed, in appropriate cases, the defendant’s use of such a domain name may itself amount to passing-off. See: British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 78, 89-92; British Telecommunications Plc. v. One in a Million Ltd., at p. 497; Law Society (British Columbia) v. Canada Domain Name Exchange Corp., at para. 23, 29-31; Stenner v. Scotia McLeod (2007), 2007 BCSC 1377, 62 C.P.R. (4th) 1 (B.C.S.C.) at para. 156-158, 167-169; Brookfield Communications Inc. v. West Coast Entertainment Corp., at pp. 1054-1055; Jews for Jesus v. Brodsky, at p. 302.
(4) Similarity of Products Sold: In assessing the likelihood of confusion among customers, the similarity and relatedness of the goods being sold by the plaintiff and defendant is another key factor. If the parties are selling entirely different goods and products in the global market place, the chance of customer confusion is greatly reduced. However, the more related the products being sold, the more likely the average customer will be confused. When the parties are selling virtually identical products, the risk of customer confusion is greatest. See: Brookfield Communications Inc. v. West Coast Entertainment Corp., at pp. 1055-1056; Jews for Jesus v. Brodsky, at pp. 301-302.
(5) Initial Interest Internet Confusion: The confusion which the tort of passing-off seeks to avoid includes “initial interest confusion,” which occurs when web shoppers are looking for the plaintiff’s website but, through the great similarity of the defendant’s domain name, are instead directed to the defendant’s web address. Internet shoppers are more likely to be confused as to the ownership of a website than more traditional patrons who do their shopping at physical “bricks-and-mortar” locations. Moreover, when the plaintiff and the defendant sell the same or similar products and both employ the internet to promote and sell their products, a significant number of shoppers who may have originally been looking for the plaintiff’s internet business site, may simply decide to purchase the defendant’s products instead. See: British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 80-92; Brookfield Communications Inc. v. West Coast Entertainment Corp., at p. 1062.
(6) The Intention of the Defendant: To be held liable for passing-off, the defendant need not have intentionally sought to confuse or mislead the public. However, proof of a defendant’s intention to confuse and/or mislead the public will provide strong evidence of customer confusion. See: British Columbia Automobile Assn. v. OPEIU Local 378, at para. 78, 211; Law Society (British Columbia) v. Canada Domain Name Exchange Corp., at para. 26; Brookfield Communications Inc. v. West Coast Entertainment Corp. at p. 1059; Jews for Jesus v. Brodsky, at p. 304.
C. Applying the Law to the Facts
1. The Good Will of Dentec in US Safety Products
a. Introduction
[14] To establish the first required element in the tort of passing-off, the plaintiff must demonstrate that it possessed good will. Good will has been described as the business benefit flowing from the “good name, reputation, and connection” enjoyed by a business. It is the “attractive force” that brings in customers. It distinguishes an old, established business from a new business at its inception. Good will is the legal property of the business and adds value to it, as its strength provides a coincidentally loyal base of customers. See: Inland Revenue Commissioners v. Muller & Co. Margarine Ltd., [1901] A.C. 217 (H.L.) at pp. 223, 235.
[15] To establish the good will element of the tort of passing-off, it is not enough for the plaintiff to establish a generalized business good will. The plaintiff must establish “a good will or reputation attached to the goods or services” which it supplies “in the mind of the purchasing public.” See: Reckitt & Colman Products Ltd. v. Borden Inc., at p. 880; Ciba-Geigy Canada Ltd. v. Apotex Inc., at para. 32.
[16] The defendant contends that the plaintiff has not established the good will component of the tort of passing-off. I disagree. In my view, the evidence in this case establishes that, throughout the relevant time period in 2009 (and beyond), Dentec had gathered very considerable good will as an industrial safety products business generally, and had established that good will, more specifically, in the sale of the brand name product line, US Safety. Indeed, Dentec was the exclusive Canadian distributor for US Safety products.
b. The Evidence of the Necessary Good Will
[17] Claudio Dente testified that he has been in the industrial safety business for some 32 years. He worked in the family business, Degil Safety Products (1989) Inc., which he had founded, for some 15 years before starting his own business.
[18] After a series of negotiations, Claudio Dente sold off his interest in Degil and, on March 1, 2004, he created the plaintiff, Dentec Safety Specialists Inc., his new business. At that point, with Martino Dente continuing with his leadership at Degil, and with Claudio Dente leading his new company Dentec, the Dente brothers became direct competitors in the industrial safety products industry.
[19] According to Claudio Dente, he was able to quickly grow the Dentec business and develop his well-respected reputation in the industrial safety supply industry. He soon achieved over $1 million in sales, and developed a significant and growing following of suppliers and customers. Dentec now operates its business from a 21,000 square foot facility in Newmarket, with approximately 25 employees.
[20] As Claudio Dente explained, right from the very beginning, Dentec relied very heavily upon the internet. The name of its website, dentecsafety.com, was put on everything, including all of its advertising, business cards, shipping cartons, invoices, packing slips, and letter heads, and was included in all outgoing company emails. As a matter of corporate policy, it was thought that the internet was both the easiest way for people to find the company’s products, and an inexpensive way to advertise the company globally. In short, Dentec sought to “blast” its internet address everywhere.
[21] In his evidence Claudio Dente described himself as, essentially, a “salesman” for Dentec. In his efforts to promote Dentec and its products, Claudio Dente travels very frequently in Canada and the United States. He frequently attends trade shows, designed both for the general industrial public and distributors, and he is a speaker at some of these functions.
[22] Dentec has won awards for the quality of its business. In 2006, in only its second year of operation, Dentec won an award from IDI, a consortium of approximately 100 independently owned distributors, as being the “Supplier of the Year.” This award was presented to Dentec for “outstanding excellence, professionalism, distributor-oriented programs and support of IDI and its independent distributor member shareholders.” In 2008, Dentec won another business award, from Indicia, a competitive marketing group with the same type of distributorship. Dentec won this Vendors Award based on its business performance and its sales performance to the membership of Indicia.
[23] Importantly, in February of 2007, Dentec was appointed as the exclusive master distributor for the Canadian marketplace for all US Safety products. There was a formal announcement of this important appointment. Immediately thereafter, Dentec started promoting the US Safety products on its own dentecsafety.com website.[^1] By the time Degil began diverting internet traffic through the dentecsafety.ca domain name, Dentec had been serving in this capacity for some two years.
c. Conclusion
[24] In light of this evidence, I am satisfied that the plaintiff has established, on the balance of probabilities, that Dentec not only possesses considerable good will as an industrial safety products business, but, more particularly, has established that good will and business reputation, in connection with the sale of the brand name US Safety products as the exclusive Canadian distributor of these products. Accordingly, the plaintiff has proven the first element of the tort of passing-off.
2. The Misrepresentation by Degil
a. Introduction
[25] To satisfy the second element of the tort of passing-off, the plaintiff is obliged to prove that the defendant has in some way conveyed a misrepresentation to the public, whether intentionally or not, that would likely have caused confusion among ordinary average customers as to whether the goods being sold by the defendant are those of the plaintiff. I am satisfied the plaintiff has proven, on the balance of probabilities, that the defendant made such a misrepresentation.
b. The Misrepresentation
[26] The defendant contends that there was no misrepresentation in this case. I disagree. There is simply no gainsaying the reality that, by registering the dentecsafety.ca domain name and immediately employing it to redirect potential Dentec customers to the degilsafety.com website, Degil was offering a misrepresentation to the public. Degil was, in effect, suggesting that there was a business connection or association between Dentec and Degil when no such connection or association existed.
[27] Any ordinary industrial products customer who was looking to purchase goods from Dentec, and was trying to accomplish that purchase through dentecsafety.ca, would instantly find themselves looking the degilsafety.com website where similar and near identical industrial safety products are sold. Such customers could not help but infer, in such circumstances, that they were redirected becaused Dentec and Degil were in the industrial safety products business together, or were at least operating in association with each other. Why else would they have been redirected, through the internet, from Dentec to Degil.
[28] Moreover, if such customers sought to further investigate the potential existence of such a business connection, this logical inference would be confirmed. One way of learning the underlying identity of corporate entities is to conduct a “who is” internet search. The evidence establishes that if an interested potential customer conducted such a search in the present case, they would learn that dentecsafety.ca was a domain name that was registered by Degil Safety Products Inc. on February 23, 2009, and that the administrative and technical contact for Degil was Martino Dente. See: British Telecommunications Plc. v. One in a Million Ltd.
[29] Moreover, while it may not be strictly necessary for me to draw any final conclusions in this regard, I have no doubt that this misrepresentation to the public by Degil was made for the purpose of securing sales and customers that otherwise would have belonged to Dentec. In this regard it is important to recall that in February of 2009, Degil did not register any other domain names that combined the family name “Dente” and the word “safety” with any other letter of the alphabet – except the letter “c.” Indeed, the only domain name that Degil registered at that time was dentecsafety.ca.
[30] In my view, the only reasonable inference from this fact, in all of the circumstances of this case, was that Riccardo Dente registered and deployed the dentecsafety.ca domain name so as to intentionally divert internet traffic, and any resulting sales and customers, from Dentec to Degil. Riccardo Dente selected the dentecsafety.ca name precisely because it represented the name of a competitors business, and could be used to divert internet traffic, sales and customers away from Dentec to Degil. No alternative explanation makes any sense. This was even confirmed by Martino Dente, who conceded in his discovery testimony, that the dentecsafety.ca domain name was acquired not for the purpose of creating a new website, but solely to redirect the internet traffic through that name to degilsafety.com. See: Orkin Exterminating Co. Inc. v. Pestco Company of Canada Ltd. (1985), 1985 CanLII 157 (ON CA), 50 O.R. (2d) 726 (C.A.).
c. The Confusion Over the Products
[31] The defendant contends that, in any event, even if the conduct by Degil regarding its registration and use of the dentecsafety.ca domain name can be viewed as a misrepresentation, it could not have caused any potential confusion among customers of the parties as to which corporate entity was selling which goods. I disagree.
[32] On this issue it is important to recall that the legal standard which must be employed to measure whether the defendant’s conduct may have caused confusion in the minds of the public, is the standard of the “ordinary average customer.” See: British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 117; Jews for Jesus v. Brodsky, at p. 303.
[33] Applying that legal standard in the circumstances of this case leads me to conclude that the plaintiff has established the necessary element of likely confusion among potential customers. While there is no evidence of actual confusion in the present case, I am nevertheless led to this conclusion by all of the following considerations:
The Defendant Used Plaintiff’s Business Name: The secondary domain name that the defendant employed was the plaintiff’s business name. The plaintiff had previously selected that same secondary domain name as its own internet site for precisely that reason. The only difference between the two internet addresses was that Dentec registered the “.com” version of the name, while Degil registered the “.ca” version of the name. This could only have caused significant confusion in the minds of ordinary, average safety products customers.
The Parties Sold the Same Products: Any comparison of the products available from Dentec and Degil, through their respective internet web sites, quickly reveals that the two corporate parties were in direct competition and were selling virtually the same or very similar products. Apart from the fact that Dentec employed a blue colour theme on its website, whereas Degil used a red colour theme, the substantive contents of their respective websites often appeared almost interchangeable in terms of product availability. The mere fact that Degil did not carry the same brand names carried by Dentec does not settle the issue of customer confusion in favour of the defendant. The products are visually similar or, in some cases, visually identical, and would clearly cause confusion in the mind of any ordinary, average customer.
The Parties Sold to the Same Market: The plaintiff and the defendant similarly sell their respective goods through the same channels and to the same business market. They are in direct competition with each other. Such competition significantly increases the likelihood of confusion in the minds of ordinary customers. When customers shopping for the plaintiff’s industrial safety products typed into their browser the address dentecsafety.ca, they were immediately sent to the degilsafety.com website. Any ordinary, average customer could only conclude from such electronic redirection that there must have been some business association or relationship between the parties.
The Intent of the Defendant – To Redirect Customers: The defendant candidly admitted that, in redirecting the internet traffic from dentecsafety.ca to degilsafety.com, it was deliberately redirecting the plaintiff’s potential customers to Degil. While the defendant mistakenly believed that this was a “legitimate” exercise, there is no question that this was a deliberate business strategy adopted by the defendant. In taking this step the defendant hoped that customers trying to electronically shop for industrial safety products at the plaintiff’s website would, instead, make their purchases from the Degil website. In short, the defendant was relying upon the anticipated confusion that would result from the redirection to increase their business sales. Even if these shoppers were not, in fact, confused by the redirection, the defendant was hoping that the shoppers would nevertheless make their industrial safety product purchases from Degil, as the defendant sold, essentially, the same products as Dentec. In any event, this is the type of “initial interest confusion” that the tort of passing-off is designed to prevent.
The Value of the Goods for Sale: While the value of the industrial safety products sold by the parties predictably varied depending upon the nature of the individual product, it is fair to say that the value of the goods sold by the parties did not demand a heightened degree of attention and scrutiny on the part of ordinary customers. In such circumstances, ordinary customers are more likely to be confused by the defendant’s internet redirection.
[34] Accordingly, I am satisfied that the plaintiff has established the second element of the tort of passing-off, by proving, on the balance of probabilities, that the defendant made a misrepresentation to the public that would likely have caused confusion among ordinary average customers as to whether the goods being sold by the defendant were those of the plaintiff.
3. The Likelihood of Damage to Dentec
[35] To establish the third component of the tort of passing-off, the plaintiff must show that there is a likelihood that the defendant’s conduct resulted in damages to the plaintiff. As Professor Christopher Wadow stated in The Law of Passing-Off, at § 4-011, the plaintiff “does not have to prove actual damage (still less special damage)” in order to succeed in an action for passing-off, as a “[l]ikelihood of damage is sufficient.” In Ciba-Geigy Canada Ltd. v. Apotex Inc., the Supreme Court of Canada confirmed, at para. 33, that this last component of the tort of passing-off required proof of “actual or potential damage to the plaintiff.”
[36] In the circumstances of this case, I have no hesitation in concluding that, as a result of the defendant’s conduct, the plaintiff suffered not only the likelihood of damages, but actual damages. While the plaintiff has not provided any direct evidence of lost sales or customers, it would be unreasonable and unrealistic to conclude that the plaintiff suffered no damages in this regard. After all, for a period of some 5½ months, Dentec deliberately redirected all internet traffic through dentecsafety.ca to its own website, degilsafety.com. Throughout that period of time, customers who were looking to shop for industrial safety products offered by Dentec were being offered very similar or identical products by a direct competitor. I cannot help but conclude that, in those circumstances, Dentec was likely to suffer (and did suffer) damages as a result of lost sales and customers to Degil.
[37] The parties did not agree over who had, as a matter of law, the burden of proof on the issue of damages. The plaintiff argues that the law presumes damages have been suffered by a plaintiff where the elements of the tort of passing-off are otherwise established.[^2] The defendant, on the other hand, contends that the plaintiff is obliged to establish, on the balance of probabilities, that it has suffered any alleged compensatory damages as part and parcel of proving the tort of passing-off.[^3] Each of the parties is able to cite authority in support of its position. Given my conclusion that the plaintiff has established on the balance of probabilities that it has suffered damages in this case, I need not finally resolve that legal issue. I note in passing, however, that in Ciba-Geigy Canada Ltd. v. Apotex Inc., at para. 33, the Supreme Court of Canada cited with apparent approval a passage from the House of Lords decision in Reckitt & Colman Products Ltd. v. Borden Inc., at p. 880, in which Lord Oliver reaffirmed that one of the obligations on a plaintiff in a passing-off case was that “he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage” by reason of the confusion caused by the defendant’s misrepresentation [emphasis added]. This would appear to provide powerful support for the position advanced by the defendant in this case.[^4]
4. Conclusion
[38] Having found that the plaintiff has established, on the balance of probabilities, all three necessary elements of the tort of passing-off, I am compelled to the conclusion that the defendant is liable to the plaintiff for passing-off. Accordingly, the next issue for consideration is the assessment of the quantum of damages that should be paid to the plaintiff by the defendant.
IV
Damages
A. Introduction
[39] As noted at the outset, the plaintiff claims both compensatory and punitive damages. More particularly, the plaintiff seeks $10,000 in pecuniary losses and $50,000 in punitive damages. The defendant, on the other hand, argues that the plaintiff has not proven that it suffered any measureable financial losses as a result of the passing-off and, accordingly, is entitled to no compensatory damages. The defendant also contends that it has done nothing that merits an award of punitive damages. For the following reasons, I agree with the plaintiff that it is entitled to $10,000 in compensatory damages, but I agree with the defendant that this is not a case for any punitive damages.
B. Compensatory Damages
[40] Having concluded that the plaintiff has suffered actual pecuniary losses by reason of the defendant’s passing-off, I must assess and determine the quantum of those damages. This task is made more difficult because there is no clear and direct evidence as to the sales, customers or business the plaintiff may have lost due to the defendant’s passing-off, and no clear and direct evidence of any confusion on the part of any member of the public as a result of the passing-off. At the same time, however, it would be unreasonable and unrealistic to conclude that the plaintiff suffered no damages as a result of the defendant’s passing-off.
[41] In 2009 the plaintiff was a successful and profitable business and the plaintiff’s internet website, dentecsafety.com, had 570,941 hits. It is hard to imagine how, between February 23 and August 6, 2009, the dentecsafety.ca domain name would not have been proportionally heavy in internet traffic. The Dentec customers looking to purchase products through dentecsafety.ca would have been, during this 5½ month period of time, redirected to Degil, a competitor that sold the same or similar products. While there is no statistical evidence available as to how many hits dentecsafety.ca experienced during this 5½ month period, the evidence does show that, even after Degil ceased redirecting the dentecsafety.ca domain name to degilsafety.com, internet traffic on the dentecsafety.ca domain name continued. In other words, according to the evidence, even after August 6, 2009, when internet visitors to the dentecsafety.ca web address would be met with nothing but an entirely blank “home page,” internet traffic to the “site” still did not abate. This suggests that it is reasonable to conclude that, between February 23 and August 6, 2009, it is likely that considerable internet traffic was redirected to Degil through the dentecsafety.ca domain name, and that many potential Dentec customers made their necessary industrial safety product purchases from Degil.
[42] While the plaintiff, admittedly, cannot prove that it suffered significant damages from the defendant’s passing-off, the plaintiff is entitled to at least some modest compensatory damages. The available authorities support this proposition.
[43] In Inform Cycle Ltd. v. Rebound Inc. (2008), 2008 ABQB 369, 93 Alta.L.R. (4th) 312 (Q.B.) Brooker J. dealt with a near identical fact situation. The plaintiff, Inform Cycle Ltd., was a high-end bicycle business in Canmore, Alberta. The internet website for the business was InformCycle.ca. Ryan Drapper, a former employee of the plaintiff, went to work as the manager of a competitor, the defendant, Rebound Inc. The split between the plaintiff and Mr. Drapper was not on happy terms. Indeed, knowing the domain name used by the plaintiff, Mr. Drapper subsequently registered the available domain name InformCycle.com and, for a period of 21 days, redirected internet hits on that website directly to the defendant’s business website, where it offered some of the same goods and services. There was no evidence before Brooker J. as to how many people may have been redirected in this fashion, or any evidence as to any lost sales in the result. However, Brooker J. concluded, at para. 27, that in the absence of any evidence of actual damages to the plaintiff, and acting upon a presumption of damages, the plaintiff’s general damages were assessed at $5,000.
[44] Similarly, in Saskatoon Star Phoenix Group Inc. v. Noton (2001), 2001 SKQB 153, 206 Sask.R. 106 (Q.B.) Laing J. issued an injunction and assessed the damages in another factually similar case. The plaintiff published a daily province-wide newspaper and maintained an internet web site with the domain name thestarphoenix.com. Sometime between July and November of 2000, the defendant created an internet website with the domain name of saskatoonstarphoenix.com, with an appearance that looked exactly like the website created by the plaintiff, except that the defendant included its own advertising and indicated at the bottom of the page that the site was designed, hosted and marketed by Noton Inc. and that the defendant offered some free internet services. When the plaintiff learned of the defendant’s website at the end of October of 2000, it contacted the defendant and asked it to decease using this domain name. The defendant refused, but offered to sell the domain name to the plaintiff. Indeed, the plaintiff later admitted that its sole reason for registering the domain name was to be able to later sell it to those with a business interest in the name. The plaintiff sought injunctive relief and an injunction was issued on December 21, 2000. The defendant obeyed the order and immediately stopped using the website. The plaintiff could not establish that it suffered any pecuniary loss as a result of the defendant’s activities over this five-month period, but claimed compensatory damages for loss of its reputation and for being unable to control its own website and advertising. Acting upon a presumption of damages, Laing J. concluded that the plaintiff was only entitled to minimal general damages of $5,000.
[45] While neither of these cases offer a perfect comparison to the present case, they are of some assistance in assessing the quantum of compensatory damages due to the plaintiff. Applying my best judgment to the case, I am satisfied that the plaintiff is entitled to the $10,000 sought in compensatory damages. In my view, the plaintiff’s monetary damages are at least that much.
C. Punitive Damages
[46] Punitive damages are awarded against a defendant only in exceptional cases. Generally speaking, to justify such a punitive monetary award, the plaintiff must establish that the defendant’s misconduct was so “malicious, oppressive and high-handed that it offends the court’s decency.” The defendant’s conduct must represent a marked departure from the ordinary standards of decent behaviour. See: Hill v. Church of Scientology of Toronto, 1995 CanLII 59 (SCC), [1995] 2 S.C.R. 1130, at para. 199-202; Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 36, 67, 69.
[47] I am not satisfied that this is the type of exceptional case which merits an award of punitive damages against the defendant. While I am satisfied the defendant is liable for the tort of passing-off, I am not satisfied that the misconduct by the defendant is so egregious as to merit punitive damages. Applying the following factors, recognized by the Supreme Court of Canada in Whiten v. Pilot Insurance Co., at para. 113, the defendant’s misconduct simply does not display the requisite level of moral blameworthiness:
Not Planned and Deliberate: While the defendant’s misconduct was intentional, in that Degil registered and redirected the dentecsafety.ca domain name to the Degil website, this misconduct was neither planned nor deliberate on the part of the defendant. Riccardo Dente explained that it was a decision that he made, immediately, on his own, without any consultation or board meetings with others, and which he executed electronically in about “ten seconds” when he discovered that the domain name was available and had not already been registered by Dentec.
Intent and Motive: The defendant clearly intended to take advantage of the failure of Dentec to register the domain name dentecsafety.ca, and use it to redirect internet traffic away from a competitor and to its own business website.
No Persistence in Misconduct: While the defendant certainly continued to redirect internet traffic through the dentecsafety.ca domain name to the Degil website for a period of some 5½ months, the defendant stopped engaging in this misconduct shortly after being first advised that the plaintiff took issue with this conduct. The plaintiff commenced the law suit on July 7, 2009 and the redirection was stopped on August 6, 2009.
No Concealment: The defendant did not expressly advise the plaintiff what it had done regarding the dentecsafety.ca domain name, but the defendant did not make any effort to conceal or cover-up its conduct.
No Awareness of Wrongdoing: The defendant was not aware that what it was doing was legally wrong. Riccardo Dente expressly testified that, in registering the dentecsafety.ca domain name and using it to redirect internet traffic to the Degil website, he did not believe he was doing anything wrong. He explained that the name was available, that he thought Degil had a “legitimate claim” to the name once it was registered, and that he thought there was nothing illegal about the way Degil was using the name.
Profit: I have no doubt that the defendant profited financially from its misconduct regarding the dentecsafety.ca domain name. However, in awarding $10,000 in compensatory damages in favour of the plaintiff, I am satisfied that this award requires the defendant to, essentially, disgorge the profits that it would have earned through the dentecsafety.ca domain name.
Personal: The defendant’s misconduct did not deprive the plaintiff of anything that is irreplaceable, but the defendant must have appreciated, in engaging in his passing-off misconduct, that the plaintiff would take this step as “deeply personal.” The defendant was, in effect, interfering with the plaintiff’s business by disrupting its internet connection to the business world. Claudio Dente was, quite predictably, upset and concerned by this misconduct.
V
Conclusion
[48] In conclusion, judgment must issue in favour of the plaintiff. The defendant is liable to the plaintiff for the tort of passing-off. The defendant is obliged to pay the plaintiff $10,000 in compensatory damages. There will be no award of punitive damages. Judgment shall issue accordingly.
[49] The only remaining issue is the costs of this action. If the parties cannot agree on the issue of costs, the parties should follow the following timetable regarding the filing of their costs submissions.
[50] Counsel for the plaintiff shall file his bill of costs and written submissions on costs by August 30, 2012. Counsel for the defendant shall file his bill of costs and submissions on costs by September 13, 2012. These written submissions from the parties on any and all of the costs issues shall be no longer than five pages each, excluding the bill of costs and excluding, of course, copies of any authorities that the parties may elect to provide in support of their respective arguments. To the extent that any reply submissions are necessary, the plaintiff shall file such submissions, which shall be no longer than two pages, by September 20, 2012.
Kenneth L. Campbell J.
Released: August 16, 2012
COURT FILE NO.: CV-09-382505
DATE: 20120816
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DENTEC SAFETY SPECIALISTS INC.
Plaintiff
- and -
DEGIL SAFETY PRODUCTS (1989) INC.
Defendant
REASONS FOR JUDGMENT
Kenneth L. Campbell J.
Released: August 16, 2012
[^1]: Significantly, prior to February of 2007, it was Degil that had been the Canadian distributor of US Safety products. The appointment of Dentec to this role led Degil to institute a $15 million action against Dentec and Claudio Dente personally. Ultimately, the litigation was settled without cost to either Dentec or Claudio Dente.
[^2]: In advancing this argument the plaintiff relied on a series of cases, following Draper v. Trist, [1939] 3 All E.R. 513 (H.L.) at p. 526, including Law Society (British Columbia) v. Canada Domain Name Exchange Corp., at para. 44-45; Inform Cycle Ltd. v. Rebound Inc. (2008), 2008 ABQB 369, 93 Alta.L.R. (4th) 312 (Q.B.) at para. 25; Saskatoon Star Phoenix Group Inc. v. Noton (2001), 2001 SKQB 153, 206 Sask.R. 106 (Q.B.) at para. 13; British Columbia Automobile Assn. v. O.P.E.I.U. Local 378, at para. 56-58.
[^3]: In advancing this argument the defendant relied on Ciba-Geigy Canada Ltd. v. Apotex Inc., at para. 32; BMW Canada Inc. v. Nissan Canada Inc., [2007] F.C.J. No. 991 (C.A.) at para. 33-37; Pro-C Ltd. v. Computer City Inc. (2001), 2001 CanLII 7375 (ON CA), 55 O.R. (3d) 577 (C.A.) at para. 24.
[^4]: Oddly, many of the cases relied on by the plaintiff appear to proceed on the assumption that, in Ciba-Geigy Canada Ltd. v. Apotex Inc., the Supreme Court of Canada held that there was a presumption of damages. With respect, the decision in Ciba-Geigy Canada Ltd. v. Apotex Inc. does not stand for that proposition.