INTA Features: How to Avoid a Loss of Distinctiveness in Canada

May 15, 2019

Tamara Ramsey provided a feature article for the Bulletin published by the International Trademark Association about avoiding a loss of distinctiveness in Canada. A full copy of the article is reproduced below and available by clicking here.

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Distinctiveness is a deceptively simple concept. In a recent case, the applicant (wrongly) alleged that the opponent could not rely on its own use of its trademark to challenge the distinctiveness of the applicant’s mark because the opponent’s use was infringing. Sadhu Singh Hamdard Trust v. Navsun Holdings Ltd., 2018 FC 42. Contrary to the applicant’s submission, the Federal Court of Appeal had previously held that there is no principled reason why one party’s infringement could not cause a mark to lose its distinctiveness. Auld Phillips Ltd. v. Suzanne’s Inc., 2005 FCA 429, paras. 5‒7.

This line of cases leads to the conclusion that there may be many situations in which the competing use of a similar mark renders both the infringing mark and the infringed mark unregistrable. It does not matter whether this distinctiveness was lost as a result of intentional infringement by another brand owner or by inadvertent coexistence.

A review of the law relating to distinctiveness in Canada and the registrability of competing marks indicates that maintaining or restoring distinctiveness requires a multi-pronged approach that could include modifying the marks at issue to add indicia as to source or design features.

Distinctiveness Under the Canadian Trade-marks Act

“[D]istinctiveness is the very essence of a trademark; it allows a consumer to identify the source of the goods.” Mattel U.S.A. Inc. v. 3894207 Canada Inc., 2006 SCC 22 at para. 75. The necessity of distinctiveness as the “essence” of a trademark is reflected in the Trade-marks Act (TMA) because a trademark can be refused registration if it is not distinctive. A registered trademark can also be expunged if it ceases to be distinctive. Distinctiveness is concerned not just with the inherent qualities of the mark (such as descriptiveness or being a common name), but also with how the mark functions in the marketplace.

For a trademark to be registered in Canada, it must be distinctive. The TMA provides that applications may be opposed on the basis that “the trademark is not distinctive.” TMA, R.S.C., 1985, c. T-13 (TMA) s. 38(2)(d). Only marks that survive such a distinctiveness challenge may be lawfully registered.

Distinctiveness, likewise, is required to maintain a registration. The TMA grants jurisdiction to the Federal Court of Canada to strike a mark from the Register if “the trade-mark is not distinctive at the time proceedings bringing the registration into question are commenced.” TMA, s. 18(1)(b) and 57(1). Those proceedings can be brought by any interested party. If a registered mark does not survive a distinctiveness challenge, it will be expunged from the Register.

The term “distinctive” is defined in Section 2 of the TMA as follows:

Distinctive, in relation to a trade-mark, means a trade-mark that actually distinguishes the goods and services in association with which it is used by its owner from the goods or services of others or is adapted so to distinguish them.

The courts have articulated three conditions to be met to establish that a mark is distinctive:
That a mark and a product be associated; That the “owner” uses this association between the mark and its product; and That this association enables the owner of the mark to distinguish its product from that of others.Bojangles’ International LLC v. Bojangles Café Ltd. (2006), 293 F.T.R. 234, 2006 FC 657 at para. 70.

Competing Marks Are Not Registrable

Competing use of similar marks, whether or not this use is infringing, can cause those marks to lose their distinctiveness. It is well established that trademark owners must protect their marks from counterfeiting or risk them losing their distinctiveness. Mattel at para. 26. Once counterfeiting happens, both the counterfeit mark and the marks of the counterfeiters are no longer distinctive of a single source.

As a starting point, a mark cannot be distinctive of two different trademark owners. In various scenarios, the Canadian courts have held that the distinctiveness of a trademark is related to source. This has been illustrated by several recent cases.

In Nature’s Path Foods Inc. v. Quaker Oats Co. of Canada, 2001 FCT 366, Nature’s Path sought to expunge a registration for the HONEY PUFFS mark on the basis of its own long-standing use of the MULTIGRAIN HONEY PUFFS trademark. In addition to finding the marks were confusing and that Quaker Oats Co. was not entitled to register its mark because it was confusing with the applicant’s mark, which had been previously used in Canada, the court also held that the HONEY PUFFS mark was not distinctive of Quaker Oats Co.

More specifically, the court held that the Quaker Oats Co.’s HONEY PUFFS mark was not distinctive in light of Nature’s Path’s uncontested, long-term use of the MULTIGRAIN HONEY PUFFS trademark. The court held that Quaker Oats Co.’s mark could not meet the third test for distinctiveness; that is, the association between its goods and the trademark did not enable the Quaker Oats Co. to distinguish its wares from those of others.

The Importance of Source

There are several cases in which marks were held not to be distinctive following a corporate split. These include Moore Dry Kiln Co. v. United States Natural Resources Inc., 1976 Carswell Nat 478 at paras. 12‒13 and 19 (A.D.), in which two members of a corporate family went their separate ways and were both using the MOORE mark such that it was not distinctive of either entity. The court declared the registration of the MOORE mark by one of the entities was invalid. Another example is Chalet Bar-B-Q (Canada) Inc. v. Foodcorp Ltd. (1982), 66 C.P.R. (2d) 56, (A.D.) in which the CHALET BAR-B-Q mark was held to be nondistinctive and expunged.

Following a corporate split, and the evolution of the marks used by different owners over the years, the mark was used by two different restaurants that were owned by two different companies and therefore not distinctive of either company. In these circumstances, the company that registered the mark was not entitled to a monopoly and the registration was expunged.

The rationale for distinctiveness being related to source is that a mark that is related to more than one source does not function to distinguish one source from another. These marks are not distinctive because they do not enable the owner of the mark to distinguish the owner’s goods and services from others. Bousquet v. Barmish Inc. (1991), 48 F.T.R. 122 at paras. 23‒24 (F.C.T.D.), aff’d (1993), 46 C.P.R. (3d) 510 (F.C.A.D.); Anne of Green Gables (2000) 4 C.P.R. (4th) 289 at paras. 133, 134, and 139 (Ont. S.C.J.).

In Canada, the evidentiary standard for whether a competing mark has negated the distinctiveness of another was articulated by the Federal Court in Bojangles, in which the Federal Court held that “[a] mark must be known to some extent at least to negate the established distinctiveness of another mark, and its reputation in Canada should be substantial, significant or sufficient.” Paras. 33 and 34.

How Infringing Use Can Remove Distinctiveness

With respect to competing use that is alleged to be an infringing use, in a brief analysis that focuses on whether a mark’s distinctiveness may be disproved by evidence of infringing use, the Federal Court of Appeal held in Caricline Ventures Ltd. v. ZZTY Holdings Ltd., 2002 FCA 446 that, “infringing prior use may cause a mark to lose its distinctiveness, although how much will be sufficient to have this effect has been found to be a difficult question. It is one of degree.” Paras. 7‒9. Based on the court’s analysis, the reference to “prior use” appears to be a reference to use before registration.

The Federal Court of Appeal considered whether a single alleged infringer can cause a mark to lose its distinctiveness in Auld Phillips. The Federal Court of Appeal held, first, that the question of whether a trademark has lost its distinctiveness is one of fact (para. 5) and, second, that a single infringer can cause a loss of distinctiveness. Para. 6. With specific reference to loss of distinctiveness caused by a single infringer, the Federal Court of Appeal held:

Obviously, it will be a rare occurrence when one party is in a position to cause a mark to lose its distinctiveness, but nothing in principle prevents this result. In the present case, there was evidence to support the conclusion that as the Appellant’s trademark had lost its distinctiveness, and the fact that the Respondent was the sole cause of this loss, is of no assistance to the Appellant. Para. 7.

If we expand these principles to consider not just the mark for which registration is at issue, but also the registrability of the mark that has caused the loss of distinctiveness, there will be many scenarios in which such marks have negated the distinctiveness of each other; that is, neither mark is sufficiently distinctive to be registered in Canada.

Restoring Distinctiveness

The digital economy makes it easier for marks in once disparate marketplaces to compete in the same digital marketplace, and this can make it more difficult for those marks to establish their separate distinctiveness in Canada; likewise, when anticipated revisions to the TMA permit marks to be registered without use in Canada, it is more likely that foreign marks with little or no local distinctiveness will apply for registration in Canada. In both these scenarios, there is an increased likelihood that competing marks will negate each other’s distinctiveness.

Once an owner has learned that a mark has lost its distinctiveness, that owner may wish to take a multi-pronged approach to restoring distinctiveness and maintaining the registrability of the mark:
When available and sought promptly, a court proceeding for an injunction to regain a monopoly in Canada is an option for trademark owners that can meet the test for infringement and/or passing off in Canada; however, when the injunction is sought by the owner of a registered trademark, then this registration will almost certainly be attacked for lacking distinctiveness.An opposition to any application to register a similar competing mark on the basis that the applied-for marks lack distinctiveness can ensure that the mark does not get registered as a trademark in Canada. While expungement proceedings may be taken after registration, an opposition proceeding is preferable. Finally, in addition, or in the alternative, to the litigious processes described above, brand owners may wish to add distinctive elements to their respective marks in an effort to restore distinctiveness. These elements may include design features or indicia as to source that help to distinguish the source of the goods and/or services. The Importance of Additional Elements

With respect to the third point discussed above, in various different contexts, the courts have considered whether the non-common features of competing marks permit consumers to distinguish between such marks by those other features. This proposition is illustrated in two different contexts in the cases discussed below.

In Alticor Inc. v. Nutravite Pharmaceuticals Inc., 2004 FC 235, aff’d 2005 FCA 269, the owner of the NUTRILITE mark began an action for trademark infringement against the owner of the NUTRAVITE mark. The courts were required to determine whether the NUTRILITE and NUTRAVITE marks were likely to be confusing. Ultimately, the courts held that confusion was unlikely because, among other things, there was evidence of widespread use of “NUTR” in the marketplace. This evidence mitigated the significance of resemblance. The case followed the rationale in several authorities that small differences will serve to distinguish marks in which none of the marks at issue is inherently distinctive.

In Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2017 BCCA 41; leave to appeal ref’d 2018 Carswell BC 85 (S.C.C.), the courts were required to determine whether the VCCollege.ca domain name infringed, for the purposes of an action in passing off, the rights of Vancouver Community College in its VCC acronym. Although the court found that the VCCollege.ca domain name was confusing with VCC for the purposes of liability for passing off, the court synthesized the reasoning and results from a number of cases involving domain names.

The court identified cases in which infringement had not been found on the basis that the impugned domain names contained information disclaiming attachment to the party alleging infringement. More specifically, the ICBCadvice.com domain name was not confusing with the ICBC acronym for British Columbia’s universal automobile insurance scheme because the average consumer would recognize that the ICBCadvice.com domain name would probably relate to how to deal with ICBC in an arm’s-length or adversarial sense, rather than in a manner endorsed by ICBC. Insurance Corporation of British Columbia v. Stainton Ventures Ltd., 2012 BCSC 608, aff’d 2014 BCCA 296. Similarly, the bcaaonstrike.com domain name was found to not be confusing with the website for BCAA. BCAA v. Office and Professional Employees’ International Union, 2001 BCSC 156.

While each inquiry is fact-specific, the additional non-common elements of a trademark can sometimes permit an otherwise nondistinctive mark to become distinctive. When distinctiveness has been lost because competition in the marketplace has created confusion as to source for the competing marks, then adding indicia as to source to such marks may be sufficient to restore distinctiveness.

Be Vigilant

In Canada, there may be many situations in which use of a similar mark by multiple owners renders that mark unregistrable for all the parties that use it. Since infringement is irrelevant to determining whether an impugned mark is, in fact, distinctive, it is important to promptly prosecute infringements and oppose registration of similar marks whenever possible; however, when marks are unregistrable for lack of distinctiveness, additional design elements or indicia as to source may help these marks to become distinctive.

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