COURT FILE NO.: CV-16-2368

DATE: 2019 11 15

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HTS Engineering Ltd.

Plaintiff

AND:

Gurjot Marwah aka Greg Marwah, Equipment NAD Inc. aka NAD Equipment Inc. and NAD Klima Ontario Inc.

Defendants

AND RE:

Equipment NAD Inc. aka NAD Equipment Inc. and NAD Klima Ontario Inc.

Plaintiffs by Counterclaim

AND:

HTS Engineering Ltd.

Defendant by Counterclaim

BEFORE: Ricchetti J.

COUNSEL: K. MacDonald and J. Allingham for the Plaintiff

J. Wadden and L. Fulop for the Defendants

HEARD: October 15, 2019

ENDORSEMENT

Table of Contents

THE MOTION.. 2

THE PARTIES. 3

THE FACTS. 4

Air Diffusers. 4

NAD's Trademarks. 4

The Selection of Air Diffusers for Building Projects. 5

The Former NAD/Emco Relationship. 7

The Former NAD/HTS Relationship. 8

The HTS Distribution of Emco Air Diffusers. 8

Evidence of Confusion. 11

THE LITIGATION BACKGROUND.. 12

Alleged Lack of NAD’s disclosure. 14

THE POSITION OF THE PARTIES. 14

ANALYSIS. 15

Marwah's Evidence. 15

Should HTS’ Pleadings Be Struck?. 16

Is NAD In Default Under The Rules Of Civil Procedure?. 16

Should HTS’ pleadings be struck for failing to comply with the Rules?. 18

Should NAD Be Granted A Permanent Injunction?. 23

Should NAD Be Granted An Interlocutory Injunction?. 23

HTS’ Denial there is a Continuation of the Alleged Improper Marketing and Selling. 23

HTS denies liability for the Emco Website. 24

HTS as Middleman. 25

The Evidence of Raffaele Verre. 25

Application of the R.J. R. Macdonald Test 26

Serious Issue to be Tried. 27

NAD has no Standing to Bring this Action. 27

i. NAD's Claims under the Trademarks Act Sections 19 and 20. 28

ii. Depreciation of Goodwill 30

iii. Passing Off. 31

Will this Injunction likely end the Litigation?. 37

Irreparable Harm.. 38

Balance of Convenience. 41

Weighing these Factors. 45

CONCLUSION.. 45

COSTS. 46

THE MOTION

[1] This is a motion by the Defendants for an order:

a) Striking HTS Engineering Ltd.’s ("HTS") Statement of Claim and the HTS’ Defence to Counterclaim, with prejudice and without leave to amend, for failure to produce documents; comply with court orders; and/or unreasonable delay and, if so ordered, grant NAD Equipment Inc. (“NAD”) a permanent injunction preventing HTS from using NAD’s Trademarks (as described below) or similar and confusing marks/descriptions for the marketing, sale or distribution of the HTS’ products; and directing a trial on the issue of damages; or

b) In the alternative, an interlocutory injunction preventing HTS from using NAD’s Trademarks or similar and confusing marks/descriptions for the marketing, sale or distribution of HTS’ air diffuser products.

THE PARTIES

[2] HTS is a company distributing HVAC products, manufactured by others, in Ontario and elsewhere. HTS sales include specialized high induction air diffusers for industrial and commercial projects.

[3] NAD is a manufacturer of HVAC products including high induction air diffusers for industrial and commercial projects in Canada and elsewhere. NAD’s offices are located in Germany.

[4] NAD Klima Ontario Inc. (“NAD Klima”) is NAD 's distributor for air diffusers in Ontario. For the purpose of this motion, I will use NAD to describe both NAD companies except where there is a significant difference.

[5] Gurjot Marwah ("Marwah") was employed by HTS in Engineering Sales when HTS was a NAD distributor. Subsequently, in December 2015, Marwah became employed, and is currently employed by NAD as its Director of Sales.

[6] Daniel Lauzon (“Lauzon”) is not a party to this proceeding. He is the principal of NAD and owner of the NAD Trademarks.

[7] Emco Bau-und Klimatechnik GmbH & Co. KG (“Emco”) is a manufacturer of HVAC products, including high induction air diffusers, for industrial and commercial projects around the world. Emco is located in Germany.

THE FACTS

Air Diffusers

[8] In a very simplistic way, air diffusers are the vents which distribute the HVAC air into a room or space. Obviously, there are many different air diffuser models. High induction air diffusers vent the HVAC air into the room or space in a different manner. The high induction air diffusers are relatively new to the Ontario building market.

[9] Certain of NAD’s high induction air diffusers, such as its DAL358 and DAL359 product ("product designations"), are certified as meeting ANSI/ASHRAE, standard 129, by the National Research Council of Canada (“NRC”) (“HTS air diffusers”). No other air diffusers or high induction air diffusers marketed in Canada have certification to this standard.

[10] NRC certification permits the design of the HVAC system using NAD's certified air diffusers, to reduce the air handling capacity of the building’s HVAC (by reducing the outside air flow rate significantly) and, nevertheless, remain in compliance with the Building Code. Other air diffusers, not so certified, require an HVAC system with greater air handling capacity to comply with the Building Code. The reduced air handling capacity permitted by NAD's certified air diffusers, could result in potential savings for the overall HVAC construction costs and the subsequent operating costs of the project. Consequently, NAD's certified air diffuser products are sold at a premium price.

[11] HTS’ principal, Mr. Povolo, makes vague statements that other non-NAD air diffuser products also have "some level of certification." However, there is no detail to such a vague statement. Most importantly, the air diffusers sold by HTS, the Emco air diffusers, do not have NRC’s standard 129 certification.

NAD's Trademarks

[12] Lauzon, the principal of NAD, is the owner of the NAD Trademarks described below.

[13] In 2011 for some trademarks and in 2013 for other trademarks, Lauzon licensed NAD as the exclusive licensee to use and enforce the NAD Trademarks.

[14] NAD manufacturers the NAD air diffusers.

[15] In order to more readily identify and protect the marketing, identification and supply of the NAD air diffusers, NAD registered Canadian Trademarks for:

a) its Ontario distributor’s name ("NAD Klima"); and

b) its air diffuser product designations (such as "DAL358", "DAL359", "SAL", "RRA" and others).

(collectively the "NAD Trademarks")

[16] NAD has continually used the NAD Trademarks to identify, market, distribute and sell its air diffusers in Canada since 2012.

[17] There is no claim to expunge the registration of NAD's Trademarks.

[18] NAD Klima does not have a written "sublicense" to use the NAD Trademarks in Canada.

[19] While NAD's allegations relate generally to all of NAD's Trademarks, I will focus, in these reasons, on several NAD's Trademarked air diffuser product designations such as: DAL358, DAL 359 and SAL35 or SAL50. There are other NAD product designations, some of which HTS states it has never marketed or sold in Canada, which are less relevant to the analysis below.

The Selection of Air Diffusers for Building Projects

[20] The selection of air diffusers for commercial or industrial project are generally specified by architects or consulting engineers (“consulting engineers”) when designing an HVAC system. In specifying air diffusers, the consulting engineers primarily take into account the performance of the air diffusers, in the context of the design requirements of the project’s specific HVAC system. The consulting engineers will prepare an equipment schedule which specifies two things to identify the chosen air diffusers: the manufacturer and the manufacturer's product designation. The mechanical contractor must then acquire and install the specified air diffusers.

[21] As a result, the identification of the manufacturer and the manufacturer’s product designation is critical to ensure the right air diffusers is selected and used.

[22] In some cases, a consulting engineer might, but is not obligated to, specify acceptable alternate air diffuser manufacturer/model designation if the consulting engineer determines multiple air diffusers meet or exceed the necessary performance requirements.

[23] As a result, the manufacturers and distributors of air diffusers market their air diffusers to consulting engineers to attempt to persuade them to specify their air diffusers in a project's design specifications.

[24] If a consulting engineer believes it is specifying a particular manufacturer's air diffuser based on its performance requirements for the HVAC design but, because of confusion regarding the manufacturer or product designation, the consulting engineer specifies a different manufacturer or different product designation, there is potential for the HVAC system not to operate as designed (which may not be uncovered for years), and potentially fail to meet Building Code requirements. Hence, this highlights the importance of avoiding confusion when a particular manufacturer or product designation is specified by a consulting engineer.

[25] However, the potential for confusion does not end there. If the consulting engineer specifies a specific manufacturer and a specific product designation, but the HVAC mechanical contractor orders and installs another air diffuser due to confusion in what the consulting engineer specifies or the mechanical contractor mistakenly believes what specific product was specified, this too could create a problem with the HVAC system and Building Code compliance.

[26] Consequently, if there is any confusion, regarding the manufacturer or product designation, it could occur at either the consulting engineer stage or the mechanical contractor stage.

[27] It is difficult to ascertain what air diffuser was specified and what air diffuser was installed in a particular completed project. Whether or when a consulting engineer has specified a NAD air diffuser or an Emco air diffuser for a project, will not necessarily be public information. The same can be said for exactly what air diffuser has been installed in a project by the HVAC mechanical contractor.

[28] HTS submits that consulting engineers are knowledgeable and rely on the performance of the air diffusers they specify rather than trademarks or air diffuser product designations. I reject this submission:

a) First, the consulting engineer does not specify the performance requirements of the air diffuser in the specifications - the consulting engineer specifies the manufacturer and product designation. The product designations differentiate a manufacturer's products from another manufacturer's product. By choosing a manufacturer and product designation, the consulting engineer is selecting the air diffuser performance needed for the HVAC system;

b) Secondly, this submission fails to deal with the existence of actual or likely confusion as to what the consulting engineers intended to and did specify by referring to a manufacturer or the product designation. If a consulting engineer equates two products because of confusion in either the manufacturer or the product designation, then the potential performance differences between the two products may not be appreciated by the consulting engineer;

c) Finally, the evidence on this motion appears to show the existence of actual confusion between what consulting engineers specify as the manufacturer and the specific air diffuser model number; and

d) There is also a fundamental inconsistency with Mr. Povolo’s statement that trademarks and product designations are not relevant: if there is no significance to trademarks or product designations – why did HTS choose to use “Klima” as part of its brand name "Klimakontor" and similar product designations for its air diffuser models in 2016 after NAD complained of trademark infringement?

The Former NAD/Emco Relationship

[29] NAD and Emco are competitors. Each sell air diffusers. There is a former relationship between the two companies, but details are not fully disclosed on this motion.

[30] There was a dispute between NAD and Emco. The court was advised this dispute has now been resolved. The details of this dispute and the terms of the resolution are not included in the evidentiary record of this motion.

[31] I am not persuaded that the former relationship between NAD and Emco or their dispute are relevant to the determination of the issues in this motion.

The Former NAD/HTS Relationship

[32] In about April 2012, by way of an oral agreement, HTS became NAD's Ontario distributor (except in two cities). HTS then began to market and sell NAD's air diffusers, including the DAL358, DAL359 and other NAD air diffuser products. HTS states that high induction air diffusers were largely unproven in Ontario at the time requiring investment, marketing and promotion into the marketplace.

[33] In November 2015, NAD determined that it would start marketing and distributing its own NAD air diffuser products in Ontario. NAD Klima opened its own sales office in Ontario.

[34] For a short period of time, HTS continued to market and sell NAD air diffuser products.

[35] Ultimately, in early 2016, HTS decided to end its relationship with NAD.

The HTS Distribution of Emco Air Diffusers

[36] In early 2016, HTS entered into a distribution arrangement with Emco. As a result, HTS started to compete with NAD Klima by marketing and selling Emco products including Emco air diffusers.

[37] Initially, HTS used the brand “Emcoair” to describe the Emco air diffusers. During this initial period, HTS used Emco’s air diffusers product designations identical to NAD’s Trademarks: DAL358, DAL359, SAL and RRA. This was done primarily through HTS’ use of Emco’s catalogue and website to market and sell Emco’s air diffusers.

[38] HTS denies any intentional infringement of NAD’s Trademarks during this period. Whether that is accurate, it is no answer to a claim for trademark infringement or passing off.

[39] The correspondence between HTS and Emco suggests that the "connection" between the NAD and Emco product designations was not accidental. The following was exchanged in an email dated March 15, 2016 between Emco and HTS:

“I have a project where I already supplied 3 floors in a hospital with NAD type SAL and DAL diffusers. I might be getting the order for two more floors and my bill of material consists of qty 25 of SAL35 and qty 35 of DAL358. I am wondering how similar your products will look in comparison to the existing items already installed? Any thoughts? If they are very similar, I want to switch this order over to Emco Group.

As long as there are no special solutions the diffusers from NAD and us should be replaceable. They should look very similar, but keep in mind that we would have to send you DAL358 with aluminum profiles. These will maybe have a slightly other look in the front plate talking about the width of the visible part of the profile. But other than that you should be fine.”

(emphasis added)

In an email between Emco and HTS dated March 23, 2016 Emco and HTS wanted to “connect” their products with the NAD products:

“In order to keep the preparation of quotes as simple as possible, we would like to produce a table that connects NAD products with the correct product from our portfolio. Therefore, we would need to get an idea about the products that you bought from NAD over the last months in detail….”

(emphasis added)

[40] In April 2016, NAD determined that HTS had used NAD’s Trademarks for the “Atlas” construction project. In the Atlas project, the consulting engineer’s specified Emcoair’s “SAL” and “RRA” air diffusers, both product designations are NAD’s Trademarks. NAD notified HTS in writing that HTS was infringing NAD’s Trademarks.

[41] In early May 2016, HTS advised its sales force that they were not to refer to NAD in the future including for “unreleased” NAD orders. HTS started to use “Klima” as describing the Emco air diffusers - eventually referring to the Emco air diffusers as its "Klimakontor" air diffusers. HTS published its “HTS Klimakontor” catalogue. Mr. Povolo states that the Emco name was changed to Klimakontor "after we advised them... after we were informed of the possible trademark issues" raised by NAD.

[42] Along with this change, the product designations of the Emco air diffusers in the “Klimakontor” catalogue also changed. But ever so slightly. DAL358 became D358; DAL359 became D359 and SAL35 became S35 and so on.

[43] There is no evidence or explanation why HTS started to use the name “klima” as part of its air diffuser brand designations or whether any consideration was given its new product designations were confusingly similar to NAD’s Trademarks. There is no evidence regarding the meaning of klima, whether it is a generic word or one of customary use in the industry or whether the product designations used have some customary meaning. The only inference left is that, by using "klima", HTS was attempting to "connect" its air diffusers with the air diffusers distributed by NAD Klima.

[44] HTS states that it ceased to use the NAD Trademarks in mid 2016. I take this to mean HTS did not market or sell air diffusers using the exact NAD trademarked name or exact product designations such as “DAL358” or “DAL359” or “NAD Klima.” It appears that HTS believed that by not using NAD’s exact Trademarked name "Klima" or product designations, HTS could market its air diffusers without liability. However, even if this had been accurate, for the reasons set out below, these changes by HTS, does not end the inquiry on this motion as to whether there was trademark infringement or passing off.

[45] After the HTS changes in 2016, NAD continued objecting to HTS’s use of NAD's Klima and product designations. It commenced this proceeding for trademark infringement.

[46] HTS continues to use “Klimakontor” for its air diffusers to date.

[47] HTS continues to use product designations similar to the NAD trademarked product designations such as D358, D359 and so on.

[48] I am satisfied there were and remain striking similarities between the NAD Trademarks and the HTS marketed air diffusers source and product designations.

[49] There remains one further issue relating to HTS’ marketing and sales after 2016. HTS linked the Emco website in the HTS website. The Emco website described its air diffusers using the exact NAD Trademark protected product designations.

[50] NAD continued to object to HTS’ website containing a hyperlink to Emco’s website which included product designations such as DAL358 and DAL359, SAL35 and so on. In other words, it used the exact NAD's Trademarks.

[51] In his August 29, 2019 affidavit, HTS’ Mr. Povolo stated that the “link to Emco’s website” had been removed a long time ago and the “fact that Emco website has identical model numbers [to NAD’s Trademarks] has nothing to do with HTS.” (emphasis added)

[52] The difficulty with this statement is that it was not true. When cross-examined Mr. Povolo was shown that HTS’ hyperlink to Emco’s website continued to exist and the Emco website continued to include the identical NAD air diffuser product designations which are the subject of NAD’s Trademarks. For example, on the HTS website dated October 1, 2019, there continued to be a hyperlink to Emco’s website – which specifically referred to and showed air diffuser product designations such as “DAL358” and “SAL35.” As a result, in October 2019 HTS were continuing to use the exact NAD Trademarks to market its air diffuser products in Canada even though HTS’ earlier affidavit stated that these had been changed to D358 and S35 and so on back in 2016.

[53] Mr. Povolo now states that HTS’ website hyperlink to Emco’s website was removed on October 3, 2019. HTS now only uses its May 2016 "Klimakontor" catalogue and still uses product designations such as D358 (for NAD's DAL358), D359 (for NAD's DAL359), S (for NAD's SAL) and so on.

Evidence of Confusion

[54] I accept that it is difficult to find out the final specifications for air diffusers in individual projects or what air diffusers were actually installed. However, NAD has discovered the following project specifications which demonstrate actual confusion regarding the manufacturer and air diffuser product designations:

a) Hydro Quebec Centre of Excellence project: July 2019 specifications refer to “NAD DAL358” and “Emcoair DAL358” as acceptable or equivalent products;

b) Fleurimont Hospital project: September 5, 2019 equipment schedule refers to “NAD DAL 358” and “Klimakontor (Emco Klima) D358” as acceptable or equivalent products;

c) Conestoga College project: specifications refer to air diffusers "D358" and "S35" and "S50" are specified but in the Supply air diffuser schedule of 2017 which shows "Klimakontor" as the manufacturer of "DAL358, SAL35;

d) New North Chatham School project, specifications refer to "Klimakontor" and "D358" but then provides to "Use NAD Klima diffusers";

e) In the City Hall project, specification refer to the manufacturer as "Emco-Klima" and the model as "DAL358"; and

f) Peterborough project which shows a reference to the manufacturer as "Emco-Klima" and the model as "DAL358".

[55] In my view, the above examples demonstrate actual confusion by the consulting engineers when specifying the manufacturer and the air diffuser product designations.

THE LITIGATION BACKGROUND

[56] HTS issued a Statement of Claim on May 20, 2016. HTS claimed that damages flowing from Marwah's leaving HTS and becoming an NAD Klima employee.

[57] The Defendants defended the HTS’ Claim and issued a Counterclaim alleging:

a) Defamation;

b) Injurious falsehood;

c) Intentional interference with economic relations;

d) Breach of the Competition Act;

e) Passing off;

f) A declaration that NAD is the owner of the Trademarks; and

g) Breach of the Trademarks Act (ss. 19, 20, 22(b) and 22(1) for trademark infringement and depreciation of goodwill.

[58] HTS defended the NAD Counterclaim. HTS denies that there is any actual confusion or likelihood of confusion, and that NAD suffered no damages. With respect to the NAD Trademark declaration, HTS stated in its defence:

With respect to the declaration sought in sub-paragraph 34(d), this Court cannot grant it as Lauzon is the registered owner of the trademarks at issue which are allegedly licensed to NAD as described in paragraph 45 of the counterclaim.

[59] HTS does not seek any relief to declare the NAD Trademarks are invalid or should be expunged. HTS does not, in its defence, deny that NAD has the authority to bring the trademark infringement claims it advances in the Counterclaim.

[60] Pleadings were closed on September 26, 2016.

[61] It was not until the spring of 2017 that NAD’s counsel sought an agreement on a discovery plan with HTS’ counsel. HTS was not cooperative and, to a large extent, ignored requests from NAD’s counsel on this issue. Discussions broke down later in 2017.

[62] Nothing significant occurred until March 2018, when NAD’s counsel prepared a draft discovery plan and forwarded it to HTS’ counsel. HTS’ counsel did not immediately respond. Some discussions ensued between counsel. Nothing came of those discussions.

[63] During the summer of 2018, the discovery plan again became a topic of discussion. At that time, HTS’ counsel responded with its comments on NAD’s discovery plan in July 2018, but the parties could not agree on a discovery plan.

[64] A motion was brought by NAD to fix a discovery timetable. The motion was heard on October 11, 2018 by Dennison J. The motion was adjourned at HTS’ request. Nevertheless, Dennison J. ordered that Affidavits of Documents be exchanged by “no later than Oct. 31, 2018.” The motion was adjourned to October 25, 2018. The motion was never brought back before the court.

[65] HTS suggests that, as a result, no discovery timetable was set or, if one was agreed to by the parties, NAD had an obligation to negotiate changes to it in good faith. Whichever is correct is irrelevant. Dennison J. ordered that HTS serve/file its Affidavit of Documents by October 31, 2018. HTS failed to do so regardless of the rest of the discovery plan. Simply put, HTS did comply with the Dennison J. Order. HTS suggests that compliance was accomplished by delivering an Affidavit of Documents in early November is simply wrong. HTS’ November Affidavit of Documents was unsworn and incomplete. HTS expressly communicated to NAD that it needed more time to gather further documents to be produced.

[66] In January 2019, HTS sought to amend the discovery plan to extend the time to deliver further documents and hold the examinations for discovery in 2019. The parties were not able to come to an agreement.

[67] On May 13, 2019, NAD brought this motion. The motion was returnable on August 19, 2019.

[68] On July 31, 2019, while this motion was pending, HTS set the action down for trial.

[69] On August 19, 2019, this court ordered HTS to produce a further and better Affidavit of Documents by August 30, 2019 to expressly include listed documentation.

[70] HTS suggests that it delivered a supplementary Affidavit of Documents in response to the August 19, 2019 Order. This act was meaningless since HTS did not produce all the relevant documents including those specifically ordered to be produced. In particular, HTS' counsel admitted that HTS’ total sale revenues from the sale of NAD or similar air diffuser products could not or was not available. HTS' documentation only shows the amount HTS paid Emco for the air diffusers but fails to show the profit earned by HTS from the sale of the Emco air diffusers. It is clear from Povolo's cross-examination that, while the price HTS pays Emco for the air diffusers is "set by Emco," it is up to HTS what it bids (hence profits) on construction projects to supply such products. As a result, it is impossible for NAD to calculate damages flowing from HTS' use of the NAD Trademarks, similarly confusing marks or passing off, if successful at trial.

Alleged Lack of NAD’s disclosure

[71] HTS points to the allegation that NAD has failed to disclose relevant documents in its Affidavit of Documents.

[72] HTS saw fit to set this matter down for trial. It did so with full knowledge that, by doing so, it was accepting NAD’s productions and could not bring a motion for any deficiency it now alleges or engage in any further discovery of NAD. HTS’ counsel expressly stated when setting the matter down for trial that “we have waived our discovery rights.”

[73] There is no merit to this submission.

THE POSITION OF THE PARTIES

[74] NAD submits that HTS’ pleadings be struck for delay and non-compliance with the Rules and the Order of Dennison J. NAD submits that, if HTS’ pleadings are struck, then HTS is deemed to admit NAD’s allegations and this court should grant a permanent injunction as sought in NAD’s Counterclaim.

[75] In the alternative, NAD submits that HTS is selling its air diffusers in a manner that confuses or is likely to confuse in a way that breaches the Trademarks Act or is passing off by HTS' use of NAD’s Trademarks and/or marketing and selling its air diffusers with a confusingly similar to NAD's air diffuser products. Therefore, NAD seeks an interlocutory injunction.

[76] HTS submits that NAD’s motion to strike its pleadings be dismissed:

a) As NAD was in default of the Rules when it brought this motion;

b) In just over 3 years, neither party actively advanced the litigation and on July 31, 2019, HTS set it down for trial.

[77] HTS submits that NAD’s motion for a permanent injunction be dismissed until a full evaluation and final adjudication of NAD’s claims takes place at trial.

[78] HTS submits that NAD’s motion for an interlocutory injunction be dismissed as NAD has failed to establish any of the RJR-MacDonald factors.

ANALYSIS

Marwah's Evidence

[79] HTS criticizes the evidence from Marwah as lacking engineering expertise (as he is a mechanical engineering Technologist), and submit his statements are mostly speculation. HTS attempts to diminish the expertise and experience of Marwah's evidence relating to the marketing and sales of air diffusers in this matter.

[80] I do not accept this submission.

[81] Marwah was, according to HTS as alleged in its claim, a "key" HTS’ employee working in Engineering Sales, integral to its marketing and sales of NAD's products, including air diffusers, prior to 2015, to such an extent that fiduciary obligations to HTS arose.

[82] Marwah has, since December 2015, been NAD Klima’s Director of Sales.

[83] At the heart of the dispute is the marketing and sale of air diffusers, not their engineering design or manner of manufacture. Marwah has extensive and direct knowledge of the marketing and sales of air diffusers in Ontario.

[84] I am satisfied Marwah has considerable experience in the marketing and sales of air diffusers and, in particular, NAD air diffusers. While Povolo is an engineer, I am not persuaded that his evidence regarding the marketing and sale of air diffusers is inherently more reliable (or less reliable) than Marwah's evidence.

Should HTS’ Pleadings Be Struck?

Is NAD In Default Under The Rules Of Civil Procedure?

[85] HTS submits that NAD is in default under the Rules and therefore, cannot bring this motion.

[86] The Rules of Civil Procedure provide as follows:

24.01 (1) A defendant who is not in default under these rules or an order of the court may move to have an action dismissed for delay where the plaintiff has failed,

(a) to serve the statement of claim on all the defendants within the prescribed time;

(b) to have noted in default any defendant who has failed to deliver a statement of defence, within thirty days after the default;

(c) to set the action down for trial within six months after the close of pleadings; or

Revoked: R.R.O. 1990. Reg. 194, r. 24.01(2).

(e) to move for leave to restore to a trial list an action that has been struck off the trial list, within thirty days after the action was struck off.

[87] Rule 24.01 (1) provides that a moving party shall, when bringing such a motion, not be “in default” of the enumerated obligations under the Rules.

[88] The action has now been set down for trial by HTS. HTS setting the matter down for trial, when faced with this motion to strike HTS’ pleadings for delay, does not assist HTS’ defence to this motion. Essentially, the most significant period to examine is the delay prior to date the motion to dismiss was brought. Otherwise, any such motion, based on delay, could easily be defeated, regardless of the length of delay or the merits of the motion, by simply setting the matter down for trial after such a motion is brought.

[89] HTS submits that NAD's default is NAD’s failure to:

"produce any “documents and correspondence relating to the hiring process of the defendant, Greg Marwah”, contrary to the discovery plan, and they have failed to produce any damage documents or provide a supplementary affidavit to include relevant documents (subsequently discovered relevant documents)."

[90] As for the alleged lack of documents relating to Marwah's hiring by NAD, HTS did not raise this issue prior to NAD's motion or deal with this alleged lack of documentation prior to HTS setting the matter down for trial. According to HTS’ counsel, setting the matter down for trial was a "waiver" of further discovery from NAD.

[91] As for the alleged lack of NAD’s "damage" documents, HTS does nothing but make this bald statement. More importantly, the quantum of damages, if NAD is successful at trial, will almost exclusively flow from HTS’ sales of air diffusers using NAD's Trademarks or confusingly similar marks. Again, HTS waived further discovery of NAD.

[92] Lastly, it is difficult for HTS to allege NAD's default in producing documents as a defence to this motion, when it is clear HTS is and remains in default of its production obligations under the Rules and two court orders to produce specified documents.

[93] On the evidence before me, I am not persuaded that HTS has established that NAD is in default under the Rules. However, even if NAD is in default of its production obligations/producing an Affidavit of under the Rules, I am satisfied that this court should hear and determine this motion on its merits.

Should HTS’ pleadings be struck for failing to comply with the Rules?

[94] NAD seeks to strike pleadings submitting that HTS has failed to comply with the Rules in that:

a) HTS failed to set the action down for trial within six months after the close of pleadings;

b) HTS failed serve an Affidavit of Documents;

c) HTS failed to comply with two orders of this Court; and

d) HTS failed to comply with a timetable order.

[95] There is a high threshold to dismiss an action or the striking of pleading under the Rules. See Langenecker v. Sauvé, 2011 ONCA 803 at para 5:

It should not in any event be exercised without giving the plaintiff an opportunity to remedy his default, unless the court is satisfied either that the default has been intentional and contumelious, or that the inexcusable delay for which the plaintiff or his lawyers have been responsible has been such as to give rise to a substantial risk that a fair trial of the issues in the litigation will not be possible at the earliest date at which, as a result of the delay, the action would come to trial if it were allowed to continue.

[96] The Court of Appeal has consistently stated that striking pleadings is a remedy of last resort only to be made in exceptional circumstances where no other remedy would suffice to deal with the non-compliance. See Mullin v. Sherlock, 2018 ONCA at para 33.

[97] The courts have stated repeatedly that there is a preference that legal disputes be dealt with on the merits.

[98] In any proceeding, there is an obligation on both parties to move the action along. While the primary responsibility to move an action along is on the Plaintiff, the failure of the Defendant to move an action along is a factor for this court to consider. This principle was described in Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592:

[53] While this court has stated frequently that the plaintiff bears the primary responsibility for moving a case forward, it has also acknowledged that the conduct of a defendant is a factor, especially where a plaintiff encounters some resistance when trying to move the action along: 1196158 Ontario Inc., at para. 29. The suggestion that it is normal and acceptable for a defendant, if not to actively delay, to simply wait for the plaintiff to make the next move, may be based on a conventional view of litigation strategy. The objectives of timely and efficient access to justice, and effective use of court resources require all parties to play their part in moving actions forward, and for counsel to act in a way that facilitates rather than frustrates access to justice: Hryniak, at para. 32. For these reasons, although the burden of proof on the motion is on the plaintiff, the conduct of all parties in relation to the litigation is relevant in determining whether to restore an action to the trial list.

[99] Whether under Rule 24 or Rule 48, the court have described the following considerations, for motions to dismiss for delay, in Sickinger v. Krek, 2016 ONCA 459:

[30] The jurisprudence provides guidelines for evaluating the three requirements:

Inordinate: A court will measure the length of time from the commencement of the proceeding to the motion to dismiss to determine if the delay is inordinate: Langenecker, at para. 8; Ali v. Fruci, 2014 ONCA 596, 122 O.R. (3d) 517, at para. 11. When considering the delay, the court should remember that some cases will move slower than others because of the issues raised, the parties involved, and/or the nature of the action: Langenecker, at para. 8.

Inexcusable: A court should consider the reasons offered for the delay and whether those reasons provide an adequate explanation, with regard to the credibility of the explanations, the explanations for individual parts of the delay, the overall delay, and the effect of the explanations considered as a whole: Langenecker, at paras.9-10.

Prejudice: The third factor considers the prejudice caused by the delay to a defendant’s ability to put forward its case for adjudication on the merits: Langenecker, at para. 11. An inordinate delay will give rise to a presumption of prejudice and, unless rebutted, that presumption may result in the action being dismissed: Armstrong v. McCall (2006), 2006 17248 (ON CA), 213 O.A.C. 229 (C.A.), at para. 11. A defendant may also suffer, and demonstrate, case-specific prejudice: Langenecker, at para. 12.

[100] The delay in this case is inordinate. The proceeding is now over three years old but documentary discovery is still not complete. This, despite this court's intervention on two occasions. However, it is important to consider the responsibility for the delay.

[101] A considerable amount of evidence on this motion from both parties was to allege that the opposing party was responsible through lack of diligence or employing unfair litigation “tactics” as the cause of the delay.

[102] I reject NAD's submission that it "has been steadfast in its attempts to move this matter forward". There were many months where this proceeding languished without explanation or effort by either side to move this matter forward. I generally accept that, on several occasions, NAD tried to move this matter along with a discovery plan or by motion. However, NAD did not act diligently and consistently, as there were long periods of time during which nothing happened and NAD failed to seek interlocutory orders to move the matter along or to enforce the Dennison J. order.

[103] It is also important to note that NAD is the "Plaintiff" in the Counterclaim, which is at the heart of this motion. NAD also has an obligation to move the proceeding forward.

[104] HTS’ position that it has always cooperated in moving the action forward is also rejected. I will refer to several examples for coming to this conclusion:

a) HTS denies that it failed to comply with the Dennison J. Order to serve its Affidavit of Documents by October 31, 2018 because both parties were to negotiate changes to the discovery plan in good faith. HTS was required to comply with the Dennison J. Order and it did not do so. As for the discovery plan (which never became a court order), if HTS determined that NAD was being unreasonable, it could have always returned to court for judicial imposition or variation of the discovery plan. It did not do so. We are now three years after the action was commenced and one year after the time period set by Dennison J. and HTS’ productions are not complete and oral discovery has not taken place. HTS has been extremely slow, and I cannot stress this enough, about disclosing all relevant documents, an objective which has still yet to be met; and

b) HTS was prepared to mediate the dispute with NAD this past summer but would only mediate on the condition that NAD first “withdraw” its motion. This appears to be a clear attempt to further delay this motion.

[105] In my view, both parties share some of the blame for the delay in this case. It is a significant factor against the dismissal of HTS’ pleading that NAD shares a considerable amount of the responsibility for the delay in this proceeding.

[106] NAD submits it will suffer prejudice unless HTS’ pleadings are struck, there is no clear explanation or evidence of what this alleged prejudice is. This is not a situation that the court can or should imply prejudice simply because of the length of time of the delay in the circumstances of this case. I do not find that the three-year delay will or will likely result in an unfair trial to NAD. NAD has failed to establish prejudice will arise from the delay. Considering the unexplained reasons for the delay by NAD and the HTS, I am not persuaded that this factor is as significant as it might be in other circumstances.

[107] Let me deal with the specific issues raises by NAD.

[108] First, regarding HTS's failure to set the action down, NAD equally could have set the proceeding down for trial but failed to do so. I do not see this as a reasonable basis to strike HTS’ pleadings.

[109] Second, I agree that HTS has not filed a full and complete Affidavit of Documents. I agree that in the context of this case, HTS' failure to produce an Affidavit of Documents is serious. For example, the unproduced documents are the only way that NAD can establish its damages in this case.

[110] However, NAD has not been diligent about forcing HTS to comply with the Rules. For example, as for the Dennison J. Order, NAD did nothing for more than 6 months after HTS' failed to produce a complete and proper Affidavit of Documents by October 31, 2019, only bringing this motion in May 2019 raising the issue of deficient productions. Considering what has occurred over the past three years, I am not persuaded that HTS’ conduct to date is sufficient to deprive HTS of one last opportunity to produce a full and complete Affidavit of Documents.

[111] Third, NAD relies on HTS failure to produce relevant documents as ordered by Dennison J. and as ordered by this court on August 19, 2019. Rule 30.08(2) provides:

(2) Where a party fails to serve an affidavit of documents or produce a document for inspection in compliance with these rules or fails to comply with an order of the court under rules 30.02 to 30.11, the court may,

(a) revoke or suspend the party’s right, if any, to initiate or continue an examination for discovery;

(b) dismiss the action, if the party is a plaintiff, or strike out the statement of defence, if the party is a defendant; and

(c) make such other order as is just.

[112] In Glass v. 618717 Ontario Inc., 2011 ONSC 2810 (S.C.J.), D.M. Brown, J. (as he then was) stated at para. 36 in a motion by the plaintiffs for an order striking out the defendants’ pleadings for failure to produce material documents in a timely fashion and to provide a supplementary affidavit of documents:

The case law submitted by the parties makes two points. First, in exercising its discretion under Rule 30.08(2) a court must consider the seriousness of any breach and the prejudice such a breach may cause to the innocent party's right to a fair hearing. Second, as stated by Wein J. in Newlove v. Moderco Inc., 2002 CarswellOnt 3720 (Ont. S.C.J.), at para. 2: "the draconian measures set out in Rule 30.08(2)(b) can only be used, in my view, in exceptional circumstances" or, as put by Lane J. in Breslin v. Breslin [2006 CarswellOnt 6372 (Ont. Div. Ct.)], 2006 50893, at para 9: the "interlocutory dismissal of an action is a remedy of last resort, to be invoked when the litigant has shown a cavalier disregard of his obligations". I agree with those statements of the law.

[113] While it is true that HTS has failed to comply with two orders of this court, it is now on notice that failure to comply with the Rules, and in particular to produce a full and complete Affidavit of Documents, may result in further serious sanctions, including striking HTS’ pleadings and thereby depriving HTS of the ability to advance its claims and defences. This is HTS’ last chance to comply with its production obligations under the Rules and the prior court orders.

[114] Fourth, it is unclear whether there was a binding discovery timetable. None was ordered by this court. No one sought a judicial variation of the discovery timetable, if one was agreed upon. This is not a basis to strike HTS’ pleadings.

[115] Given the circumstances and factual matrix to be considered in the exercise of this discretion, each case is unique. As a result, very little can be drawn from other legal authorities based on the length of the delay.

[116] Are there presently exceptional circumstance or prejudice to a level which requires HTS' to be deprived of its rights to have its claim and defence heard on the merits? I am not persuaded that there are. I am not satisfied this case, at this time, meets the test for the court exercising its discretion to strike HTS’ pleadings, which would, in essence, be a dismissal of HTS’ claims and defences.

[117] I am not persuaded that the circumstances of this case justify striking HTS’ pleadings. This is a close call but, I am of the view, that HTS should be given one last opportunity to produce a full and complete Affidavit of Documents of all relevant and material documents and make same available for production to NAD, and thereby ensure compliance with the Dennison J. Order and the August 19, 2019 order.

[118] As a result, this part of NAD's motion is dismissed.

Should NAD Be Granted A Permanent Injunction?

[119] Given my conclusion on the dismissal of HTS’ Claim, NAD cannot succeed on this relief as, absent striking HTS’ pleadings, NAD's legal rights and the alleged trademark infringement by HTS has NOT been established or adjudicated on its merits.

[120] This part of NAD's motion is dismissed.

Should NAD Be Granted An Interlocutory Injunction?

HTS’ Denial there is a Continuation of the Alleged Improper Marketing and Selling

[121] HTS submits that it has not “continuously infringed” NAD’s Trademarks or passed off the products it markets, distributed and sells after the 2016 changes. Essentially, HTS suggests that an interlocutory injunction is no longer necessary.

[122] I am not satisfied the alleged “change” by HTS in 2016, even if true, necessarily absolves HTS of potential liability in this proceeding or whether an interlocutory injunction should be granted.

[123] First, HTS continued to market and distribute its Emco air diffusers using the exact NAD Trademarks. HTS did this through its website (used to market its products) which hyperlinked the Emco website for product information, which Emco website, used the exact NAD product designations, such as DAL358, right up until October 3, 2019.

[124] Secondly, even if this court were to accept the HTS 2016 "change", the submission ignores that trademark infringement or passing off could also occur if the manner HTS markets and sells its products are confusingly similar to the NAD Trademarks, depreciates NAD’s goodwill, or constitutes the tort of passing off. HTS’ use of the exact NAD’s Trademarks is not necessary for NAD to be successful in this proceeding.

[125] There is no dispute that, as of the date this motion was heard, HTS continues to market and sell its “Klimakontor” air diffusers and uses product designations such as D358, D359, and S.

[126] In conclusion, I am not persuaded that HTS’ alleged change in 2016 necessarily defeats this motion.

HTS denies liability for the Emco Website

[127] HTS submits that Emco’s website is in Germany and as such is not a breach of NAD's registered Canadian Trademarks or constitutes passing off.

[128] I disagree. In this case, HTS deliberately chose to use Emco's website to market and sell its air diffusers in Ontario and elsewhere in Canada. In addition, HTS’ evidence was that it takes the Emco catalogue "it is given to me by the manufacturer and then I give it to the sales force." By doing so, if the Emco catalogue and its website contains product designations which are identical NAD's Trademarks, this is use of NAD's Trademarks by HTS. This could constitute trademark infringement and/or passing off.

[129] HTS also submits that it is not responsible for the contents of the Emco website because HTS’ website made it clear that the Emco website was the “manufacturer’s website.” In my view, this submission has no merit. Considering all the circumstances, whatever the hyperlink is called on HTS’ website, it invites, seeks and hopes its Ontario potential customers will go to this linked website to purchase or assist in making a purchasing decision regarding air diffusers. There is no other reason why the hyperlink would be there.

[130] There would be little by way of trademark protection in Canada if a Canadian distributor could simply refer to an offshore website containing Canadian registered trademarks without liability for trademark infringement or passing off. Similarly, there would be little trademark protection in Canada if marketing and sales distributors were allowed to use, with impunity, foreign catalogues with unauthorized Canadian registered trademarks or to pass off their goods in Ontario.

HTS as Middleman

[131] HTS states that it is just a “middleman” caught in a trademark dispute between NAD and Emco. I disagree. The NAD Trademarks are and remain valid. Until such time as the NAD Trademarks are expunged or declared invalid, the unauthorized use by any person of NAD's Trademarks or confusingly similar marks to market and sell their wares in Canada is trademark infringement and might also constitute passing off.

[132] There is no merit to this submission.

The Evidence of Raffaele Verre

[133] HTS relies on the evidence of Raffaele Verre, a mechanical engineer, as opinion evidence, that consulting engineers do not rely on trademarks or trade names but rather rely on the performance of the specified air diffusers.

[134] There are a number of reasons why I find Mr. Verre’s evidence not materially relevant:

a) Mr. Verre has only used NAD products “once or maybe twice,” whereas he has used and worked with HTS much more often. This raises an issue of impartiality in his “opinion”;

b) When specifically asked whether there was "any thought to the confusion about the name or the product specified as being important to the overall design of the system," Mr. Verre said "no." It is not clear that Mr. Verre understands the issues in this proceeding or motion. Mr. Verre was not provided with all of the documentation in this proceeding and motion. As a result, his knowledge of the documents such as the NAD Trademarks, the HTS website with its hyperlink, and other issues is limited;

c) In the Atlas project, where Mr. Verre’s company was involved, the specifications specified "Emco air model SAL50 or equivalent." SAL is an NAD Trademark. This highlights the confusion alleged by NAD. Similarly, the Atlas specifications show "Manufacturer Klimakontor" rather than Emco or NAD. "Klimakontor" is not a manufacturer of air diffusers; and

d) Mr. Verre’s evidence did not deal with whether there was or was not a performance difference between NAD air diffusers and the HTS marketed air diffusers, being the Emco air diffusers. Fundamentally, it is presumed that consulting engineers know the different performance of the individual products sold by respective manufacturers. Mr. Verre said that the name of the product is not important to the overall design. This fails to deal with the connection the consulting engineer must make with a particular manufacturer’s specific product because the consulting engineer only specifies the manufacturer and product designations and not the product performance. This begs the question, not asked, whether he appreciates or knows the performance difference between the NAD and Emco air diffusers such as the difference between the NAD SAL50 and the Emco SAL50; and

e) There is no dispute that certain NAD products have NRC standard 129 certification; HTS products do not. Mr. Verre did not deal with the importance or significance of this certification.

[135] Considering the entirety of Mr. Verre's evidence, I am not persuaded that it assists to demonstrate that the manufacturer’s trademark or air diffuser product designations are not relevant to a consulting engineer's decision as to which manufacturer and which specific product designation to specify.

Application of the R.J. R. Macdonald Test

[136] Injunctive relief is expressly authorized by section 53.2(1) of the Trademarks Act as a remedy for trademark infringement. There is no dispute that an interlocutory injunction may be granted for passing off.

[137] The party seeking an interlocutory injunction must satisfy the tripartite test established by RJR-McDonald Inc. v Canada (Attorney General), 1994 117 (SCC), [1994] 1 S. C. R. 311, as follows:

1. Is there a serious issue to be tried, or in a narrow band of cases, is there a strong prima facie case?

2. Will the Applicant suffer irreparable harm if the motion is refused? and

3. Which party will suffer the greater harm from granting or refusing the remedy pending a decision on the merits?

Serious Issue to be Tried

[138] The Supreme Court in RJR-McDonald noted at paragraphs 45 and 56 that the purpose of the lower threshold of the "serious issue to be tried" in the first part of the test is to account for the limited evidence of factual and legal issues at this early stage.

[139] Where the injunction will likely amount to a final determination of the action, the moving party must show a strong prima facie case rather than a serious issue to be tried at the first step of the test (paragraphs 51–56).

[140] NAD’s Claims include claims for breach of ss. 19 or 20 or 22 of the Trademarks Act and passing off. These are the grounds for the interlocutory injunction sought (as set out in paragraph 3 of NAD's Notice of Motion).

[141] HTS submits that NAD has failed to establish there is a serious issue to be tried.

[142] HTS has not alleged that the Trademarks are invalid or taken any steps to challenge the validity of the NAD Trademarks. NAD has not licensed or authorized HTS to use its Trademarks. Further, the air diffuser products marketed and sold by HTS are not NAD air diffuser products.

NAD has no Standing to Bring this Action

[143] HTS submits that NAD does not have standing to bring this trademark infringement action because Lauzon is the owner and that an action for trademark infringement must be brought by the owner of the trademark.

[144] I repeat from above, HTS did not defend the Counterclaim on the basis that NAD did not have standing to seek the trademark infringement remedies under the Trademarks Act. Nevertheless, I am satisfied that the onus is on NAD to establish a legal basis for the claims it advances and, as such, must establish on this motion a serious issue to be tried by namely a legal basis for its trademark infringement claims under the Trademarks Act.

[145] The NAD Trademarks are owned by Lauzon. Lauzon is NAD’s directing mind of NAD. In 2011 and 2013, Lauzon granted an exclusive license in writing to NAD to use the NAD Trademarks. NAD Klima is NAD’s exclusive distributor in Ontario of NAD air diffusers using the trademarked name and product designations.

[146] This “standing” issue received little direct attention in the written factums of counsel. The issue was briefly the subject of oral submissions. The only issue after submissions on the motion were completed related to whether an "oral license" could be granted for authorized use of a registered trademark. I have concluded that, even if there was an oral license for NAD Klima to use the NAD Trademarks, it would not change the disposition of NAD's motion.

[147] If it had been necessary, there is a credible basis to find that NAD Klima is an authorized distributor of NAD air diffusers. A licensing agreement may be implied from the circumstances and may be implied where the distribution company is related to the company holding the license. See 3082833 Nova Scotia Co. v. Lang Michener LLP 2009 CarswellNat 2886, 2009 CarswellNat 6626, 2009 FC 928, 2009 CF 928, [2009] F.C.J. No. 1142, 180 A.C.W.S. (2d) 963:

32 It is not necessary to produce a formal licensing agreement to prove the existence of a licensing agreement under s. 50 of the Act [Wells’ Dairy Inc. v. UL Canada Inc. (2000), 2000 15538 (FC), 7 C.P.R. (4th) 77, 98 A.C.W.S. (3d) 189 (Fed. T.D.) at para. 38; Lindy v. Canada (Registrar of Trade Marks) (1999), 241 N.R. 362, 88 A.C.W.S. (3d) 201 (Fed. C.A.) at para. 9]. A licensing agreement may be inferred from the facts. A licensing agreement need not be in writing [Wakefield Realty Corp. v. Cushman & Wakefield Inc., 2004 FC 210, 247 F.T.R. 180 (F.C.), at para. 56]. However, the mere fact that there is some common control between the applicant’s companies is not sufficient to establish that the use of the trade-mark was controlled and therefore infer a licensing agreement [Cheung Kong (Holdings) Ltd. v. Living Realty Inc. (1999), 1999 9394 (FC), [2000] 2 F.C. 501, 179 F.T.R. 161 (Fed. T.D.), at paras. 44-45]. Evidence of control has to be adduced.

[148] Let me now deal with HTS’ submission that: the fact Mr. Lauzon is not a party to this proceeding is fatal to this motion for an interlocutory injunction by considering the various claims advanced by NAD.

i. NAD's Claims under the Trademarks Act Sections 19 and 20

[149] The restriction on the unauthorized use of registered trademarks is found in s. 19 of the Trademarks Act which provides:

19 Subject to sections 21, 32 and 67, the registration of a trademark in respect of any goods or services, unless shown to be invalid, gives to the owner of the trademark the exclusive right to the use throughout Canada of the trademark in respect of those goods or services.

(emphasis added)

[150] As for trademark infringement based on confusingly similar marks, s. 20 of the Trademarks Act provides:

20(1) The right of the owner of a registered trademark to its exclusive use is deemed to be infringed by any person who is not entitled to its use under this Act and who

(a) sells, distributes or advertises any goods or services in association with a confusing trademark or trade name;

(b) manufactures, causes to be manufactured, possesses, imports, exports or attempts to export any goods in association with a confusing trademark or trade name, for the purpose of their sale or distribution;

(c) sells, offers for sale or distributes any label or packaging, in any form, bearing a trademark or trade name, if

(i) the person knows or ought to know that the label or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark, and

(ii) the sale, distribution or advertisement of the goods or services in association with the label or packaging would be a sale, distribution or advertisement in association with a confusing trademark or trade name; or

(d) manufactures, causes to be manufactured, possesses, imports, exports or attempts to export any label or packaging, in any form, bearing a trademark or trade name, for the purpose of its sale or distribution or for the purpose of the sale, distribution or advertisement of goods or services in association with it, if

(i) the person knows or ought to know that the label or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark, and

(ii) the sale, distribution or advertisement of the goods or services in association with the label or packaging would be a sale, distribution or advertisement in association with a confusing trademark or trade name.

(emphasis added)

[151] The Trademarks Act, s. 50(3) specifically contemplates that licensees, such as NAD Equipment Inc. as a licensee from Lauzon, can, in some circumstances, bring an action for trademark infringement under the Trademarks Act:

(3) Subject to any agreement subsisting between an owner of a trademark and a licensee of the trademark, the licensee may call on the owner to take proceedings for infringement thereof, and, if the owner refuses or neglects to do so within two months after being so called on, the licensee may institute proceedings for infringement in the licensee’s own name as if the licensee were the owner, making the owner a defendant.

[152] Hughes on Trademarks, 2nd Edition, section 65 states:

The party suing for infringement shall be the registered owner of the trade-mark, whose rights to sue are implied from the terms of the Trade-marks Act. A licensee, subject to any agreement with the owner, may commence an action for infringement under the provisions of the Trade-marks Act if the registered owner refuses or neglects to do so within two months after notice or may be joined initially as co-plaintiff with the owner. A distributor may be a proper party to infringement proceedings where the distributor shares in the reputation and goodwill of the mark, holds an interest and is involved.

(emphasis added)

[153] Fox on Canadian Law of Trade-marks and Unfair Competition, 4th Edition at ch. 7.3 states:

To bring a s. 19 infringement action, the plaintiff must only prove entitlement to bring the action as the registered owner, owner or licensee pursuant to s. 50(3), and that the defendant is using the registered mark, as a trade-mark, without authorization in association with any of the wares or services for which the mark is registered. Nothing else need be proved in such an action to enjoin the defendant’s use of the mark anywhere in Canada.

(emphasis added)

[154] Similar requirement applies to trademark infringement actions under s. 20 of the Trademarks Act. See also Fox on Canadian Law of Trade-marks and Unfair Competition, 4th ed, at ch. 7.4

[155] There is no evidence that NAD complied with s. 50(3) of the Trademarks Act.

[156] I will also accept, for this motion, that NAD did not comply with the provisions of the Trademarks Act to notify the owner of the Trademarks and add the owner as a party and, as such, cannot succeed on a s. 19 or a s. 20 claim under the Trademarks Act.

[157] Based on the evidence on this motion, there is no serious issue to be tried regarding NAD's claim under s. 19 or 20 of the Trademarks Act.

ii. Depreciation of Goodwill

[158] In addition to a breach of NAD’s Trademarks under ss. 19 and 20 of the Trademarks Act, NAD has claimed a depreciation of its goodwill arsing from HTS use of confusingly similar marks to market and sell its air diffusers.

[159] Sections 22(1) of the Trademarks Act provides:

22(1) No person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.

[160] Section 50(3) of the Trademarks Act does not assist NAD in this Claim. See Fox on Canadian Trademarks and Unfair Competition, 4th ed, at ch. 7.8(f) which provides:

A licensee, in proper circumstances, may institute a ss. 19 or 20 action for infringement pursuant to s. 50(3). However, s. 50(3) does not explicitly permit a licensee from instituting an action in its own name for depreciation of goodwill under s. 22. Similarly, only the trade-mark owner can bring an action under s. 7 of the Trade-marks Act.⁸⁹ As such, it appears that only the owner of the registered trade-mark can properly bring an action for depreciation of goodwill pursuant to s. 22.

(emphasis added)

[161] I will accept for the purpose of this motion that NAD cannot succeed on this ground. Therefore, based on the evidence on this motion, there is no serious issue to be tried regarding NAD's claim under s. 22 of the Trademarks Act.

iii. Passing Off

[162] NAD's motion is for an injunction to prohibit HTS marketing, drawing attention to and selling its air diffuser products "in such a way as to cause, or be likely to cause, confusion in Canada between its wares, services or business and those of NAD." Essentially, this wording mirrors NAD's passing off claim in paragraph 34 of its Counterclaim.

[163] The action for trademark infringement is different from the action for passing off. The action for passing off is meant to prevent and compensate for misrepresentations as to the source of the goods or services caused by the defendants conduct.

[164] The purpose of the tort of passing off was described in Fox on Trademarks and Unfair Competition at ch 4.1:

The protection of trade-marks as property is based in the common law action for passing off. ....

The name of a business, its trade-marks and other symbols used to identify it in the marketplace are among the most valuable assets of a business.^1.1 These symbols are the means by which a business communicates with its customers. They serve both as an indication of source and as the badge of quality for its products and services. These symbols embody the relationship that exists between the business and its customers and the goodwill that has been created through its marketing and sales. Symbols of source and quality in the form of trade names, trade-marks and other indicia are protected at common law under the doctrine of passing off.^1.2 But passing off is not so limited. As well, it provides protection generally against trade misrepresentations, not only through proprietary trade indicia, but also against false or misleading trade descriptions in association with wares or services and substitution of wares or services for those ordered or requested. Passing off through use of trade indicia, substitution of wares and services, and use of false or misleading descriptions in association with wares and services has also been given statutory codification under s. 7(b), (c) and (d) respectively of the Trade-marks Act. At present, there are no significant differences between the statutory codification and the common law of passing off....

(emphasis added)

[165] Hughes on Trademarks 2nd Edition at ss. 85 states:

The core of an action at common law for passing off is not now the simple wrong of selling one’s goods deceitfully as those of another; rather, it is the protection of the community from the consequential damage of unfair competition or unfair trading.1 Four elements may be required to make out a classic case of passing off: (1) the plaintiff’s goods (or services) enjoy a reputation; (2) the defendant has misrepresented its goods (or services) as those of the plaintiff; (3) there is actual confusion or a likelihood of confusion in the public’s mind between the goods (or services) of the plaintiff and defendant; (4) the plaintiff has suffered damage as a result.2

The Supreme Court of Canada has reduced these elements to three,3 namely:

(1) a goodwill or reputation attached to the plaintiff’s goods or services in the mind of the public with the name in question such that the name is identified with the plaintiff’s goods or services;

(2) a misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that the goods or services are those of or authorized by the plaintiff;

(3) the plaintiff has or is likely to have suffered damage.

In a classic case of passing off the original requirement of an intent to deceive has died out, but there remains the requirement, at the very least, that confusion in the minds of the public be a likely consequence by reason of the sale, or property for sale by the defendant of a product not that of the plaintiff’s making, under the guise or implication that it was the plaintiff’s product or equivalent.8 This confusion assessment is similar to the confusion analysis conducted in the context of trade-mark infringement pursuant to section 6 of the Trade-marks Act.

……A closely related corporate group can collectively be regarded as having sufficient interests to sustain an action for passing off.12 …

(emphasis added)

[166] Unlike a trademark infringement claim, a licensee can maintain an action for passing off. See Fox on Trademarks and Unfair Competition, at ch. 4.3(d):

The courts have implicitly recognized the ability of licensees of common law trading indicia to institute passing-off actions on their own. In S.C. Johnson & Son Ltd. v. Pic Corp.⁷⁸ the plaintiff brought an action for statutory passing off under s-s. 7(b) of the Trade-marks Act alleging imitation of the plaintiff’s get-up for its RAID product. The defendant brought a motion to strike the statement of claim on the basis that the plaintiff was only the user of the get-up and not the owner. The court refused to strike the statement of claim, and held the person bringing an action under s-s. 7(b) must have a reputation in a trade-mark associated with their product, and need not be the owner.

Similarly, in Organizing Committee of the 1976 Olympic Games v. Exclusive Leather Products Corp.⁷⁹ the court held that an exclusive licensee has status to sue and enforce common law rights owned by the licensor who is not a party to the action:

As with any person who acquires a right and who believes that right to be affected by another, plaintiff was entitled, as it has done, to seek the courts protection in the exercise of its rights.⁸⁰

In contrast, the Federal Court of Appeal has stated that only the owner of the goodwill, not a licensee, can bring a statutory or common law passing-off action.⁸¹ However, the Court of Appeal provided little analysis and provided no supporting case law. Thus, while this point is anything but clear, it seems more reasonable that a licensee, whether exclusive or non-exclusive, has a right to bring a passing-off action on its own without naming the licensor of the trading indicia as a party to the action. A defendant should not therefore be able to defend an action on the basis that the proper owner of the trading indicia is not before the court. All recognized defences to passing off are available against that plaintiff, including loss of common law rights to the trading indicia due to improper licensing, whether under the old law discussed above, or under the new law as codified by s. 50(3) of the Trademarks Act.

(emphasis added)

[167] Let me turn to the requirements for a passing off action. The three-part test required to be met to establish a claim of “passing off” is as follows:

(a) the existence of goodwill regarding the Applicant’s name or product;

(b) the deception or confusion of the public due to a misrepresentation on the part of the respondent; and

(c) that the applicant has suffered, or has the potential, to suffer damages as a result of the misrepresentation.

Goodwill:

[168] HTS cannot dispute that there is goodwill in the NAD high induction air diffuser products, having spent three years of time, money and effort developing the Ontario high induction air diffuser market for NAD.

[169] I am satisfied that NAD has established it has goodwill in its name and products.

[170] NAD has established this element of passing off for the purpose of this motion.

Misrepresentation causing confusion as to source of the air diffusers:

[171] Fox on Trademarks and Unfair Competition, 4th ed at ch 4.5(a) describes this requirement as follows:

The second of the three requirements to be proved in a passing-off action is an actionable misrepresentation. As the Supreme Court of Canada stated: “The second component is misrepresentation creating confusion in the public. Misrepresentation may be wilful and may thus mean the same thing as deceit. But now the doctrine of passing off also covers negligent or careless misrepresentation by the trader.”³⁵⁹ As Lord Parker observed in A.G. Spalding & Brothers v. A.W. Gamage Ltd., it is “impossible to enumerate or classify all the possible ways in which a man may make the false representation relied on.”³⁶⁰ The most direct form of passing off occurs when a consumer requests the goods of trader A, but is given the goods of trader B.³⁶¹ But the same type of passing off occurs indirectly when the goods of trader B effectively tell a falsehood about themselves, where the manner in which they packaged or sold causes purchasers to believe that they are the goods of trader A or in some way connected or associated with A. There are no limits on the manner in which a trader may misrepresent its goods, services or business as being connected with the goods, services or business of a competitor:

(emphasis added)

[172] Put another way, an actionable misrepresentation is conduct which causes or is likely to cause confusion as to the source of the goods marketed and sold.

[173] There is no dispute that HTS is directing attention to the Emco air products (even after the HTS hyperlink to the Emco website was removed) by HTS’ continued use of “Klimakontor” name and similar product designations such as D358, D358, S and so on. The issue is whether product descriptions by HTS, such as HTS’ use of its Klimakontor brand of D358 air diffusers causes confusion with the NAD Klima DAL359 air diffuser.

[174] Section 6(2) of the Trademarks Act provides guidance on confusion:

The use of a trademark causes confusion with another trademark if the use of both trademarks in the same area would be likely to lead to the inference that the wares or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.

[175] Some of the factors to be considered are:

1. The inherent distinctiveness of the trademarks or trade-names;

2. Extent to which they have become known;

3. The length of time the trademarks or trade-names have been in use;

4. The nature of the wares, services or business;

5. The nature of the trade;

6. The degree of resemblance between the trademarks or trade-names in appearance or sound or in the ideas suggested by them.

[176] In this case, the only evidence is that the name "klima" is distinctive in the Ontario marketplace, this name is distinctive, the products at issue are similar products, and there is a high degree of similarity between the product designations used by HTS and those of NAD.

[177] It is also important to look at the entirety of HTS’ conduct - namely both the use of "klima" and the similar product designations. Considered as a whole, there can be no doubt that there is a high degree of similarity by HTS’ representations as to source and product designation that is likely to cause confusion with the NAD air diffusers.

[178] However, in this case, the evidence has established not only that there is a likelihood of confusion as to source and product designations but has shown that there is actual confusion in the marketplace regarding the source and product designations of the air diffusers chosen and specified by consulting engineers.

[179] NAD submits that the Supreme Court of Canada explained in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, that the issue of “confusion” must be examined in relation to “a matter of first impression in the mind of a casual consumer somewhat in a hurry who … does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks.”

[180] This case involves consulting engineers as the "consumers." HTS submits that air diffusers are chosen by consulting engineers, who presumably would employ a greater scrutiny and knowledge to what they specify. That may be true and it might, in most cases, make it more difficult to establish actual or likelihood of confusion without clear evidence. However, there is no doubt that, on the evidence in this case, NAD has established that there is confusion regarding the manufacturer and product designations specified by consulting engineers.

[181] HTS relies on Crookes v. Wikimedia Inc. 2001 CarswellBC 2627 (S.C.C.) at paras. 27-30. I am not persuaded this authority is relevant. Firstly, Crookes was a defamation case. This is a Trademark and passing off case. I repeat, trademark and passing off protection in Canada would be meaningless if distributors could use deceptively and makes misrepresentations in marketing and selling their products with impunity by simply referring to out of country websites.

[182] HTS submits there is no confusion in the HVAC industry and relies on Mr. Verre's evidence. For the reasons set out above, I reject this view of Mr. Verre's evidence. In fact, Mr. Verre's evidence may very well assist NAD to establish actual confusion as to the source of the product.

[183] There are several additional facts which have increased the continuation of actual and the likelihood of confusion.

[184] First, HTS marketed NAD products during the initial development of this market by using "Klima" and the NAD product designations up until 2016. HTS then immediately started to use the "Klima" and similar product designations such as D358. This combination makes for a greater likelihood that consulting engineers and mechanical contractors would be confused as to the source and product designation.

[185] Secondly, the evidence discloses a conscious effort by HTS in 2016 to select and use the "Klima" name and similar product designations for the Emco air diffusers it sells.

[186] Thirdly, the confusion was caused by HTS’ own conduct - using "Klima", using product designations such as D358, and referring potential customers to the Emco website which used the actual NAD Trademarks for its product designations right up until October 3, 2019.

[187] I am satisfied that NAD has established both actual and the likelihood of confusion through HTS’ use of "Klima" and the NAD or similar product designations.

[188] As a result, I conclude the evidence on this motion establishes that there is actual and a continued strong likelihood of confusion by HTS’ past and continued use of “Klima” and similar air diffuser product designations to the NAD product designations such as DAL358.

Damages:

[189] The issue of whether NAD has, or will likely, suffer damage or injury to its reputation or goodwill as a result of HTS’ conduct is conceptually distinct from the issue of the quantum of damages. Actual damage need not be proved; a probability of damage is sufficient for purposes of a passing-off action.

[190] In this case, the evidence has established that HTS has sold air diffusers with the name "Klimakontor" and "D358" and other similar product designations to the NAD air diffusers. This establishes a strong likelihood that NAD has suffered damages.

Will this Injunction likely end the Litigation?

[191] The Supreme Court in RJR Macdonald identified two exceptional circumstances where the “serious issue” threshold will be elevated: RJR-MacDonald, paras. 56-60. One such circumstance arises where the interlocutory ruling will effectively amount to a final determination of a claim. In such a case, the court must take a more extensive review of the merits of the claim, to determine if a strong prima facie case has been made out.

[192] In this case, I am satisfied that NAD has established a strong prima facie case on this record. In this case, NAD has established:

a) It has goodwill in the name Klima and the NAD product designations;

b) There is evidence of actual confusion regarding the source of the products sold by HTS as being the NAD products; and

c) HTS has sold such products, in all likelihood at a profit, resulting in damages to NAD.

[193] There has been HTS use of actual NAD Trademarks, including klima and product designations for 3 years.

[194] HTS offers little but a bald statement that there is no actual or likelihood of confusion. Yet, this submission is completely undercut by the evidence of actual confusion.

[195] I am satisfied that the similarities between HTS’ brand and product designations are not only similar, but are strikingly similar and designed to draw a connection between the HTS products and the NAD products.

[196] NAD has established a strong prima facie case.

Conclusion:

[197] I am satisfied that NAD has met the first part of the RJR MacDonald test and established it has a strong prima facie case.

Irreparable Harm

[198] HTS submits that NAD has failed to establish it will suffer irreparable harm.

[199] The Supreme Court in RJR MacDonald defined “irreparable” as referring to the nature of the harm suffered rather than its magnitude and, specifically described it as harm which either cannot be quantified in monetary terms or which cannot be cured:

"Irreparable" refers to the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. Examples of the former include instances where one party will be put out of business by the court's decision; where one party will suffer permanent market loss or irrevocable damage to its business reputation; or where a permanent loss of natural resources will be the result when a challenged activity is not enjoined.

[200] The relative ease or difficulty of quantifying damages and the probability of recovering damages, if they are awarded, are major factors in determining whether the applicant will suffer irreparable injury unless the court grants an injunction. Damages which are difficult or impossible to quantify imply irreparable harm, while an injunction is likely unnecessary if damages are easily quantifiable. Similarly, the probability of irreparable harm increases as the probability of recovering damages decreases.

[201] In my view, the approach to a consideration of irreparable harm is best found in Bell Canada v. Rogers Communications Inc., 2009 39481 (ON SC), where Code J. stated:

[38] As is so often the case in this area of law, the means of reconciling these seemingly inconsistent decisions is found in Justice Sharpe’s text, Injunctions and Specific Performance, supra. He begins by noting (at p. 2-32) that the “Federal Court of Appeal has said that proof of irreparable harm cannot be inferred and the ‘evidence of irreparable harm must be clear and not speculative’”, pointedly omitting any comparison to the position in the Ontario Courts which seems to be more flexible. He then turns to the apparent inconsistency in some of the case law (at p. 2-38 to 2-40):

It is exceptionally difficult to define irreparable harm precisely. Courts regularly and routinely assess monetary awards for non-pecuniary injuries where this is necessary. On the other hand, the courts have sometimes been prepared to view what otherwise seem readily calculable losses as “irreparable” for the purposes of interlocutory relief.

In the context of preliminary relief, the test is a relative and flexible one which, it is submitted, necessarily involves an evaluation of the other factors. Indeed, it has been held that an interlocutory injunction may be granted even where “irreparable” harm has not been demonstrated. Similarly, attempts to make irreparable harm a condition precedent, and hence a threshold test, have been rejected. These cases suggest that the “irreparable harm” requirement can only be defined in the context of the risk-balancing exercise. If the plaintiff’s case looks very strong, harm may appear to be more “irreparable” than where the plaintiff has only an even chance of success. While judges seldom explicitly acknowledge that there is an “overflow” effect produced by strength or weakness of other factors, it cannot be doubted that, as a practical matter, it exists. The important point is that irreparable harm has not been given a definition of universal application: its meaning takes shape in the context of each particular case. However it is defined, failure to establish irreparable harm is commonly cited as the primary reason for refusing injunctive relief.

…If damages are an adequate remedy, running the risk of restraining the defendant unjustifiably pending the trial is simply not warranted.

[emphasis added]

[39] There is broad agreement in the case law that the 3 part test in RJR-MacDonald is, in fact, a wholistic set of factors and not 3 separate and distinct requirements. To repeat the earlier quote from Justice Sharpe’s text, the three “factors relate to each other, and strength on one part of the test ought to be permitted to compensate for weakness on another.”

[202] In this case, there is no dispute that high induction air diffusers are relatively new into the Ontario market. HTS and NAD knew in 2012 that it would take time and considerable effort to develop the high induction air diffuser market. HTS knew in 2016 it would be using a similar name (klima) and similar product designations to market and sell Emco air diffusers.

[203] The effect on market share is significant in this case as the evidence establishes that high induction air diffusers are increasingly used in the marketplace. The market share of high induction air diffusers continues to grow. As such, the generation of goodwill during this start-up of the industry's recognition of high induction air diffusers will impact market shares of high induction air diffusers. This makes it, in my view, impossible to later determine what the respective share of the market NAD and HTS would have been but for the confusion generated by HTS’ use of NAD's "Klima" or NAD's product designations or HTS’ use of confusingly similar product designations.

[204] One other fact to be considered in this case is that HTS has failed, despite two orders (the Dennison J. Order and the August 19, 2019 Order) to produce documents which will permit NAD to determine the quantum of its damages for all HTS projects which used NAD’s Trademarks or similar air diffuser product designations. This raises serious concerns regarding the ability of NAD to recover meaningful damages. In simple words, it is difficult for HTS to submit that damages will be an adequate remedy when it fails to produce documentation to permit a proper assessment of those damages.

[205] HTS suggests that NAD cannot rely on a loss of goodwill to establish damages because the NAD Trademarks are weak or lack distinctiveness. There is no basis on the evidence before me to conclude that the NAD Trademarks are weak or lack distinctiveness. If this submission was true, it then begs the question why HTS in 2016, after NAD put them on notice of its Trademarks, chose to change their product designations to those very similar to NAD’s product designations for HTS’ air diffusers. The only logical inference is that HTS believed there was value in having similar product designation to those of NAD in Canada. After all, the change in early 2016 could have been anything and did not have to be similar to NAD's product designations.

[206] Courts have made clear that damage to goodwill or loss of distinctiveness amounts to irreparable harm:

…where use of a confusing mark will cause the Plaintiffs’ mark to lose its distinctiveness, that is, its ability to act as a distinctive and unique signifier of the Plaintiffs’ wares or business, such damage to goodwill and the value of the mark is impossible to calculate in monetary terms.

See Reckitt Benckiser LLC v. Jamieson Laboratories Ltd, 2015 FC 215 at para. 55.

[207] HTS points to NAD's increasing revenue from 2017 to the present. So what? That alone does not establish what, if any, are NAD's damages lost to HTS through the passing off, if established at trial.

[208] Another significant factor is that it is difficult to uncover what air diffusers were specified and what air diffusers were actually installed in which projects. It will be impossible to accurately and fully assess damages without a detailed analysis on a project by project basis of what the consulting engineer's performance specifications were, what was intended to be specified, what was specified, what was installed, what profit was lost on the sales and so on. As the current situation continues, the sales of air diffusers will likely increase as more and more projects use these high induction air diffusers making any assessment of damages impossible.

[209] I am satisfied that NAD has established irreparable harm.

Balance of Convenience

[210] HTS submits that NAD has failed to establish that the balance of convenience favours granting the injunction sought.

[211] The third test involves the determination of which of the parties will suffer the greater harm from the granting or refusal of the interlocutory injunction pending a decision on the court. See RJR MacDonald at para 68. In determining the balance of convenience, the court will consider whether the benefit the Claimant will gain from preliminary relief outweighs the inconvenience caused to the Respondent by the granting of relief. The judge must determine which party will suffer greater harm from the granting or refusal of the injunction pending a final decision. In other words, the balance of convenience must be weighed.

[212] HTS submits that the balance of convenience favours the status quo. I disagree.

[213] In 2016, HTS chose to use the name "klima" and the similar product designations by deliberate choice knowing about the NAD Trademarks. HTS has been using “Klima” and the similar NAD air diffuser product designations for approximately three years. NAD has been in the market in Canada for seven years and has been using Klima and the NAD trademarked product designations for the entire period of time.

[214] The market for air diffusers is growing. Market shares are potentially changing.

[215] There is no evidence as to the impact on HTS of a further change of its use of “Klima” and the air diffuser product designations. As stated, it is unclear what HTS’ sales or profits are or may be effected since HTS has not produced these documents.

[216] On the other hand, NAD’s sales are increasing.

[217] While this assessment relates to passing off, it is a factor that NAD has Trademark protection. It is highly unlikely that HTS could obtain Trademarks for D358 and its other similar product designations if it chose to do so. I am satisfied that a consideration of NAD's Trademarked product designations is a factor that weighs in its favour on a balance of convenience.

[218] Let me turn to the most significant issue addressed by the parties as to whether the interlocutory injunction should be granted. HTS points to NAD's delay in seeking an interlocutory injunction and the refusal of Marwah to explain why it waited for almost 3 1/2 years to seek the interlocutory injunction.

[219] Granting an injunction is equitable relief. Delay in seeking equitable relief is a factor to be considered whether the court should grant the injunction.

[220] In R.J. Sharp’s Injunctions and Specific Performance: Toronto; Canada Law Book, November 2005, Sharpe J.A. made the following statement:

The very fact of delay by the plaintiff, quite apart from any questions of prejudice to the defendant, may often serve as evidence that the risk is not significant enough to warrant interlocutory relief.

[221] A similar statement was made in Burkshire Funding Initiatives Ltd. v. Trinity Capital Corp., [2002] O.J. No 4723 at para. 2:

Delay while knowledgeable of the alleged threat to one’s economic interest at the same time as the other side ramps up its business, is a telling factor against granting interlocutory injunctive relief.

[222] There is no rule of law which provides that delay, even an extensive delay, is a bar or disentitles a party to an interlocutory injunction. Delay is but one factor that the court considers in determining whether it will exercise its equitable jurisdiction to grant the interlocutory injunction.

[223] NAD became aware in the middle of 2016 that HTS was using the NAD Trademarks or other marks to market and sell Emco air diffusers with similar product designations. HTS relies on Bell Canada v. Rogers Communications Inc., 2010 CarswellOnt 3617 (S.C.J.) the court held:

21 Furthermore, I agree with the submissions of counsel for Rogers that the delay since August 2008 [when the advertisements about Rogers having the fastest service appeared, including reference to the comScore data] does not support the contention that Bell has suffered and will continue to suffer irreparable harm. If that had occurred or there was a serious concern on Bell’s part that it might occur, Bell would have brought the motion much earlier. Given the litigious history between the parties, it is clear that both Bell and Rogers have sought recourse to the Courts on a regular basis to settle their disputes.

If the matter was truly urgent and Bell was sustaining irreparable harm, in my view, they would have moved more expeditiously to have the matter dealt with.

[emphasis Added]

[224] NAD submits that much of the highly relevant facts were only recently discovered and points in its factum to:

a) The mechanical equipment schedule attached as Exhibit “B” to the First Marwah Affidavit only came to NAD’s attention in April 2019;

b) The specification for the Bishop’s University project which specifies RRA and SRA diffusers from both NAD and Klimakontor and other references such as to NAD DAL358 and Kilmakontor (EmcoKlima) D358;

c) The mechanical equipment specification for Hydro-Québec’s new Center of Excellence only came to NAD’s attention in September 2019; and

d) The mechanical equipment schedule for the Fleurimont Hospital project only came to NAD’s attention in September 2019.

[225] I agree that NAD's motion could have been brought earlier on the evidence it had, although the evidence relied on by NAD would not have been as complete and would not have established the actual confusion to the extent established on this motion.

[226] Again, I point to HTS’ failure to disclose until recently (being after this motion was brought), some of the projects it supplied high induction air diffusers using NAD’s Trademarks or similar product designations. In these circumstances, it is difficult for HTS to now state that NAD had all the information it needed to have brought this motion early. And it is important to remember that HTS still has not made complete disclosure of relevant documents and all projects that HTS supplied air diffusers with NAD Trademarks or similar product designations.

[227] There are other factors which substantially reduce the impact of NAD’s delay in bringing this motion:

a) It is difficult to determine which/why manufacturer and which/why product designations were specified and what air diffuser was installed in any particular project. It takes time to ascertain and gather evidence of the confusion. That can be seen through the recent documentations uncovered by NAD regarding the actual confusion;

b) There is strong evidence of actual confusion continuing;

c) There is a public interest component: compliance with the Building Code, which becomes more important given the evidence of actual confusion. In other words, confusion in the marketplace, may result in buildings not complying with the Building Code;

d) Here the evidence suggests a deliberate choice by HTS in 2016 to market and sell its air diffusers with the exact NAD Trademarked product designations and the continued use of the hyperlinked Emco website which was suggested by HTS as not being its responsibility or resulting in potential liability to HTS – which in my view is clearly wrong; and

e) It is only recently (four months after this motion was brought) that HTS has removed one significant area of confusion, its use of the Emco website which used the exact NAD Trademarks for its product designations.

f) Some of the delay is attributed to HTS’ failure to produce documentation regarding the sale of air diffusers with the NAD Trademark or similar product designations.

[228] Considering all the circumstances in this case, I consider the delay as not causing the balance of convenience to weigh in HTS’ favour.

[229] In this case, the balance of convenience does not strongly favour either party.

Weighing these Factors

[230] The court then considers and weighs the above RJR MacDonald factors and determines whether it is just or convenient to grant the injunction. The fundamental question is whether the granting of an injunction is just and equitable in all of the circumstances of the case. This assessment will necessarily be context-specific analysis.

[231] I am satisfied that, despite the lengthy delay, it is just and equitable that an interlocutory injunction be granted prohibiting HTS from marketing or selling products using the name “Klima” and NAD's trademarked product designations or similar to such product designations.

CONCLUSION

[232] This court orders:

a) An interlocutory injunction, effective 60 days from the date of the release of these reasons, prohibiting HTS, its officers, directors, employees, assigns or agents, or any third parties with knowledge of this order, or instructing, counselling encouraging or participating any person or entity from, directly or indirectly:

i) marketing, advertising, promoting, drawing attention to or selling air diffusers using the name "klima," and/or the air diffuser product designations set out in Schedule A to the Notice of Motion dated May 13, 2019;

ii) marketing, advertising, promoting, drawing attention to or selling air diffusers using "klima" or any other confusingly similar product designations to those in Schedule A to the Notice of Motion dated May 13, 2019 in association with HTS' air diffuser products, services or business in a way which causes or is likely to cause confusion in Canada between HTS’ products, services or business and those of NAD; and

iii) marketing, advertising, promoting, drawing attention to or selling air diffusers through the use of any third party catalogues, websites (including linking websites) social media, or other adverting or marketing materials which would cause, or be likely to cause confusion in Canada between its products, services and business and those of NAD or which make reference to "klima" or any product designations (or confusingly similar product designations) to those in Schedule A to the Notice of Motion dated May 13, 2019.

b) HTS is to fully and completely comply with Dennison J. Order and this court’s August 19, 2019 Order by providing a sworn fresh as amended Affidavit of Documents containing all documentation set out in those orders and any and all other relevant documentation, by December 15, 2019, failing which NAD may renew its motion to strike HTS’ pleadings, on notice. In particular, HTS’ productions are to expressly include:

i) productions described in my Order of August 19, 2019;

ii) financial records relating to the marketing and promotion of NAD’s products;

iii) financial records of all revenues relating to the sale of NAD-type products, or products comparable to NAD’s products; and

iv) all relevant records relating to any and all projects where HTS supplied NAD-type air diffusers and any air diffusers using the D358, D359, S, and other similar product designations to those in Schedule A.

COSTS

[233] Cost Outlines for the motion were received at the conclusion of the hearing.

[234] Any party seeking costs shall serve and file written submission on entitlement and quantum within two weeks of the release of these reasons. Written submissions shall be limited to 6 pages, with attached Offers and any authorities.

[235] Any responding party shall have two weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 6 pages with attached Offers and any authorities.

[236] There shall be no reply submissions without leave.

Ricchetti J.

Date: November 15, 2019

COURT FILE NO.: CV-16-2368

DATE: 2019 11 15

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

RE: HTS Engineering Ltd., Plaintiff

AND:

Gurjot Marwah aka Greg Marwah, Equipment NAD Inc. aka NAD Equipment Inc. and NAD Klima Ontario Inc., Defendants

AND:

Equipment NAD Inc. aka Equipment Inc. and NAD Klima Ontario Inc. Plaintiffs by Counterclaim

AND:

HTS Engineering Ltd., Defendant by Counterclaim

ENDORSEMENT

Ricchetti J.

Released: November 15, 2019