The Supreme Court of Canada has very recently issued its much awaited decision in the intellectual property case involving Masterpiece Inc. v. Alavida Lifestyles Inc. and in doing so overturned the previous rulings of the Federal Court Trial Division and Federal Court of Appeal. The International Trademark Association (“INTA”) was an Intervener in the case and saw the Court adopt its position. Ian MacPhee, attorney of Lapointe Rosenstein Marchand Melançon, was the head of the INTA committee which successfully prosecuted the intervention the results of which will have a significant impact on intellectual property law in Canada as explained in the following summary.
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The Supreme Court of Canada’s Decision in Masterpiece Inc. v. Alavida Lifestyles Inc.
The Appellant in the case Masterpiece, Inc. began operation in the retirement residence industry in the western Canadian province of Alberta in 2001. In doing so, in addition to its trade-name, it employs several unregistered MASTERPIECE formative trade-marks including MASTERPIECE THE ART OF LIVING. The Respondent Alavida Lifestyles Inc. filed an “intent to use” application to register the trade-mark MASTERPIECE LIVING on December 1, 2005 for similar services. Its application went unopposed and issued to registration once Alavida had commenced use in the eastern Canadian province of Ontario.
The Appellant’s subsequent efforts to register its own trade-marks were unsuccessful because of Alavida’s prior filing. The result was that Masterpiece, Inc. brought an application to the Federal Court of Canada to expunge the registration. The Appellant challenged its validity on the ground that the Respondent was not the person entitled to register the trade-mark MASTERPIECE LIVING because its trade-mark was confusing with the Appellant’s prior used trade-name and trade-marks.
Both the Federal Court and Federal Court of Appeal rejected the application on the basis that there was no likelihood of confusion. It appeared that in reaching its decision, the Federal Court of Appeal had taken into account the fact that the parties respective trade-name and trade-marks were not used in the same geographical area. If indeed geography were relevant, then Alavida operating in the east could claim there is no confusion between its trade-marks and Masterpiece, Inc.’s trade-name and trade-marks because on December 1, 2005 Masterpiece, Inc. was only operating in Alberta. It was on this issue and this issue alone that INTA sought and was granted leave by the Court to intervene as an ”amicus curiae”. INTA argued that the fact that the parties’ trade-name and trade-marks were not used in the same geographical area was irrelevant to the determination of the likelihood of confusion. In particular, it was urged that Sections 6(2) and (4) of the Canadian Trade-marks Act clearly required that the likelihood of confusion be determined on the basis that the trade-name and trade-marks at issue are used in the same area (the hypothetical marketplace), irrespective of whether this is in fact the case.
The Supreme Court of Canada fully agreed with INTA’s position on this issue. His Honour Justice Rothstein on behalf of the Court noted that the hypothetical marketplace test reflects the intention of the legislature to provide a national scope of protection for registered trade-marks in Canada.
Does the expense of the goods and services in question diminish the likelihood of confusion?
In what represents an important clarification of one of the factors employed in assessing the likelihood of confusion, the Court rejected the approach adopted by the lower courts. The trial judge had held that the more expensive the services at issue the more consumers will take time in effecting their purchase decision and thus be less likely to be confused. The Supreme Court of Canada in its analysis reverted to first principles. Justice Rothstein invoked the traditional test for determining confusion namely that it must be assessed from the point of view of the initial impression of an average consumer when first dealing with the trade-mark used in association with the services at issue. Indeed Justice Rothstein indicated that even though the initial confusion may subsequently be resolved by reason of careful deliberation by the consumer, this does not negate the fact that the first consumer reaction was one of confusion.
The Court noted in particular there is nothing in Alavida’s registration which restricts its use to upscale-markets. The Court also criticized the trial judge’s consideration of Alavida’s actual use of its trade-mark noting that this does not reflect the entire scope of the exclusive rights which Alavida was granted upon achieving its registration. The trial judge had placed emphasis on the fact that Alavida’s use of MASTERPIECE LIVING had been in the nature of a slogan accompanying its corporate identity whereas Masterpiece, Inc. used MASTERPIECE to identify the company itself.
Diminished role for survey and linguistic experts in the assessment of confusion.
The Court went out of its way to criticize the work of the survey experts employed in the case. The Court seems to be saying that whether consumers would be likely to be confused is an issue for the trial judge to assess and that experts have little role to play. Indeed, the Court went out of its way to suggest that Court officials charged with case management of files should seriously consider whether such evidence is even necessary especially in view of its expense to the parties.
Conclusion
It goes without saying that the successful Appellant was the author of much of its own misfortune in the lower Courts. Had it applied to register its own trade-marks much earlier and/or opposed the Respondent’s application based on its prior use before it issued to registration, it would not have had to incur the effort and expense which resulted in its struggle to reach our highest court for relief.
The decision itself is a welcome clarification to the test of confusion in the areas of geographical use, the importance of the expense of the goods and services involved, and the role of experts.