Milano Pizza Ltd. v. 6034799 Canada Inc.

Milano Pizza Ltd. v. 6034799 Canada Inc.
Court (s) Database
Federal Court Decisions
Date
2022-03-29
Neutral citation
2022 FC 425
File numbers
T-152-17
Decision Content
Date: 20220404
Docket: T-152-17
Citation: 2022 FC 425
Ottawa, Ontario, April 4, 2022
PRESENT: The Honourable Justice Fuhrer
BETWEEN:
MILANO PIZZA LTD.
Plaintiff
and
6034799 CANADA INC.; CHADI WANSA; YOUSSEF ZAHER, A.K.A. JOSEPH ZAHER; AND YOUSEF NASSAR, A.K.A. JOE NASSAR
Defendants
AND BETWEEN:
6034799 CANADA INC.; CHADI WANSA; YOUSSEF ZAHER, A.K.A. JOSEPH ZAHER; AND YOUSEF NASSAR A.K.A. JOE NASSAR
Plaintiffs By Counterclaim
and
MILANO PIZZA LTD.; MAZEN KASSIS; MARWAN KASSIS; MAHMOUD TABAJA; MILANO BASELINE; AND JOE KASSIS
Defendants By Counterclaim
AMENDED JUDGMENT AND REASONS
Table of Contents
I. Overview_ 3
II. Factual Background_ 5
(1) Parties 5
(2) MILANO PIZZERIA Business and Licences Granted by MPL_ 6
(3) Baxter Location_ 11
(4) Third Party PIZZERIA MILANO in Masson, QC_ 16
(5) Parties’ Live Evidence 17
(6) Prosecution History Regarding the Milano Design Registration_ 17
(7) Other Third Party MILANO Marks 19
III. Procedural History_ 19
IV. 2018 Summary Judgment 20
V. Dispute and Issues 22
VI. Relevant Provisions 25
VII. Analysis 25
A. Is the Milano Design Registration Invalid? 26
(a) Invalidity under the TMA s 18(b) for lack of distinctiveness 27
(i) Insufficient controlled licensing under the TMA s 50(1) 27
(ii) Lengthy co-existence of PIZZERIA MILANO in Masson, QC_ 39
(b) Invalidity under the TMA s 18(c) because of abandonment 42
(c) Invalidity under the TMA s 18(d) because of non-entitlement 42
(d) Invalidity because claimed first use date precedes incorporation date 44
(e) Whether Corporate Defendant’s predecessor used the Milano Design Mark prior to March 1994 45
(f) Invalidity because of lack of disclaimer of MILANO_ 45
(g) Enforceable rights in the registered Milano Design Mark (and/or the Milano Word Marks) 46
G. Actions and communications of MPL and the Personal Defendants by Counterclaim_ 47
(a) Have MPL and the Personal Defendants by Counterclaim made false or misleading statements tending to discredit the business, goods or services of the Defendants, in contravention of the TMA s 7(a)? 48
(b) Have MPL and the Personal Defendants by Counterclaim directed public attention to their goods, services or business in such a way as to cause or be likely to cause confusion with those of the Defendants, in contravention of the TMA s 7(b)? 52
(c) Have MPL and the Personal Defendants by Counterclaim passed off their goods or services as and for those ordered or requested, in contravention of the TMA s 7(c)? 54
(d) Have MPL and the Personal Defendants by Counterclaim made use, in association with goods or services, of any description that is false in a material respect and likely to mislead the public as to their geographical origin, in contravention of the TMA s 7(d)(ii) 55
H. Have the Defendants used the trademark MILANO BAXTER and acquired any reputation or goodwill in this mark? 56
VIII. Conclusions 57
IX. Costs 58
Annex “A” : Summary of the Parties’ Live Evidence at Trial 62
Annex “B” : Relevant Provisions 71
I.
Overview
[1] At the heart of this dispute are take out restaurants operating as MILANO PIZZERIA in Ottawa and surrounding areas, and the Plaintiff’s rights in the trademark MILANO PIZZERIA & Design reproduced below [Milano Design Mark], that are contested by alleged former licensees:
[2] The Milano Design Mark is registered in the Plaintiff’s name under registration number TMA571,144, dated November 22, 2002 for “take out restaurant services, with delivery” based on use in Canada since at least as early March 1994 [Milano Design Registration]. No predecessor in title is named. The word PIZZERIA is disclaimed.
[3] The registrability of the Milano Design Mark at the time of registration is no longer in question in this dispute. Justice Mactavish (as she then was) sided with the Plaintiff on this narrow issue in summary judgment motions brought by these parties (Milano Pizza Ltd v 6034799 Canada Inc, 2018 FC 1112 [2018 Summary Judgment]). The validity of the Milano Design Mark, however, remained in issue at the trial of this matter, along with the Plaintiff’s claimed rights in the unregistered word marks MILANO PIZZERIA, MILANO PIZZA, MILANO’S PIZZA and MILANO’S [collectively, Milano Word Marks]. In these Reasons, I refer to all of the Plaintiff’s asserted trademarks together as “Milano Marks” including, for clarity, the Milano Design Mark.
[4] As explained in greater detail below, the Plaintiff presently claims for trademark infringement, passing off, and depreciation of goodwill, while the Defendants counterclaim for expungement of the Milano Design Registration by reason of non-distinctiveness, abandonment, and non-entitlement. In addition, the Defendants seek redress in their counterclaim for false or misleading statements allegedly made by the Plaintiff tending to discredit the Defendants’ business, goods or services, passing off, and making use by the Plaintiff of materially false descriptions that are likely to mislead the public as to the geographic origin of the goods and services ordered by the public.
[5] For the reasons that follow, the Plaintiff’s action is dismissed, while the Defendants’ counterclaim for the expungement of the Milano Design Registration is granted pursuant to paragraph 18(1)(b) of the Trademarks Act, RSC 1985, c T-13 [TMA]. The Plaintiff has failed to demonstrate sufficient controlled licensing of the Milano Design Mark, as contemplated by the TMA s 50(1), to justify maintaining the Milano Design Registration. The balance of the Defendants’ counterclaim otherwise is dismissed.
[6] Shortly before the trial of this matter, the parties agreed to bifurcate the liability and damages issues. In light of the findings on the liability issues in this matter, however, the damages issues have been rendered moot in my view.
II. Factual Background
[7] Justice Mactavish summarized the factual context, as well as the evidence and submissions the parties presented on their summary judgment motions, which formed the backdrop for her analysis: 2018 Summary Judgment, above at paras 1-23, 42-82. Although overlapping with the summary judgment factual context, what follows is a description of the background facts applicable to the trial of this matter, including a summary of the parties’ evidence. For this background, I draw on the live and documentary evidence at trial, the agreed partial statement of facts submitted by the parties, as well as the 2018 Summary Judgment.
(1) Parties
[8] The Plaintiff/Corporate Defendant by Counterclaim, Milano Pizza Ltd. [Plaintiff or MPL] is an Ontario corporation incorporated on May 14, 1996 by the individual Defendant by Counterclaim, Marwan Kassis.
[9] The individual Defendants by Counterclaim, Mazen Kassis, Marwan Kassis, Mahmoud Tabaja, and Joe Kassis (also known as “Youssef” Kassis) are all shareholders of MPL [collectively, Personal Defendants by Counterclaim]. Mazen Kassis has been the president of MPL since 2013.
[10] The Defendant by Counterclaim, Milano Baseline, is a Milano Pizzeria store located at 2529 Baseline Road in Ottawa [Baseline Location], which opened in April 2016 and is owned and operated by Joe Kassis.
[11] The Corporate Defendant/Plaintiff by Counterclaim, 6034799 Canada Inc. is a Federal corporation incorporated on November 6, 2002 [Corporate Defendant] by the individual Defendants/Plaintiffs by Counterclaim Chadi Wansa, Youssef Zaher and Yousef Nassar (also known as “Joe” Nassar) [collectively, Personal Defendants].
[12] There are several noteworthy familial relationships among the parties and others. Mazen, Marwan and Youssef Kassis are brothers. Mahmoud Tabaja is married to a niece of Yousef Nassar, while Mahmoud’s brother, Mohammed Tabaja is married to Chadi Wansa’s sister. Chadi Wansa and Youssef Zaher are cousins, and Yousef Nassar is their uncle.
(2) MILANO PIZZERIA Business and Licences Granted by MPL
[13] MPL is an Ottawa-based company that licenses independent pizzeria owner-operators. When MPL was incorporated in 1996, there were at least six pizzerias or stores offering take out restaurant services with delivery, in various locations under the name MILANO PIZZERIA and the Milano Design Mark. These locations were opened by Marwan Kassis but later were sold to other owner-operators. By the time of trial, there were thirty-eight MILANO PIZZERIA stores run by independent owner-operators and licensed by MPL [MPL Licensees].
[14] Although the Defendants dispute the licensing aspect, I find that the above description represents the essence of the MILANO PIZZERIA Business, as demonstrated by the evidence, on a balance of probabilities. Whether the licences granted are valid is a different issue that I address later in the Analysis.
[15] The licence agreements were not always in writing but were agreed to verbally or were understood to involve “purchasing” and “territory” in exchange for use of the name “Milano Pizza” or “Milano Pizzeria.” More details emerge in the written licence agreements, and in the parties’ live evidence, described below.
[16] Any written agreements that may have existed prior to the mid 2000s were destroyed in a flood in the home of Marwan Kassis where some MPL records were kept at the time. The written licence agreements in evidence at trial do not cover all of the MILANO PIZZERIA stores that were licensed by MPL but do cover the majority of the licensed stores at the time when MPL commenced its action in 2017. The evidenced agreements are from 2008, 2012-2014, and 2016-2019. The bulk of the agreements are from 2013-2014 and 2017-2018, with only a small number from 2008, 2012, 2016 and 2019. None of these agreements states that it is nunc pro tunc or confirmatory of an existing licensing relationship. Further, Mazen Kassis does not know whether Marwan Kassis had any written licences for the name prior to the flood in his home.
[17] While not identical, the written agreements are substantially similar. Some identify the registered trademark as “Milano Pizza,” while others refer to “Milano Pizzeria” as the registered trademark, which then is defined as the “Business Name” that is licensed to the named MPL Licensee on a non-exclusive basis. Only one of the agreements (the most recent one from 2019) mentions the Milano Design Mark per se. The rules or terms involve purchasing branded products from approved distributors or suppliers, and using the Business Name within an agreed upon territory. No other licence would be awarded or granted for that territory without the licensee’s consent. Any further locations approved by the shareholders of MPL must enter into an agreement that replicates the licence agreements; that said, the licence agreements also provide, contradictorily, that the licence terms within the territory awarded by the MPL Licensee (and approved by MPL), shall be set at the sole discretion of the MPL Licensee.
[18] The written licence agreements refer to “License / franchise fees and royalties” that the MPL Licensee (as opposed to MPL) would receive in the context of an approved second location in the MPL Licensee’s territory. While some MPL Licensees paid a royalty to MPL in the early days, royalties were eliminated when MPL received rebates from the approved supplier Tannis (described below). The rebates initially were earmarked for joint advertising or promotion campaigns but eventually became MPL’s sole source of revenue. MPL’s business model thus can be summed up as purchasing commitments by MPL Licensees and rebates received by MPL for the purchasing commitments.
[19] Although not identified by name in the agreements, the designated suppliers are “Tannis” (that is, Tannis Food Distributors, now known as “Sysco”) and Pepsi. The branded products provided by Tannis include pizza sauce, cheese, pepperoni, and pizza boxes, but do not include vegetables and accounting supplies. Early branded products involved designated third party products. MPL later developed its own line of private label products. The pizza sauce, for example, is sold in cans labelled with the Milano Design Mark as follows:
[20] The written agreements also refer to a menu approved by MPL, taking the location into consideration, but in my view, there is insufficient evidence to demonstrate an approval process and little documentary evidence regarding the menus used in licensed MILANO PIZZERIA stores. In any event, the 2018 Summary Judgment holds that any copyright claim in the menus no longer is in issue (at para 153).
[21] Pursuant to audit or review controls that, at best, can be described as “ad hoc,” Mazen Kassis demanded, in one instance, that a licensee remove Halal offerings from the menu. As well, MPL relies on its Tannis representative to bring to MPL’s attention instances of non-compliance with the purchasing requirement (such as noticeable reductions in purchasing).
[22] As admitted by Mazen Kassis and substantiated by the parties’ live evidence, the MPL Licensees otherwise are free to operate their businesses as they see fit, including store décor, advertising, staffing, uniforms, training, menu offerings (with limited exceptions, such as the one mentioned above) and pricing, and food preparation, including recipes used.
[23] Store signage was patchwork in the early days among MPL Licensees until the Milano Design Mark was developed, the MPL Licensees agreed to adopt it, and Marwan Kassis changed the store signs for the MPL Licensees, at no cost to them, to signs displaying the Milano Design Mark. The MPL Licensees also used the Milano Design Mark on their menus, after receiving a camera-ready version for such purpose, but each location had its own menu. Every MILANO PIZZERIA shop was different, with different combinations of pizza and different menu items. As several of the witnesses testified at trial, however, including Chadi Wansa, it was beneficial to their businesses to be perceived as part of a larger group, or a “franchise” (even though a franchise – in the legal sense – has not been established to date), by using the Milano Design Mark.
[24] The written licence agreements also refer to advertising and promotion campaigns from time to time that MPL and the MPL Licensees agree to make, but in practice, participation in the cooperative or joint campaigns that occurred was voluntary.
[25] Online ordering is a significant feature of the MILANO PIZZERIA Business, with all MPL Licensees depending on the sales generated through the website platform at www.milanopizzeria.ca, including the supporting software and mechanism supplied by menu.ca (that is, Local Media Concepts Inc.) that enables the MPL Licensees to accept online orders. Further details about how online ordering features in these proceedings are provided under the next heading.
(3) Baxter Location
[26] Since 2002, the Defendants have owned and operated a MILANO PIZZERIA store on Baxter Road in Ottawa [Baxter Location]. As described below, they purchased the business from Vahid and Farid Khorrami [Khorrami brothers]. It was an asset purchase that included the equipment, leasehold improvements, and goodwill. They subsequently moved to a nearby location, still on Baxter Road. For clarity, the term Baxter Location means the Defendants’ business in either location.
[27] Marwan Kassis and Youssef Kassis acquired the Baxter Location in 1992 and sold it to Kamal Ibrahim in 1994 who in turn sold 50% of the business to Vahid Khorrami in 1995. Vahid later brought in his brother, Farid with whom he ran the business, after purchasing the remaining 50 per cent. Together, they set up the company 1252106 Canada Inc..
[28] During the time when Vahid Khorrami owned 50% of the business with Kamal Ibrahim, he learned Mr. Ibrahim was paying a monthly fee for the use of the Milano name. After the Khorrami brothers bought the remaining 50% of the business from Kamal Ibrahim, they continued paying the monthly fee for a little while to use the Milano name. The Khorrami brothers also continued making purchases from Tannis, but otherwise they made business decisions for their location without any assistance from MPL during the “trial-and-error” phase of their business.
[29] Chadi Wansa approached Vahid Khorrami in 2002 about purchasing the business. Mr. Wansa worked at the Baxter Location before purchasing it to learn the business. Although initially reluctant to sell the business to Mr. Wansa, Mr. Khorrami changed his mind upon learning there was no MILANO PIZZERIA Business structure and agreed to sell the business to the Corporate Defendant.
[30] The evidence confirms that there was no involvement of MPL in the actual sale, in terms of the purchase documents prepared to effect the transfer of the business to the Defendants. In other words, MPL was not a party to the transaction. This is consistent with the evidence of one of the Personal Defendants, Youssef Nassar, who previously owned a MILANO PIZZERIA store in Russell, Ontario. His niece’s husband, Mahmoud Tabaja, approached him in early 2000 about buying the operation. According to Mr. Nassar, MPL owned the building and had to sign off on the lease, but otherwise, it was not involved with the purchase.
[31] No trademark clearance search was conducted when the Corporate Defendant acquired the business from the Khorrami brothers. Although the asset purchase included the goodwill, there is no mention in the Bill of Sale, and related documentation in evidence, of any trademarks. Further, the Bill of Sale avers that the “said goods [namely, the equipment, leasehold improvements and goodwill] are free and clear from any and all encumbrances.”
[32] None of the purchase documents required the Corporate Defendant to enter into a licence agreement with MPL, nor had 1252106 Canada Inc. been subject to any written licence agreement restrictions regarding its use of the names Milano, Milano Pizza and Milano Pizzeria. None of the written licence agreements in evidence covers the Baxter Location. From the Defendants’ point of view, the MILANO PIZZERIA locations are a somewhat loosely organized cooperative formed for the purposes of funding marketing campaigns, and for joint purchasing from suppliers; this is the structure that always had been in place.
[33] Nonetheless, Tannis was a significant supplier for the Baxter Location until 2016. Although Mr. Wansa attempted to characterize the Defendants’ continued purchasing from Tannis after their acquisition of the Baxter Location as a “gesture,” I find this unpersuasive. For example, Youssef Nassar recalled it was possible meeting with Marwan and Mazen Kassis in 2007 to discuss a decline in purchasing from Tannis because they could buy products cheaper elsewhere. After the meeting, the Defendants’ decline in purchasing from Tannis reversed.
[34] The Defendants also complied with their territory. Mr. Nassar recalled that Vahid Khorrami gave them a map that was on his cooler outlining the territory for the Baxter Location. Mr. Nassar also recalled that he believed he had Marwan Kassis sign the map. Mr. Wansa testified that the map is displayed on what now is their walk-in cooler. A copy of the signed map was produced at trial. Further, the Defendants’ territory changed over time; Marwan Kassis agreed to add Centrepointe to the Baxter Location territory, in exchange for the Defendants agreeing to use a centralized phone number.
[35] In 2003, Chadi Wansa acquired the domain milanopizzeria.ca and hired a web designer to create and set up a website. About nine locations eventually joined the Baxter Location in advertising on the website. When online ordering platforms came along starting in about 2010, with Just Eat, followed by Skip the Dishes and later Uber Eats, the Baxter Location jumped on. All of this was done without any input or oversight by MPL. Online ordering became a significant part (about 25%) of the Baxter Location’s business.
[36] From 2002 until 2013, Mr. Wansa had a friendly relationship with Mazen Kassis. Relations deteriorated after Mr. Kassis became the president of MPL in 2013. At that time, they discussed transferring the milanopizzeria.ca domain to Mr. Kassis. Mr. Wansa agreed to the transfer after Mr. Kassis assured him that the Baxter Location would not be removed from the website for any reason without Mr. Wansa’s consent. Mr. Kassis attempted to have Mr. Wansa sign an “Agreement of Non-Abuse of proprietary Trade name, Trademarks. [sic] and The Milano Pizza Brand” which references the agreed upon transfer of the domain name, among other terms, but there is no evidence that it ever was signed. Mr. Kassis eventually had the domain transferred with the assistance of a domain service provider.
[37] Contrary to the assurances given to the Baxter Location, it was removed from the website and online ordering system, first in November 2015 over refusal to buy a certain size of Pepsi, and then permanently in February 2016 over refusal to purchase pizza boxes (that display the domain milanopizza.ca, a second, related domain owned by MPL). At the end of June 2016, MPL’s counsel sent a letter to Mr. Wansa at the Baxter Location formally terminating permission to use MPL’s trademarks in association with takeout restaurant services and related food offerings.
[38] In the meantime, the Baseline Location, owned and operated by Joe Kassis, opened in April 2016. Facebook listings for the Baseline Location have included the description “Milano Baxter – Iris Cobden.” Further, the menu for the Baseline Location in evidence contains a note addressed generally to the MPL customer from Mazen Kassis, President MPL. The note describes Joe Kassis as “one of two brothers who founded the Milano Pizza franchise.” It also mentions the opening of a second location in the area but leaves the reason for doing so unanswered. A letter to “Milano Pizza Ltd. Customer” contains similar content and, in addition, describes that “we are having grave issues with the location that has until now, been serving our Milano Pizza brand to your dining room table.” [Emphasis in original.]
[39] As a consequence of these developments, the Defendants acquired the domain milanoottawa.com, as well as ottawamilano.com, and launched their own website to restore online ordering for the Baxter Location. In addition, from about the end of June 2016 to the present, the Corporate Defendant has used the trademark shown below in association with goods and services offered and sold by the Baxter Location:
[New Milano Design]
[40] Notwithstanding the adoption of the New Milano Design, the Defendants continue to use signs, menus and social media advertising displaying the Milano Design Mark or a substantially similar variation of the trademark, such as with the word PIZZERIA dropped but with the design elements of the stylized word MILANO maintained.
[41] Also from about the end of June 2016, Tannis no longer is a significant supplier to the Corporate Defendant, which, since then, has purchased pizza ingredients from other suppliers. Prior to at least mid-2015, Tannis was the Corporate Defendant’s primary supplier for pepperoni, pizza sauce and cheese.
(4) Third Party PIZZERIA MILANO in Masson, QC
[42] Dimitrios Stougianos has operated PIZZERIA MILANO in Masson, Québec for the last 40 years. Masson is located about 30 minutes from Ottawa by car. The following is the sign on display in a front window of the restaurant which is open 7 days per week:
[43] The word PIZZERIA MILANO are in the colour red, while the background colour is yellow. The sign also has a red border.
[44] In addition, Mr. Stougianos has been using the same menu for 40 years. It depicts the words “Pizzeria Milano Restaurant,” with the words Pizzeria and Restaurant in green letters and the larger word Milano in red letters, as shown below:
[45] Mr. Stougianos testified that his restaurant sells more pizzas than other items, and he offers delivery to the Masson area. The name of his business, as it appears on receipts for food orders, is “Pizzeria Nouveau Milano.” This always has been the name of his business. When asked how customers refer to his business, he answered “Milano Pizzeria.”
(5) Parties’ Live Evidence
[46] Although the above paragraphs capture the more salient facts from the live evidence in these proceedings (and some of the documentary evidence), a summary of the testimony of the witnesses at trial can be found in Annex “A” below.
(6) Prosecution History Regarding the Milano Design Registration
[47] The underlying application to register the Milano Design Mark was filed on October 6, 1997 under number 857,952 in the name of MPL and took more than five years to proceed to registration. During that time, MPL amended the application to include a disclaimer of the word PIZZERIA, and to redefine the services as “take out restaurant services, with delivery.” At no point was the application amended to identify a predecessor in title, even though the claimed date of first use, March 1994, precedes the date of MPL’s incorporation, May 14, 1996, by more than two years.
[48] MPL also responded to the objection raised and maintained by the Registrar of Trademarks [Registrar] in successive official actions to the registrability of the Milano Design Mark, under the TMA s 12(1)(d), on the basis of confusion with the registered trademark MILANO, registration number TMA380,997 for “restaurant and dining facilities serving Italian food, Western food and seafood.”
[49] MPL’s responses to this registrability objection contained notable admissions, including that “‘Milano’ is actually a common trade term in association with restaurants and cafés in Canada.” In support, MPL pointed to the coexistence of the prior, registered trademark MILANO EXPRESS & Design, registration number TMA267,423, that was considered by former Justice Cullen in Milano Dining Room & Lounge Ltd. et al. v Milano Express (Medicine Hat) Ltd. (1987), 15 CPR (3d) 272 (FCTD) [Milano Dining Room]. At page 274 of the decision, Justice Cullen observed that “Milano,” a city in Italy, is a geographically descriptive term, and “[i]f merely a geographic name with no secondary meaning, it cannot be monopolized and remains in the public domain, by virtue of its geographical significance.”
[50] I infer from the fact of the Milano Design Registration that the Registrar eventually approved, advertised, and allowed the application. The file history in evidence is incomplete in this regard. I note, however, that there is no evidence that any third party opposed the registration of the Milano Design Mark.
(7) Other Third Party MILANO Marks
[51] The documentary evidence in this matter includes file histories for the following trademarks:
- MILANO COFFEE HOUSE design, registration number TMA836,464, for goods and services that include the “operation of restaurants”;
- MILANO FRUITERIE LOGO TRADEMARK, allowed application number 1,703,103, for goods and services that include “restaurant and catering services”;
- MILANO English logo, allowed application number 1,753,787 for goods and services that include “restaurant and catering services.”
III. Procedural History
[52] The following is a summary of the 4-year procedural history leading to the trial of this matter in February 2021.
[53] The Plaintiff filed its Statement of Claim on January 31, 2017 claiming: declaratory and injunctive relief against the Defendants regarding alleged infringement of the Plaintiff’s exclusive right to the Milano Design Mark by reason of the Milano Design Registration, passing off, depreciation of goodwill, and copyright infringement; an order for delivery up of offending material; an order requiring the Defendants to transfer to the Plaintiff the domain name milanoottawa.com and any other relevant domain name; damages or an accounting of profits; aggravated, punitive, and exemplary damages; pre- and post-judgment interest; and solicitor-and-client costs. The Statement of Claim was amended just before trial on January 8, 2021.
[54] The Defendants filed their Statement of Defence and Counterclaim on June 2, 2017, claiming: enumerated damages for the Plaintiff’s removal of the Defendants from the online ordering system found at www.milanopizzeria.ca, and additional damages for other business disruption and confusion caused by the Plaintiff/Defendants by Counterclaim; declaratory and injunctive relief regarding alleged invalidity of the Milano Design Registration pursuant to the TMA s 18, false and misleading statements, and descriptions that were false in a material respect, made by the Plaintiff/Defendants by Counterclaim contrary to the TMA s 7(a) and s 7(d)(ii), and passing off; an order for delivery up of offending material; aggravated, punitive and exemplary damages; solicitor-and-client costs; and pre- and post-judgment interest. The Statement of Defence and Counterclaim was amended on July 28, 2017 and again shortly before trial on January 5, 2021.
[55] The Plaintiffs’ Reply and Defence to Counterclaim was filed on August 11, 2017 and amended on January 8, 2021. The Defendants’ Reply to Defence to Counterclaim was filed on August 24, 2017.
[56] The parties’ amendments to their pleadings flow, to a large extent, from the 2018 Summary Judgment, discussed in more detail below.
IV. 2018 Summary Judgment
[57] As noted, both sides of the dispute moved for summary judgment. The Defendants sought to have the Plaintiff’s action dismissed, while the Plaintiff sought summary judgment in its favour on all issues, except the copyright claim. Justice Mactavish found that there were no genuine issues for trial regarding the impugned registrability of the Milano Design Registration under the TMA s 18(1)(a), and regarding the Plaintiff’s copyright claim. The 2018 Summary Judgment issued for the Plaintiff on the first issue, but favoured the Defendants on the second issue resulting in the partial dismissal of the Plaintiff’s action to the extent that it was framed in copyright (at paras 6 and 155-156). The motions otherwise were dismissed (at paras 7 and 157).
[58] In her analysis of the registrability issue, Justice Mactavish noted that the “Plaintiff specifically disclaimed the use of the word ‘pizzeria’ in relation to the MILANO Design Mark, and it does not now claim ownership of the word ‘Milano’ per se, as a trade-mark or otherwise” [emphasis added]: 2018 Summary Judgment, above at para 95. In her view, the distinctiveness of the Milano Design Mark, as a whole, resides in the combination of the words “Milano” and “Pizzeria”, coupled with the design elements, namely “the layout and font of the words, as well as the pizza slice appearing in the letter ‘O’ of ‘Milano’, which is the most distinctive element of the MILANO Design Mark”: 2018 Summary Judgment, above at paras 96 and 99.
[59] In reaching this distinctiveness conclusion in the context of the registrability analysis, Justice Mactavish referred to the decision in Milano Dining Room, and noted the combination of the words “Milano” and “Express,” coupled with a train logo [Milano Express Mark] which mark was upheld. Although not stated expressly, I find that Justice Mactavish impliedly analogized the format of the Milano Design Mark here, to that of the Milano Express Mark.
[60] In concluding that there was a genuine issue for trial in respect of Plaintiff’s passing off claim (and others), Justice Mactavish noted that the existence of a registered trademark is a complete defence to an action for passing off: 2018 Summary Judgment, above at para 133.
[61] In dismissing the Plaintiff’s copyright claim, Justice Mactavish noted the lack of evidence establishing the creation and provenance of the Milano Design Mark. In particular, even assuming that Marwan Kassis authored the Milano Design Mark, evidence of which was considered “vague, non-specific, inconsistent and incomplete,” there was no evidence he ever assigned his alleged copyright to the Plaintiff: 2018 Summary Judgment, above at paras 148-150. The Plaintiff thus failed to establish any enforceable copyright rights in the Milano Design Mark. Justice Mactavish also found at para 153 that the Plaintiff failed to establish enforceable rights in the menus.
V. Dispute and Issues
[62] Both the Plaintiff and the Defendants allege that the activities of the other party(ies) have caused confusion in the marketplace and harmed their respective businesses. While the parties agree that customers in the Ottawa area have come to know the MILANO PIZZERIA operations of the independent owner-operators as, interchangeably, MILANO, MILANO’S, MILANO PIZZA, MILANO’S PIZZA, and MILANO PIZZERIA, neither the Plaintiff nor the Defendants presented direct evidence of the perceptions of their customers, or of other third parties, in this regard.
[63] Further, for their part, the Defendants challenge whether MPL or any predecessor in title has licensed any of the MILANO PIZZERIA owner-operators. A key issue of the dispute, in my view and as discussed further below, is whether the Plaintiff has demonstrated sufficient controlled licensing within the meaning of subsection 50(1) of the TMA. A determination on this point, in the larger context of distinctiveness, is a necessary antecedent to a consideration of the validity of the Milano Design Registration, which the Defendants challenge in their counterclaim.
[64] Based on the parties’ pleadings and the above factual background, I find that the liability phase of the trial raises the following issues:
A. With respect to the alleged invalidity of the Milano Design Registration:
(a) Whether, as of the date of the Defendants’ counterclaim, namely June 2, 2017, the Milano Design Mark was distinctive of MPL in association with take out restaurant services, with delivery, and if not, whether the registration is invalid under the TMA s 18(b) for at least one of two possible reasons, namely:
(i) whether MPL’s licensing program is valid under the TMA s 50(1) such that use of the Milano Marks by the MPL Licensees enures to MPL’s benefit, and if not, whether this renders the Milano Marks non-distinctive; and/or
(ii) whether the co-existence of other third party MILANO marks/operations, such as PIZZERIA MILANO of Masson, QC, renders the Milano Marks non-distinctive;
(b) Depending, in part, on whether MPL’s licensing program is valid, whether MPL abandoned or intended to abandon the Milano Design Mark, as contemplated by the TMA s 18(c);
(c) Whether the Milano Design Mark was used under licence at the time the application for its registration was filed on October 6, 1997 or its claimed first use date of March 1994, failing which the registration would be invalid under the TMA s 18(d);
(d) Whether the Milano Design Registration is invalidated because the claimed first use date of March 1994 precedes the incorporation date of May 14, 1996 of MPL but the registration does not identify any predecessor in title;
(e) Whether the Corporate Defendant’s predecessor in title used the Milano Design Mark prior to the claimed first use date of March 1994;
(f) Whether the lack of a disclaimer of the word MILANO in the Milano Design Registration invalidates the registration, or whether, alternatively, the registration can be amended to incorporate a disclaimer of the word MILANO in addition to PIZZERIA; and
(g) Whether MPL has enforceable rights in the registered Milano Design Mark (and/or the Milano Word Marks) to sustain its claims that the Defendants have contravened the TMA sections 19, 20, 22, 7(b) and/or 7(c);
B. Whether the Defendants have made any unauthorized use of the registered Milano Design Mark, either before or after any alleged licence or permission to use it ceased in June 2016, in contravention of the TMA s 19;
C. Whether the New Milano Design Mark and the Milano Word Marks, as used by the Defendants, are confusing with the registered Milano Design Mark, such that their unauthorized use constitutes infringement under the TMA s 20;
D. Whether the Defendants’ unauthorized use of the Milano Marks and the New Milano Design Mark has depreciated MPL’s goodwill in registered the Milano Design Mark in contravention of the TMA s 22;
E. Whether the Defendants, by using the Milano Marks and the New Milano Design Mark without MPL’s authorization, have passed off their goods and services as and for those of MPL in contravention of the TMA sections 7(b) and 7(c);
F. Whether the Personal Defendants should be liable for any unlawful acts of the Corporate Defendant;
G. Whether the actions and communications of MPL and the Personal Defendants by Counterclaim to the Defendants’ third party suppliers, service providers, and/or their customers, on the milanopizzeria.ca website and elsewhere, constitute:
(a) making false or misleading statements tending to discredit the business, goods or services of a competitor, in contravention of the TMA 7(a);
(b) directing public attention to their goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time they commenced so to direct attention to them, between their goods, services or business and the goods, services or business of the Defendants, in contravention of the TMA s 7(b);
(c) passing off their goods or services as and for those ordered or requested, in contravention of the TMA s 7(c);
(d) making use, in association with goods or services, of any description that is false in a material respect and likely to mislead the public as to their geographical origin, in contravention of the TMA s 7(d)(ii); and
H. Whether the Defendants have used the trademark MILANO BAXTER and acquired any reputation or goodwill in said trademark.
VI. Relevant Provisions
[65] See Annex “B” below.
VII. Analysis
[66] I begin my analysis by noting that the version of the TMA that existed prior to the implementation of substantial changes on June 17, 2019 is applicable to my consideration of this matter.
A. Is the Milano Design Registration Invalid?
[67] For the reasons explained below, I find Defendants have met their onus of establishing, on a balance of probabilities, that the Milano Design Mark is not distinctive and, hence, the Milano Design Registration is invalid under the TMA s 18(1)(b): Kirkbi AG v Ritvik Holdings Inc., 2003 FCA 297 at para 80 (CanLII), [2004] 2 FCR 241; aff’d 2005 SCC 65. There are two principal reasons for finding non-distinctiveness.
[68] First, regardless of the existence of oral versus written licence agreements, MPL has not satisfied the onus on it to establish that it exercises sufficient control over the services performed (and goods sold) by the MPL Licensees such that MPL would benefit from the deeming provision in the TMA s 50(1): Live! Holdings, LLC v Oyen Wiggs Green & Mutala LLP, 2020 FCA 120 at para 36. In other words, the lack of control means that any use, advertisement or display of the Milano Design Mark (and the Milano Word Marks, for that matter) by the MPL Licensees does not enure, and has not enured, as of the date when the Plaintiff commenced its action, or as of the date of the Defendants’ counterclaim, to the Plaintiff’s benefit.
[69] I add that, given the proliferation and coexistence of independently owned and operated MILANO PIZZERIA locations, the use, advertisement or display of the Milano Design Mark (and the Milano Word Marks) has not enured to their benefit either in the circumstances. I address the latter point further below in the context of the Defendants’ counterclaim.
[70] Second, the lengthy coexistence of PIZZERIA MILANO in Masson, QC undermines the distinctiveness MPL otherwise might have enjoyed in the Milano Design Mark, and the Milano Word Marks, were they validly licensed.
(a) Invalidity under the TMA s 18(b) for lack of distinctiveness
(i) Insufficient controlled licensing under the TMA s 50(1)
[71] I am not satisfied that the Plaintiff has established sufficient