Author: Marsha Simone Cadogan, MSC Intellectual Property & Technology Law (MSC IPTL)
Without proof of goodwill or reputation, passing off claims will not be successful. Absent this essential component of the passing off test, the other elements (misrepresentation to the public and actual or potential damage) bear little or no significance to claimants in passing off cases. This was re-emphasized by the Federal Court in an unfair competition claim initiated by a winery against its neighbouring competitor in Hidden Bench & Vineyards v Locust Lane Estate Winery (2021 FC 156).
Hidden Bench Vineyards & Winery (“Hidden Bench) initiated an unfair competition claim against Locust Lane Estates Winery (“Locust Lane”) on the basis that Locust Lane was directing public attention to their wines in a manner that caused confusion to the relevant public between the two entities’ wines. Hidden Bench also claimed that Locust Lane was passing off their wines as those ordered or requested by its customers. Both wineries operate vineyards that are opposite to each other and located on a road called Locust Lane. Hidden Bench started using the mark “Locust Lane” as part of its label guise as early as in 2003. The mark was used along with the more prominently featured “Hidden Bench” name on product packaging.
Locust Lane, a new vineyard and winery business, started operations opposite to Hidden Bench’s winery in 2019. The business sold wine under the name “Locust Lane” and operated a website bearing the same name. On learning of the similarity in names between the competing products, Hidden Bench sent cease-and-desist letters to Locust Lane, and later filed a trademark application for the same name in association for use on its wines. Hidden Bench then initiated unfair competition proceedings against Locust Lane seeking to prevent the latter’s use of the name on their winery products and as a domain name.
In Hidden Bench, the specific unfair competition claim relates to s.7(b) and s.7(c) of the Trademarks Act (the Act) which pertains to prohibition against unfair competition. This provision is a codification of the common law tort of passing off but also has a relationship with Article 10bis of the Paris Convention for the Protection of Industrial Property.
The provisions of the Act relevant to the Hidden Bench case are reproduced below:
7. No person shall
(b) direct public attention to his goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his goods, services or business and the goods, services or business of another;
(c) pass off other goods or services as and for those ordered or requested.
The Court’s Reasoning
The Applicant must have a valid and enforceable registered or unregistered Trademark
In its ruling, the Federal Court first considered whether Hidden Bench had the right to bring an unfair competition claim before the Court. Bearing in mind that Hidden Bench’s mark was unregistered, the claim could only be heard by the Federal Court if Hidden Bench had a valid and enforceable trademark in the disputed name. This threshold is established through use of the mark. Hidden Bench submitted evidence showing the “Locust Lane” name on its wines; the winery also had labelled one of its products as “Locust Lane port”. The Federal Court found that Hidden Bench held a valid and enforceable trademark in the word “Locust Lane”, through its continuous use of the mark on its wines and ports. A point that was covered in this analysis and bears significant relevance to the good will doctrine, was the lack of inherent distinctiveness in the mark. This issue is covered in the next segment below.
Elements of Passing off
Passing off claims require claimants to prove (i) that the product has acquired goodwill or reputation with the relevant public, (ii) that the public is deceived by the misrepresentation and (iii) that actual or potential damage has resulted to the claimant.
The first threshold – Goodwill or Reputation
Hidden Bench could not successfully establish that it had acquired goodwill or reputation in its use of the Locust Lane name in association with its wines and ports. Names that are geographically descriptive, (that is, they are names of places) such as Locust Lane have little or no inherent distinctiveness. If geographically descriptive names have not acquired secondary meaning among the relevant public, then they are unregistrable as trademarks. Hidden Bench had a heavy onus to proof that the relevant public perceived that Locust Lane was associated with wine and ports from Hidden Bench and not just the name of a place in the area. Although sale invoices were submitted as proof of distinctiveness, there was no indication that the sales were based on a recognition of this perception. The mark was not prominently placed on Hidden Bench’s wines and ports; there was no evidence to indicate that it stood out to consumers as a distinctive name. The claimant did not meet its first burden.
Why the first burden Matters to the other elements of the Passing off Test
As Hidden Bench could not proof that the Locust Lane mark had acquired distinctiveness, submissions made about the public being deceived by the misrepresentation were not addressed. Since the relevant public did not perceive the mark (based on evidence presented) to be associated with Hidden Bench, goodwill could not be established. Lack of goodwill impacted the rest of the test, and essentially, the decision of the case. The Federal Court did not do an enquiry into the second and third branches of the passing off test, as Hidden Bench could not establish that its mark was known and distinguished from where the winery was located. However, the court opined that confusion would likely not be founded as there was no inherent or acquired distinctiveness in the name.
Hidden Bench failed in its claim that goods were substituted for goods or requested from their winery and vineyards. There was no passing off based on the lack of inherent and acquired distinctiveness in Hidden Bench’s unregistered trademark.
The case is significant to unfair competition jurisprudence for the following reasons.
First, Hidden Bench is instructive of the relationship between grounds of unfair competition claims and a trademark strategy (or lack thereof). While trademark statutes, competition laws or other regulatory mechanisms enumerate grounds on which unfair competition claims can be brought, or what they seek to prevent, businesses still must be mindful of how they position their marks in consumer markets. Hidden Bench’s mark was an unregistered geographically descriptive name that was not prominently featured on its labels. There was also insufficient branding of the name as being associated with its overall business. This made it more onerous for their claim of acquired distinctiveness to succeed. The takeaway from this is that unfair competition claims cannot be envisaged in silos from a businesses overall IP strategy. Other things being equal, a registered trademark will likely be more successful in unfair competition claims than one that is unregistered and geographically descriptive.
Second, the case shows the importance of goodwill to passing off claims. It all comes down to the perception of the relevant public. If the public does not perceive the mark to be associated with a specific product or service, then the mark bears no distinction in their minds in this way. If the relevant public does not perceive that one product is being passed off as another, then there is no unfair competition on these grounds. Therefore, goodwill or reputation can either make or break an unfair competition claim.
This article is for general information purposes only and is not intended to be legal advise.