Written by Martin P.J. Kratz
In two companion cases, the Supreme Court of Canada has reaffirmed the place of famous trademarks in the Canadian trademarks context. Choosing to take these two appeals after consecutive dismissals of appeals by lower courts, the |Supreme Court sought the opportunity to clarify the law regarding confusion in the context of famous trademarks and shed important light on the little considered s. 22 of the Trade-marks Act. All owners and users of trademarks in Canada will benefit from the lucid reasoning of Justice Binnie, speaking for the unanimous court in both cases.
Mattel, Inc. v. 3894207 Canada Inc.
In Mattel, Inc. v. 3894207 Canada Inc., the Supreme Court was faced with an appeal of the Trade-marks Opposition Board decision by both a Federal Court and Federal Court of Appeal decision dismissing Mattel's opposition to the respondent's application to register trademarks in connection with its small chain of "Barbie's" restaurants. Mattel, owner of the BARBIE registered trademark, alleged that the use of the name would likely create confusion in the marketplace. The lower courts and Opposition Board had found that Mattel had not shown that there was any likelihood of confusion between the sale of doll products and the provision of restaurant services. Mattel argued the fame of the BARBIE trademark transcended doll products and covered additional diverse products set out in a variety of its registrations.
In this case, there was no credible evidence that Mattel or a licensee had used BARBIE in Canada in connection with "restaurant services, take-out services, catering and banquet services" as claimed by the respondent's trademark application.
The Supreme Court reminded us that confusion is a defined term and that s. 6(2) requires the Trade-marks Opposition Board (and ultimately the court) to address the likelihood that in areas where both trademarks are used, prospective purchasers would infer (incorrectly) that the wares and services (though not being of the same general class) are nevertheless supplied by the same person. Such a mistaken inference can only be drawn if a link or association is likely to arise in the consumer's mind between the source of the well known BARBIE products and the source of the respondent's less well-known restaurants. If there is no likelihood of a link, there can be no likelihood of a mistaken inference, and no confusion under the Act.
Mattel's argument was that its BARBIE trademarks were famous in Canada and worldwide. Mattel argued that famous marks like BARBIE may not now be used in Canada on most consumer wares and services without the average consumer being led to infer the existence of a trade connection with the famous brand. The Court confirmed that the proper test for confusion would be from the perspective of "ordinary hurried purchasers" and that "all of the surrounding circumstances" must be taken into consideration but that, in some cases, some circumstances would carry greater weight than others. Mattel argued that fame "trumps" all other factors in s. 6(5).
The Supreme Court confirmed that fame, like differences between products and services, were among the factors to be considered. While the Supreme Court confirmed that confusion under s. 6(2) could occur for some trademarks that were so well known that use in connection with any wares or services would generate confusion, in this case, the evidence did not support that BARBIE had that transcendence. The Court noted that, while not necessary, evidence of actual confusion would be a relevant "surrounding circumstance". Nevertheless, an adverse inference could be drawn from the lack of such evidence in circumstances where it would readily be available if the allegation of likely confusion was justified.
The Supreme Court confirmed that to the extent that the Pink Panther and the Lexus cases had indicated a restriction in obiter that confusion could only occur within similar classes of wares or services that was wrong. However, the Supreme Court noted that in both cases, the proper test was applied, namely to consider all of the s. 6(5) factors in the context of the surrounding circumstances.
The Supreme Court confirmed that the proper standard for the review of a decision of the Opposition Board was the intermediate standard of reasonableness. In this case, the decision of the Opposition Board met that standard.
The Supreme Court commented on admissibility of survey evidence and noted that the additional evidence sought to be admitted was not relevant as it did not address the question of likelihood of confusion. The Court reviewed when survey evidence could be helpful, if reliable and valid, and noted other grounds where Courts properly reject survey evidence: where the individuals surveyed did not constitute the relevant population; where the survey was not in relation to the correct trademark; where the wrong question is asked; and where the survey had not been carried out in an impartial and independent manner. In this case, survey evidence was found inadmissible, not merely given little weight.
In conclusion, the fame of a trademark is among one of the surrounding circumstances that the Opposition Board and the Courts should consider in addressing the likelihood of confusion. The Court noted that there may be cases where such fame could transcend dramatic differences between the wares or services. However, this was not that case.
Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltd.
In Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltd., Veuve Clicquot Ponsardin (owner of the VEUVE CLICQUOT trademarks) brought an action against the respondents, Boutiques Cliquot Ltd., alleging infringement of the Veuve Clicquot trademarks, registered for champagne and wine, by the respondent's registration and use of the term "Cliquot" for its small chain of medium quality ladies clothing stores. Both claims for infringement (confusion) and depreciation of good will (s. 22) were advanced. At the Federal Court, the Court acknowledged that, for confusion to occur, it was not necessary that the wares belong to the same general category. While the VEUVE CLICQUOT trademarks were recognized as inherently distinct and entitled to a broad measure of protection, the Court found that "there is no connection between the plaintiff 's activities and those of the defendants". On the claim that the respondent's use of the trademark CLIQUOT depreciated the value of the goodwill attached to the VEUVE CLICQUOT trademarks, the Court referred to her finding of no likelihood of confusion and held "[a]lthough confusion is not the test laid down in s. 22, I consider that it is still necessary for there to be an association between the two marks." A consumer has to be able to make a connection between the parties in order for there to be depreciation of the goodwill attaching to the trademark.
The appeal to the Federal Court of Appeal was dismissed, concluding that the trial judge had applied the correct tests and that the findings were supported by the evidence.
The Supreme Court framed the issues by noting Veuve Clicquot's allegation that while ordinary trademarks largely operate in their defined field of wares, services and businesses, "famous" marks transcended such limitations, and therefore that broad effect must be given to the owner's remedies in respect of likely confusion in the marketplace and likely depreciation of the value of the goodwill (s. 22) with that transcendence in mind.
Veuve Clicquot alleged that the fame of VEUVE CLICQUOT was such that consumers who walked into the respondents' women's clothing shops would likely be confused into believing the dresses and fashion apparel came from the same source as the champagne, even though the type of product was very different, the products fl owed in different channels of trade and the registered trademarks did not appear on the respondent's garments. Regardless of these differences, Veuve Clicquot argued that fame conquers all. With respect to the s. 22 depreciation claim, Veuve Clicquot claimed that the fame of its marks for up market luxury goods was such that associating the name CLICQUOT with a mid-range women's clothing store robbed the appellant's mark of some of its lustre, blurring its powerful association with top quality luxury goods, and thereby diluting the distinctive qualities that attract high-end business.
On the infringement claim, the Supreme Court applied the decision in Mattel, confirming that the test to be applied was a matter of first impression in the mind of a casual consumer somewhat in a hurry. The test was set out as follows:
"The test to be applied is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the name Cliquot on the respondents' storefront or invoice, at a time when he or she has no more than an imperfect recollection of the VEUVE CLICQUOT trade-marks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks."
The test is applied by considering the factors in s. 6(5) in the context of all of the surrounding circumstances. Those circumstances are not exhaustive and different circumstances will be given different weight in a context-specific assessment. In this case, the Supreme Court found that the trial judge applied the proper "all the surrounding circumstances" test. The Supreme Court did not identify a basis to interfere with the trial judge's conclusion that the evidence did not establish confusion, or make a plausible case for expungement of the respondents' marks.
Importantly, the Supreme Court closely reviewed the development of the s. 22 depreciation action and reviewed the somewhat similar U.S. anti-dilution law and U.K "anti-detriment" remedy, noting applicable differences. Binnie J. identified the elements of the s. 22 cause of action as follows:
"Firstly, that a claimant's registered trade-mark was used by the defendant in connection with wares or services – whether or not such wares and services are competitive with those of the claimant. Secondly, that the claimant's registered trade-mark is sufficiently well known to have significant goodwill attached to it. Section 22 does not require the mark to be well known or famous (in contrast to the analogous European and U.S. laws), but a defendant cannot depreciate the value of the goodwill that does not exist. Thirdly, the claimant's mark was used in a manner likely to have an effect on that goodwill (i.e. linkage) and fourthly that the likely effect would be to depreciate the value of its goodwill (i.e. damage)."
On the issue of the "use" of the mark, the Supreme Court found critical that there must be some link, connection or mental association in the consumer's mind between the respondents' display and the VEUVE CLICQUOT mark, without which there could be no depreciation of the latter. Note that the Supreme Court appeared willing to apply a much broader concept of "use" than the very technical s. 4 definition which substantially limited the application of the s. 22 remedy.
On the issue of goodwill, the Court found that there was considerable goodwill attached to the VEUVE CLICQUOT mark that extended beyond wine and champagne. Veuve Clicquot argued that the fame of its mark must of necessity depreciate the good will associated with the mark and that it was up to the respondent to prove it did not do so. The Court disagreed noting that not all famous trademarks have the same drawing power and that s. 22 requires the appellant to show the likelihood of depreciation of good will.
On the issue of depreciation of good will, the Court canvassed a number of U.S. authorities on disparagement or tarnishing and on blurring noting cautiously that the Canadian provisions were different and that "depreciation" in s. 22 was not necessarily limited to the notions of blurring and tarnishment. Binnie J. then noted that "Canadian courts have not yet had an opportunity to explore its limits." Focusing on the instant case he stated:
"Acknowledging that the VEUVE CLICQUOT trademark carries an aura beyond its particular products, and that the extended aura carries significant goodwill, in what way is the value of that goodwill likely to be diminished by the respondents' "use" (if use there be) of the appellant's registered trademark? Acceptance of the argument that depreciation could occur, is not acceptance of the assertion that on the facts of this case depreciation is likely to occur, still less that depreciation did occur. The appellant need only prove likelihood but there is nothing in the evidentiary record from which likelihood could be inferred."
In this case, the casual consumer, on the evidence, would not associate the name of the respondents' stores with VEUVE CLICQUOT. While no depreciation was found in this case, Binnie J. has opened the door for the trademark bar to consider developing s. 22 as a meaningful remedy that may transcend the U.S. blurring and tarnishment concepts. The apparent willingness not to be limited by the technical definition of "use" but to instead look for a linkage or connection to the registered mark may auger a new era and remedy for Canadian trademark law.
After Veuve Clicquot, s. 22 now appears to be a sustainable cause of action when there is evidence that a registered trademark (or something that comes close to it) has been used by another person (ideally a competitor) in such a way that the relevant public makes a mental association between that non-authorized use and the registered owner; and that such unauthorized use has the effect of depreciating the value of the goodwill associated with the registered trademark in terms of disparagement or even loss of distinctiveness.
Both cases underscore further benefits of registering one's trademark as well as the need for reliable and valid evidence of linkage in order to make out a case under s. 20 or 22.