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The Naked Truth about Appeals from the Trademark Opposition Board

The Supreme Court of Canada has recently changed the standard of review concerning appeals from the decisions of administrative bodies. They intended to simplify the law and to require more deference to be given to such decisions. It does not seem this result has been achieved regarding appeals from the decisions of the Trademarks Opposition Board.


The Facts

Diageo North America, Inc. applied to register the trademark THE NAKED TURTLE for association with rum and rum-flavoured beverages (vodka and beer excluded). The application was based on the proposed use.


Constellation Brands Canada, Inc., Canada’s largest producer, marketer and distributor of wines, opposed the application on the basis the trademark was confusing with its NAKED GRAPE trademarks used in association with wine, wine spritzers, and icewine.


Constellation Brands’ NAKED GRAPE line of wines has been sold since October 2005. In the years 2008-2013 sales of NAKED GRAPE wines ranged between $16-26 million and advertising expenditures were almost $10 million in total during this period.


The name of the opponent was changed to Arterra Wines Canada, Inc. because of an assignment of the trademarks.


The Decision of the Trademarks Opposition Board

The Hearing Officer rejected the opposition and allowed the application. She said that after considering the surrounding circumstances and applying the test of confusion as a matter of first impression and imperfect recollection, the Applicant met the legal onus on it to show, on a balance of probabilities, that there was no reasonable likelihood of confusion between its mark and the Opponent’s trademark. She said that (i) the parties’ trademarks are more different than alike; (ii) only the Opponent’s trademark had a significant degree of acquired distinctiveness; (iii) the nature of the goods and channels of the trade overlapped; and (iv) there was no evidence that casual consumers understand the word NAKED to have a descriptive or suggestive meaning, or that they are accustomed to seeing and having to distinguish between trademarks containing the word NAKED in the alcoholic beverages field.


The Hearing Officer also said that consumers turning their mind to what NAKED suggests in the context of wine or rum may conclude, after consideration, it suggests the associated wine or rum has not been aged in an oak barrel. However, consumers would not do so as a matter of the first impression.


The Appeal to the Federal Court

Arterra Wines appealed from the decision to the Federal Court. Both parties filed additional evidence as part of the appeal.


The initial issue related to the standard of review. The Supreme Court of Canada has recently said in its decision in Canada (Minister of Citizenship and Immigration) v. Vavilov that a revised framework for determining the standard of review concerning appeals from administrative decisions should be followed. The starting point is a presumption that a standard of reasonableness applies. However, the presumption is rebutted where a statutory appeal applies to the decision. In this case, the appellate standard of review applies.


Nothing was said in Vavilov about an appeal mechanism that contemplates filing new evidence as in an appeal under the Trademarks Act. The judge concluded that Vavilov did not displace the previous jurisprudence regarding new evidence filed with the Federal Court on appeal from a decision of the Board but necessitated an adjustment. The standard of review should be determined on an issue-by-issue basis, depending on the materiality of any new evidence affecting the issue. If the new evidence is considered material to an issue, the court must consider the outcome of that relevant issue de novo.To trigger a de novo review, the new evidence must be substantial and significant so it would materially affect the Board’s decision. Evidence that supplements or repeats existing evidence will not meet the threshold.


If new material evidence is not presented the appellate standard of review will apply, as opposed to reasonableness. Leaving aside questions of statutory interpretation and jurisdiction, questions of law are to be assessed according to the correctness standard, while questions of fact and mixed fact and law, where the legal principle is not readily extricable, are to be considered for any palpable and overriding error.


In substance, the judge found that the additional evidence filed in this appeal was not sufficiently material to justify a de novo review. She considered whether the Hearing officer made any palpable and overriding errors regarding questions of fact or mixed fact and law in determining the likelihood of confusion between the parties’ trademarks. Determining a likelihood of confusion involves issues of mixed fact and law and fact and there were no extricable questions of law of general importance in this case that would attract the correctness standard of review.


The Judge said the appellate standard of palpable and overriding error was a highly deferential standard of review but determined that the Hearing officer had made several palpable errors that cumulatively were overriding. The Hearing officer made the following errors:

  • Viewing THE NAKED TURTLE as a unitary phrase but not treating NAKED GRAPE in the same fashion. This made little sense.

  • Finding the trademarks “more different than alike”. This is not part of the test for confusion and suggested a side-by-side comparison of the respective marks which is not appropriate.

  • Dissecting Arterra’s trademark and discounting the word GRAPE, notwithstanding the finding that NAKED GRAPE is well known, if not famous in Canada for wine. The case law is clear that the respective marks must be viewed as a whole from the perspective of a casual consumer somewhat in a hurry with an imperfect recollection of the senior mark.

  • Assigning different ideas to the word NAKED when both marks suggest a slightly risqué connotation to consumers when they suggest “nakedness”.

As there was a complete record on which to make a redetermination, the judge concluded that the interests of justice would be served by deciding the matter, rather than sending it back to the Board. This required a redetermination of the degree of resemblance and then reweighing the Hearing Officer’s findings on the other statutory factors, with which there was no palpable and overriding error. The question was, as of the date of the decision, as a matter of first impression would a “casual consumer somewhat in a hurry”, who sees Diageo’s trademarks, when they have no more than an imperfect recollection of any one of Arterra’s trademarks, be likely to be confused; that is, would they likely think that Diageo was the same source of alcoholic beverages, rum on the one hand and wines on the other, as Arterra?


The judge concluded there was a degree of resemblance between the respective marks by reason of the “shared” component NAKED, which is striking in both parties’ marks and the first significant component. In addition, there was insufficient evidence to conclude the term “naked” was so common in the applicable channel of trade, whether the alcoholic industry as a whole or the wine industry more narrowly, that it diluted the mark for being common. In addition, it was found that the word NAKED in the marks in issue conveyed a risqué connotation of playfulness or cheekiness.


Both of the respective marks would be pronounced or sounded as two words – NAKED GRAPE for Arterra, and NAKED TURTLE for Diageo.


There was sufficient resemblance between the respective marks, that source confusion as contemplated by the Act was likely. It was not a question about someone mistaking rum for wine, but the casual consumer somewhat in a hurry, and having an imperfect recollection of Arterra’s NAKED GRAPE product, mistakenly believing the source of THE NAKED TURTLE product was the same as the NAKED GRAPE product.


Arterra’s appeal was allowed; the TMOB’s decision was overturned and the Registrar was directed to refuse the trademark application.


Comment

The Vavilov decision is predicated on the assumption that more deference should be given to administrative bodies but because of the exception for statutory appeals, this may not happen with the Trademarks Opposition Board. This decision was released before the decision of the Federal Court of Appeal in the Clorox case, which we have also discussed, but is not inconsistent with it.


If you have questions, please contact me at mckeown@gsnh.com.


John McKeown

Goldman Sloan Nash & Haber LLP 480 University Avenue, Suite 1600 Toronto, Ontario M5G 1V2 Direct Line: (416) 597-3371 Fax: (416) 597-3370 Email: mckeown@gsnh.com


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.

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