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The Trials and Tribulations of Weak Trademarks

A recent decision of the Federal Court dealt with entitlement to the trademark SMART CLOUD and its lack of inherent distinctiveness. [Smart Cloud Inc. v. International Business Machines Corporation 2021 FC 236].


International Business Machines Corporation (IBM) applied for the trademark IBM SMARTCLOUD (the Mark) in association with a broad range of computer hardware and software (Goods) and business management, development, network and consulting services (Services).


Smart Cloud Inc. (Smart Cloud), a Canadian company, was incorporated in October 2010 to develop and offer business computing and consult services centred on cloud computing, digital security, data storage and technical support in Canada and elsewhere. Smart Cloud opposed the application primarily based on its allegation that the Mark was confusing with its prior use of the trademark SMARTCLOUD and the tradenames SMART CLOUD and SMARTCLOUD in association with services, including cloud computing services.


The Opposition

The opposition proceeded to the hearing stage. The Hearing Officer said that Smart Cloud’s trademark and tradename consisted of two ordinary dictionary words. As Smart Cloud’s services were essentially cloud computing services, its trademark and tradename were highly suggestive, possessing a low degree of inherent distinctiveness. Similar considerations applied to the Mark.


It was well-established that a mark with low inherent distinctiveness or weak mark, is not entitled to a wide ambit of protection and that comparatively small differences will distinguish one weak mark from another. As Smart Cloud had not shown extensive use of its trademark and tradename, low distinctiveness of the SMARTCLOUD mark had not been enhanced.


It was found that, on the balance of probabilities, the confusion weighed slightly in favour of IBM and Smart Cloud’s opposition was rejected. Including the prefix IBM in the Mark significantly impacted the idea suggested by the Mark so it would clearly signal to the average consumer that the source of the Goods and Services was IBM.


The Federal Court

Smart Cloud filed new evidence concerning the timing of the development of the dictionary definition of the word “cloud”. The Judge said that on a preliminary basis this evidence could have materially affected the Hearing Officer’s conclusion concerning the ordinary meaning of the word “cloud” in a computing sense at the relevant date and the inherent distinctiveness of Smart Cloud’s trademark and tradename. IBM filed new evidence relating to marketplace use of the word “cloud” and the inherent distinctiveness of the mark SMARTCLOUD.


The Judge found this new evidence was sufficiently substantial and significant and the appeal proceeded as an appeal de novo.


Based on the admissible new evidence filed by Smart Cloud the Judge found that the Hearing Officer erred in relying on the dictionary definitions to conclude that, as of the relevant date the term ‘cloud’ was an ordinary dictionary word. However, based primarily on IBM’s new evidence, the Judge also found that the hearing Officer’s conclusion that the mark SMARTCLOUD was highly suggestive and possessed a low degree of inherent distinctiveness was correct.


A finding of low inherent distinctiveness in a trademark does not require the word or words that comprise the trademark to be ordinary dictionary words. A trademark that consists of a word or words in general usage and sufficiently defined in the casual consumer’s mind may have a low degree of inherent distinctiveness. IBM’s new evidence canvassed a broad range of publications and source material that helped to clarify the meaning of the words “cloud” and “cloud computing” or that use these terms in a manner that assumes knowledge of their meanings. The evidence included numerous articles and publications that pre-dated the relevant date and established that the terms ‘cloud’ and ‘cloud computing’ were words or terms commonly understood and in common use.


Based on this evidence the SMARTCLOUD trademark and tradename comprised two ordinary words. The Hearing Officer did not error in concluding that SMARTCLOUD was a highly suggestive mark “as it indicates that some form of automation is used in the provision of [its] cloud services” and positions those services as “a smart or intelligent choice”. There was also no error in the conclusion that the trademark SMARTCLOUD possessed a low degree of inherent distinctiveness. The Hearing Officer relied on these conclusions and the conclusion that the mark had acquired no measure of distinctiveness through use. The Judge confirmed the conclusion that the SMARTCLOUD trademark was a weak mark at the material dates.


In summary, a review de novo of the parties’ admissible new evidence led to the conclusion that the two words comprising Smart Cloud’s trademark and tradename SMARTCLOUD were words in common usage and were understood by the casual Canadian consumer of computer goods and related services at the relevant dates. The Hearing Officer’s error in using an inappropriate definition of the term ‘cloud’, while a material error, did not undermine the remaining analysis and conclusions.


Comment

The first circumstance to be considered in determining whether trademarks or tradenames are confusing is the inherent distinctiveness of the trademarks or tradenames and the extent to which they have become known. Distinctiveness is the essence and cardinal requirement of a trademark. When a trademark is inherently weak, absent acquired distinctiveness, small differences will distinguish it from other marks.


But it can be advantageous to choose a brand name that suggests the attributes of the class of product in issue. This type of mark can be easy to recall. However, as this case shows, it can be difficult to protect such a mark.


John McKeown

Sloan Nash & Haber LLP

480 University Avenue, Suite 1600

Toronto, Ontario M5G 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370


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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