Supreme Court of Canada's Masterpiece trademark judgement

The Supreme Court of Canada (SCC) released its latest trademark decision on May 26, 2011 in the case of Masterpiece Inc v Alavida Lifestyles Inc.

The judgment, which reversed the somewhat troubling decisions of the Federal Court and Federal Court of Appeal, has been generally well received by trademark practitioners and trademark owners alike as reinforcing the principle that the first person to adopt a trademark anywhere in Canada, whether by filing an application or using it, will enjoy superior rights to enforce against subsequent use of a confusing mark.

At issue was the adoption and use by Alavida, a company operating in the retirement residence industry, of the trademark ‘Masterpiece Living’. Alavida applied for its mark in 2005, based on proposed use, and soon began using its mark in Ontario, before it registered it in 2007. Masterpiece, which operated in the same industry, had been using trademarks containing the word ‘Masterpiece’ in Alberta since 2001.

When Masterpiece learned of Alavida’s registration, it commenced expungement proceedings in the Federal Court, on the basis that Masterpiece had previously used a confusing trademark. According to the Trademarks Act, an applicant for a proposed-use trademark is only entitled to register its mark if it is not confusing with a trademark that was previously in use in Canada, or for which an application had already been filed by another person prior to the applicant’s filing date.

Confusion is to be determined in accordance with the test set out in Section 6 of the Act. Masterpiece was unsuccessful both before the Federal Court and the Federal Court of Appeal, which held the marks not to be confusing.

In dismissing Masterpiece’s application, both levels of the Federal Court came to the somewhat surprising conclusion, inter alia, that confusion was unlikely since consumers would be expected to exercise considerable care and attention in the selection of a retirement home, and the parties were using their respective trademarks in different geographic regions of Canada.

"The SCC has ‘restored order’ by confirming the proper application of the test for confusion as well as other principles that lower courts appeared to have challenged."

Both conclusions, as well as other findings of the courts, departed from established principles of trademark law and caused concern for trademark owners. The SCC has ‘restored order’ by confirming both the proper application of the test for confusion set out in the Act as well as other principles that the lower courts appeared to have challenged.

In particular, the SCC confirmed that the geographic location where the marks are actually used is irrelevant, as the Act confers rights that are national in scope. Applicants cannot be permitted to enjoy the exclusivity granted to registered trademarks where there is a likelihood of confusion with another trademark somewhere in Canada.

The SCC also firmly reiterated the principle that confusion is to be assessed as a matter of first impression in the mind of a hurried casual consumer who sees the mark at a time when he or she has no more than an imperfect recollection of the prior trademark. While the cost or sophistication of the parties’ wares or services is a factor that may be taken into account, it is not determinative, in and of itself, of the issue of confusion.

The SCC’s comments in this regard are seen by many to have opened the door in Canada to the concept of ‘initial interest confusion’, which is of particular relevance in the context of Internet keyword advertising and cybersquatting. The SCC recognised that consumers may be initially confused, even if the confusion is remedied before the ultimate decision to purchase is made.

In addition to the clarification on these points, the case highlights two issues: the importance of seeking trademark registration to protect trademark rights and the usefulness of regularly monitoring newly advertised trademarks in the Trademarks Journal published weekly by the Canadian Intellectual Property Office.

Had Masterpiece applied to register its own mark before Alavida’s application was filed, Alavida’s application likely would not have matured to registration. Similarly, had Masterpiece learned of Alavida’s application when it was advertised in the journal rather than after it was registered, it could have opposed the mark rather than pursuing more costly and difficult court cancellation proceedings.