Introduction

Section 22 of the Trademarks Act, depreciation of a registered trademark's goodwill, is a potentially powerful yet generally underused weapon for dealing with damaging comparative advertising campaigns. In the recent summary judgment decision in Energizer Brands, LLC v The Gillette Company (2018 FC 1003), in which Energizer sued Duracell for its use of Energizer's registered trademarks and other phrases – including 'the bunny brand' and 'the next leading competitive brand' – the Federal Court provided some guidance as to the scope of this claim, as well as related remedies that are available under the Competition Act.

Comparative advertising

Comparative advertising involves the direct comparison of one company's product or brand to a competitor's product or brand. While comparative advertising per se is not prohibited in Canada, comparative claims may invite several complaints from the competitor. Some of the more common complaints include:

  • false and misleading representations contrary to the Competition Act;
  • making false or misleading claims contrary to Section 7(a) of the Trademarks Act;
  • making false claims in a material respect that are likely to mislead the public contrary to Section 7(d) of the Trademarks Act; and
  • depreciation of the goodwill attaching to a registered trademark, contrary to Section 22 of the Trademarks Act.

Claims under Trademarks Act

Dilution-type claims to prevent comparative advertisements displaying a registered trademark are particularly complex as they require that the advertising actually 'use' the registered mark within the meaning of the Trademarks Act. In particular, the display of a trademark in advertising may constitute use in connection with services, while use of a mark registered for goods requires that the trademark is:

  • marked on the goods;
  • on the packaging for the goods; or
  • in some other manner that the trademark is associated with the goods at the point of sale or transfer.

Therefore, if a trademark is registered only in connection with goods, the comparative use of the registered trademark in a competitor's advertising materials – as opposed to a display of the identical or confusing trademark directly on the competitor's packaging – may not constitute 'use' under the Trademarks Act. Without such use of the identical or confusing trademark, a plaintiff cannot establish depreciation of goodwill under the Trademarks Act.

On the other hand, to succeed in a claim of depreciation of goodwill, the plaintiff must show that the defendant has made use of a trademark that is sufficiently similar to the plaintiff's registered trademark to evoke, in a relevant universe of consumers, a mental association of the two trademarks that is likely to depreciate the value of the goodwill attaching to the plaintiff's trademark.

Indeed, while the Supreme Court of Canada in the 2006 decision in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltee, (2006 SCC 23), held that Section 22 of the Trademarks Act applies even though the use of the trademark at issue may differ from the trademark as registered, the scope of this section has been relatively untested.

Energizer Brands

However, in a recent motion for summary judgment brought by the defendants (Duracell) to strike certain allegations from the plaintiffs' claim, the Federal Court has provided some clarity.

In this case, Duracell had made various comparative claims and used Energizer's registered trademarks ENERGIZER and ENERGIZER MAX, as well as the phrases 'the next leading competitive brand' and 'the bunny brand' on the label of its Duracell batteries.

Energizer sued Duracell for its use of Energizer's registered trademarks as well as the phrases under Section 22(1) and 7(a) and (d) of the Trademarks Act. In relation to Duracell's reference to 'the bunny brand', Energizer relied on the following registered ENERGIZER BUNNY design trademarks.

Although Duracell had not used the plaintiff's registered ENERGIZER BUNNY design trademarks on its packaging, the court refused to strike Energizer's claim on the summary judgment motion and held that Duracell's use of the term 'the bunny brand' on the packaging of Duracell's batteries might contravene Section 22 of the Trademarks Act. In particular, the court found that:

the somewhat-hurried consumer seeing the words 'the bunny brand' in relation to batteries, both AA and of the hearing aid type, would make both a link with and a connection to the ENERGIZER Bunny Trade-marks.

Likewise, the court held that the phrase 'the bunny brand' was "nourished by sufficient trade-mark or 'intellectual property' interest to benefit from the protection and application" of both Sections 7(a) and (d) of the Trademarks Act; therefore, this pleading was not struck.

However, the court held that Duracell's use of the phrase 'the next leading competitive brand' had not offended the Trademarks Act because no mental association had been made between Energizer's marks and the phrase 'the next leading competitive brand' used on Duracell's batteries. Such an association, the court said, "would involve imputing to the somewhat-hurried consumer details of market share in respect of which expert third-party evidence was filed in this Court". These pleadings were therefore struck from Energizer's claim as the court held that resolving this aspect of the case by way of summary judgment was appropriate because it would reduce the cost of trial preparation.

Claims under Competition Act

The court also found that Energizer had no right to an accounting for profits under Section 52(1) of the Competition Act because the remedies for a breach of this section are limited to the plaintiff's actual loss and damages and do not permit a party to seek an accounting of the defendant's profits.

Comment

The court's decision confirms that the scope of Section 22 of the Trademarks Act extends beyond a company's identical registered trademark and may provide an effective weapon against damaging comparative advertising campaigns which make use of any mark or phrase that consumers would associate with a plaintiff's registered trademark. The remaining issues concerning whether Duracell's comparative advertising claims violate the Trademarks Act and the Competition Act will be heard by the trial judge. Although the matter was originally set down for a 10-day trial commencing 3 December 2018, this has now been rescheduled for a later date.

For further information on this topic please contact Mark Evans or Jennifer Ponton at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email (mkevans@smart-biggar.ca jwponton@smart-biggar.ca). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.

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