Streamlined Canadian trademark litigation — Court of Appeal opens door to full compensation

by Smart & Biggar
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A recent decision of the Federal Court of Appeal sheds light on a streamlined litigation procedure that brand owners may find attractive. In Group III International Ltd v Travelway Group International Ltd, 2017 FCA 215 [Travelway] the court suggests that trademark owners who commence infringement proceedings in the Federal Court, by way of the more summary procedure known as an application, may still be able to recover damage awards, even by way of a reference. 

Background

In recent years, parties initiating trademark infringement proceedings in the Federal Court have had the option of a more streamlined, expeditious procedure. By commencing the proceeding by way of “application” rather than the more conventional “action” the parties are limited to affidavit evidence (and cross-examination on those affidavits) without pre-trial discovery. The Court then decides the matter after an oral hearing that does not include live witnesses. 

While proceeding by way of application can be an efficient means to address relatively simple cases of trademark infringement, the absence of pre-trial discovery could potentially hamper the ability of the plaintiff to recover damages. Often, evidence relevant to the plaintiff’s damages and/or the defendant’s profits as a result of the infringing activity is obtained during discovery. For example, in 2013, in Trans-High Corporation v Hightimes Smokeshop and Gifts Inc, 2013 FC 1190, the applicant, Trans-High Corporation, obtained a permanent injunction in respect of its claims against the respondent for trademark infringement and passing off. However, the damages awarded to Trans-High were roughly one-tenth of what it was seeking. In this regard, the Federal Court in Trans-High stated at paragraph 12 of the decision that by proceeding by way of application, "the Applicant chose to forego any opportunity for discovery […] as well as to elicit facts relating to damages caused by these activities."  

Nevertheless, a recent decision by the Federal Court of Appeal suggests that trademark owners that choose to proceed by way of application may still be able to recover more significant damages, potentially by way of a Federal Court procedure known as a reference – a procedure which can include documentary production and examination for discovery to assess the quantum of damages.

The Travelway decision

In Travelway, the applicants were Wenger S.A. and two other parties who had interests in the Wenger registered trademarks, depicted below, used in association with luggage and bags (collectively the “Wenger marks”).

Wenger’s claim against the respondent, Travelway Group International Ltd, included allegations of trademark infringement and passing off. In particular, Travelway had registered and used the allegedly confusing trademarks, depicted below, in association with luggage, including the “Travelway cross mark” (left) and the “Travelway triangle mark” (right) (collectively the “Travelway marks”).

Notably, the Travelway triangle mark was being used in modified forms referred to by the Court as: (i) the “Disappearing S”, where the “S” was etched in metal and difficult to see; and (ii) the “Missing S”, where the “S” was missing altogether. In short, Travelway was depicting its registered marks in a manner that made them more closely resemble the Wenger marks.  

While the Federal Court had held that the parties’ marks were not confusing, the Federal Court of Appeal disagreed. The Federal Court ruling was overturned, with the Court of Appeal finding that there was a likelihood of confusion between the parties’ trademarks and that Travelway was therefore liable for trademark infringement and passing off. As part of its analysis, the Federal Court of Appeal held that the Disappearing S and Missing S marks were not separate trademarks from the Travelway triangle mark as registered; rather, these marks were mere variants of the registered mark and consequently, if the variants were likely to cause confusion with the Wenger marks, then the registered mark would also likely cause confusion. The Court of Appeal found the Travelway marks infringed Wenger marks notwithstanding that the Travelway marks were registered, and came to this conclusion without resolving Wenger’s request to strike the Travelway marks from the register as invalid. Instead, the Court of Appeal remitted the issue of expungement back to the Federal Court for further submissions.

Reference for Damages?

After making its finding of infringement and passing off, on the issue of the quantification of Wenger’s damages, the Court of Appeal stated that it would refer the matter of damages to the Federal Court to determine whether damages are recoverable and, if so, the amount of damages and the appropriate procedure for determining them. The Court of Appeal indicated that “the Federal Court may wish to consider whether a reference is appropriate to facilitate this determination.”

Although Travelway argued that a reference was not appropriate since the matter had been commenced by way of application rather than an action, the Court of Appeal held that “This should not be a bar to proceeding by way of reference, and the Federal Court should determine the procedure that is most appropriate.” [Emphasis added]

The precise mechanism by which the Federal Court will assess the damages remains to be seen.

Conclusions

The Travelway decision is instructive in a number of respects. First, it represents another example of a trademark owner successfully enforcing its trademarks by way of the more streamlined procedure of an application. Second, it suggests that trademark owners who decide to proceed by way of application may not be compromising their ability to obtain damages to the extent previously thought. Third, the decision represents an interesting departure from the principle of a registered trademark acting as a defense to trademark infringement, given that in this case the respondent’s use of its registered trademarks were nevertheless found to infringe those of the applicant.

The Federal Court of Appeal decision in Group III International Ltd v Travelway Group International reinforces that the more streamlined application procedure in the Federal Court can be an effective option for brand owners to enforce their marks.  In addition, the decision appears to open the door to a more fulsome recovery of damages using the application procedure than prior jurisprudence suggested was possible. 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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