The Supreme of Canada Clarifies Criteria for Assessing Trade-mark Confusion in Masterpiece Inc. v. Alavida Lifestyles Inc.

The Supreme Court of Canada (SCC) issued its eagerly awaited decision in Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27 (“Masterpiece”) on May 26, 2011. In Masterpiece, the SCC had to determine whether the trade-mark MASTERPIECE LIVING registered by Alavida Lifestyles Inc. (“Alavida”), a business in the Ontario retirement residence industry, was confusing with the unregistered trade-marks and trade-name containing MASTERPIECE and previously used by another company, Masterpiece Inc. (“Masterpiece”) in the Alberta retirement residence industry.

 A.              Background

Alavida’s MASTERPIECE LIVING application, filed December 1, 2005 on a proposed use basis, registered unopposed on March 23, 2007. Alavida had used the mark since January 2006. Masterpiece had used Masterpiece Inc. as a trade-name since 2001, and concurrently used several unregistered trade-marks containing the word MASTERPIECE, including MASTERPIECE THE ART OF LIVING, MASTERPIECE THE ART OF RETIREMENT LIVING, and a butterfly logo containing the word MASTERPIECE. Masterpiece started to use the MASTERPIECE LIVING trade-mark shortly after Alavida’s application was filed, and applied to register MASTERPIECE and MASTERPIECE LIVING as trade-marks in January 2006 and June 2006, respectively. Both of Masterpiece’s applications were denied by the Canadian Registrar of Trade-marks on the basis of confusion with Alavida’s previously filed application.

In light of its previous use of the MASTERPIECE marks and trade-name, Masterpiece applied to the Federal Court to have Alavida’s registration expunged. The Federal Court rejected Masterpiece’s application; the Federal Court of Appeal upheld the Federal Court’s decision. The SCC unanimously ruled in Masterpiece’s and ordered Alavida’s registration expunged.

B.                Issues the SCC Considered

The SCC considered four (4) issues on the appeal. Those issues, and the Court’s findings on each issue, are outlined below.

1. Is the location where a mark is used relevant when considering the likelihood of confusion between an applied for or registered trade-mark and a prior unregistered trade-mark or trade-name

In a word, no. “In order for the owner of a registered trade-mark to have exclusive use of the trade-mark throughout Canada, there cannot be a likelihood of confusion with another trade-mark anywhere in the country” (Masterpiece at para. 31). This is because the Canadian registered trade-mark regime is national in scope, as it grants the owner of a registered trade-mark the exclusive national right to use that mark. Further, the tests for assessing trade-mark and trade-name confusion under the Trade-marks Act (the “Act”) are based upon the hypothetical assumption that both trade-marks and trade-names are used in the same area. Similarly, Act subs. 16(3) states that an applicant for a proposed mark will be entitled to registration unless at the date the application was filed the mark was confusing with a trade-mark or trade-name previously used in Canada.

2. What considerations are applicable in the assessment of the resemblance between a proposed use trade-mark and an existing unregistered trade-mark?

In its decision, the SCC reiterated the relevant Canadian law applicable to the Masterpiece case, which is summarized below. The SCC indicated that the below factors are not an exhaustive list applicable to every instance of trade-mark confusion.

  • A party is able to oppose an application or apply to expunge a registration based on its earlier use of a confusingly similar mark.
  • The test for confusion is whether, as a matter of “first impression in the mind of a causal consumer somewhat in a hurry who sees the [mark] at a time when he or she has no more than an imperfect recollection of the [prior] trade-mark, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks”.
  • The necessity to compare Alavida’s trade-mark with each of Masterpiece’s trade-marks and trade-name, as opposed to comparing Alavida’s trade-mark with all of Masterpiece’s trade-marks and trade-name (the trial judge’s approach).
  • While the degree of resemblance between the marks is the last of the criteria for assessing confusion per subs. 6(5) of the Act (with the first four factors being the inherent distinctiveness of the marks and trade-names and the extent to which they have become known, the length of time the marks or trade-names have been in use, the nature of the wares, services or business, and the nature of the trade), it is the degree of resemblance between the marks that is most likely to have the greatest effect on the confusion analysis.  The remaining factors only “become significant once the marks are found to be identical or very similar” (Masterpiece at para. 49). Accordingly, the SCC first reviewed the trial judge’s consideration of the degree of resemblance of the marks.
  • Whether the proposed use trade-mark would be confusing with the existing unregistered mark should not be considered on the basis of how the proposed use trade-mark was used after the application was filed. Rather the trial judge should recognize that the proposed trade-mark can be used in a variety of ways within the scope of the registration. “Actual use is not irrelevant, but it should not be considered to the exclusion of potential uses within the registration” (Masterpiece at para. 59). The author notes that this principle would appear to apply only to proposed use word marks, not design marks where there would be limited, if any, deviation between the mark as registered vs. the mark as used. In the Masterpiece case, the trial judge held that Alavida had used its mark as MASTERPIECE LIVING as a slogan accompanying Alavida’s corporate identity. The SCC noted that the registration would have conferred the right on Alavida to use MASTERPIECE LIVNG in any size and with any style of lettering, color or design, allowing Alavida to highlight the word MASTERPIECE and give the word LIVING less prominence. Accordingly, it was incorrect to limit consideration to Alavida’s post-application use of its trade-mark to find a reduced likelihood of confusion between the marks.
  • Subsection 6(5)(e) of the Act states that the “degree of resemblance” between the marks is relevant in assessing confusion. The phrase “degree of resemblance” implies that the likelihood of confusion does not arise solely from identical trade-marks but rather that marks with some differences may still result in likely confusion. The SCC held that while the first word of a trade-mark may, for the purposes of distinctiveness, be the most important in some cases, the preferred approach “is to first consider whether there is an aspect of the trade-mark that is particularly striking or unique” (Masterpiece at para. 64).

3. When considering the “nature of the trade” under subs. 6(5) of the Trade-marks Act, what effect does the nature and cost of the wares or services have on the confusion analysis?

While the SCC acknowledged in Masterpiece that it has previously affirmed that consumers in the market for expensive goods may be less likely to be confused when they encounter a trade-mark, the primary test for assessing confusion is still one of “first impression”. Specially:

  • The care or attention to an important or costly purchase must relate to the consumer’s attitude when (s)he encounters the trade-mark, “not to the research or inquiries or care that may be subsequently be taken” (Masterpiece at para. 69). “[S]ubsequent research or consequent purchase… occur after the consumer encounters a mark in the marketplace” (Masterpiece at para. 71), contrary to the “first impression” test.
  • “Properly framed, consideration of the nature of the wares, services or business should take into account that there may be a lesser likelihood of trade-mark confusion where consumers are in the market for expensive or important wares or services” (Masterpiece at para. 70).

The SCC also held that “[c]onsumers of expensive wares or services and owners of associated trade-marks are entitled to trade-mark guidance and protection as much as those acquiring and selling inexpensive wares or services” (Masterpiece at para. 73).

4. When should courts take into account expert evidence in trade-mark or trade-name confusion cases?

The courts should only take expert evidence into account when necessary or relevant to the case. “If a trial judge concludes that proposed expert evidence is unnecessary or irrelevant or will distract from the issues to be decided, he or she should disallow such evidence from being introduced” (Masterpiece at para. 77). In particular:

  • Expert evidence is not generally necessary where the consumer is not expected to be particularly skilled or knowledgeable and there is a resemblance between the marks at issue. In such cases, where wares or services are marketed to the general public, “judges should consider the marks at issue, each as a whole, but having regard to the dominant or most striking or unique features of the trade-mark. They should use their own common sense, excluding influence of their “own idiosyncratic knowledge or temperament” to determine whether the casual consumer would be likely to be confused” (Masterpiece at para. 92).  In specialized markets, evidence about the special knowledge or sophistication of the targeted consumers may be necessary in determining the likelihood of confusion.

 Survey evidence, however, is a different matter.

  • Survey evidence to demonstrate consumer reactions as to whether two (2) marks are confusing may be necessary, as they may potentially provide empirical evidence which demonstrates consumer reactions in the marketplace. However, the use of such evidence should still be applied with caution.
  • Survey evidence must be both reliable (if the survey was repeated it would likely produce the same results) and valid (the right questions were asked of the right participants in the right circumstances to provide the information sought) in order to be relevant.
  • The SCC noted that “[f]or a survey assessing trade-mark confusion to be valid, there must be some consumers who could have an imperfect recollection of the first trade-mark. Simulating an “imperfect recollection” through a series of lead-up questions to consumers will rarely be seen as reliable and valid” (Masterpiece at para. 96).

The admissibility of proposed expert and survey evidence should be considered at the case management stage to avoid the expense of obtaining such evidence which may subsequently be deemed inadmissible at trial.

C.                  The SCC’s Ruling

Applying the law to the specific facts of the Masterpiece case, the SCC found that:

  1. “[T]here is no doubt” that there a strong resemblance between Masterpiece’s trade-mark MASTERPIECE THE ART OF LIVING and Alavida’s MASTERPIECE LIVING trade-mark. A casual consumer observing the Alavida trade-mark and having no more than an imperfect recollection of Masterpiece’s trade-mark would likely be confused into thinking that Alavida was the source of the services associated with Masterpiece’s trade-mark.
  2. While the cost and importance of retirement home services was relevant, even a consumer seeking relatively expensive retirement residence accommodation would be unlikely to recognize that the marks signified difference sources of services given the close resemblance between the parties’ marks.
  3. While the SCC agreed with the trial judge that MASTERPIECE is a distinctive trade-mark in retirement residence services, and that Masterpiece’s evidence of use prior to the filing date of Alavida’s trade-mark application did establish acquired distinctiveness, the SCC noted that the trial judge should have taken into account the rejection of Masterpiece’s trade-mark applications due to confusion with Alavida’s application. The Registrar’s decision supported a finding of a likelihood of confusion between the parties’ marks.

Accordingly, because Masterpiece’s use preceded Alavida’s proposed use application, Alavida was not entitled to register its trade-mark. Consequently, the SCC ordered Alavida’s registration expunged.

D.                  The Decision’s Significance

The Masterpiece decision clarifies the Canadian law on assessing confusion following the trial judge’s decision in the first Masterpiece decision. The SCC has made it undoubtedly clear that the owner of a registered trade-mark can only have the exclusive right to use the registered mark throughout Canada if there is no a likelihood of confusion with another trade-mark in Canada. This ruling aligns with previous Canadian trade-mark law. But the Masterpiece decision is also significant for the SCC’s holding on other issues. These include:

  • Confusion analysis should start with the degree of resemblance between the marks before assessing the other factors relevant to confusion analysis per Act subs. 6(5), such as distinctiveness, the nature of the wares, services or business etc.
  • The preferred approach for assessing the degree of resemblance between marks is to consider whether there is an aspect of the mark at issue that is particularly striking or unique.
  • The primary test for assessing trade-mark confusion for marks associated with expensive goods and/or services is still one of “first impression”, not any research, inquiries or care that may be taken after the consumer encounters the marks in the marketplace.
  • The admissibility of proposed expert and survey evidence should be considered at the case management stage to avoid the expense of obtaining such evidence which may ultimately be deemed inadmissible at trial.
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