VI. Trademarks and Passing Off
Lucie Guibault
A. Introduction
1. Legislative history
Trademark protection has a long history in Canada. It commenced prior to Confederation with the passage on May 19, 1860 by the Legislative Council and Assembly of Canada of An Act respecting Trade-Marks. That Act made it a misdemeanour to use the known and accustomed trademark, name, package or device of any manufacturer with intent to deceive, so as to induce the belief that the goods so marked were manufactured by the owner of the mark. Section 2 contained a definition of fraudulent use of trademarks, names, packages, or devices, as being a use identical with or so closely resembling another trademark as to be calculated to be taken for the true trade-mark by ordinary purchasers. Provision was also made for actions by the owner of a mark for damages.
Contrary to matters concerning ‘Patents of Invention and Discovery’ and ‘Copyrights’, the Constitution Act, 1867 is silent in respect of trademarks. Legislative competence in the area of trademarks and unfair competition can just as easily fall within the provincial power over ‘Property and Civil Rights’, pursuant to s.92(13) of the Constitution Act, 1867 or within Parliament’s power over ‘Trade and Commerce’ pursuant to s. 91(2). After Confederation, however, Parliament enacted the Act of 1868, entitled the Trade Mark and Design Act. Over time Parliament’s competence over trademarks has been discussed occasionally, but was never seriously contested. Trademark protection is generally seen as being intra vires the power of Parliament since it has the power to adopt general regulation of trade affecting the whole country.
This Act repealed the prior trademark legislation. It was periodically amended, until it was subsumed in the Unfair Competition Act, 1932. This Act was passed as an attempt to take a broader approach to acts of unfair competition. The Act proved unsuccessful: it had many contradictions, was difficult to interpret, and resulted in some unforeseen complications in jurisprudence. The Unfair Competition Act remained in force for just over twenty years, when it was replaced by the Trade Marks Act, 1953. For more than sixty years, the Trade-marks Act [r.s.c. 1985, c. P-4] remained relatively unchanged since its passage in 1953. During this period, the only international convention to which Canada was a party in the field of trademark law was the Paris Convention of 1883. It allowed Canada to maintain a number of particular features of its trademark registration system, some of which were inspired from the U.S. system, like the use-based registration.
Starting in 2014, the Canadian government passed a flurries of amendments to the Trademarks Act. Some of these were rendered necessary as a consequence of Canada’s decision to (finally!) accede to international treaties in the area of trademark protection, while others were required as measures of implementation of the trade agreements signed with South Korea, the European Union, and the United States and Mexico. The changes brought about a major, long overdue, overhaul of Canadian trademark law. The acts amending the Trademarks Act are the following:
- Bill C-8 – Combating Counterfeit Products Act [S.C. 2014, c. 32, ss. 7-57]
- Bill C-31 – Economic Action Plan 2014 Act, No. 1 [S.C. 2014, c. 20, ss. 317-370]
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Bill C-59 – Economic Action Plan 2015 Act, No. 1 [S.C. 2015, c. 36, ss. 66-72]
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Bill C-30 – Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act, [S.C. 2017, c. 6, ss. 60-79]
- Bill C-79 – An Act to implement the Comprehensive and Progressive Agreement for Trans-Pacific Partnership [S.C. 2018, c. 23, ss. 17-18]
- Bill C-86 – Budget Implementation Act, 2018, No. 2 [S.C. 2018, c. 27, ss. 214-242]
- Bill C-4 – An Act to implement the Agreement between Canada, the United States of America and the United Mexican States [S.C. 2020, c. 1, ss. 108-110]
The most comprehensive modifications were brought through Bill C-31, The Economic Action Plan Act 2014, No. 1, and Bill C-30 aiming to implement Comprehensive Economic and Trade Agreement (CETA). The revised Trademarks Act and Trademarks Regulations align Canadian trademark law with that of Canada’s major international trading partners including the United States and the European Union. In particular, under the new legislation, Canada adopted the standard procedures of the Singapore Treaty on the Law of Trademarks and the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks and ratified and implement the Madrid Protocol concerning the International Registration of Marks. Adhering to these internationally used conventions make is easier for Canadian businesses to protect their trademarks internationally and expand their businesses beyond Canada’s borders. Canadians are now able to file a single application and pay one set of fees to apply for protection in over 100 countries. Adoption of the standardised international procedures also make it easier for international companies to seek trademark protections for their businesses and marks in Canada, comparable to the mechanism put in place by the PCT in the area of patent protection. The Trademark Regulations have been modified accordingly. Both the Amended Act and the Regulations came into force on June 29, 2019.
Among the most outstanding changes are the broadening of the definition of ‘sign’ for what is considered eligible for trademark registration purposes, the possibility to obtain registration on proposed marks without having to prove the use of the mark, the shortening of the term of protection from 15 to 10 years, as well as the harmonised spelling of the word ‘trademark’ (which lost its hyphen).
2. Objectives of Trademark Protection
B. Registrable Signs
The recent legislative changes brought to the Trademarks Act have a direct impact on what is deemed eligible for trademark protection in Canada. The definition of ‘trademark’ was amended to now refer to only two categories of marks, e.g. the ‘ordinary’ trademark and the certification mark. This comes in sharp contrast to the previous versions of the Act that defined trademarks as including ‘ordinary’ marks, certification marks, distinguishing guises and proposed trademarks. In this section, we examine what is an eligible trademark, looking at the definition of ‘sign’, the requirement of distinctiveness, and the grounds for refusal of registration, before saying a few words about certification marks.
S. 2 trademark means
(a) a sign or combination of signs that is used or proposed to be used by a person for the purpose of distinguishing or so as to distinguish their goods or services from those of others, or
(b) a certification mark;
1. Definition of Sign
Until the recent legislative amendments, the Act did not specifically describe the sort of signs that could be registered as trademarks, except for a definition of ‘distinguishing guise’. These were understood as including “(a) a shaping of wares or their containers, or (b) a mode of wrapping or packaging wares, the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others”. Typical signs that have always been deemed admissible as registrable trademarks encompass a word, a personal name, a design, a letter, a numeral, colours, a figurative element, a mode of packaging goods, and the positioning of a sign. In recognition of the changing marketing landscape, the evolving consumer habits, and the enhanced technical possibilities, the new definition of ‘sign’ in s. 2 of the Trademarks Act now also includes a range of less traditional signs, such as a three-dimensional shape, a hologram, a moving image, a sound, a scent, a taste, and a texture. With the broadening of the scope of eligible signs for trademark registration, the concept of ‘distinguishing guise’ was repealed from the Act, since it was no longer needed as separate concept.
2. Distinctiveness
(i) the three-dimensional shape of any of the goods specified in the application, or of an integral part or the packaging of any of those goods,
(ii) a mode of packaging goods,
(iii) a sound,
(iv) a scent,
(v) a taste,
(vi) a texture,
(vii) any other prescribed sign.
According to s.37(1)(d) TA, the Registrar shall refuse an application for the registration of a trademark if he is satisfied that the trademark is not distinctive. As Michele Ballagh explains (Trademark Legislation – 2019 Amendments, Hamilton Law Association, 2020), the sign must be “wholly without” or “bereft” of any distinctive character before the examiner should refuse the application or request evidence.
EXAMPLE # 1: SOUND MARK – 1733564
[Click on the link above to listen to the sound bite]
Registrant
Danjaq, LLC
11400 Olympic Blvd
Suite 1700
Los Angeles, CA 90064
UNITED STATES OF AMERICA
Goods
(1) Pre-recorded audio and video compact discs, DVDS, and motion picture films featuring entertainment, namely, action adventure, drama, comedy, and romance; musical sound recordings, contained on compact discs and digital music (downloadable) provided from web sites or from any other communications network including wireless and cable; computer video games; video and computer game compact discs adapted for use with television receivers; downloadable computer video game software supplied on-line from databases or provided through a global computer network or from any other communications network including wireless and cable; images and animations via the internet and wireless devices; downloadable videos and films featuring entertainment, namely, action adventure, drama, comedy, and romance via a wireless network for use with mobile devices; downloadable mobile telephone games and graphics via a global computer network and wireless devices.
Services
(1) Entertainment services, namely, production and distribution of motion pictures.
(2) Internet services, namely, providing information via an electronic global computer network in the field of entertainment relating to motion pictures, and providing electronic games, not downloadable, via the Internet.
Questions: Can this piece of music be used to distinguish the products and services of the company holding the trademark? What kind of extra evidence do you think was requested from this applicant by the Registrar of Trademarks? Would another IP right provide protection for this sign? What is the advantage for the company of registering a trademark on this sign?
EXAMPLE # 2: A scent – Cannabis odor
Questions: Can the scent mark that is the object of this application be used to distinguish the product of this applicant from those of other producers? What kind of evidence could be adduced to support the registration of this trademark? How likely is it that the trademark would be registered?
NOTE: this trademark application is now listed as ‘withdrawn’ in the Trademark database.
2. When Trademark is [Not] Registrable
The Act not only defines what a registrable sign is and when a mark is distinctive, it also lays down the grounds for refusal to enter a trademark in the Register. The expression used in s. 12(1) TA ‘When Trademark is Registrable’ is somewhat misleading, since the opening sentence is formulated in the negative: ‘a sign is registrable if it is not…’ What ss. 12 (1) and (2) regulate are actually the grounds for refusal of registration against which the Trademark Office examines every single trademark application.
The most frequently invoked grounds for refusal relate to the descriptive or deceptively misdescriptive character of the trademark (s. 12(1)(b) TA) and the existence of a confusing trademark in the Register (s. 12(1)(c) TA). That a descriptive trademark not be registrable is logical, since it presumably is incapable of fulfilling the primary function of a trademark, e.g. distinguishing the goods or services of the company using it. The same logic applies to an already registered trademark that would be confusing with the trademark applied for: confusion among the public between two marks is an indication that either one or both marks are not able to distinguish the source of the goods or services. The concept of confusion is examined in detail in section F. below.
Section 12(2) TA prohibits the registration of a trademark where its features are dictated primarily by a utilitarian function. This ground for prohibition is not only connected to the requirement of distinctiveness as to the need to safeguard fair competition in the market: it would give an undue advantage to one company, above its competitors, to allow it to secure exclusive trademark rights on a functional aspect of a good. This principle is reinforced by s. 18.1 TA which provides that ‘the registration of a trademark may be expunged by the Federal Court on the application of any person interested if the Court decides that the registration is likely to unreasonably limit the development of any art or industry”.
In the course of the registration process, the unregistrable character of a trademark should be raised by the Registrar of Trademark as a matter of law. If it is not, a trademark that is not registrable can be attacked either at the stage of the opposition during the registration process, pursuant to s.38(2) TA, or as a defence to a trademark infringement claim, pursuant to s. 18(1)(a) TA.
When trademark registrable
12 (1) Subject to subsection (2), a trademark is registrable if it is not
(a) a word that is primarily merely the name or the surname of an individual who is living or has died within the preceding thirty years;
(b) whether depicted, written or sounded, either clearly descriptive or deceptively misdescriptive in the English or French language of the character or quality of the goods or services in association with which it is used or proposed to be used or of the conditions of or the persons employed in their production or of their place of origin;
(c) the name in any language of any of the goods or services in connection with which it is used or proposed to be used;
(d) confusing with a registered trademark;
(e) a sign or combination of signs whose adoption is prohibited by section 9 or 10;
(f) a denomination the adoption of which is prohibited by section 10.1;
(g) – (h.1) in whole or in part a protected geographical indication identifying a wine, a spirit or an agricultural product or food where the trademark is to be registered in association with a wine not originating in a territory indicated by the geographical indication;
(…)
(i) subject to subsection 3(3) and paragraph 3(4)(a) of the Olympic and Paralympic Marks Act, a mark the adoption of which is prohibited by subsection 3(1) of that Act.
Utilitarian function
(2) A trademark is not registrable if, in relation to the goods or services in association with which it is used or proposed to be used, its features are dictated primarily by a utilitarian function.
Guiding principles have been established by jurisprudence to determine whether the mark is clearly descriptive or deceptively misdescriptive of the services. The approach to take consists in recognizing:
(1) that whether a trademark is clearly descriptive is one of first impression;
(2) that the word “clearly” in para. 12(1)(b) of the Act is not a tautological use but it signifies a degree and is not synonymous with “accurate” but means in the context of the paragraph “easy to understand, self-evident or plain”, and
(3) that it is not a proper approach to the determination of whether a trademark is descriptive to carefully and critically analyse the words to ascertain if they have alternate implications when used in association with certain wares and to ascertain what those words in the context in which they are used would represent to the public at large, who will see those words and will form an opinion as to what those words will connote: see John Labatt Ltd. v. Carling Breweries Ltd. (1974), 18 C.P.R. (2d) 15 at p. 19.
The evaluation of the descriptive nature of the mark must take into account the goods and services in association with which the mark is used. For a trademark to be “deceptively” misdescriptive, it must mislead the public as to the character or quality of the associated goods or services. Evidence is key, as the three examples below demonstrate.
EXAMPLE # 1: Descriptive Mark – Orange Maison for Home Made Orange Juice
Home Juice Co. v. Orange Maison Ltée, [1970] S.C.R. 942
Since 1954 respondent has been selling orange juice in the Province of Quebec under the trade mark ORANGE MAISON and, since December 9, 1960, this trade mark has been registered at the Trade Marks Office. After objecting to an application for registration of the trade mark HOME JUICE filed by appellant Home Juice Company, respondent brought an action against the other two appellants claiming infringement of its own trade mark. Appellants then moved in the Exchequer Court to strike out the registration of respondent’s trade mark on the ground that it is clearly descriptive in the French language of the character or quality of the wares in association with which it is used.
(…)
In this Court, as in the Exchequer Court, the appellants in support of their contention as to the meaning of ORANGE MAISON relied especially on two dictionaries published in France in 1959: the Petit Larousse and the Robert. In both, the definition of the word “maison” used as an adjective is given as: [TRANSLATION] “that which has been made at home” and also [TRANSLATION] “of good quality”.
Respondent answered that this meaning is not found in dictionaries published in Canada, namely, the Bélisle and the Larousse Canadien Complet both published in 1954. In my view, this argument is not valid. Positive evidence drawn from the works of lexicographers who give a certain meaning is in no way destroyed by the fact that others do not report it. A work of this kind is never absolutely complete and negative evidence is always in itself weaker than positive evidence.
Respondent has contended that the current meaning in France is not to be considered, that regard must be had only to the meaning current in Canada and that, in the absence of any evidence, whether by dictionaries or otherwise, that the meaning in question was current in Canada at the date of registration, no account should be taken of a recent meaning found in France only. This contention would have serious consequences if it was accepted. One result would be that a shrewd trader could monopolize a new French expression by registering it as a trade mark as soon as it started being used in France or in another French-speaking country and before it could be shown to have begun being used in Canada.
In my opinion, the wording of s. 12 does not authorize such a distinction. It refers to a description “in the English or French languages”. Each of these two languages is international. When they are spoken of in common parlance they are considered in their entirety and not as including only the vocabulary in current use in this country, a vocabulary that is extremely difficult to define especially in these days when communication media are no longer confined within national boundaries. On this point, I should like to quote what Evershed J. said concerning the word “Oomph” in a case in which he held that “Oomphies” could not be considered as descriptive of the character or quality of shoes (In the Matter of an Application by La Marquise Footwear, Inc.:
I should perhaps add this: much argument was addressed upon the footing that, after all, the word, in so far as it is in current use, however short and brutish a life it may have, is American slang rather than, as we would say, part of our own native tongue. That is a matter upon which one might have debate for hours — whether it is the fact that the English tongue as spoken in these islands and the English tongue as spoken in the United States or in Canada or in Australia or in other parts of the globe is or is not one and the same language. I do not propose to throw any light upon any possible answer to the question, save to say that, where, as here, the word is primarily employed in the film industry, and, as is well known, the products of the American film industry, are shown and seen by hundreds of thousands of people throughout the whole of the English-speaking world, I think that it would be an affectation to say that a word which has gained any currency as an American slang word ought to be treated in these islands, in the absence of any evidence one way or the other, as a foreign word.
The trial judge seems to have considered it of great importance that respondent’s trade mark includes only the two words “ORANGE MAISON” while its wares are orange juice, not oranges. He quoted the following words of Lord MacNaghten in the Solio case:
…the word must be really an invented word; nothing short of invention will do. On the other hand, nothing more seems to be required. If it is … “new and freshly coined” (to adopt an old and familiar quotation), it seems to me that it is no objection that it may be traced to a foreign source, or that it may contain a covert and skilful allusion to the character or quality of the goods.
With respect, it must be emphasized that this was said of an invented word. Here, the trade mark is composed of two French words and this is not at all a case of a covert allusion but that of an explicit description indeed. The omission of the words “jus de” (juice) in no way prevents the word “ORANGE” from being descriptive of the character of the wares, because those words are clearly understood through the association with a liquid product. It must also be noted that respondent took care, in his application for registration, to disclaim any right to the exclusive use of the word “orange” by itself. It must therefore be said that the distinctive character of the trade mark is claimed exclusively for the combination “ORANGE MAISON”. But, as we have seen, the word “maison” thus placed clearly becomes an adjective descriptive of quality.
Therefore, when the meaning of the trademark is analyzed in respect of the goods to which it is affixed, the only possible conclusion is that the first word is an elliptical description of their character and the second an explicit description of their quality.
In Kirstein Sons & Co. v. Cohen Bros., this Court held that the trade marks “Shur-on” and “Sta-zon” were descriptive of the frames of eyeglasses to which they were affixed and considered them as mere corruptions of descriptive words. If the corruption of a word of the language does not destroy its descriptive character, why should an ellipse do it? This is what appears to have been held in Channell Co. v. Rombough where Mignault J. speaking for the majority in this Court said (at p. 604):
…a common English word having reference to the character and quality of the goods cannot be an apt or an appropriate instrument for distinguishing the goods of one trader from those of another. And the mere prefixing of the letter “O” to such a word as cedar certainly does not make it so distinctive that registration gives to the appellants the right to complain of the use of it by another manufacturer to describe a polish whereof oil of cedar is one of the ingredients.
It having been held that the word “cedar” should be considered as descriptive of a product that included only a small quantity of cedar oil, a fortiori the word “orange” should be considered as descriptive of “orange juice”.
For these reasons, I would allow the appeal with costs, set aside the judgment of the Exchequer Court, allow appellants’ motion without costs and order that the registration made for respondent in the Register of trade marks under number 120,375, on December 9, 1960, be amended by restricting it to the territorial area of the Province of Quebec.
EPILOGUE: The trademark Orange Maison was entered in the Trademarks Register, ORANGE MAISON — 0391939 on 23 September 1977 presumably based on the evidence of acquired distinctiveness (see below for explanation on this concept)
EXAMPLE # 2: Deceptively Misdescriptive Mark – Spirit of Cuba Rum produced in the Dominican Republic
Ron Matusalem & Matusa of Florida Inc. v. Havana Club Holding Inc., S.A., 2010 FC 786
1. The present appeal by Ron Matusalem & Matusa of Florida Inc. (the applicant) is made pursuant to section 56 of the Trade Marks Act, R.S.C. 1985, c. T-13 (the Act). It exclusively concerns the registrability of the trade-mark “THE SPIRIT OF CUBA” (the Mark), application number 1,154,259, based on proposed use in association with rum (the wares).
2. On October 2, 2009, the Trade-Marks Opposition Board (the Board) found that the Mark is deceptively misdescriptive and is not distinctive when used in association with rum and thus allowed the opposition made by Havana Club Holding Inc., S.A. (the respondent).
3. The applicant now invites the Court to overrule the Board’s decision, to reject the opposition and to grant the application to register the Mark in association with rum.
(…)
12. Paragraph 12(1)(b) of the Act provides that a trade-mark is registrable if it is not either “clearly descriptive or deceptively misdescriptive” in the English or French language of the character or quality of the wares in association with which it is used or proposed to be used.
13. “Distinctiveness” is also a requirement to a valid trade-mark and means a trade-mark that “actually distinguishes” the wares in association with which it is used from the wares of others: see section 2 and paragraph 38(2)(d)of the Act.
14. The present litigation arises from the fact that the word “spirit” has two meanings, both of which are relevant to the wares. The first, the interpretation espoused by the applicant, means a mental condition or attitude; while the second, the interpretation espoused by the respondent, means strong, distilled liquor. There is evidence supporting both of these definitions.
15. When determining whether the Mark in its entirety is deceptively misdescriptive, the issue is whether the general public in Canada would be misled into the belief that the product with which the trade-mark is associated has its origin in the place of a geographic name contained in the trade-mark. One must place oneself in the position of the average Canadian consumer of ordinary intelligence and education who would see the Mark used in association with rum.
16. When determining whether the Mark is descriptive or misdescriptive, a decision maker should not carefully and critically analyze the words to ascertain if they have alternate implications in the abstract. Rather, a decision maker should apply common sense to determine the immediate impression created by the Mark as a whole in association with the wares. In short, the etymological meaning of the words is not necessarily the meaning of the words used as a trade-mark.
17. The Court finds that the Board’s decision is reasonable in the circumstances. Moreover, even if the matter would have to be reviewed de novo, the Court finds that the additional evidence submitted in this appeal would not justify overruling the result reached by the Board. The Mark, when viewed in its entirety, is deceptively misdescriptive of the place of origin of the wares and is not distinctive.
18. In the case at bar, the Board was faced with two contradictory interpretations of the words used in the Mark in relation to the product, here rum, with which the Mark is associated. The first was to interpret “spirit” as meaning “liquor” and “of Cuba” as meaning “from Cuba.” The second was to interpret “spirit” as meaning “soul” or “essence.”
19. The Board chose the first interpretation and held:
… we have a trade-mark comprising of two words: one that means alcoholic beverage and the second word being the name of a country known for its rum. I am of the view that the average Canadian consumer of rum confronted with the Mark used in association with rum is more likely, on a first impression, to think that it is rum originating from Cuba.
20. The Board also held, based on the same reasoning, that the Mark was not “distinctive”.
21. The findings made by the Board are not clearly wrong and were supported by the evidence on record and the public sources consulted. Moreover, an analysis of the additional evidence presented on appeal, while certainly relevant, demonstrates that it would not have materially affected the Board’s decision. In other words, in the Court’s opinion, this new evidence does not “put quite a different light on the record” before the Board (Mattel Inc. v. 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772 at paragraph 35) (Mattel).
22. The Mark appears on the label and is also embossed on the rum bottle. The applicant does not challenge the fact that the wares are manufactured in Dominican Republic and that Cuba is a producer of rum.
23. The applicant has argued both before the Board and the Court that the Mark, when viewed as a whole, “conveys the attitudes, temperament, disposition and character of the people of Cuba. It refers to the ‘soul’ or ‘essence’ of the applicants’ history in Cuba embodied in its rum products.”
24. According to the Salazar affidavit, the Salazar family has been making rum for a long time. In 1872, his great grandfather, Evaristo Alvarez, began producing rum in Santiago, Cuba under the name Matusalem (the “Matusalem rum”). The original recipe for Matusalem rum was developed in Cuba and uses the Solera system of blending liquor (which involves blending liquors of different ages to produce a final product of a certain average age). This same recipe and system are still used to make Matusalem rum.
Dr. Picard’s affidavit
29. The applicant relies on Dr. Picard’s affidavit where he expresses his opinion about the usage of the singular “spirit” in modern English. The survey conducted by Mr. Maurice Guertin also demonstrates that English-speaking Canadians, when faced with the word “spirit” in a variety of contexts, associate it with the soul, spirituality and the supernatural far more frequently than with alcohol. Finally, pertaining to the worldwide market, the Auclair affidavit reveals that there is not one specific country known for its rum, but rather an area called the Caribbean (or West Indies).
Mr. Guertin’s affidavit
35. With respect to the weight to be given to the internet survey conducted by Mr. Guertin, it is of very little assistance in this case. His survey asked two questions: (1) If you were to read the words “The Spirit” on a product, what would be the meaning of “The Spirit” for you? (2) If you were to read the words “The Spirit of Cuba” on a product, what would be the meaning of the “The Spirit” for you?
36. First, the Court doubts that it is “responsive to the point at issue” (Mattel, at paragraph 44) since it never puts the word “spirit” or “THE SPIRIT OF CUBA” in the context of rum. Again, the relevant question in the Court’s opinion is whether the average Canadian consumer of rum would believe that rum sold under the trade-mark “THE SPIRIT OF CUBA” comes from Cuba.
37. Second, the Court notes that only 506 people out of the 1,054 survey had purchased rum in the previous 12 months. Thus only 48% of those surveyed can be considered consumers of rum.
38. Third, the survey is not decisive. Even, when asked out of context, 15% of respondents associated “Alcohol/Drink” with the word “The Spirit” (first question), and 13% associated “Cuban Rum” with the words “The Spirit of Cuba” (second question). Thus, one may argue that on a first impression, a significant number of average Canadian consumers would believe that rum sold under the trade-mark “THE SPIRIT OF CUBA” comes from Cuba.
Ms. Auclair’s affidavit
39. Lastly, the Court finds that the evidence submitted by Ms. Auclair is not significant as it was either rejected by the Board or supports the Board’s factual findings.
EXAMPLE # 3: Utilitarian Function of a LEGO brick
Kirkbi AG v Ritvik Holdings Inc., 2005 SCC 65
1. For many years, Kirkbi AG (“Kirkbi”) has been a well-known and successful manufacturer of construction sets for children, and at times, for their parents too. The construction sets consist of standardized small plastic bricks, held together by a pattern of interlocking studs and tubes. Patent protection of this locking system has now expired in Canada and in several other countries. Kirkbi now attempts to protect its market share and goodwill against the inroads of competitors by invoking other forms of intellectual property rights. In particular, it is engaged in a long-running dispute with the respondent Mega Bloks Inc., formerly Ritvik Holdings Inc./Gestions Ritvik Inc. (“Ritvik”), a Canadian toy manufacturer. After the expiry of the last LEGO patents in Canada, the respondent began manufacturing and selling similar bricks, using the same locking method.
2. Kirkbi is now relying on an unregistered trade-mark, the “LEGO indicia”, which consists of the well-known geometrical pattern of raised studs on the top of the bricks as the basis for a claim of passing off under s. 7(b) of the Trade-marks Act (…)
3. Although I hold that s. 7(b) is a valid exercise of the federal power over trade and commerce, I agree that the action should be dismissed and that the majority judgment of the Federal Court of Appeal should be upheld. A purely functional design may not be the basis of a trade-mark, registered or unregistered. The tort of passing off is not made out. The law of passing off and of trade-marks may not be used to perpetuate monopoly rights enjoyed under now-expired patents. The market for these products is now open, free and competitive.
4. The LEGO toy business was founded in 1932. In 1949, Kirkbi produced its first toy building blocks. Those blocks were derived from a British product, the Kiddicraft blocks, which used a system of interlocking blocks. Kirkbi bought the patents covering the Kiddicraft system a few years later. Kirkbi then introduced significant improvements to the blocks. It added tubes underneath the blocks which coupled with the studs on top. This clever locking system increased the friction between the bricks and enhanced their “clutch power”, although children could still easily disassemble them. The current LEGO block was thus designed and marketed some 50 years ago. The same pattern of studs on the top of the block with tubes underneath remains in use. The only change was the addition of the mark “LEGO” on the top of each stud in tiny script. Kirkbi managed to keep patent protection of its technology in place for many years. But, in Canada, as elsewhere, patent protection came to an end. In Canada, the last patent expired in 1988. By that time, the quality and originality of its products had earned LEGO bricks a well-deserved reputation amongst parents and children. LEGO toys acquired generations of devoted clients and users in Canada as in many other countries.
5. After the expiry of Kirkbi’s patents, clouds gathered on the horizon. New competitors appeared and attempted to market similar if not identical products. The most aggressive was the respondent, a Montreal toy manufacturer now known as Ritvik. Ritvik had begun manufacturing toys in the 1960s. Later, in the 1980s, it developed and marketed a line of large-size building blocks. Finally, after the expiry of the last LEGO patents in Canada, it decided to use the traditional LEGO technology. It brought to market a line of small blocks, identical in size to LEGO blocks, which used the same geometrical pattern of stubs on top coupled with tubes underneath. They were sold under the name “MICRO MEGA BLOKS”. Ritvik sold its new line in Canada and exported them to several other countries. Over the last 10 years, it has become a significant global competitor to Kirkbi.
6. Facing new competition and now deprived of patent protection, Kirkbi attempted to protect its market position, employing a highly creative and aggressive use of the law of intellectual property and unfair competition, in several different legal systems throughout the world. This ongoing effort led to a substantial amount of litigation in several countries. For example, at times, Kirkbi tried to register its pattern of studs as a trade-mark or a design. Those attempts generally failed. In Canada, after the Registrar of Trade-marks rejected an application to register the pattern as a trade-mark, the appellant resorted to a more subtle and creative use of the resources of the law of intellectual property. This attempt led directly to the present litigation.
7. Kirkbi asserted unregistered trade-mark rights in respect of its use of the “LEGO indicia”. This mark consists of its distinctive orthogonal pattern of raised studs distributed on the top of each toy-building brick. These LEGO indicia are thus the upper surface of the block, with eight studs distributed in a regular geometric pattern (see Sexton J.A., (2003), [2004] 2 F.C.R. 241 (F.C.A.), at para. 11). It alleged that the marketing by Ritvik of its micro and mini lines of small bricks using the same pattern caused confusion with its unregistered trade-mark. It claimed relief under s. 7(b) of the Trade-marks Act and under the common law doctrine of passing off. In a statement of claim filed in the Federal Court, Trial Division, it claimed ownership of this unregistered mark and sought a declaration that it had been infringed. It requested a permanent injunction to prevent the marketing of the micro and mini lines of MEGA BLOKS and damages.
(…)
On the facts, the trial judge found that the LEGO indicia and the asserted unregistered mark were purely functional. The mark was the product (see Gibson J., at para. 61). Those findings were accepted by the Federal Court of Appeal and were not challenged in our Court. These findings raised the issue of the application of the doctrine of functionality, which barred the claim of infringement under s. 7(b) of the Trade-marks Act, in the view of the trial judge and of the majority of the Court of Appeal.
(3) The Doctrine of Functionality in Trade-marks Law
42. The doctrine of functionality appears to be a logical principle of trade-marks law. It reflects the purpose of a trade-mark, which is the protection of the distinctiveness of the product, not of a monopoly on the product. The Trade-marks Act explicitly adopts that doctrine …
43. In these few words, the Act clearly recognizes that it does not protect the utilitarian features of a distinguishing guise. In this manner, it acknowledges the existence and relevance of a doctrine of long standing in the law of trade-marks. This doctrine recognizes that trade-marks law is not intended to prevent the competitive use of utilitarian features of products, but that it fulfills a source-distinguishing function. This doctrine of functionality goes to the essence of what is a trade-mark.
44. In Canada, as in several other countries or regions of the world, this doctrine is a well-settled part of the law of trade-marks. In the law of intellectual property, it prevents abuses of monopoly positions in respect of products and processes. Once, for example, patents have expired, it discourages attempts to bring them back in another guise.
45. The doctrine of functionality is a well-established principle of the Canadian law of trade-marks. Indeed, our Court characterized it in 1964 as a “well-settled principle of law”:
The law appears to be well settled that if what is sought to be registered as a trade mark has a functional use or characteristic, it cannot be the subject of a trade mark. (Parke, Davis & Co. v. Empire Laboratories Ltd., [1964] S.C.R. 351, at p. 354, per Hall J.)
46. The Federal Court of Canada has consistently applied this doctrine. As in the present case, it has held time and again that no mark could consist of utilitarian features. Otherwise, it would make the wares a part of the mark and grant a monopoly on their functional features. For example, it is worth quoting MacGuigan J.A., in a discussion of the validity of a mark consisting of the particular shape of a razor head:
The distinguishing guise in the case at bar is in my opinion invalid as extending to the functional aspects of the Philip shaver. A mark which goes beyond distinguishing the wares of its owner to the functional structure of the wares themselves is transgressing the legitimate bounds of a trade mark. (Remington Rand Corp. v. Philips Electronics N.V. (1995), 64 C.P.R. (3d) 467 (F.C.A.), at p. 478; see also Pizza Pizza Ltd. v. Canada (Registrar of Trade Marks), [1989] 3 F.C. 379 (C.A.), at p. 381, per Pratte J.A.; Thomas & Betts, Ltd. v. Panduit Corp., [2000] 3 F.C. 3 (C.A.), at para. 25.)
This jurisprudence echoes earlier decisions of the Exchequer Court of Canada which applied the doctrine of functionality in respect of trade-marks, under an earlier statute. A combination of elements primarily designed to perform a function may not be the subject matter of a trade-mark (Imperial Tobacco Co. v. Canada (Registrar of Trade Marks), [1939] Ex. C.R. 141 (Can. Ex. Ct.), at p. 145; Elgin Handles Ltd. v. Welland Vale Manufacturing Co. (1964), 43 C.P.R. 20 (Can. Ex. Ct.), at p. 24).
47. The Canadian jurisprudence is consistent with legislative and jurisprudential developments in other countries. Some of these jurisprudential developments arose out of the ongoing campaign of Kirkbi to protect its market position in many countries, by other legal means after the expiry of its patents.
48. In the United States, Congress recently incorporated the doctrine of functionality into the law of trade-marks. It is now a part of the Lanham Trade-Mark Act: see 15 U.S.C.A. § 1052(e)(5). The Supreme Court of the United States has also held that purely functional features may not become the basis of trade-marks (see, for example, TrafFix Devices, Inc. v. Marketing Displays, Inc., 532 U.S. 23 (U.S. Sup. Ct. 2001), at p. 34; Wal-Mart Stores Inc. v. Samara Bros. Inc., 529 U.S. 205 (U.S. Sup. Ct. 2000), at p. 211).
49. The European law of trade-marks also applies the doctrine of functionality. A directive of the European Commission does not allow the registration of purely functional trade-marks. It prohibits the registration as marks of signs which consist exclusively of a shape which is necessary to obtain a technical result (First Council Directive 89/104, Encyclopedia of European Community Law (EEC), art. 3(1)(e); see also L. Bently and B. Sherman, Intellectual Property Law (2nd ed. 2004), at pp. 794-96).
50. The European Court of Justice reached the same conclusion as had been reached in Canada. On the basis of the EEC directive and of the functionality principle, it found that the triangular shape of the Philips razor could not be registered as a trade-mark. It commented that the directive precluded the registration of shapes
whose essential characteristics perform a technical function with the result that the exclusivity inherent in the trade mark right would limit the possibility of competitors supplying a product incorporating such a function or at least limit their freedom of choice in regard to the technical solution they wish to adopt… (Case C-299/99, Koninklijke Philips Electronics NV v. Remington Consumer Products Ltd., [2002] E.C.R. I-5475, at para. 79)
51. Kirkbi had registered its indicia as a community trade-mark, under European law. Seized of an application for cancellation by Ritvik, the Cancellation Division of the Office for Harmonization in the Internal Market (Trade-marks and Designs) applied the principles set out in Philips Electronics, and voided the mark (63 C 107029/1 “Lego brick” (3D), July 30, 2004). It found that it had a purely technical function and that the EEC directive barred its registration.
52. At the root of the functionality principle in European law, as in Canadian intellectual property law, lies a concern to avoid overextending monopoly rights on the products themselves and impeding competition, in respect of wares sharing the same technical characteristics. It is interesting to observe that, within two different legal systems, a judge of the English High Court and a French Court of Appeal raised the same concerns and came to similar conclusions, when they had to pass judgment on attempts by Kirkbi to protect its indicia by relying on trade-mark law, the tort of passing off or the delict of unfair competition in French law. In this manner, their judgments confirm the validity and broad relevance of the functionality principle as well as the doggedness of Kirkbi in its efforts to retain its market share by any means.
53. In the English case, Interlego AG’s Trade Mark Application, [1998] R.P.C. 69 (U.K. H.L.), INTERLEGO appealed the Registrar of Trade Marks’s refusal to register the LEGO indicia as marks under British trade mark law to the High Court. Neuberger J. dismissed the appeal on this issue. In his opinion, the functional features of the brick could not be a trade mark. Granting rights under trade-mark law would be tantamount to perpetuating a monopoly on the product itself:
In all the circumstances, it seems to me that Mr. Pumfrey was right to contend, that Interlego are not so much seeking to protect a mark on an item of commerce, but are attempting to protect the item of commerce as such. In other words, they are not so much seeking a permanent monopoly in their mark, but more a permanent monopoly in their bricks. This is, at least in general, contrary to principle and objectionable in practice. A trade mark is, after all, the mark which enables the public to identify the source or origin of the article so marked. The function of the trade mark legislation is not to enable the manufacturer of the article to have a monopoly in the article itself. In the present case there is no special reason to conclude that the general approach should not apply. On the contrary, the functional aspect of the knobs and tubes, and the extent of the monopoly in the field of toy building bricks when Interlego might establish if their appeal succeeded, are strong factors supporting the registrar’s decision. [p. 110]
54. During the same period, the appellant had also engaged in a variety of legal proceedings to ward off Ritvik’s entry into the French market. It relied on various grounds, but, in the end, it appears that its efforts foundered on the same grounds as in Great Britain, namely that, in a free market, trade-marks should not be used to prolong monopolies on technical characteristics of products. Competition between products using the same technical processes or solutions, once patent rights are out of the way, is not unfair competition. It is simply the way the economy and the market are supposed to work in modern liberal societies.
(…)
(4) The Applicability of the Doctrine of Functionality to Unregistered Trade-marks
56. Kirkbi does not challenge the application of the functionality doctrine to registered marks in this Court. It raises a different argument. It submits that the doctrine does not apply to unregistered marks. In its view, such a mark does not grant its holder monopoly rights, but solely the right to be protected against confusion as to the source of the product. Moreover, it argues that legislative changes which occurred at the adoption of the present Trade-marks Act changed the previous law and limited the application of the functionality principle to registered trade-marks.
57. The first prong of the appellant’s argument concerns the nature of the rights granted by an unregistered trade-mark. In substance, the appellant advances the submission that unregistered trade-marks do not create exclusive property rights, but give rise to a right to be protected against confusion in the market. The appellant says that this right could be enforced against competitors causing confusion in the market place under s. 7(b) of the Trade-marks Act and by the tort of passing off.
58. As Sexton J.A. found for the majority in the Court of Appeal, this argument has no basis in law. Registration does not change the nature of the mark; it grants more effective rights against third parties. Nevertheless, registered or not, marks share common legal attributes. They grant exclusive rights to the use of a distinctive designation or guise (Ciba-Geigy Canada Ltd. v. Apotex Inc., [1992] 3 S.C.R. 120 (S.C.C.), at p. 134; Gill and Jolliffe, at pp. 4-13 and 4-14). Indeed, the Trade-marks Act, by allowing for the assignment of unregistered trade-marks, recognizes the existence of goodwill created by these marks as well as the property interests in them. Registration just facilitates proof of title (Sexton J.A., at paras. 76, 77, and 81). Sexton J.A. rightly pointed out that the argument of Kirkbi appears to rest on a misreading of a 19th century judgment of the House of Lords, Singer Manufacturing Co. v. Loog (1882), (1882-83) L.R. 8 App. Cas. 15 (U.K. H.L.), aff’g (1880), 18 Ch. D. 395 (Eng. C.A.). This judgment stands only for the proposition that an unregistered trade-mark could be mentioned by competitors in comparative advertising, not that it failed to create exclusive rights to the name for the purpose of distinguishing the products. The functionality doctrine remains relevant, as the legal nature of the marks remains the same.
(…)
61. In the end, the appellant seems to complain about the existence of competition based on a product, which is now in the public domain. As “LEGO” and LEGO-style building blocks have come close to merging in the eyes of the public, it is not satisfied with distinctive packaging or names in the marketing operations of Ritvik. It seems that, in order to satisfy the appellant, the respondent would have to actively disclaim that it manufactures and sells LEGO bricks and that its wares are LEGO toys. The fact is, though, that the monopoly on the bricks is over, and MEGA BLOKS and LEGO bricks may be interchangeable in the bins of the playrooms of the nation – dragons, castles and knights may be designed with them, without any distinction. The marketing operations of Ritvik are legitimate and may not be challenged under s. 7(b). This is enough to dispose of the claim of the appellant, which had grounded its claim of passing off on the existence of a trade-mark. Nevertheless, given the discussion in the courts below, some comments on the common law action for passing off will be useful.
(…)
Conclusion
70. For these reasons, I would dismiss the appeal with costs
While no amount of use can remedy a sign that is dictated by a utilitarian function, the registration of a descriptive or deceptively misdescriptive mark is still possible provided that it has acquired secondary meaning in the market. To overcome the obstacle of s.12(1)(b) TA, a trademark owner must therefore show that it has acquired sufficient distinctiveness (otherwise known as ‘secondary meaning’) to let the mark fulfil its essential function. This possibility is specifically provided for in s.12(3) TA which states that ‘a trademark that is not registrable by reason of paragraph (1)(a) or (b) is registrable if it is distinctive at the filing date of an application for its registration, determined without taking into account subsection 34(1), having regard to all the circumstances of the case including the length of time during which it has been used.’ The ‘Bon Appétit Banff’ trademark of the Banff Lake Louise Tourism Bureau described in the frame below provides an example of such ‘acquired distinctiveness’.
EXTENSION: Acquired Distinctiveness of Bon Appétit
Advance Magazine Publishers, Inc. v. Banff Lake Louise Tourism Bureau, 2018 FC 108
1. The Banff Lake Louise Tourism Bureau (“Banff”) wanted to promote tourism during the “shoulder season”, the period after the end of the summer and before the launch of the ski season. It decided to advertise a ten-day event in November during which restaurants in the area would serve a series of special fixed-price meals, all under the name “Bon Appétit Banff”. It signed up local restaurants, set up a website, printed a number of advertisements, and required the participating restaurants to print menus and other material under the banner “Bon Appétit Banff”. It also applied for trademark protection for this name, and that application gave rise to this proceeding.
2. Advance Magazine Publishers, Inc. (“Advance”) opposed Banff’s application on the basis that it had already registered a number of trademarks under the name “Bon Appétit”, and allowing “Bon Appétit Banff” to be registered would likely be confusing for individuals in the marketplace. The Trademark Opposition Board (“TMOB”) granted Banff’s application, finding that the opponent had not filed evidence to support its claims, while Banff had filed evidence to demonstrate a limited use of the mark. Advance launched an appeal under section 56(1) of the Trade-Marks Act, and filed new evidence pursuant to s. 56(5) of the Act. Banff was given notice of this proceeding but did not participate.
3. The question in this appeal is whether an ordinary casual consumer, somewhat in a hurry, would look at a menu, notice or website advertising “Bon Appétit Banff” and likely be confused into thinking that the source of the services associated with the “Bon Appétit Banff” trademark was one and the same as the source of the goods or services associated with Advance’s BON APPÉTIT trademarks. If yes, Advance’s opposition to the registration of the Respondent’s trademark should be granted, and the TMOB decision should be overturned.
(registration No. TMA221520, registered June 24, 1977) For Publications, namely a magazine.
(Application number 1519424)
(1) Inherent and acquired distinctiveness
30. This factor requires consideration of both the inherent distinctiveness of the mark and the extent to which the mark has acquired distinctiveness through use in the marketplace. (…)
31. Inherent distinctiveness depends on the extent to which a trademark is an everyday word or a non-descriptive, distinctive word. Where a trademark is a unique or created name, such that it refers to only one thing, it will be inherently distinctive and given a wide scope of protection.
32. In contrast, a descriptive or suggestive word or phrase will be viewed as a weak mark and given relatively less protection; thus where a mark refers to many things or is a common reference in the market, or is merely descriptive of the goods or services, it will be given less protection.
33. The TMOB decision refers to the affidavit filed by Advance, which presented “dictionary definitions for the term ‘bon appétit.’ The literal meaning is ‘good appetite,’ however, the connotation is ‘enjoy your meal.’” On the basis of this, the TMOB found that the mark possesses “a fairly low degree of inherent distinctiveness as it is a common phrase comprised of two French words.” No other evidence on this point has been introduced, and I agree with the TMOB that the terms are not particularly unique. Indeed, they are often used at the opening of a meal.
34. Advance argues that the consideration of inherent distinctiveness must be made in the context of the particular goods or services (…). Advance contends that the term “bon appétit” is not inherently descriptive of the character or quality of the goods or services associated with its registrations and applications, namely on-line and print publications, operation of a website and social media activity, educational and training materials, etc.
35. I find that the terms are suggestive, but not particularly unique. They are two ordinary words, commonly associated with food or dining, but not unique or invented. However, there is no evidence that the term is commonly used in the market. I agree with the TMOB that the affidavit filed on this point did not establish that the term had become commonplace in the Canadian market. This does not end the analysis, however; I must consider the second aspect of this factor: whether the term has acquired distinctiveness.
36. On the evidence before me, Advance has established a strong presence in the Canadian market, both through long-standing distribution and sales of its print publication and through significant on-line and social media presence and activity. The affidavit of Ms. Wong Ortiz, on which there was no cross-examination, provides the factual foundation on this point which was missing before the TMOB.
37. The evidence on the reach into the Canadian market of the various components of Advance’s goods and services reflects wider trends over the past decade. While its print publication had ten-year total Canadian sales of 4.1 million copies to retailers and 1.36 million to customers, the annual figures show a decline in print sales over that period. The highest monthly totals in evidence are from 2006, when over 46,000 magazines were sold to retailers, of which over 22,000 were sold to customers. By 2015 this had declined to sales of over 22,000 magazines to retailers, of which 2,900 were sold to customers. In contrast, Advance’s on-line reach through its “Bon Appétit” website and social media presence has shown a steady and continuous growth in Canada during the same period. There are various ways of measuring this, but a few examples will make the point. Since 1997, there have been over 60 million “unique visits” to the website from Canada. As Ms. Wong Ortiz explains, “unique visitors” refers to different individuals annually and does not track repeat visits in any given year by the same unique visitor. Another approach simply measures the number of visitors per month from Canada, and this shows over two million unique visits per month from Canada.
38. In regard to social media, again there are a number of different ways of measuring the reach into the Canadian market through activity on social media. There are tens of thousands of Canadian “followers” of the Facebook and Twitter accounts held by Bon Appétit, and well over one million “likes” from Canadians for various articles and stories. Other channels measure the number of subscribers from Canada, and these show over ten thousand Canadian users, particularly focused on food, recipes, cooking, and restaurant recommendation features. It is estimated that 200,000 Canadians annually viewed videos presented by Bon Appétit on YouTube over the past decade.
39. In addition, Bon Appétit has licensed its trademark and logo in Canada to outlets such as the Home Shopping Network, Electrolux Major Appliances, and another (un-named) company that creates on-line travel packages. The trademark was also licenced to Terlato Wines International, a company that distributes wine through an on-line wine shop. In addition to wine sales, this company created promotional events, featuring gourmet meals and wines selected by renowned chefs.
40. In regard to the magazine and website, Ms. Wong Ortiz’ affidavit shows a number of feature articles on Canadian cities, with a particular focus on dining and other tourist attractions. This includes travel and restaurant guides for Montréal, Toronto, Québec City, Vancouver, and Niagara-on-the-Lake. Advertisements were placed in the magazine by several Canadian tourism bureaus, including Nova Scotia, Ontario, Québec, Tourism Canada, as well as tourism organizations from Toronto and Montreal. In addition, the magazine carried feature stories on particular culinary events held in various cities in North America. Overall, Bon Appétit’s main focus is on tourism, dining, specialty food and drink, food preparation, along with other tourist activities.
41. While there is no evidence of actual recognition in the marketplace by consumers, I find that it is reasonable to infer from the evidence referred to above that the Applicant’s use of “bon appétit” for its goods and services has acquired distinctiveness through its various activities in print and on-line, particularly given the evidence of sales and reach into the Canadian market. (…)
42. In many cases the acquired distinctiveness of a trademark is demonstrated by the reach of its presence in the market through both storefront presence and advertising. Consumer awareness can be demonstrated through surveys, or simply inferred from widespread advertising and the number of stores displaying the banner. Here, Advance sought to demonstrate its presence in the market through evidence of the sales of the magazine and the on-line presence through a website and social media vehicles. I find that the evidence of on-line and social media presence and activity is as useful and compelling as evidence of storefront presence and more traditional forms of advertising in print, radio or television.
43. In assessing customer awareness or reach into the marketplace through a website or social media presence, merely posting a website or putting content into a social media platform may not be indicative of any particular reach into the market which would support an argument of acquired distinctiveness through use in Canada. In this case, the more telling evidence relates to the number of visits or activity on the website or social media platforms. This is valuable because it demonstrates both Canadians’ awareness of the material and their desire to take some steps to seek it out, which itself reflects a certain recollection or awareness. The on-line impact of the brand is evident because it requires Canadians to take steps to engage, either through visiting the website or taking steps to “follow” it or to “like” a feature article or photograph on one or more social media platforms. This can be equally valuable in supporting an analysis of acquired distinctiveness under the Act.
44. On the basis of all of the evidence presented, I find that Advance has established that its BON APPÉTIT registered and applied-for marks have acquired a degree of distinctiveness in the Canadian market.
[NOTE: The trademark application filed by Banff Lake Louise Tourism Bureau for Bon Appétit Banff was refused]
3. Certification Marks
Not all marks are meant to distinguish the goods or services of one undertaking from those of another. Some marks, known as certification marks, typically apply to the goods or services manufactured, sold or supplied by various entities that meet the standards set by the association holding the mark. Think of CSA, CAA, Fair Trade, Energy Star, FSC, Egg Quality Assurance, Gluten Free, Canada Organic, Non GMO, Dairy Farmers of Canada, 100% Canadian Milk etc. These marks receive the same level of protection as traditional trademarks once they are registered. Certification marks are specifically regulated under ss. 2, 23 to 25 of the Trademarks Act.
2. certification mark means a sign or combination of signs that is used or proposed to be used for the purpose of distinguishing or so as to distinguish goods or services that are of a defined standard from those that are not of that defined standard, with respect to
(a) the character or quality of the goods or services,
(b) the working conditions under which the goods are produced or the services performed,
(c) the class of persons by whom the goods are produced or the services performed, or
(d) the area within which the goods are produced or the services performed;
Registration of certification marks
23 (1) A certification mark may be adopted and registered only by a person who is not engaged in the manufacture, sale, leasing or hiring of goods or the performance of services such as those in association with which the certification mark is used or proposed to be used.
Licence
(2) The owner of a certification mark may license others to use it in association with goods or services that meet the defined standard, and the use of the certification mark accordingly is deemed to be use by the owner.
That definition must be viewed in the context of the Act as a whole, in that, in order to be a valid mark, any certification mark must be:
- not clearly descriptive or deceptively misdescriptive of the wares or services in association with which it is used;
- able to distinguish the wares or services of a defined standard from wares and services of others (ie. be distinctive);
- not be used by the certification mark owner, but only by authorized licensees, in association with the performance of services, the production of wares or advertising the wares or services of those licensees, at the date relied upon by the owner as a date of first use;
- not likely to be confusing with any registered or previously applied for trademark, or previously used trademark or trade name, in Canada (for a discussion of the concept of confusion, see section F. below);
- such that “use” must be in accordance with section 4 of the Act with respect to services, which requires that a trademark (and therefore certification mark) is deemed to be used with services if it is used or displayed in the performance or advertising of these services (for a discussion of the concept of use, see section E. below).
In relation to point 1 above, s.25 TA specifies that a certification mark that is descriptive of the place of origin of goods or services, and not confusing with any registered trademark, is registrable if the applicant is the administrative authority of a country, state, province or municipality that includes or forms part of the area indicated by the certification mark, or is a commercial association that has an office or representative in that area, but the owner of any certification mark registered under this section shall permit its use in association with any goods or services produced or performed in the area of which it is descriptive. In other words, there must be a connection between the description of origin of the goods or services offered and the location of administrative authority or commercial association carries on its affairs. Section 25 carves out a narrow exception to section 12(1)(b) for certification marks that are descriptive of a place of origin [see Maple Leaf Foods Inc v Consorzio del Prosciutto di Parma, 2012 TMOB 249.]
Example: FAIR TRADE CERTIFIED & DESIGN — 1421478
Registration number
TMA801957
Type(s)
Design
Category
Certification Mark
CIPO status
REGISTERED
LIVE/REGISTRATION/Issued and Active
|
Filed
Registered Registration Expiry Date Registrant Fairtrade Canada Inc. Index headingsFAIR TRADE CERTIFIED
|
Goods(1) Body soap bars, deodorant soaps, lip balms, hand creams, shea butter. (2) Clothing for infants, namely, sleepwear; fresh flowers; green foliage accompanying fresh flowers in a bouquet. (3) Sports balls, namely, soccer balls, basketballs (4) Chocolate products, namely, chocolate chips, chocolate bars, cocoa powder; cereal-based bars; non-alcoholic beverage, namely, fruit juices; coffee; sugar; molasses; dried fruits. Certification mark textThe wares shall be produced, imported, processed and/or distributed in conformity with defined standards as set in the attached Trade Certification- Standard Operating Procedure manual and shall either be sourced from organizations of small producers or from establishments using hired workers. The organizations of small producers shall: be composed mainly of small producers; be able to demonstrate accountability to its members and for the resources used in its activities; use a portion of its income from the wares to invest in community initiatives for the improvement of social and economic conditions of its members; ensure the respect of national norms concerning the use and storage of pesticides; encourage its members to use environmentally sound methods of production; receive a set price or premium over the market price.The hired workers shall: receive minimum wages and benefit from safe and stable working conditions as defined by national legislation in the country of production; have the right and be given the opportunity to form a labour union; determine the use of the funds from the price premium associated with the sale of the wares through their elected representatives on a joint committee of workers and management representatives; use the funds for social and economic initiatives to improve their socio-economic initiatives to improve their socio-economic conditions. Where wares contain ingredients that cannot be coursed according to the above criteria, the wares shall: contain at least 20% Fair Trade Certified ingredients by dry weight; contain only Fair Trade Certified Ingredients where standards exist for those ingredients. AMENDMENT TO REGISTRATION / MODIFICATION A L’ENREGISTREMENT: |
The owner of a registered certification mark is responsible for certifying that the products bearing the mark have been produced, imported, processed and/or distributed in conformity with the standards set out in the defined certification standard. The owner’s licensees are required in their licenses to conform to the character and quality of the goods set out in the standard. The same obligation exists in relation to a certification mark for services. Failure to conform with the standard can lead to termination of the licensing agreement [see Robinson Sheppard Shapiro S.E.N.C.R.L./L.L.P. v Fairtrade Canada Inc., 2017 TMOB 133].
C. Prohibited Trademarks/ Official Marks
Apart from prohibiting the registration of signs that are descriptive, deceptively misdescriptive, confusing with a registered trademark or embodying a purely functional design, s.12(1) of the Act lists four additional categories of signs that cannot be registered: a sign or combination of signs whose adoption is prohibited by section 9 or 10; plant breeders’ rights denominations; geographical indications set out on a list maintained by the registrar; and a mark the adoption of which is prohibited under the Olympic and Paralympic Marks Act. The list of prohibited trademarks laid down in s.9 is quite impressive, ranging from ss.9(1)(a) to (o). Most prohibited marks listed in the section find their origin directly in Article 6ter of the Paris Convention of 1883. It makes sense that the international community would early on have made arrangements to protect one another’s state emblems, official hallmarks, as well as the emblems of Intergovernmental Organizations. Official mark can be put on the list of prohibited marks by filing a request with the registrar. Such requests may only be filed by countries who are parties to the Paris Convention, a province, a municipal corporation, Her Majesty’s forces, or any university.
Paris Convention 1883
Article 6ter
Marks: Prohibitions concerning State Emblems, Official Hallmarks, and Emblems of Intergovernmental Organizations
(1)
(a) The countries of the Union agree to refuse or to invalidate the registration, and to prohibit by appropriate measures the use, without authorization by the competent authorities, either as trademarks or as elements of trademarks, of armorial bearings, flags, and other State emblems, of the countries of the Union, official signs and hallmarks indicating control and warranty adopted by them, and any imitation from a heraldic point of view.
(b) The provisions of subparagraph (a), above, shall apply equally to armorial bearings, flags, other emblems, abbreviations, and names, of international intergovernmental organizations of which one or more countries of the Union are members, with the exception of armorial bearings, flags, other emblems, abbreviations, and names, that are already the subject of international agreements in force, intended to ensure their protection.
(…)
Compared to the legislation of other jurisdictions, however, the Canadian Trademarks Act contains two unique subsections: first with respect to any scandalous, obscene or immoral word or device (s. 9(1)(j)); and second, with respect to the use of any sign used by public authority in Canada (s. 9(1)(n)(iii)). Let us examine the two types of prohibited marks below, looking at signs used by public authorities first.
1. Official marks
This subsection in the Canadian Trademarks Act is undeniably its most unique and controversial feature. Because of the broad power it confers on public authorities over the use of their official marks and because of the relative ease of obtaining protection, the application of this provision has always carried an air of controversy. Some have argued for its repeal; most advocate for its narrow interpretation. As a result of the unabated criticism, s.9(1)(n)(iii) was modified in 2018 to create a mechanism aimed at reducing potential abuses in relation to official marks. Sub-paragraphs 9(3) and 9(4) give the Registrar the power, on its own initiative or at the request of anyone who pays the fee, to issue a public notice indicating that a previously issued notice that reserves the use of an official mark by a public authority no longer applies where the user of the official mark is not a public authority or where the authority no longer exists. The possibility to clean up deadwood in the Trademark Registry and to free some marks for others to use has been created; it must now be put to good use.
9 (1) No person shall adopt in connection with a business, as a trademark or otherwise, any mark consisting of, or so nearly resembling as to be likely to be mistaken for,
(n) any badge, crest, emblem or mark
(…)
(iii) adopted and used by any public authority, in Canada as an official mark for goods or services,
in respect of which the Registrar has, at the request of Her Majesty or of the university or public authority, as the case may be, given public notice of its adoption and use;
(…)
9 (3) For greater certainty, and despite any public notice of adoption and use given by the Registrar under paragraph (1)(n), subparagraph (1)(n)(iii) does not apply with respect to a badge, crest, emblem or mark if the entity that made the request for the public notice is not a public authority or no longer exists.[IN FORCE on 01.04.2025]
Notice of non-application
(4) In the circumstances set out in subsection (3), the Registrar may, on his or her own initiative or at the request of a person who pays a prescribed fee, give public notice that subparagraph (1)(n)(iii) does not apply with respect to the badge, crest, emblem or mark. [IN FORCE on 01.04.2025]
Despite the controversy, the application for a public notice recognizing a public authority’s official mark is a frequently invoked provision in the Trademarks Act. Protection of an official mark can be obtained by filing a request with the registrar. In determining whether a body is a public authority, three of the factors which may be taken into account are:
(1) does the body have a public duty;
(2) is the body subject to significant public control;
(3) and does the body direct its profits toward public benefit.
The degree of governmental control and the extent to which the body’s activities benefit the public appear to be the most important factors in determining whether a body is a public authority for the purpose of subparagraph 9(1)(n)(iii). Bodies that qualify as a public authority must also establish that the official mark that is the object of the notice has indeed been adopted and used prior to the filing of the request to the registrar. The registrar has no discretion to refuse, not even in cases where the public notice could be deemed not to be in the public interest. Contrary to normal trademarks, requests to have an official mark put on the list of prohibited marks are not subject to the same controls of ss.12(1)(a) to (d), i.e. they can be descriptive, deceptively misdescriptive, or even generic. The inscription of official marks on the register is not subject to the opposition proceeding, nor does the existence of a confusing or identical registered trademark prevent the publication of the notice.
Public notice is given through the Trademark Journal. The purpose of the registrar’s giving public notice of the adoption and use of an official mark is to alert the public to that adoption as an official mark by the public authority to prevent infringement of that official mark. It does not bestow upon the registrar any supervisory functions. Once public notice of the adoption and use of an official mark has been given, no person may adopt a trademark consisting of or so nearly resembling the trademark for which notice has been given as to be likely to be mistaken for it.
Defining ‘Public Authority’: Assn. of Architects (Ontario) v. Assn. of Architectural Technologists (Ontario), 2002 FCA 218
1 The Registrar of Trade-marks has given public notice that the Association of Architectural Technologists of Ontario (“AATO”) has adopted and used as official marks for services, the words ARCHITECTURAL TECHNICIAN, ARCHITECTE- TECHNICIEN, ARCHITECTURAL TECHNOLOGIST, ARCHITECTE-TECHNOLOGUE.
2 As a result, members of the appellant, the Ontario Association of Architects (“OAA”), may be prevented from using any of these words in connection with their professional services, unless they had started to use them before April 28, 1999, the date when the Registrar gave public notice in the Trade-marks Journal of their adoption and use by the AATO as official marks.
3 This is an appeal from a decision of the Trial Division in which the Applications Judge dismissed an application by the OAA to reverse the decision to give public notice of the adoption and use of the official marks. He held that the Registrar had committed no reviewable error in concluding that the AATO is a public authority and that it had adopted and used the marks as official marks for services. The decision is reported as Assn. of Architects (Ontario) v. Assn. of Architectural Technologists (Ontario) (2000), [2001] 1 F.C. 577 (Fed. T.D.).
4 There are important advantages for a body that is able to claim a mark as an official mark, rather than simply as a trade-mark. However, only a public authority may register an official mark under subparagraph 9(1)(n)(iii) of the Trade-marks Act, R.S.C. 1985, c. T-13. The principal issue in this appeal is whether the AATO, a self-regulatory professional body, is a public authority for the purpose of this provision and thus capable of requesting the Registrar to give public notice of its adoption and use of a mark as an official mark.
5 A secondary issue is whether an application for judicial review under section 18.1 of the Federal Court Act, R.S.C. 1985, c. F-7, or an appeal under section 56 of the Trade-marks Act, is the appropriate proceeding in which an interested person may challenge the public notice given by the Registrar of an official mark. Although this case does not turn on the resolution of this issue, I propose to deal with it in these reasons since there is justifiable uncertainty in the profession on the proper way to proceed in cases of this kind.
(…)
15 It is convenient to describe here the provisions of the AATO Act that are relevant to this appeal. Section 2 sets out the principal objects of the AATO, which are virtually identical to those in its letters patent, which the Act superseded.
- The objects of the Association are,*
(a) to increase the knowledge, skill and proficiency of architectural technologists, architectural technicians, building technologists and building technicians and to grant accreditation and certification to such persons;
(b) to foster the attainment of the highest standard of quality and competence in the field of architectural technology;
(c) to establish, maintain and enforce strict rules of ethical conduct for members of the Association in the field of architectural technology;
(d) to inform the public of the purposes and aims of the Association;
(e) to promote harmonious relationships among members of the Association in order to stimulate the development of the Association and enhance its public reputation.
Any surplus funds derived from its activities are to be applied solely for carrying out the AATO’s objects, and shall not be divided among its members : section 13.
16 Section 3 of the Act creates a council to manage the AATO’s affairs and provides for the election of council members. Section 4 confers on the council a power to make by-laws, which must be open for examination by members of the public.
17 The AATO must grant membership to all applicants who are Canadian citizens of good character and satisfy its certification board that they have met the membership requirements prescribed in the by-laws or have equivalent qualifications : section 5. The AATO’s registrar is under a duty to maintain a register of members in good standing, which must be kept open for public examination (section 7), and to remove from the register the names of members whose registration has been suspended or revoked as a result of disciplinary proceedings or whose membership has lapsed for other reasons (section 8). A copy of the register, certified by the registrar, shall, in the absence of evidence to the contrary, be received in evidence in any proceedings as proof of a person’s membership in the AATO : section 11. A person who has been refused membership in the AATO or who has been the subject of a disciplinary sanction may appeal to the Divisional Court on questions of fact or law : section 10.
18 Section 9 defines the scope of the monopoly created by the Act. Subsection 9(1) provides that a registered member of the AATO may use the designation “M.A.A.T.O.” and one or more of the designations : “architectural technician” or “architecte-technicien”; “architectural-technologist” or “architecte-technologue”; “registered building technologist” or “registered building technician”. It is an offence for those who are not registered members of the AATO to use these designations or to hold themselves out as registered members : subsection 9(2). However, as a result of submissions made by the OAA, subsection 9(3) was added to create an important exception to subsection (2) : it is not an offence for those holding licences or certificates of practice issued under the Architects Act, or who are permitted by paragraph 46(8)(c) of that Act to use the title “architect” or “architecte”, to use designations that otherwise may be used only by members of the AATO.
19 Section 12 emphasises the relatively narrow scope of the statutory monopoly. It provides that, subject to subsection 9(2), nothing in the Act prevents those who are not members of the AATO from describing themselves as building technologists or building technicians, from being employed in those capacities, or from offering or providing services similar to those offered or provided by architectural technologists or architectural technicians.
(…)
(i) governmental control
57 Counsel for the OAA argued that the Judge erred in law in concluding, in effect, that, simply because it is a creature of statute, the AATO is subject to a significant degree of governmental control. The Applications Judge explained his conclusion by saying of the AATO (supra at para. 18): “Its enabling legislation is capable of being amended or repealed by the Government of Ontario at any time.” Perhaps an even stronger way of putting this point would be to say that the AATO is subject to governmental control because it is a statutory body with no delegated power to alter its corporate powers, objects or functions without an amendment to its statute.
58 Thus, the essential question is whether the fact that the AATO requires an amendment to its legislation to change its objects, powers or duties is a sufficiently significant degree of government control to satisfy this element of the test of whether a body is a public authority. In my respectful opinion, the Judge erred when he concluded that AATO’s statutory origin is in itself sufficient to make it a public authority. That conclusion is reviewable for correctness because it is likely to be of precedential effect in future cases where a body’s status as a public authority is in dispute: see Housen v. Nikolaisen, supra at para. 28.
59 Even if the test of governmental control of an otherwise private organization does not require control by the Executive, as opposed to control by the Legislature, it does call for some ongoing government supervision of the activities of the body claiming to be a public authority for the purpose of subparagraph 9(1)(n)(iii).
60 A comparison with the Architects Act reveals the kinds of government control often included in Ontario legislation creating self-regulatory professional bodies. For example, section 6 confers powers on the relevant Minister to review the activities of the OAA’s Council; to request Council to undertake activities that, in the Minister’s opinion, are necessary and desirable for implementing the intent of the Act; and to advise Council on the implementation of the statutory scheme. In addition, the Council’s regulation- making power is exercisable with the approval of the Lieutenant Governor in Council: subsection 7(1). The Lieutenant Governor in Council also has the power to appoint between three and five members of the Council (paragraph 3(2)(b)); a member of the Complaints Committee (paragraph 29(1)(b)) and the Discipline Committee (paragraph 33(1)(b)); and the Complaints Review Councillor (subsection 31(1)).
61 Similar provisions are contained in the Regulated Health Professions Act, 1991, S.O. 1991, c. 18, sections 2, 3, 5 and 6, and the legislation governing the regulation of the various health disciplines.
62 In my view, this is the kind of government superintendence to which one would expect a self-regulatory professional body to be subject if it is to be characterized as under a significant degree of governmental control for the purpose of subparagraph 9(1)(n)(iii). Counsel for the AATO conceded that the only form of governmental control on which he could rely was that exercisable through the Legislature’s exclusive power to change the AATO’s statutory objects, powers and duties. This is insufficient to satisfy the governmental control test because it is not a power that enables the government, directly or through its nominees, to exercise a degree of ongoing influence in the body’s governance and decision-making similar to that often found in legislation dealing with statutory bodies that regulate the practice of a profession in which only those whom they license may engage, such as architecture and the law.
63 In reaching this conclusion, I have kept in mind the statutory context in which this question is being considered, namely, subparagraph 9(1)(n)(iii) of the Trade-marks Act. This provision, it will be recalled, confers very substantial benefits not available to the owners of trade marks, and thus has the capacity to injure both existing trade mark owners and the public. An official mark need not serve to distinguish wares or services, it may be merely descriptive, and it may be confusing with another’s mark. Once public notice has been given of its adoption and use, an official mark “is hardy and virtually unexpungeable” (Mihaljevic v. British Columbia, supra at 89) and, once the Registrar has given public notice under subparagraph 9(1)(n)(iii), no mark may be used that is likely to be confused with an official mark.
64 These considerations persuade me that subparagraph 9(1)(n)(iii) should not be given an expansive meaning by equating the need for legislative amendment with government control. To hold that any body created by statute satisfies the government control test would widen very considerably the range of bodies that may be able to claim the benefit of an official mark. A body that succeeded in securing a private Act of the Legislature would be recognized as a public authority if it could also show that its activities conferred a public benefit. And, according to the Applications Judge, the fact that the body also benefits its members does not preclude a finding of public benefit. Hence, the fact that a self-regulatory body is statutory, and its objects and powers may be amended unilaterally and exclusively by the Legislature that created it, does not in law constitute “governmental control” in this context.
(ii) public benefit
65 In view of my conclusion that the AATO is not subject to a sufficiently significant degree of governmental control to qualify as a public authority, it is strictly not necessary for me to consider whether the activities of the AATO satisfy the public benefit requirement. Nonetheless, I shall deal with this issue since it was fully canvassed in argument and constitutes the other half of the definition of a public authority.
66 Counsel for the OAA submitted that the Applications Judge committed a legal error when he stated (supra at paras. 19 and 22) that the AATO regulated the professions of architectural technician and architectural technologist. He said that, unlike the Architects Act, subsection 2(3), the objects of the AATO do not include the regulation of the practice of a profession. At most, the AATO regulates the conduct of its members and, through its powers to set standards and determine membership, controls who may claim membership and use the designations that are reserved almost exclusively for its members.
67 I agree that the AATO does not regulate a profession in the sense of controlling professional activities in which only its members may lawfully engage. However, I do not accept that the Applications Judge committed a legal error in expressing himself as he did. For, as counsel for the AATO pointed out, by setting and enforcing standards of professional competence and ethical conduct of its members, the AATO regulates part of the practice of the profession. That is, it regulates the part of the profession in which practitioners use their membership in the AATO and the statutory designations, including architectural technician or architectural technologist, in connection with the services that they provide.
68 Further, it was entirely reasonable in my opinion for the Applications Judge to conclude that the AATO’s regulatory activities benefit the public. By engaging a member of the AATO, a client who requires the services offered by architectural technicians or architectural technologists has some assurance that the person engaged is competent and honest. Moreover, because the registrar of the AATO is under a duty to ensure the accuracy of the register, which must be available for public inspection, potential clients or employers can check whether a given person is a member.
69 I would also agree with the Applications Judge that the fact the activities of the AATO may also benefit its members is not a fatal objection to characterizing them as benefiting the public. The mix of public and private benefit tends to be a feature of professional self-regulation, even when, as in the case of the legal profession for example, a statutory body regulates the practice of the profession and a non-statutory body acts as its advocate. Both perform functions (professional education, for example) that serve the interests of the public as citizens and clients, as well as those of members of the profession.
70 Similarly, I am not persuaded by the further argument that the AATO does not exist for the benefit of the public because section 13 of the AATO Act provides that any surplus that the AATO derives from carrying on its affairs shall be applied to the pursuit of its objects and shall not be divided among the members. Counsel for the OAA argues that paragraph 2(e) of the Act provides that it is an object of the AATO to promote harmonious relationships among members in order to stimulate the development of the AATO and to enhance its public reputation. Accordingly, he argues, all the surplus could be spent on this object, which benefits the AATO’s members and not the public.
71 However, in my view this object has a dual function: to encourage the public to seek out the services of members of the AATO by eliminating unseemly conduct among members and thus enhancing the reputation of the AATO and its members, and, thereby, to increase members’ professional income. Section 13 and paragraph 2(e) are not, in my opinion, incompatible with a finding that the AATO’s activities benefit the public.
72 Accordingly, the Applications Judge committed no reviewable error in concluding that the AATO satisfied the public benefit element of the definition of a public authority for the purpose of subparagraph 9(1)(n)(iii).
73 Finally, I would note that, as with many other statutory self-regulatory professional bodies in Ontario, including the OAA, decisions of the AATO to refuse membership and to discipline members are subject to an appeal on questions of fact and law to the Divisional Court of the Superior Court of Justice. By expanding somewhat the scope of judicial review to which such decisions would otherwise be subject, the Legislature has provided another indication that the public benefits from the proper performance by the AATO of its functions.
Conclusions
74 In view of my conclusion that the Applications Judge erred in law when he held that the AATO established that it was subject to a significant degree of governmental control simply because it was created by statute, I do not propose to deal with the separate issue of whether the AATO had established that it had adopted and used the marks as official marks for services.
75 The error committed by the Applications Judge requires that the appeal be allowed. Moreover, since the only connection between the AATO and government is its statutory creation, and its consequent inability to amend its objects, powers and duties without an amendment to its statute, the Registrar’s decision to give public notice under subparagraph 9(1)(n)(iii) was either an unreasonable application of the statute to the facts or must have been based on a legal error, namely that, as a body created by statute, the AATO was thereby subject to a sufficiently significant degree of governmental control to be a public authority.
76 For these reasons, I would allow the appeal with costs and set aside the order of the Trial Division, grant the application for judicial review with costs, and set aside the public notice given by the Registrar of the marks adopted and used by the AATO as official marks for services.
The public notice of an official mark gives the public authority using it the power to prevent anyone from adopting and using a mark ‘so nearly resembling as to be likely to be mistaken for’ it. Disputes between public authorities and (potential) trademark applicants are not uncommon, especially since the existence of a public notice relating to an official mark is sufficient ground for the refusal by the Registrar to register a mark that ‘so nearly resembling as to be likely to be mistaken for’ it, pursuant to s.12(1)(e) TMA. Section 12(1)(e) TMA can also be invoked by public authorities as a ground for opposition to the registration of another undertaking’s mark.
A public notice relating to an official mark issued pursuant to subparagraph 9(1)(n)(iii) forbids the future adoption of a trademark ‘so nearly resembling as to be likely to be mistaken for’ a mark adopted by a public authority in respect of which the Registrar ‘has … given’ (past tense) public notice. Consequently, it does not retroactively prohibit the adoption of marks. It is only prospective in operation. Section 12 of the Act, dealing with registration, speaks in the present tense (‘a mark of which the adoption is prohibited by section 9’). It therefore renders unregistrable a not yet registered mark, the adoption of which would now run afoul of s. 9, even if that mark had been adopted and used prior to the giving of public notice under s. 9. The wording of the provisions relating to the adoption of an official mark by a public authority and the registration of a similar trademark by another party are not parallel. Whatever rights to the use of a mark may flow from its adoption are undisturbed by the subsequent adoption and use of a confusingly similar official mark; the right to register the mark is, however, prohibited from the time of the giving of the public notice, irrespective of whether the goods and services are similar or not. Cdn. Olympic Assn. v. Allied Corp., [1990] 1 F.C. 769 (F.C.A.)
Contrary to the above, a dispute between a previously registered ordinary trademark and a subsequent request for public notice relating to a confusing official mark will be solved in favour of the former. In Ontario (Energy) v. Quality Program Services Inc. 2020 FCA 53, the Federal Court of Appeal confirmed that subpara. 9(1)(n)(iii) of the Act prohibits the use of a mark that has been ‘adopted and used by any public authority in Canada as an official mark for goods and services’ where ‘the Registrar has, at the request…of the…public authority…given public notice of its adoption and use’, but that it in no way confers on the public authority any particular protection against claims for trademark infringement or other claims under the Act. A public authority that chooses to use a mark that is confusing to a registered trademark does so at its peril. In other words, holders of official marks may be held liable for damages if their official marks infringe on other previously registered marks. If the use of an official mark by a public authority causes confusion with a trademark that was already registered, then the trademark holder may bring an action for infringement. If the official mark is found to infringe on the trademark, the public authority may be forced to pay damages to the trademark holder.
When dealing with an opposition filed by a public authority, the Trademark Opposition Board (TMOB) and the Federal Court have been known to give a narrow interpretation to the official mark. In Chartered Professional Accountants of Ontario v. American Institute of Certified Public Accountants, 2021 FC 35, CPA Ontario opposed the registration by AICPA of the mark “THIS WAY TO CPA” under section 12(1)(e) TMA, because it is “a mark of which the adoption is prohibited” by section 9(1)(n)(iii) of the TMA. The TMOB rejected the opposition finding that there was no evidence that CPA Ontario’s official mark was used. As the Federal Court observed, ‘while there was evidence of provincial legislation regulating the use of professional designations by accountants in Ontario, there was no evidence of use of CPA as a designation by accountants, apart from bald assertions’. The Court agreed with the TMOB that the regulation of the use of CPA as a professional designation under provincial statutes does not constitute use of that designation as a trademark within the meaning of section 4 of the TMA [see section E. ‘Concept of Use’ below] and in a trademark opposition proceeding, it is use as a trademark that is of concern.
Example: Official Mark to protect Indigenous signs
Indigenous communities across Canada have been struggling to find adequate legal protection for their cultural heritage. Among the various forms of expression, the use of logos and signs is part of each community’s identity. It makes perfect sense that First Nations would seek to obtain the protection of their official marks under subparagraph 9(1)(n)(iii) TMA on the same footing as any other public authority in Canada.
The Trademark Database currently counts fifty inscriptions of official marks owned by First Nations, including the example below.
The Madawaska Maliseet First Nation community obtained the protection of their logo as official mark in 2013.
2. Scandalous, obscene, immoral marks
In the long list of prohibited marks enumerated in s.9(1) TMA are those that are likely to be mistaken for ‘any scandalous, obscene or immoral word or device’. This provision knows of no equivalent in the Paris Convention or the TRIPs Agreement.
9 (1) No person shall adopt in connection with a business, as a trademark or otherwise, any mark consisting of, or so nearly resembling as to be likely to be mistaken for (…)
(j) any scandalous, obscene or immoral word or device;
Admittedly, the provision has seldom been invoked before the TMOB or the courts. But it does offer undertakings, and society as a whole, a tool to counter the adoption and use of offensive marks. What constitutes a scandalous, obscene or immoral mark will undeniably change over time, along with societal values. Recent discussions in the media relating to the use Uncle Ben’s, Aunt Jemima and Eskimo trademarks are clear illustrations of how society’s views on equality, diversity and inclusiveness have changed. Societal pressure seems to have been sufficient to motivate the trademark owners to reconsider the use of these trademarks. In absence of voluntary action, s.9(1)(j) TMA could perhaps have served as an extra argument towards change.
D. Registration Process
Although non-registered trademarks benefit from a certain degree of protection under the Canadian common law, the full protection of a regular trademark or certification mark is only guaranteed if it is registered at the Canadian Intellectual Property Office. In comparison to the patent application process, registering a trademark is much quicker, and cheaper, and the examination process is much less demanding. A trademark will be registered if it qualifies as a distinctive sign, if it does not fall within the exclusions of s.12 TA, if all formalities are complied with and if no one lodges a successful opposition proceeding. The most important steps in the application process are described in greater detail in the following paragraphs.
CONTENT OF A TRADEMARK APPLICATION
Requirements for application
30 (1) A person may file with the Registrar an application for the registration of a trademark in respect of goods or services if they are using or propose to use, and are entitled to use, the trademark in Canada in association with those goods or services.
Contents of application
(2) The application shall contain
(a) a statement in ordinary commercial terms of the goods or services in association with which the trademark is used or proposed to be used;
(b) in the case of a certification mark, particulars of the defined standard that the use of the certification mark is intended to indicate and a statement that the applicant is not engaged in the manufacture, sale, leasing or hiring of goods or the performance of services such as those in association with which the certification mark is used or proposed to be used;
(c) a representation or description, or both, that permits the trademark to be clearly defined and that complies with any prescribed requirements; and
(d) any prescribed information or statement;
Pursuant to s.30(2) TMA and s.31 of the Trademark Regulations 2018, a complete application includes:
- an application for registration, containing all required information;
- a formal drawing, if needed;
- the filing fee;
A separate application must be filed for each trademark, for example for a word mark and a logo relating to the same goods or services. One application for a trademark can cover multiple goods and/or services. The goods or services are to be grouped according to the classes of the Nice Classification, each group being preceded by the number of the class of the Nice Classification to which that group of goods or services belongs and presented in the order of the classes of the Nice Classification. There are 34 classes of goods and 11 classes of services. The class headings describe in very broad terms the nature of the goods or services contained in each class. Note, however, that the Nice Classification does not supersede the Trademarks Act and Regulations. Consequently, the provisions under the Canadian legislation for specifying all goods and services pursuant to paragraph 30(2)(a) of the Act prevail.
Recall also that additional evidence of the distinctive character of a mark at the filing date of the application for its registration can be requested by the Registrar in any of the situations covered by s.32(1) TMA, including descriptive marks for which secondary meaning must be established, marks that are not inherently distinctive, a trademark that consists exclusively of a single colour or of a combination of colours without delineated contours, and a non-traditional sign as a trademark.
FILING DATE
According to s.33 TMA, the filing date of an application for the registration of a trademark in Canada is the day on which the Registrar has received all of the following:
(a) an explicit or implicit indication that the registration of the trademark is sought;
(b) information allowing the identity of the applicant to be established;
(c) information allowing the Registrar to contact the applicant;
(d) a representation or description of the trademark;
(e) a list of the goods or services for which registration of the trademark is sought;
(f) any prescribed fees.
This filing date is important since it is the date used to assess who is entitled to registration in the case of confusion between co-pending trademarks.
In the case of applications first filed outside of Canada for the registration of the same or substantially the same trademark in association with the same kind of goods or services, the filing date of the application in or for the other country is deemed to be the filing date of the application in Canada and the applicant is entitled to priority in Canada, if
(a) the filing date of the application in Canada is within a period of six months after the date on which the earliest application was filed in or for any country of the Union for the registration of the same or substantially the same trademark in association with the same kind of goods or services;
(b) the applicant files a request for priority in the prescribed time and manner and informs the Registrar of the filing date and country or office of filing of the application on which the request is based;
(c) the applicant, at the filing date of the application in Canada, is a citizen or national of or domiciled in a country of the Union or has a real and effective industrial or commercial establishment in a country of the Union; and
(d) the applicant furnishes, in accordance with any request under subsections (2) and (3), evidence necessary to fully establish the applicant’s right to priority.
THE EXAMINATION PROCESS
When the Registrar receives the application, the Office will:
- search trademark records to find any existing or pending trademark that could conflict with the applicant’s trademark
- examine the application to make sure it complies with the Trademarks Act and Regulations, and inform the applicant about any missing requirements or any objection to registering the trademark; pursuant to s.35 TMA, the Registrar may require an applicant for registration of a trademark to disclaim the right to the exclusive use apart from the trademark of such portion of the trademark as is not independently registrable, but the disclaimer does not prejudice or affect the applicant’s rights then existing or thereafter arising in the disclaimed matter, nor does the disclaimer prejudice or affect the applicant’s right to registration on a subsequent application if the disclaimed matter has then become distinctive of the applicant’s goods or services.
- publish the application in the Trademarks Journal, leaving time for opposition (challenges) to the application
- allow and register the trademark if no one files an opposition to the application (or if any opposition filed has been decided in the applicant’s favour)
During the examination process, the applicant may amend their application either at the request of the Registrar or voluntarily. For example, pursuant to s.35 TMA, the Registrar may require an applicant for registration of a trademark to disclaim the right to the exclusive use apart from the trademark of such portion of the trademark as is not independently registrable. Such disclaimer does not prejudice or affect the applicant’s rights then existing or thereafter arising in the disclaimed matter, nor does the disclaimer prejudice or affect the applicant’s right to registration on a subsequent application if the disclaimed matter has then become distinctive of the applicant’s goods or services.
Example: Disclaimer text
According to s.35(1) of the Regulations, an application for the registration of a trademark may be amended before the trademark is registered. Some exceptions apply, however, as listed in s.35(2) of the Regulations. Requests for amendment can pertain for example to the description of the goods and services sold in association with the trademark, to the entry of a disclaimer, to the correction of an error or to the modification of the standard underlying the use of a certification mark. Pursuant to s.41(1) of the Act, once the trademark is entered in the register, the Registrar may, on application by the registered owner of a trademark and on payment of the prescribed fee, make any of the following amendments to the register:
(a) correct any error or enter any change in the name, address or description of the registered owner;
(b) cancel the registration of the trademark;
(c) amend the statement of the goods or services in respect of which the trademark is registered;
(d) amend the particulars of the defined standard that the use of a certification mark is intended to indicate;
(e) enter a disclaimer that does not in any way extend the rights given by the existing registration of the trademark; or
(f) subject to the regulations, merge registrations of the trademark that stem, under section 39, from the same original application.
Since an extension of the statement of goods and services has the potential of affecting the activities of competitors, applications in this sense are also published in the Trademark Journal, to give notice to anyone of the change. The publication of applications and amendments to registration also serves as a means of informing the general public about the trademark and the associated goods and services.
Example: Application to extend the statement of goods and services (s.41 TMA)
OPPOSITION
Pursuant to s.38 TA, any person with a reasonable argument for doing so can oppose a trademark application advertised in the Trademarks Journal. The person must make the opposition within two months of the publication date by either filing a statement of opposition or asking for more time to oppose. The proper fee must be sent with the statement of opposition or request for more time. The Registrar will not allow any opposition that it considers to be frivolous.
Statement of opposition
38 (1) Within two months after the advertisement of an application for the registration of a trademark, any person may, on payment of the prescribed fee, file a statement of opposition with the Registrar.
Marginal note:Grounds
(2) A statement of opposition may be based on any of the following grounds:
(a) that the application does not conform to the requirements of subsection 30(2), without taking into account if it meets the requirement in subsection 30(3);
(a.1) that the application was filed in bad faith;
(b) that the trademark is not registrable [see s.12(1) TMA];
(c) that the applicant is not the person entitled to registration of the trademark [see s.16(1) TMA];
(d) that the trademark is not distinctive [see s.32(1) TMA];
(e) that, at the filing date of the application in Canada, determined without taking into account subsection 34(1), the applicant was not using and did not propose to use the trademark in Canada in association with the goods or services specified in the application; or
(f) that, at the filing date of the application in Canada, determined without taking into account subsection 34(1), the applicant was not entitled to use the trademark in Canada in association with those goods or services.
Opposition is a complex and often long process. Opposition proceedings are held before the Trademark Opposition Board. They are adversarial in nature and similar to court proceedings. Both parties may file evidence and counter-arguments, cross-examine the evidence of the other party, and appear at an oral hearing. After a final decision is made, it may be appealed to the Federal Court of Canada.
The opposition proceeding is a powerful, strategic, tool in the hands of competitors mostly, who use it to assert their own rights against those of other applicants whose marks risk impeding their activities, or to put limits on the scope of protection that would be conferred on the applicant.
Subparagraph 38(2)(a.1) TMA, i.e. allowing oppositions against applications filed in bad faith, was added through the 2018 legislative amendments as a result of the 2014 removal of the requirement of actual use as a condition for the registration of a trademark in Canada. Until that time, applicants were required to provide evidence of use of the mark in connection with all the goods or services claimed in the application, before the Registrar would issue the certificate of allowance. Upon ratifying the Singapore Treaty on Trademark Law, Canada changed its age-old practice of requiring proof of use as a condition for registration, in favour of allowing applications based on actual use or intent to use. Some expressed fear that this change would open the door to bad behaviour, including mala fide ‘trademark squatters’ who would herd registrations for trademarks they never intend to use before selling them back to their legitimate owners at an exorbitant price. No decision has been rendered to date on the basis of the new language of s.38(2) TMA. Time will tell whether this specific provision will need to be invoked frequently.
Of the grounds for opposition, the three most commonly invoked are subparagraph 38(2)(b) TMA, i.e. the applied for mark is not registrable for one of the reasons listed in s.12(1) TMA; subparagraph 38(2)(c) TMA, that the applicant is not the person entitled to registration of the trademark; or subparagraph 38(2)(d) TMA, i.e. that the applied for mark is not distinctive. A person may file an opposition pursuant to s.38(2)(b) TMA, for example because the mark applied for is descriptive, deceptively misdescriptive, or confusing with a registered trademark. A person may file an opposition against the registration of a trademark on the ground that they, rather than the applicant, are entitled to register the trademark (s.38(2)(c) TMA). This occurs, for example, when the opponent can establish that they had already used the mark or made it known in Canada before the application filing date. Subparagraph 38(2)(d) most often comes into play when an opponent contests that the applicant’s trademark has acquired sufficient distinctiveness so as to give it secondary meaning.
If successful, an opposition proceeding instituted within the two month window from the date of publication is more effective than a later action for trademark infringement, because it prevents the registration of a mark that would not deserve protection at all. In an opposition proceeding, the applicant bears the burden to prove that the application complies with s.12, e.g. that the mark is registrable, while the opponent must provide sufficient admissible evidence from which it could reasonably be concluded that the facts alleged to support each ground of opposition exist, e.g. that the mark should not be registered. The evidence is assessed on a balance of probabilities.
An example of an opposition on one or more of the three most commonly invoked grounds is provided in the boxes below.
Example: Opposition against a mark that is not registrable and not distinctive (s.38(2)(b) and 38(2)(d) TMA)
[1] PODS Enterprises, LLC (the Opponent) is an international business that provides moving and storage services, including the provision of containers for the storage and transportation of goods. The Opponent conducts its business in Canada in association with the registered trademarks PODS (TMA672,471) and PODS Logo (TMA721,151).
[2] The Opponent has opposed application No. 1,742,509 (the Application) filed by Qwik Contain Solutions Inc. (the Applicant) for the trademark MODPOD & Design (the Mark), depicted below, in association with similar goods and services to those of the Opponent.
The Record
[4] The Application was filed on August 19, 2015 and lists the following goods and services (the Goods and Services):
Goods
(1) Collapsible modular metal containers for the storage, warehousing, transportation of household, commercial, industrial purposes and waste.
(2) Storage container accessories, namely, metal storage containers for the modular storage containers, large or small ramps, metal security doors, shelving sets, skylight panel, windows of metal, window shutters, packaging containers of metal, packaging containers of plastic, all purpose scouring powder, down insulation, fiberglass insulation, vandal bars.
(3) Portable metal and plastic fence panels and portable waste disposal bins.
(4) Printed and electronic instructional publications, namely booklets, handouts, pamphlets, brochures, in relation to assembling and dissembling collapsible modular metal containers.
Services
(1) Moving and storage services, namely, rental, storage, delivery, installation and pick-up of portable storage containers namely, hydraulic lifts for use in respect of transportation and installation of storage containers.
(2) Operation of an Internet website providing information on modular storage containers to the general public.
[5] The Application is based on use of the Mark in Canada since at least as early as September 2013 in association with Goods (1), (2), (4) and the Services, and proposed use of the Mark in Canada in association with Goods (3).
[6] The Application was advertised for opposition purposes in the Trademarks Journal on February 22, 2017. On July 19, 2017, the Opponent filed a statement of opposition against the Application pursuant to section 38 of the Trademarks Act, RSC 1985, c T-13 (the Act). I note that the Act was amended on June 17, 2019. All references in this decision are to the Act as amended, with the exception of references to the grounds of opposition which refer to the Act as it read before it was amended (see section 70 of the Act which provides that section 38(2) of the Act as it read prior to June 17, 2019 applies to applications advertised prior to that date).
[7] The Opponent raises grounds of opposition based on registrability under section 12(1)(d), entitlement under sections 16(1)(a) and 16(3)(a), distinctiveness under section 2, and non-compliance with sections 30(b) and 30(i) of the Act. For the grounds of opposition based on an alleged likelihood of confusion, the Opponent relies on its use and registration in Canada of the trademarks PODS (TMA672,471) and PODS Logo (TMA721,151), details of which are included as Schedule A to this decision. The Opponent also relies on its use of the trademark PODS in the design format depicted below.
[8] The Applicant filed a counter statement on September 20, 2017 denying the grounds of opposition.
[9] The Opponent filed as its evidence the Affidavit of David Metcalf sworn January 11, 2018 (the Metcalf Affidavit). Mr. Metcalf is the Vice President, Marketing of the Opponent. He attests to the Opponent’s use in Canada since 2006 of its trademark PODS, and design versions thereof, in association with the goods and services set out in the Opponent’s registrations. His evidence is discussed further in the analysis of the grounds of opposition. Mr. Metcalf was not cross-examined.
Onus and Material Dates
[12] The Applicant bears the legal onus of establishing, on a balance of probabilities, that the Application complies with the requirements of the Act. However, there is an initial evidential burden on the Opponent to adduce sufficient admissible evidence from which it could reasonably be concluded that the facts alleged to support each ground of opposition exist [John Labatt Limited v The Molson Companies Limited (1990), 1990 CanLII 11059 (FC), 30 CPR (3d) 293 (FCTD) at 298].
[13] The material dates with respect to the grounds of opposition are as follows:
• Sections 38(2)(a)/30 of the Act – the filing date of the Application [Georgia-Pacific Corp v Scott Paper Ltd (1984), 3 CPR (3d) 469 (TMOB) at 475];
• Sections 38(2)(c)/16(1)(a) of the Act – the claimed date of first use of the Applicant’s Mark;
• Sections 38(2)(c)/16(3)(a) of the Act – the filing date of the Application; and
• Sections 38(2)(d)/2 of the Act – the filing date of the opposition [Metro-Goldwyn-Mayer Inc v Stargate Connections Inc, 2004 FC 1185, 34 CPR (4th) 317].
(…)
[16] In the present case, the Application contains the requisite statement and there is no evidence that this is an exceptional case involving bad faith or the violation of a Federal statute. Accordingly, the section 30(i) ground of opposition is dismissed.
[47] In view of the above, pursuant to the authority delegated to me under section 63(3) of the Act, I refuse the Application pursuant to section 38(12) of the Act.
ALLOWANCE AND REGISTRATION
If there is no opposition, or if an opposition has been decided in the applicant’s favour, the Registrar will allow the application and will not look at any further challenges. The applicant will receive notice of allowance and be asked to pay a registration fee. The final step is for the Registrar to give you a certificate of registration and enter the trademark in the Register of Trademarks.
Section 46 TMA states that the registration of a trademark is on the register for an initial period of 10 years beginning on the day of the registration and for subsequent renewal periods of 10 years if, for each renewal, the prescribed renewal fee is paid within the prescribed period.
E. Concept of Use
The concept of use is the second cornerstones of trademark law, after the concept of distinctiveness. Until the legislative amendments of 2014 [proclaimed in force in 2019], trademarks could only be registered in Canada if the applicant could establish actual ‘use’ of the mark in the course of trade. This meant that no trademark was entered on the Register without evidence being brought either through affidavit or samples that the mark was actually used. This condition for registration has been abandoned, opening the door to registration of future trademarks. Even if the use of a mark no longer plays a role at the registration stage, the continued use of a mark by its owner is still a key element in the mark’s continued protection. For example, use of a trademark reinforces its distinctiveness in the eyes of the public. Use of a trademark by one undertaking can stop the registration of the same or similar mark by another, while failure to use a registered trademark opens the door to its expungement from the Register. The concept of use also underlies any infringement action under ss. 19, 20 and 22 TMA, where the examination of the use of a mark will occur from both the plaintiff’s and the defendant’s perspective.
Not all forms of use qualify as a ‘use’ in the sense of the Act, however. In this section, we explore what ‘use’ entails pursuant to s.4 TMA and how such use affects who may be entitled to register the mark under s.16(1) TMA. We also discuss the concept of ‘making a mark known in Canada’, pursuant to s.5 TMA. Finally, we consider the legal consequence of the non-use of a trademark, pursuant to s.45 TMA.
1. Use in Canada
The definition of ‘use’ laid down in s.4(1) TMA contains several elements which deserve clarification. To qualify as a use in the sense of s.4(1), a mark must be associated with goods in the context of a transfer of property or possession, in the normal course of trade. What constitutes a ‘normal course of trade’? What kind of transfer of property must take place and in whose benefit to count as a use?
When deemed to be used
4 (1) A trademark is deemed to be used in association with goods if, at the time of the transfer of the property in or possession of the goods, in the normal course of trade, it is marked on the goods themselves or on the packages in which they are distributed or it is in any other manner so associated with the goods that notice of the association is then given to the person to whom the property or possession is transferred.
(2) A trademark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services.
(3) A trademark that is marked in Canada on goods or on the packages in which they are contained is, when the goods are exported from Canada, deemed to be used in Canada in association with those goods.
Use of a trade mark is deemed to have occurred if, at the time property in or possession of the wares is transferred, in the normal course of trade, it is ‘marked on the wares themselves or on the packages in which they are distributed’. Would the definition include trademark bearing goods that are sold to consumers through a professional intermediary, like a patient consuming medicine prescribed by a physician? In an often cited decision of the Federal Court, Syntex Inc. et al. v. Apotex Inc., [1984] 2 F.C. 1012, the Court recalled that to qualify as ‘use’, a mark may come to the attention of the transferee in a direct way at the time of transfer which is the critical point in time. But notice can also be given in any other manner of association at that same point in time. This could occur, for example, through the appearance of a trademark in written material inserted in a package containing the goods even though not marked on the package or on the goods themselves, like a flyer inserted in a magazine. In the case at hand, the flyer at issue had a dual function, serving as a piece of promotional material and as an order form. For the Court, however, the presence of the plaintiffs’ marks on the comparative shade charts of the defendants’ brochures was not a use of such marks within the meaning of section 4(1) since the brochures were neither the wares themselves nor the packages in which the wares were distributed. Nothing could be regarded as notice to any person purchasing the defendants’ wares of any association of the plaintiffs’ marks with those wares, since no such act ever occurred in any use to which the brochure or its chart could be put at the time of the transfer of the property or possession of the defendants’ goods to their purchaser.
Case law has established that a passive website cannot constitute a use in association with goods if no transfer of ownership is possible through that medium (Pro-C Ltd. v. Computer City Inc., 2001 CanLII 7375 (ON CA)). In order to prove ‘use’ as a trademark at a certain date, one cannot rely on bald statements. One must produce actual evidence demonstrating use of the alleged trademark in association with one’s goods or services. For example, one can produce invoices of sales of goods or of services under the trademark bearing a date within the relevant period, or actual advertisements made during the relevant period.
Is the distribution of promotional goods to a small circle of individuals an instance of ‘normal course of trade’? Does the use of the mark require transfer of the marked goods be sold for profit? The Federal Court ruled that promotional goods distributed free of charge per se do not meet the requirements of s.4(1) of the Act in Riches, McKenzie & Herbert LLP v. Cosmetic Warriors Limited, 2018 FC 63. Transfers of property merely for the acquisition of goodwill are insufficient to constitute a transfer or use in the normal course of trade. However, while free distribution of goods typically is not considered use in the ordinary course of trade under s.4(1), if such use is part of an overall course of action for a business, carried out for the purpose of deriving profits and developing goodwill for the goods, it may constitute use in the normal course of that business, particularly if the goods freely distributed are the goods in which the business normally deals. In the present case, employees were paying money to purchase the t-shirts; there had therefore been some payment or exchange for the goods supplied. However, such an exchange does not on its own establish use in the normal course of trade. For the use of a mark in advertisement and promotional material to be sufficiently associated with a good to constitute use, the advertisements and promotional material would have to be given at the time of transfer of the property in or possession of the goods.
Example: Promotional material per se insufficient to amount to use
Nissan Canada Inc. v. BMW Canada Inc., 2007 FCA 255
[2] The appellant, Nissan Canada Inc. (“Nissan”), is in the business of selling, distributing and promoting automobiles, parts and accessories in Canada. Nissan is the owner of a number of registered Canadian trade-marks, including registration No. 612,708 for M45 and registration No. 640, 144 for M35, both for use in association with motor vehicles. The two marks are used for two series of Infiniti vehicles, Infiniti being the luxury division of Nissan. Nissan uses the unregistered marks M and M6 for promoting and advertising its automobiles, parts and accessories.
[3] The respondents, BMW Canada Inc. and Bayerische Motoren Werke Aktiengesellschaft (“BMW”), are also in the business of manufacturing, selling, distributing and promoting automobiles, parts and accessories throughout the world. BMW Canada Inc. sells, distributes and promotes automobiles, parts and accessories in Canada under the authority of BMW AG. BMW AG is the owner of the registered Canadian trade-marks, including registration No. 544, 922 for M3, registration No. 561, 482 for M5 and registration No. 336, 985 for M & Design. These trade-marks are registered for use in association with automobiles and their parts. BMW AG claims to also be the owner of the unregistered marks M and M6. Both marks were, at the time of trial, the subjects of applications for registration by BMW.
(…)
[22] The trial judge appears to have assumed that BMW’s limited use of the M mark was sufficient to amount to “use” of a trade-mark under subsection 4(1) without providing any analysis on the issue. In doing so, I believe the trial judge erred. In my view, there was no probative evidence on the record demonstrating an association at the time of transfer of the property in or possession of the wares.
[23] The evidence indicates that the letter M is used in many BMW trade-marks in association with numbers, letters or words. In addition to the registered trade-marks M3, M5, M & Design owned by BMW, the trial judge noted BMW’s interest in other marks containing the letter M at paragraphs 9 to 11: (…)
[24] I agree with the trial judge, as held at paragraph 37, that use of the M mark in association with numbers, letters or words is not equivalent to use of M alone as a trade-mark. I also agree with the trial judge’s conclusion at paragraph 59 that use of the M & Design mark cannot be considered use by BMW of the M mark.
[25] Based on the evidence, BMW’s use of the M mark was limited to advertisements and promotional type materials. Such use of a mark is not in itself sufficient to constitute “use” under subsection 4(1) of the Act. For the use of a mark in advertisement and promotional material to be sufficiently associated with a ware to constitute use, the advertisements and promotional material would have to be given at the time of transfer of the property in or possession of the wares: see Clairol International Corp. et al. v. Thomas Supply & Equipment Co. Ltd. et al. (1968), 55 C.P.R. 176 at 190 (Can. Ex. Ct.) and General Mills Canada Ltd. v. Procter & Gamble Inc. (1985), 6 C.P.R. (3d) 551 (T.M. Opp. Bd.).
[26] In this case, some of the evidence in itself was problematic. For instance, the BMW Product Guide 2003, although it contained the M mark, was intended for use within the BMW organization, i.e. for retailer sales personnel, and therefore would not have been given to purchasers. There were other types of promotional material which were apparently intended for wide-spread distribution; however, there is no evidence indicating when the advertisements and promotional materials containing the M mark were distributed in Canada, if at all, such that notice of the association was given at the time of transfer.
[27] Similarly, with respect to the M6 mark, the only evidence is that M6 was used in an owners’ handbook (date unknown), a 1989 owners’ manual and a 1988 technician bulletin. Again, there was no evidence as to how many, if any, of these handbooks, manuals or bulletins were distributed in Canada and when, if at all, and if they were available at the time of transfer of property or possession.
[28] Quite simply, in the absence of evidence indicating whether the advertisements or promotional materials were given to purchasers at the time of transfer of BMW’s wares, there is no evidence to support a finding of use of the M and M6 marks as that term is defined in the Act.
[29] In light of the foregoing and on the basis of the record, I find there is no evidence of use on which the trial judge could rely to conclude that the M and M6 marks are unregistered trade-marks in accordance with section 2 of the Act and for the purposes of determining the passing off claim under subsection 7(b) of the Act. I find the trial judge erred in law in pursuing a paragraph 7(b) analysis without first establishing the existence of the M and M6 marks as trade-marks.
With respect to the use of a mark in relation to services, s.4(2) TMA states that a trademark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services. The mere advertising of services in Canada will not constitute use in Canada in association with a service. Some aspect of the services must be performed or delivered in Canada. In Ontario Dental Assistants Association v. Canadian Dental Association, 2013 FC 266, the concept of use was examined in relation to the alleged use of a professional designation that had been registered as a certification mark. According to the Court, the use of a professional designation by licensed users (dental assistants), while performing the services, would satisfy the “use” requirements set out in s.4(2). In this case, however, the applicant only made bare allegations of such use, without any valid evidence to support that use. No evidence was adduced that pointed to use by licensees at the relevant claimed date of first use. Since not one license evidencing use was offered by the applicant, either before the Board or on appeal through any new evidence, the Court found that the applicant had not shown use of the CDA acronym as a certification mark since as early as 1965.
In Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134, the Federal Court of Appeal confirmed the lower court decision and ruled that Hilton had established that some aspect of “hotel services” were performed or delivered in Canada under the mark WALDORF ASTORIA. According to the Court, subsection 4(2) of the Act deems a mark to be used in association with “services” if it is used or displayed in the performance or advertising of those services. In first instance, the Federal Court agreed that a bricks and mortar hotel located and operated in Canada would indeed be required where the registered service was the operation of a hotel. However, the Federal Court has held that providing a service that is incidental or ancillary to a registered service can be considered to be performance of the registered service itself. As long as some consumers, purchasers or members of the public in Canada receive a material benefit from the activity in issue, it will amount to the performance of the service in this country. In this case, “hotel services” included other, incidental or ancillary services such as reservation or payment services. Were these hotel services performed in Canada? According to the evidence 41 000 people with addresses in Canada had stayed at Waldorf Astoria hotels during the relevant period. Some 1 300 people from Canada had received a discounted room rate during the relevant period in exchange for paying up-front for their hotel reservation. These individuals also received e-mail confirmation of their booking displaying the WALDORF ASTORIA mark. In addition, individuals enrolled in the Hilton loyalty program would receive points for each booking, which they could redeem for stays or other benefits at hotels located in Canada or elsewhere. The Federal Court was satisfied that these services amounted to ‘use’ under the Trademarks Act.
In a country as big as Canada, the issue of the location of the use of the mark in association with goods or services deserves attention. It arose in Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, where the Supreme Court must determine whether the trademark “Masterpiece Living”, proposed and subsequently registered by Alavida Lifestyles Inc. (“Alavida”), a company entering the retirement residence industry in Ontario, was then confusing with the unregistered trademarks or trade name previously used by another company, Masterpiece Inc., in the retirement residence industry in Alberta. In the context of a confusion analysis [see section F. below], s.6(2) TMA specifies that ‘the use of a trade-mark causes confusion with another trade-mark if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.’ In this context, the Supreme Court emphasized:
[30] It is immediately apparent from these words, “if the use of both . . . in the same area”, that the test for confusion is based upon the hypothetical assumption that both trade-names and trade-marks are used “in the same area”, irrespective of whether this is actually the case. As a result, geographical separation in the use of otherwise confusingly similar trade-names and trade-marks does not play a role in this hypothetical test. This must be the case, because, pursuant to s. 19, subject to exceptions not relevant here, registration gives the owner the exclusive right to the use of the trade-mark throughout Canada.
Where a mark may be recognized as being associated with a good within the course of trade, it must also be ‘used’ in accordance with the registration specifications. In the below example, we see that the Federal Court has given a flexible interpretation of the concept of use in relation to software products, so as not to disadvantage the trademark owner because of a change of technology.
Example: Use of mark in association with software = good or service?
Specialty Software Inc v Bewatec Kommunikationstechnik GMBH, 2016 FC 223
[1] In 1992, Specialty Software Inc registered the trade-mark “MEDINET” in association with computer software programs. Specialty registered its mark in relation to wares rather than services.
[2] In 2011, Specialty assigned its mark to Medinet Health Systems Inc.
[3] In 2013, Bewatec Kommunikationstechnik GMBH initiated proceedings before the Registrar of Trademarks to expunge Specialty’s mark from the register. In order to avoid expungement, Specialty was asked to show evidence of its use of the mark for the period between November 22, 2010 and November 22, 2013. Specialty failed to file any evidence and, accordingly, the Registrar granted Bewatec’s application.
[4] Specialty now appeals the Registrar’s decision and has presented fresh evidence of use. The parties do not dispute that evidence. It is clear that Specialty and Medinet have used the mark during the relevant period, particularly in relation to software used by hospitals and physicians to track patients’ medications. However, Bewatec argues that the mark has been used in relation to services, not wares. This means, according to Bewatec, that Specialty is no longer entitled to its mark.
[5] At its heart, this dispute arises as a result of technological change. Specialty used to sell its software in a tangible form on disks. This is no longer necessary. Clients can now obtain access to the software over the internet from Specialty’s computer server after installing an icon on their computers. Bewatec argues that this change means that Specialty is now providing a service in the form of access to a website. Specialty has not proved, Bewatec submits, that any transfer of property or possession has taken place, as is required by s 4 of the Trade-marks Act, RSC 1985, c T-13 (all provisions cited are set out in an Annex).
[6] I disagree with Bewatec’s argument. In my view, there has been no real change in what Specialty is selling. The change relates to the means by which the software is transferred to clients, not to the actual nature of Specialty’s use of its trade-mark. Specialty has shown compliance with its legal requirements. Therefore, I must grant Specialty’s appeal and order the Registrar to maintain its registration.
[7] The issue is whether Specialty has shown any transfer of the property in, or possession of, a ware, as required by the Act. (The word “wares” has since been replaced with the word “goods” in the Act. Nothing turns on this change and I will use the words “goods” and “wares” interchangeably).
- Has Specialty shown any transfer of the property in, or possession of, a ware?
[8] Bewatec argues that Specialty’s mark is associated with data and software available only through an internet browser. Specialty has not met, in its view, its burden of demonstrating that there has been a transfer of ownership or possession of any goods. It points out that Specialty’s clients do not download or install or physically acquire anything. In reality, Bewatec says, clients merely obtain access to a service that Specialty provides over the internet.
[9] Bewatec relies on MyLife.com Inc. v. Grbic, 2014 TMOB 175 (T.M. Opp. Bd. (s.45)). There, the Board concluded that providing free access to a website, without any evidence of any form of transfer of software to users, was a service. It struck the trade-mark owner’s registration in relation to wares, but maintained it in respect of services.
[10] Bewatec argues that Specialty’s online software is also situated on a website and that Specialty has failed to show an actual transfer to users, whether in the form of installation or registration of the software, during which the MEDINET mark is visible.
[11] I disagree.
[12] According to s 4 of the Act, a “trade-mark is deemed to be used in association with goods if, at the time of the transfer of the property in or possession of the goods, … it is marked on the goods themselves or on the packages in which they are distributed or it is in any other manner so associated with the goods that notice of the association is then given to the person to whom the property or possession is transferred”.
[13] Even though Specialty used to sell its software on disks – which are obviously tangible and easily identified as wares – it was always really selling a license to use the software, which is an intangible good. Specialty did not actually sell the software itself; it sold an entitlement to obtain access to it by way of licenses. The disks merely represented the means by which the transfer of the goods occurred. The real goods were, and are, the licenses.
[14] The evidence demonstrates that Specialty’s trade-mark has been used in a manner that shows an association between the mark and the goods that are sold – the licences themselves:
- The software is sold to health care workers, including doctors, clinicians, and hospital staff, on an annual subscription basis.
- The software is situated on Medinet’s server, and purchasers obtain access to it by way of a web browser on their own computers.
- After the sale, purchasers receive an invoice showing the MEDINET mark. They then receive a license agreement by e-mail.
- When purchasers log on to the software, they are linked to a screen showing the MEDINET mark.
- If a purchaser chooses not to renew a subscription, the purchaser’s license to access the software is cancelled.
[15] In my view, this evidence shows that the mark is used in a manner that gives notice to purchasers of software licenses of an association between those goods and the registered mark and therefore, the requirements of the Act regarding use have been met.
[16] Specialty’s operations closely resemble those carried out by companies selling software and whose trade-marks have been upheld in respect of wares. For example, the Board has accepted that a mark could be considered to have been used in association with software if there was evidence that purchasers would have seen the mark at the time the software was transferred to them, that is, when it was installed on their computers: Brouillette Kosie Prince v. Axon Development Corp. (2005), 50 C.P.R. (4th) 273 (T.M. Opp. Bd.). The Board struck the trade-mark in that case because there was no actual evidence of any transfers during the relevant period.
[17] Similarly, the Board found an association between the mark in question and wares based on evidence of sales and renewals of software, including evidence of licensing agreements: Baker & McKenzie LLP v. Genesistems Inc. (2009), 74 C.P.R. (4th) 75 (T.M. Opp. Bd.). In another case, dealing with the same mark, the Board found the required association existed based on the appearance of the mark on license agreements that customers would see before installing the software, and on the installation screens themselves: Clark Wilson LLP v. Genesistems, Inc., 2014 TMOB 64 (T.M. Opp. Bd. (s.45)). In the latter case, the Board observed that “institutional computer software is not a physical object, and thus a computer software company experiences unique difficulties when attempting to associate a trade-mark with its software” (at para 10).
[18] Certainly, Specialty has experienced those difficulties in this case. However, as the President and CEO of Medinet, Ms Katherine Linda Culter, put it: “License agreements for software products are license agreements for software products, however you want to provide access”.
[19] I am satisfied that the evidence before me meets the fairly low threshold that a registered owner must meet to demonstrate that its mark is not merely “deadwood” on the register: Performance Apparel Corp. v. Uvex Toko Canada Ltd. (2004), 31 C.P.R. (4th) 270 (F.C.), at 282.
[20] The Applicant has demonstrated that there has been a transfer of property in a ware. The ware in question is the license to use the software. The property is the entitlement to enjoy the use of the licence. The transfer has occurred through the granting of access, on payment of a subscription fee, in the form of login credentials. The mark is visible to purchasers before, during and after the transfer. Accordingly, the requirements of s 4(1) of the Trade-marks Act have been met.
III. Conclusion and Disposition
[21] Specialty has demonstrated an association between its mark and the transfer to purchasers of the means to acquire access to and make use of its software. I must, therefore, allow this appeal, with costs.
The reader will notice that Parliament has created two regimes under s. 4 TMA in relation to trademarks used in association with goods destined for the domestic Canadian market (s.4(1) TMA) and trademarks used in association with goods destined for exportation to foreign countries (s.4(3) TMA). The question arose whether the use tests in the two provisions are the same. In Molson Co v Moosehead Breweries Ltd, [1990] FCJ No 602, the Federal Court ruled that ss. 4(1) and 4(3) TMA set out two different standards. the purpose of s.4(3), which is to protect Canadian entities who would be entitled to protection under the Act but for the fact that their sales take place exclusively outside of Canada. Subsection 4(3) requires that the goods to which a trademark is affixed in Canada, or to their containing packages on which it is affixed, be sent out of Canada to another country in a commercial transaction, if use of the trade mark on exported wares is to be deemed use in Canada. The gravamen of s.4(3) is not to deem that any exportation of goods bearing a trademark is a “use” of that trademark, but rather to provide that where there is actual use such use shall be deemed to have occurred “in Canada”. This subsection does not incorporate the condition of subsection 4(1), that the transaction be “in the normal course of trade”.
Entitlement to registration
16 (1) Any applicant who has filed an application in accordance with subsection 30(2) for the registration of a registrable trademark is entitled, subject to section 38, to secure its registration in respect of the goods or services specified in the application, unless at the filing date of the application or the date of first use of the trademark in Canada, whichever is earlier, it was confusing with
(a) a trademark that had been previously used in Canada or made known in Canada by any other person;
(b) a trademark in respect of which an application for registration had been previously filed in Canada by any other person; or
(c) a trade name that had been previously used in Canada by any other person.
Disputes involving the determination of which undertaking started first using a trademark are frequent. The landmark case of Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27 is prime example of this (NB: the case is reproduced below, under F.2. The Confusion Test). The Supreme Court ruled in favour of Masterpiece, judging that because Masterpiece Inc.’s use preceded Alavida’s proposed use, Alavida was not entitled under s. 16(1) to registration of its trademark. As a result, Alavida was not “the person entitled to secure the registration” of its trade-mark under s. 18(1) and this ground of invalidity has been made out.
2. Marks Made Known in Canada
Article 6bis of the Paris Convention requires the Countries of the Union to provide protection for well known marks. Although Canada is long standing party to the Paris Convention, the protection of well-known marks in Canada is only conferred by virtue of s.5 TMA. The Trademarks Act does not define well-known trademark.Generally speaking, a trademark is well-known if it enjoys “a high degree of consumer recognition.” The exact scope of the wider or extended protection accorded to famous trademarks in Canada remains unclear, however.
Article 6bis
Marks: Well-Known Marks
(1) The countries of the Union undertake, ex officio if their legislation so permits, or at the request of an interested party, to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods. These provisions shall also apply when the essential part of the mark constitutes a reproduction of any such well-known mark or an imitation liable to create confusion therewith.
(2) A period of at least five years from the date of registration shall be allowed for requesting the cancellation of such a mark. The countries of the Union may provide for a period within which the prohibition of use must be requested.
(3) No time limit shall be fixed for requesting the cancellation or the prohibition of the use of marks registered or used in bad faith.
In two key decisions, Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22 (see below) and Pink Panther Beauty Corp. v. United Artists Corp., 1998 CanLII 9052 (FCA), the Supreme Court recognized the fact that famous or well-known trademarks may receive greater protection than non-famous trademarks. A famous trademark is particularly deserving of extended protection if it “casts an aura that is not circumscribed by association with its traditional“ products. But the extra protection is not limitless.
When deemed to be made known
5 A trademark is deemed to be made known in Canada by a person only if it is used by that person in a country of the Union, other than Canada, in association with goods or services, and
(a) the goods are distributed in association with it in Canada, or
(b) the goods or services are advertised in association with it in
(i) any printed publication circulated in Canada in the ordinary course of commerce among potential dealers in or users of the goods or services, or
(ii) radio broadcasts ordinarily received in Canada by potential dealers in or users of the goods or services,
and it has become well known in Canada by reason of the distribution or advertising.
Example: Mattel’s Famous BARBIE trademark
Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22
[1] The BARBIE doll is said by the appellant toy manufacturer to be an iconic figure of pop culture. And so, within limits, it is. The sale of various BARBIE products annually exceeds $1.4 billion worldwide, representing 35 percent of the appellant’s sales. The appellant advises that Canadian girls aged three to eleven years are given an average of two BARBIE dolls per year. The appellant therefore opposes the respondent’s application to register trade-marks in connection with its small chain of Montreal suburban “Barbie’s” restaurants on the basis that use of the name (albeit in relation to different wares and services) would likely create confusion in the marketplace. On a casual acquaintance with both marks, it is contended, there is a likelihood that consumers would think that the doll people had something to do with a restaurant called “Barbie’s”. Or, as the appellant framed its point in a consumer survey by asking the following question “Do you believe that the company that makes Barbie dolls might have anything to do with the restaurant identified with this sign or logo?” (emphasis added.).
[2] Merchandising has come a long way from the days when “marks” were carved on silver goblets or earthenware jugs to identify the wares produced by a certain silversmith or potter. Their traditional role was to create a link in the prospective buyer’s mind between the product and the producer. The power of attraction of trade-marks and other “famous brand names” is now recognized as among the most valuable of business assets. However, whatever their commercial evolution, the legal purpose of trade-marks continues (in terms of s. 2 of the Trade-marks Act, R.S.C. 1985, c. T-13) to be their use by the owner “to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others”. It is a guarantee of origin and inferentially, an assurance to the consumer that the quality will be what he or she has come to associate with a particular trade-mark (as in the case of the mythical “Maytag” repairman). It is, in that sense, consumer protection legislation.
[3] The appellant advises that the name BARBIE and that of her “soul mate”, Ken, were borrowed by their original designer from the names of her own children. The name, as such, is not inherently distinctive of the appellant’s wares. Indeed, Barbie is a common contraction of Barbara. It is also a surname. Over the last four decades or so, however, massive marketing of the doll and accessories has created a strong secondary meaning which, in appropriate circumstances, associates BARBIE in the public mind with the appellant’s doll products.
[4] The appellant’s argument is that the trade-mark BARBIE now transcends the products which originally it served to distinguish. Moreover, the appellant says, its fame goes beyond wares and services aimed at girls in the 3- to 11- year-old age group (its primary market) to the diverse products set out in various of its registrations (“cologne, hand lotion and body lotion”), food products (“spices, breads, cakes, cereal, coffee, crackers, flour, fresh herbs, pies, ice cream, pizza”), as well as bicycles, backpacks, books and construction pads. Of course, nothing prevents the appellant from using its BARBIE trade-mark to boost (if it can) sales of everything from bicycles to cologne, or for that matter lawn mowers and funeral services, but the question is whether the appellant can call in aid trade-mark law to prevent other people from using a name as common as Barbie in relation to services (such as restaurants) remote to that extent from the products that gave rise to BARBIE’s fame.
[5] Unlike other forms of intellectual property, the gravaman of trade-mark entitlement is actual use. By contrast, a Canadian inventor is entitled to his or her patent even if no commercial use of it is made. A playwright retains copyright even if the play remains unperformed. But in trade-marks the watchword is “use it or lose it”. In the absence of use, a registered mark can be expunged (s. 45(3)). There was no credible evidence that BARBIE has been used in Canada either by the appellant or by one of its licencees in connection with the services for which the respondent made trade-mark application, namely “restaurant services, take-out services, catering and banquet services”.
[6] In opposition proceedings, trade-mark law will afford protection that transcends the traditional product lines unless the applicant shows the likelihood that registration of its mark will not create confusion in the marketplace within the meaning of s. 6 of the Trade-Marks Act. Confusion is a defined term, and s. 6(2) requires the Trade-marks Opposition Board (and ultimately the court) to address the likelihood that in areas where both trade-marks are used, prospective purchasers will infer (incorrectly) that the wares and services – though not being of the same general class – are nevertheless supplied by the same person. Such a mistaken inference can only be drawn here, of course, if a link or association is likely to arise in the consumer’s mind between the source of the well- known BARBIE products and the source of the respondent’s less well-known restaurants. If there is no likelihood of a link, there can be no likelihood of a mistaken inference, and thus no confusion within the meaning of the Act.
[7] The substance of the appellant’s argument (set out at para. 48 of its factum) is that “Mattel’s BARBIE trade-marks are famous in Canada and worldwide, instantly evoking the image of the brand in the minds of consumers. Having acquired such fame, marks such as … BARBIE may not now be used in Canada on most consumer wares and services without the average consumer being led to infer the existence of a trade connection with the owners of these famous brands” (emphasis added). Some trade-marks may have that effect, but the Board found BARBIE’s fame to be tied to dolls and doll accessories. At this stage, its fame is not enough to bootstrap a broad zone of exclusivity covering “most consumer wares and services”. The Board was not required to speculate about what might happen to the BARBIE trade-mark in the future. It was required to deal with the respondent’s application on the facts established in the evidence.
[8] The appellant relies on Professor J. T. McCarthy’s dictum, discussed below, that “a relatively strong mark can leap vast product line differences at a single bound” (McCarthy on Trademarks and Unfair Competition (loose-leaf ed.), at p. 11-150.1). However, the evidence before the Board was that, for BARBIE, the present case was a leap too far, and that on the evidence prospective consumers will likely not infer that whoever owns the BARBIE doll trade-mark is associated in some way with the restaurants identified by the applied-for mark. This is a conclusion that was open to the Board.
[9] As is permitted under s. 56(5) of the Act, the appellant sought to introduce fresh evidence before the applications judge about the likelihood of confusion but the proffered evidence was found to be unresponsive to the statutory test and on that account it was rightly rejected.
[10] On this appeal, the Board’s decision should be upheld unless it is shown to be unreasonable. On the admissible evidence, the Board was not shown to be clearly wrong in its decision that the respondent restauranteur has established that it is not likely that prospective consumers will draw the mistaken inference. I would therefore affirm the reasonableness of the decision of the Board to accept registration of the respondent’s trade-mark and dismiss the appeal.
- Facts
[11] The respondent opened its first Barbie’s restaurant in Montreal in 1992. Over the years it has added three more (one of which subsequently closed). These are medium-priced “bar-and-grill” type operations, with meals including ribs, smoked meat, souvlaki, steak, chicken, seafood and pizza, much of which is barbecued (or, as the menu puts it, done on the “barbie-Q”), along with alcoholic beverages. There are also breakfast and lunch menus. The bulk of the business is sit-down clientele. The decor is predominantly geared to adults and the bar is an important feature of each location. The restaurants do offer a kids’ menu and a “kids eat free” promotion one night of the week but the Board found its target clientele to be adults. Compared to that of the appellant, it is a modest operation. Total restaurant sales for the six years 1992-1997 inclusive totalled about $11 million. Advertising expenses, including television, radio and newspaper advertising, amounted to about $616,000 for the same time period. In September 1993, an application (now assigned to the respondent) was made to register the trade-mark BARBIE’S & DESIGN in association with “restaurant services, take-out services, catering and banquet services”. The applicant’s mark is prominently displayed on the exterior of the restaurants and on menus, napkins, matchbooks, receipts, order forms and business cards. The mark, as now applied for, looks like this:
[12] There are clearly significant points of resemblance between the trade-marks of the appellant and the trade-marks applied for by the respondent. The appellant’s registered trade-mark looks like this
BARBIE
[13] The appellant’s trade-marks enjoy an extensive worldwide reputation for dolls and accessories primarily targeted at the market of 3- to 11-year-old girls. There are some adult collectors of BARBIE doll products. By 2001, sales, promotion, and advertising of BARBIE products across Canada generated annual sales revenue approximately $75 million, annual licensing revenues approximately $5 million, and annual advertising expenses approximately $5 million. The appellant describes itself in these proceedings as being “in the business of building brand equity”. Licensing of the BARBIE trade-mark is commonplace and the wares or goods to which the trade-mark is attached are growing. The appellant sees licencing of the BARBIE trade-marks as an expanding and lucrative commercial opportunity. To date, BARBIE has not been used in Canada by the appellant or any of its licencees for restaurant services, take-out services, catering and banquet services. I generally will refer to the appellant’s trade-marks collectively as the BARBIE mark.
[…]
- Analysis
[21] Trade-marks are something of an anomaly in intellectual property law. Unlike the patent owner or the copyright owner, the owner of a trade-mark is not required to provide the public with some novel benefit in exchange for the monopoly. Here, the trade-mark is not even an invented word like “Kodak” or “Kleenex”. The appellant has merely appropriated a common child’s diminutive for Barbara. By contrast, a patentee must invent something new and useful. To obtain copyright, a person must add some expressive work to the human repertoire. In each case, the public through Parliament has decided it is worth encouraging such inventions and fostering new expression in exchange for a statutory monopoly (i.e. preventing anyone else from practising the invention or exploiting the copyrighted expression without permission). The trade-mark owner, by contrast, may simply have used a common name as its “mark” to differentiate its wares from those of its competitors. Its claim to monopoly rests not on conferring a benefit on the public in the sense of patents or copyrights but on serving an important public interest in assuring consumers that they are buying from the source from whom they think they are buying and receiving the quality which they associate with that particular trade-mark. Trade-marks thus operate as a kind of shortcut to get consumers to where they want to go, and in that way perform a key function in a market economy. Trade-mark law rests on principles of fair dealing. It is sometimes said to hold the balance between free competition and fair competition.
[22] Fairness, of course, requires consideration of the interest of the public and other merchants and the benefits of open competition as well as the interest of the trade-mark owner in protecting its investment in the mark. Care must be taken not to create a zone of exclusivity and protection that overshoots the purpose of trade-mark law. As Professor David Vaver observes:
On the one hand, well-known mark owners say that people should not reap where they have not sown, that bad faith should be punished, that people who sidle up to their well-known marks are guilty of dishonest commercial practice. These vituperations lead nowhere. One might as well say that the well-known mark owner is reaping where it has not sown when it stops a trader in a geographic or market field remote from the owner’s fields from using the same or a similar mark uncompetitively. (D. Vaver, “Unconventional and Well-known Trade Marks”, [2005] Sing. J.L.S. 1, at p. 16).
[23] The purpose of trade-marks is to create and symbolize linkages. As mentioned, s. 2 of the Trade-marks Act defines “trade-mark” to mean
(a) a mark that is used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others…
To the same effect is art. 15 of the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights, 1869 U.N.T.S. 299, which defines “trade-mark” in part as
Any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings…
[24] As the Court put it in Kirkbi AG v. Ritvik Holdings Inc. / Gestions Ritvik Inc., [2005] 3 S.C.R. 302, 2005 SCC 65(S.C.C.), a trade-mark is “a symbol of a connection between a source of a product and the product itself” (per LeBel J., at para. 39). If, as the Board found, it is not likely that even casual consumers will make a connection between the source of BARBIE dolls and the respondent’s restaurants, then the appellant’s marks have received the protection to which the law entitles them.
(…)
[28] Under the Trade-marks Act, however, the appellant’s protected commercial space is not so limited. It relies in particular on the 1953 amendments and the antecedent Report of Trade Mark Law Revision Committee to the Secretary of State of Canadachaired by the redoubtable Dr. Harold G. Fox, Q.C. (“Fox Report”). The appellant contends that “[t]he scope of protection of famous marks in Canada was an important justification for the enactment by Parliament and proclamation” of the amendment and notes the following passage in the Fox Report:
Some trade marks are so well known that the use of the same or similar trade marks on any wares of any kind would cause the general purchasing public to believe that the original user and owner of the trade mark was in some way responsible for the wares to which the use of the mark has been extended. [Emphasis added.] ((1953), 18 C.P.R. 1, at p. 34)
Parliament recognized the truth of that statement in 1953 and the subsequent experience of more than 50 years has borne out its wisdom. The problem is to apply the broad principle to particular situations in a way that is fair to all concerned.
[29] In my view, with respect, the appellant’s case is based on an overgeneralization. The fact that Parliament has recognized that some trade-marks are so well known that use in connection with anywares or services would generate confusion is not to say that BARBIE has that transcendence. As the Fox Report (1953) also stated:
In a proper case this [new] ambit of protection can be widened to include the whole of the course of trade or restricted to a field limited by the use which has been made of a trade mark or trade name and the reputation acquired by it. The particular ambit of protection will in the future so far as applies to registration, be a matter for determination, having regard to all the circumstances, by the Registrar in the first instance, and by the Exchequer Court on appeal. (p. 40)
[30] No doubt some famous brands possess protean power (it was submitted, for example, the distinctive red and white “Virgin” trade-mark has now been used in connection with such a diversity of wares and services that it knows virtually no bounds), but other famous marks are clearly product specific. “Apple” is said to be a well-known trade-mark associated in separate markets simultaneously with computers, a record label and automobile glass. The Board’s conclusion that BARBIE’s fame is limited to dolls and dolls’ accessories does not at all mean that BARBIE’s aura cannot transcend those products, but whether it is likely to do so or not in the context of opposition proceedings in relation to restaurant, catering and banquet services is a question of fact that depends on “all the surrounding circumstances” (s. 6(5)). Neither the “Virgin” nor “Apple” situations are before us and I make no pronouncement on either except to note them as illustrations that surfaced in the course of argument.
3. Non-use of a Mark
No use keeping non-used trademarks in the Register! Subsection 45(1) of the Act authorizes the Registrar, either on her own initiative or in response to a request made by a third party, to issue a notice requiring that the owner of a registered trademark show use of the mark in Canada in the three years immediately preceding the date of the notice (the relevant period). In accordance with subsections 45(3) and (5) of the Act, a trademark registration may be expunged if the owner fails to show use in Canada within the relevant period, or the existence of “special circumstances” justifying the non-use of the mark. This procedure has gained new importance following the removal of the requirement of actual use as precondition for the registration of trademarks and the allowance of registration of future marks. Without the possibility to challenge a registration based on future use, the register would potentially become cluttered with unused marks, putting barriers on other undertakings that would want to make legitimate use of those marks.
In 2019-2020, a total of 702 requests for expungement under s.45 TMA were filed with the Registrar. Section 45 provides a simple and expeditious method of removing from the register marks which have fallen into disuse or proposed marks which have not been used after registration. It is not intended to provide an alternative to the usual inter partes attack on a trademark envisaged by s. 57 [see section G. ‘Infringement & Expungement’ below]. The fact that an applicant under s. 45 is not even required to have an interest in the matter speaks eloquently to the public nature of the concerns the section is designed to protect.
Registrar may request evidence of use
45 (1) After three years beginning on the day on which a trademark is registered, unless the Registrar sees good reason to the contrary, the Registrar shall, at the written request of any person who pays the prescribed fee — or may, on his or her own initiative — give notice to the registered owner of the trademark requiring the registered owner to furnish within three months an affidavit or a statutory declaration showing, with respect to all the goods or services specified in the registration or to those that may be specified in the notice, whether the trademark was in use in Canada at any time during the three-year period immediately preceding the date of the notice and, if not, the date when it was last so in use and the reason for the absence of such use since that date.
(…)
Effect of non-use
(3) Where, by reason of the evidence furnished to the Registrar or the failure to furnish any evidence, it appears to the Registrar that a trademark, either with respect to all of the goods or services specified in the registration or with respect to any of those goods or services, was not used in Canada at any time during the three year period immediately preceding the date of the notice and that the absence of use has not been due to special circumstances that excuse the absence of use, the registration of the trademark is liable to be expunged or amended accordingly.
Exception
S.53.2 (1.1) If, within a period of three years beginning on the date of registration of a trademark, the owner of the registered trademark makes an application claiming that an act has been done contrary to section 19, 20 or 22, the owner is not entitled to relief unless the trademark was in use in Canada at any time during that period or special circumstances exist that excuse the absence of use in Canada during that period.
Mere assertions of use are not sufficient to demonstrate use in the context of a section 45 proceeding [Plough (Canada) Ltd v Aerosol Fillers Inc (1980), 1980 CanLII 2739 (FCA), 53 CPR (2d) 62 (FCA)]. Sufficient facts must be provided to permit the Registrar to arrive at a conclusion of use of the trade-mark in association with each of the wares or services specified in the registration during the relevant period. In Plough, the Federal Court of Appeal stated the following with respect to the type of evidence required in response to a section 45 notice:
What subsection 44(1) [now section 45(1)] requires is an affidavit or statutory declaration not merely stating but “showing”, that is to say, describing the use being made of the trade mark within the meaning of the definition of “trade mark” in section 2 and of “use” in section 4 of the Act. The subsection makes this plain by requiring the declaration to show with respect to each of the wares and services specified in the registration whether the trade mark is in use in Canada and if not the date when it was last used and the reason for the absence of such use since that date. The purpose is not merely to tell the Registrar that the registered owner does not want to give up the registration but to inform the Registrar in detail of the situation prevailing with respect to the use of the trade mark so that he, and the Court on appeal, can form an opinion and apply the substantive rule set out in subsection 44(3) [now section 45(3)]. There is no room for a dog in the manger attitude on the part of registered owners who may wish to hold on to a registration notwithstanding that the trade mark is no longer in use at all or not in use with respect to some of the wares in respect of which the mark is registered.
In an appeal by FFAUF S.A. from a decision of the Registrar of Trademarks [2015 TMOB 3] expunging the Applicant’s PASTA ZARA & DESIGN mark from the Register, the Federal Court ruled in favour of the applicant, saying that the use of the trademark had been demonstrated in Canada during the period between December 18, 2009, and December 18, 2012. The evidence establishes that FFAUF exercised control over the character and quality of the goods produced and sold in association with its mark by is licensee Pasta ZARA, namely pasta. The evidence also established that these goods were sold in packaging displaying the mark to Canadian distributors during the relevant period. Finally, the display of the mark in the form shown on the product packaging, invoices, and shipping labels, as well as the product catalogues constitute use of the mark, even though the design is a slight deviation from the mark as registered. The dominant features of the design are the words “Pasta ZARA” in an ellipse and the picture of the woman holding sheaves of wheat, and these are preserved and very evident in the mark as it was actually used. The mark as used maintains its identity and remains recognizable as the registered mark. FFAUF S.A. v. Industria di Diseno Textil, S.A., 2020 FC 520 (Justice Pentney).
Extension: Special circumstances excusing non-use
Scott Paper Limited v. Smart & Biggar, 2008 FCA 129
[1] Does evidence of an intention to resume use of a trade-mark which has been absent from the marketplace for some 13 years, coupled with evidence of a single sale transaction amount to “special circumstances” that justify the absence of use of the trade-mark for the purposes of section 45 of the Trade-marks Act, R.S.C. 1985, c. T-13 (the Act)? The Senior Hearing Officer before whom this matter was raised found that it did. On appeal, pursuant to subsection 56(5) of the Act, Strayer D.J. asked the rhetorical question “Would one excuse a truant schoolboy for an absence of a month because, when confronted, he demonstrated that although he had no explanation for his past absences he genuinely intended to go to school the next week?” before going on to allow the appeal. In my view, his question was apt. I would dismiss the appeal.
(..)
[3] In accordance with the procedure set out in subsection 45(1), on April 29, 2002, the Registrar, at the request of Smart & Biggar, gave notice to Scott Paper Limited (Scott Paper) to show whether the registered trade-mark VANITY had been used in Canada in the three years preceding the giving of the notice, and if not, to show the date of last use and the reasons for the absence of use.
[4] Scott Paper responded by filing the affidavit of one Mr. Teijeira, its Marketing and Legal Affairs Manager, who deposed as to Scott Paper’s plans and activities with respect to the trade-mark in question. That affidavit did not provide the date of last use of the trade-mark in Canada nor did it provide any reason for the absence of such use. Instead, the affidavit set out that as of the date of the section 45 notice, plans were already well underway to commence use of the mark in 2002 and that, as of the date of the affidavit, October 28, 2002, such sales had already begun.
[5] According to Mr. Teijeira, Scott Paper’s Away from Home Division began to discuss and review the re-introduction of the VANITY brand as early as late summer 2001. These plans were referred to in Scott Paper’s 2002 Marketing Plan, which was circulated and discussed at a Scott Paper marketing meeting held in October 2001. The decision taken at that meeting was to launch products bearing the VANITY mark beginning in the second quarter of 2002, with all products being on the market by the fourth quarter of 2002.
[6] Sales of the VANITY products began in June 2002 as evidenced by copies of two invoices bearing the same purchase order number showing sales to a distributor. The affidavit also included a copy of labels showing the use of the VANITY mark.
[7] The Senior Hearing Officer reviewed Scott Paper’s evidence. Given the absence of any evidence of use, the Senior Hearing Officer considered that the date of last use was the date of acquisition of the trade-mark by the registered owner, March 28, 1989, approximately 13 years prior to the date of the decision. This determination is not challenged.
[8] Given the absence of any evidence as to the reason for non-use, the Senior Hearing Officer concluded that the reason for non-use was a deliberate and voluntary decision of the registered owner. This determination was not challenged.
[9] The Senior Hearing Officer identified three criteria to be used when considering special circumstances: the length of non-use, whether the non-use was due to circumstances beyond the registered owner’s control and whether there was an intention to resume use of the mark in the near term. The origin of these criteria is the decision of this Court in Canada (Registrar of Trade Marks) v. Harris Knitting Mills Ltd. (1985), 4 C.P.R. (3d) 488 (Harris Knitting Mills).
[10] Having concluded that the date of last use was some 13 years previously and that the non-use was due to a deliberate decision to suspend use, the Senior Hearing Officer then considered whether there was evidence of a serious intention to shortly resume use of the trade-mark. The Senior Hearing Officer reviewed the affidavit of Mr. Teijeira and concluded that it was sufficient to show that the registered owner had a serious intention to resume use of the trade-mark prior to being served with the section 45 notice. The Senior Hearing Officer concluded that this amounted to special circumstances within the meaning of section 45. In the Senior Hearing Officer’s view, the fact that the registered owner took steps to use the mark before having received the section 45 notice and made sales shortly after the notice date were of paramount importance in showing that the trade-mark was not deadwood and should not be expunged.
(…)
[21] … Writing for the Court, Pratte J.A. analyzed the elements of section 45 in a comprehensive manner, expressing his reasoning in the following paragraphs, whose reproduction below, though lengthy, is necessary to fully appreciate the conclusions to which he came:
Under section 44 [now section 45], where it appears from the evidence furnished to the Registrar that the trade mark is not in use, the Registrar must order that the registration of the mark be expunged unless the evidence shows that the absence of use has been “due to special circumstances that excuse such absence of use”. The general rule is thus that absence of use of a mark is penalized by expungement. For an exception to be made to this rule, it is necessary, under subsection 44(3), for the absence of use to be due to special circumstances that excuse it. With regard to this provision, it should be noted first that the circumstances it mentions must excuse the absence of use in the sense that they must make it possible to conclude that, in a particular case, the absence of use should not be “punished” by expungement. These circumstances must be “special” [See John Labatt v. Cotton Club Bottling Co, 25 CPR (2d) 115.] in that they must be circumstances not found in most cases of absence of use of a mark. Finally, these special circumstances that excuse the absence of use must, under subsection 44(3), be circumstances to which the absence of use is due. This means that in order to determine whether the absence of use should be excused in a given case, it is necessary to consider the reasons for the absence of use and determine whether these reasons are such that an exception should be made to the general rule that the registration of a mark that is not in use should be expunged. I would add, finally, that the absence of use that must thus be excused is the absence of use before the owner receives the notice from the Registrar.
It is impossible to state precisely what the circumstances referred to in subsection 44(3) must be to excuse the absence of use of a mark. The duration of the absence of use and the likelihood it will last a long time are important factors in this regard, however; circumstances may excuse an absence of use for a brief period of time without excusing a prolonged absence of use. It is essential, as well, to know to what extent the absence of use is due solely to a deliberate decision on the part of the owner of the mark rather than to obstacles beyond his control. It is difficult to see why an absence of use due solely to a deliberate decision by the owner of the mark would be excused.
[22] The conclusions to be drawn from this analysis are, it seems to me, the following:
1- The general rule is that absence of use is penalized by expungement.
2- There is an exception to the general rule where the absence of use is due to special circumstances.
3- Special circumstances are circumstances not found in most cases of absence of use of the mark.
4- The special circumstances which excuse the absence of use of the mark must be the circumstances to which the absence of use is due.
[23] The fourth of these factors is sufficient to dispose of this appeal. The special circumstances which excuse the absence of use of the mark must be the circumstances to which the absence of use is due.As one would expect, this is consistent with the statutory language which requires that the absence of use “has not been due to special circumstances that excuse the absence of use”. The French version is even clearer when it too requires that « le défaut d’emploi n’a pas été attribuable à des circonstances spéciales qui le justifient ». The point here is not the nature of the special circumstances, but simply that the special circumstances refer to the cause of the absence of use, and not to some other consideration.
[24] Pratte J.A. makes this clear when he speaks of the nature of the inquiry required by subsection 45(3):
… in order to determine whether the absence of use should be excused in a given case, it is necessary to consider the reasons for the absence of use and determine whether these reasons are such that an exception should be made to the general rule that the registration of a mark that is not in use should be expunged …
[25] The relevant inquiry as to whether special circumstances exist is an inquiry into the reasons for the non-use.
[26] Here, it is clear that the 13 year absence of use was due to a deliberate decision not to use the mark. (…)
[27] The facts of this case illustrate the wisdom of this policy.
[28] It is apparent from this analysis that a registrant’s intention to resume use of a mark which has been absent from the marketplace, even when steps have been taken to actualize those plans, cannot amount to special circumstances which excuse the non-use of the trade-mark. The plans for future use do not explain the period of non-use and therefore, cannot amount to special circumstances. No reasonable construction of the words used in section 45 could lead to that conclusion.
[37] I would therefore dismiss the appeal with costs.
F. Concept of Confusion
The concept of confusion is the third cornerstone of the Trademarks Act. Confusion between trademarks or between a trademark and a trade name must be avoided as much as possible, for confusing marks are not distinctive; they are incapable of fulfilling their essential function, that of distinguishing the goods or services of one undertaking from those of another. The concept of confusion plays a role at the registration stage and in the context of infringement proceedings. Confusion with a registered trademark is an absolute ground for refusal to register an applicant’s trademark under s.12(1)(d) TMA. It is also a ground for opposition under s. 38(2) TMA, and invalidation under s.18(1) TMA. Finally, it is certainly a ground for a finding of infringement under s.20 TMA, as well as passing off under s.7(b) TMA.
This section first describes the reference consumer used in the confusion analysis. We then review the different components of the test for confusion as laid down in s.6(5) TMA and interpreted and applied by the courts. The final part of this section discusses the sort of evidence admissible to establish whether confusion exists between marks.
When mark or name confusing
6 (1) For the purposes of this Act, a trademark or trade name is confusing with another trademark or trade name if the use of the first mentioned trademark or trade name would cause confusion with the last mentioned trademark or trade name in the manner and circumstances described in this section.
Confusion — trademark with other trademark
(2) The use of a trademark causes confusion with another trademark if the use of both trademarks in the same area would be likely to lead to the inference that the goods or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class or appear in the same class of the Nice Classification.
Confusion — trademark with trade name
(3) The use of a trademark causes confusion with a trade name if the use of both the trademark and trade name in the same area would be likely to lead to the inference that the goods or services associated with the trademark and those associated with the business carried on under the trade name are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class or appear in the same class of the Nice Classification.
Confusion — trade name with trademark
(4) The use of a trade name causes confusion with a trademark if the use of both the trade name and trademark in the same area would be likely to lead to the inference that the goods or services associated with the business carried on under the trade name and those associated with the trademark are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class or appear in the same class of the Nice Classification.
What to be considered
(5) In determining whether trademarks or trade names are confusing, the court or the Registrar, as the case may be, shall have regard to all the surrounding circumstances including
(a) the inherent distinctiveness of the trademarks or trade names and the extent to which they have become known;
(b) the length of time the trademarks or trade names have been in use;
(c) the nature of the goods, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trademarks or trade names, including in appearance or sound or in the ideas suggested by them.
1. Standard Consumer
Like patent law where the validity of an application is examined through the eyes of the POSITA, confusing trademarks are assessed from the perspective of a ‘reference consumer’. Like for the POSITA, the characteristics of this reference consumer have been developed through case law. What, then, is the perspective from which the likelihood of a “mistaken inference” is to be measured? As Justice Binnie colourfully described in Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22, ‘It is not that of the careful and diligent purchaser. Nor, on the other hand, is it the “moron in a hurry” so beloved by elements of the passing-off bar. It is rather a mythical consumer who stands somewhere in between, dubbed in a 1927 Ontario decision of Meredith C.J. as the “ordinary hurried purchasers” (Klotz v. Corson (1927), 33 O.W.N. 12 (Sup. Ct.), at p. 13). It is now settled jurisprudence that confusion is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the mark, at a time when he or she has no more than an imperfect recollection of the prior trademarks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks.
As discussed below in Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, the question arose whether the higher price or more luxury nature of the goods or services has any bearing on the degree of scrutiny exercised by the consumer. The Supreme Court had already affirmed in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23 that consumers in the market for expensive goods may be less likely to be confused when they encounter a trademark, but the test is still one of “first impression”. The importance and cost of expensive goods and services does not change the likelihood of confusion test from one of first impression of a trademark to a test of consumers being “unlikely to make choices based on first impressions”.
As Justice Binnie further explained in Mattel Inc. v 3894207 Canada Inc, 2006 SCC 22
[58] A consumer does not of course approach every purchasing decision with the same attention, or lack of it. When buying a car or a refrigerator, more care will naturally be taken than when buying a doll or a mid-priced meal: General Motors Corp. v. Bellows, 1949 CanLII 47 (SCC), [1949] S.C.R. 678. In the case of buying ordinary run-of-the-mill consumer wares and services, this mythical consumer, though of average intelligence, is generally running behind schedule and has more money to spend than time to pay a lot of attention to details. In appropriate markets, such a person is assumed to be functionally bilingual: Four Seasons Hotels Ltd. v. Four Seasons Television Network Inc. (1992), 43 C.P.R. (3d) 139 (T.M.O.B.). To those mythical consumers, the existence of trade-marks or brands make shopping decisions faster and easier. The law recognizes that at the time the new trade-mark catches their eye, they will have only a general and not very precise recollection of the earlier trade-mark, famous though it may be or, as stated in Coca-Cola Co. of Canada Ltd. v. Pepsi-Cola Co. of Canada Ltd., 1942 CanLII 344 (UK JCPC), [1942] 2 D.L.R. 657 (P.C.), “as it would be remembered by persons possessed of an average memory with its usual imperfections” (p. 661). The standard is not that of people “who never notice anything” but of persons who take no more than “ordinary care to observe that which is staring them in the face”: Coombe v. Mendit Ld. (1913), 30 R.P.C. 709 (Ch. D.), at p. 717. However, if ordinary casual consumers somewhat in a hurry are likely to be deceived about the origin of the wares or services, then the statutory test is met.
Lord Diplock in General Electric Co. v. The General Electric Co. Ltd., [1972] 2 All E.R. 507 (H.L.) distinguished between goods sold in a specialized market of sophisticated consumers engaged in a particular trade, e.g., large industrial electrical machinery, on the one hand, and those sold to the general public, on the other. Where the market is specialized, evidence about the special knowledge or sophistication of the targeted consumers may be essential to determining when confusion would be likely to arise. However, where goods are sold to the general public for ordinary use, the normal test would apply.
The perspective of the first impression of the casual consumer in a hurry with imperfect recollection is taken into consideration for all types of confusion analyses, whether in the context of an application for registration or an infringement action.
2. Confusion Test
The five circumstances making out the confusion test, listed in s.6(5) TMA, pertain to:
(a) the inherent distinctiveness of the trademarks or trade names and the extent to which they have become known;
(b) the length of time the trademarks or trade names have been in use;
(c) the nature of the goods, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trademarks or trade names in appearance or sound or in the ideas suggested by them.
The list of circumstances is not exhaustive and different circumstances will be given different weight in a context-specific assessment. Although the last factor listed in s. 6(5), the degree of resemblance is the statutory factor that is often likely to have the greatest effect on the confusion analysis, because without resemblance between the marks, there is no need to examine the other factors. When several trademarks are targeted in an opposition or infringement proceeding, courts must conduct a separate analysis for each of them.
Subsections 6(2) to 6(4) provide that the confusion test must take account of all the surrounding circumstances under which the prospective purchaser may be led to the mistaken inference that the goods or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class. This by no means implies that the nature of the goods or services is irrelevant. Section 6(5)(c) specifically identifies “the nature of the wares, services or business” as a relevant consideration. However, the wording of s. 6(2) clarifies that the general class of goods and services, while relevant, is not controlling. The difference in goods or services will generally be an important consideration, but certainly not always a dominant consideration. Where a court is called upon to decide if there is a likelihood of confusion between that registered trade-mark and any registered or previously used unregistered trade-marks, the analysis should address the proposed trade-mark for which the registration was ultimately obtained.
Comparison can be approached by considering only those characteristics that define the relevant trademarks or trade-name. It is only these elements that will allow consumers to distinguish between the two trademarks or between the trademark and the trade-name.
Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27
II. Facts
[7] Both Masterpiece Inc. and Alavida operate in the retirement residence industry. Prior to December 2005, Masterpiece Inc. used several trade-marks which included the word “Masterpiece”, as well as its trade-name “Masterpiece Inc.”. Alavida entered the market near the end of 2005 and applied to register the trade-mark “Masterpiece Living” to market its services.
[8] Masterpiece Inc. was incorporated in 2001. In the years between 2001 and 2005, it undertook two retirement residence construction and operation projects in Alberta and began a third. During this time, it used its corporate name, Masterpiece Inc., as a trade-name on materials including prospectuses, contracts and advertisements.
[9] Concurrently, Masterpiece Inc. used several unregistered trade-marks which involved the word “Masterpiece” including “Masterpiece the Art of Living”, “Masterpiece the Art of Retirement Living”, and a stylized word “Masterpiece” alongside a butterfly logo. It also used other marks, including the trade-mark “Club Sierra”, in its advertisements.
[10] Alavida, a subsidiary of Ashcroft Homes Inc., was incorporated on August 4, 2005. It applied to register the trade-mark “Masterpiece Living” on December 1, 2005, on the basis of a proposed use. The mark was registered unopposed on March 23, 2007. Since January 2006, Alavida has used “Masterpiece Living” as its trade-mark.
[11] Shortly after Alavida’s application, Masterpiece Inc. changed its branding slightly, and began using the very same trade-mark “Masterpiece Living”. The result of these almost simultaneous decisions was that, beginning in 2006, there were two Canadian companies, one operating in Alberta, another in Ontario, using the trade-mark “Masterpiece Living” in the retirement residence industry.
[12] In January 2006, Masterpiece Inc. applied to register “Masterpiece” as a trade-mark, and in June 2006, it applied to register the trade-mark “Masterpiece Living”. As a result of Alavida’s prior application, which was eventually granted, Masterpiece Inc.’s applications for both the trade-mark “Masterpiece Living” and the trade-mark “Masterpiece” were denied, as the Registrar concluded that they were confusing with Alavida’s trade-mark “Masterpiece Living”.
[13] On March 16, 2007, Masterpiece Inc. commenced this application to expunge Alavida’s registration. It appears that Masterpiece Inc. did not oppose Alavida’s application. However, it was not argued that its failure to do so had any impact on the expungement proceedings.
(…)
V. Issues on Appeal
[22] There are four issues for consideration by this Court:
1. Is the location where a mark is used relevant when considering the likelihood of confusion between an applied for or registered trade-mark and a prior unregistered trade-mark or trade-name?
2. What considerations are applicable in the assessment of the resemblance between a proposed use trade-mark and an existing unregistered trade-mark?
3. When considering the “nature of the trade” under s. 6(5) of the Act, what effect does the nature and cost of the wares or services have on the confusion analysis?
4. When should courts take into account expert evidence in trade-mark or trade-name confusion cases?
VI. Analysis
A. Is the Location Where a Mark Is Used Relevant When Considering the Likelihood of Confusion Between an Applied for or Registered Trade-Mark and a Prior Unregistered Trade-Mark or Trade-Name?
[24] In the Federal Court of Appeal, a major focus in the reasons was whether Masterpiece Inc.’s plan to expand into eastern Canada, which could lead it into direct competition with Alavida, was relevant to the determination of confusion. While those plans have now been executed, and Masterpiece Inc. is operating in the retirement residence industry in Quebec, on December 1, 2005, they were merely plans.
[25] The Federal Court of Appeal concluded that these plans were not relevant. However, in doing so, it distinguished several authorities which Masterpiece Inc. submitted to support the relevance of its plans. Some of these authorities suggested that the geographical location where two trade-marks are used or proposed to be used does not affect the likelihood of confusion.
[26] Distinguishing these authorities could be seen as an acceptance that the geographical locale in which marks are used or proposed to be used is relevant for determining whether there is a likelihood of confusion. Indeed, in this Court, there was an intervention by the International Trademark Association which sought to address only this point. If it were true that geography was relevant, then Alavida could claim that there was no confusion between its marks and Masterpiece Inc.’s marks because on December 1, 2005, Masterpiece Inc. was only operating in Alberta, while it was operating in Ontario.
[27] While it is not entirely clear that the Federal Court of Appeal’s reasons should be read as suggesting that geography is relevant, I would take this opportunity to dispel any doubt on this point.
[28] The Canadian trade-marks regime is national in scope. The owner of a registered trade-mark, subject to a finding of invalidity, is entitled to the exclusive use of that mark in association with the wares or services to which it is connected throughout Canada. Section 19 of the Trade-marks Act provides:
19. Subject to sections 21, 32 and 67, the registration of a trade-mark in respect of any wares or services, unless shown to be invalid, gives to the owner of the trade-mark the exclusive right to the use throughout Canada of the trade-mark in respect of those wares or services.
[29] With respect to confusion, ss. 6(1) and (2) of the Trade-marks Act provide:
6. (1) For the purposes of this Act, a trade-mark or trade-name is confusing with another trade-mark or trade-name if the use of the first mentioned trade-mark or trade-name would cause confusion with the last mentioned trade-mark or trade-name in the manner and circumstances described in this section.
(2) The use of a trade-mark causes confusion with another trade-mark if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.
Section 6(3) deals with trade-mark confusion with a trade-name and 6(4) with trade-name confusion with a trade-mark. In subsections (2), (3) and (4), the same formula is used “if the use of both . . . in the same area would be likely to lead to the inference”.
[30] It is immediately apparent from these words, “if the use of both . . . in the same area”, that the test for confusion is based upon the hypothetical assumption that both trade-names and trade-marks are used “in the same area”, irrespective of whether this is actually the case. As a result, geographical separation in the use of otherwise confusingly similar trade-names and trade-marks does not play a role in this hypothetical test. This must be the case, because, pursuant to s. 19, subject to exceptions not relevant here, registration gives the owner the exclusive right to the use of the trade-mark throughout Canada.
[31] In order for the owner of a registered trade-mark to have exclusive use of the trade-mark throughout Canada, there cannot be a likelihood of confusion with another trade-mark anywhere in the country.
[32] Section 16(3) confirms this conclusion, stating that an applicant for a proposed mark will be entitled to registration unless at the date of filing the trade-mark it is confusing with a trade-mark or trade-name that had been previously used in Canada. Section 16(3) provides:
16. . . .
(3) Any applicant who has filed an application in accordance with section 30 for registration of a proposed trade-mark that is registrable is entitled, subject to sections 38 and 40, to secure its registration in respect of the wares or services specified in the application, unless at the date of filing of the application it was confusing with
(a) a trade-mark that had been previously used in Canada or made known in Canada by any other person;
(b) a trade-mark in respect of which an application for registration had been previously filed in Canada by any other person; or
(c) a trade-name that had been previously used in Canada by any other person.
[33] Whether in assessing trade-mark infringement under s. 19 or entitlement under s. 16, the test for likelihood of confusion is the same. The application of the hypothetical test reflects the legislative intent to provide a national scope of protection for registered trade-marks in Canada (see D. Vaver, Intellectual Property Law: Copyright, Patents, Trade-marks (2nd ed. 2011), at p. 536).
B. What Considerations Are Applicable in the Assessment of the Resemblance Between a Proposed Use Trade-Mark and an Existing Unregistered Trade-Mark?
[34] To clarify the proper approach to assessing the resemblance between a proposed use trade-mark and existing unregistered marks, it will be useful to address a number of issues:
(1) the relationship between use and registration;
(2) the test for confusion;
(3) the necessity to consider each mark separately;
(4) the approach to testing for resemblance;
(5) the necessity to consider the proposed use trade-mark according to its terms, rather than by its actual use;
(6) the requirement to assess the unregistered marks according to their actual use; and
(7) the resemblance between the trade-marks in issue.
While these issues are relevant in this case, they are not intended to be an exhaustive list of all considerations that are relevant in assessing resemblance.
(1) The Relationship Between Use and Registration
[35] At the outset, it is important to recall the relationship between use and registration of a trade-mark. Registration itself does not confer priority of title to a trade-mark. At common law, it was use of a trade-mark that conferred the exclusive right to the trade-mark. While the Trade-marks Act provides additional rights to a registered trade-mark holder than were available at common law, registration is only available once the right to the trade-mark has been established by use. As explained by Ritchie C.J. in Partlo v. Todd (1888), 1888 CanLII 10 (SCC), 17 S.C.R. 196, at p. 200:
It is not the registration that makes the party proprietor of a trade-mark; he must be proprietor before he can register . . . .
[36] That principle established under Canada’s early trade-mark legislation continues under the present Act. Rights arising from use have been incorporated into the Act by granting rights to the first user of a trade-mark in two ways. First, under s. 16, a party normally gains a priority right to register a trade-mark when it first uses that trade-mark. Second, a user is also able to oppose applications or apply to expunge registrations based on its earlier use of a confusing trade-mark. This explains why an unregistered trade-mark of Masterpiece Inc. can be the basis of a challenge to Alavida’s subsequent registration application. Section 16(3) of the Act recognizes the right of a prior user against any application for registration based upon subsequent use. Section 17(1) preserves that right, subject to certain limitations that are of no relevance here, where the trade-mark has been registered.
[37] It should also be explained why Alavida’s application for a proposed trade-mark on December 1, 2005, would preclude Masterpiece Inc.’s subsequent trade-mark applications based on actual use. As noted above, at common law, trade-mark protection only arose from actual use. However, under the current Trade-marks Act, the opportunity was created for an applicant to claim priority as of the date the applicant files for a proposed but yet unused trade-mark. Registration will, however, not occur unless the applicant subsequently provides a declaration demonstrating that the proposed trade-mark was actually used within the time specified in s. 40(2) of the Act.
[38] In this case, Alavida did provide such a declaration, with the result that its priority claim as of December 1, 2005, the date it filed its registration application, precluded Masterpiece Inc. from obtaining registration of “Masterpiece Living”, the exact same trade-mark as Alavida, by a subsequent application based on use after December 1, 2005. Instead, it would have had to oppose Alavida’s application or would have to apply to expunge Alavida’s trade-mark registration on the grounds of likelihood of confusion between Alavida’s trade-mark and its trade-marks or trade-name that had been in use before December 1, 2005. Because Masterpiece Inc. did not oppose Alavida’s application, which was granted, the only remedy open to Masterpiece Inc. was to apply to have Alavida’s mark expunged. If successful, this remedy would allow Masterpiece Inc.’s application for registration of its own trade-marks to be considered on its merits by the Registrar of Trade-marks.
(2) The Test for Confusion
[39] The question at the centre of this case is whether there was confusion between Alavida’s and Masterpiece Inc.’s trade-marks or trade-name in terms of s. 6 of the Act. In my respectful opinion, the learned trial judge erred in law when conducting the confusion analysis, and thereby erred in his conclusion that Masterpiece Inc. had not established confusion between its trade-name and trade-marks and Alavida’s now registered trade-mark.
[40] At the outset of this confusion analysis, it is useful to bear in mind the test for confusion under the Trade-marks Act. In Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, [2006] 1 S.C.R. 824, Binnie J. restated the traditional approach, at para. 20, in the following words:
The test to be applied is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the [mark], at a time when he or she has no more than an imperfect recollection of the [prior] trade-marks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks.
Binnie J. referred with approval to the words of Pigeon J. in Benson & Hedges (Canada) Ltd. v. St. Regis Tobacco Corp., 1968 CanLII 1 (SCC), [1969] S.C.R. 192, at p. 202, to contrast with what is not to be done — a careful examination of competing marks or a side by side comparison.
[41] In this case, the question is whether, as a matter of first impression, the “casual consumer somewhat in a hurry” who sees the Alavida trade-mark, when that consumer has no more than an imperfect recollection of any one of the Masterpiece Inc. trade-marks or trade-name, would be likely to be confused; that is, that this consumer would be likely to think that Alavida was the same source of retirement residence services as Masterpiece Inc.
(3) The Necessity to Consider Each Mark Separately
[42] As noted above, the basis for Masterpiece Inc.’s claim under s. 16(3) of the Act is that the trade-mark for which Alavida applied was confusing with any trade-mark or the trade-name it had used prior to December 1, 2005.
[43] Under s. 16(3), even one confusingly similar trade-mark or trade-name will invalidate Alavida’s registration. In pleading several potentially confusingly similar trade-marks and trade-names, Masterpiece Inc. presented several distinct bases for an invalidation of Alavida’s registration.
[44] Section 6(5) of the Act sets out the required approach to a confusion analysis. All surrounding circumstances must be considered including:
6. . . .
(5) . . .
(a) the inherent distinctiveness of the trade-marks or trade-names and the extent to which they have become known;
(b) the length of time the trade-marks or trade-names have been in use;
(c) the nature of the wares, services or business;
(d) the nature of the trade; and
(e) the degree of resemblance between the trade-marks or trade-names in appearance or sound or in the ideas suggested by them.
[45] Some of the s. 6(5) factors that guide the confusion analysis will be the same for each of the trade-marks and trade-name in this case. For example, all of the evidence suggests that Masterpiece Inc. only engaged in the retirement residence industry and used all of its marks in relation to that industry. In others, each mark will have to be considered separately. For example, because the Masterpiece Inc. trade-marks are different in content from one another, and are different from the trade-name, it will be necessary to consider the similarity of Alavida’s proposed trade-mark, “Masterpiece Living”, to each of the trade-marks and trade-name for which Masterpiece Inc. has established use.
[46] The trial judge found that Masterpiece Inc. demonstrated that it had used the trade-name “Masterpiece” and the trade-marks “Masterpiece the Art of Retirement Living” and “Masterpiece the Art of Living”. Alavida’s application for registration was for the trade-mark “Masterpiece Living”. It was therefore necessary to compare Alavida’s “Masterpiece Living” with each of Masterpiece Inc.’s trade-marks and trade-name separately.
[47] However, instead of undertaking a separate resemblance analysis comparing each of Masterpiece Inc.’s marks and trade-name with Alavida’s mark, the trial judge undertook a single composite analysis. He only considered the issue of resemblance between “Masterpiece Living” and all of Masterpiece Inc.’s trade-marks and trade-name generally. At para. 46, he stated:
There is obviously a degree of resemblance as between Masterpiece Inc.’s trade-name and marks and Alavida’s registered mark for “Masterpiece Living”. However, as part of the overall circumstances, I note that Alavida’s use of “Masterpiece Living” has been in the nature of a slogan accompanying its corporate identity. By contrast, Masterpiece Inc. uses “Masterpiece” to identify the company itself, along with various other words and phrases of far lesser prominence, alongside a distinctive butterfly logo. These differences help reduce the likelihood of confusion. [Emphasis added.]
[48] However, under ss. 16(3)(a) and (c) of the Act, Masterpiece Inc. was entitled to assert, and have considered, any of the marks or trade-name that it had used prior to December 1, 2005, as a basis to challenge Alavida’s application for registration. In my opinion, the trial judge erred in not conducting the separate analysis required by the Act. Some of the expert evidence which treated Masterpiece Inc.’s trade-marks and trade-name as a whole instead of one by one (see, e.g., paras. 21-23 and 36), may have contributed to this error.
(4) The Approach to Testing for Resemblance
[49] In applying the s. 6(5) factors to the question of confusion, the trial judge conducted his analysis in the order of the criteria set forth in s. 6(5), concluding with a consideration of the resemblance between the marks. While it is no error of law to do so, the degree of resemblance, although the last factor listed in s. 6(5), is the statutory factor that is often likely to have the greatest effect on the confusion analysis (K. Gill and R. S. Jolliffe, Fox on Canadian Law of Trade-marks and Unfair Competition (4th ed. (loose-leaf)), at p. 8-54; R. T. Hughes and T. P. Ashton, Hughes on Trade Marks (2nd ed. (loose-leaf)), at §74, p. 939). As Professor Vaver points out, if the marks or names do not resemble one another, it is unlikely that even a strong finding on the remaining factors would lead to a likelihood of confusion. The other factors become significant only once the marks are found to be identical or very similar (Vaver, at p. 532). As a result, it has been suggested that a consideration of resemblance is where most confusion analyses should start (ibid.).
[50] I will therefore first review the trial judge’s consideration of the degree of resemblance of the marks.
(5) The Necessity to Consider the Proposed Use Trade-Mark According to Its Terms, Rather Than by Its Actual Use
[51] In his analysis, the trial judge found that there was “obviously a degree of resemblance as between Masterpiece Inc.’s trade-name and marks and Alavida’s registered mark” (para. 46).
[52] It is clear from the trial judge’s reasons that he took into account Alavida’s actual use of its mark in comparing the Alavida and Masterpiece Inc. marks. For convenience, I repeat a portion of para. 46 of his reasons:
However, as part of the overall circumstances, I note that Alavida’s use of “Masterpiece Living” has been in the nature of a slogan accompanying its corporate identity.
[53] In my opinion, the trial judge’s consideration of Alavida’s actual use of its mark was problematic. The difficulty is that it takes into account a single form of the trade-mark that Alavida used after the relevant date. This single use did not reflect the entire scope of exclusive rights that were granted to Alavida under its registration. As found by Binnie J. in Mattel, at para. 53:
The appellant argued that the courts below erred in looking at the respondent’s actual operations rather than at the terms set out in its application for the proposed trade-mark. It is quite true that the proper focus is the terms of the application, because what is at issue is what the registration would authorize the respondent to do, not what the respondent happens to be doing at the moment.
[54] Alavida’s registration process began on December 1, 2005, with an application based on proposed use. At s. 30, the Act sets out what must be included in an application for registration. When submitting the application, an applicant is required to provide a formulation of its trade-mark in addition to various other pieces of information. The trade-mark on an application may simply be a word mark, or it may be a design, or it may be a word mark and design (for example, see the marks in Leaf Confections Ltd. v. Maple Leaf Gardens Ltd. (1986), 12 C.P.R. (3d) 511 (F.C.T.D.), aff’d (1988), 19 C.P.R. (3d) 331 (F.C.A.)). The application may identify the mark as being used only with particular colours: Trade-marks Regulations, SOR/96-195. An application may also contain disclaimers, or an applicant may be required by the Registrar to include disclaimers, to limit the scope of trade-mark rights: s. 35 of the Act.
[55] In this case, Alavida’s registration (TMA 684,557) identifies the trade-mark that Alavida applied for and was subsequently registered — the words “Masterpiece Living”. This trade-mark is identified only in a textual form. It would therefore permit Alavida to use the words “Masterpiece Living” in any size and with any style of lettering, color or design. As found by the Federal Court of Appeal in Mr. Submarine Ltd. v. Amandista Investments Ltd., 1987 CanLII 8953 (FCA), [1988] 3 F.C. 91:
Nothing restricts the appellant from changing the colour of its signs or the style of lettering of “Mr. Submarine” or from engaging in a telephone and delivery system such as that followed by the respondent or any other suitable system for the sale of its sandwiches. Were it to make any of these changes its exclusive right to the use of “Mr. Submarine” would apply just as it applies to its use in the appellant’s business as presently carried on. Whether the respondent’s trade marks or trade names are confusing with the appellant’s registered trade mark must accordingly be considered not only having regard to the appellant’s present business in the area of the respondent’s operations but having regard as well to whether confusion would be likely if the appellant were to operate in that area in any way open to it using its trade mark in association with the sandwiches or services sold or provided in the operation. [Emphasis added; pp. 102-3.]
[56] When engaging in a confusion analysis, it is important to keep in mind that the exclusive rights granted by the Act refer to a registered trade-mark (ss. 19, 20 and 21). Where a court is called upon to decide if there is a likelihood of confusion between that registered trade-mark and any registered or previously used unregistered trade-marks, the analysis should address the proposed trade-mark for which the registration was ultimately obtained.
[57] If the trial judge had recognized that it was open to Alavida to use its trade-mark in any way within the scope of its registration, he would have had to conclude that the actual use by Alavida did not limit Alavida’s rights. Alavida was entitled to use the words in any form.
[58] The problem with an analysis which takes into account limited use becomes apparent by observing that the bare words “Masterpiece Living” could be presented in many ways under the registration. Nothing would prevent Alavida from altering its advertising to highlight the word “Masterpiece” and give the word “Living” less prominence, just as Masterpiece Inc. had done, or from changing the font or style of lettering that it had used.
[59] For this reason, it was incorrect in law to limit consideration to Alavida’s post-application use of its trade-mark to find a reduced likelihood of confusion. Actual use is not irrelevant, but it should not be considered to the exclusion of potential uses within the registration. For example, a subsequent use that is within the scope of a registration, and is the same or very similar to an existing mark will show how that registered mark may be used in a way that is confusing with an existing mark.
(6) The Requirement to Assess the Unregistered Marks According to Their Actual Use
[60] As for Masterpiece Inc., because its trade-marks were unregistered on December 1, 2005, it may only rely on those trade-marks that it had actually used and the trade-name under which it had been carrying on business, and which had not been abandoned up to that date (see s. 17(1)). There is no suggestion of abandonment in this case (transcript, at p. 17, lines 8-12).
(7) The Resemblance Between the Trade-Marks in Issue
[61] In a case such as this, comparison can be approached by considering only those characteristics that define the relevant trade-marks or trade-name. It is only these elements that will allow consumers to distinguish between the two trade-marks or between the trade-mark and the trade-name. Here, because Alavida’s proposed trade-mark is only the words “Masterpiece Living”, the difference between or similarity with each of Masterpiece Inc.’s trade-marks and trade-name must be assessed only on the basis of these words alone. In my opinion, Alavida’s “Masterpiece Living” is closest to Masterpiece Inc.’s “Masterpiece the Art of Living”. I think that comparing this Masterpiece Inc. trade-mark with the Alavida trade-mark is decisive. If Alavida’s mark is not likely to cause confusion with this Masterpiece Inc. mark, it is unnecessary to consider the other Masterpiece Inc. marks and trade-name which are less similar to the Alavida trade-mark. Conversely, if Alavida’s trade-mark is found to be likely to cause confusion with this Masterpiece Inc. mark, it is unnecessary to test resemblance of its trade-mark with other Masterpiece Inc. trade-marks or its trade-name, although they may be relevant as part of the surrounding circumstances when likely confusion with the “Masterpiece the Art of Living” trade-mark is considered.
[62] Resemblance is defined as the quality of being either like or similar; see Shorter Oxford English Dictionary on Historical Principles (5th ed. 2002), at p. 2544, under the definition of “resemblance”. The term “degree of resemblance” in s. 6(5)(e) of the Act implies that likelihood of confusion does not arise solely from identical trade-marks. “[D]egree of resemblance” recognizes that marks with some differences may still result in likely confusion.
[63] The first word in both Alavida’s and Masterpiece Inc.’s trade-marks is the identical word “Masterpiece”. It has been held that for purposes of distinctiveness, the first word is important (see Conde Nast Publications Inc. v. Union des éditions modernes (1979), 46 C.P.R. (2d) 183 (F.C.T.D.), at p. 188, per Cattanach J.).
[64] While the first word may, for purposes of distinctiveness, be the most important in some cases, I think a preferable approach is to first consider whether there is an aspect of the trade-mark that is particularly striking or unique. Here there is nothing striking or unique about the word “Living” or the words “the Art of Living”. “Masterpiece” is the word that distinguishes Alavida and Masterpiece Inc. from other sources of retirement residence services. It is a reasonable conclusion that “Masterpiece” is the dominant word in these trade-marks, and it is obviously identical as between Alavida and Masterpiece Inc. By the same token, in the context of the retirement residence industry, the idea evoked by the word “Masterpiece”, high quality retirement lifestyle, is the same for both Alavida and Masterpiece Inc. Finally, the word “Living” is identical as between the Alavida and Masterpiece Inc. trade-marks.
[65] Given these striking similarities, it is, in my respectful view, very difficult not to find a strong resemblance as a whole between the two, Masterpiece Inc.’s trade-marks and Alavida’s trade-mark.
C. When Considering the “Nature of the Trade” Under Section 6(5) of the Act, What Effect Does the Nature and Cost of the Wares or Services Have on the Confusion Analysis?
[66] A further difficulty is the trial judge’s consideration of the cost associated with a retirement residence. He found that consumers in the market for a retirement residence will take more care and ultimately will be less likely to be led astray by confusing trade-marks than if they were in the market for less expensive wares or services. In taking into account both the nature of the parties’ business under s. 6(5)(c) and the “nature of the trade” under s. 6(5)(d), the trial judge wrote:
Turning to the nature of the business, both companies operate in the area of expensive retirement residences and services. People take considerable care in choosing a residence and selecting the company that will provide it. In these circumstances, consumers can be presumed to be less susceptible to confusion about the source of the goods or services they are seeking because they are unlikely to make choices based on first impressions. They will generally take considerable time to inform themselves about the source of expensive goods and services (General Motors Corp. v. Bellows, 1949 CanLII 47 (SCC), [1949] S.C.R. 678). [Emphasis added; para. 43.]
[67] This Court has affirmed that consumers in the market for expensive goods may be less likely to be confused when they encounter a trade-mark, but the test is still one of “first impression”. In his reasons, the trial judge used the importance and cost of expensive goods and services to change the likelihood of confusion test from one of first impression of a trade-mark to a test of consumers being “unlikely to make choices based on first impressions”. This approach is not consistent with the test for confusion under s. 6(5) which has been consistently endorsed by this Court, most recently in Veuve Clicquot.
[68] While the hypothetical test for likelihood of confusion must be applied in all situations, it is flexible enough to reflect the observation of Binnie J. in Mattel, at para. 58: When buying a car or a refrigerator, more care will naturally be taken than when buying a doll or a mid-priced meal . . . .
[69] However, as one element of the broader hypothetical test, this care or attention must relate to the attitude of the consumer approaching an important or costly purchase when he or she encounters the trade-mark, not to the research or inquiries or care that may subsequently be taken. As Rand J. put it in General Motors Corp. v. Bellows, 1949 CanLII 47 (SCC), [1949] S.C.R. 678, at p. 692:
Do the words then in that situation [refrigerators] lend themselves to the errors of faint impression or recollection of the average person who goes to their market? [Emphasis added.]
[70] The focus of this question is the attitude of a consumer in the marketplace. Properly framed, consideration of the nature of the wares, services or business should take into account that there may be a lesser likelihood of trade-mark confusion where consumers are in the market for expensive or important wares or services. The reduced likelihood of confusion is still premised on the first impression of consumers when they encounter the marks in question. Where they are shopping for expensive wares or services, a consumer, while still having an imperfect recollection of a prior trade-mark, is likely to be somewhat more alert and aware of the trade-mark associated with the wares or services they are examining and its similarity or difference with that of the prior trade-mark. A trade-mark, as Binnie J. observed in Mattel, is a shortcut for consumers. That observation applies whether they are shopping for more or less expensive wares or services.
[71] It is not relevant that, as the trial judge found, consumers are “unlikely to make choices based on first impressions” or that they “will generally take considerable time to inform themselves about the source of expensive goods and services” (para. 43). Both of these — subsequent research or consequent purchase — occur after the consumer encounters a mark in the marketplace.
[72] This distinction is important because even with this increased attentiveness, it may still be likely that a consumer shopping for expensive goods and services will be confused by the trade-marks they encounter. Careful research and deliberation may dispel any trade-mark confusion that may have arisen. However, that cannot mean that consumers of expensive goods, through their own caution and wariness, should lose the benefit of trade-mark protection. It is confusion when they encounter the trade-marks that is relevant. Careful research which may later remedy confusion does not mean that no confusion ever existed or that it will not continue to exist in the minds of consumers who did not carry out that research.
[73] Indeed, before source confusion is remedied, it may lead a consumer to seek out, consider or purchase the wares or services from a source they previously had no awareness of or interest in. Such diversion diminishes the value of the goodwill associated with the trade-mark and business the consumer initially thought he or she was encountering in seeing the trade-mark. Leading consumers astray in this way is one of the evils that trade-mark law seeks to remedy. Consumers of expensive wares or services and owners of the associated trade-marks are entitled to trade-mark guidance and protection as much as those acquiring and selling inexpensive wares or services.
[74] For these reasons, it was an error to discount the likelihood of confusion by considering what actions the consumer might take after encountering a mark in the marketplace. The trial judge should have instead limited his consideration to how a consumer, upon encountering the Alavida mark in the marketplace, with an imperfect recollection of the Masterpiece Inc. mark, would have reacted. Because consumers for expensive retirement residence accommodation may be expected to pay somewhat more attention when first encountering a trade-mark than consumers of less expensive wares or services, cost is not irrelevant. However, in circumstances where a strong resemblance suggests a likelihood of confusion, and the other s. 6(5) factors do not point strongly against a likelihood of confusion, then the cost is unlikely to lead to a different conclusion.
D. When Should Courts Take Into Account Expert Evidence in Trade-Mark Confusion Cases?
(1) The Judge’s Role in Controlling the Admission of Expert Evidence
[75] Tendering expert evidence in trade-mark cases is no different than tendering expert evidence in other contexts. This Court in R. v. Mohan, 1994 CanLII 80 (SCC), [1994] 2 S.C.R. 9, set out four requirements to be met before expert evidence is accepted in a trial: (a) relevance; (b) necessity in assisting the trier of fact; (c) the absence of any exclusionary rule; and (d) a properly qualified expert. In considering the standard for the second of these requirements, “necessity”, the Court explained that an expert should not be permitted to testify if their testimony is not “likely to be outside the experience and knowledge of a judge”:
This pre-condition is often expressed in terms as to whether the evidence would be helpful to the trier of fact. The word “helpful” is not quite appropriate and sets too low a standard. However, I would not judge necessity by too strict a standard. What is required is that the opinion be necessary in the sense that it provide information “which is likely to be outside the experience and knowledge of a judge or jury”: as quoted by Dickson J. in R. v. Abbey, supra. As stated by Dickson J., the evidence must be necessary to enable the trier of fact to appreciate the matters in issue due to their technical nature. [p. 23]
[76] In light of the relatively extensive expert evidence in this case, and the difficulties with the evidence that I discuss below, I think it is timely to recall that litigation is costly. Courts must fulfil their gatekeeper role to ensure that unnecessary, irrelevant and potentially distracting expert and survey evidence is not allowed to extend and complicate court proceedings. While this observation applies generally, I focus particularly on trade-mark confusion cases, which is the subject of this appeal.
[77] If a trial judge concludes that proposed expert evidence is unnecessary or irrelevant or will distract from the issues to be decided, he or she should disallow such evidence from being introduced. I will also suggest that proposed expert and survey evidence be a matter for consideration at the case management stage of proceedings so that if such evidence would not be admissible at trial, much of the cost of engaging experts and conducting surveys may be avoided. To explain my reasons, I turn to the expert evidence in this case.
(2) The Expert Evidence in This Case Did Not Assist With the Confusion Analysis
[78] A significant part of the trial judgment, and argument in this Court, was dedicated to the expert evidence submitted by the parties. This evidence took two forms: expert testimony adduced by Alavida on how a consumer is likely to react when presented with the trade-marks, and a survey conducted by an expert for Masterpiece Inc. which was heavily critiqued by an expert for Alavida.
[79] It is apparent that the expert evidence on either side was not particularly helpful. Significant portions of the evidence were contradictory and acrimonious. In the result, these disputes appear to have substantially distracted from the confusion analysis rather than assisting it.
[80] The first problem was that much of the expert testimony did not meet the second Mohan requirement of being necessary. In a case such as this, where the “casual consumer” is not expected to be particularly skilled or knowledgeable, and there is a resemblance between the marks, expert evidence which simply assesses that resemblance will not generally be necessary. And it will be positively unhelpful if the expert engages in an analysis that distracts from the hypothetical question of likelihood of confusion at the centre of the analysis.
[81] The evidence of one of Alavida’s experts consisted in part of a discussion of morphology, semantics, rules of grammar and conventions of expression. This led him to conclude that in the case of Alavida’s “Masterpiece Living” trade-mark, the focus of the mark is on life and living, where living is the dominant element. On the other hand, in the case of Masterpiece Inc.’s “Masterpiece the Art of Living”, his view was that “Masterpiece” is the focal point which he thought reduced the likelihood of confusion.
[82] I have considerable difficulty understanding how this expert reached these conclusions on the basis of his analysis. If a conclusion is rational, an expert must be able to explain the reasons for it. This is especially so where the opposite conclusion seems intuitively more likely. No such explanation was provided. The distinctive word is “Masterpiece” in both cases, not “Living”. “Masterpiece” is the first word in each trade-mark. The word “Living” appears in both the Masterpiece Inc. and Alavida trade-marks. The idea of the trade-marks is the same. As discussed above, in this case, it is apparent that in the retirement residence industry, Alavida’s “Masterpiece Living” closely resembles Masterpiece Inc.’s “Masterpiece the Art of Living”.
[83] Neither an expert, nor a court, should tease out and analyze each portion of a mark alone. Rather, it should consider the mark as it is encountered by the consumer — as a whole, and as a matter of first impression. In Ultravite Laboratories Ltd. v. Whitehall Laboratories Ltd., 1965 CanLII 43 (SCC), [1965] S.C.R. 734, Spence J., in deciding whether the words “DANDRESS” and “RESDAN” for removal of dandruff were confusing, succinctly made the point, at pp. 737-38: “[T]he test to be applied is with the average person who goes into the market and not one skilled in semantics.”
[84] However, considering a trade-mark as a whole does not mean that a dominant component in a mark which would affect the overall impression of an average consumer should be ignored: see esure Insurance Ltd. v. Direct Line Insurance plc, 2008 EWCA Civ 842, [2008] R.P.C. 34, at para. 45, per Arden L.J. This is because, while the consumer looks at the mark as a whole, some aspect of the mark may be particularly striking. That will be because that aspect is the most distinctive part of the whole trade-mark. In this case, contrary to the view of the expert, the most distinctive and dominant component of the marks in issue is in all cases the word “Masterpiece” because it provides the content and punch of the trade-mark. The word “Living” is bland by comparison.
[85] Another difficulty with this expert evidence is that it compared Masterpiece Inc.’s marks with Alavida’s trade-mark in the format and font in which it was used by Alavida subsequent to December 1, 2005. The expert did not, as was necessary in this case, consider any other presentation available to Alavida in accordance with its trade-mark registration. For example, as discussed above, nothing would preclude Alavida from using the same format and font as Masterpiece Inc. and giving prominence to the word “Masterpiece” in the same manner as Masterpiece Inc. This may have been what led the trial judge into the same error in concluding that the subsequent use by Alavida of its trade-mark was sufficiently different from Masterpiece Inc.’s trade-marks and trade-name that it would reduce the likelihood of confusion.
[86] Another problematic example in the expert evidence relates to the expert’s reference to the cost and importance of the goods or services in question. The expert expresses the opinion:
As decision extend[s] from the shallow to the grave end of the decision spectrum, consumers exert a higher degree of consumer care and attention, increase their efforts to acquire information, engage in elaborate product search behaviours, and judge competing offers with elevated levels of scrutiny. Most importantly, as the degree of care exercised increases, the likelihood of confusion decreases. [A.R., vol. II, at p. 75]
[87] It is apparent that the expert was focusing on points in time after the consumer first encountered the trade-mark. As I have explained, subsequent research and care may unconfuse the consumer, but they do not detract from the confusion relevant for purposes of the Trade-marks Act that occurred when the consumer first encountered the trade-mark. The expert made assumptions of law that were wrong, and his conclusions were therefore wrong. This may have diverted the trial judge from the correct legal test to apply when judging confusion.
[88] In view of these and other difficulties with the expert evidence in this case, I think it may be useful to comment generally on the use of expert evidence in a confusion case. In doing so, I have found guidance in the observations of Lord Diplock in General Electric Co. v. The General Electric Co. Ltd., [1972] 2 All E.R. 507 (H.L.). He distinguished between goods sold in a specialized market of sophisticated consumers engaged in a particular trade, e.g., large industrial electrical machinery, on the one hand, and those sold to the general public, on the other. Where the market is specialized, evidence about the special knowledge or sophistication of the targeted consumers may be essential to determining when confusion would be likely to arise. However, where goods are sold to the general public for ordinary use, he explained, at p. 515:
. . . the question whether such buyers would be likely to be deceived or confused by the use of the trade mark is a ‘jury question’. By that I mean that if the issue had now, as formerly, to be tried by a jury, who as members of the general public would themselves be potential buyers of the goods, they would be required not only to consider any evidence of other members of the public which had been adduced but also to use their own common sense and to consider whether they would themselves be likely to be deceived or confused.
[89] The question is not answered differently when the issue is determined by a judge. Lord Diplock wrote, continuing at p. 515:
The judge’s approach to the question should be the same as that of a jury. He, too, would be a potential buyer of the goods. He should, of course, be alert to the danger of allowing his own idiosyncratic knowledge or temperament to influence his decision, but the whole of his training in the practice of the law should have accustomed him to this, and this should provide the safety which in the case of a jury is provided by their number. That in issues of this kind judges are entitled to give effect to their own opinions as to the likelihood of deception or confusion and, in doing so, are not confined to the evidence of witnesses called at the trial is well established by decisions of this House itself. [Emphasis added.]
[90] In esure, the same concern and caution was expressed about expert evidence of confusion. At para. 62, Arden L.J. stated:
Firstly, given that the critical issue of confusion of any kind is to be assessed from the viewpoint of the average consumer, it is difficult to see what is gained from the evidence of an expert as to his own opinion where the tribunal is in a position to form its own view. That is not to say that there may not be a role for an expert where the markets in question are ones with which judges are unfamiliar . . . .
[91] In Ultravite, Spence J. was quite satisfied to express and apply his own view of the first impression of a trade-mark on the average consumer. At p. 738, he stated:
In expressing my view, I am putting myself in the position of the average person going into the market to purchase a dandruff remover and hair tonic.
[92] I would endorse these comments about expert evidence and follow the approach of Spence J. in Ultravite, the House of Lords in General Electric and the English Court of Appeal in esure. In cases of wares or services being marketed to the general public, such as retirement residences, judges should consider the marks at issue, each as a whole, but having regard to the dominant or most striking or unique feature of the trade-mark. They should use their own common sense, excluding influences of their “own idiosyncratic knowledge or temperament” to determine whether the casual consumer would be likely to be confused.
[93] Surveys, on the other hand, have the potential to provide empirical evidence which demonstrates consumer reactions in the marketplace — exactly the question that the trial judge is addressing in a confusion case. This evidence is not something which would be generally known to a trial judge, and thus unlike some other expert evidence, it would not run afoul of the second Mohan requirement that the evidence be necessary. However, the use of survey evidence should still be applied with caution.
[94] The use of consumer surveys in trade-mark cases has been recognized as valid evidence to inform the confusion analysis. As Binnie J. noted in Mattel, often the difficulty with survey evidence is whether it meets the first of the Mohan requirements: relevance. At para. 45, he further divided the question of relevance into two sub-issues:
As to the usefulness of the results, assuming they are elicited by a relevant question, courts have more recently been receptive to such evidence, provided the survey is both reliable (in the sense that if the survey were repeated it would likely produce the same results) and valid (in the sense that the right questions have been put to the right pool of respondents in the right way, in the right circumstances to provide the information sought). [Emphasis added.]
[95] In Mattel, the survey at issue was found to be invalid, as it did not address the likelihood of confusion, only a “mere possibility, rather than a probability, of confusion” (para. 49). This was because the survey asked consumers whether they thought that the company that makes Barbie dolls “might have anything to do with” a restaurant that used the trade-mark “Barbie’s” (para. 1 (emphasis in original)).
[96] In this case, the problem is somewhat different. Unlike Mattel, Masterpiece Inc. had not yet established a presence in the community in which it operated. Thus, there were no casual or average consumers with “imperfect recollection” of Masterpiece Inc.’s marks to test. As a result, the survey was based on a series of questions that attempted to establish a proxy for “imperfect recollection”, and only thereafter test how such customers would react when exposed to the second mark. This is not asking questions “in the right way, in the right circumstances” to elicit evidence of how those with an imperfect recollection of Masterpiece Inc.’s marks would react to Alavida’s proposed mark. For a survey to be valid, it seems elementary that there must be some consumers who could have an imperfect recollection of the first mark. Simulating an “imperfect recollection” through a series of lead-up questions to consumers will rarely be seen as reliable and valid.
[97] While I would not absolutely foreclose the possibility that a party may devise a valid survey in a case where a trade-mark user has not established a sufficient presence in the marketplace for consumers to have formed an imperfect recollection of its trade-mark, I would venture that it is highly unlikely that such a survey would meet the requirements of reliability and validity.
[98] I do not know the exact circumstances in which the expert evidence was introduced in this case or what was requested of the trial judge, and there is no suggestion that the trial judge erred in admitting it. Nonetheless, I think it is apparent, particularly with respect to the survey, that the evidence was of little assistance to the trial judge and indeed distracted from the required confusion analysis.
[99] Where parties propose to introduce expert evidence, a trial judge should question the necessity and relevance of the evidence having regard to the Mohan criteria before admitting it. As I have already pointed out, if a trial judge concludes that the expert evidence is unnecessary or will distract from the issues to be decided, he or she should disallow such evidence from being introduced.
[100] I would further suggest that it would be salutary to have a case management judge assess the admissibility and usefulness of proposed expert and survey evidence at an early stage so as to avoid large expenditures of resources on evidence of little utility.
[101] As I have said, I do not know the exact pre-trial procedures in this case or whether the Federal Court generally includes the scope and methodology of proposed surveys within the case management process in trade-mark confusion cases. However, in making this recommendation I have had regard to a similar recommendation made by Arden L.J., at para. 63 of esure, where she observed that surveys can be costly and sometimes based on wrong questions and produce irrelevant or unhelpful responses, precisely the difficulty with the survey in this case. I have had regard to her recommendation for case management direction on proposed surveys in making the recommendation outlined above. As she explained, at para. 64:
My object of referring to this developing practice [case management directions] is to give it wider publicity and to encourage practitioners in this field to use this mechanism, so that any waste of costs and court resources is minimised.
My object is the same.
VII. The Confusion Analysis
[102] The determination of whether a likelihood of source confusion exists is a fact-finding and inference-drawing exercise, and thus, appellate courts should generally defer to the trial judge’s fact findings and inferences, unless the facts and inferences were based on an error of law or constituted a palpable or overriding error of fact: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.
[103] In this case, three errors of law have been identified in the interpretation and application of the confusion analysis conducted by the trial judge. It is now necessary to consider whether the matter should be remitted to the trial judge for redetermination in accordance with these reasons, or whether this Court should make a fresh assessment of the evidence. In Hollis v. Dow Corning Corp., 1995 CanLII 55 (SCC), [1995] 4 S.C.R. 634, at para. 33, this Court found:
It is well established that appellate courts have the jurisdiction to make a fresh assessment of the evidence on the record where they deem such an assessment to be in the interests of justice and feasible on a practical level . . . .
In Hollis, the “bulk of the critical evidence adduced at trial was documentary, not testimonial” which made the reassessment feasible. Here, this Court has a similarly complete record on which to make a redetermination, having concluded that the expert evidence was of little or no use to the issue of confusion. In order to avoid further protracting the proceedings between these parties, I believe that the interests of justice would be served by this Court finally deciding the matter.
[104] Without repeating the findings above, there is no doubt that there is a strong resemblance between Masterpiece Inc.’s trade-mark, “Masterpiece the Art of Living” and Alavida’s trade-mark, “Masterpiece Living”. In my opinion, a casual consumer observing the Alavida trade-mark and having no more than an imperfect recollection of Masterpiece Inc.’s trade-mark would likely be confused into thinking that the source of the services associated with the Alavida trade-mark was one and the same as the source of the services associated with the Masterpiece Inc. trade-mark. The question now is whether any of the other circumstances reduce this likelihood of confusion to the point that confusion is not likely to occur.
[105] As to the cost and importance of retirement residence services, such considerations are relevant. However, in view of the close resemblance between the marks, even a consumer in the market for relatively expensive retirement residence accommodation would not likely recognize that Alavida’s “Masterpiece Living” signified a different source than Masterpiece Inc.’s “Masterpiece the Art of Living”. The ideas conveyed by both companies’ marks are the same. Looking at the marks as a whole and the dominant word “Masterpiece” in particular, there is little to dispel the consumer from thinking that the source of the marks was the same.
[106] As to the nature of the wares, services or businesses, Alavida has argued that the services it sought to provide were “up-market” while Masterpiece Inc. only provided “middle-market” services. This parsing of the services is too narrow. Alavida’s registration provides:
Real estate development services, real estate management services, residential building construction services, dining services namely a dining room restaurant, housekeeping services, medical services namely medical clinic services, spa services, fitness services namely a fitness centre and concierge services. [R.R., vol. I, at p. 210]
[107] Nothing in this registration limits Alavida to the “up-market”. Its registration would entitle it to use its trade-mark in the exact same market as that serviced by Masterpiece Inc. For the purpose of a confusion analysis, the services provided by the parties are essentially the same — retirement residence services. There is no justification for subdividing between “up-market” and “middle-market”. Consideration of the nature of the services involved, in my view, enhances the likelihood of confusion for the casual consumer.
[108] The trial judge found that while the term “Masterpiece” is a common word with wide use in describing goods and services, its use in the retirement residence industry is somewhat distinctive in the sense that it is intended to distinguish the retirement residence services provided by its owner from the retirement residence services provided by others. I agree with that finding.
[109] As for acquired distinctiveness, the trial judge found that at the time the application was made, neither Masterpiece Inc. nor any of its trade-marks were particularly well known. While the evidence presented by Masterpiece Inc. was sufficient to establish that there had been use of its trade-name and trade-marks, including “Masterpiece the Art of Living”, for the purposes of the Act, it did not rise to the level of demonstrating any acquired distinctiveness. I agree with the trial judge.
[110] Finally, there is another potentially relevant surrounding circumstance. As explained at para. 11 above, not long after Alavida’s application, Masterpiece Inc. applied to register both “Masterpiece” as well as “Masterpiece Living” for retirement residence services. These applications were rejected by the Registrar of Trade-Marks because of Alavida’s existing application.
[111] This refusal was founded on the observation that each of these marks submitted by Masterpiece Inc. was confusingly similar to Alavida’s proposed registration. For purposes of the confusion analysis in this case, Masterpiece Inc.’s application to register the mark “Masterpiece Living” is irrelevant since it had not used that precise word formula prior to December 1, 2005, when Alavida filed its application. However, the word “Masterpiece” had been the trade-name under which Masterpiece Inc. had carried on business prior to that date, and it was the dominant part of the “Masterpiece the Art of Living” trade-mark.
[112] Despite the fact that the trial judge noted the rejection of Masterpiece Inc.’s applications at the outset of his reasons, there is no indication that this evidence was taken into account in his confusion analysis. It is true that the trial judge was not conducting an appeal or judicial review of the reasonableness of the decision of the Registrar, owed no deference to the Registrar’s decision and was certainly not bound by it. However, as a relevant surrounding circumstance under s. 6(5), I am of the opinion that the trial judge should have acknowledged the Registrar’s finding, which was diametrically opposite to his conclusion, in weighing the evidence before him. The Registrar’s decision supports a finding of likelihood of confusion between Alavida’s trade-mark and Masterpiece Inc.’s trade-name, and thus the “Masterpiece the Art of Living” trade-mark.
VIII. Conclusion
[113] Consideration of all the circumstances of the case, including the factors set out in s. 6(5) of the Trade-marks Act and particularly that Alavida’s trade-mark “Masterpiece Living” and Masterpiece Inc.’s “Masterpiece the Art of Living” are very similar, leads to a finding that Masterpiece Inc. has proven that the use of Alavida’s trade-mark in the same area as those of Masterpiece Inc.’s would be likely to lead to the inference that the services associated with Masterpiece Inc.’s trade-marks were being performed by Alavida.
[114] Because Masterpiece Inc.’s use preceded Alavida’s proposed use, Alavida was not entitled under s. 16(3) to registration of its trade-mark. As a result, Alavida was not “the person entitled to secure the registration” of its trade-mark under s. 18(1) and this ground of invalidity has been made out. I would therefore allow the appeal with costs here and below and, pursuant to s. 57(1) of the Trade-marks Act, I would order the Registrar to expunge this registration from the register of trade-marks.
3. Survey Evidence
Survey evidence, as a species of expert evidence, must meet the following conjunctive criteria for the Court to find it admissible: (a) relevance; (b) necessity in assisting the trier of fact (in the sense that the evidence is outside the experience and knowledge of a judge); (c) the absence of any exclusionary rule; and (d) a properly qualified expert.Further, to be considered relevant, the survey must be both reliable (in that if it were repeated it would produce the same results) and valid (in that the right questions were put to the right pool of survey participants in the right way and in the right circumstances to produce the evidence sought)
The Federal Court concluded that an online survey was not admissible in determining whether the parties’ respective trademarks were confusing (Tokai of Canada Ltd. v. Kingsford Products Company, LLC., 2021 FC 782).
Example: Inadmissible survey evidence
Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22
[42] Before the applications judge, the appellant sought to adduce fresh evidence in the form of a survey which purported to show that:
– For 57 percent of the participants, BARBIE dolls came to mind when they saw the Barbie’s restaurant logo.
– 36 percent of the participants believed that the company that manufactured BARBIE dolls might have something to do with the logo of Barbie’s restaurant.
– 99.3 percent of the participants were familiar with the BARBIE dolls. (Rouleau J., at para. 10)
[43] Until comparatively recently, evidence of public opinion polls was routinely held to be inadmissible because it purports to answer the factual component of the very issue before the Board or court (i.e. the likelihood of confusion), and in its nature it consists of an aggregate of the hearsay opinions of the people surveyed who are not made available for cross-examination, see, e.g., Building Products Ltd. v. BP Canada Ltd. (1961), 36 C.P.R. 121 (Ex. Ct.); Paulin Chambers Co. v. Rowntree Co. (1966), 51 C.P.R. 153 (Ex. Ct.). The more recent practice is to admit evidence of a survey of public opinion, presented through a qualified expert, provided its findings are relevant to the issues and the survey was properly designed and conducted in an impartial manner.
[44] The principal attack on the survey evidence in this case rests on relevance. The issue in these opposition proceedings is the likelihood of confusion. The survey question (“Do you believe that the company that makes Barbie dolls might have anything to do with the restaurant identified by this sign or logo?” (emphasis added)) addresses the wholly different issue of possibilities. If the survey is not responsive to the point at issue, it is irrelevant and should (as the Federal Court of Appeal held) be excluded on that ground alone.
[45] As to the usefulness of the results, assuming they are elicited by a relevant question, courts have more recently been receptive to such evidence, provided the survey is both reliable (in the sense that if the survey were repeated it would likely produce the same results) and valid (in the sense that the right questions have been put to the right pool of respondents in the right way, in the right circumstances to provide the information sought). See Canadian Schenley Distilleries Ltd. v. Canada’s Manitoba Distillery Ltd. (1975), 25 C.P.R. (2d) 1 (F.C.T.D.), at p. 9; Joseph E. Seagram & Sons Ltd. v. Seagram Real Estate Ltd. (1990), 33 C.P.R. (3d) 454 (F.C.T.D.); Walt Disney Productions v. Fantasyland Hotel Inc. (1994), 1994 CanLII 5264 (AB QB), 20 Alta. L.R. (3d) 146 (Q.B.). Thus, in Cartier Inc. v. Cartier Optical Ltd. (1988), 20 C.P.R. (3d) 68 (F.C.T.D.), the court accepted as helpful a survey found to be properly designed and impartially administered and whose findings were directly relevant to the likelihood of confusion. This was also the case in Sun Life Assurance Co. of Canada v. Sunlife Juice Ltd. (1988), 1988 CanLII 4550 (ON SC), 22 C.P.R. (3d) 244 (Ont. H.C.J.).
[46] On the other hand, surveys have been excluded
(i) where the individuals surveyed did not constitute the relevant population, see Joseph E. Seagram, at p. 472; New Balance Athletic Shoes, Inc. v. Matthews (1992), 45 C.P.R. (3d) 140 (T.M.O.B.); National Hockey League v. Pepsi-Cola Canada Ltd. (1992), 1992 CanLII 2324 (BC SC), 70 B.C.L.R. (2d) 27 (S.C.), at para. 44; McDonald’s Corp. v. Coffee Hut Stores Ltd. (1994), 55 C.P.R. (3d) 463 (F.C.T.D.), at p. 475, or only included a subset of the relevant population: Unitel Communications Inc. v. Bell Canada (1995), 92 F.T.R. 161, at para. 117;
(ii) where the trade-mark used in the survey was not precisely the trade-mark applied for: Canada Post Corp. v. Mail Boxes Etc. USA, Inc. (1996), 77 C.P.R. (3d) 93 (T.M.O.B.);
(iii) where the wrong question is asked, e.g. a survey done for Coca-Cola was excluded on the basis that it was not directed to the issue of confusion but rather to measure public recognition of the word Classic as part of soft drink names: Coca-Cola Ltd. v. Southland Corp. (2001), 20 C.P.R. (4th) 537 (T.M.O.B.). See also: Molson Companies Ltd. v. S.P.A. Birra Peroni Industriale (1992), 45 C.P.R. (3d) 28 (T.M.O.B.); Molson Breweries v. Swan Brewery Co., [1994] T.M.O.B. No. 253 (QL); Toys “R” Us (Canada) Ltd. v. Manjel Inc. (2003), 229 F.T.R. 71, 2003 FCT 283;
(iv) where the survey had not been carried out in an impartial and independent manner: Unitel Communications, per Gibson J., at para. 120.
[47] In the present case, the appellant retained a reputable and qualified firm to conduct the survey. However, the evidence showed that the persons questioned by the pollsters were merely shown without any context the respondent’s Barbie’s design logo, subsequently had it removed from their sight, and were then asked a series of questions, some of them suggestive. The key question, which the Federal Court of Appeal found to be irrelevant, was “Do you believe that the company that makes Barbie dolls might have anything to do with the restaurant identified by this sign or logo?” (emphasis added). The Montreal respondents were posed the question in French: “Croyez-vous que la compagnie qui fabrique les poupées Barbie pourrait avoir quelque chose à faire avec le restaurant identifié par cette enseigne ou ce logo?” (Emphasis added.)
[48] Other alleged shortcomings included:
(i) the lack of information provided to those who responded to the survey;
(ii) the survey excluded anyone who was even aware of the respondent’s Barbie’s restaurants. It is pointed out that such people were part of the relevant universe of individuals in the market for the respondent’s services and are therefore potentially some of the people who may or may not “likely” be misled by the applied-for trade-mark. The survey need not be limited to such people of course, but nor should they be excluded. A similar objection was sustained in both McDonald’s Corp. v. Coffee Hut Stores Ltd. and in the Fantasyland Hotel case which referred with approval to Safeway Stores, Inc. v. Safeway Insurance Co., 657 F. Supp. 1307 (M.D. La. 1985), in this respect;
(iii) the survey methodology included questions suggestive of the answers the appellant apparently wanted to hear.
[49] The appellant has not made any application to adduce the survey testimony or results as fresh evidence in this Court, and in my view the exclusion of that evidence by the applications judge does not constitute reversible error in light of the broad power given to him under s. 56(5), which provides:
(5) On an appeal under subsection (1), evidence in addition to that adduced before the Registrar may be adduced and the Federal Court may exercise any discretion vested in the Registrar.
The use of the word “might” (or “pourrait”) in the survey question was directed to a mere possibility, rather than a probability, of confusion. The respondents who answered “yes” to this question may merely have believed that it was within the realm of possibility that the appellant had something to do with the restaurant, rather than actually inferring from the trade-marks that it was likely that the two trade-marks represented wares or services emanating from the same source. It is relevant if even a limited percentage of the population surveyed is confused, but evidence that a lot of people might or could possibly make the mistaken inference is not. The other grounds of objection go to the weight rather than to admissibility of the survey evidence and, subject to assessing that weight (or the lack of it), the survey evidence could have been admitted over the respondent’s other objections. Lack of relevance, however, was fatal.
[50] At most, the proferred survey indicated that the BARBIE trade-mark is well known. Even without the survey however, the courts below were content to proceed on the basis that BARBIE is a “well known” if not “famous” mark, and I do so as well.
G. Infringement & Expungement
The registration of a trademark carries definite advantages for the holder compared to an unregistered trademark. The Trademarks Act offers indeed a wider ambit of protection than the common law remedy of passing off which is the only recourse available for unregistered marks (see Section H. Passing Off, below). First, the plaintiff in an infringement proceeding need not show that the goods or services are marketed in the same area as the common law doctrine does. The registered trademark is valid across Canada and, along with it the owner possesses the right to its exclusive use in association with specified wares or services nationwide. As well, no damages need to be proven, nor indeed must an attempt to deceive be made out in order to succeed. Besides the action in passing off discussed in the following section, the exclusive rights granted under the Trademarks Act allow a trademark owner to institute proceedings against anyone who uses an identical mark (s.19 TMA), a confusingly similar mark (s.20 TMA) or a mark that is likely to have the effect of depreciating the value of the goodwill attaching their mark (s.22 TMA). A request for expungement of an allegedly invalid mark (s.57 TMA) can be filed before the Federal Court either as a distinct cause of action, or in defence of a claim of infringement. Each cause of action is discussed separately in the below subsections.
1. Identical Use of a Trademark
Pursuant to s.19 TMA, the owner has the exclusive right to use the trademark throughout Canada in respect of the goods or services mentioned in the registration, unless the trademark is shown to be invalid. Once the owner obtains the certificate of registration, a presumption of validity exists in favour of the trademark owner. This protection serves to protect the public as well as the owners of trademarks by affording transparency, stability and certainty of the trademark system in Canada.
Rights conferred by registration
19 Subject to sections 21, 32 and 67, the registration of a trademark in respect of any goods or services, unless shown to be invalid, gives to the owner of the trademark the exclusive right to the use throughout Canada of the trademark in respect of those goods or services.
An action brought on the basis of s.19 does not require evidence of confusion. This section is concerned with the use by a defendant of a trademark that is identical to the plaintiff’s registered trademark; the exclusive right that it protects is the right to the trademark as registered. In the section 19 context, identical simply means the same, not merely similar. In assessing whether the trademarks are identical, it is necessary to take into account that the trademarks in each case contain the same words or depict the same logo. [see Group III International Ltd. v. Travelway Group International Ltd., 2020 FCA 210]
2. Confusing Use of a Trademark
Instances of exact trademark imitation – same mark, same goods or services – are rare. Generally speaking, claims for infringement arise where the mark used by one undertaking in association with its certain goods or services comes, intentionally or not, too close to another undertaking’s registered trademark. Such cases revolve around the concept of confusion, as discussed in the previous section of this book. Therefore, the most commonly invoked provision in support of a trademark infringement claim is s.20 TMA, which creates a presumption of infringement in favour of the trademark owner, in cases where a person not entitled to use it sells, distributes or advertises wares or services in association with a confusing trademark.
Pre-2014 version of section 20 TMA
Infringement
20 (1) The right of the owner of a registered trade-mark to its exclusive use shall be deemed to be infringed by a person not entitled to its use under this Act who sells, distributes or advertises wares or services in association with a confusing trade-mark or trade-name, but no registration of a trade-mark prevents a person from making
(a) any bona fide use of his personal name as a trade-name, or
(b) any bona fide use, other than as a trade-mark,
(i) of the geographical name of his place of business, or
(ii) of any accurate description of the character or quality of his wares or services,
in such a manner as is not likely to have the effect of depreciating the value of the goodwill attaching to the trade-mark.
This section was substantially expanded and reinforced to the benefit of registered trademark owners through the legislative amendments of 2014 adopted in the context of the Combating Counterfeit Products Act (“CCPA”). Section 20(1) now expressly covers all instances of use of non-identical trademarks, including the sale, distribution or advertising of any goods or services or the manufacture, possession, importation, exportation, sale, distribution or advertising of any goods in association with a confusing trademark. With the use of the words ‘any goods‘, the legislator intended to specifically extend protection under the Trademarks Act to goods and services that are not listed in the register of trademarks.
Section 20(1.01) TMA establishes a new presumption of infringement under s. 20(1)(b) TMA of a registered trademark, where a person who is not entitled to its use the mark imports goods on a commercial scale that bear a trademark or trade name that is identical to, or cannot be distinguished in its essential aspects from, the trademark registered for such goods.
Protection also extends to the sale, offer for sale or distribution of any label or packaging, in any form, bearing a trademark or trade name if their is actual or constructive knowledge that such labels or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark owner. This provision was introduced in the law to counter the practice by some counterfeiters of importing goods and labels bearing trademarks separately and attach them once in Canada, instead of importing goods with counterfeit trademarks already attached to them.
Infringement
20 (1) The right of the owner of a registered trademark to its exclusive use is deemed to be infringed by any person who is not entitled to its use under this Act and who
(a) sells, distributes or advertises any goods or services in association with a confusing trademark or trade name;
(b) manufactures, causes to be manufactured, possesses, imports, exports or attempts to export any goods in association with a confusing trademark or trade name, for the purpose of their sale or distribution;
(c) sells, offers for sale or distributes any label or packaging, in any form, bearing a trademark or trade name, if
(i) the person knows or ought to know that the label or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark, and
(ii) the sale, distribution or advertisement of the goods or services in association with the label or packaging would be a sale, distribution or advertisement in association with a confusing trademark or trade name; or
(d) manufactures, causes to be manufactured, possesses, imports, exports or attempts to export any label or packaging, in any form, bearing a trademark or trade name, for the purpose of its sale or distribution or for the purpose of the sale, distribution or advertisement of goods or services in association with it, if
(i) the person knows or ought to know that the label or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark, and
(ii) the sale, distribution or advertisement of the goods or services in association with the label or packaging would be a sale, distribution or advertisement in association with a confusing trademark or trade name.
Deemed infringement under paragraph (1)(b)
(1.01) An infringement under paragraph (1)(b) is presumed, unless the contrary is proven, if a person who is not entitled to use a registered trademark imports goods on a commercial scale that bear a trademark that is identical to, or cannot be distinguished in its essential aspects from, the trademark registered for such goods.
Exception — bona fide use
(1.1) The registration of a trademark does not prevent a person from making, in a manner that is not likely to have the effect of depreciating the value of the goodwill attaching to the trademark,
(a) any bona fide use of his or her personal name as a trade name; or
(b) any bona fide use, other than as a trademark, of the geographical name of his or her place of business or of any accurate description of the character or quality of his or her goods or services.
Exception — utilitarian feature
(1.2) The registration of a trademark does not prevent a person from using any utilitarian feature embodied in the trademark.
The new subsection 20(1.1) adds an exception to the general rule stated in the first subsection by providing that the registration of a trade-mark does not prevent a person from making, in a manner that is not likely to have the effect of depreciating the value of the goodwill attached to the trade-mark:
- any bona fide use of his or her personal name as a trade-name; or
- any bona fide use, other than as a trademark, of the geographical name of his or her place of business or of any accurate description of the character or quality of his or her goods or services.
Lastly, the new subsection 20(1.2) provides a new exception to the infringement of the right to the exclusive use of a registered trademark allowing the use any utilitarian feature embodied in the trademark.
Example: Advertising of services in association with a trademark that is confusing with a registered trademark
Responsive Brands Inc. v. 2248003 Ontario Inc., 2016 FC 355
I. Overview
[1] This is an action for trade-mark infringement and passing off brought by Responsive Brands Inc., owner of the “Mister Transmission” trade-mark, against Marc Picard, Michael Urquhart and their corporation, 2248003 Ontario Inc. During the trial of this matter, the action as against Mr. Picard and Mr. Urquhart in their personal capacities was withdrawn by Responsive Brands Inc., and an Order to that effect was issued on March 3, 2016. Consequently, the action is now only as against the Defendant, 2248003 Ontario Inc., and that is the party referred to as the Defendant in the reasons that follow.
[2] An Order to bifurcate the liability and damages aspects of the action was issued prior to commencement of the trial, so these reasons deal only with the issue of liability.
[3] Responsive Brands Inc., the Plaintiff, alleges that the Defendant is infringing on its trade-marks because the Defendant’s trade names, which they allege are “Master Transmission” and “Master Transmission & Driveline”, are confusingly similar to “Mister Transmission.” The Plaintiff further alleges that the Defendant is passing off its goods and services as those of the Plaintiff and, because of the confusion and passing off, the goodwill associated with the Plaintiff’s trade-marks has been depreciated. The Defendant denies having used the name “Mister Transmission” and pleads that the logo and branding of Master Transmission & Driveline is not confusingly similar to Mister Transmission, particularly since the words “mister” and “master” have different meanings, with master referring to the skills and abilities of Mr. Picard and Mr. Urquhart.
II. Background
[4] Since the 1970s, Mister Transmission [Mister] has been advertising on radio and television and, now, also utilizes the internet and social media. Mister is a well-known, national brand for transmission services for vehicles. According to Randall A. Moore, the President and Chief Executive Officer of Mister Transmission International, Mister’s advertising budget is approximately $800,000 to $1,000,000 per year. This budget is largely spent promoting the various Mister trade-marks, design, and jingle. Mister’s franchisees contribute to an advertising fund which is used with other corporate funds to advertise Mister’s transmission services in some 65 locations across Canada, including approximately 45 locations in Ontario.
[5] Mister advertises heavily in sports broadcasts. Its radio ads always end with its jingle. Its television commercials end with an orange-coloured logo or its name and, sometimes, several seconds of the jingle. Mister has done tests of consumer awareness. It also conducts a customer service index campaign; when a customer gets work done, the customer is asked how they heard about Mister. Mr. Moore testified that, outside of the French market area, the concentration of people who know Mister as a brand for transmission services is over 90 percent, and also that most people who can sing Mister’s jingle have never been in a Mister store.
[6] Mister has a franchise location in Orillia, Ontario, which is also where the Defendant [Master] operates its business. Mister spends over $500,000 of its annual advertising budget in the greater Toronto area; this advertising reaches into the Orillia area, so many residents of Orillia see and hear Mister’s national ads. Chris and Christina Jansen, who operate Mister’s outlet in Orillia, testified at trial that they spend approximately $20,000 per year for their local advertising, using such forms as ads in local newspapers and on local radio stations, the telephone book, and attending car shows. Their local advertising does not advertise for engine repairs, oil changes, exhaust or brake work, suspension repairs, or general automotive services.
[7] Mr. Urquhart testified that when Master started its business in Orillia in June 2010, he and Mr. Picard had limited funds. Their advertising started with the Yellow Pages and local flyers, and they advertised in the local Perkolator newsletter every week for a couple of years. They also established a webpage and a Facebook presence. Master does not use any jingles. Mr. Urquhart says their slogan is “Building Relationships One Transmission at a Time.” Master advertises on one billboard on Highway 12 between Rama and Brechin, Ontario; it says “‘Transmission problems,’ with a question mark, lifetime warranty, Memorial Avenue, and the phone number.” Master’s name is not on this billboard. Mr. Picard testified that Master attracts a lot of customers from individuals working at a nearby casino, as they offer discounts to casino employees and advertise in the employee handbook.
[8] Prior to starting their business, Mr. Urquhart and Mr. Picard worked together at a Mister store located in Barrie, Ontario, Mr. Urquhart as a transmission rebuilder for many years and Mr. Picard as store manager for about six months. Sometime in late 2009 or 2010, they approached Mark D’Angeli, a representative of Mister, about the possibility of establishing a Mister location in the Huntsville area, but they never put together a formal franchise application because the customer base in that area was too small.
[9] Mr. Moore testified that sometime after Mr. Urquhart and Mr. Picard opened their business in Orillia, Mr. D’Angeli informed him that the Defendant’s business name was “Master Transmission”, which prompted Mr. Moore to phone Mr. Urquhart. Mr. Moore says he told Mr. Urquhart he had to find some other name, whether Orillia Transmission or Mike’s Transmission, but not Master Transmission because it is confusing. According to Mr. Moore, Mr. Urquhart told him he would have to speak to Mr. Picard about the matter. Mr. Urquhart, however, testified that he first learned that Mister took issue with Master’s name when he received a cease-and-desist letter. He says he did not receive a phone call from Mr. Moore.
[10] In any event, after Master received the cease-and-desist letter dated August 31, 2010, Mr. Urquhart says he and Mr. Picard wondered whether there was a plot to bury Master’s business because they did not consider the names confusing. He says they thought about changing their name, but really did not believe it was confusing because it is a different word with a completely different meaning. In choosing their business name, Mr. Urquhart said they had bounced around a bunch of names. When “master” was brought up – possibly by Mr. Picard – Mr. Urquhart thought it said everything he wanted to say about his abilities, and it was more than just a generic name like “Mike’s Transmission.” He testified that, to him, “master” meant everything he needed to say about his ability, and that you are very good at whatever is involved in accomplishing your job. Master’s logo was drawn by a former customer of the Midas muffler shop Mr. Picard had managed in Orillia before starting the Master business with Mr. Urquhart.
III. Evidence of Confusion
[11] During cross-examination, Mr. Moore said he has not heard of Mister’s head office being contacted about Master’s taxes or harmonized sales tax. He also has not heard of credit card companies, creditors, insurance companies, or other persons contacting Mister’s head office about Master’s financial and business affairs. He further acknowledged that he did not know of any banking errors concerning Mister and Master, and that as far as he knows he has not been contacted about the Casino Rama employee discount programs offered by Master or by the Better Business Bureau or Yellow Pages concerning Master. He is not aware of any media related mix-ups, or of credit going to Mister for Master’s charity work in Orillia. He is also not aware of a business called Master Transmission and Engine Rebuilders, or one called Master Transmission and Diagnostic Import and Domestic Limited.
[12] The Plaintiff called as a witness Mr. Robert Roxburgh, the general manager of King-O-Matic Industries, which according to Mr. Roxburgh is the largest distributor of transmission and driveline components in Canada. At the Plaintiff’s request prior to trial, Mr. Roxburgh searched King-O-Matic’s database of speciality transmission shops in Canada, and aside from Master’s name his searches revealed customers called Master Auto and Transmission and Auto-Master Transmission Automatic as well as several Master Mechanic franchises. During cross-examination, he stated his search did not reveal a Master Transmission Inc. in Verdun, Quebec, and that he has never heard of Master Transmission and Engine Rebuilders, or Master Transmission and Diagnostic Import and Domestic Limited, or Masters Automotive. Mr. Roxburgh did not recall any issues about being unable to correctly fill orders made by Master Transmission & Driveline and those made by Mister Transmission.
[13] Mr. Jansen testified as to one incident where a parts supplier, Inter-Continental Gear & Brake, mistakenly invoiced and delivered parts to his Mister store which had been ordered by Master. He and Ms. Jansen also testified about the frequency of courier deliveries received by them which were intended for Master and telephone inquiries as to whether the location of their business was on Memorial Drive.
[14] It was Ms. Jansen who, during the week prior to the trial of this matter, answered the phone when a potential customer named Josiah Smith called looking for directions to the Mister store in Orillia. The Plaintiff called Mr. Smith as a witness at trial to offer evidence as to him being confused by the transmission services offered by Master and those of the Mister store in Orillia. However, Mr. Smith’s testimony was tainted by the fact that, unbeknownst to Mr. Jansen, Mister Transmission International had agreed to cover Mr. Smith’s transmission repair costs in return for his testimony. Nevertheless, his testimony presented, at best, confusion only as to the location of Mister’s store and not as to him being confused by the names and services of Master and Mister. Indeed, after being referred to the Mister store by someone at Blaine’s Automotive where he first went to have his truck inspected, Mr. Smith did some price shopping which included a telephone call to Master, where he spoke with Mr. Picard and was told that his truck could not be looked at that day.
[15] As further evidence of confusion, the Plaintiff submitted an affidavit of Mr. Donald Gilks, a retired member of the Toronto Police Service. At the trial, he was cross-examined on his affidavit about how his vehicle came to be repaired by Mr. Picard at the Master store instead of at the Mister store in Orillia. Following a golf tournament the previous day, Mr. Gilks began experiencing a problem with his truck. He asked the concierge at the hotel where he had stayed the night before if there was a Mister Transmission in Orillia, and asked if they would call for him. Mr. Gilks gave his cellphone number and he was called back by a young lady stating she was from Mister Transmission and would call a tow truck. The tow truck driver showed up and took Mr. Gilks and his truck to Master’s store on Memorial Drive, not Mister’s store on Brodie Drive. Ms. Jansen testified that the tow truck driver subsequently apologized to her for this mix up and that an incident like that involving Mr. Gilks has not happened again.
[16] Upon review and consideration of the evidence as to whether there has been any actual confusion amongst consumers between the trade-marks and business names of Mister and Master, I find there is, at best, insufficient evidence that any consumer has actually been confused or misled since Master opened its business in Orillia some five and a half years ago. It was the tow truck driver, not Mr. Gilks as a consumer of transmission services, who apparently was confused as to Mister’s location. Mr. Gilks had never even heard of Master’s business before he was unknowingly transported there.
[17] Mr. Smith’s evidence, despite its tainted nature, shows confusion only about Mister’s store location in Orillia and not confusion caused by the names of Master and Mister or the transmission services they offer. In addition, while misdirected courier deliveries do show some confusion by various courier delivery personnel, again that is not evidence of actual confusion amongst consumers of the parties’ respective services; nor, for that matter, is the misdirected delivery and charge to Mister for parts ordered by Master evidence of actual confusion because this appears to be more of an error on the part of someone at Inter-Continental Gear & Brake, a third-party supplier, than an instance of actual confusion by a potential purchaser of transmission services.
IV. Likelihood of Confusion
[18] Despite the absence of any persuasive or sufficient evidence that any consumer has actually been confused or misled, it is necessary nevertheless to consider and analyze the likelihood of confusion between the trade-marks and trade names of the parties.
[19] Mister has several registered trade-marks, the first one being obtained in 1980 for “Mister Transmission” (TMA239868) relating to services described as “repairing, replacing, renewing and installing automobile transmissions, [and] the operation of a transmission repair and replacement centre.” The parties have agreed in the agreed statement of facts in the joint trial record that the first use of this mark in Canada was on August 1, 1974. Mister’s domain name on the internet is “mistertransmission.com.”
[20] Mister has also registered trade-marks for “Hey Mister Mister Transmission You’re A Friend Of Mine” and for the trade-mark and design below, the background colour of which is a bright orange:
[21] Master has not registered a trade-mark. It registered a business or trade name, “Master Transmission & Driveline,” under the Business Names Act, RSO 1990, c B17, on June 29, 2010, with the activity being carried out stated as “automotive and transmission service.” There was some evidence at trial that the Defendant also uses and is referred to simply as “Master Transmission.” Mr. Moore indicated during his testimony that Master was known by the short-form of its trade name. Mr. Roxburgh stated that since King-O-Matic’s database only takes a limited number of characters, Master is listed as “Master Transmission”; however, he did acknowledge that all invoices to Master use its full business name, and it was not Master’s choice as to how they are referred to in the database.
[22] In addition, Master’s domain name is “mastertransmission.ca.” Its uniform resource locator (URL) for Facebook is “www.facebook.com/mastertransmission”, although the name on its Facebook page is Master Transmission & Driveline. One of the packing slips from Thor Motors Limited in the joint trial record also shows the name “Master Transmission”, although there is no evidence as to how or why this name was used. Lastly, Master’s logo, on the visual inspection report sheet it uses (with a dark background) at its store located on Memorial Drive in Orillia, and on its webpage, looks like this:
(…)
[31] Before turning to whether the Plaintiff in this case has established a likelihood of confusion, the general principles noted by the Federal Court of Appeal in Philip Morris Products SA v Marlboro Canada Ltd, 2012 FCA 201, 216 ACWS (3d) 994; leave to appeal refused, [2012] SCCA No 413 [Philip Morris] warrant mention. In Philip Morris, Justice Johanne Gauthier observed (at para 59) that:
- A mark symbolises a linkage between a product and its source. When assessing the likelihood of confusion, the focus is on such mental link in the head of the mythical consumer (Mattel, Inc. v. 3894207 Canada Inc.,2006 SCC 22, [2006] 1 S.C.R. 772 [Mattel]). The full factual context including the factors set out in subsection 6(5) of the Act must be considered.
- It is not relevant that consumers are “unlikely to make choices based on first impressions”. It is an error to discount the likelihood of confusion by considering what actions the consumer might take after encountering the mark in the market place (Masterpiece Inc., paragraphs 71, 73 and 74).
- Confusion as to the source (no need for it to be precisely identified) will arise if the public (mythical consumer) would likely infer that the source of the two products (senior mark or junior mark) is the same (this includes in appropriate circumstances associated sources such as licensor and licensee).
- Steps taken to avoid confusion are irrelevant in the context of an infringement action pursuant to section 20 of the Act (David Vaver, Intellectual Property Law: Copyright, Patents, Trade‑marks, 2nd ed. (Toronto: Irwin Law, 2011) [Vaver] at page 533, Pink Panther Beauty Corp. v. United Artists Corp., 1998 CanLII 9052 (FCA), [1998] 3 F.C. 534 (C.A.).
- Proof of actual confusion or the absence of such confusion over a long period of time is a very weighty factor that must be considered as part of the surrounding circumstances pursuant to subsection 6(5) of the Act (Mr. Submarine Ltd. v. Amandista Investments Ltd., (1987) 19 C.P.R. (3d) 3, [1988] 3 F.C. 91 (C.A.) [Mr. Submarine], at paragraph 34, Mattel, at paragraph 55).
[32] In view of the foregoing statutory provisions and case law, it is appropriate now to turn and determine whether there is a likelihood of confusion between the Plaintiff’s registered trade-marks and the Defendant’s business and trade names.
C. Inherent distinctiveness
[33] The first factor to assess is the inherent distinctiveness of the parties respective trade-marks and trade names and the extent to which they have become known. In terms of distinctiveness, this factor weighs against the Plaintiff and favours the Defendant. “Mister Transmission” is not an invented or unique word; the second half of the two-word mark is merely descriptive of the services performed. As noted by the Federal Court of Appeal in Pink Panther:
23 …Marks are inherently distinctive when nothing about them refers the consumer to a multitude of sources. Where a mark may refer to many things or…is only descriptive of the wares or of their geographic origin, less protection will be afforded the mark. Conversely, where the mark is a unique or invented name, such that it could refer to only one thing, it will be extended a greater scope of protection.
[34] Furthermore, trade-marks which utilize words common to a trade or industry have little distinctiveness (see: Tradition Fine Foods Ltd v Oshawa Group Ltd, 2004 FC 1011 at para 38). There was evidence at trial in this case that the words “mister” and, for that matter, “master” are not uncommon in the automotive repair industry. One of the Plaintiff’s marks contains a generic image of a transmission (as does the Defendant’s logo and its signage), and it is difficult to see how the Plaintiff’s mark is original and distinctive in the manner which an invented or unique word or original design would be.
[35] Nonetheless, the evidence adduced at trial and in the joint trial record shows that the Plaintiff’s trade-marks and name are well-known in and across Canada. They are, in a word, ubiquitous. So, while the Plaintiff’s marks and name may not be inherently distinctive, they have definitely acquired significant distinctiveness through use and recognition across Canada during the last several decades. This aspect of the first statutory factor favours the Plaintiff, such that the acquired distinctiveness of the Plaintiff’s marks counterbalances their lack of inherent distinctiveness.
[36] On balance, therefore, the dual aspects of this factor, inherent and acquired distinctiveness, favour neither party.
D. Time in Use
[37] The second statutory factor is the length of time the trade-marks or trade names have been in use. Mr. Moore testified that the Plaintiff’s marks and names have been in use since the 1970s. The Defendant has acknowledged and agreed in the agreed statement of facts that the date of first use for “Mister Transmission” was August 1, 1974. Master’s trade name has been in use only since June 2010. Consequently, this factor favours the Plaintiff.
E. Nature of the Goods, Services and Business
[38] Mr. Picard testified that about 50 percent of Master’s repair orders involve transmissions, and that the balance would be for repairs to such things as a vehicle’s brakes, suspension or front end. Mr. Jansen told the Court his Mister location did not advertise for engine repairs, oil changes, exhaust or brake work, suspension repairs, or general automotive services, and that he did not do general automotive service. Nonetheless, there is a significant degree of overlap in the transmission services provided by Mister and by Master even though Master does offer some other sorts of vehicle repairs and maintenance.
[39] In assessing this factor, the Supreme Court has offered the following guidance in Masterpiece [see para. 67-70]
[40] What evidence there was at trial as to the cost or price of a transmission repair was, at best, that the nature of the required repair and the time to complete it dictated the cost. Furthermore, there is no evidence of any material difference with respect to the quality of the transmission work or services provided by Master or by Mister. This factor tends to favour the Plaintiff in this case because, while Mister’s business is more centered on transmission services and repairs than that of Master, both of them operate a business offering transmission services and repairs to consumers in the Orillia area.
F. Nature of the Trade
[41] This factor looks to the customs and usages of the trade and the character of the markets where the trade-marks are intended to serve their purposes (see: Joseph E Seagram & Sons Ltd v Canada (Registrar of Trade Marks), [1990] FCJ No 909 at para 36, 23 ACWS (3d) 486). It also looks to the manner by which goods or services are marketed and sold (see: Lesters Foods Ltd c Lesters Delicatessen and Hot Smoked Meat Inc, 2008 QCCS 2010 at paras 64-65, [2008] QJ No 4197).
[42] There is a Mister location in Orillia, and geographically and service-wise it targets the same market for transmission services as Master, such that the nature of the trade overlaps. Each of Master and Mister advertise through local media. However, Mister benefits from national advertising which focuses heavily on radio and television and the use of a distinctive jingle, whereas Master does not so benefit. According to Mr. Moore, Mister’s overall business is comprised of about 15 percent with the fleet industry such as UPS; about 30 to 40 percent is local automotive garages and places like Midas which refer their customers to a Mister location, and 45 percent is retail. Master’s business is locally focused, whereas the Plaintiff’s is not except insofar as its Orillia location is one of the three places where consumers in Orillia can obtain transmission services.
[43] This factor also favours the Plaintiff because, while Mister’s business is more centered on transmission services than that of Master, both of them operate a business offering transmission services to consumers in the Orillia area such that the nature of the trade and their markets overlap.
G. Degree of Resemblance
[44] The final statutory factor looks to the degree of resemblance between the trade-marks and trade name in appearance or sounds or in ideas suggested by them. In this regard, the Court of Appeal in Pink Panther noted:
34 Obviously, where the marks are identical this analysis is not needed. But where the marks are similar, the Registrar or the Court must assess the likely impression made by the marks on the public. While the marks must be assessed in their entirety (and not dissected for minute examination), it is still possible to focus on particular features of the mark that may have a determinative influence on the public’s perception of it.
[45] In Masterpiece, Justice Marshall Rothstein stated (at para 64) that: “While the first word may, for purposes of distinctiveness, be the most important in some cases, I think a preferable approach is to first consider whether there is an aspect of the trade-mark that is particularly striking or unique.”
[46] In this case, because “transmission” is a generic word, the word “Mister” constitutes the unique or distinctive part of the Plaintiff’s trade-mark, even though it does not possess a significant degree of inherent distinctiveness. The same can be said for the Defendant’s trade name to the extent that it is referred to simply as “Master Transmission.” The words “mister” and “master” are similar in appearance, just one letter in the difference. Their respective internet domain names differ only as to this one letter difference (though one domain name is .com and the other is .ca).
[47] Moreover, a consumer might well misread these words, whether at a distance or with only a quick or hurried look, and perhaps be confused by these similar words. For example, in view of the prominence of the words “Master TRANSMISSION” over the words “& DRIVELINE” on the Defendant’s sign on Memorial Avenue, a consumer might mistake the reference to “Master TRANSMISSION” for “Mister TRANSMISSION” and fail to see or pass over the reference to “& Driveline” which is in a smaller font than the words “Master TRANSMISSION.”
[48] Taken as a whole, “Mister Transmission” and “Master Transmission & Driveline” do not sound similar. However, “Mister Transmission” and “Master Transmission” do sound similar, although they are certainly not homonyms or identical such that one might be as easily mispronounced as the other. That being said, for the casual consumer in a hurry, perhaps they would be, considering there is just a single letter difference between the first words of each name and the sound of those first words is similar.
[49] Beyond the appearance and sound of the trade-marks and trade names, the ideas suggested by them or the “concept” behind them can also be differentiating factor. For example, in Ikea Ltd/Ikea Ltee v Idea Design Ltd, [1987] FCJ No 104, 3 ACWS (3d) 244) [Ikea], Justice Jean-Eudes Dubé found that while the marks IKEA and IDEA were similar phonetically, there was nevertheless no likelihood of confusion because “the letter ‘k’ in Ikea comes out strongly and gives the mark a very strong Scandinavian flavour, whereas the mark IDEA evokes mostly a concept, or a thought (at page 478)”. Although Mr. Urquhart testified as to why the word “master” was chosen to be part of the Defendant’s business name, that is, to convey his expertise as a transmission mechanic, a member of the public would not be aware of this. On their face the words “mister” and “master” are both prefixes for a man’s name. Unlike the names in Ikea, the words “mister” and “master” are not substantially different as to the idea or concept they convey.
[50] This last statutory factor favours the Plaintiff. The degree of resemblance between the Plaintiff’s trade-marks and the business and trade names of the Defendant, especially as used on their respective websites, is such that there is a likelihood of confusion amongst potential consumers of transmission services in the Orillia area. A somewhat hurried consumer with imperfect recollection of the Plaintiff’s trade-marks who is ordinarily cautious, but who does not pause to examine closely the similarities or differences between those trade-marks and the Defendant’s trade or business names, might well be confused as to who is actually offering the transmission services.
H. Surrounding Circumstances
[51] Subsection 6(5) of the Act requires that “all the surrounding circumstances” must be considered in determining whether trade-marks or trade names are confusing. The factors explicitly listed in subsection 6(5) are not exhaustive of what surrounding circumstances may be relevant or determinative in a particular case. Surrounding circumstances may include evidence of actual confusion. As noted by the Court of Appeal in Christian Dior:
[19] …While the relevant issue is “likelihood of confusion” and not “actual confusion”, the lack of “actual confusion” is a factor which the courts have found of significance when determining the “likelihood of confusion”. An adverse inference may be drawn when concurrent use on the evidence is extensive, yet no evidence of confusion has been given by the opponent. (See Pink Panther, supra, at paragraph 36; Multiplicant Inc. v. Petit Bateau Valton S.A. (1994), 55 C.P.R. (3d) 372 (F.C.T.D.); Bally Schuhfabriken AG/Bally’s Shoe Factories Ltd. v. Big Blue Jeans Ltd. (1992), 41 C.P.R. (3d) 205 (F.C.T.D.); Monsport Inc. v. Vêtements de Sport Bonnie (1978) Ltée (1988), 22 C.P.R. (3d) 356 (F.C.T.D.).)…
[52] Surrounding circumstances may also include consideration of the existence of other trade-marks or trade names which use features of either parties’ trade-marks or trade names (see: e.g., Advance Magazine Publishers Inc v Farleyco Marketing Inc, 2009 FC 153 at para 104, 175 ACWS (3d) 215). The evidence in this case suggests the words “mister” and “master” are associated with and used in the automotive industry with reference to goods and services other than transmission services. Despite there being a transmission service provider in Georgetown, Ontario, called “Auto-Master Transmission Automatic”, that business name does not infringe the Plaintiff’s trade-marks in the same manner as the Defendant’s does because the word “master” is part of a hyphenated word, whereas that of the Defendant prefaces the word “transmission” simply with the word “master.”
[53] Similar names in a telephone directory can also be an aspect of the surrounding circumstances in assessing the likelihood of confusion. In Mr. Submarine, the Court observed:
29 …In my view it is not unlikely that someone, whether vaguely or even precisely, familiar with MR. SUBMARINE on looking for it in a telephone directory whether it is not listed … and finding MR. SUBS’N PIZZA could mistakenly conclude that the name, if not indeed that of the appellant, was in some way associated with MR. SUBMARINE as licensee or otherwise. The same applies where they appear close together in ordinary telephone listings. … It follows in my view that the appellant’s trade mark is infringed by the respondent’s use of its trademarks and trade names.
[54] In this case, the Yellow Pages listing in the joint trial record shows Master’s name immediately above that of Mister; there is, for instance, no intervening name listed.
[55] Proof of actual confusion or the absence of such confusion over a long period of time is “a very weighty factor that must be considered as part of the surrounding circumstances” (Phillip Morris, at para 59). In this case, the confusion evidence adduced at trial shows some minimal confusion among third parties during the five years or so since Master started its business. The Plaintiff was unable to produce any evidence of actual confusion by which a purchaser of transmission services had mistaken Master’s services for those of Mister, although the Plaintiff did adduce some evidence of confusion among courier delivery personnel, something which may be considered as evidence of actual confusion (see, e.g. Precision Door & Gate Services Ltd v Precision Holdings of Brevard Inc., 2012 FC 496, at paras 36-37). The absence of actual confusion among consumers of transmission services leans in Master’s favour.
[56] Nevertheless, in the circumstances of this case, an adverse inference should not be drawn from the lack of evidence of actual confusion. Such evidence is not necessary to establish an infringement of the Plaintiff’s trade-marks. The relevant issue is “likelihood of confusion” and not “actual confusion.”
[57] It is the likelihood of confusion, not actual confusion, which is the test. If ordinary, casual consumers of transmission services in the Orillia area, somewhat in a hurry, are likely to be misled about the source of such services, the statutory test is met. Mister and Master are each engaged in the provision of transmission services and have similar sounding names, particularly when the emphasis is placed on the first words of the name. Despite the limited distinctiveness of Mister’s trade-marks because of a lack of originality, its trade-marks have gained substantial distinctiveness over several decades. Mister and Master each operate a business offering transmission services to consumers in the Orillia area and the nature of the trade and their markets overlap. In short, I find that there is a likelihood of confusion between the Plaintiff’s trade-marks and the Defendant’s trade and business names.
Combatting counterfeiting was made easier with the adoption of the Combating Counterfeit Products Act (“CCPA”) in 2014. Trademark owners can now stop counterfeiting on the basis of s. 20(1.01) TMA which creates a presumption of infringement under paragraph 20(1)(b), unless the contrary is proven, if a person who is not entitled to use a registered trademark imports goods on a commercial scale that bear a trademark that is identical to, or cannot be distinguished in its essential aspects from, the trademark registered for such goods. The legislative amendments created a new part entitled “Importation and Exportation,” by adding new sections 51.02 to 51.12 to the Trademarks Act. These amendments change the law concerning the importation and exportation of counterfeit goods bearing a registered trademark. Section 51.03 TMA now gives trademark owners a direct cause of action in such circumstances, subject to the exceptions provided in subsection (2). Section 51.04 provides that the owner of a registered trademark may file with the Minister a request for assistance in pursuing remedies under the Trademarks Act with respect to goods imported or exported in contravention of new section 51.03. Sections 51.05 to 51.09 contain measures relating to detained goods and deal with the disclosure of information that may be made between a customs officer and an owner of a registered trade-mark.
No importation or exportation
51.03 (1) Goods shall not be imported or exported if the goods or their labels or packaging bear — without the consent of the owner of a registered trademark for such goods — a trademark that is identical to, or that cannot be distinguished in its essential aspects from, that registered trademark.
Exception
(2) Subsection (1) does not apply if
(a) the trademark was applied with the consent of the owner of the trademark in the country where it was applied;
(b) the sale or distribution of the goods or, in the case where the trademark is on the goods’ labels or packaging, of the goods in association with the labels or packaging would not be contrary to this Act;
(c) the goods are imported or exported by an individual in their possession or baggage and the circumstances, including the number of goods, indicate that the goods are intended only for their personal use.
The new provision was recently tested in court in an ex parte case of counterfeit computer components.
Example: Unlicensed importation of trademarked goods into Canada
Apple Inc. v. Waseah (Mobile Q), 2021 FC 542
APPLE INC.
Plaintiff
and
ABDUL WASEAH
OPERATING AS MOBILE Q
Defendant
ORDER AND REASONS
UPON CONSIDERING the Plaintiff’s ex parte motion for default judgment against the Defendant, brought pursuant to Rules 210 and 369 of the Federal Courts Rules, SOR/98-106 (“Rules”);
AND UPON BEING SATISFIED that the Defendants have failed to serve and file a Statement of Defence within the time set out in Rule 204 of the Rules;
AND UPON REVIEWING the evidence and submissions of the Plaintiff;
THE COURT ORDERS THAT the Plaintiff’s motion for default judgment is granted.
[1] I find the following Canadian registered trademarks are owned by the Plaintiff (collectively, the “Subject Trademarks”):
(a) (APPLE DESIGN) (TMA690,668);
(b) AIRPODS (TMA989,948); and
(c) USB Power Adapter (TMA1,066,319).
[2] I find the Defendant, without the consent, license or permission of the Plaintiff, imported into Canada and sold goods bearing marks that a casual consumer somewhat in a hurry would likely confuse for the Subject Trademarks (Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 at para 20). Considering the factors enumerated under subsection 6(5) of the Trademarks Act, RSC 1985, c T-13 (the “Act”), I find the Defendant has infringed the exclusive rights of the Plaintiff to the use in Canada of the Subject Trademarks, contrary to sections 19 and 20 of the Act. In addition, I find the Defendant has imported into Canada counterfeit Apple merchandise, contrary to section 51.03 of the Act.
[3] In light of the above determinations, I order that the Defendant is restrained from offering for sale, importing, displaying, advertising, selling, manufacturing, distributing, or otherwise dealing in merchandise not being that of the Plaintiff, bearing one or more of the Subject Trademarks.
ORDER AND REASONS IN T-409-20
THIS COURT ORDERS that:
- The Plaintiff’s motion for default judgment is granted.
- The Defendant is restrained from offering for sale, importing, displaying, advertising, selling, manufacturing, distributing, or otherwise dealing in merchandise not being that of the Plaintiff, bearing one or more of the Subject Trademarks.
3. Depreciation of Goodwill
One of the most cited decisions in the area of trademark law is Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23. In this case, the Supreme Court was asked to assess whether the use of the name Boutiques Cliquot in connection with a chain of mid-priced women’s fashion depreciated the goodwill of the well-known champagne etiquette known as Veuve Clicquot Ponsardin. Justice Binnie summarized the appellant’s argument regarding the depreciation of its brand as follows:
[15] With respect to the s. 22 depreciation claim, the appellant says that the fame of the VEUVE CLICQUOT mark for upmarket luxury goods is such that associating the name CLICQUOT (albeit misspelled as Cliquot) with a mid-range women’s clothing store robs the appellant’s mark of some of its lustre, blurring its powerful association with top quality luxury goods, and thereby diluting the distinctive qualities that attract high-end business. If the champagne mark becomes associated in the public mind with a group of mid-priced women’s clothing shops, the “brand equity” the appellant has been building in France since the 18th century, and in this country since the 19th century, would be devalued and whittled away. Again, however, the onus of proof to establish the likelihood of such depreciation rested on the appellant. Despite the undoubted fame of the mark, the likelihood of depreciation was for the appellant to prove, not for the respondents to disprove, or for the court to presume.
Depreciation of goodwill
22 (1) No person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.
The depreciation of goodwill is to be determined by the four-part test [Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23 para. 46]:
(1) a claimant’s registered trademark is used by the defendant in connection with wares or services — whether or not such goods and services are competitive with those of the claimant.
(2) the claimant’s registered trademark is sufficiently well known to have significant goodwill attached to it.
(3) the claimant’s mark was used in a manner likely to have an effect on that goodwill (i.e. linkage) and
(4) the likely effect would be to depreciate the value of its goodwill (i.e. damage).
Section 22 presupposes the existence of significant goodwill capable of being depreciated by a non-confusing use. Goodwill is not defined in the Act. In ordinary commercial use, it connotes the positive association that attracts customers towards its owner’s goods or services rather than those of its competitors. Without such a link, connection or mental association in the consumer’s mind between the respondents’ display and mark, there can be no depreciation of the latter. In Inland Revenue Commissioners v. Muller & Co.’s Margarine Ltd., [1901] A.C. 217, 224, the Court mentioned “the attractive force which brings in custom”; it may reside not only in trade connections, but in many other aspects, such as particular premises, long experience in some specialised sphere, or the good repute associated with a name or mark. It is something generated by effort that adds to the value of the business.
On the elements to consider to know if a trademark enjoys a sufficient degree of goodwill, Justice Binnie explained in Veuve Clicquot:
[54] While “fame” is not a requirement of s. 22, a court required to determine the existence of goodwill capable of depreciation by a “non-confusing” use (as here) will want to take that approach into consideration, as well as more general factors such as the degree of recognition of the mark within the relevant universe of consumers, the volume of sales and the depth of market penetration of products associated with the claimant’s mark, the extent and duration of advertising and publicity accorded the claimant’s mark, the geographic reach of the claimant’s mark, its degree of inherent or acquired distinctiveness, whether products associated with the claimant’s mark are confined to a narrow or specialized channel of trade, or move in multiple channels, and the extent to which the mark is identified with a particular quality.
The word “depreciate” is used in its ordinary dictionary meaning of “lower the value of” as well as to “disparage, belittle, underrate”. In other words, disparagement is a possible source of depreciation, but the value can be lowered in other ways, as by the lesser distinctiveness that results when a mark is bandied about by different users [Veuve Clicquot, para 63].
Example: Depreciation of goodwill
United Airlines, Inc. v. Cooperstock, 2017 FC 616
[3] The Plaintiff is a commercial airline that was formed by the merger of two predecessor airlines, United Air Lines, Inc. [UAL] and Continental Airlines [Continental]. This merger was announced in 2010 and finalized on March 31, 2013. United and its predecessor UAL have been operating commercial flight services in and out of Canada since 1939 under the brand name of UNITED. UAL used the domain name www.ual.com for its online presence until December 17, 1998, when it began using www.united.com.
[4] Following the merger between UAL and Continental, the Plaintiff unveiled its brand name and logo in August 2010: the United brand name with the United Logo (previously used by UAL) and the Globe Design (previously used by Continental). At that time, UAL began to use the United brand name and United Logo, including on its website. Continental continued to use its own branding, including the Globe Design. On November 30, 2011, UAL and Continental started operating under a single operating certificate, and on March 3, 2012 they merged their consumer-facing platforms (i.e., their websites). The new, merged website was located at www.united.com and it used the design of the previous Continental website, which had used the same basic design and artwork since 2006.
[5] The Plaintiff has made use of a number of trademarks in association with its services [the United Marks or United Trademarks], including:
a) The UNITED word mark (Registration TMA204,456) [UNITED Mark], which was registered by UAL in January 1975 and renewed in January 2005. This trademark has been used in Canada in relation to air transportation services for passengers since as early as 1939.
b) The UNITED AIRLINES word mark (Registration TMA367,179) [UNITED AIRLINES Mark], which was registered by UAL in March 1990 and renewed in March 2013. This trademark has been used in Canada in relation to air transportation of passengers, property, and mail since as early as 1939.
c) The Globe Design (Registration TMA492,886), which was registered by Continental in April 1998 and renewed in April 2013. This trademark has been used in Canada in relation to air transportation of persons and property since as early as 1995.
a) The United logotype (Registration 1099766) [United Logo], which was first published on August 11, 2010 and was registered on October 29, 2012.
b) The Globe Design (Registration 1099765), which was first published on February 1, 1991 and was registered on October 29, 2012.
c) The INTERNET WEBSITE CONTENT INCLUDING, WITHOUT LIMITATION: (TEXT, IMAGES, DESIGNS, LAYOUT, DOMAIN: WWW.united.com) (Registration 1099767) [United Website], which was first published on July 29, 2006 and was registered on October 29, 2012.
[7] The Defendant operates UNTIED.com, which was registered and launched on or about April 24, 1997. UNTIED.com is the successor to a personal webpage operated by the Defendant titled “Poor Show”, which was launched around the summer of 1996. The “Poor Show” webpage displayed information about the Defendant’s negative experience with United (then UAL) and United’s purportedly inadequate responses. After launching this webpage, the Defendant began to receive letters from other travellers regarding their negative experiences with United and he posted these on his webpage. The content related to United was removed from the “Poor Show” webpage around March 24, 1997; about one month later, the Defendant launched UNTIED.com. The Defendant chose the domain name UNTIED.com as a play on the word “United”, so as to highlight the disconnection and disorganization that he perceived in the company. The Defendant continues to maintain UNTIED.com as a consumer criticism website where visitors can find information on the Plaintiff, submit complaints about the Plaintiff, and read complaints about the Plaintiff dating back to 1998 in the database of complaints.
[8] Between August and September 2011, the Defendant redesigned UNTIED.com – it was at this time that graphics similar to the current graphics [the Untied Marks] were displayed in the top left-hand corner of the website, including an “UNTIED” logo [Untied Logo] (a blue sans-serif rendering of the word “UNTIED” in evenly spaced capital letters) and a globe logo covered with a frown [Frowning Globe Design]:
[9] At this time, UNTIED.com also adopted, for the first time, a design similar to the design of the United Website.
[10] Following the redesign of UNTIED.com in September 2011, the Plaintiff became aware of the strong resemblance between UNTIED.com and the United Website. UNTIED.com was updated again in June 2012 to mirror the United Website design launched in March 2012.
[11] The Plaintiff contacted the Defendant on July 16, 2012, to request that changes be made to the appearance of UNTIED.com so as to diminish the potential for confusion in the minds of visitors. The Defendant responded on July 17, 2012, indicating that he would “study” these concerns; at this time, he also offered his services to the Plaintiff as a consultant.
[12] The Plaintiff contacted the Defendant again on September 10, 2012 to restate its request and to “formally” put the Defendant on notice with respect to the Plaintiff’s intellectual property rights. The Defendant responded on September 25, 2012 but did not address the request to change UNTIED.com’s appearance.
[13] The Plaintiff contacted the Defendant for a third time on October 2, 2012. The Defendant responded on October 12, 2012, but he did not alter UNTIED.com’s appearance as requested. However, in October 2012, the Defendant made certain alterations to UNTIED.com: he changed the colour of the T and I in the Untied Logo to red (from blue), changed the frown on the Frowning Globe Design to red (from blue), and added a disclaimer and a pop-up dialogue box to the website indicating that this was not the website of United. The disclaimer, stating “(This is not the website of United Airlines)”, was placed at the top of the website in small black type – next to the graphic identifying “Untied” as “An Evil Alliance Member”.
[14] The Parties to this litigation are not unfamiliar with each other. Proceedings have taken place before the Superior Court of Quebec with respect to the Defendant’s practice of making the personal information of United employees available on UNTIED.com. On September 27, 2016, in United Airlines inc v Cooperstock, 2016 QCCS 4645, 2016 CarswellQue 9046 (WL Can), the Superior Court issued an injunction requiring the Defendant to remove the contact information of employees with no customer care responsibilities from his website. The Superior Court found that the employees in question (co-plaintiffs in that proceeding) had no responsibility for customer care and had received phone calls, voice messages, and e-mails following the publication of their contact information on UNTIED.com, causing “significant prejudice” (para 75). The Superior Court further found that the publication of such information served “absolutely no purpose whatsoever” with respect to resolving customer complaints, and that it had a negative influence on the job performance of at least one employee (paras 70, 78). In reaching its conclusion, the Superior Court noted that the Plaintiff was not seeking to shut down the Defendant’s website, and rejected the Defendant’s contention that he would be forced to shut down his website if the injunction were granted.
[15] The Court of Appeal of Quebec upheld this injunction on January 16, 2017 in Cooperstock v United Airlines Inc, 2017 QCCA 44, 2017 CarswellQue 223 (WL Can). The Court of Appeal stated:
[4] In effect, the Appellant wants to continue harassing employees without anyone benefitting from the exercise: certainly not the customers who complain to someone who is unable to respond to their complaint and certainly not the employees who are not meant to handle such complaints.
[5] It is our unanimous view that the appeal is doomed to fail.
[16] The Court of Appeal rejected Cooperstock’s contention that the injunction limited his freedom of speech, commenting that the injunction simply allowed United non-customer care employees to do the tasks that they were hired to perform. Likewise, this Court is of a similar view in respect of the Defendant’s suggestion that freedom of speech is at issue in this litigation.
[17] In September 2015, the current design for the United Website was launched. It continues to make use of the United Logo and the Globe Design, as well as the domain name www.united.com. Although the design of UNTIED.com had not been updated at the time of the trial in December 2016, a “beta” website (www.untied.com/beta) operated by the Defendant directs visitors to a website that closely resembles the current United Website.
(…)
C. Depreciation of Goodwill
[90] There are four elements to consider in the analysis of the depreciation of goodwill pursuant to s 22 of the Trade-marks Act: the use of a plaintiff’s registered trademark by a defendant in connection with wares or services, the presence of goodwill attached to the trademark, the plaintiff’s trademark was used in such a way as to have a likely effect on that goodwill (i.e., linkage), and the likely impact would be to depreciate the value of the goodwill (i.e., damage) (Veuve Clicquot at para 46).
(1) Use
[91] As discussed in detail above, the Defendant has made use of the Plaintiff’s registered trademarks on UNTIED.com.
(2) Goodwill
[92] As discussed in detail above, there is goodwill in the United Marks [see below in Section H. Passing off]
(3) Effect/Linkage
[93] The third requirement, linkage, is assessed from the perspective of a somewhat-hurried consumer; for example, in the case of Veuve Clicquot, “[i]f the somewhat-hurried consumer does not associate what is displayed in the respondents’ stores with the mark of the venerable champagne maker, there can be no impact – positive or negative – on the goodwill attached to VEUVE CLICQUOT” (para 56). This is not a speculative exercise and evidence must be produced to show that the trademarks in question were used in such a way as to have an impact on goodwill.
[94] Confusion is not a required element of s 22. However, in my view, the evidence of confusion put forward in this case establishes that customers would be likely to “associate” the marks on the United Website and the marks on UNTIED.com. As discussed above, the evidence of Ms. Proietti was that she associated the marks on UNTIED.com with United – in fact, she believed that she was on the United Website when she was actually on UNTIED.com.
[95] In Future Shop Ltd v A & B Sound Ltd, 1994 CanLII 1068 (BC SC), the British Columbia Supreme Court stated:
[12] The question, depending on the evidence in any particular case, is whether the use of the competitor’s trademark is for a purpose which stresses the similarities or the differences with the trademarked competition. If the purpose is to stress the similarities, the value of the goodwill associated with the trademark is appropriated in a manner contrary to the intent of s. 22. If use stresses the differences with the trademark, then the use is for the purpose of distancing the trademarked ware or service and s. 22 is not offended.
[96] It is clear that the Defendant intended to stress the similarities between the United Marks and his own. In his testimony, he indicated that he “transformed elements of United’s logo and I made changes to it… I would say that my purpose was to identify the target of my criticism as that of United”. The Defendant therefore appropriated the goodwill associated with the United Marks.
[97] In my view, the somewhat-hurried consumer would be likely to associate the marks displayed on the Defendant’s website with the Plaintiff’s registered trademarks.
(4) Depreciation
[98] The final requirement, likelihood of depreciation, was described in Veuve Cliquot thus:
[63] The word “depreciate” is used in its ordinary dictionary meaning of “lower the value of” as well as to “disparage, belittle, underrate”: The New Shorter Oxford English Dictionary (5th ed. 2002), at p. 647. In other words, disparagement is a possible source of depreciation, but the value can be lowered in other ways, as by the lesser distinctiveness that results when a mark is bandied about by different users. Although the appellant makes much of the licencing provisions in the Act, the fact is that a trade-mark owner can depreciate its value by spreading the mark too thinly over too many products of differing quality. …
[67] These references to U.S. cases are made for the purpose of illustration. Our Act is differently worded and I do not suggest that the concept of “depreciation” in s. 22 is necessarily limited to the notions of blurring and tarnishment. Canadian courts have not yet had an opportunity to explore its limits. Nevertheless, the key question remains. Acknowledging that the VEUVE CLICQUOT trade-mark carries an aura beyond its particular products, and that the extended aura carries significant goodwill, in what way is the value of that goodwill likely to be diminished by the respondents’ “use” (if use there be) of the appellant’s registered trade-mark? Acceptance of the argument that depreciation could occur, is not acceptance of the assertion that on the facts of this case depreciation is likely to occur, still less that depreciation did occur. The appellant need only prove likelihood but there is nothing in the evidentiary record from which likelihood could be inferred.
[99] The Defendant’s position at trial was that any depreciation of goodwill caused by UNTIED.com was not attached to the attractive force of the United Marks, but rather to the Plaintiff’s business reputation. He argued that it was “ludicrous” to suggest that the Plaintiff has experienced depreciation of goodwill due to his actions, and argued that the evidence of goodwill adduced did not establish that there was goodwill associated with the Plaintiff’s logo, its name, or its image.
[100] In my view, the Plaintiff has established that there is a likelihood of depreciation of goodwill. The Defendant reproduces and disparages the Plaintiff’s registered trademarks on UNTIED.com, as shown by the “frown” on the Globe Design (and the “angry eyes” on the Globe Design on the beta website). Further, the crudeness of UNTIED.com is likely to depreciate the goodwill of United’s marks. In Thoi Bao Inc v 1913075 Ontario Limited (Vo Media), 2016 FC 1339 at para 38, 275 ACWS (3d) 375, Justice McDonald found, similarly, that “Mr. Vo used the THOI BAO’s trade-mark for the name of a website of inferior quality, which projects an unprofessional character which is therefore likely to depreciate the value of the goodwill attached to TB Inc.’s trade-mark”. The unprofessional nature of the Defendant’s website similarly tarnishes the goodwill attached to United’s trademarks.
[101] Further, the Defendant’s use of marks confusingly similar to the United Marks decreases the distinctiveness of the United Marks. The similarities between the United Marks and the Untied Marks is likely to confuse some members of the public and may discourage others from continuing their search for the Plaintiff’s customer service website due to anger, frustration, or the mistaken belief that the Plaintiff does not have a “complaints” page.
(5) Conclusion
[102] Therefore, I find that the Defendant has intentionally attempted to attract the Plaintiff’s online consumers to his own website for notoriety. In doing so, he has depreciated the value of goodwill attached to the United Trademarks contrary to s 22 of the Trade-marks Act.
4. Expungement
Section 19 TMA confers on the trademark owner the exclusive right to use the mark as registered in respect of the goods and services mentioned in the registration, unless the trademark is shown to be invalid. These words open the door to a defence of invalidity of the registration of the trademark in dispute. Raising the registration’s invalidity is in fact a frequently used defence to a trademark infringement claim. Requests for expungement need not only arise in the context of infringement claims, however, as shown in Masterpiece Inc. v Alavida Lifestyles Inc., 2011 SCC 27.
Pursuant to s.57 TMA, the Federal Court has exclusive original jurisdiction, on the application of the Registrar or of any person interested, to order that any entry in the register be struck out or amended on the ground that at the date of the application the entry as it appears on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the trademark. The grounds for invalidation are laid down in s.18 TMA. These grounds are similar to those set out in s.38(2) TMA in the context of opposition proceedings.
When registration invalid
18 (1) The registration of a trademark is invalid if
(a) the trademark was not registrable at the date of registration; [see s.12(1) TMA]
(b) the trademark is not distinctive at the time proceedings bringing the validity of the registration into question are commenced;
(c) the trademark has been abandoned;
(d) subject to section 17, the applicant for registration was not the person entitled to secure the registration; [see s.16(1) TMA] or
(e) the application for registration was filed in bad faith.
Example: Expungement of a trademark
Yiwu Thousand Shores E-Commerce Co. Ltd. v. Lin, 2021 FC 1040
I. Background
[5] The following background facts are affirmed in the Lin Affidavit with reference to extensive exhibits that include operational and sales records, photographic evidence, and relevant correspondence. Mr. Lin’s evidence is uncontested and, in my opinion, is presented factually and is based on reliable source and documentary evidence.
[6] Since October 2014, ThousandShores has operated an online retail store in Canada (the OHUHU Storefront) in association with its trademark OHUHU via the e-commerce platform Amazon.ca. The OHUHU trademark is a coined word that is meaningless in English and French. ThousandShores sells a wide variety of goods in association with the OHUHU mark to consumers in Canada via the OHUHU Storefront including art supplies, garden and outdoor tools, furniture and accessories, home and kitchen tools, and sports and outdoor equipment (the OHUHU Goods). Since the launch of the OHUHU Storefront, ThousandShores has made sales of OHUHU Goods in excess of $25 million CAD to customers with shipping addresses located in Canada.
[7] Also since October 2014, ThousandShores has operated an online retail store in association with the trademark OHUHU via Amazon.com for U.S. consumers (the U.S. OHUHU Storefront). ThousandShores has sold in excess of $150 million USD of OHUHU Goods via the U.S. OHUHU Storefront to customers with shipping addresses located in the United States.
[8] Since its 2014 launch, ThousandShores has spent more than $450,000 CAD advertising and promoting the OHUHU Storefront and OHUHU Goods in Canada. ThousandShores’ OHUHU mark appears on the OHUHU Goods sold in Canada, on their packaging, and on the invoices that accompany the OHUHU Goods when shipped to Canadian customers.
[9] The Respondent is the owner of the Impugned Registration. He filed the application to register the Impugned Registration on February 27, 2017 claiming use since January 1, 2015. The Impugned Registration contemplates a long list of goods and services from apparatus for recording, transmission or reproduction of sound or images, to bicycle equipment, furniture, household and kitchen utensils, industrial and household storage goods, textiles and clothing, and services related to the rental, recording and live performance of music. The full description of the goods and services referenced in the Impugned Registration is set out in Schedule A to this judgment.
[10] In early August 2020, ThousandShores received a first notification from Amazon.ca informing it that many of its OHUHU Goods had been removed from the OHUHU Storefront. The Respondent had requested the removal of the goods based on his representation to Amazon.ca that the OHUHU Goods infringed the Impugned Registration. The notification sent to ThousandShores referred to the OHUHU Goods as inauthentic and the infringement type as counterfeit. ThousandShores received similar notifications removing additional OHUHU Goods in September and November 2020. I will refer to the Canadian notifications collectively as the “Takedown Requests”.
[11] As a result of the Takedown Requests, ThousandShores lost in excess of $348,000 CAD in sales and $68,000 CAD in profits between August 2020 and December 2020. ThousandShores also incurred fees imposed by Amazon.ca to store the affected OHUHU Goods in excess of $1,400 CAD.
[12] In parallel, ThousandShores received correspondence from Amazon.com stating that a significant number of its OHUHU Goods had been removed from the U.S. OHUHU Storefront based on a U.S. takedown request by the Respondent. In that instance, the Respondent relied on two (now cancelled) United States trademark registrations, U.S. Reg. No. 5296058 and U.S. Reg. No. 5127600, for goods such as firearm attachments, riflescopes and telescopic sights (the U.S. Registrations).
[13] On October 6, 2020, ThousandShores’ Canadian counsel wrote a detailed cease and desist letter (the October 2020 Letter) to the Respondent objecting to the Impugned Registration based on invalidity and informing him of ThousandShores’ prior rights to the OHUHU trademark in Canada. The October 2020 Letter also demanded that the Respondent acknowledge ThousandShores’ prior rights in the OHUHU mark, cancel the Impugned Registration and cease his interference with its business.
[14] Despite receiving confirmation of delivery of the October 2020 Letter, ThousandShores received no response from the Respondent.
[15] On November 19, 2020, ThousandShores filed this application to strike in reliance on subsection 57(1) of the Act.
[16] In response to the U.S. takedown request, ThousandShores filed a petition for cancellation of the Respondent’s U.S. Registrations with the U.S. Patent and Trademark Office, Trademark Trial and Appeal Board (TTAB). The petition was based on ThousandShores’ prior and ongoing use of the identical OHUHU trademark, the absence of any use by the Respondent of the OHUHU mark in the United States and the argument that continued registration of the Respondent’s U.S. Registrations was likely to cause confusion and adversely affect ThousandShores’ U.S. business. The Respondent failed to respond to the cancellation proceedings and, on November 23, 2020, the TTAB cancelled the U.S. Registrations.
[17] Since 2014, ThousandShores has conducted regular internet and marketplace searches and investigations to identify third-party use of any of its trademarks including the OHUHU trademark, or similar trademarks. Most recently, Mr. Lin conducted internet searches using the search terms “OHUHU” and “OHUHU + LIN”. Despite its searches, ThousandShores has not identified any use of the OHUHU name or trademark or any confusingly similar name or trademark by any other person, including the Respondent.
[18] ThousandShores has filed two Canadian OHUHU trademark applications, each in association with a broad range of goods (the full description of the goods and services referenced in the applications is set out in Schedule B to this judgment):
- Trademark Application No. 1951858, filed March 18, 2019 and based on use in Canada since October 20, 2014; and
- Trademark Application No. 2049036, filed September 2, 2020, containing no date of first use due to the 2019 amendments to the Act.
II. Issues
[19] The following issues are before the Court:
A. Does ThousandShores have standing to bring this application because it is a person interested within the meaning of section 57 of the Act?
B. Is the Impugned Registration invalid because:
- the OHUHU trademark was not distinctive of the Respondent as of November 19, 2020 in light of ThousandShores’ prior and ongoing use of the identical mark in Canada?;
- the Respondent was not the person entitled to secure registration of the OHUHU trademark on the basis that, at January 1, 2015, it was confusing with ThousandShores’ OHUHU trademark that ThousandShores had previously used and made known in Canada?;
- the Respondent has abandoned the OHUHU trademark in Canada?;
- it was obtained on the basis of fundamental material misstatement that the Respondent had used the OHUHU trademark in Canada since January 1, 2015?; and/or
- the application to register the OHUHU trademark was filed in bad faith?
C. Has the Respondent, directly or indirectly, made false and misleading statements tending to discredit ThousandShores’ goods, services and business in violation of subsection 7(a) of the Act? [see Section H. Passing Off below]
III. Analysis
[20] For ease of reference, subsection 57(1) of the Act provides that:
| 57(1) The Federal Court has exclusive original jurisdiction on the application of the Registrar or of any person interested, to order that any entry in the register be struck out or amended on the ground that at the date of the application the entry as it appears on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the trademark. | 57(1) La Cour fédérale a une compétence initiale exclusive, sur demande du registraire ou de toute personne intéressée, pour ordonner qu’une inscription dans le registre soit biffée ou modifiée, parce que, à la date de cette demande, l’inscription figurant au registre n’exprime ou ne définit pas exactement les droits existants de la personne paraissant être le propriétaire inscrit de la marque de commerce. |
A. Does ThousandShores have standing to bring this application?
[21] The Registrar and any “person interested” in an entry in the register of trademarks may bring an application under subsection 57(1). Section 2 of the Act defines “person interested” as including “…any person who is affected or reasonably apprehends that he may be affected by any entry in the register, or by any act or omission or contemplated act or omission under or contrary to this Act…”.
[22] The issue of whether ThousandShores has standing can be addressed quickly. A “person interested” is a de minimus threshold (Beijing Jingdong 360 du E-commerce Ltd. v Zhang, 2019 FC 1293 at para 11). The term is to be interpreted broadly and includes a party whose rights may be restricted by a trademark registration or who has a reasonable apprehension of prejudice or whose business is likely to be hampered by a trademark registration (Apotex Inc. v Registrar of Trademarks, 2010 FC 291 at para 7; TLG Canada Corp v Product Source International LLC., 2014 FC 924 at para 38).
[23] ThousandShores argues it is a person interested for the purpose of bringing this application because its commercial interests have been prejudiced by the Respondent’s reliance on the Impugned Registration to support the Takedown Requests. ThousandShores also argues that it is reasonable to expect that the Trademark Office will review and cite the Impugned Registration during examination of its two pending trademark applications in Canada for the identical mark OHUHU, which may prevent ThousandShores from registering and effectively enforcing its OHUHU mark in Canada. I accept these arguments. Accordingly, I find that ThousandShores is an interested person under section 57 of the Act and has standing to bring this application.
B. Is the Impugned Registration invalid?
[24] The starting point for my assessment of ThousandShores’ submission that the Impugned Registration is invalid is the presumption that trademarks are valid until proven otherwise (Beyond Restaurant Group LLC v Wang, 2020 FC 514 at para 24 (Beyond Restaurant); Mr P’s Mastertune Ignition Services Ltd v Tune Master Inc, [1984] 82 CPR (2d) 128 (FC) at 134). The presumption underlines the normal burden of proof borne by an attacking party to present evidence that establishes that the trademark at issue is invalid (Bedessee Imports Ltd. v GlaxoSmithKline Consumer Healthcare (UK) IP Limited, 2019 FC 206 at paras 14-15 (Bedessee), citing Cheaptickets and Travel Inc. v Email.ca Inc., 2008 FCA 50 at para 12).
[25] The Respondent’s use or failure to use the OHUHU trademark in Canada is the determinative issue in a number of ThousandShores’ invalidity submissions (paragraphs 18(1)(b) (distinctiveness), 18(1)(c) (abandonment) and 18(1)(e) (bad faith)). Due to the Respondent’s failure to participate in this proceeding or to respond to the October 2020 Letter, ThousandShores must attempt to prove a negative (that the Respondent has not used the OHUHU mark in Canada). Evidence of the Respondent’s use can reasonably be expected to exist and to lie within his ability to access, if indeed the Respondent has used “OHUHU” in Canada as claimed in the Impugned Registration. The absence of such information from the Respondent is a factor in my assessment of whether ThousandShores’ evidence has established non-use by the Respondent on a balance of probabilities (Corporativo De Marcas GJB, SA DE CV v Bacardi & Company Ltd., 2014 FC 323 at paras 35-37).
[26] I accept ThousandShores’ evidence that the company has routinely conducted Internet and marketplace searches and investigations since October 2014 to identify use of its trademarks or similar trademarks by third parties. At no time during that period has ThousandShores identified any use of the OHUHU trademark in Canada by a third party, including the Respondent. In addition, Mr. Lin attaches to his affidavit searches he conducted in 2020 through Google using the search terms “OHUHU”, a coined word, and “OHUHU + Lin” that do not reveal any use of the OHUHU mark by the Respondent.
[27] In the absence of evidence from the Respondent, Mr. Lin’s evidence is uncontradicted and establishes, on a balance of probabilities, that the Respondent has not used the OHUHU trademark in Canada.
i. Is the Impugned Registration invalid because the OHUHU trademark was not distinctive of the Respondent as of November 19, 2020 in light of ThousandShores’ prior and ongoing use of the identical mark in Canada?
[29] The three conditions for distinctiveness are: (i) the mark and the goods or services must be associated; (ii) the owner of the mark must use this association in manufacturing and selling the goods or services; and (iii) the association must enable the owner of the mark to distinguish its goods or services from those of others (Bedesseeat para 36; Roots Corporation v YM Inc. (Sales), 2019 FC 16 at para 56).
[30] ThousandShores argues that the OHUHU trademark cannot be distinctive of the Respondent as the source of the goods and services listed in the Impugned Registration because ThousandShores has continuously used the OHUHU trademark in Canada since October 2014. ThousandShores relies on its evidence that the Respondent has not used the OHUHU trademark in Canada or the United States in association with any goods or services to argue that the first two conditions for distinctiveness have not been met. I agree.
[31] As stated above, ThousandShores has established, on a balance of probabilities, that the Respondent has not used the OHUHU trademark in Canada since at least October 2014. It follows that (a) the mark is not associated with any goods or services listed in the Impugned Registration, and (b) the Respondent does not rely on that association in manufacturing and selling any such goods and services.
[32] Further, the third condition for distinctiveness is that the association of the goods and services listed in a trademark registration must enable the owner to distinguish its products from those of other parties. A trademark’s distinctiveness resides in its ability “to indicate the source of a particular product, process or service in a distinctive manner, so that, ideally, consumers know what they are buying and from whom” (Kirkbi AG v Ritvik Holdings Inc., 2005 SCC 65 at para 39). In other words, a trademark must be distinctive of a single source. It cannot lead to confusion as to the source of the goods and services associated with it.
[33] The well-known legal test for confusion was set out by the Supreme Court of Canada in Masterpiece Inc. v Alavida Lifestyles Inc., 2011 SCC 27 at paragraph 40 (Masterpiece):
[40] At the outset of this confusion analysis, it is useful to bear in mind the test for confusion under the Trade-Marks Act. In Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, [2006] 1 S.C.R. 824, Binnie J. restated the traditional approach, at para. 20, in the following words:
The test to be applied is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the [mark], at a time when he or she has no more than an imperfect recollection of the [prior] trade-marks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks.
[34] ThousandShores’ arguments regarding distinctiveness (paragraph 18(1)(b)) and the Respondent’s entitlement to register (paragraph 18(1)(d)) both require an assessment of the issue of confusion. Under paragraph 18(1)(b), confusion is assessed as of the date ThousandShores filed its Notice of Application, November 19, 2020 and, under paragraph 18(1)(d) in combination with paragraph 16(1)(a), confusion is assessed as of the earlier of (A) the date the Respondent applied to register the OHUHU trademark, February 27, 2017; and (B) its claimed date of first use of the mark in Canada, January 1, 2015. In this case, there is no material difference in the confusion analysis as of November 19, 2020 and January 1, 2015.
[35] Subsection 6(5) of the Act requires the Court to have regard to all the surrounding circumstances in assessing a likelihood of confusion between two trademarks, including a list of prescribed factors. The factor that often has the greatest effect on a confusion analysis is the degree of resemblance between the two marks at issue (Masterpiece at para 49).
[36] Degree of resemblance: ThousandShores’ OHUHU mark is identical to the Respondent’s impugned OHUHU trademark. This factor strongly favours ThousandShores.
[37] Distinctiveness: Distinctiveness requires consideration of both the inherent distinctiveness of a mark and the extent to which the mark has acquired distinctiveness through use in the marketplace (United Artists Corp. v Pink Panther Beauty Corp., 1998 CanLII 9052 (FCA), [1998] FCJ No. 441 (CA)). A trademark is inherently distinctive if it is unique or is an invented or coined name. Thousand Shores’ OHUHU trademark is a coined word with no dictionary definition and no geographic connotation. I agree with ThousandShores that the mark has a high degree of inherent distinctiveness. Further, ThousandShores’ evidence establishes that it has continuously used the OHUHU trademark in Canada in association with sales of over $25 million CAD of its OHUHU Goods through the OHUHU Storefront since October 2014. As discussed above, there is no evidence of the Respondent’s use of the mark since January 1, 2015. This factor strongly favours ThousandShores.
[38] Length of time the trademarks have been in use: Again, ThousandShores has established extensive and continuous use of its OHUHU trademark in Canada in association with the OHUHU Goods since at least October 2014. There is no evidence that the Respondent has used the mark since January 1, 2015. As a result, this factor also strongly favours ThousandShores.
[39] Nature of the goods, services or business and nature of the trade: ThousandShores uses its OHUHU trademark in Canada in association with a wide range of goods. The Respondent’s Impugned Registration encompasses a long and broad list of goods and services. The range of goods does not directly overlap but the parties’ goods fall at least in part in the same or similar broader categories such as household goods and furniture, and textiles and clothing. There is also likely overlap in the channels of trade for sales of the goods to consumers. I conclude that this factor slightly favours ThousandShores or is neutral.
[40] Conclusion on confusion: I have concluded that the majority of the factors identified in subsection 6(5) of the Act, including that of resemblance, strongly favour ThousandShores. There is no evidence before me of any other relevant surrounding circumstances that would diminish or otherwise affect the likely degree of confusion between the two marks. I find a likelihood of confusion between the parties’ marks as of the material dates of November 19, 2020 (paragraph 18(1)(b)) and January 1, 2015 (the earlier of the material dates for paragraphs 18(1)(d) and 16(1)(a)).
[41] Accordingly, I find that, as of November 19, 2020, the OHUHU trademark did not enable the Respondent to distinguish its goods and services from those of ThousandShores. The OHUHU trademark is not distinctive of the Respondent as of November 19, 2020 and I find the Impugned Registration invalid under paragraph18(1)(b) of the Act.
ii. Is the Impugned Registration invalid because the Respondent was not the person entitled to secure registration of the OHUHU trademark on the basis that, at January 1, 2015, it was confusing with ThousandShores’ OHUHU trademark that ThousandShores had previously used and made known in Canada?
[43] The issue of the Respondent’s entitlement to register the applied-for OHUHU trademark in Canada turns on whether it was confusing with ThousandShores’ OHUHU mark on January 1, 2015, the date of the Respondent’s claimed first use. The confusion analysis is virtually the same as that set out in the prior section of this judgment, although the evidence in ThousandShores’ favour is marginally less compelling as it covers a shorter period of time. Nevertheless, the evidence supports a conclusion of a likelihood of confusion between the parties’ marks.
[44] As a result, I find that the Respondent was not entitled to secure registration of the OHUHU trademark. The Impugned Registration is invalid under paragraph 18(1)(d) of the Act.
iii. Is the Impugned Registration invalid because the Respondent has abandoned the OHUHU trademark in Canada?
[46] A finding of abandonment turns not only on non-use of a trademark but also on an intention to abandon (Iwasaki Electric Co. Ltd. v Hortilux Schreder B.V., 2012 FCA 321 at para 18 (Iwasaki)). However, in the absence of any evidence of use, an intention to abandon may be inferred from a person’s failure to use the mark for a long period of time (Iwasaki at para 21).
[47] ThousandShores submits that it can be inferred from the record that the Respondent has abandoned the OHUHU trademark in Canada. The Respondent was not using the OHUHU trademark in Canada as of November 19, 2020 and, at a minimum, has not used the mark since or prior to October 2014. ThousandShores relies on the absence of any indication of use of the OHUHU trademark by the Respondent in the regular Internet and marketplace searches it has carried out since 2014. In addition, the Respondent has been given numerous opportunities to establish his use of the OHUHU mark but has failed to respond to the October 2020 Letter or to participate in any way in the U.S. cancellation proceedings or in this expungement proceeding.
[48] I agree with ThousandShores’ submissions and find that the Impugned Registration is invalid pursuant to paragraph 18(1)(c) of the Act on the basis that it has been abandoned.
iv. Is the Impugned Registration invalid because it was obtained on the basis of fundamental material misstatement that the Respondent had used the OHUHU trademark in Canada since January 1, 2015?
[50] The jurisprudence establishes that a fundamental misstatement in an application may render a registration invalid and void ab initio (Coors Brewing Company v Anheuser Busch, LLC, 2014 FC 716 at para 38; WCC Containers Sales Ltd. v Haul-All Equipment Ltd., 2003 FC 962 at para 25). There is no requirement to establish fraud or an intent to deceive in these circumstances. A false statement of use has been recognized as a fundamental misstatement because the registration could not have been secured without the misstatement.
[51] Consistent with my prior analysis of use, and emphasizing the Respondent’s failure to participate in this proceeding and to adduce any proof of use, I find that ThousandShores has established, on a balance of probabilities, that the Respondent’s claimed date of first use is false. Therefore, I find that the Impugned Registration is invalid and void ab initio.
v. Is the Impugned Registration invalid because the Respondent’s application to register the OHUHU trademark was filed in bad faith?
[53] ThousandShores argues that the Respondent has attempted to usurp the OHUHU name and trademark in both Canada and the United States. ThousandShores also argues that bad faith need not be egregious and that an action taken with intent to block or otherwise disrupt a business is sufficient to establish bad faith. In the current circumstances, when the Respondent applied to register the OHUHU mark in February 2017, ThousandShores had already used the mark extensively in Canada for over two years. In the absence of any evidence of use by the Respondent of the trademark and in light of the business disruption and losses it has suffered, ThousandShores states that an inference of bad faith could and should be drawn.
[54] I do not agree. There is no evidence in the record that the Respondent purposely filed his trademark registration in 2017 to usurp the OHUHU trademark. ThousandShores has not established that the Respondent was then familiar with ThousandShores’ business or its OHUHU trademark and brand, or that he intended to harm its business. The U.S. TTAB’s cancellation of the Respondent’s U.S. Registrations is not necessarily indicative of bad faith. According to the evidence, the U.S. Registrations were cancelled because of the Respondent’s failure to respond. While the Respondent’s actions in Canada and the United States may suggest a burgeoning pattern of conduct from which an inference of bad faith could be made, I am not convinced that it should be made on the record before me.
[55] I find that there is insufficient evidence in the record to warrant a finding of bad faith on the part of the Respondent.
H. Passing Off
As mentioned in the introduction to this chapter, the protection of trademarks in Canada was subsumed into the Unfair Competition Act for the period extending between 1932 and 1953. This is no longer the case, where acts of unfair competition are regulated under the Competition Act. Nevertheless, section 7 of the Trademarks Act remains a powerful tool in the hands of private persons against anyone who makes misleading statements or passes off their goods or services for those of another. Actions and remedies based on s.7 TMA must relate to the use of a trademark, whether registered or unregistered. Section 7 describes four circumstances of unlawful behaviour, the most commonly invoked of which is s.7(b) TMA that prohibits anyone from directing public attention to their goods, services or business in such a way as to cause or be likely to cause confusion in Canada.
In Pink Panther Beauty Corp. v. United Artists Corp., 1998 CanLII 9052 (FCA), Justice Linden explained the origins of the action for passing off in the following terms:
The protection of trade-marks as property is based in the common law action for passing off. Historically, the marketplace has been very concerned with guaranteeing consumers the quality of goods that they had come to rely upon in the course of trade. To further that guarantee, the common law developed the tort of passing off, which helped to assure that a person was representing his or her goods as being his or her own goods and not the goods of someone else. A necessary element of the tort of passing off was always an attempt to deceive. When this attempt to deceive caused confusion and damage, it was actionable. While the rationale for the tort was to protect the public, it was not the consumer who sued, but the owner of the trade-mark who brought the action, thereby protecting the public, as well as its own interest.
In the following subsection, we take a brief look at the prohibitions under ss. 7(a), (c) and (d) before exploring the unlawful act of directing public attention to their goods, services or business in such a way as to cause or be likely to cause confusion in Canada under s.7(b) TMA. First, we need to say a few words about the constitutionality of s.7 TMA.
Unfair Competition and Prohibited Signs
Prohibitions
7 No person shall
(a) make a false or misleading statement tending to discredit the business, goods or services of a competitor;
(b) direct public attention to his goods, 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 goods, services or business and the goods, services or business of another;
(c) pass off other goods or services as and for those ordered or requested; or
(d) make use, in association with goods or services, of 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 of the manufacture, production or performance of the goods or services.
[(e) do any other act or adopt any other business practice contrary to honest industrial or commercial usage in Canada – repealed]
1. Constitutionality of section 7 TMA
The constitutionality validity of section 7 of the Trademarks Act has been challenged in several key decisions, most notably in Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65, in the particular context of an unregistered trademark. At issue is whether Parliament has power to enact s.7 TMA or whether the object of regulation under this section falls under the provincial power of property and civil rights in the province (s. 92(13) Constitution Act 1867). Speaking for the Court in Kirkby AG v Ritvik Holdings Inc., Justice Lebel confirmed the validity of the provision in the Trademarks Act insofar as it is invoked and applied in relation to a trademark.
Determining the constitutionality of s.7 TMA is not a purely theoretical question. Because the Federal Court has no inherent jurisdiction, it can only hear actions that fall under express competence granted to it through federal legislation. The Federal Court has therefore no constitutional jurisdiction to entertain any common law actions, unless it is intertwined or incidental to matters which fall within its area of jurisdiction. Passing off actions can be heard by the Federal Court as long as they are based on s. 7 of the Act and on a trademark scheme.
Constitutionality of s. 7 TMA – Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65
[15] The grant of legislative authority to the Parliament of Canada listed in s. 91 of the Constitution Act, 1867 does not specify that trade-marks are a component of the federal government’s power to legislate. Patents and copyrights are explicitly allocated to federal legislative power (s. 91(22) and (23)). Pursuant to s. 91(2), the federal government has exclusive jurisdiction in relation to trade and commerce. In Citizens Insurance Co. of Canada v. Parsons (1881), 1880 CanLII 6 (SCC), 7 App. Cas. 96, the Judicial Committee of the Privy Council distinguished two branches of federal power under s. 91(2): (1) the power over international and interprovincial trade and commerce, and (2) the power over general trade and commerce affecting Canada as a whole (“general trade and commerce”). This interpretation of s. 91(2), which limits the scope of the federal trade and commerce power to these two branches, is intended to ensure a proper constitutional balance between the otherwise overlapping federal power over trade and commerce (s. 91(2)) and the provincial power over property and civil rights in the province (s. 92(13)).
[16] The “general trade and commerce” category requires an assessment of the relative importance of an activity to the national economy as well as an inquiry into whether an activity should be regulated by Parliament as opposed to the provinces. To determine whether a particular issue requires national rather than local regulation, this Court has set out five criteria to be considered. These criteria are integrated into an assessment of whether federal legislation can be supported on the basis of Parliament’s authority over general trade and commerce. They reflect principles which help distinguish the federal trade and commerce power from the provincial property and civil rights power. In two comprehensive decisions dealing with the second branch of s. 91(2) (Attorney General of Canada v. Canadian National Transportation, Ltd., 1983 CanLII 36 (SCC), [1983] 2 S.C.R. 206; General Motors of Canada Ltd. v. City National Leasing, 1989 CanLII 133 (SCC), [1989] 1 S.C.R. 641), Dickson C.J. adopted and extended the three indicia initially set out by Laskin C.J. in MacDonald v. Vapor Canada Ltd., 1976 CanLII 181 (SCC), [1977] 2 S.C.R. 134. These requirements “serve to ensure that federal legislation does not upset the balance of power between federal and provincial governments” (City National Leasing, at p. 662).
[17] The jurisprudence of our Court now recognizes that the following factors are hallmarks of a valid exercise of Parliament’s general trade and commerce power: (i) the impugned legislation must be part of a regulatory scheme; (ii) the scheme must be monitored by the continuing oversight of a regulatory agency; (iii) the legislation must be concerned with trade as a whole rather than with a particular industry; (iv) the legislation should be of a nature that provinces jointly or severally would be constitutionally incapable of enacting; and (v) the failure to include one or more provinces or localities in a legislative scheme would jeopardize the successful operation of the scheme in other parts of the country (…)
[18] The federal government’s power to legislate with respect to trade-marks has never been the target of a direct constitutional challenge. The issue was raised in the Privy Council in a 1937 decision examining the constitutionality of federal trade-mark legislation. The Privy Council judgment relies, albeit implicitly, on the second branch of the trade and commerce powers under s. 91(2) to confirm Parliament’s jurisdiction to enact trade-mark legislation: Attorney-General for Ontario v. Attorney-General for Canada, 1937 CanLII 366 (UK JCPC), [1937] A.C. 405. (…)
(2) Determining the Constitutionality of Section 7(b): The Test to be Applied
[20] In General Motors of Canada Ltd. v. City National Leasing, 1989 CanLII 133 (SCC), Dickson C.J. set out the proper framework for analysis to determine the characterization of an impugned provision for constitutional purposes. He stressed that the mere fact that a provision codifies a civil cause of action does not necessarily make it ultra vires the federal government. Although the creation of civil causes of action is generally a matter of property or civil rights in the province, a finding that a provision standing alone, in its pith and substance, intrudes on provincial powers does not determine its ultimate constitutional validity. At the same time, a provision will not be valid merely because the main provisions of an Act are valid. It is necessary to consider both the impugned provision and the Act as a whole when undertaking constitutional analysis. The nature of the relationship between a provision and the statute determines the extent to which the provision is integrated into otherwise valid legislation. If the legislation is valid and the provision is sufficiently integrated within the scheme, it can be upheld by virtue of that relationship: a provision may take on a valid constitutional cast by the context and association in which it is fixed as complementary provision serving to reinforce other admittedly valid provisions (Vapor Canada, at pp. 158-59, per Laskin C.J.).
[21] The three-part test for determining whether the impugned provision is within the constitutional powers of the enacting legislature was restated by this Court in Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), [2002] 2 S.C.R. 146, 2002 SCC 31, at para. 58, here paraphrased to reflect the facts of this case:
1. Does the impugned provision intrude into a provincial head of power, and to what extent?
2. If the impugned provision intrudes into a provincial head of power, is it nevertheless part of a valid federal legislative scheme?
3. If the impugned provision is part of a valid federal scheme, is it sufficiently integrated with that scheme?
(3) Application to the Facts of This Case
[22] … In this section I will apply the analytical framework set out above to determine the constitutional validity of s. 7(b).
(a) Characterization of the Impugned Provision: Does Section 7(b) Encroach on Provincial Powers?
[23] The first stage of the analysis requires a characterization of the impugned provision in isolation from the rest of the statute. We look to its purpose and its effect to determine whether the provision encroaches on provincial powers, and if so, to what extent: City National Leasing, at p. 674; Kitkatla, at para. 59. Section 7(b) creates a civil cause of action that essentially codifies the common law tort of passing off: Vapor Canada, at p. 147; Asbjorn Horgard A/S (F.C.T.D.), at p. 241. Standing alone it appears to encroach on provincial power, namely property and civil rights in the province (s. 92(13)). As Dickson C.J. noted in City National Leasing: “This provincial power over civil rights is a significant power and one that is not lightly encroached upon” (pp. 672-73). As explained above, if s. 7(b) is sufficiently integrated into the scheme of the Trade-marks Act as a whole, then it will nonetheless be intra vires Parliament.
[24] In City National Leasing, this Court found that the intrusion of s. 31.1 of the Combines Investigation Act, R.S.C. 1970, c. C-23, into provincial jurisdiction was minimal. In coming to this conclusion Dickson C.J. highlighted the following three factors: (i) the provision was remedial and was not in itself a substantive part of the Act; the provision did not create a general cause of action; (ii) its application was limited by the provisions of the Act; and (iii) Parliament was not constitutionally precluded from creating rights of civil action where such measures are shown to be warranted (p. 673).
[25] These factors apply equally to s. 7(b) of the Trade-marks Act. First, s. 7(b) is remedial; its purpose is to enforce the substantive aspects of the Trade-marks Act relating to unregistered trade-marks:
The tort of passing off is in many respects the equivalent cause of action for unregistered trade-marks as infringement [s. 20 of the Act] is to registered trade-marks. The overall legislative scheme of the Trade-marks Act is the protection, identification, and registration of trade-marks, whether registered or unregistered. (Gill and Jolliffe, at p. 2-22)
[26] Second, the passing-off action protects unregistered trade-marks and goodwill enjoyed by the trade-marks. Section 7(b) is therefore limited by the provisions of the Trade-marks Act: it does not expand the federal jurisdiction in relation to trade-marks and trade-names but merely rounds out an otherwise incomplete trade-mark scheme (Asbjorn Horgard A/S (F.C.T.D.), at p. 237). Unlike s. 7(e), which was found to be ultra vires Parliament because it did not have any connection with the enforcement of trade-marks or trade-names (Asbjorn Horgard A/S (F.C.T.D.), at p. 242) and was significantly broader in application, the creation of a statutory action for passing off in s. 7(b) is limited in its application.
[27] Finally, as regards federal statutory civil actions, Dickson C.J. reminds us in City National Leasing that “[i]t is also important to recognize that while the Court in Vapor Canada, supra, struck down one civil cause of action, the Court did not preclude other federally created private actions from being sustained under federal heads of power” (p. 693). Not only has this Court sustained federally created civil causes of action in a number of cases, but the test developed by this Court in City National Leasing and in Kitkatla (outlined above) makes clear that civil causes of action are intra vires Parliament if sufficiently integrated into valid federal legislation. In sum, although the impugned provision encroaches on an important provincial power, the intrusion is minimal. We must now determine whether the Trade-marks Act is valid and, if so, ascertain whether s. 7(b) is sufficiently integrated into the federal scheme of regulation to be sustained as an exercise of Parliament’s general trade and commerce power.
(b) The Validity of the Federal Trade-marks Act
[28] In the second stage of the analysis, the Court must determine whether the Trade-marks Act is a valid exercise of Parliament’s general trade and commerce power. The analysis is guided by the five indicia of validity set out above. In Asbjorn Horgard A/S, MacGuigan J.A. of the Federal Court of Appeal noted that:
All of the criteria of Chief Justice Dickson are verified in the Act: a national regulatory scheme, the oversight of the Registrar of Trade Marks, a concern with trade in general rather than with an aspect of a particular business, the incapability of the provinces to establish such a scheme, and the necessity for national coverage. [p. 559]
The parties do not dispute Parliament’s constitutional power to regulate registered trade-marks. Rather, it is Parliament’s right to create a civil remedy in relation to an unregistered trade-mark that is in issue. The respondent’s position is that the only regulatory scheme in the Trade-marks Act is the scheme governing registered trade-marks. In my view this is an incorrect characterization of the Act. The Trade-marks Act establishes a regulatory scheme for both registered and unregistered trade-marks.
[29] The protection of unregistered trade-marks is integral to the legitimacy, legal standards and efficacy of registered trade-marks. The Trade-marks Act is clearly concerned with trade as a whole, as opposed to within a particular industry. There is no question that trade-marks apply across and between industries in different provinces. Divided provincial and federal jurisdiction could mean that the provincial law could be changed by each provincial legislature. This could result in unregistered trade-marks that were more strongly protected than registered trade-marks, undermining the efficacy and integrity of the federal Parliament’s Trade-marks Act. The lack of a civil remedy integrated into the scheme of the Act, applicable to all marks, registered or unregistered, might also lead to duplicative or conflicting and hence inefficient enforcement procedures.
[30] The Trade-marks Act includes numerous provisions relating to unregistered trade-marks: “Parliament by sections 1 to 11 of the Trade Marks Act has prescribed a regime concerning what constitutes a trade mark and the adoption thereof, whether registered or not” (Royal Doulton, at p. 374). The primary difference between registered and unregistered trade-marks under the Act is that the rights of a holder of a registered trade-mark are more extensive:
At common law the right to a trade mark thus arose through the use of a mark by a business to identify its products to the public. There was no need for the business to register its mark in order to protect its right to use the trade mark and prevent the misuse of its trade mark by other businesses. The passing off action was the enforcement mechanism available for the protection of trade mark rights. Without the passing off action, common law trade mark rights would have little value.
The Canadian Act, as the statutory history set out by Laskin C.J.C. in the MacDonald case, supra, showed, has traditionally been concerned with the protection of unregistered as well as registered trade marks. In this it is like the Copyright Act [R.S.C. 1970, c. C‑30], whose coverage is broader than registered copyright. In both Acts what registration does is to provide additional benefits over and above those available at common law. (Asbjorn Horgard A/S (F.C.A.), at pp. 560-61)
Registration of a trade-mark gives the registrant the exclusive right to the use throughout Canada of the trade-mark and a right of action to remedy any infringement of that right: ss. 19-20. In addition, in order to exercise those rights, the existence of the mark itself does not have to be established. Registration is evidence enough. Nonetheless, marks remain marks, whether registered or unregistered, because their legal characteristics are the same.
[31] There is no reason to believe that the registration regime under the Trade-marks Act was intended to create two separate enforcement regimes. The scheme set out in the Trade-marks Act regulates both registered and unregistered trade-marks. It regulates the adoption, use, transfer, and enforcement of rights in respect of all trade-marks. If trade-marks are intended to protect the goodwill or reputation associated with a particular business and to prevent confusion in the marketplace, then a comprehensive scheme dealing with both registered and unregistered trade-marks is necessary to ensure adequate protection. The inclusion of unregistered trade-marks in the regulatory scheme is necessary to ensure the protection of all trade-marks. The Trade-marks Act is more than simply a system of registration.
(c) The Extent of Integration
[32] The final step in the analysis is to determine whether the provision is sufficiently integrated into the otherwise valid statute. The inquiry has two parts. First, it is necessary to determine the appropriate test of “fit”, namely “how well the provision is integrated into the scheme of the legislation and how important it is for the efficacy of the legislation” (City National Leasing, at p. 668). Once the correct standard is determined, the test is applied on a case-by-case basis. If the provision passes this integration test, it is intra vires Parliament as an exercise of the general trade and commerce power. If the provision is not sufficiently integrated into the scheme of regulation, it cannot be sustained under the second branch of s. 91(2). To determine the degree of integration required, it is necessary to consider the extent to which the provision encroaches on provincial powers: “The degree of relationship that is required is a function of the extent of the provision’s intrusion into provincial powers” (City National Leasing, at p. 683). If the encroachment is minimal, then a “functional relationship” is sufficient to sustain the constitutionality of the provision (p. 669). If the provision is highly intrusive, a stricter test is applied: the provision must be “truly necessary” or “integral” to the federal scheme (pp. 669 and 683). Consideration of the seriousness of the encroachment on provincial powers and of the proper standard for the relationship between a legislative provision and a valid federal scheme ensures that the balance of constitutional powers is maintained and focuses the analysis on the “pith and substance” of the provision.
[33] As outlined above, s. 7(b) of the Act only minimally intrudes into provincial jurisdiction over property and civil rights. It is a remedial provision limited to trade-marks as defined in the Act (ss. 2 and 6). As this Court observed in Vapor Canada and the Federal Court of Appeal held in Asbjorn Hogard A/S, s. 7(b) “rounds out” the federal trade-marks scheme. In this regard s. 7(b) is, in its pith and substance, directly connected to the enforcement of trade-marks and trade-names in Canada because it is directed to avoiding confusion through use of trade-marks.
[34] In Vapor Canada, this Court struck down s. 7(e) of the Trade-marks Act on the ground that it was unrelated to trade or to trade-marks, or other forms of intellectual property subject to federal legislative authority. Laskin C.J. concluded that s. 7(e) “is not directed to trade but to the ethical conduct of persons engaged in trade or in business, and . . . such a detached provision cannot survive alone unconnected to a general regulatory scheme” (p. 165). Although the majority found that, standing alone, s. 7 was not valid federal legislation, Laskin C.J., who wrote for the majority, wrote the following:
Section 7 is, however, nourished for federal legislative purposes in so far as it may be said to round out regulatory schemes prescribed by Parliament in the exercise of its legislative power in relation to patents, copyrights, trade marks and trade names. The subparagraphs of s. 7, if limited in this way, would be sustainable, and, certainly, if s. 7(e) whose validity is alone in question here, could be so limited, I would be prepared to uphold it to that extent. [p. 172]
Section 7(e) could not be sustained on this basis because its subject matter was not related to or connected with the enforcement of trade-marks or trade-names. This connection was found to exist, however, in relation to s. 7(a), (b), and (d). The Court suggested that these subparagraphs did relate to and give effect to valid federal legislative subjects, namely trade-marks, patents and copyrights (p. 157).
[35] The respondent submits that the civil action in s. 7(b) has no functional connection to the registered trade-mark scheme in the Trade-marks Act. Having concluded that the Act creates a scheme regulating both registered and unregistered trade-marks, the functional relation of s. 7(b) to the scheme in the Trade-marks Act is apparent. In its pith and substance, s. 7(b) is directly connected to the enforcement of trade-marks and trade-names in Canada: the civil remedy in s. 7(b) protects the goodwill associated with trade-marks and is directed to avoiding consumer confusion through use of trade-marks. As Gill and Jolliffe note: “No provision of s. 7 is more inextricably linked to the overall scheme of the Trade-marks Act than is s. 7(b)” (p. 2‑22).
[36] Unlike breach of confidence and appropriation of confidential information (s. 7(e)), the passing-off action plays a clear role in the federal scheme. Without this provision there would be a gap in the legislative protection of trade-marks. This would create inconsistencies in the protection of registered and unregistered trade-marks and lead to uncertainty. Section 7(b) is sufficiently integrated into the federal scheme and, in this respect, is significantly different from s. 7(e). I conclude that s. 7(b) lies within the federal government’s legislative competence. I will now turn to the issues of interpretation and application of the Act raised by the present appeal.
II. False discrediting statements/ False description
Section 7(a) TMA aims at preventing acts of unfair competition in the form of false or misleading statements tending to discredit the business, goods or services of a competitor. This subsection cannot be read as generally prohibiting the making of false or misleading statements tending to discredit the business, wares or services of a competitor, but only as prohibiting the making of such false and misleading statements in association with a trade mark or other intellectual property. The essential elements to establish a claim under s. 7(a) are set out by the SCC in S & S Industries Inc v Rowell, 1966 CanLII 53 (SCC), [1966] SCR 419 at 424:
- A false and misleading statement;
- Tending to discredit the business, [goods] or services of a competitor; and
- Resulting damage.
To establish that the false or misleading statement was made, the evidence of malice or knowledge of the statement’s falsity is not required, but it is necessary to show that statement amounts to discredit and causes damage. Even if the other essential elements of a violation of s. 7(a) of the Act are present, a plaintiff must prove resulting damages to succeed in their action. In order to be actionable, whether at common law or under section 7(a), the plaintiff must be identified in the allegedly untrue statement or be understood as the reasonable target of the inference. Section 7(a) is invoked primarily in the context of disputed claims made in comparative advertisements. The use of another undertaking’s trademark in comparative advertising is allowed under Canadian law, as long as it is not false or misleading.
Example: Pet insurance plans – false and misleading statements?
Petline Insurance Company v. Trupanion Brokers Ontario Inc., 2019 FC 1450
[1] The applicant, Petline Insurance Company, and the respondents, Trupanion Brokers Ontario, Inc and Trupanion Inc (Trupanion), are competitors in the pet health insurance market.
[2] Petline submits that Trupanion has infringed the Trademarks Act, RSC 1985, c T-13 and the Competition Act, RSC 1985, c C-34 by publishing false and misleading comments about Petline for the purposes of promoting Trupanion’s product. Petline seeks a declaration that Trupanion has acted contrary to those laws, an injunction preventing Trupanion from making further statements against Petline, and damages.
[3] In my view, Petline is not entitled to the relief it seeks.
[4] At issue is a publication by Trupanion containing a comparison between its insurance and that offered by Petline (under its registered trademark PETSECURE). The comparison appeared on Trupanion’s website and in pamphlets. Petline submits that the statements contained in the comparison are false and misleading, and had a detrimental impact on the goodwill attached to its trademark.
[5] There are three separate legal grounds on which Petline relies. First, it contends that Trupanion’s statements are contrary to s 7(a) of the Trade-marks Act, (all statutory provisions cited are set out in an Annex). To succeed on that ground, Petline has to establish that Trupanion made a false or misleading statement tending to discredit Petline that resulted in actual or potential damage.
[6] Second, Petline argues that Trupanion’s statements included a false or misleading representation for the purpose of promoting Trupanion’s insurance product, contrary to s 52 of the Competition Act.
[7] Third, Petline maintains that Trupanion’s comparison made improper use of the PETSECURE trademark contrary to s 22 of the Trade-marks Act. To succeed on this ground, Petline must establish that Trupanion used the PETSECURE trademark in a manner that would likely have a negative effect on Petline’s goodwill.
[8] In my view, Petline fails on the first two grounds because it has not shown that Trupanion’s statements were false or misleading. It fails on the third ground because it has not shown harm to its goodwill. Therefore, I cannot grant the relief Petline seeks.
II. Issue One – Are the statements in the comparison false or misleading?
[9] Comparative advertising helps consumers make better choices (Kirkbi AG and Lego Canada Inc v Ritvik Holdings Inc et al, 2003 FCA 297 at para 71, aff’d 2005 SCC 65). Still, the statutes relied on by Petline in this case set parameters on the ways in which comparisons can be made. Most important in this case is the requirement that a competitor’s comparison not be based on false or misleading statements.
[10] There are nine Trupanion statements in the comparison that are in dispute. As I explain below, two of them were removed from Trupanion’s website after Petline clarified its policies. Still, I consider all nine, and find that none of them is false or misleading.
(1) “We can pay your veterinarian directly – usually within 5 minutes”
[12] I disagree with Petline. Petline concedes that it does not have an equivalent service. It uses a “standard reimbursement model”
in which policy holders pay their veterinarian bills and are compensated for the insurable amount later by cheque. In some special circumstances, Petline will arrange to pay veterinarians directly, but policy holders would have to contact Petline to make those arrangements. The availability of this process is not mentioned in Petline’s policies or on its website. By contrast, Trupanion’s default payment service involves paying veterinarians directly. The statement is not misleading.
(2) “We process your co-insurance fairly”
[14] I disagree. The evidence shows that the two companies process claims differently. Petline processes the co-insurance before the deductible which, all else being equal, results in pet owners receiving less reimbursement on claims than Trupanion’s policy holders. In addition, Trupanion’s website shows a simple calculation of the reimbursement on a $1000.00 claim. The resulting payment to Petline customers is $550.00 and the amount paid to Trupanion policy holders is $675.00. There are other factors that can affect the reimbursable amount – the eligible costs, the degree of coverage, etc. But there is a reasonable basis for the statement in the comparison; it is not misleading.
(3) “We don’t change coverage or rates for submitting claims”
whereas PETSECURE “punishes unlucky pets for filing claims”
[16] I disagree. Again, the two companies have different approaches to managing risk. Petline increases individual premiums for policy holders who make claims. Trupanion increases premiums on the basis of the number of claims within a given class of pets, on a going-forward basis. In other words, if statistics show a rise in claims in respect of dachshunds, the premiums for new policies for dachshunds may increase. However, the premiums for existing policy holders will not change. Accordingly, Trupanion’s statement is not misleading.
(4) PETSECURE can cancel a policy for “absolutely no reason at all”
whereas “we don’t drop coverage”
[18] This is perhaps somewhat of an overstatement, but it is not false. Trupanion was seeking to distinguish its policies, which define the situations where a policy can be cancelled, from Petline’s, which provide a non-exhaustive list of circumstances that could result in cancellation. According to Petline, its policies reflect the possibility that cancellations could result from unforeseen circumstances. In reality, however, Trupanion’s policy holders know when their policies can be cancelled, but Petline’s will not be entirely sure. Their policies could be cancelled for some unknown reason. On its website, Trupanion allows that Petline may choose not act on that authority.
[19] In my view, this statement is not false or misleading. There was a reasonable basis for it.
(5) “We don’t exclude conditions we’ve covered for your pet in the past just because you change your coverage”
[21] I disagree. Petline, agreeing that the language in its policies was unclear, changed it after seeing Trupanion’s characterization. Trupanion’s original statement was not misleading. In any case, it has now been removed from Trupanion’s website.
(6) “We don’t dictate how your veterinarian should treat your pet”
[23] I disagree. Trupanion’s statement was an accurate characterization of Petline’s policy on medication. Petline has now clarified that its policies limit coverage for medications to six months at a time. Coverage can be renewed in six-month installments. Given the clarification, Trupanion has removed this statement from its website.
(7) “We don’t cover wellness”
[25] I disagree. Petline is taking the reference to toys and leashes on Trupanion’s website out of context. Trupanion explains that its policies focus on providing the best value to pet owners by not covering expenses that they would expect to pay themselves. Trupanion states in the comparison that there are costs that pet owners know they will have to cover – checkups, vaccines, food, leashes, and toys. It goes on to say that insurance should be used for unexpected costs. I do not read the statement as suggesting that Petline pays for toys and leashes; I see nothing misleading about the statement.
(8) “We’re here for you 24/7”
[27] I disagree. Trupanion has a call centre that is open 24/7. Petline does not. There is nothing misleading about the statement.
(9) “You pick your deductible no matter your pet’s age”
Trupanion does not “penalize pets for aging”
[29] I disagree. Again, the companies deal with age differently. Petline increases premiums and deductibles as pets age. Trupanion, however, takes account of a pet’s age only at the date of enrolment. Premiums and deductions do not rise as the pet ages. As such, the statement is not misleading.
[30] I have found no false or misleading statements in the comparison; there was a reasonable basis for each of them (Purolator Courier Ltd v United Parcel Service Canada Ltd [1995] OJ No 876 (OCJ Gen Div) at para 63).
[31] It follows that Petline cannot succeed on its claims that Trupanion’s statements are contrary to s 7(a) of the Trademarks Act and s 52 of the Competition Act.
[33] I have insufficient evidence of harm. Petline must show that the likely effect of Trupanion’s use of Petline’s trademark was to depreciate Petline’s goodwill (Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 at para 67).
[34] Petline has not filed any evidence from customers, employees or others about the impact of Trupanion’s statements. Ms Carolyn Baker, from Petline, testified that she sometimes hears customers use language that echoes the statements in the comparison. She conceded, though, that it is difficult, if not impossible, to calculate the harm caused to Petline. Her own affidavit shows that both Petline and Trupanion grew in terms of the gross value of premiums over the years 2016 to 2018, although Petline’s market share declined while Trupanion’s rose.
[35] Ms Baker claims that 33 Petline customers switched to Trupanion in 2017, but did not provide any information about why they might have done so, or what the data shows for other years. Trupanion states that in 2017 at least 42 of its policy holders moved over to Petline, some of them citing lower costs, a desire for wellness coverage, a wish to consolidate all pets under the same insurer, or a move to obtain a policy with an annual deductible. The evidence shows, in essence, that policy holders may move from one insurer to another for any number of reasons, which is conceded by Ms Baker.
[36] The evidence does not persuade me that there has been any depreciation in Petline’s goodwill owing to Trupanion’s comparative statements.
IV. Conclusion and Disposition
[37] Trupanion’s comparison of its insurance with Petline’s did not include any false or misleading statements. Further, Petline has failed to show any depreciation of its goodwill. Therefore, I dismiss Petline’s application, with costs.
Section 7(d) TMA prohibits the making use, in association with goods or services, of any description that is false in a material respect and likely to mislead the public as to, among other things, the character of the goods or services. Section 7(d) involves deceit in offering goods or services to the public, deceit in the sense of material false representations likely to mislead in respect of the character of goods or services.
III. Act of Passing off
A necessary element of the tort of passing off has always been an attempt to deceive. When this attempt to deceive causes confusion and damage, it is actionable. While the rationale for the tort was to protect the public, it was not the consumer who sued, but the owner of the trademark who brought the action, thereby protecting the public, as well as its own interest. The essential question, in such an action, is not whether anyone has in fact been deceived, but whether the circumstances are such as to render deception probable. Today, even though the common law remedies are still available, trademarks are protected statutorily and the action for passing off has been codified in paragraph 7(b) of the Act. Pink Panther Beauty Corp. v. United Artists Corp., 1998 CanLII 9052 (FCA).
In order to establish a claim of passing off a plaintiff must prove three necessary components:
(1) the existence of goodwill associated with the mark;
(2) deception of the public due to a misrepresentation; and
(3) actual or potential damage
To meet the requirements of the first component, evidence must be presented of the existence of goodwill associated with the trademarks. As the Court of Appeal noted in Sandhu Singh, goodwill for purposes of passing off requires that a mark is distinctive and possesses reputation. Factors considered for this purpose may include inherent distinctiveness, acquired distinctiveness, length of use, surveys, volume of sales, advertising and marketing, and intentional copying.
The second component requires that “confusion in the minds of the public be a likely consequence by reason of the sale, or offering for sale, by the defendant of a product not that of the plaintiffs making, under the guise or implication that it was the plaintiff’s product or the equivalent” (see: Consumers Distributing Co. v Seiko, 1984 CanLII 73 (SCC), [1984] 1 SCR 583 at 601, [1984] SCJ No 27). Subsection 7(b) requires the defendant’s conduct to cause or be likely to cause confusion between the goods, services and business of one trader and those of another. The second element of passing off is therefore sometimes described as misrepresentation creating confusion (Kirkbi at para 68). While the misrepresentation element of a claim of passing off often pertains to the use of a confusing trademark, it is impossible to enumerate or classify all the possible ways in which a man may make the false representation relied on. At the same time, any misrepresentation must be related to a registered or unregistered trademark given the constitutional limitations of subs.7(b) TMA. The plaintiff must establish that there was likelihood of confusion at the time defendant commenced to direct public attention to his wares, services or business.
To satisfy the third component for a passing off claim, a plaintiff must demonstrate it has suffered or is likely to suffer “damage as a result of the erroneous belief created by the defendant’s misrepresentation that the source of the goods or services is the same as those offered by the plaintiff”. Passing off occurs when a company’s business reputation or goodwill will or will likely be injured by a misrepresentation through which a competitor creates an illusion of sameness or similarity to its wares or services, causing confusion in the consumer’s mind to the effect that one’s goods or services are someone else’s or sponsored by or associated with that other person. It is effectively a “piggybacking” by misrepresentation. Distrimedic Inc v Dispill Inc, 2013 FC 1043
The three components for a passing off action at common law are often discussed as part of an analysis under subsection 7(b) of the Act. However, passing off at common law differs from a claim that subsection 7(b) has been contravened because the Act only applies where there are enforceable trademarks at issue. The Federal Court of Appeal in Kirkbi AG v Ritvik Holdings Inc, 2003 FCA 297 at para 38, stressed that
“in order to use paragraph 7(b) a person must prove that they have a valid and enforceable trade-mark, whether registered or unregistered. The thing that distinguishes the common law action of passing off from a passing-off action under paragraph 7(b) of the Act is that in the common law action a litigant need not rely on a trade-mark to make use of an action. To bring a passing-off action under the Act, one must have a valid trademark within the meaning of the Act. The definitions in section 2 of the Act are integral to any trade-mark passing-off action under paragraph 7(b)….”
Example: Passing off another company’s prescription drug as its own
Ciba-Geigy Canada Ltd. v. Apotex Inc., 1992 SCC 33 (J. Gonthier for the Court)
I Facts and Proceedings
The plaintiff Ciba-Geigy Canada Ltd. (“Ciba-Geigy”) is a pharmaceutical laboratory which since 1977 has manufactured and sold metoprolol tartrate (“metoprolol”) in Canada under a licence from AB Hässle of Sweden. Metoprolol is included in the list contained in Schedule F of the Food and Drug Regulations of drugs which can only be sold on prescription. Since 1977 this beta-blocker product, the trade name of which is “Lopresor”, has been prescribed by doctors in Ontario and Canada for low or moderate hypertension; since 1981 it has been prescribed in Ontario for patients suffering from angina. Hypertension is one of the diseases and disorders listed in Schedule A of the Food and Drugs Act, R.S.C., 1985, c. F-27 (formerly R.S.C. 1970, c. F-27), for which the advertising and sale of therapeutic products are prohibited. The drug is given in two doses, each of which has a specific get-up. Fifty mg Lopresor is an oblong pink tablet and 100 mg Lopresor is a tablet of the same shape, only blue.
The respondents, Apotex Inc. (“Apotex”) and Novopharm Limited (“Novopharm”), obtained licences under the Patent Act, R.S.C., 1985, c. P-4 (formerly R.S.C. 1970, c. P-4), to manufacture and sell metoprolol in Canada.
From July 1984 to June 1986, the product sold by Apotex, the trade name of which is “Apo-metoprolol”, took the form of white circular, biconvex 50 mg and 100 mg tablets. Since June 1986 the tablets sold by Apotex have had the same get-up – shape, size and colour – as those of the plaintiff.
The drug manufactured and sold by Novopharm since 1986, “Novo-metoprolol”, available in two doses – 50 mg and 100 mg – also has the same get-up as that of the plaintiff.
The parties’ metoprolol tartrate tablets have been designated interchangeable pharmaceutical products pursuant to the Prescription Drug Cost Regulation Act, 1986, S.O. 1986, c. 28. Accordingly, a pharmacist may give a patient the products of either of the respondents in place of Lopresor when the prescription does not bear the notation “no substitution”.
In June 1986 the plaintiff brought two passing-off actions, one against Apotex and the other against Novopharm, alleging that its metoprolol tartrate tablets have a unique get-up by reason of their size, shape and colour and that this get-up has become associated with its product.
As often happens in such a case, the plaintiff sought an interlocutory injunction to prevent Novopharm from manufacturing and marketing blue capsule-shaped and pink capsule-shaped metoprolol tablets. The injunction was denied by J. Holland J. of the Supreme Court of Ontario on September 8, 1986 as Ciba-Geigy had not shown there was any “serious issue to be tried”: (1986), 12 C.P.R. (3d) 76. Leave to appeal to the Ontario Divisional Court was refused by Osler J. on November 21, 1986.
The respondents filed motions for summary judgment in the Supreme Court of Ontario in response to the plaintiff’s actions. They submitted that there was no genuine issue for trial as Ciba-Geigy was unable to establish that physicians and pharmacists prescribe or dispense metoprolol tartrate on the basis of its appearance or that physicians and pharmacists were confused in choosing the brand of metoprolol to give patients because of the similar appearance of the parties’ tablets.
In the alternative, the respondents asked the court to rule on the following question of law:
… with respect to the marketing of prescription drugs, a plaintiff in an action for the alleged passing-off of a prescription drug must establish that the conduct complained of is likely to result in the confusion of physicians and pharmacists in choosing whether to prescribe or dispense either the plaintiff’s or the defendant’s product.
In February 1989 Fitzpatrick J. denied the motions but answered the question of law in the affirmative. Ciba-Geigy appealed to the Ontario Court of Appeal as, it argued, the trial judge had erred in excluding patients, who are consumers of the drugs, from those affected by the confusion. The Ontario Court of Appeal dismissed the appeal: (1990), 1990 CanLII 6794 (ON CA), 75 O.R. (2d) 589, 45 O.A.C. 356, 32 C.P.R. (3d) 555.
On May 16, 1991, leave to appeal to this Court was granted, [1991] 1 S.C.R. vii.
IV – Analysis
A. Passing-off Action
(1) General Principles Developed by the Courts
The concept of passing-off was developed in 1842 in Perry v. Truefitt (1842), 6 Beav. 66, 49 E.R. 749, which seems to have been the first case in which the expression “passing-off” appeared: “A man is not to sell his own goods under the pretence that they are the goods of another man” (p. 752 E.R.). In Singer Manufacturing Co. v. Loog (1880), 18 Ch. D. 395 (C.A.), aff’d (1882), 8 App. Cas. 15 (H.L.), James L.J. described passing-off and its origins, at pp. 412-13:
. . . no man is entitled to represent his goods as being the goods of another man; and no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false representation himself to a purchaser who purchases from him, he enables such purchaser to tell a lie or to make a false representation to somebody else who is the ultimate customer. . . . [H]e must not, as I said, make directly, or through the medium of another person, a false representation that his goods are the goods of another person.
The House of Lords has set out the requirements for a passing-off action on many occasions. In Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., [1980] R.P.C. 31, Lord Diplock identified five conditions, at p. 93: there must be (1) misrepresentation (2) by a trader in the course of trade (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader, and (5) which causes actual damage to the business or goodwill of the trader bringing the action.
More recently, in Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873, Lord Oliver reaffirmed, at p. 880:
The law of passing off can be summarised in one short general proposition, no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying “get-up” (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff’s goods or services. Second, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. . . . Third, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff. [Emphasis added.]
The three necessary components of a passing-off action are thus: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.
In Canada the Supreme Court has also had occasion to rule on a passing-off action, in particular in Oxford Pendaflex Canada Ltd. v. Korr Marketing Ltd., supra, in which the issue turned primarily on the similar get-up of the parties’ products. In that case this Court stated that in any passing-off action the plaintiff, in order to succeed, must establish that its product has acquired a secondary meaning.
In Consumers Distributing Co. v. Seiko Time Canada Ltd., 1984 CanLII 73 (SCC), [1984] 1 S.C.R. 583, this Court noted at p. 601 that the requirements of a passing-off action have evolved somewhat in the last hundred years:
. . . attention should be drawn to the fact that the passing off rule is founded upon the tort of deceit, and while the original requirement of an intent to deceive died out in the mid-1800’s, there remains the requirement, at the very least, that confusion in the minds of the public be a likely consequence by reason of the sale, or proffering for sale, by the defendant of a product not that of the plaintiff’s making, under the guise or implication that it was the plaintiff’s product or the equivalent.
A manufacturer must therefore avoid creating confusion in the public mind, whether deliberately or not, by a get-up identical to that of a product which has acquired a secondary meaning by reason of its get-up.
Outside the common law countries passing-off has no exact lexicological equivalent and in general is not a delict as such. In France, for example, it is one aspect of unfair competition to which civil liability sanctions apply. The passing-off rules in Quebec are derived largely from the common law. Remedies may be sought in federal as well as provincial law:
[TRANSLATION] Unlawful or unfair competition causing an unjust injury to another person falls within civil liability under art. 1053 C.C. Actions for damages for unfair competition are heard under not only the federal legislation but also the general principles of delictual civil liability. (Nadeau and Nadeau, Traité pratique de la responsabilité civile délictuelle (1971), at p. 221.)
(2) Purposes of the Passing-off Action and Target Clientele
In considering those upstream and downstream of the product, two separate aspects must be distinguished. I refer in this regard to the persons who manufacture or market the products, on the one hand (“the manufacturers”), and on the other to those for whom the products are intended, the persons who buy, use or consume them (“the customers”).
It is clear that however one looks at the passing-off action, its purpose is to protect all persons affected by the product.
(a) Protection of Manufacturers
This corresponds to the third point mentioned by Lord Oliver. The right to be protected against the “pirating” of a brand, trade name or the appearance of a product is linked to a kind of “ownership” which the manufacturer has acquired in that name, brand and appearance by using them.
In Pinard v. Coderre, [1953] Que. Q.B. 99, Marchand J.A. of the Quebec Court of Appeal noted at p. 103:
[TRANSLATION] It would seem that the first occupant of this name or these words acquired a right to use them exclusive of all other persons, comparable in many ways to a true right of ownership. [Emphasis added.]
Accordingly, to begin with, from what might be called the individual or manufacturer’s standpoint, the passing-off action is intended to protect a form of ownership.
There is also the concept of ownership, protected by the passing-off action in relation to goodwill, a term which must be understood in a very broad sense, taking in not only people who are customers but also the reputation and drawing power of a given business in its market. In Consumers Distributing Co. v. Seiko Time Canada Ltd., supra, Estey J., at p. 598, cites Salmond on the Law of Torts (17th ed. 1977), at pp. 403-4:
The courts have wavered between two conceptions of a passing-off action — as a remedy for the invasion of a quasi-proprietary right in a trade name or trade mark, and as a remedy, analogous to the action on the case for deceit, for invasion of the personal right not to be injured by fraudulent competition. The true basis of the action is that the passing off injures the right of property in the plaintiff, that right of property being his right to the goodwill of his business.
. . .
Indeed, it seems that the essence of the tort lies in the misrepresentation that the goods in question are those of another; . . . [Emphasis added.]
It will then be necessary to look at the relationship between the various merchants or manufacturers, and it is at that point that questions of competition have to be considered. As Chenevard says (Traité de la concurrence déloyale en matière industrielle et commerciale (1914), vol. 1, at pp. 6-7), [TRANSLATION] “[c]ompetition is the soul of commerce; it requires unceasing effort and as such is the chief factor in economic progress”. Drysdale and Silverleaf (Passing Off: Law and Practice (1986)) are substantially of the same opinion, at p. 1:
In countries with a free market system the proper functioning of the economy depends upon competition between rival trading enterprises. It is the mechanism of competition which controls the price, quality and availability of goods and services to the public.
However, merchants must observe certain rules which, quite apart from being legal, are ethical at the least:
[TRANSLATION] Just as an effort made to dislodge an opponent from the position he occupies, to attract sales to oneself by offering better goods on better terms, is legitimate when only fair methods are used, so such conduct is objectionable when it infringes the rules of honesty and good faith that underlie commercial transactions. (Chenevard, supra, at p. 11.)
The author describes at p. 10 certain situations which, if the manufacturer succumbs to temptation, will easily lead him to commit the tort of passing-off:
[TRANSLATION] Seeing the success of his competitor’s product, he had the idea of profiting from it: since this article, this shape, this packaging had met with public favour, why not copy it?‑‑since this trade name had made its way in the world, why not adopt a similar one?
The purpose of the passing-off action is thus also to prevent unfair competition. One does not have to be a fanatical moralist to understand how appropriating another person’s work, as that is certainly what is involved, is a breach of good faith.
Finally, another more apparent, more palpable aspect, a consequence of the preceding one, must also be mentioned. The “pirated” manufacturer is very likely to experience a reduction in sales volume and therefore in his turnover because of the breaking up of his market. When such a situation occurs in the ordinary course of business between rival manufacturers that is what one might call one of the rules of the game, but when the rivalry involves the use of dishonest practices, the law must intervene.
(b) Protection of Customers
In the Anglo-Saxon legal systems, [TRANSLATION] “the person chiefly concerned is the competitor affected by the unfair act” (Mermillod, Essai sur la notion de concurrence déloyale en France et aux États-Unis (1954), at p. 176). He is frequently in fact the first party affected by the practice or aware of it.
However, “[i]t should never be overlooked that . . . unfair competition cases are affected with a public interest. A dealer’s good will is protected, not merely for his profit, but in order that the purchasing public may not be enticed into buying A’s product when it wants B’s product” (General Baking Co. v. Gorman, 3 F.2d 891 (1st Cir. 1925), at p. 893). Accordingly, “the power of the court in such cases is exercised, not only to do individual justice, but to safeguard the interests of the public” (Scandinavia Belting Co. v. Asbestos & Rubber Works of America, Inc., 257 F. 937 (2d Cir. 1919), at p. 941). The ordinary customer, the consumer, is at the heart of the matter here. According to the civilian lawyer Chenevard, supra, at p. 20, in a case of unfair competition it is [TRANSLATION] “the buyer who is the first to be injured”.
The customer expects to receive a given product when he asks for it and should not be deceived. It often happens that products are interchangeable and that a substitution will have little effect. However, the customer may count on having a specific product. There are many reasons for such a choice: habit, satisfaction, another person’s recommendation, the desire for change, and so on. I have no hesitation in using the classic saying, taken from popular imagery: “the customer is always right”. Merchants must respect his wishes, choices and preferences as far as possible. Where this is simply not possible, no substitution must be made without his knowledge. That is the minimum degree of respect which manufacturers and merchants, who we should remember depend on their customers, should show.
There is no shortage of fraudulent or simply misleading practices: one may think, for example, of products having a similar get-up, the use of similar labelling, use of the same trade name, counterfeiting, imitation of packaging. These are all possible ways of attempting, deliberately or otherwise, to mislead the public. The courts and authors have unanimously concluded that the facts must be weighed in relation to an “ordinary” public, “average” customers:
. . . you must deal with the ordinary man and woman who would take ordinary care in purchasing what goods they require, and, if desiring a particular brand, would take ordinary precautions to see that they get it. (Neville J. in Henry Thorne & Co. v. Sandow (1912), 29 R.P.C. 440 (Ch. D.), at p. 453.)
The average customer will not be the same for different products, however, and will not have the same attitude at the time of purchase. Moreover, the attention and care taken by the same person may vary depending on the product he is buying: someone will probably not exercise the same care in selecting goods from a supermarket shelf and in choosing a luxury item. In the first case, the misrepresentation is likely to “catch” more readily.
In The Law of Passing-off (1990), Wadlow gives the following definition at p. 351:
The term “get‑up” is normally used in passing‑off to mean the whole visible external appearance of goods in the form in which they are likely to be seen by the public before purchase. If the goods are sold in packages, then their get‑up means the appearance of the pack taken as a whole. If they are sold or displayed unpackaged, then the get‑up relied on can only be that inherent in the goods themselves.
The look, the appearance, the get‑up of a product play a crucial role in the purchase process since they are the chief means at the manufacturer’s disposal to attract customers. The importance of visual impact is well known: what appeals to the eye is crucial.
The product’s appearance or its packaging, shape, size or colour, may be characteristic of a particular manufacturer and have the effect of marking out the product or making it recognizable as his own. In the mind of the customer appearance is not always linked to a trade mark, that is, the consumer may rely on the appearance rather than the trade mark to indicate the use of the product. For example, when he needs removable self‑stick notes, he will look for small blocks of yellow paper. He may not know the name of the product or manufacturer, but he does not need to in order to recognize what he wants to buy. What he has noticed and what he has retained is the specific colour of the merchandise; or he will know that a particular product contained in a tin with an exotic bird on the lid is polish, without necessarily having to know the trade name or brand, and when he wishes to purchase that polish it is the image of the bird on the packaging that will assist him in recognizing the product. With a few exceptions, the external features of a product are not sought for themselves, but because they are the means of recognizing the satisfactory product, for example. They are a source of information associated with reputation for a consumer or a group of customers. Appearance is thus useful not only in product recognition but also to distinguish one product from another with the same uses.
Of course, it may be that appearance is associated with a specific brand in the consumer’s mind. When he wishes to have a product of that brand he will look for that get-up.
The question now is as to who lies beyond the product, that is who must be protected, who must not be confused by manufacturers, for example, by a similar appearance. As business is organized at present, it is very seldom that an individual deals directly with the manufacturer or producer: he is not generally the immediate customer. The route taken by a product between the time of its manufacture, to use a broad term, and the time it reaches the consumer can be compared to a chain made up of several links which must all be there and be in a particular order. Manufacturer, wholesaler, retailer and consumer are all links in this chain.
The first person who buys the product is not generally the one for whom it is ultimately intended. Assuming that there are three links in the chain, with the producer and the consumer at the two ends, the “retailer” (grocer, bookseller, garage owner and so on) is an intermediary between the producer and the consumer. I would without hesitation describe him as a “trade customer”, that is a person who obtains a product not for his own use but with a view to passing it on to a third person in the course of his business. There is little need to dwell at length on the case of such merchant intermediaries, who are in fact part of the manufacturer’s or producer’s clientele. There may at times be some question whether the passing‑off action really affects them as customers. The closer they are, that is the more direct contact they have with the manufacturer or producer, the less likely they are to be misled. This is indeed what Viscount Maugham found in Saville Perfumery Ld. v. June Perfect Ld. (1941), 58 R.P.C. 147 (H.L.), at pp. 175-76: “It is, for example, quite a common occurrence . . . to find that retail traders are not misled while ordinary customers are”.
Outside the field of pharmaceutical products, the courts and authors have unquestionably recognized that the consumer, or the person who might be called the ordinary customer‑‑the last link in the chain‑‑is also part of the “clientele” in whose minds any confusion must be avoided.
The English common law has long recognized this principle very explicitly. I shall again quote a passage from James L.J. mentioned above to emphasize the use of certain terms:
. . . no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false misrepresentation himself to a purchaser who purchases from him, he enables such purchaser to tell a lie or to make a false representation to somebody else who is the ultimate customer. [Emphasis added.] (Singer Manufacturing Co. v. Loog, supra, at p. 412.)
Further, when Lord Diplock in Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd., supra, set out the conditions for the passing-off action at p. 93, he used the very words “ultimate consumers”.
There is no question that confusion, which is the essence of the tort of passing-off, must be avoided in the minds of all customers, whether direct – here one thinks of the retailers – or indirect in that case the consumers. Proof of reputation or secondary meaning and of misrepresentation has never been limited by the courts to direct customers of the person claiming a right.
In civil law jurisdictions, including Quebec, the concept of a clientele is expressed still more broadly where misrepresentation is involved, as indicated by this passage from the reasons of Pelletier J.A. in République française v. S. Hyman Ltd. (1920), 31 Que. K.B. 22, at p. 23:
[TRANSLATION] [What is at issue is] the means of enforcing the principle that while a person may sell his own goods as he wishes, he is not entitled to offer them for sale in such a way as to lead buyers and the public in general to think that the goods he is selling are those legitimately manufactured and sold by someone else. [Emphasis added.]
Nadeau and Nadeau, supra, at p. 224, state in connection with passing‑off: [TRANSLATION] “It is not necessary to establish that buyers have been misled, but simply that an attempt was made to mislead the public”. (Emphasis added.) This language indicates that it is necessary to avoid confusing anyone who has an actual or potential, immediate or remote, connection with the product. The tendency in Anglo‑Saxon law appears to be to discontinue use of the expression adopted by Lord Diplock, “ultimate consumers”, and, as he himself has increasingly done, to refer to the concept of the public. (See inter alia Wadlow, supra, and Fleming, The Law of Torts (7th ed. 1987), at pp. 675‑76.)
Moreover, we must not lose sight of the fact that the ordinary clientele includes “consumers”. I use this word in its juridico-sociological meaning, which to Western minds in the late 20th century inevitably implies the need for protection. The passing-off action is entirely consistent with the plethora of present-day protectionist provisions, even though it existed long before they did!
B. The Principles of Passing-off Applied to the Pharmaceutical Field
(1) Preliminary Observations
There is no need to dwell at length on the purposes of the passing-off action in this field as they are essentially the same as those I have just considered. Adapting the principles set out to cases such as that now before this Court leads to the conclusion that competing laboratories must avoid manufacturing and marketing drugs with such a similar get‑up that it sows confusion in the customer’s mind.
First, I should make a few observations on the get-up of the products at issue here. As Wadlow points out (supra, at p. 379), pharmaceutical companies are limited in the choice of ways to distinguish the get‑up of their products. As pharmacists buy such products in bulk and dispense them to the public in standard containers which are transparent and anonymous, the only way of drawing the attention of patients to the origin of the product is the capsule or tablet itself. There are not many possibilities: what is written on tablets is often too small to be legible, at least not readily so, and that leaves only the shape, size and colour of the products as a means of distinguishing them. Here again pharmaceutical laboratories have little room for manoeuvre. The size and shape of drugs cannot depend solely on imagination, since they must meet certain functional requirements resulting from physiological necessities such as ingestion and digestion. As to colour, owing partly to the small size of the products, combinations which might be original or characteristic are also relatively limited.
Further, the same is true for the composition of drugs as for that of any other product. What I would call the basic components of two competing products are quite often identical while it is the incidental ingredients that are specific to each, and it is often the quantity and quality of such ingredients which make the difference in taste, consistency, texture and so on. In the pharmaceutical field, drugs consist of an active ingredient, the basic medicinal substance, and an excipient which plays a role inter alia in get‑up, ingestion and digestion. Understandably, two remedies which must achieve the same therapeutic result will contain the same active ingredients. In the case at bar, the parties’ products all contain a beta‑blocker, metoprolol tartrate. At the same time, the incidental substances in which the active ingredients are embodied may well be different.
(2) Target Clientele
Of course, the passing-off action is meant to protect manufacturers. In the case at bar, these are the pharmaceutical laboratories which manufacture and market the drugs. There is no need to consider this point further, as it presents no problem here. One must instead look at the other links in the chain, those who “buy” or “consume” the products, in order to determine who are the customers to be protected by the passing-off action. There are those who argue that only physicians, dentists and pharmacists are included. I will begin by reviewing the cases which have given a limited definition of the clientele and then consider several aspects of the question, an analysis of which will inevitably lead in my opinion to a preference for a broad clientele. Finally, I will cite decisions of the courts and authors who consider that the patient is included in the clientele of pharmaceutical laboratories for the purposes of a passing-off action.
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V – Conclusion
There is no reason in law to depart from the well-established rule that the final consumer of a product must be taken into account in determining whether the tort of passing-off has been committed. In the field of prescription drugs, therefore, the customers of pharmaceutical laboratories include physicians, pharmacists, dentists and patients.