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What is a Statutory Claim for Passing Off?

Updated: Jul 27, 2021

The common law cause of action for passing off has a lengthy history. The claim has evolved to take into account changing commercial realities and is concerned with unfair competition or unfair trading. As illustrated by a recent decision of the Federal Court the statutory claim for passing off available in that court is much more constrained.

The Facts

The plaintiff is the owner and publisher of an Indian Punjabi-language daily newspaper called the “Ajit Daily”. This paper has been published in India since 1955 and is well-known among the Punjabi population in India. An online version, which Canadian Punjabis, read has been available since 2002.

While only a few subscriptions have been sold in Canada the plaintiff presented the evidence of several individuals who said they knew the Ajit Daily and its reputation as an important Punjabi paper in India.

The plaintiff’s logo for its newspaper originally looked like this:





The defendant owns and publishes a Canadian Punjabi-language newspaper called the “Ajit Weekly.” The newspaper has been published in Canada since 1993 and is distributed without charge at the front of supermarkets and other stores. An online version has been available since 1998.

For many years the defendant’s masthead incorporated the Punjabi word AJIT (essentially in the form of plaintiff’s logo shown above), with the words “The Ajit (Weekly Newspaper)” underneath, and with a design featuring two Canadian flags flanking the Sikh Khanda symbol under those words, as shown below:







Since September 2009, the defendant has used the following design mark normally with the stylized Punjabi word AJIT in the colour green:






The defendant adopted the above mark, (the Modified Logo) because of a Partial Settlement Agreement signed by the parties on September 15, 2009.

The Action

This dispute has been before the Federal Court and the Federal Court of Appeal on numerous occasions. After a motion for a summary trial the judge dismissed the first action. The plaintiff appealed to the Federal Court of Appeal who allowed the appeal and ordered that a new trial take place. We discussed this trial and subsequent decision in March of 2016.

A further appeal was allowed 2019 FCA 295 and a further redetermination was ordered. The current decision, 2021 FC 602 helpfully reviews the statutory codification of the cause of action for passing off.

As the litigation continued the plaintiff was left with an action for passing off and other related claims.

The Claim for Passing Off

The plaintiff’s claim relied on paragraph 7(b) of the Trademarks Act, which is a statutory codification of the common law cause of action. The claim under the paragraph 7(b) protects the goodwill associated with a trademark and is directed to avoiding consumer confusion through use of trademarks. To bring such a claim a plaintiff must prove possession of a valid and enforceable trademark, whether registered or unregistered, when the defendant first directed public attention to its own goods and services.

To succeed in an action for passing off, a plaintiff must establish three elements: the existence of goodwill; deception to the public because of a misrepresentation; and actual or potential damage to the plaintiff. A plaintiff must establish that:

(1) goodwill or reputation attached to the goods or services supplied by the plaintiff exists, in the mind of the purchasing public, from association with the identifying get up, such as a brand, recognized by the public as distinctive of the plaintiff’s goods or services;

(2) the defendant has made a misrepresentation to the public (whether intentional or not) resulting in or likely to result in the public concluding the defendant’s goods or services are those of the plaintiff; and

(3) the plaintiff has suffered or likely will suffer damage because of the erroneous belief caused by the defendant’s misrepresentation about the source of the goods or services.

There is a threshold requirement for a plaintiff to establish that it has used its trademark to distinguish its goods and services from those of others, which results in a valid and enforceable trademark, whether registered or unregistered, when the defendant directed public attention to its own goods and services: A plaintiff who does not meet this minimum threshold cannot prevent others from using that mark or name:

A trademark’s distinctiveness resides in its ability to indicate the source of a particular product, process or service in a distinctive manner, so consumers know what they are buying and from whom. While a trademark’s traditional role was to create a link in the prospective buyer’s mind between the product and the producer, it has come to represent not only a guarantee of origin but also an assurance to the consumer that the quality will be what they associate with the mark.

An assessment of deception to the public because of a defendant’s alleged misrepresentation necessitates consideration of the likelihood of confusion under section 6 of the Trademarks Act. All of the factors set out in subsection 6(5) of the Act and surrounding circumstances must be assessed and balanced. The section 6(5) factors include:

  • the inherent distinctiveness of the trademarks and the extent to which they have become known;

  • the length of time the trademarks have been in use;

  • the nature of the goods, services or business;

  • the nature of the trade; and

  • the degree of resemblance between the trademarks, including in appearance or sound or in the ideas suggested by them.

The test for confusion to be applied is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the mark when he or she has no more than an imperfect recollection of the prior trademark and does not give the matter any detailed consideration or scrutiny or examine closely the similarities and differences between the marks.

With respect to the third factor, it was unnecessary for the parties to have been or be in direct competition for the plaintiff to have suffered injury. Further, the defendant’s decision to use the name “Ajit” when it launched Ajit Weekly in Canada, with no credible basis and given Daily Ajit’s reputation in Canada which preceded it supported the inference that the name had commercial value in Canada at that time. It also meant that the plaintiff effectively lost control over the impact of its trade name in the defendant’s jurisdiction. Such a loss was sufficient to ground the third component of the test for passing off.

However, the plaintiff failed to establish that it suffered any significant damage by such loss of control in Canada.

When the Judge applied this approach to the facts of the case she was satisfied that the defendant has engaged in passing off during the period July 2004 to September 2009. The plaintiff was unsuccessful in asserting claims for passing off or other claims concerning the Modified Logo used after September 2009.

Comment

The judge’s statements apply to the statutory cause of action under subsection 7(b) of the Trademarks Act in the Federal Courts. Because of jurisdictional issues specific to the Federal Court such a claim must be in relation to a registered or unregistered trademark.

The common law cause of action is not restricted in the same way although the same three elements: the existence of goodwill; deception to the public because of a misrepresentation; and actual or potential damage to the plaintiff, must be shown. This cause of action can be more flexible, but it must be brought in a court of competent jurisdiction of one of the provinces.

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

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 in the Lawyer’s Daily published by LexisNexis Canada Inc.

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