Passing off and an Expunged Trademark Registration
A recent decision of the Federal Court relates to a claim for passing off and considers the effect of the expungement of the plaintiff’s registered trademark in this context.
As a result of several transactions that occurred in 1979, the ownership of the SPEED QUEEN mark was split between unrelated entities in Canada and the United States. The Canadian SPEED QUEEN mark has been owned by Whirlpool Canada LP (the ‘Plaintiff”) since 2004. The mark is owned by Alliance Laundry Systems LLC (the “Defendant”) in the United States and the rest of the world.
In 2011, the Defendant initiated a proceeding under section 45 of the Trademarks Act, requiring the Plaintiff to show the use of the trademark in Canada during the three-year period immediately preceding the date of the notice (October 2008 to October 2011). The Registrar of Trademarks found that the Plaintiff had used its trademark during the three-year period. This decision was upheld by the Federal Court in 2014 but overturned by the Federal Court of Appeal in 2015. In May 2016, the Supreme Court of Canada denied leave to appeal. As a result, the Canadian registration for the Plaintiff’s SPEED QUEEN mark was expunged in 2016.
The Defendant immediately introduced its SPEED QUEEN products in the Canadian market, by renaming and rebranding an existing line of washers and dryers. The parties have each filed trademark applications in Canada for the SPEED QUEEN mark: The Plaintiff filed applications for the word mark and a logo on September 13, 2016, and the Defendant filed two applications for the word mark, one filed in 2011 and one in 2014. Both parties have opposed the other’s applications.
The Plaintiff brought an action for passing off against the Defendant. To succeed the Plaintiff must establish (1) the existence of goodwill; (2) deception of the public due to a misrepresentation; and (3) actual or potential damage to it.
Concerning the first element, the Plaintiff submitted that its evidence showed (i) the SPEED QUEEN mark has been used to sell goods in Canada for 85 years; (ii) the Plaintiff had significant sales of SPEED QUEEN products since 1996; and (iii) the Plaintiff continues to promote its SPEED QUEEN products.
This assertion was contested, but the Judge said there is no prescribed quota under the Trademarks Act or case law that a business must reach to show that the mark has attained recognition. The Plaintiff showed consistent sales of roughly 140-250 units per year from 2011 to 2016 (except for 2015, which was 59 units) which was consistent with the Plaintiff’s use of the mark in the normal course of trade. This was sufficient to show the existence of goodwill in the Canadian market, at least in the province of Ontario.
The Defendant asserted that the plaintiff had abandoned the SPEED QUEEN mark. This was said to be consistent with the decision in section 45 proceedings and that the Plaintiff was making token use of the mark to block the Defendant from using the mark in Canada.
The Judge said that the sale volumes also had little to do with resolving this issue. What is important is that the Defendant’s sales be bona fide and made in the normal course of trade.
To establish abandonment of a trademark it must be shown that: (1) the trademark is no longer in use in Canada; and (2) the owner intended to abandon the trademark. The Defendant failed to satisfy either requirement.
In addition, regarding the expungement due to non-use between 2008 and 2011, the Judge said that, when a trademark’s reputation is strong, it can withstand periods of non-use.
On the issue of misrepresentation, the Plaintiff submitted that the defendant ’s SPEED QUEEN mark resulted in confusion under subsection 6(5) of the Act. Specifically, the Plaintiff alleged: (i) that the two marks have a high degree of resemblance as they are the same word mark; (ii) that Plaintiff’s SPEED QUEEN mark is distinctive due to its 85 years of use in Canada; (iii) that the Plaintiff’s SPEED QUEEN mark has been in use for a longer period of time than the defendant’s mark (1930 versus 2016); and (iv) that the nature of the goods and the channel of the trade are the same.
Previous cases have found that showing confusion will establish a misrepresentation. Since it was clear the marks were confusing the Judge was satisfied that the second element was established.
Concerning the damage element, the Judge relied on a recent decision of the Federal Court of Appeal to the effect that when two companies engage in the same trade with very similar goods, loss of sales and business can be inferred due to misrepresentation. However, considering the Plaintiff’s relatively low volume of sales of SPEED QUEEN products in Canada, nominal damages of $20,000 were awarded.
The Judge granted the usual injunctive relief restraining the defendant from using the SPEED QUEEN mark, or any trade name, trade style, or corporate name comprising the SPEED QUEEN mark or any confusingly similar trademark in Canada.
This is an interesting decision. It seems odd that the relatively modest recent sales of the Plaintiff could justify a finding that the trademark’s reputation was strong.
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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.