Court gives guidance on latest trends in Tommy Hilfiger Case

In Tommy Hilfiger Canada Inc v Produits de Qualité IMD Inc, the Federal Court of Canada has issued guidance on the tests to be applied and the evidence required in respect of claims of trademark infringement, passing off and depreciation of the value of the goodwill in a trademark.

Tommy Hilfiger Canada Inc is the owner of the well-known 'Rectangles' design trademark registration consisting of a flag design made up of a number of rectangles in the colours blue, red and white. Produits de Qualité IMD Inc (PQ) created an 'Explorer Canada' design, which it used on a variety of clothing and souvenir items. The design consisted of a flag having similar colours and proportions to the Tommy Hilfiger 'Rectangles' design, and also included the words 'Explore' and 'Canada'. A maple leaf was centrally located within the design.

Tommy Hilfiger sued PQ for trademark infringement, passing off and depreciation of the value of the goodwill attaching to its trademark. PQ counterclaimed for invalidity of the mark.

The Federal Court first examined the issue of infringement and the test for confusion in particular. It stated that this test, as applied to the facts of the case, required the court to put itself in the position of a consumer who is familiar with the Tommy Hilfiger mark, but has an imperfect recollection of it. The question was whether such a consumer would, on seeing the PQ mark, infer as a matter of first impression that PQ's goods were in some way associated with the goods covered by the Tommy Hilfiger mark. The court concluded that PQ's mark would cause confusion and PQ was therefore liable for trademark infringement.

Next, the court examined the issue of passing off. It stated that to succeed in such an action, a plaintiff must prove three components:

• existence of goodwill;
  
  
• deception of the public due to a misrepresentation; and
  
  
• actual or potential damage to the plaintiff.

In this case, the court held that Tommy Hilfiger had established significant goodwill or reputation in respect of its trademark by reason of extensive advertising and substantial sales in Canada. The court also found that there was a likelihood of confusion between the two trademarks, which it implicitly equated with a misrepresentation. However, the court did not agree that damage could be presumed and, in the absence of evidence quantifying the nature and type of damage to Tommy Hilfiger, it denied the claim for passing off.

In respect of depreciation of the value of the goodwill attaching to Tommy Hilfiger's trademark, the court held that Tommy Hilfiger needed to show that PQ used its registered trademark (not necessarily in the sense of trademark use), and that such use was likely to have the effect of depreciating the value of the goodwill attached to the mark. The court stated that goodwill is defined as the benefit and advantage of the good name, reputation, and connection of a business; the attractive force that brings in custom, and the one thing that distinguishes an established business from a new business. The court stated that:

"depreciating the value of the goodwill occurs whether it arises through reduction of the esteem in which the mark itself is held or through the direct persuasion and enticing of customers who could otherwise be expected to buy or continue to buy goods bearing the trademark. There is no requirement to show a likelihood of confusion in order to prove a likelihood of depreciation of the value of the goodwill".

The court accepted that customers would probably make a connection in their minds between PQ's products and Tommy Hilfiger. However, there was no evidence that such connection would reduce the esteem in which customers hold the Tommy Hilfiger trademarks. The court stated that the proof presented to the court must show that there is at least a likelihood that a negative impression would be left in the mind of the consumer, and what that negative impression would be. The court also noted that there was no evidence of a likelihood of direct persuasion and enticing of customers who would otherwise be expected to buy or continue to buy the goods bearing the Tommy Hilfiger trademark. Because of the lack of evidence, the court dismissed the claim for depreciation of the value of the goodwill.

John S Macera, Macera & Jarzyna - Moffat & Co, Ottawa