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"Public morals" and "honest practices" in German and Canadian unfair competition law : a proper means… Buss, Thomas 1996

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"Public Morals" and "Honest Practices" in German and Canadian Unfair Competition Law - A Proper Means of Responding to New Challenges? By Thomas Bul3 Ref. iur. (Rhineland-Palatinate, Germany) Ass. iur. (North Rhine-Westphalia, Germany) Dr. iur. (Trier, Germany)  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE FACULTY OF GRADUATE STUDIES (FACULTY OF LAW) We accept this thesis as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA July 1996 © Thomas BuB, 1996  In  presenting this  degree at the  thesis  in  University of  partial  fulfilment  of  of  department  requirements  British Columbia, I agree that the  freely available for reference and study. I further copying  the  agree that permission for extensive granted  or  understood  his  or  her  representatives.  an advanced  Library shall make it  this thesis for scholarly purposes may be by  for  It  is  by the that  head of copying  my or  publication of this thesis for financial gain shall not be allowed without my written permission.  Department The University of British Columbia Vancouver, Canada  DE-6 (2/88)  u  Abstract  The thesis focuses on the use o f general terms in unfair competition law in the common law jurisdiction o f Canada and the civil law jurisdiction o f Germany. It describes how the terms "public morals" in the German Act Against Unfair Competition and "honest practices" in the Canadian Trade-marks Act are defined and interpreted by the courts in these two different jurisdictions. While the German term more or less constitutes unfair competition law alone, the Canadian term has in the field o f intellectual property a very controversial and dubious residual meaning. The analysis o f Canadian judgments indicates three reasons for this significant difference in the importance of both terms. The first and most important reason is the difference in both Constitutions as to the division o f powers. While the German term could be defined within the whole scope o f civil law, the Canadian term from the very hour of its birth was limited to the subject-matter "trade and commerce" as interpreted by the J . C . P . C . and now the Supreme Court o f Canada. The second reason is the different origin o f unfair competition law in both countries. Being closely connected to the protection o f trade-marks, Canadian unfair competition law was never and still is not concerned with practices that have little or nothing to do with direct interference with a competitor's proprietary rights. O n the other hand, unfair competition law in Germany was and still is considered to be distinctive from intellectual property protection under other acts. Although the Act Against Unfair Competition was originally understood to be an instrument to protect the trader against dishonest competitors, the term "public morals"  Ill  remained open to further interpretation beyond the protection of a businesses reputation, and focuses on the consumers' interests in the first place. The third reason is the coexistence of unwritten and written law in Canada's common law jurisdiction. Some judgments support the idea that Canadian courts were not willing to go beyond well established common law principles for the interpretation of the term "honest practices". Having shown these practical ways of interpretation the thesis shifts to the more theoretical question of whether the use of general terms is a constitutional means of reacting to new phenomena of social behaviour. First, it will be pointed out that the constitutional principle of vagueness sets a limit to the legislator's decision to refrain from a detailed regulation and to use instead general and intentionally imprecise terms. Secondly, the question will be addressed as to how Charter rights can influence the courts' interpretation of general terms.  iv TABLE OF CONTENTS Abstract  ii  Table of Contents  iv  Table of Cases  vii  Abbreviations and Explanations  xiii  Acknowledgment  xviii  CHAPTER I: Introduction  1  1) The bases for judicial decisions  1  2) Changing business methods and adaptability of law  13  3) Different terminology and different approaches  16  CHAPTER H: "Public morals" in German Unfair Competition Law  20  1) The statutory situation in Germany  20  2) § 1 UWG  21  a) "Business practices"  21  b) "For the purpose of competing"  22  c) "Public morals"  24  aa) "Sense of decency of all just and right thinking people"  24  bb) Specification and systematization  25  aaa) Enticing customers (1) Misleading representation  26 26  V  (2) Undue Pressure and Pestering (3) Temptation bbb) Interference (1) Interference with respect to sales, sales promotion and the competitor's business (2) Displacement and cut-throat competition (3) Boycott and Discrimination (4) Comparative advertisements  28 29 31  31 34 35 36  ccc) Exploitation  37  ddd) Violation of the law  38  (1) Violation of statutory obligations  39  (2) Violation of contractual obligations  40  eee) Disturbance of the market  41  3) Summary and analysis  42  CHAPTER HI: "Honest practices" in Canadian Unfair Competition Law  46  1) General  46  a) Federal statutory regulation  46  b) Common law  50  aa) The Law of Torts aaa) Tort of passing-off bbb) Tort of slander ccc) Tort of inducing or procuring breach of contract ddd) Tort of conspiracy and tort of intimidation bb) Equity c) Provincial statutory regulation a) Trade Practice Acts  50 50 55 55 56 56 58 58  vi b) Consumer Protection Acts 2) "Honest practices" in paragraph 7(e) of the Trade-marks Act a) Scope of application aa) Statutory version of a "tort of unfair competition"? bb) The cases b) The effect of paragraph 7(e) after MacDonald v. Vapour Canada Ltd. 3) Summary and analysis  60 61 61 61 67 70 76  a) First reason: The different concepts with respect to the division of powers  76  b) Second reason: The different origin of unfair competition law  79  c) Third reason: The coexistence of unwritten and written law in Canada's common law jurisdiction?  81  CHAPTER IV: General terms as a means of responding to new business methods  87  1) Advantages and disadvantages of general terms  87  2) The influence of constitutional law  90  a) The constitutional doctrine of vagueness  90  b) Interpretation in the light of Charter rights  107  CHAPTER V: Conclusion  112  BIBLIOGRAPHY  115  Vll  Table of Cases - Canadian Cases A.C. Spark Plug Co. v. Can. Spark Plug Service, [1935] 3 D.L.R. 84 (Exch.Ct). Aca Joe International v. 147255 Canada Inc. (1986), 10 C.P.R. (3d) 301 (F.C.T.D.). Adidas (Canada) Ltd. v. Collins Inc. (1978), 38 C.P.R. (2d) 62 (F.C.T.D.). A.-G. Canada v.A.-G. Ontario, [1937] 1 A.C. 326 (J.C.P.C.). Allen v. 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BGH, GRUR  1961, 90.  B G H Z 28,  60.  BGH, GRUR  1961, 237.  B G H Z 28,  396.  BGH, GRUR  1961, 288.  B G H Z 34,  270.  BGH, GRUR  1961, 418.  B G H Z 39,  356.  BGH, GRUR  1962, 36.  B G H Z 43,  284.  BGH, GRUR  1962, 45.  B G H Z 44,  209.  BGH, GRUR  1962, 418.  B G H Z 44,  302.  BGH, GRUR  1963, 201.  B G H Z 45, 2.  BGH, GRUR  1963, 583.  B G H Z 46,  BGH, GRUR  1964, 209.  BGH, GRUR  1965, 361.  175.  xi  B G H , G R U R 1965, 375.  B G H , G R U R 1986, 547.  B G H , G R U R 1965, 607.  B G H , JuS 1986, 736 N o . 11.  B G H , G R U R 1966, 47.  B G H , G R U R 1986, 820.  B G H , G R U R 1966, 97.  B G H , G R U R 1987, 52.  B G H , G R U R 1966, 323.  B G H , G R U R 1987, 371.  B G H , G R U R 1966, 564.  B G H , G R U R 1988, 39.  B G H , G R U R 1966, 620.  B G H , G R U R 1988, 311.  B G H , G R U R 1967, 37.  B G H , G R U R 1988, 629.  B G H , G R U R 1967, 255.  B G H , G R U R 1989, 367.  B G H , N J W 1967, 723.  B G H , G R U R 1989, 609.  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OLG Hamburg, NJW-RR 1987, 556. OLG Karlsruhe, NJW-RR 1987, 737. OLG Koblenz, NJW-RR 1988, 558. OLG Hamburg, GRUR 1990, 288. OLGHamm, GRUR 1990, 689.  Xlll  Abbreviations and Explanations AC.  Law Report, Appeal Cases  Adel.L.R.  The Adelaide Law Review  A. -G.  Attorney-General  All Engl.Rep.  The All England Law Reports  annot.  annotation  Auck.U.L.Rev.  Auckland University Law Review  Austr.L.J.  The Australian Law Journal  BB  Betriebsberater (Law Journal)  B. C.  British Columbia  BCCA.  British Columbia Court of Appeal  B.C.L.R.  British Columbia Law Report  B.C.S.C.  British Columbia Supreme Court  BGB1.  Bundesgesetzblatt (Federal Law Gazette; statutes and treaties series)  BGH  Bundesgerichtshof (Federal Supeme Court of Justice)  BGHZ  Entscheidungen des Bundesgerichtshofes in Zivilsachen (Federal Supreme Court of Justice law reports, civil law cases)  BVerfG  Bundesverfassungsgericht (Federal Constitutional Court)  BVerfGE  Entscheidungen des Bundesverfassungsgerichts (Federal Constitutional Court law reports)  CA.  Court of Appeal  Camb.L.J.  The Cambridge Law Journal  Can.Bar Rev.  Canadian Bar Review  xiv  Can. Tax J.  Canadian Tax Journal  CCC.  Canadian Criminal Cases  Ch.D.  Law Reports, Chancery Division, 1875-1890 High Court of Justice, Chancery Division  C.L.P.  Current Legal Problems  C.I.P.R.  Canadian Intellectual Property Review  CL.R.  Commonwealth Law Reports  C. P.R.  Canadian Patent Reporter  CR.  Criminal Reports  Cro.Jac.  Croke's Reportss temp James I, King's Bench and Common Pleas, vol. 1, 1603-1625  Diss.  Dissertation  D. L.R.  Dominion Law Reports  DTC  Dominion Tax Cases  e.g.  exempli gratia  Einl.  Einleitung (introduction)  Exch. Ct.  Exchequer Court of Canada  F.C  Federal Court Reports  F.C.A.  Federal Court of Appeal  F.C.T.D.  Federal Court, Trial Division  GG  Grundgesetz (Basic Law - German Constitution)  GWB Gesetz gegen Wettbewerbsbeschrankungen (Restraint of Harv. J.L.&Publ.Pol. Competition Harvard Journal Act;of Anti-Cartel Law and Public Act) Policy  XV  Harv.L.Rev.  Harvard Law Review  H.C.Austr.  High Court of Australia  H.L.  House of Lords  ibid.  ibidem  i.e.  id est  Isr.L.Rev.  Israel law Review  J.C.P.C.  Judicial Committee of the Privy Council  J.of the SPTL  Journal of the Society of Public Teachers of Law  JuS  Juristische Schulung (Law Journal)  JW  Juristische Wochenschrift (Law Journal)  K.B.  Law reports - King's Bench Division  K.B.D.  King's Bench Division  KG  Kammergericht (Regional Appeal Court of Berlin)  Leg. St.  Legal Studies  L.Q.R.  Law Quaterly Review  Mod.L.Rev.  Modern law Review  Mon.U.L.Rev.  Monash University Law Review  MuW  Markenschutz und Wettbewerb (Law Journal)  NJW  Neue Juristische Wochenschrift (Law Journal)  NJW-RR  Neue Juristische Wochenschrift-Rechtsprechungsreport (L; Journal)  N.Z.L.J.  New Zealand Law Journal  OLG  Oberlandesgericht (Regional Appeal Court)  xvi  Ont.C.A.  Ontario Court of Appeal  Ont.H.C.  Ontario High Court (of Justice)  Ont.Prov.Ct.  Ontario Provincial Court  O.R.  Ontario Reports  Pace L.Rev.  Pace Law Review  Que. SC.  Quebec Superior Court  RabattG  Rabattgesetz (Act on Discounts)  RG  Reichsgericht (Supreme Court of the former German Reich)  RG (GS)  Reichsgericht (GroBer Senat) (Supreme Court of the former German Reich, Enlarged senate)  RGB1.  Reichsgesetzblatt (Law Gazette of the former German Reich; statutes and treaties series)  RGZ  Entscheidungen des Reichsgerichts in Zivilsachen (Supreme Court of the former German Reich law reports, civil law cases)  R.P.C.  Report of Patent Cases  R.S.A.  Revised Statutes of Alberta  R.S.B.C.  Revised Statutes of British Columbia  R.S.C.  Revised Statutes of Canada  R.S.M.  Revised Statutes of Manitoba  R.S.N.T.  Revised Statutes of Northwest Territories  R. S. O.  Revised Statutes of Ontario  R. S .P.E.I.  Revised Statutes of Prince Edward Island  S. Aff.L. J.  South African Law Journal  S. Cal.L.Rev.  South California Law Review  XVll  SC.  Statutes of Canada  S.C.C.  Supreme Court of Canada  S.C.R.  Supreme Court Reports  Supp.  Supplement  Tul.L.Rev.  Tulane Law Review  U.B.C.L.Rev.  The University of British Columbia Law Review  U.N.S.W.L.J.  The University of New South Wales Law Journal  U.ofPitt.L.Rev.  The University of Pittsburg Law Review  UWG  Gesetz gegen den unlauteren Wettbewerb (Act against Unfair Competition)  W.Austr.L.Rev.  Western Australia Law Review  W.L.R.  The Weekly Law Reports  WRP  Wettbewerb in Recht und Praxis (Law Journal)  ZugabeVO  Zugabeverordnung (Regulation governingfreegifts with sales)  XV111  Acknowledgement Most academic achievements and accomplishments are, to a considerable extent, the result of favourable circumstances and good working conditions. I have found both of them at the University of British Columbia. I would like to thank my supervisor Professor Elizabeth Edinger for her ideas, encouragement and patience. I am also indebted to Professor Bruce McDougall whose support went far beyond of what I could expectfroma secondary reader. I also wish to express my gratitude to Professor Dr. Pitman Potter and the Graduate Committee of the Faculty of Law, as well as to the Law Foundation of British Columbia for its kind generosity. I very much appreciate the inspiration I obtainedfromthe discussions and work with Professors Joost Blom, Douglas Sanders, Bob Paterson and Steve Wexler and my colleagues and friends in the Graduate Programme, of whom I would like to mention Wang Feihong and Janie Tremblay. I also owe special thanks to the library and faculty staff for their energy and time, in particular Lillian Ong. Last but not least I would like to thank my friends at home, Jorg Badewitz and Dr. Antonia Ehring, who provided me a lot of data and information without which the thesis could not have been finished.  1  CHAPTER I: Introduction  1) The bases for judicial decisions "Justice as an abstraction or as a paper model is no use to man."  1  I agree with Scarman's assessment that the essential morality o f case law lies in the fact that it recognizes this truth. Neither is law a mere aggregate o f theoretical rules and customs but rather rights that are actually granted and duties that are actually imposed by the courts, and ultimately enforced by state authorities. This is true for a common law 2  system and a civil law system alike. A statutorily-granted right is o f little value where the court's willingness to apply the statute is doubtful, and the reference to customs and habits as the sources o f common law  3  is a blunt sword where a trader cannot rely on the  enforcement of these customs. It has been pointed out, however, that 'customs which will be recognised by a judge are already law." This might be true but the question is not 4  when a pattern o f established social behaviour can be labelled 'law" but when rights and duties that are considered to result from this behaviour can be enforced. This shift from a moral or social obligation to rule adherence to a legal and enforceable  obligation  constitutes law as referred to here. The latter is why common law has not 'always been  1  2  S carman, Common Law and Ethical Principle (1976), at 9. Hogue, Origins of Common Law (1966), at 175, e.g., describes common law as a 'body  of rules prescribing social conduct which was justiciable in the royal courts in England". 3  See e.g. Sadler, The Relation of Custom to Law (1919), at 1 ff. and at 50 where he refers  to Austin, Lectures of Jurisprudence, declaring 'that a custom became a law when it was recognised by a judge o f the State." See also Dawson, The Oracles of the Law (1968), at 2, who states that "the solid core [of common law] was English custom (...)" 4  Sadler, supra note 3, at 50.  2  there" but was created by judges when they made trade customs and rules o f social conduct legally binding. This reason, however, has not always been accepted. A s Stone 5  points out, '[m]ost British judges and lawyers all the time, and all o f them some o f the time, do regard judicial decisions as either direct application o f existing law, or logical deductions from some existing principle." A s a result o f this 'declaratory theory" it was 6  7  concluded that 'the judge does not make the law, he merely declares it" and that 'fijf it is unclear, the judge's task is to 'find" the law".  8  However, following a more modern  understanding o f the judges' role in the process o f law-making (so-called 'realist" or 'positivist theory') , the existence o f 'judiciary law" 9  5  1 0  or 'judicial law-making"  1 1  is no  See Dawson, supra note 3, ibid., who states 'that the English common law from the  very beginning was created by the royal judges who administered the new royal remedies". See also Hogue, supra note 2, who explains the continuing growth o f common law at 233: 'Bold judges have created precedents adding new rules to meet new social and economic circumstances." 6  7  The Province and Function ofLaw (1950), at 168. See e.g. Atiyah, 'Judges and Policy" (1980), 15 Isr. L . Rev. 346-347; Krygier, 'Julius  Stone: Leeways o f Choice, Legal Tradition and the Declaratory Theory o f Law" (1986), U . N . S . W . L . J . 31. 8  See e.g. Atiyah, supra note 7, ibid.  9  See Ayitah, supra note 7, at 348; Krygier, supra note 7, at 31.  1 0  This term has been used 'to emphasize the view that the judge, though, as it is said,  nominally doing no more than declaring the existing law, may be said in truth to be making it", Barwick, "Judiciary Law: Some Observation Thereon" (1980), 33 C . L . P . 239-240. 1 1  See e.g. Pound, 'Common L a w and Legislation" (1908), 21 Harv.L.Rev. 383; Stone,  Recent Trends in English Precedent (1945) and The Province and Function of Law (1950) and Precedent and Law (1985); Frank, Courts on Trial (1949), particularly at 292 f f ; Reid, 'The Judges A s L a w Makers" (1972), 12 J. o f the S P T L 22, 22-23, who regards the declaratory theory as 'a fairy tale", Tate, 'The 'New' Judicial Solution: Occasions F o r and Limits to Judicial Creativity" (1980), 54 T u l . L . Rev. 877; Scarman, 'Ninth Wilfred Fullagar Memorial Lecture: The Common L a w Judge and the Twentieth Century - Happy Marriage or Irretrievable Breakdown?" (1980), 7 M o n . U . L . R e v . 1, who, at 16, considers the common law to be 'the judges' contribution to law-making", Cappelletti, 'The L a w Making Power o f the Judge and Its Limits: A Comparative Analysis" (1981), 8 M o n . U . L . Rev.  15; Richardson, 'Thirteenth Wilfred  Fullagar Memorial Lecture: Judges A s  3  longer seriously denied 'Where no authority binds or current or acceptable decision compels."  12  It follows that even (or especially) today when courts face new kinds o f  behaviour, the reference to 'Well established common law principles" is not a mere application o f law but the creation o f it where precedents provide no guideline and thus new rules are made a system o f rights and duties by judges.  13  In order to determine on what grounds this granting o f rights and imposing o f duties is to be made, it has to be decided - so to speak in the very hour o f birth o f law - how much weight is to be given to statutes, judicial precedent and academic juristic opinion in the courts' process o f decision making. The English effort to create laws that continuously mirror contemporary social rules and reflect the character o f the social order has made the judiciary look suspiciously at written law, and has ultimately led to the predominance o f  Lawmakers in the 1990s" (1986), 12 M o n . U . L . R e v . 35, who, at 36, states: T n explaining what the statute means the Court makes law just as if the explanation given were contained in a new Act o f Parliament"; Krygier, supra note 7; M c H u g h , 'The L a w Making Function o f the Judicial Process - Part II" (1988), 62 Austr.L. J. 116; Kramer, 'The Lawmaking Power of the Federal Courts" (1992), 12 Pace L . Rev. 263. But see also the critical views o f Devlin, 'Judges and Lawmakers" (1976), 39 M o d . L . Rev. 1; Atiyah, supra note 7. 1 2  This expression has been taken from The Mutual Life & Citizen's Assurance Company  Limited v. Evatt (1968), 122 C . L . R . 556, at 563, where the High Court o f Australia regarded '[t]he matter so far as this Court is concerned [to be] free o f any binding authority" but nevertheless saw its task in declaring 'the common law in this respect for Australia". 1 3  See Dawson, supra note 3, ibid. See also Houghteling, The Dynamics of Law (1963),  at 65: "When do judges 'make law'? They do so every time they decide a case that no existing rule quite fits. They make law when, in order to determine what rule applies to a case, they interpret a statute or a constitutional provision. They also make law when, in the absence o f either an applicable legislative rule or a directly controlling precedent, they have to create a rule by building on the precedents established in analogous cases."  4  common law.  14  However, the flexibility and adaptability that permits the continual  adjustment o f law to social necessities is only one side o f common law. The other side is a lack o f permanence, stability and certainty in legal doctrines, the necessary result o f the 'elasticity" of the law.  15  This may be surprising at first glance because the basic features o f  common law, the doctrines o f precedent and stare decisis, are generally thought to provide the three C s : Certainty, Consistency and Continuity. The principle that all courts are 16  bound by the decisions o f superior courts , however, requires the existence o f precedents, 17  of cases that have already dealt with similar or identical circumstances. If there is no precedent the court that - one way or another - is required to make a decision resorts to its own understanding o f fairness and justice and thus creates law according to its own opinion o f what law should be. O f course, apart from highly exceptional cases the courts are guided by existing principles. Applying these principles to a new set o f circumstances and thus adding a new rule to them is (in most cases) nothing but a mere adoption and development of the principles. However, existing principles are only law to the extent they  See e.g. Hogue, supra note 2, at 3-4; Cappelletti, supra note 11, at 47; Stone, Precedent and Law (1985), supra note 11, at 117 ff. See also Prager v. Blatspiel, Stamp andHeacock, Limited (1924), 1 K B . 566 ( K . B . D . ) , where it was stated at 570: 'The object o f the common law is to solve difficulties and adjust relations in social and commercial life. (...) It must grow with the development o f the nation. It must face and deal with changing or novel circumstances. Unless it can do that it fails in its function (...)" The term 'common law" as referred to in this context means common law as opposed to statutory law. However, common law can also be understood as encompassing precedents that result from the application o f statutes. 1 5  1 6  See Hogue, supra note 2, at 8 f f See e.g. Freedman, 'Continuity and Change - A Task o f Reconciliation" (1973), 8  U . B . C . L . Rev. 209; Gall, The Canadian Legal System (1990), at 289. 1 7  A s the doctrine o f stare decisis is described by Friedmann, 'Stare Decisis at Common  Law and under the Civil Code o f Quebec" (1953), 31 Can. Bar Rev. 723 at 725.  5  exist. T o develop them means to change their scope of application, to make it broader or narrower; to apply them to a new set of circumstances means to modify them and thus to create law. Therefore, when speaking of certainty in common law one has to distinguish two different situations: The doctrine of stare decisis which requires a principle of (already created) law to be applied to a particular state of facts, and the creation of law which takes place where such a principle in the form of a precedent does not cover the circumstances.  Only the obligation to follow  new  decided cases provides certainty and  continuity. When it comes to the creation o f law, certainty and continuity are exactly what would hinder an independent process of decision making by the courts; or in other words, the granting of flexibility to the judiciary requires the absence o f an assumably complete and conclusive system of codified principles. This approach to creating law case by case and the ability to distinguish cases so as to allow new circumstances to be subject to a new 'Unbound" decision does contain more instability than the creation of law by providing a system of codified principles which is supposed to be complete and conclusive.  18  Another proof for this assessment is provided by a current tendency in common law jurisdictions, namely, the limits on the ability of practitioners of common law to adapt the  See Dawson, supra note 3, at 93, who points out that '[fjor law developed by case-law methods is sure to contain unsuspected gaps and fissures, open paths leading in different directions, crossing points where the trails marked out in the past intersect and choices must be made that are essentially free." See also L o r d Gardiner's assessment that the use o f precedent provides "at least some degree of certainty upon which individuals can rely in the conduct of their affairs (...)" Practice Statement (Judicial Precedent), [1966] 1 W . L . R . 1234. ( M y emphasis). See also Richardson, supra note 11, at 35-36: 'Judicial intervention is perhaps more recognized in areas of the common law where (...) there is general warrant for judicial law making, than in statute law where there must at least be a presumption that Parliament has said all that it wanted to say on a particular topic."  6  legal system to new conditions.  19  Modern societies have become tremendously complex.  20  A new emphasis on self-determination, self-fulfillment and individual freedom and an apparently increasing unwillingness to respect or even accept the needs of others and the interest of the community demands state intervention to create new rules to balance the competing freedoms involved.  21  This need becomes more urgent the more an economic  system allows the rise of dominant and highly influential corporations and the more such corporations face less powerful entities in the market-place. Thus, it is not surprising that 22  in 1965 it could be observed that the legislative bodies of the United States had produced more statutes this century than had been enacted in all legislatures o f the known world in all previous history.  23  One reason for this 'tremendous increase in the amount  of  See Hutchinson's remarkable statement in 'The Death o f Common Law?", Canadian Lawyer May/June 1983, 26: 'The common law is dead, but it refuses to be buried. Sustained by legal tradition and self-preservation, Our Lady of the Common L a w still demands legal affection. Yet, in the final decades of the twentieth century, her continued ghostly presence is an embarrassment and an affront to the society it serves. The legal community must shake itself free from this dated infatuation. W e must embark upon a complete rethinking of the judicial function." 2 0  2 1  See e.g. the examples provided by Tate, supra note 11, at 877, fh. 1. See e.g. Regina v. Nova Scotia Pharmaceutical Society (1992), 43 C . P . R . (3d) 1  where the S . C . C . states that '[t]he modern state, while acting as an enforcer, assumes more and more of an arbitration role" (at 24). 2 2  See e.g. Hogg, 'Is the Supreme Court o f Canada Biased in Costitutional Questions?"  (1979), 57 Can. Bar Rev. 721, who stated at 728: 'The improvements in transportation and communication, and other technological developments, have led to larger and larger business units which can take advantage of the techniques o f mass production, mass distribution and mass advertisement. (...) The general tendency of technological changes is to convert activities which (...) could be governed by the private law of contract, tort, and property, into activities which extend across the entire nation, make use of public facilities and require regulation in order to protect the public from predatory or monopolistic practices." 2 3  Buckland\Mc Nair, Roman and Common Law (1965), at 11.  1 7  legislation (...) in common law jurisdictions"  is a greater efficiency that is provided by an  overarching regulatory scheme. This is so because the common law can develop only slowly on a case by case basis whereas the legislator can collect all relevant and necessary data before it regulates a specific subject-matter. Another reason is that those who live in this highly complex world need certainty about what conduct is expected from them to act accordingly. Traders simply need to know in advance the way how they can carry on their business to foresee the possible risks.  O n the other hand, those legal systems which had - either fully or partially - assimilated Roman law and thus created a law essentially based on written statutes face a considerable lack o f flexibility in reacting to new kinds o f social conduct. This has been most clearly and impressively described in the statement by the drafters o f the French Civil Code to explain the manner in which they approach their task:  25  "We have equally avoided the dangerous ambition to desire to regulate and foresee everything. Is it not strange that those to whom a code always appears too large imperiously give the legislator the terrible task of leaving nothing to the decision o f the judge? Regardless o f what one does, positive laws will never be able to replace entirely the use o f natural reason in the affairs o f life. The needs o f society are so varied, the intercourse among humans so active, their interests so multiple, and their relationships so extensive that it is impossible for the legislator to  Gall, supra note 16, at 29. See also Hutchinson, supra note 19: 'The distinguishing feature o f twentieth century legal history has been the shift from the common law to legislation as the major source o f law. (...) The number o f statutes and statutory instruments currently in force in Canada runs into the tens o f thousands. In Ontario, alone, over 100 government Bills were introduced in the legislature in 1982 and over 60 o f them were enacted." 2 5  Portalis, Tronchet, Bigot-Preameneu & Maleville, Discours preliminaire, in 1 J. Locre,  La Legislation Civile, Commerciale et Criminelle de la France 251, at 255-72 (1827), cited by von Mehren\Gordley, The Civil Law System (1979), at 54.  8  foresee everything. E v e n in the matters upon which he fixes his particular attention there are a host o f details that escapes his attention or are too disputed or too rapidly changing to become the object o f the text of law. Moreover, how can one hold back the action o f time? H o w can the course of events be opposed, or the gradual improvement o f mores? H o w can one know and calculate in advance what  only  experience can reveal to us? Can foresight ever extend to those objects which thought cannot reach?"  The conclusion to which the drafters of the French Civil Code came was that the 'science of the legislator consists in finding, in each matter the principles most favourable to the common good" whereas 'the science of the judges is to put these principles in action, to develop them, to extend them, by a wise and reasoned application, to private relations; to study the spirit o f the law when the letter kills, and not to expose himself to the risk o f being alternatively slave or rebel, or to disobey because o f a servile spirit."  26  The requirement 'to extend principles", 'to study the spirit o f the law" and 'to disobey because of a servile spirit" leaves the judge in a most unfavourable position and creates some discomfort not only for those who have to apply the law but also for those who are subject to judicial decisions. Furthermore, according to the current German understanding of the separation of powers and the Rechtsstaat principle , a judge is strictly bound by the 27  law.  2 6  2 7  2 8  28  L a w must not be created by the judiciary but rather provided by a democratically-  Supra note 25, at 55. See as to this term fh. 323. In Germany every court can consider a statutory provision void i f it holds that the  provision contravenes the German Constitution (Grundgesetz - GG). However, statutes that have been passed after the enactment o f the Constitution in 1949 can be declared to be unconstitutional and thus be treated as invalid only by the Federal Constitutional Court (Bundesverfassungsgericht - BVerfG). If a different court takes the view that such a statute violates the Constitution it must suspend the process and submit the file to the Federal Constitutional Court.  9  authorized legislative body.  29  O f course, as the drafters o f the French Civil Code point out,  statutes always give way to various interpretations and the more imaginative a judge is the more he finds himself able to read his own view into the text o f a statute. B u t every judicial interpretation has to be made on the grounds o f textual analysis and with regard to the intention of the legislator and the purpose o f the legislation.  30  Otherwise it is no longer  interpretation but rather making o f law, which the judge is not authorized to do.  In between the 'flexible" common law approach and the Stable" civil law approach to determine what law should be stands the use o f general terms in statutes, which can be  See e.g. Pound, supra note 11, at 406-407: 'Formerly it was argued that common law was superior to legislation because it was customary and rested upon the consent o f the governed. Today we recognize that the so-called custom is a custom of judicial decision, not a custom o f popular action. W e recognize that legislation is the more truly democratic form o f law-making. W e see in legislation the more direct and accurate expression o f the general will." See also Frank, supra note 11, at 292:'(...) the legislatures come closest to reflecting  popular desires." The lack o f democratic legitimation  seems also to be  Dawson's concern when he, supra note 3, at 92, refers to the principle o f precedent: 'The cases that reach a high appelate court are a selected group in which (...) the court must make law. Judges who declare themselves slaves to the past are thus in some degree, inescapably, decisions,  sovereigns in controlling the future. The binding effect o f high court  as interpreted in England for 68 years, meant that high court judges in  announcing their reasons could bind themselves and their successors in a way that Parliament, the ultimate sovereign, could not do i f it tried. N o one explained the source o f this power." O n the other hand, this strict doctrine o f precedent was considered to be the proper means o f avoiding that'(...) judges will be tempted to encroach on the proper field of the legislature (...)'* Myers v. Director of Public Prosecutions [1964], 2 A l l E n g . Rep. 881, at 8 8 6 ( H . L . ) .  See e.g. Nastelski, Unbestimmte Rechtsbegrijfe, Generalklauseln und Revision, GRUR 1968, 545, at 548 and Schutz der Allgemeinheit im Wettbewerbsrecht, GRUR 1969, 322,  3 0  at 325; Kisseler, Wettbewerbsrecht und Verbraucherschutz, WRP 1972, 557, at 559; Sack,  Die luckenausfullende Funktion der Sittenwidrigkeitsklauseln, WRP 1985, 1, at 4; Richardson, supra note 11, at 36. The four different ways o f interpretation used in German jurisprudence are the grammatical, the historical, the teleological systematical (or contextual) interpretation.  and the  10  considered an attempt to combine the advantages of both approaches. General terms as written law provide the expressed will of the legislator as to what law should be and therefore leave no doubt about the general scheme of rules which the legislator wants to govern the activities he aims at. However, since the purpose of the usage o f general terms is to cover a broad range of social conduct that the legislator is unable to regulate in detail, general terms need to be interpreted and defined by the judiciary to be effectively applied. The judge thus replaces the legislator as far as the details and the subtleties are concerned.  31  The following thesis will describe how a common law and a civil law jurisdiction deal with general terms. Under civil law, the use of general terms is certainly a step towards the common law approach. O n the basis of the legislator's expressed intention the courts  3 1  See Ott, Systemwandel im Wettbewerbsrecht in Festschrift fur L . Raiser (1974) 403, at  404; see also Sack, supra note 30, at 2, and Hirtz, Der Rechtsbegrijf "Gute Sitten" in § 1 UWG, GRUR 1986, 110, at 111 who both refer to the blanket clause in § 1 UWG as a 'piece of left-open legislation". In § 1 UWG und Wirtschaftspolitik, WRP 1974, 247, at 253, Sack also refers to the application of § 1 UWG as a 'judiciary's legislation". A s to the  common law jurisdiction see  e.g.  Lane,  'Legislative Process  and Its  Judicial  Renderings: A Study in Contrast" (1987), 48 U . o f Pitt.L.Rev. 639, who at 655 considers 'planned vagueness" as one of the cases in which lawmaking is delegated to the judiciary; and Houghteling, supra note 13, at 115-116: 'Realizing their [framers of statutes] inability to do this [provide for all possible future situations], the wisest legislators have been usually preferred to be deliberately imprecise; by the generality o f their language they have in effect delegated to others the task of filling in the details. The principal recipients o f this authority are administrative officials and judges. The more imprecise the statute, the greater the delegated authority; (...) the 'interpreter' becomes in effect the true lawmaker." But see also Regina v. Nova Scotia Pharmaceutical Society (1992), supra note 21, at 245 where the Supreme Court 'fail[s] to see a difference in kind between general provisions where the judiciary would assume part of the legislative role and 'mechanical" provisions where the judiciary would simply apply the law". The Supreme Court concludes that " [t]he judicary always has a mediating role in the acualization of law, although the extent to this role may vary".  11  eventually create a large number o f precedents that can serve as directives and guides for other courts dealing with identical or similar cases. The final result is the creation of judgemade law within the ambit o f a written statute. The broader the term in the statute and the more case law is accepted as decisive authority for interpretation o f the term, the more the judgements o f higher courts have an actual binding effect on lower courts , and the more 32  this case law replaces the need for further detailed legislative regulation and the closer the civil law comes to common law.  33  F o r a common law jurisdiction the use o f general  statutory terms is unfamiliar. Unlike common law in general, case law that results from the interpretation and specification o f a general term in a statute is restricted by the legislator's intention and purpose. Moreover, the rise o f this type of judge-made law beside common law makes it necessary for the courts to determine the mutual influence between both kinds o f lex non scripta.  34  See e.g. Nordemann, Der verstdndige Durchschnittsgewerbetreibende, GRUR 1975, 625, who states at 627 that a long tradition and a large number of judgements have given the 'fcense-of-decency-phrase" a certain stability and who expresses on the same page his admiration for the BGH having established a 'quite reliable" jurisdiction as to § 1 UWG. Indeed, the judgements o f the BGH have a tremendous impact on the dispensation o f justice by the lower courts. It is very seldom that a lower court's decision differ from precedents provided by the BGH. A s to the impact o f higher courts' decisions on lower courts in civil law jurisdictions see Gall, supra note 16, at 29. See also Sack, supra note 30, who states that judge-made law carries the 'presumption o f correctness" and that lower courts' decisions should vary from Supreme Court's decisions only when the lower court has "weighty doubts" about the correctness of the precedent (at 8). 3 3  See e.g. Loewenheim, Suggestivwerbung, unlauterer Wettbewerb, Wettbewerbsfreiheit  und Verbraucherschutz, GRUR 1975, 99, at 103 who draws a comparison between the specification o f the term 'bublic morals" by the courts and the "Anglo-American case law". This also seems to be the view o f Knight, 'Unfair Competition: A Comparative Study o f Its Role in Common and Civil L a w Systems" (1978), 53 Tul.L.Rev. 164, when she states at 176 that Germany has 'tieveloped a 'common law' in this area far more comprehensive than that o f the United States." 3 4  See fh. 14 for the meaning of the term "common law" as referred to in this context.  12  This thesis will focus on the use o f general terms in unfair competition law in the common law jurisdiction o f Canada and the civil law jurisdiction o f Germany. It will describe how the terms 'public morals"  35  and 'honest practices" have been defined and interpreted by  German and Canadian courts. A brief outline o f the statutory situation in Germany will be given first in order to explain the context in which the term 'public morals" is embedded. Then it will be outlined how first the Reichsgericht (RG - Supreme Court o f the former German Reich ) and later the Bundesgerichtshof (BGH - Federal Supreme Court o f 36  Justice), which as the successor o f the Reichsgericht generally followed the practices o f its predecessor, were able to give the general expression 'public morals" concrete terms and to make use o f only one provision to decide a wide range o f totally different cases.  Next I will describe how Canadian courts have interpreted the term 'honest practices". In 1976, paragraph 7(e) o f the Trade-marks Act o f 1953 , which contains the term 'honest 37  practices", was held ultra vires the Federal Parliament by the Supreme Court o f Canada.  3 5  38  The term "gute Sitten" can be translated in different ways, one o f which is 'public  morals" which in my opinion fits the German term best. Other translations could be 'good manners", 'morality", 'public policy", 'bona mores" or 'Unconscionability". Business actions violating § 1 UWG are often called 'Unconscionable", 'Unfair", 'dishonest" or 'contrary to fair competition". When using the term 'Unconscionable" one has to bear in mind that the unfair competition law does not deal with the question as to whether the content o f a contract is fair and the contract invalid, in connection o f which the term is often used, too. 3 6  It should be noted that the Reichsgericht is also known as the so-called 'Imperial  Court", see e.g. Dawson, supra note 3, at 446. This translation, however, is imprecise and misleading because the Reichsgericht began its sessions in 1879 and ceased to exist in 1945. Thus its jurisdiction covers a period that is not identical with the period o f existence of the so-called "Imperial Germany" (1871-1918). 3 7  R . S . C . 1970 ch. T-10.  3 8  MacDonaldv. Vapour Canada Ltd. (1976), 22 C . P . R (2d) 1.  13  To understand the reasoning of the Supreme Court, the difficulties the court had in defining the relationship between 'provincial" common law and 'federal" statutory law, and to illustrate the statutory context of the term, it is necessary to give a short overview of the Canadian unfair competition law and - to some limited extent - consumer protection legislation.  Having shown these practical and actual ways of interpretation, the thesis will shift to the more theoretical question of whether the use of general terms is a constitutional means of reacting to new phenomena of social behaviour. First, I wrill show that the constitutional principle of vagueness sets a limit to the legislator's decision to refrain from a detailed regulation and to use general and thus intentionally imprecise terms instead. Secondly, the question will be addressed as to how Charter rights can influence the courts' interpretation of general terms. Although these questions will be answered with reference to the terms 'public morals" and 'honest practices", they are not restricted to the field of unfair competition law, but occur in every statute which contains a general term or comprehensive clause.  2) Changing business methods and adaptability of law  The fight for new markets and an increasing commercialization of our lives and the flourishing technology which enables us to reach everyone almost everywhere at any time  14  make it necessary for the state to look at current business ethics , and to examine whether 39  an unfair competition law is able to adjust itself easily to new business practices so as to ensure proper business methods for a well functioning market and to protect the consumer against pestering, confusion and deceit.  For Canada and Germany this is an obligation imposed by the Union Convention o f Paris for the Protection o f Industrial Property (March 20, 1883) to which both countries are parties. Article 10/3/5 subsection 1 o f the Paris Convention requires parties to assure effective  protection against  unfair competition which is described as 'any act o f  competition contrary to honest practices in industrial or commercial matter".  3 9  40  A n d yet,  See again Hogg's statement, supra note 22; see also Shaw, The Law of Unfair  Competition (1965), at 2, who explains the unfixed and extending scope o f the law o f Unfair Competition with 'changing methods o f business and changing standards o f commercial morality" and with the 'ingenuity o f unscrupulous traders [which] never fails (...) to spawn new devices for capitalizing on the growing complexities o f modern business." One only needs to think of the new means o f communication such as telephone, telefax and internet, o f the immense importance o f mass media to the creation o f public opinion, and o f her or his going shopping on Robson Street in Vancouver, B . C . on Boxing Day. 4 0  Article 106/5 of the Union Convention reads:  1. The countries o f the Union are bound to assure to nationals o f such countries effective protection against unfair competition. 2. Any act o f competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition. 3. The following in particular shall be prohibited: (1) all acts o f such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, o f a competitor; (2)  false allegations  in the course o f trade o f such a nature as to discredit the  establishment, the goods, or the industrial or commercial activities, o f a competitor; (3) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.  15  although both countries essentially cover the same issues, their approaches to accomplish their obligations are not only different but also appear to be contrary to their basic legal system.  The Act Against Unfair Competition  41  on which the German unfair competition law is  based provides judges essentially with only one very general provision, according to which someone can be held liable for damages i f he uses business practices which violate 'public morals". O n this very broad statement, German courts under the leadership formerly o f the Reichsgericht and now o f the Bundesgerichtshof must determine which practices can be considered unfair. This responsibility devolves on them because the legislator, confronted by a varied and multi-faceted and continually changing economic life, was not able to foresee all possible situations and provide detailed regulations.  O n the other hand, Canada has implemented the Paris Convention obligation to assure effective  protection against 'any act o f competition contrary to honest practices in  industrial or commercial matter" by enacting a large number o f rules, federally and provincially, describing precisely which cases constitute an unfair practice. Canadian legislators did not, however, forget to allow the courts to respond independently to new business methods. They preserved this judicial discretion by prohibiting 'business practices  41  Gesetz gegen den unlauteren Wettbewerb o f 1909, RGBl. p. 499, most recently altered  by the Act o f October 25, 1994 (BGBl. I p. 3082).  16  contrary to honest industrial and commercial usage in Canada" in their various acts regulating trade-marks and unfair competition.  3) Different terminology and different approaches A comparison between two different jurisdictions always involves the danger of trying to compare things which are actually incomparable. Different terminology for identical matters and identical terminology for different matters can cause confusion and lead to wrong assumptions. Taking this issue into account must therefore be o f constant concern in this thesis. Thus it is necessary to explain what is covered by unfair competition law in Germany and Canada.  Unfair competition law in Germany focusses on the conduct of traders in competition. Unfair competition law does not provide measures to establish freedom of competition but  rather  requires the  very existence  of it.  42  To  ensure that there is competition in the market  place is the concern of the Gesetz gegen Wettbewerbsbeschrdnkungen (GWB - Restraint of Competition Act; Anti-Cartel Act) ; the task of unfair competition law is to ensure that 43  this competition is and remains fair. Notwithstanding this basic difference anti-cartel law and unfair competition law do influence each other in that both take on the misuse of economic freedom.  4 2  4 3  44  Once there is competition in the market-place, unfair competition  See e.g. Emmerich, DasRecht des unlauteren Wettbewerbs, 4th edition (1995), at 1 In the version published February 20, 1990 (BGBl. I p. 235), most recently altered by  the Act o f October 28, 1994 (BGBl. I p. 3210). 4 4  See Loewenheim, supra note 16, at 104; Sack, supra note 33, at 5-6.  17  law attempts to prohibit trade practices that because o f their unfair character are likely to cause an unjustified advantage for their practitioners and thus ultimately lead to the removal o f competitors. This being so, unfair competition law differs from anti-cartel law in terms o f its thrust. While the latter seeks to prevent restriction o f competition by mutual and collusive agreements, the former concentrates on instances o f confrontation and rivalry that contravene the idea o f competition and eventually lead to its elimination.  45  Furthermore, German unfair competition law is not meant to protect monopoly intellectual property rights. The protection o f exclusive rights in registered trade-marks, trade-names and patents and the protection o f copyright are dealt with by special acts, such as the Markengesetz {Trade-marks Act) , Patentgesetz {Patent Act) , Gebrauchsmustergesetz 46  41  {Utility Models Act) * and Urheberrechtsgesetz {Copyright Act) 4  49  The principal rule is 50  that where there is no right o f action under these special acts the commercial activity in  4 5  See Lehmann, Wirtschaftspolitische Kriterien in § 1 UWG, Mitarbeiterschrift fur E .  Ulmer (1973), 321, at 328. 4 6  Gesetz iiber den Schutz von Marken undsonstigen Kennzeichen o f 25.10.1994 {BGBl.  I p. 3082, revised BGBl. I p. 156). 4 7  Patentgesetz 1981 in the version published December 16, 1980 {BGBl. 1981 I p. 1),  most recently altered by the Gesetz zur Reform des Markenrechts und zur Umsetzung der Ersten Richtlinie 89/104 EGG des Rates vom 21.12.1988  zur Angleichung der  Rechtsvorschriften der Mitgliedstaaten iiber die Marken (Markenrechtsreformgesetz) vom 25.12.1994 {BGBl. 1994 I p. 3082). 4 8  Gebrauchsmustergesetz o f 28.08.1986 {BGBl. I p. 1455), most recently altered by the  Gesetz zur Neuordnung des Berufsrecht der Rechtsanwdlte und Patentanwdlte o f 02.09.1994 {BGBl. I p. 2278). 4 9  Gesetz iiber Urheberrecht und verwandte Schutzrechte o f 09.09.1965 {BGBl. I p.  1273), most recently altered by the Gesetz zur Anpassung des EWR-Ausfuhrungsgesetz o f 27.09.1993 {BGBl. I p. 1666). 5 0  F o r details see p. 37-38.  18  question cannot be considered unfair and thus be prohibited under unfair competition law.  51  O n the other hand, from the very beginning Canadian unfair competition legislation has dealt with the protection o f trade-marks.  52  Today the term "Unfair Competition" is  generally applied 'to all dishonest or fraudulent rivalry in trade and commerce, but in particular (...) to the practice o f endeavouring to substitute one's own goods or products in the markets for those o f another (...)"", and thus to benefit from the competitor's reputation. It follows that also in Canada unfair competition law is essentially not anticartel l a w  54  which was first covered by the Criminal Code* , later by the Combines 5  Investigation Act  56  understanding competitors  o f what  57  unfair competition  and (as will  representations,  5 1  and which is now regulated by the Competition Act  explains  be  shown)  the close  law deals with,  consumers  connection  against  between  namely false  unfair  This current  protecting o f  and misleading competition and  Baumbach/Hefermehl, Wettbewerbsrecht, 15th edition (1988), § 1 £/JFG,annot. 407.  See the Act respecting Unfair Competition in Trade and Commerce, R . S . C . 1952 ch. 274; the Act relating to Trade Marks and Unfair Competition, R . S . C . 1970 ch. T-10 and 5 2  Shaw, supra note 39, at 4, who considers it as being 'Well settled that the law o f Trade marks and Trade-Names is but a branch of the broader law of Unfair Competition." 5 3  Black's L a w Dictionary, Revised Fourth Edition, 1968. The reference to the U . S . -  American law dictionary is permissible because there are no detectable  differences  between the subject-matters that are governed by Canadian and U.S.-American unfair competition law. 5 4  The emphasis placed on this distinction is to be explained by the personal experience  that everyone to whom the subject-matter o f this thesis was introduced thought that it deals with anti-cartel law. 5 5  R . S . C . 1927, ch. 36.  5 6  R . S . C . 1970, ch. C-23.  5 7  R . S . C . 1985, ch. C-34.  19  advertising  58  and makes it necessary to look at federal and provincial regulation o f the  latter. When comparing the scope of application of the terms 'bublic morals" and 'honest practices", this thesis will focus on these issues and only refer to related regulation under anti-cartel law when it becomes necessary either to illustrate the corresponding Canadian regulation of what is covered by the German term 'bublic morals", or to portray 'dishonest and fraudulent rivalry in trade and commerce" that is not related to combines, monopolies, trusts and mergers.  Finally, it should be mentioned that a survey of the ways the term 'bublic morals" has been interpreted should necessarily be broad, and conclusions confined to more general and basic features. Given that far more than 2000 decisions o f the Bundesgerichtshof on the  Act against Unfair Competition and its additional statutes have been published since 1950 , this thesis cannot deal with all the details and subtleties, however interesting they 59  might be for both the author and the reader. The same must apply for the overview o f the Canadian unfair competition legislation. Showing the difference in directions o f protection and importance of the use of both terms in the respective jurisdictions will be sufficient for the purpose o f this thesis.  e.g. Shaw, Trade Marks and Unfair Competition (1952), chapter six; McCarthy, Trademarks and Unfair Competition (1973), chapter 27; PattishallXHilliard, Trade Identity and Unfair Trade Practices (1974) chapter 8, § 8.4. See  5 9  Emmerich, supra note 42, at 74 (fh. 147).  20  CHAPTER H: "Public morals" in German Unfair Competition Law  1) The statutory situation in Germany German unfair competition law is based on the Gesetz gegen den unlauteren Wettbewerb (UWG - Act Against Unfair Competition), the predecessor o f which was the Act To Fight Against Unfair Competition o f 1896 . The latter was changed into the current version in 60  1909  61  when, among other changes, § 1 with its general term 'public morals" was added.  Further regulation can be found in the Zugabeverordnung (ZugabeVO - Regulation governing free gifts with sales) o f 1932 Discounts) o f 1933.  63  62  and in the Rabattgesetz (RabattG - Act  on  O f all these statutes, which are under the legislative authority o f the  federal parliament, the UWG has been subject to the most alterations and amendments in order to take into account the changing conditions and customs in business life. The comprehensive clause, § 1, however, was left unaffected.  64  In the scope o f its application  the consideration o f changing habits and customs had been devolved upon the courts under the leadership first of the Reichsgericht and later of the Bundesgerichtshof which in these days can look back to an almost 90 years long history o f interpretation.  6 0  Reichsgesetz o f 27.05.1896, RGBl. I p. 145.  61  Reichsgesetz o f 07.06.1909, RGBl. I p. 499.  6 2  63  6 4  Verordnung of09.03.1932, RGBl. I p. 121. Reichsgesetz of25.11.1933, RGBl. I p. 1011. See Schricker, Entwicklungstendenzen im Recht des unlauteren Wettbewerbs, GRUR  1974, 579, who points out that even without explicit alterations o f the wording o f the law unfair competition law has experienced substantial development.  21  Outside the scope of § 1 the UWG - among other regulation - essentially prohibits false and misleading statements and misrepresentations ( § § 3 ff.), the use o f pyramid sales schemes ( § 6c), the announcement and realization o f special sales ( § 7), corrupt practices ( § § 14-15), and the disclosure of trade secrets and the unauthorized use o f entrusted templates, drawings, recipes and other models or technical instructions ( § § 17 ff). The legal consequences of the different offences vary. While some o f the provisions, such as § § 4, 6c, 12, 17, 18 and 20, are criminal clauses and while § 6 provides for the possibility to impose a fine, the violation of all provisions gives the right to claim damages and to apply for an interlocutory or permanent injunction.  2) § 1 UWG According to § 1 UWG someone can be held liable for damages and can be ordered to refrain from further actions when he - for the purpose of competing (b) - uses business practices (a) which violate "public morals" (c).  a) "Business practices" §  1 UWG  does not prohibit unfair behaviour in general but only unfair 'business  practices". This clarifies that the UWG only has the function to regulate one's commercial activities  whereas it is applicable neither for mere private activities  administrative actions  65  nor for  any  According to the Bundesgerichtshof a 'business practice" is every  action which serves - in any way - to promote one's business, that is to say, every  Emmerich, supra note 42, at 22.  22  independent participation in business affairs. It follows that whenever a trader decides to 66  participate in economic transactions only mere private bargains that are not made in the course o f business (i.e. when the trader himself or herself is the last consumer)  67  and  simple internal operations, which have no effects on actual or possible consumers or competitors  68  (such as instructions to employees), are excluded from the scope o f § 1.  b) "For the purpose of competing" Firstly, the UWG serves to protect the competitor, that is to say it regulates only commercial practices which have a particular impact on the interests o f other competitors. That is why the application o f § 1 requires an action with the object o f competing. A s to this requirement the Bundesgerichtshof demands that there has to be not only an act o f competition - so to speak an 'external" aspect - but also a corresponding intention to compete, or the 'internal" side.  69  Accordingly it is not sufficient that the behaviour o f one  competitor has the effect o f favouring his own selling to the disadvantage o f another competitor; this result must also be the very goal the competitor pursues.  70  Thus, the act  of competition and the corresponding intention to compete is only possible within the ambit o f a 'bompetitive relationship" between two or more competitors.  66  67  68  71  However, as to  Kg. BGHZ 19, 303; BGH, GRUR 1964, 209; BGH, NJW-RR 1993, 1064. BGH, NJW-RR 1993, 1064. BGH, NJW-RR 1993, 1064; OLG Koblenz, NJW-RR 1988, 558; Emmerich, supra note  42, at 22. 69  Kg. BGH, NJW 1981, 2304; BGHZ 107, 42; BGH, NJW-RR 1990, 1184; BGH, NJW  1992, 3094. 70  71  Kg. BGH, GRUR 1988, 39; BGHZ 107, 42. Kg. BGHZ 107, 42; BGH, NJW-RR 1990, 1184.  23  the existence of a competitive relationship German courts tend to be very generous as it is not necessary that the competitors face each other in the same branch of business; a competitive relationship also exists if goods or services are offered which - according to the general attitude - may hinder each other's selling, even if their purchasers belong to different consumer groups (so called 'indirect competitive relationship') . A competitive 72  relationship has been assumed between the distributors o f flowers and coffee , whisky and 73  men's  cosmetics  74  and between  entertainment shows.  75  a broadcasting corporation and an organizer of  In sum, a competitive relationship already exists, where the  competitors - even if they are in different branches o f business - offer their goods or services to the same consumer.  With respect to the required intention to compete German courts usually do not make high demands. It is (rebuttably) assumed when someone decides to start business , and it 76  follows that it only serves to exclude scientific, religious and political activities from the scope o f § 1, even if they do have a certain effect on the competition  7 2  7 7  Emmerich, supra note 42, at 24.  BGH, GRUR 1972, 553. BGHZ 93, 96. BGHZ 39, 356; BGH, NJW1990, 3133. BGH, GRUR 1962, 36; BGH, GRUR 1962, 45. Emmerich, supra note 42, at 30-31; Burmann, Zum Problem der Sittenwidrigkeit im Wettbewerb, WRP 1972, 511; Nordemann, supra note 32, ('almost everything is controversial'); Ott, supra note 31, at 405 ('bore issue'); Vogt, Bedeutungsgehalt und Funkiion der guten Sitten im Wettbewerbsrecht, N J W 1976, 730 ("decades of discussions"). 73  74  75  76  7 7  24  c) "Public morals" A business practice with the object o f competing is only prohibited i f it violates 'public morals". What practices violate 'bublic morals" and who is to define 'bublic morals" have become the central questions o f competition law in Germany.  78  aa) "Sense of decency of all just and right thinking people" The formulation 'bublic morals" in § 1 goes back to § 826 BGB (Biirgerliches Gesetzbuch (1896), Civil Code) which gives a claim in tort for damages caused by intentional, unconscionable injuries. It follows from the motives for its making that § 826 was intended to cover actions which contradict the 'fcense o f decency o f all just and right thinking people" . In the following period o f almost 50 years this phrase had been used by 79  the Reichsgericht in order to define the term 'bublic morals" so that it is not astonishing 80  that the Bundesgerichtshof made this definition its own. However, as to § 1 the Bundesgerichtshof adopted the 'fcense-of-decency-phrase" with a slight modification: T o judge on what 'bublic morals" are the court refers to not only the 'fcense o f decency o f all just and right thinking people" but also - and more and more exclusively - o f the involved business circles, that is to say o f the 'honest, reasonable and just thinking average  7 8  Emmerich, supra note 42, at 43.  7 9  Motive II, p. 727.  8 0  RGZ 55, 373; RGZ 80, 221; RGZ 120, 148; RGZ (GS), 150, 5. This 'fcense-of-decency-  phrase" was also replaced by the expression 'ruling people's sense" (" herrschendes Volksbewufitseiriy, e.g. RGZ 166, 318. See v. Godin. Uber den Verstofi gegen die wettbewerblichen guten Sitten, GRUR 1966, 127, who, at 128, still refers to this expression.  25  businessman".  81  In addition, the Bundesgerichtshof thinks it important whether the act of  competition is disapproved and regarded as intolerable by the general public  82  and, in  doing so, increasingly refers to the view of those whom the trader approaches.  bb) Interpretation and systematization The 'sense-of-decency-phrase" used by the Reichsgericht and the Bundesgerichtshof - be it with reference to 'all just and right thinking people", be it with respect to the 'honest, reasonable and just thinking average businessman" - has met a lot o f criticism which is partly of semantical, partly of philosophical-ethical and partly of methodical origin and which cannot be fully examined in this thesis. Notwithstanding the latter it is obvious that 83  § 1 and the general term 'public morals" need a more precise definition. This was to be done by the courts and has led to a vast range of case law which has become systematized by legal scholars and juridical writers. However, with systematizations one has to be careful. Regardless of how helpful a systematization of case law might be for lower courts and regardless o f to what extent it leads to a better predictability o f law , it certainly does 84  not have the intention - the mere attempt would be bound to fail - to cover all thinkable and possible acts of competition and business practices. With different categories of unfair conduct in competition one has to keep in mind that the mere fact that a particular business action does not fall within one of the categories does not mean that it cannot be  81  BGH, GRUR 1955, 349; BGH in Lindenmaier/Mohring ( L M ) , § 1 UWGNo.  31, N o .  6 1 , N o . 7 1 , N o . 106;BGHZ54, 190;BGH, GRUR 1960, 561;BGH, GRUR 1971, 318. 82  8 3  8 4  BGHZ 54, 190;BGH, GRUR 1971, 3\%;BGHZ 59, 3\9;BGH, NJW 1993, 3330. See e.g. Emmerich, supra note 42, at 48 ff. This is emphazised by Nordmann, supra note 32, at 627.  26  regarded unfair. The systematization only serves as a means of putting the immense variety of court decisions in some kind of order to make it clearer and more comprehensive. Hence, following the ordering of Hefermehl it has become common in German unfair competition law to classify unfair business practices into five different categories.  85  These  categories are: Enticing customers (aaa), interference (bbb), exploitation (ccc), violation of the law (ddd) and disturbance of the market (eee).  aaa) Enticing customers The influencing of consumers in order to extend the range o f one's customers is the very nature of sales promotion and a significant part o f competition. But this is permissible only as long as the competitor does not use methods which restrain the consumer's decision whether or not to purchase the offered product, which normally will be made on the ground of price and service comparisons.  (1) Misleading representation The typical case where the attraction of customers becomes dishonest enticing occurs when the trader misrepresents his product, e.g. its quality, nature or origin, his own business or the business of a competitor. In this field the comprehensive clause o f § 1 overlaps with the special provision o f § 3 according to which any misleading information in competition is prohibited. For obvious reasons misleading information generally can be  8 5  Baumbach/Hefermehl, supra note 51, Einl. UWG, annot. 160 ff. See discussion on the  actual importance of this systematization Mayer-Maly,  Rechts, JuS 1986, 596, at 598.  Die guten Sitten als Mafistab des  27  regarded as contravening 'bublic morals" so that in most cases a violation o f § 3 automatically means a breach o f § 1. Nevertheless, since § 3 only prohibits misleading information in the form o f statements and descriptions, § 1 has a 'completing function" insofar as it prohibits all other forms o f deceptive information, for example, the deceiving suggestive influencing o f consumers.  86  T o these practices belongs for instance the so  called 'bait and switch tactics advertising" (" Lockvogelangebof) which occurs in various forms, one o f which describes the following situation: A product is offered at a very reasonable price in spite o f the fact that it is either not available for this price at a l l available only in a totally insufficient quantity.  88  87  or  In this way the allegedly good offer does  not really exist and is only used to attract customers to the business premises. The same applies to another form o f 'bait and switch tactics advertising": The competitor fixes a usually well known brand merchandise at a very low price in order to give the impression that his whole stock is offered that cheaply when it is not.  89  Here the misled customer is  supposed to be encouraged to purchase other products too, which are fixed at a normal and often at an excessive price. In both cases the competitor counts on the customer's indolence insofar as he expects him, once attracted to his premises by the allegedly good offer, to buy other products also for reasons o f laziness or time saving  8 6  9 0  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 9. F o r details see Loewenheim's  article, supra note 33. 87  OLG Hamburg, WRP 1955, 150.  BGH, GRUR 1982, 681; BGH, GRUR 1984, 593; BGH, GRUR 1985, 980; BGH, GRUR 1987, 52; BGH, GRUR 1987, 371; BGH, GRUR 1988, 311; BGH, GRUR 1988, 629; BGH, GRUR 1989, 609.  88  8 9  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 13.  9 0  Lindacher, Lockvogel- und Sonderangebote (1979), at 5.  28  Another form o f misleading customers occurs when the competitor labels his products with excessive prices in order to reduce them instantly and delude the customer into thinking that there is a special price concession.  91  (2) Undue Pressure and Pestering The category 'Enticing customer" also includes the constraint o f customers. This kind o f conduct in competition covers every effort to urge consumers to sign a contract by means of physical or psychological influence. Thus, § 1 UWG prohibits every kind o f threat or pressure. Another disallowed way o f enticing customers that is similar to undue pressure, is to pester consumers by means o f every sort o f obtrusive advertising or sales promotion which goes beyond the tolerable mark o f annoyance to such an extent that a calm and objective verification becomes impossible and the customer only signs the contract in order to put an end to the pestering.  92  This particularly applies to cases in which  customers are individually approached by a sales person or agent on a public street , at a 93  railway station or other public transport vehicles  94  as well as to cases o f undesirable  telephone calls , unasked-for advertisements through telex, if this does not happen within 95  an existing business connection , and to cases where unordered goods are sent to 96  OLG Hamburg, WRP 1970,  91  184; Baumbach/Hefermehl, supra note 51, § 1 UWG,  annot. 46. 9 2  9 3  9 4  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 51. BGH, GRUR 1960, 431; OLG Stuttgart, NJW 1955, 147. OLG Hamburg, BB 1970, 1275.  BGH,  95  9 6  GRUR 1970, 523; BGH, GRUR 1989, 753; BGH, GRUR 1990, 281.  OLG Hamm, GRUR 1990, 689; BGH, NJW-RR 1991, 160.  29  customers.  97  The Bundesgerichtshof also regards it as pestering i f persons involved in an  accident are asked to enter into a contract for repairs , a contract for renting a c a r 98  contract for towing away the w r e c k  100  99  or a  when the offer is made on the street shortly after  the accident and without any request on their part. These decisions are in line with a judgement in which a sales call with which a gravestone was offered four weeks after the relative's passing-away, was considered to contravene fair trade practices.  101  (3) Temptation The final major group o f unfair practices within the category o f 'Enticing customers" is the so called 'temptation" o f customers. This group comprises the wide range o f cases in which the prospect o f a further profit i f he or she signs the contract is held out to the customer. In doing so, the competitor does not try to convince the customer about the quality and the price o f his products or services, which is regarded the very nature o f fair competition, but uses an unobjective means, namely, the promise to grant a special benefit.  102  The forms o f temptation are manifold. The presentation o f sales promotion  gifts, for example, becomes dishonest if its 'tempting effect" is so dominant that the consumer's decision to enter into a contract is not made on the ground o f his or her idea of good prices and the quality o f the product but rather to benefit from the advantage o f  BGH, GRUR 1959, 277; BGH, GRUR 1960, 382; BGH, GRUR 1966, 47. BGH, GRUR 1975, 264. BGH, GRUR 1975, 266; OLG Nurnberg, BB 1968, 1448. BGH, GRUR 1980, 790; OLG Nurnberg, BB 1968, 1448.  BGH, GRUR 1971, 317. Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 85.  30  the gift . Also, the 'touting" o f consumers in form o f individual transportation to the 103  trader's premises is regarded as unfair.  104  The Bundesgerichtshof has even gone further by  ruling that a trader acts dishonestly if he appeals to the environmental awareness o f his customers and promises to compensate for the costs for buses or train o f the local traffic system in case one o f his products is purchased if this method is exclusively in the trader's interest and his alleged interest in environmental protection has no objective connection with his offered goods.  105  The group 'temptation o f customers" also includes the so called  'covered package deals" which occur when several products are offered at a total price without showing the individual prices o f each single product.  106  The unfair moment is  supposed to lie in the fact that the customer who does not know the individual prices is not able, even roughly, to determine the value o f the joint offered goods or services  107  and  thus is likely to be cheated. Furthermore, a trader violates 'public morals" if he or she lures consumers by taking advantage o f their passion for gambling and in conjunction with the sales o f his or her products.  This  can be  done  by organizing gambling games  or competitions  the  participation in which depends on the purchase o f the trader's goods. The underlying idea  BGH, GRUR 1959, 546; BGH, GRUR 1967, 255; BGH, GRUR 1971, 163; BGH, GRUR 1974, 346; BGH, GRUR 1984, 464; BGH, GRUR 1986, 820; BGH, GRUR 1989, 103  367. The presentation o f free gifts which depends on the conclusion o f a contract is already prohibited by virtue o f § 1 ZugabeVO. However, this does not apply to those cases in which the granting of the gift is not supposed to have an influence on the customer, which is expressed in § 1 ZugabeVO in the form o f precisely described exceptions to the rule. 104  105  BGH, GRUR 1972, 605. BGH, GRUR 1991, 543.  1 0 6  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 127.  107  BGH, GRUR, 1962, 418.  31  is that a trader must not be allowed to make use o f the 'human fraility" for gambling to sell his or her products. A trade practice is unfair, therefore, when a trader tempts the customer to buy his or her wares or services by offering the opportunity to win prizes and thus by causing that the consumer's decision to be based on the desire to gamble and to win instead o f on a quality-price-comparison.  108  bbb) Interference The second category o f business actions violating 'bublic morals" is titled 'interference" which means every kind o f interference with respect to sales, sales promotion or the competitor's business as well as boycott, discrimination, displacement or cut-throat competition and disallowed comparative advertisement.  (1) Interference with respect to sales, sales promotion and the competitor's business The attempt to win new customers in order to increase one's own sales is an inherent element o f competition. In most cases such an increase in sales has an unfavourable effect on the competitors' business as it is likely to lead to a decline in sales on their part. Yet, this is the very meaning o f competition and gives no cause for concern. But 'bublic morals" can be violated if a trader not only tries to convince or persuade the customers that his goods or services are the best available in the market-place but also interferes with  1 0 8  BGH, GRUR 1973, 476; BGH, WRP 1976, 100; BGH, GRUR 1990, 616. This form o f  unfair behaviour is not to be mistaken with the organization o f competitions in order to evoke the consumer's interest for his products without connecting the participation in the game with the purchase o f his goods. This form o f sales promotion is not considered to be unfair.  32  the competitors' businesses in order to weaken their position and to strengthen his own. Such a disallowed interference, for example, is the calculated interception of customers of a particular competitor by distributing promotional material or by any other kind o f sales promotion in the immediate vicinity of the competitor's business premises.  109  The  unconscionable aspect of such an interception lies in the fact that it makes it impossible for the affected trader to offer his wares or services to his customers which prevents an objective comparison as to the goods or services and their prices.  110  Another example of  excluding the possibility of offering wares to the public is the removal o f competing products from the market-place  111  either by buying them from a wholesale distributor or  taking them in payment for the delivery o f one's own products.  112  Furthermore, it has been  regarded as an interference when a trader advertises in a telephone book on the page where his or her competitor is listed, although his or her name does not begin with a letter which is normally required for this page , or when other wares or services are passed-off 113  as and for those ordered or requested, which is the case when a customer orders a particular product and the vendor delivers something different in the hope that the customer will not notice the difference or at least not complain.  114  A case in which a trader  filled a bottle labelled with a trade-mark of a competitor with a different liquid on the  1 0 9  1 1 0  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 187.  Baumbach/Hefermehl, ibid.; e.g. BGH, GRUR 1960, 433; BGH, GRUR 1963, 201;  BGH, GRUR 1986, 547; O Z G H a m m , WRP 1973, 538; OLG Koblenz, WRP 1974, 283. 1 1 1  1 , 2  1 1 3  1 1 4  Kg. BGHZ 3, 342; OLG Diisseldorf, GRUR 1950, 191. Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 189. KG, JW1923,  723; OLG Diisseldorf, NJW 1956, 64.  Kg. BGH, GRUR 1966, 564; BGH, GRUR 1965, 361; BGH, GRUR 1965, 607. There  is also a violation of § 3 UWG if the customer explicitly has been told that he obtains the ordered goods, although he did not.  33  assumption that the customer would believe that he or she is receiving the liquid described on the label  115  is an example of this kind of passing-off.  Another way to interfere with the sales promotion o f a competitor is to take away the effect o f his advertisement. The easiest and coarsest form o f this kind o f conduct is to destroy advertising posters or to stick something over them. A more subtle form is the use of a competitor's non registered trade-mark to cause confusion in the market-place or to dilute the good name o f a well-known b r a n d .  116  Furthermore, every kind o f interference  with the competitor's firm, be it with respect to operational procedures, or with regard to staff relation, is prohibited under § 1 UWG. That is why the removing or defacing o f serial numbers which have been attached to the competing products in order to facilitate later material or manufacture control has been considered to violate 'public morals", especially when it is likely to have a negative effect on the after-sales offers.  117  service the competitor  Also prohibited is the disturbance o f the internal peace in a competitor's firm by  stirring the employees up against their employer or by spying out certain production equipment or operating facilities.  118  1 1 3  OLG Celle, MuW 1933, 88.  1 1 6  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 203. A n efficient protection o f  registered trade-marks is granted by § § 14 ff. 117  1987, 556; 1 1 8  Markengesetz (Trade-marks Act).  BGH, GRUR 1978, 364; OLG Koblenz, GRUR 1978, 470; OLG Hamburg, NJW-RR  OLG Hamburg, GRUR 1990, 288; OLG Karlsruhe, NJW-RR 1987, 737.  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 218, 219. But § 1 UWG is not  applicable when the object o f the espionage is a trade secret because those are already protected by § § 17 - 20a UWG.  34  (2) Displacement and cut-throat competition One o f the most significant reasons for the popularity o f a product is its price. It is therefore every trader's right to offer his or her wares as cheaply as he or she wants in order to widen the range o f customers. However, although underselling is basically not prohibited , there are limits where it is used only as a means o f ruining or displacing a 119  particular competitor.  120  This being so, the question whether or not dumping constitutes  unfair competition depends on the object which is pursued. Underselling for the mere purpose o f ruining a competitor is never allowed. Thus, the question is whether an underselling is simply part o f a special sales strategy and, being so, o f no concern, or whether it is a measure to displace a competitor. The  Bundesgerichtshof answers this  question by seeing an unfair cut-throat competition to be indicated when wares are continually or repeatedly offered at a price which is below the original cost o f the product , especially if this offer is meant to hit a particular competitor. 121  (3) Boycott and Discrimination Another kind o f interference is the boycott, which is the organized blockade o f a trader by means o f either not entering into transactions with him or her or breaking off business  BGHZ 28, 60; BGHZ 28, 396; BGHZ 44, 302; BGHZ 46, 175; BGH, GRUR 1960, 331; BGH, GRUR 1966, 620; BGH, JuS 1970, 94 No. 8; BGH, GRUR 1979, 322; BGH, NJW 1983, 569; BGH, GRUR 1984, 206; BGH, JuS 1986, 736 N o . 11; BGH, NJW 1990, 246%; BGH, NJW 1992, 1817; BGH, NJW 1993, 1010. BGH, JuS 1986, 736 N o . 11; BGH, GRUR 1985, 883; BGH, NJW 1990, 2468; BGH, NJW 1992, 1817. See Lehmann, Schutz des Leistungswettbewerbs und Verkauf unter Einstandspreis, GRUR 1979, 368, at 377 ff. Further bounds for market-dominating 119  120  enterprises can be found in § § 22 (4), (5), 26 (2), (3), 37a (3) GWB. 121  BGH, GRUR 1979, 323; BGH, GRUR 1983, 125.  35  relations. A boycott requires at least three persons: first, the one who encourages others to block a particular trader; secondly the addressee who follows this call; and thirdly, the trader who is affected by this action. Thus, a boycott is a means o f restraining the competition by excluding a particular competitor from the trade which, of itself, makes it contrary to fair business practices.  122  Another way of violating 'public morals" in commercial matters is the discrimination, for example, based on the unjustified unequal treatment o f a person in the course o f trade. Nevertheless, one has to bear in mind that unfair competition law also follows the principle of liberty to contract. Since this is so, every trader has the right to establish contractual relations and to break off business connections with the person he chooses.  123  This liberty,  however, faces limits where the trader meets a statutory obligation to conclude a contract. Those obligations are rare; one can find them mainly in the field where public utilities supply the community with essentials such as power, gas or water.  124  F o r market-  dominating enterprises the obligation to conclude a contract can also result from their liability for damages pursuant to § 26 (2) GWB, which contains a prohibition against discrimination.  122  BGH, GRUR 1960, 331, at 335; BGH, GRUR 1980, 242; OLG Diisseldorf, GRUR  1984, 131, at 134; see Emmerich, supra note 42, at 95. 1 2 3  OLG Celle, BB 1971, 1120.  E.g. § 6 Energiewirtschaftsgesetz {Act for the Promotion of the Fuel and Electricity Industries) or § 22 Personenbefdrderungsgesetz {Passenger Transport Act). 124  36  (4) Comparative advertisements Since false and misleading representations as such violate 'public morals", comparative advertisements  only raise controversial questions in terms o f business  statement in the advertisement is true. While the  ethics if the  Reichsgericht tended to be very strict  even as to true statements and held comparative advertisements to be violating 'bublic morals" i f they referred to a specific trader or to a particular group o f competitors while the  125  and  Bundesgerichtshof at first stuck to the position o f its predecessor , the latter 126  eventually acknowledged the right o f a trader to refer to the competitor's wares in a critical way provided that the trader has a sufficient cause for the comparison and his criticism stays within the ambit o f what is necessary.  127  The following have been regarded  as sufficient causes for a comparison: the counter comparison , the explicit request o f a 128  customer to be informed of the nature and quality o f competing products , the correction 129  of misconceptions  130  and the need to inform the general public o f a technical progress  RG, GRUR 1927, 486; RG, GRUR 1931, 1299; RG, GRUR 1934, 473; RG GRUR 1937, 230; RG, GRUR 1939, 386; RG, GRUR 1940, 53; RG, GRUR 1942, 364. O n the  125  other hand, the comparative advertizing as to procedures or systems which do not refer to  BGH, GRUR 1952, 416; BGH, GRUR 1953, 37; BGH, GRUR 1958, 553. BGH, GRUR 1952, 417; BGH, GRUR 1953, 293; BGH, GRUR 1959, 488; BGH, GRUR 1960, 384; BGH, GRUR 1961, 237. BGH, GRUR 1962, 45. BGH, GRUR 1954, 41; BGH, GRUR 1962, 48. BGH, GRUR 1957, 24; BGH, GRUR 1959, 49; BGH, GRUR 1960, 387; BGH, GRUR  a specific competitor has always been regarded a fair means o f competing; 126  127  128  129  1986, 220. 130  BGH, GRUR 1960, 385; BGH, GRUR 1961, 288.  37  which cannot be described by other means than by comparing the trader's wares with those o f his competitors.  131  ccc) Exploitation Making use o f the achievements o f others and benefiting from their abilities, skills, and efforts is not an unfamiliar element o f competition. However, the adoption o f others achievements is limited, especially in the field o f exclusive rights in registered trade-marks, trade-names and patents. Yet, the protection o f exclusive intellectual property rights is granted by special provisions in different acts.  132  A s has already been mentioned, it follows  from the very existence o f a special protection o f exclusive rights in creative or innovative achievements that commercial activities which do not infringe these rights essentially are supposed to be allowed or, in other words, unfair competition law must not prohibit what is allowed under special acts for the protection o f intellectual property.  133  That is why the  German unfair competition law has to view the adoption o f competitors' achievements in a different way from the various acts for the protection o f intellectual property. In doing so, unfair competition law does not protect a property right on behalf o f the owner or the general public but pays attention to the way someone benefits from the achievements o f a competitor in the market-place in a way that itself contravenes the idea o f competition.  134  From this point o f view the adoption o f foreign achievements has been regarded as unfair  BGH, GRUR 1952, 418; BGH, GRUR 1958, 345; BGH, GRUR 1961, 90, BGH, GRUR 1961, 240. 131  1 3 2  See fh. 46-49.  133  BGH, GRUR 1966, 97; BGH, NJW 1967, 723; Emmerich, supra note 42, at 160.  1 3 4  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 407.  38  only if it was likely to lead to a confusion as to the source and only if the imitator could be accused o f not having taken reasonable measures to prevent the likelihood o f confusion.  135  O n the other hand, the likelihood o f confusion is not necessary i f the imitator has obtained the knowledge which is necessary to imitate his competitors' wares or services by devious means.  136  Always unfair is the exploitation o f the reputation o f a competitor's product by  using it as some kind o f 'fctage setting" for one's own products, or a means o f evoking the consumer's interest and giving the impression that both products meet the same quality standard.  137  Another form o f exploitation in terms o f making use o f the achievements o f  others is the persuasion o f the employees o f a competitor to break their employment contract in order to hire them for the own business and to benefit from their experience.  138  ddd) Violation of the law It is contrary to the whole object o f competition that a trader get ahead o f his competitors by violating statutory or contractual obligations with which the rest o f the competitors comply.  139  In other words, it is not enough that someone can offer his or her wares or  services at a reasonable price and o f better quality; he or she has to achieve this by means o f honest and legal actions. It follows that the unfairness o f the violation o f the law does  1 3 5  136  137  138  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 428, 429.  BGH, GRUR 1961, 40. BGH, GRUR 1983, 248. BGH, GRUR 1956, 273. O n the other hand, the mere fact that a trader takes advantage  of a breach o f contract or that he persuades an employee to terminate the employment  RG, GRUR 1936, 994; RG, GRUR 1938, 137;BGH,GRUR 1956, 237;BGH, GRUR 1957, 219.  duly is generally not considered to be unfair; 1 3 9  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 567.  39  not lie in the mere violation but in the fact that the trader gets a better position in the market-place by his own infringement and by benefiting from the competitors' obedience to the l a w .  140  (1) Violation of statutory obligations N o t every violation o f statutory provisions is necessarily unfair and contrary to 'bublic morals" as defined in § 1 UWG ; the business method in question must have some 141  impact on the competition. However, some provisions protect the general public and express some basic values, such as public health or the administration o f justice. German courts tend to consider business practices violating these provisions  eo ipso to be contrary  to 'bublic morals" for the mere reason that they contradict the ethical feeling o f the general public.  142  Furthermore, the infringement o f provisions regulating and protecting  the competition as an institution are generally held to be contrary to 'bublic morals" whereas the infringement §  1 4 3  ,  of'Value-free" (or 'rnorally neutral') provisions usually violates  1 UWG only when special circumstances render the conduct  unfair.  144  These  circumstances include, for example, the intention, the motives and the way the trader proceeds. Thus, intentional, continual and systematic ignorance o f statutory provisions in  140  BGHZ 45, 2; BGH, GRUR 1957, 559; BGH, GRUR 1960, 195; BGH, GRUR 1965,  375.  BGH, GRUR 1957, 558; BGH, GRUR 1960, 195. Baumbach/Hefermehl, supra note 51, § 1 UWG, annot, 573; BGHZ 22, 180; BGHZ 44, 209; BGH, GRUR 1961, 4\S;BGH, GRUR 1965, 375; BGH, GRUR 1970, 559. BGH, GRUR 1978, 446. BGH, GRUR 1963, 583; BGH, GRUR 1967, 37; BGH, GRUR 1970, 181; BGH, NJW 1981, 2519; BGH, NJW 1990, 578; BGH, NJW 1990, 3199; BGH, NJW 1994, 54. See 141  1 4 2  143  144  Sack, supra note 30, at 1.  40  order to get a more favourable position in the market-place has always been considered unfair.  145  However, one has to keep in mind that the unfair element o f any violation o f the  law - at least in terms o f business ethics - is the disturbance o f a  par conditio  concurrentium, i.e. the same conditions for every competitor. That is why the advantage pursued by an unfair trader needs to be achieved over competitors who are bound by the same provisions. profession surgeons , 147  morals".  146  Atypical example o f a statutory obligation that binds all members o f a  is the restraint on advertising for physicians and dental or veterinary the infringement o f which is generally regarded as contrary to 'bublic  148  (2) Violation of contractual obligations Even the mere non-performance o f a contractual obligation can breach § 1 UWG. The violation o f agreements about resale price maintenance  149  or covenants for restraints on  the freedom to compete , which typically occur in employment contracts, are good 150  examples.  BGH, GRUR 1957, 559; BGH, GRUR 1960, 243; BGH, GRUR 1966, 323; BGH, GRUR 1973, 655;BGH, GRUR 1974, 2%\;BGH, GRUR 1981, 142. Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 603. See § 21 (1) Muster-BerufsO fur die deutschen Arzte (Model Occupational Regulations for German Physicians); § 1 (3) ZahnheilkundeG o f 16.04.1987 {BGBL. I p. 145  1 4 6  1 4 7  1225) (Act on Dentistry). 1 4 8  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 603.  1 4 9  The condition is that these agreements are valid under the GWB.  1 5 0  A n enumeration o f different kinds o f restraints o f competition is provided, e.g., by  Bul3, 1995.  Wettbewerbsverbote und konkurrierende Erwerbstdtigkeit des Ehegatten, Diss. Trier  41  fff) Disturbance of the market-place The last category of business actions violating 'public morals" covers methods which are likely to endanger the very existence of competition by removing the principle of supply and demand.  151  In this field of application § 1 UWG overlaps with provisions o f the GWB  (Restraint of Competition Act), especially with § 22 (4) GWB which gives the antitrust division special authority if a company misuses its market-dominating position. In most cases such a behaviour will already be covered by one of the above mentioned categories, so it follows that the 'disturbance of the market" has a relatively narrow scope o f application. Nevertheless, a disturbance can be assumed if a trader causes an obstruction of the market by supplying masses of free wares which makes it impossible for his competitors to take part in the competition at a l l .  152  This behaviour carries the more  weight the more likely it leads to the danger that the customer will get accustomed to the given wares and will not - in the present or future - judge the offers by the competitors on the grounds of price and quality comparisons.  153  This being so, it has been held unfair that  a trader distributed baby dairy food free to almost 80 % of all mothers in Germany and in doing so met the demand for this product for 5 to 6 days.  154  1 5 1  Baumbach/Hefermehl, supra note 51, § 1 UWG, annot. 771.  152  BGHZ 23, 375, BGH, GRUR 1957, 363. BGHZ 43, 2S4.  153  1 5 4  OLG Munchen, BB 1966, 513.  42  4) Summary and analysis Looking at all these different categories one has to be reminded o f the fact that the whole adjudication o f the courts is founded on one single legal basis. Keeping in mind that the courts' judgements are usually more varied and sophisticated in details than can be portrayed here, the tremendous importance o f § 1 UWG and its term 'bublic morals" becomes obvious.  Moreover, by relying on the judiciary's ability to take into account new forms o f conduct in trade and commerce the legislator allowed - and ultimately confirmed - a change o f the scope o f protection as the result o f the 'judicial legislation": First o f all, § 1 UWG serves to protect the competitor by requiring an action with the object o f competing, that is to say, an action that is likely to have some impact on the interests o f other traders. Accordingly, unfair competition law had originally been understood as a means o f protecting  only  the  competitor  against  unfair  trade  practices  "individualrechtliche Auffassung" - 'individual dimension approach')  (so-called 155  A n d yet, the  wide scope o f the application o f § 1 UWG has shown that this provision certainly does not only protect the competitors alone. Protection is granted for competitors as well as for consumers and the general public. This shift from the 'individual dimension approach" to a  Schutz der Allgemeinheit im Wettbewerbsrecht, GRUR Verbraucherschutz und Wettbewerbsrecht, GRUR 1969, 326, at 327; Sack, Sittenwidrigkeit, Soziabvidrigkeit und Interessenabwdgung, GRUR 1970, 493; Kisseler, supra note 18; Burmann, Zur Problematik eines wettbewerblichen Verbraucherschutzes, WRP 1973, 313; Schricker, supra note 64; Lindacher, Grundfragen des Wettbewerbsrechts, BB 1975, 1311. For details, see Nastelski,  1969, 322; Samwer,  43  so-called 'social dimension approach" ("sozialrechtliche  Aujfassung") that also takes  into consideration interests o f consumers and the general public was introduced by the judiciary. It was the  Reichsgericht which in 1928 for the first time stated that the  prevention o f unfair trade practices is expedient in the public interest. 1936 the  156  Consequently, in  Reichsgericht began to take also the public interest into consideration when it  interpreted and specified the term 'public morals" in § 1 UWG.  151  In doing so, it laid the  foundation for a more diversified interpretation o f this provision that ultimately led to the rise o f the 'fcocial dimension approach" and the develpment o f the above-portrayed categories o f interpretation and specification.  A n inherent feature o f the 'fcocial dimension approach" is that the protection for competitors, consumers and the general public is granted in two different ways: directly and indirectly. It is obvious that the interdiction o f unconscionable business methods falling into the category Interference" and 'exploitation" pursues the protection o f competitors against unfair practices which aim directly at their businesses and, in doing so, are likely to cause harm. In the same way, it is not difficult to understand that the prohibition o f misleading representation, undue pressure, pestering and temptation is a means  o f protecting the consumer against  overambitious traders. A n d finally, the  protection o f competition as an institution and a cornerstone o f our economic system and the consideration o f ethical feelings o f the public in judging infringements o f provisions  RGZ 120, 47, at 49; see Schwartz, Verfolgung unlauteren Wettbewerbs im Allgemeininteresse, GRUR 1967, 333; Nastelski, supra note 155. 156  1 5 7  RGZ 128, 330, at 343; see Nastelski, supra note 155.  44  which express some basic values can easily be seen as a means o f protecting the general public against the elimination o f a well-functioning market and against moral decline in trading practices.  158  A n d yet, every interpretation o f § 1 UWG aiming at the protection o f competitors is simultaneously a consumer protection decision and every judgment which guards the consumer against molestation and temptation simultaneously protects competitors against unfair methods which enable its users to get ahead o f them. This is so because the protection o f competitors against devious and unfair practices eventually results in ensuring the existence o f a competition in performance or, in other terms, the elimination of every unfair element in trade and commerce necessarily leads to a consumer's decision that is essentially made on the grounds o f his or her ideas o f good quality and reasonable prices o f the wares or services offered. A n d in fact, this very aspect has increasingly been stressed in some judgments o f the  Bundesgerichtshof  essential content and very nature o f fair competition.  159  160  and is often considered the  Giving weight to the consumer's  e.g. Kraft, Die Berucksichtigung wirtschaftspolitischer und gesellschqftspolitischer Belange im Rahmen des § 1 UWG, Festschrift fur Bartholomeyczik (1973), 223 at See  229 ff.  BGHZ 15, 365; BGHZ 34, 270; BGHZ 51, 242. See Nordemann, supra note 32, at 631; Ulmer, Der Begriff des "Leistungswettbewerb " und seine Bedeutung fur die Anwendung von GWB und UWG-Tatbestanden, GRUR 1977, 368. But see also the criticism by Emmerich, supra note 28, at 56 where the 159  1 6 0  learned author points out that this kind o f fair competition is described by the German term  "Leistungswettbewerb" (competition governed by and based on the individual  performance as to quality and price o f the product) which is almost as imprecise as the term "gute Sitten" so that one might argue that one general term has been replaced by another.  45  unaffected  and uninfluenced  decision  is  also  the  very  approach for  considering  molestation, undue pressure, temptation and misrepresentation as unfair and, in doing so, it seems that the intended protection o f traders has basically become  a consumer  protection issue which only reflexively defends the competitors against traders who pursue their goals by devious means to the disadvantage of the honest competitors.  For the protection of the general public one can argue that protection of the individual consumer is at the same time a protection of the general public. In addition, the  Bundesgerichtshof, in particular, increasingly asks whether a business practice is disapproved or found intolerable by the general public. Thus, the views and ideas o f the general public have become an essential element in unfair competition cases and nowadays one can say that a business method violates 'public morals" not only if it is contrary to the sense of decency of the honest, reasonable and just thinking average businessman but also if it is disapproved by the general public even i f the involved business circles would tolerate this practice.  161  Interestingly, this shift from the individual dimension approach to a social dimension approach, i.e. from an approach that focuses only on the interest o f competitors to an approach that takes into account the need to protect consumers and the general public, was ultimately confirmed by the legislator, in 1965 when § 13 (l)(a) UWG (which is now § 13 (2) 3) was amended. Until then § 13 (2) UWG regulating, who is entitled to sue in  See Emmerich, supra note 42, at 45.  46 case of the violation of'public morals", granted the right of action only to traders who are dealing with the same kinds of products to associations which represent a considerable number of those traders, provided that the business method in question is likely to have some profound negative effect on the competition, and to Chambers of Industry and Commerce or Chambers of Handicrafts. The new provision extended the right of action to associations whose purpose is to represent the consumers by advising and informing them provided that the allegedly unfair business practice interferes with essential interests of the consumers.  CHAPTER III: "Honest practices" in Canadian Unfair Competition Law 1) General a) Federal statutory regulation As mentioned before, Canada's adherence to the Union Convention of Paris of 1883 for the Protection of Industrial Property obliges her by Article 10/3/5 subsection 1 to assure effective protection against unfair competition, i.e. dishonest practices in industrial or commercial matters. Since treaties and conventions do not become part of Canadian local law until they are embodied in legislation , this basic statement had to be transferred into 162  Canadian Law. One of the first implementations had been paragraph 11(c) of the Unfair  Fox, The Canadian Law of Trade Mark and Unfair Competition, 3rd edition (1972), at 13; California Fig Syrup Co. 's Trade Mark (1888), 6 R.P.C. 126; Walker v. Baird [1892] A.C. 491 (J.C.P.C.).  47  Competition Act,  163  This subsection, like its 'international counterpart", was very broadly  stated in that no person should 'adopt any (...)  business practice contrary to honest  industrial or commercial usage" in Canada. This formulation was adopted by the Trade  Marks Acts of 1953  164  and is also the wording o f paragraph 7(e) of the  Trade-marks Act  R . S . C . 1952, ch. 274. It should be noted that in spite of a reference to the  Convention  in the interpretation section and in spite o f the almost identical wordings in section 106/5 and paragraph 7(e), the Supreme Court of Canada stated that 'there is nothing in the Trade-marks A c t of 1953 to indicate that it was passed in implementation of the ...[Union]  MacDonald v. Vapour Canada Ltd. (1976), supra note 38, at 32. This assessment is rather surprising as the Supreme Court in S. & S. Industries Inc. v. Rowell (1966), 48 C.P.R. 193, at 197 stated that section 11 o f the Unfair Competition Act, the successor of which became section 7 of the Trade-marks Act o f 1953, was based upon Article 10/3/5 of the Convention. In doing so, the Supreme Court adopted the view taken by the Exchequer Court which in two cases - A C . Spark Plug Co. v. Can. Spark Plug Service, [1935] 3 D . L . R . 84, at 95; and Kitchen Overall & Shirt Co. v. Elmira Shirt Convention [of Paris]",  & Overall Co., [1937] 1 D . L . R . 7, at 9 - stated that section 11 'Virtually enacte[d] one o f the provisions o f the Convention" and was 'intended to give legal effect [...]  to Article  MacDonald case also seems to contradict Eldon Industries Inc. v. Reliable Toy Co. Ltd. and National Sales Incentives Ltd. (1964), 44 C.P.R. 239, where, at 257, the Ontario High Court of 10/3/5 of the [...]  Convention". The Supreme Court's assessment in the  Justice stated that paragraph 7(e)  'is passed really pursuant to art. 10 o f the  [...]  Convention", The judgment of the Supreme Court o f Canada, however, needs to be seen in the context. The Supreme Court had to deal with the question o f the constitutional validity of section 7 and to answer whether or not this provision could be supported as federal legislation in implementation of an international obligation. Although in the Labour  Convention Case (A.-G. Canada v. A.-G. Ontario, [1937] 1 A . C . 326, at 352) the J . C . P . C . held that the mere fact that international obligations were to fullfil had no impact  on the division of powers provided by sections 91 and 92 of the British North America Act, 1867, this question was controversial at the time of the judgment, as there seemed to be a certain willingness to reconsider this decision. Considering that an affirmative answer would have had a far-reaching impact on the constitutional division o f powers,  the  Supreme Court's hesitation to uphold the federal legislation only on the grounds of Canada's obligation under the  Convention becomes understandable. The Supreme Court  therefore held that the exercise of a federal legislation based on Canada's international involvements must by no means be left open to inference but rather need to be explicitly manifested in the implementing legislation itself. 1 6 4  R . S . C . 1970, ch. T-10, paragraph 7(e).  48  which is in force today.  165  T o specify this broad statement section 7 refers to an  enumeration of unfair practices such as false or misleading statements tending to discredit the business of a competitor, directing public attention to wares, services or business in such a way as to cause confusion in Canada, passing-off other wares or services as and for those ordered, and finally making use of any false description that is likely to mislead the public as to the character, quality, quantity, composition, geographical origin and the mode o f the manufacture, production or performance.  166  However, the efficiency of provisions intended to regulate the behaviour o f competitors not only depends on the extent to which competition exists but also on the very existence of this competition. The protection o f competition was accomplished first by section 498  165  Trade-marks Act of 1985,R.S.C. 1993, ch. T-13.  1 6 6  Section 7 of the Trade-marks Act reads:  N o person shall (a) make a false or misleading statement tending to discredit the business, wares or services o f a competitor; (b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business o f another; (c) pass off other wares or services as and for those ordered or requested; (d) make use, in association with wares or services, o f any description that is false in a material respect and likely to mislead the public as to (i) the character, quality, quantity or composition, (ii) the geographical origin, or (iii) the mode o f the manufacture, production or performance o f such wares or services; or (e) do any other act or adopt any other business practice contrary to honest industrial or commercial usage in Canada.  49  of the  Criminal Code , the successor o f which became section 32 o f the Combines 161  Investigation Act.  168  Although the latter section essentially dealt with the investigation o f  combines, monopolies, trusts and mergers, it also focused on the question o f how traders should behave in competition. F o r example, prohibitions included misrepresentations o f the ordinary p r i c e  169  and the publishing o f false advertisements , as well as the attempt, 170  by threat, promise or other means, to require or induce other persons to resell an article to conditions set up by the trader , and the refusal to sell an article to this person for the 171  mere reason that he or she has refused to resell the article under the required conditions.  In 1986 the  172  Combines Investigation Act was altered and renamed Competition Act  m  section 32 has maintained the most important provision with respect to business practices which restrain or injure competition unduly. In addition, the scope o f application o f the  Competition Act has become much broader. The act now explicitly deals with 'bidrigging" , 'double ticketing" , 'pyramid selling" , 'referral selling" , 'bait and 174  switch selling"  175  178  and sales above advertised prices.  1 6 7  R . S . C . 1927, ch. 36.  1 6 8  R . S . C . 1970, ch. C-23.  169  Combines Investigation Act, Combines Investigation Act, Combines Investigation Act, Combines Investigation Act,  170  171  172  1 7 3  R . S . C . 1985, ch. C-34.  174  Competition Act, Competition Act, Competition Act, Competition Act, Competition Act, Competition Act,  175  176  177  178  179  176  section 36. section 37. subsection 38(2). subsection 38(3).  section 47. section 54. section 55.1. section 56. subsection 57(2). section 58.  179  177  but  50  b) Common law aa) Law of torts aaa) Tort of passing-off Probably the most important form of misrepresentation concerning a trader's business is the tort of passing-off, which has also been called 'Unfair competition par or the 'main instance of unfair competition at common law".  181  excellence" ™, 1  The term 'passing-off' as  it is presently used in Canada covers every kind of misrepresentation of wares or services in order to benefit from the reputation of a competitor. Two general classes of passing-off were codified in paragraphs 7(b) and 7(c) of the Trade-marks Act * However, instead of 1  2  creating clarity, this codification has generated questions about the constitutional validity of these provisions and as to the relationship between the common law tort of passing-off and the statutory version of passing-off. The constitutional question was left open by the Supreme Court of Canada  183  and while some courts have held that paragraphs 7(b) and  7(c) are ultra vires Parliament , the Federal Court of Appeal in particular considers these 184  180  Fleming, Law of Torts, 6th edition (1983) at 672.  1 8 1  Se&MacDonald v. Vapour Canada Ltd., supra note 38, at 15.  In the Province of Quebec article 1457 of the Civil Code of Quebec provides for a general regulation concerning civil liability. This new provision has replaced article 1053 of the Quebec Civil Code of Lower Canada which had been considered to be sanctioning passing-off and encompassing the torts contained with paragraphs 7(b) and (c) of the 182  Trade-marks Act; see Compro Communications Inc. v. Communications Promo-Phono  L.T. Inc. (1991), 41 C;P.R. (3d) 260 (Que.S.C). MacDonald v. Vapour Canada, supra note 38. A more detailed interpretation of the findings of the Supreme Court will be given at p. 70 ff. 183  1 8 4  Seiko Time Canada Ltd. v. Consumers Disrtibuting Co. Ltd. (1980), 50 C.P.R. (2d)  147 (Ont.H.C); Motel 6 Inc. v. No. 6 Motel Ltd. (1981), 56 C.P.R. (2d) 44 (F.C.T.D.); Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. (1986), 9 C.P.R. (3d) 341 (F.C.T.D.); Griffon Fieberglass Co. Ltd. v. Spectrum Aircraft Inc. (1986), 11 C.P.R. (3d)  51  provisions to be valid legislation that rounds out the regulatory scheme prescribed by Parliament in the exercise o f its legislative power in relation to trade-marks.  The first class o f passing-off, described in paragraph 7(c) o f the  185  Trade-marks Act, is the  prohibition on passing-off wares or services as and for those ordered or requested, or in other words, the substitution o f a product o f one party on calls for that o f another without explanation  186  and in the hope that the customer will not notice the difference. The second  and more important class, described in paragraph 7(b) , 187  is the interdiction against  directing public attention to ones wares, services or business in such a way as to cause or be likely to cause confusion in Canada. In order to be successful in a common law action  267 ( F . C . T . D . ) ;  Aca Joe International v. 147255 Canada Inc. (1986), 10 C.P.R. (3d) 301  (F.C.T.D.).  Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. (1987), 14 C.P.R. (3d) 315 (F.C. A.); concurring: Aluminum Co. Of Canada Ltd. v. Tisco Home Building Products (Ontario) Ltd. (1977), 33 C.P.R. (2d) 146 ( F . C . T . D . ) . Adidas (Canada) Ltd. v. Collins Inc. (1978), 38 C.P.R. (2d) 145 ( F . C . T . D . ) ; ImperialDax Co. Inc. v. Mascoll Corp. Ltd. (1978), 42 C.P.R. (2d) 62 ( F . C . T . D . ) ; Royal Doulton Tableware Ltd. v. Cassidy's LtdCassidy'sLtee (1984), 1 C.P.R. (3d) 233 ( F . C . T . D . ) . 185  1 8 6  1 8 7  Pattishall\Hilliard, supra note 58, 8-71. Although the common law doctrine o f passing-off and the statutory remedy provided  in paragraphs 7(b) and (c) are not identical, it is generally held that paragraphs 7(b) and  e.g., MacDonald v. Vapour Canada Ltd. , supra note 38, at 14; Asbjorn Horgard A/S v. Gibbs/Nortac Industries, 9c) are codified versions o f the common law action. See,  supra note 185, at 327, both with respect to paragraph 7(b); Motel 6, Inc. v. No. 6 Motel  Ltd., supra note 184, ibid.; Aca Joe International v. 147255 Canada Inc., supra note 184, ibid., both with respect to paragraphs 7(b) and (c); Kitchen Overall & Shirt Co. v. Elmira Shirt & Overall Co, supra note 163 with respect to section 11 o f the Unfair Competition Act, R.S.C.1952 ch. 274. The Manitoba Court o f Queen's Bench in Home Shoppe Ltd. v. National Development Ltd. (1987), 17 C.P.R. (3d) 126, at 129, more cautiously stated that 'the common law rules o f 'passing-off l[are)  perhaps expressed in  those paragraphs" (emphasis added). See also Fox, supra note 162, at 497 and 504. The differences between the common law and the statute will be explained at p. 82-83.  52  for passing-off as described in paragraph 7(b) the trader who sues must prove three issues : first, the existence o f proprietary rights, in respect o f which he is entitled to 188  protection ; secondly, a misrepresentation by the defendant which is likely to cause 189  confusion in the market-place; and thirdly, the probability o f suffering damages.  The right o f property that is protected is goodwill o f the business which can be described, to quote  Lord MacNaghten, as 'the benefit and advantage o f the good name, reputation  and connection o f a business", or as the 'attractive form which brings in custom" and "which distinguishes an old-established business from an new business at its first start."  190  That is to say, the defendant has to make use o f the plaintiffs reputation based on his - the plaintiffs - efforts, skills and innovative abilities, or in other terms, interfere with the plaintiffs  business  by skimming the  cream off without  any efforts  o f his  own.  Furthermore, in cases which turn on the get-up or distinguishing guise o f a product, the plaintiff has to prove a so-called 'secondary meaning", that is to say, it must be established that the consumer believes, by reason o f the appearance o f the goods o f the plaintiff, that the goods being sold are those o f the plaintiff or come from the same source as 'the originals".  191  Accordingly, in cases where the plaintiff alleges imitation o f the way o f  188  Ciba-Geigy Canada Ltd. v. Apotexlnc. (1992), 44 C . P . R . 289, at 297 (S.C.C.).  1 8 9  See Fox, supra note 162, at 503.  190  The Commissioners of Inland Revenue v. Muller & Co. 's Margarine Ltd. (1901),  A . C . 217 (H.L.).  Roche Products Ltd. v. Bertz Pharmaceuticals Ltd. (1973), R . P . C . 473 at 482 ( C . A . ) ; Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd. (1982), 134 D . L . R . (3d) 271 (S.C.C.); Ciba-Geigy Canada Ltd. v. Apotex Inc., supra note 188; Plastics Ltd. v. Dustbane Products Ltd. (1994), 57 C.P.R. (3d) 474 (S.C.C.). 191  53  representing his business, this way has to be distinctive in a sense that the consumer thinks only o f the plaintiffs business whenever the representation comes to his mind. Yet, this required distinctiveness does not burden the plaintiff with the need to show that actual confusion has occurred; he only has to prove that there is a probability o f confusion occurring in the normal course o f trade due to the defendant's misrepresentation. The 192  difficult question as to when such a probability can be assumed is answered by section 6 o f the  Trade-marks Act. This provision applies also to the common law tort o f passing-off to  which the  Trade-marks Act is not directly applicable because it is generally held that  paragraphs. 6(2)-(5) provides a 'Useful guide" to determine whether the use o f a name, mark or sign or any other way o f misrepresentation is likely to cause confusion, regardless of whether this question arises in a case under the action for passing-off.  193  Trade-marks Act or in a common law  Therefore, it is o f special significance whether the use o f both  symbols in question, or both ways o f representing a business, is likely to lead to the assumption that the wares or services associated with the business are manufactured or performed by the same person. In determining whether this is the case all the surrounding circumstances have to be considered, including the distinctiveness o f the symbol or the  Kg. La Maur Inc. v. Prodon Industries Ltd. (1971), 2 C.P.R. (2d) 114, at 116 ( S . C . C ) ; GunnardCo. v. Regal Home Products Inc. (1986), 13 C . P . R . (3d) 335, at 339 ( O n t . H . C ) ; World Wide Treasure Adventures Inc. v. T.G.I. Games Inc. (1988), 21 C . P . R . 192  (3d)206(B.C.S.C.).  Kg. Canadian Converters' Co. Ltd. v. Kastport Trading Co. Ltd. (1968), 56 C.P.R. Fastening House Ltd. v. Fastway Supply House Ltd. (1974), 13 C . P . R . (2d) 16 ( O n t . H . C ) ; Aluminum Co. of Canada Ltd. v. Tisco Home Building Products (Ontario) Ltd., supra note 185. Contra: Westfair Foods Ltd. v. Jim Pattison Industries Ltd. (1989), 26 C.P.R. (3d) 43 ( B . C . S . C . ) with reference to MacDonald v. Vapour Canada Ltd, supra note 38. 193  205 (Exch.Ct.);  54 way of representing the business and the extent to which both have become known , the 194  length of the time the symbol has been used , the nature of the wares, services, business 195  and trade , and finally the degree of resemblance between the two competing symbols or 196  ways of representation.  197  The methods of passing-off are manifold and, although it is frequently accomplished with the assistance of deceptive or confusingly similar marks, signs or logos, passing-off may be practiced without the benefit of those.  198  Taking into account that the common law action  for passing-off is basically unconnected with any regulatory scheme , one has to keep in 199  mind that a misrepresentation, for example, can also be practised by using the specific furniture the competitor's premises is fitted out with, if it is distinctive enough, or by imitating the dresses which are typical for the waitresses in a competitor's restaurant. Passing-off can also include the purchase of merchandise under a deceptive name  200  supplying a conspirator with the means to pass off goods under false trade description.  or 201  Trade-marks Act, paragraph 6(5)(a). Trade-marks Act, paragraph 6(5)(b) Trade-marks Act, paragraphs 6(5)(c) and (5)(d). Trade-marks Act, paragraph 6(5)(e). Pattishall\Hilliard, supra note 58, 8-71. Motel 6 Inc. v. No. 6 Motel Ltd., supra note 184, at 76. Fleming, supra note 180, at 674 with reference to F.W. Woohvorth & Co. v. Wollworths (Australia) (1930), 47 R.P.C. 337 (Ch.D.). Fleming, ibid.  1 9 4  195  1 9 6  197  1 9 8  1 9 9  2 0 0  2 0 1  55 bbb) Tort of slander  The second form of misrepresentation in commercial matters is the tort of slander of title or goods. The wrong of this kind of injurious falsehood consists in false statements 202  made to other persons concerning a competitor or his goods with the result that those persons are induced to act in an manner that causes loss to him. Examples are the false 203  charge that goods offered by a competitor for sale are an infringement of a patent or copyright , the false and malicious depreciation of the quality of the goods or services 204  manufactured or performed by a competitor or the imputation that a competitor has 205  ceased to carry on business. The common law tort of slander of title or goods has found 206  its statutory version in paragraph 7(a) of the Trade-marks Act which prohibits any false 207  or misleading statement tending to discredit the business, wares or services of a competitor.  ccc) Tort of inducing or procuring breach of contract  Another type of unfair competition is the interference with contractual relations by means of intentionally inducing or procuring breaches of contract. Thus someone is liable for 208  Both the tort of slander and the tort of passing-off are considered to be versions of "injurious falsehood" by Salmond and Heuston on the Law of Torts, 19th edition (1987), at 446 ff. See also Fleming, supra note 180, at 669, who also prefers the general term. Salmond, supra note 202, ibid. Royal Baking Powder Co. v. Wright, Crossley&Co. (1901), 18R.P.C. 95 (H.L.). White v. Mellin, [1895] A.C. 154 (H.L.). Both examples are provided by Salmond, supra note 202, at 447. The Hall-Gibbs Mercantile Agency Limitedv. Dun (1910), 12 C.L.R. 84 (H.C.Austr.). Further examples can be found at Fleming, supra note 180, at 669. MacDonald v. Vapour Canada Ltd., supra note 38, at 14. Fleming, supra note 180, at 649-650. 203 204  205  206  207  208  56  damages i f he or she either persuades, induces or procures a contracting party o f a competitor not to perform his or her obligation (direct interference), or commits some unlawful act to prevent such performance (indirect interference).  209  ddd) Tort of conspiracy and tort of intimidation T w o other torts o f less importance in the field o f unfair competition are conspiracy and intimidation. The tort o f conspiracy consists o f concerted actions o f more than one trader against a competitor with the purpose o f causing damages to him in his trade.  210  The tort  of intimidation covers every action that is intended to compel someone , by means o f a threat o f a illegal act, to do something that causes loss to h i m .  211  bb) Equity The disclosure o f trade secrets and confidential business information and their usage for the purpose o f competing certainly constitute an unfair trade practice.  212  However, those  Fleming, supra note 180, at 651. See for details Salmond, supra note 202, at 404 f f ; Hughes, "Liability F o r Loss Caused B y Industrial Action" (1970), 86 L . Q . R . 181, at 182192; Smith, "The Economic Torts: Their Impact on Real Property" (1977), 41 The Conveyancer 318, at 320-326; Burns, "Tort Injury to Economic Interests: Some Facets o f Legal Response" (1980), 58 Can. Bar Rev. 102; Mills, "The Tort o f Inducement o f Breach of Contract" (1971), 1 A u c k . U . L . R e v . 27. 2 1 0  Salmond, supra note 202, at 415 ff; Fleming, supra note 180, at 663. The leading  ibid., net Mogul Steamship Co. v. Mc Gregor, Gow & Co., [1892] A C . 25 (H.L.); Allen v. Flood, [1898] A . C . 1 (H.L.); Quinn v. Leathern, [1901] A . C . 495 (H.L.); Crofter Hand Woven Harris Tweed Co. v. Veitch, [1942] A . C . 435 cases, according to Salmond,  (H.L.). 2 1 1  2 1 2  See e.g. Salmond, supra note 202, at 421 ff. See e.g. Fox, supra note 162, chapter 13; Institute o f L a w Research and Reform  Edmonton, Alberta, and A Federal Provincial Working Party,  Trade Secrets, Report No  46 (1986) ("Report"), at 58; Turner, The Law of Trade Secrets (1962), at 422.  57  acts do not fall within one o f the above-mentioned nominate torts, and there is currently no recognized tortious cause of action for misappropriation of a trade secret in C a n a d a .  213  This, however does not mean that a trader and his or her trade secrets are not protected by law. A s stated by the Federal Court o f A p p e a l  214  , "a businessman, in Quebec as well as in  the common law provinces, is, quite apart from statute, liable to damages and an injunction if he embarks on a course of using in his business information that has been obtained for him from a competitor by an employee of that competitor in contravention of the employee's contract o f employment with that competitor." This protection is accomplished, as Fox puts i t jurisdiction of the court."  216  2is  , "by virtue o f the inherent equitable  The precise basis for this protection, however, seems to be  somewhat unclear. It is settled, that if the trade secret has been obtained in the course of a confidential relationship the principle o f equity applicable is "breach o f confidence".  217  If  this is not the case and the trade secret is used by a competitor who obtained it from a dishonest employee the doctrine of unjust enrichment is suggested to be applicable.  2 1 3  214  218  The Legal Protection of Trade Secrets (1992), at 58. Vapor Canada Ltd. v. MacDonald (1972), 8 C.P.R. (2d) 15, at 21.  Coleman,  2 1 5  Supra note 162, at 653.  2 1 6  It should be noted, however, that the  Copyright Act and the Patent Act grant additional  protection if the trade secret constitutes a copyright or consists of a patent. 2 1 7  For details see Fox, supra note 162, at 652; Report, supra note 212, at 64 ff and the  authorities cited there. It should be borne in mind that in most o f these cases the law of contract already provides for adequate remedies. 2 1 8  See Report, supra note212, at 62 ff; Turner, supra note 212, at 352-353 and 356-360.  58  c) Provincial statutory regulation aa) Trade Practice Acts At the provincial level the protection o f consumers and (reflexively) o f competitors has been accomplished by the different instances o f unconscionable acts  Trade Practice Acts  219  These acts concentrate on  (e.g. section 4 o f the Trade Practice Act o f B . C . ) and  deceptive practices by suppliers that have the capability, tendency or effect o f deceiving or misleading a person  (e.g. section 3 o f the Trade Practice Act o f B . C . ) . B o t h kinds o f  conduct need to occur in relation to a consumer transaction which leads to the conclusion that the Trade Practice Acts are measures primarily to protect the consumer. The Trade  Practice Act o f B . C . , for example, provides an enumeration o f 19 different kinds o f misleading representations as examples o f a deceptive practice (paragraphs 3(3)(a)-(s)). The  same statute requires the judge to consider all surrounding circumstances  220  to  determine whether an act or practice is unconscionable and refers specifically to the questions whether the consumer was subjected to undue pressure (paragraph 4(2)(a)) ; 221  whether the consumer was taken advantage o f by his inability or incapability to reasonably protect his or her own interest (paragraph 4(2)(b)) ; whether the price o f the ware or 222  service was grossly exceeded (paragraph 4(2)(c)) ; whether there was no reasonable 223  British Columbia: Trade Practice Act, R . S . B . C . 1979 ch. 406; Manitoba: Trade Practices Inquiry Act, R . S . M . 1987 ch. T-110; Newfoundland: Act Respecting Unfair and Unconscionable Trade Practices, R S . N f d l . 1990 ch. T - 7 ; Ontario: Business Practices Act, R S . O . 1990 ch. B.18; 2 1 9  2 2 0  Newfoundland: 23 (paragraphs 5(l)(a)-(w)); Ontario: 14 (subparagraphs 2(l)(i)-xiv)).  2 2 1  Newfoundland: paragraph 6(l)(e); Ontario: subparagraph 2(2)(viii).  2 2 2  Newfoundland: paragraph 6(l)(f); Ontario: subparagraph 2(2)(i).  2 2 3  Newfoundland, paragraph 6(1 )(c); Ontario: subparagraph 2(2)(ii).  59  probability of full payment (paragraph 4(2)(d)) ; and whether the terms or conditions of 224  the transaction were so harsh or adverse to the consumer as to be inequitable (paragraph 4(2)(e)).  225  The Trade Practices Inquiry Act of Manitoba takes a slightly different approach. It provides for the possibility of requiring a public investigation concerning trade practices such as misleading representation or advertising (subparagraph 2(a)(i)); dealing in improperly adulterated or diluted articles (subparagraph 2(a)(ii)); unfair or improper making charges for additional services (subparagraphs 2(a)(iii)-(iv)); making use of unfair, improper or misleading advertisement (subparagraph 2(a)(v)); making improper, misleading or unfair appeals to the public for financial support (subparagraph 2(a)(vii)); or following or using unfair detrimental or improper practices (subparagraph 2(a)(viii)).  As "classical" consumer protection acts, the Trade Practice Acts also become a means of directly protecting competitors when they provide a right of action for them. Subsection 18(1) of the Trade Practice Act of B.C., for example, provides that an action under the Act may be brought by any person "whether or not that person has a special, or any, interest under this Act or the regulations, or is affected by a consumer transaction (...)"  Newfoundland: paragraph 6(l)(a); Ontario: subparagraph 2(2)(iv). Newfoundland: paragraph 6(l)(d); Ontario: subparagraph 2(2)(vi). The Acts of other Provinces provide additional examples, e.g. whether the consumer is unable to receive a substantial benefit from the subject-matter of the consumer representation (Newfoundland; Ontario); whether the proposed transaction is excessively one-sided in favour of someone other that the consumer (Newfoundland; Ontario); and whether the consumer is likely to rely on a misleading statement of opinion (Ontario). 2 2 4 225  60 Section 2 of the Trade Practices Inquiry Act of Manitoba requires only the complaint of "any four persons who are residents in Manitoba", persons who may be consumers or competitors. Thus the Trade Practice Acts and their sanctions on deceptive and unconscionable conduct in trade and commerce become available to the rival competitors whose businesses are affected by the defendant's dishonest behaviour.  bb) Consumer Protection Acts  Another cornerstone of consumer protection legislation are the provincial and territorial Consumer Protection Acts  726  Although most of their provisions deal with the buyer's  contractual or post-contractual rights, there are some regulations that focuse on the trader's conduct before the consumer enters into contract. Section 30 of the Consumer Protection Act of B.C., for example, limits advertisement relating to the terms of credit , 227  and section 32 of the same act deals with the dispatch of unsolicited credit cards or  Alberta: Consumer Credit Transactions Act, R.S.A. 1980, ch. C-22.5; British Columbia: Consumer Protection Act, R.S.B.C. 1979, ch. 65; Manitoba: The Consumer Protection Act, R.S.M. 1987, ch. C200; Newfoundland: Act to Provide for the Protection 2 2 6  of Buyers of Consumer Goods and for the Fair Disclosure of the Cost of Credits, R.S.Nfdl. 1990, ch. C-31; Nova Scotia: Act to Provide for the Fair Disclosure of the Cost of Credit and for the Protection of Buyers of Consumer Goods, R.S.N.S. 1989, ch. 92;  Ontario: Consumer Protection Act, RS.O. 1990, ch. C.31; Prince Edward Island: Act to Provide for the Fair Disclosure of the Cost of Credit andfor the Protection of Buyers of Consumer Goods, R.S.P.E.I. 1974, ch. C-17; Northwest Territories: Consumer Protection  Act, R.S.N.T. 1988, ch. C-17; Yukon Territory: Ordinance for the Protection of Consumer 1971, ch. 3.  Identical or similar regulation can be found in Manitoba (section 26); Newfoundland (section 19); Nova Scotia (section 20); Ontario (section 29); Prince Edward Island (section 21); Northwest Territories (section 37); and Yukon Territory (section 27).  2 2 7  61 goods.  228  The Consumer Protection Act of Manitoba also focuses on the inducement of  consumers. Subsection 60(2) of this Act prohibits selling practices in the course of which the vendor gives, offers, or promises to give gifts or other benefits to a buyer on the condition that the buyer assists him in trying to make a sale to another buyer. Subsection 60(3) provides for a prohibition against premiums where the retail sale value of the goods is not accurately disclosed, or where it is contingent upon the prospective buyer making a purchase.  2) "Honest practices" in paragraph 7(e) of the Trade-marks Act  a) Scope of application aa) Statutory version of a "tort of unfair competition" ? Up until now it could be noted that the federal Competition Act and the common law of torts in particular provide for a comprehensive protection of competitors against unfair rivalry that interferes with the competitor's business and thus causes damages to him. In addition, very detailed provincial regulations provide for the protection of consumers against unfair trade practices. The different thrusts of the common law economic torts, i.e. the protection of competitors, on the one hand, and the provincial consumer protection  Identical or similar regulation can be found in Alberta (section 29); Nova Scotia (section 23); Ontario (section 36); and Prince Edward Island (section 17). It should be noted, however, that these provisions are different in their attempts to stem this kind of undesirable and obtrusive invasion into the consumer's private sphere. In Nova Scotia and Ontario the dispatch of unsolicited goods is not generally prohibited. The Acts in these Provinces only emphazise that there is neither an obligation to accept the goods nor a duty to take care of them. On the other hand, in Alberta the issue of unsolicited credit cards is generally prohibited, whereas in Prince Edward Island the issue or delivery of unsolicited goods and credit cards is disallowed.  62 legislation on the other hand, result in a partial overlapping with respect to false and misleading representations. Yet, as pointed out before, every measure to protect a competitor against unfair rivalry is, at the same time, a means of protecting the consumer. That is to say, although the remedies at common law in actions for passing-off, slander, inducing or procuring breach of contract, or conspiracy and intimidation were chiefly built up for the protection of traders and for the prevention of commercial dishonesty , the 229  prohibition of these actions also has the effect of protecting the consumer. This is particularly apparent for the tort of passing-off and vice versa for the prohibition against deceptive representations in the provincial Trade Practices Acts, because every sign or symbol, whether it is a trade-mark or not, is displayed on the goods or their labels for the purpose of distinguishing the waresfromthose manufactured by others and because every distinctive way of representing a business is a means of standing out against the large number of competitors in the market-place. It follows that the specific symbols or logos or every distinctive way of representing a business generally indicates that the goods or services come from the same source and meet the same standard of quality as all other goods and services which have been sold or performed under the same symbol or in the same distinctive way. Since the source and the quality of a product are two of the most important grounds for the consumers' decision to purchase the wares or services that are offered to him, it can easily be argued that any misleading use of marks or symbols or any kind of misrepresentation is a means of deceiving and enticing customers. This is the  Kitchen Overall & Shirt Co. v. Elmira Shirt & Overall Co., supra note 163, at 9, with reference to the tort of passing-off.  63 reason why the prohibition against misrepresentation that is likely to lead to confusion as to the origin of the goods or services is not only a means of protecting the goodwill or reputation of a trader's business but also an essential part of consumer protection legislation. This very aspect - at least with regard to the doctrine of passing-off - has been stressed by the Supreme Court of Canada, which held that the common law principles relating to commerce and trade are also for the benefit to the community from free and fair competition.  230  Having regard to the relatively comprehensive protection of traders at common law, it is not surprising that the examples provided by section 7 of the Trade-marks Act for dishonest conduct in commercial matters have been considered to be statutory versions of common law torts, namely, paragraph 7(a) as the statutory version of the tort of slander of title, and paragraphs 7(b) and (c) as the statutory versions of the tort of passing-off.  231  Consequently, the first question that arises when the scope of application of paragraph 7(e) is to be defined is whether this provision regulates in statutory form a matter that is already covered by common law. It would follow from the broad and general wordings in subsection 7(e) that this common law tort would need to be a "tort of unfair competition" or a "tort of dishonest conduct" with respect to a commercial transaction. And indeed,  Consumers Distributing Co. Ltd. v. Seiko Time Canada Ltd. (1984), 1 C.P.R. (3d) 1;  Ciba-Geigy Canada Ltd. v. Apotexlnc, supra note 188, at 300. This shows an interesting shift from a mere property protection approach inZevy v. Walker (1879), 10 Ch.D. 436 (CA.) where it was stated that the "primary purpose of the passing-off action is to safeguard the plaintiffs proprietary interest in his goodwill, and not to protect the consumer". See references given in fn. 187.  2 3 1  64 there have been some attempts to acknowledge that kind of general tort. It has been suggested that the above considered torts are only examples of a tort of causing loss by unlawful means. The case Rookes v. Barnard which primarily deals writh the existence 232  of the tort of intimidation is generally thought to implicitly support this suggestion. The 233  House of Lords held there that a right to a tortious claim arises where there is a threat of an unlawful act (in this case: threat of a breach of contract) to cause economic harm. This "new tort" is considered to be acknowledged in Stratford v. Lindly * where the House of 23  Lord again focused on the "interfering with existing contracts" that "made it practically impossible (...) to do any new business (...)" "Such interference with business" was held to be "tortious if any unlawful means are employed." Both cases, however, primarily 235  dealt with the interference with contractual relations so that there may remain some doubts as to whether they refer to a general tort of causing damages by unlawful means. A clearer statement was given by the Court of Appeal in Torquay Hotel Co. Ltd. v. Cousins , a 236  case that also deals with the interference with contracts, where Lord Denning stated that he had "always understood that if one person deliberately interferes with the trade or business of another, and does so by unlawful means, then he is acting unlawfully, even though he does not procure or induce any actual breach of contract. If the means are  [1964] A.C. 1129 (H.L.). Weir, "Chaos or Cosmos? Rookes, Stratford and the Economic Torts", [1964] Camb.L.J. 225, at 226; Hoffmann, "Rookes v. Barnard" (1965), 81 L.Q.R. 117, at 140 ("may be the starting point"); Mitchell, "Liability in Tort For Causing Economic Loss By the Use of Unlawful Means and Its Application to Australian Industrial Disputes" (1975), 5 Adel.L.Rev. 428, at 434; Burns, supra note 209, at 142; Carty, "Unlawful Interference with Trade", [1983] 3 Leg. St. 193 ff. See, e.g., Burns, supra note 209, ibid. [1965] A.C. 269, at 324. 2 3 2 233  2 3 4 235  65 unlawful, that is enough." According to this proposition the idea of the existence of a tort of causing damages by unlawful means has also found some support in the legal literature.  237  This view, however, is not unanimous. Apparently relying on Lord Denning's finding counsel for defendant in Merkur Island Shipping Corporation v. Laughton ** contended 2  that there are two distinct torts, namely, inducing breach of contract and interfering with trade or business by unlawful means. Pointing out that these two different torts have a different history and that the latter was older, they contented themselves with giving only the earliest authority for this kind of alleged tort, a case occurring in 1620. The House 239  of Lords, however, remained unimpressed and did not refer to this case, and ultimately held that the claim of wrongful interference with trade or business was barred by the Trade Union and Labour Relation Act and that (only) the claim of inducing breach of contract was sustainable at common law.  240  This assessment seems to be shared by the Ontario  High Court of Justice which was not convinced by the plaintiffs argument that "there is 241  a right of action acknowledged by section 7(e) and probably at common law, where  [1969] 2 Ch.D. 106, at 139. Salmond, supra note 202, at 402 ff; Hughes, supra note 209, at 197. Smith, supra note 209, at 326, by not wanting to review the controversy implicitly assumes the existence of this tort. [1983] 2 A.C. 571, at 595. 236  2 3 7  238  Garret v. Taylor (1620), 2 Cro.Jac. 567, cited in Merkur Island Shipping Corporation v. Laughton, supra note 238, at 596. Ibid, at 586. Eldon Industries Inc. v. Reliable Toy Co. Ltd. and National Sales Incentives Ltd., 239  240  241  supra note 163, at 258.  66  anyone does a dishonest thing with respect to a commercial transaction with another". Also, the Ontario Court held that "an act of dishonesty within the meaning of section 7(e) (...) which does not constitute a tortious act, is not actionable and ultimately denied the existence of the right of action for dishonesty "unless it was dishonesty arising out of a breach offiduciaryrelationship or breach of contract or some other relationship giving a right of action". It is also worth mentioning that in the MacDonald case the Supreme 242  Court of Canada which paid so much attention to the relationship between the common law torts and section 7 did not mention the existence of a tort of causing damages by unlawful means or, in commercial matters, a tort of unfair or dishonest competition, that could have been expressed in statutory form in paragraph 7(e).  243  The question, however, whether or not the common law has a general doctrine of unfair competition or trade and whether or not this principle has found its statutory version in paragraph 7(e) does not need to be answered here. This is because an affirmative answer would, if anything, not say much about the scope of this principle and the function of paragraph 7(e). To determine what conduct is regulated by this provision one has to look  See also Carty supra note 233, at 193: "The common law has no general doctrine of unfair competition or trade" and Report, supra note 212, at 55: "Anglo-Canadian law has not adopted prima facie tort theory, which holds that any harm which one person inflicts on another person is actionable in the absence of lawful justification." The Report's view also has been adopted by Coleman, supra note 213, at 47. The Supreme Court, however, stated very broadly and unconvincingly that paragraph 7(e) "as a class of prescriptions, additional to those in the preceding catalogues" appeared "to be simply a formulation of the tort of conversion, perhaps writ large and in a business context." On the other hand, the Report, supra note 212, at 57, saw in paragraph 7(e) an attempt "to introduce a cause of action for unfair competition" in form of a "statutory tort". 1 4 1  243  67 at the cases that dealt with "dishonest practices" until paragraph 7(e) was held to be unconstitutional in 1976.  bb) The cases Looking at the interpretation and specification of the term "honest practices" by the Canadian Courts, two basic statements can be made as the starting point for the determination of the ambit of paragraph 7(e): Firstly, paragraph 7(e) must be read eiusdem generis with paragraphs 7(a), (b), (c), and (d) ; and secondly, it does not intend to grant 244  monopoly rights for which statutory protection in special acts, such as the Copyright Act or the Industrial Design and Union Label Act, cannot be obtained.  245  The eiusdem generis point of view, however, can be interpreted in two slightly different manners: When paragraph 7(e) must not be "removed from the contextual influence of the foregoing clauses of the section" , then it follows from the words "other acts" in this 246  paragraph that it only encompasses acts that do not fall within one of the preceding paragraphs. On the other hand, it could be argued that these words indicate that 247  Eldon Industries Inc. v. Reliable Toy Co. Ltd. (1965), 48 C.P.R. 109, at 117 (Ont.C.A.); Clairol International Corp. and Clairol Inc. of Canada v. Thomas Supply &  244  Equipment Co. Ltd. (1968), 55 C.P.R. 176, at 186 (Exch.Ct.). See also Vapor Canada Ltd. v. MacDonald (1972), 8 C.P.R. (2d) 15, at 22, where the Federal Court of Appeal looks at section 7fromthe point of view of the eiusdem generis rule. Eldon Industries Inc. v. Reliable Toy Co. Ltd., supra note 244, ibid. Eldon Industries Inc. v. Reliable Toy Co. Ltd., supra note 244, ibid. As stated in Clairol International Corp. and Clairol Inc. of Canada v. Thomas Supply & Equipment Co. Ltd., supra note 244, at 186/87, 54601 Ontario Ltd. v. Hollander  245  246  2 4 7  (1989), 24 C.P.R. (3d) 408, at 409 (F.C.T.D.).  68 paragraph 7(e) expresses a general principle of which paragraphs 7(a)-(d) are only examples. This seems to be indicated in A.C. Spark Plug Co. v. Can. Spark Plug Service *, where the Exchequer Court of Canada pointed out that "[i]nasmuch as (...) 24  there has been (...) no passing-off, I cannot see how it can be said that the business carried on (...) is contrary to honest industrial and commercial usage." This proposition, 249  however, would not lead to a different result. Even if paragraph (e) were the general rule and even if every action that falls under the preceding paragraphs would thus also fall within paragraph (e), the lex specialis derogat legis generalis rule would make paragraph (e) not applicable where an action is already covered by one of the foregoing paragraphs.  Given that paragraph 7(e) does not encompass acts that fall under paragraphs 7(a) - (d) and that it does not grant protection for intellectual property that cannot be obtained in special Acts dealing with monopoly rights, what kind of conduct was left for its application? Until 1976, paragraph 7(e) had been applied in three cases involving a breach  [1935] 3 D.L.R. 84. This point of view is also indicated in Therapeutic Research Corp. Ltd. v. Life Aid Products Ltd. (1968), 56 C.P.R. 149, at 152 (Exch.Ct), and mDupont of Canada Ltd. v. Nomad Trading Co. Ltd. (1968), 55 C.P.R. 97 (Que.S.C). In the former case it was stated that "although such a course of action may not fall under the prohibition contained in paragraphs (a), (b), (c), or (d) of section 7 of the Trade-marks Act it is, (...), covered by paragraph (e) thereof (...)" In the latter the Quebec Superior Court held that an act that falls under paragraph 7(d) because it creates "confusion of goods by falsely presenting in character, quality, production and performance of goods" is "dishonest and ... a direct transgression of the right of the petitioners and to good business practice." The Quebec Court, however, did not distinguish between paragraph 7(d) and 7(e) but more generally held that the act in question violates "section 7". 248  2 4 9  69 of confidence and a taking of a trade secret : In Breeze Corporation v. Hamilton Clamp 250  & Stampings Ltd.  251  the Ontario High Court held that the use of "confidential and  technical information for purposes other than that for which it was disclosed, constituted an act contrary to honest industrial or commercial usage in Canada." This point of view was shared by the Federal Court of Appeal in Vapor Canada Ltd. v. MacDonald. * In this 2  2  case it was held that it is contrary to paragraph 7(e) if the defendant makes use of knowledge that he had acquired as an employee of the plaintiff. The Federal Court, Trial Division eventually extended the scope of application of paragraph 7(e) to cases where the information was not obtained by an employee but an independent contractor doing confidential work.  253  publicity  contained a number of untrue and deceptive statements and  leaflet  In addition paragraph 7(e) was considered to be applicable where a  representations about the origin of a medical device.  254  In some other cases paragraph 7(e) and its predecessor, paragraph 11(c) of the Unfair Competition Act, had been considered but not applied: In Lebel v. Ontario Beauty Supply Co. Ltd  255  the Quebec Superior Court held that paragraph 11(c) was not applicable where  an ambiguous advertising bulletin with respect to a competitor's business was merely the result of a carelessly drafted phrase. In 1968 the Exchequer Court of Canada found  See Morrissey, "Subsection 7(e) of The Canadian Trade-Marks Act" (1991), 8 C.I.P.R. 12, at 15. (1961), 37 C.P.R. 153, at 165. (1972), 8 C.P.R. (2d) 15, at 21. Consolidated Textiles Ltd. v. Central Dynamics Ltd. (1974), 18 C.P.R. (2d) 1, at 7. Therapeutic Research Corp. v. Life Aid Products, supra note 249, ibid. (1950), 16 C.P.R. 105 (Que.S.C).  2 5 0  2 5 1  2 5 2  253  254  255  70 paragraph 7(e) not applicable in a case where the defendant used for hair tinting and colouring products, colour comparison charts on the packages that were likely to depreciate the value of the goodwill associated with a competitor's trade-mark.  256  In Eldon Industries Inc. v. Reliable Toy Co. Ltd} the applicability of paragraph 7(e) was 51  eventually denied on the grounds that the trade practice in question (the production of a toy that was identical in design with a competitor's product) itself was not actionable because it did not infringe a copyright or constitute a breach of contract. Finally, in Warner Bros. - Seven Arts Inc. v. CESM - TV Ltd.  258  the question was raised  whether the video taping of television programs constitutes not only a copyright infringement but also a dishonest act as described in paragraph 7(e). The Exchequer Court of Canada, however, thought it to be sufficient to hold that the copyright was infringed and left this question open.  b) The effect of paragraph 7(e) after MacDonaldy. Vapour Canada Ltd. The courts' obvious uncertainty about the scope of paragraph 7(e) found its temporary end with the Supreme Court's decision in MacDonald v. Vapour Canada Ltd.  259  This  decision, the factual plot of which was the "unlawful disclosure, in breach of confidence, of trade secrets and unlawful business use of such trade secret" , is significant especially 260  Clairol International v. Thomas Supply & Equipment, supra note 244, at 177.  (1965), 48 C.P.R. 109 (Ont.C.A.). (1971), 65 C.P.R. 215 (Exch.Ct). Supra note 38. For a summary of the constitutional situation and a comment on the effect of this case see the excellent article by Bell\Probert, "The Constitutionality of Canadian Trade Mark Law" (1985), 4 C.P.R. (3d) 305.  2 5 7  2 5 8 259  260  Supra note 3%, at 7.  71 with respect to its interpretation of the division of powers under sections 91 and 92 of the British North America Act, 1867.  261  However, it will not be necessary to consider the  constitutional aspects in detail. For the purpose of determining the present effect of paragraph 7(e) it will be sufficient to briefly summarize the Supreme Court's relevant findings:  - paragraph 7(a) is the equivalent of the tort of slander.  262  - paragraph 7(b) is a statutory statement of the common law action of passing off  263  - paragraph 7(c) is a remedy that already exists in the ordinary law of contract.  264  - paragraph 7(d) gives a right of action that would be expected to arise through breach of contract. It can also envisaged as a statutory tort of deceit.  265  - the wording of paragraph 7(e) supports the suggestion that paragraph 7(e) "encompass breach of confidence by way of appropriating confidential knowledge or trade secrets to a business use adverse to the employer." It would also "appear to be broad enough to cover the fruits of industrial espionage."  266  2 6 1  In 1982 The British North America Act was renamed Constitution Act, 1867;  Constitution Act, 1982, subection 53(2). 262Supra note 38, at 14. 263  264  Ibid. Ibid.  265 266  At 15.  Ibid.  72 - paragraph 7(e) "as a class of prescriptions, additional to those in the preceding catalogues" appears "to be simply a formulation of the tort of conversion, perhaps writ large and in a business context."  267  - paragraph 7(e) "does not have any connection with the enforcement of trade-marks or trade names or patent rights or copyright as may be said to exist in paragraphs 7(a), (b) and (d)."  268  The Supreme Court held that paragraph 7(e), regardless of whether it "be taken alone or as part of a limited scheme reflected by section 7 as a whole", could not be supported as federal legislation under section 91 of the British North America Act, 1867. This 269  judgment appeared to have set an end to the controversial question about the ambit of paragraph 7(e). The only more or less unanimously accepted conduct to which paragraph 7(e) was held to be applicable - breach of confidence and disclosure of trade secrets - was eventually denied to be validly encompassed by this provision. From an uncertain living in the shadows paragraph 7(e) ultimately seemed to have dissolved in the meaninglessness 270  of its unconstitutionality.  At 16. At 22. Apart from the question whether or not Federal Parliament has the legislative authority to pass acts in implementation of an international obligation (see supra fh. 163), the core issue was whether paragraph 7(e) falls under the "trade and commerce" power in section 92(2) of the British North America Act, 1867. See as to the scope of this section Hogg, 2 6 7  2 6 8  2 6 9  Constitutional Law in Canada (1985), at 440 ff.  Another description can be found in the Report, supra note 212, at 57: "This statutory tort lay dormant for many years and was not relied upon in practice." 270  73 However, in several cases decided by the Federal Court, Trial Division paragraph 7(e) experienced its revival.  In Balinte v. DeCloet Bros. Ltd.  the Federal Court pointed  out that the MacDonald case "did not declare s. 7(e), ultra vires, absolutely, but that "[i]t was ultra vires on the facts of that case which did not bring into issue any question of patent, copyright or trade mark infringement or any tortious dealing with such matters or with trade names." The Trial Division's decision was upheld by the Federal Court of Appeal which considered this view to be a "fairly arguable position". In Flexi-Coil Ltd. 273  v. Smith-Roles Ltd} * the Federal Court held that the "plaintiff ought not summarily be 1  precludedfromarguing that para. 7(e) is intra vires as rounding out the scheme of the Patent Act (...)" This view was repeated inMcCabe v. Yamamoto & Co. (America) Inc.  215  where it was again suggested that the Supreme Court's finding "possibly leave(s) open the argument that s. 7(e) may nevertheless be valid in respect of subject-matters which may not be dealt under the other subsections of s. 7, so long as its application is in relation to patents, trade marks or copyrights."  276  But also see the list of cases provided by Morrissey, supra note 250, at 18-19 as authorities for the proposition that paragraph 7(e) is completely unconstitutional. (1978), 40 C.P.R. (2d) 157.  2 7 2 273  Decloet Bros. Ltd. v. Balinte (1980), 56 C.P.R. (2d) 102. In Molnlycke AB v.  Kimberley-Clark of Canada Ltd. (1991), 36 C.P.R. (3d) 493, at 497, the Federal Court of Appeal expressed its uncertainty about the effect of the Supreme Court's decision by still looking at paragraph 7(e) "to the extent that [it] has any force in the wake of [this] decision (...)" In a more recent decision, however, the Federal Court of Appeal took the opposite view. In Bousquet v. Barmish Inc. (1993), 46 C.P.R. (3d) 510 it held that paragraph 7(e) "is not constitutionally valid as to any residual subject-matter." (1981), 59 C.P.R. (2d) 46, at 47. (1989), 23 C.P.R. (3d) 498. See also the references given in fh. 184-185 with respect to the constitutionality of paragraphs 7(b) and (c). 2 7 4 275  2 7 6  74 What exactly is meant by these statements, however, and what kind of conduct can still be considered to be falling under paragraph 7(e) remains unanswered. In the McCabe case 277  the Federal Court described the act that might be encompassed by paragraph 7(e) as being "of a dishonest nature tending to cause some sort of harm or prejudice to a person who might otherwise appear to be, at least as against the opponents, properly vested with the rights to that piece of intellectual property."  278  It may well be that the Supreme Court's decision leaves only room for this specific approach. But this, of course, does not necessarily mean that this approach is correct. It is certainly not in line with the decision of the Ontario Court of Appeal in the Eldon Industries  219  case where paragraph 7(e) was denied to grant monopoly rights for which  statutory protection in special acts such as the Copyright Act or Industrial Design and Union Label Act cannot be obtained. The Ontario Court's view is also supported by the Federal Court's judgement in Weider v. Beco Industries Ltd  280  where with respect to  paragraph 7(b) it was stated that the Patent Act "provides the plaintiffs with causes of action and remedies for the enforcement and protection of the rights granted them under it" and that "[i]t is entirely unnecessary to the scheme of the Patent Act for them to go outside it, to s. 7(b) of the Trade Marks Act (...)" Furthermore, with reference to the suggestion that paragraph 7(e) be "applicable to a predatory practice or misuse" of  As to the uncertain effect ofthe MacDonald decision see also BellVProbert, supra note 259, at 323 ff.; Morrissey, supra note 250, at 17 ff. Supra note275, at 508. Supra note 257'. (1976), 29 C.P.R. (2d) 175, at 177. 278 279  280  75 intellectual property that is not otherwise covered by paragraphs 7(a) - (d), the editorial note to the MacDonald case in the Canadian Patent Reporter points out that "as applied to patents one would more likely have found Parliament dealing with the subject-matter in the Patent Act (...) rather than the Trade Marks Act."  291  At least two further authorities can be referred to in order to question the limited validity of paragraph 7(e) with respect to intellectual property rights. Without a reference to the Supreme Court's decision in the MacDonald case the Federal Court, Trial Division in Mattel Canada Inc. v. GTS Acquisition and Nintendo of America Inc.  282  stated that  paragraph 7(e) in regulating the whole "minefield" of unfair competition "surely" intends to ensure "that some kind of (video) games should not be played in the market-place." The Court then suggested "that underlying the whole concept of the Trade-marks Act is the fundamental principle that the statute should never afford aid or protection to anyone's unlawful activities." Without the need to further examine this assessment, it certainly indicates that it is not paragraph 7(e) which actually determines what conduct with respect to intellectual property is unlawful but that this is to be accomplished by the relevant acts themselves dealing with this subject-matter. This view is supported by the decision of the Federal Court of Appeal in Molnlycke AB v. Kimberley-Clark of Canada Ltd.  283  The  Court of Appeal with regard to paragraph 7(e) emphazised that "Parliament has in the Patent Act (...) defined a 'due' impairment of competition, such that it defines a monopoly  22 C.P.R. (2d) 6. (1989), 27 C.P.R. (3d) 358, at 365. Supra note 273.  76 that in its existence is not contrary to public policy" and that "[u]ndue impairment of competition cannot be inferred from the evidence of the exercise of rights under the Patent Act alone."  3) S u m m a r y a n d analysis  The given overview of the interpretation and specification of the terms "public morals" and "honest practices" by German and Canadian Courts shows a rather significant difference in the importance of both terms for German and Canadian unfair competition law. While the German term more or less constitutes unfair competition law alone, the Canadian term has in thefieldof intellectual property, if at all, a very controversial and dubious residual meaning which nobody seems to be able to define. Three reasons can be given for this.  a) First reason: The different concepts with respect to the division of powers The first and most important reason is the difference in both Constitutions as to the division of powers. Both Canada and Germany are federal states consisting of provinces or states (Lander) with legislative power to regulate certain subject-matters on their own. The Grundgesetz (Basic Law - German Constitution) in Article 74(1) No. 1, however, grants the Federal Parliament (Bundestag) the concurrent legislative authority with respect to civil and commercial law including unfair competition law. In contrast, the Canadian 284  The enumerated subject-matters that fall under concurrent legislative authority can be regulated by the states (only) unless Federal Parliament has made laws to regulate them. If Federal Parliament enacts a law with regard to such a subject-matter a previous state law  77 Constitution Act, 1867, in subsection 92(13) confers legislative authority to regulate property and civil rights on the provinces. As a "federal provision", paragraph 7(e) could thus only be interpreted a being connected to trade and commerce, the regulation of which is conferred on the federal Parliament by subsection 91(2). In its landmark decision in Citizens Insurance Co. of Canada v. Parsons **, however, the Judicial Committee of the 2  Privy Council (J.C.P.C.) had established four important propositions with respect to the federal legislative power to regulate trade and commerce, namely that (1) this power does not correspond to the literal meaning of the words "regulation of trade and commerce"; (2) it essentially but not only includes arrangements with regard to international and interprovincial trade; (3) it may include general regulation of trade affecting the whole dominion; and (4) it does not extend to regulating the contracts of a particular business or trade. These criteria were specified in the MacDonald case where the Supreme Court of 286  Canada held that in order for federal legislation to fall under the trade and commerce power, it must be: (1) part of a general scheme that is monitored by the continuing oversight of a regulatory agency and (2) concerned with trade as a whole rather than with a particular industry. It followsfromthis that while the German term could be defined 287  regulating the same matter becomes void (Art. 31: "Federal law breaks state law"). However, Federal Parliament has only legislative power under Art. 74 (concurrent legislation) as long as a federal regulation is necessary to create equally good living conditions within the whole nation or to preserve the legal or economical unity in the interest of the nation (Art. 72). (1881), 7 A.C. 96. Although the definition of the J.C.P.C. has been modified by the Supreme Court, Citizens'Insurance v. Parson still stands for the proposition that section 91(2) confers to federal parliament only the power to regulate trade in general. See, e.g., General Motors 285  2 8 6  ofCanadaLtd. v. City National Leasing (1989), 58 D.L.R. (4th) 255 (S.C.C.). 287  Supra note 38, at 27/28.  78 within the whole scope of civil law, the Canadian termfromthe very hour of its birth was limited to the subject-matter "trade and commerce" as prescribed in subsection 91(2) and interpreted by the J.C.P.C. and now the Supreme Court of Canada. The result of this has been shown: § 1 UWG with its term "public moral" could slightly change its thrust away from a means of merely protecting the competitors in the market-place to an instrument to also ensure fair trade practices on behalf of the consumers without leaving thefieldof federal legislative powers. This is the reason why, for example, the categories "undue pressure", "pestering" and "temptation" could arise as examples of unfair trade practices. On the other hand, "dishonest practices" to be covered by paragraph 7(e) had to occur in relation to a "general scheme" that is concerned with trade as a whole in order to be falling under subsection 91(2) of the Constitution Act, 1867. That is why the Federal Courts' attempt to suggest a limited validity of paragraph 7(e) in connection with intellectual property rights is not in the least surprising. Nor is it astonishing that, according to the described constitutional situation, trade practices such as "undue pressure" on or "inducement" of consumers (both of which are considered to contravene the German term "public morals") are dealt with in provincial Trade Practices and Consumer Protection Acts ** and are not considered to fall under paragraph 7(e) and thus 2  under federal legislative authority.  288  See again paragraph 4(2)(a) of the Trade Practice Act of B.C., R.S.B.C. ch. 406;  paragraph 6(1 )(e) of the Act Respecting Unfair and Unconscionable Trade Practices of  Newfoundland, RS.Nfdl. ch. T-7; subparagraph 2(2)(viii) of the Business Practices A ct of Ontario, R.S.O. ch. B.18; and subsection 60(2) of the Consumer Protection Act of Manitoba, R.S.M. 1987, ch. C200.  79 b) Second reason: The different origin of unfair competition law Until the Supreme Court's decision, however, the constitutionality of paragraph 7(e) was not an issue. Nevertheless this provision and its term "dishonest practices" - to use the Report's words again - "lay dormant for many years and was not relied upon in practice." This reluctance of the courts to freely make use of paragraph 7(e) in order to 289  combat every trade practice they regard to be unfair has a reason in the fact that unfair competition law in its English tradition from its very beginning was closely linked with the protection of trade-marks. Although, as Shaw puts it, "the law of Unfair Competition is 290  designed primarily to safeguard the purchasing public from deceptive and fraudulent trade practices" , those trade practices had to occur in connection with trade-marks and their 291  "dishonest' usage. Trade-marks, however, - as has been pointed out - are displayed on the goods or their labels for the purpose of distinguishing the wares from those manufactured by others.  292  It follows that a trade-mark represents a right of property in terms of  goodwill or reputation of a business. Consequently, "unfair competition par excellence" , or as it was also called, the "main instance of unfair competition at 293  common law" , the tort of passing-off, requires the proof that the goods or services for 294  which protection is sought have acquired a sufficient reputation, or when it comes to the  289 290 291 2 9 2  293 294  Supra note 212. See references given supra note 52. Supra note 39. See the definition of "trade-marks" in section 2 of the Trade-marks Act. Supra note 180. Supra note 181.  80 shape of a product a "secondary meaning" that distinguishes it from products manufactured by competitors.  As closely connected to the protection of trade-marks and thus proprietary rights, Canadian unfair competition was never and still is not concerned with practices that have nothing or little to do with direct interference with a competitor's business. Thus, despite the Supreme Court's assessment that the "common law principles relating to commerce and trade are also for the benefit to the communityfromfreeand fair competition" , 295  business practices like "undue pressure" or "molestation" the prohibition of which are means of protecting the consumer in the first place and of competitors only in the second place have - because of their lack of connection to business proprietary rights - never been considered "unfair" or "dishonest" as described in paragraph 7(e).  On the other hand, as already pointed out, the German term "public moral" was never concerned with the use of trade-marks. On the contrary, unfair competition lawfromits very beginning was considered to be distinctive from intellectual property protection which was and still is to be obtained from acts other than the Act Against Unfair Competition. Thus, although this Act originally was understood to be an instrument to protect the trader against dishonest competitors, the term "public morals" remained open to further interpretation that goes beyond the protection of a businesses reputation and focuses on the consumers' interests in the first place. Moreover, this way to broaden the  See fn 230.  81  scope of application of § 1 UWG was still within in the ambit of the Act's intended application because the prohibition of trade practices that lead to undue pressure on or pestering of customers or to his or her enticement, is still a means of protecting the trader against unfair methods that enable their users to get ahead of them.  c) Third reason: The coexistence of unwritten and written law in Canada's common law jurisdiction? The judiciary's reluctance to make use of a statutory provision that according to its wording enables the courts to interdict every trade practice they consider to be contravening the idea of competition could have another reason in the coexistence of unwritten and written law in Canada. Whereas paragraphs 7(a) - (d) can be applied in a way that follows precedents in corresponding common law tort or contract cases, there was no common law principle to fill in the blanket clause in paragraph 7(e). Thus, every interpretation and specification of the term "dishonest practices" by the courts would essentially have gone beyond "established" common law doctrines by providing remedies that could not be obtained at common law. Apparently this would have contravened the idea that section 7 is basically a codification of common law principles. In result, it can possibly be argued that the coexistence of common law principles and a provision that in its first four paragraphs basically repeats those principles made the judiciary hesitate to interpret and define the fifth paragraph in a way that is, simply stated, "uncommon". This hesitation by the judiciary is apparently not a new phenomenon as Hutchinson points out that "[o]ne of the most important weapons at the disposal of the judges in interpreting statutes is the presumption that statutory enactments are not considered to change the  82 common law unless there is a clear contrary intent". This assessment is supported by 296  Frank, who observes 'that when legislatures changed the rules, our courts, until quite recently, resented it, treated statutes as intrusions and therefore to be so interpreted as to do the least possible to alter the judge-made law".  297  To determine whether this is true it is necessary to briefly look again at the more important paragraph 7(b). It has already been pointed out that this provision is generally considered to be the statutory versions of the common law action in passing-off. Nevertheless, the common law doctrine of passing-off and the statutory remedy provided in paragraph 7(b) are not identical. While an action in passing-off at common law 298  requires the plaintiff and defendant to be competitors, paragraph 7(b) does not protect  296  Supra note 19.  Supra note 11, at 292. See also Pound, supra note 11, at 383 who made in 1908 the following observation: " The courts, likewise, incline to ignore important legislation, not merely deciding it to be declaratory without adducing any reasons, citing prior judicial decisions and making no mention of the statute. Finn, 'Statutes and the Common Law" (1992), 22 W.Austr.L.Rev. 1, at 9-10 provides for two examples of how the interpretation of statutes 'Was also informed and directed by the common law itself with sometimes curious or unfortunate results", one of which he describes the 'emasculation" of 'hiuch of the very purpose of this beneficial legislation." On the other hand, it has been noticed by Gunasekara, 'Judicial Reasoning By Analogy with Statutes: A Heresy or a New Avenue For the Development of the Common Law?", [1993] N.Z.L.J. 446, that '[t]he concepts of judges using legislative precedents (as opposed to judicial ones) in developing the common law may be gaining acceptance in the common law world, albeit slowly", and 'that the evolution of judge-made law may be influenced by the ideas of the legislature as reflected in contemporary statutes." An interesting analysis of the relationship between common law and statutes is provided by Calabresi, A Common Law For the Age of 297  Statutes (1982), at 101 ff. The Noshery Ltd. v. The Penthouse Motor Inn Ltd. (1969), 61 C.P.R. 207, at 214 (Ont.H.C); Windmere Corp. v. Charlescraft Corp. Ltd (1988), 23 C.P.R. (3d) 60, at 66 (F.C.T.D.); Sharp Electronics of Canada Ltd. v. Continental Electronic Info. Inc. (1988),  298  23 C.P.R. (3d) 330, at 334 (B.C.S.C).  83 only the products of a competitor, but is also applicable where wares, services or business in general have been passed off. Moreover, every passing-off action at common law is 299  based on the goodwill of a business so that a trader can protect his rights only in the geographical area in which he has a sufficient reputation. Paragraph 7(b), on the other 300  hand, grants protection across Canada, even in areas where the trader enjoys no special reputation.  301  The courts' dealing with paragraph 7(b), however, made the Federal Court in Windmere Corp. v. Charlescrqft Corp. Ltd}  02  state that '{djespite these obvious differences, the  jurisprudence relevant to actions of passing-off at common law has been used quite liberally in s. 7(b) cases." The Federal Court does not give much evidence for its assessment about the judiciary's lack of awareness of the differences between the common law passing-off and its codified version. However, Asbjorn Horgard A/S v. Gibbs/Nortac Industries , which the court refers to, might be taken as an example of this 'liberal use". 303  In this case, the Federal Court of Appeal conducts its analysis of the applicability of paragraph 7(b) by describing the characteristic features of the passing-off action at common law.  Windmere Corp. v. Charlescrqft Corp. Ltd., supra note 298, ibid. Windmere Corp. v. Charlescrqft Corp. Ltd., supra note298, ibid.; World Wide Treasure Adventures Inc. v. T.G.I. Games Inc., supra note 192, at 214. Windmere Corp. v. Charlescrqft Corp. Ltd., supra, note298, ibid. Supra note 298, ibid.  300  301  302  303  Supra note 185, at 327 ff.  84 On the other hand, the reference to a well-established doctrine at common law, the statutory version of which the court deals with, is not surprising, especially when the differences between both of them are not relevant in the particular case. Moreover, as 304  pointed out by the British Columbia Supreme Court, given that paragraph 7(b) 'declare[s] in codified form the common law tort of passing-off (...), the common law test will still apply except as necessarily altered by the language used in the code."  303  However,  although the Federal Court's statement can hardly be taken as more than a mere allegation that the judiciary tends to mix up the common law tort and its statutory version, the courts' expressed understanding of paragraph 7(b) clearly shows a plain orientation towards the corresponding common law doctrine. Considering the common ground of both types of passing-off, this conclusion is - to stress it again - almost inevitable.  Paragraph 7(e), however, did not express in written form a principle that was already available at common law. Thus, while the courts were standing on firm ground when interpreting and applying paragraphs 7(a) - (d), the 'Unconstrained" interpretation and specification of 'honest practices" would have let the judiciary onto an unknown turf. Moreover, would the close connection between the law of torts and paragraph 7(a) - (c) not necessarily have evoked the impression on the courts' part that giving paragraph 7(e)  See e.g. Eldon Industries Inc. v. Reliable Toy Co. Ltd. and National Sales Incentives  Ltd., supra note 163, at 251 where the Ontario High Court of Justice refers to the plaintiffs suggestion that old section 11 was not a codification of the common law: 'I do not think it makes a great deal of difference whether it is or it is not, as far as this case is concerned; (...)" 305  West/air Foods Ltd. v. Jim Pattison Industries Ltd., supra note 193, at 38.  85 a broad scope of application would create a new kind of tort that is not (yet) known at common law? Since the courts were not quite clear about their suspicion towards paragraph 7(e) and the seemingly unlimited power granted by its general term, this assessment is hardly more than a question. However, there are some indications which seem to support this proposition.  There is, for example, the Supreme Court's conclusion that paragraph 7(e) 'appears ... to be simply a formulation of the tort of conversion" As a matter of fact, there is simply 306  not a single clue in the wording of paragraph 7(e) that could presumably lead to that conclusion and it is almost striking how the court tries to establish a link between paragraph 7(e) and a well-known common law principle without a sufficient basis in the text of the provision. Furthermore, there is the fact that the only business practice to which paragraph 7(e) was held to be applicable - breach of confidence and disclosure of trade secrets - is already dealt with in the law of equity. In the absence of a corresponding tort the falling back to equity law is, in fact, the only way to give paragraph 7(e) a limited meaning while still standing on the firm ground of common law. And there is finally the suggestion that to make paragraph 7(e) applicable the 'dishonest" act must itself be actionable. This understanding of paragraph 7(e) most clearly shows that paragraph 7(e) 307  should not go beyond what is already known, and thus adds nothing to common law. In 308  307  3 0 8  MacDonald v. Vapour Canada Ltd., supra note 38, at 16. Eldon Industries v. Reliable Toy Co. Ltd., supra note 163. But see, on the other hand, Vapor Canada Ltd. v. MacDonald, supra note 214, at 22  where the Federal Court of Appeal stated that's. 7 is not restricted to a prohibition of things that are otherwise illegal". This view was also taken by the Supreme Court of  86 other words, if there is no action for unfair trade practices at common law, paragraph 7(e) cannot help either. Thus the scope of application of paragraph 7(e) is fixed and limited by common law. The logical conclusion of this view is that paragraph 7(e) was merely to be used to give the Federal Courts jurisdiction in matters that - being governed by common law - originally fall under the jurisdiction of the provincial courts.  309  However, whether or not the judiciary's effort to interpret paragraph 7(e) 'in the light of common law" was a reason for the limited scope of application of this provision, the coexistence of common law and statutory law is not an issue in the German civil code jurisdiction. Although the term 'public morals" in § 1 UWG goes back to an identical formulation in § 826 of the Civil Code which provides for a tortious action and although 'public morals" in both provisions were defined according to the 'sense-decency'-phrase, § 1 UWG constitutes a lex specialis which means that it replaces in the field of its application the C/v/7 Code provisions concerning torts. This being so, there was and still is no need to interpret and § 1 UWG within the ambit of the Civil Code provisions, and thus to bring both "law" in line.  Canada in S.&S. Industries Inc. v. Rowell, supra note 163, at 202 where it was stated that to succeed in an action based on section 7 the plaintiff does not need to prove mala fides, as what he or she would have been required to do at common law. This seems to be suggested in the editorial note to Eldon Industries Inc. v. Reliable Toy Co. Ltd., supra note 244, at 111 with respect to the jurisdiction of the Exchequer Court. The Federal Courts have jurisdiction because of subsection 20(2) of the Federal Court Act, R.S.C. 1970, c.10 (2nd Supp.) according to which the Trial Division has concurrent jurisdiction in all cases 'in which a remedy is sought under the authority of any Act of Parliament (...)" 3 0 9  87  In result, although the starting point for both the German and the Canadian general term seemed to be identical, their significance and importance for the unfair competition law in both countries is as distinct as it possibly could be. Both terms started as the implementation of Germany's and Canada's obligation to prohibit acts of competition contrary to honest practices in industrial and commercial matters. Both terms were broad enough to enable the courts to independently adjust the law to a business world that changes its conduct in accordance with technological progress and social degeneration.  However, different concepts with respect to the division of powers, the different understanding of the relationship between unfair competition law and intellectual property law and the coexistence of written and unwritten law in Canada's common law jurisdiction made both terms go in different directions. Thus, the use of the general terms 'bublic morals" and 'honest practices" in German and Canadian unfair competition law may serve as an excellent example for how seemingly identical provisions can have totally different meanings in a civil code and a common law jurisdiction.  CHAPTER IV: General terms as a means of responding to new business methods  1) Advantages and disadvantages of general terms It has been pointed out in the first part of this thesis that one of the advantages of judgemade law - whether it is common law in general (as opposed to statutory law), or  88 'judiciary law" as a result of interpretation of statutes - is the fact that it is - as Cappelletti puts it - 'more flexible, more concrete and more adaptable to unforeseeable individual situations than legislation." It was a concern of the foregoing chapters to prove this 310  proposition by showing how the scope of protection of one provision containing a blanket-clause could be continuously enlarged by the judiciary because the courts were not obliged to wait for explicit authorization by the legislator. Cappelletti, identifies four further advantages of law-making by judges : (1) judges are 'less vulnerable both to 311  demagogic and to local or pressure group values and priorities" ; (2) the courts 'ban add 312  to the overall representativeness of the system by protecting groups that cannot gain access to the political process" ; (3) the 'courts are in continuous contact with the actual 313  and most concrete problems of society" that occur to them in form of actual cases instead of theoretical questions ; and (4) courts tend to generalize 'bnly after a long course of 314  trial and error in the effort to work out a practical principle". Interesting enough, at 315  least the first mentioned aspect concerning the vulnerability to demagogic pressure could also be considered as support against judge-made law. In November 1933, for example,  Supra note 11, at 47.  See the summary provided by McHugh, supra note 11, at 117. Supra note 11, at 49. This is also empasized by Mosk, 'The Common Law and the Judicial Decision-Making Process", (1988), 11 Harv.J.L.& Publ.Pol. 35, at 40-41: 'There is a substantial portion of society that expects courts to be responsive to public opinion. The executive branch of government and the legislative branch of government must harken to the will of the majority, why not the third branch of government, the judiciary? (...) But do we really want a judge to decide the innocence or guilt of an individual, or whether the constitutionally guaranteedrightsof an unpopular religious, political or racial group are to be curtailed, on the basis of public opinion? I would suggest that the courts must be prepared to protect therightsof an individual against public opinion." Supra note 11, at 54. %?ranote 11, at 56. 3 1 1 312  313  3 1 4  89 the Higher Regional Court of Appeal in Cologne (Oberlandesgericht Kolri) had the courage to hold that the reference to the 'race" of a competitor contravened 'public morals" as described in § 1 UWG and constituted an unfair trade practice. In January 316  1935, however, the Reichsgericht expressed the opinion that the reference to the 'bolitical views" of a competitor could be justified if it allowed some conclusions as to the 'trustworthiness in business matters". This most plainly shows how a statutory blanket317  clause can be filled by the courts just as they see it fit in the political landscape.  318  Furthermore, also Cappelletti's second positive assessment of the courts' role in protecting groups that cannot gain access to the political process can be seen as a disadvantage. The fact that it is a panel of three to five judges, or often only one judge, who defines 'morals" or 'honesty" involves the danger that the ethical views of a handful of people become decisive in a society which may not share this view  319  - a danger that  does arise when law is made by a legislative body that is supposed to represent the majority in a society and thus the ruling or - as one might also say - 'bommon" understanding of 'morality". This aspect has made Baumbach make his well-known ironical statement that only those trade practices violate 'public morals" that contravene the sense of decency of senior judges who actually never ever got to know practical  315  Supra note 11, at 51.  316  GRUR 1934, 202.  GRUR 1935, 445, at 447. Both cases are mentioned by Nordmann, supra note 32, at 628. See Nordmann, supra note 32, ibid. See von Godin, supra note 80, at 128/129, and Vogt, supra note 77, at 730, who state that the courts' interpretation of 'public morals" should not be based of the sense of decency of the average people because - according to both of them - the average lacks "class" or "style" (Niveau). 317  318  3 1 9  90 business life. Finally, according to its task being subject to continuous changes, judge320  made law is certainly more unpredictable than statutory law 'Where there must be the presumption that Parliament has said all it wanted to say on a particular topic."  321  However, when it comes to the question as to whether or not the legislator ought to use a blanket-clause instead of regulating a subject-matter in detail, the need to weigh the advantages and disadvantages of general terms is not the only issue that has to be considered. Neither the legislator's decision to refrain from a detailed regulation nor the courts' freedom to replace the legislator are unrestricted. A provision in a Criminal Code, for example, that would provide that 'Unsociable conduct shall be punished" is as much unthinkable as the judiciary's interpretation of a general term that would deprive the individual of his or her fundamental right to dignity or physical integrity. The crucial questions therefore are what are the limits to the legislator's use of blanket-clauses and what restrictions do the courts face when they interpret a blanket-clause.  2) The influence of constitutional law a) The constitutional doctrine of vagueness The limits to the legislator's decision to refrain from a detailed enactment by using a general term that is open to a varied interpretation are set by the constitutional principle of vagueness. In Germany this so-called Bestimmtheitsgrundsatz (principle of clarity and  See e.g. Sack, Das Anstandsgefuhl alter billig und gerecht Denkenden und die Moral als Bestimmungsfaktoren der guten Sitten, NJW 1985, 761, at 764. 321 See again Richardson, supra note 11.  91 definiteness) is a constituent element of the so-called Rechtsstaat (rule of law ) idea that 322  is expressed and embodied in Art. 20 (3) GG.  323  This principle basically requires the  legislator to draft its statutes so precisely as to enable those who are addressed and affected by them to understand what standards of conduct are set and thus expected from them. If a statutory provision does not meet this requirement it violates the Bestimmtheitsgrundsatz, thus the Rechtsstaat principle, and thus the constitution. As a result it has to be considered invalid and must not be applied by the courts. This, however, does not mean that the German legislator is not at all allowed to use general terms in its statutes. The Bundesverfassungsgericht (BVerjG - Federal Constitutional Court) has pointed out that the Bestimmtheitsgrundsatz does not prohibit the use of general terms as long as those who are subjected to the regulation can - without depending on special knowledge - ascertain its content with a sufficient degree of certainty. Moreover, 324  imprecise terms do not give cause for concern if their content, purpose and scope of application have been clarified by the judiciary over many decades so that their meaning is sufficiently defined.  325  This translation is suggested by Blaau, 'The Rechtsstaat Idea Compared with the Rule of Law as a Paradigm for Protecting Rights" (1990), 107 S.Afr.L.J. 76; and by Clark, 'The Selection and Accountability of Judges in West Germany: Implementation of a Rechtsstaat" (1988), 61 S.Cal.L.Rev. 1797, at 1832 ('state based on the rule of law'). However, it should be borne in mind that, as Blaau points out, these concepts are not identical. See the summary and description of the Rechtsstaat idea given by Blaau, supra note 322, at 80-82. The Bestimmtheitsgrundsatz would fall under heads (d) and (g) of the enumerated essential components that he describes as being associated with the formal concept of the Rechtsstaat. See the references provided by Schmidt-Bleibtreu/Klein, Kommentar zum Grundgesetz, 8th edition (1995), Art. 20 annot. 25. 3 2 2  323  3 2 4  325  See e.g. BVerfGE 54, 143.  92 In Canada the question of vagueness was initially addressed only as to regulations and bylaws and thus to provisions which were enacted by an administrative body in the exercise of a legislative power that had been delegated to it by the legislator. One of the principles that are considered to rule the sub-delegation of power is described as directing that '[w]hen it establishes general standards of behaviour, the regulation-making authority must set them out with some degree of precision and detail so as to allow persons affected to know the exact terms of their rights and obligations." If this requirement is not met, 326  which depends on whether a 'reasonably intelligent" person, 'sufficiently well-informed" if the provision in question is technical, 'is unable to determine the meaning of [it]" and act accordingly, the provision can be annulled by reason of vagueness.  327  The enactment of the Canadian Charter of Rights and Freedoms *, however, brought a 32  new constitutional dimension to the doctrine of vagueness. Prior to the Charter, the doctrine of vagueness could be seen as based on the 'rule of law" principle. According 329  Dussault\Borgeat, Administrative Law, A Treatise, 2nd ed., vol. 1 (1985), at 422. 327  3 2 8  City ojMontreal v. Arcade Amusements Inc., [1985] 1 S.C.R. 368, at 400. The Charter of Rights and Freedoms comprises ss. 1-34 of the Constitution Act, 1982  [enacted by the Canada Act, 1982 (U.K.) c. 11, Sched. B]. See e.g. Trotter; 'LeBeau: Toward a Canadian Vagueness Doctrine" (1988), 62 C.R. (3d) 183, at 188 ('principle of legality'); Nitikman, 'Is GAAR Void for Vagueness?" 3 2 9  (1989), 37 Can. Tax J. 1409, at 1424-26; Committee for the Commonwealth of Canada v.  Canada, [1991] 1 S.C.R. 139, at 210. The rule of law principle is now explicitly protected by the preamble to the Charter which reads: 'Whereas Canada is founded upon principles that rcgognize the supremacy of God and the rule of law". However, although the Constitution Act, 1867 did not explicitly refer to this principle, the rule of law was considered to be implicitly guaranteed by the preamble to [it] in its reference to a constitution similar in Principle to that of the United Kingdom', see Vanguard Coatings and Chemicals Ltd. v. The Queen (1988), 88 DTC 6375, at 6377 (F.C.A.) and the references given there. According to the Supreme Court (Reference re Language Rights 1  93 to Trotter , Canadian courts 'have treated the doctrine as something foreign or alien, 330  purely a creation of American constitutional law." Therefore, is not surprising to notice that, even after the enactment of the Charter, the Ontario Court of Appeal in Regina v. Morgentaler, Smoling and Scott  331  stated that '[c]ounsel was unable to give the court any  authority for holding a statute void for uncertainty". Neither is it astonishing that the 332  Federal Court, Trial Division held that 'there is no power in the Court to hold that provision or any other enactment or statute void for uncertainty only, in the absence of a Charter issue." However, after the enactment of the Charter the courts took a closer 333  look at the 'Void for vagueness" doctrine. In 1983, the Ontario High Court of Justice as one of the first dealt with the problem of vagueness and held that any law that is 'Vague, undefined and totally discretionary" cannot be considered 'law" at all and thus cannot set limits to the rights and freedoms guaranteed by the Charter  334  Thus, identifying the  problem of vagueness as falling under the 'limits prescribed by law" - clause in section 1 of the Charter, the court hastened to add that a vague provision is not necessarily void but  under Section 23 of the Manitoba Act, 1870, and Section 133 of the Constitution Act,  1867 [1985] 1 S.C.R. 721, at 748/9) the rule of law principle 'must mean at least two things. First that the law is supreme over officials of of the government as well as private individuals, and thereby preclusive of the influence of arbitrary power" and second, 'the obligation to create and maintain an actual order of positive laws which preserves and embodies the more general principle of normative order." Supra note 329, at 188. (1985), 22 C.C.C. (3d) 353, at 388. 330  3 3 1  3 3 2  But see also R.V.P. Enterprises Ltd. v. A.-G. British Columbia (1988), 25 B.C.L.R.  (2d) 219, at 228, where the Court of Appeal points out that this statement cannot be taken as an indication that the Ontario Court of Appeal rejected the void of vagueness doctrine. 333  Vanguard Coatings and Chemicals Ltd. v. The Minister of National Revenue (1986),  86 DTC 6552, at 6565. 334  Re Ontario Film and Video Appreciation Society and Ontario Board of Censors  (1983), 41 O.R. (2d) 583, at 585.  94 'may be said to be 'bf no force or effect", but (...) may be rendered operable by the passage of regulation pursuant to the legislative authority, or by the enactment of statutory amendments, imposing reasonable limits and standards". In 1984 the Ontario Court of 335  Appeal saw the question of uncertainty connected with the 'fundamental justice' requirement in section 7 rather than with section 1 of the Charter and held that an offence (in this particular case the offence of contempt) is not 'bpen to attack as a violation of section 7 of the Charter on the grounds of uncertainty". An attempt to explain the 336  relationship between vagueness on the one hand, and sections 1 and 7 of the Charter on the other hand, was then undertaken by the British Columbia Supreme Court in 1984. In Regina v. Robson the court held that a provincial legislation providing that a peace 331  officer may require a motorist to surrender his or her driver's licence for a 24-hour period where the officer suspects the driver to have consumed alcohol may in view of its vagueness well be a deprivation of liberty that is not in accordance with the principle of fundamental justice. The 'real question", however, was seen to be arising under section 1 of the Charter, "i.e. whether such a law is a reasonable limit which can be demonstrably justified", because '[a] law cannot be at once contrary to the provisions of fundamental justice, and at the same time a reasonable limit on therightguaranteed within the meaning ofs. 1 of the Charter"  338  336  Regina v. Cohn (1984), 15 C C C . (3d) 151, at 164.  (1984), 11 D.L.R. (4th) 727. But see also Regina v. Robson (1985), 19 C C C (3d) 137, where the British Columbia Court of Appeal did not follow this view.  3 3 7  338  Ibid., at 145.  95 These three early decisions show three different approaches which can be taken to bring the question of vagueness into a Charter-context. Firstly, it is possible to consider law that is too vague as not being 'law" at all and thus being unable to limit rights and freedoms guaranteed by the Charter. Secondly it can be argued that vague law is not a reasonable law as required in section 1 of the Charter. Thirdly, uncertain law can be seen as violating the principle of fundamental justice. In the following years all these approaches were 339  accepted by various courts. The Federal Court of Appeal preferred the 'reasonable limit" approach, and stated that a 'limit which is vague, uncertain or subject to discretionary determination is, by the fact alone, an unreasonable limit". - a view that was shared by 340  the Nova Scotia Supreme Court  341  and the Ontario Court of Appeal.  342  The question  whether a provision that is too vague does constitute a 'limit prescribed by law" was asked by the Supreme Court of Canada three times , whereas the British Columbia Court 343  of Appeal took the view that a vague and imprecise language of a statute is able 'to render it a law contrary to the principles of fundamental justice" . This 'section 7" approach 344  For the different approaches see also Trotter, supra note 329; Nitikman, supra note 329; Stuart, 'The Canadian Void for Vagueness Doctrine Arrives with No Teeth" (1990), 77 CR. (3d) 101. Luscherv. Deputy Minister, Revenue Canada, Customs and Excise, [1985] 1 F.C 85, at 86; Osborne v. Canada, [1988] 3 F.C. 219, at 221. Regina v. Nova Scotia Pharmaceutical Society (1990), 32 C.P.R. (3d) 259, at 261. Regina v. Zundel (\9%1), 31 C.C.C. (3d) 97, at 126. Irwin Toy Ltd. v. A.-G. Quebec, [1989] 1 S.C.R. 927, at 980-83; Canada (Human Rights Commission) v. Taylor, [1990] 3 S.C.R. 892, at 955; Committee for the Commonwealth of Canada v. Canada, supra note 329, at 143. R. V.P. Enterprises Ltd. v. British Columbia (Minister of Consumer and Corporate 340  341  342  343  344  Affairs), supra note 332, at 224. Similar: Regina v. Rowley (1986), 31 C.C.C. (3d) 183 (BCCA.).  96 was also taken by the Ontario Court of Appeal in Regina v. LeBeau , by the Supreme 345  Court in Reference Re ss. 193 and 195.1 (l)(c) of the Criminal Code (Man./  46  and by the  Nova Scotia Supreme Court in Regina v. Nova Scotia Pharmaceutical Society. In other 347  cases the different approaches were taken in various combinations. In Osborne v. Canada (Treasury Board)  348  and Regina v. Butler  349  the Supreme Court acknowledged that  '[vjagueness can have constitutional significance in at least two ways in a s. 1 analysis", namely with respect to the 'limit prescribed by law" clause and the 'reasonable limit" requirement. The Ontario Provincial Court held that law which is too vague does not fall under the 'prescribed by law" expression and violates section 7 of the Charter. The British Columbia Court of Appeal focused on section 7 of the Charter but also argued that '{t]he fact that the terms of a statute are not capable of precise definition is not itself a reason for holding that the statute does not disclose an offence known to law" - a statement that suggests a "prescribed by law" approach.  The courts under these various approaches were unanimous in the assessment that the doctrine of vagueness is to be distinguished from the problem of overbreadth. The relationship between vagueness and overbreadth was expounded by the Ontario Court of Appeal the explanation of which is generally considered to be the 'leading" authority. In  (1988), 41 C C C . (3d) 163. [1990] 1 S.C.R. 1123, at 1141 ('Vagueness should be recognized as a principle of fundamental justice"). (1991), 36 C.P.R. (3d) 173. [1991] 2 S.C.R. 69, at 94. [1992] 1 S.C.R. 452, at 490. 343  346  3 4 7  3 4 8  3 4 9  97 Regina v. Zundel the court stated: "Vagueness and overbreadth are two concepts. They 350  can be applied separately, or may be closely interrelated. The intended effect of a statute may be perfectly clear and thus not vague, and yet its application may be overly broad."  351  Thus overbreadth is not a matter of imprecise language in a statute but rather a question of whether or not a statute that restricts a right guaranteed by the Charter stays within the ambit of what is necessary to accomplish the goal the legislator wants to achieve. This question has become known as the 'minimal impairment" branch of the so-called Oakes test, developed by the Supreme Court in Regina v. Oakes  252  In 1992, the Supreme Court eventually undertook the effort to explain the doctrine of vagueness in detail. In Regina v. Nova Scotia Pharmaceutical Society the Supreme 353  Court decided on the question whether the term 'Unduly" in section 32 of the Combines Investigation Act was impermissibly vague. Having analyzed the different approaches taken by the courts to anchor the doctrine of vagueness under the Charter, the Supreme Courtfirstfocused on overbreadth by explaining: that overbreadth must not be confused with vagueness ; overbreadth is subsumed under the 'minimal impairment branch" of the 354  330  Supra note 342, at 125.  Followed in Regina v. Nova Scotia Pharmaceutical Society (1992), 43 C.P.R. (3d) 1, at 17 (S.C.C.); Regina v. LeBeau, supra note 345, at 171; Reference re ss. 193 and 195.1(l)(a) of the Criminal Code (Man.), [1990] 1 S.C.R. 1123, at 1154; Committee for the Commonwealth of Canada v. Canada, supra note 329, at 215. Similar: Regina v.  3 5 1  Keegstra, [1990] 3 S.C.R. 697, at 818. see also Nitikman, supra note 329, at 1424. (1986), 26 D.L.R. (4th) 200. Supra note 351. 3 5 2 353  98 Oakes  test ; it is always related to some limitation under the Charter" by always being 355  'established by comparing the ambit of the provision touching upon a protected right with such concepts as the objectives of the state, the principle of fundamental justice, the proportionality of punishment (,..)" ; and that '[tjhere is no such thing as overbreadth in 356  the abstract" because overbreadth is 'ho more than an analytical tool" without any "autonomous value under the Charter".  357  With respect to the doctrine of vagueness the Supreme Court made clear that under the Charter  it would consider the doctrine as 'a single concept, whether invoked as a principle  of fundamental justice under s. 7 of the Charter or as part of s. 1 in limine", and that 'from a practical point of view this makes little difference in the analysis, since a consideration of s. 1 in limine would follow immediately the determination of whether s. 7 has been violated." In concluding that 'tfjrom a theoretical perspective, the justifications invoked for the doctrine of vagueness under both s. 7 and s. 1 are similar" the court eventually accepted both sections 1 and 7 of the Charter as possible and arguable grounds to render impermissibly vague provisions null and void. Thus the Supreme Court more or less followed the British Columbia Supreme Court in Regina v. Robson which had emphasised that a 'law cannot be at once contrary to the provision of fundamental justice, and at the same time a reasonable limit on the right guaranteed within the meaning of  355 3 5 6  3 5 7  At 16. Ibid. Ibid.  99 section 1 of the Charter". However, instead of taking the view that a law that is too 358  vague cannot constitute a reasonable limit, the Supreme Court only referred to the 'prescribed by law" clause in section l  3 5 9  and thus apparently favours the proposition that  impermissibly vague law does not constitute law at all.  Having anchored the doctrine of vagueness in the Charter, the courts had to determine how vague a law can be in order to be still valid. The starting point for the answer to this question is what purpose the doctrine of vagueness serves. As pointed out by the Supreme Court, two rationales have been adopted as the theoretical foundations of the doctrine of vagueness, namely, 'fair notice to the citizen" and 'limitation of enforcement discretion". According to the Supreme Court, 'ffjair notice may not have been given 360  when enactments are in somewhat general terms, in a way that does not readily permit citizens to be aware of their substance, when they do not relate to any element of the substratum of values held by society". In other words, 'law ... must prescribe the 361  proscribed conduct clearly, in order that the citizen may know what cannot be done".  362  As to the second rationale the Supreme Court saw the crux of the concern for limitation of enforcement discretion in that 'law must not be so devoid of precision in its content that a  358 3 5 9  360  3 6 1 362  Supra note 337. At 18. Ibid.  At 20. Regina v. Glassman (1985), 53 CR. (3d) 164, at 183 (Ont.Prov.Ct.); similar:  Committee for the Commonwealth of Canada v. Canada, supra note 329, at 143; Regina v. Keegstra, supra note 351, at 771; Regina v. LeBeau, supra note 345, at 163.  100 conviction will automaticallyflowfromthe decision to prosecute". The court concluded that '[w]hen the power to decide whether a charge will lead to conviction or acquittal, normally the preserve of the judiciary, becomes fused with the power to prosecute because of the wording of the law, then law will be unconstitutionally vague."  363  With this  statement the court expressed in a similar way what it had already asked in Reference re ss. 193 and 195.1(l)(a) of the Criminal Code (Man./ , 64  namely, whether a 'statute [is] so  pervasively vague that it permits a 'standardless sweep" allowing law enforcement officials to pursue their personal predilections."  Apartfromthese two generally acknowledged rationales for the doctrine of vagueness a third more pragmatical one was occasionally added. In Irwin Toy Ltd. v. A.-G. Quebec  365  the Supreme Court, after recognizing that '[a]bsolute precision in law rarely exists", asked the question 'Whether the legislature has provided an intelligible standard according to which the judiciary must do its work" and whether the courts were able to give the impugned provision a 'sensible interpretation".  366  Thus it seems that not only is it  necessary that the citizens know what kind of conduct is expectedfromthem; but also the  At 20-21. note 351, at 1157; similar: Regina v. Rowley, supra note 344, at 186, where the test was whether the statute "encourages arbitrary and eratic arrests and convictions." Supra note 343, at 983. This question was adopted in Osborne v. Canada, supra note 340, at 96; Canada (Human Rights Commission) v. Tayler, supra note 343, at 955; Irwin Toy Ltd. v. A.-G. Quebec, supra note 343, at 983. Similar Regina v. Nova Scotia Pharmaceutical Society, supra note 351, at 26: "The doctrine of vagueness can therefore be summed up in this proposition: a law will be found unconstitutionally vague if it so lacks in precision as not to give sufficient guidance for legal debate". The latter decision was affirmed by Ruffo v. Conseilde laMagistrature (1995), 130 D.L.R. (4th) 1, at 43 (S.C.C.). i b i  3 6 4  3 6 5  3 6 6  Supra  101 judiciary must know what to make of a provision. It follows that certainty is not only an issue for those who are subjected to statutory regulation but also for those who are supposed to apply the statutes and to determine whether the regulation has been complied with.  However, the question when a citizen cannot be sure what kind of conduct is expected from him or her; when a court cannot provide a Sensible interpretation', and when law 1  enforcement officials are enabled to pursue their personal predilections remains open. There is probably no way to answer this in abstract. However, the courts do have some guiding rules. In order to determine whether a statute is impermissibly vague, the courts look not only at 'the bare words of the statutory provision but, rather, to the provision as interpreted and applied in judicial decisions." In result a provision is not impermissibly 367  vague if it had been defined by the judiciary in previous cases, and had been given a certain Sensible" meaning that can serve as a basis for further interpretation. This practice, however, made Trotter point out, that it 'essentially transforms the criterion from 'men of common intelligence' to jurists of unusual diligence" , and that 'reliance on previous 368  judicial decisions deprives the doctrine of any realistic application with respect to fair notice"  369  Trotter's critique is supported by Stuart, who states that the 'emphasis on  clarification through prior judicial interpretation (...) focusfes] too much on specialist legal  367  Regina v. LeBeau, supra note 345, at 173.  368  Supra note 329, at 187. At 191.  3 6 9  102 knowledge" and that 'fj;]o allow judicial interpretation to (...) vague laws is indeed 370  contrary to the principle of nullem crimen [sine lege; nulla poena sine lege], which prohibits the retroactive definition of criminal offences."  371  This is not the place to discuss this controversy. For the purpose of this thesis I think it sufficient to add that, although I principally share Trotter's and Stuart's concern, one should bear in mind that the wording of almost every criminal provision is open to a varied interpretation. What must be decisive is the common understanding of the words based on the legislator's intention. This is the 'hien of common intelligence" test, referred to above. However, someone has to determine what the 'man of common intelligence" thinks when he reads the statute. There will certainly not be a survey on the streets conducted to find this out. It is the judges who are to determine how 'men of common intelligence" can and must understand a provision that proscribes certain behaviour. This was actually done in Regina v. Red Hot Video Ltd.  372  where the British Columbia Court of Appeal dealt with  the term 'bbscenity" and its definition in the Criminal Code. The court pointed out that 'ft]he test of obscenity as interpreted by the courts is whether the accepted standards of tolerance in the contemporary Canadian community have been exceeded" and that 'tfjhe courts have had no difficulty in applying the community standards test". That is to say, it is the courts which determine what kind of conduct exceeds the accepted standards of tolerance. Conduct that does exceed these accepted standards consequently is supposed to  Supra note 339, at 108. At 109. (1985), 18 C C C . (3d) 1 (B.C.C.A.).  103 be 'obscene" in the eyes of the contemporary Canadian community, which is nothing else but the aggregate of 'men of common intelligence". The point is that the average person of common intelligence is a fiction anyway; a fiction that will never be able to go to court and expresses what it thinks when it reads the statute. When the courts speak 'bn its behalf they use it as a tool to determine the common intelligence as they see it. The shift from the 'hien of common intelligence to jurists of unusual diligence", therefore, might not be as big as Trotter and Stuart see it.  Furthermore, once the judiciary can look at a larger period of interpretation and a large number of cases that had already been provided for the definition of a broad term the situation is hardly distinctfroma detailed regulation. Everybody who deals with juridical texts, especially with statutory provisions that provide for a detailed regulation, whatever the subject-matter might be, will probably agree that someone who is not trained to read them will hardly be able to understand them completely. For the person of common intelligence it makes no difference whether he or she does not understand the judiciary's interpretation of a statute or the statute itself. In either case 'ignorance of law is no excuse". Of course the main concern of relying in clarification through prior judicial 373  interpretation is that it must not be the task of the judiciary to determine what conduct shall be punished. This is definitely reserved to Parliament. However, clarification does 374  As embodied in section 19 of the Criminal Code. But see Regina v. Cohn, supra note 336, where the Ontario Court of Appeal decided on the question whether the offence of contempt of court was impermissibly vague. The problem was 'that the Code does not specifically provide for or define any such offence nor does it set forth any procedure for the prosecution of such offence or any penalty  3 7 4  104 not mean that the citizen will necessarily be confronted with unforeseeable results. Rarely will a citizen be in a situation where he or she is found guilty by a court of an offence that he or she could never ever have imagined to be prohibited. If a law is that vague and gives the judiciary that much discretionary power it indeed violates the principle of nullum crimen sine lege.  In order to determine whether a law is impermissibly vague the courts also consider the context in which it appears. This gives less cause for concern as this is a well375  established approach to interpret a term in a statute (so-called systematical interpretation). This finally leads back again to 'honest practices" in paragraph 7(e) of the Trade-marks Act, which was also placed in a broader context provided by paragraphs 7(a)-(d). As could be seen the judiciary's dealing with the doctrine of vagueness focuses almost exclusively on criminal provisions. However, as the Supreme Court pointed out, the above-mentioned standards as to whether a law is unconstitutionally vague 'applie[s] to all enactments, irrespective of whether they are civil, criminal, administrative or other. The citizen is entitled to have the state abide by constitutional standards of precision whenever it enacts legal dispositions."  376  But what could these standards mean for the term 'dishonest  practices'? When MacDonald v. Vapour Canada Ltd. was decided, in 1976, the Supreme  following conviction therefor" (at 156). Nevertheless, the court held that the offence was not too vague because 'the common law has provided a satisfactory definition'which followed that 'such behaviour [in this case: the refusal of a witness to testify] has been held to be contempt of court for over a century, and the witness (...) could not in any way be uncertain as to the nature of the offence (...)" 375  376  Regina v. LeBeau, supra note 345, at 172. Regina v. Nova Scotia Pharmaceutical Society, supra note 351, at 25.  105 Court had not yet expounded a doctrine of vagueness as described above. The principles and  standards which were later applied to 'Unduly" , 377  'obscenity" , 'gross 378  indecency" , 'bffence of contempt" , the ban on commercial advertising directed at 379  380  children , 'engage in work"  , 'incident"  , communications which are likely to incite  racial hatred , 'holding area" , 'health" , 'fcommunications in public for the purpose 384  385  386  of prostitution" and 'keeping of common bawdy-houses"  387  , 'Wilfully promoting hatred  against any identifiable group by communicating statements other than private  'Conspiracy to lesson competition unduly" in section 32(l)(c) and (1,1) of Combines Investigation Act; Regina v. Nova Scotia Pharmaceutical Society, supra notes 341, 347 and 351. As used and described in section 159 of the Criminal Code; Regina v. Red Hot Video Ltd., supra note 372. For the question whether or not the term 'bbscenity" and its definition provided by the section 159 is impermissibly vague, see Pelletier v. Regina (1985), 49 C.R. (3d) 253, where the Quebec Superior Court, at 254, stated: "Although these words are somewhat vague, there is no other conceivable language by which a civilized society could describe these types of prohibited conduct." Section 157 of the Criminal Code, R.S.C. 1970, c. C-34; Regina v. LeBeau, supra note 345 and section 163 of the Criminal Code, R.S.C. 1985, c. C-46; Regina v. Butler, supra note 349. At common law; Regina v. Cohn, supra note 336. As proscribed in sections 248 and 249 of the Consumer Protection Act of Quebec, R.S.Q. c. P-40.1; Irwin Toy Ltd. v. A.-G. Quebec, supra note 343. In paragraph 32(l)(a) of the Public Service Employment Act, R.S.C. 1970, c. P-32; Osborne v. Canada, supra note 340. As used in subsection 62(1) of the Motor Vehicle Act (B.C.), R.S.B.C. 1979, c. 288; Regina v. Rowley, supra note 344. As prohibited in subsection 13(1) of the Canadian Human Rights Act, S.C. 1976-77; Canada (Human Rights Commission) v. Taylor, supra note 343. Where the serving of liquor to a patron is prohibited under subparagraph 17(2)(e)(iv) 3 7 8  3 7 9  3 8 0  3 8 1  3 8 2  3 8 3  3 8 4  385  of the Liquor Control and Licensing Act, R.S.B.C. 1979, c. 237; R.V.P. Enterprises v. A.G. British Columbia, supra note 332. 3 8 6 In the abortion provision of paragraph 251(4)(c) of the Criminal Code, R.S.C. 1970, c. C-34; Regina v. Morgentaler, supra note 331. 3 8 7 As prohibited under sections 193 and 195.1(l)(c) of the Criminal Code, R.S.C. 1970, c. C-34; Reference re ss. 193 and 195.1(l)(c) of the Criminal Code (Man.), supra note  351.  106 conversations" , 'any business or undertaking, commercial or otherwise" , 388  'disgusting" , 'immoral" and 'indecent" 390  389  391  , the requirement to surrender a driver's  licence where an officer suspects the consumption of alcohol , the censorship scheme for 392  films , the offence of 'spreading false news" , the determination of fair price , the 393  394  395  offence of 'tax evasion" , and 'the duty to act in a reserved manner"  were not yet  elaborated. That is why it is not surprising that the Supreme Court in its MacDonald decision contented itself with succinctly stating that 'ti]ts [paragraph 7(e)] vagueness is not, of course, a ground of constitutional validity". It remains unclear whether the 398  Supreme Court was saying that the term 'honest practices" was not too vague or simply  3S8  Prohibited under section 319(2) of the Criminal Code, R.S.C. 1985 c. C-46; Regina v.  Keegstra, supra note 351. 389  Prohibited on airports under subsection 7(a) of the Government Airport Concession  Operations Regulations, SOR/79-373; Committee for the Commonwealth of Canada v. Canada, supra note 329. 390  As used in paragraph 159(2)(b) of the Criminal Code, R.S.C. 1970, c. C-34; Regina  v. Glassman, supra note 362.  Prohibition of printed works of immoral or indecent character under section 14 of the Customs Tariff, R.S.C. 1970, c. C-41, Schedule C, tariff item 99201-1; Luscher v. Deputy  391  Minister, Revenue Canada, Customs and Excise, supra note 340. 3 9 2  Provided by subsection 214(2) of the Motor Vehicle Act (B.C.), R.S.B.C. 1979, c.  288; Regina v. Robson, supra note 337. 393  Provided by sections 3, 35 and 38 of the Theatres Act, R.S.O. 1980, c. 498; Re  Ontario Film and Video Appreciation Society and Ontario Board of Censors, supra note  334. As prohibited under section 177 of the Criminal Code, R.S.C.1970, c. 34; Regina v.  3 9 4  Zundel, supra note 350. 395  Pursuant to section 34 of the Excise Tax Act, R.S.C. 1970, c. E-13; Vanguard  Coatings and Chemicals Ltd. v. The Queen, supra note 333. 396  As prohibited under paragraph 239(l)(d) of the Income Tax Act, S.C. 1970-71-72, c.  63; The Queen v. Print Three Inc. (1988), 88 DTC 6315 (Ont.Prov.Ct).  As proscribed in art. 8 of the Judicial Code of Ethices, O.C. 643-82, 114 G.O.Q. 1982.11.1253 - R.R.Q. 1981 (Supp.), c. T-16, r.4.1; Ruffo v. Conseil de la Magistrature, supra note 366. %?ranote38, at 15. 397  398  107 ascertain that there was no doctrine of vagueness that could render a vague provision null and void. And it is equally uncertain whether the court that so accurately dealt with vagueness in its Nova Scotia Pharmaceutical Society decision  399  would stick to this  assessment after the enactment of the Charter had led to the development of the doctrine of vagueness. However, it is also idle to speculate about this since paragraph 7(e) is unconstitutional anyway. The foregoing discussion identifies the limits which the Charter and the doctrine of vagueness set to the use of general terms. It shows that a legislator who (within its legislative authority) decides to use a term such as 'honest practices" in a statute which focuses on the prevention of unfair trade practices must take into account that the term is at least vulnerable in that there is a possibility that it may be challenged on the grounds of section 1 and 7 of the Charter and claimed to be unconstitutionally vague.  b) Interpretation in the light of Charter rights Not only does the Charter influence the legislator's decision to refrain from a detailed regulation and to use a general term instead, it can also restrict the courts' freedom to interpret a general term. This is obvious when (permissibly) broad terms in a Criminal Code are to be interpreted, but needs explanation when general terms are used in statutes which regulate the relationship between private parties. This is because a Charter of Rights is usually designed to bind governments not individuals. Charter rights therefore 400  are generated to protect the citizen against state authorities and not against other citizens.  Supra note 351. 4 0 0  See, e.g., for Canada: Tarnopolsky\Beaudoin, The Canadian Charter of Rights and  Freedoms (1982), at 44; see, e.g., for Germany: BVerfGE 7, 198.  108 The growing influence of the "Charter" in Germany, however, did not spare the civil 401  law.  In its  famous  landmark decision,  the  so-called  Luth-judgment, the  Bundesverfassungsgericht provided for the basis for this 'invasion" of Charter rights into the relationship between individuals. The court pointed out that although the Charter rights are 'defensive rights" of citizens against the state in the first place, they also embody the constitution's decision on what (objective) values should govern German society. These values are effective in all fields of law so that every provision must reflect them and thus be interpreted in the light of them. This means for courts which are to interpret general terms such as 'public morals" that they always have to consider whether the interpretation sufficiently takes into account the meaning and importance of these values.  402  Thus, although the Charter is not directly applicable to civil law it does  (indirectly) influence the relationship between individuals in that the courts which are to define the rights and duties resulting from civil law provisions are obliged to consider the basic values expressed in the Charter rights (so-called mittelbare Drittwirkung der Grundrechte). This is more apparent where the provision is broad and thus subject to a m  It should be noted that in Germany there is no specific enactment of a "Charter". Charter rights (Grundrechte) are embodied in Art. 1-19 of the Basic Law, the German Constitution. This decision also has an interesting effect on the successive stages of appeal: Although the Federal Supreme Court of Justice's decisions on civil cases are conclusive there is a possiblility to 'appeal" to the Constitutional Court on the ground that the Supreme Court's judgment is based on incorrect assessments as to the 'significance and range" of the involved Charterright.The Constitutional Court can reverse the Supreme Court's judgment if the latter's interpretation of a statute is not 'in accordance with the system of values expressed in the "Charter ofRights"; see e.g. BVerfGE 32, 311, at 316. The literal translation would be "indirect effect of Charterrightson third party". 4 0 2  403  109 varied interpretation. The Bundesgerichtshof and the Bundesverfassungsgericht both 404  considered Charterrightsin three cases involving the violation of 'bublic morals" as described in § 1 UWG. The Bundesgerichtshof held that the distribution of free papers, containing advertisements, violates 'public morals" if the position of the 'classical" press (i.e. newspapers with an editorial part) is considerably weakened by such a practice.  405  The court argued that the term 'public morals" must be interpreted in the light of the constitution's decision to protect the freedom of the press (Art. 5 GG). The freedom of religion (protected under Art. 4 GG) was considered by the Bundesverfassungsgericht in the following case: A Catholic youth group organized a so-called 'bperation lumber-room" in the course of which it asked for the donation of scrap materials. These materials were sold and the profit was designed to be contributed to foreign aid. The appeals to donate the materials was made, among other things, from the pulpit of Catholic churches. As a result of this operation the business of a wholesaler in raw materials suffered considerable losses. The wholesaler sued on the ground of § 1 UWG and the District Court ordered the youth group not to announce their operation from the pulpit. The Bundesverfassungsgericht reversed this decision. It argued that the District Court did not sufficiently consider the freedom of religion and that an interpretation of the term 'bublic morals" in the light of this constitutionalrightwould have led to the finding that the practice of the youth group (i.e. the announcements from  BVerfGEl, 198. Eg. BGHZ 19, 392; BGHZ 51, 236; see also Gartner, Verfassungskonforme Auslegung wettbewerblicher Generalklauseln, BB 1970, 1361, at 1364; Sack, Die liickenfullende Funktion der Sittenwidrigkeitsklauseln, supra note 30, at 5. 404  405  110 the pulpit) did not violate 'public morals" in competition.  406  Bundesverfassungsgericht  Finally, the  made clear that although § 1 UWG is a permissible restriction  of the right to the freedom of vocational practice (protected under Art. 12 GG), the courts are obliged to always bear in mind the importance of this right when they decide on whether a certain trade practice is not allowed.  407  The Canadian Charter of Rights and Freedoms, on the other hand, has not yet reached this level of dominance in allfieldsof law. However, Tarnopolsky and Beaudoin point out that the Charter is open to such an interpretation. They observe that 'the language used by the drafters of the Charter may provoke arguments that the Charter of Rights, at least in some articles, is directly applicable to individuals in their relationship with other private actors". They explain that sections 2, 7, 8 and 12 refer 'to individual rights without 408  reference to any state or governmental action requirement" and that therefore 'f_e]ach [section] would seem to be open to application in proceedings between private individuals". However, pointing out that 'the courts should bear in mind its [the direct 409  application of the Charter] drawbacks as a method of dealing with private action and the advantage of leaving the regulation of such conduct to human rights legislation or other  BVerfG, NJW 1969, 31. In fact, the District Court's judgment could have also been challenged on the ground that the there was no 'business action for the purpose of competing" on the youth group's part. The Bundesverfassungsgericht, however, was bound by thefindingof the District Court as to this requirement because the ordinary courts' interpretation and application of civil law provisions is conclusive as long as they do not show an incorrect understanding of the meaning Charter rights. 4 0 7  4 0 8  BVerfGE 32, 311, at 317; BVerfG, GRUR 1986, 397, at 389. Supra note 400, at 45.  Ill  legal controls" , they ultimately recommend the Charter not be interpreted as applicable 410  to the relationship between individuals.  As far as it could be made out the judiciary has not yet dealt with the influence of the Charter on the 'private" rights and duties of citizens. However, when the Supreme Court in Regina v. Nova Scotia Pharmaceutical Society explained the doctrine of vagueness in  detail it stated, referring to the state's task to maintain the balance between societal interests and individual rights: "A measure of generality also sometimes allows for greater respect for fundamental rights, since circumstances that would not justify the invalidation of a more precise enactment may be accommodated through the application of a more general one." It is hard to say what exactly is meant by this somewhat unclear statement 411  and whether the Supreme Court favours a similar view to that taken by the Bundesverfassungsgericht, namely, that it is the general terms in particular which allow the judiciary to (indirectly) bring into effect Charter rights when it decides upon rights and duties between individuals. This, however, remains to be seen in the future. For the term 'honest practices" this question, of course, is of no importance unless one of the ten provincial legislative bodies decides to use such a broad term in one of its statutes that regulate fair and honest conduct in competition.  410 411  At 48. Supra note 351, at 25.  112 Chapter V: Conclusion This thesis started with the question whether the terms 'public morals" and 'honest practices" in German and Canadian unfair competition law are proper means of reacting to new business methods. The foregoing chapters have shown that the answer to this question is not the same for both jurisdictions. With respect to the German term 'public morals" the question can certainly answered in the affirmative. In the past 90 years the courts have shown their capability of enlarging the protection of consumers against trade practices such as misrepresentation, pestering and temptation, while the Act Against Unfair Competition  still remained an instrument of protecting the traders against unfair  competitors in the first place. The courts' independent (and later approved by the legislator) shift from a narrow 'individual dimension approach" to a much broader 'social dimension approach" also allowed the courts to pay attention to the interests of the general public. In result, the legislator's decision to prohibit every trade practice that violates 'public morals" enabled the judiciary to combat any kind of business method they considered to contravene the idea of fair competition, regardless of whether it was a competitor, a consumer or the general public which was affected by it in thefirstplace. This way of interpretation of § 1 UWG and its term 'public morals" does not cause constitutional concerns. Although the rule of law principle requires every provision to be sufficiently precise and clear so that every citizen knows what kind of conduct is expected from him or her, the Bundesverfassungsgericht'sfindingthat a long history of judicial clarification and interpretation can provide for sufficient precision has made the term 'public morals" constitutionally undisputed. Thus, there are no doubts that the term  113 'public morals" will further provide a stable basis for the judiciary's ability to independently react to new business methods which may arise as a result of a moral decline in trade.  The answer to the initial question is equally simple with respect to the Canadian term 'honest practices". Since paragraph 7(e) of the Trade-marks Act is ultra vires Federal Parliament, the term 'honest practices" in this provision is certainly not a means of responding to changing habits in competition. However, before paragraph 7(e) was challenged on constitutional grounds this provision has had no significance either. It could be observed that this was the result of the Canadian concept of the division of powers and the restricted interpretation of subsection 91(2) of the Constitution Act, 1867 which allowed the courts to only interpret 'honest practices" as being connected with 'trade and commerce" as described first by the J.C.P.C. and later by the Supreme Court of Canada. Two additional reasons were the close link between the protection of trade-marks on the one hand and unfair competition law, on the other hand, in Canada and the reluctance of Canadian courts to go beyond well established common law principles when they defined the scope of application of paragraph 7(e). Thus, even when the term 'honest practices" was part of a valid provision it was not - and partially could not - be used as an instrument to widen the scope of application in a way that has been accomplished in Germany. Whether or not a broad term such as 'honest practices" will ever be able to gain significance remains to be seen when one of the provincial legislators should decide to use it in its consumer protection or trade practices legislation. It is equally open whether the  114 recently developed doctrine of vagueness, which did not play a role in the Supreme Court's finding of paragraph 7(e)'s unconstitutionality, would be a sufficient ground to challenge the validity of the term again.  115 Bibliography  Atiyah, P.S. -  Judges and Policy (1980), 15 Isr.L.Rev. 346.  Barwick, Sir Garfield  -  Judiciary Law: Some Observation Thereon (1980), 33 C.L.P.  239. Baumbach, Adolf / Hefermehl, Wolfgang -  Wettbewerbsrecht, 15th edition (Munchen  1988). 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