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A recent decision of the Quebec Court of Appeal illustrates the rather unexpected ways in which Trademarks Actmay apply to comparative advertising. Constellation Brands US Operations Inc. v. International Wine Company Ltd., 2021 QCCA 1664.
Constellation Brands US Operations Inc (“Constellation”) is a division of Constellation Brands, a United States-based company that produces, sells and markets alcoholic beverages around the world. Its wines are available for purchase in Quebec, including
Quebec Alcohol Corporation(“SAQ”) in retail stores and grocery stores. Constellation holds approximately 60% of the wine market share in the Quebec grocery sector.
Two of Constellation’s wines – a Chardonnay and a Pinot Noir – are sold under the trade name “MEIOMI”. These wines are sold in Quebec exclusively through the SAQ. The registration of this mark is limited to products made from wine.
International Wine Company Ltd.(“SVI”) is a Quebec producer, importer and supplier of wines sold in grocery stores. It competes with Constellation in the grocery sector in Quebec.
In May 2015, SVI launched a new product line called “Apollo Discoveries” (“Apollo”). This range includes three wines: a Zinfandel (“Apollo Rouge”), a chardonnay (“Apollo Bleu”) and a pinot noir (“Apollo Jaune”). The wines were sold only in Quebec and exclusively in grocery stores (including Costco).
SVI has created flyers to advertise these products. These brochures contained information such as the brand names of the wines, their countries of origin, the types of grapes used and their alcohol content. They used images of products sold in SAQ stores for comparison purposes. The flyers advertising Apollo Bleu and Apollo Jaune compared these wines to MEIOMI wines from Constellation. The flyers contained images of bottles of wine produced by Constellation as well as statements claiming that two of SVI’s new wines were comparable to wines sold by Constellation in stores operated by the SAQ.
Constellation alleged that SVI infringed the copyright on the product labels of its wines and violated section 22 of the
Trademarks Act. Section 22 provides that no person shall use a mark registered by another person in a manner likely to have the effect of depreciating the value of the goodwill attached to it.
The trial judge dismissed the action and Constellation appealed to the Court of Appeal.
The Court of Appeal observed that section 22 prohibits the use of another’s trade-mark in a manner that would depreciate the value of the goodwill attached to it. The Supreme Court has ruled that there are four elements to a claim under the section, namely:
(1) the trademark has been used by the defendant in connection with goods or services – whether or not those goods and services compete with those of the plaintiff;
(2) the registered trademark is sufficiently well-known to have significant traffic;
(3) the mark has been used in a manner likely to have an effect on goodwill; and
(4) the probable effect of this use would be to write down the value of its goodwill.
The Court said that the MEIOMI trademark owned by Constellation only appeared in SVI’s advertising material. It did not appear on Apollo products or packaging. Such use of the mark, “for the purpose of comparing the goods with the applicant’s goods”, is not in itself a violation of the “exclusive right conferred by Article 22. A mark may be used in comparative advertising. , without being considered as an infringement of the mark. The court referred to Trademark management in Canadian law written by the author in support of his conclusion concerning the lack of use of the mark.
Further, the evidence did not establish that the SVI flyers were used in a way that would affect MEIOMI’s goodwill, let alone negatively impact. Not only did the flyers compare wine brands, but they featured multiple brands, not just the MEIOMI brand. In addition, the limited evidence of the “reputation” of the MEIOMI brand was insufficient to show that there had likely been a depreciation of any alleged “purchase money”. In fact, sales of MEIOMI wines continued to increase even after SVI distributed the affected leaflets in 2015.
Based on this finding, the court dismissed the appeal.
What I said about section 22 in Trademark management in Canadian law is the following (without the footnotes):
“It was held that the verb ‘to use’ in Article 22 should be interpreted by reference to the definition of the noun ‘to use’ in Articles 2 and 4. This has the effect of restricting the application, and therefore the prohibition. of article 22, for the use that any person may make, in association with products or services within the meaning of article 4 of the registered trademark of others so as to depreciate the value of the goodwill therein attached to.
In the flagship case of Clairol International Corp. vs. Thomas Supply & Equipment Co., when the mark in issue was registered for use in association with wares only, it was concluded that the presence of the plaintiff’s trade-marks on the defendant’s packaging was a “use” within the meaning of section 22, but that their presence on the defendant’s brochures was not inside.
This interpretation leads to an unexpected situation. If the mark in question is registered for use in association with wares only, the result of the Clairol applies and the plaintiff may restrict the defendant’s use of its mark which meets the definition set out in the Goods Act. According to this definition, a trade-mark is deemed to be used in association with wares if, at the time of the transfer of ownership or possession of those wares, in the ordinary course of business, it is affixed to the wares themselves. or on the packaging in which they are distributed, or if it is in any other way so associated with the goods that notice of the association is then given to the person to whom the good or possession is transferred. However, if the mark at issue is registered for use in association with services, the broader definition of “use” for the services applies and the applicant may restrict the defendant’s use of his mark in advertising. .
Much has been written about the section by commentators, but the approach to the Clairol case continues to be applied although the article has not been widely interpreted and applied by the courts.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.