On May 26, 2011 the Supreme Court of Canada released its decision in Masterpiece Inc. v. Alavida Lifestyles Inc, 2011 SCC 27. The Court reversed decisions by the Federal Court and Federal Court of Appeal, and painted a rosier picture for those who seek to protect trade-mark rights in Canada.

Masterpiece started using the trade-mark MASTERPIECE THE ART OF LIVING in Alberta in 2001. It used the mark in association with retirement residences. On December 1, 2005 Alavida filed an application to register the trade-mark MASTERPIECE LIVING for use with, in essence, retirement residences. In the application Alavida indicated that it proposed to commence use of the mark in Canada in the future. In 2006 it did in fact commenced using the mark in Ontario.

Masterpiece did not oppose Alavida’s application and thus the latter’s application matured to registration. When Masterpiece learned of this, it commenced a proceeding in the Federal Court to expunge the registration. Masterpiece argued that Alavida was not entitled to the registration because Alavida’s trade-mark was confusing with Masterpiece’s mark, which had been in use in Canada prior to December 1, 2005.

This case demonstrates the usefulness of applying to register your trade-marks as early as possible. If Masterpiece had applied to register its marks prior to the date upon which Alavida filed its application, Alavida would not have obtained a registration.

The case also demonstrates the usefulness of monitoring the weekly Trade-marks Journal published by the Canadian Intellectual Property Office ("CIPO"). Alavida’s application was advertised in the Journal to allow interested members of the public an opportunity to oppose the application in a proceeding in CIPO. Masterpiece missed this opportunity to oppose, the registration issued, and Masterpiece was then required to commence more onerous court proceedings to cancel the registration.

The Supreme Court first addressed the relevance of the fact that all of Masterpiece’s trade-mark use was in Alberta, whereas Alavida’s use, commenced in 2006, was all in Ontario. The International Trademark Association intervened at the Supreme Court level to argue that these were irrelevant considerations. The Supreme Court agreed. Dispelling any lack of clarity in the decisions below, the Supreme Court affirmed the concept that our Trade-marks Act can afford national rights even if a mark is only used locally. The Court held that the test for confusion set out in section 6 of the Trade-marks Act is based upon the hypothetical assumption that both trade-marks under consideration are used in the same area, regardless of whether this is in fact the case. Alavida was not to be permitted to own a trade-mark registration which would give it the exclusive right to use its mark across Canada, if in fact the mark was confusing with one used earlier by another person, even if only in one part of Canada.

The Court also clarified the proper approach for assessing the resemblance between a proposed use trade-mark and an existing unregistered mark. The importance of "use" of a trade-mark in Canada, the need to consider each trade-mark at issue (rather than conducting a single composite analysis of the marks), and the need to consider not only the actual use of a proposed mark, but also that mark’s potential scope of use, were addressed. And, not surprisingly, the Court confirmed the test for confusion, as restated in its earlier decision of Veuve Clicquot, 2006 SCC 23; namely, that it is a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the mark at a time when he or she has no more than an imperfect recollection of the prior trade-mark, and whether that consumer would be likely to be confused.

This decision gives hope to owners of brands for expensive goods and services. The Supreme Court held that even though a consumer shopping for expensive goods or services is likely to be more alert and aware of the trade-marks associated with the goods or services they are examining, the proper test for confusion, as it relates to expensive goods or services, is the same as that for all other goods or services. That is, it is still one of the first impression of the consumer when they encounter the marks in question. So, while source confusion may be remedied through careful research and deliberation by the consumer, this should not disentitle the consumer to the benefit of trade-mark protection, namely, providing a short cut to get to the goods or services that they are looking for. In a comment highly relevant to the current debate over whether the purchase of a trade-mark of a competitor as a keyword for advertising through internet search engines constitutes trade-mark infringement, the Court went on to state that diverting consumers from their intended brand is a diversion which diminishes the value of the goodwill associated with the trade-mark and the business the consumer initially thought he or she was encountering. The Court further stated that leading consumers astray in this way is one of the evils that trade-mark law seeks to remedy. It will be very interesting to see how these comments will be applied in the developing Canadian case law on keyword advertising.

The decision also has significant implications for trade-mark enforcement proceedings. The Court appears to be discouraging expensive battles of survey and linguistic experts. In particular, the Court treated with favour a development in English law that where goods are sold to the general public for ordinary use, the question of whether such buyers would be likely to be confused is an issue the judge may address without the assistance of expert witnesses. Indeed, in certain cases, such expert testimony may be disregarded altogether because it is not necessary to the disposition of the case, or not relevant to the issues at hand. Last, the Supreme Court suggested that court officials charged with case management take a good hard look at the necessity of such evidence, and, where appropriate, steer parties away from expending resources on evidence that will be improper or of minimal effect.

Litigants now must seriously ask whether the significant expenses associated with trade-mark experts will have any real impact in obtaining a favourable decision in an infringement proceeding.

Considered against the backdrop of recent decisions of lower courts, the Supreme Court’s decision contributes to a larger effort to streamline trade-mark enforcement proceedings and make them cheaper and easier to bring. In that light, this case may be read together with the Federal Court of Appeal’s recent decision in BBM Canada v. Research in Motion Ltd., 2011 FCA 151, where that court made it clear that, in order to promote access to the courts, trade-mark infringement proceedings may be commenced by way of action or application, much to the surprise of many practitioners who believed that only the former, more expensive route was available to parties. Thus, proceedings for infringement, passing off, and depreciation of goodwill may be addressed via affidavit evidence rather than by means of a more prolonged process involving discovery and live testimony at trial.