May 3, 2011

By Brian Babcock

A 2004 Ontario Court of Appeal decision illustrates the value of trademark registration.

Molson Breweries markets an ale called “ Export”. Another brewery, Oland, owned by Labatt’s has also for many years sold ale called “ Export”, previously only in Atlantic Canada. Oland has a registered trademark of its label, although not of the term “ Export”. Molson attempted to trademark “Export” as a name several years ago, but, at that time, the court found that the term was not sufficiently distinctive They accepted the argument that “export” refers generically to quality beer historically manufactured for export purposes. Molson also trademarked its label, and the phrase “Molson Export”.

The battle arose out of Labatt’s decision to market Oland Export in Ontario. Molson sued, using the old-fashioned doctrine of “passing off”. This concept predates modern trademark law, but exists alongside trademark rights. In a nutshell, passing off prevents anyone from selling a product in any way that the consumer is deceived about what they are buying. The classic old English case dealt with a copycat mustard maker imitating the established jar design.

The trial judge decided that even though Oland had a trademark, this did not give it the right to use the name if doing so resulted in confusion. On the facts of the case however, he found that there was no confusion or deception.

Molson appealed. The Court of Appeal disagreed with the trial judge, but dismissed the appeal. The disagreement was not about the result, but about the effect of Oland’s trademark. The Court of Appeal ruled that the effect of the registration is that Oland is entitled to use its mark throughout Canada in association with its beer. If Molson’s takes exception to that use, its sole recourse is to attack the validity of the registration. They go on to point out that Oland might even have a claim for trademark infringement, if there is confusion, since the Trade-marks Act holds the party without registration responsible for any confusion.

This decision is a useful reminder of the power of trademark registration, and permits us to consider several issues relating to trade names, including:

• business or corporate name registration does not offer trade mark protection
• the cost of a “ simple “ trademark, such as a word, is modest – a few thousand dollars.
• many common English words are not distinctive
• invented words are more likely to be distinctive
• designs can easily be distinctive, but the cost of registration is somewhat higher
• the cost of lost goodwill due to confusion, or wasted signs, supplies and labels, is often greater than the cost of registration
• registration gives exclusive use in the registered products throughout Canada
• in the absence of registration, damages or an injunction is available under the doctrine of “passing off”, but proof of both misrepresentation and confusion is required- trademark registration simplifies proof, saving costs .
• trademark registration also is a defence to claims , another potential cost saving.

Trademark registration is not necessary in every business, but it is worth considering before significant investments are made in advertising, signs, websites, letterhead and product labels.