Officially Infringing — Court Empowers Plaintiff Against Official Mark Owner

October 23, 2018
By Cynthia Rowden and Tamara Céline Winegust

The Federal Court’s recent decision in Quality Program Services Inc. v. Her Majesty the Queen in Right of Ontario as Represented by the Minister of Energy (2018 FC 971) adds further clarification to the impact of marks protected under s. 9(1)(n) of the Trademarks Act—an alternative to regular trademark protection available to public authorities, universities, and the Armed Forces—by finding that ownership of a published official mark is not a defence to an infringement claim. Mr. Justice Southcott held that the Province of Ontario’s adoption and use of the mark emPOWERme infringed the Plaintiff’s, Quality Program Services’ (“QPS”), registered trademark EMPOWER ME, and awarded it $10,000 in damages. In the course of analyzing the issues, the Judge offered additional comments, several in obiter, on a range of subjects including how local reputation impacts depreciation of goodwill, the definition of “use” for services, the necessity of “commercial” activities for such use, survey evidence, and the quantum of damages when there is no specific evidence of loss. The decision illustrates one of many pitfalls of the s. 9 mark system even if found to infringe a registered mark or be unenforceable, the Court has no power to cancel or expunge a published s. 9 mark, because such marks are not formally “on the Register”, and unless withdrawn by the owner, they remain “published”, and a continuing obstacle to registration and use by others in the future.

At issue in Quality Program Services was a dispute between the owner of the registered trademark EMPOWER ME against an Ontario government entity who had sought protection for emPOWERme by requesting the Registrar to publish it as an “official mark”, pursuant to s. 9(1)(n) of the Trademarks Act. Once such notice is given, no other person may, without consent, adopt, use or register any mark in connection with a business that is the same as, or so nearly resembling the protected mark as to be likely to be mistaken for it. The request for publication does not need to identify any goods or services. In fact, once published, the mark is indexed on the Canadian Trademarks Database (using the odd status of “advertised”) as if it covers all goods and services. Section 9 marks are not subject to opposition proceedings, renewal, non-use cancellation, or expungement, and the Courts cannot specifically order that a s. 9 mark publication be cancelled or withdrawn. Such broad rights in turn lead to the potential for abuse. For years, there have been requests that the Government place limitations on such rights, to no avail. However, the Courts have imposed some limitations; for example, setting qualifications to claim “public authority” status, defining what is necessary for “adoption and use”, confirming that such marks cannot be asserted against an entity who used its mark prior to the publication of the s. 9 mark, and that s. 9 marks are not enforceable if such marks were improperly published.

The Quality Program Services decision followed an application for summary trial by the Plaintiff (“QPS”), who owned a registration for the trademark EMPOWER ME based on an application filed in April 2013, shortly before use of the mark began in British Columbia. The registration, which issued in July 2014, covered services related to a program focusing on energy awareness, conservation, and efficiency. In November 2013, the Government of Ontario’s Ministry of Energy (“OME”) announced the launch of a website, branded “emPOWERme”, to help Ontario energy customers better understand the province’s electricity system. In effect, this was an education tool regarding energy generation, distribution, and conservation. QPS became aware of OME’s program in 2015 and sent a demand that such use stop. The Government responded by arguing the emPOWERme program was limited to Ontario and there was no “trademark” use since the term was not displayed for commercial purposes. It also took the position that it could seek protection of emPOWERme as an “Official Mark”. When QPS brought an action for infringement, passing off and depreciation of goodwill, the Ontario Minister of Energy sought publication of emPOWERme as an “Official Mark” under s. 9(1)(n), which occurred in January 2018.

Arguing against QPS’s claims in the motion for summary trial, OME argued that it was immune from infringement claims as a result of its official mark. The Judge disagreed. He held both that QPS had the exclusive right to use the EMPOWER ME mark, and that the OME infringed that right contrary to s. 20 of the Trademarks Act. However, both the claims of passing off and depreciation of goodwill failed, the Judge noting the limited geographic scope of QPS’ goodwill. Oddly, a specific injunction against use was not ordered (this may have been due to the OME’s remarks that it had already made plans to cease use of the emPOWERme mark, and was phasing it out). While the Judge ordered some damages be paid to QPS, the award was only $10,000, given the absence of any proof of actual damage or loss.

The Judge made the following comments of note:

  1. On Official Marks—there was a strong pronouncement that, although the Registrar has no authority to refuse publication of a s. 9 mark despite earlier registrations, this does not support the position that a public authority may, with impunity, infringe, pass off or depreciate the goodwill of a previously registered mark. Section 9 should not be interpreted so as to confer statutory immunity on s. 9 mark holders, or more specifically, to allow owners of such marks to contravene other provisions of the Trademarks Act. When the Act refers to “no person” offending ss. 20, 7(b), or 22, there is no reason to exclude owners of published official marks. In short, a subsequently published official mark, or other mark protected by s. 9 cannot be used to defend an allegation of infringement of an earlier registration.
  2. On what activity could be “services”— Following the TSA Stores Inc. v. Canada (Registrar of Trade-Marks), 2011 FC 273, decision, the Judge stated that “services” should be given a liberal interpretation, and if the public, consumers, or purchasers receive a benefit, it is a service. The Judge held OME’s provision of an information website was a “service” and that “this conclusion is inescapable, given that fact that [OME] obtained official mark status for its “emPOWERme” mark, which, under the language of s. 9(1)(n), must be a mark adopted and used for goods or services.” The Judge also added, in obiter, that the services need not be “commercial” to be actionable under s. 20, although he recognized that he was not being asked to rule on this point so would “express no definitive conclusion”.
  3. On the likelihood of confusion—In running through the factors for determining confusion, the Judge agreed that the balance weighed in favour of QPS. While neither survey evidence nor evidence of actual confusion was filed, the Judge confirmed that such evidence is not a prerequisite to a finding of confusion, (consistent with many recent trademark decisions), and specifically noted that the absence of proof of confusion was not surprising given the separate markets of the parties. No specific injunction against use was ordered, but the statement that the Plaintiff has an “exclusive” right to use implies that any use by OME would be unlawful.
  4. On Passing Off under section 7 of the Act—The Judge confirmed that the tort of passing off only protects goodwill within the geographic area in which it was acquired. QPS failed on this claim because it could not show goodwill beyond British Columbia, particularly since OME’s activities were essentially restricted to Ontario. Further, there was no evidence of QPS’ goodwill in British Columbia being harmed by people in that province viewing the OME’s website.
  5. On Depreciation of Goodwill—This claim appears to have failed for similar reasons as the passing off claim, namely, that the Judge interpreted s. 22 of the Act to require proof of the plaintiff’s goodwill in the same geographic location as the defendant’s use, and QPS could not show any goodwill outside British Columbia. The Judge relied on the Supreme Court of Canada’s factors for a successful depreciation of goodwill claim set out in the leading s. 22 decision, Veuve Clicquot Ponsardin v. Boutiques Cliquot ([2006] 1 SCR 824), namely: “use” by the defendant, proof of the plaintiff’s goodwill, likely link or connection by consumers of the defendant’s use to the plaintiff’s goodwill, and likelihood of depreciation. The Judge in Quality Program Services had already found “use” when reviewing the infringement claim. He also appears to have accepted that QPS had goodwill, although it existed only in B.C. That seems to have made it unnecessary to pursue any further analysis of a “likely” consumer link or depreciation. Instead, the Judge held that OME’s mark was not used in a manner likely to depreciate goodwill. While that finding might be right on the facts, it appears to have been made prematurely, and seems to add a new restriction to a successful s. 22 depreciation claim namely that a plaintiff must demonstrate goodwill where the defendant operates. Given that s. 22 claims are restricted to registered trademarks only (i.e., marks that are granted national exclusivity for the registered goods/services) and that s. 22’s language prohibits use that is “likely to have the effect” of depreciating the value of the attached goodwill, it seems that actual goodwill in the defendant’s field of operation should not be required, if other factors suggest that there is “likely” to be a consumer link and likely depreciation. Adding a local goodwill criterion to s. 22 seems to ignore the relevance of “national” registration rights, and will probably make a claim for depreciation under s. 22 even more difficult.
  6. On Damages—Relying on other cases where the court awarded $25,000 in the absence of evidence to support quantification of damages, QPS claimed $50,000, based on two years of infringement at $25,000 per year. Instead, the Court awarded $10,000, noting that compensatory damages for infringement justified an award, but not a particularly high one where no proof of damage was provided.

The decision in Quality Program Services deals with ongoing issues that have long been the subject of recommended amendments to the Trademarks Act, namely the treatment of rights granted under s. 9 and the absence of a predictable monetary remedy for trademark infringement. Without government intervention, it has been left to the Courts to put limits on the rights of s. 9 marks. Further, because the Trademarks Act does not include the option of statutory damages in civil disputes, many plaintiffs find it difficult to recover their full costs of taking action against infringers, including counterfeiters. The recent United States Mexico Canada Agreement requires the parties to have one of two options for trademark damages, either pre-established trademark damages (which presumably refer to statutory damages) or “additional damages” (which include punitive damages). It is not certain that such requirement will result in Canada amending the Trademarks Act to add statutory damages, but choosing such a path could ease the burden on successful parties, and make infringement proceedings faster and more efficient for courts.

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