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Passing Off Trademarks

August 23, 2021

Ontario

,

Canada

Issue

Can an unregistered trademark be infringed if the party alleging infringement does not use the trademark?

Conclusion

No person shall direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another. (s. 7(b)) (Trademarks Act)

The accepted approach to the infringement of unregistered trademarks differs only to the extent that the Court must examine the actual use of the trademarks. In the absence of usage, there can be no infringement of an unregistered trademark. (Divine Hardwood Flooring Ltd. (Dvine Flooring) v. D Nine Flooring Ltd., (D Nine Flooring))

The tort of passing off is in many respects the equivalent cause of action for unregistered trade-marks as infringement s. 20 of the Trademarks Act is to registered trade-marks. The overall legislative scheme of the Trade-marks Act is the protection, identification, and registration of trade-marks, whether registered or unregistered. (Kirkbi AG v. Ritvik Holdings Inc.)

In order to succeed in an action for passing off, a plaintiff must establish three elements: the existence of goodwill; deception to the public because of a misrepresentation; and actual or potential damage to the plaintiff. A plaintiff must establish, more specifically, that:

(1) there exists goodwill or reputation attached to the goods or services supplied by the plaintiff, in the mind of the purchasing public, by reason of association with the identifying get up, such as a brand, recognized by the public as distinctive of the plaintiff’s goods or services;
(2) the defendant has made a misrepresentation to the public (whether intentional or not) resulting in or likely to result in the public concluding the defendant’s goods or services are those of the plaintiff; and
(3) the plaintiff has suffered or likely will suffer damage as a result of the erroneous belief caused by the defendant’s misrepresentation regarding the source of the goods or services. (Sadhu Singh Hamdard Trust v. Navsun Holdings Ltd.)

In Marlboro Canada Limited v. Philip Morris Products S.A., the parties each appealed from various portions of the trial judge’s decision regarding a "no-name" cigarette package identified only by the image on the front. The Plaintiffs had introduced a cigarette onto the Canadian market that used on its packaging the disinctive "rooftop" design associated with a brand of cigarettes sold by the Defendent. In their decision, the Court held that the unregistered mark can only be considered with regards to infringement to the extent that it has been used.

In Hidden Bench Vineyards & Winery Inc. v. Locust Lane Estate Winery Corp., the Federal Court held that the Plaintiff alleging passing off by a competing business had not satisfied the test applicable to the establishment of a cause of action under either s 7(b) or s 7(c) of the Trademarks Act. Both trade names were unregistered. In their judgement, the Court examined the definition of the term "use". The claim was dismissed.

Law

S. 7 of the Trademarks Act, RSC 1985, c T-13 governs confusion in the marketplace:

7.  No person shall
(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another;

In Divine Hardwood Flooring Ltd. (Dvine Flooring) v. D Nine Flooring Ltd., (D Nine Flooring), 2018 FC 500 (CanLII), the Plaintiff, Divine Hardwood Flooring Ltd. [Divine], brought a motion before the Court seeking a default judgment in the form of injunctive relief to restrain the Defendant, D Nine Flooring Ltd. [D Nine], from continuing to infringe its several registered and unregistered trademarks. Divine had created substantial goodwill and brand recognition in Alberta and British Columbia. D Nine competed with Divine in the same channels of trade, but on a much smaller scale. The Court found that the trade name and signage was confusingly similar, and that use of the D Nine trade name was likely to cause confusion in the for the consumer. The Court found for the Plaintiff in relation to both the registered and unregistered marks, and granted the injunction:

[14] A finding of trademark infringement is based on the presence of confusion about the source of the goods or services.

[15] Under section 20 of the Trade-marks Act, RSC, 1985, c T-13 [Act], Divine is entitled to the exclusive right to the use throughout Canada of its registered trademarks in respect of the associated goods and services. An infringement occurs where, inter alia, a party sells, distributes, or advertises any goods or services in association with a confusing trademark or trade name: see subsection 20(1)(a) of the Act.

[16] There is no question that D Nine is engaged in the sale of goods and services associated with Divine’s registered and unregistered trademarks. The issue that remains is whether the use of the D Nine trade name would be likely to lead a customer to infer that D Nine’s goods and services are those of Divine.

[17] In determining whether D Nine’s promotional activities are likely to be confused with Divine’s registered trademarks, subsection 6(5) of the Act requires the Court to consider all of the surrounding circumstances, including:

(a) the inherent distinctiveness of the trade-marks or trade-names and the extent to which they have become known;
a) le caractère distinctif inhérent des marques de commerce ou noms commerciaux, et la mesure dans laquelle ils sont devenus connus;
(b) the length of time the trade-marks or trade-names have been in use;
b) la période pendant laquelle les marques de commerce ou noms commerciaux ont été en usage
(c) the nature of the goods, services or business;
c) le genre de produits, services ou entreprises;
(d) the nature of the trade; and
d) la nature du commerc
(e) the degree of resemblance between the trade-marks or trade-names in appearance or sound or in the ideas suggested by them.
e) le degré de ressemblance entre les marques de commerce ou les noms commerciaux dans la présentation ou le son, ou dans les idées qu’ils suggèrent.


[18] The test to be applied is whether the use of D Nine’s trade name when promoting the sale of flooring products would create confusion in the mind of a casual consumer somewhat in a hurry and with an imperfect recollection of Divine’s trademarks. That consumer is not expected to give the matter any detailed consideration or scrutiny or to closely examine the similarities or differences between the marks: see Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 at para 20, [2006] 1 SCR 824.

[19] A key consideration in this analysis is the degree of visual and sound resemblance between Divine’s marks and D Nine’s trade representations. The other factors set out in subsection 6(5) of the Act largely favour Divine. Divine’s trademarks are visually distinctive and some of them have been in use since 1999. Divine has also made substantial investments to create goodwill around its trademarks and, given the size of its business, those trademarks are obviously well-known in Western Canada, including Edmonton. The goods and services associated with the Divine trademarks also match those of D Nine.

[20] The accepted approach to the infringement of unregistered trademarks differs only to the extent that the Court must examine the actual use of the trademarks. In the absence of usage, there can be no infringement of an unregistered trademark: see Marlborough Canada Limited v Philip Morris Products S.A., 2012 FCA 201 at paras 55-56, 434 NR 207. In this case, I am satisfied that at least three of Divine’s unregistered trademarks (depicted at para 7 herein) have been and continue to be used throughout its area of trade, including Edmonton.

In Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 SCR 302, 2005 SCC 65 (CanLII), the Supreme Court of Canada discussed whether an unregistered trademark was protected under s. 7(b) of the Trademarks Act, RSC 1985, c T-13. The dispute revolved around whether the plaintiff, who was the manufacturer of a well-known building block product, could claim that the functionality of the product itself and the geometrical pattern of raised studs on top of the block constituted a trademark. In their decision, the Court held that an unregistered trademark is protected by the Act, and that the tort of passing off applies to unregistered trademarks:

25 These factors apply equally to s. 7(b) of the Trade-marks Act. First, s. 7(b) is remedial; its purpose is to enforce the substantive aspects of the Trade-marks Act relating to unregistered trade-marks.

The tort of passing off is in many respects the equivalent cause of action for unregistered trade-marks as infringement [s. 20 of the Act] is to registered trade-marks. The overall legislative scheme of the Trade-marks Act is the protection, identification, and registration of trade-marks, whether registered or unregistered.
(Gill and Jolliffe, at p. 2-22)


26 Second, the passing-off action protects unregistered trade-marks and goodwill enjoyed by the trade-marks. Section 7(b) is therefore limited by the provisions of the Trade-marks Act: it does not expand the federal jurisdiction in relation to trade-marks and trade-names but merely rounds out an otherwise incomplete trade-mark scheme (Asbjorn Horgard A/S (F.C.T.D.), at p. 237). Unlike s. 7(e), which was found to be ultra vires Parliament because it did not have any connection with the enforcement of trade-marks or trade-names (Asbjorn Horgard A/S (F.C.T.D.), at p. 242) and was significantly broader in application, the creation of a statutory action for passing off in s. 7(b) is limited in its application.
[...]

30 The Trade-marks Act includes numerous provisions relating to unregistered trade-marks: “Parliament by sections 1 to 11 of the Trade Marks Act has prescribed a regime concerning what constitutes a trade mark and the adoption thereof, whether registered or not” (Royal Doulton, at p. 374). The primary difference between registered and unregistered trade-marks under the Act is that the rights of a holder of a registered trade-mark are more extensive:

At common law the right to a trade mark thus arose through the use of a mark by a business to identify its products to the public. There was no need for the business to register its mark in order to protect its right to use the trade mark and prevent the misuse of its trade mark by other businesses. The passing off action was the enforcement mechanism available for the protection of trade mark rights. Without the passing off action, common law trade mark rights would have little value.
The Canadian Act, as the statutory history set out by Laskin C.J.C. in the MacDonald case, supra, showed, has traditionally been concerned with the protection of unregistered as well as registered trade marks. In this it is like the Copyright Act [R.S.C. 1970, c. C‑30], whose coverage is broader than registered copyright. In both Acts what registration does is to provide additional benefits over and above those available at common law.
(Asbjorn Horgard A/S (F.C.A.), at pp. 560-61)


Registration of a trade-mark gives the registrant the exclusive right to the use throughout Canada of the trade-mark and a right of action to remedy any infringement of that right: ss. 19-20. In addition, in order to exercise those rights, the existence of the mark itself does not have to be established. Registration is evidence enough. Nonetheless, marks remain marks, whether registered or unregistered, because their legal characteristics are the same.

31 There is no reason to believe that the registration regime under the Trade-marks Act was intended to create two separate enforcement regimes. The scheme set out in the Trade-marks Act regulates both registered and unregistered trade-marks. It regulates the adoption, use, transfer, and enforcement of rights in respect of all trade-marks. If trade-marks are intended to protect the goodwill or reputation associated with a particular business and to prevent confusion in the marketplace, then a comprehensive scheme dealing with both registered and unregistered trade-marks is necessary to ensure adequate protection. The inclusion of unregistered trade-marks in the regulatory scheme is necessary to ensure the protection of all trade-marks. The Trade-marks Act is more than simply a system of registration.

In Sadhu Singh Hamdard Trust v. Navsun Holdings Ltd., 2021 FC 602 (CanLII), the Federal Court examined a case about the Punjabi term AJIT, meaning “unconquerable” or “invincible,” and the rights to it in Canada in association with newspapers. The Plaintiff claimed the Defendant had engaged in passing off, infringement, and depreciation of goodwill. In its examination of the case, the Court cited Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 SCR 302, 2005 SCC 65 (CanLII) in determining that s. 7(b) of the Trademarks Act, RSC 1985, c T-13 applies to both registered and unregistered trademarks, and found for the Plaintiffs that the Defendants had engaged in passing off:

[47] The Trademarks Act regulates both registered and unregistered trademarks. More specifically, paragraph 7(b) is directed to the enforcement of trademarks and trade names in Canada. “[T]he civil remedy in s. 7(b) protects the goodwill associated with trade-marks and is directed to avoiding consumer confusion through use of trade-marks”: Kirkbi AG v Ritvik Holdings Inc, 2005 SCC 65 [Kirkbi] at para 35. As noted by Justice Laskin, it is a requirement that the Plaintiff prove “possession of a valid and enforceable trademark, whether registered or unregistered, at the time the defendant first began directing public attention to its own goods and services”: Hamdard FCA 2019, above at para 39. Apart from the amendment of the word “wares” to “goods” and the formal repeal of paragraph 7(e), section 7 has remained substantially the same from the time when the Plaintiff commenced this lawsuit in 2010 to the present, including the recent amendments to the Trademarks Act that came into force in June 2019.

[48] In order to succeed in an action for passing off, a plaintiff must establish three elements: the existence of goodwill; deception to the public because of a misrepresentation; and actual or potential damage to the plaintiff. Greater detail about these prerequisites can be found in Ciba-Geigy Canada Ltd v Apotex Inc, 1992 CanLII 33 (SCC), [1992] 3 SCR 120 [Ciba-Geigy] at 132, citing Reckitt & Colman Products Ltd v Borden Inc, [1990] 1 All ER 873 at 880. Paraphrasing, a plaintiff must establish, more specifically, that:

(1) there exists goodwill or reputation attached to the goods or services supplied by the plaintiff, in the mind of the purchasing public, by reason of association with the identifying get up, such as a brand, recognized by the public as distinctive of the plaintiff’s goods or services;
(2) the defendant has made a misrepresentation to the public (whether intentional or not) resulting in or likely to result in the public concluding the defendant’s goods or services are those of the plaintiff; and
(3) the plaintiff has suffered or likely will suffer damage as a result of the erroneous belief caused by the defendant’s misrepresentation regarding the source of the goods or services.


[49] In my view, inherent in (1) above is the threshold requirement for a plaintiff to establish that it has used its trademark to distinguish its goods and services from those of others, thus resulting in a valid and enforceable trademark, whether registered or unregistered, at the time the defendant started to direct public attention to its own goods and services: Hamdard FCA 2019, at para 39, citing Nissan Canada Inc v BMW Canada Inc., 2007 FCA 255 at paras 15-18. A plaintiff who does not meet this minimum threshold cannot succeed in preventing others from using that mark or name: Brewster Transport Co v Rocky Mountain Tours & Transport Co, 1930 CanLII 36(SCC), [1931] SCR 336 at pages 339-340.

In Marlboro Canada Limited v. Philip Morris Products S.A., 2012 FCA 201 (CanLII), the parties each appealed from various portions of the trial judge’s decision regarding a "no-name" cigarette package identified only by the image on the front. The Plaintiffs had introduced a cigarette onto the Canadian market that used on its packaging the disinctive "rooftop" design associated with a brand of cigarettes sold by the Defendent. In their decision, the Court held that the unregistered mark can only be considered with regards to infringement to the extent that it has been used:

[53] ITL argues that, in reaching such conclusion, the trial judge failed to apply his mind to “reverse confusion”, that is, customers of the senior mark mistakenly associating its source with the source of the junior mark (Reasons paragraph 248). He also did not appreciate that if PM’s no-name package continues to be referred to by a significant number of consumers as Marlboro, this will jeopardize the distinctiveness of its MARLBORO mark because two different products sold on the Canadian market, emanating from two different and non-associated sources, will be called Marlboro by Canadian consumers.
[54] A few months after the trial judge’s decision, the Supreme Court of Canada in Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387[Masterpiece Inc.] had an opportunity to review how one should apply the test set out in section 6 of the Act to determine if a trade-mark would likely cause confusion with another trade-mark.
[55] Justice Marshall Rothstein, writing for the Court made it very clear that, when considering the degree of resemblance between marks, the approach differed depending on whether they were registered or not.
[56] For unregistered marks, a court should only consider the manner in which they have actually been used. However, for registered marks, a court must consider the trade-mark registration according to its terms to reflect the entire scope of the rights granted under the latter.
[57] According to Justice Rothstein, the problem with an analysis which takes into account the actual use by the owner of a registered trade-mark is that nothing prevents such owner from changing how and for what he uses it, so long as this change is within the ambit of the registration. Thus, he concludes at paragraph 59:

[59] For this reason, it was incorrect in law to limit consideration to Alavida’s post-application use of its trade-mark to find a reduced likelihood of confusion. Actual use is not irrelevant, but it should not be considered to the exclusion of potential uses within the registration. For example, a subsequent use that is within the scope of a registration, and is the same or very similar to an existing mark will show how that registered mark may be used in a way that is confusing with an existing mark.
[My emphasis]


[58] Finally, in Masterpiece Inc., Justice Rothstein noted that when confusion is alleged in respect of several different marks, the Court should make an individual comparison in respect of each rather than make an analysis based on a composite of all the marks (paragraphs 43 to 48).

[59] Before turning to what the trial judge did in this case, it is worth noting a few other general principles that may be relevant here:

A mark symbolises a linkage between a product and its source. When assessing the likelihood of confusion, the focus is on such mental link in the head of the mythical consumer (Mattel, Inc. v. 3894207 Canada Inc., 2006 SCC 22, [2006] 1 S.C.R. 772 [Mattel]). The full factual context including the factors set out in subsection 6(5) of the Act must be considered.
It is not relevant that consumers are “unlikely to make choices based on first impressions”. It is an error to discount the likelihood of confusion by considering what actions the consumer might take after encountering the mark in the market place (Masterpiece Inc., paragraphs 71, 73 and 74).
Confusion as to the source (no need for it to be precisely identified) will arise if the public (mythical consumer) would likely infer that the source of the two products (senior mark or junior mark) is the same (this includes in appropriate circumstances associated sources such as licensor and licensee).
Steps taken to avoid confusion are irrelevant in the context of an infringement action pursuant to section 20 of the Act (David Vaver, Intellectual Property Law: Copyright, Patents, Trade‑marks, 2nd ed. (Toronto: Irwin Law, 2011) [Vaver] at page 533, Pink Panther Beauty Corp. v. United Artists Corp.,
1998 CanLII 9052 (FCA), [1998] 3 F.C. 534 (C.A.).
Proof of actual confusion or the absence of such confusion over a long period of time is a very weighty factor that must be considered as part of the surrounding circumstances pursuant to subsection 6(5) of the Act (Mr. Submarine Ltd. v. Amandista Investments Ltd., (1987) 19 C.P.R. (3d) 3, [1988] 3 F.C. 91 (C.A.) [Mr. Submarine], at paragraph 34, Mattel, at paragraph 55).

In Hidden Bench Vineyards & Winery Inc. v. Locust Lane Estate Winery Corp., 2021 FC 156 (CanLII), the Federal Court held that the Plaintiff alleging passing off by a competing business had not satisfied the test applicable to the establishment of a cause of action under either s 7(b) or s 7(c) of the Trademarks Act, RSC 1985, c T-13. Both trade names were unregistered. In their judgement, the Court examined the definition of the term "use". The claim was dismissed:

[39] Against the backdrop of this definition, it is useful to return to the explanation of the threshold requirement by the Federal Court of Appeal in Nissan. That case involved claims under the Act, including a claim under s 7(b) related to the unregistered marks M and M6 that were, at the time of trial, the subject of applications for registration by the plaintiff BMW. After identifying that the first issue to be determined was whether the evidence supported a finding that BMW had valid and enforceable trademarks in the unregistered M and M6 marks, the Court of Appeal explained the required analysis as follows (at paras 16 to 18):

16. The term “trade-mark”, as defined in
section 2 of the Act, requires that a mark be used by a person for the purpose of distinguishing or so as to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others. As such, in order to obtain trade-mark rights, the trade-mark must be “used” by the person for the purpose of distinguishing their wares or services from those of others. As stated by the Supreme Court of Canada, “the gravaman of trade-mark entitlement is actual use”: Mattel, Inc. v. 3894207 Canada Inc.,2006 SCC 22 (CanLII), [2006] 1 S.C.R. 772 at paragraph5.
17. “Use” is a defined term in the
Act.Section 2 provides that “use” in relation to a trade-mark means any use that bysection 4 is deemed to be a use in association with wares or services. At issue are BMW’s automobiles, parts and accessories and, as such, we are dealing with wares, not services.
18. In accordance with
subsection 4(1) of theAct, a trade-mark is deemed to be used in association with wares, if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.

[40] Following analysis of the evidence, the Court of Appeal concluded (at para 29) that there was no evidence of use of the marks, in the manner required by the Act, on which the trial judge could rely to conclude that they were unregistered trademarks in accordance with s 2 of the Act for purposes of a passing off claim under s 7(b).

[41] Based on this jurisprudence, I am unable to agree with LLEW that Hidden Bench is required to establish acquired distinctiveness in relation to its alleged mark, in order for it to represent a valid and enforceable mark. To be clear, the sufficiency of the evidence necessary to establish acquired distinctiveness is an issue in this matter, related to the components of an action for passing off, which will be canvassed in detail later in these Reasons. However, I disagree with LLEW’s position that acquired distinctiveness is a requirement that must be satisfied in connection with the threshold issue.

[42] While Nissan does not state expressly what is required for a mark to be valid and enforceable, it analyses that requirement in terms of whether the alleged mark has been used, within the meaning of s 4 of the Act, so as to constitute a trademark within the meaning of s 2. LLEW has not referred the Court to any jurisprudence that analyses this requirement in terms of an alleged mark’s distinctiveness.
Alexsei publishing date:
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