The Fame Game: The Scope of Protection for Famous Trade-marks in Canada 

publication 

Fall 2006 - (Intellectual Property Brief Fall 2006 and Canadian Corporate Counsel (Canada Law Book) December 200)

Intellectual Property Brief Fall 2006 and Canadian Corporate Counsel (Canada Law Book), December 2006

The Supreme Court of Canada's much anticipated decisions in Mattel, Inc. v. 3894207 Canada Inc ., 2006 SCC 22 ("Mattel") and Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée , 2006 SCC 23 1 ("Veuve Clicquot") released June 2, 2006 are a welcome addition to Canadian trade-mark jurisprudence. In addition to finally resolving the Pink Panther/Lexus controversy and generally clarifying the test for trade-mark confusion, the companion decisions confirm that famous and well known trade-marks are capable of a broad scope of protection while they simultaneously serve as a caution to brand owners that such broad protection will only be afforded if it is warranted in the totality of the circumstances. Also, in laying out a four-part test for depreciation of goodwill of a registered trade-mark under section 22 of the Trade-marks Act , Veuve Clicquot has revitalized that cause of action. Finally, the Supreme Court offered helpful insights into other aspects of Canadian trade-mark law.

Clarifying Pink Panther/Lexus

The test for confusion in Canada was itself in a state of confusion following the controversial decision of the Federal Court of Appeal in Pink Panther Beauty Corp. v. United Artists Corp., [1998] 3 F.C. 534 ("Pink Panther") 2 and the subsequent decision of that court in Toyota Jidosha Kabushiki Kaisha v. Lexus Foods Inc ., [2001] 2 F.C. 15 ("Lexus").

Sub-section 6(2) of Trade-marks Act  3 provides that one trade-mark causes confusion with another if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated therewith are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class . However, despite the wording of the legislation, the Pink Panther and Lexus decisions suggested that only in exceptional circumstances, if ever, could there be a finding of confusion without evidence of some connection between the wares/services of the two marks. Unsurprisingly, these decisions did not sit well with many owners and licensees of well known brands who held the view that the scope of protection for famous trade-marks should transcend traditional product and service lines. Some perceived Pink Panther and Lexus as evidence that Canada, which has no legislation directed specifically at the protection of famous or well known trade-marks, is weak on those seeking a free ride on the goodwill of another's famous trade-mark. 4

It was against this background that Mattel, the toy manufacturer and owner of the famous registered trade-marks BARBIE and BARBIE'S (the "Barbie Marks"), and Veuve Clicquot, the champagne maker and owner of the famous registered trade-mark VEUVE CLICQUOT, each received leave to appeal to the Supreme Court of Canada when the Federal Court of Appeal ruled against their respective cases. Mattel sought to prevent a restaurant chain from obtaining a Canadian trade-mark registration for the mark BARBIE'S & Design (see Figure 1) for use in association with restaurant-related services, on the basis that there was a reasonable likelihood that consumers would erroneously believe the restaurant was affiliated with the famous BARBIE brand. 5 Veuve Clicquot sought to prevent a clothing retailer from continuing to use the retailer's own registered trade-mark CLIQUOT in association with mid-range women's clothing stores on the basis that (i) customers walking into the shops would be confused into believing the clothing emanated from the same source as the champagne, and (ii) that the brand equity built up in Canada since the 19th century in association with the upmarket luxury bubbly would be devalued. In each case, the decisions below contained factual findings that there was no connection between the wares of Mattel and Veuve Clicquot and the services of their respective opposite parties, and dismissed the complaints citing Pink Panther and Lexus . Mattel and Veuve Clicquot hoped to convince the Supreme Court that Pink Panther and Lexus had been wrongly decided and that famous trade-marks are worthy of a broad scope of protection in Canada despite any difference in the nature of the wares and services at issue.

In Mattel and Veuve Clicquot , the Supreme Court agreed that the "exceptional circumstances, if ever" test as contained in Pink Panther was incorrect and stated that Lexus was wrong insofar as it suggested that a finding of confusion required "some resemblance or linkage" between the wares. 6 However, satisfied that the lower courts' previous rulings in Mattel and Veuve Clicquot, despite references to Pink Panther and Lexus, were nonetheless decided on the correct test for confusion, the Supreme Court dismissed the appeals and maintained that there was no likelihood of confusion in either case.

The Test for Confusion

The Supreme Court restated the test for confusion in Canada: confusion will arise between two trade-marks if it is likely in all the surrounding circumstances that, as a matter of first impression in the mind of an ordinary casual consumer somewhat in a hurry who sees the trade-mark of one party at a time when they have no more than an imperfect recollection of the trade-mark of the other party and does not pause to give the matter any detailed consideration or scrutiny nor to examine closely the similarities and differences between the marks, that consumer will be led to 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. 7 The Supreme Court noted that s.6(5) of the Trade-marks Act lists five such surrounding circumstances that must be taken into account, 8 but confirmed that this list is not exhaustive and that different circumstances will be given different weight in a context-specific assessment. 9 The totality of the circumstances dictates how each consideration should be treated. 10

The Impact of Fame in the Confusion Analysis

After commenting on Mattel's submissions that the scope of protection of famous marks in Canada was an important justification for the 1953 amendments to the Trade-marks Act , 11 the Supreme Court acknowledged Parliament's recognition that fame is a factor that must be considered in a confusion analysis. 12

On the specific issue of the potential impact of the fame of a trade-mark in a confusion analysis, the Supreme Court held in Mattel that "fame is capable of carrying the mark across product lines where lesser marks would be circumscribed to their traditional wares or services" 13 [emphasis added]. However, the Court stressed that fame is only one factor in the confusion analysis which requires consideration of all of the surrounding circumstances: "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." 14

The Supreme Court went on to say in Veuve Clicquot that a determination that a mark is famous is an important one, "because fame presupposes that the mark transcends at least to some extent the wares with which it is normally associated" 15 [emphasis added]. However, the Court recognized that fame is not a monolithic construct. Responding to the intervener the International Trademark Association's ("INTA") submission in Veuve Clicquot that the importance of a connection between the parties' wares and services diminishes as the strength of a mark increases, and in the case of a famous mark it has little bearing on the question of confusion, 16 the Supreme Court held:

This proposition, with respect, is an oversimplification. 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. 17

Mattel and Veuve Clicquot thus offer a caution to famous mark owners not to rely solely on evidence of fame when seeking a remedy. Although the Supreme Court explained Pink Panther/Lexus to clarify that a difference in wares or services does not preclude a determination of confusion, it also emphasized that the fame of a trade-mark will not avoid the assessment of all the surrounding circumstances. 18 At the conclusion of a confusion analysis, after all of the surrounding circumstances have been weighed, fame – despite the presupposition of transcendence attaching to that factor when considered in isolation – may not be sufficient to raise a likelihood of confusion.

Depreciation of Goodwill

Separate from the issue of consumer confusion, Veuve Clicquot argued that the Cliquot women's wear stores diminished the brand equity in its trade-marks. Subsection 22(1) provides:

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 Supreme Court reviewed the history of the introduction of this provision into the Act, looked at similar provisions in foreign jurisdictions, and noted that "Section 22 of our Act has received surprisingly little judicial attention in the more than half century since its enactment." The Court then went on to analyze the four elements of the cause of action, as follows:

(1) Defendant's use of claimant's registered trade-mark in association with wares or services 

The Supreme Court confirmed that the use by the defendant must be as defined in section 4 of the Act, but noted that the wares and services did not have to be competitive with those of the claimant. Most importantly, the Court clarified that the mark used by the defendant was not required to be identical to the complainant's registered mark, and observed that the provision was available if the casual observer would recognize the mark used by the defendant as the mark of the complainant. 19 This finding has the prospect of giving new life to Section 22 and will likely contribute to its increased judicial attention in the coming years.

(2) Claimant's registered mark is sufficiently well known to have significant goodwill 

Unlike the analogous European and U.S. laws, Section 22 does not require the mark to be well known or famous, however, the Court noted that the provision "presupposes the existence of significant goodwill capable of being depreciated by a non-confusing use." In determining the existence of goodwill capable of depreciation by a non-confusing use, the Court listed the following factors to consider: 20

(a) ability of the mark to retain its source significance when encountered outside the context of the goods or services with which the mark is used by the owner;

(b) degree of recognition of the mark within the relevant universe of consumers;

(c) volume of sales and depth of market penetration of products associated with the claimant's mark;

(d) the extent and duration of advertising and publicity accorded the claimant's mark;

(e) the geographic reach of the claimant's mark;

(f) its degree of inherent or acquired distinctiveness;

(g) whether products associated with the claimant's mark are confined to a narrow or specialized channel of trade, or move in multiple channels; and

(h) the extent to which the mark is identified with a particular quality

(3) Likelihood of consumer connection between claimant's goodwill and defendant's use 

The Court held that if the somewhat hurried consumer does not associate what is displayed by the defendant with the registered mark of the complainant, there can be no impact on the goodwill attached thereto. 21 The Court further held that a "likelihood" of a consumer drawing a connection is not speculation, but a matter of evidence for the complainant to prove, and stated that the legislation neither permits the court to assume that the consumer will draw the requisite mental association, nor reverse the onus onto the defendants. 22

(4) Likelihood of depreciation of goodwill

The Court suggested that the concept of depreciation in s.22 could encompass the notions of disparagement or tarnishment (where a defendant creates a negative association for the mark), as well as the notions of blurring of brand image, or its positive associations, or an erosion of the power of the trade-mark to distinguish the products of the claimant and attract consumers. 23 The claimant need not prove that depreciation has occurred, but must prove that the defendant's use will have the likely effect of depreciating the value of the goodwill.

Veuve Clicquot was not able to establish that consumers would draw the requisite connection between Cliquot's use of CLIQUOT and the complainant's mark, or that any likelihood of depreciation in the value of the goodwill would result.

Function of Trade-marks

The Supreme Court noted that "the purpose of trade-marks is to create and symbolize linkages" 24 and referred to its recent decision in Kirkbi AG v. Ritvik Holding Inc ., [2005] 3 R.C.S. 302, 2005 SCC 65 in which it stated that a trade-mark "is a symbol of a connection between a source of a product and the product itself." 25

The Supreme Court observed that a trade-mark owner's claim to monopoly rests "not on conferring a benefit on the public in the sense of patents or copyrights but on serving an important public interest in assuring consumers that they are buying from the source from whom they think they are buying and receiving the quality which they associate with that particular trade-mark. Trade-marks thus operate as a kind of shortcut to get consumers to where they want to go, and in that way perform a key function in a market economy." 26 With this statement, the Supreme Court has affirmed a "source and quality" theory of trade-marks.

Licensing

The Supreme Court established that "the recognition in our society that ‘famous brands' are widely licensed for wares or services not traditionally associated with the mark must be kept in mind as another surrounding circumstance" in the confusion analysis. 27

The Supreme Court acknowledged that, provided the trade-mark owner retains direct or indirect control of the character or quality of the wares or services, use by the licensee is deemed to have the same effect as use by the owner. However, the Supreme Court cautioned that "profligate use by the owner alone can destroy the distinctiveness of the mark, and licenses granted too widely and unwisely may aggravate its problem" 28 and that "a trade-mark owner can depreciate its value by spreading the mark too thinly over too many products of differing quality." 29 The Court cited one such example that appeared in Veuve Clicquot's evidence, namely the example of Pierre Cardin as having "moved down market through overuse of licensing and expanding the range and variety of different products carrying its name, which had led to a loss of distinctiveness, prestige and credibility." 30

Relevance of Intention in Confusion Analysis

In response to Mattel's complaint that the respondent sought to register a mark designed to pirate whatever goodwill it could from the Barbie Marks, the Supreme Court held that intention is of little relevance to the issue of confusion and stated that if "the respondent's activities have trespassed on the marketing territory fenced off by [Mattel's] BARBIE trade-marks, it would be no defence for the respondent that it did not intend to trespass. Equally, however, if the respondent's activities did not in fact trespass, evidence that it may have wished to do so does not constitute confusion." 31 The Court observed, however, that courts historically have been slow to conclude that a demonstrated piratical intent has failed to achieve its purpose, but noted that no such intent had been found as a fact in this case. 32

This article appeared in Intellectual Property Brief Fall 2006

1 Lang Michener LLP's Supreme Court Practice Group acted as the Ottawa agent for the appellant Veuve Clicquot Ponsardin.
2 Lang Michener LLP represented the applicant Pink Panther Beauty Corp ("PBBC") in the appeals following the Opposition Board decision and on the leave application to the Supreme Court of Canada. PBBC applied to register the trade-mark PINK PANTHER in relation to hair care and beauty product supplies to the objection of United Artists, the owners of The Pink Panther series of successful films. In a controversial decision, the majority of the Federal Court of Appeal determined the trade-marks were not confusing. Following the grant of leave to appeal to the Supreme Court on November 19, 1998, PBBC assigned the trade-mark application for PINK PANTHER to United Artists. Coincidentally, a mere two days before the Supreme Court's release of the Mattel and Veuve Clicquot decisions which sought to "explain" the Federal Court of Appeal decision Pink Panther , the application was deemed abandoned and inactivated by the Trade-marks Office.
3 (RSC 1985, c. T-13)
4 Notably, the International Trademark Association sought and obtained status as an intervener in Veuve Clicquot .
5 Mattel did not adduce any evidence of actual confusion, however, the absence of actual confusion is not determinative of the issue. The Supreme Court held in Mattel at para 16 that "the absence of such evidence was only one circumstance among many to be considered" but also noted at para 55 that "an adverse inference may be drawn from the lack of such evidence in circumstances where it would readily be available if the allegation of likely confusion was justified."
6 The Supreme Court was generally sympathetic to Jinden J.A., however, and explained that "in their dispositive passages (as opposed to stray dicta)" neither Pink Panther nor Lexus departed from the totality of the circumstances test, and reasoned that such stray dicta seemed designed to dispute the argument of the famous mark owners that fame trumps all other factors. Nonetheless, Binnie J., writing for the Supreme Court, stated: "To the extent Linden J.A. held that the difference in wares or services will always be a dominant consideration, I disagree with him, but given the role and function of trade-marks, it will generally be an important consideration. [Mattel] contends that some of Linden J.A.'s obiter statements can be read virtually to require a ‘resemblance' between the respective wares and services. In that respect, the obiter should not be followed," Mattel supra, at para 71.
Mattel , supra, at paras 56–58; Veuve Clicquot , supra, at para 20
8 These are: "(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."
Mattel , supra, at para 54; Veuve Clicquot , supra, at paras 21 and 27
10  Mattel , supra, at para 63
11 In particular, the Supreme Court referred to the Report of Trade Mark Law Revision Committee to the Secretary of State of Canada , issued prior to the amendments, which stated "Some trade marks are so well known that the use of the same or similar trade marks on any wares of any kind would cause the general purchasing public to believe that the original user and owner of the trade mark was in some way responsible for the wares to which the use of the mark has been extended. … In a proper case this [new] ambit of protection can be widened to include the whole of the course of trade or restricted to a field limited by the use which has been made of a trade mark or trade name and the reputation acquired by it. The particular ambit of protection will in the future so far as applies to registration, be a matter for determination, having regard to all the circumstances, by the Registrar in the first instance, and by the Exchequer Court on appeal." Mattel , supra, at paras 28 and 29
12  Mattel , supra, at para 29
13  Mattel , supra, at para 63
14  Mattel , supra, at para 72
15  Veuve Clicquot , supra, at para 26
16  Veuve Clicquot , supra, at para 31. Despite rejecting that submission as an oversimplification, see the Supreme Court's acknowledgement in Mattel at para 73 that " ‘all of the surrounding circumstances' must be taken into consideration but that, in some cases, some circumstances (such as the difference in wares) will carry greater weight than others."
17  Veuve Clicquot , supra, at para 32
18  Mattel , supra, at para 72. Also, The Supreme Court stated at paras 29 and 30:

The fact that Parliament has recognized that some trade-marks are so well known that use in connection with any wares or services would generate confusion is not to say that BARBIE has that transcendence.

The Board's conclusion that BARBIE's fame is limited to dolls and dolls' accessories does not at all mean that BARBIE's aura cannot transcend those products, but whether it is likely to do so or not in the context of opposition proceedings in relation to restaurant, catering and banquet services is a question of fact that depends on "all the surrounding circumstances."

19  Veuve Clicquot , supra, at para 48. This finding settles an issue which had previously proved divisive.
20  Veuve Clicquot , supra, at para 53 and 54
21  Veuve Clicquot , supra, at para 56
22  Veuve Clicquot , supra, at paras 57, 60 and 61
23  Veuve Clicquot , supra, at paras 63–67
24  Mattel , supra, at para 23
25  Mattel , supra, at para 24
26  Mattel , supra, at para 21
27  Mattel , supra, at para 81
28  Mattel , supra, at para 81
29  Veuve Clicqot , supra, at para 63
30  Veuve Clicquot , supra, at para 63
31  Mattel , supra, at para 90
32  Mattel , supra, at para 90