Canada: IP Year In Review – Trade-marks

Last Updated: December 21 2005

Article by Pauline Wong, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Intellectual Property, December 2005.

2005 has been an active year for trade-mark law in Canada. The Supreme Court of Canada has weighed in on the doctrine of functionality, the Federal Court has held that reverse confusion can be the basis for a cause of action, and courts have clarified issues with respect to official marks and trade-mark infringement generally.

Recent decisions have also led to changes in the practice in the Trade-marks Office with respect to descriptive or misdescriptive marks, and the priority of co-pending applications. Still to come is the Supreme Court of Canada’s decision relating to famous marks in two cases that were heard together: Veuve Clicquot and Mattel.

Significant Decisions

Functional Trade-marks. The Supreme Court of Canada opined on the interface between trade-marks and patents in the highly anticipated case of Kirkbi AG v. Ritvik Holdings Inc. (otherwise known as Lego Canada Inc. v. Mega Bloks Inc. ) (for an analysis of the Federal Court of Appeal decision, see Court of Appeal Blocks Lego, Blakes Bulletin on Intellectual Property, September 2003). Dismissing the appeal, the Supreme Court held that LEGO bricks did not have trade-mark protection due to the application of the doctrine of functionality, which establishes that a purely functional design cannot be the basis of a trade-mark. The rationale is that trade-mark law should not be used to perpetuate monopoly rights enjoyed under expired patents. Two constitutional questions were also in issue. First, the Supreme Court acknowledged that subsection 7(b) of the Trade-marks Act (the Act) codifies the common law tort of passing off, which falls within provincial jurisdiction over property and civil rights. However, the Supreme Court held that subsection 7(b) also completes the federal trade-mark scheme and, as a result, is within the federal government’s legislative jurisdiction. Second, the Supreme Court held that the Act as a whole is a valid exercise of the federal government’s legislative power over general trade and commerce.

Reverse Confusion. Another significant development was the recognition of reverse confusion as a cause of action by the Federal Court in A&W Food Services of Canada Inc. v. McDonald’s Restaurants of Canada Limited. Previously, it was thought that only forward or direct confusion might be actionable under section 20 of the Act. The Court stated that A&W’s claim of reverse confusion would be established if it could show that McDonald’s CHICKEN MCGRILL mark caused customers to believe that A&W’s sandwich sold under the mark CHICKEN GRILL originated with McDonald’s. In the result, however, the Court held that A&W failed to establish confusion.

Official Marks. With respect to official marks published pursuant to section 9 of the Act, the Federal Court considered the definition of “public authority” in College of Chiropodists of Ontario v. Canadian Podiatric Medical Association (CPMA) . When an official mark is published pursuant to section 9, it prevents others from using that mark even when there may not be any overlap in wares or services. However, section 9 is available only to public authorities and certain other categories of applicants. The test for “public authority” requires that there be a significant degree of governmental control and that any profit earned be dedicated to the public benefit. The Court concluded that the CPMA did not satisfy this test, but instead was essentially a professional association that promotes or lobbies for the interest of its members without being subject to government control.

Material Date for Confusion. The material date for assessing confusion in an action for infringement was considered by the Federal Court of Appeal in Alticor Inc. v. Nutravite Pharmaceuticals Inc. Consistent with jurisprudence stating that the material date for confusion in an opposition proceeding is the hearing date, the Court of Appeal held that the material date in an infringement action is also the hearing date. In this case, a permanent injunction was sought, so it was particularly relevant whether confusion existed at the time of the hearing and not at some previous time. However, the Court recognized that there may be cases where other dates may be more appropriate, for example, where a party alleges that infringement both began and ceased prior to trial.

Anton Piller Orders. The terms of an Anton Piller order for the search and seizure of counterfeit merchandise were considered by the Federal Court in New Era Cap Co. v. Capish? Hip Hop Inc. The Court found that while the order provided for the search and seizure of unauthorized or counterfeit merchandise, it did not prohibit the sale of authentic New Era baseball caps and did not explain how to identify caps that were unauthorized or counterfeit. It was not enough for the order to identify the plaintiff’s copyrights and trade-marks. The order should also have described the hallmarks of the counterfeits, such as out of date logos or poor quality headbands. While the Court was satisfied on the balance of the probabilities that the store contained counterfeit baseball caps, it was unable to find beyond a reasonable doubt that the Anton Piller order had been knowingly breached. Thus, the motion for a finding of contempt of court was dismissed.

Practice in the Trade-marks Office

Prompted by jurisprudential changes to the law, the practice in the Trade-marks Office also changed this year. The use of a “sounded” test for composite marks was established in a practice notice issued by the Trade-marks Office in February. Pursuant to paragraph 12(1)(b) of the Act, marks that are either clearly descriptive or deceptively misdescriptive are not registrable. This provision was considered by the Federal Court in Best Canadian Motor Inns Ltd. v. Best Western International. The practice notice stated that the Trade-marks Office adopted the approach in Best Canadian Motor Inns such that a composite mark would be considered not registrable if, when sounded, it contains word elements that are clearly descriptive or deceptively misdescriptive and that are also the dominant feature of the mark.

The practice of the Registrar of Trade-marks with respect to the priority of co-pending applications was also significantly changed by the Federal Court of Appeal’s decision in Effigi Inc. v. Canada (Attorney General) (also see Prior Users Hung in Effigi, Blakes Bulletin on Intellectual Property, October 2005). Previously, as between two pending applications, the Registrar would consider the one with the earliest claimed date of use to have precedence regardless of the filing dates. As a result of Effigi, an application would only be assessed against other applications with an earlier filing date. In Effigi, the application was based on proposed use and the Court of Appeal held that it could not be trumped by an application that was filed subsequently and claimed an earlier date of actual use. As a result of this decision and a subsequent practice notice in May, a subsequent applicant who claims an earlier use must assert his or her superior right to registration through the opposition procedure.

Legislative Developments

2005 also saw some legislative activity touching on trade-marks. The Food and Drug Regulations were amended with respect to, among other things, nutrient-related claims in nutritional labelling. The amendments will apply to members of the Canadian food industry as of December 12, 2005. The Regulations prohibit, for instance, the use of unlisted carbohydrate-related claims, which includes “low carbohydrate”, “reduced carbohydrates” and “source of carbohydrates”. This prohibition also applies to brand names and trade-marks containing such words or phrases when they are used on food labels and advertisements. Smaller companies with revenues from sales of food in Canada of less than $1 million have until December 12, 2007 to bring their labels into compliance.

Also, on an international level, the Canadian Intellectual Property Office (CIPO) has requested comments on proposals for the harmonization of the Trade-marks Act and its regulations with the Madrid Protocol of 1989 and the Trademark Law Treaty (TLT) of 1994. Among other things, CIPO has proposed removing pre-registration use requirements so that actual use would not be required before a mark could be registered. Comments were due by the end of May 2005 in order to prepare for the World Intellectual Property Organization conference to be held in March 2006. The conference is expected to consider issues relating to formalities, in addition to more controversial matters such as geographic indications and domain names.

With respect to geographic indications, the Spirit Drinks Trade Act (Spirits Act) received royal assent on November 3, 2005. The Spirits Act restricts the use of certain names for spirits, some of which may have geographic connotations, but are not necessarily named after a geographic location. These spirit names include Grappa, Jagertee, Korn and Kornbrand, Ouzo, Pacharan, Scotch whisky, Irish whisky, Armagnac brandy, Cognac brandy, Bourbon whiskey, Tennessee whiskey, Tequila, Mezcal, and Caribbean rum. The Spirits Act comes into force on June 1, 2006. The provisions of the Spirits Act are intended to implement Canada’s obligations pursuant to the Agreement between the European Community and Canada on trade in wines and spirit drinks which was signed in September 2003. Related to the Spirit Drinks Trade Act are sections 11.11 through 11.2 of the Trade-marks Act, which provide for certain exemptions to the prohibitions against the use of certain geographic appellations of origin and permit the use of generic names for wines and spirits.

Future Decisions in the Supreme Court of Canada

Famous Marks. The Supreme Court has reserved its decision in two appeals that were heard together, relating to famous marks: Veuve Clicquot Ponsardin v. Boutique Cliquot Ltée and Mattel, Inc. v. 3894207 Canada Inc. The question was whether a famous mark can have superior rights over another mark even when the two marks are used in association with significantly different wares or services. In the first case, VEUVE CLICQUOT is allegedly famous with respect to use in association with champagne and Les Boutiques Cliquot used CLIQUOT in association with the retail sale of women’s clothing. In the second case, Mattel asserted its famous BARBIE mark against 3894207 Canada’s use of a BARBIE’S design mark in association with restaurant and bar services. In both cases, the Federal Court of Appeal found that the fact that the mark was famous did not override the finding that there were substantial differences in wares and services and, therefore, no likelihood of confusion.

Enforcement of Foreign Judgments. The Supreme Court of Canada is also scheduled to hear the appeal in Pro Swing Inc. v. ELTA Golf Inc. (see also Pro Swing Drives Foreign Judgments Forward, Blakes Bulletin on Intellectual Property, October 2005). The case involves the enforcement in Canada of a foreign judgment that enjoined ELTA from purchasing, marketing, selling or using infringing golf clubs and golf club heads. The Ontario Court of Appeal suggested that foreign judgments of a non-monetary nature may be enforced, despite the previous prohibition against enforcing judgments that go beyond a simple money debt. This holding represents a significant expansion of the law even though the Ontario Court of Appeal ultimately did not enforce the foreign judgments because they lacked certainty in respect of material matters, such as their extra-territorial application.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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