Supreme Court Rules On Famous Mark Protection

On June 2, 2006, the Supreme Court of Canada (SCC) issued decisions in two cases that were eagerly awaited by owners of famous brands. Although the famous brand owners were not successful in the cases of Mattel, Inc. v. 3894207 Canada Inc., and Veuve Clicquot Ponsardin v. Boutiques Cliquot, the decisions provide guidance on the scope of protection of famous marks. The cases may also have opened the door to more claims under section 22 of Canada’s Trade-marks Act (the Act), which allows a claim for depreciation of goodwill.

Consistent with its recent approach in respect of decisions concerning intellectual property, the SCC was careful to consider the public interest when defining the appropriate scope of trade-mark protection for famous marks. The SCC noted that trade-marks are "something of an anomaly in intellectual property law. Unlike the patent owner or the copyright owner, the owner of a trade-mark is not required to provide the public with some novel benefit in exchange for the monopoly." Instead, the monopoly claimed by a trade-mark owner rests on the fact that a trade-mark serves an important public interest in functioning as a sort of consumer protection legislation: a trade-mark, by distinguishing the goods and services of one owner from those of another, serves as a guarantee of origin and inferentially, an assurance to the consumer that the quality will be what he or she has come to associate with a particular trade-mark. The SCC also noted that "[f]airness, of course, requires consideration of the interest of the public and other merchants and the benefits of open competition as well as the interest of the trade-mark owner in protecting its investment in the mark. Care must be taken not to create a zone of exclusivity and protection that overshoots the purpose of trade-mark law."

The Mattel case came to the Supreme Court at the end of a series of appeals by Mattel from a decision of the Trade-marks Opposition Board (TMOB). At the TMOB, Mattel, owner of the BARBIE trade-mark for the famous doll (among other related items), was unsuccessful in stopping registration of the trade-mark BARBIE’S, for use in association with restaurant services. The TMOB noted the wide chasm between the respective wares and services, and found that there was no reasonable likelihood of confusion between the marks.

The SCC confirmed that in considering the likelihood of confusion of any mark with a famous mark, the standard statutory test for confusion under the Act is applied. Under the Act, confusion is said to arise if it is likely that a prospective purchaser would make the mistaken inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class, having regard to all of the circumstances set out in section 6(5) of the Act.

Section 6(5) of the Act requires a decision-maker conducting a confusion analysis to have regard to all of the surrounding circumstances including: (a) the inherent distinctiveness of the trade-marks or trade names and the extent to which they have become known; (b) the length of time the trade-marks or trade names have been in use; (c) the nature of the wares, services or business; (d) the nature of the trade; and (e) the degree of resemblance between the trade-marks or trade names in appearance or sound or in the ideas suggested by them.

The SCC noted that the list of circumstances in Section 6(5) of the Act is not exhaustive, and different circumstances will be given different weight in a context-specific assessment. The SCC also confirmed that the perspective from which a reasonable likelihood of confusion must be assessed is that of the "ordinary hurried purchaser," a mythical consumer whose attention to detail is somewhere between the attention paid by a "moron in a hurry" and the attention paid by a careful and diligent purchaser.

The SCC affirmed that there does not need to be any resemblance or linkage to the wares or services associated with the marks in question for confusion to occur. On the other hand, the mere fact that a trade-mark is famous does not mean that there does not need to be any linkage between the wares or services in question. In short, the SCC affirmed that fame is not a factor that trumps all other factors in the Section 6(5) analysis: "a difference in wares or services does not deliver the knockout blow, but nor does the fame of the trade-mark. Each situation must be judged in its full factual context."

Mattel had contended that the restaurant which applied for the BARBIE’S trade-mark was a deliberate free rider that had no reasonable explanation for adopting its trade-mark. While the SCC had some sympathy for this argument, it noted that "the relevant perspective of Section 6(2) of the Trade-marks Act is not that of the respondent [junior trade-mark user] but rather the perception of the relevant mythical consumer. Mens rea is of little relevance to the issue of confusion."

In the end, the SCC found that the TMOB’s conclusion that there was no reasonable likelihood of confusion between Mattel’s BARBIE trade-mark for dolls and accessories for dolls and the pending application for BARBIE’S, for use in association with restaurant and catering services, was reasonable, and dismissed Mattel’s appeal.

The famous champagne brand owner Veuve Clicquot Ponsardin (Veuve Clicquot) fared no better in its claim for trade-mark infringement and depreciation of goodwill against Boutiques Cliquot Ltée. (Boutique Cliquot), a women’s clothing retail business operating six stores under the names LES BOUTIQUES CLIQUOT and CLIQUOT in Ontario and Quebec.

Although the Court found that the Veuve Clicquot trade-marks were famous and distinctive, it was not prepared to find confusion between the Veuve Clicquot marks and the Cliquot Boutiques clothing marks. The SCC explicitly rejected the assertion that the importance of a connection between the wares and services of the respective parties diminishes as the strength of the mark increases. Instead, the SCC noted that "famous marks do not come in one size. Some trade-marks may be well known but have very specific associations (Buckley’s cough mixture is advertised as effective despite its terrible taste, not, one would think, a brand image desirable for restaurants). Other famous marks, like Walt Disney, may indeed have largely transcended product line differences."

The lack of a reasonable likelihood of confusion meant that Veuve Clicquot’s trade-mark infringement claim failed. However, Veuve Clicquot had also claimed depreciation of goodwill, based on Section 22(1) of the Act, which provides that "no person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto."

The SCC decision discussed the history of the Section 22 remedy, and drew parallels to similar remedies available in the United States (anti-dilution) and in the European community (anti-detriment in the United Kingdom). In keeping with the SCC’s desire to be mindful of the balance between the public interest and private intellectual property rights, the decision noted that "the depreciation or anti-dilution remedy is sometimes referred to as a ‘super weapon’ which, in the interest of fair competition, needs to be kept in check."

The SCC outlined and considered the four elements of a Section 22 depreciation-of-goodwill claim. First, a claimant’s registered trade-mark must have been used by the defendant in association with wares or services (whether or not such wares or services are competitive with those of the claimant). Second, the claimant’s registered trade-mark must be sufficiently well known to have significant goodwill attached to it. While the claimant’s mark does not have to be well known or famous (unlike the analogous U.S. and European law), a defendant obviously cannot depreciate the value of goodwill that does not exist. Third, the claimant’s mark must have been used in a manner likely to have an effect on the goodwill associated with that mark (i.e. linkage). Lastly, the likely effect of that use would be to depreciate the value of its goodwill (i.e. damage).

In respect of use of a claimant’s mark, the SCC confirmed that the defendant need not use the mark exactly as registered. In this case, the CLIQUOT mark was spelled differently than found in the VEUVE CLICQUOT mark, but the SCC confirmed that this was no defence to the claim of depreciation of goodwill, if a casual observer would recognize the mark used by the defendants as the mark of the claimant. The Court noted that the requirements of Section 22 must be interpreted in light of its remedial purpose. However, the Court went on to find that there has to be some link between the word "Cliquot" as used in the defendant’s stores and a mental link or connection to the VEUVE CLICQUOT marks. "Without such a link, connection or mental association in the consumer’s mind between the [Boutique Cliquot] display and the VEUVE CLICQUOT mark, there can be no depreciation of the latter."

In support of this proposition, the SCC cited the leading six-volume treatise on U.S. trade-mark law, McCarthy on Trademarks and Unfair Competition: "… if a reasonable buyer is not at all likely to think of the senior user’s trade-mark in his or her own mind, even subtly or subliminally, then there can be no dilution. That is, how can there be any "whittling away" [of goodwill] if the buyer, upon seeing [the] defendant’s mark, would never, even unconsciously, think of the plaintiff’s mark? So the dilution theory presumes some kind of mental association in the reasonable buyer’s mind between the two parties and the mark" (emphasis in original).

The SCC also confirmed that a plaintiff in a claim for depreciation of goodwill must provide proof of its claimed goodwill, and evidence from which a court may infer that there is a likelihood of depreciation of such goodwill. The SCC suggested that goodwill could be assessed by looking at factors such as: the degree of recognition of the mark within the relevant universe of consumers; the volume of sales and the depth of market penetration of products associated with the claimant’s mark; the extent and duration of advertising and publicity accorded the claimant’s mark; the geographic reach of the claimant’s mark; its degree of inherent or acquired distinctiveness; whether products associated with the claimant’s mark are confined to a narrow or specialized channel of trade, or move in multiple channels; and the extent to which the mark is identified with particular quality.

The SCC expressly acknowledged that the Canadian concept of depreciation of goodwill could go beyond the U.S. concepts of blurring (where there is a diminishment of distinctiveness, uniqueness, effectiveness and prestigious connotations of a senior user’s trade-mark) or tarnishment (where a defendant creates a negative association for a mark). Accordingly, despite these two recent decisions, on the right facts, a claim of depreciation of goodwill may still be a powerful weapon for famous brand owners.

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