In a March 4, 2014 decision (H-D USA LLC et al v Jamal Berrada et al2014 FC 207), the Federal Court recognized that Harley-Davidson may sell its SCREAMIN’ EAGLE brand of clothing and collateral items in Canada in connection with its well known HARLEY-DAVIDSON trade-mark, notwithstanding another party’s trade-mark registration for SCREAMING EAGLE for use in association with the operation of retail clothing stores, as well as its common law rights arising from the sale of SCREAMING EAGLE clothing for more than 20 years. This decision should be of particular interest to owners of well known brands as it underscores the ability to negate confusion by closely associating a sub-brand with a strong and widely recognized house mark. The decision also provided one of the most comprehensive reviews by a Canadian court of a dilution claim based upon section 22 of the Trade-Marks Act.

Harley-Davidson was successfully represented by Mark K. EvansGeneviève M. Prévost and François Guayof Smart & Biggar.

In this case, Harley-Davidson sought from the Court a declaration that its use in Canada of its SCREAMIN’ EAGLE trade-mark in connection with clothing did not infringe the trade-mark rights of the defendants, which operate two retail stores in Canada under the registered trade-mark SCREAMING EAGLE and have sold SCREAMING EAGLE clothing and accessories to motorcyclists for over 20 years. In their counterclaim, they alleged that Harley-Davidson had engaged in depreciation of goodwill, statutory passing off and trade-mark infringement by selling clothing and accessories in association with its SCREAMIN’ EAGLE trade-mark.

In dismissing the defendants’ claims of statutory passing off and trade-mark infringement, the Court held that the defendants had failed to establish a reasonable likelihood of confusion between their registered trade-mark SCREAMING EAGLE, for use in Canada in association with the operation of retail clothing stores, and Harley-Davidson’s SCREAMIN’ EAGLE trade-mark, which it had used in Canada in association with clothing and accessories, among other wares.

The Court noted that “the prime consumer” of Harley-Davidson’s SCREAMIN’ EAGLE clothing, through whose eyes the issue of confusion must be determined, is a Harley-Davidson motorcyclist, who is “quite familiar” with the plaintiffs’ brand and also knows the HARLEY-DAVIDSON trade-mark with which Harley-Davidson’s SCREAMIN’ EAGLE clothing is always associated. Since “[t]he average HARLEY-DAVIDSON owner, who seeks SCREAMIN’ EAGLE clothing, also looks for the [HARLEY-DAVIDSON] BAR AND SHIELD logo and the distinctive orange and black coloring associated with HARLEY-DAVIDSON”, the Court ruled that a likelihood of confusion between the two trade-marks was “improbable, if not impossible”. The Court recognized that an action for trade-mark infringement could not succeed “where a confusing trade-mark is accompanied by distinguishing indicia that would avoid misrepresentation as to the source” of the associated wares or services.

The Court also dismissed the defendants’ claim that Harley-Davidson had depreciated the value of the goodwill attaching to the defendants’ registered trade-mark SCREAMING EAGLE. In doing so, the Court found that the defendants had failed to establish all four “elements” of the test set out by the Supreme Court of Canada in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée2006 SCC 23:

  1. Use of the registered trade-mark: The Court found that Harley-Davidson did not use the defendants’ registered trade-mark, but rather used its own trade-marks, when it sold clothing and accessories in Canada under its SCREAMIN’ EAGLE trade-mark.
  2. Evidence of significant goodwill: The Court found that “the relevant universe of consumers” was to be “made up of [Harley-Davidson] owners/riders”. As a result, the goodwill attached to the defendants’ trade-mark was hugely outweighed by that attached to Harley-Davidson’s own trade-marks, including its prior use of SCREAMIN’ EAGLE in connection with motorcycle parts and accessories, which are “better known and enjoy much greater brand recognition and fame”.
  3. Such use likely to have an effect on goodwill: Given the fame of the plaintiffs’ brand, the Court found that the relevant universe of consumers was more likely to associate the defendants’ trade-mark with Harley-Davidson, rather than vice versa; in any event, the Court ruled that “a mental association … with [Harley-Davidson] does not in itself establish an effect on the [d]efendants’ goodwill”.
  4. Such effect likely to be damaging: Finally, the defendants “failed to adduce any evidence of lost sales or damage to their goodwill”, as the Court found that the defendants had instead “willingly created and nourished this association” with Harley-Davidson in an effort to trade on the plaintiffs’ name.

As a result, the Court dismissed all of the defendants’ claims, notwithstanding both the defendants’ trade-mark registration for SCREAMING EAGLE, for use in association with the operation of retail clothing stores and the defendants’ common law rights arising from more than 20 years of sales of SCREAMING EAGLE clothing.

In addition, the Court expressed difficulty reconciling the defendants’ actions given their “willingness … to create some form of association with [Harley-Davidson], for their own benefit”, and questioned the defendants’ good faith, “since they accuse[d] [Harley-Davidson] of passing-off and confusion and yet they ha[d] clearly taken several initiatives to associate themselves with the [HARLEY-DAVIDSON] mark and reinforce that association with their own customers”. Having found that the defendants willingly tried to associate themselves with Harley-Davidson and trade on its name, the Court barred the defendants from any equitable relief.

This decision is of considerable note for a number of reasons. First, the Court gives very detailed consideration to the test for depreciation of goodwill. Not since Veuve Clicquot has section 22 of the Trade-marks Act been examined by a court in such detail. Second, this decision demonstrates that a famous house mark may help to insulate an allegedly confusing sub-brand from creating a reasonable likelihood of confusion. And third, the Court’s ruling serves to remind litigants of the importance of “clean hands,” as evidence of a party’s bad faith may disentitle it from being granted equitable relief.