Case Law

Distinguishing Guise or Partly Functional?: Trial Required

By In Case Law

In Crocs Canada Inc. v. Holey Soles Holdings Ltd. the Defendants, Holey Soles, sought summary judgment dismissing Crocs Canada’s claim of copyright infringement and passing-off under the Trade-marks Act. At issue was plastic footwear sold by Crocs Canada. The footwear features distinctive holes placed in the upper portion, as well as side venting.

Prior to 2004, Holey Soles and other companies had been allowed to sell Crocs Canada’s shoes under their own brand names. When that arrangement ended, Holey Soles began selling shoes similar in style, but manufactured for Holey Soles in China.

In seeking a summary judgment, Holey Soles argued that Crocs Canada’s claim disclosed no triable issue because the doctrine of functionality precluded the assertion of any trademark right. Both parties relied on the 2005 “Lego case” (Kirkbi AG et al. v. Ritvik Holdings Inc.) in which the Supreme Court of Canada concluded that the shape of the building blocks was purely functional and not a distinguishing guise.

Here, the Court noted that the circles and semicircles on the shoes did have a functional role namely, to allow air and water in and out of the shoes.

However, the Court also noted that the decision in Lego did not rule out the possibility of trademark protection for a design that was only partly functional. Given this, the Court here concluded the summary judgment application could not succeed. The question whether the design and pattern of the circles and semicircles on Crocs Canada’s shoes was sufficiently functional so as to support distinguishing guise claims, was a question of fact that required a trial.

Canadian Trademark Registrations Expunged

By In Case Law, Protection & Enforcement, Registration

Following up on a case we first told you about in March 2007, Canada’s Federal Court of Appeal recently delivered its judgement in the case of Cheap Tickets and Travel Inc. v. Emall.ca Inc.

Disputes between these parties have been underway for some time. In 2002, Cheap Tickets obtained Canadian trademark registrations for CHEAP TICKETS and CHEAP TICKETS AND TRAVEL & DESIGN for use in association with a range of travel agency and other ticketing-related services, claiming use in Canada dating back to July 1997. Emall obtained the domain name cheaptickets.ca in 1999.

In 2003, Cheap Tickets tried to use the CDRP to stop Emall from using the cheaptickets.ca domain. This effort failed, so in late 2004, Cheap Tickets took to the courts, commencing a trademark infringement action against Emall in the Supreme Court of British Columbia.

Likely tired of Cheap Tickets’ attacks, Emall commenced an action in the Federal Court of Canada to expunge Cheap Tickets’ trade-marks. And the Federal Court obliged: concluding that the marks were clearly descriptive of the character or quality of the services in association with which they were registered, the Court expunged Cheap Tickets’ trademarks.

On appeal to the FCA, Cheap Tickets made a variety of arguments: that their marks were not “clearly descriptive” but rather “merely suggestive;” that their marks had acquired distinctiveness at the time applications to register them were filed; that the Design mark contained unique and distinct visual elements, entitling it to remain on the Register.

Again, all of Cheap Tickets arguments failed. The Federal Court concluded that no errors of fact or law could be found in the Trial Division’s judgement; accordingly, Cheap Tickets’ appeal was dismissed.

Beyond serving as another example of the maxim “turnabout is fair play”, there are a couple of important lessons for both trademark owners and advisors arising from this case. For trademark owners, this case is a prime example of the perils of selecting and using trademarks that are strongly suggestive of the products and services offered in association therewith. Such marks, even if secured by a registration, typically enjoy a narrow scope of protection, are highly susceptible to attack, and should be avoided. In addition, if you have already registered trade-marks that “push the limits” of descriptiveness, consider if it is possible to file supporting applications for those marks on the basis of acquired distinctiveness. Had Cheap Tickets done so, or if they had been able to establish acquired distinctiveness at the time of their original filings, they likely would not have lost their registrations.

For advisors: remember that once judgment is rendered and an order made by a court, the Registrar of Trademarks will not tarry in acting upon it, unless a stay is in place. Though it filed an appeal, Cheap Tickets did not seek a stay of the trial judge’s expungement order; accordingly, the Registrar struck Cheap Tickets’ marks from the Registry before the order’s appeal period had even expired. Had a stay been obtained, Cheap Tickets’ registrations would have remained on the Registry through the appeal period, and could have been used to assert claims against third parties while it awaited its hearing before the Federal Court of Appeal.

A Successful Interlocutory Injunction

By In Case Law, Protection & Enforcement

A recent posting noted how difficult it is to obtain interlocutory injunctions in Canadian trade-mark actions. However, a judge of the Manitoba Court of Queen’s Bench recently concluded that the Plaintiffs in Marlborough Hotel Corporation et al. v. First Canadian Hotels & Entertainment Ltd. et al. were entitled to an interlocutory injuction. The Plaintiffs had since 1959 marketed and advertised a large ballroom at their hotel facilities as the “Skyview Ballroom”. On May 1, 2007, the Defendant, a hotel located one block away, started using the name “Radisson Winnipeg Skyview”.

The judge applied the three-part test in R.J.R. MacDonald Inc. v. Attorney General (Canada) noting also that, according to Apotex Fermentation Inc. v. Novopharm Ltd, a 1994 decision of the Manitoba Court of Appeal, the three factors are not individual hurdles for an applicant to overcome, but are to be viewed as interrelated. 

The judge concluded that there was a serious issue to be tried. Although the Defendants raised numerous arguments regarding the Plaintiffs’ likelihood of success, these were matters for the trial judge to assess.

The judge also found that there would be irreparable harm, noting that there would very likely be confusion, given that the two businesses were one block apart. The judge was also satisfied that it would be difficult for the Plaintiffs to quantify or prove the extent of any damages, both financially and to their goodwill, should the Defendants be allowed to use “Skyview”. Finally, the judge was satisfied that the balance of convenience favoured the Plaintiffs, given that the Plaintiffs were a long-established business and that the Defendants had only started to use the word “Skyview” in May of 2007.

Setting Aside a Trademark Default Judgment

By In Case Law

We recently reported on the trial judge’s decision in Louis Vuitton Malletier S.A. et al. v. Yang et al., a case which discussed the type of damages which can be awarded against a Defendant trading in counterfeit goods.

One of the Defendants in that case, Lin Pi-Chu Yang (also known as Pi-Chu Lin, Wai Ying, Martina and Coco), brought a motion to set aside the Default Judgment by arguing that she was never served with the Statement of Claim and that she had no interest whatsoever (other than as the lessor of the premises) in the business known as K2 Fashions, which traded in the counterfeit goods.

The Federal Court declined the order requested on the basis that the Defendant failed to meet the well-established test for setting aside a default judgment (1. a reasonable explanation for the failure to file a Statement of Defence; 2. a prima facie defence on the merits to the Plaintiff’s claim; and 3. that the Defendant moved promptly to set aside the Default Judgment.) Although Ms. Lin met the third element of the test given her promptness in seeking to set aside the Default Judgment, Ms. Lin was unable to satisfy the Court that there was a reasonable explanation for her failure to file a Statement of Defence, or that she had a prima facie defence on the merits to the Plaintiff’s claim. While Ms. Lin argued that as a landlord and not an owner of K2 Fashions she should not be liable in respect of counterfeit stock, the evidence showed Ms. Lin to be “the person in control of the business”. Furthermore, an affidavit by a licensed private investigator was presented to the Court which showed that Ms. Lin had been correctly served with the Statement of Claim.

Accordingly, the motion to set aside the Default Judgment was dismissed.

Interlocutory Injunctions in Trademark Cases: A Difficult Test to Meet

By In Case Law, Protection & Enforcement

Two recent cases, one from the Federal Court and the other from the Federal Court of Appeal, illustrate how difficult it is to meet the test for an interlocutory injunction in a Canadian trademark case.

In CMAC Mortgages Ltd. et al v. Canadian Mortgage Expert Centres Ltd. et al, Lemieux, J. of the Federal Court applied the 3-part test found in the Supreme Court of Canada’s decision in RJR-MacDonald Inc. v. Canada Attorney General (that the applicant for an injunction must demonstrate (1) a serious question to be tried; (2) that the applicant would suffer irreparable harm in the absence of the injunction; and (3) that an assessment of which party would suffer greater harm from the granting or refusal of a remedy favours the applicant.)

The Applicant (Plaintiff), Ontario Mortgage Action Centre Ltd. c.o.b. as OMAC, had been operating a residential mortgage business in Ontario for a number of years and had several trademark registrations. The principal of OMAC had only recently incorporated CMAC Mortgages Ltd. and opened a Calgary office under the latter name.

The Defendant Canadian Mortgage Expert Centres Ltd. c.o.b. CMEC was incorporated shortly after CMAC Mortgages Ltd. and opened two offices, both in Ontario. Thus, CMAC Mortgages Ltd. and the company carrying on business as CMEC operated in different jurisdictions.

There was no evidence of actual confusion regarding CMAC and CMEC. There was, however, some evidence of actual confusion as between OMAC and CMEC, although minimal. Lemieux, J. concluded that there was a serious issue to be tried in respect of confusion and passing–off between OMAC and CMEC, but not between the other Plaintiffs and CMEC since the latter were not operating in the same marketplace.

However, the Plaintiffs had not led sufficient evidence to establish irreparable harm. According to Lemieux J. “the loss of goodwill and the resulting irreparable harm cannot be inferred. It must be established by ‘clear evidence'”. It was noted that the Plaintiffs, rather than focusing on evidence of irreparable harm had attempted to show the defendants were impecunious.

Finally, Lemieux, J. explained that his preliminary assessment of OMAC’s case was that it was weak in terms of confusion since buying mortgage services is not like buying wares off a shelf, given that the buyer of mortgage services will be more discriminating.

In Hyundai Auto Canada v. Cross Canada Auto Body Supply (West) Limited et al the Court of Appeal dismissed the appeal with costs noting that the test for granting an interlocutory injunction had been clearly set out by the Supreme Court of Canada in RJR-MacDonald. The Court of Appeal also agreed with the trial judge that the evidence as to irreparable harm was essentially speculative and there was no demonstration that the harm could not be compensated in damages if the injunction was refused.

It is clear from these cases that interlocutory injunctions are very difficult to obtain. In the absence of clear evidence of irreparable harm that cannot be compensated for in damages, courts will refuse to grant the injunction.

POM-POM Survives Section 45 Scrutiny

By In Case Law

We recently reported on a number of section 45 decisions, the purpose of which is to remove “deadwood” or outdated registered trademarks from the Register. In such proceedings, the burden of proof is on the registered owner of the trademark to demonstrate “use” during the previous three year period in order to maintain the mark on the register.

In the recent Federal Court of Appeal case of Brouillette Kosie Prince and Orange Cove-Sanger Citrus Association, the applicant (the party challenging the registration) appealed the decison of the Registrar with respect to a proof-of-use proceeding. The applicant objected to the quality of the evidence submitted by the respondent (the owner of the registration) both before the Registrar and before the Federal Court of Appeal. The respondent was a grower member of Sunkist Growers, a cooperative that assists in the distribution of its members’ products including invoicing such products to buyers on behalf of its members. The Registrar maintained the registration of the respondent’s mark POM-POM on account of its appearance on packaging when the wares were sold to Canadian distributors. The Federal Court held that it was not necessary for the mark to be seen by the consumers who purchased the wares from the respondent’s customers and the Court of Appeal agreed with this conclusion.

The Federal Court of Appeal held that it need only decide on the issue de novo when additional evidence is adduced that would materially affect the Registrar’s finding of fact or the exercise of his discretion. If new evidence added nothing of significance, but was merely repetitive of existing evidence, the issue was whether the Registrar’s decision could survive a probing examination. As the evidence submitted on the appeal did not raise any new issues, the case was dismissed given the reasonableness of the Registrar’s decision in maintaining the registration of the POM-POM mark.

Judging A Wine By Its Label: A Trademark Issue

By In Case Law, Registration, Trademark Oppositions

In Sociedad Agricola Santa Teresa Ltda. et al. v. Vina Leyda Limitada, the Federal Court considered what constitutes a place of origin for wine such that the place name cannot be registered as a trademark. At issue was section 12(1)(b) of the Canadian Trade-marks Act which states that a trademark is not registrable if it is “clearly descriptive or deceptively misdescriptive” of the “place of origin” of the wares or services.

Vina Leyda Limitada applied in 2001 to register LEYDA as a trademark and on the evidence before the Registrar in an opposition to such application, the Registrar allowed the application. The Sociedad appealed the Registrar’s decision under section 56 of the Act.

The Court allowed the appeal and held that LEYDA could not be registered. According to Harrington J., “Once the Registrar found as a fact, as he did, that Leyda is a wine producing region in Chile, as a matter of law he was required to conclude on the record before him that the opposition was well founded.” Of concern was the fact that if the registration stood the applicants, wine producers from the Leyda Valley, would not be able to refer to that fact on their labels or in their promotional literature and might be limited to calling their wine Chilean red or white. The judge also noted that “producers from a specific region want to promulgate their area in the belief that their wine is superior to the wine of that country as a whole”. A general appellation could lead a consumer to believe a wine is “plonk”.

In reaching his decision Harrington J. relied on a 1970 Supreme Court of Canada decision, Home Juice Co. v. Orange Maison Ltee, for the proposition that “a shrewd trader should not be permitted to monopolize the name of a foreign wine district in Canada by registering it as a trademark”. He also distinguished Prosciutto di Parma v. Maple Leaf Meats Inc. in which the Federal Court of Appeal refused to expunge the trademark PARMA since it had been used in Canada for 39 years and registered for 26. LEYDA had not been in use in association with wine in Canada at the time the application was filed.

On an appeal under section 56 the parties may introduce evidence that was not before the Registrar and the Sociedad put forward that “Vallee de Leyda” was an appellation of origin in Chile. This evidence was taken into account, but Harrington J. specifically noted that whether a name signifies a geographical area under section 12 of the Act and whether that area produces wine are not contingent upon a governement decree.

Finally, it is worth noting that Harrington J. may very well know something about wine. He not only references the origin of the word “plonk” (“There are different legends as to the origin of the word ‘plonk’. The one I prefer is that a Monsieur Plonque was the purveyor of cheap wine to British Troops in World War I.”), but he also begins his reasons stating, “One may not be able to judge a book by its cover, but one should know something about a bottle of wine from its label; the more the better.”