Trademark Registration a Defence to Damages Even if Later Expunged
February 10, 2022
This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.
On December 9, 2020, the Federal Court of Appeal of Canada (FCA) in Group III International Ltd v Travelway Group International Ltd, 2020 FCA 210, held that a trademark registration is a defence to damages during the period that it is registered, even if it is later invalidated. The Appellant, Wenger SA, is a Swiss company that has used the popular “Swiss flag” logo on its luggage in Canada since 2003. The Respondent, Travelway Group International Ltd (Travelway), obtained two trademark registrations in 2009 for a “S in cross” logo (which can be found here and here), also used on luggage. These trademark registrations form the basis of the subsequent legal actions taken by Wenger SA, asserting that Travelway’s use of its marks were an infringement of its trademarks, as well as passing off.
History of the Trademarks
In 2013, the Appellants brought an application before the Federal Court against the Respondent for infringement of the Appellants’ registered trademarks and passing off. Though the Appellants had not challenged Travelway’s trademarks when published in the Trademarks Journal in December 2008, Travelway allegedly modified the logos appearing on its luggage and bags in February 2012. The “S” feature in the “S in cross” logo was altered, making the “S” difficult to see or completely removed. The Federal Court dismissed the application, holding that Travelway’s marks were registered and valid, and putting the onus on Wenger SA to prove that the marks should be expunged. The Appellants appealed this decision.
In 2017, the FCA allowed the appeal, finding that Travelway’s marks were likely to be confused with Wenger SA’s trademarks. The FCA granted the following relief: a declaration that the respondent infringed the appellants’ registered trademarks, a permanent injunction against the respondent, and an order that the Respondent destroy or deliver up to the appellants all wares, packages, labels and advertising materials marked with the trademarks in its possession, power or control. The FCA referred the two remedial issues of expungement and damages to the Federal Court for further adjudication.
In 2019, the Federal Court heard the two remedial issues, granting a judgment for the expungement of the Respondent’s registered trademarks while dismissing the Appellants’ claim for damages. Though the Respondent has not appealed the judgment striking out its registered trademarks, Wenger SA has appealed the Federal Court’s judgment dismissing its claim for monetary compensation for Travelway’s pre-expungement use of the infringing marks.
The FCA Assesses Entitlement to Damages for Infringement and Passing Off
In its assessment of entitlement to damages for infringement and passing off for Travelway’s pre-expungement use of the infringing marks, the FCA makes a clear distinction between trademark claims relating to unregistered and registered trademarks. While section 7(b) of the Trademarks Act allows rights holders to enforce unregistered trademark rights through the common law of passing off, owners of registered trademarks can bring infringement actions under section 20 of the Trademark Act. Infringement and passing off are separate and distinct causes of action, and each may give rise to an order of damages. Additionally, section 19 of the Trademarks Act gives to the owner of a registered trademark the exclusive right to use the mark throughout Canada. The owner of the registered mark could be liable for damages, however, if the registration is invalid due to fraud, wilful misrepresentation, or bad faith.
With respect to damages for infringement, the FCA held that damages are generally not available if the infringing mark is registered because of the rights conferred under section 19 of the Trademarks Act. With respect to damages for passing off, the FCA concluded at paragraph 47 of the decision that “jurisprudence indicates that the registrations of the trademarks are a complete defence to the action of passing off”. However, in its 2017 decision, the FCA made a finding that the Respondent was liable for passing off, contrary to section 7(b) of the Act. Though the FCA states that “portions of this Court’s 2017 decision finding passing off should not be followed as authority in future cases”, given that Travelway had not appealed the FCA’s finding on passing off and the findings could not be relitigated, the FCA concluded that monetary compensation should be granted, and awarded Wenger SA an accounting of profits.
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