The Federal Court of Appeal recently clarified the applicable test for challenging a trade-mark that is clearly descriptive of a good’s place of origin, pursuant to s. 12(1)(b) of the Trade-marks Act, RSC 1985, c. T-13 (the “Act”). The Court also articulated how such a trade-mark could still be ruled distinctive, and, accordingly valid: good old fashioned proof!

The context for the decision in MC Imports Inc. v. AFOD Ltd., 2016 FCA 60 [1] was a dispute between two importer-distributors of bagoong, a fish and shrimp based condiment from the Philippines.

Case Background

The action began as a trade-mark infringement proceeding commenced by MC Imports Inc. (“MC Imports”), which owned the trade-mark LINGAYEN. The trade-mark was registered in August 2003 and MC Imports had licensed the trade-mark until the trade-mark was assigned to it in October 2011. Prior to the trade-mark being registered, MC Imports’ predecessor company sold products using the same LINGAYEN mark dating back to 1975. Around May 2011, AFOD Ltd. (“AFOD”) began importing and distributing bagoong products, with its trade-mark Napakasarap and the words “Lingayen Style” on the label. Lingayen is a Philippine municipality that is known for its distinctive style of bagoong.

MC Imports alleged that AFOD’s use of the term Lingayen on its product labels violated its LINGAYEN trade-mark and commenced the infringement proceeding in November 2011. AFOD responded to the infringement claim by, inter alia, challenging the validity of the LINGAYEN trade-mark on the basis that it was clearly descriptive or deceptively misdescriptive of the place of origin of MC Import’s bagoong.

Relevant Trade-marks Act Provisions and Summary Trial Outcome

The Act lists several requirements for a trade-mark to be registrable. In particular, a trade-mark must not be “… either clearly descriptive or deceptively misdescriptive… of the character or quality of the goods… or of their place of origin.”[2] A trade-mark may be deemed invalid if the trade-mark was not registrable at the time of registration or if the trade-mark is not distinctive at the time when its validity is challenged.[3] Even if a trade-mark is clearly descriptive of a good’s place of origin, it may still be registrable if the mark has become distinctive due to prior use of the mark in Canada.[4]

It was undisputed at the summary trial of this matter before the Federal Court that Lingayen is a geographical region in the Philippines. The judge found that MC Import’s bagoong originated in Lingayen. Faced with two lines of seemingly conflicting case law, the judge concluded that both tests reached the same result: the LINGAYEN mark was clearly descriptive of the place of origin of the bagoong, was not registrable at the time of registration, and was accordingly invalid.

Which Test to use: the Parma vs. Leyda Contest

On appeal, MC Imports argued that the judge erred in his application of the relevant test by failing to apply the approach used in the Parma[5] case, pursuant to which the ordinary consumer’s perception of the trade-mark should factor into the analysis. Although Parma was a “deceptively misdescriptive” case, MC Imports argued that it applied because, like the current case, Parma dealt with a longstanding use of the mark prior to registration. AFOD argued that the case of Leyda[6] articulated the law on a “clearly descriptive” place of origin: i.e. average customer perception is not relevant to the analysis.

The Federal Court of Appeal, referencing the Federal Court’s ruling in Atlantic Promotions,[7] determined that the Leyda test applied and accordingly found that consumer perception is generally only relevant in deceptively misdescriptive type cases. However, as explained below, there may be circumstances under which a Court must resort to consumer perception in a clearly descriptive origin case in order to resolve an ambiguity and/or consider the mark’s acquired distinctiveness.

The Court articulated a three-step test for determining whether a geographic name is unregistrable because it is clearly descriptive of the place of origin of a good/services:

  1. Determine whether the trade-mark is a geographical name;
  2. Determine the place of origin for the goods or services;
  3. Assess the trade-mark owner’s assertion of prior use, if any.

1. Geographical Name

The first step may seem fairly obvious: does the mark correspond with an identifiable place on a map? Although this will likely be the extent of the analysis in many cases, the inquiry allows for some nuance to account for terms which happen to share a name with a geographic location. For instance, as the Court points out, numerous towns in the US and UK share a name with the everyday sandwich. Other examples of goods that share names with places, to name a few, include java, hamburger, bikini, cognac, jersey fabric, Bristol board and brie cheese.

For situations in which there are multiple meanings for a term, the Court advocated the approach adopted in Atlantic Promotions, which held that the primary meaning of the word to a person of “ordinary education and intelligence” dictates its meaning. A party defending against a challenge related to clearly descriptive type of trade-mark would need to submit evidence that the primary meaning of the mark is not the geographic location.

2. Place of Origin

The analysis for many cases will likely conclude at this stage. If the good originates from the same location as its geographical namesake, the Court will draw the inference that the mark is clearly descriptive of its place of origin and, as a result, unregistrable, unless the defending party asserts distinctiveness as a result of prior use (discussed below).

The Court distinguishes the deceptively misdescriptive type of challenge at this step. If it turns out that the good originates from a different location than the one for which it is named, the trade-mark is misdescriptive. A different type of analysis than that discussed in this case would follow to determine if the misdescription is deceptive.

3. Prior Use

Finally, even if a trade-mark is clearly descriptive of a good’s place of origin, the trade-mark may still be registrable if it has, through use in Canada by the owner of the mark or a predecessor in title, become distinctive.

The issue of consumer perception of the trade-mark is highly relevant for this inquiry. The holder of the trade-mark bears the onus of demonstrating that the mark “has acquired a dominant secondary or distinctive meaning in relation to the wares or services” with which it is associated. Evidence of mere use of the mark is not sufficient to satisfy this onus.

Comments

It appears that MC Imports did not submit any evidence to argue that through its predecessor’s use of the mark since 1975, LINGAYEN had acquired a distinctive meaning at the date of its filing, January 2000. Its mere assertion that there had been significant “time for the mark to establish its reputation and awareness among customers” was insufficient. The outcome may have been different in this case if s. 12(2) evidence tending to prove the mark’s acquired distinctiveness had been before the Court. Affidavits from actual customers, retailers and/or industry specialists speaking to the reputation of the mark and its associated bagoong, both generally and in comparison to competitors’ bagoong products, could have very well impacted the ultimate outcome in this case.

MC Imports’ efforts to protect its rights and prevent infringement of its trade-mark resulted in that same trade-mark being ruled invalid. A significant takeaway for businesses considering enforcement of a registered trade-mark would be to assess the validity of the trade-mark and consider the evidence required to prove the reputation of the mark before undertaking a court proceeding.

Case Information

MC Imports Inc. v. AFOD Ltd., 2016 FCA 60

Docket: A-569-14

Date of Decision: February 23, 2016