End Of The Line: Federal Court Finds Subway's Trademark Rights Infringed By Cannabis Retailer That Adopted "Budway" Parody Mark

• Published date: 24 June 2021
• Subject Matter: Intellectual Property, Trademark
• Law Firm: Smart & Biggar
• Author: Mr Graham Hood

Earlier this month, the Federal Court issued its decision in Subway IP LLC v Budway, Cannabis & Wellness Store, 2021 FC 583, a case involving a cannabis retailer that knowingly adopted a parody mark in connection with its business. This case was no laughing matter for the plaintiff, Subway IP LLC (Subway), or the Court, which ruled in favour of Subway, and awarded the plaintiff permanent injunctive relief, damages and over 80% of its costs. This case demonstrates not only the expeditious relief available to brand owners in Canadian trademark litigation, but also the serious consequences for cannabis companies that (foolishly) adopt parody marks to piggyback on the goodwill and reputation of established brands.

Background

Subway, the well-known restaurant company that owns Canadian registered trademarks used in association with SUBWAY-branded sandwich restaurants, brought an application in the Federal Court against Budway, Cannabis & Wellness Store, William Matovu and Atlantic Compassion Club Society.¹ Budway, Cannabis & Wellness Store (Budway) is a Canadian company operating a cannabis retail store in Vancouver, BC. Mr. Matovu is its owner and directing mind. The respondents had adopted and were using the trademark BUDWAY, and prominently displayed, outside its storefront, the following design mark:

In addition to their infringing use of the BUDWAY mark shown above, the respondents also adopted a "mascot" that alluded strongly to Subway's brand. Among the evidence filed with the Court were "Instagram posts ... show[ing] the use by [the respondents' Instagram profile] 'budwayonclark' of a 'mascot' in the form of a submarine sandwich filled with cannabis leaves, with what are apparently bloodshot and half-opened eyes. This mascot appear[ed] in the video clip, smoking what is presumably a joint, with the legend 'It's the way, bud' appearing below it".²

In its application, Subway alleged that the respondents had (i) infringed its trademark rights, (ii) directed public attention to its goods, services and business in such a way as to cause or be likely to cause confusion in Canada (also known as passing off), and (iii) depreciated the value of the goodwill attached to its registered SUBWAY trademarks, including the subject trademark of registration No. TMA521134, shown below:

(the SUBWAY Design Mark)

Court decision

The Court granted Subway's application in its entirety.

The respondents infringed Subway's registered trademark rights

In determining whether the parties' trademarks are confusing, the Court considered all the surrounding circumstances, including the particular circumstances identified in subsection 6(5) of the Trademarks Act, namely inherent or acquired distinctiveness, length of time the trademarks have been in use, the nature of the goods, services, business, and trade, and the degree of resemblance between the trademarks.

In considering these circumstances, the Court found that Subway's registered trademark rights in and to the Subway Deign Mark were infringed.

Degree of resemblance

The Court found that "[t]he resemblance between the marks points strongly toward a finding of confusion".³ In considering the degree of resemblance between the marks, the Court found that "the word element of the mark is similar, with the similarities in letters and pronunciation between SUBWAY and BUDWAY being self-evident".⁴ Interestingly, the Court also held that the respondent's use of a coined term strengthened the degree of resemblance between the marks in the ideas suggested by them: "[t]he fact that 'budway' is not itself a word means that it would tend to be read in a manner to connote the common word 'subway.' In context, the connotation would be with Subway's SUBWAY-branded restaurants in particular".⁵

The Court went on to find that "the similarity between the marks, and the associative connotation with Subway's restaurants, is further enhanced by the respondents' use of the same logo elements that appear in the [SUBWAY Design Mark], namely the colour differentiation between the first three and last three letters, and the arrow design motif".⁶

Distinctiveness

The Court found that the SUBWAY Design Mark has a "fairly high degree of inherent distinctiveness".⁷ While the "sub" element is strongly suggestive of the submarine sandwiches sold at SUBWAY restaurants, "the use of that element in the SUBWAY trademarks is distinctive. This distinctiveness is further enhanced by the graphic elements of the marks, which include the arrow designs and colour differentiation".⁸ In addition, the Court found that the SUBWAY Design Mark is "well known" in Canada, having gained "significant acquired distinctiveness" as a result of Subway's extensive sales, advertising and promotion of the SUBWAY Design Mark in Canada.⁹

As for the distinctiveness of the respondents' mark, the Court found that "the distinctiveness of its graphic elements derives primarily from adopting the elements seen in [Subway's] trademarks", concluding that "[t]he relative distinctiveness of the trademarks again point[ed] to a finding of confusion".¹⁰

Length of use

While Subway had used its trademarks for many years, the respondents had used their mark for only a year or so. This factor also pointed to a finding of confusion.

Nature of the goods, services and business

Notably, the parties' goods in this case actually overlapped. Unlike in...