The Ontario Superior Court of Justice in BioSteel Inc. v. Cizzle Brands Ltd., 2024 ONSC 5515, recently outlined the type of evidence that a company must proffer in order to prove that another company's product is being "passed off" as one of its own. The Court refused to grant an injunction sought by BioSteel Inc. to prohibit Cizzle Brands Ltd., the maker of Cwench Hydration, from continuing to market and sell sports drinks that they alleged were an "obvious rip-off of BioSteel." It is clear that the tort of "passing off" is not easy to establish; however, in the right case with the right evidentiary record, it could lead to injunctive relief.
Background
BioSteel is a sports drink maker that at one time was the official sports drink of the NHL, had 12% of the Canadian sports beverage market, and counted Connor McDavid and Patrick Mahomes as endorsers. BioSteel encountered financial challenges and went through Companies' Creditors Arrangement Act proceedings in 2023 in which it was acquired by D.C. Holdings Ltd. One of its founders and other former BioSteel executives launched the Cwench product through Cizzle Brands in May 2024.
Tort of Passing Off
To establish the tort of "passing off", the plaintiff must demonstrate three elements:
- There is goodwill or reputation attached to the goods and services they supply in the mind of the purchasing public by association with an identifying "get-up" (being a brand name, trade description, or the individual features of their labelling or packaging) that is recognized by the public as distinctive to their goods or services.
- A misrepresentation by the defendant to the public leading, or likely to lead, the public to believe that the goods or services they offer are the goods or services of the plaintiff.
- The plaintiff has suffered, or is likely to suffer, damages resulting from this misrepresentation.1
The Court found that BioSteel had not established any of the elements of the test. The Court held that the tort was not established applying either the more onerous "strong prima facie case" standard required to issue a mandatory injunction or the more relaxed "serious issue to be tried" standard that must be met for a prohibitory injunction.
Element #1: Goodwill in the get-up of the goods
The focus of this inquiry is on the "get-up" of the product, which means the "whole visible external appearance of goods in the form in which they are likely to be seen by the public before purchase" including its shape, size, colour, packaging and labelling. It is not enough to show broad goodwill or reputation in the brand name or logo—the goodwill or reputation must attach to the on-the-shelf appearance of the product to the consumer and be distinctive of the plaintiff's goods alone.2
For example, in Kraft Jacobs Suchard (Schweiz) AG v. Hagemeyer Canada Inc., the Court found that there was reputation in the get-up of Toblerone chocolate bars with their sectioned "peaks" or "treads" and triangular packaging.3
Conversely, in Unitop v. Exclusive Candy, the Court found that there was no reputation in the get-up of Sesame Snaps bars, as there was no evidence that the blue, white, red and clear cellophane wrapping had become distinctive in the minds of consumers.4
The Court found that BioSteel had not demonstrated that that consumers exclusively associate the get-up of BioSteel's products (packaging, colour, and imaging) with the brand. BioSteel put forward evidence of goodwill related to the BioSteel brand at large, but not related to the on-the-shelf appearance of the product to consumers which was required to establish the first element in the tort of passing off.5
Element #2: Confusion caused by Defendant misrepresentation
This element raises two distinct questions: (i) whether there has been a misrepresentation by the defendant, such as through having a similar get-up, and (ii) whether that misrepresentation leads, or is likely to lead, the public to confuse the products.6
On the first question, the Court reiterated the principle that similarities in a side-by-side comparison between products are not enough to prove misrepresentation, noting that casual consumers do not examine products closely and that products are not expected to be completely unique. The legal standard is approached from the viewpoint of a hurried consumer, who does not meticulously compare product similarities and differences.7
Additionally, if the similarities are common features in the particular industry based on functional or utilitarian considerations or consumer preferences, they are not protected by the tort of passing off.8
BioSteel: Blue Raspberry9 Cwench: Blue Raspberry10
The Court held that the various similarities between BioSteel and Cwench were common features in the industry or were functional considerations, not a bid by Cwench to pass off BioSteel's products as its own:
- While the names of Cwench's four flavours (Blue Raspberry, Berry Crush, Rainbow Swirl, Cherry Lime) were identical or nearly identical to BioSteel's (Blue Raspberry, Mixed Berry, Rainbow Twist, Cherry Lime), fruit-based flavours and names are common in the wellness drink industry.
- While the packaging colours and images are similar, it is common in the industry to use colours and images associated with the drink flavours (i.e. common to have blue packaging with pictures of blue raspberries for blue raspberry-based flavours).
- Cwench's use of Tetra Pak cartons was for functional reasons, not an attempt to mimic BioSteel's design. The fact that they were in identically-shaped cartons reflected that only that particular shape of carton was manufactured in Canada.
The Court also noted that Cwench's brand name was prominent on its packaging, taking up most of the front label, which undermined the suggestion that it was trying to pass off its goods as those of BioSteel.11
On the second question, the Court noted that customer confusion could be established by putting forward (i) direct affidavit evidence from confused consumers (such as a customer who bought one product thinking they were buying the other), (ii) direct affidavit evidence of confusion from sellers themselves (such as evidence that products had been returned once consumers realized they had not bought the product they intended), or (iii) expert evidence offering an empirical measure of consumer confusion (such as consumer surveys).12 BioSteel had only put forward hearsay evidence of social media postings by unnamed individuals about the apparent similarities between the two products, which was not sufficient.13
Element #3: Damages suffered
The plaintiff is required to demonstrate that it has suffered or is likely to suffer damage as a result of the erroneous belief created by the defendant's misrepresentation that the source of the goods or services is the same as those offered by the plaintiff. There is some precedent that when two companies engage in the same trade with very similar goods, loss of sales and business can be inferred based on the misrepresentation.14 The Court held that BioSteel had not demonstrated that it had experienced any decreases in sales since Cwench launched its products in May 2024, and there was no misrepresentation that warranted drawing an inference that its sales would suffer.15
In addition to failing to demonstrate that it had a strong prima facie case that Cwench was liable under the tort of passing off, the Court also held that BioSteel had not met the two other elements of the test for an injunction: irreparable harm and balance of convenience.16
Key Takeaways
In cases where another product enters the market that appears to be very similar to one that a company is already offering, in order to successfully establish the tort of "passing off" and potentially obtain an injunction to require those products to be pulled from the shelves, the company has to be able to put forward evidence that, among other things:
- The on-the-shelf appearance of their product to consumers is distinctive of their goods alone.
- The on-the-shelf appearance of the other company's product to consumers is similar in ways that do not merely reflect industry standards or consumer preferences.
- The similar appearance has caused consumer confusion, ideally either through direct evidence from consumers or expert evidence.
- They have suffered damages in the form of reduced sales as a result.
This requires careful and thoughtful marshaling of evidence with the assistance of experienced counsel. The team at McCarthy Tétrault has market-leading expertise in both retail and consumer markets and intellectual property litigation, making it ideally situated to assist in this effort.
Footnotes
1 BioSteel Inc. v. Cizzle Brands Ltd., 2024 ONSC 5515 ("BioSteel") at para 8 citing Reckitt & Colman Products Ltd. v. Borden Inc., [1990] 1 All E.R. 873.
2 BioSteel at paras. 17-22.
3 Kraft Jacobs Suchard (Schweiz) AG v. Hagemeyer Canada Inc. 1998 CanLII 14780 (ON SC) at para. 20.
4 Unitop v. Exclusive Candy, 2023 ONSC 4363 at paras. 43-48.
5 BioSteel at paras. 23-24.
6 BioSteel at para. 26.
7 BioSteel at paras. 27-28.
8 BioSteel at paras. 29.
9 Image Source: https://biosteel.ca/collections/sports-drinks.
10 Image Source: https://cwenchhydration.ca/collections/sports-drink.
11 BioSteel at paras. 30-42.
12 BioSteel at para. 43.
13 BioSteel at paras. 44-47.
14 BioSteel at paras. 50-51, citing Alliance Laundry Systems LLC v. Whirlpool Canada LP, 2019 FC 724.
15 BioSteel at paras. 51-52.
16 BioSteel at paras. 54-61.
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