The fight over depreciation of goodwill in Canada keeps going and going …

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This article was originally published by the World Trademark Review on March 25, 2020. It has been republished with permission.


While comparative advertising can be an effective tool for comparing and contrasting competing brands, there are limits on what claims can lawfully be made. One such limit is provided by Section 22 of the Trademarks Act, which prohibits use of “a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.”

The plain language of Section 22 of the Trademarks Act suggests that a claim for depreciation of goodwill may be limited to use of registered trademarks.  However, in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, the Supreme Court of Canada found that such claims could extend to use of marks “sufficiently similar” to the registered mark to evoke in consumers a mental association of the two marks that is likely to depreciate the value of goodwill attaching to the registered mark.1 Now, in a dispute2 over use of “the bunny brand” and “the next leading competitive brand” in comparative advertising for Duracell batteries, the scope of depreciation of goodwill is once again at issue.

While a recent Federal Court of Appeal decision3 means that this issue may not be determined until trial, the outcome could have a significant impact on comparative advertising in Canada.

Background

The two leading brands of batteries in Canada are DURACELL and ENERGIZER. In 2014, Duracell started using stickers on packaging of its DURACELL brand batteries with claims that they were “Up to 15% longer lasting vs. the next leading competitive brand” and “Up to 20% LONGER LASTING vs. the bunny brand.” Energizer commenced an action against Duracell asserting that the claims on Duracell’s stickers depreciate the goodwill attaching to Energizer’s trademarks contrary to section 22 of the Trademarks Act.4 Energizer’s registered trademarks include the following design marks for its pink bunny mascot:

The Energizer Bunny The Energizer Bunny

Duracell brought a motion for summary judgment seeking to strike Energizer’s claim for depreciation of goodwill on the basis that neither “the bunny brand” nor “the next leading competitive brand” are registered trademarks owned by Energizer. In response, Energizer argued that these phrases evoke an association with Energizer’s registered trademarks. At first instance, the Federal Court refused to strike portions of the claim relating to use of “the bunny brand”, finding that the “somewhat-hurried consumer would certainly make a mental association … between the words ‘the bunny brand’ that Duracell used on its battery packages and the ENERGIZER Bunny Trade-marks.” 5 However, the Federal Court agreed to strike the portions of Energizer’s claim relating to use of “the next leading competitive brand.” Based on the record before it, the Federal Court could not conclude that the somewhat-hurried consumer would understand that “the next leading competitive brand” referred to Energizer and its registered trademarks.6 Energizer appealed.

The Federal Court of Appeal’s decision

Energizer’s appeal focused on whether the Federal Court exceeded the scope of Duracell’s notice of motion, which raised a pure question of law, i.e. whether the phrases “the bunny brand” and “the next leading competitive brand” could form the basis for a claim under section  22 of the Act, even though such phrases were neither registered trademarks nor simple misspellings of Energizer’s registered marks. Energizer argued that the Federal Court exceeded the scope of Duracell’s motion and erred by answering the question of whether the phrases were in fact sufficiently similar to Energizer’s registered trademarks to evoke a mental association that is likely to depreciate the value of their goodwill.

The Federal Court of Appeal agreed with Energizer. It allowed the appeal and dismissed the motion for summary judgment relating to the claim based on use of “the next leading competitive brand.” In doing so, it found that the Federal Court erred in depriving Energizer of the opportunity to make its case.7

Conclusion

As previously reported the court’s decision confirmed that the scope of section 22 of the Trademarks Act extends beyond a company’s identical registered trademark and may provide an effective weapon against damaging comparative advertising campaigns which make use of any mark or phrase that consumers would associate with a plaintiff’s registered trademark. Energizer’s action tests the limits of claims for depreciation of goodwill under Section 22 and a determination of those limits could significantly impact the scope of permissible claims in comparative advertising. While the Federal Court of Appeal’s recent dismissal of Duracell’s motion for summary judgment avoided squarely addressing such limits, it may ultimately result in greater clarity if the scope of Energizer’s claim for depreciation of goodwill is determined after trial with the benefit of a full evidentiary record. In the meantime, our recent article discussing comparative advertising in pet insurance in Petline Insurance Company v Trupanion Brokers Ontario Inc, 2019 FC 1450 also explores these issues.

Duracell has until April 19, 2020 to seek leave to appeal from the Supreme Court of Canada.

1. Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 at para 38 (“Veuve”); 2. Energizer Brands et al v The Gillette Company et al , T-1591-15; 3. Energizer Brands LLC v The Gillette Company , 2020 FCA 49; 4. Trademarks Act , RSC, 1985, c T-13, s. 22; 5. 2018 FC 1003 at para 65; 6. 2018 FC 1003 at para 69; 7. 2020 FCA 49 at para 49.

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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