Interlocutory injunctions in Canadian trademark cases are rare. The decision at first instance to grant a motion for an interlocutory injunction in a dispute related to the “Bombay Frankie” trademark (in 2788610 Ontario Inc. v Bhagwani et al., 2022 ONSC 905) therefore made headlines, at least in trademark circles, for two reasons. First, the fact that the injunction had been granted was in itself noteworthy. Second, many in the intellectual property bar were of the view that the decision misapplied certain fundamental principles of trademark law and therefore introduced uncertainty into the law.
The motion decision was appealed to the Divisional Court and practitioners have been closely following that appeal. The Divisional Court (“Court”) has now issued a decision allowing the appeal and ordering that the injunction Order be vacated (2788610 Ontario Inc. v. Bhagwani, 2022 ONSC 6098).
In October of 2020, 2788610 Ontario Inc. (the “Respondent”) filed an application to register the trademark “Bombay Frankies”. The Respondent was developing a restaurant franchise under the same name. At the time its motion for an injunction was heard, it had not yet opened or advertised a restaurant under the name “Bombay Frankies”.
Hemant Bhagwani, Fatima Bhagwani, 1727799 Ontario Inc. and Bombay Frankie Inc. (collectively, the “Appellants”) were likewise in the restaurant business. Bombay Frankie Inc. was incorporated on March 12, 2021. In March of 2021, 1727799 Ontario Inc. filed a trademark application to register the trademark “Bombay Frankie”. The Appellants registered the domain name <www.bombay-frankie.com> in February of 2021 and operated social media accounts using the “Bombay Frankie” name. Importantly, the Appellants opened a restaurant called “Bombay Frankie – the Original Bombay Roll” in July of 2021 and a second “Bombay Frankie” restaurant in October of 2021.
In September of 2021, the Respondent commenced an action against the Appellants alleging trademark infringement and passing off.
The Motion Decision
In October of 2021, the Respondent brought a motion for an interlocutory injunction to prohibit the Appellants from using the term “Bombay Frankie” as the name of any restaurant or franchising business, social media account or website.
The Respondent argued that pursuant to the Trademarks Act, R.S.C. 1985, c. T-13 (“Act”), it had priority to register the trademark over a subsequent applicant. The Respondent submitted that the Appellants would have had notice of its trademark application prior to opening their restaurants because the application would have appeared on a trademark search.
The motion judge applied the three-part test set out by the Supreme Court of Canada in RJR MacDonald Inc. v Canada (Atty. Gen.),  1 SCR 311 and granted the interlocutory injunction.
The Appeal Decision
The issues raised on appeal were:
- did the motion judge make an error in principle in finding a serious issue to be tried?;
- did the motion judge make a palpable and overriding error in finding that the Respondent would suffer irreparable harm?; and
- did the motion judge make a palpable and overriding error in finding that the balance of convenience favoured the Respondent?
In the appeal decision, the Court recognized that the decision to grant the extraordinary remedy of an interlocutory injunction is a discretionary one. On appeal, a motion judge’s exercise of discretion is therefore entitled to deference, unless the judge erred in principle or was clearly wrong. However, where an erroneous finding of fact can be attributable to the application of an incorrect legal standard, a failure to consider a required element of a legal test, or a similar error in principle, the error is one of law that must be reviewed on a standard of correctness.
Serious Issue to Be Tried
The Court found that the motion judge erred in principle in finding a serious issue to be tried. In order to state a cause of action of trademark infringement under sections 19 or 20 of the Act, a claimant must have a registration for its trademark.
In this case, the Respondent had no registered trademark for “Bombay Frankies”. Rather, the Respondent had a pending trademark application that had not yet even reached examination. The Court noted that a mere application to register a trademark is, of course, insufficient to support a cause of action for trademark infringement. Because the Respondent had no claim for trademark infringement under the Act, the Court found that it had no right that could ultimately be vindicated at trial. As a result, the claim could not meet even the low threshold of a serious issue to be tried.
The motion judge had not specifically considered whether the Respondent’s claim raised a serious issue to be tried in respect of the passing off claim. On appeal, however, the Court found that claims for passing off under paragraphs 7(b) and 7(c) of the Act also failed to meet the threshold of a serious issue to be tried. The Court summarized the leading case law on passing off, noting that goodwill attaches to a name or mark as it relates to the reputation or association with the goods or services provided by the owner of the mark.
In this case, the Respondent’s activities of retaining franchise lawyers and a marketing firm did not give rise to activities which could generate goodwill. The Court recognized that goodwill could theoretically exist from the perspective of potential franchisees. However, there was no evidence from potential franchisees that could support a finding that the Respondent had developed goodwill in the “Bombay Frankies” name as a franchising business. Given the absence of evidence of goodwill, a finding that the Respondent’s passing off claims raised a serious issue to be tried constituted an error.
The Court therefore found that, having failed to meet the first prong of the RJR-MacDonald test for an interlocutory injunction, the Respondent’s motion ought not to have been granted.
The Court also found that the motion judge made a palpable and overriding error in finding that the Respondent would suffer irreparable harm if an injunction was not granted. The jurisprudence provides that confusion does not, per se, result in a loss of goodwill and a loss of goodwill does not, per se, establish irreparable harm. Furthermore, a loss of goodwill and resulting irreparable harm must be established by clear evidence. In this case, the motion judge found irreparable harm because landlords had questioned whether the Respondent was affiliated with the term “Bombay Frankie”, expressed concern at the confusion and therefore hesitated to lease them space. The Respondent submitted that this would affect any goodwill developed by them and that the potential existed to have any such goodwill appropriated by the Appellants.
The Court found, however, that the foregoing did not constitute clear, non-speculative evidence of irreparable harm. Rather, such harm is quantifiable (e.g. the higher price of renting alternative space) and the evidence suggesting confusion amongst prospective landlords was speculative hearsay.
In any event, the Court also noted that the alleged landlord confusion does not constitute confusion among customers or the public resulting in a loss in goodwill. Moreover, the cause of action for passing off protects existing goodwill and so the references to prospective goodwill were not sufficient to establish irreparable harm.
Balance of Convenience
In light of the foregoing determinations the Court found that it need not address the third prong of the RJR-MacDonald test. It noted, however, that the balance of convenience may have weighed in favour of the Appellants who were required to take down the signs bearing the “Bombay Frankie” name, as well as their website and social media accounts.
Based on the foregoing findings, the Court allowed the appeal and ordered that the injunction Order be vacated.
This appeal decision marks a return to the proper application of the principles of trademark law thereby circumventing the uncertainty that could have resulted had the motion decision stood. The decision also reinforces the importance of clear and convincing evidence on a motion for an interlocutory injunction. For example, the Respondent might have obtained a different result if it had filed evidence to establish that it had developed a reputation in the “Bombay Frankies” mark among potential franchisees as of the relevant date. In the absence of such evidence, however, there was no basis upon which the motion judge could have found a serious issue to be tried.