Exploring Depreciation of Goodwill as a New Ground of Trade-mark Opposition

Exploring Depreciation of Goodwill as a New Ground of Trade-mark Opposition

Sanjukta Tole is an Osgoode Hall alumnus and practiced with the IP Group of a large Vancouver law firm.

In 2006, the Supreme Court of Canada released its decision in the case of Veuve Clicquot Ponsardin, Maison Fondee en 1772 v. Boutiques Cliquot Ltee, 2006 SCC 23 ("Veuve Clicquot"), in which the maker of the famed champagne, Veuve Clicquot, sued a mid-sized clothing business that was operating stores under the names "Les Boutiques Cliquot" and "Cliquot". In a unanimous decision, Binnie J. held that the depreciation of goodwill attached to a registered trade-mark, as set out in s. 22 of the Trade-marks Act (the "Act"), did not require a finding of confusion and was a separate basis of complaint in the trade-mark infringement matter.

Around the time of Veuve Clicquot, Parmalat Canada Inc. ("Parmalat") was in the midst of opposing a trade-mark application filed by Sysco Corporation ("Sysco") to register the trade-mark BLACK DIAMOND in association with a variety of kitchen utensils, cooking pots, frying pans and related promotional items. Parmalat was itself the owner of an identical trade-mark registered for use in association with cheese and related products since as early as 1933.

Based on the Court's remarks in Veuve Clicquot and pursuant to s. 40 of the Trade-marks Regulation, Parmalat applied to the Trade-mark Opposition Board ("TMOB") for leave to amend its statement of opposition to include non-compliance with s. 30(i) of the Act as a ground of opposition. Parmalat's argument was that Sysco could not have been certain that it was entitled to use the trade-mark in association with its specified goods (i.e. Sysco could not have been sure of compliance with s. 30(i)) because Sysco would have known that such use would depreciate the goodwill attached to Parmalat's trade-mark registration (i.e. Sysco would be in breach of s. 22 of the Act). The TMOB rejected Parmalat's request based on its lack of authority to decide on issues related to s. 22 of the Act.

Parmalat appealed that interlocutory decision to Lemieux J. at the Federal Court of Canada ("FCC") pursuant to s. 18 of the Federal Courts Act (see Parmalat Canada Inc. v. Sysco Corporation, 2008 FC 1104 [Parmalat v. Sysco]). Lemieux J. found that the TMOB had misstated the issue: it was not whether s. 22 of the Act alone qualified as a ground of opposition, but rather whether Parmalat could obtain leave to amend its application to include s. 30(i) of the Act as a ground of opposition based on Sysco's alleged breach of s. 22. The FCC held that the issue was to be decided by giving heed to the factors set out in the TMOB Practice Notices addressing amendments to a statement of opposition, namely, the stage of the proceedings, timing of amendment, importance of the amendment and prejudice to the other side. Since the TMOB made an error of jurisdiction by misstating the issue and there existed no other means of providing Parmalat with an adequate remedy, a re-determination of the issue by a different member of the TMOB was deemed to be appropriate. The TMOB has yet to rehear this matter.

It is likely that the TMOB will allow Parmalat to amend its statement of opposition thereby indirectly qualifying the depreciation of goodwill of a trade-mark (i.e. through 30(i)) as a possible ground of opposition. The real test is whether this ground of opposition can be sustained by Parmalat in the course of the opposition hearing itself. There are several reasons to conclude that it can be sustained. First, s. 38(2) of the Act, which enumerates non-compliance with s. 30(i) as a ground on which an opposition can be raised, does not preclude the conjunctive use of s. 22 of the Act with s. 30(i) in an opposition proceeding. In fact, the FCC recognized that non-compliance with s. 30(i) almost always went hand in hand with a likely breach of other statutory provisions, including sections of the Act itself (see para. 40, Parmalat v. Sysco).

Second, there are instances where other provisions of the Act itself, not provided for in s. 38(2), were held to be valid grounds of opposition. For example, in Bojangles International LLC et al v. Bojangles Café Ltd. (2004), 40 CPR (4th) 553 [Bojangles], s. 7(b) of the Act was recognized as a ground of opposition even though it was not specifically enumerated in s. 38(2) of the Act. The rationale for such recognition was that the registration of a trade-mark could not be approved in the knowledge that it would then breach other statutory provisions, including those of the Act (see para 41, Parmalat v. Sysco). Parmalat could raise the same rationale.

Lastly, there is nothing in Veuve Clicquot that prevents the TMOB from recognizing s. 22 as an indirect ground of opposition. It was a trade-mark infringement case where the requirements to establish the depreciation of goodwill attached to a registered trade-mark were set out. This additional avenue of protection for the owner of a registered trade-mark was not in any way limited by the Court, directly or indirectly, to trade-mark infringement actions.

If Parmalat's opposition proceeds to a full-blown opposition hearing, it will be interesting to see how the TMOB will address this issue. Should the TMOB recognize Parmalat's ground of opposition, we should expect a greater (and much needed) body of jurisprudence in the area of depreciation of goodwill in the coming days.