Diageo Canada Inc. v. Heaven Hill Distilleries, Inc.

Diageo Canada Inc. v. Heaven Hill Distilleries, Inc.
Court (s) Database
Federal Court Decisions
Date
2017-06-12
Neutral citation
2017 FC 571
File numbers
T-740-14
Notes
Digest
Decision Content
Date: 20170612
Docket: T-740-14
Citation: 2017 FC 571
Ottawa, Ontario, June 12, 2017
PRESENT: The Honourable Mr. Justice Boswell
BETWEEN:
DIAGEO CANADA INC.
Plaintiff/
Defendant by Counterclaim
and
HEAVEN HILL DISTILLERIES, INC. and DIAMOND ESTATES WINES & SPIRITS LTD. d.b.a. KRISCOTT DISTRIBUTORS
Defendants/
Plaintiffs by Counterclaim
JUDGMENT AND REASONS
TABLE OF CONTENTS
SECTIONS:
PARAGRAPH #
I. Background
[4]
A. Diageo
[4] – [8]
B. Heaven Hill and Diamond Estates
[9] – [14]
C. ADMIRAL NELSON’S Revised Packaging
[15] – [20]
II. Issues
[21]
III. Analysis
[22]
A. Is Diageo’s action an abuse of the Court’s process?
[22] – [25]
B. Is Diageo estopped by acquiescence, laches and delay from asserting rights in and to its trademarks and rum products as against Heaven Hill?
[26] – [34]
C. Are any of Diageo’s claims statute-barred as against Heaven Hill?
[35] – [37]
D. Are any of Diageo’s Trade-mark Registrations invalid by reason of non-distinctiveness, non-entitlement or abandonment, and if so should they be expunged?
[38] – [45]
E. Has Heaven Hill sold, distributed or advertised any of its ADMIRAL NELSON’S rum products in Canada?
[46] – [56]
F. Has Heaven Hill passed off its ADMIRAL NELSON’S rum products as the goods of Diageo in contravention of subsections 7(b) and 7(c) of the Act?
[57]
(1) The Parties’ Submissions
[57] – [63]
(2) Passing off
[64] – [76]
(3) Has Diageo Established Its Passing Off Claim?
[77]
(a) Is the trade dress or get-up associated with Diageo’s CAPTAIN MORGAN rum bottle, labels, and character a valid and enforceable trademark?
[77] – [80]
(b) Goodwill
[81] – [83]
(c) Misrepresentation
[84] – [100]
(d) Damages
[101] – [106]
G. Does Heaven Hill’s use of its character or label trademarks in association with ADMIRAL NELSON’S rum products constitute an infringement of Diageo’s exclusive right to use its registered trademarks, contrary to section 20 of the Act?
[107]
(1) Pertinent Law
[107] – [115]
(2) Inherent Distinctiveness and Fame
[116] – [117]
(3) Length of Time in Use
[118] – [119]
(4) Nature of the Goods and the Trade
[120] – [121]
(5) Degree of Resemblance
[122] – [125]
(6) Likelihood of Confusion
[126] – [135]
H. Is Heaven Hill’s use of its character or label trademarks in association with ADMIRAL NELSON’S rum products likely to depreciate the value of the goodwill associated with Diageo’s registered trademarks, contrary to subsection 22(1) of the Act?
[136] – [140]
I. Is Heaven Hill entitled to any of the relief requested in its Amended Statement of Defence and Counterclaim?
[141] – [148]
J. Is Diageo entitled to any of the relief requested in its Amended Statement of Claim?
[149] – [151]
IV. Conclusion
[152]
[1] Diageo Canada Inc., the Plaintiff/Defendant by Counterclaim [Diageo], has brought this action against Heaven Hill Distilleries, Inc. [Heaven Hill] and Diamond Estates Wines & Spirits Ltd. d.b.a. Kriscott Distributors [Diamond Estates], the Defendants/Plaintiffs by Counterclaim, alleging that they have infringed Diageo’s trademarks associated with its CAPTAIN MORGAN rum products and also that they have passed off their ADMIRAL NELSON’S rum products as those of Diageo. Diageo seeks, among other things, damages and injunctive relief as a result of the activities of Heaven Hill and Diamond Estates. Diageo’s allegations are denied by Heaven Hill and Diamond Estates and they have counterclaimed as against Diageo, seeking declaratory and other relief including damages.
[2] The principal rum products in dispute look like this:
[3] An Order dated July 16, 2015, to bifurcate the liability and damages aspects of this action [the Bifurcation Order] was issued prior to commencement of the trial, so these reasons deal only with the Liability Issues as defined and stated in the Bifurcation Order.
I. Background A. Diageo [4] Diageo is a corporation under the laws of Canada with a registered office in Toronto, Ontario. It is a subsidiary of Diageo plc, a publicly listed corporation based in London, England. Diageo plc is one of the world’s largest producers of spirits and through its affiliates and subsidiaries sells various brands of alcoholic beverages, including SMIRNOFF vodka, TANQUERAY gin, JOHNNIE WALKER Scotch whisky, CROWN ROYAL Canadian whisky, BAILEYS Irish Cream, and GUINNESS beer.
[5] Diageo is identified on the Trade-marks Register as being the owner of Canadian Trade-mark Registration Nos. TMA298,005; TMA409,540; TMA445,025; TMA676,015; TMA676,119; TMA846,828; TMA846,829; TMA848,087; TMA863,667; and TMA864,267. These trademarks are summarized in the following table:
Registration No.
Registration Date
Trademark
Goods
Date of first use/ of Declaration of Use Filed
TMA298,005
December 7, 1984
Distilled alcoholic beverages.
Used in CANADA since at least as early as 1961 on wares.
TMA409,540
March 12, 1993
Rum.
Used in Canada since at least as early as November 2, 1984 on wares.
TMA445,025
July 7, 1995
(1) Rum.
(2) Clothing, namely, hats, shirts, sweat-tops and bottoms, T-shirts, sweaters and jackets.
Used in CANADA since at least as early as November 1993 on wares (1). ((1) Rum)
TMA676,015
November 1, 2006
Colour Claim: Colour is claimed as a feature of the trade-mark. The portion of the Pirate’s hat covering his forehead is white, the portion directly above that is red, followed by a white band, and a gold band; his face and hands are natural flesh colour, his eyes, hair, beard, eyebrows and moustache are black; his earrings are gold; his ascot and cuffs are white; the collar of his cape is black; his cape is blue, with white and gold border; his jacket is red with gold border, gold belt and gold buttons; his pants are blue; his boots are brown with gold border and buckles; his gun and sword are silver; and the barrel is brown with a gold bottom and gold bands around the circumference.
Alcoholic beverages, namely rum, rum-based beverages, rum-flavoured beverages and cocktails.
Declaration of Use filed October 16, 2006 on wares.
TMA676,119
November 2, 2006
Alcoholic beverages, namely rum, rum-based beverages, rum-flavoured beverages and cocktails.
Declaration of Use filed October 16, 2006 on wares.
TMA846,828
March 21, 2013
Alcoholic beverages namely rum.
Declaration of Use filed March 21, 2013 on wares.
TMA846,829
March 21, 2013
Alcoholic beverages namely rum.
Declaration of Use filed March 21, 2013 on wares.
TMA848,087
April 9, 2013
Alcoholic beverages, namely rum and rum-based beverages.
Declaration of Use filed April 9, 2013 on wares.
TMA863,667
October 25, 2013
Alcoholic beverages, namely rum, rum-flavoured and rum-based beverages.
Declaration of Use filed October 25, 2013 on wares.
TMA864,267
November 4, 2013
Alcoholic beverages, namely rum and rum-based beverages.
Declaration of Use filed November 4, 2013 on wares.
[6] Diageo has acknowledged in the Agreed Statement of Facts between Diageo and Heaven Hill that it has no present intention to re-launch rum products in Canada bearing the character representations depicted below; these representations last appeared on CAPTAIN MORGAN rum products sold in Canada in or around the years noted in the table below:
TMA298,005
1985/1986
TMA409,540
1994/1995
TMA445,025
1999
[7] Diageo sells several varieties of CAPTAIN MORGAN rum, including Original Spiced Rum, 100 Proof Spiced Rum, Silver Spiced Rum, Gold Rum, Dark Rum, and White Rum. Each variety of CAPTAIN MORGAN rum bears a label containing a fanciful depiction of Sir Henry Morgan, a 17th century privateer, and they look like this:
[8] Annual sales of the CAPTAIN MORGAN Original Spiced Rum variety in Canada for 2004 approximated 135,930 nine-litre cases (equivalent to over 1.6 million 750ml bottles) and, for all varieties of CAPTAIN MORGAN rum, approximated 556,290 nine-litre cases (equivalent to over 6.68 million 750ml bottles). Annual sales of the CAPTAIN MORGAN Original Spiced Rum variety in Canada for 2015 approximated 632,140 nine-litre cases (equivalent to over 7.5 million 750ml bottles) and, for all varieties of CAPTAIN MORGAN rum, approximated 1.1 million nine-litre cases (equivalent to over 12 million 750ml bottles).
B. Heaven Hill and Diamond Estates [9] Heaven Hill is incorporated pursuant to the laws of the State of Kentucky, with a registered address in Bardstown, Kentucky, in the United States of America. It is a private distillery that produces and markets distilled spirits. Heaven Hill is the seventh largest alcohol supplier in the United States, the second largest holder of bourbon whiskey in the world, and the largest independent family-owned and operated producer and marketer of distilled spirits in the United States. Heaven Hill has shipped and sold various brands of alcoholic beverages to provincial boards and organizations in Canada for retail resale for approximately 20 years. In addition to the ADMIRAL NELSON’S brand, some of Heaven Hill’s other brands of alcoholic beverages sold into Canada include HPNOTIQ Liqueur, EVAN WILLIAMS and ELIJAH CRAIG bourbon whiskeys, and TWO FINGERS tequila.
[10] Diamond Estates has acted as Heaven Hill’s broker in Canada for ADMIRAL NELSON’S rum products since 2011, and has been its exclusive broker for these products since 2012. Other than in Quebec, Diamond Estates has acted as Heaven Hill’s broker in Canada for a decade or so for other alcoholic products. As Heaven Hill’s broker, Diamond Estates assists Heaven Hill in the marketing and distribution of Heaven Hill’s alcoholic beverages in Canada. In an Order dated September 25, 2015, made by the case management judge for this proceeding, Diageo’s action as against Diamond Estates was stayed pending the final disposition of the claim and counterclaim as between Diageo and Heaven Hill. That Order stipulates that if the Court enjoins Heaven Hill’s sale and orders the delivery-up or destruction of the ADMIRAL NELSON’S rum products in Canada, Diamond Estates will consent to judgment on the same terms, and that if the Court dismisses the action as against Heaven Hill, the action as against Diamond Estates will also be dismissed. Diamond Estates did not participate at the trial of this action, although its founder did testify at the trial.
[11] Heaven Hill acquired the assets and business relating to the ADMIRAL NELSON’S brand of rum from Luxco, Inc., on or about July 1, 2011. It is the registered owner of Canadian Trade-mark Registration No. TMA663, 725, registered on March 5, 2006, for the word trademark “ADMIRAL NELSON’S” with respect to the following goods: (1) alcoholic beverages, namely, rum; and (2) rum. It is also the registered owner of U.S. Trademark Registration No. 2436494 for the design trademark shown below, which was filed on August 13, 1999 and registered on March 20, 2001:
[12] ADMIRAL NELSON’S rum products were distributed and sold in the United States and Canada before Heaven Hill’s acquisition of the ADMIRAL NELSON’S brand in 2011. ADMIRAL NELSON’S rum products and CAPTAIN MORGAN rum products have both been sold in the United States since 1998.
[13] Each variety of ADMIRAL NELSON’S rum bears a label with a fanciful depiction of Vice Admiral Horatio Lord Nelson, a British naval officer in the late 18th and early 19th centuries. Retail sales of ADMIRAL NELSON’S rum products in Alberta commenced in about 2003. There were intermittent retail sales of ADMIRAL NELSON’S rum products from 2005 to 2009 in British Columbia and from 2004 to 2006 in Saskatchewan. Annual retail sales of ADMIRAL NELSON’S rum products in Canada approximated 178.3 nine-litre cases (2,140 bottles) in 2003 and 406 nine-litre cases (4,872 bottles) in 2012. Annual retail sales of ADMIRAL NELSON’S rum products in Canada approximated 890 nine-litre cases (10,680 bottles) in 2014 and 657 nine-litre cases (7,884 bottles) in 2015 up to May 2015.
[14] The ADMIRAL NELSON’S Premium Spiced Rum and ADMIRAL NELSON’S Coconut Rum varieties, which were distributed for retail sale and sold in Canada immediately before and immediately after Heaven Hill’s acquisition of the ADMIRAL NELSON’S brand in 2011, are depicted below:
C. ADMIRAL NELSON’S Revised Packaging [15] Beginning in 2011, and continuing on into 2012 and 2013, Heaven Hill revised the packaging for ADMIRAL NELSON’S rum products. The final label for the Premium Spiced variety after revision of the packaging is shown below, at the right, and the front label at the time of Heaven Hill’s acquisition of the ADMIRAL NELSON’S brand in 2011 is shown below at the left:
[16] The revised ADMIRAL NELSON’S rum products with the revised packaging are depicted below:
[17] In November 2013, Heaven Hill began shipping and selling to Canadian retailers five varieties of ADMIRAL NELSON’S rum; namely, Premium Dark, Premium Silver, Premium Gold, Premium Spiced, and Premium Coconut. Each of the five varieties of ADMIRAL NELSON’S rum with the revised packaging bears a fanciful depiction of Vice Admiral Horatio Lord Nelson.
[18] In about November 2013, Heaven Hill started to ship ADMIRAL NELSON’S rum products with the revised packaging to Alberta retailers, the New Brunswick Liquor Corporation, and the Nova Scotia Liquor Corporation. Retail sales of ADMIRAL NELSON’S rum products with the revised packaging commenced in about November or December 2013 in Alberta, about December 2013 in New Brunswick, and in 2014 in Nova Scotia. The evidence at trial was such that these three provinces are the only jurisdictions in Canada where ADMIRAL NELSON’S rum products are currently sold to consumers.
[19] Depending upon provincial laws and regulations, alcoholic beverages are sold through liquor stores and grocery stores. In most Canadian provinces, retail liquor stores are regulated and government controlled. Some provinces, including Ontario and New Brunswick, have agency stores which are independent local retailers authorized by the provincial liquor board or organization to sell alcoholic beverages. Alberta is considered to be an open, deregulated market. There are no government owned retail liquor stores in Alberta. In British Columbia and Quebec, retail sales of spirits are sold by government liquor stores and private liquor stores. Online retail sales of spirits are available in Nova Scotia, Quebec, Ontario, Alberta, and British Columbia. Liquor varieties are often grouped together in the same area of physical retail liquor stores. Rums are often grouped together on liquor store shelves in the same area.
[20] After Diageo learned about the sales of ADMIRAL NELSON’S rum products in Canada, Heaven Hill received a demand letter from Diageo’s attorneys dated March 17, 2014, putting it and Diamond Estates on notice with regard to their infringement of Diageo’s rights and their acts of unfair competition. Heaven Hill continued marketing its ADMIRAL NELSON’S products after receipt of the demand letter. Subsequently, Diageo issued a press release dated March 26, 2014, which included the following statements:
Heaven Hill’s use of blatantly confusing trade dress, including blatantly confusing historical character, in connection with the sales of the ADMIRAL NELSON rum brand is clearly intended to mimic the CAPTAIN MORGAN brand to trade upon the brand’s goodwill and create consumer confusion.
“Diageo appreciates healthy competition, as continued innovation maintains consumer excitement and benefits the entire industry,” said Iain Chalmers, Vice President of Marketing, Diageo Canada. “However, we are strongly opposed to competitors copycatting the label design and character trademark of established brands like CAPTAIN MORGAN. We will fight these infringements wherever we can.”
II. Issues [21] The parties’ efforts to agree upon a statement of issues for trial prior to the hearing of this matter failed to result in a joint statement of issues. Nonetheless, the parties did submit their own respective statement of the issues, and upon review of these statements and in view of the evidence and submissions at trial, the following issues arise:
1. Is Diageo’s action an abuse of the Court’s process?
2. Is Diageo estopped by acquiescence, laches and delay from asserting rights in and to its trademarks and rum products as against Heaven Hill?
3. Are any of Diageo’s claims statute-barred as against Heaven Hill?
4. Are any of Diageo’s Trade-mark Registrations invalid by reason of non-distinctiveness, non-entitlement or abandonment, and if so should they be expunged?
5. Has Heaven Hill sold, distributed or advertised any of its ADMIRAL NELSON’S rum products in Canada?
6. Has Heaven Hill passed off its ADMIRAL NELSON’S rum products as the goods of Diageo in contravention of subsections 7(b) and 7(c) of the Trade-marks Act, RSC 1985, c T-13 [the Act]?
7. Does Heaven Hill’s use of its character or label trademarks in association with ADMIRAL NELSON’S rum products constitute an infringement of Diageo’s exclusive right to use its registered trademarks, contrary to section 20 of the Act?
8. Is Heaven Hill’s use of its character or label trademarks in association with ADMIRAL NELSON’S rum products likely to depreciate the value of the goodwill associated with Diageo’s registered trademarks, contrary to subsection 22(1) of the Act?
9. Is Heaven Hill entitled to any of the relief requested in its Amended Statement of Defence and Counterclaim?
10. Is Diageo entitled to any of the relief requested in its Amended Statement of Claim?
III. Analysis A. Is Diageo’s action an abuse of the Court’s process? [22] Heaven Hill claims Diageo has brought this action in an attempt to limit and stifle competition with Captain Morgan rum products in the Canadian market. Heaven Hill asserts that this action is an abuse of process and is predatory, frivolous, and vexatious, intended only to harass and intimidate Heaven Hill. According to Heaven Hill, Diageo’s action improperly interferes with Heaven Hill’s legitimate business with respect to its Admiral Nelson’s rum products. Heaven Hill alleges that Diageo brought this action with full knowledge and awareness that it is without merit and for ulterior and collateral purposes of stifling legitimate competition.
[23] The only evidence adduced at trial by Heaven Hill to support its claim of Diageo’s action being an abuse of process was an email exchange involving Alister Kidd, then a brand manager at Diageo for CAPTAIN MORGAN, dated December 12, 2013, wherein the following was stated:
I’ve spoken with our IP team…Apparently Admiral Nelson has been in the US for some time and has created problems for Captain Morgan. The team in the US didn’t react, and the brand has been allowed to establish itself, taking volume from CMOS [Captain Morgan Original Spiced].
The IP team doesn’t want to see this repeated in Canada, and I have a call with them next week to review next actions.
[24] It is true, as Heaven Hill points out, that abuse of process can be invoked as a procedural defence in a trademark infringement suit. However, a defendant asserting abuse of process as an affirmative defence must prove that the abuser has used the legal process for a purpose other than that which it was designed to serve; in other words, for a collateral, extraneous, ulterior, improper, or illicit purpose (see: Levi Strauss & Co v Roadrunner Apparel Inc, [1997] FCJ No 1432 at para 13, 221 NR 93 (CA) [Levi Strauss]). “The gist of the tort is the misuse or perversion of the Court’s process and there is no abuse when a litigant employs regular legal process to its proper conclusion, even with bad intentions” (Levi Strauss at para 11). The Court of Appeal in Levi Strauss also noted that “the difficulties for a defendant of proving a misuse or perversion of the process on the part of a plaintiff seeking to enforce its trademark through the legal process cannot be underestimated” (at para 15).
[25] In my view, Heaven Hill’s arguments in this regard are without merit: not only because the evidence upon which Heaven Hill relies to establish an abuse of process by Diageo shows no collateral, extraneous, ulterior, improper, or illicit purpose; but also because there is no other evidence before the Court to show that Diageo’s action is anything other than one to enforce what it regards as its trademark rights in Canada as against Heaven Hill.
B. Is Diageo estopped by acquiescence, laches and delay from asserting rights in and to its trademarks and rum products as against Heaven Hill? [26] Heaven Hill contends that the equitable doctrines of laches, acquiescence and delay apply in this case, such that Diageo is estopped from seeking the relief it claims. According to Heaven Hill, there is direct evidence of actual knowledge of the Admiral Nelson’s brand as early as 2009 by Diageo plc, and Diageo Canada knew or ought to have known of the sale and marketing of Admiral Nelson’s products in Canada as early as 2003. Despite this knowledge, Heaven Hill says Diageo stood by and watched for over a decade as it continued to sell its ADMIRAL NELSON’S rum products in Canada, while failing to take any steps to enforce the rights Diageo claims in this action and in so doing Diageo acquiesced and implicitly waived its rights.
[27] Heaven Hill further contends that, by delaying its action, Diageo has permitted the Admiral Nelson’s brand to establish itself in the marketplace and it would be unjust to disturb the headway it has made in attempting to compete with other rum products in Canada, including Captain Morgan. Heaven Hill says it has relied on Diageo’s failure to take any steps to enforce the rights claimed in this action, resulting in Heaven Hill’s reasonable reliance on Diageo’s acceptance of the status quo. Heaven Hill states that, even if the Court finds that the Admiral Nelson’s products infringe the Captain Morgan trademarks, the injunction sought by Diageo is not an appropriate remedy. According to Heaven Hill, the Court must consider the equities as at the date of trial in determining whether the doctrine of laches should apply to deny Diageo any injunctive relief. In Heaven Hill’s view, Diageo’s delay and acquiescence has resulted in the establishment of the ADMIRAL NELSON’S brand in the marketplace, and because Diageo waited more than a decade to take any steps to enforce its alleged rights against Heaven Hill, Diageo’s request for injunctive relief should be denied.
[28] Diageo reminds the Court that Heaven Hill bears the burden of proving a defence of laches. According to Diageo, Heaven Hill’s claims that Diageo must have known or should have known of the sale of Admiral Nelson’s rum products in Canada dating back to 2003 are completely unsubstantiated and must fail. Diageo maintains it was unaware of ADMIRAL NELSON’S rum until it was seen in New Brunswick in mid-December 2013 and, thereafter, it promptly sent a cease and desist letter on March 17, 2014, and commenced this action on March 26, 2014.
[29] Diageo refutes Heaven Hill’s argument that knowledge of the ADMIRAL NELSON’S products in the United States by other entities within the Diageo plc organization should preclude Diageo from any equitable relief. According to Diageo: there was never any knowledge of the ADMIRAL NELSON’S product being sold in Canada until December 2013; no Diageo entity was aware of ADMIRAL NELSON’S rum being sold anywhere in the world before 2009; Diageo was never advised as to the existence of ADMIRAL NELSON’S rum in other countries; other than its biggest competitors, Diageo never discussed its competitors with Diageo US; and, many brands of alcoholic beverages sold in the United States are never sold in Canada, including many of Heaven Hill’s own brands.
[30] Diageo says Heaven Hill has not established that it has been prejudiced by Diageo’s alleged delay because: Heaven Hill has not invested in the ADMIRAL NELSON’S products in Canada in any material respect since it acquired the brand in 2011; there is no short-term plan for the brand in Canada, nor has Heaven Hill made any sales projections for Canada; there is no marketing budget; and because Max Shapira, Heaven Hill’s President, acknowledged the absence of prejudice during his testimony at discovery (which was read in at the trial) as follows:
Q. Did Heaven Hill ever do something differently or change its position in relation to the sale of Admiral Nelson’s because of the alleged delay by Diageo in taking action?
A. No, not at all.
[31] The jurisprudence pertaining to laches and acquiescence is well-established and was summarized by the Supreme Court of Canada in Manitoba Métis Federation Inc v Canada (Attorney General), 2013 SCC 14, [2013] 1 SCR 623:
[145] The equitable doctrine of laches requires a claimant in equity to prosecute his claim without undue delay. It does not fix a specific limit, but considers the circumstances of each case. In determining whether there has been delay amounting to laches, the main considerations are (1) acquiescence on the claimant’s part; and (2) any change of position that has occurred on the defendant’s part that arose from reasonable reliance on the claimant’s acceptance of the status quo: M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, at pp. 76-80.
[146] As La Forest J. put it in M. (K.), at pp. 76-77, citing Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221, at pp. 239-40:
Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.
La Forest J. concluded as follows:
What is immediately obvious from all of the authorities is that mere delay is insufficient to trigger laches under either of its two branches. Rather, the doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine. [Emphasis added; pp. 77-78.]
[32] The evidence adduced at trial does not, in my view, establish Heaven Hill’s allegation that Diageo knew or ought to have known of the sale and marketing of ADMIRAL NELSON’S rum products in Canada as early as 2003. Although the evidence suggests that entities within the Diageo plc organization may have been aware of ADMIRAL NELSON’S as early as 2009, and although one of Heaven Hill’s witnesses testified that he has been aware of ADMIRAL NELSON’S for two decades and said it is a long-standing brand in Canada, no evidence directly contradicts or diminishes the weight of the evidence that Diageo only became aware of ADMIRAL NELSON’S rum products being sold in Canada, and in particular in New Brunswick, in mid-December 2013. Peter Kourtis, Diageo’s General Manager, testified that Diageo first became aware of ADMIRAL NELSON’S rum products in Canada when ADMIRAL NELSON’S was launched in New Brunswick. Mr. Kourtis’ testimony was not discredited on cross-examination and it was substantiated by Darcy Traer, a key account manager for Diageo in Atlantic Canada in 2013, who testified as to email correspondence between him and other Diageo employees on or about December 11, 2013, regarding ADMIRAL NELSON’S rum being offered for sale in New Brunswick. Diageo’s witnesses consistently maintained that this was when Diageo first became aware of ADMIRAL NELSON’S rum products being sold in Canada.
[33] Accordingly, in view of the evidence, I find it more likely than not and on a balance of probabilities that Diageo was unaware of ADMIRAL NELSON’S rum products being sold in Canada prior to on or about December 11, 2013. This being so, it cannot be said that there was undue delay in Diageo’s commencement of this action, especially in view of the fact that Diageo’s Statement of Claim was filed on March 26, 2014, only some 14 weeks after Mr. Traer sent a photograph of a bottle of ADMIRAL NELSON’S rum on sale at an Alcool NB Liquor store to Alistair Kidd, Diageo’s brand manager for Canada. It also cannot be said that Diageo has acquiesced to ADMIRAL NELSON’S rum products being sold in Canada because this action, if anything, evidences not only an absence of undue delay but also an absence of acquiescence by Diageo.
[34] Moreover, Heaven Hill has not shown how it has been prejudiced by Diageo’s alleged delay in enforcing the rights Diageo claims in this action. Heaven Hill has also not shown how it changed or altered its position by relying upon Diageo’s alleged acceptance of the status quo. On the contrary, Mr. Shapira’s admission that Heaven Hill has not done anything differently or changed its position in relation to the sale of Admiral Nelson’s rum products serves to undermine and defeat Heaven Hill’s claim that Diageo should be estopped by acquiescence, laches and delay from asserting rights in and to its trademarks and CAPTAIN MORGAN rum products as against Heaven Hill. Consequently, I find Diageo is not estopped in this action as against Heaven Hill by reason of acquiescence, laches or delay.
C. Are any of Diageo’s claims statute-barred as against Heaven Hill? [35] Heaven Hill argues that Diageo’s action is statute-barred from the relief sought. By virtue of subsection 39(1) of the Federal Courts Act, RSC 1985, c F-7, and in view of the Federal Court of Appeal’s decision in Apotex Inc v AstraZeneca Canada Inc, 2017 FCA 9 at para 114, [2017] FCJ No 22, Heaven Hill says the applicable limitation period in this case is two years pursuant to subsection 3(1) of the Alberta Limitations Act, RSA 2000, c L-12, since Admiral Nelson’s rum products have been sold in Alberta since as early as 2003. Heaven Hill points out that the limitation period in subsection 3(1) commenced once Diageo knew or ought to have known about the alleged infringement. In Yugraneft Corp v Rexx Management Corp, 2010 SCC 19 at para 60, [2010] 1 SCR 649, the Supreme Court of Canada said that subsection 3(1) “does subject the knowledge elements of its discoverability rule to an objective test: the plaintiff must know or ‘ought to have known’ the elements that trigger the running of the limitation period. Thus, constructive or imputed knowledge, in addition to actual knowledge, will trigger the limitation period.” According to Heaven Hill, Diageo knew or reasonably ought to have known of the sale of ADMIRAL NELSON’S rum products in Canada since at least 2003 and, therefore, Diageo’s action is statute-barred because the applicable two year limitation period has expired.
[36] Based on my finding above that Diageo first knew of ADMIRAL NELSON’S rum products being sold in Canada on December 11, 2013, Heaven Hill has not, in my view, established that Diageo “ought to have known” that ADMIRAL NELSON’S rum products were being sold in Canada prior to December 11, 2013. The evidence shows that ADMIRAL NELSON’S rum products were sold primarily in the deregulated Alberta market prior to December 11, 2013, with annual sales in Alberta ranging from 108.3 nine-litre cases in 2003 to 333 nine-litre cases in 2012. Mr. Kourtis’s testimony was that there are approximately 2,000 to 3,000 liquor retailers and a further 6,000 to 7,000 licenced establishments in Alberta, whereas a province with a larger population, such as Ontario, has approximately only 650 government-owned stores. Mr. Kourtis testified that his sales team aims to visit 80% of liquor stores across the country, except for Alberta because: “In a private area like Alberta, it would be smaller because just the sheer, sheer volume of stores. It's hard to get to every geographical area.” Mr. Kourtis also testified about the significance of ADMIRAL NELSON’S retail sales, stating that 267 nine-litre cases is “a very small amount. That would be -- the size of a busy bar in downtown Toronto would sell roughly 260 cases of rum per year.” Based on Diageo’s evidence, and the relatively small amount of ADMIRAL NELSON’S volume in the large deregulated Alberta marketplace, Heaven Hill has not established that Diageo “ought to have known” that ADMIRAL NELSON’S rum products were sold prior to December 11, 2013. In these circumstances, finding a bottle of Admiral Nelson’s rum at a liquor store or on a shelf in a bar in Alberta would be like looking for the proverbial needle in a haystack.
[37] Heaven Hill’s argument that Diageo’s action is statute-barred must fail since Diageo commenced its action within two years from when it knew or ought to have known the elements that triggered the running of the limitation period. Diageo filed its action on March 26, 2014, well before the expiration of any applicable two year limitation period on December 11, 2015.
D. Are any of Diageo’s Trade-mark Registrations invalid by reason of non-distinctiveness, non-entitlement or abandonment, and if so should they be expunged? [38] Heaven Hill claims that Diageo’s Trade-mark Registrations Nos. TMA298,005, TMA409,540 and TMA445,025 are invalid because they have been abandoned and should be expunged from the Trade-marks Register. These three trademarks are depicted below:
TMA298,005
1985/1986
TMA409,540
1994/1995
TMA445,025
1999
[39] Heaven Hill notes that Diageo has never used these three trademarks in association with its rum products and has no present intention to re-launch rum products in Canada bearing the character representations in these trademarks. In Heaven Hill’s view, the design forms of the CAPTAIN MORGAN character in these three trademarks differ substantially from the more recent CAPTAIN MORGAN character design trademarks, and the three older renditions leave completely different commercial impressions than do the later CAPTAIN MORGAN character renditions.
[40] Heaven Hill contends that the more recent renditions of the CAPTAIN MORGAN character are not mere variants of the older renditions but, rather, substantial variations of the earlier versions. In Heaven Hill’s view, the character’s clothing and attire in the three older renditions are completely different from the later renditions and, most importantly, the three older renditions do not have what Heaven Hill characterizes as the “iconic” raised leg on a barrel pose of the later CAPTAIN MORGAN character renditions. In view of the substantial periods of non-use of these three trademarks, in association with all of the goods associated with them, and their completely different commercial impressions, Heaven Hill says Trade-mark Registrations Nos. TMA298,005, TMA409,540, and TMA445,025 should be expunged from the Trade-marks Register even though they may be associated with the later trademarks.
[41] Diageo says in cases where the trademark as used is different from the trademark as registered there will still be use of the trademark as registered if the trademark, as used, has not lost its identity and remains recognizable in spite of differences with the trademark as registered. In determining whether two trademarks are substantially different, Diageo further says the Court must look at whether the trademark has maintained its identity and recognisability, and whether it has preserved the dominant features of the trademark as registered. Moreover, Diageo notes that all of its registrations for the CAPTAIN MORGAN character are “associated” trademarks as contemplated by subsection 15(1) of the Act. According to Diageo, trademarks which share common characteristics and are registered to one owner may be presumed to form a series or family of marks, and that this is tantamount to a single registration comprised of those several marks. Diageo says an associated trademark is one that is confusingly similar and would not be registrable unless it is registered by the same owner. In Diageo’s view, the identity of the CAPTAIN MORGAN trademark has been preserved and any deviations would not mislead an unaware purchaser.
[42] Although Diageo has not actually used Trade-mark Registrations Nos. TMA298,005, TMA409,540, and TMA445,025 for many years and, as stated in the Agreed Statement of Facts, has no present intention to re-launch rum products in Canada bearing the CAPTAIN MORGAN character as portrayed in these three registrations, there was no evidence adduced at trial to show any intention on Diageo’s part to actually abandon these trademarks or to allow their registration to lapse for want of renewal. Moreover, the registration records for each of these three trademarks show that they are “associated marks” to the seven later registrations: TMA676,015; TMA676,119; TMA846,828; TMA846,829; TMA848,087; TMA863,667; and TMA864,267.
[43] In order to establish abandonment of a trademark, two elements must be established: (1) that the trademark is no longer in use in Canada; and (2) that the owner intended to abandon the trademark (see: Promafil Canada Ltée v Munsingwear Inc, [1992] FCJ No 611 at para 15, 142 NR 230 (FCA) [Promafil]). Additionally, in the case of a design mark, which is the case here, a variant of the registered mark will constitute use of the registered mark provided the variant is not substantially different from the registered design (Promafil at para 15). The central question then is: are the three trademarks Heaven Hill says have been abandoned substantially different than the subsequent emanations of the CAPTAIN MORGAN design trademarks? The test to apply in this regard is “to compare the trade mark as it is registered with the trade mark as it is used and determine whether the differences between [the]…marks are so unimportant that an unaware purchaser would be likely to infer that…, in spite of their differences, [they] identify goods having the same origin” (Canada (Registrar of Trade Marks) v Cie internationale pour l’informatique CII Honeywell Bull SA, [1985] 1 FC 406 at para 5, 4 CPR (3d) 523 (FCA)).
[44] It is true, as Heaven Hill points out, that there are some differences between the three earlier trademarks and the subsequent depictions of the CAPTAIN MORGAN character. Heaven Hill draws the Court’s attention to the later depictions of the CAPTAIN MORGAN character which have him with a raised leg on a barrel, and to the character’s clothing and attire in the three older renditions which, in Heaven Hill’s view, are different from the later ones. In my view though, neither these differences nor any others are substantially or significantly different from the registered designs, and they are such that an unaware purchaser would be likely to infer that, despite any differences, they identify goods having the same origin. Every depiction of the CAPTAIN MORGAN character shares the following elements: a strap across the chest; an ascot; a sword in his right hand (though in one instance it is unsheathed); a cape which is flowing open in the later versions but not in the three earlier ones; a prominent moustache and long dark hair; a nearly knee length naval jacket or coat with exaggerated cuffs; and a fanciful hat which is on the character’s head in the later versions but not on in the earlier ones (though in one instance there is no hat). Moreover, while the “pose” is seen within many images of the CAPTAIN MORGAN character, CAPTAIN MORGAN is often displayed without the pose in some of the promotional and advertising materials received as evidence at trial.
[45] Accordingly, Heaven Hill’s claim – that Diageo’s Trade-mark Registrations Nos. TMA298,005, TMA409,540, and TMA445,025, have been abandoned and should be expunged from the Trade-marks Register – fails.
E. Has Heaven Hill sold, distributed or advertised any of its ADMIRAL NELSON’S rum products in Canada? [46] Although Heaven Hill admitted in the Agreed Statement of Facts that it began “shipping and selling to Canadian retailer customers [provincial liquor boards and organizations] five varieties of ADMIRAL NELSON’S rum” in November 2013, and also admitted t