Federal Court Decision Highlights Alternative Path to Proving Trademark Damages

For trademark owners, proving damages in an infringement proceeding can be a challenging task. It is often difficult to show that the defendant's infringing conduct caused lost sales and an impairment to goodwill. However, a recent Federal Court of Canada decision, 7299362 Canada Inc. (Alexa Translations) v. Amazon.com, Inc., 2025 FC 1674 (Alexa Translations), points to an alternative path to proving damages, which could make it easier for plaintiffs to receive fair compensation for trademark infringement.

The Challenge of Proving Damages in Trademark Cases

A trademark distinguishes the source of one's goods or services from those of others in the marketplace. Trademark registrations grant their owner the exclusive right to use their mark and to prevent others from using marks confusingly similar to it. Remedies for trademark infringement include: a permanent injunction, to prevent further infringement; damages, to compensate for any loss suffered as a result of the infringement; and/or an accounting of profit, to force the defendant to disgorge the benefit of the infringement.

In practice, proving that a defendant's infringement caused the plaintiff's loss is often very difficult. Showing that prospective customers did not purchase the plaintiff's product or service because of confusion involves establishing a baseline level of sales, and a drop in sales that is causally related to the defendant's infringement. These practical requirements are challenging to meet in rapidly- evolving markets, or where products and services do not have perfect substitutes. What if a plaintiff recently launched its products and it does not have a long history of sales, or if its sales continued to grow despite the infringement? What if the plaintiff's and defendant's services are not perfect substitutes, or if the defendant (or plaintiff) does not charge to allow users to access its services online? How do plaintiffs show impairment to their goodwill in these circumstances?

In difficult situations like these, Canadian courts often award "nominal damages", which are better described as, "compensatory damages whose amount is determined by convention." These damages acknowledge that the plaintiff suffered harm, but their quantum is low, almost invariably less than $20,000, set by reference to case law rather than the parties' circumstances. Although courts occasionally award more significant nominal damages, particularly in counterfeiting cases, where the defendant is liable for repeated infringement, low nominal damages awards have contributed to making many trademark infringement claims uneconomic for plaintiffs to pursue in Canada. Though nominal damages are awarded when a plaintiff has adduced too little evidence of harm, this fact also reflects the difficulty of proving lost sales and loss of goodwill. Arguably, nominal damages awards have been a boon to trademark infringers; this situation is quite unsatisfactory in a world where a business' branding is more valuable than ever.

Federal Court Judgment Suggests More Reliable Means of Assessing Trademark Damages

In Alexa Translations, the plaintiff Alexa Translations was pursuing a trademark infringement claim against Amazon.com, arising from the latter's use of the trademark ALEXA in relation to translation services, offered through Amazon's well-known virtual assistant. Shortly before trial, Alexa Translations served an expert report on remedies. In his report, the plaintiff's expert, Mr. Harington, stated that he could not reliably quantify either the profits earned by Amazon, or the sales lost by Alexa Translations, as a result of the allegedly infringing activities.

However, the plaintiff's expert opined that the best means of assessing the economic consequences of the defendants' conduct was to consider what type of arrangement the parties would most likely have concluded to avoid infringement, before the defendants' first act of trademark infringement. Mr. Harington concluded that the parties would have negotiated a purchase of, or an exclusive licence to, the plaintiff's ALEXA TRANSLATIONS registered trademark. Either scenario would have involved a rebranding by the plaintiff, an issue about which the plaintiff also served expert evidence. Using this framework, the plaintiff's expert assessed Alexa Translations' minimum willingness to accept, and the Amazon defendants' maximum willingness to pay and, from these values, derived a reasonable payment based on a hypothetical negotiation between the parties.

Faced with this novel theory, the Amazon defendants moved to strike the plaintiff's expert reports in their entirety. The Federal Court dismissed the motion, holding that the substantive merits of Alexa Translations' theory of damages was not an issue on the motion. Nonetheless, for the purpose of assessing the defendants' other contentions, the Court went on to characterize Alexa Translations' proposed theory of damages.

The Court noted that the plaintiff's expert's theory of damages relied upon the similar remedy available in patent infringement cases, the hypothetical negotiation of a reasonable royalty between a willing licensor and a willing licensee on the eve of the first infringement. The Court also noted that United Kingdom courts may assess damages flowing from trademark infringement based on the “user principle”, namely that: "a person who has used another person’s property wrongfully may be liable to pay a reasonable sum for such usage, such as damages". The Federal Court noted that an English case cited by Amazon observed that rebranding costs could have an impact on hypothetical negotiations between parties to a trademark infringement action.

In Alexa Translations, the Federal Court held that a reasonable royalty based on a hypothetical negotiation between the plaintiff and defendant before the first instance of infringement is an arguable remedy for trademark infringement in Canada. For many trademark infringement plaintiffs, such a remedy would be more appropriate, contextual and, ultimately, more satisfactory than arbitrarily low nominal damages.

Bennett Jones represented the plaintiff in the Alexa Translations trademark infringement action.