Supreme Court to hear first trademark appeal in four years

Canada

The Supreme Court of Canada has granted leave to hear an appeal of the decision of the Federal Court of Appeal in Masterpiece Inc v Alavida Lifestyles Inc (2009 FCA 290), marking the Supreme Court’s first trademark appeal since it clarified the law relating to famous marks in 2006. The case concerns an application for expungement of a trademark registration under Section 57 of the Trademarks Act and involves the test for determining whether there is a likelihood of confusion between two marks.

The facts of the case are relatively straightforward. The parties operate in the retirement residence industry. Masterpiece Inc had used an evolving series of unregistered trademarks incorporating the terms 'masterpiece', some including the word 'living', since 2001. Alavida Lifestyles Inc started using the trademark MASTERPIECE LIVING in late 2005 or early 2006, and applied to register this mark on December 1 2005. In 2006 Masterpiece applied to register its trademarks MASTERPIECE and MASTERPIECE LIVING, but its applications were denied by the Canadian Intellectual Property Office on the basis of Alavida’s prior application.

Alavida’s application subsequently issued to registration, at which point Masterpiece filed an application with the Federal Court to expunge Alavida’s registration based on Masterpiece’s prior use of confusingly similar trademarks in Canada. The expungement application was denied by the trial judge and that decision was upheld by the Federal Court of Appeal.

The main issue before the Supreme Court is whether a likelihood of confusion between two trademarks can exist if the marks are not already in competition in the same geographic area. The Federal Court trial judge, in his reasons, indicated that he had considered the entirety of the evidence and found no likelihood of confusion based on an analysis of the usual factors to be considered.

The Federal Court of Appeal, in being asked to consider whether the trial judge had erred in not considering a future likelihood of confusion, appears to have held that, because Masterpiece’s use of its trademarks at the time of filing of Alavida’s application was not in the same geographic area as Alavida’s use, there was no likelihood of confusion to prevent registration of Alavida’s mark. The Federal Court of Appeal further held that the Trademarks Act requires that there be a present likelihood of confusion on the relevant date (namely, the filing date of Alavida’s application) in order for prior use by another party to bar registration. A future likelihood of confusion is insufficient and, because the parties were not operating in the same geographical location at the time of the application, there was no likelihood of confusion. Future plans for geographical expansion were held to be irrelevant to the analysis.

Also at issue before the Supreme Court is whether the Court of Appeal has, by its application of the test for likelihood of confusion, elevated the test for expungement to that of a common law passing off action, which requires a reputation in the geographic area in question to enforce unregistered trademark rights. The court is also being asked to consider whether the lower courts erred in holding that a likelihood of confusion can be overcome by aspects of get-up surrounding use of the marks.

IP practitioners in Canada will be closely watching the outcome of this appeal, in view of both the rare opportunity to hear from Canada’s highest court on issues of trademark law, and the potential ramifications to the commonly held view that a prior user of a trademark in Canada can prevent registration by another of a confusingly similar mark, regardless of the precise geographical location in Canada in which the prior use occurred.

Karen F MacDonald, Smart & Biggar/Fetherstonhaugh, Vancouver

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