Delhi High Court Reverses Decision: E-Commerce Platforms Now Allowed To Sell And Advertise Products Of Direct Selling Entities Without Consent

In a landmark judgement in Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Others, FAO(OS) 133/2019, a Division Bench of the Delhi High Court has permitted e-commerce platforms to sell and advertise products of Direct Selling Entities ("DSEs") without their consent. In doing so, it has set aside the Single Judge's order in Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr., CS(OS) 410/2018 passed in July 2019 by a Single Judge bench of the same Court, which had restrained various e-Commerce platforms including Amazon, 1MG, Flipkart, Healthkart, Snapdeal and independent sellers from selling, offering to sell, advertising, or displaying products in breach of third party agreements. An article summarising the main arguments and issues laid down in the Single judge's order is available on our blog ( See).

Under the concept of direct selling, sellers' market, distribute and sell manufacturers' products and provide services, directly to consumers. Such sale is regulated by agreements between the manufacturers and sellers, and a code of ethics/code of conduct regulated by the manufacturers. The Direct Selling Guidelines, 2016 ("the Guidelines") (See) also safeguard the interests of direct sellers. Clause 7(6) of the Guidelines recommends that any e-Commerce platform or marketplace should obtain prior written consent before selling products of direct sellers.

Direct Selling Entities argued that e-Commerce platforms were offering their products for sale and advertising them on their platforms without their (DSEs) consent, and in contravention of the Guidelines.

In response to appeals filed against the July 2019 order, the Division Bench held that the previous judgment was passed without considering whether the grant of injunction would have an adverse impact on online marketing, and whether it would deprive unwary consumers of exercising their choice to buy such products on online platforms, while ensuring free flow of trade.

The Division Bench also rejected the DSE's argument (specifically, Amway) that e-commerce platforms (specifically, Amazon) had sold tampered, damaged and counterfeit products and held that there was no material or conclusive proof at present, and this could only be determined after trial.

Four major issues were discussed in this judgement, as follows:

Legal validity of Direct Selling Guidelines, 2016

In the original July 2019 order, the Single Judge had held that even though the Guidelines were issued as advisory instructions, once Gazette notifications were issued and implemented by various State Governments, they became binding executive instructions, and thus had force of law. That order had also stated that sellers on e-commerce platforms cannot claim to have a fundamental right under Article 19(1)(g) of the Constitution (the right to practice any profession or to carry on any occupation, trade or business to all citizens) to sell the goods of DSEs without their consent and were bound by these guidelines.

Reversing this decision, the Division Bench clarified that mere notification in the Gazette does not confer the status of "law" on the Guidelines, and that they remained only advisory in nature.

Trademark violation, and abuse of goodwill and reputation

The doctrine of exhaustion of trademark rights came up here again: the principle states that a trademark owner's rights end with the first sale of the product being made, and thus, cannot stop the sale of genuine products on e-Commerce platforms.

The Single Judge had said that the exhaustion of trademark rights could not legitimise the tampering, mutilation, wrongful pricing, or unauthorized sale of products. Accordingly, the Single Judge had held that the use of the marks and the manner of sale on the e-Commerce platforms constituted passing off, misrepresentation and dilution/tarnishment of the marks, products and businesses of the DSEs.

In contrast, the Division Bench pointed out that the e-Commerce platforms had not asserted or even mentioned anything about trademark registration in its plaint. In fact, the suits were not filed for passing off or infringement under the Trade Marks Act and would accordingly not fall under commercial suits. Further the Division Bench relied on Kapil Wadhwa v. Samsung Electronics Company Limited, MIPR 2012 (3) 0191, where it was held that the use of a registered trademark in relation to the goods to be sold in any place, or exported to any market, would not constitute an infringement. It was held that once the goods have been lawfully acquired, if they are put into the market and further sold, there would be no infringement, regardless of whether it was an international market or a domestic market.

The Division Bench also held that once the title to a product passes through sale, no further condition can be imposed on the buyer to restrict "post-sale alienation". Clause 7 (6) of the Guidelines imposes one such condition that the buyer cannot resell the product online. Such a condition was held to be not an enforceable law in the present case, as there was no contractual obligation to that effect between the DSEs and the e-commerce platforms.

Safe harbour protection not contingent on intermediaries' compliance with Guidelines

The third issue was whether e-Commerce platforms could be termed as intermediaries and if they could obtain Safe Harbour protection under the Information Technology Act and the Intermediary Guidelines of 2011.

The Information Technology Act, 2000 ("IT Act") exempts intermediaries from liability for hosting third party content in certain instances (Section 79). "Safe harbour protection" is available where intermediaries merely facilitate and host/list third party information/data or provide a communication link.

The Single Judge had concluded that e-Commerce platforms were not merely passive non-interfering platforms but providers of a large number of value-added services, thus taking them out of the ambit of being termed mere intermediaries.

The Division Bench contrarily held that the Single Judge had misinterpreted Section 79 of the IT Act in concluding that it is restricted to passive intermediaries. The Division Bench concluded that under Section 79, an intermediary would not be liable for any third-party information, data or communication link posted by it, as long as it complies with Sections 79 (2) or (3) of the IT Act.

For this, the court relied on Shreya Singhal v. Union of India, (2015) 5 SCC 1, where it was held that the obligation of an online platform to remove content arises only if there is a court order or a notification from a government agency on the grounds mentioned in Article 19(2) of the Constitution. Thus, allegations from DSEs without a supporting court order or government notification was not sufficient to trigger a takedown obligation.

The Division Bench added that providing value-added services would not dilute safe harbour protections. The definition of an intermediary under the IT Act along with the policy laid down under Press Note No. 2 of 2018 (See) permits entities following the marketplace-based model to provide such value-added services and claim to be a mere intermediary. Infact, Section 2 (1) (w) of the IT envisages that such intermediaries could provide value-added services to third party sellers. This interpretation is reinforced by Press Note No. 2.

Contractual relationships between DSEs and e-commerce platforms

The original order had held that the continuous sale of DSEs' products on e-Commerce platforms, without the consent of the DSEs, results in inducement of breach of contract, and tortious interference with the contractual relationships of the DSEs with their distributors. As e-Commerce platforms were not merely passive non-interfering platforms, upon being notified by the DSEs of unauthorised sales, the Judge had said that they had a duty to ensure that the contractual relationships were not unnecessarily interfered with by their businesses.

The Division Bench, on the contrary, held that the tort of inducement to breach of contract necessitates that there be a contract in the first place between the platforms and the DSEs. The mere fact that online platforms may have knowledge of the Code of Ethics of the DSEs, and the contractual stipulation imposed by such DSEs on their distributors, is insufficient to lay a claim of tortious interference.

In the present case, the Division Bench stated that whether the platforms induced a breach of contract between the DSEs and its sellers/distributors had to be proved and could not be inferred. In fact, the Division Bench held, "by permitting private entities like Amway to restrict downstream distribution of genuine goods, by enforcing contractual stipulations against third parties, the judgment of the learned Single Judge recognizes a monopoly that can be exercised in perpetuity. There is also force in the contention that this runs contrary to the legal position explained in Kapil Wadhwa v. Samsung Electronics."

CONCLUSION

Effectively, the Division Bench has overwritten the Single Judge's ruling in favour of e-Commerce platforms. This has come at a time when courts and the Government have been strictly enforcing due diligence obligations on intermediaries. It remains to be seen as to whether the enactment of the Consumer Protection (Direct Selling) Rules (See) (which have stayed long-pending) will add to the uncertainty on the e-Commerce selling module or fortify the Direct Selling Guidelines by offering more clarity on e-commerce businesses. Arguably, the e-Commerce marketplace wars are not over yet.

http://www.mondaq.com/india/Intellectual-Property/907934/Delhi-High-Court-Reverses-Decision-E-Commerce-Platforms-Now-Allowed-To-Sell-And-Advertise-Products-Of-Direct-Selling-Entities-Without-Consent

Court finds trademark infringement, but imposes only future prohibition

Facts

Guangzhou Hongfu Real Estate Co Ltd is the owner of registered Trademarks 1946396 (September 28 2002) and 1948763 (September 21 2003) comprising combination trademarks STAR RIVER in Chinese characters and device, to be used respectively for the services of "real estate rental, real estate management" in Class 36 and "architecture" in Class 37.

Hongfu assigned the trademarks to Guangzhou Star River Industrial Development Co Ltd, which licensed Hongfu to use the trademarks – enabling Hongfu to bring infringement actions in its own name. Hongfu and its affiliated companies developed several Star River real estate projects in Guangzhou, Beijing, Shanghai and other cities, and won many awards.

In 2000 Jiangsu Weifu Group Construction & Development Co Ltd launched various real estate projects using the names 'Star River Garden', 'Star Garden' and 'Star Scenery Garden' in Nantong – a city in Jiangsu Province. The names of the apartment blocks were approved by the Municipal Civil Affairs Bureau of Nantong.

Star River Co and Hongfu sued Weifu on the grounds of trademark infringement and unfair competition.

The Nantong City Intermediate People's Court ruled that Weifu's use of 'Star River Garden' as the name of its apartment blocks did not constitute trademark infringement, since it did not mislead consumers as to the developer of the buildings. The first-instance court further found that – since Weifu had not intended to free ride and had not caused misidentification among consumers – Weifu's use of 'Star River Garden' did not constitute an act of unfair competition. The court therefore dismissed the claims.

Star River Co and Hongfu appealed to the High People's Court of Jiangsu Province, which upheld the first-instance judgment.

Star River Co and Hongfu then filed a retrial application to the Supreme People's Court.

Decision

The Supreme People's Court determined that Weifu's use of 'Star River Garden' as the name of its apartment blocks was likely to cause confusion and misidentification among the relevant public, due to its similarity to the cited marks, which constituted infringement. Consequently, the court overruled the first and second-instance judgments, concluding that Weifu must not use 'Star River' as the name of buildings yet to be developed and sold, and must compensate Star River Co and Hongfu Rmb50,000 for their economic loss.

Comment

The case attracted a lot of attention, since it involved the protection of trademarks registered for real estate sale services and liability after a court had found infringement. In the retrial, the Supreme People's Court clarified that when an IP right such as a trademark conflicts with a property right, whether the parties should be ordered to stop using the trademark should be based on the principle of good faith and by taking into account the public interest. The court considered the fact that the name of Weifu's apartment blocks had been approved by the local civil affairs agency. In addition, residents had been living in the complex for many years and there was no evidence to prove whether they knew, upon initial purchase, that the name of the building infringed the cited trademarks. Terminating all use of 'Star River' would have created imbalance between the interests of the trademark owner and those of the public or residents. As a result, the court did not order a complete prohibition against use of 'Star River Garden', but ruled that buildings yet to be developed and sold must not use the name. The verdict protected the trademark owner's interests to the extent allowed by the law, while minimising the harm against the public interest – highlighting the significance of the judicial guidance.

The fact that the infringing products were apartment blocks, with each unit sold individually, created an unusual situation where the final product (the apartment) did not bear the infringed trademark and where the buyer may have been unaware that infringement had been committed. Knowledge of the exact claims submitted by the plaintiffs is essential to assess the significance of this decision. If the plaintiffs requested that the first and second-instance courts affirm the existence of infringement, order the cessation of the infringement and compensate the damages caused, the court's decision did as requested and it was not necessary to rule further. However, if the plaintiffs requested that the courts order the modification of all existing buildings' names, the court's dismissal of the plaintiff's claims may be questioned. Unlike the Patent Law, the Trademark Law contains no reference to the public interest. On the contrary, it is in the interest of consumers not to be confused by an act of infringement, which could happen if the owner of one of the infringing apartments decides to resell.

http://www.lexology.com/library/detail.aspx?g=78035f01-10ca-46e9-934e-8307d0067c1b

Parallel import issues under Indian trademark law

Parallel importation is a complex and often disputed issue in the IP field. ‘Parallel imports’ are genuine goods that are legitimately acquired from the rights holder and subsequently sold at lower prices through unauthorised trade channels in the same or a different market.

As parallel importation is essentially a trade practice, it is regulated under both IP law and competition law. In the trademark law context, parallel importation significantly affects the rights of a manufacturer or trader, as trademarks help traders to earn goodwill in the market and to protect their commercial reputation. As territorial rights, trademarks also indicate the source of the trademarked products or services. A conflict therefore arises when parallel importation results in a misrepresentation of the source, reputation or quality of the trademarked goods.

There is no dispute that parallel importers are in business to make money. Parallel importation occurs due to price differentials caused by currency rate fluctuations and tax differentials in different markets. This allows goods to be resold at a profit by a third party in a more expensive market. Actions to prevent parallel imports under trademark law include suits for passing off and/or infringement.

Parallel imports are also referred to as ‘grey-market’ goods because although the goods may be genuine, they are sold through unauthorised trade channels. The Indian judiciary has recently attempted to clarify this ‘grey’ area.

Law on parallel imports

In India, parallel importation is intricately linked to the principle of exhaustion of rights under the Trademarks Act, 1999. The principle of exhaustion of rights is enshrined in Article 6 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), which states that “nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights”. Hence, each state is entitled either to prohibit or to allow parallel imports within its own legal framework.

Two major issues that are often discussed in the context of parallel importation and trademarks in India are whether parallel importation constitutes infringement under Section 29 of the Trademarks Act and whether India recognises the principle of international exhaustion of rights under Section 30 of the Trademarks Act.

Case law

One of the first cases concerning parallel importation and trademark law in India was Cisco Technologies v Shrikanth 2006 (31) PTC 538, in which the Delhi High Court granted an ex parte injunction in favour of the plaintiff and restrained the defendant from importing computer hardware and hardware components under the trademark CISCO (which was registered in India). The plaintiff argued that:

CISCO products such as routers and switches are mission and human critical hardware components used in network infrastructure; that the product of the Plaintiff is used in critical networks such as railways, air-traffic control, hospitals, air defenses etc.; that malfunctioning/failure of the product of the Plaintiff would result in huge losses due to failure of these networks; that keeping in view the critical importance of the product in question, it becomes imperative to ensure that neither counterfeit sales nor sales by misrepresentation take place… and that public interest has to be kept in mind while determining the issue whether ex-pare ad interim relief should flow to the Plaintiff at this stage.

In accepting the plaintiff’s arguments, the court also observed that:

It is the obligation of all statutory and governmental authorities to ensure that laws are not violated by any person in this country. For persons who hold benefit of registered trademarks, Section 140 of the Trade Mark Act, 1999 makes statutory provisions whereunder the Collector of Customs could prohibit the importation of goods if the import thereof would infringe Section 29(vi)(c) of the Trade Marks Act. I see no reason why the statutory authorities should not prohibit import of such products, import whereof would result or abet in the violation of the proprietary interest of a person in a trademark/trade name.

The court also issued directions to Customs to notify at all ports that no consignments, other than those of the plaintiff, should be permitted to be imported in respect of routers, switches or cards bearing the CISCO trademark and/or the bridge device.

The Indian courts will usually grant an injunction against parallel importers only if the nature or quality of the goods has been changed or impaired after they have been put on the market. For instance, in Samsung Electronics Co Ltd v Mr G Choudhary, 2006 (33) PTC 425, Samsung argued that the sale of parallel-imported ink cartridges and toners did not strictly conform to Indian laws and regulations (eg, they were not accompanied by literature in English or the vernacular, and/or a label indicating the maximum retail price; they were not covered by a warranty; and use of the products would likely breach the warranty of the printer in which they were used). The Delhi High Court restrained the defendant from dealing directly or indirectly in those products.

In M/S General Electric Company v Altamas Khan General Electric argued, among other things, that the defendants’ import of its genuine products into a territory for which they were not intended violated its trademark and caused it loss. It further argued that the illegal sale caused it loss of reputation, insofar as purchasers that were unable to claim warranty or avail of an aftercare service would likely blame it or hold it responsible. The Delhi High Court found the defendants liable for infringement.

In Kapil Wadhva v Samsung Electronics, 2013 (53) PTC112, the Delhi High Court Division Bench reinforced the legality of parallel imports and held that the Trademarks Act enshrines the principle of international exhaustion of rights. In other words, it held that the exclusive right of a trademark owner over its goods is exhausted once the goods have been put on the market either by the trademark owner or with its consent. The court held, among other things, that the word ‘market’ used in the statute implies a global market, and that the preparatory works to the Trademark Bill 1999 clearly indicate the intent of the legislature to recognise the principle of international exhaustion of rights to control further sales of the goods once they have been put on the market by the trademark owner.

To illustrate: where a third party acquires goods legitimately from the trademark owner in country X, which follows the principle of international exhaustion of rights, and subsequently sells them at a higher or lower price in country Y, which also has an international regime, the trademark owner cannot oppose the sale because its exclusive right has already been exhausted by the doctrine of exhaustion in country X. An international exhaustion regime is therefore consistent with TRIPs in promoting free trade.

Section 30(4) of the Trademarks Act allows the trademark owner to control the circulation of goods where there are legitimate reasons to object to further dealings in the goods – in particular, where their condition is changed or impaired after they have been put on the market. The Delhi High Court Division Bench has broadly interpreted ‘legitimate reasons’ to include differences in:

• services and warranties;
• advertising and promotional efforts;
• packaging;
• quality control, pricing and presentation; and
• the language of the product literature.

Although an appeal is pending before the Supreme Court of India, the decision remains in force.

A notable aspect of this ruling is that the court directed that, as far as possible, unauthorised dealers and parallel importers must prominently display in their showrooms signs stating that the products they sell have been imported, and that they themselves – rather than the trademark owners – are providing the related warranty and aftercare services. The appellant in this case was ordered to display the following sign outside its showroom: “Samsung/SAMSUNG Products sold are imported into India and SAMSUNG (KOREA) does not warranty the quality of the goods nor provide any after sales service for the goods. We warranty the quality of the goods and shall provide after sales service for the goods.”

Such practices can mitigate the risk of confusion and deception among consumers and help consumers to identify the source of the products and distinguish between parallel imports and authorised products.

In India, the only circumstances in which a trademark owner can oppose or prohibit unauthorised parallel imports and plead infringement under the Trademarks Act are where the goods either were not lawfully acquired or were changed or materially altered after their acquisition. Therefore, given the international exhaustion of rights regime, a parallel importer need not prove that the trademark owner has consented to the parallel imports, either expressly or implicitly. Perhaps the only burden on the parallel importer relates to the quality and safety compliance of the products. In Philip Morris Products SA v Sameer, 209 (2014) DLT 1, the Delhi High Court held that in light of the legal position enunciated by the Division Bench in Samsung, an importer of grey-market goods, its representative or a subsequent purchaser will not be liable for infringement under Section 29 if the imports fall within the purview of Section 30(3). However, the importer must prove that the impugned goods were placed on a market worldwide by the trademark owner or with its consent, and thereafter that it lawfully acquired them.

Customs law

Indian customs law also includes provisions on parallel importation. According to the 2012 Central Board of Excise & Customs Circular on Enforcement of Intellectual Property Rights on Imported Goods, parallel importation is not prohibited unless:

• the goods bear a false trademark as specified in Section 102 of the Trademarks Act; or
• the goods bear a false trade description within the meaning of Section 2(1)(i), in relation to any of the matters connected to the description, statement or other indications of the product, excluding those specified in Sections 2(1)(ii) and (iii).

This marked a clear departure from the Intellectual Property Rights (Imported Goods) Enforcement Rules 2007, which provided that where a trademark owner notified the customs authorities in the prescribed format requesting that clearance of goods suspected of infringing its rights be suspended, and this notice was duly registered by the customs authorities, the import of all goods bearing the infringing trademark would be suspended and proceedings for confiscation of the goods would be initiated under Section 111(d) of the Customs Act. The confiscated goods were eventually required to be destroyed or disposed of outside normal channels of commerce with the trademark owner’s consent.

Consequences of parallel importation

Parallel importation has both legal and economic ramifications. Economically, it promotes the availability of trademarked goods at different prices, which prevents the establishment of a trade monopoly. A monopolistic approach in a parallel import-free market would lead to inflated prices of the goods sold by the trademark owner or authorised dealer. In the absence of cheaper alternatives, consumers would be obliged to purchase goods at the price set by the monopolist. This could have an adverse effect on the overall market, as well as on supply and demand.

Legally, it is essential to prevent deception and confusion among consumers regarding the source or quality of products, and to protect the economic interests of trademark owners. Only if the parallel imported products are materially different from those sold directly can a trademark owner file suit, including for passing off, falsification and infringement.

Therefore, the positive impact of parallel importation is that it forces prices down and provides consumers with goods at lower prices. Parallel imports prevent trademark owners from exercising their exclusive right to divide markets and thus promote free trade, subject to the exhaustion doctrine followed in the particular country. The negative impact is that the manufacturer’s distribution arrangements and ability to monitor the quality of trademarked goods are restricted. Parallel imports are also often used as a tool to cash in on the reputation and goodwill of the trademark owner; this can give rise to an action for passing off.

While consumers may benefit from lower prices for trademarked goods, parallel imports do not necessarily guarantee quality assurance or an aftercare service, and may thus result in consumer dissatisfaction and cause damage to the reputation and goodwill of the trademark. On a more practical note, however, the consumer as end user has the ultimate choice and is the ultimate beneficiary of parallel trade. Most consumers would purchase an Apple or Sony product from authorised dealers only and would be aware of the repercussions if they did otherwise. Similarly, in the case of pharmaceuticals, consumers would generally exercise extra caution and purchase the same from trusted distributors, chemists or hospitals.

Conclusion

Under Indian trademark law, trademark owners can take legal action only against traders dealing in goods that compromise the goodwill, reputation or quality of the trademark. Parallel importation thus acts as a reasonable limitation to the trademark owner’s exclusive rights to use the mark in relation to the goods and services for which it has been registered.

The decision on whether to allow parallel importation is ultimately a choice between quality control and price control; between the economic rights of trademark owners and consumer access; between trade monopolies and free trade. In the trademark context, parallel importation in no way compromises the trademark owner’s right to sue for infringement, passing off or falsification of its marks. In this sense, by following the principle of international exhaustion of rights, Indian law not only safeguards the reputational assets of a trademark, but also ensures free trade, as mandated by TRIPs, by eliminating the monopolistic tendencies of profit-driven trademark owners.

This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com

Trademark Law

The year 2014 will be remembered as the year when Canada rewrote its trademark laws. Much has been written on this subject and much more will be written over the next few years. However, 2014 was also an exceptionally busy year for trademark cases in Canada. While no single case stood out above the rest, there were a number of interesting cases of which both legal professionals and brand owners should take note.

When is a trademark clearly descriptive of geographic origin?

In Lum v Dr Coby Cragg Inc the Federal Court considered whether the registered mark OCEAN PARK for use with “dental clinics” was clearly descriptive of place of origin, as the dental clinic in question was located in an area called Ocean Park. The court applied a two-part test that:

• the mark must point to a place; and
• the place must be indigenous to the services in question.

The plaintiff failed on the second part of the test as Ocean Park was not indigenous to dental services. There was no evidence that a reasonable person hearing the term 'Ocean Park' would automatically think of going to the dentist, and as a result the registration was maintained.

In MC Imports Ltd v Afod Ltd the Federal Court considered whether the registered mark LINGAYEN, covering a variety of Filipino foods – including bagoong, a fish sauce – was clearly descriptive of the place of origin of these products. The evidence showed that Lingayen was a municipality in the Philippines and a known source of bagoong. Further, the registrant’s goods originated from Lingayen. As such, the court deemed the mark to be clearly descriptive of the place of origin and the registration was ordered to be expunged.

The Federal Court also considered the issue from the perspective of the ordinary consumer and concluded that he or she would not be without knowledge, and would have some intelligence and concern about the item being purchased. The ordinary consumer in this case would essentially be Canadians of Filipino or Southeast Asian origin, a group among which LINGAYEN would be viewed as clearly descriptive of origin.  

Both of these decisions have been appealed, providing the Federal Court of Appeal an opportunity to clarify the test to be applied in determining if a mark is objectionable on the basis that it is clearly descriptive of place of origin.

Distinctiveness of geographical designation not linked to absence of deception

London Drugs Limited v International Clothiers Inc concerned London Drugs, a well-known Canadian drugstore chain which owns various trademark registrations incorporating the term 'London'. It appealed a decision of the Opposition Board that allowed applications for the trademark SMITH & BARNES LONDON, covering a variety of retail store services and related wares.

In assessing confusion, the Federal Court rejected the argument that a trademark incorporating a geographical term may be distinctive where it is used on wares or services that have no pre-existing connection to the designation. It noted that the distinctiveness of a mark has to do with its originality, uniqueness and inventiveness, not with the absence of deception. Geographical designations such as 'London' are not inherently distinctive, and should not be accorded a high degree of protection unless they have acquired distinctiveness over time. The court upheld the board’s decision and rejected the appeal.

Assessing confusion between inherently weak letter marks

In Gemological Institute of America v Gemology Headquarters International an application for the mark GHI was opposed by the Gemological Institute of America on the basis of confusion with its registered trademark, GIA. Both marks covered goods and services in the field of gemology. The Opposition Board noted the inherent weakness of marks consisting of letter acronyms and rejected the opposition. On appeal to the Federal Court, fresh evidence was filed to show that while not inherently distinctive, the opponent’s GIA mark had been used over a significant period of time and was well known in Canada. The court noted that if this new evidence had been put before the board, it would have approached the confusion analysis differently and would have considered that the opponent’s mark was well known. The appeal was allowed, and the application to register GHI was refused. The court’s decision has been appealed.

Consideration of nature of wares and channels of trade

In Hayabusa Fightwear Inc v Suzuki Motor Corporation the applicant, a company specialising in mixed martial arts, appealed the board’s decision to refuse its application to register HAYABUSA for use with clothing. Suzuki opposed the application based on its registration for the identical mark HAYABUSA for motorcycles and on its prior use of HAYABUSA with motorcycles and caps.

The court found that the board had failed to consider the different channels of trade for the parties’ products. As Suzuki did not hold a registration covering “caps”, it was imperative to consider its actual use with these goods, which involved sales strictly through authorised Suzuki dealers (ie, a single channel of trade and to targeted consumers). The fact that it would be virtually impossible to find the parties’ wares in the same channels of trade should have been determinative of the matter in favour of Hayabusa Fightwear. The court set aside the decision of the board and allowed the application.

Similarly, in Bridgestone Corporation v Campagnolo SRL the nature of the wares and channels of trade were key considerations. Campagnolo, a manufacturer of track and competitive road racing bicycle parts and accessories, applied to register the trademark POTENZA for bicycle parts and accessories, but not including tyres, brakes, wheels, rims and spokes. Bridgestone – primarily known for its automotive products – opposed based on its registration of the identical mark POTENZA in association with tyres, tubes and wheels. The board held that there was no reasonable likelihood of confusion, and on appeal the court agreed.

Bridgestone argued that it was erroneous to consider only current channels of trade – just because Campagnolo sold high-end bicycle components in specialty stores did not mean that it would not market a cheaper line in big-box stores in the future. The court disagreed, noting that the parties’ respective statements of wares must be read with a view to determining the probable channels of trade as opposed to the possible channels of trade.

Always confirm that the other side is still active

In Bacardi & Co Ltd v The Devil’s Martini Inc an application for the trademark DEVIL’S MARTINI was unsuccessfully opposed by Bacardi, which appealed to the Federal Court. During the appeal, it became apparent that the applicant had been dissolved. After confirming that the Office of the Public Guardian and Trustee in Ontario did not intend to continue with the application and that the director appointed under the Ontario Business Corportations Act did not intend to oppose the appeal, the court held that the mark was not registrable under Section 30 of the act and ordered that the application be refused. 

Issue raised for first time on appeal refused

In Cohen v Susan Fiedler Incorporated Cohen’s application for the 'F CANCER and design' mark was successfully opposed by Fiedler on the basis of Fiedler’s prior use of a series of unregistered F CANCER marks. On appeal, Cohen raised an entirely new argument – that the word 'f***' was obscene and therefore prohibited by Section 9(1)(j) of the act. The court noted that the argument was “somewhat counter-intuitive” given that it would be fatal to Cohen’s own application, but Cohen conceded that her goal was not the registration of her own mark, but rather the collateral purpose of obtaining a ruling from the court that Fiedler had no enforceable common law rights to its F CANCER marks.

The court held that the question should have been decided by the Opposition Board, the expert tribunal with the authority to decide such questions, and that there was no valid reason why the argument could not have been raised before the board. The appeal was refused and the court went on to assess elevated costs, given that the appeal had been brought for collateral purposes.

Strict interpretation of 'use in Canada' not applicable in Section 45 proceedings

In Ridout v HJ Heinz Company Australia Ltd, a non-use cancellation proceeding, the registrar of trademarks maintained the registered mark OX & PALM for use with meat and processed meat. The evidence before the registrar showed that the registrant had received a purchase order for the wares and the goods were delivered to a shipper in Australia before expiry of the material period, but that they were subsequently delivered to the Canadian customer three days after the expiration of the material period. The registrar maintained the registration, noting that the mark was not “deadwood” and that this case did not warrant a strict interpretation of 'use'. The Federal Court upheld the decision, concluding that there was a transfer of property in the goods in Canada when they were delivered to the shipping entity in Australia, so long as the delivery to Canada was ultimately completed.

Thymes decision distinguished

The Reitmans (Canada) Ltd v Thymes Ltd decision confirmed that an application claiming use and registration in another jurisdiction must have all of the requisite elements present (use and the foreign registration, or at least a pending application) as of the Canadian filing date. If not, the application could be successfully opposed. Coors Brewing Company v Anheuser-Busch, LLC established that an allegation of an improper foreign registration and use claim in a registered mark did not constitute a ground for expungement. A lack of foreign use at the Canadian filing date is not fatal to registered trademarks that are issued based on a claim of foreign use and registration, provided that the claim was true at the time that it was made.

In August 2010 Anheuser filed a US application to register GRAB SOME BUDS based on intended use in the United States. A corresponding Canadian application was filed in mid-September 2010 based on proposed use in Canada. Use commenced in the United States in late September 2010 and the US case issued to registration in March 2011. In February 2011 Anheuser amended its Canadian application to rely on foreign (US) use and registration. The Canadian application proceeded to registration on this basis.  

Coors applied to expunge Anheuser’s Canadian registration, arguing that it was invalid since use of the mark did not commence in the United States until after the Canadian filing date. The court disagreed and upheld the registration. The sole basis for invalidating the registration raised by Coors was the alleged improper foreign registration and use claim. However, the grounds on which a registration may be expunged are set forth in Section 18 of the Trademarks Act, and the court confirmed that non-compliance with procedural filing requirements under Section 30 of the act does not constitute grounds for expungement. Further, while a misstatement in an application may present a ground for expungement, the statement made by Anheuser in its application was true when it was made, and as such it did not constitute a misstatement.

Section 9 objection at examination overturned by Federal Court

In Jack Black LLC v Canada (Attorney General) the applicant applied to register JACK BLACK for skincare products. The examiner objected to the registrability of the mark on the basis that Jack Black is a “famous living individual”. On appeal, the Federal Court concluded that the print-outs from the Internet relied on by the examiner in reaching his decision were insufficient to establish that there was an individual named Jack Black with a significant public reputation across Canada. The applicant also filed new evidence showing that the skincare products offered under its mark were not new, and in fact benefited from a fairly large circulation, without objection from Black.

Federal Court considers official marks

In Terrace (City) v Urban Distilleries Inc, which concerned the official mark SPIRIT BEAR, the failure to show prior adoption and use resulted in a declaration that the official mark was unenforceable. The court noted that adoption “is a low bar; all a party must do is state it has adopted the mark”. Use requires that the mark be made available for public display before publication. The court noted that “such use cannot be abstract. It must be associated with a particular ware or service, and a connection must be made with the wares or service and the mark”.

In surveying the relevant case law, the court noted that public display can include the display of a mark on a website in association with a particular service; use can be found when an announcement for the services and a logo, containing the mark and a graphical depiction of the mark, have been published in a public newsletter. A mark is not used where it is not distinguished from surrounding text, nor when it is used on internal communications only. 

The evidence fell short of establishing use, with the result that the SPIRIT BEAR official mark was deemed unenforceable. The court’s decision has been appealed.

In TCC Holdings Inc v Families as Support Teams Society the court considered whether a registered charity qualified as a public authority for the purposes of Section 9 of the act. The respondent, the Families as Support Teams Society, was a registered charity when it obtained the protection of Section 9, but its charity status was revoked shortly thereafter. It did not participate in the proceedings.

The court was satisfied that the respondent was not a public authority, noting that it did not meet the test of significant governmental control. As such, the court did not have to consider whether its activities satisfied the public benefit requirement. The court further noted that even if it had been a public authority, it ceased to be one when its charitable status was revoked, such that it was not entitled to benefit from the official mark.

Punitive and aggravated damages distinguished

In Bauer Hockey Corp v Sport Maska Inc, on a motion dealing with the sufficiency of pleadings, the Federal Court of Appeal commented on the distinction between punitive and aggravated damages. The court noted the following:

• Punitive damages are intended to punish the defendant in situations where the defendant’s misconduct is so malicious, oppressive and high handed that it offends the court’s sense of decency. They are not limited to situations of litigation misconduct.
• Aggravated damages are intended to compensate the plaintiff and are usually awarded in relation to intangible injuries (humiliation or mental distress), and it is questionable whether such damages can be claimed by a corporation.

The court struck Bauer’s claim to aggravated damages, but allowed the claim for punitive damages to remain in the statement of claim. While allegations of wilful and knowing infringement alone do not support a claim to punitive damages, the court held that it was not plain and obvious that the statement of claim disclosed no reasonable cause of action with respect to punitive damages, as there were other allegations to be considered.

Criminal penalties stemming from sale of counterfeit goods

In R v Strowbridge the accused was seen selling counterfeit brand-name products from the back of a van parked next to the highway, and C$500-worth of products were seized. He pled guilty to fraud and copyright and trademark infringement, and was sentenced to 15 months in prison – six of which were for copyright infringement under the Copyright Act and trademark infringement under the Criminal Code.

On appeal, the Newfoundland Court of Appeal canvassed sentencing decisions relating to the sale of counterfeit goods, primarily under the Copyright Act, most of which resulted in conditional sentences. The court distinguished between operations where customers buy goods from an ostensibly legitimate storefront operation versus the purchase of goods from the back of a van parked on the side of a highway, noting that while purchasers of counterfeit goods can be victims, there was no indication that they were in this case. The court deemed Strowbridge’s operation to be marginal and unsophisticated. 

The court agreed that a six-month sentence was disproportionately long and reduced it to two. This decision is of particular interest given the recent amendments to the Trademarks Act, which provide for significant criminal penalties in relation to counterfeiting activities.

Source: http://www.iam-media.com/reports/detail.aspx?g=3a07dca3-381e-4054-b2be-d0209a329ad4