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Interim and Interlocutory Injunctions Availability: Trademark Disputes

By: Georgina Danzig, May Cheng | Last updated: June 17, 2022

For two decades after the Federal Court of Appeal decision in Centre Ice Ltd. v. National Hockey League, [1994] F.C.J. No. 68 (F.C.A.) ("Centre Ice"), plaintiffs embroiled in trademark infringement disputes had an uphill battle in seeking interlocutory injunctions to enjoin the use of confusingly similar marks pending trial. The Centre Ice decision arguably had a chilling effect on access to injunctive relief, because it was repeatedly cited as authority for the proposition that evidence of irreparable harm must be "clear and not speculative".

Then in 2015, in Reckitt Benckiser LLC v. Jamieson Laboratories Ltd., [2015] F.C.J. No. 996 (F.C.) ("Reckitt FC"), an interlocutory injunction was upheld by the Federal Court of Appeal ([2015] F.C.J. No. 587 (F.C.A.) ("Reckitt FCA"), vard on other grounds), where the trial judge had held that depreciation of goodwill and loss of distinctiveness was not capable of being quantified, and therefore constituted irreparable harm (Reckitt FC, para. 55). The decision was widely recognized by the intellectual property bar as a marked departure from Centre Ice, (C. Pibus and M. Savoy "Interlocutory Injunctions Alive and Well in Canada's Federal Court", April 28, 2015, online, and C. Rowden, "Reckitt v. Jamieson — Is the Federal Court of Appeal Signaling MEGA Changes?", Intellectual Property Journal Vol. XX No. 3, p. 1313, Federated Press) but it remained an open question whether the case would be held to its own facts or used to usher in new grounds for injunctive relief.

It should be noted that the Reckitt FC decision had granted the interlocutory injunction to the plaintiffs based on a trademark registration owned by the plaintiffs for MEGARED, but not in use prior to the adoption and use of the allegedly confusingly similar mark of the defendant, OMEGA RED. The inherent descriptiveness of the marks, which both were used for a red krill oil product that contained Omega-3s, was also brushed aside in the Court's analysis of the case. Further, Justice Brown in Reckitt FC, ignored the delay of some 18 months in bringing the application for the interlocutory injunction, presumably on the basis that the defendant was on notice of the potential infringement due to a cease and desist letter sent at the outset of the product launch for OMEGA RED. Finally, the case featured scant evidence of confusion based on three hearsay examples of customer and store clerk confusion reported in emails and in product identification signs on store shelves (Reckitt FC).

Whether the door on injunctions had been thrown open by the Court of Appeal’s decision in Reckitt FCA in 2015 was left in doubt, due to the Court of Appeal's insistence that each case must be decided on its own peculiar facts. While the Court of Appeal admonished Justice Brown for referring to the defendant as an "infringer" at this early stage in the proceedings, the decision was upheld and only varied to allow the defendant an additional 30 days to comply with the terms of the "forthwith" injunction, which required the defendant to withdraw its products from 8,500 retail locations operated by third parties (Reckitt FCA).

A couple of years later, Sleep Country filed for an interlocutory injunction application against the adoption by Sears of the "descriptive" slogan "THERE IS NO REASON TO BUY A MATTRESS ANYWHERE ELSE", which was alleged to infringe Sleep Country's trademark registrations for "WHY BUY A MATTRESS ANYWHERE ELSE?" A demand letter was sent by Sleep Country and both interim and interlocutory injunction applications were brought within six months due to the refusal to comply.

The interim injunction decision was rendered by Justice Boswell of the Federal Court on October 26, 2016, and resulted in the refusal to grant an interim injunction. Justice Boswell acknowledged that a serious issue was conceded by Sears, but found irreparable harm had not been established. Justice Boswell invoked the Centre Ice test in noting only that Sleep Country had not adduced clear and non-speculative evidence that it will suffer irreparable harm. (Sleep Country Canada Inc. v. Sears Canada Inc., [2017] F.C.J. No. 180 ("Sleep Country"). When considering the interlocutory application, Justice Kane held that she did not find Justice Boswell's ruling on the interim injunction persuasive, because she had a more extensive record and the relevant time period to assess irreparable harm was very different.

The interlocutory injunction application record in Sleep Country included three expert reports for the plaintiff and two for the defendant, in addition to party affidavits. There were cross-examinations conducted, and the decision of Justice Kane includes a fifteen-page summary of the affidavit and expert evidence filed by the parties, complete with references to the cross-examinations.

Justice Kane correctly set out that the key issue in the application for an interlocutory injunction was whether "Sleep Country has established, with clear and non-speculative evidence, that it will suffer irreparable harm as a result of the alleged infringement, including confusion and/or depreciation of goodwill or loss of distinctiveness, between now and the time the action is finally determined and whether this harm can be quantified and compensated in damages. If it cannot be quantified, it is irreparable." (Sleep Country at para. 9)

Against this test, she then granted the interlocutory injunction, with the statement "Sleep Country has established this irreparable harm on a balance of probabilities, using concrete and non-speculative evidence provided by experts who refer to marketing principles and concepts, as well as the principles governing damages." [emphasis added] (Sleep Country at para. 15)

Sleep Country counsel specifically asserted the Reckitt FCA case for the proposition that depreciation of goodwill and loss of distinctiveness in its slogan constitute irreparable harm that is not capable of quantification (Sleep Country at para. 35).

After reviewing the submissions of both parties at length in her judgment, Justice Kane concluded that, "The Court is as well placed as an expert to determine whether confusion will occur" and added "[i]n the present case, although the experts opine on confusion, the Court is equally capable of making this determination", citing the Supreme Court of Canada decisions in Masterpiece Inc. v. Avalida Lifestyles Inc. , [2011] S.C.J. No. 27 at paras. 39, 75–101 and Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltee, [2006] S.C.J. No. 22 at para. 20) as authority (Sleep Country at para. 88).

The judge then reviewed the opinion evidence of the experts for both sides and rejected the defendant's expert evidence of Professor Moorthy to the effect that any confusion is unlikely because of the use of the name "Sears" or "Sleep Country", and that any confusion would likely benefit Sleep Country, because the Sleep Country slogan is well recognized (Sleep Country at para. 88 ). She even went so far as to suggest that Professor Moorthy's assertions were illogical (Sleep Country at paras. 107–108).

Justice Kane in Sleep Country was also clearly not persuaded that the Sears slogan was developed "organically", opining that "it would seem to be more than a coincidence that Sears' slogan is so similar to that of Sleep Country" (Sleep Country at para. 93).

Justice Kane asserted that the Court can put itself into the shoes of the "somewhat hurried consumer" and can consider all the surrounding circumstances, finding that no expert evidence is necessary. In her opinion, all of the factors support the view that, on a balance of probabilities, a likelihood of confusion before trial, because the Sears slogan is almost identical, the two slogans convey the same "value proposition" and the Sleep Country slogan is iconic and etched in the mind of many consumers (Sleep Country at para. 94).

In considering the Reckitt FC decision, Justice Kane held that the case establishes a more general proposition, that where there is a loss of distinctiveness, the damage to goodwill is not possible to calculate, further finding similarities in the circumstances of the cases (Sleep Country at para. 116).

In awarding an interlocutory injunction, the Sleep Country decision has taken the Reckitt FC case into new territory. If this had been the test prior to Reckitt FC, many more injunctions would surely have been granted, because in virtually all circumstances a plaintiff has argued that its registered trademark would be damaged by the loss of distinctiveness that is inevitable when other traders encroach by adopting a similar mark.

For example, in the Target Brands, Inc. v. Fairweather Ltd., [2011] F.C.J. No. 991 (F.C.) ("Target Brands"), decision, the use by the defendants of the trademark TARGET APPAREL for retail services, would effectively dilute the goodwill associated with the TARGET brand before the US retailer could establish itself in the Canadian market. However, the application by Target Brands to obtain an interlocutory injunction was thwarted by acceptance that any damages suffered could be calculable, based on the same damages calculation expert relied upon by the defendants in the Sleep Country decision, Mr. Harrington (Target Brands at para. 66). It should be noted that Target Brands had also used a marketing expert to argue that TARGET was a "sincere" brand and that the transgression to the brand that would be caused by the defendant's use of TARGET APPAREL would damage the "brand promise" and "brand equity" as well as the goodwill of the plaintiffs. There was also significant evidence of actual confusion by consumers mistaking the new retail locations of defendant for plaintiff's market entry into Canada, as a result of the plaintiff's announced intention to launch in Canada.

Justice Kane inadvertently acknowledged her departure from prior decisions on interlocutory injunctions, when she stated that the calculations of damages as proposed by Mr. Harrington may be "possible", but rejected this on the basis that injunctions would be nearly impossible to obtain and protection of trademarks would be lost until trial if the threshold for calculating damages were set so low (Sleep Country at paras. 151–152). She concluded that it would be difficult to the point of impossibility to calculate Sleep Country's losses.

Finally, Justice Kane accepted that the balance of convenience favours the plaintiff, based on the length of time it has used its mark, and that Sears will not be inconvenienced if enjoined from using its slogan, which it only adopted in the past 6 months.

The appeal from the Sleep Country decision was subsequently withdrawn, leaving the case as the fresh precedent for issuance of an interlocutory injunction to enjoin competitive market activity without any evidence of actual consumer confusion, and no evidence that any damages have been suffered. This same lack of confusion was pointed out in Reckitt FC, where the judge relied on quia timet decisions and ruled that a likelihood of confusion justified the granting of the injunction, rather than requiring evidence of actual confusion in light of the period of coexistence.

The injunctions in both of these Federal Court cases appear to be rooted in the concept of dilution, which would result in loss of goodwill to the registered trademark owner, which would be difficult to quantify in the circumstances. The difficulty with calculating damages has not, however, resulted in the granting of interlocutory injunctions for a couple of decades prior to Reckitt FC, and therefore it can now be recognized that the Federal Court will continue to rely on the Reckitt FCA decision as standing for the proposition that loss of goodwill can be impossible to calculate in many circumstances, not only where the defendant was first to market.

Notably in 2020, the decision of Justice McHaffie of the Federal Court in TFI Foods Ltd. et. al. v. Every Green International Inc., [2020] F.C.J. No. 850(F.C.), granted an interlocutory injunction in the context of the sale of grey market goods. The plaintiffs, TFI Foods Ltd. And I-MEI Foods Co Ltd., sought an interlocutory injunction to stop Every Green International Inc. from distributing and selling grey market products with the false claim that it was the exclusive distributor of the goods in Canada. The Federal Court granted the interlocutory injunction prohibiting the defendant from distributing the grey goods in Canada, requiring a recall of the falsely labelled products and enjoining the defendant from falsely identifying itself as the exclusive distributor. In a subsequent ruling in August of 2021, TFI Foods Ltd. v. Every Green International Inc., [2021] F.C.J. No. 247(F.C.), the same plaintiffs obtained a default judgment that included compensatory and punitive damages as well as a higher level of costs for the flagrant disregard of the injunction and proceedings.

A far-reaching decision of the Supreme Court of Canada dealing with injunctions to halt the sale of counterfeit goods is worthy of mention when considering the availability of injunctive relief. In the case of Google Inc v. Equustek Solutions Inc, [2017] S.C.J. No. 34, the Supreme Court of Canada upheld an interlocutory injunction with world-wide effect against Google, a non-party to the action for infringement, effectively requiring Google to globally de-list Equustek's websites and remove references to certain search results on its internet search engine to prevent the continued sale of allegedly infringing goods. The underlying facts present as a quintessential counterfeiting case. The Plaintiffs owned trade secrets and trademarks used in the manufacture of their networking devices. Equustek was alleged to have stolen those rights and conspired with others to manufacture a competing infringing product. Multiple court orders against Equustek were issued, including injunctions enjoining Equustek from carrying on its infringing business. Equustek evaded those orders by abandoning the litigation, fleeing the jurisdiction, and carrying on business via the Internet from an undisclosed location. In order to remedy the wrong, the plaintiffs successfully applied for an interim inunction restraining two non-parties, Google Inc. and Google Canada Corporation (Google) from including the defendants' websites in search results generated by Google's search engines. This application raised novel questions about the Court's authority to make such an order against a global Internet service provider.

At the British Columbia Court of Appeal, Justice Fenlon recognized that, in order to preserve the effectiveness of their judgments, courts must "adapt to new circumstances". The landmark decision of the SCC affirms the tripartite test for interlocutory injunctions, affirms that injunctions can issue against non-parties, and concludes that principles of international comity and freedom of expression, do not preclude the granting of the remedy sought and ordered. Speaking for the majority on the Supreme Court of Canada, Abella J. acknowledged the reality of the borderless Internet; the necessity of granting meaningful remedies; and acknowledged the universality of opinion that, "most countries will likely recognize intellectual property rights and view the selling of pirated products as a legal wrong." Google ultimately sought relief from the Canadian decision granting a 'world-wide' injunction in the US Courts, successfully obtaining a declaration from a California Court that the Canadian injunction was not enforceable in the US.

A recent decision of the Court of Queen's Bench of Alberta is additionally noteworthy for its granting of an interlocutory injunction primarily as a result of its finding that a trademark that was no longer in use held residual goodwill sufficient to prevent its use by a third party. In Corus Radio Inc. v. Harvard Broadcasting Inc., [2019] A.J. No. 1543, the Court granted an interlocutory injunction to prevent Harvard Broadcasting from using the POWER 107 name and logo after it rebranded its HOT 107 radio station in Edmonton. Corus had previously operated a POWER 92 radio station in Edmonton and held a number of POWER trademark registrations; however, its registration for POWER 92 had been expunged and Corus had not used the mark since in or around 2004. Nonetheless, the Court acknowledged the continued goodwill, and the value in such goodwill, held by Corus, and granted the injunction restricting Harvard Broadcasting's use of the POWER 107 brand.

Further, in VisionWerx Investment Properties Inc v Strong Industries, Inc, 2020 FC 378, the plaintiff sought an interlocutory injunction for an infringement of distinguishing guise pursuant to section 7(b) of the Trademarks Act. The plaintiff, who designs, manufactures, and sells hot tubs, claimed that the defendant’s two-person hot tub was being passed off as the plaintiff’s at a lesser cost. The plaintiff attempted to rely on Corus Radio Inc. v. Harvard Broadcasting Inc., [2019] A.J. No. 1543 to argue that the test for an interlocutory injunction should be considered as a whole. However, the Federal Court found that all three parts of the test still need to be established. Despite the plaintiff establishing a “serious issue,” the court found that the plaintiff did not present evidence of “irreparable harm” when it would have been possible to quantify in monetary terms. This was ultimately fatal to their application.

A recent decision by the Ontario Superior Court of Justice is also worth noting for granting an interlocutory injunction as a result of its finding that the plaintiff had invested significant resources in preparation of using the trademark. In 2788610 Ontario Inc v Bhagwani et al., 2022 ONSC 905, the Court granted an interlocutory injunction prohibiting Hemant Bhagwani, Fatima Bhagwani, 1727799 Ontario Inc and Bombay Frankie Inc (the defendants) from using the term "Bombay Frankie" as the name of any of their restaurants or franchising business, social media accounts or website. The plaintiff, 2788610 Ontario Inc, filed an application to register the trademark "Bombay Frankies" in 2020; however, to date, the plaintiff has not opened any restaurants under that name. In 2021, the defendant began using the name "Bombay Frankie" to operate two restaurants, and subsequently applied to register the trademark. Justice Brown found that despite the plaintiff’s lack of use of the trademark, it had applied for registration and put considerable work "into planning and developing its concept for the launch of its franchise restaurants, including retaining lawyers for trademark, franchising, leasing and a firm for branding and marketing, as well as working with a chef on developing menus" and would suffer undue disadvantage and irreparable harm not compensable monetarily if the injunction was not granted (at para 30). It should be noted that this decision of Justice Brown is currently under appeal.

Materials reproduced with the permission of LexisNexis Canada.