Canada: A Masterpiece Preserved: The Supreme Court of Canada Rules on Trade-Mark Rights Acquired Through Use

Last Updated: June 3 2011
Article by Jean-Philippe Mikus

In a lengthy unanimous decision the Supreme Court of Canada ended today (May 27, 2011) an important chapter in a four year long struggle to control the use of the MASTERPIECE trade-mark in the flourishing retirement home industry. The Court reversed earlier decisions and concluded that the registration of the MASTERPIECE LIVING trade-mark obtained by Ontario based Alavida Lifestyle Inc. should be cancelled on the basis of prior use of the MASTERPIECE mark by a rival Alberta corporation, Masterpiece inc.

Masterpiece was placed in a difficult situation because it had never applied for registration of the prized MASTERPIECE trade-mark. This Alberta corporation only became aware of the steps taken by its Ontario rival Alavida after this rival had secured a certificate of registration for the trade-mark MASTERPIECE LIVING, which gave it (on paper at least) exclusive rights in this trade-mark across Canada.

Alavida had argued successfully before the Federal Court and the Federal Court of Appeal that there could not be any likelihood of confusion because, amongst other reasons, at the time the application for registration was filed Masterpiece's use was limited to Alberta and its own activities were limited to Ontario. Alavida's MASTERPIECE LIVING registration was therefore, Alavida argued, insulated from any claim based on prior use because of the absence of overlap in the activities.

The Supreme Court specifically states in its decision that a person can object to the issuance of a national trade-mark registration based on prior use of a confusing mark in Canada even though there is no overlap in the geographical regions in which each party have used their respective marks. The Registrar of Trade-Marks must assume for purposes of determining a likelihood of confusion that the two marks could potentially be used in the same region. This is a reflection of the fact that a certificate of registration grants rights in all regions of Canada irrespective of whether the use made by its owner is local, regional or national.

The Supreme Court then assessed the likelihood of confusion based on the traditional factors set out in the Trade-Marks Act and came to the conclusion that there would be a likelihood of confusion. In the course of this analysis, the Court makes several points that may have an influence on future cases.

The Court was concerned that the trial judge had not analyzed each of the variants of the MASTERPIECE trade-mark used by the first user Masterpiece and gave undue weight to the actual manner in which Alavida had used the trade-mark in the marketplace (by taking into account for example designs, logos or other matter associated to the trade-mark). The Court reasoned that an application for a trade-mark consisting of words only can be used in a wide variety of manners (with associated logos for example) and it was inappropriate to focus on the current stylized appearance as this could change. The comparison had to be made between the trade-mark as applied for (only the words) and each of the marks previously used by Masterpiece, which included the slogan "Masterpiece the Art of Living".

The Court also indicated that generally the factor that will have the greatest importance to determine whether there is a likelihood of confusion is the resemblance of the marks at issue. It also confirms that a word that is particularly striking or unique in the trade-mark should be given more weight than other words, whether or not it is the first word of a trade-mark formed by many words.

The Court also dealt with the fact that choosing a retirement home was an important and expensive choice that may be the subject of careful consideration. This type of factor is often cited to support a conclusion that although there are similarities between the marks, consumers will have a greater opportunity of becoming aware of differences in the marks because more time is spent or more attention is given in the course of the purchasing process.

One of the aims of the Trade-Marks Act according to the Court is to avoid that consumers be led astray as to sources of goods or services they did not know of or would not have considered. Consumers should not be deprived of the protection of the Act if they act with caution and wariness by making more in depth verification and therefore the Court reasons that consideration must be given to the first impression. The value of the goods and services is still relevant, but only in the context of assessing this first impression.

Both sides had experts provide evidence at trial that came to markedly different conclusions. This led the Supreme Court of Canada to issue words of caution with regards to expert evidence in trade-mark matters. The Court even goes so far as to state that in this instance the contradictory and acrimonious nature of the evidence may have distracted the trial judge in his analysis of whether or not consumers were likely to be confused.

In the case of products or services targeting the general public the trial judge should, according to the Supreme Court, be able to rely on his or her own common sense and does not need to rely on expert evidence.

Survey evidence on consumer perception is subject to cautionary words that are less vigorous, as the Supreme Court acknowledges this is information that is not readily perceptible by the Court. However, the Court underlines the difficulty of properly simulating the imperfect recollection of the consumer in the context of a survey, particularly when the mark at issue is not well implanted in the marketplace.

The Supreme Court suggests that the judge presiding a trial should perhaps consider letting the parties know early on whether he or she believes that expert or survey evidence will be useful in order to avoid unnecessary expense.

In the end the Supreme Court found that there was a likelihood of confusion without relying on expert evidence presented at trial to support this conclusion.

This Supreme Court decision is quite important to Masterpiece. If it had failed to successfully contest its rival's registration this could potentially have enabled its Ontario rival to claim to have the right to enter the Alberta market with the MASTERPIECE LIVING trade-mark, thus disrupting its marketing and advertising plans. Moreover, Alavida could also potentially have been bolder and have attempted to prevent Masterpiece from pursuing its own use of the MASTERPIECE trade-mark in Alberta, with potentially devastating consequences.

The Supreme Court carefully avoided ruling on whether Masterpiece would be entitled to a national registration for the MASTERPIECE trade-mark. It essentially left this matter for further proceedings before the Registrar of Trade-Marks. Masterpiece may face challenges in this process since it is possible that its rival Alavida will object to this registration by raising its own use of the trade-mark in the province of Ontario.  This Supreme Court ruling may not spell the end of the ongoing disputes between the parties. Indeed, Masterpiece still has an action pending before the Federal Court of Canada against Alavida to try to put an end to its use that had been put on hold pending the Supreme Court of Canada's decision.

This case again highlights the importance of taking steps to register trade-marks early on in the life of a business. For many businesses, it can be helpful to avoid drawn out legal battles. In this case Alavida had allegedly conducted a trade-mark search prior to choosing the MASTERPIECE LIVING trade-mark but because Masterpiece had taken no steps to register its mark with the Canadian Intellectual Property Office at that time its trade-mark was not identified in these searches.

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