In January of 2009, we discussed the decision of the Federal Court in the case of Masterpiece Inc. v. Alavida Lifestyles Inc. a case concerning an application for expungement of a trade-mark registration pursuant to section 57 of the Trade-marks Act and the test for determining whether there is a likelihood of confusion between two marks. Leave to appeal to Supreme Court of Canada has now been granted in this matter, which is the first time in several years that the Supreme Court will hear an appeal of a trade-mark case.

The parties, Masterpiece Inc. (“Masterpiece”) and Alavida Lifestyles Inc. (“Alavida”), operate in the retirement residence industry. Masterpiece claimed to have used various unregistered trade-marks, all of which include the word MASTERPIECE, and some of which include the word LIVING, since 2001. Masterpiece used the mark MASTERPIECE LIVING commencing in either December 2005 or February 2006.

Masterpiece filed trade-mark applications for MASTERPIECE in January 2006 and MASTERPIECE LIVING in June 2006. The Trade-Marks Office cited Alavida’s prior registration for MASTERPIECE LIVING as an obstacle to registration of both of the applications filed by Masterpiece.

Masterpiece applied to expunge Alavida’s trade-mark registration for MASTERPIECE LIVING pursuant to section 18(1)(a) of the Trade-Marks Act on the basis that it was confusing with Masterpiece’s common law trade-mark and therefore unregistrable as of the date of registration. The application was dismissed as the trial judge’s assessment of all of the relevant facts resulted in a finding that there was no confusion.

On appeal to the Federal Court of Appeal, Masterpiece submitted that the trial judge erred in failing to consider the possibility of future confusion and considering confusion only as at the date of registration. The Court considered that section 16(3) of the Trade-Marks Act clearly authorizes registration of a proposed mark unless it was confusing with another mark at the date of filing the application. The Court also considered the meaning of “would be likely to” in the context of the provision of the Trade-Marks Act that defines “confusion” as follows:

The use of a trade-mark causes confusion with another trade-mark if the use of both trade-marks in the same area would be likely to lead to the inference that the wares or services associated with those trade-marks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.

Having regard to the fact that the confusion test must operate within the limits of section 16(3), the context of both the English and French versions of the Act, as well as case law relating to confusion analysis, the Federal Court of Appeal concluded that the trial judge was correct in assessing confusion at the date of registration. It was held that “Had Parliament wished to require an analysis of the possibility of future confusion, it could have used the word “will” instead of “would.” Unlike the word “would,” the word “will” inquires whether, based on the same state of affairs at the time of registration, a mark will likely be confusing at a time subsequent to registration.”

As a result, it was held that the trial judge correctly applied the test for confusion and disregarded the fact that Masterpiece may have intended to expand its operations into new cities or new markets. The appeal was dismissed with costs.

The issues to be addressed by the Supreme Court of Canada will be:

  1. whether the likelihood of confusion between two trade-marks cannot exist unless the marks are already in competition for the same geographic area;
  2. whether the test for expungement requires a reputation in the geographic area in question in order to enforce unregistered common law trade-mark rights; and
  3. whether the lower courts erred in finding that a likelihood of confusion can be overcome by differences in the designs, product packaging and “get-up” used in association with the trade-marks.

This case will be monitored closely by trade-mark lawyers as the Supreme Court does not often rule on trade-mark cases. The outcome of the issue of whether prior use of a trade-mark in Canada can prevent registration of a confusingly similar mark by another party, regardless of the geographic area of the prior use will have significant implications for trade-mark owners.