Spiderplow Canada Ltd. v. Lyons, 2004

Court of Queens Bench of Alberta

 

 

Spiderplow Canada Ltd. v. Lyons, 2004 ABQB 921

 

 

Date: 20041209

 

 

BETWEEN:

 

 

Spiderplow Canada Ltd.

 

Plaintiff

- and -

 

 

John Lyons, 6189377 Canada Inc., Spiderplow International Ltd. and 1113319 Alberta Ltd. operating as Spiderplow International Ltd.

 

Defendants

 

AND BETWEEN

 

Spiderplow International Limited

 

Plaintiff by Counterclaim

 

- and-

 

Spiderplow Canada Ltd. and The Registrar of Corporations of Alberta

 

Defendants by Counterclaim

 

 

 

REASONS  FOR  JUDGMENT

of the

HONOURABLE  MADAM  JUSTICE J.C. COUTU

 

 

 

INTRODUCTION:

[1]               There are cross-applications by the Plaintiff and the Defendants for an interim injunction prohibiting the other from using the name “Spiderplow”.  Each party maintains it has spent considerable money to develop goodwill in this trade name.  The Plaintiff also seeks an interim injunction prohibiting the Defendants from contacting any existing or prospective customers of the Plaintiff or any of its current or former employees.

 

FACTUAL BACKGROUND:

[2]               The factual background is somewhat complicated.  Both the Plaintiff,  Spiderplow Canada Ltd., and the Defendants, Spiderplow International Ltd. and 1113319 Alberta Ltd. (operating as Spiderplow International Ltd.) are in the business of providing specialized plough services, trenching and pipeline installation using a unique plough, which is often referred to as the “Spiderplow”.  Currently, both the Plaintiff and the Defendants import the “Spiderplow” from a manufacturer in Germany, Walter Fockersperger.

 

[3]               At one time, Fockersperger only allowed companies who bought exclusive distributor licences to sell the plough.  In 2000, the Defendant, SpiderplowInternational Ltd. (then known as Gemwood  Investments Ltd.) had such a licence as a distributor.

 

[4]               In 2000, the parent company of the Plaintiff being Spiderplow USA, entered into a purchase and sublicence agreement with the Defendant, SpiderplowInternational Ltd. (then Gemwood), to acquire the rights to exclusively sell the ploughs in a certain territory in the U.S.A.  The agreement provided that the buyer, Spiderplow USA, would pay $2,300,000.00 U.S. dollars, to the seller  Gemwood, for the right to exclusively sell the Fockersperger ploughs in a certain territory in the United States, for the assignment period, being June 23, 2000 to December 31, 2007. (Under the agreement the seller Gemwood could not sell the ploughs in the assigned territory).  The agreement outlined that Gemwood was the owner of a pending trademark for the names “Spiderplow” and “Spider Plow” for the Fockersperger ploughs and during the assignment period the purchaser was granted licence to use the said trade names in the U.S.A and to use the name in its corporate name.  The agreement stated these distribution rights were co-extensive with (or contingent on) the distribution rights the seller had with the manufacturer, Fockersperger.  In May 2000, Spiderplow USA was incorporated in New Jersey to sell the ploughs in the U.S.A. and conducted its business under “Spider Plow” USA.

 

[5]               On January 21, 2002, the manufacturer, Fockersperger, terminated its agreement with Gemwood (Spiderplow International) as the minimum number of units was not purchased. Since January 2002 the manufacturer Fockersperger has allowed any company to distribute or sell the ploughs, however, these are no longer exclusive rights.  Since January 2002, both the Plaintiff and the Defendants buy the ploughs directly from Fockersperger.

 

[6]               The Defendant Spiderplow International alleges that the exclusive distribution rights from Fockersperger were lost, in part, because of the failure of Spiderplow U.S.A. to buy the number of ploughs it had agreed to buy. The Plaintiff denies this.  The Plaintiff maintains the sub-licence agreement it had with Gemwood  was contingent on the main distributor’s agreement between  Fockersperger and Gemwood  being in effect.  The Defendant, Spiderplow  International, maintains the  Plaintiff only had the  right to use the name while the agreement was in effect, and since the agreement is no longer in effect the licence or right of the Plaintiff to use the names “Spiderplow” or “Spider Plow” ended  and that the Plaintiff has no right to use the names.

 

[7]               On September 1, 2003, the Plaintiff’s parent company, Spiderplow USA, decided to expand the selling of the ploughs to the Canadian market.  The Plaintiff alleges that its parent company had spent money developing the Canadian market since October 2002.  On September 1, 2003, the parent company, Spiderplow USA , hired the Defendant John Lyons as a sales and marketing manager to market the ploughs in Canada.  The Defendant Lyons was from the U.S.A. and had no experience in the plough industry.  Since May 2003 the Defendant Lyons had been employed in the telecommunications business by a Spiderplow USA affiliate (OTS).  As for the marketing job, there was no written contract of employment, only a verbal one.  The Defendant Lyons worked with the two owners of  Spiderplow USA to promote and develop the plough market in Canada.

 

[8]               On November 13, 2003, the parent company, Spiderplow USA, incorporated an Alberta company (the Plaintiff, Spiderplow Canada Ltd.) to carry on business in western Canada.

 

[9]               On January 9, 2004, the Defendant Lyons resigned from his employment with Spiderplow Canada Ltd.  Shortly thereafter, the Defendant Lyons incorporated a company, the Defendant 6189377 Canada Inc., to perform the same services as the Plaintiff in Canada, buying the ploughs from Fockersperger.

 

 

[10]           On May 31, 2004, the Plaintiff sued the Defendant Lyons and 6189377 for damages for breach of contract, breach of fiduciary duty, breach of confidence and passing off.  The Plaintiff maintains that the Defendant Lyons used confidential information he obtained while employed by the Plaintiff to solicit business away from the Plaintiff’s customers.  Further, it is alleged that the Defendant Lyons tried to solicit the Plaintiff’s employees to work for 6189377. As well,the Plaintiff alleges that the Defendant Lyons and 6189377 were using “Spiderplow” as  its business name,  purposely creating confusion by passing off its services as being those of the Plaintiff.  In its Statement of Claim, the Plaintiff seeks an interim and permanent injunction prohibiting the Defendants from using the name “Spiderplow”.

 

[11]           In April 2004, the Plaintiff became aware that the Defendant 6189377 had applied for a trademark registration for “Spiderplow” in Canada.  The Plaintiff alleges that the Defendant Lyons and 6189377 knew that the only prior use of the name in Canada had been by the Plaintiff, but they falsely represented that 6189377 had been using the name “Spiderplow” in Canada since 2001.  The Plaintiff is in the process of contesting this trademark registration.

 

[12]           The Plaintiff maintains that it has spent  $10,000,000 to develop goodwill in its business name and reputation in the marketplace in western Canada and that it would be unfair to allow the Defendants to materialize on this goodwill.  The Plaintiff maintains the use of the same name by the Defendants is creating confusion in the marketplace and that the Defendants should be prohibited from using the name “Spiderplow” until the trial of this action.

 

[13]           As  mentioned earlier, Spiderplow USA (the parent company of Spiderplow Canada) once held the exclusive rights to distribute the Spiderplow equipment in the U.S.A. by virtue of the sub-licensing agreement dated June 23, 2000 between Spiderplow USA and Gemwood Investments (now Spiderplow International).  On January 31, 2002, the exclusive distributor agreement between Fockersperger and Gemwood was terminated.  The Plaintiff maintains that Spiderplow USA continued after January 31, 2002 with the full knowledge and consent of Spiderplow International and Fockersperger, and continues to import ploughs to sell in the U.S.A. under the name “Spiderplow”.  Also, the Plaintiff maintains that it began to do business in Canada, using the “Spiderplow”  name beginning in October 2002, with the full knowledge and consent of Spiderplow International and Fockersperger, and that  Spiderplow International was not in the Canadian market at that time.

 

[14]           On May 31, 2004, the Plaintiff filed a motion seeking an interim injunction prohibiting the Defendants, Lyons and 6189377, from using the name “Spiderplow”,  and prohibiting them from contacting any current or former customers of the Plaintiff or any current employees or former employees of the Plaintiff.

 

[15]           On July 5, 2004, the Defendant Lyons, swore an affidavit, in opposition to the Plaintiff’s application for an interim injunction.  In that affidavit, the Defendant Lyons maintains he quit working for the Plaintiff as they refused to pay his travel expenses.  The Defendant Lyons admits he was hired to assist in developing the Plaintiff’s business involving Spiderplows  in Canada.  The Defendant Lyons denies he received confidential information during his employment or that he used confidential information, such as customer lists, to promote the business of 6189377.

 

 

[16]           In the affidavit, the Defendant Lyons refers to information he received from Andrew Curtis, a director of Spiderplow International Limited (formerly Gemwood).  The Defendant Lyons deposes that Mr. Curtis informed him that the term “Spiderplow” was coined by Twin Tech Inc., a company affiliated with Spiderplow International, that Twin Tech Inc. filed a trademark application for the word mark “SpiderPlow” with the U.S. Patent and Trademark Office on February 18, 1999 and that the term “SpiderPlow” was registered on September 11, 2001.  The Defendant Lyons further deposes that after he left the Plaintiff’s employment, he contacted with Spiderplow International, with a view to going into business with them to sell Spiderplows in Canada.  He deposes that Spiderplow Internationalpermitted him to operate in Canada under the name of Spiderplow .  The Defendant Lyons deposes that on March 15, 2004, 6189377 submitted a trademark application in Canada to trademark the name “Spiderplow”.  In that application, the Defendant Lyons stated that 6189377 had used the name “Spiderplow” in Canada since January 6, 2001.  The Defendant Lyons deposes that 6189377 was doing so “in furtherance of its business arrangement with Spiderplow Internationaland with the permission of Andrew Curtis.”

 

[17]           I find it curious that on July 5, 2004, the Defendant Lyonsdid not depose that as at that date, he was actually working for Mr. Curtis’ company, SpiderplowInternational (being 1113319 Alberta Ltd.).  In the Defendant Lyons’ Statement of Defence filed October 6, 2004,  he stated that he has been employed by 1113319 since June 6, 2004 to assist with developing the sale of “Spiderplows” in the Canadian market. Examinations of the Defendant Lyons and Mr. Curtis confirm this.

 

[18]           After the Plaintiff  filed its Statement of Claim, it became aware that the Defendant Lyons was hired by  Spiderplow International Ltd. (operating as 1113319 in Canada).   Consequently, the Plaintiff amended its Statement of Claim on August 27, 2004, and added as Defendants, Spiderplow  International Ltd. and 1113319 Alberta Ltd.  As against these Defendants, the Plaintiff seeks damages for inducing the Defendant Lyons to breach his contract by providing confidential information, using the Plaintiff’s confidential information to compete unfairly, and unlawfully interfering with the Plaintiff’s economic relations and passing off.  The Plaintiff seeks an interim and permanent injunction prohibiting these Defendants from using the name “Spiderplow”.

 

[19]           On September 21, 2004, the Defendants Spiderplow International Ltd. and 1113319 filed a Statement of Defence and Counterclaim against the Plaintiff. These Defendants allege that Spiderplow International has carried on business in Western Canada under the name “Spiderplow” since August 2001.  They further allege that Spiderplow International is the owner of the name “Spiderplow” and the Defendant, 1113319 Alberta Ltd., uses the name “Spiderplow” in Canada with the permission of Spiderplow  International Ltd.,   and that Spiderplow International is and has been the owner, both at common law and pursuant to trade mark registration ( in U.S.A.), of the name “Spiderplow”.  They further allege in the Counterclaim that the Plaintiff is trying to pass off its services as those of SpiderplowInternational Limited and unlawfully using its trade and word mark name of “Spiderplow”.  The counterclaim seeks damages and an interim and permanent injunction prohibiting the Plaintiff from using that name.

 

 

[20]           On September 21, 2004, the Defendant, Spiderplow International, also applied for an interim injunction against the Plaintiff, prohibiting the Plaintiff from carrying on business in Canada or, alternatively, within Alberta, using the trade name “Spider Plow” or “SpiderPlow”.  In support of Spiderplow International’s motion, Mr. Andrew Curtis, President of Spiderplow International, swore an affidavit.  He deposes that the previous name of Spiderplow International was Gemwood  Investments. (The name change took place on March 26, 2001.)  He deposes that Gemwood was associated with a group of companies known as the Twin Tech Group of Companies, which were involved in the marketing of the Fockersperger plough.  He deposes that the efforts at marketing the plough were initiated, on a world-wide basis, by Guenther Sperber in the mid-1990′s.  (He is a shareholder in Spiderplow International).  He deposes the name “SpiderPlow” was coined and first used by the Twin Tech Companies in 1999 as the marketing name for the Fockersperger plough.  He deposes that the exclusive rights to market the Fockersperger plough were sub-licensed to Spiderplow USA and the right to use the names “Spider Plow”  and “Spiderplow”  were licensed to Spiderplow USA by agreement (dated May 1, 2000).  However,  he maintains the right to use the names was limited solely to those parts of the U.S.A. described in the agreement and only for the assignment period described therein (June 23, 2000 to December 31, 2007).  He deposes the agreement terminated in January 2002  and so did the right to use the names. He deposes that Spiderplow International retained the services of John Lyons and 6189377 to market the Fockersperger plough in Canada under its trademark or word mark name of “Spiderplow”.  He deposes that Spiderplow International has expended time, energy and money to establish a reputation and goodwill under the names “Spider Plow” and “Spiderplow”.  He deposes that the use by Spiderplow Canada Ltd. or Spiderplow USA of the names in Canada will cause confusion in the market.

 

[21]           The cross-applications for interim injunctions were heard on November 5, 2004 and  I reserved my decision.

 

ISSUE:

Should an interim injunction be granted and, if so, to which applicant?

 

THE LEGAL TEST:

[22]           The test for an interim injunction is the three-part test set out in American Cyanamid Company v. Ethicon, [1975] A.C. 396.  The applicant must show that:

 

(1)        the applicant’s claim presents a serious question to be tried;

 

(2)        the applicant will suffer irreparable harm if the interim injunction is not granted; and

 

(3)        the balance of convenience between the parties justifies granting an injunction pending a final determination of the action: that is, the harm which the applicant will suffer before trial, if the interim injunction is not granted, is greater than the harm the respondent will suffer if it is granted.

 

 

Position of the Defendants, John Lyons and 6189377 Canada Inc.

[23]           The Defendants, John Lyons and 6189377, adopt and agree with the arguments advanced by Spiderplow International and support its application for an interim injunction against the Plaintiff, Spiderplow Canada.

 

[24]           These Defendants argue there is no contract of employment between the Defendant Lyons and this Plaintiff, therefore relief should be denied.

 

[25]           They maintain that the Plaintiff’s interim injunction should be denied as there is no serious issue to be tried as the Defendant Lyons was only an employee (not a fiduciary) of the Plaintiff and there was no fiduciary duty owed by him.  Alternatively, they submit that even if the Defendant Lyons was a fiduciary, he did not breach any duty. These Defendants submit that a former employee is free to compete with his ex-employer, so long as he does not disclose or make use of confidential information belonging to the employer, and  there is no evidence supporting such allegations. They rely on the Defendant  Lyons’ assertion that he located his customers from the Alberta Oil and Gas Directory, not from the Plaintiff’s customer information. Further, the Plaintiff  has not provided sufficient evidence that it will suffer irreparable harm if an injunction is not granted.  If loss is proved at trial, damages can be calculated and the Plaintiff adequately compensated.  Further, the balance of convenience favours  the Defendant Lyons and Spiderplow  International, because if an injunction is granted to the Plaintiff, this would prevent the Defendant Lyons from earning an income. On the other hand, if the injunction against Spiderplow Canada is granted they can continue to do business in Canada, the only restriction is that they could not use the name “Spiderplow”.

 

[26]           Lastly, these Defendants argue that an interim injunction is equitable relief and should only be granted if the party seeking the relief comes to court with clean hands.  Here, it is alleged that the Plaintiff does not have clean hands because it is using the name “Spiderplow” in breach of the limited licence granted to Spiderplow USA to use the name, pursuant to the Licensing Agreement, which licence has expired.

 

Position of Spiderplow International Limited and 1113319 Alberta Ltd.

[27]           Spiderplow International Limited and 1113319 agree with and adopt the submissions made on behalf of the Defendant Lyons and 6189377.

 

[28]           As to Spiderplow International’s application for an injunction, it maintains that the first part of the tripartite test is met in that there is a serious issue to be tried (Who is “passing off”?).  As to the second part of the test, Spiderplow International refers to case law for the proposition that proof of confusion in the marketplace is sufficient to show irreparable harm.  In this case both applicants agree that there is confusion in the market.  As to the last factor, Spiderplow  International submits that the balance of convenience favours  protecting the trademark “SpiderPlow” for its owner, who has used the name worldwide for at least seven years, against use by the Plaintiff, whose parent company could only previously claim a limited licence (now expired), for use only in the United States.

 

 

Position of the Plaintiff Spiderplow Canada Ltd.

[29]           The Plaintiff relies on the decision of R.J.V. Gas Field Services v. Baxandall, 2002 ABQB 849 (CanLII), [2002] A.J. 1154, 2002 ABQB 849 for the proposition that the threshold to satisfy the first arm of the American Cyanamid test is low; only a preliminary assessment of the merits is required to confirm that the claim is not frivolous or vexatious.   There are serious triable issues in this case.

 

[30]           As to the irreparable harm, this Applicant relies on the decision of RJR – MacDonald Inc. v. Canada (Attorney-General) 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311:

 

“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.

 

[31]           The Plaintiff refers to case law wherein courts have recognized that where an established business reputation is at risk, the risk of irreparable harm is proven.  While the Plaintiff has claimed an accounting from Spiderplow International for any profits made during its operations pending trial, it may be difficult to connect the erosion of the Plaintiff’s clientele to the Defendant’s actions, or whichever of those actions may be found to be actionable at trial.  If a relatively small client base is left open to solicitation by the Defendants, it may be impossible to restore public confidence and name recognition, even if the Plaintiff is eventually successful at trial.

 

[32]           As for the balance of convenience, it is argued  this factor favors the Plaintiff, since if an injunction is granted in favour of Spiderplow  International, it will receive an immediate, unfair advantage in the market.  It will be employing the Plaintiff’s former sales representative to solicit the Plaintiff’s customers using the Plaintiff’s corporate and trade name to the Plaintiff’s exclusion.  The Plaintiff, meanwhile, would have to compete against Spiderplow  International just to keep its own customers, but without the name recognition it has built up and with no restrictions on the use of confidential information Spiderplow  International now has through John Lyons. The Plaintiff maintains that there is no evidence of the trade mark name registration in the U.S.A. by any of the Defendants. In any event, it submits that trade mark registration is not conclusive in a passing off action. Further, even if the Defendants had a common law word name in the U.S.A., it was abandoned. In any event, they had no trade or word name goodwill in Canada.

 

 

[33]           If, on the other hand, Spiderplow Canada’s injunction is granted, Spiderplow International’s worst case scenario is that its entry into the Canadian market may be delayed.  It could still do business, although with other customers and using another name.  Since Spiderplow International is an international company, it could potentially focus on other markets pending trial.  Spiderplow International has many other operations worldwide which contribute to its ongoing revenue and are unaffected by these proceedings, unlike Spiderplow Canada.

 

[34]           Lastly, Spiderplow Canada is well-established in this market and Spiderplow International, while established elsewhere, is a newcomer here of only a few months. Granting an injunction to Spiderplow Canada essentially preserves the status quo while the parties await trial.

 

DECISION AND REASONS:

[35]           In my view, both applicants meet the first and second part of the test for an injunction (serious issue to be tried and irreparable harm). The decision turns on the balance of convenience.

 

Serious Issue to be Tried:

[36]           I  have reviewed David Cairns’ The Remedies for Trademark Infringement, (Scarborough:  Carswell, 1988), an excellent resource in this area of the law.  At p. 20, the author states:

 

Lord Diplock in American Cyanamid states that the plaintiff does not need to establish a prima facie case to be eligible for interlocutory relief, but must show that the claim is not ‘frivolous or vexatious’, in other words, that there is a serious question to be tried.

 

And at p. 21:

 

The threshold standard in American Cyanamid is generally accepted to be a lower one than the prima facie case standard.

 

[37]           Here, I am satisfied that in fact a prima facie case, on both the Plaintiff’s and the  Defendants claims has been proven and that there are serious questions to be tried.

 

[38]           I do not accept the Defendants’ argument that the Defendant Lyons was not an employee of the Plaintiff, Spiderplow Canada.  Although OTS, the Plaintiff’s affiliated company issued the pay cheque, this was in an administrative capacity only.  The Defendant  Lyons’ business correspondence, when he worked for the Plaintiff and his representations to customers of the Plaintiff, made it clear he was an employee of the Plaintiff.  He was hired to promote the business of Spiderplow  Canada, not OTS, and this “semantic” argument is not convincing.

 

 

[39]           The trial judge will make a final decision whether or not the Defendant Lyons was a key employee, who had fiduciary duties and whether he breached those duties.  On a prima facie basis, I am satisfied the Plaintiff has shown that the Defendant Lyons had some of the earmarks necessary to establish fiduciary status of a key employee, as these were outlined by the Supreme Court of Canada in Lac Minerals v. International  Corona Resources Ltd. 1989 CanLII 34 (SCC), (1989), 61 D.L.R. (4th) 14.  He was the only person involved in marketing the plough services in Canada, aside from the two owners of the Plaintiff company.  He had confidential information about pricing and customers.  He told Mr. Curtis he was Vice-President of Development for Spiderplow USA, and that information was used by Mr. Curtis and given to Human Resources to support the Defendant Lyons’ Canadian work permit.  Mr. O’Connor deposed that the Defendant Lyons had access to all information on pricing, future plans, general strategic planning, supplier relationships and potential sales leads and customers.  The Defendant Lyons had confidential information on his laptop computer when he left. I might add that the longer an employee is in an industry and the more contacts he makes over the years, the more difficult it is for the Plaintiff to establish the activities of a Defendant employee, who left to start a competing business, constitute nothing more than permissible competition.  However, here, the Defendant Lyons had no previous experience in this industry, and no contacts in Canada  until he joined the Plaintiff. He was in the industry only  four months before he left the Plaintiff company.

 

[40]           As to whether he breached his fiduciary duties, again the trial judge will make the final decision on that issue.  However, the Plaintiff has shown there is a prima facie and serious issue to be tried.  The Defendant Lyons admitted that a day after he resigned, he contacted Mr. Andrew Curtis, an owner of the Defendant, Spiderplow International, and had discussions about starting up a competing business in Canada, to compete against his former employer, the Plaintiff.  Mr. Curtis was aware of the situation.  The Defendant Lyons admitted, shortly after resigning, that he contacted customers of the Plaintiff to solicit their business and admitted contacting an employee of the Plaintiff (Steve Ecker) to entice him to come and work for the competing company.  Mr. O’Connor, one of the owners of the Plaintiff company, testified that some of the Plaintiff’s customers told him the Defendant Lyons had called them looking for business.

 

[41]           The Defendant Lyons incorporated 6189377 to carry on the same business as the Plaintiff company and on March 15, 2004, he applied for the trademark name of “Spiderplow”.  (That application was later withdrawn by 6189377).  The Plaintiff suggests the Defendant Lyons falsely represented that 6189377 had used the “Spiderplow” name in Canada since 2001. On a prima facie basis, there is some substance to that allegation.  Both Mr. Curtis and the Defendant Lyons admitted that less than a month after the Defendant Lyons resigned and, on Mr. Curtis’ first visit to Canada to meet with the Defendant Lyons, they met with one of the Plaintiff’s customers  (Flint Energy). Mr. Curtis was asked if the Defendant Lyons gave him names of potential customers, who were also the Plaintiff’s customers, and he agreed he was given names “anecdotally”.  Later, he admitted he knew the Defendant Lyons was contacting the Plaintiff’s customers.

 

[42]           The Defendant Lyons admitted that he and Mr. Curtis discussed the confidential information about the Plaintiff’s sub-licensing agreement with Flint, the Plaintiff’s ex-customer and suggested that the Plaintiff was in breach of the agreement.

 

 

[43]           As for the Plaintiff’s action against the Defendant, Spiderplow International, and 1113319 Alberta Ltd., the Plaintiff alleges these Defendants induced the Defendant Lyons to breach his duty (not to provide the Plaintiff’s confidential information) in order to allow the Defendants to unfairly compete with the Plaintiff’s business.  The Plaintiff alleges these Defendants unlawfully interfered with the Plaintiff’s economic relations with its customers by using confidential information provided to it by the Defendant Lyons.  I find on a prima facie basis the Plaintiff has established there are serious issues to be tried in that regard.

 

[44]           Some of the evidence concerning Mr. Curtis, to which I earlier referred, goes to that issue.   Further, Mr. Curtis was asked why he and the Defendant Lyons did not use the already incorporated company (6189377 Canada Ltd.) to carry on business, instead of incorporating a new company (1113319 Alberta Ltd.) and he replied “because that company was party to litigation” (this litigation).  Mr. Curtis maintains he had no idea the Defendant Lyons had applied for the trademark name “Spiderplow”, yet he could not explain, to my satisfaction at least, how it was that the Defendant Lyons used the specific date of January 6, 2001, as the date the name “Spiderplow” was used in Canada (being the same date the Defendant, Spiderplow  International, heavily relies on as the date it started doing business in Canada, the demonstration date in Jasper).  The Defendants submit that the Defendant Lyons was hired by 1113319 five months after termination.. That may be so on paper, however Mr. Curtis and the Defendant Lyons communicated a day after Mr. Lyons’ termination and in that conversation set the plans in motion to start up a competing business.

 

[45]           The other serious issue to be tried, acknowledged by all parties, is whether it is the Plaintiff or the Defendant, Spiderplow International, which should have the right to the trademark or word  name “Spiderplow”.

 

[46]           In conclusion, as I stated earlier,  I am satisfied that there are serious issues to be tried  in this case and both applicants meet the first part of the test.

 

Irreparable Harm:

[47]           Both Applicants maintain that customers are confusing the two companies.   Further, Mr. O’Connor deposes that the Defendant Lyons answers the business telephone as “Spiderplow”, which makes it difficult for customers to distinguish between the two companies.

 

[48]           Each Applicant  that if its application is not granted, it will be impossible at trial to subsequently determine how much of its income is attributable to legitimate business activities and how much is attributable to its misuse of the name “Spiderplow” and  the harm done is not easily calculated in damages.

 

[49]           I accept the submission by Spider International that courts have held that confusion in the marketplace is sufficient to show irreparable harm. I also accept the submission by the applicant  Spiderplow Canada that “irreparable harm” is harm which is not easily quantified in monetary terms.

 

 

[50]           Again, I find Cairns’ The Remedies for Trademark Infringement to be helpful.  At pp. 22-23 he states that irreparable harm in trademark law means serious financial harm, and that where a party’s harm will be difficult to quantify in monetary terms, this reduces the adequacy of the damages remedy.

 

[51]           Here, on a prima facie basis, I am satisfied there is confusion in the marketplace by both companies using the name “Spiderplow” and that harm will be difficult to quantify in monetary terms.  Therefore, I find both applicants meet the second part of the test.

 

Balance of Convenience:

[52]            Consequently, the result of this application turns on which applicant  meets the balance of convenience test.  That is, which of these parties will suffer the greater harm from the granting of an injunction to the other, pending a decision on the merits?  At this point (and it may well be that the trial judge will conclude otherwise), the Plaintiff has satisfied me that the balance of convenience is in its favor.  On a prima facie basis, the Plaintiff has more convincing evidence of the harm that it will suffer if an injunction is granted to the Defendants than that which the Defendants will suffer if an injunction is granted to the Plaintiff.

 

[53]           Here, the Plaintiff has made out a much stronger case that it has established a market presence and goodwill in the industry in western Canada using the name “Spiderplow”. As at July 2004, it had completed 14 jobs in Canada with another approximately 20 jobs  pending. The Plaintiff’s evidence on this application as to the money it has spent and the jobs it has done in the Canadian market is much more convincing than the Defendant’s evidence. In fact, at the time this lawsuit started, the Defendants had not completed any projects in Canada .  Clearly, it is less harmful for the Defendants to be prohibited, until trial, to use the “Spiderplow” name in Canada , than to stop the Plaintiffs, who have spent money in Canada to build up the goodwill in the name, from using it.

 

[54]           The Defendant, Spiderplow International, relies heavily on its demonstration of its equipment in Jasper in 2001.  However, it admitted it obtained no business from that demonstration.  The Defendant, Spiderplow International, admitted that from 2001 to 2004  it had no business projects in Canada.  It admits   it did not apply for the word name “Spiderplow” in Canada until July 5, 2004 (after the Defendant Lyons started work for them).

 

[55]           In Mr. Curtis’ affidavit in support of Spiderplow International’s injunction application, he deposed “a significant amount of time, energy and money was expended by Spiderplow International [to promote the Spiderplow business in areas ...] including Canada.”  In cross-examination, the only example he had of promotion in Canada was the January 2001 Jasper demonstration.

 

 

[56]           Spiderplow International may have a market presence in other countries but as for Canada, on the evidence before me, it appears that the Defendants intended  to develop a Canadian presence but never did.  I realize that the Plaintiff is also a relative newcomer to western Canada, however it certainly has demonstrated more of a market presence than the Defendants.  In fact, at the time the Plaintiff first filed its Statement of Claim and motion, Spiderplow Internationalhad no Spiderplow machines in Canada.  Two were later brought over from the Philippines after the Defendant Lyons joined up with the Defendant, SpiderplowInternational.

 

[57]           Mr. Gunther Sperber, a shareholder in Spiderplow International appears to have been one of the main people trying, at one time, to develop the Canadian market. Yet, he testified that he was in Canada in 1998 and 1999 and never returned until 2001. Further, from 2001 to 2004, other than the Jasper demonstration, he could give no concrete examples of infiltration into the Canadian market.

 

[58]           The evidence as to whether the Plaintiff has the right to use the name “Spiderplow”  or whether the Defendant, Spiderplow International, has the exclusive trademark or word mark to use that name, raises more questions than it answers. The Plaintiff points out that nowhere in any affidavit does the Defendant attach documentary evidence of the trademark right it says it received in the U.S.A.  It is unclear if it was Twin Tech (which company is no longer active) which obtained the trade mark. Mr. Curtis suggested there was an “informal” assignment to the Defendant in 2000, yet the sublicence agreement in 2000 states that Gemwood is the owner of a pending trademark.   Usually, if a company is protective of its trade or word name it does not easily allow others to use it. Here, the Defendant Lyons suggested that first of all 6189377 was given permission to use it in Canada (though no evidence was presented in that regard), and then, supposedly, 1113319 was allowed to use the name (though again no evidence of that was produced).  After termination of the main distributor licence in January 2002,  Spiderplow U.S.A. continued to use the name in the U.S.A and nothing was done to prohibit that. In 2002, the Plaintiff, to the knowledge of the Defendant, started using the name in Canada. The Plaintiff incorporated a company in Canada, using that name; nothing was done then. No action was taken until the Plaintiff applied for an injunction, and then the Defendants applied for a counter-injunction.

 

[59]           I am not swayed by the argument that the Defendant Lyons will be prevented from earning an income if an injunction is granted to the Plaintiff.  The Defendants can market the ploughs in Canada under any other name; this does not preclude keeping the Defendant on as an employee.

 

[60]           I am not persuaded that the Defendants have shown a prima facie basis for its allegation that the Plaintiff has “unclean hands” by using the name “Spiderplow” in breach of the limited licence.  The evidence pertaining to the agreement raises more questions than it answers. It is arguable that the licence agreement was contingent on the main distributor  agreement being in effect.  Does the agreement affect the Canadian market? Further, Mr. Sperger in cross examination maintained in cross-examination that the sublicence agreement is still in effect but Mr. Curtis maintained it was not. Yet, on July 5 2004, Mr. Curtis wrote a letter to Canadian Human Resources in support of the Defendant Lyon’s Canadian work permit, wherein he referred to the Plaintiff as “its franchise operation in the U.S.A.”

 

[61]           Further, as the Plaintiff pointed out in argument, the Defendants have not raised the alleged breach of the licence or expiry of the licence in their Statement of Defence or Counterclaim.

 

 

[62]           The Defendant, Spiderplow International, maintains it has used the name “Spiderplow”  throughout the world and has a word mark for the name.  However, the evidence suggests that the Defendants allowed companies with which it was affiliated or on good business terms to use the name (for example, Akola Investments Ltd., Spiderplow USA (even after January 31, 2002), the Defendant Lyons’ company, 6189377 and now 1113319 Alberta Ltd.).  The Defendant, SpiderplowInternational, appears to have had no problem with the Plaintiff using the name in Canada until it decided to hire the Defendant Lyons to market the ploughs in the Canadian market.  It is clear by the exchange of e-mails between Mr. O’Connor and Mr. Sperber that prior to this action the Defendants were aware of the Plaintiff’s using the name “Spiderplow”  in Canada and there was no suggestion in those exchanges of any licensing or name problem.

 

[63]           Frankly, I am sympathetic to the Plaintiff’s position, which is that it spent monies to market the “Spiderplow” name in Canada (to the knowledge of the Defendant, Spiderplow International) and now that it has made a “presence” in the market, the Defendants want to prohibit it from using the name.  Overall, it appears that there was a falling out between Mr. Curtis and Mr. Sperber (Spiderplow International) and the O’Connors (Spiderplow Canada) over the licensing agreement and now that the Defendant Lyons has “hooked up” with the Defendant, Spiderplow International, the use of the name “Spiderplow” by the Plaintiff in the Canadian market is now in issue.

 

[64]           I am of the view that if I granted the injunction in favour of the Defendants, theywould realize on the “goodwill” the Plaintiff established in the Canadian market.  Mr. O’Connor, Jr. deposed that ,in 2003, the first year of operation, the company had $1.8 Million in gross sales in Canada.  The company has ten full-time employees in Canada and the company has invested $10,000,000 in the Canadian market.

 

[65]           I conclude, on the balance of convenience, that the Defendants are in the preliminary stages of entering the Canadian market, whereas the Plaintiff has a more established presence and the Defendants would suffer less harm if enjoined from using the name “Spiderplow”  in Canada than would the Plaintiff if it continued to lose contracts and goodwill while the action proceeds.

 

[66]           I accept the Defendants’ position that they have used the name in the United States and other countries, and they may have trademarked the name in the United States, but what is in issue here is who has used the name and built up its goodwill in Canada.  The evidence before me suggests it is the Plaintiff.  It appears that the Twin Tech Group of Companies coined the name “Spiderplow” as the marketing name for the Fockersperger plough to refer to the product manufactured by Fockersperger.  It is less clear that the Twin Tech or Defendant company used the name to refer to services provided by the Defendants.

 

 

[67]           I  find it is noteworthy that from November 2002 to  September of 2004 (after the time when the Plaintiff sued the Defendant Spiderplow International), nothing was done to prohibit the Plaintiff from using the name “Spiderplow” in Canada. Until then, Spiderplow International had not applied for the trademark for the name in Canada.  I realize that the owner of a trademark name has the right to protect it, notwithstanding that it has not been registered, however, the point is that until this action started, nothing was done to prohibit the Plaintiff from using the name.

 

[68]           The timing of an application for an interim injunction may affect the balance of convenience test.  For example, in the decision which was affirmed in Spanos v. Luciano’s (1996), 184 A.R. 236 (C.A.), the Chambers Judge took into account, in granting the injunction, that one restaurant had not yet opened.  Here, the Plaintiff has been using the name in Canada for over two years, resulting in increased harm to the Plaintiff if it must now change its name. The Defendants have just entered the Canadian market.

 

[69]           As stated in Los Gatos Food Corp. v. Margarita’s Taco (1984), 80 C.P.R. (2nd) 172 (B.C.S.C.) 173:

 

Where a plaintiff moves immediately, the balance of convenience is more likely to lie in its favour than when it goes to sleep on its rights. Here there has been delay.

 

[70]           The balance of convenience tends to favor the status quo: there is usually less harm and inconvenience in the continuation of the existing state of affairs than in change: Cairns (p. 26). In my view, the status quo should continue, that the Plaintiff should be allowed to continue to use the name in Canada until trial.

 

[71]           I  conclude the Plaintiff has shown the balance of convenience favours it and not the Defendants.

 

RELIEF GRANTED:

[72]           Until trial of this action, I grant the Plaintiff’s injunction:

 

(a)        prohibiting any of the Defendants from using the name “Spiderplow” ( one word or two), whether written, verbal or otherwise, in the Western Canadian Provinces only (British Columbia, Alberta, Saskatchewan, Manitoba).  To be clear, this does not prevent any of the Defendants from  marketing the ploughs and doing business under another name;

 

(b)        prohibiting any of the Defendants from contacting any customers of the Plaintiff, which customers shall be defined as being the 14 customers listed by Mr. O’ Connor (referred to in argument);

 

 

(c)        prohibiting any of the Defendants from contacting any employees of the Plaintiff for the purpose of soliciting them for hire or obtaining any confidential information of the Plaintiff; and

 

(d)        prohibiting any of the Defendants from using any confidential information of the Plaintiff.

 

COSTS:

[73]           As the merits of this case remain to be determined, costs are in the cause.

 

 

Heard on November 5, 2004.

Dated at the City of Calgary, Alberta this 9th day of December, 2004.

 

 

J.C. Coutu                 

J.C.Q.B.A.

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