Clark Wilson

Trademark Settlement Agreements: Lost in Translation

By In Case Law, Protection & Enforcement

A recent Ontario case is a rare example of parties seeking a judicial interpretation of a trademark settlement agreement.  It also emphasizes the importance of understanding all possible translated meanings of a word before committing to refrain from using any translated versions, a challenge that often arises in a bilingual country.

In Skipper Online Services (SOS) Inc. v. 2030564 Ontario Inc., the Ontario Superior Court of Justice considered a settlement agreement that restricted Boatsmart from using translated versions of particular words.  Skipper and Boatsmart were competing companies that administered online training for the Pleasure Craft Operator Card as required by Transport Canada.  The parties had a trademark dispute regarding the words each party could use as metatags, which are “hidden keywords” affecting how the parties appear in search engine results.  The two companies entered into a settlement agreement, wherein Boatsmart agreed to refrain from using the following words or “any reversals, misspellings, translations or plurals” thereof in its metatags:  BOATER EXAM; EXAMEN DE BATEAU; EXAMEN BATEAU; BOATEREXAM; EXAMENBATEAU.

Boatsmart, however, continued to use the phrases “BOAT EXAM” and “BOATING EXAM”, both of which can be translated as “EXAMEN DE BATEAU”.  Skipper sought a declaration that Boatsmart’s continued use of “BOAT EXAM” and “BOATING EXAM” was in breach of the agreement, since the agreement plainly restricted translations of “EXAMEN DE  BATEAU”.

Boatsmart, on the other hand, contended that the agreement was ambiguous, and that the parties never intended to restrict the terms “BOAT EXAM” and “BOATING EXAM”.  It argued that the word “translations” in the agreement referred to translations into any languages other than English or French, since the agreement already included specific terms in English and French.  Boatsmart further asserted that any other interpretation would result in commercial absurdity and go beyond what was necessary for the agreement’s purpose.

The Court found that the plain meaning of the agreement restricted Boatsmart from using the translated terms of “EXAMEN DE BATEAU”, including “BOAT EXAM” and “BOATING EXAM”.  Furthermore, the Court disagreed that the agreement’s context indicated an intention to allow Boatsmart to use the terms.  The purpose of the agreement was to limit as much as possible the parties’ use of certain terms and phrases in relation to their websites, in order to affect the search engine results.  A finding that Boatsmart was restricted from using these terms did not go beyond what was necessary for the agreement’s purpose.  The application was therefore granted.

Social Media: A Lesson for Trademark Owners

By In Case Law, Protection & Enforcement

A recent Quebec case and the resulting social media criticism provides a cautionary tale for trademark owners who aggressively assert their rights.  Success in the court room may in some instances have a negative impact on goodwill. Trademark owners should be taking social media into account when assessing their litigation options.

Deborah Kudzman, the founder of Olivia’s Oasis, Inc., was embroiled in a lengthy trademark dispute with Lassonde, the Quebec fruit-juice corporation. Kudzman’s company sells olive-oil based beauty products in association with the trademark OLIVIA’S OASIS & Design. Lassonde sells a line of juices in association with the trademark OASIS and other marks that include OASIS. In 2005, Lassonde commenced legal proceedings against Kudzman, alleging that Kudzman’s company was infringing its trademark rights.

In a judgment handed down in 2010, Justice Zerbisias of the Quebec Superior Court rejected Lassonde’s claim. The difference in the nature of the products, together with the visual disparities in the design of the marks, made confusion under s. 6 of the Trade-marks Act highly unlikely. Furthermore, while Lassonde’s juices and Kudzman’s beauty products were sold in some of the same stores, the placement of the OLIVIA’S OASIS products was in a completely different store section – in the non-edible, health and beauty section. Zerbisias J., in quashing Lassonde’s assertion of confusion, explained that “to impute the likelihood of confusion between Plaintiff’s and Defendant’s marks to the average consumer would insult him by assuming that such consumer is completely devoid of intelligence”.

Zerbisias J. also found that Lassonde’s action was an improper use of the legal process. Lassonde’s claim, with the unnecessary injunction application, threatening letters and overly complicated litigious conduct, was deemed to be “menacing and abusive”.  To compensate Kudzman and punish Lassonde, Kudzman was awarded $100,000 to cover her legal fees and $25,000 in punitive damages.

However, Kudzman’s story was not yet finished.  Lassonde appealed.  The Quebec Court of Appeal, while agreeing that there was no trademark infringement, reversed Zerbisias J.’s decision regarding Lassonde’s abuse of process and dismissed the $125,000 award. The Court of Appeal declined to hold that Lassonde’s behaviour was abusive, holding that Lassonde had every right to bring its trademark dispute before the court.

Little did Lassonde know, it was about to be inundated with social media criticism. La Presse, a Quebec newspaper, ran a story on April 7th, 2012 chronicling Kudzman’s battle with Lassonde. Within 8 hours, the story had been shared over 1000 times on Facebook, and #Oasis began trending in the Twittersphere, becoming the most used hashtag in Montreal that day. Hundreds of negative comments flooded Lassonde’s Facebook page. Guy Lepage, a Quebec media star, tweeted his boycott of OASIS juice products in protest to Lassonde’s actions.  Internet users reacted to the David and Goliath scenario that Kudzman’s story represented – almost universally decrying what they saw as Lassonde’s bullying tactics.

Lassonde, undoubtedly sensing a public relations nightmare, decided that same evening to offer a settlement. Although details are not available, Kudzman has assured the media that the settlement sum was similar to the amount that she was awarded in the lower-court decision – and was enough to cover the debts she had incurred during the protracted court case.

Ultimately, Lassonde’s success in the courtroom was irrelevant and it was public opinion as expressed in the social media that mattered. Whether Lassonde might have handled the litigation differently is an open question, but it is clear that owners, when enforcing trademark rights, need to consider the potential impact of social media.

A Tale of Two Trademark Appeals

By In Protection & Enforcement, Registration

In Clic International Inc. v. Convenience Food Industries (Private) Ltd., 2011 FC 1338, Clic International appealed a decision of the Registrar to expunge its trademark. The mark, which was used in association with the company’s line of canned fava beans, consisted of LAZIZA and an accompanying palm-tree design. Under s. 45 of the Trade-marks Act, a trademark may be expunged at the request of a third party if the owner cannot demonstrate use within the last three years. Here, Convenience Foods made the s. 45 request to the Registrar.

Before the Registrar, Clic attempted to show use of its trademark with evidence of the word LAZIZA on a can of fava beans. However, the Registrar noted that Clic had not used the accompanying palm tree logo (which was part of the trademark). The “evidence of modified use” did not constitute “use” for the purposes of s. 45, as far as the Registrar was concerned, and the trademark was expunged.

On appeal, Clic was entitled to provide new evidence and asserted that the change to its logo was within the scope of “cautious variations” that are allowed under current jurisprudence, citing, among other cases, Promafil Canada Ltee v. Munsingwear Inc, [1992] FCJ 611, which held that as long as the dominant features of a trademark are maintained and the differences are “so unimportant as not to mislead an unaware purchaser”, the use of the modified trademark should be enough to satisfy s. 45.

In response, Convenience Food pointed to Bierrsdorf AG v. Becton Dickinsons and Co., (1992), 44 CPR (3d) 151, where use of the word component and an altered design component were sufficient for s. 45, noting that Clic’s design component was done away with altogether.

The Court, agreed with Convenience Food, explaining that the logo being used was quite different than the registered trademark. Not only was there no palm-tree drawing, but LAZIZA was in a different font and was above an oval depicting some Arabic characters. This gave the whole mark quite a different look, which, according to the Court, departed from a “cautious variation”.

The Court was careful to refute Clic’s assertion that the trademark not be expunged because consumers still recognized the mark and associated it with Clic’s fava beans. This had no bearing on the issue of “use” for s. 45, and the correct consideration was whether the mark had been used in a substantially unchanged manner.

*****

In David M. Locke v. Osler, Hoskin & Harbourt LLP, 2011 FC 1390 the Registrar expunged a mark in the initial hearing, but the Court overturned that decision based on new evidence. Here, the Court did not have to consider a modified trademark. Rather the issue was much more straightforward; the trademark holder had not introduced any evidence at the initial hearing, but did on appeal.

The trademark in question here was SPORTSMAN’S CHOICE, which was used in association with a small, home-based sporting goods and pet accessories store. In the original s. 45 hearing, Locke did not put forth any evidence because he had not initially understood the nature of the claim, and only retained legal counsel just prior to the extinguishment of the trademark. The Federal Court held that a failure to adduce evidence during the underlying hearing was not a bar to introducing it on appeal. So, Locke was able to introduce evidence of his use of SPORTMAN’S CHOICE in the appeal, including labels affixed to pet food, labels on hunting clothes and gear, and tags on pet supplies.

In considering this evidence, the Court noted that the threshold for proving “use” is quite low, and a prima facie case of “use” is enough. Indeed, evidence of a single sale can suffice as long as it is not contrived for the purposes of the hearing.

Trademark Expungement Proceedings: Standing as a “Person Interested”

By In Case Law, Protection & Enforcement

In McCallum Industries Ltd. v. HJ Heinz Co. Australia Ltd., the Federal Court dismissed the applicant’s action to expunge the respondent’s trademark under s. 57(1) of the Trade-marks Act.

Both the applicant and the respondent produced canned and processed meat products in Canada, the applicant under the name “PALM & Device“, and the respondent under the name “OX & PALM”. The applicant was granted a trademark in July 2003, while the respondent was granted a trademark in October 2005.

Section 57(1) allows “any person interested” to apply to the Federal Court for an order that any entry in the register be struck out or amended on the grounds that at the date of the application the entry as it appears on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the trademark. The applicant sought expungement of the respondent’s trademark on the grounds that the trademark was confusing to the public, that the respondent was not the person entitled to secure registration of the trademark, and that the trademark was non-distinctive. Read more

Trademark Interlocutory Injunction Denied to Target

By In Case Law, Famous Marks

In Target Brands Inc. v. Fairweather Ltd., the Federal Court of Canada refused to grant the interlocutory injunction sought by the American retail chain, this recent application being part of a continuing battle.

In 2002, Target’s counsel initiated proceedings under s. 45 of the Trade-Marks Act to cancel INC’s trade-mark registration for TARGET APPAREL. The Registrar of Trade-marks issued a notice on April 2002 requiring INC to show use of the trade-mark registration in Canada. INC filed an affidavit on its use of the trade-mark in response to the s. 45 notice. The Registrar of Trade-marks held that the evidence was insufficient to show use. INC appealed the Registrar’s decision and the Federal Court reversed that decision on October 19, 2006. Target’s counsel appealed to the Federal Court of Appeal, which affirmed the Federal Court decision on November 26, 2007.

Target claimed that they only became aware of INC’s use of TARGET APPAREL as a store name in June 2010. Its counsel sent a letter to INC objecting to the use of the TARGET trade name on August 3, 2010. Again, Target commenced a s. 45 proceeding to cancel the trade-mark registration of TARGET APPAREL. The Registrar of Trade-marks has issued another notice to INC under s. 45 of the Trade-marks Act on July 30, 2010, and the proceeding is currently underway.

Target also requested an injunction for the months leading up to the trade-mark dispute trial, scheduled to begin in November 2012.

The Court set out and applied the three-step test for applications for interlocutory injunctions. Although the Court found the first requirement of a serious question to be tried had been met, the question of irreparable harm to the Plaintiff was answered in the negative.
The Court found the Plaintiff’s submission on irreparable harm, advanced on the basis of a marketing theory about “sincere” and “exciting” brand personalities, difficult to assess. The Court noted, where expert evidence is provided by affidavit and is challenged in the course of the proceedings, the assessment of such expert evidence is best left for the fullness of a trial where review of qualifications and in-court testimony, direct, cross-examination and redirect, are present.

In deciding the question of irreparable harm, the Court held that the level of confusion among prospective customers to be a matter of debate, the expert opinions required closer examination and assessment, and the time to trial was relatively short. Resultantly, Target had not proved on balance of probabilities that it would suffer irreparable harm during the intervening months until a decision is rendered at trial.

The Court further considered the issue of the balance of convenience and determined that the balance favoured INC. In looking back upon the chain of events, the Court noted that INC did not begin expansion with the Target Apparel stores until after the Federal Court of Appeal decision in its favour. At that point, Target had not yet announced its expansion into Canada. The Court held that INC’s decision was not the sort of risk that should be met with the Court’s disapproval. They had taken precautionary steps in the face of Target’s claims: they had inscribed a red maple leaf in a circle rather than using a red bull’s-eye; posted a disclaimer to the effect that it is not Target; and undertaken to maintain records of sales while the litigation is continued. 

No evidence was presented to suggest that Target would be prevented or delayed from opening Target stores in Canada, but the granting of the requested injunction would result in INC having to remove and replace its signage for all stores. Such removal and replacement would not only be costly, but may also suggest instability to INC’s customers, having significant consequences for the company. Consequently, the balance of inconvenience, as it was described by the Court, lay with INC rather than Target. Presumably the matter will now proceed toward trial in November 2012.

Counterfeit Goods: Significant Statutory and Punitive Damages

By In Famous Marks, Protection & Enforcement

We have been following the line of cases dealing with counterfeit goods and the resulting damage awards, and note the most recent case from the Federal Court makes clear that a tougher approach to trademark  and copyright infringement can now be expected in Canada.  In Louis Vuitton Malletier S.A. v. Singga Enterprises (Canada) Inc., the Court awarded significant damage awards as well as punitive damages against the three defendant companies and their principals.

The Plaintiffs, Louis Vuitton and Burberry, hired a number of investigators to attend the stores and warehouses of the defendants Singga Enterprises Canada, Altec Productions and Guo (doing business as Carnation Fashion Company), as well as purchase items from their websites. While in attendance at the stores and warehouses, the investigators were shown and purchased a number of counterfeit items including handbags, sunglasses and jewellery, all of which contained unauthorized productions of the Louis Vuitton and Burberry trade-marks. The Plaintiffs were successful in showing that the defendants’ activities of manufacturing, importing, distributing, offering for sale and actual sale of bulk quantities of counterfeit and/or infringing items had been ongoing and, in the case of one of the defendants, had continued after the commencement of the proceeding and the motion for summary trial brought by the Plaintiffs.

The Court noted that none of the defendants, with the exception of the defendant Guo, had filed any materials in response to the motion or attempted to cross-examine any of the Plaintiffs’ affiants on their affidavits. Additionally, none of the defendants, again with the exception of Guo, had attended the hearing of the matter.

Following cases such as Louis Vuitton Malletier S.A. v. Lin Pi-Chu Yang and Louis Vuitton Malletier S.A. et al v. 486353 B.C. Ltd., the Court took a tough stance toward the defendants.  Noting the defendants’ knowing and wilful behaviours, the Court awarded damages for trade-mark infringement of $30,000 for each instance of infringement against the Singga defendants and defendant Guo. Resultantly, the Singga defendants were found liable for a total of $300,000 to the Louis Vuitton Plaintiffs and $180,000 to the Burberry Plaintiffs, and the Guo defendant was required to pay $180,000 to the Louis Vuitton Plaintiffs and $120,000 to the Burberry Plaintiffs.

With regard to the Altec defendants, the evidence showed a high level of importation and inventory turn-over and was held to warrant an award of damages on a turn-over basis rather than simply a per instance basis of infringement. The Altec defendants were required to pay $480,000 in damages to the Louis Vuitton Plaintiffs, and $480,000 to the Burberry Plaintiffs. Additionally, the Singga and Altec defendants were found jointly and severally liable for the activities of the Altec defendants, for which the Singga defendants received a commission, and were required to pay $60,000 to the Louis Vuitton Plaintiffs and $60,000 to the Burberry Plaintiffs.

In addition to the damages awarded for the defendants’ infringement of the Trade-marks Act, Louis Vuitton was found to be entitled to recovery of damages and profits, pursuant to the Copyright Act, in relation to infringement by each of the groups of defendants. Statutory damages for copyright infringement were awarded at the high end of the scale due to the defendants’ bad faith conduct, which was found to be dismissive of law and order, and demonstrating a necessity for deterring future infringements. The Court awarded a total of $40,000 per group of defendants.

Additionally, the Court found that the Plaintiffs were entitled to punitive and exemplary damages as against each of the defendants. Following the earlier cases referenced above, which held that punitive and exemplary damages may be awarded where a defendant’s conduct is “outrageous” or “highly reprehensible” and with little regard for the legal process, the Court awarded punitive and exemplary damages against each of the defendants. The Louis Vuitton Plaintiffs were awarded $200,000 against the Singga defendants, $250,000 against the Altec defendants, and $50,000 payable by the defendant Guo.

Finally, citing the Louis Vuitton cases mentioned above, the Court awarded solicitor and client costs due to the defendants “disrespectful disregard” for the process of the Court, and the higher legal fees and disbursements incurred by the Plaintiffs as a result.

An appeal has now been filed by the Singga defendants, which means that there may eventually be a Federal Court of Appeal decision regarding the awards. We will continue to follow this story.

Certification Marks: Decision Affirmed by Court of Appeal

By In Case Law, Registration

An earlier blog discussed a Federal Court decision, agreeing with a decision of the Registrar of Trade-marks and preventing the registration of a certification mark, HALLOUMI, in association with cheese.  In The Ministry of Commerce and Industry of the Republic of Cyprus v. International Cheese Council of Canada, the Federal Court of Appeal affirmed the decision.

The Trade-marks Act defines a certification mark as a type of trademark and sets up a specific regime for its adoption and registration by a person not engaged in the manufacture, sale, leasing or hiring of the wares or services in question, who wishes to license others to use the marks.  With wares a certification mark is intended to signify character or quality, working conditions, the class of persons producing the wares or the area they are produced.

The opponent successfully established that HALLOUMI could not be registered pursuant to section 12(1)(b) of the Trade-marks Act, which precludes registration of a mark contrary to section 10, namely a mark that has by ordinary and bona fide usage become recognized in Canada as designating, among other things, a kind of wares.  The evidence established such usage with regards to the cheese at issue.

On appeal to the Court of Appeal, the Cyprus Ministry of Commerce and Industry argued that the relevant date for an opposition based on section 10 was other than the date of the Registrar’s decision and that the judge had failed to apply the proper burden of proof and assess the evidence.  However, none of these arguments succeeded and the registration was not allowed.