Canadian Trademarks year in review 2021 - Infringement/Passing off

13 minute read
28 February 2022

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Infringement/Passing off

Loblaws Inc. v. Columbia Insurance Company, 2021 FCA 29

This decision supports the principle that acronyms are afforded a narrow scope of protection in Canada, and that the mark as a whole must be reviewed when assessing confusion.

The Federal Court of Appeal dismissed various claims made by Loblaws Inc., and provided guidance regarding the importance in establishing the overall circumstances as to how consumers may encounter trademarks in the marketplace, and how this might assist in avoiding a finding of confusion.

The parties both use Short Form Marks bearing the letters "PC".

The Federal Court found that while there was some resemblance between the marks, confusion was still unlikely due to the fact that the Defendant sold its wares as a direct seller and its Mark was always used together with its corporate name. Loblaws appealed the decision. In dismissing the appeal, the Federal Court of Appeal rejected all four of Loblaws' arguments relating to the following factors:

  1. Degree of Resemblance: Loblaws submitted that finding the competing marks to be identical in sound should have been sufficient for the Federal Court to establish the existence of a strong resemblance, but the FCA disagreed:

    […] As explained by the respondents, although paragraph 6(5)(e) of the Act provides that resemblance is assessed on the basis of "appearance or sound or in the ideas suggested by them" [our emphasis], it is clear from the context that the word "or" is intended to be inclusive, as it is notably used in combination with the word "including".

    The Act requires the court to consider and weigh all surrounding circumstances. It would be odd if the trial judge had to limit his analysis to the sound and not consider the visual appearance of the competing marks, especially when regard is had to his finding that this is the most relevant aspect.
  2. Nature of Trade: Loblaws submitted that the trial judge erred in limiting the analysis of the "nature of trade" factor without considering that both parties targeted the same class of customers. While the review of relevant customer base was usually part of the "nature of trade" analysis, the Federal Court found that considering the customer base as part of the "nature of wares, services or business" factor was essentially the same:

    It is not an error not to have repeated this observation in the course of the "nature of trade" analysis; what is important is that the trial judge was alive to this issue
  3. Lack of Evidence: Loblaws submitted that the trial judge erred in drawing an adverse inference from the lack of evidence since no such evidence was readily available. Loblaws argued that the competing marks had only existed for a short time to explain the lack of evidence of customer complaints. The Federal Court disagreed, stating that there was no set period during which competing marks must coexist before an adverse inference can be drawn:

    No doubt some measurable amount of time must past before a negative inference can be drawn, but the duration must be assessed in light of the particular circumstances of each case.
  4. Channels of Trade: Finally, Loblaws argued that the trial judge placed too much emphasis on the difference between the parties' channels of trade especially since consumers would "not know anything" about the Defendant's marketing. The FCA disagreed:

    The trial judge was fully aware that Loblaw's diversion argument was premised on consumers having no awareness of Pampered Chef at the time they first encounter its Short Form Marks. However, he observed that the possibility of first time consumers seeing Pampered Chef's Short Form Marks, without contextual cues, "represents only one component of the overall circumstances surrounding how … consumer[s] may encounter the Short Form Marks". He went on to discard this possibility because Pampered Chef's Short Form Marks are deployed together with its long form mark or its corporate name, so that consumers are not likely to be confused.

The Federal Court of Appeal dismissed the appeal with costs.

Hidden Bench Vineyards & Winery Inc. v. Locust Lane Estate Winery Corp., 2021 FC 156

This decision demonstrates the difficulty in establishing acquired distinctiveness in descriptive secondary marks.

This case involves adjacent wineries located on Locust Lane in the Niagara wine region. In 2003, Hidden Bench began using the mark LOCUST LANE in association with its winery and in 2005, it began using LOCUST LANE in association with wines.

In 2019, Locust Lane Estate Winery Corp. was founded on the property that was formerly the Mike Weir winery, which was in receivership. It began using the words "Locust Lane Estate Winery" in 2019 and it began using the LOCUST LANE mark on its wine labels in 2020:

Hidden Bench took issue with Locust Lane Estate's use of LOCUST LANE and brought an application for passing off contrary to ss. 7(b) and (c) of the Trademarks Act. The application was dismissed on both grounds.

Before addressing the merits of the passing off claim, there were two preliminary issues addressed by the Court. First, the Court clarified that s. 7(b) of the Trademarks Act codifies the common law cause of action for passing off and that s. 7(c) of the Trademarks Act codifies the common law action for "passing off by substitution".

Second, the Court discussed the "valid and enforceable trademark" threshold requirement for bringing a claim pursuant to s. 7(b) of the Trademarks Act. The Court confirmed that "distinctiveness" is not required to meet this threshold. All that is required is that the mark meet the statutory definition of a mark, including use within the meaning of s. 4 of the Trademarks Act for the purpose of distinguish goods or services.

In assessing the passing off claim under s. 7(b) of the Trademarks Act, the Court found that the Locust Lane marks lacked inherent distinctiveness, since LOCUST LANE was a descriptive mark. The Court then assessed whether the Locus Lane marks had acquired distinctiveness. In finding they had not, the Court acknowledged that Hidden Bench had demonstrated exclusive and continuous use of the Locust Lane marks since 2005, but found that its evidence of sales, namely,$2.4 million in sales of LOCUST LANE branded wine between 2006 and 2019 (e.g., $184,000 per year) was not sufficient to establish secondary meaning. The Court noted that there is a "heavy onus" to establish that a descriptive mark has acquired secondary meaning and noted the placement of the Locust Lane marks beside more prominent and non-descriptive marks (e.g., HIDDEN BENCH) played a role in coming to this decision:

Given the manner in which the Locust Lane Marks are used on the labels in the context of more prominent and non-descriptive marks, it is difficult to conclude from such use that it will have engendered in the minds of Hidden Bench's customers a secondary meaning of the sort necessary to establish acquired distinctiveness in relation to the descriptive marks. I therefore agree with [Locust Lane Estate's] position that Hidden Bench's evidence of its sales volumes is insufficient evidence of consumer perceptions to establish reputation or goodwill in any of the Locust Lane Marks.

Having established that there was no goodwill, the passing off claim under 7(b) of the Trademarks Act failed. And, since there was no evidence that Locust Lane Estate's goods or services were substituted for those of Hidden Bench, the claim under 7(c) of the Trademarks Act failed as well.

Boulangerie Vachon Inc. v. Racioppo, 2021 FC 308

This decision highlights the limits of registry evidence alone, provides further clarity to circumstances in which depreciation of goodwill can be found, and discusses circumstances in which an officer or director will be personally liable for intellectual property infringement.

The Federal Court granted relief on the basis of passing-off, infringement and depreciation of goodwill, determining that the Defendants' use of the trademark HOSTESS on bread products contravened the registered trademark rights of Boulangerie Vachon in the trademark HOSTESS, used and registered in association with cakes.

The Defendant tried to invalidate the Plaintiff's registrations on the basis of non-distinctiveness given other HOSTESS trademark registrations, against which the Plaintiffs had failed to enforce its rights. The Federal Court rejected this attempt, as no evidence of use of these marks was put forth. Even with evidence of use, the plaintiff's failure to enforce its marks against certain traders would not have been enough to show a loss of distinctiveness:

The ongoing and unenforced use of the mark must be such that consumers were no longer able, at the date of the challenge, to distinguish between Vachon Bakery's products and those of others using HOSTESS marks. There is no evidence this is the case. In essence, the defendants ask the Court to conclude Vachon Bakery's marks have lost distinctiveness simply because it has not enforced them against four other traders who have not been shown to be using their marks, and who would have the statutory right to do so if they were. In my view, there is no basis to reach such a conclusion.

Based on this, the Federal Court found that the surrounding circumstances all weighed in favour of a finding of confusion:

[...] there may be infringement even where a defendant sells a good not expressly listed in a registration, even if those goods are not in the same general class. A trademark or trade name is "confusing" with another trademark if the use of both in the same area "would be likely to lead to the inference that the goods or services associated with [them] are manufactured, sold, leased, hired or performed by the same person, whether or not the goods and services are of the same general class or appear in the same class of the Nice Classification

As to passing off, the Federal Court found evidence of the Plaintiff's extensive sales and promotion over a lengthy period sufficient to demonstrate the existence of goodwill. The Defendants were also found to have considered using the HOSTESS trademark at least in part based on their knowledge of that mark as used by Saputo Bakery, further suggesting the recognized existence of goodwill.

In its analysis of depreciation of goodwill, the Federal Court relied on volume of sales, the extent and duration of advertising and publicity, and the degree of inherent and acquired distinctiveness of the HOSTESS Word Mark to find that there was goodwill. The court also considered the trademark's geographic reach and the fact that it was not confined to a specialized channel of trade as favouring a finding of goodwill. The Federal Court also noted:

Finally, the requirement of likely depreciation involves a lowering of the value of the goodwill in the trademark: Veuve Clicquot at para 63. This may include notions of "blurring" of brand image, "whittling away" of the power to distinguish the plaintiffs' products and attract consumers, "diminishing its distinctiveness," or "tarnishing" the trademark through negative association: Veuve Clicquot at paras 64–67. This is not by causing confusion, but "by creating an association in consumers' minds between a mark and a different good or service"

I am satisfied that the defendants' use of the trademark HOSTESS on bread products had—and if permitted to resume, would further have—the likely effect of blurring the HOSTESS brand image and diminishing its distinctiveness.

The Court declined find personal liability as the Defendant had a sincere belief that he was entitled to use a HOSTESS mark, and there was no clear evidence of willful infringement or indifference.

The plaintiffs were granted injunctive relief, the cancellation of the domain name and awarded damages in the amount of $10,000.

If you would like to discuss this article further or have any specific questions about it, please contact a member of our Trademarks, Brands & Designs Group.

The authors would like to thank Melissa Cheng, Richard Du, YooJung Jung, Luke Robert and Chloe Ilagan.

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