The process of litigating trademark disputes in Canada bears many similarities to other common law jurisdictions, in particular the United States. However, there are some unique aspects of Canadian procedure that IP practitioners in other jurisdictions should know. This short article provides a brief overview of how trademark disputes are litigated in Canada.
1. Trademark Rights
In Canada, as in other common law jurisdictions, rights in a trademark may be obtained through use of the mark and/or through registration pursuant to the provisions of the Trademarks Act.
Unregistered trademarks. The common law confers to a person who uses a trademark over a period of time certain limited rights in that trademark that depend on the extent of goodwill or reputation that the person has acquired in the trademark. As a result, these unregistered trademark rights, which are sometimes referred to as common law trademarks, are typically limited in territorial scope and to the specific areas of commerce in which goodwill or reputation has been acquired. Because the rights to a common law trademark are not registered, an owner who wishes to enforce such an unregistered trademark bears the burden of proving the validity and scope of their rights, in addition to proving that the defendant’s activities will cause confusion in the marketplace.
Registered trademarks. In addition to acquiring rights through use, a trademark owner may also acquire rights by way of registration pursuant to the provisions of the Trademarks Act. A trademark registration offers broader rights and protections to trademark owners than common law rights. First, a significant advantage conferred by registration is that it creates a presumption of ownership and validity, thus shifting the initial burden to prove invalidity of the registration onto the defendant. Second, a registration provides more certainty in the scope of the rights conferred on the owner. More specifically, the Trademarks Act grants to the registration owner the exclusive right to the use of the trademark throughout Canada in association with the specified goods and services. Third, the owner’s rights extend beyond the uses specified in the registration to uses that are causing or likely to cause confusion in the marketplace. This means that the defendant can be liable despite not using the identical trademark on identical goods or services in the same geographical location as the registration owner.
2. The Causes of Action
The Trademarks Act creates causes of action for both registered and unregistered trademarks, including passing off, infringement, and depreciation of goodwill. There are also additional protections for unregistered trademarks available at common law.
Unregistered trademarks. An unregistered common law trademark can be enforced in Canada through a passing off action based on either the common law tort of passing off or based on provisions found in the Trademarks Act.
Canadian courts recognize the tort of passing off as a means for enforcing unregistered trademark rights. Three elements must be proved by the claimant to make out an action for passing off: 1) the claimant has acquired goodwill or reputation in the trademark in a specified geographical area; 2) the defendant has deceived the public by misrepresenting their goods or services as being those of the claimant through use of a confusingly similar mark; and 3) the claimant has suffered or will suffer damages as a result of the defendant’s misrepresentation.
In addition to the common law, section 7 of the Trademarks Act outlines certain prohibitions regarding trademarks and includes two causes of action: 1) the defendant has directed attention to its goods or services in a manner that is likely to cause confusion; and 2) passing off. Although both causes of action apply equally to unregistered and registered trademarks, they are frequently used to enforce unregistered trademarks. To make out these causes of action, the same three elements must be proved as are required for the common law tort of passing off.
Registered trademarks. A registered trademark may be enforced through three main provisions of the Trademarks Act.
Section 19 of the Trademarks Act grants to the registration owner the exclusive right to use the registered trademark throughout Canada in respect of the goods and services listed in the registration. Section 19 is particularly useful where a defendant is using the same mark as registered on identical goods or services.
Section 20 creates a cause of action in situations where either the mark used by the defendant is different and/or the goods or services on which the defendant uses its mark are different than those in the registration In this type of case, the registration owner can enforce its registered trademark against the selling, distribution and manufacturing of goods or services in association with a mark that causes, or is likely to cause, confusion in the marketplace. Thus, neither the defendant’s mark nor the goods or services need to be identical to those in the registration as long as confusion or a likelihood of confusion occurs.
Section 22 of the Trademarks Act provides a cause of action for the depreciation of goodwill attached to a registered trademark. Similar to the concept of dilution in the United States, an action under this section is intended to compensate for any damage caused to the goodwill associated with the registered trademark. The Supreme Court has set out four elements that a successful claimant must show in an action for depreciation of goodwill: 1) the defendant used claimant’s registered trademark in connection with goods or services; 2) the registered trademark is sufficiently well known to have significant goodwill attached to it; 3) the registered trademark was used by the defendant in a manner likely to have an effect on that goodwill (that is, there is linkage between the defendant’s actions and the effect on the goodwill); and 4) the likely effect of the defendant’s use would be to depreciate the value of the registered trademark’s goodwill (that is, damage).
Competition Act. The Competition Act includes prohibitions against promoting a product or service by making a representation that is false or misleading in a material respect. This provision is typically asserted in conjunction with other causes of action under the Trademarks Act.
3. Forum for Trademark Disputes
Canada has a well-established and independent court system that operates at both the federal and provincial/territorial levels. Although the provincial/territorial superior courts have concurrent jurisdiction to hear trademark passing off and infringement cases, the vast majority of such cases are brought and tried in the Federal Court.
The Federal Court is a national court based in Ottawa but with offices and courtrooms in all major Canadian cities. There are at least two advantages to trying a trademark case in the Federal Court. First, its judgments apply nationally, including any injunctions it grants, whereas judgments of provincial/territorial superior courts have application only within that province or territory. Second, the Federal Court is well-versed in intellectual property matters, including trademark infringement and passing off actions. The Federal Court has a roster of judges that typically hear intellectual property cases, including a handful of judges that are former intellectual property litigators.
All trials in the Federal Court are bench trials. Civil actions in the provincial/territorial superior courts may be heard and decided by a jury, but typically commercial cases such as trademark disputes are heard by a judge alone.
4. Procedures
The owner of a trademark and any licensees thereof may bring a proceeding to enforce the trademark. Such an enforcement proceeding may be brought by way of either an “application” or an “action”, with an action being the typical route, regardless of whether the trademark rights are unregistered or registered.
Application. An application is a faster and less costly way to enforce trademark rights in Canada.
An application is commenced with the claimant (referred to as the “applicant”) filing a Notice of Application that sets out the relief requested and the grounds upon which the relief is based. The applicant also files evidence, typically by way of affidavits and certified copies of documents, at the time of commencing the application. The respondent then has an opportunity to file its own evidence, also typically by way of affidavits and certified copies of documents. The parties’ evidence will also include any expert evidence they wish to rely on, including any survey evidence. Each party is then permitted to cross-examine the other party’s affiants out of court, and the transcripts from these cross-examinations are filed with the court. The application culminates in a hearing that is based solely on this written record and without live witnesses. The entire proceeding may typically be completed within 12 to 18 months.
An application is intended for summary matters where significant material facts are not in dispute and where the trademark owner has enough evidence available to it at the time of commencing the proceeding to make out its causes of action without needing discovery of the respondent.
Action. In contrast, an action is a more involved and costly proceeding.
An action begins with the filing of pleadings by both the claimant (referred to as the plaintiff) and the defendant. The Statement of Claim sets out the relief requested, the causes of action that permits the court to grant the requested relief, and the material facts on which the causes of action are grounded. The defendant then files a Statement of Defence that sets out any defences it raises to the causes of action. The defendant may also include a Counterclaim, which typically includes a request to invalidate the plaintiff’s trademark rights, and any other relief that the defendant may request against the plaintiff.
Following the exchange of pleadings, the action proceeds to the discovery stage. The parties exchange copies of relevant documents and then orally examine representatives of the opposing parties for discovery. Once examinations for discovery are concluded, any expert reports the parties intend to rely on are exchanged. The action culminates with a trial where live fact and expert witnesses testify before a judge alone. The Federal Court aims to set a trial date within two or three years of commencing an action, and trademark trials typically last anywhere from five days to several weeks depending on the complexity of the issues.
Appeals. The final decision in an application or action may be appealed to the province’s Court of Appeal, or to the Federal Court of Appeal. Further appeals may be taken to the Supreme Court of Canada but only with leave of that court.
Border enforcement. The owner of a registered trademark that considers its rights to be infringed by the importation and sale of counterfeit goods has two additional options available. First, the registration owner may apply to the court for an order that the Minister of Public Safety and Emergency Preparedness detain goods bearing the registered trademark or a confusingly similar mark that are about to be imported into Canada or have been imported into Canada but have not yet been released. Second, the registration owner is also given access to an assistance procedure under the Combating Counterfeit Products Act, whereby counterfeit and infringing goods may be detained by customs officials.
5. Proving a Trademark Case
All trademark passing off and infringement causes of action must be proven by the plaintiff/applicant on a balance of probabilities. As noted above, a registered trademark is presumed to be valid so that the defendant/respondent bears the onus to prove invalidity of the registration.
The key aspect of each cause of action is confusion. In assessing whether the use of a mark or name is causing confusion, the court considers all the surrounding circumstances, including five specific factors set out in subsection 6(5) of the Trademarks Act: 1) the inherent and acquired distinctiveness of the trademarks or trade names; 2) the length of time the trademarks or trade names have been in use; 3) the nature of the goods, services or business; 4) the nature of the trade; and 5) the degree of resemblance between the trademarks or trade names, including in appearance or sound or in the ideas suggested by them.
The defendant/respondent can successfully defend a claim for passing off or trademark infringement by asserting that the plaintiff/applicant failed to meet its burden of proof, or by providing sufficient evidence to show that the necessary components of the causes of action have not been proven. For example, the responding party can adduce evidence to show there is no likelihood of confusion or can assert that the plaintiff/applicant’s trademark rights are invalid and thus cannot be enforced.
Section 18 of the Trademarks Act sets out when a trademark registration is invalid. These circumstances include that the trademark was not registrable at the date of registration, it lacks distinctiveness, it was abandoned, the applicant was not the person entitled to secure the registration, and the applicant filed the application in bad faith.
6. Summary Disposition
Where an action is brought in the Federal Court, the Rules permit a party to seek to have the case heard summarily. Although these procedures were not widely used in trademark cases in the past, the Federal Court has not hesitated to recently decide trademark cases summarily.
A request for a summary trial is initiated by way of motion and may occur upon the completion of discovery. A summary trial differs from a regular trial in that evidence is primarily presented by written record with limited live cross-examination. A summary trial typically lasts two or three days.
To promote efficiency, the Federal Court may appoint a case management judge to oversee and set the schedule for all pre-trial matters. No fast-track procedures are available in the Federal Court, although the Court will endeavor to expedite pre-trial procedures where there may be urgency in getting to trial.
7. Remedies
Injunctions. Injunctions in trademark infringement and passing off cases are broadly categorized based on whether they are granted prior to or after the final hearing of a case.
A preliminary (i.e., interlocutory) injunction is intended to stop infringement before the final determination of the case. An interlocutory injunction may be obtained in appropriate cases in Canada, but the plaintiff/applicant bears a heavy burden to prove that it will suffer irreparable harm prior to trial. Two circumstances where an interlocutory injunction may be more readily granted by the courts are where the defendant’s product is not yet on the market, and in counterfeiting cases.
Canadian courts have also granted in appropriate cases so-called Anton Piller orders. These are extraordinary forms of injunctive relief that are most often obtained in counterfeiting cases without notice to the defendant. An Anton Piller order typically includes an interim injunction requiring the defendant to immediately: 1) allow the plaintiff to enter its premises; 2) cease all uses, sales, etc. of infringing goods and services; 3) turn over to the plaintiff evidence such as documents and infringing goods on hand; and 4) refrain from communicating with anyone other than counsel about the details of the order and its enforcement. Many have described an Anton Piller order as a “civil search warrant”, however, an important distinction is that the Anton Piller order does not authorize forcible entry into the defendant’s premises. Rather, this order requires the defendant to allow the plaintiff into its premises, failing which the defendant may be liable for contempt for refusing to comply with the terms of the order.
A permanent injunction after trial is almost always ordered in cases of passing off and trademark infringement, although sometimes on terms imposed by the court. It is also typical, as ancillary to the permanent injunction, that infringing goods be ordered to be delivered up to the successful plaintiff/applicant or destroyed under oath.
In limited circumstances, the defendant may obtain an order staying the injunction pending an appeal if they successfully show they will suffer irreparable harm in the interim.
Accounting of Profits. A successful trademark owner is always entitled to claim its damages as a matter of law. The damages award is intended to compensate the plaintiff/applicant for the losses caused by the infringement.
In addition, the plaintiff/applicant may sometimes be entitled to elect to claim an accounting of the defendant/respondent’s profits instead of damages. This is an equitable remedy and therefore the right to make this election is granted at the discretion of the court. The availability of the accounting of profits remedy is useful because it places the onus on the defendant/respondent to prove its deductible costs and any apportionment. The plaintiff/applicant need only prove gross revenues made as a result of the infringement. Moreover, the plaintiff/applicant’s financial documents and information are not relevant and thus need not be produced for discovery. Finally, there may be instances where the profits made by the defendant/respondent are higher than the plaintiff/applicant’s damages, for example, where the defendant/respondent is a larger competitor.
Punitive Damages. In appropriate cases, the court will award punitive damages in addition to compensatory damages or an accounting of profits, but this usually requires a finding of egregious or high-handed conduct, or callous disregard for the trademark owner’s rights. Counterfeiting is a type of case in which punitive damages are typically awarded.
8. Limitation Period
The Trademarks Act does not contain an express limitation period for bringing an infringement action and, as such, the limitation periods applicable in the particular provinces or in the Federal Courts Act apply. If a cause of action arose in a single province, the limitation period applicable in that particular province applies (e.g., two years in Ontario). For causes of action spanning multiple provinces, the Federal Court Act’s limitation period of six years applies.
9. Cost Consequences
The successful litigant in a passing off or trademark infringement case is generally entitled to recover their “costs” of the litigation. Recently, the Federal Court has been awarding costs in the range of 25% to 40% of actual legal fees paid, plus all reasonably required disbursements (including experts’ fees).