A decision of the Federal Court illustrates the potential problems that can arise relating to the use of descriptive trademarks particularly when the mark was not appropriately used.
The Facts
The applicant sells a wine (and related services) and has been in business since 2003, Some of its wines are labelled and marketed in a manner that employs the words “Locust Lane”. Examples of such wine labels are shown below:
The respondent founded its winery in 2019 and began to use the name “Locust Lane Estate Winery” to label and market its wines and related services. The two companies operate wineries on adjacent properties situated on Locust Lane, in Beamsville, Ontario.
The applicant does not own a registered trademark but claims rights in the unregistered mark LOCUST LANE. When the applicant became aware of the respondent’s business plans a letter was sent expressing concern that the respondent’s use of the LOCUST LANE mark was likely to mislead the public into believing that the applicant was the source of respondent’s goods and services. The letter requested that the respondent cease all use of LOCUST LANE in association with any goods and services and undertake in writing to refrain from conducting such activities in the future.
The respondent did not comply, and the applicant brought an application in the Federal Court.
Passing Off
To assert rights the owner of a common-law unregistered trademark must bring an action or an application for passing off. If the proceeding is brought in the Federal Court this means that the action must be brought under the statutory codification of this cause of action contained in the Trademarks Act. The relevant section provides that:
No person shall
(b) direct public attention to his goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his goods, services or business and the goods, services or business of another;
In order to establish its claim the applicant had to show (a) the existence of goodwill; (b) deception of the public due to a misrepresentation; and (c) actual or potential damage to the applicant. In addition, the applicant must prove that it is the owner of a valid and enforceable trademark.
The Judge confirmed that the applicant’s trademark must comply with the definition of a trademark as well as the rules for the use of a mark contained in the Act. The term “trademark”, as defined in the Act, requires that a mark be used by a person for the purpose of distinguishing or so as to distinguish goods or services manufactured, sold, leased, hired or performed by them from those manufactured, sold, leased, hired or performed by others. In order to obtain trademark rights, the trademark must be “used” by the person for the purpose of distinguishing their goods or services from those of others.
Under the Act a trademark is deemed to be used in association with goods, if, at the time of the transfer of the property in or possession of the goods, in the normal course of trade, it is marked on the goods themselves or on the packages in which they are distributed or it is in any other manner so associated with the goods that notice of the association is then given to the person to whom the property or possession is transferred.
On reviewing the evidence submitted by the applicant the Judge was satisfied that the applicant had used the words ’Locust Lane” in a way that satisfied the above requirements.
Goodwill and Acquired Distinctiveness
The Judge then proceeded to consider whether the applicant had presented sufficient evidence to establish the existence of goodwill. In determining the existence of reputation or goodwill for the purpose of passing off, courts consider inherent distinctiveness, acquired distinctiveness, length of use, surveys, volume of sales, the extent and duration of advertising and marketing, and intentional copying. An applicant may establish goodwill in any number of ways, but must do so based on perceptions in the marketplace.
For marks that are descriptive in nature it must be shown that the descriptive word has acquired distinctiveness or a secondary meaning in order to make it distinctive of its owner’s goods or services. This is described as a heavy onus which requires that evidence be presented to demonstrate that from the perspective of the relevant public — that is, people who actually use the product or service in question — the trademark has become distinctive of that product or service. It is clear that evidence of prior use will not satisfy this requirement.
When the Judge reviewed the evidence, he concluded that it was not sufficient to satisfy the heavy onus on the applicant. The Judge rejected as insufficient the applicant’s evidence on other factors such as length of use, volume of sales, and extent and duration of advertising and marketing. Since the passing off claim relied on use of unregistered descriptive mark, the applicant’s failure to show acquired distinctiveness resulted in inability to establish the goodwill necessary to succeed with its claim. 2021 FC 156.
Comment
Some of the important factors that resulted in the dismissal of this case were not explicitly mentioned. First, the applicant’s use of LOCUST LANE was less than ideal. The alleged mark does not seem to have been consistently used as a trademark and was not given the typographical prominence typically associated with a mark. Given this problem it is hard to imagine the applicant would be in a position to satisfy the heavy onus it faced concerning acquired distinctiveness.
Second, there are constitutional issues related to claims for passing off in the Federal Court. The courts of the provinces have unlimited jurisdiction to hear claims for passing off in all forms; the common law variety and the codification under the Trademarks Act. The Federal Court only has jurisdiction to decide claims under the codification when such claims relate to a trademark. This seems to have led to the tendency to tie such claims to the wording of the Act.
If you have questions, please contact me at mckeown@gsnh.com.
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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.
A version of this article originally appeared on the Lawyer’s Daily website published by LexisNexis Canada Inc.