February 17, 2017
In Sleep Country Canada Inc. v. Sears Canada Inc., 2017 FC 148, the Federal Court granted an interlocutory injunction restraining Sears Canada Inc. [“Sears Canada”] from using the slogan “There is no reason to buy a mattress anywhere else”.
Sleep Country Canada Inc. [“Sleep Country”] owns two Canadian trademark registrations for the slogan “WHY BUY A MATTRESS ANYWHERE ELSE?”. The slogan, and its accompanying musical jingle, have been used by Sleep Country in television, print, radio, and online advertising and promotional campaigns since 1994.
In response to Sears Canada’s adoption and use of its slogan, Sleep Country filed an action for trademark infringement, and subsequently a motion for an interlocutory injunction alleging that Sears Canada’s continued use of the slogan pending the determination of the trial would result in confusion in the market, depreciation of goodwill, and the irrevocable loss of distinctiveness to Sleep Country’s registered trademarks. The primary issue in the interlocutory injunction motion was whether Sears Canada’s continued use of its slogan would result in irreparable harm to Sleep Country.
3-part interlocutory injunction test
In RJR-MacDonald Inc. v. Canada, the Supreme Court set out the three elements that must be established in order for an interlocutory injunction to be granted, namely, that (1) a serious issue has been raised; (2) that irreparable harm will result if the injunction is not granted; and (3) that the balance of convenience favours the requesting party. Historically, interlocutory injunctions have been very rarely granted in trademark infringement cases, often because the alleged harm is found by the court to be quantifiable and not therefore “irreparable”
Determination that harm is “irreparable”
The determination of irreparable harm is a factual assessment that must be established by the evidence. It cannot be based on speculation or inferred from the facts. In this case, the Court was persuaded by the expert evidence presented by Sleep Country that on a balance of probabilities Sears Canada’s continued use of the slogan would result in trademark confusion, loss of distinctiveness, and damage to Sleep Country’s goodwill. The Court accepted that Sleep Country had established with clear and non-speculative evidence that the harm it would suffer as a result of Sears Canada’s use was unquantifiable and not compensable in damages.
Sleep Country relied on evidence from experts in the field of marketing, brand management, and accounting. The opinions were supported by marketing studies and research in consumer behaviour. The evidence established that Sleep Country’s slogan was well-known in Canada. Due to the qualitative and subjective nature of the slogan and its effect on consumer behaviour, Sleep Country’s experts argued that it would be impossible to isolate and quantify the slogan’s impact on brand value or sales. As described by one expert, “the big difference here is that we are measuring an idea that is a feeling to the customer, rather than something that inherently affects sales directly”. If a slogan is meant to trigger a response from a consumer, and the consumer is unable to link the slogan to a single source, then the value, impact, and distinctiveness of the slogan is lost. Once lost, the experts argued that it would be impossible to recover.
Sears Canada argued that the complexity or difficulty in calculating a potential harm does not result in an impossibility of quantification. So long as there is some reasonably accurate way of measuring the damages, the harm is not irreparable.
Sears Canada relied on expert evidence that it would be possible to calculate Sleep Country’s losses using historical sales information, with adjustments for the other factors. The expert theorized that it could “parse out” the effect of Sears Canada’s use of its slogan on both Sears Canada’s and Sleep Country’s mattress sales. Despite the expert evidence put forward by Sears Canada, the Court ultimately held that applying the proposed quantification methodology would be difficult and uncertain to the point of impossibility.
The Court’s Holding
The Court accepted that Sleep Country had established, on a balance of probabilities, both confusion and loss of distinctiveness. The Court stated that while confusion does not automatically result in the loss of distinctiveness, where there is a loss of distinctiveness, damage to goodwill is not possible to calculate. The Court found that Sleep Country’s evidence of harm was not speculative, but rather was based on and supported by fundamental marketing principles, foundational research in marketing econometrics, consumer behaviour, and learning theory. Having found that Sleep Country had established irreparable harm and that the balance of convenience was in Sleep Country’s favour, the court granted the requested injunction.
This case is instructive of the type and nature of evidence required to support a motion for an interlocutory injunction in a trademark infringement case. In particular, it demonstrates that where a loss of distinctiveness and damage to goodwill can be established with concrete and non-speculative evidence, the Court is more likely to find that the harm suffered is irreparable.
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