2022 has again been a difficult year for trademark owners and their advisors. While the impact of the pandemic may have lessened it is still a factor. We continue to face unacceptably long processing delays and waits for hearing dates in the Trademark Office.
Despite this situation there have been several important decisions in the Federal Court and one decision in the Ontario courts in the last year. These decisions have considered the impact of an opposition decision in subsequent litigation in the Court, recent developments relating to counterfeiters, the clearly descriptive bar to registration, the downside of a questionable mark, expungement in the Court and under section 45, the nature of a ground of opposition, an appeal from opposition decisions and the rights available to an applicant for a trademark.
The Impact of a Previous Decision of the TMOB in an Action for Statutory Passing Off
A decision of the Federal Court deals with a statutory claim for passing off and the effect of a prior decision of the Trademark Opposition Board (TMOB). One defendant had applied for a variant of the design in issue. The plaintiff opposed the application. In the opposition it was concluded that the applicant had not discharged its burden of establishing, on a balance of probabilities, that the mark was not confusing with the plaintiff's trademarks.
In assessing the merit of the plaintiff's claim in a summary trial in the Federal Court, the decision of the TMOB was not given any weight because it was based on a different record, where the Board had to apply a different burden of proof. Mainstreet properties Corp. v. Canadian Mortgage Capital Corporation 2022 FC 20.
A decision of the Federal Court deals with the sale of counterfeit goods. It is positive because it shows the Court's willingness to grant summary trial in cases involving counterfeiting and the statement by the Judge that counterfeiting will not be tolerated.
Unfortunately, the decision is less helpful concerning the relief granted to the plaintiff. There is no statutory right to grant fixed or statutory damages under the Trademarks Act although such damages can be granted under the Copyright Act. Using relatively standard awards of $3000 for street vendors and flea market operators, $6000 for sales from fixed retail premises and $24,000 for manufacturers or distributors (subsequent cases have updated these figures to reflect inflation) seems to be an attempt to fill the gap. However, the Judge viewed this approach with caution as it violated the principal the plaintiff must prove the damages it has suffered. The Judge said that damages in this type of case essentially compensated the brand owner for depreciation of goodwill rather than lost sales. As it is next to impossible for a plaintiff to show the specific damages it has suffered, it was reasonable to assume that the harm to goodwill was proportional to the volume of sales of counterfeit goods. On reviewing the evidence, the judge awarded the plaintiff $1000 for each of the eight instances of infringement shown for a total of $8000. Lululemon Athletica Canada Inc. v Campbell 2022 FC 194.
Place of Origin
A Judge of the Federal Court has expanded the grounds precluding the registration of a trademark because the mark is clearly descriptive of the place of origin of goods or services applied for.
The applicant sought to register the trademark NORTH 42 DEGREES in association with wine and operating a winery. The opponent opposed the application on the basis that the mark was clearly descriptive of the place of origin of the goods and services as the applicant's winery is located at or near the 42nd line of constant latitude in the northern hemisphere or near "north 42 degrees" and the wine originates from the same geographic region.
The Hearing Officer did not agree and dismissed the opposition. On appeal the Judge concluded that the term "place of origin" should not be so restrictively interpreted as to exclude a designated line of latitude or longitude. In keeping with the purpose of section 12(1)(b), the term "place of origin" should be considered to refer to any geographical designation. Because of this, she was satisfied that the Hearing Officer adopted an incorrect approach in concluding the trademark in issue did not identify or name a place. The appeal was allowed, and the application refused. Nia Wine Group Co., Ltd. v. North 42 Degrees Estate Winery Inc. 2022 FC 24
A Questionable Choice of a Mark
The applicant chose a bell design similar to the design used by their competitor, in the same Ontario market, for essentially the same wares and services. On the resulting opposition the Hearing Officer observed that the burden was on the applicant to establish that, on a balance of probabilities, its mark was not confusing with the respondent's mark. The applicant could not do this, and the opposition succeeded.
On appeal to the Federal Court the applicant filed additional affidavits relating to the state of the register and the marketplace concerning similar marks used by others and the extent of its advertising using its mark, and the goodwill it had acquired relating to its mark. When the Judge considered this evidence, he concluded there was a likelihood of confusion at the time of his decision and dismissed the appeal. The Applicant chose a similar bell design with eyes wide open and subject to the risk of confusion. Bellwoods Brewery Inc. v. Bellwoods Holding Inc. (2021), 187 C.P.R. (4th) 425 (T.M.O.B.) appeal dismissed 2022 FC 248.
When is a Trademark "Clearly Descriptive"?
The Federal Court has confirmed that the TMOB was correct when it found that the trademark HALLMARK in association with real estate and related services was not clearly descriptive of the quality of the services.
The Board said that the test under the Act considered whether the trademark as a whole was clearly descriptive of the character or quality of the services in association with which it is used. "Character" means a feature, trait or characteristic of the goods or services and "clearly" means easy to understand or plain. While the word "Hallmark" had a laudatory connotation, it was not clearly descriptive of the Applicant's real estate and related services. The word is a noun which refers to a distinctive feature, mark or sign indicating quality or excellence, but not a descriptor or adjective that clearly describes the Applicant's services as excellent.
The Judge agreed that the Hearing Officer had stated the correct test and reached a correct conclusion. Laudatory words are not a special category of automatically excluded trademarks under the Act. To be clearly descriptive of quality, the word must be assessed according to the above test. The test is not simply whether a word has a laudatory connotation- it must be "clearly" descriptive, and it must be clearly descriptive not of quality in an abstract sense, but of the quality of the services in association with which it is used. Courts have consistently recognized that a trademark is registrable even though it is suggestive or even descriptive. Courts also permit a skilful allusion to a characteristic of the associated services. The test contemplates the acceptance of some descriptive connotation. Spagnuolo v Re/Max Hallmark Realty Ltd 2022 FC 416
Non-Compliance with the Trademarks Act Leads to an Unfavourable Result
A decision of the Federal Court illustrates the importance of proper trademark management in operating a business. The Plaintiff seems to have ignored this to its detriment, notwithstanding that its business was otherwise successful.
The plaintiff is an Ottawa-based company that licenses independent pizzeria owner-operators. At the time of trial, there were thirty-eight MILANO PIZZERIA stores run by independent owner-operators and licensed by the plaintiff. The licence agreements were not always in writing but were agreed to verbally and were understood to involve "purchasing" and "territory" in exchange for use of the name "Milano Pizza" or "Milano Pizzeria." The licensees could operate their businesses as they saw fit, including store décor, advertising, staffing, uniforms, training, menu offerings (with limited exceptions,) pricing, and food preparation, including recipes used.
A dispute arose with one licensee, and its licence was terminated. Later an action was brought in the Federal Court for trademark infringement and related relief. The action was vigorously defended, and a counterclaim seeking to expunge the registered mark was brought.
Regardless of oral or written licence agreements, the plaintiff did not satisfy the onus on it to establish that it exercised sufficient control over the services performed by the licensees such that the plaintiff would benefit from the deeming provision of subsection 50(1) of the Trademarks Act. Here there was no evidence that the plaintiff exercised direct or indirect control of the character or quality of the services in association with which the registered mark was used. The licences contained no product specifications, right of inspection or right to obtain samples or delivery requirements. In addition, there was little evidence that the plaintiff regularly inspected or approved products and menu items or monitored delivery.
The concurrent use by the Licensees without complying with subsection 50 rendered the registered mark non-distinctive as there were multiple confusing sources of the services. Milano Pizza Ltd. v. 6034799 Canada Inc. 2022 FC 425
Decision of the TMOB Confirmed on Appeal
The Federal Court has upheld the decision of the TMOB, confirming that the marks in issue were not confusing, despite the filing of material new evidence on the appeal.
The applicant filed a trademark application for MAGICALIGN in association with orthodontic appliances and mouthpieces The opponent opposed the application on the basis that the mark was confusingly similar to the family of trademarks registered and extensively used in Canada in association with orthodontic and dental products and related services. The family included registrations for the mark ALIGN and for INVISALIGN.
The TMOB rejected the applicant's opposition to MAGICALIGN. The Hearing Officer concluded that an ordinary consumer would not, as a matter of first impression, be likely to think that the goods associated with MAGICALIGN would emanate from the same source as those associated with the INVISALIGN or ALIGN trademark or vice versa. There was no reasonable likelihood of confusion between the parties' trademarks.
Despite filing significant new material evidence, the Judge concluded that the overall differences in the appearance, sound and idea of the marks dominate and would not lead to a likelihood of confusion in the marketplace. The ordinary consumer, which in this case would be a consumer that would take more care as these products are higher priced products, would not, as a matter of first impression, be likely to think that the goods associated with MAGICALIGN would emanate from the same source as those associated with INVISALIGN and ALIGN. The appearance, sound and idea conveyed by the marks are just too dissimilar. Align Technology, Inc. v. Osstemimplant Co., Ltd 2022 FC 720.
A Clear Case for Expungement
The applicant is a California corporation which manufactures and sells water treatment systems. The Applicant has sold reverse osmosis drinking water filtration systems under the business name "APEC Water Systems" for over 20 years. The applicant applied to register its APEC trademarks in Canada in November of 2019 and learned that the trademark APEC WATER had been registered by its competitor, the respondent.
The applicant brought an application under section 57 of the Trademarks Act to expunge the registration obtained by the respondent. The first ground of attack was that the respondent was not the person entitled to secure the registration. Section 16 of the Act provides that a party is entitled to register a trademark unless the mark was confusing with a trademark previously used in Canada. The second ground of attack was that the trademark was not distinctive at the time proceedings bringing the validity of the registration into question were commenced. The final ground was that the respondent's application included a material misstatement and was void from the date of its filing. Since there was no evidence of use of the mark, the date of first use claimed in the application was false and was a material misstatement. The applicant succeeded on these grounds and the registration was expunged. Advanced Purification Engineering Corporation (APEC Water Systems) v. iSpring Water Systems, LLC 2022 FC 388.
In Beijing Judian Restaurant Co. Ltd. v Wei Meng the Federal Court adopted an approach similar to that followed by the EU courts. The respondent had registered the applicant's trademark without a legitimate commercial purpose and in bad faith and the registration was found to be invalid and expunged.
Bad faith can include applying for registration of a mark with no intention of using it in a legitimate commercial way, where the sole objective is to prevent a third party from entering the market or to interfere with their business. Bad faith may also exist when an applicant seeks or obtains registration of a trademark for use as an instrument of extortion.
Where there are facts that fall uniquely within the knowledge of the respondent, circumstantial evidence and inferences from proven facts may establish the objectives of the respondent at the time of filing. However, hearsay evidence and vague conjecture will not be sufficient. Beijing Judian Restaurant Co. Ltd. v Wei Meng 2022 FC 743
The Failure to Consider the use and Ownership of Trademarks in a Family Business
The parties to this action were two businesses run by separate branches of an extended family. Both use trademarks and trade names incorporating the word DRAGONA. The plaintiff branch sued the defendant branch alleging infringement and passing off. The dispute centered on the terms under which the original founder made the trademark in issue available to the two branches and whether oral licenses of the mark were in place and the terms of the licenses.
The facts were contested and less than clear but on a motion for summary judgement the Judge concluded that the defendant had sufficient rights in the DRAGONA trademark that it could not be said they were misrepresenting those rights. The plaintiff could not show passing off was occurring and the action was dismissed. If there was confusion it resulted from the failure of the founder to develop a proper plan for the use of the mark and was "one of the misfortunes which occur in life". Dragona Carpet Supplies Mississauga Inc. v. Dragona Carpet Supplies Ltd. 2022 FC 1042
Use it or Lose it
A decision of the Federal Court illustrates how section 45 can affect a trademark owner. This section provides a summary procedure for trimming the register of "dead wood." Frequently, proceedings under the section will be instituted by third parties who are prevented from obtaining a registration for a desired mark by a registration perceived not to be in use.
The section provides that after three years beginning on the day on which a trademark is registered, unless the Registrar sees good reason to the contrary, the Registrar shall, at the written request of any person who pays the prescribed fee — or may, on his or her own initiative — give notice to the registered owner of the trademark requiring the registered owner to furnish within three months an affidavit or a statutory declaration showing, with respect to all the goods or services specified in the registration or to those that may be specified in the notice, whether the trademark was in use in Canada at any time during the three-year period immediately preceding the date of the notice and, if not, the date when it was last so in use and the reason for the absence of such use since that date.
It has been recognized that variations which do not change the dominant feature of a registered mark are acceptable deviations from the mark as registered. This includes displaying a mark in different colours. The test is whether the differences are so unimportant that an unaware purchaser would likely infer that both marks, despite their differences, identify goods or services with the same origin. The two versions of the mark used by the owner had consistent dominant characteristics. The mark as used fell within the range of acceptable deviation. Vass v Leef Inc. 2022 FC 1192
In another decision under the section on appeal to the Federal Court it was observed the section provides a simple, summary and expeditious procedure to clear the Register of "deadwood", i.e., marks that have fallen into disuse. The owner of the mark need only establish a prima facie case of use in response to a notice under the section. The evidentiary threshold is low, and reasonable inferences can be made from the evidence as a whole. The Registrar's conclusion that the evidence showed use of the trademark in relation to "headphones" through the sale of packages actually naming the goods as "headphones" but containing "earphones" and "earbuds" could not be construed as a palpable and overriding error. Fasken v. Gentec 2022 FC 327
How to Deal with a Suspect Ground of Opposition?
The Applicant applied to register the trademark FIND YOUR CRAFT in association with beer. The respondent opposed the application. The respondent asserted that the Applicant was not entitled to registration of the mark because the proposed trademark was confusing with a trademark previously used by the respondent in association with beer. The respondent's evidence was that the trademark "Find Your Craft" was used by placing it on its delivery van on August 10, 2016.
Although the statement of opposition referred only to "beer" and not "brewery services," the Board noted that respondent's evidence and submissions referred to both, and that the Applicant understood the case to meet. As the marks were identical and there was a clear overlap between the Applicant's beer and the respondent's brewery services, the Board had no difficulty finding there was a reasonable likelihood of confusion between the parties' marks.
An appeal to the Federal Court was dismissed. The respondent's opposition was based on subsection 16(3)(a) and a likelihood of confusion with the "Find Your Craft" trademark used by it. These two essential matters did not change when the respondent asserted that its trademark was used in association with brewery services, in addition to beer. That the respondent's statement of opposition provided the further detail that the mark was used in association with beer did not mean that enlarging the alleged use to include brewery services constituted a new ground of opposition.
The Applicant knew the respondent was relying on the use of its trademark in association with brewery services. That the Applicant chose to raise an objection instead of responding on the merits is immaterial. 101217990 Saskatchewan Ltd. (District Brewing Company) v. Lost Craft Inc. 2022 FC 1254
What is a Palpable and Overriding Error?
A decision of the Federal Court deals with the standard of review applicable to an appeal from the TMOB. The standard of review for appeals of this nature is the appellate standard of review. For questions of mixed fact and law the standard is palpable and overriding error, for questions of law, the standard is correctness. Palpable means an obvious error, while an overriding error affects the decision-maker's conclusion. Palpable and overriding error is a highly deferential standard of review, while the correctness standard gives no deference to the underlying decision-maker.
Where additional evidence is filed, the Court must first consider the materiality of the evidence and determine whether the evidence is sufficiently substantial, significant and probative that it would have a material impact on the Board's decision. If evidence is material, the Court reviews that portion of the decision to which the evidence applies on a correctness standard and makes its own determination based on the whole of the evidence. The Court is not limited to finding a reviewable error in the Board's decision and the appeal is a hearing "de novo" with the benefit of the additional evidence. Vivo Mobile Communication Co., Ltd. v. Garmin Switzerland GmbH 2022 FC 1410
When Are Rights under the Trademarks Act Available?
The plaintiff filed an application for the trademark BOMBAY FRANKIES for restaurant related services. The plaintiff had not yet opened a restaurant or used the mark at the date it brought its action. The defendant had opened a restaurant under the name BOMBAY FRANKIE and filed a trademark application for its mark. The plaintiff successfully applied to a Judge of the Superior Court of Justice and obtained an interlocutory injunction restraining the defendants from using the term "Bombay Frankie" as the name of any restaurant or franchising business, from using "Bombay Frankie" on their social media accounts, and from using its website,
The defendants obtained leave to appeal and appealed to the Divisional Court. The appeal was allowed. The court said the motion Judge erred in finding that there were serious issues. In order to establish a cause of action for trademark infringement under the Trademarks Act the plaintiff must own a registered trademark that is alleged to have been infringed. The plaintiff's application had not been examined, approved or advertised for opposition by the Registrar of Trademarks. A mere application to register a trademark is insufficient to support a cause of action for trademark infringement under the Act. In addition, it was an error to presume that a trademark for which an application has been filed would be registered. Registration was not a foregone conclusion. The Registrar may refuse to register the trademark on the basis that it is, for example, not distinctive within the meaning of the Act. In addition, another party may oppose the registration of the trademark, which is likely to happen here. It seems surprising that this case ever got as far as it did. Bhagwani v. 2788610 Ontario Inc. 2022 ONSC 6098
Toronto, December 2022
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.