Supreme Court of Canada safeguards rights of prior trademark owners

The Supreme Court of Canada issued a decision in May 2012 regarding rights to registration between competing applicants, and the impact of prior use and geographic differences between the parties. The decision rectified Federal Court trial and appeal court decisions that many trademark practitioners felt were based on a flawed understanding of the Trademarks Act. The decision also has cautionary words about the use of survey evidence.

In Masterpiece Inc v Alavida Lifestyles Inc, both parties were in the retirement residence industry, but separated by thousands of miles (Calgary and Ottawa). In 2001, Masterpiece began using both a corporate name and series of marks that included Masterpiece, some with the word Living. In December 2005, Alavida filed an intent-to-use application for Masterpiece Living and began using the mark in January 2006.

Masterpiece applied to register Masterpiece marks in 2006, but the applications were refused based on Alavida’s earlier application. Before the Trademarks Office, the first-filed application will proceed to advertisement, regardless of earlier rights in a subsequent application. As in the US, the other applicant must oppose or take other steps to preserve its rights.

Masterpiece brought an application to expunge Alavida’s registration for Masterpiece Living, citing prior use of the Masterpiece marks and trade name. To the surprise of many trademark practitioners, both the Federal Court at first instance and the Federal Court of Appeal denied Masterpiece’s application.

At trial, the judge concluded that there was no likelihood of confusion, noting that Masterpiece’s use was “limited in time and scope,” and its marks “neither particularly distinctive nor well known.” The court held that differences in how the marks were used, in design and in advertising, reduced the likelihood of confusion, as did the fact that consumers would research retirement options carefully, especially given the cost of retirement accommodation.

The Federal Court of Appeal upheld that judgment and, very surprisingly, found that when Masterpiece had filed its application, it did not sell its services in the same geographic market as the respondent, thus mitigating any likelihood of confusion.

The Supreme Court

The Supreme Court allowed Masterpiece’s appeal, and ordered the Masterpiece Living mark to be expunged. Masterpiece had proved that it had used a confusingly similar trademark in Calgary before the filing date of the Alavida application, and the Alavida registration was invalid.

The Supreme Court found that geographic separation of the marks is not relevant to confusion analysis. The test for confusion is based on a hypothetical assumption that both trade names and/or trademarks are used in the same area, irrespective of whether this is the case.

The Supreme Court found that the trial judge erred in finding reduced likelihood of confusion because of the cost of the services. Confusion must be assessed from the perspective of the first impression of the consumer when he or she first encounters the mark.

In a comment that raises the prospect of arguing that 'initial interest confusion' is important, the court noted that, before confusion is remedied, consumers may seek out, consider or purchase wares or services from a source of which they previously had no awareness or interest. The court found that such diversion may diminish the value of the mark’s goodwill.

The decision confirmed that the most important element of the respective marks was the word ‘Masterpiece’. Small differences should not have led to a finding of non-confusion. If an application or registration is for a word mark, the confusion analysis should consider other possible formats in which the mark could be used.

The decision also highlights the importance of the court’s ‘gatekeeper’ role to ensure that unnecessary, irrelevant and potentially distracting survey and other expert evidence is not admitted. The decision is a reminder that expert evidence should be permitted only if the testimony is likely to be outside the experience and knowledge of the judge.

Expert evidence on the resemblance between two marks is unlikely to be necessary, and if goods/services are sold to the public for ordinary use, the court suggested that judges should use their own common sense, excluding influences of their own idiosyncratic knowledge or temperament, to determine whether the casual consumer is likely to be confused.

Cynthia Rowden is a partner at Bereskin & Parr LLP. She can be contacted at: crowden@ bereskinparr.com

Catherine Lovrics is an associate at Bereskin & Parr LLP. She can be contacted at: clovrics@ bereskinparr.com