2021 Year In Review: Key Trademark Cases In Canada

• Published date: 20 January 2022
• Subject Matter: Intellectual Property, Media, Telecoms, IT, Entertainment, Trademark, Advertising, Marketing & Branding
• Law Firm: Bereskin & Parr LLP
• Author: Ms Susan Keri, R. Scott MacKendrick and Mark Robbins

Throughout 2021, the world remained overwhelmingly preoccupied with ending the COVID-19 pandemic. That said, the Federal Court continued to provide guidance to Canadian trademark practitioners in a number of noteworthy decisions. The following represents a summary of our "top picks".

Use of a Parody Trademark may not be a Budding Success

The Federal Court decision in Subway IP LLC v. Budway, Cannabis & Wellness Store, 2021 FC 583 confirms the emerging trend in Canadian courts in finding that the adoption of a parody trademark by a third party serves to depreciate the value of the goodwill attached to a well-known mark.

Subway IP LLC operates sandwich restaurants throughout Canada and is the registered owner in Canada of various trademarks including the SUBWAY logo in green, white and yellow:

Budway, Cannabis & Wellness Store ("Budway") operates a retail store selling cannabis and related goods, and adopted the trademark BUDWAY in design form using various shades of the colour green:

In an advertisement of its dispensary services, Budway also adopted a "mascot" in the form of a submarine sandwich filled with cannabis leaves and bulging eyes, as shown below:

Subway IP brought an application against Budway alleging trademark infringement, passing off, and depreciation of goodwill, contrary to sections 7(b), 20 and 22 of the Trademarks Act. Although Budway did not respond to the application, Subway was still required to establish its entitlement to the order sought on a balance of probabilities.

On the issue of trademark infringement, Justice McHaffie ruled that the respondents' BUDWAY mark was confusing with the SUBWAY registered trademarks, noting the similarities in letters and pronunciation between SUBWAY and BUDWAY, the use of colour differentiation between the first three and last three letters, the presence of arrow design motifs, the use of green colouring, and the oval background. He further noted that confusion between the marks was enhanced by the fact that "budway" is not a dictionary word and would therefore tend to be read in a manner to connote the common word "subway" which, in context, would allude to the SUBWAY trademarks.

Justice McHaffie also found that the SUBWAY marks enjoyed a fairly high degree of inherent and acquired distinctiveness. He noted that while the BUDWAY mark possesses some distinctiveness, the distinctiveness of its graphic elements was primarily derived from copying the various distinctive elements of the SUBWAY trademarks.

With regard to the nature of the respective goods, services and business associated with the respective marks, Justice McHaffie found an overlap in that they both covered "cookies", and noted that the SUBWAY registration covering "cookies" was not limited to any type of cookie, and could conceivably cover cookies containing cannabis.

Justice McHaffie also found that Subway had demonstrated each of the necessary elements with respect to passing off under section 7(b) of the Trademarks Act, namely, the existence of goodwill, deception of the public due to a misrepresentation, and actual or potential damage. Subway's depreciation of goodwill claim under Section 22 was also successful, with Justice McHaffie finding that the BUDWAY mark was sufficiently similar to the SUBWAY registered trademarks to evoke in the minds of consumers a mental association between the respective marks.

In light of these findings, Budway was permanently enjoined from using the trademark or trade name BUDWAY, and Subway was awarded damages in the amount of $15,000, with an additional $25,000 for costs.

A Half-Baked Plan

In Boulangerie Vachon Inc. v. Racioppo, 2021 FC 308, the Federal court held that the defendants' use of the trademark HOSTESS and the trade name Hostess Bread Company Inc. on bread products infringed the rights of the plaintiff trademark owner in its HOSTESS registration covering cakes and pies under Subsection 20 of the Trademarks Act; constituted passing off contrary to Section 7(b); and depreciated the value of the goodwill associated with the plaintiff's mark contrary to Section 22 of the Act.

Not surprisingly, given the overlap in the goods and trade channels associated with the parties' respective HOSTESS marks (both fell within the category of baked goods, and were often sold side by side or in close proximity to each other), the judge concluded that the defendants' use of the HOSTESS name and mark with bread products was confusing with the plaintiff's HOSTESS word mark covering cakes and pies, and the case for infringement and passing off was quite strong. More noteworthy, however, was the court's finding that the defendants' use of the HOSTESS name and mark on bread products had the likely effect of "blurring" the HOSTESS brand and image and, as such, constituted depreciation of goodwill in the plaintiff's mark.

Although the defendants counterclaimed to invalidate the plaintiffs' registrations and filed evidence showing some co-existence on the Register of different HOSTESS related marks for various food products, the judge held that the presence of a few other traders with HOSTESS-formative marks on the Register for a variety of food products was not sufficient to establish that the HOSTESS trademarks of the plaintiff were not distinctive or that the registrations were invalid. This was consistent with the principle that, absent evidence showing actual use of third party marks, marketplace use cannot be assumed. Indeed, the judge noted that the only evidence of use in the marketplace was that of the plaintiffs and the defendants. The judge also commented that the other third party HOSTESS registrations covered foods that were considerably less similar to cakes than the defendants' bread.

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