Executive Summary: Key Legal and Evidentiary Issues

• The sufficiency of pleadings regarding trademark infringement and passing off based on alleged unauthorized and potentially unsafe Toyota parts.

• Whether non-compliance with shipping protocols or cosmetic damage can constitute a misrepresentation under trademark law.

• The adequacy of material facts supporting claims of public safety risks related to the defendant’s automotive parts.

• The appropriateness of striking claims under the Competition Act and certain sections of the Trademarks Act.

• The threshold for granting leave to amend a statement of claim after multiple amendments.

• The entitlement to damages or costs, specifically storage fees, in the context of ongoing litigation.

Background and facts of the case

Toyota Jidosha Kabushiki Kaisha, trading as Toyota Motor Corporation, and Toyota Canada Inc. (collectively, Toyota) initiated legal proceedings against Marrand Auto Inc. after the Canada Border Services Agency (CBSA) detained a shipment of automotive parts suspected to be counterfeit, with Marrand Auto Inc. listed as the owner and consignee. Upon inspection, Toyota did not allege that the parts were counterfeit or unauthorized by the trademark owner, but instead claimed the goods were “unauthorized” because they were not purchased from an authorized Toyota dealer and thus did not come with a Toyota Canada warranty. Toyota further alleged that the defendant’s sale of these parts could mislead consumers into believing the parts were covered by a Toyota warranty, amounting to passing off and trademark infringement.

The statement of claim was amended to include alleged breaches of the Competition Act. Marrand Auto Inc. responded by arguing that the goods were lawfully acquired and constituted “grey goods,” meaning their resale could not be prohibited under the Trademarks Act. The defendant moved to strike the amended statement of claim, asserting that no reasonable cause of action was disclosed.

Procedural history and policy terms at issue

The court initially struck the Competition Act claims and certain trademark claims without leave to amend but allowed Toyota to further amend its statement of claim regarding passing off and misrepresentation, particularly focusing on whether the sale of damaged or improperly shipped parts could constitute a misrepresentation. The relevant policy terms discussed included Toyota’s Parts Handling Guide and warranty practices, with the plaintiffs emphasizing that only parts purchased from authorized dealers are covered by warranty.

Toyota’s amended claim alleged that the defendant’s unauthorized shipping practices increased the likelihood of damage and potential public safety risks. However, the court found that the claim failed to provide sufficient material facts to support the allegation that the parts were unsafe, noting that the pleadings described only cosmetic damage and speculative safety risks. The court emphasized that non-compliance with shipping protocols alone does not amount to misrepresentation under trademark law.

Court’s analysis and outcome

The court applied established principles for motions to strike, noting that a claim must disclose a reasonable cause of action and be supported by material facts. The court found that Toyota’s pleadings did not adequately explain how the alleged damage rendered the parts unsafe or how the defendant’s conduct constituted misrepresentation. As a result, the court struck the fresh as amended statement of claim but granted Toyota leave to amend once more, provided it could articulate material facts supporting its allegations.

Marrand Auto Inc. requested damages in the form of storage fees under the Trademarks Act, but the court denied this request, as the proceeding had not been dismissed or discontinued. The court also encouraged the parties to agree on costs, allowing for written submissions if no agreement could be reached.

Ruling and overall outcome

The Federal Court granted the defendant’s motion to strike the plaintiffs’ fresh as amended statement of claim, with leave to amend. No damages or specific costs were awarded at this stage, and the matter of costs was left for the parties to resolve or to be determined by further submissions if necessary.