In recent years, it has become exceptionally difficult for plaintiffs in the Federal Court of Canada to obtain an interlocutory injunction in trade-mark infringement cases. A recent decision, however, indicates that at least one Federal Court judge may not agree with the strict approach taken by the Federal Court of Appeal in interlocutory injunction applications, and may be prepared to lower or eliminate some of the hurdles in establishing irreparable harm.
In order to obtain an interlocutory injunction, a plaintiff must convince the Court
- that it has an arguable case,
- that the balance of convenience favours granting the injunction and
- that the plaintiff will suffer irreparable harm if the injunction is not granted.
The difficulty most plaintiffs in trade-mark cases encounter is establishing irreparable harm.
The Federal Court has effectively set three hurdles that must be cleared if a plaintiff is to establish irreparable harm in a trade-mark matter:
- that there is confusion in the marketplace between the plaintiff's and the defendant's trade-marks,
- that this confusion is causing loss of goodwill (i.e., lost sales), and
- that the loss of goodwill is unquantifiable.
The Court's tough stance on proving irreparable harm has effectively denied plaintiffs the ability to obtain interlocutory injunctions in trade-mark infringement cases in all but the most exceptional circumstances. Even in situations where a defendant has commenced sales, a plaintiff can be caught in a "Catch 22" situation: in order to meet the second hurdle (that the confusion in the marketplace is leading to a loss of sales), a plaintiff must submit evidence of a loss in sales. Doing so, however, tends to prove, in the Court's view, that the plaintiff's lost sales are quantifiable. Often, the only hope for a plaintiff who is otherwise able to establish confusion and lost sales is to try to establish that the defendant has insufficient financial resources to meet any future award of damages. This has often resulted in the anomalous situation that if a defendant was small enough, an injunction could be obtained, but if the defendant was larger (and thus in a position to do more harm), no injunction would be granted.
The recent decision of Mr. Justice Teitelbaum in the Imax Corp. v. Showmax, Inc. case indicates that at least one Federal Court judge may be prepared to lower or eliminate some of the hurdles in establishing irreparable harm. In this case the Court issued an interlocutory injunction to restrain Showmax Inc. from commencing use of its SHOWMAX mark which allegedly would infringe the plaintiff's IMAX trade-mark. Departing from the traditional strict approach required by the Court in demonstrating the plaintiff will be irreparably harmed if the injunction is not issued, Mr. Justice Teitelbaum was prepared to accept, at face value, an expert's statement that harm would be irreparable, without any evidence of lost sales.
The decisive passage in the case is as follows:
It is correct to say that the plaintiff has not adduced any evidence of loss of sales. This, of course, is true. The defendant has not commenced business in Montreal and therefore one cannot adduce direct evidence of loss of sales. I accept the statement of Dr. Pearce in para. 22 of his affidavit:
In my opinion, it is usually the case that a company will lose some or all of the ability to benefit from the retail brand equity in its name, if a competitor adopts a confusing name. Aside from the issue of lost sales or profits (which may be quantifiable), the lost equity in a name undermines the ability of the company to position itself in the marketplace, and to further develop and enhance its business in the future. Once a name loses its unique or distinctive quality, it is impossible to determine the value of what has been lost in terms of the company's ability to expand and market itself in the future.
Teitelbaum then continued:
This evidence clearly indicates the nature of the harm that plaintiff would suffer if defendant would be permitted to commence to use SHOWMAX for large-format theatres.
The Imax Corp. v. Showmax, Inc. case may mean there is light at the end of the tunnel for plaintiffs whose Canadian trade-marks are being infringed, or are about to be infringed.
The contents of this publication are intended for informational purposes only and should not be construed as legal advice or legal opinion, which can be rendered properly only when related to specific facts.