Summary – Compatibility claims are statements made by one party that its products can be used with, or are compatible with, the goods of another party. For example, the statement “Brand X parts work with Brand Y products” is a compatibility claim. Such claims are generally made to inform consumers about the purpose and uses of the product. These differ from the more controversial comparative claims, which evaluate and compare two products by pointing out either the similarities or differences. The claim that “Brand X products are more efficient and last longer than Brand Y products” is an example of a comparative claim.

Advertising practices, and the use of another’s product name or mark therein, are subject to various regulatory and legislative regimes in Canada, including the Canadian Code of Advertising Standards, the Competition Act, the Trade-marks Act and the Copyright Act. The potential risks associated with making compatibility claims vary under each regime.

Canadian Code of Advertising Standards

The Canadian Code of Advertising Standards (the “Code”) sets the criteria for acceptable advertising practices in Canada. The Code is administered by Advertising Standards Canada (the “ASC”), a non-profit self-regulatory body, which oversees the consumer complaints process for Canadian advertising. Where a contravention of the Code is found, the advertiser will be asked to amend or withdraw the advertisement.

The Code contains 14 clauses for acceptable advertising that is “truthful, fair and accurate” and is supplemented by Interpretation Guidelines. The Code applies to the advertising of products and services in any medium, including the Internet, TV, newspapers, magazines, radio, flyers and billboards. Notably, however, product packaging, wrappers and labels are explicitly excluded and, therefore, not subject to the Code.

While none of the clauses address compatibility claims per se, the Code prohibits certain comparative advertising practices as follows:

6. Comparative Advertising

Advertisements must not, unfairly, discredit, disparage or attack one or more products, services, advertisements, companies or entities, or exaggerate the nature or importance of competitive differences.

The Guidelines for the Use of Comparative Advertising[1] provide examples of advertising that would be prohibited under Clause 6 of the Code, including:

  • claiming your product will last longer than a competitor’s product when the products are of different sizes;
  • suggesting a competitor’s product is significantly smaller or less substantial when the difference is barely discernible to consumers; and
  • making an unsubstantiated claim that a competitor’s product is inferior, when it is not.

None of the above prevents use in advertising of a simple compatibility claim such as “Product X can be used with Product Y.” The above will be relevant, however, where the compatibility claim also includes a comparative claim, such as “Product X can be used with Product Y and lasts longer than Brand Y replacement parts.” In the event that the latter part of the claim was untrue, this would be a contravention of the Code.

The Guidelines also provide other examples falling under Clause 6 of the Code that, while not directed to compatibility claims, may limit how such claims can be made. For example, the following is prohibited:

  • showing another product used in a way other than as recommended by the manufacturer;
  • showing another product being abused, such as being thrown, trampled or distorted; and
  • exaggerating the difficulty of using another product or service, when the difference is barely discernible to consumers.

The prohibition against showing a product used in a way other than as recommended was likely included to prevent a competitor from using a product incorrectly and then claiming its own product was superior. It is unclear, however, whether this might also apply to an attachment product that can be used with another’s product and which allows that other product to be used for a purpose other than its intended use. There may be a contravention if, for example, the new use was somehow offensive.

The last two points, above, caution against making a compatibility claim that also disparages the other product. This would include making statements or implying that the other product has little value or is difficult to use without the benefit of the compatible product. For example, it may be a contravention of the Code to state: “Tired of your slow and inefficient Product X? Product Y works with Product X to make it faster and more efficient!”.

Finally, the Code also prevents advertising that is inaccurate, or more generally, unclear. Clause 1(a) of the Code states that “Advertisements must not contain inaccurate, deceptive or otherwise misleading claims, statements, illustrations or representations, either direct or implied, with regard to any identified or identifiable product(s) or service(s).” Clause 1(b) further prohibits the omitting of relevant information in a manner that, in the result, is deceptive. Under these clauses, a compatibility claim may be in breach of the Code where the two products are not, in fact, compatible or not compatible to the extent claimed.

While the Code may place some limits on the types of claims that can be made as between products, it does not prevent use in advertising of an accurate, informative statement that one product is compatible with another.

Competition Act

The Competition Act[2] is federal legislation that governs misleading advertising practices in Canada. There are two adjudicative regimes under this Act: a criminal regime and a civil regime.

Criminal Regime: Section 52

Section 52 is the criminal offence section, and it states the following:

52. (1) No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

This general provision requires that the representation is “false or misleading in a material respect,” considering both the general impression and the literal meaning of the representation.[3] According to the Competition Bureau, a representation is material if it could influence a consumer to buy or use the product or service advertised.[4]

A compatibility claim could easily influence a consumer to buy or use a product and, accordingly, if such a claim is false or misleading, could be caught by this provision. While a compatibility claim is not likely to be made where the two products at issue are completely incompatible, such a claim may be made where the two products are partially, though not entirely, compatible. Since any information that would likely have a tendency to affect a purchasing decision should be disclosed, any aspects of the product that are not, in fact, compatible should be made clear. While section 52(1) requires that the representation be “made to the public,”[5] it does not require that any person was actually deceived or misled, that any member of the public to whom the representation was made was within Canada or that the representation was made in a place to which the public had access.[6]

This section of the Competition Act includes a criminal intent requirement, which makes it less likely that a compatibility claim will fall under this provision. This means that, even if a false or misleading representation is made, there must be proof beyond a reasonable doubt that said representation was made “knowingly or recklessly.” In the case of a compatibility claim where the products are not entirely compatible, the misleading representation may not be caught by this provision if the person responsible for the representation was not aware of the incompatible aspects.

Any person who contravenes this subsection is liable, on summary conviction, to a fine not exceeding $200,000 or to imprisonment for a term not exceeding one year, or to both; if convicted on indictment, an offender is liable to a fine in the discretion of the Court or to imprisonment for a term not exceeding 14 years, or to both.

According to the Competition Bureau, proceeding on the criminal track requires: (1) clear and compelling evidence suggesting that the accused knowingly or recklessly made a false or misleading representation to the public (i.e., continued practice after complaints have been made directly to the accused), and (2) the Bureau be satisfied that criminal prosecution would be in the public interest (including consideration of the seriousness of the alleged offence and any mitigating factors).[7] Where these criteria are not met, the civil regime will be followed.

Civil Regime: Section 74.01

The corresponding civil provision against false or misleading advertising is contained in section 74.01, which identifies, inter alia, the following as “reviewable conduct”:

Misrepresentations to public

74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,

  1. makes a representation to the public that is false or misleading in a material respect;
  2. makes a representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the representation;

Section 74.01(1)(a) is similar to section 52 of the Competition Act, with similar criteria, but without the criminal intent requirement. Section 74.01(1)(b) may also be relevant to compatibility claims in cases where the two products are not entirely compatible. In particular, such claims may be considered statements of the performance or efficacy of a product that are not based on adequate and proper testing and, therefore, constitute reviewable conduct under this provision.

Where a statement is made as to the performance or efficacy of a product, the onus is on the person making the statement to prove that the statement was based on an “adequate and proper test,” a phrase that is not defined in the legislation. According to the Competition Bureau, such tests should be reliable (based on similar results from a repetition of the test) and based on representative samples.[8] Further, a performance claim that is broad will not be sufficient where the existence of adequate and proper testing was relevant only to one portion of the claim. While no cases applying this section to a compatibility claim could be located, it appears from the language of section 74.01(1)(b) that a compatibility claim may be caught by this provision where the claim to compatibility is broad, but the testing was only relevant to one aspect of compatibility.

The consequences of engaging in reviewable conduct under section 74.01 may include ordering the person not to engage in such conduct, publishing a corrective notice, or ordering the payment of administrative penalties up to $750,000 for individuals (and $1,000,000 for each subsequent order) or up to $10,000,000 for corporations (and $15,000,000 for each subsequent order). Additionally, for conduct reviewable under paragraph 74.01(1)(a), the Court may order the person to pay an amount, not exceeding the total of the amounts paid to the person for the products in respect of which the conduct was engaged in, to be distributed among the persons to whom the products were sold (except wholesalers, retailers or other distributors, to the extent that they have resold or distributed the products) in any manner that the Court considers appropriate.

Trade-marks Act

The Trade-marks Act[9] provides trade-mark owners with the exclusive right to use their mark throughout Canada in association with the wares and services in which their mark is registered.[10] Accordingly, any use of, or reference to, another’s trade-mark should be made with caution.

Use of another’s mark in advertising and product packaging is somewhat complicated by the fact that the Trade-marks Act differentiates between “use” in association with wares and “use” in association with services. According to section 4 of this Act, a mark is considered to be “used” in association with wares if it is marked on the wares themselves, on the product packaging or is otherwise associated with the product at the time of the transfer of goods (for example, point of purchase advertising). In contrast, a mark is “used” in association with services if it is used or displayed in the performance or advertising of those services. As a result, while displaying a mark in an advertisement can constitute use in association with advertised services, it cannot constitute use in association with advertised wares.

Infringement: Sections 19 and 20

In addition to the different definitions of “use” in association with wares and services, there is also a distinction between trade-mark use and use as a trade-mark. The former means that the use falls within the section 4 definition, as described above, whereas the latter means that the mark is being used for the purpose of indicating the origin of the wares or services. For example, a trade-mark may be displayed on another’s product or packaging, which would constitute use under section 4, but not be displayed for the purpose of identifying the source of those goods.

Infringement under sections 19 and 20 of the Trade-marks Act requires use of another’s mark as a trade-mark and, therefore, compatibility claims will generally not be caught by these provisions. In the context of compatibility claims, another’s mark is typically used to make an informative statement that the wares of the two trade-mark owners may be used together; the other mark is not used to imply the origin of those goods. Given that this use does not qualify as use as a trade-mark, comparative claims will not generally constitute infringement under these sections.

Depreciation of Goodwill: Section 22

The following four requirements must be met in order to succeed in a section 22 claim:

  • the claimant’s registered trade-mark must be used by the defendant in connection with wares or services;
  • the claimant’s trade-mark must be sufficiently well known to have significant goodwill attached to it;
  • the claimant’s mark must be used in a manner likely to have an effect on that goodwill; and
  • the likely effect on the goodwill would be to depreciate the value of the goodwill.[11]

In Clairol International Corp. v. Thomas Supply & Equipment Co. Ltd. (1968) 55 CPR 176 (Ex. Ct.) [Clairol], the Court interpreted section 22 in the context of comparative claims, rather than compatibility claims. In that case, the defendant had used the plaintiff’s registered trade-marks in colour comparison charts on packaging and in brochures for their competing hair colour products. The Court found that the plaintiff’s marks had goodwill and that the defendants had used those marks in a manner likely to depreciate the goodwill of the those marks. However, the section 22 claim was successful only in respect of the marks displayed on the product packaging and not in the brochures because only the former fell within the definition of “use” in section 4 of the Trade-marks Act.

In comparison, Nintendo of America Inc. v. Camerica Corp. [1991] F.C.J. No. 58 aff’d [1991] F.C.J. No. 445 [Nintendo] involved an application for an interlocutory injunction in an action that included a section 22 claim by the plaintiff in the context of a compatibility claim made by the defendant. The plaintiff was the owner of the NINTENDO and related trade-marks in association with video games. The defendant, Camerica, had introduced a product called the Game Genie, which was designed to connect between a video game cartridge and a gaming system to allow players to modify game-play features by entering special codes. Camerica included on its packaging a notice that the product was usable with the plaintiff’s video games and the NINTENDO trade-marks appeared on the packaging in this context. Unlike in Clairol, however, and despite the fact that the mark was used on the product packaging (thereby constituting “use” with wares according to section 4 of the Trade-marks Act), the Court in Nintendo denied the plaintiff’s argument that the defendants were depreciating the value of the goodwill in Nintendo’s marks and refused the plaintiff’s injunction.

In coming to its decision, the Court in Nintendo distinguished the facts of that case from those in Clairol. In particular, the Court considered that, in Clairol, the plaintiffs’ and defendants’ products were competitive; they were both hair colouring products. In Nintendo, however, the Game Genie was not competitive with the Nintendo video game products, but rather required a video game product in order to achieve its purpose.

It does not appear that the Courts have yet addressed a factual scenario where one party made a compatibility claim (as in Nintendo), but the compatible products were also competing products (as in Clairol). This may occur where one product is compatible with another company’s product, but the compatible product competes with the other company’s own compatible product. This is likely to occur when a product has components that are disposable, refillable, or for which replacement parts may be necessary. Take, for example, a razor for shaving manufactured by Company X. Company Y produces generic replacement blades and markets their product by claiming “Company Y replacement blades work with Company X razors.” Company Y’s replacement blades would require another razor product to achieve its purpose, as was the case in Nintendo. It is unclear, however, what the result would be if Company X also sold its own replacement blades such that Company Y’s products, though compatible, were also competitive.

In general, more caution should be exercised when the company using another’s mark is using that other mark in association with a competing, and not simply a compatible, product. Given the different definitions of “use” for wares and services under section 4 of the Trade-marks Act, one should also exercise more caution when using another’s mark, in the case of wares, on the product itself or product packaging (as opposed to an advertisement) and any time another’s mark is used in relation to services.

Unfair Competition and Prohibited Marks: Section 7

Pursuant to sections 7(b) and (c) of the Trade-marks Act, no person shall:

(b) direct public attention to his wares, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his wares, services or business and the wares, services or business of another; and

(c) pass off other wares or services as and for those ordered or requested.

Whether or not a compatibility claim will be found to contravene sections 7(b) or (c) will largely turn on whether the public is, or is likely to be, deceived or confused. Accordingly, any compatibility claim that displays the trade-mark of another should make abundantly clear that the display of the other trade-mark does not, and is not intended to, signify that the goods are those of the other trade-mark owner.

In Nintendo, for example, the Court took into consideration the disclaimer on the product packaging that stated Game Genie was a product of Camerica and “not manufactured, distributed or endorsed by Nintendo of America Inc.” The Court noted this disclaimer was unequivocal and the public would understand that the product originated from Camerica and not Nintendo. In other cases decided in the context of sections 7(b) and (c), the Courts have similarly noted the importance of disclaimers or other notices to consumers explaining the origin of the goods.[12]

Pursuant to sections 7(a) and (d) of the Trade-marks Act, no person shall:

(a) make a false or misleading statement tending to discredit the business, wares or services of a competitor; and

(d) make use, in association with wares or services, of any description that is false in a material respect and likely to mislead the public as to (i) the character, quality, quantity or composition,(ii) the geographical origin, or (iii) the mode of the manufacture, production or performance of the wares or services.

Sections 7(a) and (d) of the Trade-marks Act are akin to the provisions under the Competition Act, discussed earlier, in their prohibition against false or misleading statements and, therefore, compatibility claims that are true will likewise not be caught under these provisions.

Copyright Act

The Copyright Act makes it an offence to produce or reproduce a work or substantial part of that work without the consent of the copyright owner. Copyright may subsist in design marks and logos, and the Supreme Court of Canada has held that logos can receive concurrent trade-mark and copyright protection.[13] Therefore, use of another’s mark in the context of a compatibility claim may raise issues under the Copyright Act in addition to the Trade-marks Act.

Given that the Copyright Act prohibits reproduction of a work generally, where compatibility claims are made, only word marks of another trade-mark owner should be displayed and never any original design marks or logos.

Conclusion – Compatibility claims in advertising and product packaging raise potential risks under the Canadian Code of Advertising Standards, the Competition Act, the Trade-marks Act and the Copyright Act. While an honest statement that the goods of one company are compatible with the goods of another company does not appear to be prohibited per se, the various regulatory and legislative regimes place certain limits on how these claims may be made.

While the lack of case law on point makes it difficult to know the exact limits of making compatibility claims, the following are some helpful guidelines:

  • claims should be true and accurate;
  • claims should not discredit the other product for the purpose of making the compatible product more desirable;
  • claims should be substantiated by prior testing that is reliable and representative;
  • any aspects of the product that are not compatible should be disclosed;
  • caution when displaying another’s mark in association with a product that is not only compatible, but competitive, with the other trade-mark owner’s product;
  • exercise caution when displaying another’s mark on the product or packaging of wares or any time it is displayed in association with services;
  • any representation of another’s trade-mark should include a clear disclaimer that the mark is not owned by the owner of the compatible product; and
  • only the word version of third party marks, and not design marks or logos, should be used in making the claim.

Given that the risks associated with compatibility claims may not be fully known, however, using such claims should always be done with caution.