Restaurant Trademarks: Worth their Salt?

The Globe and Mail is reporting on a dispute that has arisen between Vancouver’s Salt Tasting Room, which opened in 2006, and Toronto’s Salt Wine Bar, which opened in the summer of 2010.  The owner of the Vancouver Tasting Room apparently appealed to the Toronto Wine Bar owners to change their name, but without success. 

This dispute highlights the need for businesses, restaurant and otherwise, to register their trademarks in Canada and to register them sooner rather than later, since once a registration issues, it grants the registered owner the exclusive right to use that mark or one that is confusingly similar, throughout Canada in association with the claimed goods and services, even if that owner has only used its mark in one city or region of Canada.

In this case, the Vancouver owner waited until May of 2009 to file applications to register its SALT TASTING ROOM  and SALT marks, even though it claims in both applications to have used those marks since July of 2006.   Because of the timing of the start up of the Toronto restaurant and the current status of those applications, the position of the parties is murkier than it might otherwise be.  What further muddies the waters are several prior registrations for marks in Canada that include the word “Salt” that are registered to other entities.

As another recent article notes, the restaurant industry is no stranger to trademark issues, including the lawsuit recently launched by the Wild Wing restaurant chain in Aurora, Ontario against Buffalo Wild Wings, a United States franchise operator that is expanding into Canada.

The fact that the Salt story involves restaurants in Vancouver and Toronto is also of interest, given that we are waiting to hear how the Supreme Court of Canada will rule in Masterpiece Inc. v. Alavida Lifestyles Inc. where one of the issues is the likelihood of confusion between similar marks used in two geographically distinct areas; in that case, in the context of the ability of an earlier user’s ability to block a later user’s application for registration.

Loss of Control of Trademark Constitutes Damages for Passing Off

This blog previously reported on the Federal Court’s decision in Target Event Production Ltd. v. Paul Cheung and Lions Communications Inc. In that January 11, 2010 decision, the Court considered the trademark and copyright infringement claims of the Plaintiff, Target Event Production, which arose when the Defendants, Paul Cheung and his company Lions Communications, operated a Chinese night market beginning May 2008 in the location where Target had previously run a similar business until late 2007.  Specifically, Target’s claims were based on Lions’ use of a name similar to the “RICHMOND NIGHT MARKET” trademark owned by Target, as well as Lions’ use of a nearly identical site plan and vendor registration form.

The Court found that although Target’s trademark was valid as of January 2007, it was not durable and lost its distinctiveness when Target failed to re-open open a market by 2009.  However, the Court proceeded to find that Lions’ actions in 2008 were confusing to visitors (but not to vendors) of the market in breach of section 6(5) of the Trade-marks Act.  The Court found that since Lions had lost money operating its market, there could be no accounting of profits but only an award of $15,000 in damages for copyright infringement and the tort of passing off.  The Court held Paul Cheung jointly liable with Lions and issued an injunction preventing Paul Cheung and Lions from operating their market in a manner which was a “substantial reproduction” of Target’s site plan.

Paul Cheung and Lions appealed the Court’s decision and a 15 page judgement was issued by the Federal Court of Appeal on October 5, 2010.  Paul Cheung and Lions contended that the Federal Court was mistaken in finding that Target had a valid enforceable trademark, and that Target suffered damage, both of which are necessary for a court to have jurisdiction to entertain a claim for passing off under the Trade-marks Act (the existence of goodwill and deception due to misrepresentation being the other requirements).  Further, Paul Cheung and Lions argued that the Federal Court was mistaken in finding them jointly and severally liable and in enjoining them from operating their market.  Target cross appealed claiming that the Federal Court was mistaken in finding that its trademark lost its distinctiveness by 2009 and in awarding inappropriate injunctive relief. Read more

Contempt of Court: Compounding a Trademark and Copyright Breach

In 9038-3746 Quebec Inc. v. Microsoft Corporation the Federal Court of Appeal upheld a sentence for contempt, one of several court decisions and orders arising from trademark and copyright infringements dating back to the 1990’s. 

In the 2006 decision, Microsoft Corporation  v. 9038-3746  Quebec Inc., two corporate defendants and an individual found to be the controlling mind, Carmello Cerrelli, were ordered, jointly and severally, to pay statutory damages under the Copyright Act of $500,000 and punitive damages of $100,000 each.  Permanent injunctions were also issued enjoining the defendants from directly or indirectly infringing Microsoft’s trademarks or selling, distributing or advertising counterfeit copies of the twenty-five computer programs that were at issue in the proceedings.  Subsequently, Microsoft was also awarded costs of $1,410,000 plus the Canadian equivalent of $175,715.23 USD.

Notwithstanding these significant awards, the defendants violated the injunctions and continued to sell the software.  Microsoft brought contempt of court proceedings and Cerrelli plead guilty to: (1) violating the Court Order by selling seven counterfeit copies bearing the trademark MICROSOFT and possessing for the purpose of selling 545 counterfeit units bearing the trademark MICROSOFT; and (2) possessing for the purposes of selling 88 counterfeit units that constituted a breach of copyright.

In oral reasons the Federal Court ordered Cerrelli to pay $50,000 for each offence within 120 days, failing which he would serve a 60 day term of imprisonment.  Cerrelli appealed, but the Federal Court of Appeal found no reason to overturn the lower Court’s order, finding that there was no error in principle, failure to consider a relevant factor or overemphasis of the appropriate factors.  Moreover, the sentence was not demonstrably unfit.  The Court of Appeal referred back to the original judgment and the finding that Cerrelli “had little regard for the truth at discovery or trial” and “acted in bad faith”.  It was also noted that Cerrelli had sought to transfer his residential property for $1.00 following the judgment.  In upholding the sentence the Court of Appeal sought to “deter the offender from repeating his unlawful behaviour as well as other persons who would be tempted to commit the same offences”.

Affidavit Struck: US Trademark Decision Not to Be Used as Evidence

The Federal Court recently took the unusual step of striking evidence on an interlocutory application, concluding that the affidavit at issue contained irrelevant or hearsay evidence going to controversial issues and that the objecting party would be prejudiced if admissibility was left to the trier of fact.

In The Chamberlain Group v. Lynx Industries Inc., Chamberlain sought to file an affidavit in support of its appeal of two Opposition Board decisions, the Board having rejected its oppositions to the trade-marks LYNXMASTER and LYNXMASTER & Design.  The Affidavit at issue was sworn by Chamberlain’s U.S. counsel and sought to introduce the decision of the U.S. Trademark and Trial Appeal Board (“TTAB”) which allowed Chamberlain’s opposition to LYNXMASTER and was not appealed by Lynx.

In its decision the Federal Court of Canada specifically noted that Chamberlain was seeking to rely on the TTAB decision as evidence of the likelihood of confusion and not simply as a precedent, concluding that, while the TTAB decision might have precedential value in appropriate circumstances, it was clearly irrelevant to the determination of factual issues in the Canadian trademark proceedings.  Moreover, the fact that Lynx did not appeal the TTAB decision was irrelevant and not something Lynx should be required to explain.

The Court was also concerned that the affidavit sought to summarize evidence given by Lynx’s deponent in the TTAB proceedings, although the same deponent filed affidavits in the Canadian opposition proceedings which Chamberlain declined to cross-examine on.

In light of these concerns the Court chose to exclude the affidavit.

Certification Mark Under the Trade-marks Act Refused: Evidence of Use by Others

In Ministry of Commerce and Industry of the Republic of Cyprus v.  Les Producteurs Laitiers du Canada et al. the Federal Court set aside two decisions of the Registrar of Trade-marks, but allowed a third to stand in part, which was sufficient to prevent registration of the Applicant’s certification mark, HALLOUMI, in association with cheese.

The Registrar concluded that contrary to sections 38(2)(a) and 30(a) of the Trade-marks Act, the Applicant had not discharged its initial burden of proving that it was in fact the authority that issued licences authorizing the use of the Mark in association with cheese.  Section 23(2) of the Act provides that only the owner of a certification mark may authorize others to use the mark in association with wares that meet the defined standard.  Relying on the Applicant’s own affidavit material the Registrar concluded that it was the Ministry of Health, in collaboration with the Department of Veterinary Services of the Ministry of Agriculture, National Resources and the Environment, that issued licences.  On appeal by the Applicant, the Ministry of Commerce and Industry, filed additional evidence explaining the internal operations of the Cypriot government in terms of the responsibility for monitoring the use of the Mark.  The Court accepted this evidence, applied a correctness standard of review given the new evidence, and concluded that the Applicant was the authority with the power to authorize use of the Mark.

The Applicant also appealed on the basis that the Registrar incorrectly concluded that the Mark had become recognized in Canada by ordinary and bona fide commercial usage as designating a type of cheese, contrary to sections 38(2)(b), 10 and 12(1)(e) of the Act.  No new evidence was filed on this point and the standard of review was therefore reasonableness.  The Court agreed that one of the Opponents, the Cheese Council, had filed evidence before the Registrar, including packaging from cheese purchased in Ottawa and various cities in Quebec, establishing that marks resembling the Mark and likely to be mistaken for it had been used in Canada to designate a type of cheese.

The other two opponents could not rely on the evidence filed by the Cheese Council and therefore, given the Court’s finding on the other issue, their oppositions failed with the appropriate cost consequences.  Nevertheless, success by the Cheese Council meant the certification mark could not be registered, with costs to the Cheese Council on its opposition.

Expungement: A Poisoned Trademark – for Both Parties

In JAG Flocomponents N.A.  Inc. v. Archmetal Industries the Plaintiffs sought expungement of the Canadian trademark FUSION, as well as a declaration that the Defendants had breached section 7(a) of the Trade-marks Act.  The trademark was registered for  use in association with ball valves for industrial use and use was claimed since as least as early as September, 2002.

One of the Defendant companies had been a 30%  owner  of one of the Plaintiff companies and a Letter of Intent had been executed setting out the basic relationship whereby the Plaintiff s were to distribute valves manufactured by the Defendants in China.  The parties had also executed a Consignment Agreement which the Court found to be a critical document since clause 12 specified that the intellectual property arising by virtue of the Agreement was deemed to be equally owned by the parties. 

For marketing purposes, the Plainitffs adopted the trademark FUSION and proceeded to market wares manufactured by the Defendants, as well as wares sourced from a different manufacturer, using the trademark.  However, following the breakdown of the relationship, one of the Defendants registered the trademark.  The disputes arising between the parties were eventually settled under an Alberta Queen’s Bench action, which left only the intellectual property issues unresolved. The Plaintiffs had also applied to register the trademark, but the Defendants successfully opposed the application on the basis of alleged prior use.  Read more

First Canadian Decision on Keyword Advertising

The British Columbia Supreme Court recently issued the first Canadian Court decision dealing with the use by one party of another party’s trademarks in keyword advertising.  The case involved a defendant, Vancouver Career College (Burnaby) Inc. (VCC), that provides post-secondary career training services under different business names and trademarks.  As part of its internet marketing strategy, VCC, like numerous other businesses, uses keyword advertising, whereby VCC pays search engines such as those provided by GOOGLE and YAHOO! for links to its websites to appear as “sponsored links” or “‘sponsored results” alongside the search engine’s normal search results.  In order to use keyword advertising, VCC selected certain keywords to describe its website, including the business names and trademarks of various VCC competitors.

The plaintiff, the Private Career Training Institutions Agency (Agency) is a provincial regulatory agency charged with overseeing career training institutions that operate throughout the Province of British Columbia.  Acting on complaints received from other career training institutions in the Province, the Agency sought an injunction against VCC’s practice of using the names and trademarks of those other institutions in VCC’s keyword advertising program, on the basis that such use was false, deceptive or misleading.  The Court held that VCC’s keyword advertising program was not false, deceptive or misleading and therefore no injunction was granted.

While framed as a false, deceptive or misleading advertising complaint, rather than a trademark infringement or passing off claim, the Judge in his reasons specifically referenced trade-mark and passing off concepts when looking at the issue of what is confusing or misleading in the context of alleged improper advertising.  The Judge found that what the defendants were doing did not amount to false, deceptive or misleading advertising.  The Judge also held in his reasons that: “I also accept VCC Inc.’s argument that its practice of using Keyword Advertising is no different than the time-honoured and generally accepted marketing practice of a company locating its advertisement close to a competitor’s in traditional media (e.g., placing its Yellow Pages advertisement next to or in close proximity to a competitor’s telephone number  in the same directory so that potential customers of that competitor discover there is another company offering a similar product or service and that they, the consumer, have a choice).”

The Agency has until June 28, 2010 to file an Appeal of the decision, should it choose to do so.