Most traditional passing-off principles apply to domain names passing-off cases

A decision of the Superior Court of Ontario (Dentec Safety Specialists Inc v Degil Safety Products (1989) Inc (2012 ONSC 4721)) illustrates that most normal passing-off principles can be applied in the context of the adoption of a confusing domain name.

The plaintiff and defendant, Dentec Safety Specialists Inc and Degil Safety Products (1989) Inc, respectively, were competitors in the industrial safety products business. Each company was owned and run by a Dente brother. The brothers had an acrimonious relationship and have had past disputes and legal proceedings on unrelated matters.

In this action, Dentec claimed that Degil wrongfully passed itself off as Dentec by registering and using the domain name 'dentecsafety.ca'. The record showed that Dentec relied heavily on the internet and its website 'dentecsafety.com' for marketing and sales of its products. Dentec used its domain name extensively in its advertising, and on its business cards, shipping cartons, invoices, packaging slips and letter heads. Dentec’s domain name was a combination of the last name Dente and the first letter of the owning brother’s first name, Claudio. Dentec’s corporate strategy was to 'blast' its internet address to the world. This appeared to be a successful strategy. Dentec won industry recognition awards in 2006 and 2008 and was appointed as the exclusive master distributor for the Canadian marketplace for all US safety products in 2007. These products were sold through its website.

Dentec learned of the Degil’s 'dentecsafety.ca' domain name four months after registration thereof. Degil had redirected traffic from the 'dentecsafety.ca' domain name to its 'degilsafety.com' website. Dentec commenced proceedings, and one month after the start of this action, Degil voluntarily stopped redirecting the traffic.

The court found that Degil’s registration and use of the 'dentecsafety.ca' domain name amounted to passing off of Dentec’s domain name. In arriving at this conclusion, the court reviewed and relied on the following domain name passing-off factors as summarised by Sigurdson J in British Columbia Automobiles Assn v OPEIU Local 378 ([2001] BCJ No 151 (SC)):

1. The tort of passing off seeks to avoid different types of confusion including “initial interest confusion” which can occur when web shoppers are looking for the plaintiff’s website but, through the great similarity of the defendant’s domain name, are instead directed to the defendant’s web address.
2. The appropriate legal standard by which to measure whether or not the defendant’s conduct may have caused confusion in the minds of the public is the standard of the “ordinary average customer” shopping for the products sold.
3. In assessing the likelihood of confusion among customers, the degree of similarity between the plaintiff’s business name and defendant’s second-level domain name, and the similarity of the goods and services are determined.
4. If the parties are selling entirely different goods and products in the global market place, the chance of customer confusion is greatly reduced. Where, however, the plaintiff and defendant both employ the internet to promote and sell their products, the more related the products being sold, the more likely the average customer will be confused. 
5. Although intent is not a necessary element, proof of a defendant’s intention to confuse and/or mislead the public will provide strong evidence of consumer confusion.
6. The value of the products, if sufficiently high, can reduce the likelihood of consumer confusion if it would cause consumers to take more care and attention when making their purchase.
7. Evidence of actual confusion is persuasive for finding a likelihood of confusion.

With the above factors in mind, the court considered the three elements of the tort of passing off with the facts of the present case. The court found that Dentec did have very considerable goodwill as an industrial safety products business. Although no actual evidence of consumer confusion was submitted to the court, the court found that Degil’s conduct was likely to cause confusion in the minds of the public because:

• the marks were almost identical;
• the websites appeared interchangeable;
• the parties sold essentially the same products to the same market;
• an ordinary average consumer could only have concluded that the website redirection meant that the businesses were related or associated; and
• the intent of Degil was to confuse the public or at least redirect sales that would have otherwise gone to Dentec.

The plaintiff did not introduce evidence showing lost sales or customers. Nevertheless, the court found that it would be unreasonable and unrealistic to conclude that the plaintiff suffered no damages since, for a period of five and a half months, Degil deliberately redirected all internet traffic to its own website.

In assessing the quantum of damages, the court agreed that the plaintiff was entitled to C$10,000 in compensatory damages but no punitive damages. The court relied on two similar cases involving domain name passing off which made a presumption of, and awarded, C$5,000 in compensatory damages despite no evidence of lost sales. The court in the present case was not willing to award punitive damages, however, since it did not find Degil’s conduct to be sufficiently malicious, oppressive and high-handed to offend the court’s decency. In making a finding against punitive damages, the court appeared to be swayed by a number of factors including, but not limited to, the fact that:

• Degil was not aware that its actions were legally wrong;
• Degil stopped the misconduct shortly after being advised by Dentec of its complaint; and
• Degil’s misconduct did not deprive Dentec of anything this was irreplaceable.

This case confirms that those factors, normally considered in a traditional passing-off case, equally apply to domain names passing-off cases. One important factor the court failed to identify is the geographic area served by the plaintiff and the defendant. Case law has held that, even though the parties may be geographically widely separated, if they are likely to serve some of the same customers or the plaintiff has goodwill in its mark in the same geography being served by the defendant, confusion may exist (see Coin Stars Ltd v KK Court Chili & Pepper Restaurant Ltd ([1990] BCJ No 1622, 33 CPR (3d) 186 at 192 (SC)). Where the parties’ activities occur in geographically remote areas, however, the courts will be more likely to find no likelihood of confusion (see Walt Disney Productions v Fantasyland Hotel Inc ([1994] AJ No 484, 56 CPR (3d) 129 (QB)). Due to the global availability of the internet, there is a greater likelihood that the parties serve the same geographic area, or that the plaintiff has goodwill in its mark in the same geographic area served by the defendant. The courts should be open to the possibility in domain name passing-off cases, however, that the parties may serve very different geographic areas which do not overlap, despite each having a presence on the internet, operating in the same channel of trade, and providing similar goods and services.

Gordon Zimmerman and Brandon Evenson, Borden Ladner Gervais LLP, Toronto