Canada: Small Claims Court Grants Trademark Relief — Seems Kosher

Last Updated: February 15 2019
Article by Tamara Céline Winegust

The recent small claims court decision in Kashruth Council of Canada v 1412189 Ontario Inc., 2018 CanLII 130064 saw the Ontario Small Claims Court grant the maximum $25,000 award available in that court to the plaintiff, the Kashruth Council of Canada, in a default judgement for the defendant's breach of contract and under section 53 of the Trademarks Act in relation to the corporate defendant's unauthorized use of the plaintiff's COR certification mark (the Judge found the owner and operator of the corporation bore no personal liability).

Small Claims Courts have a relatively limited jurisdiction. Claims brought must be for money or the return of personal property valued at under CAD$25,000. The court is not empowered to grant any other relief, including equitable remedies—so no injunctions (in Kashruth Council of Canada, the plaintiff's request for an order requiring the defendant to remove offending products from sale was denied for being outside the Court's jurisdiction). Where modest damages are likely to be sufficient, however, a Small Claims Court may be an appropriate venue to consider for a trademarks claim. Moreover, this venue could provide faster relief—in this case, the action commenced earlier in 2018, the hearing was December 2, 2018 and a decision rendered December 11, 2018. There is also the added benefit that the validity of a trademark registration cannot be challenged by counterclaim in a Small Claims Court, since section 57 of the Trademarks Act reserves exclusively for the Federal Court the power to amend the Trademarks Register, and therefore, to invalidate a registration.

The Kashruth Council of Canada decision is also notable because it involves a certification mark. Unlike an ordinary trademark, certification marks must not be "used" by their owners, who are prohibited under the Trademarks Act from manufacturing, producing, or providing any of the goods or services that they certify. Rather "use" must be through a licensee. The purpose of certification marks is to designate that the goods and services on which the certification appears adheres to a particular defined standard of the certifying authority set out in the registration.

Jurisdiction of the Small Claims Court to hear Trademark Matters

The Ontario Small Claims Court's jurisdiction to hear and decide actions under the Trademarks Act was confirmed by the Ontario Superior Court of Justice in 2010 in a passing off action brought under section 7(b) of the Act (See Laurentide Cabinet Copr v Beyond Flooring, 2010 ONSC 3609). Jurisdiction was found pursuant to section 53.2 which allows a "court" (defined in s 52 as including any superior court of a province) to "make any order that it considers appropriate in the circumstances, including an order providing for ... the recovery of damages or profits, for punitive damages ..." if the court is satisfied on application by any interested person, that any act has been done contrary to the Trademarks Act. Because the Small Claims Court is a branch of the Ontario Superior Court of Justice, the court in Laurentide held a proceeding brought there was still brought before the "Superior Court of Justice" as allowed under section 52/53.2 of the Trademarks Act.

Kashruth Council of Canada

The defendants in the case were a corporation (Adee Flour Mills), and its owner/operator, that produce food products. The plaintiff, Kasruth Council of Canada, is a Toronto-based kosher product supervision and certification agency. It owns registered certification mark no. TMA617158 for , which is registered for food products as well as services for kosher supervision of food service establishments and instritions, and is used to indicate that the goods and services with which the mark appears have been approved by the Toronto Rabbinical Vaad Hakashruth as being Kosher—i.e., adhering to rabbinical rules for Jewish dietary and food preparation standards. Many people, both inside and out of the Jewish community, rely on the COR symbol, and other similar certifications from different rabbinical bodies (called "Hekhshers"), to identify what food is religiously permitted to consume or have in one's home. Since it is not permitted to mix meat and dairy, many kosher certifications include further designations such as "dairy", "dairy equipment", or "pareve" (meaning neither meat nor dairy).

According to the uncontested pleadings in the case, Adee received kosher certification from the Kashruth Council for some of its products in 2016. A licensing fee was paid, and Adee was permitted to place the COR certification on approved products. However, no renewal fee was paid, and in 2017 the Kashruth Council terminated the certification and required Adee to remove the COR symbol from packaging. Adee did not adhere, and the Kashruth Council's evidence was that as of November 2018, products with the unauthorized markings continued to be sold. Further, Kashruth Council's evidence was that the products were incorrectly marked "pareve" when the product was, in fact, "dairy". 

The Kashruth Council sued Adee and its owner/operator personally for trademark infringement, breach of contract, and violation of the Food and Drugs Act, and also for punitive damages "for harm caused to kosher consumers". However, in the decision, the Deputy Judge seemed to address actions that could include infringement, as well as passing off and depreciation of goodwill (it is not known from the decision whether the Claim also specifically mentioned passing off or depreciation of goodwill under s. 22 of the Trademarks Act). For example, the Deputy Judge highlighted section 22 of the Trademarks Act and found that "there is significant goodwill in the plaintiff's role as a trusted certifier of kosher goods". The Deputy Judge concluded that Adee's failure to remove the COR trademark after it lost its certification was a breach of contract (as the licensing contract was terminated) and "is also a breach of section 22(1) of the Act". Of note, the Deputy Judge did not consider the test for depreciation of goodwill set out by the Supreme Court in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, and also did not consider whether there was any trademark infringement (under section 19 and 20 of the Act) or passing off. 

With respect to damages, there was no evidence of any quantifiable damages. Damages flowing from Adee's unauthorized use of the mark was instead "presumed", "due to loss of control over its reputation and goodwill". The Deputy Judge noted the Kashruth Council's evidence that the value of the COR certification is "not based on any profit generated by the Council, but is rooted in the goodwill and reputation of the Council as a trusted certifier of kosher food and its strict control of the COR trademark". A criminal fraud case under the Canadian Food and Drugs Act was also referenced by the Kashruth Council in their submissions, as in that case, the offending company was convicted and fined $25,000 for attempting to pass off non-kosher food as kosher. The Deputy Judge did not consider the claim under the Food and Drugs Act. In awarding damages, the following comments were made:

I am satisfied, based on the [Kashruth] Council's evidence given through Mr. Rabkin, that there has been damage to its reputation, but the damages are difficult to assess. In such circumstances, the Court must make its best assessment possible, based on the evidence of Mr. Rabkin and materials tendered. In all the circumstances, I find that $20,000 is a fair and reasonable assessment of damages ... The plaintiff is entitled to $20,000 in damages, in breach of contract and pursuant to section 53 of the [Trademarks] Act against the defendant Adee. 

Of note, this analysis appears to be rooted in section 22/depreciation of goodwill claims where quantifiable damage can be difficult to assess. However, the Deputy Judge's reference to the damages being granted pursuant to section 53 of the Trademarks Act should probably be read as a reference to s. 53.2 of the Trademarks Act, which empowers a court to make orders for damages, including punitive damages, where it is satisfied the Trademarks Act was violated. 

Punitive damages of $5,000 were also awarded on the basis that "the products that are not authorized to be kosher certified are sold to unsuspecting consumers who adhere to a kosher diet for religious reasons, the failure to adhere to a kosher diet could foreseeably result in spiritual trauma". The Defendant's conduct was therefore "highly reprehensible" and departed "markedly from the ordinary standards of decent behaviour, as there is foreseeable harm to the innocent consumer" which went beyond the harm caused to the Kashruth Council's goodwill and reputation and the dilution of the COR certification mark.

The total damage award, namely $20,000 for infringement and breach of contract, plus $5000 in punitive damages, thus fits within the $25,000 damage limit of the Small Claims Court.

Take Aways

Rights owners looking for potentially swift results to modest and straightforward claims relating to trademark infringement, depreciation of goodwill, or passing off, could consider pursuing action in Small Claims Court, keeping in mind that relief is restricted to monetary damages of no more that CAD$25,000—and injunctions will not be ordered. For many cases, the threat of a fast monetary award may be enough to resolve other issues between the parties. However, rights owners seeking broader relief and more significant damages would still need to bring their action in the Federal Court or Provincial Superior Court of Justice.

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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