Charging ahead: Canada's Federal Court clarifies trademark rules for comparative advertising in battery giant dispute

24 minute read
20 November 2023

In the recent decision Energizer Brands, LLC v Gillette Company, 2023 FC 804, Canada's Federal Court has provided helpful guidance around the use of competitor trademarks in comparative advertising.

While this topic is frequently considered by brands and Canadian trademark practitioners, it is a subject that has been rarely adjudicated in Canada. The decision in Energizer therefore joins just a handful of Canadian cases to have considered these issues comprehensively, including with a notable discussion of expert evidence and remedies in comparative advertising cases.

Background to the dispute

From 2014 to 2017, Duracell began selling DURACELL-branded batteries in Canada featuring packaging labels or stickers that included the ENERGIZER or ENERGIZER MAX word trademarks, the phrase "the bunny brand," or the phrase "the next leading competitive brand," alongside various comparative claims touting the superiority of Duracell's products. The labels at issue are set out below:

Products featuring the ENERGIZER and ENERGIZER MAX word trademarks directly on packaging were only sold in limited quantities in Canada (less than 900 individual packages bearing the ENERGIZER MAX trademark). Duracell asserted that these packages were destined for other markets, but reached the Canadian market inadvertently due to an "unintended operational error." As noted by the Court, however, there was no evidence that Duracell made any efforts to recall these products from the Canadian marketplace, and had no quality controls in place to prevent this type of error in the first place.

Energizer sued, alleging that Duracell's use of the ENERGIZER word trademarks, "the bunny brand," or "the next leading competitive brand" violated s. 22(1) of the Trademarks Act by depreciating the goodwill associated with its registered ENERGIZER word trademarks and Energizer Bunny Design trademarks in Canada (shown below):

Reg. No. TMA399312

Reg. No. TMA399312

Reg. No. TMA943350

Reg. No. TMA943350

Energizer also alleged that the comparative claims made by Duracell were false and misleading and prohibited by s. 7(b) and 7(d) of the Trademarks Act and s. 52 of the Competition Act.

In the course of the proceedings, Duracell freely admitted that all of the various comparative claims were intended to reference and target its competitor, Energizer. Therefore the only issue for the Court was whether or not Duracell's activities constituted violations of the Trademarks Act and Competition Act, and if so, what remedies were appropriate.

Procedural history

Energizer's claim has a lengthy procedural history. Commenced in 2015, a two-week trial of the action was not heard until 2022, followed by the issuance of the Court's decision in 2023.

Prior to the trial of the action, the parties had contested a motion for summary judgment brought by Duracell, which sought to narrow Energizer's claims. Among other issues, Duracell argued that the phrases "the bunny brand" and "the next leading competitive brand" were not themselves registered trademarks of Energizer and therefore could not engage either s. 7 or 22(1) of the Trademarks Act. After an appeal of the first instance summary judgment decision to the Federal Court of Appeal, all of Energizer's trademark claims against the impugned packaging survived summary judgment and advanced to trial: Energizer Brands, LLC v The Gillette Company, 2018 FC 1003 and Energizer Brands, LLC v The Gillette Company, 2020 FCA 49.

The importance of context when considering the use of competitor trademarks

Section 22(1) of the Trademarks Act prohibits "use" of another's registered trademark in a manner that is likely to "depreciate the goodwill" associated with it. In contrast to "ordinary" trademark infringement, s. 22(1) can prohibit "non-confusing uses" and uses by another that do not distinguish the source of the goods or services.

The Canadian "depreciation" action is similar to "dilution" or "tarnishment"-type claims in other jurisdictions and is intended to prevent misuse of a brand owner's rights even in the absence of a likelihood of confusion that is required for "ordinary" trademark infringement or passing off claims.

Among other situations, s. 22(1) of the Trademarks Act may be engaged in cases of comparative advertising where a party uses a competitor's registered trademark on its own packaging or in advertising as part of comparative performance claims.

There have only been a small handful of cases where a claim under s. 22(1) of the Trademarks Act has been successfully prosecuted in the roughly six decades since the depreciation remedy became available in Canada. There have been fewer still arising in the comparative advertising context.

In Canada, the leading s. 22(1) case in the context of comparative advertising remains the 1968 Clairol International Corp. et al v Thomas Supply and Equipment Co. et al decision of the former Exchequer Court. In Clairol, the Court found that depreciating trademark uses contrary to s. 22(1) can arise from any unauthorized use and are not limited to situations where a trademark is explicitly disparaged or tarnished. In a comparative advertising case, if the purpose of the use is to direct customers away from the trademark owner's goods or services as opposed to merely describing compatibility or the complementary nature of the other party's goods or services, s. 22(1) may be violated.

Clairol has also been taken to stand for the proposition that use of a competitor's trademark on labels or packaging will be generally prohibited if that trademark is registered with goods but may be permissible in advertising or non-point of sale marketing materials if that trademark is only registered with goods (rather than services). This somewhat artificial distinction flows from the particular definitions of "use" with goods as opposed to "use" with services under the Canadian Trademarks Act. While this aspect of Clairol has been the subject of considerable criticism over the years, it has never been overturned.

In Energizer, and following Clairol, the Court found that the Duracell packaging that directly featured the ENERGIZER and ENERGIZER MAX word trademarks violated s. 22(1) of the Trademarks Act. The Court found that:

  1. the ENERGIZER trademarks (registered with batteries) had been used by Duracell on packaging, though not for the purpose of distinguishing Duracell as the "source" of the  batteries (amounting to a "non-confusing" use);
  2. there was substantial goodwill attaching to the ENERGIZER trademarks, being a "globally recognized" and "well known, if not famous"; and
  3. that Duracell's use of the ENERGIZER trademarks was likely to have a depreciating or damaging effect on that goodwill.

On this last point, sometimes called the "linkage" element of the depreciation claim, the Court noted that it was difficult to determine if Duracell's use was likely to depreciate the goodwill in the ENERGIZER trademarks given the particular context and manner in which the ENERGIZER trademarks had been used in the marketplace. Specifically, the Court noted there was no evidence available speaking to how the average consumer "somewhat in a hurry" would react to the "jumble of information" provided on Duracell's crowded retail displays and the packaging itself and whether consumers would be influenced by the packaging and use of the ENERGIZER trademarks at issue.

Ultimately, however, the Court observed that the purpose of putting the ENERGIZER trademarks on the packaging was to promote the sale of Duracell's batteries by suggesting consumers would get a better result using Duracell's batteries. The Court therefore found Duracell's use was a case of a "bandying about" of another's trademarks resulting in lost control for the trademark owner, lesser distinctiveness, and ultimately a likelihood of depreciation of goodwill in the ENERGIZER trademarks.

With respect to the Duracell packaging that referenced the "bunny brand" opposed to the ENERGIZER trademarks, the Court continued to expand on a recent trend in the s. 22(1) jurisprudence and recognized that something other than use of the other party's exact registered trademark (or minor deviations of that trademark) can fall within the ambit of s. 22(1). In past cases, minor variations of a registered trademark had been found to be sufficient to engage s. 22(1). However, the Court took this trend a step further and found that the description "the bunny brand" was capable of evoking the image of a bunny that functions as a brand or mark (i.e. the ENERGIZER Bunny Design trademark). According to the Court, the use of the phrase "the bunny brand" was a short hand reference to the famous ENERGIZER Bunny Design trademark, and that Duracell's evocation in words of the "ideas suggested" by the ENERGIZER Bunny Design was sufficient to demonstrate a "use" of that trademark for the purposes of s. 22(1).

Somewhat surprisingly, while the Court found that this indirect reference to the ENERGIZER Bunny Design trademarks constituted a "use" of those registered trademarks, the Court found that the depreciation claim nonetheless failed at the "linkage" stage of the analysis. According to the Court, "the average hurried consumer is unlikely to pause long enough at the in‑store battery rack to read the [Bunny Brand Sticker] and to note the reference to "the bunny brand" written in much smaller print." Further, the Court found that "to make the linkage advocated by Energizer requires that the consumer take an extra mental step or steps when confronted with indirect phrase 'the bunny brand,' in contrast to the more direct" ENERGIZER word trademarks.

According to the Court, "the consumer would need to think of Energizer's iconic spokes‑character. Then the consumer would need to remember that the word ENERGIZER is written on the bunny's drum, thereby completing the link to an Energizer Trademark, or simply recall that a pink, bespectacled bunny with large feet and wearing a drum with ENERGIZER on it is a spokes‑character for, or trademark of, Energizer." In the absence of any survey or other evidence of consumer reaction to "the bunny brand" packaging, the Court was unable to conclude that this use resulted in a likely depreciation of the ENERGIZER Bunny Design trademarks.

It is somewhat difficult to reconcile the Court's findings that, on one hand, "the bunny brand" is a short hand reference that evokes the ENERGIZER Bunny Design trademarks, so much so that it constitutes "use" at the first stage of the analysis, but on the other hand, consumers would not be likely to make the same connection at the "linkage" stage. The reasoning given by the Court appears to be that at the "linkage" stage of the analysis the Court has to have regard to the full "context" of the use, including the relative size and appearance of the impugned reference not only on an individual package but within a full retail store display of products. Why the Court believed that consumers would not be likely to notice the reference to "the bunny brand" but would be likely to notice the reference to ENERGIZER word trademarks in the first category of packaging remains unexplained.

The prevailing message seems to be that in comparative advertising cases, or other cases where the trademark owner's trademark is not being used for the purpose of distinguishing the source of the product, a plaintiff will face a greater evidentiary burden to prove the linkage element. The Court's frequent comments on the lack of primary evidence of consumer perception  throughout the Energizer decision very much suggests that if there had been even some evidence of consumer reactions suggesting that they recognized the "the bunny brand" as reference of Energizer's trademarks the claim may well have succeeded.

The decision in Energizer also suggests that in other s. 22(1) cases where the plaintiff's trademark (or something sufficiently similar to it) is in fact being used for the purpose of distinguishing (i.e. used as the brand of the defendant's goods or services), "linkage" may be capable of being inferred or presumed without further consumer evidence.

Finally, dealing with the Duracell packaging which referenced the "next leading competitive brand," the Court found that there was not any likelihood of depreciation of goodwill of Energizer's trademarks. Among other reasons, the Court found that the evidence did not prove that the phrase "next leading competitive brand" comprises a distinctive aspect of, or may be mistaken for, any of Energizer's trademarks. Energizer did not own a trademark registration for the "next leading competitive brand," nor was the "next leading competitive brand" sufficiently similar to any Energizer trademark registrations to evoke them to the ordinary consumer.

Guidance on comparative claims

In addition to prohibiting infringing and depreciating uses of trademarks, the Trademarks Act codifies various unfair competition prohibitions. These include prohibitions against making false or misleading statements discrediting the business, goods or services of a competitor, or making use of false or misleading descriptions about the character or quality of goods or services. Similar prohibitions against making false and misleading statements are found in the Competition Act.

In this case, Energizer alleged that Duracell's various performance claims (for example, that Duracell's products would last 15 per cent or 20 per cent longer than Energizer's products) were false and misleading.

The Court noted that comparative advertising is by its nature one-sided and does not necessarily represent a full and balanced view, though for it to be permissible there must be a reasonable basis for the representations made. Under the applicable case law, the Court considers the general impression conveyed by the representations as well as their literal meaning in determining whether the representations are  false or misleading.

After reviewing extensive expert evidence put forward on testing of the parties' battery products, the Court was unconvinced that Duracell's various claims were not reasonably supported by the testing data. Based on this review, the Court concluded there was in fact a reasonable basis for the comparative claims made and they were not false or misleading.

In making these findings, the Court reiterated that a reasonable basis to support a performance claim is one that conveys or reflects to the consumer an advantage or benefit that is "reasonably attainable in the circumstances" (rather than necessarily or always attainable), and that analysis of such claims will invariably depend on the facts of each case. In this respect, the Court noted the utility of disclaimer language such as "up to," "results vary by device and usage patterns," and similar language that may be sufficient to temper consumer expectations and ensure that claims are "reasonable" in the circumstances.

Furthermore, even if the claims were false and misleading, the Court also indicated that these allegations would have failed, as the representations were not "materially misleading." In this respect, Energizer had not been able to establish that there were any increased sales attributable solely to the presence of the stickers on the Duracell products at issue.  

Substantial award of damages

While the parties put forward substantial evidence (including expert evidence) on the issue of monetary remedies, the Court was not satisfied that Energizer had suffered lost sales attributable to the packaging that used the ENERGIZER word trademarks and which was found to violate s. 22(1) of the Trademarks Act. As noted by the Court, if anything, the evidence appeared to show that the opposite occurred during the period in question (that Energizer had gained market share). Nor was the Court persuaded that Duracell's activities had nonetheless "slowed" Energizer's growth in sales that it would have otherwise enjoyed during that time.

Based on these findings, while the Court granted a permanent injunction against any further use of the ENERGIZER trademarks by Duracell, the Court exercised its discretion under s. 22(2) of the Trademarks Act to disallow Energizer's claim to elect an accounting of profits instead of damages. On this point, the Court noted that Energizer had failed to demonstrate causation between Duracell's stickers and the profits earned on the sale of stickered battery packages.

Nonetheless, the Court found that Energizer was still entitled to damages for Duracell's "bandying about" of its registered ENERGIZER trademarks to the likely detriment of the goodwill attaching to them and "as a deterrent."

The Court recognized the difficulty of assessing damages for a harm that had "not occasioned any demonstrable loss in the form of market share." Ultimately, the Court fixed damages in the amount of $179,000, which is significant given the relatively modest period of infringing sales and volume of infringing products sold. Details as to how precisely the Court arrived at this figure based on the parties' financials have been redacted from the public version of the Court's decision.

Finally, while noting that the distribution of packaging bearing the ENERGIZER trademark in Canada was inadvertent, the Court nonetheless found that Duracell's lack of quality controls to prevent this inadvertent entry into the Canadian market was a significant and aggravating factor affecting the damages assessment.

Despite this aggravating factor, the Court declined to award punitive damages as Duracell's behaviour in this matter did not rise to the level of "high-handed, malicious, arbitrary or highly reprehensible misconduct" required.

Comments on expert evidence in trademark cases

Throughout the decision, the Court lamented the fact that it was being asked to decide key issues with no primary evidence, survey evidence, or expert opinion evidence speaking to consumer reactions of the packaging at issue.

While the parties had put forward expert opinion evidence addressing general and theoretical marketing concepts, the Court found this evidence to be for the most part "commonsensical." The Court noted that, notwithstanding their expertise, the experts' evidence was focused on speculation about consumers' reactions to the packaging at issue rather than being based on primary data or survey evidence that could provide evidence of consumer reactions to the packaging (e.g. whether there was a linkage to the Energizer trademarks and/or whether the claims would have been perceived as false or misleading by consumers). The Court noted that if such evidence had been put forward, it would have been received by the Court as both relevant and necessary, as it would be relevant to exactly the questions the Court was addressing and would be necessary as something not generally known to a trial judge.  

In the years since the 2011 Supreme Court of Canada decision in Masterpiece Inc. v Alavida Lifestyles Inc., there has been a general reticence by litigants to put forward expert evidence in trademark disputes. In Masterpiece, the Supreme Court indicated that trial judges should use their "common sense" in trademark infringement cases rather than rely on many types of expert opinion evidence, and to fulfil their "gatekeeper role" to ensure that unnecessary, irrelevant, and potentially distracting expert evidence is not allowed to extend and complicate court proceedings.  

The Court's decision in Energizer is a reminder that survey evidence and expert opinion evidence, provided it is necessary, properly constructed and addresses relevant issues, will be welcomed by the Federal Court in trademark cases.

Final thoughts

The trial decision in Energizer was not appealed and is now final. The issue of liability for legal costs remains under reserve and a separate decision on costs is expected to be issued by the Court.

The decision in Energizer provides useful guidance on a number of points, including:

  • For brands considering their own or another's comparative advertising, Canadian law on the use of competitor trademarks in comparative advertising remains more stringent than other jurisdictions. In Canada, consequences for violations of these trademark prohibitions may be substantial in monetary terms even in the absence of evidence of monetary damages such as lost sales. As such, the use of a competitor's registered trademark directly on packaging, even as a part of a comparative claim, continues to be a high-risk activity in Canada. Brands should therefore ensure that packaging intended for the Canadian market complies with Canadian trademark law, and put in place quality control processes to prevent the inadvertent distribution of packaging intended for other markets.
  • Canadian trademark law treats comparative advertising cases differently from other situations involving the unauthorized use of another party's trademarks. In comparative advertising cases, the context and manner of the allegedly unlawful use will be given significant attention, and evidence speaking directly to consumer reactions to the allegedly unlawful use may be necessary depending on the facts of the case.
  • There remains a role for properly constructed survey and other expert evidence in trademark cases in Canada, particularly where that evidence deals with consumer reactions that are not simply a matter of common sense or otherwise within a trial judge's knowledge.

At the same time, the decision in Energizer raises a number of questions and leaves other questions to be decided in future cases, including:

  • The limits of what trademark "uses" will be captured by s. 22(1) of the Trademarks Act. It is reasonably clear that the use of another's registered trademark (or something very similar to it) within the scope of the registration will likely always be improper, and that generic references to "the next leading brand" or similar language will likely be permissible. However, there is considerable grey area in between these extremes. What type of "indirect" reference will sufficiently "evoke" another's registered trademark and give rise to a depreciating linkage will continue to be a fact-specific determination.
  • The Court's focus in Energizer on the "full context" of how the impugned references appeared both on packaging and within a larger retail displays creates uncertainty about whether a given comparative advertising activity will be found to offend s. 22(1) of the Trademarks Act. Oftentimes how a brand owner's products and packaging are actually displayed by a retailer within retail displays is not even fully within the brand owner's control, raising additional challenges to trademark owners trying to avoid these types of claims.
  • Finally, whether and in what circumstances s. 22(1) of the Trademarks Act prohibits "honest referential use" or "nominative fair use" of another's trademark (concepts recognized in other jurisdictions) or uses in support of "compatibility" claims rather than comparative claims remains unclear. The limits of permissible non-comparative referential uses of another's trademark in Canada remains to be determined in future cases.

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