Top trends in trademark law

Monique: Hello. My name's Monique Couture. I am a partner with the IP department of Gowling WLG. I'm here today with Rob MacDonald. Delighted to be so. Rob has very recently retired from our firm. Before he retired, Rob was the head of the Gowling WLG IP group in Canada, as well as Co-Head of the Gowling WLG international IP group. He's widely known as one of Canada's leading trademark practitioners with global recognition. So glad that you're here, Rob. Welcome.

Rob: Thanks, Monique, I'm delighted to be here with you today.

Monique: So I've asked Rob to join us today to chat about our favourite topic which is, of course, some of the leading trademark cases of the past year. Despite the pandemic the courts were actually quite surprisingly busy and found all kinds of interesting issues to resolve. Rob, let's get started. What cases caught your eye in 2020?

Rob: Well, I'm going to start with two decisions out of the Federal Court of Appeal. One is rather complicated and, unfortunately the time we have, we can't do it justice. The other is fairly straightforward. The first one is a case involving two companies, Wenger and Travelway. It's been kicking around in the Federal Court for quite some time now. In fact, in 2017 the Federal Court of Appeal found Wenger liable for both trademark infringement and passing off. What was really interesting about that decision though was that Travelway was using its own registered trademark. So up until that point I would have said to a client, "The use of a registered trademark is a defense to a passing off action." But the Federal Court of Appeal in 2017, without any comment on that point, found Travelway liable for passing off. The case went back down to the trial division for further consideration and then came back up to the Federal Court of Appeal in 2020. What's interesting in 2020 is the Federal Court of Appeal acknowledged that what it had decided in 2017 was probably not correct. It reiterated that in action for passing off a trademark registration is a defense. Until that registration is expunged you cannot be held liable for passing off, nor can you be liable for damages in the period of time when the registration was valid. That is the simplest way to put the decision. There are lots of other things that are going on in there, and what's interesting is that Travelway has sought leave to appeal the decision to the Supreme Court of Canada, so possibly a case that will be keeping our eye on and talking about in the future.

Monique: Absolutely. Do you have a sense of when we would expect to hear on the leave from the Supreme Court of Canada?

Rob: I think typically leave applications take about 4 to 6 months to resolve. I think this one was filed about 2 months ago so probably early summer we should know whether or not this case is going to go up to the Supreme Court of Canada.

Monique: Alright. So something to look for in the summer/fall of 2021.

Rob: Absolutely. Lots of fun on that one.

Monique: Always good to have a case to look out for. What about the QPS case, Rob?

Rob: Well QPS is a case, again in the Federal Court of Appeal, that involves official marks and anybody who has dealt with trademark law in Canada has encountered an official mark from time to time. This is a case involving the Ontario Government and a company called Quality Program Services. Quality Program Services owned a registered trademark, 'EMPOWER ME', and the Ontario Government launched a similar service also called 'EMPOWER ME'. QPS sued for infringement and passing off. After the law suit was commenced the Ontario Government went to the Registrar of Trademarks and said, "We have adopted EMPOWER ME as an official mark and we want you to give public notice under Section 9." Registrar did that. Keep in mind that there is no examination of the mark in the official mark process. The Registrar has no discretion but to give public notice. Right. Public notice having been given, Ontario goes to the Federal Court in the action brought by QPS and says, "We have an official mark. It is a complete defense." The Federal Court said, "No. It's not. An official mark is a prohibition against third parties doing something but it doesn't give you rights." So Ontario was found liable for trademark infringement. Case went to the Court of Appeal and the Court of Appeal agreed and said section 9 prohibits activity by third parties but it doesn't give you any rights. A public authority that chooses for its official mark something that is confusing with an already existing registration does so at its peril. I thought that a very clear and very important decision.

Monique: MmHmm. Absolutely. Has it been appealed further than the Supreme Court of Canada or are we standing on this Federal Court of Appeal decision?

Rob: Ontario did seek leave to go to the Supreme Court of Canada. The Supreme Court of Canada turned it down. So I take that to mean the Supreme Court of Canada looked at the cases and said, "Yup. Court of Appeal's got it right." Quite frankly I think the Court of Appeal did. I think it was the right decision.

Monique: Very interesting.

Rob: Now those are sort of the first two cases that caught my eye and they're very important cases for trademark owners in Canada but there's also been some cases relating to grey goods. Monique, I know you've been keeping particularly close eye on the grey goods cases. Tell us about that.

Monique: Yes, grey goods is a very interesting topic because, of course, it's very frustrating for a trademark owner who has a problem with grey goods in Canada but there are two cases last year which took a different line of attack which were very interesting cases.

Rob: Before we talk about the cases, let's remind our listeners that the sale of grey goods in Canada is legal. You can do it. Right?

Monique: Yes. The sale of grey goods in Canada is legal, from the perspective of a straight trademark infringement, but what the two cases are showing us is that there are emerging lines of attack that are developing which are very interesting and important for brand owners. So the first case we're going to talk about is the Costco case. Now, this is a Quebec case. So it was based on Quebec civil law. So it wouldn't necessarily have application across the country but nonetheless it's extremely interesting. Costco was an importer of grey goods that was found liable for intentional interference with contractual rights. So Costco started to import these high end jeans and received a demand letter from the official exclusive distributor in Canada advising that they should not do so. Costco continued to sell these jeans on the basis that they were grey goods. So there was a court case where the Trial Judge and the Court of Appeal both were satisfied that Costco was aware of the contractual agreement between the trademark owner and the distributor. From the moment it received the demand letter it was liable in damages, both actual and punitive, for interfering with contractual relations. So this case was a big one this year in 2020.

Rob: Now, did Costco try and go to the Supreme Court of Canada on this? Because it sounds like a fairly important issue here.

Monique: It's a very important issue and interestingly Costco did not. So the Quebec appeal decision stays. So Costco is found liable under the Quebec Civil Code. Very interesting case from a grey goods perspective. The second interesting case from a grey goods perspective was a Federal Court case. A TFI case. In that case it involved foods and the labelling of foods. This case, the angle taken against the grey goods was the improper labelling. So the facts were that the exclusive Canadian distributor found grey goods in food stores, and the label identified the defendant as the exclusive Canadian distributor, which was of course false. It is incorrect. So both the trademark owner and the distributor took action for infringement and passing off. The infringement action was dismissed because they were grey goods so you can't win an infringement action on grey goods in Canada. However, with respect to the passing off action, it was successful because there was misrepresentation on the label which could cause damage to the goodwill of the trademark owner. So this is a very interesting aspect to take. That it was a misrepresentation on the label that could cause damage to the goodwill of the trademark owner. So damages flowed to the trademark owner but interestingly not to the distributor.

Rob: It's a very interesting case. In fact both cases are very interesting. I guess the takeaway for both trademark owners and importers of goods is that it's not carte blanche. If you're importing grey goods you do have to exercise some care in light of what the courts have said in these two decisions. If you're the trademark owner you don't have to simply sit back and say, "Well they're grey goods. There's nothing I can do.", you should look at all the surrounding circumstances and see if there's something akin to what we've seen in these cases that you can hang your hat on.

Monique: That's exactly right. So in this case it's the devil is most definitely in the details. So the surrounding circumstances, in one case a label, and the other aspect what are the contractual arrangements that you may or may not know about. There might be other creative ways to look at the grey goods from the perspective of passing off. So the cases are very interesting and also for the perspective of this idea of interfering with a contractual relation. So fairly new cases. Super interesting to know what direction brand owners may go with this but certainly better than just saying there's absolutely nothing we can do. So that's interesting.

So I think now, Rob, let's switch gears and let's talk about a standard of review for decisions of the Opposition Board by Federal Court. Always an exciting subject.

Rob: I think only two trademark lawyers could think it's an exciting subject but I agree with you. It is exciting. In this instance though we're actually going to reach back to a decision in 2019. This is a decision of the Supreme Court of Canada in a case called Vavilov. Now Vavilov was not a trademark case. Vavilov was actually an immigration case and what sort of is really sort of interesting about it is, it's an immigration case relating to the children of two Russian deep cover spies. But the court took the opportunity to look at the standard of review when appealing decisions of regulatory bodies such as the opposition board.

Monique: That's right and that standard is now, just to go through it quickly, where no new evidence is filed the standard is correctness for questions of law, and palpable and overriding error for questions of fact or mixed fact in law of which confusion, excessive confusion, would be such a question. If you have new evidence filed the de novo review of the record, with respect of those issues to which new evidence speaks, however, the new evidence must be sufficiently substantial and significant and of ... value. So you just can't slap any old thing together. The evidence really has to speak to the issues at hand.

Rob: Now, you used the phrase 'palpable and overriding error'. What does that mean?

Monique: What is this beast?

Rob: What is it?

Monique: It's beast and what does it eat in the winter? A palpable and overriding error is described as one that is obvious and goes to the very core of the outcome of the case. That's one way to look at it. Another way, which I really like this one, it is a beam in the eye and not a needle in the haystack. I think that's kind of helpful conceptually, this big picture. Then in another example, sort of analogy that's been put forth by the courts, is that it's not enough to pull at the leaves and the branches and leave the tree standing. Being the decision, of course. The entire tree must fall. So, there we have it. A few analogies that are helpful. How was Vavilov applied, Rob?

Rob: So we saw several cases over the past year in which Vavilov was applied. Both at the Federal Court level and at the Federal Court of Appeal. What I take from those decisions is that it is going to be more difficult to overturn decisions of the Registrar. Unless you have new evidence, as you spoke to. But keep in mind, our listeners should keep in mind, there is an amendment pending to the Trademarks Act. We're waiting for it to come into force. Currently you can file new evidence as of right. When the amendment comes into force you will only be able to file new evidence with leave of the court. So that will make it that much more difficult and I think much more important for people to make sure that their case in front of the Opposition Board is rock solid from the outset.

Monique: Yes. It does usher in a new era especially thinking how long it takes to get a decision. I would think by the time you get to the point where you're appealing these new changes might be in place. Do you have a sense of when the new amendments might come into force?

Rob: Well, it's difficult to sort of second guess what goes on inside the government. I would assume that they're probably looking at an in force state in the fall. They've got regulatory change they have to deal with and I've no idea where that process stands. The regulations haven't been published yet. Hopefully in the fall but I think that would be the earliest we're likely to see it.

Monique: Alright. So something to keep an eye on in 2021.

Rob: Yes, indeed.

Monique: So, Rob, I think we've got time to talk about one last case. What do you make of the Waldorf Astoria case?

Rob: We've been waiting for this decision for quite some time. There have been various cases dealing with the use of trademarks in association with services, when those services are offered by someone outside of Canada via the internet. We've seen a lot of retail store cases where the retail services are offered on the internet but there's no bricks and mortar. The Waldorf case involves the trademark Waldorf Astoria and the hotel services. Just to be clear from the outset, there is no Waldorf Astoria Hotel in Canada. I don't think there ever was a Waldorf Astoria Hotel in Canada. To actually enjoy the benefit of a Waldorf room you have to leave Canada to do it. The Waldorf Astoria trademark was challenged on the basis of non-use in Canada but ultimately the challenge was unsuccessful. What the Federal Court of Appeal said is, "Okay. Hotel services is very broad and it includes in their reservation services." Waldorf Astoria is offering reservation services via the internet. So that service is being offered. Is it being offered in Canada? Then that comes down to is there a material benefit that is enjoyed by Canadians in Canada? Did they receive a material benefit here? What the court said, on the evidence in front of it was, a Canadian consumer can go online to the Waldorf website, or in fact the Hilton website because Hilton owns Waldorf, they can choose their Waldorf Astoria Hotel. They can choose the location. They can choose their type of room and they can choose the price they're willing to pay. All of that means that they are receiving a benefit in Canada because they've nailed down all of these criteria. They may not enjoy the room until they go to the States but that doesn't matter. In this instance the court said, "Yeah. That constitutes use of the trademark in Canada."

Monique: But, Rob, does that mean that if a Canadian can access a website that it necessarily constitutes use in Canada?

Rob: Well that's always been the big question. How far does this net extend? What the Court of Appeal said to us in this case is, no. There's got to be a sufficient degree of interactivity between the trademark owner and the Canadian consumer so as to amount to use in Canada. What the court said it would look for in assessing that interactivity was website metrics showing the extent to which Canadians actually visit the website. Evidence with respect to the number of transactions Canadians have actually conducted on the website. Evidence showing that the data is stored on servers in Canada or evidence showing that when I go on, for example, to the website it shows the price in Canadian dollars, there's an automatic conversion. So it gave us a checklist of things to look for in terms of assessing that interactivity with the Canadian market.

Monique: So, Rob, do you think this goes deeper? For a time it used to be if the services are available to Canadians and the mark is displayed that would suffice to be use in association with services. So this is a deeper level of kind of duty to Canada that's being contemplated.

Rob: I think the point is that we live in a very interconnected world. You and I sitting at our computers here today could find any number of websites that aren't directed at Canadians. Aren't directed at Canada at all but we may be able to purchase something on those websites. I think what the court is saying, more than a random access to that service is going to be required for there to be use in Canada. I think that's probably the right approach for the court to take.

Monique: It's a very interesting issue because, of course, with the pandemic online retailing has exploded and it's online everything. It's the future. There's no doubt about it and online use is so important for clearance and for enforcement. This is a huge issue. I wish we could speak about it some more but this is the end of our time on this, our first conversation online. Thank you so much for joining me with this, Rob. I hope that we can speak again in the fall when the new regulations are tabled.

Rob: Well, Monique it is always a pleasure to sit down with you and talk about trademark law. Thanks for inviting me along today.

Monique: Thank you for being here.