BRAND MGT. NWS Page 1 MCKEOWN-BRAND Intellectual Property Newsletters December 2010

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1 BRAND MGT. NWS Page 1 BRAND MGT. NWS Intellectual Property Newsletters December 2010 McKeown's Brand Management In Canadian Law Newsletter John McKeown Thomson Reuters Canada Limited or its Licensors (excluding individual court documents). All rights reserved. Contents I. Headlines I.1 The Importance of a date of First Use in A Trade Mark Application I.2 Should Section 22 of the Trade-Marks Act be Reconsidered? I.3 Protection of Geographical indications I.4 The Scope of Protection for Industrial Designs I. Headlines I.1 The Importance of a date of First Use in A Trade Mark Application By John McKeown A recent decision of the Trade-marks Opposition Board emphasizes the importance of accurately specifying the date of first use in a trade-mark application. Background An application for a trade-mark based on use must contain, among other information, the date of first use for each of the general classes of wares or services described in the application. In the case of conflicting applications, this date will be the applicant's priority date. An applicant may, out of caution, select a date which is later than the actual date of first use, but in such cases it is preferable to state the date is "as early as." An opposition may be based on a number of grounds including an allegation that the application does not comply with the Trade-marks Act in that the applicant did not use the mark from the date alleged. However, the failure to correctly state the date of first use is not grounds for the expungement of any resulting registration. Similar considerations apply to an application based on proposed use if the mark was actually used prior to the date of the filing of the application. Evidence of such use can support an opposition.

2 BRAND MGT. NWS Page 2 The Facts The applicant filed an application to register the trade-mark ZERO-X POSUR based on use since January 1, 2002 in association with a lengthy list of men's and women's garments, shoes, and accessories. The application was opposed on the ground, among others, that the application did not comply with the Act since the applicant had not used its mark in association with all of the wares described in the application on the claimed date of first use. The Onus In an opposition, the applicant bears the legal onus of establishing on a balance of probabilities that its application complies with the requirements of the Act. However, there is an initial evidential burden on the opponent to present evidence from which it could be reasonably concluded that the facts alleged to support the ground of opposition exist. In this context, the evidential burden on the opponent was relatively light, since the facts relating to the applicant's date of first use are within its knowledge. Once the evidential burden is met by the opponent, the burden shifts to the applicant, who must prove on a balance of probabilities that it used its trade-mark from the date alleged in the application. The Evidence The opponent's evidence included affidavits of investigators who had visited the applicant's stores but were not able to locate wares bearing the applicant's trade-mark. In addition, the opponent filed an affidavit describing a search of archived versions of the applicant's website, located at The search did not show any references to wares sold in association with the applicant's trade-mark. The applicant filed an affidavit but the Hearing Officer described it as nothing more than describing one isolated custom order for a pair of pants sold in association with the applicant's trade-mark approximately three years after the claimed date of first use. As a result, the Hearing Officer found that the applicant had failed to meet its onus to provide evidence to support the claimed date of first use and refused the application. Conclusion In light of the potential for a successful opposition, brand owners should take care in determining the date of first use claimed in a trade-mark application. If it is difficult to determine the date consideration should be given to claiming use as early as the date when use can be shown. Similar considerations apply to an application incorrectly based on proposed use. I.2 Should Section 22 of the Trade-Marks Act be Reconsidered? By John McKeown A recent decision of the Court of Appeal for England and Wales provides some interesting arguments concerning the use of a competitor's trade-marks in comparative advertisements. Background

3 BRAND MGT. NWS Page 3 The Act does not provide any specific exceptions relating to comparative advertisements and the general provisions of the Act concerning infringement apply. Section 19 provides that the registration of a trade-mark in respect of any wares or services gives to the owner of the mark the exclusive right to the use throughout Canada of the mark in respect of those wares or services. Section 20 extends the right to activities of third parties that cause confusion. Section 22 extends the rights available under the Act to activities which likely have the effect of depreciating the value of the goodwill attached to the mark. Section 22 is frequently applied in comparative adverting cases. This section provides that no person shall use a trade-mark registered by any person in a matter likely to have the effect of depreciating the value of the goodwill attaching thereto. The rights set out in the section are subject to a discretionary power vested in the court to decline to order the recovery of damages or profits, and permit the defendant to continue to sell wares marked with such trade-mark that were in its possession or under its control at the time notice was given to it that the owner of the registered trade-mark complained of such use. Goodwill for these purposes consists of reputation and connection built up by years of work or gained through significant expenditure of money and which is identified with the goods distributed by the owner in association with the trade-mark. The goodwill attached to a registered trade-mark may be depreciated if any of the following occur: a. the esteem in which the wares or services are held is reduced; b. direct persuasion and enticing of customers who would otherwise be expected to buy or continue to buy goods bearing the trade-mark; c. disparagement of the mark; or d. dilution of the distinctiveness or unique characteristics of the mark. The application of section 22 is limited to use which any person may make in association with goods or services within the meaning of the Act of another's registered trade-mark, in such a manner as to depreciate the value of the goodwill attaching thereto. The difference between the requirements to show use for wares and services has led to somewhat surprising results. In one case, it was found that the reproduction of the plaintiff's trade-marks on the defendant's packages was use within the meaning of section 22 and actionable. However, the reproduction on the defendant's brochures was not. The Proceedings In the case, L'Oréal S.A. brought proceedings against the defendants who were selling replica perfumes. The defendants sold three ranges of products called STITCH, CRÉATION LAMAIS and DORALL. Each member of the range smells like a famous luxury branded perfume known under a well-known registered trade-mark. L'Oréal alleged that the defendants' use of comparison lists for each of the defendants' ranges of product, showing which products correspond to which L'Oréal perfume, infringes its registered trade-marks for those perfumes.

4 BRAND MGT. NWS Page 4 The Factual Position The Court summarized the factual position as follows: a. It is lawful to make and sell the smell-alike product; b. The best and only practical way to describe its smell is to inform people that it smells like "X"; c. The defendants have done this through the use of comparison lists; d. The defendants get a major promotional advantage from using such lists; e. Neither customers or ultimate consumers are deceived as a result of the use of the lists; f. Neither the image nor the distinctiveness of the trade-mark for the comparable fine fragrance is impaired by the use of the list there is no tarnishment or blurring; g. Sales of the corresponding fine fragrance are not affected by the use of the lists. It was observed that consumers are not stupid. They will not see the cheap copy as being the same in quality as the original. They will see it for what it is and no more. The ECJ Some of the issues in the case were referred by the Court to the European Court of Justice ("ECJ") since they involved an interpretation of specific provisions of the Trade-marks Directive of the European Parliament. The ECJ found, for a number of reasons, that the use of the comparative advertisements was actionable. Once this judgment was received, it was up to the English Court to implement the decision of the ECJ. While the decision was implemented, it prompted judicial criticism. Jacob, L.J., a respected jurist, said his strong predilection, free from the opinion of the ECJ, would be to find that trade-mark law did not prevent traders from making honest statements about their products where those products are themselves lawful. The Issue Jacob, L.J. said the issue was whether trade-mark law prevented the defendants from telling the truth. Even though their perfumes were lawful and smelt like the corresponding famous brands, does trade-mark law nonetheless muzzle the defendants so that they cannot say so? Free Speech Jacob, L.J. had a number of negative comments concerning the judgment of the ECJ. First and most generally, he said he was in favour of free speech. There is no good reason to dilute free speech in cases where the speaker's motive for telling the truth is his own commercial gain. Truth in the marketplace matters, even if it does not attract quite the strong emotions as the right of a journalist or a politician to speak the truth. The ECJ's decision means that poor consumers are the losers. Only the poor would dream of buying the defendants' products. The real thing is beyond their wildest dreams yet they are denied the right to receive information which would give them a little bit of pleasure: the ability to buy a product for a Euro or so which they know

5 BRAND MGT. NWS Page 5 smells like a famous perfume. Also, there was no harm to the trade-mark owner. Freedom to Trade The second reason related to freedom to trade. If a trader cannot say "my goods are the same as Brand X (a famous registered trade-mark) but half the price", there was a real danger that important areas of trade will not be open to proper competition. Competition The final reason was that as a result of the ECJ decision, the EU will have a more "protective" approach to trade-mark law than other major trading areas or blocks. Many countries, such as the United States, have a healthy attitude to competition law and would not keep a perfectly lawful product off the market by the use of trade-mark law to suppress truthful advertising. A brief review of US law shows that the Court's observation was correct. It seems that one may lawfully use the trade-mark of another in comparative advertising so long as there is truthful disclosure and no likelihood of confusion. Conclusion When it comes to comparative use of trade-marks, Canada clearly has a more "protective" approach to trademark law than other major trading areas or blocks, particularly the United States. The criticisms made by Jacob, L.J. are not dependent on statutory wording and are of broad application. Perhaps they will be considered when the Act is reviewed. I.3 Protection of Geographical indications By John McKeown A recent decision of the Federal Court deals with a geographical indication ("GI") and illustrates the problems that can occur concerning their protection. Background A GI is a type of trade-mark that is intended to designate product quality, highlight brand identity, as well as preserving cultural traditions. Apart from a definition relating to wines and spirits contained in the Act the most commonly accepted definition is contained in The Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS"). TRIPS provides geographical indications are, for its purposes "indications which identify a good as originating in the territory of a [member [country], or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin." Examples of GIs include COGNAC, BEAUJOLAIS, and PROSCIUTTO DI PARMA. Problems occur when a GI is protected in one region but is in common usage in another. GIs have been a long term source of international controversy. The Facts In the case in issue, the Ministry of Commerce and Industry of the Republic of Cypress ("Cypress") applied to

6 BRAND MGT. NWS Page 6 obtain a certification mark for the trade-mark HALLOUMI in association with cheese. Certification Marks A certification mark is a specialized type of trade-mark used to distinguish wares which comply with a defined standard in contrast to a trade-mark which is used to distinguish wares of the owner from the wares of others. A certification mark may be adopted and registered only by a person who is not engaged in the manufacture or sale of the wares in issue. The owner of the mark may license others to use the mark in association with wares that meet the defined standard. The licensed use is deemed to be use by the owner. A certification mark descriptive of the place of origin of the wares may be registered by an administrative authority for a country associated with the wares. The owner of the mark must permit use of the mark in association with any wares produced or performed in the area where the mark is descriptive. In this case, the certification mark HALLOUMI was intended to indicate the cheese with which it was used was of the following defined standard: produced only in Cypress using the historic method unique to that country, namely; traditionally, produced from sheep and/or goat's milk or in the case of mixtures, cow's milk is also allowed. The Opposition When the application was advertised, it was opposed by a number of parties, including the International Cheese Council of Canada ("Cheese Council"). Numerous grounds of opposition were asserted, including that: a. the adoption of HALLOUMI as a trade-mark was prohibited because HALLOUMI had by ordinary and bona fide commercial usage become recognized in Canada as designating a kind or quality of cheese; b. the trade-mark could not function as a certification mark because HALLOUMI had been used in Canada prior to the applicant's date of first use and subsequently by persons not licensed by the applicant to describe cheeses which did not meet the standard set out in the application. The Hearing Officer said that no one could obtain a monopoly over a word on the basis that it was a certification mark if the word had been used extensively in Canada by others prior to relevant date such that it had become recognized in Canada as designating the kind, quality, value or place of origin of the wares. On reviewing the evidence, the Hearing Officer concluded that the Cheese Council had established the ground of opposition (a) since there had been bona fide commercial use of the mark or similar terms such that it was recognized in Canada as designating a kind of cheese. In addition, regarding ground of opposition (b), the Cheese Council had shown that at the date the statement of opposition was filed, a confusingly similar trade-mark had been sufficiently known to negate the distinctiveness of the applied-for mark. As a result, this ground of opposition was also established. The Appeal Cypress appealed from this decision to the Federal Court. On appeal it was argued that the Cheese Council had not met its initial evidentiary burden before the Trade-marks Opposition Board. However, Cypress did not file any additional evidence concerning the above grounds although it could have done so.

7 BRAND MGT. NWS Page 7 The Judge noted that it was settled law that an opponent only had an initial evidentiary burden: at most it must submit sufficient evidence to support a prima facie finding in support of the grounds of opposition. Where an opponent satisfies this initial burden, it is up to the applicant to persuade the Hearing Officer that the grounds of opposition should not prevent the application from proceeding. In order to satisfy its burden, the Cheese Council had to demonstrate that the applied-for mark or any other mark so nearly resembling it as to be likely to be mistaken for it, had been used extensively in Canada by others prior to the relevant date to designate a type of cheese and that the mark had an accepted definition or meaning in the industry. The Cheese Council had established that it was possible to purchase cheese from various sources whose packaging bore the marks HALOOM, HALLOUM or HALOUMI in different cities in Quebec and in Ottawa. There was also evidence that a number of Canadian producers had sold substantial quantities of cheese designated as HALLOUM since A number of stakeholders in the industry swore affidavits stating that the term "halloumi" was used generically to designate a type of cheese. In light of this evidence, the Judge concluded that the Register's decision was reasonable and the Cheese Council had discharged its initial burden. It was open to the Hearing Officer to find that the term "halloumi" could not be used exclusively by any one person or entity. As a result, the appeal was dismissed and the trade-mark application dismissed. Conclusion The use of a mark that is potentially seen as a GI is problematic from a brand owners point of view. First, the availability of the mark may vary significantly from one jurisdiction to another. For example, in Europe, it was found that producers located in Greece had the exclusive right to use the trade-mark FETA in association with cheese products, notwithstanding that the mark is generic in other countries. Second, such a mark is not likely distinctive of the brand owner. The essence of a trade-mark is its distinctiveness. I.4 The Scope of Protection for Industrial Designs A recent English case illustrates important principles concerning the scope of protection available for registered industrial designs. Protection under the Industrial Design Act Product shape and appearance are tangible elements of a brand. One of the primary methods for protecting product shape and appearance is registration under the Industrial Design Act. Registration under the Act is time sensitive and must occur within one year of publication of the design in Canada or elsewhere. If the shape or appearance of a product is not protectable, a brand owner cannot legally stop a competitor from copying it. The Act provides that "design" means features of shape, configuration, pattern or ornament, and any combination of those features, that, in a finished article, appeal to and are judged solely by the eye. Subsection 11(1) of the Act deals with infringement and provides that during the existence of an exclusive right, no person shall, without the licence of the proprietor of the design, make, import for the purpose of trade or business, or sell, rent, or offer or expose for sale or rent, any article in respect of which the design is registered and to which the design or a design not differing substantially from the design has been applied.

8 BRAND MGT. NWS Page 8 Designs are registered in association with specifically identified articles. Infringement will occur when the design or a design not differing substantially from the design has been applied to the article for which the design was registered. In considering whether differences are substantial, the extent to which the registered design differs from any previously published design will be taken into account. A design which has substantial originality will be entitled to a broader scope of protection than a design which is close to designs published before it. If only small differences separated the registered design from the designs which preceded it then equally small differences between the impugned article and the registered design should be sufficient to avoid infringement. The appearance of the allegedly infringing article must be compared to the appearance of the registered design. The emphasis is on the visual image conveyed by the article. The Facts Dyson Ltd. was the first manufacturer to introduce two-stage cyclone dust-separation technology for vacuum cleaners as an alternative to the use of porous bags. Initially an upright cleaner was introduced to the marketplace and then a cylinder cleaner. The design of the cylinder cleaner vacuum is regarded as a classic design. It has received numerous accolades and awards as a result of its novel and striking design. It has also been exhibited in a number of museums. An industrial design registration was obtained relating to the cylinder cleaner. The registration provides that the features of the design for which novelty was claimed reside in the shape and the configuration applied to the article shown in the application. A representative photograph of the side view of the vacuum is reproduced below: The defendant commenced to sell a multi-stage cyclone vacuum cleaner. A side view of the defendant's vacuum is reproduced below:

9 BRAND MGT. NWS Page 9 The Scope of Protection Under the legislation in the United Kingdom, the owner of a registered design has the exclusive right to make articles incorporating that design for a fixed period of time. The scope of protection conferred by a design includes any design which does not produce on the informed user a different overall impression. In assessing the scope of protection, the degree of freedom of the designer in developing the design is taken into consideration. The Informed User The Trial Judge referred to the concept of an informed user as implying that the person concerned uses the product to which the design has been applied. The use of the word "informed" suggests that without being a designer or technical expert, the user knows the various designs that exist in the relevant sector of the marketplace and possesses some knowledge with regard to the features of the designs and, as a result of the potential interest in the products, shows a relatively high degree of attention when the products are used. In this case, it was found that the informed user was a knowledgeable user of domestic vacuum cleaners. Pre-Existing Designs The Judge considered that an informed user would regard the plaintiff's vacuum as a cylinder vacuum cleaner. The design was strikingly different from any pre-existing designs. Degree of Design Freedom The concept of design freedom relates to the extent of pre-existing designs. If a large departure can be made from prior designs this suggests significant design freedom. The more the designer's freedom in developing a design is restricted, the more likely minor differences between the designs in issue will be sufficient to produce a different overall impression on the informed user. The Judge did not accept that there were any significant constraints on design freedom. As a result the plaintiff's design was entitled to a fairly broad scope of protection because of the differences between it and pre-existing designs and because of the degree of freedom available to the designer.

10 BRAND MGT. NWS Page 10 The Overall Impression The Judge observed that while it is proper to consider both similarities and differences between the respective designs, what matters is the overall impression produced on the informed user by each design having regard to pre-existing designs and the degree of freedom of the designer. While considerable attention was directed to the specific elements making up the designs, the Judge concluded that standing back from the details and considering the overall impression created by the respective designs, the informed user would not consider the similarities as being significant and would notice the differences between the respective designs. The overall impression produced by the registered design was a vacuum that was smooth, curving and elegant. The overall impression produced by the defendant's design was a rugged, angular industrial vacuum. As a result, the action was dismissed. Conclusion While the Canadian Industrial Design Act does not use exactly the same words in dealing with infringement of industrial designs, all of the same concepts described above can be applied in order to determine if infringement has occurred under the Act. While obtaining a registration under the Act can be an important element in protecting product shape and appearance, there are limits on the scope of protection. It is the visual appearance of the allegedly infringing article that must be compared to the appearance of the registered design, not the concepts that are reflected in the design. END OF DOCUMENT