Canada: Intellectual Property Update – June 2007

On March 2, 2007, the Federal Court issued its decision in Emall.ca Inc. (c.o.b. Cheaptickets.ca) v. Cheap Tickets and Travel Inc. [2007 FC 243], and ordered the expungement of the trade-marks CHEAP TICKETS (TMA564,905) and CHEAP TICKETS AND TRAVEL & DESIGN (TMA564,432) (collectively, the CHEAP TICKETS Marks), on the grounds of descriptiveness. The case serves as a reminder to owners of registered trade-marks that a registration will almost certainly face scrutiny for validity whenever an owner tries to enforce its rights in the trademark. It is also a reminder that it may be difficult to enforce descriptive or very suggestive trade-marks, even if a trade-mark registration has been obtained.

The owner of the CHEAP TICKETS Marks was Cheap Tickets and Travel Inc. (Cheap Tickets or Respondent), a federal corporation using its registered trade-marks in association with the provision of the following services: "travel agency; travel information; travel tours and charters; ticket agency services in the field of transportation, travel, theatre and sports events." Both of its CHEAP TICKETS Marks were registered in July, 2002 on the basis of use in Canada by itself, and by predecessor companies, back to 1997.

In December, 2004 Cheap Tickets and Travel Inc. commenced an action in the Supreme Court of British Columbia against EMALL.ca Inc. c/o/b Cheaptickets.ca (EMALL.ca or Applicant) alleging infringement of the CHEAP TICKETS Marks. By way of affidavit evidence, EMALL.ca describes itself as "the registrant of numerous similarly generic or descriptive Canadian domain names," including its principal website EMALL.CA, an "on-line shopping mall or portal that enables Internet users to visit a wide variety of online businesses." In response, EMALL.ca commenced a proceeding in the Federal Court for expungement of the CHEAP TICKETS Marks on the bases of non-registrability and non-distinctiveness.

In deciding to expunge the CHEAP TICKETS Marks, Justice Strayer explained that a proceeding under Section 57 of the Trade-Marks Act (the Act) is the exercise by the Federal Court of its exclusive original jurisdiction, as opposed to an appeal under Section 56 for which a standard of review should be identified. The Respondent’s argument that the CHEAP TICKETS Marks could not be clearly descriptive of the wares, given that many of its sales do not involve "tickets" per se, was refuted by Justice Strayer, who explained that a trade-mark "does not become other than descriptive by virtue of the fact that it may be somewhat inaccurate. It is sufficient if it gives the impression of the nature or function of the goods or services in connection with which it is used."

Interestingly, Justice Strayer declined to review the evidence submitted by the Respondent to establish acquired distinctiveness. Having concluded that the CHEAP TICKETS Marks were descriptive and never should have been registered in the first place, Justice Strayer determined that it was unnecessary for him to consider whether they had acquired distinctiveness either by virtue of the doctrine of secondary meaning which would allow consideration of acquired distinctiveness as between the date of first use and the date of filing of the application, or by the time the within application had been commenced as permitted by Section 18(1)(b).

The decision of the Federal Court in Microsoft Corporation v. 9038-3746 Quebec Inc. et al [2006 FC 1509] is of interest because it adds to the relatively scant Canadian jurisprudence on statutory damages awarded for infringement of copyright.

The judgment sets out the details of Microsoft’s licensing and distribution processes (including the retail and the original equipment manufacturer markets), and is interesting for its assessment of how the counterfeit and unlicensed goods are typically released into the market. The defendants’ business practices are also explained, including the fact that the defendant companies bought and sold, but did not themselves manufacture, the compact discs and other wares in question.

Despite this, Justice Harrington determined that the defendants 9038-7746 Quebec Inc., 9014-5731 Quebec Inc. (collectively referred to as "Inter-Plus") and Messers Adam and Carmelo Cerrelli had infringed both the trade-marks and literary works protected by copyright owned by Microsoft Corporation (Microsoft) through their sale of counterfeit compact discs containing Microsoft computer software programs, and related documentation such as instruction manuals and certificates of authenticity. The Court held that Microsoft need not prove that the defendants had actual knowledge that the products being sold were infringing, as the Court was satisfied on the balance of probabilities that both Inter-Plus and Mr. Cerrelli knew or should have known that the items were counterfeit and infringed copyright.

In assessing the special statutory provisions in the Copyright Act, the Court reiterated that it must take into account the criteria set out in Section 38.1(5), namely all relevant factors including (a) the good faith or bad faith of the defendant; (b) the conduct of the parties before and during the proceedings; and (c) the need to deter other infringements of the copyright in question. The Court took into account the factors enumerated in section 38.1(5) to find that the defendants had acted in bad faith, and their conduct both before and during the proceedings had been dismissive of law and order such that it demonstrated the need to deter other infringements of the copyrights in question. As such, the Court determined that the statutory maximum of $20,000 per work for each of the 25 copyrights which had been infringed would be just, and damages of $500,000 against the corporate defendants and Carmelo Cerrelli jointly and severally were awarded. In addition, the Court found the conduct of the defendants was so outrageous that it justified a further award of $100,000 from the numbered companies jointly and severally, and an additional $100,000 from Carmelo Cerrelli personally in punitive damages. The monetary damages were awarded in addition to wide-ranging, permanent injunctive relief.

In a unanimous decision issued in December 2006, the Federal Court of Appeal (FCA) allowed the appeal of Maison Cousin (1980) Inc., and rejected the trademark application of Cousins Submarines Inc., a U.S. corporation. Cousins Submarines had applied to use the trademark COUSINS, in association with "sandwiches, namely, submarine sandwiches; beverages, namely, carbonated beverages, coffee, milk and ice tea" and "restaurant services".

The FCA decision came as the last word in a dispute that began in October 1998, when Maison Cousin filed a statement of opposition before the Canadian Registrar of Trade-marks, alleging, among other things, a likelihood of confusion between its various MAISON COUSIN marks and the proposed use of the COUSINS trademark.

In coming to its decision, the FCA recognized the acquired distinctiveness of the MAISON COUSIN trademarks, which was developed through use of the trademarks in the Quebec market since 1921 in association with food products. The MAISON COUSIN marks are currently used in association with many wares in the food industry (bakery products and delicatessen meats) and the company has also been selling its wares in prepared food sections of convenience stores and grocery stores.

The Trade-marks Opposition Board had issued a split decision, rejecting the application with respect to "submarine sandwiches", and granting it with respect to "beverages, namely, carbonated beverages, coffee, milk and ice tea" and "restaurant services". The decision of the Registrar was upheld by the Federal Court, despite supplementary evidence presented before the Court that showed the continued and widespread use of the various MAISON COUSIN trademarks.

The FCA held that the trial judge had erred on a number of points. First, he had not explained how he came to the conclusion that the COUSINS wares in question, namely submarine sandwiches and drinks, are so distinctive from wares such as bread, desserts, cold cuts and sandwiches that there could be no possibility of confusion. The FCA noted that they are all food products that are very similar and commonly found in the same areas.

The FCA also noted, however, that even if it could be said that there was a distinction between the wares, the confusion analysis should not end there. The Supreme Court of Canada has recently reaffirmed in Mattel Inc. v. 3894207 Canada Inc. that there may still be a possibility of confusion, even if the goods and services to be compared are not of the same general class.

The FCA was also of the opinion that the trial judge erred in comparing the current operations of Maison Cousin with the current operations of Cousins Submarines. Where the statement of wares and services in a trademark registration does not limit the mode of distribution, a trademark owner is always free to change its distribution networks. The FCA noted that nothing prevented MAISON COUSIN from using its trademark in the food services industry, and, in fact, it already does so at food counters in convenience stores and grocery stores.

Thus the appeal was allowed, and the FCA directed the Registrar to refuse the application for the COUSINS trademark in its entirety. Maison Cousin was represented by Stikeman Elliott’s Bruno Barrette, Patrick Girard and Benoît Huart.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.