Lesters Delicatessen enjoined from using Lesters name

In Lesters Foods Ltd v Lesters Delicatessen and Hot Smoked Meat Inc (2008 QCCS 2010, May 14 2008), the Quebec Superior Court has granted a permanent injunction to Lesters Foods Ltd in a dispute over the name Lesters.
Lesters Foods is a meat processing company based in Laval, Quebec. Lesters Delicatessen and Hot Smoked Meat (Lesters Deli), which is located in Montreal, is a spin-off from a restaurant called Lesters Delicatessen. It is a reseller of processed meat and deli-related products. In 2001 Lesters Deli, which had previously gone by the names Lesdel’s or Mr Smoked Meat, altered its marketing approach by using phrases such as 'Lesters', 'Lesters Deli' or 'Lesters Deli on Bernard Street'.
Lesters Foods brought a lawsuit against Lesters Deli and an individual, Bill Berenholc, seeking damages and a permanent injunction prohibiting the defendants from using the word 'Lesters' in relation to wholesale smoked meat and spices. Lesters Foods based its claim on statutory passing off under the federal Trademarks Act and the provincial Quebec Civil Code.
The Quebec Superior Court adopted the three-step test for passing off arising from established case law, such that it was necessary for Lesters Foods to show that:
  • it had goodwill or reputation in the unregistered mark LESTERS;
  • the public had been misled due to a misrepresentation; and
  • Lesters Foods had suffered, or could possibly suffer, damages as a result.
With respect to the first branch of the test for passing off, the court concluded that Lesters Foods had "enormous" goodwill in the name Lesters in the wholesale meat market, based on its advertising, promotional activities and physical presence in the marketplace. The court was persuaded by evidence arising from its annual production figures, as well as industry-based publications, newspaper reports, television broadcasts and food store chain flyers, among other things.
With respect to the second branch of the test, the court stated that Lesters Foods had to show that Lesters Deli had misled the public in a way that would lead or be likely to lead to the inference that its products are produced by Lesters Foods. The court held that there was a likelihood of confusion as the two companies associated the same word with the same products in the same marketplace. The court nevertheless reviewed the criteria of confusion under Section 6(5) of the act and found that the criteria favoured Lesters Foods. The court was also moved by several incidents of actual confusion, pointing out that one incident of confusion occurred directly from Lesters Deli’s change in marketing strategy in 2001.
The court also considered whether a defendant’s intention in making the misrepresentation was to be a factor. Here, the court drew a distinction depending on the remedy sought. The court held that where an injunction is sought, proof of a fraudulent intent or malice on the part of a defendant is not required. However, where damages are sought, negligence or fault is required. The court’s reasoning was based on the 'civil law syllogism' of fault, damages and causality. Though rooted in a theory of civil liability under Quebec law, this theory applied to the federal legislation because of the "flexibility and discretion" given to the court by Section 53(2) of the act, which reads as follows:
"Where a court is satisfied, on application of any interested person, that any act has been done contrary to this act, the court may make any order that it considers appropriate in the circumstances, including an order providing for relief by way of injunction and the recovery of damages or profits and for the destruction, exportation or other disposition of any offending wares, packages, labels and advertising material and of any dies used in connection therewith."
With respect to the third branch of the test, the court held that it is “not necessary to prove actual or probable, or even possible, damages” if the remedy sought is an injunction. This ruling is inconsistent with the recent appellate ruling - albeit arising from the Federal Court - in Nissan Canada Inc v BMW Canada Inc (2007 FCA 255). Although the BMW proceeding was subject to a bifurcation order (ie, an order that the issue of quantum of damages be reserved to a separate hearing, if necessary), the Federal Court of Appeal held that:
  • "actual or potential damage is a necessary element in finding liability" under the statutory passing off scheme; and
  • it was not open to the trial judge to presume the existence of damages.
In the present case, the court concluded that the case for an injunction had been made, but refused to award fault-based damages or a rendering of accounts. The court held that "it is not unreasonable, malicious or faulty… to have attempted to translate some of the goodwill of the [Lesters Delicatessen restaurant] into the wholesale side of the business" or to "consolidate both sides of [the] business under one banner, the one that had been around for some 50 years".
The ambit of the court-ordered injunction was limited to the sale and marketing of smoked meat, spices and other delicatessen-related products to the wholesale sector. Lesters Deli was not enjoined from using the phrase 'Lesters Deli' in relation to the restaurant or other, non-wholesale operations.
Yuri Chumak, Cameron MacKendrick LLP, Toronto

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