Canada: Supreme Court of Canada Gives Hope to Owners of Famous Marks

In two long awaited and landmark decisions, the Supreme Court of Canada has put the Canadian law on the protection of famous trade marks back on course.

While the Court ultimately dismissed the appeals in Veuve Clicquot Ponsardin v.Boutiques Cliquot Ltée, 2006 SCC 23, and Mattel, Inc . v. 3894207 Canada Inc., 2006 SCC 22, on the basis that the evidence in the cases did not establish a likelihood of confusion, the Court went on to reject the limitations placed on the protection of famous marks by the infamous case of United Artists Corp. v. Pink Panther Beauty Corp. (1998), 80 C.P.R. (3d) 247 (F.C.A.). As a result, owners of famous marks can be better assured that, in the appropriate circumstances, their trade marks will be fully protected in Canada.

Prior to the Veuve Clicquot and Mattel decisions, the Canadian law on the protection of famous marks was limited by the decision of the Federal Court of Appeal in United Artists v. Pink Panther Beauty Corp., in which Linden J.A. held that:

The wide scope of protection afforded by the fame of the appellant's mark only becomes relevant when applying it to a connection between the applicant's and the opponent's trades and services. No matter how famous a mark is, it cannot be used to create a connection that does not exist.

Linden J. A. went on to hold that:

…the issue to be decided is not how famous the mark is, but whether there is a likelihood of confusion in the mind of the average consumer between United Artists' mark and the one proposed by the appellant with respect to the goods and services specified. That question must be answered in the negative. There is no likelihood of confusion as to the source of the products. The key factor here is the gaping divergence in the nature of the wares and in the nature of the trade. It is not a fissure but a chasm. (emphasis added)

United Artists produces movies. It does not manufacture or distribute beauty products. United Artists' products are not likely to be made available in the same places of trade as the appellant's products. Shampoo is not sold in movie theatres or video stores. Videos are not available in beauty parlours.… What the Trial Judge did not give sufficient weight to is that, not only were the wares in each case completely disparate, but there is no connection whatsoever between them. As I stated earlier, where no such connection exists a finding of confusion will be rare.

… Based only on the fact that the respondent's mark is famous, there should not be an automatic assumption of confusion. The cases make this clear. There is only a tendency toward protection depending upon the other factors involved. In the circumstances, remembering that the test to be met is likelihood of confusion (not possibility of confusion), I do not see how the fame of the mark acts as a marketing trump card such that the other factors are thereby obliterated. (emphasis in original)

Gowlings was retained by United Artists to seek Leave to Appeal to the Supreme Court of Canada and leave was granted, but the case settled before the appeal could be heard. The fact that leave was granted suggests a possible concern by the Supreme Court that, in requiring a connection between the wares or services at issue, the Federal Court of Appeal in the United Artists case had unduly restricted Canadian law on the protection of trade marks and, when one considers the historical background, that concern was well placed.

State of the Law Prior to United Artists

In the 1953 Report of the Trade Mark Law Revision Committee to the Secretary of State of Canada, it was recognized that:

Some trade marks are so well known that the use of the same or similar trade marks on any wares of any kind would cause the general purchasing public to believe that the original user and owner of the trade mark was in some way responsible for the wares to which the use of the mark has been extended.

The Committee went on to find that:

Modern business has passed beyond the applicability of principles originally established over a century ago. In the beginning, it was debateable whether a merchant's goodwill extended beyond goods of the class specifically dealt in by him. … The law should expand to keep pace with the times.… Goodwill built up in a trade mark…should invest the owner of the mark with a proprietary right in respect of which he is entitled to protection.… When a trader has established a name or mark and invested it with an honourable public reputation, if others borrow that mark for use in association with articles of a kind other than those dealt in by the original trader, the impression may easily arise that they are also the product of the proprietor of the trade mark. It is naturally supposed by many that the old concern has gone into a new field.

The Committee concluded that:

…the provisions which we propose will relieve trade and commerce from the rigid and artificial boundaries which have been circumscribed around the ambit of trade mark protection, not only by the statutory provisions but by the jurisprudence…. In a proper case this ambit of protection can be widened to include the whole of the course of trade or restricted to a field limited by the use which has been made of a trade mark or trade name and the reputation acquired by it. (emphasis added)

The recommendations of the Committee were codified in Section 6 of the Trade marks Act:

6(2) The use of a trade mark causes confusion with another trade mark if the use of both trade marks in the same area would be likely to lead to the inference that the wares or services associated with those trade marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.

Section 6 goes on to require that, in determining whether or not trade marks are confusing, regard be had to all the surrounding circumstances, including

a) the inherent distinctiveness of the trade marks and the extent to which they have become known;

b) the length of time the trade marks 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 marks.

This was a major step in the evolution of Canadian trade mark law, as was noted in Cochrane-Dunlop Ltd. v. Captial Diversified Ltd. (1976), 30 C.P.R. (2d) 176 (Ont. C.A.):

The former test under the Unfair Competition Act (which applied only to wares and not to services) was much narrower and essentially required the finding that similar marks had been applied to similar wares. The concern of the new Act is with confusion as to the source of wares and services. The resemblance or similarity of wares or services is no longer the controlling criterion but is only one of the surrounding circumstances….

This reflected Canada's international obligations as well:

Paris Convention Article 6bis: "The countries of the Union undertake…to refuse or to cancel the registration, and to prohibit the use, of a trademark which constitutes a reproduction, an imitation, or a translation, liable to create confusion, of a mark considered by the competent authority of the country of registration or use to be well known in that country as being already the mark of a person entitled to the benefits of this Convention and used for identical or similar goods."

TRIPS Agreement Article 16(3): "Article 6bis of the Paris Convention (1967) shall apply, mutatis mutandis, to goods or services which are not similar to those in respect of which a trademark is registered, provided that use of that trademark in relation to those goods or services would indicate a connection between those goods or services and the owner of the registered trademark and provided that the interests of the owner of the registered trademark are likely to be damaged by such use."

What was recognized by Canada in the 1950s was that some marks can become so well known that the reputation will essentially jump product categories. This recognition is now established internationally as well. In each case, whether or not there is a likelihood of confusion will always be a matter of fact to be determined on the basis of all the surrounding circumstances and the evidence. What Canada did was to remove any precondition to a finding of confusion that there be a connection between the wares or services and to recognize that consumers might assume a connection regardless of the nature of the wares or services.

There are many examples of protection of famous marks prior to the United Artists case:

John Walker & Sons Ltd. v. Steinman (1965): JOHNNIE WALKER for whisky; JOHNNY WALKER for sporting equipment. "…I am satisfied that the trade mark JOHNNIE WALKER…is entitled to extended protection beyond the particular field in which it is used."

James Burrough Ltd. v. Reckitt & Colman (Canada) Ltd. (1967): BEEFEATERS for gin; BEEFEATER for sauce mixes, Yorkshire pudding mixes, spices and condiments.

John Haig & Co. Ltd. v. Haig Beverages Ltd. (1975): HAIG for beer; HAIG & HAIG for whisky.

Carson v. Reynolds (1980): HERE'S JOHNNY for portable trailers, outhouses and lavatory facilities; HERE'S JOHNNY for clothing and entertainment services. "It is clear that 'Here's Johnny' probably suggests, to a significant number of people in Canada, a connection with the appellant. Since there is no connection between the respondent and appellant, the appellant being a living individual, 'Here's Johnny' is not registerable as a trade mark on the respondent's application without the appellant's consent under s-s. 9(2)."

Conde Nast Publications Inc. v. Gozlan Brothers Ltd. (1980): VOGUE for fashion magazines; VOGUE for costume jewellery.

Berry Bros. & Rudd Ltd. v. Planta Tabak-Manufactur Dr. Manfred Oberman (1980): CUTTY SARK for pipe tobacco; CUTTY SARK for whisky. "…in view of the strength of the appellant's mark, and the breadth of protection to which it is entitled, the respondent has not been able to establish that the difference in the wares is such as to avoid any likelihood of confusion."

Polysar Ltd. v. Gesco Distributing Ltd. (1985): POLYSAR for resins; POLYSTAR for carpet cushioning. "…the fact that the wares are dissimilar is not conclusive of the issue of confusion."

Sun Life Assurance Co. of Canada v. Sunlife Juice Ltd. (1988): SUNLIFE for insurance and promotion of physical fitness; SUNLIFE for juice. "The onus in this situation is on the defence to establish, if it can, that the difference in wares is such that there is no likelihood of confusion."

Glen Warren Productions Ltd. v. Gertex Hosiery Ltd. (1990): MISS CANADA for beauty pageants; MISS CANADA for hosiery and pantyhose. "…even if sales of hosiery would not appear at first blush to be related to a beauty pageant, it is likely that consumers might assume the organizers of the Miss Canada pageant had in some way approved, licensed, or sponsored the use of its trade mark by a business which markets hosiery under the MISS CANADA trade mark or that there was some business connection between Hosiery and the Miss Canada pageant…. In my view, the evidence shows clearly that MISS CANADA is a famous trade mark in association with the pageant that bears its name and therefore entitled to broad protection…."

Visa International Service Assn. v. Auto Visa Inc. (1991): VISA for credit card services; VISA for auto dealership services. The Court found both confusion and depreciation of goodwill.

Danjaq Inc. v. Zervas (1997): 007 for movies; 007 for restaurant services. "The nature of the wares and services will be a less important factor where the opponent to the registration has a strong trade mark. It is trite law that the stronger the mark, the greater the ambit of the protection it will be afforded.… The respondent's choice of 007 was deliberate and not unrelated to the mark's fame."

What did Linden J.A. say of all these cases in United Artists?

A number of other cases have come to my attention involving famous trade marks…. In each of these cases the famous mark prevailed, but in each case a connection or similarity in the products or services was found. Where no such connection is established, it is very difficult to justify the extension of property rights into areas of commerce that do not remotely affect the trade mark holder. Only in exceptional circumstances, if ever, should this be the case. (emphasis added)

A more accurate characterization may be that in many cases noted above, the courts did not base their decisions on the existence of a connection between the wares or services in question, but rather considered whether consumers might assume a connection based on various factors, including the fame of the mark.

It is important to note the very vigorous dissent of McDonald J.A. in United Artists. Despite the absence of a connection between the wares and services, he argued that:

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.

United Artists diverted from the path followed by the courts over the years since the enactment of the Trade-marks Act and essentially changed the test for confusion from what would likely be in the mind of the average consumer ( i.e. will the consumer make a connection) to whether the trade mark owner is actually occupying a specific marketplace ( i.e. competition). The Supreme Court of Canada has now put Canadian trade mark law back on the proper path.

In 1994, a restaurateur in Montréal filed a trade mark application for the use of BARBIE'S & Design with restaurant services, take-out restaurant services, catering and banquet services. Mattel opposed the application on the grounds that it was confusing with Mattel's BARBIE and BARBIE'S registered trade marks. The restaurant owner admitted to having knowledge of Mattel's BARBIE dolls prior to choosing the name BARBIE'S for his restaurant chain. He had previously promoted his restaurants with a logo of an attractive, young female waitress with the letter B for "BARBIE'S" on her shirt. The BARBIE'S restaurants were successful, with annual sales estimated at $2.7 million in 2002.

Before the Trade marks Opposition Board, the Registrar found that Mattel's BARBIE mark was "very well known, if not famous," that Mattel "has been using its mark BARBIE in Canada since the early 1960s," and that the "marks are essentially the same aurally and in the ideas they suggest, and the overall visual impressions of the marks in issue are also essentially the same." However, the Registrar also found that the wares, services and target clientele in question were "quite different." On this basis, the Registrar rejected Mattel's opposition, relying on the United Artists decision. The Registrar concluded that, given the lack of connection between Mattel's wares and the restaurants' services, there was no likelihood of confusion.

Mattel appealed to the Federal Court and filed survey evidence to support its argument that there was a likelihood of confusion between the trade marks. The Federal Court agreed that Mattel's BARBIE trade mark was "very well-known — indeed, famous," but rejected the survey evidence. The Federal Court then applied the United Artists requirement that there be a "connection" between the respective wares and services as a precondition to a finding of confusion between the marks, and dismissed the appeal.

Mattel appealed again. The Federal Court of Appeal did not disturb the Trial Division's finding that Mattel's BARBIE trade mark was "very well-known — indeed, famous," nor did it revisit its previous United Artists decision. In brief reasons, the Federal Court of Appeal dismissed Mattel's appeal, and stated that Mattel's survey established nothing more than a possibility of confusion, and not a reasonable likelihood of confusion.

Mattel then retained Gowlings to seek Leave to Appeal to the Supreme Court of Canada. The Supreme Court of Canada agreed to hear the Mattel case in conjunction with the Veuve Clicquot case.

The Veuve Clicquot case involved the well known registered trade mark VEUVE CLICQUOT, which has been used on champagne for over 100 years in Canada. For a much shorter period of time, the Respondent had operated a women's clothing boutique in Québec under the registered marks CLIQUOT and CLIQUOT "UN MONDE À PART." Veuve Clicquot sued the CLIQUOT clothing boutique ("the Boutique") under Sections 20 and 22 of the Trade-marks Act. Sections 20 and 22 represent two very different causes of action.

Section 20 deems the exclusive rights of a registered trade mark owner (Veuve Clicquot) to be infringed by a junior user that sells, distributes or advertises wares or services in Canada in association with a "confusing" trade mark. In determining whether two marks are confusing, Section 6(5) of the Trade-marks Act directs the court or the Registrar to have regard to all of the surrounding circumstances. In contrast to the concept of "confusion" under Sections 6 and 20, Section 22(1) of the Act provides:

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. (emphasis added)

The purpose, scope and application of Section 22(1) has until now attracted minimal judicial attention in Canada.

In Veuve Clicquot , the trial judge found that the champagne maker's senior mark VEUVE CLICQUOT was inherently distinctive, well known in Canada from more than 100 years of use and also "unique," in that there are no similar marks in use in Canada with other wares or services. The most distinctive element of the senior VEUVE CLICQUOT mark was held to be the element CLICQUOT. Nevertheless, applying the law as stated in United Artists, the trial judge held that the fame and distinctiveness of the champagne maker's trade mark were insufficient to overcome the lack of any "connection" between champagne and a women's clothing boutique, and thus he dismissed the action for confusion under Section 20.

The trial judge also dismissed the champagne maker's action for depreciation of value of goodwill under Section 22, reasoning in part that depreciation was unlikely where consumers are unlikely to draw a connection between CLIQUOT clothing boutiques and VEUVE CLICQUOT champagne.

The Federal Court of Appeal affirmed the trial judge's approach to Sections 20 and 22 in a fairly summary way. Leave to Appeal to the Supreme Court of Canada was granted and the International Trademark Association ("INTA"), represented by Gowlings, was granted leave to intervene.

The Supreme Court of Canada dismissed the appeals of both Mattel and Veuve Clicquot, taking the position that, on the evidence filed before the lower courts, it had not been established that there was a reasonable likelihood of confusion. However, the Court went on to make it clear that, to the extent that United Artists required a connection between the wares or services in question, United Artists was wrong. To that extent, the Supreme Court decisions should give hope to owners of famous marks that they will be properly protected in Canada.

Writing for the Supreme Court in both decisions, Mr. Justice Binnie explored the purpose of trade mark law in general, noting in the Mattel case that a trade mark owner's rights rest

…not on conferring a benefit on the public in the sense of patents or copyrights but on serving an important public interest in assuring consumers that they are buying from the source from whom they think they are buying and receiving the quality which they associate with that particular trade mark. Trade marks thus operate as a kind of shortcut to get consumers to where they want to go, and in that way perform a key function in a market economy. Trade mark law rests on the principles of fair dealing. It is sometimes said to hold the balance between free competition and fair competition.

Binnie J. went on to state that fairness requires a balancing of the interests of the trade mark owner with the interests of the public and of other traders so that a trade mark is not given "a zone of exclusivity and protection that overshoots the purpose of trade mark law." With that said, Binnie J. went on to give guidelines as to how to strike the appropriate balance, essentially going back to first principles and noting that the determination of whether or not two trade marks are confusing must be decided after a consideration of all of the surrounding circumstances. The assessment as to whether there is a reasonable likelihood of confusion must be decided from the perspective of an average consumer:

It is not that of the careful and diligent purchaser. Nor, on the other hand, is it the 'moron in a hurry'…. It is rather a mythical consumer who stands somewhere in between, dubbed in [1927]…. as the 'ordinary hurried purchasers'….

On this point, Binnie J. agreed with Linden J.A. in the United Artists case: "…we owe the average consumer a certain amount of credit…."

Binnie J. then turned his attention to a consideration of whether United Artists skewed the test for confusion. He started with the proposition that the Trade-marks Act, as enacted in 1953, gave famous marks a significantly broader ambit of protection and that, in some cases, "the courts emphasized that a significant dissimilarity in wares or services was no longer fatal." With that said, Binnie J. concluded that Linden J.A. was wrong when he stated:

…in each case a connection or similarity in the products or services was found. Where no such connection is established, it is very difficult to justify the extension of property rights into areas of commerce that do not remotely affect the trade mark holder. Only in exceptional circumstances, if ever, should this be the case.

Binnie J. agreed with Mattel that this test put the bar too high and imposed rigidity where none exists. Binnie J. concluded that:

If the result of the use of the new mark would be to introduce confusion into the marketplace, it should not be accepted for registration 'whether or not the wares or services are of the same general class' (s. 6(2)). The relevant point about famous marks is that fame is capable of carrying the mark across product lines where lesser marks would be circumscribed to their traditional wares or services.

The decision of the Court is a move in the right direction. It has removed the restrictions placed on trade mark owners by the United Artists case, which is good news for trade marks owners generally. However, the Court did agree with Linden's words in United Artists when he said that the fame of a mark will not act as a marketing trump card such that all other factors, including the nature of the wares and services, are obliterated. Just as a difference in the wares and services should not be determinative, the fame of a mark will not deliver the knock-out blow — each situation must be judged in its full factual context.

While the Mattel case focused on confusion, the Veuve Clicquot case also considered the issue of depreciation of goodwill.

In 1953, the Trade Mark Law Revision Committee recognized that the protection of the goodwill was also important:

A trade mark statute should be designed to protect fair trading and, in our view, anything that depreciates the value of the goodwill attaching to a trade mark should be prohibited. We have, therefore, made a positive provision to that effect in s. 22. If, therefore, a well known trade mark is used by other than the trade mark owner in such a manner as would not previously have constituted grounds for an action either of infringement or passing off, but which has the effect of bringing the trade mark into contempt or disrepute in the public mind, the trade mark owner will be in a position to seek a remedy.

Section 22(1) of the Trade-marks Act provides that 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. Unfortunately, the usefulness of this section to owners of famous marks was limited by the decision in Clairol International Corp. v. Thomas Supply and Equipment Co. (1968), 55. C.P.R. 176 (Ex. Ct.), but arguably Section 22(1) was intended to enable the owners of well known or famous marks to protect the marks from dilution, even where no confusion existed.

While depreciation was raised as an issue in the courts below (indeed the Court noted that the issue had been treated as "something of a poor cousin"), it was not until the intervention by INTA at the Supreme Court of Canada that the issue took on real importance.

The Court noted that Section 22 does not require a demonstration of confusion; rather, Veuve Clicquot need only show that the Boutique "made use of marks sufficiently similar to VEUVE CLICQUOT to evoke in a relevant universe of consumers a mental association of the two marks that is likely to depreciate the value of the goodwill" in the VEUVE CLICQUOT mark. However, the Court cautioned that a mental association of the two marks does not, in and of itself, give rise to a likelihood of depreciation.

Writing for the Court, Binnie J. noted that Section 22 has four distinct elements:

a) The plaintiff's registered trade mark is used by the defendant in connection with wares or services, whether or not the wares or services are competitive with those of the plaintiff. An important point made by the Court is that the defendant need not use the identical trade mark — "[i]f the casual observer would recognize the mark used by the [defendant] as the mark of the [plaintiff]," that would suffice;

b) The plaintiff's registered trade mark is sufficiently well known to have significant goodwill attached to it. The mark need not be well known or famous, but "a defendant cannot depreciate the value of the goodwill that does not exist";

c) The plaintiff's mark is used in a manner likely to have an effect on the goodwill. The Court emphasized that "likelihood" is a matter of evidence, not speculation, and the mere use of a famous mark by someone other than the owner will not have the effect of depreciating goodwill. "Given the variable content and market power of 'famous marks,' no such generalization is possible and Parliament did not so enact"; and

d) The likely effect would be to depreciate the value of the goodwill.

In this situation, Veuve Clicquot failed on the basis that it had not shown that the consumer would make a link, connection or mental association between Veuve Clicquot and the Boutique with the result that there could be no depreciation of the goodwill in the trade mark. "There would be no negative perceptions to tarnish its positive aura."

While the Supreme Court has given us some guidance on the application of Section 22, a section seldom relied upon by Canadian trade mark owners, it remains to be seen how useful the section will prove to be for the protection of famous marks. The one key point is that the challenged mark need not be identical to the registered trade mark, a limitation imposed in 1968 in the Clairol case. The Supreme Court ruled that Section 22 must be interpreted in light of its remedial purpose, and that the section therefore covered a defendant's use of a mark which is "sufficiently similar" to the registered mark.

While, on the evidence before the Court, the challenged marks were not found to be confusing with the famous BARBIE and VEUVE CLICQUOT marks, the decisions should be welcomed as bringing Canadian law back into step with the international standards on the protection of famous marks.

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.