2022 Year In Review: Key Trademark Cases In Canada

• Law Firm: Bereskin & Parr LLP
• Subject Matter: Intellectual Property, Trademark
• Author: Ms Susan Keri, Mark Robbins, Meghan Dillon and R. Scott MacKendrick
• Published date: 02 February 2023

Throughout 2022, the Federal Court continued to provide guidance to Canadian trademark practitioners in several noteworthy decisions. The following represents a summary of our "top picks".

Food For Thought: Federal Court Reinforces Value of Registered Trademark Rights

The February 2022 decision of the Federal Court in 1196278 Ontario Inc. dba SASSAFRAZ v 815470 Ontario Ltd. dba SASSAFRAS COASTAL KITCHEN, 2022 FC 116 reinforces the value of owning a registered trademark as opposed to relying on unregistered or common law trademark rights.

The Applicant has operated a restaurant under the name SASSAFRAZ in the Yorkville area of Toronto, Ontario since 1997. The evidence established that the restaurant had become a well-known local landmark and a popular "fine dining" destination, serving "contemporary French-inspired Canadian cuisine". In June 2011, the Applicant acquired a registration for the trademark SASSFRAZ covering catering, restaurant, and bar services, as well as the hosting of private receptions.

In June 2020, the Applicant learned that the Respondent was about to launch a restaurant in the Niagara Peninsula region of Ontario using various names incorporating the term SASSAFRAS. The Applicant contacted the Respondent advising of its rights in the SASSAFRAZ trademark and registration; however, despite the warning letter, the Respondent proceeded with the launch. Thereafter, the Applicant commenced proceedings in the Federal Court seeking a declaration of trademark infringement of its SASSAFRAZ registration, and depreciation of goodwill.

The Federal Court held in favour of the Applicant, finding that both infringement and depreciation of goodwill had been established. On the issue of infringement, the Court held that the Respondent's operation of its restaurant in association with the SASSAFRAS name and mark was likely to give rise to confusion with the Applicant's registered trademark SASSAFRAZ. In its confusion analysis, the Court concluded that there was a substantial degree of resemblance between the SASSAFRAS and SASSFRAZ names and marks. The remaining criteria used to assess confusion also all favoured the Applicant. The absence of evidence of actual confusion was not persuasive in these circumstances. The casual consumer, somewhat in a hurry, was likely to associate the source of the Respondent's SASSFRAS marks with the source of the Applicant's registered SASSSFRAZ trademark, as a matter of first impression.

The Court also found that the geographic distance between the parties' respective restaurants did not play a role in the hypothetical confusion test - "the Applicant is entitled to fully enforce its right to national exclusivity in respect of the use of the SASSAFRAZ or any confusingly similar mark" in association with its services.

While the menus of the respective parties had some overlapping items, the Respondent's menu items were generally offered at a lower price point than those of the Applicant. However, the Court noted that differences in the parties' respective products along the price/quality spectrum was also not important since the Applicant's registered trademark rights were not restricted to any particular type of cuisine or price point.

In addition, the Court found that the Respondent's knowledge of the infringement, or "mens rea", was of little relevance in the confusion analysis.

In finding in favour of the Applicant on the depreciation of goodwill claim, the Court held that the Respondent's use of the SASSFRAS name and mark was likely to have the effect of blurring the image of the Applicant's mark and "whittling away" its power to distinguish the Applicant's services; erodes the Applicant's ability to control the manner in which its mark is used; and that the ongoing use of a highly similar mark is "a form of free-riding on the reputation of the SASSFRAZ mark, which was built up over almost a quarter century of significant effort on the part of the Applicant."

The Court granted the Applicant the declaratory and injunctive relief sought, together with nominal damages in the amount of $15,000.

This decision reinforces the value of owning a registered trademark in Canada. Unlike unregistered trademark rights, where a protectable reputation must be established in the infringer's geographic area, a registered trademark grants the right to the exclusive use of the mark throughout Canada.

Advertisement as "High Quality Replicas" is No Defense for Counterfeiters

The February 2022 decision of the Federal Court in Lululemon Athletica Canada Inc. v. Campbell, 2022 FC 194, addresses several issues relating to claims dealing with the sale of counterfeit goods in Canada.

The Plaintiff, Lululemon Athletica Canada Inc, manufactures and distributes athletic and yoga wear and is the owner of various registered trademarks including the word LULULEMON as well as the well-known "wave" design logos:

The main Defendant in the case, Ms. Campbell, together with three others, advertised and sold counterfeit LULULEMON merchandise through various Facebook pages from October 2019 through March 2021. The items were offered for sale on condition that a sufficient number of orders was received by a specified date. The merchandise was purchased by Ms. Campbell from a Chinese supplier. She was assisted by the three other defendants, who made their own posts on Facebook and handled purchases and deliveries, although purchasers paid Ms. Campbell directly.

In 2019 Lululemon became aware of these activities and delivered a cease and desist letter to Ms. Campbell in March of 2020 and again in February of 2021. Despite assurances to the contrary, Ms. Campbell continued her activities by creating different Facebook pages in which she offered counterfeit LULULEMON merchandise for sale. The Plaintiff commenced an action in March of 2021. In the spring of 2021, the matter was settled with the three other defendants and a consent judgment was issued against them; however, in July 2021, Lululemon brought a motion for summary trial against the remaining defendant, Ms. Campbell.

Although she was served with the motion for summary trial and a motion record, Ms. Campbell did not file a motion record nor did she appear at the summary trial and hearing. However, since she filed a statement of defence, the Court noted that the case was not one of default judgment.

The Court held that a summary trial based on affidavit evidence was appropriate under the circumstances - the issues were not overly complex; Lululemon led sufficient evidence; nothing turned on the issue of credibility that could only be resolved through a full trial; and a summary trial would lead to a quicker and less costly resolution of the matter.

The Court found that Lululemon's trademarks were infringed, and that the activities of Ms. Campbell violated the provisions of Sections 19 and 20 of the Trademarks Act. At the time of sale, the goods delivered to the purchasers bore the LULULEMON trademarks. Moreover, Ms. Campbell imported counterfeit goods bearing the LULULEMON trademarks by placing orders with a supplier in China; advertised them on her Facebook pages using both the wave design logos, as well as...