Notable Trademark Decisions in 2019 – Outlook for 2020
2019 has been a momentous year for trademark owners and their advisors. We have experienced the culmination of the trademark reform process and the introduction of the amendments to the Trademarks Act in June. Many changes have been implemented. While most of the changes are positive, the changes that allow an applicant to obtain a registration with no requirement to specify a date of first use of the trademark are not popular with most practitioners. The same can be said for the concept of examining trademark applications based on distinctiveness. Finally, we are faced with the new era of unacceptably long processing delays by the Trademarks Office.
Against this background, there have been many notable decisions. Decisions have provided insights concerning the impact of diminished distinctiveness, the procedure for attacking an inappropriate transfer of a mark and trademark use. In a more litigious context decisions have considered the impact of the state of the register evidence, claims for passing off, the availability of interlocutory injunctions, the absence of evidence of confusion in an action for infringement, the standard for review on appeals from the Trademarks Opposition Board and the impact of expungement on a claim for damages.
In Sadhu Singh Hamdard Trust v. Navsun Holdings Ltd. the Federal Court of Appeal confirmed that a brand owner must protect the distinctiveness of its mark, even in the face of infringing use. Infringing prior use may cause a mark to lose its distinctiveness, although the extent or degree to which distinctiveness is eroded by infringing use remains a question of fact in each case.
In Canada Bread Company, Limited v. Dr. Smood Aps evidence relating to the state of the register was important in opposition and subsequent appeal to the Federal Court. However, there must be evidence that the mark was used in relation to goods similar to those of the parties before any negative inference can be found. It is not sufficient to file evidence consisting of copies of registrations by themselves.
In Live! Holdings, LLC v. Oyen Wiggs Green & Mutala LLP the Court carefully reviewed several recent decisions concerning what must be shown to establish use in association with services. The Court summarized the principles that apply:
The registrant must demonstrate actual use of their trademark in Canada, with respect to each service specified in the registration, by itself or its licensee (i.e., “use it or lose it”).
The threshold to establish the use of a trademark is not high, but the evidence must permit a conclusion of use as a logical inference from the facts, rather than from speculation.
The term “services” is to be given a liberal but not unlimited interpretation.
A case-by-case assessment is required to determine whether use has been established regarding the words used in the registration to describe the services.
The mere advertising of services in Canada does not constitute use in Canada in association with a service. Some aspects of the services must be offered to people in Canada or performed or delivered in Canada.
Hotel reservation services could fall within the meaning of “hotel services” as a user if people in Canada enjoy some tangible and meaningful benefit.
In Cosmetic Warriors Limited v. Riches, McKenzie & Herbert LLP the Federal Court of Appeal confirmed that subsection 4(1) of the Act, which sets out the requirements to show the use of a mark in association with goods, does not require that a transfer of trademarked goods be for actual profit to constitute a transfer in the “normal course of trade.” A conclusion that actual profit was required would mean that such common business practices as selling last year’s trademarked merchandise at a discount would never amount to use sufficient to maintain registration of a trademark.
In Hutchingame Growth Capital Corporation v. Dayton Boot Co. Enterprises Ltd. the Federal Court of Appeal concluded that judicial review was not applicable to the Registrar’s decision to allow a transfer of a trademark as there was a statutory remedy available to the owner. The court agreed that section 57 applied and the registrant was a “person interested” under the section with standing to apply of the court. However, there was a contractual dispute that the Federal Court did not have jurisdiction to decide. As a result, the proceedings under section 57 stayed pending the resolution of the ownership issue in the Supreme Court of British Columbia. The Federal Court would be in a position to decide the issue under section 57 only after this issue was determined. Under the amended Act the Registrar has jurisdiction to remove a recorded transfer on the receipt of evidence that the transfer should not have been recorded.
In C.W. Parsons Ltd. v. Parsons Paving Ltd. an action was brought for passing off. It is well established at common law that an individual has a right to use his or her own name and that confusion may occur does not constitute passing off by itself. However, if confusion occurs, which is brought to the attention of that individual, they are under an obligation to take reasonable care to qualify the representation implied in their conduct to avoid confusion. In this case, corporations were involved so this defence was not directly applicable but the judge was influenced by this principle in arriving at a similar result.
In Alliance Laundry Systems LLC v. Whirlpool Canada LP the defendant initiated proceedings under section 45 requiring the plaintiff to show the use of the trademark in issue. The registration was expunged. The defendant immediately commenced to use the trademark in issue in association with similar goods. The plaintiff then brought an action for passing off. The plaintiff succeeded as the defendant failed to establish abandonment by the plaintiff of its mark and the judge found that when reputation associated with a trademark was strong it could withstand periods of non-use.
In Arysta Lifescience North America, LLC v. Agracity Crop & Nutrition Ltd. a judge of the Federal Court recently granted an interim injunction in a case involving patent infringement. This is very unusual. However, the facts were strongly in favour of the plaintiff who satisfied the requirement related to showing irreparable harm. Irreparable harm means harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. The fact that one party is impecunious does not automatically determine this issue but can be relevant. The onus is on the plaintiff to provide clear, convincing and non-speculative evidence that irreparable harm will be caused by the infringement. The decision is included in this review since it builds on previous decisions involving trademarks.
In Loblaws Inc. v. Columbia Insurance Company Loblaws Inc. brought an action against Pampered Chef Ltd. and related corporations in the Federal Court for trademark infringement relating to its President’s Choice marks. After a relatively lengthy trial, the Judge carried out a detailed confusion analysis. The action was dismissed because Loblaws had not established a likelihood of confusion. This conclusion was strongly influenced by the differences in the respective channels of trade and the very probative nature of the lack of evidence of actual confusion.
In Zara Natural Stones Inc. v. Industria de Diseno Textil, S.A. the application of the reasonableness standard was considered. A judge reviewing a decision of a Hearing Officer under reasonableness standard should not reassess the evidence and substitute his or her own appreciation of the evidence for that of the Hearing Officer. That would amount to applying the correctness and not the reasonableness standard. Rather, the question for the Federal Court is whether the Hearing Officer’s decision, as a whole on the record, was unreasonable.
Reasonableness is a genuinely deferential standard based on the idea that there may be multiple valid answers to a legal dispute and that a court should not interfere where the Hearing Officer’s decision is rationally supported. A decision is not unreasonable because the evidence would support another conclusion. The Hearing Officer is entitled to deference regarding both findings of fact and inferences of fact.
The uncertainty relating to applying this test may be reduced since the Supreme Court of Canada has recently established a new framework to be applied in this context Canada (Minister of Citizenship and Immigration) v. Vavilov.
In Wenger SA v. Travelway Group International Inc., a decision was made on a reference to determine questions remitted by the Federal Court of Appeal. The judge found that the Court had implicitly considered the Travelway marks to be invalid. The two registrations were expunged.
Wenger’s claim for damages or an accounting of profits was more contentious. Both parties agreed that Travelway ceased all use of the impugned marks when the decision of the Federal Court of Appeal was released. Before the release of the decision, Travelway was entitled to the benefit of section 19 of the Act, which states that the registration of a trademark, unless invalid, gives to the owner the exclusive right to the use throughout Canada of the trademark in respect to the goods and services it is registered for use in association with. If the registration was obtained because of a materially false statement of use fundamental to the registration or based on a fraudulent misrepresentation, the registration may be void ab initio and expunged on this basis. However, none of these grounds were present and Travelway was entitled to the benefit of section 19 of the Act. As a result, no damages or an accounting of profits were awarded to Wenger.
These decisions emphasize basic principles that recur from year to year, but which we should not lose sight of. First, distinctiveness is the key and cardinal requirement of a trademark. Brand owners should take steps to maximize the distinctiveness of their marks. When this is not done problems can arise.
Second, the battles over what constitutes “trademark use” are never-ending. Trademark owners need to be proactive concerning their ability to show use.
A claim for passing off can be a litigator’s best friend. The cause of action is flexible and can be combined with a claim for infringement. This year’s favourite claim is protecting residual goodwill.
Finally, we should not automatically give up seeking an interlocutory injunction, but the facts have to be right and evidence of irreparable harm detailed and persuasive. Because of this a party seeking this remedy will typically need a deep pocket.
These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.
A version of this article originally appeared on The Lawyer’s Daily website published by LexisNexis Canada Inc.