Case holds that a registered trademark is not valid if a confusingly similar trademark had previously been used anywhere in Canada

On May 26, 2011, the Supreme Court of Canada issued its decision in Masterpiece Inc. v. Alavida Lifestyles Inc. The decision deals with the important issue of rights to registration between competing applicants, addressing both the impact of prior use, and the effect of geographic differences between the parties. In addition, the decision cautions against the use of survey evidence of dubious relevance or scientific accuracy.

The Facts

Both parties are in the retirement residence industry. The Appellant Masterpiece is based in Calgary, Alberta; the respondent Alavida is based in Ottawa, Ontario. In 2001, Masterpiece began using a series of marks that included the word MASTERPIECE, some of which also included the word LIVING. In addition it used its corporate name Masterpiece Inc. In December 2005, Alavida filed a trade mark application based on proposed use for the mark MASTERPIECE LIVING for retirement industry-related services, and began using the mark in January 2006. Masterpiece applied to register the mark MASTERPIECE in January 2006, and MASTERPIECE LIVING in June 2006. Masterpiece’s applications were refused based on Alavida’s previously filed application for MASTERPIECE LIVING.

Masterpiece did not oppose the Alavida application, which eventually issued to registration, following which Masterpiece brought an application to expunge Alavida’s registration for MASTERPIECE LIVING on the ground that it was confusing with Masterpiece’s prior MASTERPIECE marks, and trade name.

The Federal Court and Federal Court of Appeal

Both the Federal Court at first instance and the Federal Court of Appeal denied Masterpiece’s application for expungement.

The trial judge concluded that there was no likelihood of confusion. The Court found that, although the evidence was sufficient to show some use of Masterpiece's trade name and trade marks prior to the relevant date, Masterpiece’s use of its trade name and trade marks was “limited in time and scope,” and they were, accordingly, “neither particularly distinctive nor well-known.” The Court held that differences in how the marks were used, both in design and in the focus of the advertisements, served to reduce the likelihood of confusion. The Court also found that the likelihood of confusion was reduced because consumers could be expected to research their decision carefully, given the importance and cost of selecting retirement residence accommodation.

The Federal Court of Appeal upheld the judgment of the trial judge and, importantly, found that at the date the application was filed, Masterpiece did not sell its product in the same market as the respondent, thus mitigating against any likelihood of confusion.

The Supreme Court

The Supreme Court allowed Masterpiece’s appeal, and ordered Alavida’s registration for the mark MASTERPIECE LIVING to be expunged. The Supreme Court found that Masterpiece had proven that it had used a confusingly similar trade mark in Calgary before the filing date of the Alavida application, and hence the Alavida registration is invalid.

Geographic separation is irrelevant

The decision clarifies that the location where a mark is used is not relevant to the confusion analysis. The International Trade Mark Association (INTA) was granted leave to intervene on this point, arguing that it is incorrect to take into account the geographic separation between a prior user and an applicant when determining if there is a likelihood of confusion between the two marks. Bereskin & Parr LLP acted as counsel to the INTA in connection with the appeal, and Dan Bereskin and Mark Robbins appeared as counsel to the INTA in the oral argument before the Supreme Court.

In its decision, the Supreme Court found, as argued by the INTA in its intervention, that geographic separation of the marks is not relevant to the confusion analysis. The test for confusion is based on a hypothetical assumption that both trade names and/or trade marks are used in the same area, irrespective of whether this is actually the case. For the owner of a registered mark to have exclusive use of the mark with the associated wares and services throughout Canada, there cannot be a likelihood of confusion with a prior mark anywhere in the country.

The nature of trade, and the cost of wares or services

The Court found that the trial judge erred in finding that there was a reduced likelihood of confusion because consumers of expensive goods or services would likely take considerable time to inform themselves. Confusion must be assessed from the perspective of the first impression of the consumer approaching a costly purchase when he or she first encounters the mark. The Court noted that, before confusion is remedied, consumers may seek out, consider or purchase the wares or services from a source of which they previously had no awareness or interest. The Court found that such diversion diminishes the value of the goodwill associated with the mark the consumer initially believed he or she was encountering.

Resemblance between the marks

The Supreme Court found that there was a strong similarity between Alavida’s MASTERPIECE LIVING and Masterpiece’s MASTERPIECE THE ART OF LIVING marks. The striking or unique aspect of each mark is the word “Masterpiece.” Both marks evoke the same idea: high quality retirement lifestyle. The Court also found that the trial judge erred in only considering the resemblance between Alavida’s MASTERPIECE LIVING mark and all Masterpiece’s trade marks and trade name generally (a single composite analysis), rather than considering each of Masterpiece’s trade marks separately, one-by-one (a separate resemblance analysis).

Scope of rights granted by registration

The decision highlights that, when assessing confusion, an applied-for or registered mark should be considered based on the scope of rights that would be or have been granted. If an application or registration is for a word mark, the confusion analysis should consider other possible formats in which the mark could be used. Because Alavida had applied for registration of the words MASTERPIECE LIVING, without design features, colour claims or a disclaimer, the Court found that the trial judge erred in law in limiting his consideration to Alavida’s actual use of the mark (i.e. as a tag line in a particular form) to find a reduced likelihood of confusion. The registration was not so restricted. Alavida had argued that its services were “up-market” and Masterpiece’s services were “mid-market.” However, the Court, noting that Alavida’s registration was not so limited, found that this parsing of services was too narrow.

The judge’s gatekeeper role

The Court also highlighted the importance of the judge’s “gatekeeper” role in trade mark disputes to ensure that unnecessary, irrelevant and potentially distracting survey and other expert evidence is not admitted. The Court cautioned against the use of expert evidence in assessing the resemblance between marks, and against the use of survey evidence if there are no consumers participating in the survey who have an “imperfect recollection” of the mark.

The decision is a reminder that expert evidence should only be permitted if the testimony is likely to be outside the experience and knowledge of the judge. Expert evidence that simply assesses the resemblance between two marks is unlikely to be necessary. Where the market is specialized, evidence about the special knowledge or sophistication of the targeted consumers may be necessary to determining likelihood of confusion. However, if the goods are sold to the general public for ordinary use, judges should use their own common sense, excluding influences of their own “idiosyncratic knowledge or temperament” to determine whether the casual consumer is likely to be confused. In this case, Alavida’s expert focused on semantics, morphology, rules of grammar and conventions of expression. Moreover, the analysis was based on the marks as actually used post-registration, rather than on the full scope of rights granted by the registration, which as mentioned, is a key consideration.

Surveys, on the other hand, may be relevant and provide empirical evidence that demonstrates consumers’ reactions in the marketplace. However, they too should be used with caution. It will be difficult to design a reliable and valid survey unless there are consumers who could have an “imperfect recollection” of the senior mark. In this case, the survey had proxies to simulate an imperfect recollection through a series of lead-up questions, and the Court found that such an approach would rarely be seen as reliable and valid.