On May 26, 2011, the Supreme Court of Canada released a unanimous decision overturning the Federal Court of Appeal's decision in Masterpiece Inc. v. Alavida Lifestyles Inc. In its decision, the Supreme Court examined the assessment of confusion in trade-mark cases, clarifying the applicable standard to guide future cases. In addition, the Supreme Court made it clear that trade-mark priority is national in scope.
Masterpiece Inc. ("Masterpiece") and Alavida Lifestyles Inc. ("Alavida") are both involved in the retirement residence industry. Masterpiece had been operating in Alberta since 2001 and had used several unregistered trade-marks, including MASTERPIECE THE ART OF LIVING, and the trade-name MASTERPIECE. Alavida entered the market in 2005 and operates in Ontario. In December 2005, Alavida applied to register the trade-mark MASTERPIECE LIVING on the basis of proposed use. Shortly after Alavida filed its application, Masterpiece changed its branding slightly and began using the very same trade-mark, MASTERPIECE LIVING. Eventually, Masterpiece sought its own application for both MASTERPIECE LIVING and MASTERPIECE. However, due to Alavida's prior application, which was eventually granted, Masterpiece's applications were denied.
Masterpiece subsequently commenced an application seeking to expunge Alavida's marks on the basis that they were confusing with Masterpiece's trade-marks and trade-name, which had been used prior to the filing of Alavida's application. Justice O'Reilly of the Federal Court denied Masterpiece's application finding that there was no likelihood of confusion between Alavida's and Masterpiece's marks. The Federal Court of Appeal upheld the decision.
The Supreme Court's findings
In a unanimous decision written by Justice Rothstein, the Supreme Court overturned the Federal Court of Appeal's decision, finding a likelihood of confusion did exist and ordered that Alavida's mark be expunged.1 In reaching this decision, the Court made a number of comments in respect of the proper approach for assessing confusion and the propriety of expert evidence in trade-mark cases.
At the relevant time, Masterpiece operated in Alberta and Alavida operated in Ontario. Arguments had been made that the location where the marks were actually being used was relevant to the confusion analysis. The Supreme Court clarified that geographical use within Canada is not a relevant consideration when considering confusion with a registered mark. In particular, Justice Rothstein noted "[t]he Canadian trade-marks regime is national in scope. The owner of a registered trade-mark, subject of 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." Thus, "[i]n 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."
Assessing resemblance between marks
The Supreme Court confirmed that the degree of resemblance between the marks in question is the most important factor in the confusion analysis.
In assessing the degree of resemblance, the use to the registered trade-mark must be considered in any way permissible under the registration and not limited to the actual use of the mark by the trade-mark owner. The Supreme Court found that the lower Courts erred in considering only the way in which Alavida actually used its mark rather than considering that, pursuant to the registration, Alavida could use the words MASTERPIECE LIVING in any form.
In comparing the marks, the Supreme Court held that the preferred approach is to first consider whether there is an aspect of the trade-mark that is particularly striking or unique. In this case, the Court found that the word 'Masterpiece' is what distinguishes Alavida and Masterpiece from other sources of retirement residence services. As 'Masterpiece' is the dominant word in both parties' trade-marks, there is a strong resemblance as a whole between the marks.
Nature of trade
In assessing the likelihood of confusion, the trial judge gave consideration to the cost associated with a retirement residence. In particular, Justice O'Reilly held that consumers in the market for a retirement residence will take more care and 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.
The Supreme Court clarified that, although consumers in the market for expensive goods may be less likely to be confused when they encounter a trade-mark, the likelihood of confusion is still premised on the first impression of consumers when they encounter the marks in question. Even with 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 prior to purchasing the goods or services may dispel any trade-mark confusion that may have arisen, but this does not mean that no confusion ever existed. Further, Justice Rothstein held "[i]n 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."
In making this pronouncement, the Supreme Court may have imported, though not by name, the "initial interest confusion" doctrine into Canadian law, which has long been recognized in the United States. Pursuant to the doctrine, the goodwill in a trade-mark may be diminished even in cases where confusion is dispelled at the time of the purchase. Indeed, the Supreme Court considered that as a result of the "initial" confusion, the consumers may have purchased wares or services "from a source they previously had no awareness of or interest in".
Expert and survey evidence
The Supreme Court also made a number of observations regarding the propriety of expert and survey evidence in trade-mark cases. In particular, Justice Rothstein found that in cases of wares or services being marketed to the general public, expert evidence is not often necessary or helpful. Rather, judges should consider the marks at issue, having regard to the dominant or striking feature of the trade-mark, and use their own common sense to determine whether the casual consumer would be likely to be confused.
In contrast, surveys have the potential to provide empirical evidence which demonstrates consumer reactions in the marketplace and may be helpful to the confusion analysis. However, for a survey to be valid, there must be some consumers who could have an imperfect recollection of the first mark. In this case, as the two parties operated in different provinces, there were no casual or average consumers with "imperfect recollection" of Masterpiece's marks to test. As a result, the survey evidence was based on a series of questions that attempted to establish a proxy for imperfect recollection. Justice Rothstein noted, "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."
Justice Rothstein encouraged parties and the lower courts to assess the admissibility and usefulness of proposed expert and survey evidence at an early stage in the proceedings in order minimize the resources spent on developing evidence that may ultimately have little utility.
Link to judgment
1. The Court ordered that the Alavida registration be expunged but this order does not necessarily mean that Masterpiece's applications for the marks MASTERPIECE LIVING and MASTERPIECE will proceed to registration. These applications will still have to be evaluated on their own merits by the Trade-marks Office.
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