The Federal Court of Canada’s decision in Trans-High Corporation v Hightimes Smokeshop and Gifts Inc.1 highlights the evidentiary onus on parties seeking relief by application, as opposed to regular actions that involve pleadings, full discovery, and trial with witnesses.
In contrast to a traditional action, an application is a summary proceeding commenced by a Notice of Application and supported by affidavit evidence. The Applicant files its case and all supporting evidence at the outset. The Respondent should then deliver its evidence, also by affidavit. Cross-examinations may be conducted before the exchange of written arguments and a hearing is held before a judge. There is no other discovery. Applications are routinely heard in a matter of months rather than years, making this option both cost-effective and more expeditious than a regular trial, should the right facts exist. The Federal Court only recently confirmed that the application procedure was available in trademark infringement cases2, but there still remain interesting issues about when such cases should be pursued, and the evidentiary onus, particularly if the Respondent refuses to participate or defend.
The Applicant, Trans-High Corporation (Trans-High), used its registered HIGH TIMES mark in Canada since 1982 as the title of a monthly magazine focusing on counterculture interests, including medical and recreational uses of marijuana. The Applicant also sells merchandise in Canada such as ashtrays, lighters, DVDs, t-shirts and caps bearing the HIGH TIMES trademark, through retail stores, via mail order and the internet, and has operated the www.hightimes.com website since 1996. The Respondent operated a store as High Times Smokeshop and Gifts (Smokeshop), and displayed the words "High Times" in large signage and in a similar font to that used by the Applicant.
The Applicant commenced proceedings by application for trademark infringement, passing off and depreciation of goodwill, seeking damages. The Respondent neither filed any submissions in the proceedings nor appeared at the hearing.
By electing to proceed by application, Trans-High relinquished any opportunity for discovery or to compel further and better information concerning the depreciation of goodwill of the Applicant's HIGH TIMES trade-mark due to the Respondent's activities, as well as elicit facts regarding damages.
In issuing a judgment, Justice Manson found that Smokeshop's prominent use of "High Times" on signage, as well as the display of a cannabis motif and the sale of counterculture wares, infringed the Applicant’s trademark rights and caused damage to the Applicant’s reputation and business. However, Trans-High did not succeed in its claim for depreciation of goodwill under section 22 of the Trade-marks Act. The Court found that the Applicant had not submitted sufficient evidence of Canadian sales and market penetration, or the distinctiveness of its HIGH TIMES mark, particularly given that the Applicant’s use was “certainly confined to a specialized channel of trade."
Justice Manson noted:
While I appreciate it is difficult to quantify damages when a Respondent refuses to participate in a proceeding and there is no evidence of sales, profits, or valuations, the amount of damages requested is purely speculative and no voluntary licenses to other parties have ever been granted by the Applicant.
However, given the wilful infringement by the Respondent and its failure to participate or even acknowledge the proceedings, the Court awarded $25,000 in damages, and costs in the amount of $30,000.
Proceeding by Application versus Action when Enforcing Trademark Rights
This decision follows a general trend in Federal Court decisions that damage to reputation and goodwill must be fully documented to ensure an award of monetary damages. Trademark owners contemplating enforcement proceedings should carefully consider the trade-offs between the cost savings and speed afforded by the application process versus the limited availability of discovery, particularly where the alleged infringer may refuse to participate. Because all evidence is presented by way of affidavit, with limited opportunities for discovery or cross examination, a potential applicant must ensure that it is able to not only meet its case on all causes of action with its own evidence, but also fully document all losses arising from infringing conduct. Facts must be filed to permit the court to estimate likely monetary (or other) damages, particularly if claiming damages for reputation or loss of goodwill, which will not be assumed even if a claim for trademark infringement or passing off succeeds.
On the other hand, proceeding by way of application rather than action may benefit parties seeking a prompt decision, particularly against an infringer who may refuse to acknowledge or participate in the proceedings. If a Respondent fails to file its Notice of Appearance within ten days of receiving the originating Notice of Application, the Respondent can neither participate in the proceedings, nor receive further documents in the application prior to a final judgment unless the Court orders otherwise, provided the requirements of service on the opposite party are met. In this case, the entire application – from filing of the originating Notice of Application to issuance of the Judgment – took less than six months.