The Federal Court of Canada recently released a decision that again highlights the difficulties of obtaining an interlocutory injunction in Canada without proving irreparable harm with clear and non-speculative evidence. The decision is: Visionwerx Investment Properties Inc. v Strong Industries, Inc. 2020 FC 378
Background facts
The Plaintiff, VisionWerx, manufactures and has sold a “Spaberry 5.0” hot tub in Canada since 2014. The Defendant, Strong Industries, is a US company that makes a “Solstice” hot tub which Costco Wholesale has sold in Canada since 2018.
In January 2019, VisionWerx learned of sales of the Solstice hot tub in Canada and commenced an action in the Federal Court of Canada. It filed a motion for an interlocutory injunction at the same time. The Statement of Claim asserts that VisionWerx has an unregistered “distinguishing guise” in the Spaberry 5.0 hot tub and the sale of the Solstice hot tub in Canada amounts to passing off of the VisionWerx guise. Some of the features alleged to form the distinguishing guise include “a front access panel at the center of the hot tub in a hemispherical shape with a pattern of bolt heads; sweeping, curved lines indented into the surface of the hot tub; and, a configuration of raised nodules inside the tub”.
Under the former Trade-marks Act, which was in force when the action was commenced, a “distinguishing guise” was defined as a: (a) shaping of goods or their containers; or (b) a mode of wrapping or packaging goods; the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish goods or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others. The term “distinguishing guise” was removed from the Trademarks Act following amendments which came into force on June 2019. However, a similar principle applies under the new trademark regime since the new Act now broadens the definition of a protectable “sign” to include “a three-dimensional shape” and a “mode of packaging goods”. Therefore, the findings in the VisionWerx decision ought to be applicable under the current Canadian trademark regime.
The decision
As briefly described above, VisionWerx alleged that the Solstice hot tub passed off its Spaberry 5.0 hot tub distinguishing guise. VisionWerx alleged that it had met all three components required to establish passing off , which were set out by the Supreme Court of Canada in Kirkbi AG v Ritvik Holdings Inc., 2005 SCC 65 as follows: (a) goodwill in the distinctiveness of the product; (b) misrepresentation to the public by the Defendants; and (c) damage to the Plaintiff.
In the context of the motion for an interlocutory injunction, Justice Kane applied the long standing test for an injunction as set out by the Supreme Court of Canada in RJR-MacDonald Inc. v Canada (Attorney General), [1994] 1 SCR 311 (“RJR”):
(a) that there is a serious issue to be tried;
(b) the party seeking the injunction would suffer irreparable harm if an injunction were not granted; and
(c) that the balance of convenience favors the party seeking the injunction.
On the first part of the RJR analysis, the Defendants argued for a higher threshold than “serious issue”, submitting that the threshold should be whether VisionWerx had a strong prima facie case. The Defendants submitted that RJR required a higher – prima facie - threshold to be met by the moving party where the grant of the injunction will amount to a final determination of the action. Justice Kane did not consider the facts of the motion to warrant the higher threshold and proceeded to apply the lower – serious issue – threshold.
Although the Defendants argued that VisionWerx had not met even the lower standard and that there was no serious issue to be tried, the Court disagreed and considered that VisionWerx had pointed to evidence to support its arguments with respect to the three elements of the passing off test, and that these issues were not frivolous or vexatious. In finding that VisionWerx had established that there was a serious issue to be tried, the Court noted that “having an unregistered [distinguishing guise] is not, on its own, a bar to bringing a passing off action under section 7(b) of the Trade-marks Act”. The Court left the issue of whether the distinguishing guise was functional and therefore not enforceable to be decided by the trial judge.
On the second part of the RJR analysis, VisionWerx needed to prove, on a balance of probabilities, that if an injunction were not granted, it would suffer irreparable harm. Justice Kane described, with reference to RJR, that irreparable harm is harm which “cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other”. In assessing whether VisionWerx had proven irreparable harm on a balance of probabilities, Justice Kane applied the jurisprudence of the Federal Court of Appeal in Centre Ice Ltd. v National Hockey League, [1994] FCJ No 68 noting that the evidence of harm must be “clear and not speculative”.
The Plaintiff alleged that it would suffer irreparable harm if an injunction were not granted due to confusion between the two hot tubs causing a loss of distinctiveness and a depreciation of its goodwill in the Spaberry 5.0 distinguishing guise. The Plaintiff further argued that this harm could not be quantified in monetary terms due to a number of factors contributing to the confusion with the Solstice hot tub, and that the inability to quantify the harm made it irreparable.
For its part, the Defendant argued that any lost sales to VisionWerx or any additional sales made by the Defendants could be tracked, were quantifiable and therefore not irreparable.
The Court took the view that confusion between the Spaberry 5.0 and the Solstice was not sufficient evidence alone to establish loss of distinctiveness and loss of goodwill, noting that confusion does not automatically result in loss of distinctiveness or goodwill. The Court found that the evidence relied upon by VisionWerx in support of argument for irreparable harm fell short of the “clear and not speculative” standard, in part, because there was no evidence that anyone purchased a Solstice thinking it was a Spaberry 5.0 and was dissatisfied. The Court therefore held that VisionWerx had not proven that there was any loss of goodwill in the Spaberry 5.0 hot tub distinguishing guise. The Court further found that there was no evidence that it would be impossible to determine any lost sales due to any possible confusion. VisionWerx kept business records of their sales that could be used as the starting point to determine whether the Defendants’ sales of the Solstice took away from those of VisionWerx’s Spaberry 5.0.
In the result, the Court held that the Plaintiff did not meet its burden at the second part of the RJR analysis by failing to adduce clear and not speculative evidence of irreparable harm. The Court concluded that VisionWerx would not suffer irreparable harm and denied the injunction on that basis.
While the Court did not need to address the third part of the RJR analysis given its finding on irreparable harm, it nevertheless made some brief observations and concluded that the balance of convenience would be divided.
Concluding remarks
This case is noteworthy for three points. First, RJR remains the guiding case for judges faced with motions for interlocutory injunctions. Second, an unregistered distinguishing guise may be enforceable for the purposes of passing off. And, third, clear and not speculative evidence remains the standard of proof of irreparable harm in the Federal Court.
Although VisionWerx was able to meet the low threshold to establish a serious issue, it did not adduce clear, convincing and not speculative evidence of irreparable harm. In most unsuccessful motions for an interlocutory injunction in the Federal Court, the plaintiff generally fails to meet this part of the RJR analysis. When considering whether to bring a motion for an interlocutory injunction, we recommend careful consideration of whether there is evidence to prove irreparable harm. Without that, and in the interest of timeliness, it may be preferable to forgo such a motion and instead move the proceeding along in an expedited manner.