In a decision released on May 25, 2011, Masterpiece Inc. v. Alavida Lifestyles Inc. (2011) SCC 27, the Supreme Court of Canada has provided guidance with respect to the test for confusion pursuant to section 6 of the Trade-marks Act and has confirmed that Canada is a first-to-use jurisdiction which recognizes the priority of trade-marks on the basis of first use in Canada and not registration.

The Supreme Court considered four issues relating to the assessment of a likelihood of confusion:

  1. whether the location in which a trade-mark is used is relevant when considering the likelihood of confusion between a registered mark and a prior unregistered mark;
  2. the considerations applicable in the assessment of the resemblance between a proposed use trade-mark and an existing unregistered mark;
  3. the effect of the nature of the business and the cost of the wares or services in the confusion analysis; and
  4. the role of expert evidence in the trade-mark confusion analysis.

Masterpiece Inc. (“Masterpiece”) had used MASTERPIECE THE ART OF LIVING and other trade-marks including the word MASTERPIECE, as trade-marks in association with retirement residence services in the Province of Alberta since 2001. Alavida Lifestyles Inc. (“Alavida”) offered retirement residence services in Ontario and filed a proposed use trade-mark application on December 1, 2005 for MASTERPIECE LIVING. Alavida obtained a trade-mark registration despite the prior common law trade-marks used by Masterpiece as Masterpiece did not oppose the application. Masterpiece later filed applications for MASTERPIECE and MASTERPIECE LIVING in 2006 based on use since 2005. The applications were rejected on the basis of the prior registration for MASTERPIECE LIVING owned by Alavida as the Trade-marks Office found the marks to be confusingly similar to MASTERPIECE LIVING.

Masterpiece brought an application to expunge Alavida’s registration for MASTERPIECE LIVING based on its prior use of a confusingly similar mark. The application was not successful and the Federal Court of Appeal upheld the decision on appeal. The Supreme Court, however, considered the issues and allowed the appeal, expunging Alavida’s registration for MASTERPIECE LIVING.

With respect to the issue of the location where a mark is used, it was held by the Supreme Court that this fact is irrelevant in the confusion analysis. In order for the owner of a registered trade-mark to have exclusive use of the trade-mark throughout Canada, there cannot be a likelihood of confusion with trade-marks used anywhere in Canada. The International Trademark Association was an intervener in this case with respect only to this issue.

In assessing the resemblance between a proposed use trade-mark and an unregistered mark used in Canada, the Supreme Court confirmed that it is the use of a mark and not registration that confers priority of title and the exclusive right to the trade-mark. Rights are granted to the first user of a trade-mark in Canada and the first user of a mark has the right to oppose applications or apply to expunge registrations based on its earlier use of a confusingly similar trade-mark. The confusion analysis should begin with the assessment of the resemblance of the marks in issue. In considering this issue, the Supreme Court held that there is a strong resemblance between MASTERPIECE THE ART OF LIVING and MASTERPIECE LIVING, in terms of the unique aspect of each mark, MASTERPIECE, as well as the idea evoked by each mark.

With respect to the issue of the effect of the nature of the business and the cost of the wares or services on the confusion analysis, the Supreme Court held that the trial judge erred in considering that consumers of expensive goods and services would generally take the time to inform themselves as to the source of the goods and services, thereby reducing the likelihood of confusion. The issue of confusion is to be assessed on the basis of the first impression of a consumer approaching a costly purchase at the time he or she first encounters the trade-mark. The possibility that careful research could later remedy confusion does not eliminate the likelihood of confusion. In assessing a likelihood of confusion, the consumer’s reaction, upon encountering Alavida’s mark in the marketplace, with an imperfect recollection of Masterpiece’s marks, is the appropriate test to apply. It was held that where there is a strong resemblance between the marks, the high cost of the services offered in association with the marks is to be considered, but is not determinative on its own.

Finally, with respect to the role of expert witnesses in trade-mark confusion cases, it was held that an expert should be permitted to testify only if the testimony is likely to be outside the experience and knowledge of the judge. If expert evidence is unnecessary or irrelevant or will distract from the issues to be decided, such evidence should be disallowed from being introduced. Proposed expert or survey evidence should be considered at an early stage of a proceeding so that the cost of engaging experts can be avoided if it will not be admissible at trial.

The Supreme Court applied this analysis and found that there was a strong similarity between MASTERPIECE LIVING and MASTERPIECE THE ART OF LIVING and that use of these marks in the same area would be likely to lead to the inference that the services associated with Masterpiece’s trade-marks were being performed by Alavida. As Masterpiece’s use predated Alavida’s proposed use, Alavida was not entitled to register its mark and it was expunged from the Trade-marks Register.

The clarification provided by the Supreme Court with respect to the appropriate analysis to be applied in assessing the likelihood of confusion of trade-marks will assist trade-mark users in assessing the availability of potential marks they are considering using in Canada. This also underscores the importance of obtaining full trade-mark availability searches which disclose the use of unregistered trade-marks in Canada to assess the availability of a potential new mark for use and registration in Canada.

The judgment in this case will also likely discourage the use of survey evidence in some trade-mark cases as it was held that Courts must play the role of gatekeeper to ensure that “unnecessary, irrelevant and potentially distracting expert and survey evidence is not allowed to extend and complicate proceedings.”