Canadian courts provided important guidance on some key trademark issues in 2020. A number of these notable decisions are discussed below.
A Registration is a Trump Card
The Federal Court of Appeal in Wenger SA v Travelway Group International Inc. confirmed that a trademark registration is a defence to an action for passing off.
In 2017, the Federal Court of Appeal held Travelway liable for passing off even though it was using its own registered marks, and referred the matter back to the trial court to determine if the Travelway registrations should be expunged. The trial court determined that they should:
… it must be implied that the Federal Court of Appeal considered the Travelway marks to be invalid despite not explicitly writing such a conclusion, as it found passing off had been established. This conclusion stems from the case law establishing that "the use of a registered trade-mark is an absolute defence to an action in passing off" …. I have no indication that the Federal Court of Appeal intended to depart from said case law.
However, the trial court held that Travelway could not be liable for damage during the period when its registrations were valid and in force – it could only be held liable for infringing activity after the registrations were expunged and there was no such activity.
The matter went back up to the Federal Court of Appeal for consideration on the issue of damages.
Firstly, the Federal Court of Appeal confirmed that the use of a registered trademark cannot attract damages:
Once the owner obtains the certificate of registration, the protection afforded to the registered trademark under section 19 of the Act is essential for the proper functioning of the trademark system and trademark law overall. There are policy reasons for this protection. It serves to protect the public as well as the owners of trademarks by affording transparency, stability and certainty of the trademark system in Canada.
The equivalent protection of section 19 is not available in other statutes governing intellectual property law in Canada. In that regard, trademark law is distinct from patent law and copyright law. Therefore, I conclude that there are sound reasons why the use of a registered trademark does not give rise to liability in damages or profits for the period arising prior to it being struck from the Register ….
The one exception is if the registration is void ab initio (which was not the case here).
Then the Federal Court of Appeal turned to the finding of passing off and confirmed that a registration is a complete defence to a passing off action – essentially acknowledging that its 2017 decision was wrong. However, since Travelway had not appealed the 2017 decision, it was binding as between the parties and damages were awarded.
An Official Mark is Not a License to Infringe
Official Marks give broad protection to public authorities, and are unique to Canada. In Ontario (Energy) v Quality Program Services Inc., the Federal Court of Appeal confirmed that Official Marks cannot be used as a defense to an allegation of trademark infringement.
QPS owns the registered trademark EMPOWER ME for use in association with energy awareness, conservation, and efficiency services. It sued the Ontario Government for use of the mark emPOWERme on a website used to educate electricity ratepayers about the electricity system and energy conservation. Ontario subsequently sought and obtained Official Mark protection for emPOWERme, and argued that the Official Mark afforded a complete defense to QPS's claims. The trial court disagreed:
Section 9(1)(n)(iii) reads as a prohibition against any person adopting a mark consisting of, or so nearly resembling as to be likely to be mistaken for, an official mark. It does not read as conferring upon the public authority any particular protection against claims for trademark infringement or other claims under the Act.
Accordingly, Ontario infringed the registered trademark of QPS.
The Federal Court of Appeal agreed:
In no way does the text confer on the public authority any particular protection against claims for trademark infringement or other claims under the Act. A public authority that chooses to use a mark that is confusing to a registered trademark does so at its peril. Clear legislative wording would be required to effect a different result.
Leave to appeal to the Supreme Court of Canada was denied.
Use in Canada Does not Necessarily Require Bricks & Mortar
In Miller Thomson LLP v Hilton Worldwide Holding LLP, the Federal Court of Appeal considered a narrow question with broad implications – in the absence of a bricks and mortar hotel in Canada, was there use of the WALDORF ASTORIA trademark in Canada in association with hotel services? Canadians could access reservation and booking services for the hotels but they had to go to the US to access the hotels themselves. The lower court concluded the hotel services encompass more than the provision of a room and that people in Canada could take a meaningful benefit from the delivery of hotel services through the online reservation services.
The Federal Court of Appeal agreed with the lower court that hotel services include reservation and payment services, and that "the ability to reserve a particular type of hotel room at a specific Waldorf Astoria hotel in a particular location for a specified (and potentially discounted) price constituted a material benefit to the Canadian customer".
The Federal Court of Appeal went on to caution that:
… the mere display of a mark on a website from outside of Canada will not suffice to establish use of the mark in this country in association with registered services. Moreover, the ability of individuals in Canada to passively view content on a foreign website will be insufficient to constitute use of a mark in this country. There must, at a minimum, be a sufficient degree of interactivity between trademark owner and Canadian consumer to amount to use of a mark in Canada in conjunction with services over the internet.
Grey Goods
In TFI Foods Ltd v Every Green International Inc., the Court granted an interlocutory injunction to prevent the sale of grey goods in Canada where the label constituted a misrepresentation.
TFI Foods is the exclusive Canadian distributor of food products sold by a Taiwanese company called I-Mei Foods. TFI discovered that retailers in Toronto were carrying I-Mei branded products with labels falsely stating that Every Green was the exclusive Canadian distributor. TFI and I-Mei brought an action for passing off to prevent Every Green from distributing I-Mei Foods products in Canada with a label claiming Every Green was the exclusive distributor.
The sale in Canada of grey goods does not infringe a registered trademark or constitute passing off. However, the false statement on the label could ground an action for passing off:
Every Green's label, which is affixed to the products bearing the registered I-MEI Design, falsely states that Every Green is the exclusive Canadian distributor of such I-MEI branded products. I am satisfied that there is a serious issue to be tried that this false statement pertains to a trademark, namely the I-MEI Design, and constitutes a misrepresentation within the scope of a claim for passing off under subsection 7(b). I am also satisfied that there is a serious issue that this misrepresentation is deceptive, both to the retailers Every Green and TFI sell to, and to the purchasing public.
… the fact that parallel imports may themselves be sold without constituting passing off does not excuse other acts or statements that misrepresent an association with the trademark owner.
The Court issued an interlocutory injunction.
In Costco Wholesale Canada Ltd. c Simms Sigal & Co. Ltd., the Quebec Court of Appeal determined that the sale of grey goods by Costco constituted interference with contractual rights in Quebec.
Simms was the exclusive Canadian distributor of Rock & Republic ("R & R") jeans, which retail between $250-$325. In 2009, Costco was offered R & R jeans, sourced through a different distributor, Abfi Inc., for retail at just under $100. When sales began in 2009, Simms fielded client complaints due to the price differential. Simms advised Costco that it was the exclusive Canadian distributor, demanding that Costco discontinue the sale of the jeans. Costco responded that "grey goods" are not illegal in Canada and continued sales of the product.
At trial, the Court found that, from the moment Costco became aware of the exclusive distribution contract, it committed contractual interference the elements of which are: (1) awareness of the contractual rights; (2) inciting or participating in the violation of the contractual rights; and (3) bad faith or contempt for the contractual rights.
The Quebec Court of Appeal upheld the decision.
Conclusion
These key 2020 cases from Canada provide important guidance on issues relating to Official Marks, use of trademarks on services, and grey goods.
This article was written in collaboration with Robert A. MacDonald, former Head of Intellectual Property in Gowling WLG (Canada) LLP and co-Head of the Gowling WLG International IP practice. He recently retired.