Breach of Contractual Undertaking Leads Court to Issue Permanent Injunction

2007-01-01

B
REACHOFCONTRACTUALUNDERTAKINGLEADS
COURTTOISSUEPERMANENTINJUNCTION

ALEXANDRASTEELE*
LEGERROBICRICHARD
,LLP
L
AWYERS,PATENT&TRADE-MARKAGENTS
InacaseopposingtwogiantsoftheCanadianmilkindustry,theOntarioSuperior
CourtofJusticeissuedapermanentinjunctionenjoiningDefendantParmalatDairy
andBakeryInc.fromfurtherbreachingatenyearoldcontractualundertakingtonot
usethetrade-markCOUNTRYSCENE&Designinassociationwithpremiummilk
products.[AgropurCooperativev.ParmalatDairyandBakeryInc.,2007CanLII
28219(ONS.C.)July13,2007,HarvisonYoungJ.]
TheFacts
TheDefendantParmalatDairyandBakeryInc.(“Parmalat”)andthePlaintiffAgropur
Cooperative(“Agropur”)arecompetitorsinthedairymarketinCanada.Pursuanttoa
transactionin1997betweentheparties,itwasagreedthatParmalatwouldsellpart
ofitsbusinesstoAgropur.Thepartiesenteredintovariousagreementsand
undertakingsandbywhich,amongstothers,Parmalatwouldagreenotcompetewith
AgropurinadefinedterritoryandAgropurwouldobtaintheexclusiverighttousethe
trade-markCOUNTRYSCENE&Designinassociationwithpremiummilkproducts
insuchterritoryuntilFebruary28,2010.
NearlyadecadelateraftertheagreementbetweenParmalatandAgropur,Parmalat
introducedapackagedesignforitspremiummilkandwhichAgropurclaimedwasa
breachofParmalat’scontractualundertakingnottousethetrade-markCOUNTRY
SCENE&Design.
TheissuebeforetheOntarioSuperiorCourtwasthereforetodetermineifParmalat
hadinfactbreacheditsundertakingbyintroducinganallegedlyinfringingnew
packagingdesignandintheterritorywhichwasexclusivelyAgropur’spursuanttothe
1997agreement.

©CIPS,2007.*Lawyer,AlexandraSteeleisamemberofLEGERROBICRICHARD,L.L.P.,amultidisciplinaryfirmof
lawyers,andpatentandtrademarkagents.Publication142.203.

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TheSuperiorCourtDecision
Attheoutset,theCourtnotedthattheanswertotheissueinlitigationwoulddepend
onwhether,despitethefactthatParmalat’snewpackagingdesignwasnotidentical
toAgropur’sCOUNTRYSCENEDesignpackaging,itwassosimilarastoamountto
abreachofthe1997agreement.
Parmalatadoptedthepositionthat,onaplainandunambiguousreadingofthe1997
agreement,itwouldhavetointroduceanidenticaldesignforthepackagingofits
premiummilkproductinorderforabreachofthe1997agreementtooccur.Parmalat
alsoarguedthatanyassessmentofitsnewdesignshouldnotbemadewiththeaid
ofcaselawontrade-markinfringement,asthiscasewasapurelycontractualmatter.
TheCourtdisagreedwithParmalat’spositionwithrespecttoParmalat’sinterpretation
oftheagreement:theprincipalquestionshouldnotbewhetherthedesignsare
identical,butratherhow“similar”thenewpackagingdesignmustbetoconstituteuse
ofthetrade-markCOUNTRYSCENE&Designforthepurposeofafindingofa
breachofthe1997agreement.Inaddition,sincetheagreementconcerneduseina
definedterritoryofatrade-mark,theprincipalsofassessmentoftrade-mark
infringementwereveryrelevantinordertodeterminewhetherornottheagreement
wasbreachedbyParmalatwiththeintroductionofitsnewpackaging.
Bothpartiesfiledasubstantialamountofevidenceinrespectofthesimilaritiesand
differencebetweentheparties’respectivedesigns.Theevidencealsorevealedthat
consumersofmilklookforfamiliarityinpackagingandthattheydonotexpenda
greatdealoftimeorefforttodistinguishthisspecificdetailsonthepackaging:rather,
consumerspurchasemilkbasedonwhatisfamiliartothem.
TheCourtagreedwithParmalatthatthedesignswerenotidenticalanditidentified
someoftheprincipaldifferencesbetweenthedesigns.However,theCourtnoted:
“[…]Idonotthinkthatthisissuecanberesolvedbysimplytallying
upthenumbersofdetailsthataresimilarordifferent,withoutastep
backtolooktheimpressionsformedbythetwodesigns.Inmyview,
theyareverysimilarindeed,or,tousethewordsofJeromeJ.as
citedabove“sufficientlyclose…tobringabout…confusioninthe
mindofthepublic”.”
DespiteParmalat’sinsistencethatithadcommissionedthecreationofitsnew
packagingdesignunderstrictinstructionsthatanynewdesignnotviolatethe1997
agreement,theCourtconcludedthatmore“reasonableexplanation”forthe
similaritiesbetweenthedesignswasthatParmalatwantedtocomeascloseas
possibletotheCOUNTRYSCENEDesignwithouttechnicallybreakingits
undertakingtorefrainfromusingituntil2010.InJusticeYoung’sview,therewerea
myriadofotherpossibledesignsforParmalat’spremiummilkproduct,evenonthe

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themeof“countryscenes”,andwhichwouldnotbeassimilartoAgropur’s
COUNTRYSCENEDesignastheonerecentlyintroducedinthemarketbyParmalat.
TheCourtconcludedthatParmalathadattemptedtocircumventthe1997agreement
byintroducingaconfusinglysimilardesigntotheoneithadagreednottouseuntil
2010:JusticeYoungstatedthattoruleotherwisewouldallowParmalattosimply
makeminorchangestotheCOUNTRYSCENEDesigninordertoavoidits
contractualobligations.
Forthesereasons,theCourtissuedadeclarationthatParmalatwasinbreachofits
undertakingbyvirtueofitsuseofthetrade-markCOUNTRYSCENE&Design,or
colourableimitation,orobviouslyderivefacsimilethereof.TheCourtalsoissueda
permanentinjunctionenjoiningParmalatfromfurtherbreachingthe1997agreement.
Conclusion
Thiscaseisanexampleofhowtheprinciplesoftrade-marklawpermeatethe
interpretationofcontracts:theCourtdidnothesitatetoapplythewellknown
principlesofconfusioninordertoascertainwhetherornottherewasabreachofthe
1997agreementbetweentheparties.
Manytrade-markcasesareresolvedwithoutresortingtolitigation.Thetermsand
conditionsoftheagreementssignedbythepartiesareoftheutmostimportance.
Undertakingsshouldbedraftedinsuchawaythattherationalebehindthe
agreementisclearlyexpressed:shouldabreachoftheagreementoccur,thenthe
Courtisabletoinfertheintentionofthepartiesfromasimplereadingofthe
agreement.Clientsshouldberemindedoftheimportanceofreadingand
understandinganyagreementthattheenterintoastheCourtswillnothesitateto
remindthemoftheircontractualobligations.

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