Jaguar ruling clarifies ambit of protection for famous marks

In Remo Imports Ltd v Jaguar Cars Limited, the Federal Court of Appeal has considered a decision of the Federal Court in a complicated action involving the trademark JAGUAR. This case is interesting for its treatment of famous marks, grounds for expungement of a registered mark and the use of a registered mark as a complete defence to an action for passing off. Although the appellate court disagreed with the trial court on several points, the result reached was essentially the same.

Jaguar Cars Limited has used its registered trademark JAGUAR for automobiles for many years. Remo Imports Ltd adopted the mark JAGUAR for bags in 1981. It also obtained its own trademark registration covering various bags and luggage, without objection by Jaguar Cars. In about 1990 the parties came into conflict. Remo launched an action for trademark infringement alleging a likelihood of confusion between its goods and those of Jaguar Cars. It sought an injunction. Jaguar Cars counter-claimed. Both parties alleged trademark infringement and passing off, and sought expungement of the registered trademark of the other. In a lengthy decision of the Federal Court, Remo's registration was ordered to be expunged. The court held that Remo had passed off its goods as those of Jaguar Cars and Remo's actions had depreciated the value of the goodwill in Jaguar Cars' registered mark. Nonetheless, damages prior to the date of the judgment were denied. Remo appealed and Jaguar Cars cross appealed.

The Federal Court of Appeal, after chastising Remo for an overly lengthy notice of appeal and for raising new grounds at the oral hearing of the appeal, proceeded to consider those grounds. Part of its reasoning was as follows:

• It upheld the trial court's decision that Jaguar Cars' JAGUAR mark was famous as of 1980 (by the time Remo adopted its JAGUAR mark), and remained famous in 1991 when the action was commenced and in 2005 when the trial was held.
  
  
• Although the language used by the trial court was not clear, it had not imposed a special burden on Remo to disprove any likelihood of confusion. Rather, its finding was that once evidence of confusion with a famous mark had been adduced, it was difficult for the responding party to overcome that evidence.
  
  
• The trial court had applied the wrong test for confusion. A mere possibility of confusion was not sufficient to invalidate a registered trademark. The trial court's statements tending to suggest that such a possibility was sufficient were not correct. They indicated a misconception or misapprehension of the correct test. Nonetheless, there was evidence of a likelihood of confusion. In its attempt to invalidate Jaguar Cars' registration, Remo had admitted and asserted that there was a likelihood of confusion between goods in slightly different categories, so Remo was caught by the conclusion that there must also be confusion between the marks on more similar goods. Although admissions or concessions by a party on points of law may not be binding on a court, where a party takes diametrically opposed positions on the facts, it risks having one of those positions used against it.
  

The appellate court highlighted the available grounds for expungement of a registered trademark pursuant to Section 18 of the Canadian Trademarks Act. Under Section 18, a registration may be found invalid on the basis that:

• it was not registrable at the date of registration;
  
  
• it was not distinctive as of the date proceedings for expungement were commenced;
  
  
• the trademark had been abandoned; or
  
  
• the registrant was not the person entitled to secure the registration.
  

The appellate court went on to state that other non statutory grounds for expungement had also been recognized. These included misappropriation of a trademark in violation of a fiduciary duty and fraudulent or material misrepresentations made for the purposes of securing a registration. However, the appellate court held that certain grounds relied upon by the trial judge were not proper grounds for expungement. Improper grounds included depreciation of the value of the goodwill in a registered mark (pursuant to Section 22 of the Trademarks Act) and deception of the public in the context of passing off. It was held that the trial court erred in relying on these grounds as bases for expungement.

The appellate court also held that the trial court had erred in expunging Remo's registration based on prior use by Jaguar Cars of the same mark, when that registration had become incontestable. Section 17(2) of the Trademarks Act provides that when a registration has been in force for more than five years, it cannot be expunged on the basis of prior use unless the registrant was aware of that prior used mark when it adopted its own mark. There was no evidence of such knowledge in this case.

The appellate court went on to find that since Jaguar Cars' mark had been famous at all material times, Remo's mark had never been distinctive and was not distinctive when proceedings were commenced. Accordingly, expungement on that basis was correct.

With respect to the cross appeal, Jaguar Cars claimed that it was entitled to damages for passing off and depreciation of the value of the goodwill in its registered trademark. Although the appellate court doubted that there could have been passing off under the circumstances, Remo had not appealed that finding. With respect to depreciation of the value of the goodwill in Jaguar's registered mark, the appellate court cited the stringent test set out in the recent Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée decision of the Supreme Court of Canada. A link or mental association in the mind of consumers between the famous mark and the defendant's mark was required in order to make out this cause of action. The link is not to be assumed. Mere possibility of depreciation is not sufficient. The appellate court held that since the trial court had rejected all expert evidence on the point, there was no evidence to show a link between the expensive cars sold by Jaguar Cars and the inexpensive bags sold by Remo. Accordingly, there was no depreciation of the value of the goodwill of Jaguar Cars' registered mark.

With respect to damages, interestingly, even though Remo's registration was ordered to be expunged, the existence of that registration up to trial was held to be an absolute defence to an action for passing off for the period of time prior to expungement.

If the injunction had remained in force after the trial decision, no reference as to damages or profits would have been ordered. Remo, however, obtained a stay of the injunction and continued selling bags under the JAGUAR mark after the trial decision. Accordingly, the appellate court ordered that a reference be held to determine the amount of compensation owing to Jaguar Cars for the time period between the trial decision and the appeal decision.

For background discussion of this case, see JAGUAR decision confirms ambit of protection for famous marks.

Gordon Zimmerman, Borden Ladner Gervais LLP, Toronto