Canadian Trademark Cases 2017: Our Top Picks
In a year filled with significant trademark decisions on issues as varied as global injunctions, a confusing approach to the test for confusion, keywords and counterfeiting remedies, here are our top picks for 2017.
“The Internet Has No Borders”: Worldwide Deindexing Injunction
In Google, Inc. v Equustek Solutions Inc., the Supreme Court of Canada upheld an order requiring Google to de-index websites globally, not just in Canada. Briefly, the operators of the websites had misappropriated confidential information, and misled consumers into believing the products sold on these sites were Equustek’s products; the underlying facts, summary of the litigation history and our more fulsome commentary of this decision can be found here. Equustek obtained Court orders to address the misappropriation and misleading issues, but the operators of the websites refused to comply. Equustek asked Google to de-index the sites. Google agreed to help, and de-indexed the sites in Canada only. Equustek sought a Court order in Canada to require Google, a non-party to the underlying infringement case, to de-index the sites globally. Google resisted, and the issue ultimately went before the Supreme Court of Canada, where the Court saw Google as the “determinative player” in the harm occurring and found: “[t]he problem […] is occurring online and globally. The Internet has no borders — its natural habitat is global. The only way to ensure that the interlocutory injunction attained its objective was to have it apply where Google operates — globally.”
The Supreme Court’s decision has been praised by many as practical. It signals that justice is available on the Internet, without requiring legal proceedings in every country where a website may be available.
Use of Competitor’s Trademarks in Keyword Advertising
In Vancouver Community College v Vancouver Career College (Burnaby) Inc., the British Columbia Court of Appeal overturned the decision of the trial judge and found the defendant liable in passing off for using a competitor’s trademark in keyword advertising (a more fulsome commentary can be found here). The Court of Appeal referred to the earlier decision of the Supreme Court of Canada in Masterpiece v Alavida Lifestyles, and held that the issue of confusion must be assessed as a matter of first impression — at the time when the search results first appear. Since the keywords resulted in the defendant/respondent’s advertisements appearing on the same page as the appellant’s listing, the Court of Appeal found that confusion was likely, even if such “confusion” is dispelled once the user clicked through the search results and arrived at the appellant’s website.
It is worth noting, however, that the “first impression” test referred to in Masterpiece involved a traditional “bricks and mortar” business setting. By contrast, consumers in the “online world” can conceivably move quite easily “back” and “forth” with the click of a mouse to the desired website and eliminate any “initial” confusion.
It is also interesting to note that neither the trial judge nor the appeals court considered whether the defendant (respondent) “used” the plaintiff’s marks in a trademark sense — generally a requirement in a passing off action.
Leave to appeal the Vancouver decision was filed with the Supreme Court of Canada in March of 2017 with arguments focused on the timing for the assessment of confusion under Canadian trademark law, particularly as it relates to online issues. The Court dismissed the application on January 18, 2018, without reasons.
Registered Trademark May not be Defence to Infringement
In Group III International Ltd. v Travelway Group International Ltd., the Federal Court of Appeal overturned the lower court’s decision and granted the plaintiff, Wenger S.A. (i) a permanent injunction prohibiting the defendant, Travelway, from using its registered trademarks on its luggage products; (ii) a declaration of infringement of Wenger’s trademark registrations; and (iii) an order that Travelway deliver up its luggage products for destruction. Notably, the Federal Court of Appeal did not expunge Travelway’s trademark registrations that were found to infringe Wenger’s, nor did it issue an order for damages, referring these matters back to the lower court for further submissions. The decision has resulted in a perplexing outcome: trademark registrations found to be confusing nevertheless continue to co-exist on the Trademarks Register.
The facts of this case were summarized in our 2016 Canadian Case Law Review, available here, which discussed the lower court decision in which Wenger’s application for, inter alia, a declaration of infringement and expungement of Travelway’s registrations, was dismissed in its entirety.
The Federal Court of Appeal’s decision is noteworthy in that it suggests a valid trademark registration may not be a complete defence to claims of infringement and passing off, and represents a notable departure from earlier case law. It also leaves open the question of whether such trademark registrations could be relied on to take action against other parties. Further, leaving confusing marks on the Register will add considerable uncertainty to trademark clearance searches. However, the case remains ongoing pending the lower court’s consideration on the issues of expungement and damages.
The Requirement for a Mark to Mark Confusion Analysis
In Benjamin Moore & Co. Limited v Home Hardware Stores Limited, the Federal Court of Appeal overturned a decision of the Federal Court that had granted an appeal of an Opposition Board decision. Benjamin Moore had applied to register two BENJAMIN MOORE NATURA trademarks for paint. Home Hardware opposed based on confusion with its pleaded family of NATURA trademarks. That family included seven registered marks covering cleaners and other typical hardware store goods, and also included two NATURA trademark applications, one of which covered paint. The Opposition Board rejected the oppositions. Home Hardware appealed and filed new evidence in the Federal Court proceeding. The Federal Court found that confusion was likely, and allowed the appeal. It was then Benjamin Moore’s turn to appeal. The Federal Court of Appeal found that the judge below had made errors of law (which it reviewed on a correctness standard) by not applying a proper “mark to mark” confusion analysis, and by not taking into account the relevant material dates for each ground of opposition. In assessing likelihood of confusion between the parties’ marks associated with paint, the Federal Court judge was found to have erred by relying on evidence of actual sales — this was wrong because neither party was selling paints under these trademarks at the applicable material date. The case was referred back to the Federal Court for redetermination.
No Confusion Between PINNACLE Marks Covering Different Alcoholic Beverages
The Federal Court of Appeal in Domaines Pinnacle Inc. v Constellation Brands Inc. et al., provides an interesting counterpoint to the Diageo case noted below. The appellant was a Quebec-based producer of apple-based alcoholic and non-alcoholic beverages and other apple products. The respondents were subsidiaries of Constellation Brands, a United States-based producer and distributor of wines.
In restoring the decision of the Trademarks Opposition Board, the Federal Court of Appeal held that an application for the trademark DOMAINE PINNACLE & Design, is unlikely to cause confusion with the registered mark PINNACLES covering wines, since the visual element of the two marks was sufficiently different, and each mark suggested different ideas. The design mark is shown below:
The Federal Court, on review, determined that the Board erred by not considering the potential uses that the respondents might have made of their registered mark, as required by the Masterpiece decision of the Supreme Court of Canada. The Federal Court then applied the correctness standard of review, and decided the issue of confusion in the respondents’ favour.
The Federal Court of Appeal overturned that decision, first noting that the Federal Court should have applied a reasonableness, rather than correctness standard. The Federal Court of Appeal then looked at the Board’s underlying decision on that standard, and held the full scope of the rights granted for the PINNACLES mark would not permit the respondents to use the distinctive graphic elements — the apple and snowflake design — that the Board identified as being central to the distinctiveness of the appellant's mark and avoidance of confusion with the respondents’ mark.
The Federal Court of Appeal also noted that "Pinnacle" was a commonly used term with little distinctiveness. Therefore, the Court held that the design context must play a greater role in distinguishing the respondents' mark from the numerous other registered marks in Canada that feature the word "Pinnacle".
No Infringement of Registered Trademarks Dominated by Descriptive Term
The decision in Venngo Inc. v Concierge Connection Inc. (Perkopolis), relates to Venngo’s action against CCI over use of the trademark PERKOPOLIS, which was alleged to infringe Venngo’s rights arising from six trademark registrations for various “PERKS” suffix marks (e.g. MEMBERPERKS, WORKPERKS, etc.). Both parties used their marks in the context of providing companies with incentive programs for their employees. Venngo’s claims were dismissed at trial. Venngo appealed in relation to its passing off claim, and its infringement and depreciation of goodwill claims under the Trademarks Act. The Federal Court of Appeal reviewed the trial judge’s finding, saw no palpable and overriding error, and therefore declined to intervene on the merits (but did allow Venngo’s appeal in relation to the costs ruling). There was no error in dismissing the depreciation of goodwill claim on the basis that display of the phrase “MEMBER PERKS INCLUDE” on CCI’s websites was not “use as a trademark.” The trial judge had also found that the parties’ marks were not confusing for reasons including: (1) regarding resemblance, the only point of similarity between the marks was the word ”perk,” which is a generic term for the services at issue; (2) Venngo’s marks lacked inherent distinctiveness, and had not been shown to have acquired distinctiveness; (3) the Trade-marks Office had not raised a confusion objection based on Venngo’s marks in examining CCI’s application to register PERKOPOLIS; (4) the evidence of actual confusion was not compelling — such evidence is not “a trump card” that leads to a finding of confusion under s. 6 of the Act; and, (5) the customer is typically a senior HR professional who chooses a program only after conducting research. On the costs ruling, however, the trial judge was found to have committed a legal error in assessing CCI’s written offer to settle. The offer did not meet the criteria set out in the jurisprudence and the Court’s Rules because the only element of compromise was the provision on costs, but that provision did not remain open until the commencement of trial. The costs award was therefore set aside and referred back to the trial judge for redetermination.
Rare Interlocutory Injunction Granted in a Trademark Case
The Federal Court rarely grants interlocutory injunctions in trademark cases, but one was granted in Sleep Country Canada Inc. v Sears Canada Inc. The Court held that the impossibility of quantifying damages supported a finding of irreparable harm, and, following many recent Federal Court decisions, was prepared to rely on its own analysis of the facts, as opposed to expert evidence, to find that the defendant’s slogan was confusing.
Since 1994, Sleep Country has used the slogan WHY BUY A MATTRESS ANYWHERE ELSE in TV, radio, print, and online advertising, and owns two trademark registrations for the slogan. Evidence showed the slogan had acquired national recognition of “iconic” proportions. In July 2016, Sears began advertising “THERE IS NO REASON TO BUY A MATTRESS ANYWHERE ELSE” in online flyers and social media. Despite a demand letter alleging infringement, Sears refused to stop.
The decision turned on a number of key holdings. First, Justice Kane held that there is “no need” for expert evidence when assessing likelihood of confusion. This continues the trend that limits the usefulness of expert evidence on that issue, which began with the Supreme Court of Canada’s rejection of survey evidence in the Masterpiece v Alavida decision.
Second, the holding turned on the impossibility of proving damages at trial. The Court acknowledged the difficulty faced by the moving party in meeting the irreparable harm requirement, and acknowledged that irreparable harm can be shown when the defendant’s infringing conduct is mixed with other non-infringing actions, making proof of damages unquantifiable.
Third, Justice Kane distinguished earlier decisions where interlocutory injunctions were denied by noting that Sears was using a slogan versus selling an infringing product. This distinction could limit the applicability of this decision to future cases, although it is not clear why the issue of irreparable harm would be viewed differently depending on how the trademark is employed.
Captain Morgan Strikes a Blow Against Infringers
Diageo is one of the world’s largest producers of spirits, and sells several varieties of rum under the CAPTAIN MORGAN trademark. Each var
iety bears a label containing a fanciful depiction of Sir Henry Morgan, a 17th century privateer.
Heaven Hill is the largest independent family-owned and operated distilled spirits producer in the U.S., and sells five ADMIRAL NELSON’S rum varieties. Each variety bears a label with a fanciful depiction of Vice Admiral Horatio Lord Nelson, a British naval officer in the late 18th and early 19th centuries.
ADMIRAL NELSON’s rum products and CAPTAIN MORGAN rum products have both been sold in the United States since 1998.
Diageo sued Heaven Hill in Canada for passing off, trademark infringement, and deprecation of goodwill. The principal rum products in dispute look like this:
Forthe passing off claim, the Court found for Diageo, holding that a casual or ordinary purchaser of rum products would likely be confused as to the source of ADMIRAL NELSON’S rum products as currently packaged and sold in Canada. This holding was based, in part, on survey evidence tendered by Diageo. The survey showed that 23% of the test group had a misapprehension as to source, whereas only 7% of the control group did so. The most frequent reason given by the test group participants for inferring the same source as CAPTAIN MORGAN was the character displayed on the label.
The Court also held in favour of Diageo for the trademark infringement claim. Having regard to the factors set out in subsection 6(5) of the Trademarks Act, and the evidence adduced at trial, including the survey evidence, the Court held that there is a likelihood of confusion between the characters on the bottle labels for the ADMIRAL NELSON’S rum products and but one of Diageo’s registered trademarks. Again, the Court focussed on the degree of resemblance between the ADMIRAL NELSON character and Diageo’s registered trademarks, and the effect that would likely have on the first impression of a somewhat hurried consumer, with imperfect recollection, of the CAPTAIN MORGAN trademarks.
Finally, the Court held that while Heaven Hill did not actually use any of Diageo’s trademarks, use of its ADMIRAL MORGAN composite mark was likely to have the effect of depreciating the value of the goodwill attaching to all but one of Diageo’s registered trademarks, “since ADMIRAL NELSON’S composite trademark directly competes with nine of Diageo’s trademarks in the market for rum products in three Canadian provinces”.
Consumer Complaint Websites
In United Airlines v Cooperstock, the Federal Court dealt with trademark and copyright claims in the context of a consumer complaint website. The defendant, Cooperstock, after a negative personal experience with United Airlines, launched the website “untied.com” that provided consumers with an online forum for complaints about United Airlines. The defendant subsequently added a logo to the website that resembled the globe logo used by United Airlines with a super-imposed “frown” design. In response to United Airline’s demands for changes to the website, Cooperstock added the disclaimer “This is not the website of United Airlines”, along with the notation “an Evil Alliance Member”.
United Airlines sued for trademark infringement, passing off, depreciation of goodwill, and copyright infringement. It succeeded on all counts. The Court’s finding that the defendant had “used” the “UNTIED” mark as a trademark (generally understood to be a designation of origin or source), and that the “untied.com” complaints website provided a “service” much like a consumer help line (even though there was no commercial activity), was a departure from earlier jurisprudence and may provide ammunition for trademark owners concerned with the impact of complaint websites.
Trademark Opposition based on Date of First Use claimed in the Application
In Les Marques Metro / Metro Brands S.E.N.C. v 1161396 Ontario Inc., the Federal Court took a close look at the requirements of s. 30(b) of the Trademarks Act in the context of an appeal of an Opposition Board decision. First, regarding the degree of deference owed to an Opposition Board’s decision, if a clear question of law cannot be readily extricated from a mixed question of fact and law, then the reasonableness standard of review will apply on an appeal under s. 56 of the Trade-marks Act. Here, the Opposition Board’s interpretation of s. 30(b) was found to be a mixed question of fact and law. Next, the Court concluded that while a trademark application need only state a date of first use for each general class of goods or services, s. 30(b) requires the mark to have been used with each of the specified goods or services prior to the filing date of the trademark application. However, the date of first use for each of the specific goods or services in the general class may vary (i.e., use need not have commenced with all of them by the date claimed for the general class). Finally, considering the objectives of the Trademarks Act, s. 38 must be interpreted to allow the Opposition Board to issue split decisions (i.e., to refuse the application for some but not all of the goods or services).
Significant Punitive Damages Award Arising From the Sale of Counterfeit Goods Upheld
In Lam v Chanel S. de R.L., the Federal Court of Appeal upheld a $250,000 punitive damages award arising from the sale of counterfeit goods. In dismissing the appeal, the Court found that there was “no merit” in the argument that there should be a limiting ratio as between the amount of compensatory damages and punitive damages — in the decision appealed from, compensatory damages were set at $64,000, about one-quarter of the punitive damages award. The Court specifically found that the award was “consistent with the objectives of punitive and exemplary damages — retribution, deterrence and denunciation”, finding that a number of facts going to the defendants’ conduct supported the conclusion that the punitive damages award was “rationally required to punish” the misconduct. The misconduct included: the vulnerability to, and erosion of, the plaintiffs trademark rights arising from counterfeiting; the defendants’ attempts to mislead the Court; the fraudulent transfer, after the filing of the Statement of Claim, of ownership of the defendants’ company to avoid liability; the defendants’ recidivist conduct in light of previous orders; and the defendants’ awareness of the unlawful nature of the activity.
Lifting the Corporate Veil, and Punitive Damages, in the Face of Trademark Infringement
In Asics Corporation v 9153-2267 Québec Inc. et al, the Federal Court also awarded punitive damages arising from trademark infringement. Asics had obtained a default judgment for the infringement. A third party sought relief in respect of the execution of a writ of seizure and sale related to the default judgment. The Court dismissed the relief sought. In doing so, the Court also lifted the corporate veil of the third party, to allow Asics to execute the default judgment against the third party, and awarded punitive damages against the third party in respect of the motion, set at $20,000. The Court, in an approach similar to that in Lam v Chanel S. de R.L., saw the “serial and cavalier nature of [the third party’s] attempts to evade orders issued by this Court” as a notable factor in its punitive damages award.
Use in a Section 45 Proceeding Proven by Distributing Samples
In Estee Lauder Cosmetics Ltd. v Sharlene Loveless, the validity of the ENLIGTHEN trademark registration was at issue. It has been ordered expunged by the Registrar. With new evidence, Estee Lauder advanced two arguments. First, that an agreement with a Canadian retailer within the relevant period to purchase the ENLIGHTEN goods at a specific price to be delivered by a specific date, in the context of an existing commercial relationship, constitutes a transfer of the property in the goods and hence “use”. The Court rejected this argument. However, the Court held that the distribution of samples of goods bearing the ENLIGHTEN mark to Canadian retailers during the relevant period, followed by the securing of orders during the relevant period, constituted “use”, and the shipping and receipt date (which occurred after the relevant period) was not relevant.