The victory in the fight between two rum competitors demonstrates that unregistered trade dress rights are alive and well in Canada, admissible survey evidence remains a useful tool for proving confusion, and a competing product that has experienced quality issues can tip the scale in favour of a depreciation of goodwill claim.
Diageo Canada Inc. v. Heaven Hill Distilleries, Inc., 2017 FC 571
Diageo Canada Inc. sells the CAPTAIN MORGAN brand of rum in Canada. The labels for each variety of CAPTAIN MORGAN rum have a nautical theme and prominently feature a fanciful depiction of the 17th century privateer, Sir Henry Morgan. Diageo owns several Canadian trademark registrations covering various depictions of Sir Henry Morgan for use with rum products.
Heaven Hill is a private American distillery that produces and markets distilled spirits. Like Diageo, it sells rum products bearing labels with a nautical theme and depicting a male character. These rum products are sold under the ADMIRAL NELSON'S brand; the character depicted is that of Vice Admiral Horatio Lord Nelson, a British naval officer in the late 18th and early 19th centuries.
Diageo sued Heaven Hills for passing off, trademark infringement and depreciation of goodwill of several registered trademarks depicting the Captain Morgan character, and for passing off the get-up of the bottles. Diageo prevailed.
Three aspects of this Federal Court decision are particularly notable.
First, this decision underscores that the get-up or the appearance of the packaging of goods, even if not registered as trademark, can successfully ground an action in passing off. Diageo asserted several registrations depicting the Captain Morgan character, but also succeeded in proving passing off based on the overall appearance of the CAPTAIN MORGAN bottles, which constituted a valid and enforceable common law trademark.
Second, evidence of source confusion appeared to be sufficient to establish a likelihood of damage, which is an element of a passing off claim. There was no evidence that Diageo sustained any actual damage as a consequence of the sale of ADMIRAL NELSON'S rum in Canada, but the Court concluded that it was reasonable to presume lost sales had occurred and could potentially occur in the future by virtue of source confusion. The evidence of source confusion was introduced by way of an expert survey, thereby establishing that surveys retain value in assisting the Court in its confusion assessment.
In addition, the Court reinforced that evidence of a loss of control over reputation, image or goodwill could support a likelihood of damage. Here, that evidence was the fact that some of the ADMIRAL NELSON'S product exhibited quality issues.
Third, Diageo successfully established depreciation of goodwill, which has been relatively infrequent in Canadian case law. The Court found that the source confusion survey evidence and Heaven Hill's quality control issues supported the linkage and likelihood of damage prongs of this cause of action.
At this time, the case has not been appealed.