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Bulletin

Trademark Year in Review: Notable Trademark Decisions in 2021

Fasken
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Overview

Intellectual Property Bulletin

The past year has brought forward several important decisions in Canadian trademark law. From depreciation of goodwill claims, objections founded on bad faith and lack of distinctiveness, several cases have highlighted certain challenges that trademark owners may face in enforcing their rights.

This bulletin provides an overview of certain notable trademark cases in Canada in 2021.

1. Parody Marks and Depreciation of Goodwill: Subway® IP LLC v Budway, Cannabis & Wellness Store

The legalization of cannabis in Canada had an unintended side-effect on depreciation of goodwill claims in Canadian trademark law. This is well demonstrated through the Federal Court case of Subway® IP LLC v Budway, Cannabis & Wellness Store2021 FC 583, in which the adoption of a parody trademark was found to depreciate the goodwill attached to a well-known mark.

Budway, Cannabis & Wellness Store (“Budway”) operates a retail store selling cannabis and related goods. It used the trademark BUDWAY, which is very similar in sound and in appearance to the well-known fast-food SUBWAY® mark.

The Court found that the use of the BUDWAY trademark infringes Subway®’s registered trademarks, and amounts to both passing off and depreciation of goodwill of these marks. Justice McHaffie found that the BUDWAY mark was sufficiently similar to Subway®’s registered trademarks to create a mental association between the respective marks in the minds of consumers, thereby depreciating the goodwill associated to the Subway® brand.

In light of the above, Budway was permanently enjoined from using the trademark or trade name BUDWAY. Subway® was awarded $15,000 in damages, as well as $25,000 for costs.

This case highlights potential hurdles that may be faced by parody trademark owners.

2. The Importance of Considering Prior Use Before Registering a Trademark: Norsteel Building Systems Ltd. v. Toti Holdings Inc.

Another notable trademark case in 2021 would be Norsteel Building Systems Ltd. v. Toti Holdings Inc.2021 FC 927. This case highlights the importance of considering prior use of unregistered trademarks before securing a trademark registration.

This case involved the trademark registration NORSTEEL, owned by the company Toti Holdings Inc. (“Toti”). Before Toti had obtained its trademark registration in March 2017, the company Norsteel Building Systems Ltd.  (“NBS”) had been using the trademarks NORSTEEL and NORSTEEL BUILDING SYSTEMS for several years. In October 2017, NBS tried to register these two marks, but the Registrar objected and cited Toti Holdings’ trademark.

NBS therefore brought an application under s. 57(1) of the Trademarks Act (the “Act”) to have Toti’s registration expunged. The Court found that Toti’s trademark registration was invalid under s. 18(1)(b) of the Act, as NBS had been using the trademark and tradename NORSTEEL for several years before Toti’s application. Accordingly, Toti Holdings was not the person entitled to secure the registration.

Interestingly, the Court also made a few comments pertaining to bad faith. The Applicant argued that the NORSTEEL registration was invalid because it was made in bad faith. The Court however declined to invalidate the registration on this ground, stating that Toti was “at best, wilfully blind as to whether it had the right to make the application in the face of its competitor,” but that this was not sufficient to reach a conclusion of bad faith. This suggests that the threshold for a successful claim on this basis is high.

3. Trademark Registrations are Complete Defence to a Claim for Damages: Group III International Ltd. v. Travelway Group International Ltd.

On September 29th, 2021, the Supreme Court of Canada ended an almost-ten-year long saga by for leave to appeal in dismissing an application Travelway Group International Inc. v. Group III International Ltd., et al., 2020 FCA 210.

This case involved Wenger, the Swiss company behind the “Swiss Army Knife”, and Travelway, a Canadian luggage distributor, which both owned Canadian trademark registrations that incorporate a cross evocative of the Swiss flag. In previous proceedings, Travelway’s trademark registrations were invalidated on the grounds of confusion with Wenger’s trademarks. Wenger sought financial compensation from the moment that the respondent started using the infringing trademarks, despite its then valid registrations.

At the Federal Court of Appeal, however, the Court held that the registered owner could only be liable to pay damages or disgorge profits if fraud, willful misrepresentation or bad faith in connection with the registration can be shown, even though the defendant held a registration. Wenger failed to adduce such evidence. Consequently, Travelway was not ordered to pay any financial compensation for the period in which its trademarks were validly registered.

This makes it important to bring to the forefront evidence of such fraud, willful misrepresentation or bad faith in cases where the defendant owns a registration. Otherwise, trademark registrations constitute a complete defence to claims for damages in Canada.

4. Narrow Scope of Protection for Acronym Marks: Loblaws Inc. v. Columbia Insurance Company

A recent case at the Federal Court of Appeal highlighted the sometimes-narrow scope of protection afforded to acronym marks in Canada. This case, Loblaws Inc. v. Columbia Insurance Company, 2021 FCA 29, involved two companies that use the acronym “PC” in association with kitchenware.

The plaintiff, Loblaws Inc., sold grocery items and kitchenware in association with the “PRESIDENT’S CHOICE” and “PC” trademarks for over three decades.

The defendants, The Pampered Chef, sold kitchenware products. In 2015, it adopted a family of trademarks that included logos of the acronym “PC”.

Loblaws claimed that The Pampered Chef’s trademarks were confusing with its well-known PC trademarks.

Despite finding that the parties’ respective “PC” marks bear a certain resemblance and were used in similar channels of trade, the trial judge nonetheless found that confusion was unlikely for two main reasons. The first is that the two entities do not sell their products through the exact same channel – Loblaws sells its products through its retail stores, while The Pampered Chef sells its wares as a direct seller. Second, the trial judge found that The Pampered Chef used its marks together with the name “Pampered Chef”, which rendered its marks distinctive from Loblaws’ marks.

This case has made its way up to the Federal Court of Appeal, where the Court agreed with the trial judge’s conclusions, thereby dismissing the appeal.

This case shows that the scope of protection for acronym marks can be quite narrow at times.

5. Legal Headaches for Grey Marketers: TFI Foods Ltd. v. Every Green International Inc.

In Canada, the sale of grey market goods does not, in itself, constitute trademark infringement. However, a recent case shows that importers of grey goods do not have carte blanche in Canada, and that trademark owners may have more recourses than they think against sellers of grey market goods.

In TFI Foods Ltd. v. Every Green International Inc.2021 FC 241, the Court found that a label falsely stating that the grey marketer is the exclusive distributor can constitute passing off, as the misrepresentation on the label could cause damage to the goodwill of the trademark owner. Second, interference in a contract for exclusive distributorship of branded goods may render a party liable for damages, both actual and punitive.

6. Road Names Can Be Descriptive of Place of Origin: Hidden Bench Vineyards & Winery Inc. v Locust Lane Estate Winery Corp.

The risk behind choosing geographically descriptive trademarks was recently highlighted in Hidden Bench Vineyards & Winery Inc. v Locust Lane Estate Winery Corp.2021 FC 156. In this case, the Federal Court of Canada confirmed that road names can be clearly descriptive of a place of origin under s. 12(1)(b) of the Trademarks Act.

This case involved two compagnies that operate wineries on Locust Lane, a road located in Ontario. Both parties used the term LOCUST LANE in association with wine and related services.

The applicant, Hidden Bench, had been using LOCUST LANE in association with wine for almost two decades. The respondent, Locust Lane Estate Winery Corp, was founded in 2019 and began using its name to market its wine and related services.

The applicant claimed that it owned the unregistered trademark LOCUST LANE, and that the respondent’s use of the mark constituted passing off. The Court rejected this claim, noting that the LOCUST LANE marks were clearly descriptive of the place of origin of the wares and services they are associated to. Consequently, such marks lacked inherent distinctiveness.

The Court notes that the onus in proving that a descriptive word has acquired a secondary meaning as to make it distinctive is a heavy one. Here the Court found that the applicant failed to adduce sufficient evidence to surmount the heavy onus to establish that its descriptive marks have acquired a secondary meaning so as to make them distinctive of their goods and services.

For 2022…

Fasken’s Intellectual Property group has extensive experience in trademark law. For any inquiries on the matter, please contact one of the authors or a member of the Intellectual Property team.

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