Energizer Brands, LLC v. The Gillette Company

Energizer Brands, LLC v. The Gillette Company
Court (s) Database
Federal Court Decisions
Date
2018-10-29
Neutral citation
2018 FC 1003
File numbers
T-1591-15
Decision Content
Date: 20181029
Docket: T-1591-15
Citation: 2018 FC 1003
Ottawa, Ontario, October 29, 2018
PRESENT: The Honourable Mr. Justice Brown
BETWEEN:
ENERGIZER BRANDS, LLC AND
ENERGIZER CANADA INC.
Plaintiffs
and
THE GILLETTE COMPANY,
DURACELL CANADA, INC.,
DURACELL U.S. OPERATIONS INC.,
AND PROCTER & GAMBLE INC.
Defendants
JUDGMENT AND REASONS
(Redacted version of Confidential version issued October 5, 2018)
I. Nature of the matter and summary of conclusions
[1] This is a motion for summary judgment brought by the Defendants [Duracell] to strike certain allegations from the Plaintiffs’ [Energizer’s] Second Amended Statement of Claim.
[2] Duracell and Energizer are the leading battery brands in Canada.
[3] The allegations Duracell seeks to strike from Energizer’s action arise from the fact that Duracell used the terms “the next leading competitive brand” and “the bunny brand” on labels Duracell attached to packages of its Duracell batteries. Energizer seeks damages from Duracell in relation to Duracell’s use of these two terms under subsection 22(1) and subsections 7(a) and 7(d) of the Trade-marks Act, RSC 1985, c T-13 [Trade-marks Act]. Duracell seeks to strike those claims. Energizer also claims an accounting for profits if it succeeds; Duracell asks the Court to dismiss Energizer’s claims for an accounting of profits. Energizer’s claim for an accounting of profits is made under subsection 52(1) of the Competition Act, RSC 1985, c C-34 [Competition Act]; Duracell says such relief is not available under subsection 52(1).
[4] Energizer opposes Duracell’s motion on its merits, and in addition submits the Court should not decide these issues but leave them for determination by the trial judge. As will be seen I have dismissed this submission.
[5] By way of background, the original Statement of Claim filed by Energizer’s former solicitors was narrower than it is now; it was directed at terms found on different labels Duracell attached to Duracell’s battery packages. Those labels made statements relating to ENERGIZER and ENERGIZER MAX. Both ENERGIZER and ENERGIZER MAX are registered trade-marks of Energizer and therefore may be protected by subsections 22(1) as well as subsections 7(a) and 7(d). The Court is not asked to resolve allegations related to ENERGIZER and ENERGIZER MAX; they remain in the Second Amended Statement of Claim, which is set for a ten-day trial commencing December 3, 2018.
[6] The allegations at issue in this proceeding were added by Energizer’s new counsel, who represented Energizer before the Court, after leave to file a Second Amended Statement of Claim was granted by Prothonotary Milczynski by Order dated August 10, 2016. Duracell did not appeal that Order, although it opposed allowing the amendments for many of the same reasons it now requests they be struck.
[7] For the reasons that follow, the motion is granted in part. In my respectful view, Duracell’s use of the term “the bunny brand” on packages of Duracell’s batteries may offend subsection 22(1) of the Trade-marks Act as construed in accordance with the Supreme Court of Canada’s decision in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23, per Binnie J [Veuve Clicquot]; they will not be struck. Likewise, use of “the bunny brand” may offend subsections 7(a) and 7(d) of the Trade-marks Act, and will not be struck. However, I find Duracell’s use of the term “the next leading competitive brand” on packages of Duracell’s batteries does not offend either subsection 22(1) or subsections 7(a) and 7(d). Pleadings referring to “the next leading competitive brand” in the context of subsection 22(1) and subsections 7(a) and 7(d) will be struck from Energizer’s claim.
[8] In my respectful view, Energizer does not have the right to an accounting for profits under subsection 52(1) of the Competition Act. Energizer’s claim in that respect will be struck.
[9] It is also my view that the motion for summary judgment should be considered and determined at this time.
II. Facts
[10] At a pre-hearing case management conference I asked the parties to agree, if they could, on relevant facts and provide them to the Court. Thereafter, the parties agreed on the following facts, which I accept; I will make further findings of fact in these Reasons:
Duracell’s On-Pack Claims at Issue
[1] The complained of references in issue on this summary judgment motion are as follows:
a) up to 15% longer lasting vs. the next leading competitive brand*
*Next leading alkaline based on Nielsen sales data. AA size. Results vary by device and usage patterns.
b) Durent jusqu’à 15% plus longtemps que les piles de l’autre marque concurrente la plus populaire*
*L’autre pile alcaline AA la plus populaire selon les données sur les ventes de Nielsen. Les résultats varient selon le type d’appareil et la fréquence d’utilisation.
c) Up to 20% LONGER LASTING vs. the bunny brand on size 10, 13 & 312.
d) Durent jusqu’à 20% PLUS LONGTEMPS vs. les piles 10, 13, et 312 de la marque du lapin.
[2] Examples of these references are:
[3] The references were used by Duracell on stickers applied to the front of packages of AA and hearing aid batteries sold to retailers in Canada.
[4] Duracell used the terms “the next leading competitive brand” and “the bunny brand” on its on-pack stickers. Stickering of products is part of communicating with the consumers.
Energizer’s Asserted Trademarks
[5] In its Second Amended Statement of Claim (the “Statement of Claim”), Energizer has asserted the following trademark registrations:
a) ENERGIZER (TMA157162) registered in association with “Electric dry cell batteries for use on electronic, hearing, lighting and horological devices for operation of small electric motors”;
b) ENERGIZER (TMA740338) registered in association [with] “general purpose batteries”;
c) ENERGIZER MAX (TMA580557) registered in association with “batteries”; and
d) RABBIT & DESIGN (TMA399312) registered in association with “batteries”:
[6] Duracell has consented to Energizer’s proposed amendment to the Statement of Claim with respect to adding trademark registration ENERGIZER BUNNY & Design (TMA943350) to the list of asserted trademark registrations. ENERGIZER BUNNY & Design (TMA943350) is registered in association with “general purpose batteries; general purpose battery chargers”:
[7] Energizer always used the word “ENERGIZER” when it advertised its batteries in Canada from 2012 to 2016.
The Next Leading Competitive Brand
[8] Energizer has never used the term “the next leading competitive brand” on battery packaging in Canada.
The Energizer Bunny
[9] Energizer’s bunny mascot is referred to as the “Energizer Bunny” by Energizer.
[10] The Energizer Bunny carries a drum which says ENERGIZER and in some depictions the Energizer Bunny has an ENERGIZER battery on its thigh as seen below.
[11] The Energizer website has a separate section devoted to the Energizer Bunny.
Leading Brands
[12] The two leading brands of batteries in Canada are Duracell and Energizer.
III. Affidavits and cross-examinations
[11] A private investigator hired by Duracell, James Meadway, was instructed by Duracell’s counsel to conduct a marketplace investigation on products that contained comparative advertising claims comparing a product to a competitor’s product specifically or generically. In August 2017, Meadway went to thirteen stores across the Greater Toronto Area. In his investigation, Meadway identified seven products that contained comparative claims where a competitor’s product was referred to as a “leading” brand or similar.
[12] Energizer submits that Duracell’s evidence suggests that the use of “next leading competitive brand” is not commonplace. Energizer states that after Meadway visited thirteen stores carrying thousands of products, he was only able to find a handful labelled in a manner similar to the “next leading competitive brand”.
[13] Energizer further submits that Meadway did not know what the leading brands were for the products he identified. Energizer says products like cat food, which Meadway identified, must be contrasted with the battery market, where it is agreed that there are two leading brands, Duracell and Energizer. In this connection, Energizer’s private investigator, Junior Williams attended at three stores where he found: Walmart Supercenter had eleven brands of cat food and three brands of paper plates; Real Canadian Superstore had five brands of toilet paper and five brands of orange juice; and Shoppers Drug Mart had eleven brands of cleaner bars and eight brands of battery-operated toothbrushes. These were types of product where Meadway found use of terms similar to “the next leading competitive brand”.
[14] There were two other affiants, both employees of the parties.
[15] Mark Pawliw is Sales Director for Duracell Canada, Inc, and managed Duracell’s Canadian external sales force. Pawliw held relatively senior marketing positions in Duracell since 2010. He deposed that from August 2014 to January 2016, Duracell sold approximately |||||||||||||||||| packs of AA batteries to Canadian retailers bearing the sticker with the “next leading competitive brand” claim. Pawliw’s evidence was that Duracell used the term “next leading competitive brand” based on data Duracell obtained from the AC Nielsen Company, which maintains a database of retail analytics. The Nielsen sales data indicated that Energizer AA batteries were the next leading competitive brand, next to Duracell.
[16] Pawliw also deposed that from July 2015 to January 2016, Duracell sold approximately |||||||||||| packs of hearing aid batteries bearing stickers that used the term “the bunny brand” in sizes 10, 13, and 312 to Canadian retailers. No Duracell AA batteries bore a sticker referring to “the bunny brand”. Pawliw deposed and as with the number of hearing aid batteries, I accept for these purposes, and subject to any trial court findings in this regard, that approximately |||||||||||| packs of hearing aid batteries bearing the sticker using the word “Energizer” were sold to Canadian retailers from October 2014 to July 2015. In September 2015, about |||||| AA battery packs bearing the sticker using the word “Energizer Max” were sold to Canadian retailers. While I am not asked to make a decision in relation to the use of these two terms, as noted already, both ENERGIZER and ENERGIZER MAX are registered trade-marks of Energizer.
[17] Pawliw also deposed that from his business experience, as well as his experience as a consumer, he has seen descriptive terms such as the “next leading competitive brand” and “the leading brand” used in the marketing of consumer products to designate a competitive brand for comparative advertising purposes.
[18] As Energizer submits, I accept that Pawliw admitted Duracell was familiar with the Energizer advertisements that show the Energizer Bunny. Pawliw - and hence Duracell - was familiar with the Energizer packages that display the Bunny and recognized a number of Energizer’s video advertisements with the Bunny. I accept Pawliw’s evidence in this respect notwithstanding, as Energizer submits, Pawliw did not have direct responsibility in the area of marketing. I note also that Duracell did not produce Peter Gorzkowski on this motion, notwithstanding he had previously given evidence on discovery. Pawliw testified that Duracell staff in the United States were responsible for the on-package claims.
[19] Energizer submits that some of Duracell’s sales numbers might be inaccurate (low) for a number of reasons: the last date of sales for some offending products might be incorrect, sales might not take into account products that remained on the shelf, some displays bore the offending terms that were not on the packages actually sold, and because of issues concerning the placement of stickered and non-stickered product in the same displays. However, again I am not called upon to precisely quantify the number of allegedly offending products sold as that is for the trial judge.
[20] I am satisfied that to the extent Energizer may have valid claims against Duracell based on subsections 22(1), 7(a) and 7(d), and based on the rough sales volumes alone as noted above (which if Energizer is correct may be higher), the most significant potential claims are those related to use of the term “the next leading competitive brand” on Duracell’s AA batteries. As discussed more fully below, I am persuaded that resolving this claim at this point in the proceeding will significantly reduce the cost of trial preparation including discovery and documentary matters. Such early resolution will also reduce both the cost and time required for the trial of Energizer’s action.
[21] In cross-examination, Pawliw said he was aware of labelling “problems” with Duracell’s on-package claims comparing Duracell’s batteries with those of Energizer. He testified on cross-examination:
[38] Q. Prior to the time it [the action] was started, were you aware of any problems with the claims on the Duracell packaging?
A. Yes.
[39] Q. And what were you aware of?
A. We were aware that some products had come in with the Energizer -- with an Energizer name and a claim.
[40] Q. When you say the Energizer name and the claim, are you referring both to the Energizer Max and the Energizer name or just the Energizer name?
A. The Energizer Max and the Energizer name.
[41] Q. And I take it that Duracell was aware that there was a problem with using the word “Energizer” on the packaging?
A. At the time this happened in Canada, it was brought to my attention that it was there, and then obviously discussion occurred on next steps.
[42] Q. And the next steps were to remove it from the packaging; is that right?
A. Correct.
[43] Q. And that was because Duracell understood it should not have that on its packaging?
R/F MR. LUE: That’s refused. [Court note: Mr. Lue is counsel for Duracell]
[22] Pawliw’s concern was shared by others at Duracell. Energizer filed excerpts of the discovery transcript of Gorzkowski, a senior member of Duracell’s staff. Gorzkowski’s discovery evidence is more revealing:
[458] Q. When was the investigation commenced with respect to the labelling of production number 1?
A. Around October 2015.
[459] Q. Do you have a more specific date?
A. I would have to check. I don’t know.
[460] Q. Okay. And what prompted the investigation?
A. Me finding these products in the marketplace.
[461] Q. And how did you find them? You were shopping at Shoppers and you took a look at Duracell batteries?
A. Correct.
[462] Q. And you were looking at Duracell, you noticed the labelling, and you said there is something wrong here?
A. Correct.
[463] Q. And what prompted you to notice there was something wrong?
A. It said “versus Energizer Max”.
[464] Q. And you knew -- and what…what --
A. From my understanding of trademark law in Canada, we are not allowed to use trademarks without express written consent on point-of-sale materials.
[Emphasis added.]
[23] Pawliw in cross-examination also admitted and I accept that Duracell used the term “the next leading competitive brand” as an indirect reference to Energizer in relation to its AA batteries.
[85] Q. But you [sic] would be the two main leading brands, Duracell and Energizer; is that accurate?
A. Yes.
[86] Q. And the packaging on the batteries that said “next leading competitive brand”, I take it that was meant to give a message that Duracell wanted to convey that the next leading brand was Energizer?
A. No. I wouldn’t necessarily agree with that.
[87] Q. It means a competitive brand, correct --
A. Mm-hmm.
[88] Q. -- the next leading competitive brand? And the next leading competitive brand, as you understood it, was Energizer?
A. At certain times, yes, so an indirect reference.
[89] Q. An indirect reference to Energizer?
A. Yes.
[Emphasis added.]
[24] Pawliw admitted and I accept that Duracell’s use of “the bunny brand” on packages of hearing aid batteries was in fact a “reference to Energizer”:
[234] Q. So, if we turn to paragraph 19 of your affidavit then, and you’re referencing there the Bunny brand stickers which talk about lasting “up to 20% longer lasting vs. the Bunny brand”, and you say there that the claim of “up to 20% longer lasting” is in reference to Energizer size 10, 13, and 312, and so the reference to the Bunny brand was in reference to Energizer; is that correct?
A. Yes.
[25] I have no difficulty finding on a balance of probabilities that Duracell’s use of both “the next leading competitive brand” and “the bunny brand” were intended by Duracell to refer to Energizer’s batteries.
[26] The other employee affiant was Amanda Broderick, Senior Director, Global Marketing at Energizer Holdings, Inc. From May 2015 to January 2018, Broderick oversaw marketing through the Americas.
[27] Broderick deposed that Energizer does not own a registered trade-mark in Canada for the phrase “bunny brand”. Broderick deposed that the Energizer Bunny is featured prominently on Energizer’s packaging and advertising of its batteries in Canada.
[28] In this connection, I note that Energizer has a design mark trade-mark registration described as ENERGIZER BUNNY & Design (TMA943350). This design mark is described on the registration as the ENERGIZER BUNNY; the registered design trade-mark is as follows:
[29] However, Energizer does not have a registered word mark trade-mark for ENERGIZER BUNNY. While that term is used on the design mark’s registration (TMA943350) as the design mark’s “mark descriptive reference”, Energizer does not have a word mark registration for ENERGIZER BUNNY.
[30] I also note that Energizer Brands, LLC filed a word mark trade-mark application for the words ENERGIZER BUNNY (1724082) on April 16, 2015. However, as of December 13, 2016, trade-mark registration has not been granted.
[31] Broderick deposed that from 2014 to 2016, Energizer spent in excess of |||||||||||||||||||||| in Canada to market its Energizer batteries. This amount included media buys and creative productions. Broderick noted that Canada also benefits from the creative production carried out in the US, which is in addition to these amounts.
[32] Broderick deposed that Energizer and its predecessor Eveready Canada have been selling, distributing, and promoting Energizer batteries in Canada with the iconic Energizer Bunny since at least 1992. These companies advertised the Energizer Bunny in relation to their batteries in numerous publications. She said Energizer has taken part in national promotions relating to movie vouchers, Visa gas cards, Bunny Bucks, and more all in aid of promoting the Energizer Bunny in association with their batteries. Energizer products with the Energizer Bunny are also advertised digitally through online shopping sites, news sites, and social media as well as in flyers and other media. Energizer has also used the Energizer Bunny in sponsoring celebrity athletes such as Canadian Olympian hockey star Cassie Campbell and NHL hockey star Alex Ovechkin.
[33] Broderick also deposed that in 2017, the Energizer Bunny was inducted into the Madison Avenue Wall of Fame as the “Most Iconic Mascot”. This recognition was made possible by online fan votes. Further, she deposed that in 2017, the Energizer Bunny was featured by appearing in person at the Toronto International Film Festival and New York Fashion Week. These appearances created significant media attention around the Energizer Bunny.
[34] I agree with Duracell that Broderick was evasive and reticent on certain points and incorrect on others. Despite Broderick’s hesitation in conceding the points, I find on a balance of probabilities that Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” were aimed at Energizer’s batteries as indeed Duracell admitted.
[35] I agree Energizer did not use the term “the bunny brand” on battery packaging or advertising materials in Canada. I also accept there was no evidence Energizer used the terms “Bunny Bucks” or “Bunny Birthday Cash back”. Further, Broderick gave no evidence of the use of DO YOU HAVE THE BUNNY INSIDE? In any event, Energizer does not rely on the registered trade-mark DO YOU HAVE THE BUNNY INSIDE? (TMA 590453) in its Second Amended Statement of Claim.
[36] I am also satisfied Energizer never used “the next leading competitive brand” on on-package labels or displays. That said, Energizer did use the term “other leading brand” in advertisements for lithium batteries that are not at issue here; those words were not found on package labels. Broderick deposed that according to data from AC Nielsen Company, which maintains a database of retail analytics, Energizer and Duracell make up over 80% of the Canadian market for batteries. This is not disputed.
IV. Issues
[37] At the hearing management conference referred to at the outset of these Reasons, I asked counsel to agree, if they could, on the issues to be decided at the hearing and to give me a summary of their submissions on each. Thereafter they agreed upon the following four issues for determination:
1. Does section 22 of the Trade-marks Act apply to Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” (and their French equivalents) on its on-pack stickers?
2. Do sections 7(a) and 7(d) of the Trade-marks Act apply to Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” (and their French equivalents) on its on-pack stickers?
3. Can a claim for profits be made under section 52 of the Competition Act?
4. Is Duracell’s request for partial summary judgment appropriate in the circumstances of this action?
V. Analysis
A. Nature of Motion
[38] I will deal separately with each of the four issues raised. Before doing so, I wish to review the law with respect to summary judgment motions such as this.
[39] The Federal Courts Rules, SOR/98-106 [Federal Courts Rules] provide:
General Principle
Principe general
3 These Rules shall be interpreted and applied so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits.
3 Les présentes règles sont interprétées et appliquées de façon à permettre d’apporter une solution au litige qui soit juste et la plus expéditive et économique possible.
…
…
Motion by a Party
Requête d’une partie
213 (1) A party may bring a motion for summary judgment or summary trial on all or some of the issues raised in the pleadings at any time after the defendant has filed a defence but before the time and place for trial have been fixed
213 (1) Une partie peut présenter une requête en jugement sommaire ou en procès sommaire à l’égard de toutes ou d’une partie des questions que soulèvent les actes de procédure. Le cas échéant, elle la présente après le dépôt de la défense du défendeur et avant que les heure, date et lieu de l’instruction soient fixés.
…
…
If no genuine issue for trial
Absence de véritable question litigieuse
215 (1) If on a motion for summary judgment the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant summary judgment accordingly.
215 (1) Si, par suite d’une requête en jugement sommaire, la Cour est convaincue qu’il n’existe pas de véritable question litigieuse quant à une déclaration ou à une défense, elle rend un jugement sommaire en conséquence.
[40] In Apotex Inc v Pfizer Inc, 2016 FC 136 [Apotex], Diner J held at para 31:
[31] The basic principle in a motion for summary judgment is that the parties each put their “best foot forward” in terms of evidence. As a result, the Court is entitled to assume that no new evidence would be presented if the issue were to go to trial (Rude Native Inc v Tyrone T Resto Lounge, 2010 FC 1278 at para 16). In Hryniak v Mauldin, 2014 SCC 7 at para 49 [Hryniak], the Supreme Court stated that there is no genuine issue for trial when:
…the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[41] The moving party (Duracell in this case) has the onus of proving there is no genuine issue for trial. That said, there is also a burden on Energizer to put forward serious, credible evidence demonstrating the existence of a genuine issue for trial. See Apotex at para 32:
[32] In this motion, then, while the onus is on the [moving party] to demonstrate that there is no genuine issue for trial …, the [respondents] cannot raise a genuine issue for trial on bald statements, a lack of knowledge, or denials alone (Moroccanoil Israel Ltd. v. Lipton, 2013 FC 667 (F.C.)). The burden on the [respondents] is to put forward serious, credible evidence demonstrating the existence of a genuine issue for trial (MacNeil Estate v. Canada (Department of Indian & Northern Affairs), 2004 FCA 50 (F.C.A.); NFL Enterprises L.P. v. 1019491 Ontario Ltd. (1998), 229 N.R. 231 (Fed. C.A.)).
[42] If there is no legal basis in the claim based on the law or the evidence brought forward, there is no genuine issue for trial: Burns Bog Conservatory Society v Canada (Attorney General), 2014 FCA 170 at para 35, per Gauthier JA, aff’d by Manitoba v Canada, 2015 FCA 57 at para 15, per Stratas JA.
[43] I will now proceed to analyze the issues.
B. Issue 1 – Does subsection 22(1) of the Trade-marks Act apply to Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” (and their French equivalents) on its on-pack stickers?
[44] The starting point for this analysis is subsection 22(1) of the Trade-marks Act:
Depreciation of goodwill
Dépréciation de l’achalandage
22 (1) No person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.
22 (1) Nul ne peut employer une marque de commerce déposée par une autre personne d’une manière susceptible d’entraîner la diminution de la valeur de l’achalandage attaché à cette marque de commerce.
[Emphasis added.]
[Nos soulignés.]
[45] At the outset I wish to make two points. First, I emphasize that the Court is not asked to and does not decide whether use of the terms in issue in the parts of this action now under review, was use “likely to have the effect of depreciating the value of the goodwill attaching to the mark.” The parties agreed the analysis is to proceed in the same manner whether or not there is depreciation. I make no finding on depreciation. The Court is dealing with the threshold issue: essentially, even assuming depreciation, does subsection 22(1) apply. Secondly, my findings in this matter apply equally to the English and French versions of the relevant trade-marks.
[46] The positions of the parties are as follows:
Duracell’s Position:
Duracell asks the Court to find that section 22 of the Trade-marks Act does not apply to Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” on battery packaging.
Section 22 of the Act requires use of a registered trademark. The only registered trademarks that Energizer has alleged are the marks ENERGIZER and ENERGIZER MAX and an illustration of a rabbit. Energizer has admitted that it does not own registered trademarks for the terms “the next leading competitive brand” and “the bunny brand”. Section 22 is not violated if a Defendant uses a term other than the trademark, as registered or a minor misspelling of the registered trademark. The use of the terms “the next leading competitive brand” and “the bunny brand” do not fall within that scope.
Energizer has alleged that the scope of section 22 extends to use of terms that are not registered trademarks on the basis that consumers understand that use of these terms refers to registered trademarks. This is not the test under section 22. Even if it was, which is denied, Energizer has failed to produce any evidence of any such understanding by consumers.
Energizer’s claims with respect to the terms “the next leading competitive brand” and “the bunny brand” are disingenuous. Not only is the use of these types of comparative advertising terms common in the marketplace, Energizer itself has used the term “The Other Leading Brand” to refer to Duracell in advertising its own batteries.
Energizer’s Position:
The Supreme Court of Canada held that section 22 of the Trade-marks Act applies even though the use of the mark at issue may differ from the trade-mark as registered (“Cliquot” versus the registered mark “Veuve Clicquot”) if it causes a “connection or mental association” in the mind of a consumer [ed. note: footnote moved here: Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23 at paras. 38 & 47....]. Duracell has admitted that the intended purpose of the words “the next leading competitive brand” and “the bunny brand” were to refer to Energizer, and has filed no evidence to suggest that the intended purpose of referencing the ENERGIZER Trade-marks was not met by its packaging, i.e., that it failed in its messaging.
Duracell comes to the court, after admitting that it intended to refer to the ENERGIZER Trade-marks and asks that it be exempted from the provisions of section 22 of the Trade-marks Act because it used terms to evoke the ENERGIZER Trade-marks, without using the word ENERGIZER. This is clearly contrary to the meaning of the section as it has been interpreted by the Supreme Court of Canada.
Duracell argues that the comparative advertising using the terms “the next leading competitive brand” and “the bunny brand” are common in the industry. There is no evidence to suggest that “the bunny brand” is anything but a reference to ENERGIZER. With respect to “the next leading competitive brand”, Duracell’s own evidence shows that this terminology is not commonly used on packaging. The Duracell private investigator went to 13 stores and looked at thousands of products but found only a handful, none of which were brands where he could identify “the next leading competitive brand”. He did not find the Energizer advertisement referred to by Duracell. While the Energizer advertisement is not “use” under the Trade-marks Act (as it is not on the goods), Duracell can bring an action if it believes it is entitled to do so. Duracell’s argument appears to concede the term “the next leading competitive brand” can evoke the trade-mark of a competitor.
Accordingly, the answer to the first issue is that section 22 of the Trade-marks Act does apply to Duracell’s use of the terms “the next leading competitive brand” and “the bunny brand” (and their French equivalents) on its on-pack stickers.
[47] In essence, Duracell submits that the prohibition in subsection 22(1) applies only to registered trade-marks and minor misspellings of a registered trade-mark. Energizer says this is too narrow an interpretation. Clearly the central issue involving subsection 22(1) is whether or not it applies to the two terms at issue, namely “the next leading competitive brand” and “the bunny brand” found on Duracell’s stickers on its Duracell battery packages.
[48] It is not disputed that neither “the next leading competitive brand” nor the “the bunny brand” are registered trade-marks of Energizer, and I so find.
[49] In summary and as explained below, on the interpretation of the subsection 22(1) issue, I agree with Energizer. In my view, the interpretation of subsection 22(1) advanced by Duracell is too narrow and does not respect the law determined by the Supreme Court of Canada in Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 [Veuve Clicquot]. While Duracell’s position might have been correct prior to Veuve Clicquot, that is no longer the case. In my respectful view, Veuve Clicquot materially changed the law on the interpretation of subsection 22(1). The change in the law was recently confirmed by the Federal Court of Appeal: Venngo Inc v Concierge Connection Inc, 2017 FCA 96, per Gleason JA [Venngo]. In my respectful view, subsection 22(1) construed as required by Veuve Clicquot prohibits Duracell’s use of the term “the bunny brand” even though it is not a registered trade-mark of Energizer. However, subsection 22(1) does not prohibit Duracell’s use of “the next leading competitive brand”.
[50] The leading authority on subsection 22(1) is Veuve Clicquot. The Supreme Court of Canada discusses subsection 22(1) in considerable detail at paras 38–70 of its unanimous decision authored by Binnie J. Important excerpts include:
B. Likelihood of Depreciation of the Value of Goodwill
[38] The conclusion that use of the trade-marks “in the same area” would not lead to confusion is not an end to the case. Here, unlike in Mattel, there is an additional ground of complaint. Section 22(1) provides:
22. (1) No person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.
The depreciation argument, while it was treated as something of a poor cousin by the appellant in the courts below, and was not the subject of much evidence, was brought to the fore in this Court in part due to the intervention of INTA. Nothing in s. 22 requires a demonstration that use of both marks in the same geographic area would likely lead to confusion. The appellant need only show that the respondents have made use of marks sufficiently similar to VEUVE CLICQUOT to evoke in a relevant universe of consumers a mental association of the two marks that is likely to depreciate the value of the goodwill attaching to the appellant’s mark.
...
[43] In 2003, the U.S. Supreme Court denied the anti-dilution remedy to Victoria’s Secret, the women’s lingerie chain, which had sued VICTOR’S LITTLE SECRET, an adult novelty store selling “tawdry merchandise”: Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003). Under the federal Act, as it then stood, proof of actual harm rather than just likelihood (as under our Act) was required. The court commented however that
at least where the marks at issue are not identical, the mere fact that consumers mentally associate the junior user’s mark with a famous mark is not sufficient to establish actionable dilution. . . . “Blurring” is not a necessary consequence of mental association. (Nor for that matter, is “tarnishing.”) [pp. 433-34]
...
[45] The depreciation or anti-dilution remedy is sometimes referred to as a “super weapon” which, in the interest of fair competition, needs to be kept in check.…
...
[46] Section 22 of our Act has received surprisingly little judicial attention in the more than half century since its enactment. It seems that where marks are used in a confusing manner the preferred remedy is under s. 20. Equally, where there is no confusion, claimants may have felt it difficult to establish the likelihood that depreciation of the value of the goodwill would occur. Be that as it may, the two statutory causes of action are conceptually quite different. Section 22 has four elements. Firstly, that a claimant’s registered trade-mark was used by the defendant in connection with wares or services — whether or not such wares and services are competitive with those of the claimant. ... [Federal Court note: the second, third and fourth elements are deleted because they are not relevant in this proceeding] I will address each element in turn.
(1) Use of the Claimant’s Registered Mark
[47] “Use” is defined in s. 4 of the Act as follows:
4. (1) A trade-mark is deemed to be used in association with wares if, at the time of the transfer of the property in or possession of the wares, in the normal course of trade, it is marked on the wares themselves or on the packages in which they are distributed or it is in any other manner so associated with the wares that notice of the association is then given to the person to whom the property or possession is transferred.
(2) A trade-mark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services.
. . .
[48] The appellant acknowledges that the respondents never used its registered trade-marks as such, but says that use of the word Cliquot conveys the idea. I agree it was no defence that Cliquot is differently spelled. If the casual observer would recognize the mark used by the respondents as the mark of the appellant (as would be the case if Kleenex were spelled Klenex), the use of a misspelled Cliquot would suffice. The requirements of s.22 have to be interpreted in light of its remedial purpose. As Dr. Fox noted, albeit in relation to infringement:
. . . in the course of use[r] of a trade mark the purch[a]sing public may come to regard something that does not constitute the whole of the registered trade mark as being the distinguishing feature, and it is therefore possible . . . only that portion of [the registered trademark] that consists of the name of the owner will commend itself to them as the distinguishing feature.
[Citations omitted.]
...
[49] The appellant led evidence that “Clicquot” was the distinguishing feature of the VEUVE CLICQUOT mark. This was accepted by the trial judge; however, she went on to hold:
In my view a consumer who saw the word “Cliquot” used in the defendants’ stores would not make any link or connection to the [plaintiff’s mark].[para. 96]
This, it seems to me, is the critical finding which the appellant must overcome if its appeal is to succeed. Without such a link, connection or mental association in the consumer’s mind between the respondents’ display and the VEUVE CLICQUOT mark, there can be no depreciation of the latter. As Professor McCarthy writes:
. . . if a reasonable buyer is not at all likely to think of the senior user’s trademark in his or her own mind, even subtly or subliminally, then there can be no dilution. That is, how can there be any “whittling away” if the buyer, upon seeing defendant’s mark, would never, even unconsciously, think of the plaintiff’s mark? So the dilution theory presumes some kind of mental association in the reasonable buyer’s mind between the two parties and the mark. [Footnote omitted; emphasis in original; _ 24:70, at p. 24-143.]
The appellant’s s. 22 claim fails at the first hurdle.
[Emphasis added.]
[51] In addition to Veuve Clicquot, this Court is also bound by the Federal Court of Appeal’s recent determination of the proper interpretation of subsection 22(1) in Venngo. The Federal Court of Appeal reviewed Veuve Clicquot and noted that subsection 22(1) applies where the casual observer would recognize the mark used by the respondents as the mark of the appellant (as would be the case if Kleenex were spelled Klenex), or, stated another way, where a defendant has used a mark sufficiently similar to evoke in a relevant universe of consumers a mental association of the two marks that is likely to depreciate the value of the goodwill attaching to the appellant’s mark. The Federal Court of Appeal added that subsection 22(1) applies to the use of a mark that, while not identical to the plaintiff’s registered trade-mark, is so closely akin to the registered mark that it would be understood in a relevant universe of consumers to be the registered mark: per Gleason JA at paras 79 to 81:
[79] Turning to Venngo’s argument in respect of the Federal Court’s treatment of its claim under section 22 of the Trade-marks Act, I agree with Venngo that a defendant need not use a mark that is completely identical to the plaintiff’s trade-mark to be liable under section 22. Rather, the Supreme Court of Canada has held that this section addresses circ