Canada: Supreme Court Considers Nature of Confusion

Published in Managing IP, December 2005/January 2006.

The power of famous trade marks to attract consumers is enormous. But the extent to which trade mark law protects the value that such power generates is by no means clear. This is not surprising: famous marks raise difficult questions about the nature of confusion in trade mark law, about whether confusing use is the only way to infringe the rights of the trade mark owner and about the very definition of a trade mark. The status of famous marks in Canadian trade mark law was in the spotlight in October 2005, as the Supreme Court of Canada heard arguments in Veuve Clicquot Ponsardin v Les Boutiques Cliquot Ltée (Veuve Clicquot) and Mattel Inc v 3894207 Canada Inc (Mattel). The Court’s decisions – not expected for several months – will probably contain important clarifications of the extent to which famous marks, by virtue of their fame, are worthy of protection as commodities in their own right, independently of the wares or services with which they are ordinarily associated.

Arguments at the Supreme Court

In Veuve Clicquot, the appellant champagne manufacturer argued that the trial judge had misunderstood the Pink Panther ruling by supposing that a link or connection between the parties’ wares is a threshold requirement, rather than merely a factor, for a finding of confusion. It is only in this way, the appellant argued, that one can explain the result reached by the trial judge even where every other factor in the confusion analysis – for instance, the degree of resemblance between the trade marks – in this case favoured the plaintiff.

The respondent clothing store owner argued that neither Pink Panther nor the trial judge raised a connection between the wares to the level of a threshold requirement. Rather, it was the appellant’s concept of the aura or magnetism of a famous mark, worthy of protection in its own right, that raised the fame factor to an unwarranted predominant role in the confusion analysis. No degree of fame can give rise to a presumption of confusion regardless of the remaining aspects of the confusion analysis, including the nature of the wares.

The appellant in Mattel argued that Pink Panther had mistakenly introduced into the confusion analysis a requirement of a connection between the parties’ respective fields of activity. The appellant argued that this view of trade mark law is inconsistent with the extensive licensing of famous marks that characterizes the modern marketplace and that is recognized in modern trade mark law. The diversification of trade mark use through licensing in disparate fields of activity is reflected in a widened concept of confusion that no longer requires any connection between the parties’ wares or services. The magnetic power of fame itself creates the misleading connection in the ordinary consumer’s mind.

The respondent in Mattel insisted that Pink Panther correctly formulated the relative weights of the various confusion factors. The respondent argued that the Federal Court of Appeal in Pink Panther did not so much require a connection between the parties’ wares as a matter of law but rather found that, in the case before it, the absence of such connection as a matter of fact precluded an inference of likelihood of confusion. The respondent emphasized that what is at stake is not a possibility of confusion but a likelihood thereof, and that the ordinary consumer is not a moron in a hurry but a person of average intelligence able to appreciate distinctions even in a world of extensive licensing.

The Defendant’s Intent or Bad Faith

Controversy surrounding famous marks often involves situations in which an unauthorized user allegedly uses a famous mark for the very purpose of cashing in on its fame, even though little or no confusion will result. Where no confusion arises, the detriment, if any, to the owner of the famous mark corresponding to the benefit derived by the unauthorized user would, of course, not be captured through a confusion analysis. Still, taking advantage of the fame of a mark seems to violate our sense of fair play, and it is partly because of the appearance of foul play that the question of the unauthorized user’s motivation for using the famous mark arises.

Mr Justice McDonald’s dissent in Pink Panther, for instance, underlined the likelihood that the applicant chose the name Pink Panther precisely because of the fame and goodwill associated with that mark (see box page 48 for discussion of his dissent). Not surprisingly, the appellant’s written submissions to the Supreme Court in Veuve Clicquot quote McDonald’s dissent on this point:

"It is naive to believe that the appellant’s decision to use the name "Pink Panther" was not deliberate or unrelated to the mark’s fame. The appellant surely believes, just as I believe, that the average consumer will, at the very least, upon seeing the name "Pink Panther" on its beauty products be reminded of and associate its products with the respondent’s mark.. Seeing the words alone will leave the average consumer wondering if the respondent is the promoter behind these new products."

In reply, the respondent took the position that any intention to cash in on a famous mark is completely irrelevant to the infringement analysis. Strictly speaking, the respondent argued, likelihood of confusion either can or cannot be inferred from the facts, regardless of the unauthorized user’s intent.

Similarly, in Mattel, Mattel observed that the respondent had no credible basis for choosing the name Barbie’s except to take advantage of Mattel’s mark. Mattel emphasized that no one associated with the restaurant was actually named Barbie, a fact that presumably would have made the use of the name less offensive.

It is difficult to avoid the impression that behind these protestations about the defendant’s bad faith lurks a deeper resentment about the user deriving benefit from another’s mark intentionally and without authorization. But the question is in fact less about whether the defendant derived benefit intentionally than whether trade mark liability can arise even in the absence of confusion.

What Is the Legal Nature of a Mark?

Famous marks are difficult to deal with under trade mark law because they raise two sets of issues simultaneously.

First, they raise questions about the relative weights of the confusion factors specified in section 6(5) of the Trade-marks Act. Under this rubric we find arguments about whether famous marks, because of their distinctive aura, require special treatment, making their very use lead to some sort of presumption in favour of a determination of confusion.

Second, famous marks raise questions about the bounds of trade mark infringement. Under this rubric we find arguments about whether unauthorized use of a famous mark gives rise to liability even in the absence of confusion. This indicates that confusion is not the only possible mode of infringement.

The tension between these two aspects of the problem raised by famous marks is that each aspect presupposes a different definition of a trade mark.

Under the aspect of confusion, a trade mark is a sign attached to particular wares and services and is used to signify to consumers the source of those wares and services. Infringement of the rights attached to the mark therefore arises from unauthorized use that is likely to create in the mind of consumers the mistaken impression that the wares or services of the unauthorized user are in fact those of the trade mark owner. Through the confusing use, the unauthorized user usurps the trade mark owner’s rightful place in the market. The infringement is not in the use of the mark as such, but rather in the fact that such use is likely to create confusion. The trade mark owner owns not the mark itself as a mere word or sign, but only as an identifier of the source of his or her wares. Use that does not confuse about source is not infringing use.

However, under the aspect of liability for non-confusing use, the trade mark owner seems to claim the mark as such, not merely as an identifier of source, subject to confusion. The greater the distance between the mark and the wares or services it ordinarily accompanies, the greater the likelihood that use of the mark as such is claimed to be sufficient to ensnare the unauthorized user in the web of liability. In the extreme, any use of the thereby propertized mark threatens to become infringing use.

Of course, the recognition that confusing use is not the only mode of infringement need not result in a propertization of the mark as a thing in itself. Liability in the absence of confusion need not become liability for any use. Rather, recognition of the limits of confusion as a mode of infringement would indicate that confusion is only one specific way in which an unauthorized user can infringe the trade mark owner’s rights.

In short, confusion is best conceived as a particular species of a wrong included in a wider genus, and this wider genus is the appropriation or depreciation of another’s goodwill through use of that other’s mark. This view has the virtue of suggesting that even where non-confusing usage is acknowledged as infringement, not all uses of another’s mark are actionable (only those that appropriate or depreciate another’s goodwill are). As section 22 of the Canadian Trade-marks Act puts it: "No person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto."

In the history of Canadian trade mark law, the classic (yet constantly debated) case on section 22 is Clairol International Corp v Thomas Supply & Equipment Co. In that case, Mr Justice Thurlow attempted to interpret section 22 so as to acknowledge the expansion of the web of liability toward nonconfusing usage yet at the same time to limit such expansion by differentiating between legitimate and illegitimate non-confusing uses. Regardless of his success in doing so, the basic thrust of his judgment was to ensure that the widening liability under trade mark law stops short of the propertization of the mark as a thing in itself, rather than as a signifier of the goodwill attaching thereto.

The task that the Supreme Court of Canada faces in the Veuve Clicquot champagne and Barbie appeals is twofold. First, the Court will have to address the nature of confusion, and especially the problem of the relative weights of the factors of fame and field of activity. And second, the Court may also choose to address the related matter of the interpretation of section 22 and the difficulties of expanding yet simultaneously limiting the bounds of trade mark liability. In both cases, the Court’s decisions will consider and clarify the relation between the value of a famous mark’s aura and the scope of the legally recognized rights to which that aura gives rise.

Background to the Cases

In Veuve Clicquot, the famous champagne manufacturer sued several women’s retail clothing stores carrying on commercial activities under the names Cliquot and Les Boutiques Cliquot. The Federal Court of Canada heard the case in November 2002. The trial judge emphasized the "significant difference" between the plaintiff’s wares and the defendants’ as the "key factor" in finding that there was no likelihood of confusion. That ruling was upheld by the Federal Court of Appeal in April 2004.

Similarly, in Mattel, Mattel opposed the registration of the trade mark Barbie’s & design for restaurants and catering services. Mattel argued that the mark caused confusion with several Barbie trade marks registered for dolls, doll accessories and related products. The Federal Court heard the case in March 2004. The trial judge upheld the Registrar’s dismissal of Mattel’s opposition, citing the "striking difference" between the parties’ wares and services as a "key factor". That ruling too was upheld by the Federal Court of Appeal, in January 2005.

The Pink Panther

Section 6(5) of the Canadian Trade-marks Act provides that the determination of whether trade marks or trade names are confusing is to take place in light of all surrounding circumstances, including "(a) the inherent distinctiveness of the trade-marks or trade-names and the extent to take over which they have become known; (b) the length of time the trade-marks or trade-names have been in use; (c) the nature of the wares, services or business; (d) the nature of the trade; and (e) the degree of resemblance between the trade-marks or tradenames in appearance or sound or in the ideas suggested by them".

For the most part, oral argument in the Veuve Clicquot and Mattel appeals discussed the relative weights of fame and field of activity as factors in the confusion analysis. More specifically, argument focused on the interpretation of the relation between those two factors as developed in Pink Panther Beauty Corp v United Artists Corp, the leading – yet controversial – Canadian case on famous marks.

In Pink Panther, the Federal Court of Appeal held that use of Pink Panther for hair care and beauty supplies and services did not give rise to a finding of reasonable likelihood of confusion with The Pink Panther in association with motion pictures and other products and services. In its majority judgment, the Court cited the absence of any "connection whatsoever" between the parties’ wares and services as central to its finding. The majority identified the key factor in this decision as "the gaping divergence in the nature of the wares and in the nature of the trade. It is not a fissure but a chasm".

In his dissent, Mr Justice McDonald stressed that use of a mark, especially a famous one, in association with similar wares or services is not necessary for a finding of confusion. The popularity of the Pink Panther mark, added to the extent to which it has prevailed in the Canadian market and to its widespread diversification, was sufficient to conclude that there was a likelihood of confusion for the average consumer. Justice McDonald stated that any other finding "tips the balance too far in favour of the copycat artist seeking to profit financially from someone else’s creative fortune". Accordingly, he expressed concern that, given the majority’s decision, protection of famous marks would be available only in the clearest of cases.

A Famous Mark and Its Aura

The aura of a famous mark is such that the very use of the mark, even in association with widely different wares and services, is likely to evoke a single source in the consumer’s mind. This power to transcend particular wares or services, and thereby to appear not as a sign attached to a product, but rather as a product in itself, is essential to a famous mark.

Because of the aura that defines them, famous marks raise difficult questions about the likelihood that their very use will evoke a single source in the consumer’s mind and by doing so confuse the average consumer. That is, the question is whether this evocation amounts to confusion under trade mark law. Assume, for example, that upon seeing a restaurant named Barbie, the average consumer not only thinks of Barbie dolls but, as a result of that association, decides to try out the restaurant. Must this mean that this consumer is confused about whether Mattel owns or is somehow associated with the restaurant?

On one level, the answer to this question is easy. The fact that a consumer associates the word Barbie with dolls need not mean that this consumer expects that the restaurant named Barbie is owned by Mattel. In general terms, the familiarity of a famous mark in a consumer’s mind need not mean that the consumer is likely to believe that every use of that mark signifies the same source.

Nevertheless, the question is complex because it raises issues about the very purpose of trade mark law.

Generally speaking, it is possible that the evocative aura that typifies famous marks means that use of the mark by someone other than its registered owner amounts to a use of the attractive power that the mark embodies. The unauthorized user of a famous mark benefits from such use even if no confusion arises. But does this kind of benefit derived from use of a famous mark give rise to liability under trade mark law? The question is difficult because it raises a fundamental issue: whether confusing usage is the only way to infringe the rights of a trade mark owner. To answer this question negatively is to risk affirming famous marks not as signs attached to things but as things in themselves. Yet to answer this question positively is to permit the benefit derived from unauthorized use of a famous mark.

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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