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08 February 2021
There were several notable trademark cases in Canada in 2020, including cases addressing:
Other major developments included:
This article revisits these notable cases and developments and considers their implications for 2021.
In one of the first notable decisions of 2020, the Federal Court considered the legal limits to comparative advertising under the Competition Act and the Trademarks Act in Petline Insurance Company v Trupanion Brokers Ontario Inc (2019 FC 1450). Petline Insurance Company, a Canadian pet insurance business, alleged that the ads of its competitor Trupanion Brokers Ontario Inc:
While Trupanion's statements were "perhaps somewhat of an overstatement", the court's view was that they were neither false nor misleading, and Petline could not succeed under Section 7(a) of the Trademarks Actor Section 52 of the Competition Act. Petline's claim for depreciation of goodwill also failed because it did not prove that Trupanion's statements had had any detrimental economic impact. Rather, both parties' business had grown during the years in question (for further details please see "True or false: testing limits of comparative advertising").
Depreciation of goodwill
In the ongoing battle between two of Canada's leading battery brands (Energizer Brands LLC v The Gillette Company (2020 FCA 49)), the Federal Court of Appeal upheld the Federal Court's holding that a claim for depreciation of goodwill (ie, Canada's anti-dilution prohibition) under Section 22 of the Trademarks Act is not limited to registered trademarks and minor misspellings thereof.
In 2014 Duracell started using stickers on the packaging of its Duracell brand batteries with claims that they performed better than "the next leading competitive brand" and "the bunny brand". Energizer commenced an action against Duracell, arguing that the claims on Duracell's stickers depreciated the goodwill attached to Energizer's trademarks. Energizer did not own any trademark registrations for 'the bunny brand' or 'the next leading competitive brand' but did own two design registrations for its pink bunny mascot. Duracell brought a motion to strike the claim for depreciation of goodwill, on the basis that neither 'the bunny brand' nor 'the next leading competitive brand' were registered trademarks.
The Federal Court held that, as a matter of law, Energizer is not precluded from arguing that the phrases "the bunny brand" and "the next leading competitive brand" evoke in consumers a mental association with its registered trademarks, as required under Section 22 of the act. The Federal Court then applied this legal principle to the facts before it and refused to strike portions of the claim relating to use of "the bunny brand", finding that the consumer could make a mental association between "the bunny brand" and the registered ENERGIZER bunny design marks. However, the Federal Court struck the portions of Energizer's claim relating to "the next leading competitive brand" because a consumer would not understand that "the next leading competitive brand" referred to Energizer and its registered trademarks.
Energizer appealed and the Federal Court of Appeal allowed, for procedural reasons, its appeal of the part of the judgment that dismissed its claim concerning "the next leading competitive brand". The Federal Court was held to have exceeded the scope of the issues in Duracell's motion. By answering the question of whether the phrases were in fact sufficiently similar to Energizer's registered trademarks to evoke a mental association that was likely to depreciate the value of their goodwill, the court was held to have deprived Energizer of its opportunity to make its case on this issue. As a result, this remains a question to be answered at trial by the Federal Court.
Energizer's action tests the limits of claims for depreciation of goodwill under Section 22 of the act. While the Federal Court of Appeal's recent dismissal of Duracell's motion for summary judgment avoided squarely addressing the scope of such claims, it may ultimately result in greater clarity if the scope of Energizer's claim is determined after trial with the benefit of a full evidentiary record.(1)
In another decision relating to Section 22 of the Trademarks Act, the Federal Court provided a cautionary tale about the dangers of adopting a mark or name inspired by a famous or well-known brand, even when confusion is unlikely.
Toys "R" Us is the owner of the following well-known mark.
Toys "R" Us brought an application in the Federal Court against Herbs "R" Us Wellness Society, a Canadian company operating a cannabis boutique and dispensary in Vancouver, British Columbia, for trademark infringement, passing off and depreciation of goodwill in respect of its use of the following mark.
The court dismissed the claims for trademark infringement and passing off, finding it "unlikely in the extreme" that a Canadian consumer would see the HERBS R US trademark and conclude that a well-known toy retailer had started branching out into cannabis-related goods and services. However, the court found that there was a "strong resemblance" between the marks and that they were "sufficiently similar" that a mental association was "all but inevitable and must be inferred to have been intended". As a result, the court found that use of the HERBS R US design mark was likely to depreciate the goodwill attached to the registered TOYS R US design mark, contrary to Section 22 of the Trademarks Act. The court permanently enjoined Herbs "R" Us from adopting, using or promoting the trademark or trade name HERBS R US as or as part of any trademark, trade name, logo, domain name or social media account name. The court also ordered the destruction of all goods, packages, labels and advertising material displaying the HERBS R US trademark, trade name or logo and the payment of damages and costs totalling C$30,000 to Toys "R" Us.
The court's decision demonstrates that it is never a good idea to trade on the goodwill and reputation of an established brand with a playful mark or name (for further details please see "Not all pun and games: Federal Court not amused with cannabis company's brand parody").
Use of trademark without physical location
In a widely anticipated decision, the Federal Court of Appeal held that a trademark owner could demonstrate use of a trademark in Canada in association with hotel services without a physical hotel, providing important guidance to brand and trademark owners offering services to consumers in Canada without a brick-and-mortar location.
In 2014 Miller Thomson commenced non-use proceedings under Section 45 of the Trademarks Act, requiring Hilton Worldwide Holding Inc to show use of its WALDORF ASTORIA trademark in Canada during the preceding three years. There are WALDORF ASTORIA-branded hotels and resorts in more than 15 countries, but there are no WALDORF ASTORIA hotels in Canada.
In response to the Section 45 notice, Hilton filed evidence showing proof that more than 41,000 Canadian customers had stayed at WALDORF ASTORIA-branded hotels outside Canada. Relying on its previous decisions which had narrowly interpreted the scope of hotel services, the Trademarks Opposition Board held that the absence of a brick-and-mortar hotel in Canada was fatal and ordered the WALDORF ASTORIA registration to be expunged.
Hilton appealed and filed fresh evidence, including evidence of past iterations of the Goods and Services Manual maintained by the Canadian Intellectual Property Office, which established that 'hotel reservation services' had not been identified as an acceptable service when the trademark application for WALDORF ASTORIA was filed.
The Federal Court reversed the board's decision, finding that – based on the ordinary commercial understanding of the term 'hotel services' – the evidence established that some aspect of the registered service was offered directly to Canadians or performed in Canada and that Canadians derived a tangible, meaningful benefit from such service. The Court of Appeal affirmed the Federal Court's decision: so long as consumers, purchasers or members of the public in Canada receive a material benefit from the activity at issue, it is a service offered in Canada (for further details please see "Federal Court of Appeal does not disturb lower court's finding of use for hotel services").
Importantly, the Court of Appeal distinguished today's internet age from older cases involving cross-border sales and bookings: "[t]he requirements for 'use' under section 45 of the Act must adapt to accord with 21st century commercial practices." However, it also warned that "the ability of individuals in Canada to passively view content on a foreign website" would not be enough:
[t]here must, at a minimum, be a sufficient degree of interactivity between trademark owner and Canadian consumer to amount to use of a mark in Canada in conjunction with services over the [I]nternet.
Grey market goods
Two recent decisions show that an exclusive distributor may pursue:
In TFI Foods Ltd v Every Green International Inc (2020 FC 808), the Federal Court granted an exclusive distributor's request for an interlocutory injunction against the seller of grey market goods. TFI Foods Ltd, the exclusive distributor of Taiwanese company I-MEI Foods Co Ltd, sought an interlocutory injunction to prevent Every Green International Inc's sale of genuine I-MEI goods which displayed a label falsely stating that Every Green was the exclusive distributor of such goods in Canada.
TFI's claim was based on passing off under Section 7(b) of the Trademarks Act. The sale of grey market goods does not in itself infringe a registered trademark or constitute passing off. However the court was satisfied that there was a serious issue to be tried: the false statement that Every Green was the exclusive distributor in Canada of I-MEI's goods amounted to a misrepresentation pertaining to a registered trademark and thus fell within the scope of a passing-off claim under Section 7(b).
The court also found that TFI had established actual or potential damage. Every Green's conduct had resulted in confusion among retail customers, affecting TFI's reputation and ability to select and define its own authorised distribution network. Additional harm had been caused to its reputable distributors as a result of the false association with a company with which I-MEI would not choose to associate. TFI also noted that, in the absence of an injunction, it would be impossible to assess losses, given that TFI and I‑MEI did not know whether Every Green's sales were being properly accounted. Based on this, the court was satisfied that the balance of convenience favoured granting the requested injunction; any harm suffered by Every Green was a result of its own conduct in making the false statements.
In a second significant decision involving grey market goods, the Quebec Court of Appeal confirmed that exclusive distributors have recourse under Quebec civil law against grey marketers that knowingly interfere with their exclusive distribution agreements. Importantly, punitive damages – an exceptional remedy under Canadian and provincial law – can be awarded in cases where the interference amounts to a "conscious and callous disregard for the exclusive distributor's reputation".
In 2009 Simms Sigal & Co Ltd, the exclusive distributor of high-end ROCK & REPUBLIC clothing in Canada, learned that Costco had arranged to buy goods manufactured by R&R, the owner of the ROCK & REPUBLIC trademark, and sell the goods in Canada at a significantly reduced price. As the exclusive Canadian distributor of ROCK & REPUBLIC clothing, Simms objected. Costco responded that the goods were authentic and had been purchased on the grey market. R&R subsequently terminated its exclusive distributorship agreement with Simms based on breach of contract. Simms settled with R&R for damages of C$2.7 million.
Under the Quebec Civil Code, there is an exception to the civil law principle when a third party interferes with a contractual relationship, causing a fault of contractual interference. To succeed, the plaintiff must show:
Simms satisfied all three elements: Costco had been aware of the exclusive distributorship agreement as a result of Simms's demand letter yet had continued to make orders for R&R goods. As an experienced retailer, Costco should have known the negative impact which its activities would have on Simms, ultimately causing damage to Simms in both lost sales and the loss of credibility and reputation among its retailer clients.
Notwithstanding that punitive damages remain an exceptional remedy, the Court of Appeal agreed with the Superior Court that Costco's actions justified an award of punitive damages of C$500,000 given:
The Trademarks Office issued new limits on extensions of time for responding to office actions. Prior to 17 January 2020, one extension of time for a given office action could be secured without any substantive reasons. Further six-month extensions could be secured by demonstrating exceptional circumstances.
As of 17 January 2020 the Trademarks Office will not grant any extensions for office actions in the absence of exceptional circumstances, which can include:
Importantly, for substantive objections (eg, objections on the basis of confusion, descriptiveness or inherent distinctiveness), a single six-month time extension is available once during the life of the application.
As of 14 December 2020, for the first time in more than a decade, the Trademarks Office will grant requests for expedited examination of trademark applications where the goods or services are for the prevention or treatment of COVID-19. To qualify for expedited examination, the following requirements must be met:
If a request for expedited examination is granted and the applicant later misses any deadline or seeks a time extension, the Trademarks Office may cease further expedited examination. The Trademarks Office has issued a practice notice setting out the requirements for expedited examination in greater detail (for further details please see "Trademarks Office to allow expedited examination for COVID-19-related goods and services").
In 2021 practitioners can look forward to:
For further information on this topic please contact Noelle Engle-Hardy at Smart & Biggar by telephone (+1 416 593 5514) or email (email@example.com). The Smart & Biggar website can be accessed at www.smartbiggar.ca.
(1) For further details please see "The fight over depreciation of goodwill in Canada keeps going and going…".
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