INTERNATIONAL TRADEMARK ASSOCIATION Powerful Network Powerful Brands

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The views expressed in The Trademark Reporter are those of the individual authors. The Trademark Reporter (ISSN 0041-056X) is published bimonthly by the International Trademark Association, 655 Third Avenue, New York, NY 10017-5646 USA. Periodicals postage paid at New York, NY POSTMASTER: Send address change to The Trademark Reporter, 655 Third Avenue, New York, NY 10017-5646 USA. Annual subscription rate for members is $90 (single copy $20), which is included in their annual dues. Subscriptions to nonmembers are available, in the interests of education, only to schools, public libraries and government agencies at a cost of $60 (single copy $20) per year. Rates for membership on request. Material may not be reproduced without permission. Claims for missing numbers must be made within the month following the regular month of publication. The publishers expect to supply missing numbers free only when losses have been sustained in transit and when the reserve stock will permit. Reprints of most leading articles and other material available for nominal charge on inquiry to INTA. INTA, the INTA logo, International Trademark Association, Powerful Network Powerful Brands, The Trademark Reporter, and inta.org are trademarks, service marks and/or registered trademarks of the International Trademark Association in the United States and certain other jurisdictions.

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DILUTION, THE SECTION 22 DEBACLE, AND THE PROTECTION OF BUSINESS GOODWILL

IN CANADA: SOME INSIGHTS FROM U.S. TRADEMARK LAW AND POLICY

By Eugene C. Lim∗

I. INTRODUCTION The doctrine of “distinguishing use” and the “likelihood of

confusion” test have traditionally played a central role in carving out the contours of liability for trademark infringement. Under this “classic” model of trademark law, liability for trademark infringement can arise only if there has been unauthorized use of a mark as an indicator of source or quality (viz. distinguishing use as a trademark), and where such use generates a likelihood of confusion as to the provenance of goods or services in the mind of the average consumer.1 However, for some time now, the status of these two doctrines as the central pillars of trademark law has been cast in doubt by the emergence and growth of anti-dilution law, particularly in the United States2 and to a somewhat lesser

∗ S.J.D. (Toronto). This article is based on a presentation delivered by the author, during his doctoral studies at the University of Toronto, as part of the Centre for Innovation Law & Policy graduate seminar series. The author wishes to thank Abraham Drassinower and Ariel Katz for their helpful comments on and suggestions for some of the ideas developed in this article. The feedback and assistance provided by the editorial team at the Trademark Reporter are also gratefully acknowledged. 1. See, e.g., Universal Studios, Inc. v. Nintendo Co., Ltd., 578 F. Supp. 911, 925 (S.D.N.Y. 1983) and J. Thomas McCarthy, 1 McCarthy on Trademarks and Unfair Competition § 2:8 (4th ed. 2007). See also Jennifer Files Beerline, Anti-Dilution Law, New and Improved: The Trademark Dilution Revision Act of 2006, 23 Berkeley Tech. L.J. 511, 511 (2008); Robert G. Bone, Enforcement Costs and Trademark Puzzles 90 Va. L. Rev. 2099, 2104-23 (2004); Robert G. Bone, Schechter’s Ideas in Historical Context and Dilution’s Rocky Road, 24 Santa Clara Computer & High Tech. L.J. 469, 472 (2007-2008) [hereinafter Bone, Schechter’s Ideas]. In Canada, the section 20 action, like that of section 19, requires use by the defendant of the confusing trademark or trade name for purposes of indicating origin. In other words, such use must also be “use as a trademark,” that is, to distinguish the wares and services of one trader from those of other traders. See K. Gill & R.S. Joliffe, eds., Fox on Canadian Law of Trade-marks and Unfair Competition (4th ed. 2007) at 7-3 to 7-4. They further elaborate, at 7-8, the concept of “use” as fundamental to trademark law generally and a “critical lynchpin” within the Trade-marks Act of Canada. In order to constitute infringement, the defendant’s use must be “use as a trademark.” 2. See Brian A. Jacobs, Trademark Dilution on the Constitutional Edge, 104 Colum. L. Rev. 161, 166 (2004), who notes that the concept of dilution emerged at the start of the twentieth century when corporations began to apply pre-existing famous marks to non-competing goods, such as ROLLS ROYCE to market radio parts, and KODAK to sell bicycles. See also Kathleen B. McCabe, Dilution-By-Blurring: A Theory Caught in the Shadow of Trademark Infringement, 68 Fordham L. Rev. 1827, 1845 (2000).

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degree in Canada.3 The dilution doctrine in the United States recognizes new forms of harm to trademarks, such as dilution by blurring and tarnishment, which can occur even in the absence of consumer confusion. In this regard, anti-dilution law seeks to expand the scope of legal protection afforded to trademarks beyond the traditional ambit of consumer confusion and distinguishing use.4

In Canada, the extent to which trademark liability can exist in the absence of distinguishing use and confusion remains a question of some uncertainty. Section 22 of Canada’s Trade-marks Act recognizes that a trademark may be harmed in non-confusing ways through the “depreciation of goodwill.” Under this provision, depreciation of goodwill may occur to trademarks even if consumer confusion is absent or unlikely, but the provision does not refer explicitly to an “anti-dilution” right. It is important to note in this regard that the Canadian “section 22 action” appears to differ from the U.S. version of anti-dilution in important respects.5 While the fairly recent Supreme Court decisions in Veuve Clicquot Ponsardin, Maison Fondée en 1772 v. Boutiques Cliquot Ltée6 and Mattel, Inc. v. 3894207 Canada Inc.7 have shed some light on the scope and operation of section 22, particularly with respect to the implications of “fame” on the likelihood of confusion, these judgments do not test the true limits of section 22 in Canada. In particular, the precise role of “distinguishing use” and “consumer confusion” in the scheme of the Trade-marks Act has been unsatisfactorily resolved and is in need of more careful attention. Section 22, as it has been interpreted by Canadian courts in the past, has been described as an “embarrassing anomaly”8 and a

3. Dr. Harold G. Fox, Chair of the Trade Mark Law Revision Committee of Canada in 1953, observed that the jurisprudence of the United States “demonstrated a growing perception of the dilution theory.” The Committee attempted to address the concern of dilution through an amendment to the Canadian Trade-marks Act to include what is now the “depreciation of goodwill” action in section 22. Interestingly, section 22 makes no mention of the term “dilution.” See Mirko Bibic & Vicky Eatrides, Would Victoria’s Secret Be Protected North of the Border? A Revealing Look at Trade-Mark Infringement and Depreciation of Goodwill in Canada, 93 TMR 904, 904 (2003), quoting H.G. Fox, The Canadian Law of Trade Marks and Unfair Competition 340 (3d ed. 1972). 4. Mark Lemley argues that trademark law has been “loosed from its traditional economic moorings” and refers to these shifts in trademark law as “doctrinal creep.” See Mark A. Lemley, The Modern Lanham Act and the Death of Common Sense, 108 Yale L.J. 1687, 1688, 1698 (1999). 5. For instance, Canada does not, as yet, have a statutory concept of “famous trademarks.” See Roger T. Hughes, Trade Marks, 948 (2d ed. 2008). 6. [2006] 1 S.C.R. 824. 7. [2006] 1 S.C.R. 772. 8. Norman Siebrasse, Comparative Advertising, Dilution and the Meaning of Section 22 of the Trade-marks Act, available at http://law.unb.ca/Siebrasse/Download/ Section22.pdf at 69.

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“foreign object”9 in the Act. It also appears to be the only section in the Canadian legislation that offers protection to trademarks beyond the traditional confines of classic trademark doctrine.

This article argues in favor of restoring doctrinal clarity to Canadian trademark law by repealing section 22 and re-establishing “distinguishing use” and the “likelihood of confusion” as central tests for trademark infringement. It suggests that the distinguishing function of a trademark—to enable consumers to identify the source of goods and to prevent confusion in the marketplace—remains the key rational basis for trademark protection. Extending protection too far beyond this traditional standard would lead to the recognition of trademarks as objects of ownership in and of themselves, rather than trade symbols used to represent goods in commerce. This article also suggests ways in which the “confusion doctrine,” as it is currently defined in Canada’s Trade-marks Act, can be interpreted purposively to balance the interests of trademark owners and consumers, and posits that the principles of anti-dilution law upset this balance by disrupting the natural cycles of language growth and renewal that accompany trademark death through “genericide.” To this end, the burden of keeping trademarks distinctive in the long term should fall squarely on the shoulders of trademark proprietors seeking to sustain the viability of their commercial insignia as indicators of source. Trademark law should not interfere in “non-trademark” and “non-confusing” uses of words and signs used in commerce, so as to preserve the right of the public to engage in ordinary discourse and communication.

This article offers four principal arguments in support of the repeal of section 22. First, section 22 lacks the detail and clarity of the “analogous” legislation in the United States.10 Second, liability for trademark infringement in the absence of confusion is difficult to justify from either a doctrinal or economic perspective.11 Third, 9. Id. at 70. 10. This argument is developed in Part V(A) of this article: “Sounding the Death Knell for Section 22: Lack of Specificity.” Although it might be said that there is no direct basis for comparison between the legislation in the United States and Canada, the American experience with dilution doctrine and jurisprudence can certainly be instructive for the future development of trademark law in Canada, because the concept of “dilution” was one of the key driving factors that inspired the enactment of Canada’s section 22. The lessons that can be drawn from the American experience are particularly salient for the evolving case law in Canada, since “dilution” as a cause of action in the United States has been defined with greater precision, has had a longer history of implementation and has received far greater attention and analysis in the courts. In addition to the concerns relating to the viability of dilution doctrine, Canada’s version of “depreciation of goodwill” suffers from ambiguity and inconsistent interpretation—concerns that raise additional doubts about its relevance and utility as a cause of action. 11. Protecting a trademark from dilution may, of course, result in economic gains of a financial nature for trademark proprietors; however, the focus of the economic analysis in this article is not conducted solely from the point of view of the trademark owner. Rather, the focus is on whether dilution doctrine will produce net welfare gains for society as a

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section 22 is superfluous and has led to artificial complexity in the jurisprudence (for example, the “association” dilemma in the context of comparative advertising for wares as opposed to services).12 Fourth, neither the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement nor the Paris Convention for the Protection of Industrial Property contains an explicit requirement that member states protect trademarks against dilution. The article concludes with some suggestions on how to restore doctrinal clarity to the Act, by introducing a uniform definition of trademark “use” in section 2 of the Act, and by applying a properly construed “likelihood of confusion” test as the basis for trademark liability.

The proposition that anti-dilution law should be approached with caution is of course not a new argument. Dilution doctrine has, for a long time, been subject to trenchant criticism, particularly from commentators in the academic community.13 Some of the most frequently discussed grounds for criticism of dilution have been the lack of social welfare and doctrinal justifications for its existence, and the chilling effect that it has on fundamental civil liberties, in particular the use of trademarks for description, communication, parodies, and comparative advertising. This article does not seek to provide a detailed examination or analysis of the dilution literature. Rather, its goals are far more modest—to examine how future trademark law reform in Canada should respond to the “dilution debacle,” taking into account the lessons that have been learned thus far from our experience with dilution law and jurisprudence.

In Part II of this article, I consider some of the leading arguments for and against expanding protection to trademarks, and discuss the extent to which these arguments provide a convincing normative justification for the existence of dilution law. Part III provides a brief historical overview of anti-dilution law, and explains how its emergence and application in the United whole. In essence, the argument that I seek to make is not that dilution doctrine will not result in higher profits for trademark owners, but rather that the costs that it imposes on society outweigh its benefits. See the discussion, infra, at Part V(C): “Absence of a Convincing Doctrinal Justification for Section 22.” 12. Under Canada’s Trade-marks Act, the concept of “use of a trademark in association with” is subject to a more stringent affixation requirement for wares than for services. This issue is discussed in some detail under Part V(B): “Artificial Complexity Arising from a Confusing Interpretive Legacy.” 13. See generally Felix Cohen, Transcendental Nonsense and the Functional Approach, 35 Colum. L. Rev. 809 (1935); Ralph S. Brown, Jr., Advertising and the Public Interest: Legal Protection of Trade Symbols, 57 Yale L.J. 1165 (1948); Robert C. Denicola, Trademarks as Speech: Constitutional Implications of the Emerging Rationales for the Protection of Trade Symbols, Wis. L. Rev. 158 (1982); Rochelle Cooper Dreyfuss, We Are Symbols and Inhabit Symbols, So Should We Be Paying Rent? Deconstructing the Lanham Act and Rights of Publicity, 20 Colum.-VLA J.L. & Arts 123 (1996); Katya Assaf, The Dilution of Culture and the Law of Trademarks, 49 IDEA 1 (2008).

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States represent a departure from traditional trademark principles. In Part IV, I explore the extent to which anti-dilution principles have been embraced in Canada, and the role of section 22 in the general scheme of Canada’s Trade-marks Act. In Part V, I discuss a range of possible responses to the uncertainties generated by section 22, and argue that its removal from the Act can be supported on a number of policy grounds. Finally, I conclude in Part VI with some suggestions for legislative and judicial reform in Canada, to restore doctrinal clarity and interpretative consistency to Canada’s Trade-marks Act.

II. DILUTION AS A CAUSE OF ACTION— HOW CONVINCING ARE EXISTING NORMATIVE

JUSTIFICATIONS? A. Trademarks as Assets in the Modern Marketplace The concept of dilution, which treats the loss of trademark

distinctiveness as a form of actionable harm, is often attributed to Frank I. Schechter. Schechter argued in favor of broader protection for trademarks, expressing the view that a trademark no longer functions solely as an indicator of source in the modern marketplace. In his seminal work, “The Rational Basis of Trademark Protection,” Schechter observed that trademarks had evolved beyond their traditional role as mere indicia of source, and had acquired a magnetic and distinctive appeal worthy of protection by the law. The value of a distinctive trademark lies, in Schechter’s view, not just in its source-identifying function, but also in its ability to communicate brand messages, and to actually sell goods.14 The real injury suffered by distinctive trademarks in many cases involving non-competing, non-confusing use is not necessarily the usurpation of their source-identifying function, but rather the gradual “whittling away” or dispersion of their identity and hold upon the public consciousness and the minds of consumers.15 In this vein, the more distinctive and unique a mark is, the greater its need for protection against the “dissociation from the particular product in connection with which it has been used.”16

Schechter’s arguments paved the way for a fundamental shift in the doctrinal focus of trademark law. The only rational basis of trademark law, in Schechter’s view, was to protect the distinctiveness and true functions of the trademark, which were to “identify a product as satisfactory and thereby to stimulate further

14. Frank I. Schechter, The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813, 819 (1927). 15. Id. at 825. 16. Id.

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purchases by the consuming public.”17 This shift was necessary in an age where commercial depravity and psychological advertising had transformed a trademark from a mere commercial symbol to an “agency for the creation and perpetuation of goodwill.”18

B. Refocusing Trademark Law on Source-identification and Fair Competition

In contrast to the Schechterian model, scholars like Mark Lemley have argued against the broader trend of treating words and trademarks as objects of property ownership,19 because the “propertization” of signs and symbols would have a chilling effect on the freedom of the public to use the basic building blocks of human communication.20 In developing his argument, Lemley expresses the concern that intellectual property law in the modern age has begun to lean too far toward private rights at the expense of the public interest.21 The tendency among commentators and even courts to speak of trademarks as things valuable in and of themselves, rather than for the product goodwill that they embody, would lead eventually to the rather disturbing prospect of trademarks being divorced entirely from the goods that they are supposed to represent.22

In developing his argument, Lemley decries the growing disconnect between trademark law and trademark theory. The principal function of a trademark, Lemley argues, is to perform a signaling function to the public: to indicate the origin of goods or services.23 Expanding trademark rights beyond this essential signaling function would, in Lemley’s view, entail significant costs for society. In particular, regarding trademarks as objects of property would stifle social and political discourse by locking up words and phrases, would increase merchandising fees, and would ultimately lead to an impoverishment of language and culture as individuals gradually lose the right to make fun of and criticize 17. Id. at 818. 18. Id. 19. See Mark A. Lemley, Romantic Authorship and the Rhetoric of Property, 75 Tex. L. Rev. 873, 895-904 (1997). In a similar vein, Rochelle Cooper Dreyfuss has expressed concern about the privatization of words and phrases. See Dreyfuss, supra note 13, at 128. 20. Lemley notes, for instance, that propertizing trademarks might entail significant costs to society. Important political and social commentary as well as works of art might be suppressed entirely. See Mark A. Lemley, supra note 4, at 1696. 21. Id. at 1687. 22. Id. at 1688, and at 1695-96: “Vesting trademarks with the mantle of property—and giving them some of the indicia of real property, such as free transferability—defeats the purpose of linking trademarks to goods in the first place.” 23. Id. at 1695: “We give protection to trademarks for one basic reason: to enable the public to identify easily a particular product from a particular source.” See also Brown, supra note 13, at 1185-87, where he discusses the “information function” of trade symbols.

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trademarked products and services.24 Trademark rights, if taken too far, would thus have implications far beyond the commercial realm—as overly zealous trademark proprietors seek to silence any form of use (commercial or otherwise) that might be perceived as detrimental to their brand image.

Dilution law is one key example, cited by Lemley, of how trademark rights have developed in ways that are not supported by economic theory. Since dilution does not require consumer confusion to be actionable, Lemley describes this cause of action as “a fundamental shift in the nature of trademark protection,”25 a shift that he categorizes as an example of “doctrinal creep.”26 Protecting trademarks against diluting uses could involve expanding the monopoly enjoyed by trademark proprietors to unrelated fields of activity in which they do not customarily compete for customers. Junior traders would accordingly be estopped, under dilution doctrine, from selling “Buick aspirin” or “Kodak pianos,”27 even in the absence of consumer confusion.28

In a later article co-authored with Stacey Dogan, Lemley reiterates his concern about the ever-expanding boundaries of trademark law, and the accompanying erosion of the “trademark use” doctrine, which states that unauthorized use of a trademark must be for the purpose of denoting the source of goods or services in order to constitute trademark infringement. It is the usurpation of the trademark’s source-denoting function about which the trademark proprietor is complaining in a classic trademark infringement action. Dogan and Lemley suggest that the trademark use doctrine offers an important safeguard against dilution law’s “slippery slope.”29 They caution that the reach of the “dilution” action should not extend to every use (commercial or otherwise) that could possibly affect a mark’s meaning, lest dilution becomes elevated into an “über right”30 that defeats the

24. Lemley, supra note 4, at 1696. 25. Id. at 1698. 26. Id. 27. Id. These are some of the examples cited in the history of the New York statute to illustrate that confusion may be unlikely if a famous mark is used in connection with goods that are very far removed from those traditionally sold by the owner. See 1954 N.Y. Leg. Ann. 49-50 quoted in Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, 506 (2d Cir. 1996). 28. Lemley, supra note 4, at 1699. But see R.N. Klieger, Trademark Dilution: The Whittling Away of the Rational Basis for Trademark Protection, 58 U. Pitt. L. Rev. 789, 846 (1997), who suggests that certain marks such as COCA-COLA, BUICK, and KODAK have acquired such a degree of fame that practically any unauthorized junior use of these marks would result in a sizeable number of ordinary consumers mistakenly assuming a connection between the senior and junior uses of the mark. 29. Stacey L. Dogan & Mark A. Lemley, The Trademark Use Requirement in Dilution Cases, 24 Santa Clara Computer & High Tech. L.J. 541, 545 (2007-2008). 30. Id.

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very purpose of trademark laws. According to Dogan and Lemley, a properly conceived doctrine of dilution protects famous marks from uses that interfere with their function as source-identifiers.31

In a similar vein, Katya Assaf expresses deep discomfort at the over-expansive protection of trademarks and their intrusion into our cultural space. Assaf notes that although trademark law was originally enacted to prevent consumer confusion as to the source of goods and services,32 the scope of trademark protection has grown to include the “cultural meaning” of trademarks.33 Assaf attributes the expansive scope of this protection to three factors—a very broad interpretation of “consumer confusion,” the dilution doctrine, and a general tendency to regard a trademark as a broad property right. This expansive scope had led to the domination of our cultural discourse by commercial values, at the expense of alternative interpretations of culture.34 Assaf argues that the cultural meaning of trademarks should not be considered the private property of the trademark owner, and should not be protected.35

Interestingly, taking into account the scholarly concerns over the expansion of traditional trademark doctrine, Barton Beebe has indentified a judicial trend in the United States that appears to accord with scholarly recommendations to control the expansion of trademark law. In his study, Beebe identifies a surprising number of cases in which dilution was found to have been present where classic trademark infringement had also been committed.36 This trend raises interesting questions about the viability of dilution as a “standalone” action, and perhaps marks the beginning of a gradual shift back to traditional trademark principles such as trademark use and consumer confusion as bases for liability in trademark law. In his survey of reported federal trademark decisions issued within a year after the passage of the U.S.

31. Id. 32. See Assaf, supra note 13, at 1, 2, 4, 29. 33. Assaf suggests that modern marketing strategies and marketing techniques create reciprocal “associative links” between trademarks and positive cultural signs such as freedom, youth, and intelligence. The process of this reciprocal associative linkage causes the trademark in question to carry some of the meaning of the cultural sign to which it has been connected, while the cultural sign itself also absorbs some of the meaning of the mark. For example, according to Assaf, famous marks like COCA-COLA and CHANEL have, respectively, become embedded with cultural meaning such as “freedom, youth, joy and globalization” and “exclusivity, intelligence and European chic.” See id. at 2. 34. Id. at 5. 35. Id. at 6 and 59. 36. Barton Beebe, The Continuing Debacle of U.S. Antidilution Law: Evidence from the First Year of Trademark Dilution Revision Act Case Law, 24 Santa Clara Computer & High Tech. L.J. 449 (2007-2008).

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Trademark Dilution Revision Act of 2006 (discussed later),37 Beebe demonstrates how U.S. courts have begun to treat the dilution action as superfluous to the infringement action. In cases recognizing harm caused by dilution, the remedies awarded had already been triggered by the infringement action. The courts’ rulings on dilution were, according to Beebe’s analysis, largely redundant to their infringement determinations, and did not yield any remedies not already provided by the latter.38 Beebe’s findings are indeed revealing, and perhaps even counter-intuitive, prompting him to conclude that “antidilution law (in the United States) continues to have no appreciable effect on the outcomes of federal trademark cases or the remedies issuing from those outcomes.”39 In light of his findings, Beebe argues in favor of addressing the ambiguities in U.S. trademark doctrine, suggesting that the term “dilution” be discarded40 and replaced with “blurring” and “tarnishment,” which are, in his view, two very different concepts.41

While Beebe’s analysis might be limited by the relatively small sample size of his survey, his findings are nevertheless instructive in highlighting a growing recognition in the American jurisprudence that consumer confusion remains an important criterion for infringement and actionable harm in the context of trademark law. This trend by American courts to treat dilution as superfluous to the classic trademark infringement action is reminiscent of the recent dictum by the Supreme Court of Canada that depreciation of goodwill (under section 22 of Canada’s Trade-marks Act) may be difficult to prove in the absence of consumer confusion.42 The emerging judicial view that dilution (or depreciation of goodwill) is based to some extent (however remote) on the harm caused to a trademark by the likelihood of confusion in the marketplace is an indication that courts are becoming wary of expanding trademark rights too far beyond their traditional ambit. I elaborate on the relevance of this recent empirical work, along with research by Rebecca Tushnet, in Part V below. 37. Id. at 451-54. This survey consisted of U.S. federal court opinions on anti-dilution law that were filed from October 6, 2006, through October 6, 2007, and reported in either the Lexis or Westlaw databases. 38. Id. at 459. 39. Id. at 450. 40. Beebe suggests that the term “dilution” has caused us nothing but trouble, referring to it as a “continuing debacle.” Id. at 467 and 450. 41. Id. at 467. See also Barton Beebe, A Defense of the New Federal Trademark Antidilution Law, 16 Fordham Intell. Prop. Media & Ent. L.J. 1143, 1174 (2006). 42. Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824 ¶ 46. See also William Michael Darling, Depreciation in Canadian Trade-Mark Law: A Remedy in Search of a Wrong (2007), 21 I.P.J. 49, 52, 82. Darling notes, further, that Canada’s “depreciation of goodwill” action is an “unrelated, unneeded action that is sparsely used.” Id. at 85.

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American courts are also beginning to recognize the social role of trademarks not just in protecting consumers, but also in language development. In the case of Ty v. Perryman,43 the court held that when a trademark loses its distinctive qualities and becomes generic, the trademark owner incurs a cost in having to reinvest in another trademark to market its goods. However, such trademark death by “genericide” also confers an important benefit on society by adding to and enriching language and communication. Former trademarks that have entered the vernacular by becoming accepted as descriptive words or nouns in everyday speech and communication, such as “kerosene” and “escalator,” are no longer capable of performing the function of distinguishing goods and services, but their use has nevertheless contributed to language growth and evolution. The court in Perryman correctly declined to expand the scope of anti-dilution law so far as to prevent all uses (particularly non-confusing uses) of a trademark that might threaten to render the mark generic. Eager to place limits on a trademark owner’s anti-dilution “arsenal,” the court held that an overly expansive interpretation of dilution law would not be in the public interest of promoting language development through the natural cycles of trademark use, evolution, and eventual death through genericide.44

The decision in Ty v. Perryman injects a healthy dose of realism into the jurisprudence on dilution law in the United States. The court’s ruling supports the proposition that the concept of “harm” to a trademark owner’s rights should be reined in by the notion of consumer confusion—an implicit recognition that the true function of a trademark is to function as a badge of origin for goods and services. The court’s decision recognizes that trademark law does not confer absolute rights in respect of commercial signs and symbols, but rather seeks to strike a balance between private rights and the larger public interest of protecting consumers and fostering language renewal. Taking into account these recent trends in the judicial treatment of dilution doctrine, trademark owners may not approve of the myriad variety of ways in which their trademarks are being used by third parties, but their ability to enjoin unauthorized third-party uses may ultimately be restricted to acts that are considered to be infringing. While it might be too early to make a conclusive pronouncement about the future of dilution law in the United States, the trickle of cases45 that are beginning to question the viability of dilution as an independent cause of action marks an interesting retreat from the

43. Ty v. Perryman (2002), 306 F.3d 509. 44. Id. ¶ 6. 45. See Beebe, supra note 36, at 449, discussed earlier in this part at footnotes 36-41, and accompanying main text.

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almost relentless Schechterian expansion of trademark rights in the past few decades. The growing recognition that social welfare and the public interest play important roles in carving out the balance between property rights and civil liberties might mean that the burden of keeping trademarks distinctive and safe from “genericide” could ultimately fall on the shoulders of trademark proprietors seeking the continued use of their signs and symbols in commerce.

III. TRADEMARK LIABILITY IN THE ABSENCE OF CONFUSION:

TRACING THE EMERGENCE OF ANTI-DILUTION LAW

Having considered some of the principal arguments on both sides of the dilution debate, it is apposite, at this juncture, to discuss the historical evolution of dilution doctrine, and to trace its emergence from traditional trademark principles. As mentioned earlier, the “likelihood of consumer confusion” test has served as a key criterion for traditional trademark infringement. The central role of “consumer confusion” in defining the panoply of rights conferred by trademark law is reflected in the language of Article 6bis of the Paris Convention for the Protection of Industrial Property,46 which represents the minimum level of protection to be afforded to trademarks in its member states. Article 6bis of the Convention requires Paris Union members to prohibit the registration or use of a well-known mark in relation to identical or similar goods, where such use is “liable to create confusion.” In 1995, the putative multilateral standard of trademark protection was raised by the entry into force of the TRIPS Agreement. Under Article 16.3 of the TRIPS Agreement, the scope of a trademark owner’s monopoly has been expanded to include goods and services that are not similar to those for which the mark has been registered, provided that the use in question indicates a connection with the trademark proprietor, resulting in a likelihood of damage to the proprietor’s interests. It is important to note, however, that Article 16.3 of the TRIPS Agreement does not appear to have removed the confusion requirement, stating only that Article 6bis of the Paris Convention (1967) shall apply, mutatis mutandis, to dissimilar goods and services. Since the mere dissimilarity of goods and services, on its own, does not necessarily preclude the possibility of consumer confusion arising from the unauthorized use of a well-known mark on non-competing products, there exists a strong inference that the “confusion” doctrine continues to inform trademark principles at the international level. One commentator 46. Paris Convention for the Protection of Industrial Property, Mar. 20, 1883, as last revised at Stockholm, July 14, 1967, 25 Stat. 1372, 828 U.N.T.S. 305.

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has noted that there is currently no clear treaty-based obligation to provide dilution protection at all.47 I elaborate on this issue in Part V below.

The TRIPS Agreement’s ratcheting up of trademark protection to cut across product boundaries is an indication that the influence and appeal of a trademark may be felt in classes of goods and services other than those in which the proprietor has traditionally had a business presence. The developments in trademark rules at the international level are a reflection of more radical domestic changes that have taken place in the United States over the past fifty years, a period of history that Mark Lemley has termed “the modern era of trade mark law.”48 However, it would perhaps not be an understatement to say that the growth of international trademark norms has been somewhat more modest, not having kept pace with the almost explosive growth of trademark doctrine in the United States. Since the “classic age” of trademark law prior to the 1960s, the federal Lanham Act has represented the traditional approach to trademark infringement in the United States.49 The Lanham Act imposes two conditions precedent for trademark infringement, namely “use in commerce” and a risk of confusion.50 The likelihood of confusion has, in particular, been described as “the hallmark of infringement” under §1125(a)(l) in the jurisprudence.51 Hence, the historical U.S. approach to trademark infringement is compatible with the requirements set out in Article 6bis of the Paris Convention.

In the late part of the 19th century, however, courts in the United States started to extend protection to famous trademarks in circumstances where there was no likelihood of confusion, despite the express requirement of the Lanham Act. One of the first cases to expand the traditional “Lanhamite” boundaries of U.S. trademark law involved the use of the well-known mark KODAK in association with bicycles.52 In this case, the owner of the renowned mark for photographic supplies and equipment successfully restrained the defendants’ unauthorized use even though there was, in the court’s opinion, no real risk of confusion. 47. See Ilanah Simon Fhima, The Fame Standard for Trademark Dilution in the United States and European Union Compared, 17 Transnat’l L. & Contemp. Probs. 631, 665 (2008). 48. Lemley, supra note 4, at 1687. 49. James J. Holloway, The Protection of Trade-mark Goodwill in Canada: Where We Were, Where We Are and Where We Should be Going (2003), 17 I.P.J. 1, 40. 50. See 15 U.S.C. §§ 1051-1127, particularly § 1114 and § 1125. 51. See, e.g., Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1508-09 (2d Cir. 1997); Fed. Express Corp. v. Fed. Espresso, Inc., 201 F.3d 168 (2d Cir. 2000); Sports Auth., Inc. v. Prime Hospitality Corp., 89 F.3d 955, 960 (2d Cir. 1996); Arrow Fastener Co. v. Stanley Works, 59 F.3d 390 (2d Cir. 1995). 52. See Eastman Photographic Materials Co. v. Kodak Cycle Co., 15 Rep. Pat. Cas. 105 (1989).

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In essence, the court found that customers of the defendant’s KODAK bicycles were unlikely to think that they originated from the owners of the famous KODAK mark. The court ruled that it was necessary to protect the goodwill and uniqueness of the KODAK brand even though the defendants’ use in this case did not fall afoul of the “risk of confusion” requirement in the Lanham Act.

The boundaries of the Lanham Act continued to be stretched in cases such as Wall v. Rolls Royce Co. of America,53 in which the owner of the famous ROLLS ROYCE mark for cars successfully enjoined the defendant from using the mark in association with radio parts. On the facts, the court held that while there was no actual confusion resulting from the defendant’s use, the attempt by the defendant to misappropriate the plaintiff’s goodwill in the ROLLS ROYCE mark amounted to actionable harm:

[T]o commercially use as [one’s] own a commercial asset that belonged to others, the continued use and abstraction of which is so fraught with such possibilities of irremediable injury that the only way to remedy it is to stop it at the start.54 These two cases mark the beginnings of a judicial willingness

in the United States to treat trademarks as assets worth protecting in and of themselves, rather than as indicators of source. In essence, the judicial emphasis in these early cases on the need to preserve the uniqueness of the KODAK and ROLLS ROYCE brands reflects a shift in the basis of trademark protection from consumer protection (through the avoidance of confusion) to that of property protection.

The “expansionist” trend in trademark doctrine that had begun in these early U.S. cases was later echoed by the enactment, in several states, of anti-dilution legislation.55 The first state in the United States to enact anti-dilution legislation was Massachusetts in 1947, and many others had also done so by the mid-1990s.56 This growing, nationwide recognition of damage to goodwill in the absence of confusion led eventually, in 1996, to the passage by the U.S. federal government of the Federal Trademark Dilution Act,57 which provided the owners of famous trademarks with powerful weapons against two new forms of detriment to their business goodwill: “dilution by blurring” and “dilution by tarnishment.” This

53. 4 F.2d 333 (3d Cir. 1925). 54. Id. at 335. 55. Holloway notes that at least 25 U.S. states had adopted anti-dilution legislation by 1996. See Holloway, supra note 49, at 44. 56. See Kevin Sartorio & R. Scott Jolliffe, The Rebirth of Section 22 of Canada’s Trade-marks Act as an Anti-Dilution Remedy, 96 TMR 1020, 1023 (2006). 57. FTDA, 15 U.S.C. § 1125(c), repealed by the TDRA.

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legislative development in the United States was described as a “radical and fundamental break” with prior law.58

Anti-dilution doctrine as enshrined in the new Federal

Trademark Dilution Act represented a departure from traditional Lanhamite principles in at least two ways. Firstly, dilution by blurring is premised on the notion of the “loss of singular distinctiveness” arising when a famous mark is used in association with unrelated or non-competing goods or services, even in the absence of a likelihood of confusion. The detriment being targeted in this instance is therefore the “gradual whittling away” of the goodwill and distinctiveness that has been painstakingly built up over the years in a famous mark through its association with more than one trader.59 When viewed through the lens of dilution doctrine, the “aura of uniqueness” that surrounds a famous mark is dampened through its connection with junior users using a similar mark (albeit in non-confusing ways) to market their goods. Second, dilution by tarnishment confers upon owners of famous trademarks the right to prevent their marks from being associated with negative or unsavory images or products that would diminish the reputation of the trademarks in the mind of the public. This cause of action has wide-ranging implications for the freedom of speech, as it not only prevents junior traders from using a famous mark in relation to inferior goods, but extends into the realm of non-commercial discourse by prohibiting forms of expression that cast famous trademarks in an unfavorable light.

In 2006, the United States Congress enacted into law the Trademark Dilution Revision Act,60 which clarified the standard of proof required in a dilution claim. Three years earlier, the United States Supreme Court held that a federal anti-dilution action in the United States required a demonstration of actual dilution.61 The Trademark Dilution Revision Act overturned this decision by lowering the standard of proof required to that of a “likelihood of dilution.”62 This lower standard of proof lightened the evidentiary

58. See Holloway, supra note 49, at 46; J. Thomas McCarthy, The 1996 Federal Anti-dilution Statute, 16 Cardozo Arts & Enter. L.J. 587 (1998). 59. One commentator notes that anti-dilution law is not motivated by consumer protection but is concerned primarily with preserving the trademark’s uniqueness and distinctiveness. See Assaf, supra note 13, at 42, citing J. Thomas McCarthy, supra note 1, § 24:70, and Frank I. Schechter, supra note 14, at 830-33. 60. Trademark Dilution Revision Act of 2006 (TDRA), 15 U.S.C. § 1125(c). 61. See Moseley v. V Secret Catalogue, Inc., 537 U.S. 418 (2003). 62. See 15 U.S.C. § 1125(c)(1) (2006). See also William G. Barber, Dumping the “Designation of Source” Requirement from the TDRA: A Response to the Alleged “Trademark Use Requirement in Dilution Case,” 24 Santa Clara Computer & High Tech. L.J. 559, 561 (2008), where he compares the operative provisions of the two Acts. Barber also suggests that the purpose of the Trademark Dilution Revision Act was to remove the “trademark use” requirement from dilution law in the United States. In contrast, other trademark

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burden on the trademark proprietor, and some trademark scholars have interpreted the Act as having broadened the scope of protection afforded to famous trademarks.63 Another important feature of the Act is that it explicitly incorporates “blurring” and tarnishment” into the federal anti-dilution law.64 The Act defines dilution by blurring as an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.”65 The expansive tone of the phrase “impairs the distinctiveness” has the potential of enhancing the already broad protection given to famous trademarks from adverse mental connections in the trademark jurisprudence predating the Act.66 In addition, the Act defines dilution by tarnishment in very broad terms as an association that “harms the reputation of the famous mark.”67 Dilution by tarnishment has been found in cases where the famous mark in question was associated with material considered objectionable by the trademark owner, such as pornography68 and drugs.69

Although the Trademark Dilution Revision Act in the United States has been applauded by some commentators as being more “balanced” than its predecessor70 because of its broader fair use

scholars have suggested that the Trademark Dilution Revision Act has strengthened the “trademark use requirement”—see generally Dogan & Lemley, supra note 29, at 555 (2007-2008); Sarah L. Burstein, Dilution by Tarnishment: The New Cause of Action, 98 TMR 1189, 1221 (2008). 63. See, e.g., Jesse A. Hofrichter, Tool of the Trademark: Brand Criticism and Free Speech Problems with the Trademark Dilution Revision Act of 2006, 28 Cardozo L. Rev. 1923, 1939-40 (2007); Robert G. Bone, A Skeptical View of the Trademark Dilution Revision Act, 11 Intell. Prop. L. Bull. 187, 187-88 (2007). 64. See 15 U.S.C. § 1125(c)(2)(B) (2006) and 15 U.S.C. § 1125(c) (2006). 65. 15 U.S.C. § 1125(c)(2)(B) (2006). 66. Assaf, supra note 13, at 1, 48 (2008). 67. 15 U.S.C. § 1125(c)(2)(C) (2006). The Act nevertheless excludes certain “fair use” activities from the scope of tarnishment, including news reporting, comparative advertising and parodies. See 15 U.S.C. § 1125(c)(3) (2006). 68. See, e.g., Edgar Rice Burroughs, Inc. v. Manns Theatres, 195 U.S.P.Q. 159, 162 (C.D. Cal. 1976); Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 467 F. Supp. 366, 377 (S.D.N.Y. 1979), aff’d, 604 F.2d 200 (2d Cir. 1979); Toys “R” Us, Inc. v. Akkaoui, No. C 96-3381 CW, 1996 WL 772709 (N.D. Cal. Oct. 29, 1996). It is important to note, however, that the Trademark Dilution Revision Act does not codify earlier U.S. case law on tarnishment. See Burstein, supra note 62, at 1189. 69. For instance, in the case of Coca-Cola Co. v. Gemini Rising, Inc., 346 F. Supp. 1183 (E.D.N.Y. 1972), the defendant was enjoined from selling posters with the famous “Enjoy Coca-Cola” logo that had been altered to read “Enjoy Cocaine.” See also Assaf, supra note 13, at 54. 70. See Barton Beebe, A Defense of the New Federal Trademark Antidilution Law, 16 Fordham Intell. Prop. Media & Ent. L.J. 1143, 1144 (2006), where he describes the Trademark Dilution Revision Act as “a sensible and progressive reform of American federal antidilution protection.”

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exclusions, higher threshold for fame,71 and lower requirement for proof of dilution,72 many trademark scholars remain skeptical of the arguments put forth in support of anti-dilution law.73 One argument that might be made in favor of protecting famous trademarks against diluting uses is that “blurring” weakens the distinctive quality of a mark and increases the time it would take an average consumer to identify and locate the source of desired goods or services.74 Recent empirical work undertaken by Barton Beebe and Rebecca Tushnet suggests, however, that dilutive uses of a famous trademark do not substantially increase consumer search costs.75 Famous marks have, in addition, been shown to be relatively immune to dilution by blurring, by virtue of the strong memory connections that they have forged in the consumer’s mind.76

IV. SECTION 22 AND THE DEPRECIATION OF GOODWILL:

TOWARD AN ANTI-DILUTION RIGHT IN CANADA? Unlike the United States, Canada does not have legislation

that deals explicitly with trademark dilution. The closest equivalent contained in Canada’s Trade-marks Act is section 22—which does not refer to “dilution” as such but defines a cause of action known as “depreciation of goodwill.” It is important to note, in this regard, that the extent to which dilution doctrine has been embraced in Canada is still a question of some uncertainty.77 Some commentators have noted that section 22 was intended to be a “flexible” provision capable of addressing many different situations, but this provision has unfortunately not received very much judicial attention.78 It has also been suggested that the few 71. The new standard of fame requires the mark to be known among the general consuming public of the entire United States. See Fhima, supra note 47, at 632. 72. See, e.g., Beerline, supra note 1, at 511, 535. 73. See, e.g., Julie Zando-Dennis, Note, Not Playing Around: The Chilling Power of the Federal Trademark Dilution Act of 1995, 11 Cardozo Women’s L.J. 599 (2005); Robert N. Klieger, Trademark Dilution: The Whittling Away of the Rational Basis for Trademark Protection, 58 U. Pitt. L. Rev. 789 (1997). 74. See Richard A. Posner, When Is Parody Fair Use?, 21 J. Legal Stud. 67, 75 (1992) and Dan L. Burk, Trademark Doctrines for Global Electronic Commerce, 49 S.C. L. Rev. 695, 719 (1998). 75. See, e.g., Beebe, supra note 36, at 449; Rebecca Tushnet, Gone in Sixty Milliseconds: Trademark Law and Cognitive Science, 86 Tex. L. Rev. 507 (2008). See also Robert G. Bone, supra note 63, at 187, 192-93. 76. See Tushnet, id. at 544. 77. See, e.g., Future Shop Ltd. v. A. & B. Sound Ltd. (1994), 55 C.P.R. (3d) 182 (B.C.S.C.), in which Justice MacKenzie commented that section 22 was a “unique” provision that had yet to be definitively interpreted by an appellate court in Canada. 78. See Veuve Clicquot Ponsardin, Maison Fondée en 1772 v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824 ¶ 46 (per Justice Binnie); Sartorio & Jolliffe, supra note 56, at 1020;

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Canadian cases that have interpreted section 22 have generally construed it in a very restrictive and inconsistent manner.79 In the paragraphs that follow, I outline some features of section 22 of Canada’s Trade-marks Act that appear to resemble U.S. anti-dilution law, and highlight crucial differences that set them apart.

The influence of Schechter’s ideas on the proper scope of trademark protection was not confined to the United States. In 1953, a “Trade Mark Law Revision Committee” commissioned by Canada’s Secretary of State and chaired by Dr. H.G. Fox submitted a report to Parliament outlining proposed changes to Canada’s trademark laws, as well as a draft statute.80 This statute was later enacted into law as the Trade-marks Act with very minor amendments.81

The provisions for “traditional infringement” in Canada are set out in sections 19 and 20 of the Trade-marks Act. Section 19 proscribes the unauthorized use of a validly registered trademark in respect of wares or services, by conferring upon the registered proprietor the exclusive right to engage in such use. Section 20, on the other hand, targets the unauthorized use of a “confusing” trademark or trade name, but exonerates certain forms of bona fide and descriptive uses from infringement. These two sections are similar in that they both contain the two core requirements of classic trademark infringement: the distinguishing use of a sign as a trademark (as defined in section 2 of the Act) and evidence of consumer confusion. The concept of “use” in sections 19 and 20 also requires that the mark be deployed “in association with” wares or services, in accordance with section 4.82 In the context of section 4, a trademark is deemed to be used in association with wares if, at the time of the transfer of the wares, in the normal course of trade, they are “marked on the wares themselves,” “on the packages in which they are distributed,” or are so associated in any other manner with the wares that “notice of the association is then given to the person to whom the property or possession is transferred.” In the case of services, there is “use” in accordance with section 4 if the impugned trademark is “used or displayed in the performance or advertising of services.”

Apart from the rather technical requirement, imposed by virtue of section 4, that “use in association with wares” be effected by the physical marking of the trademark on the products William Michael Darling, Depreciation in Canadian Trade-Mark Law: A Remedy in Search of a Wrong (2007), 21 I.P.J. 49, 51. 79. Sartorio & Jolliffe, id. at 1020. 80. See Fox, supra note 3, at 1-8. 81. Sartorio & Jolliffe, supra note 56, at 1023. 82. See Gill & Joliffe, supra note 1, at 7-12 to 7-13: “Infringing use” under sections 19 and 20 has to satisfy both section 4 and section 2 (use in association with wares or services, and use for the purpose of indicating falsely the origin of the wares).

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themselves, or at least on point of sale materials such as packaging, carrier bags, or display cabinets, sections 19 and 20 embody the classical approach to trademark protection in Canada, under which trademarks are viewed as serving the interests of the public and of consumers by facilitating product distinctions through the indication of source. The conditions for infringement in sections 19 and 20 mirror the requirements of “commercial use” and the “risk of confusion” enshrined in the Lanham Act of the United States. A superficial reading of sections 19 and 20 of the Canadian statute might convey the impression that the requirements for infringement in Canada are more stringent than those contained in the Lanham Act. In addition to the requirement that a trademark has to be physically marked on infringing products or on associated point of sale materials in order for there be “use in association with wares,” the Canadian Trade-marks Act appears to impose a stricter test for confusion. While section 19 assumes the existence of confusion in the case of unauthorized use of an identical mark, section 20 makes reference to the distribution or advertising of wares or services in association with a “confusing trade-mark.” Does this mean that actual confusion must be proven in order to invoke section 20? Such an interpretation is perhaps not incompatible with the plain language of sections 2 and 6 of the Canadian Trade-marks Act, which define “confusing use” as use that would cause confusion by leading consumers to the inference that the wares or services associated with a trademark are “manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general class.” In any event, it should be borne in mind that courts in Canada have construed sections 19 and 20 of the Trade-marks Act as merely requiring a “likelihood” of confusion—meaning that liability can arise as long as there is adequate evidence to indicate a significant risk of confusion. Evidence of actual confusion is considered to be helpful, but not necessary.83

Section 22 of the Canada’s Trade-marks Act, on the other hand, represents a departure from the classic notion of trademark infringement, and has often been compared to the anti-dilution action in the United States. However, there are specific features of section 22 that distinguish it from the American Federal Trademark Dilution Act of 1995. First, section 22 has been framed as a provision targeting the “depreciation of goodwill,” proscribing any use of a registered trademark by an unauthorized party that is “likely to have the effect of depreciating the value of the goodwill attaching thereto.” It does not specify the nature of the use in question, but addresses the effects that such use is likely to have on the trademark proprietor’s business interests. Second, unlike 83. See, e.g., Sprint Commc’ns Co. LP v. Merlin International Commc’ns Inc., [2000] F.C.J. No. 1861; 9 C.P.R. (4th) 307 ¶¶ 22-26.

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dilution doctrine in the United States, section 22 does not specify the level of fame or renown that a registered trademark must possess in order to enjoy protection from “depreciation of goodwill.” As such, at least in theory, any form of use that depreciates the value of the goodwill in any registered mark, regardless of how famous or unknown it is, is arguably in contravention of section 22.84

Despite the differences between the American version of dilution and the strictures of Canada’s “depreciation of goodwill” action, section 22 has been accepted in some of the scholarly literature as an “anti-dilution” provision.85 This could be because section 22 is, to date, the first and only section in the Canadian Trade-marks Act that provides protection against damage to goodwill in circumstances where confusion is absent or unlikely. Yet, in view of the similarities that appear to animate recent developments in U.S. and Canadian trademark law, there continue to be pressing concerns that relate to the scope and application of section 22, and the extent to which it has eroded the twin pillars of “confusion” and “distinguishing use” as requirements of trademark infringement in Canada. While section 22 has in the past been invoked in several Canadian cases,86 two of which were argued before the Supreme Court,87 the place of dilution doctrine in the scheme of the Canadian Trade-marks Act and its implications for the future of trademark law in Canada remain unsatisfactorily resolved. In the paragraphs that follow, I trace the judicial interpretation of section 22 in several key cases over the course of the past few decades and explore the changing roles of “confusion” and “distinguishing use” as bases for liability in the Canadian trademark law landscape.

84. Gill and Joliffe define the “depreciation of goodwill” as the “diminution of the uniqueness” of a mark by reducing in some way the advantage of the reputation that may have been built up by years of honest work or gained by lavish expenditure of money, to which the association of the trademark with the goods and services largely contributed. See Gill & Joliffe, supra note 1, at 7-27. 85. See, for instance, Robert G. Howell, Depreciation of Goodwill: A “Green Light” for Dilution from the Supreme Court of Canada in an Accommodating Infrastructure, 17 Transnat’l L. & Contemp. Probs. 689, 711 (2008), who suggests that the Supreme Court of Canada has recognized “dilution-style relief” through section 22. 86. See, e.g., Clairol Int’l Corp. v. Thomas Supply & Equip. (1968), 55 C.P.R. 176; Source Perrier S.A. v. Fira-Less Mktg. Co., [1983] 2 F.C. 18, 70 C.P.R. (2d) 61 (Fed. T.D.); Brit. Columbia Auto. Ass’n v. O.P.E.I.U., Local 378, 85 B.C.L.R. (3d) 302, [2001] 4 W.W.R. 95, 10 C.P.R. (4th) 423 (B.C.S.C.); Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] S.C.J. No. 22, [2006] 1 S.C.R. 824; Mattel Inc. v. 3894207 Inc., [2006] 1 S.C.R. 722; Remo Imps. Ltd. v. Jaguar Cars Ltd., 2007 FCA 258. 87. Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] S.C.J. No. 22, [2006] 1 S.C.R. 824; Mattel Inc. v. 3894207 Inc., [2006] 1 S.C.R. 722.

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Section 22 was first judicially considered88 in the case of Clairol International Corp. and Clairol Inc. of Canada v. Thomas Supply & Equipment Co. Ltd.89 In that case, the concept of “infringing use” in Canada was put to the test as Justice Thurlow grappled with a unique comparative advertising situation in which the unauthorized use complained of was not perceived as the “traditional” section 2 variety that requires “distinguishing use.” The plaintiffs’ marks had been reproduced on the defendants’ goods alongside the defendants’ marks in color comparison charts to identify the respective traders and their corresponding goods. The defendants in this case might not have been seeking to utilize the plaintiffs’ marks as indicia of source, but as signs to identify the plaintiffs as producers of competing goods.

Both the plaintiffs and defendants were in the business of selling hair coloring products. The defendants, who were the owners of the REVLON and COLOURSILK marks, had included in their brochures and packaging material a reproduction of the plaintiffs’ MISS CLAIROL and HAIR COLOUR BATH trademarks in a color comparison chart. The purpose of this chart was to enable customers of Clairol’s hair coloring products to select an equivalent shade under Revlon’s line of merchandise. It was not the defendants’ intention to convey the impression that their goods originated from the plaintiffs.

Justice Thurlow held that there was no “classic infringement” arising from the defendant’s use under section 19 of the Trade-marks Act, because the MISS CLAIROL and HAIR COLOUR BATH trademarks had not, in the judge’s opinion, been used to indicate the source of the defendants’ products, but rather to indicate the separate identity and origin of the plaintiffs’ merchandise. According to Justice Thurlow, liability under section 19 could have arisen only if there had been “distinguishing use” (that is, use of the mark to denote the source of wares) under section 2, as well as use “in association with products” under section 4. Because Justice Thurlow was of the view that there was no “distinguishing use” under section 2 on the facts, neither the brochures nor the packaging were held to offend section 19. In the words of Justice Thurlow, the use of the plaintiff’s marks in this case was not a use for the purpose of distinguishing goods as goods of the defendants and for that reason alone “was not a use the exclusive right to which had been conferred upon the plaintiffs by section 19.”90

88. See James C. MacInnis, Neither Nice Nor Easy: Reconsidering Clairol International and Section 22 of the Trade-marks Act (1998-1999), 13 I.P.J. 25, 26. 89. (1968), 55 C.P.R. 176. 90. Id. at 195 (per Justice Thurlow).

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The use of the MISS CLAIROL and HAIR COLOUR BATH marks on the packaging of the defendants’ wares was held, however, to offend section 22 of the Trade-marks Act. “Use” under section 22, according to Justice Thurlow, was confined to the meaning of use within section 4, and did not require “distinguishing use” under section 2. Hence, the simple fact that the plaintiffs’ marks had been reproduced without authorization on the packaging of the defendants’ wares was sufficient to satisfy the “use” requirement under section 22. The defendants’ reproduction of the plaintiffs’ marks was an attempt to appeal to the plaintiffs’ customers, by weakening their habit of purchasing the plaintiffs’ goods.91 This attempt by the defendants to win over the part of the market enjoyed by the plaintiffs was described by Justice Thurlow to be a “calculated plan to profit from the reputation and goodwill of the plaintiffs.”92 Justice Thurlow was accordingly of the view that the defendants’ use of the plaintiffs’ marks on the packaging led to the depreciation of the goodwill in the plaintiffs’ marks and accordingly constituted a violation of section 22.

It is interesting to note that Justice Thurlow’s interpretation of section 22 expressly recognizes the possibility of trademark liability for “non-trademark” uses of signs in the course of trade. The corollary of this is that certain uses of a trademark may offend section 22 even if they do not usurp the trademark’s source-identifying function. Yet, Justice Thurlow also took pains to clarify what he thought were the proper limits of section 22. In his judgment, he observed that the plain language of section 22 seemed broad enough to prohibit a conversation in which a person “adversely criticizes goods,” because such activity would, quite possibly, depreciate the goodwill attached to the mark under which they were sold. However, Justice Thurlow was quick to add that it was highly unlikely such a broad prohibition could have been intended.93

Justice Thurlow’s interpretation of section 22 has left Canadian anti-dilution law in a state of some uncertainty. While it is fairly clear that the Clairol case stands for the proposition that “trademark use” is not necessary for liability under section 22, the precise ambit of the Canadian “depreciation of goodwill” action remains difficult to sketch. In particular, it is not entirely clear whether section 22 covers all forms of “blurring” and “tarnishment.” Justice Thurlow noted that section 22 is applicable when a well-known mark is applied in a “non-competing” field of

91. Id. at 201. 92. Id. at 202, 204. 93. Id. at 195.

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trade,94 suggesting that the section 22 action cuts across product lines and fields of trade to protect well-known marks against diluting use in relation to goods where there is little or no likelihood of confusion. However, most, if not all, “dilution by blurring” cases involve some form of “trademark use” by the defendant. Classic examples of dilution by blurring include the use of KODAK for pianos or BUICK for aspirin, where the junior user of the mark uses the famous brand in relation to wares not traditionally associated with the original proprietor. However, the fact that section 22 does not require “trademark use” suggests that it proscribes a wider range of activity than mere “dilution by blurring.” Justice Thurlow seems to suggest that some forms of non-commercial tarnishment may be actionable under section 22 but stops short of specifying the full extent of the “non-trademark” uses that are captured by the section 22 action.

In their critique of the Clairol case, Sartorio and Jolliffe express dissatisfaction with Justice Thurlow’s interpretation of section 22 as requiring “use” within the meaning of section 4. Under Justice Thurlow’s interpretation, a mark would have to be affixed to the merchandise or its packaging in order to constitute “use in association with wares.” In reading this requirement into section 22, Justice Thurlow held that the use of the color comparison charts on the defendant’s wares infringed section 22, but that the use on the defendant’s brochures did not. Sartorio and Jolliffe argue that this somewhat artificial distinction drawn by Justice Thurlow does not find support in the original report submitted by the Fox Committee.95 Sartorio and Jolliffe note that the committee report had not made any mention of a section 4 “use” requirement, and had been designed to apply to all forms of use that depreciated the value of the goodwill attaching to a mark.96 In this respect, the original intentions of the Fox Committee had become somewhat “obscured and lost” in the Clairol decision by Justice Thurlow.97

Interestingly, many of the post-Clairol cases in which section 22 was pleaded as a cause of action resulted in a finding of no liability.98 For example, in the case of ITV Technologies, Inc. v.

94. Id. 95. Sartorio & Jolliffe, supra note 56, at 1026. 96. Id. at 1026, 1031. 97. Id. 98. One of the very few cases to impose liability under section 22—Source Perrier (Société Anonyme) v. Fira-Less Mktg. Co. Ltd. [1983] 2 FC 18 (FCTD) – was decided almost three decades ago. In this case, the defendant, a Canadian company, used the trade name PIERRE EH! to sell water in bottles very similar in appearance to those sold under the established PERRIER trademark. Although the defendant had intended this use of PIERRE EH! as a “political spoof,” the court held that such use was clearly designed to cash in on the reputation of the PERRIER brand and depreciated the goodwill in the plaintiff’s mark

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WIC Television Ltd.,99 the court expressed the view that the plaintiff’s use of the term “ITV” in its trade name and Internet URLs did not depreciate the goodwill in the defendant’s registered trademarks, which also contained the initials “ITV.” The court held that while the defendant’s ITV mark had acquired some degree of distinctiveness, it was capable of different meanings or representations, and there was insufficient evidence to indicate a connection in the average consumer ’s mind between the disputing parties’ respective uses of the term “ITV.”

Similarly, in Tommy Hilfiger Licensing Inc. v. Produits de Qualité I.M.D. Inc.,100 the court denied liability under section 22 because the plaintiff failed to demonstrate a connection in the minds of consumers between the defendant’s EXPLORE CANADA trademark and the plaintiff’s TOMMY HILFIGER trademark, despite there being some degree of visual resemblance between the two marks.

In two cases involving labor disputes, Cie Générale des Établissements Michelin-Michelin & Cie v. C.A.W.-Canada101 and BCAA v. Office and Professional Employees’ Int. Union,102 the courts held that the unauthorized reproduction of an employer’s trademarks on a labor union’s flyers does not constitute “use in association with services” under section 4. Accordingly, a claim that the use depreciates the value of the employer’s marks under section 22 would fail. Of particular concern to the courts in these two cases was the fact that each of the unions in question was not competing commercially with the employer through the distribution of its flyers but was instead seeking to disseminate information to the public about the union’s labor-related grievances. These two cases endorse Justice Thurlow’s ruling in Clairol that a section 22 violation requires use of a trademark in association with either wares or services, as defined under section 4.

Section 22 also received some attention in the Eye Masters103 decision, another comparative advertising case. Madam Justice Reed, in the Eye-Masters case, thought it bizarre that section 22 provided broader protection to marks used in association with services than to marks used in association with wares, which in her view seemed to be an illogical distinction drawn by Justice Thurlow in his interpretation.104 Other commentators have also under section 22 of the Trade-marks Act. See also the discussion, infra, at footnote 204 and accompanying main text. 99. 2003 FC 1056. 100. 2005 FC 10. 101. (1996), 71 C.P.R. (3d) 348 (F.C.T.D.). 102. 2001 BCSC 156. 103. Eye Masters Ltd. v. Ross King Holdings Ltd. (1992), 44 C.P.R. (3d) 459. 104. Id. at 463. See also Sartorio & Jolliffe, supra note 56, at 1027.

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echoed the concerns raised by Madam Justice Reed.105 Despite these concerns, Justice Thurlow’s interpretation has yet to be expressly overruled by the courts. Sartorio and Jolliffe note that the interpretation of “use” in section 22 remains an “open question”—one that has not been resolved by the recent Supreme Court cases.106

Section 22 experienced a “rebirth” of sorts in 2006, which Sartorio and Jolliffe describe as an “important and watershed year”107 for that provision. This was a year in which the Supreme Court of Canada “breathed new life”108 into section 22, delivering two seminal judgments on the scope of trademark protection in Canada.

One of the two cases, Mattel, Inc. v. 3894207 Canada Inc.,109 concerned a dispute between a well-known manufacturer of toys (the appellant) and a “bar-and-grill” type restaurant establishment (the respondent). The latter first started doing business in Montreal in 1992, and served barbequed meat, chicken, seafood, and pizza, along with alcoholic beverages, to “sit down” clientele. The respondent sought to register the trademark BARBIE’S & Design in respect of “restaurant services, take-out services, catering and banquet services.”110 The appellant, Mattel Inc., which enjoyed an extensive worldwide reputation for children’s toys, particularly the BARBIE doll and related accessories for young girls, commenced opposition proceedings against the respondent’s trademark application. The appellant argued that the registration and use of the word “Barbie’s” in association with the respondent’s restaurant chain would create a likelihood of confusion with the appellant’s more established mark.

The Supreme Court of Canada dismissed the appeal and upheld the Trade-mark Opposition Board’s decision to allow the respondent’s trademark application, on the basis that the fame in Mattel’s trademark BARBIE was tied largely to dolls and doll accessories, and that the respondent’s applied-for mark was to be used in relation to very different goods and services. The Supreme Court accepted the respondent’s argument that the use of “Barbie”

105. See, e.g., MacInnis, supra note 88, at 25, 29 (suggesting that Justice Thurlow’s distinction between “use in association with wares” and other uses is “not helpful”); Sheldon Burshtein, Trade-Mark Use in Canada: The Who, What, Where, When, Why and How (Part II) (1997), 12 I.P.J. 75, 111 (echoing Madam Justice Reed’s characterization of Justice Thurlow’s interpretation as “bizarre”); Siebrasse, supra note 8, at 70 (describing Justice Thurlow’s interpretation in Clairol as “an unfortunate legacy” that has distorted Canadian trademark law and policy for too long). 106. Sartorio & Jolliffe, supra note 56, at 1031. 107. Id. at 1028. 108. Sartorio & Jolliffe, id. at 1021. 109. Mattel, Inc. v. 3894207 Canada Inc., [2006] 1 S.C.R. 772. 110. Id. ¶ 11.

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in relation to a small chain of Montreal area restaurants would not likely create confusion in the marketplace with Mattel’s BARBIE trademark.111 In reaching this decision, the Supreme Court affirmed that a trademark’s fame does not provide it with absolute protection and is merely one factor to be taken into account in determining the existence or likelihood of confusion.112 Fame, on its own, does not trump all the other factors.113

The Supreme Court acknowledged that fame might enable some marks to cut across product boundaries, but this did not mean that “Barbie” had such transcendence.114 The test for determining whether a consumer would likely be confused, the Court emphasized, was not to be determined from the perspective of a “moron in a hurry,” nor that of the “careful and diligent purchaser.”115 Rather, the test is pitched at a level somewhere in between the two extremes—from the perspective of the “ordinarily hurried purchaser.”116

It is interesting to note, however, that the “confusion-oriented” focus of the Court’s analysis appears to be the principal ground on which the appellant’s claim was dismissed. The absence of a likelihood of confusion in this case—a key criterion for determining classic infringement—was fatal to the appellant’s action. The Court provided close to no analysis of section 22.

In light of the Supreme Court’s analysis in Mattel, Inc. v. 3894207 Canada Inc., an inference might be drawn that the Court was attempting to restore the “likelihood of confusion” test as a central pillar of trademark liability. One might surmise that the true function of a trademark, after all, is to serve as a badge of provenance for goods or services, and that trademark law does not confer an absolute monopoly to use a sign or logo in the marketplace. This approach confirms the general rivalrous nature of trademark regulation, which permits the contemporaneous use of two or more similar signs for non-competing fields of commercial activity, as long as such use does not create a likelihood of 111. Id. ¶ 91. 112. Id. ¶ 72: “Each situation must be judged in its full factual context.” See also Remo Imports Ltd. v. Jaguar Cars Limited, 2007 FCA 258, ¶¶ 96-105, where it was held that the connection required under section 22 must be proven by evidence and cannot be assumed even in the context of famous marks. See also Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824 at ¶ 26. 113. Mattel, Inc., 1 S.C.R. 772 ¶¶ 69-76. 114. Id. at ¶¶ 29-30. It is interesting to note that Canadian courts have generally been reluctant to provide protection to trademarks beyond the class of wares or services in respect of which they have been used. See, e.g., Lexus Foods Inc. v. Toyota KK, [2000] F.C.J. No. 1890, 9 C.P.R. (4th) 297; United Artists Corp. v. Pink Panther Beauty Corp., [1998] F.C.J. No. 441, 80 C.P.R. (3d) 247. 115. Mattel, Inc., 1 S.C.R. 772 ¶¶ 56. 116. Id. ¶ 56, citing Klotz v. Corson (1927), 33 O.W.N. 12 (Sup. Court), an Ontario decision by Meredith C.J. in 1927.

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confusion in the mind of the “ordinarily hurried customer.” While defensible (and perhaps even laudable) doctrinally, this judgment provides very little guidance on the scope of the section 22 action, and when (if ever) such an action can be used to thwart non-confusing uses of an established trademark that cause depreciation of goodwill. Indeed, while Mattel was correctly decided on the facts, it disappoints in its failure to clarify the Clairol doctrine and the larger role of section 22 in the general corpus of Canadian trademark law. Although Mattel did not specifically invoke “depreciation of goodwill” in this case, the particularities of the opposition proceeding (a relatively well-known brand being sought as part of a trademark for a non-competing line of business) would have provided the Court with a rare opportunity to elucidate the scope of this rather obscure provision, particularly the impact that a finding of “no likelihood of confusion” would have on the availability of section 22 as a cause of action. The Court could have provided some guidance in its decision on why the registration and continued use of the opposed trademark would not have resulted in liability under section 22.

The Supreme Court might have elected to reserve its analysis of section 22 for another dispute heard together with Mattel that same year and released concurrently, Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée.117 The decision in Veuve Clicquot Ponsardin, which concerns an action for trademark infringement and depreciation of goodwill, provides some additional insight into section 22, but as the appeal by the owner of the established mark in that case was also ultimately dismissed, the true limits of the section 22 action remain unclear. The appellant in that case was Veuve Clicquot Ponsardin, the renowned maker, distributor, and seller of champagne and other alcoholic beverages in many countries of the world, including Canada. The respondents, on the other hand, operated a small chain of women’s boutiques in Quebec and Ottawa under their own trade name and registered trademarks CLIQUOT and “Cliquot un monde à part.” In addition to damages and a permanent injunction, the appellant sought to have the respondents’ CLIQUOT marks expunged from the trademark register on two grounds: first, that the use of the CLIQUOT mark created a likelihood of confusion in the marketplace contrary to section 20 of the Trade-marks Act, and secondly, that it depreciated the goodwill of the appellant’s trademark contrary to section 22 of the same Act.118

The Supreme Court of Canada affirmed the decision by the trial judge, and held that there was no likelihood of confusion between the appellant’s established mark and the respondents’

117. [2006] 1 S.C.R. 824. 118. Id. ¶ 1.

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marks,119 taking into account (as one of the factors) the vast difference in the wares sold by the disputing parties.120 As in the Mattel case, the fame of the appellant’s mark did not provide absolute protection against all non-competing uses, and was merely one of a number of factors to be used in determining whether there was a “likelihood of confusion.”121 There was therefore no basis for an action for trademark infringement under section 20 of the Trade-marks Act.

The Supreme Court also dismissed the appeal with respect to section 22. In agreeing with the trial judge, the Court found that the respondents’ marks would not likely evoke in their customers a “mental association” between “Cliquot,” as used in the boutiques, and “Veuve Clicquot Ponsardin” for champagne. Accordingly, there could be no impact by the respondents’ marks on the goodwill of the appellant’s trademark,122 since an ordinary customer who saw the word “Cliquot” in one of the respondents’ stores would not form any link or connection to the appellant’s mark. In order to establish liability under section 22, the appellant would have had to show both the requisite “mental connection” and a corresponding likelihood that the goodwill in the appellant’s mark would be diminished as a result.123 Since the respondents’ CLIQUOT mark was registered in this case, the burden of proof lay on the appellant to demonstrate that the respondents’ use of its trademark created a likelihood of depreciation under section 22124—a burden that the appellant failed to discharge.

In delivering its judgment, the Supreme Court went into considerably more detail in its analysis of the section 22 “depreciation” action. In particular, the Court noted that section 22 is potentially broader in scope than the American concept of “anti-dilution,” and is not limited to diluting uses that arise when a famous mark is applied by a junior trader to non-competing goods.125 The Court also expressed the view that section 22 may be broad enough to encompass the notion of tarnishment, whereby the trademark is used, without authorization, in association with material, such as pornography, that creates a negative association

119. Id. ¶ 2. 120. Id. ¶ 25: “The respondents’ stores sell dresses, coats, sweaters, blouses, pants, jackets, belts, scarves and pins. Its wares do not intermingle with those of the appellant,” ¶ 31: “Luxury champagne and mid-priced women’s wear are as different as chalk and cheese,” ¶ 33-34. 121. Id. ¶¶ 11, 27 122. Id. ¶¶ 49, 56. 123. Id. ¶¶ 38. 124. Id. ¶ 15. The onus was also on the appellant to demonstrate the likelihood of confusion with respect to the infringement claim under section 20, since the respondents’ mark was registered. See ¶ 14. 125. Id. ¶ 67.

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for the mark.126 In addition, section 22 is not limited to famous marks, although a mark must be sufficiently well known to attract goodwill.127 Despite this analysis, the facts in Veuve Clicquot Ponsardin did not allow the Court an opportunity to determine the true limits of section 22. By the Court’s own admission, section 22 is relatively untested and its boundaries have yet to be fully defined.128

It is interesting to note, however, that the Supreme Court adopted a “confusion-centred” approach to its analysis of section 22, dismissing the appeal on the ground that there was no likelihood of confusion, and therefore no likelihood of a “mental connection” in the minds of the relevant universe of consumers. This linkage between confusion and mental association is significant, because it might mean that the Supreme Court has now read into the ambit of section 22 a requirement of consumer confusion, or the likelihood thereof. Such an interpretation can be inferred from the Supreme Court’s endorsement of the trial judge’s statement:

“Although confusion is not the test laid down in s. 22, I consider that it [confusion] is still necessary for there to be an association between the two marks. In other words, a consumer has to be able to make a connection between the parties in order for there to be depreciation of the goodwill attaching to the trade-mark.”129 In its judgment, the Supreme Court acknowledged that the

depreciation action under section 22 was not, strictly speaking, based on a “likelihood of confusion” test. The Court suggested that section 22 requires proof of four elements.130 First, the claimant’s registered trademark must be used in connection with wares or services, regardless of whether they are in direct competition with those of the claimant’s. Second, the claimant’s trademark must have “significant goodwill” attached to it (although the mark does not have to possess the same level of fame as that required under U.S. law). Third, the defendant must have used the trademark in a manner likely to have an effect on that goodwill. Fourth, that effect likely would be to depreciate the value of the goodwill in the 126. Id. ¶ 67: “These references to U.S. cases are made for the purpose of illustration. Our Act is differently worded and I do not suggest that the concept of ‘depreciation’ in s. 22 is necessarily limited to the notions of blurring and tarnishment.” See also ¶ 66. 127. Id. ¶ 46. In contrast, the dilution remedy in the United States requires proof that the mark is famous. See ¶ 53. 128. Id. ¶ 46: “Section 22 of our Act has received surprisingly little judicial attention in the more than half century since its enactment” and ¶ 67: “Canadian courts have not yet had an opportunity to explore its limits.” 129. Id. ¶ 12. The trial judge cited the case of Blue Cross Plans v. Blue Cross Beauty Products Inc., [1971] F.C. 543 (T.D.) as authority for her statement. 130. Id. ¶ 46.

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claimant’s mark. Although conceptually different, the Court pointed out that the two actions—depreciation of goodwill and confusion—were arguably related as a practical matter of proof. This view can be inferred from the Court’s statement that: “where there is no confusion, claimants may have felt it difficult to establish the likelihood that depreciation of the value of the goodwill would occur. Be that as it may, the two statutory causes of action are conceptually quite different.”131

Interestingly, section 22 again arose for consideration, this time by the Federal Court of Appeal, in the 2007 case of Remo Imports Ltd. v. Jaguar Cars Ltd.132 One of the primary issues facing the court was whether the use of the famous JAGUAR mark (for automobiles) on tote bags, handbags, luggage, and schoolbags resulted in a likelihood of confusion and/or a likelihood of depreciation of goodwill. While the Federal Court of Appeal found a likelihood of confusion on the facts, it held that there was insufficient evidence to ground a finding of depreciation of goodwill under section 22. In applying Justice Binnie’s ruling in the Veuve Clicquot Ponsardin case, the Federal Court of Appeal held that the test for depreciation of goodwill was “stringent,” and required proof of a “link, connection or mental association” in the consumer’s mind between the appellants’ display and the respondents’ famous JAGUAR mark.133 The existence of this linkage or mental association is not to be assumed,134 and on the facts, the respondents had failed to meet their burden of proving depreciation.135 Like the earlier Supreme Court decisions, the decision by the Federal Court of Appeal in the Jaguar case resulted in a finding of no liability under section 22. Yet the Jaguar case is interesting because it appears to draw a sharper distinction between the section 22 action and the classic confusion-based infringement action than did the Supreme Court in Veuve Clicquot Ponsardin. In particular, the decision by the Federal Court of Appeal suggests that the element of “mental association” under section 22 requires a standard of proof that goes beyond mere likelihood of confusion, and that proof of likely confusion does not necessarily result in a finding of depreciation, which is an independent cause of action. Nevertheless, the Federal Court of Appeal’s strict interpretation of “mental association” is arguably not incompatible with the Supreme Court’s generally conservative approach toward section 22.

131. Id. 132. [2008] 2 F.C.R. 132. 133. Id. ¶ 97. 134. Id. ¶ 98. 135. Id. ¶ 103-104.

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Despite the Supreme Court’s relatively narrow reading of section 22 and its apparent endorsement of “confusion” as a requirement for forming a “mental connection” between two marks, its judgments in 2006 have nevertheless inspired some interesting, and perhaps surprising, interpretations by trademark commentators, particularly those from the trademark bar. It has been suggested, for instance, that in light of the Supreme Court’s 2006 decisions, section 22 should now be seen as the “principal vehicle of relief” for holders of famous or well-known marks.136 It has also been argued that the Supreme Court of Canada has recognized “dilution-style relief” through its application of section 22.137 These interpretations are somewhat difficult to support from a plain reading of the Court’s decisions in Mattel and Veuve Clicquot Ponsardin. In neither case was section 22 invoked successfully by the holder of the senior mark; on the contrary, the Court specifically denied the plaintiff’s section 22 claim in Veuve Clicquot Ponsardin. It is difficult to extrapolate a conclusion that the Supreme Court has opened the door to antidilution law in Canada given its restrictive reading of section 22 and emphasis on the role of consumer confusion in the analysis of trademark liability.

The better and more accurate view is that Mattel and Veuve Clicquot Ponsardin represent a tentative step by Canada’s highest court to restore the principle of “consumer confusion” as a key test for trademark liability. The court’s refusal to grant blanket protection to a trademark on the basis of fame alone and its emphasis on the need to allow junior traders to use existing signs or word combinations in non-confusing ways signify a return to traditional trademark principles. Of particular significance is the court’s suggestion that showing a “likelihood of confusion” under section 20 and establishing a “mental connection” as required under section 22 may be related as a matter of proof. In light of these two cases, the Supreme Court of Canada appears to be endorsing the view that the key function of a trademark in Canada is to serve as a badge of origin for a trader’s goods and services and to avoid confusion in the marketplace. Under this approach, liability under the Trade-marks Act would arise only when the

136. Howell, supra note 85, at 706. See also Sartorio & Jolliffe, supra note 56, at 1021 and 1033, who suggest that the Supreme Court has “breathed new life” into section 22, and that brand owners in Canada who are seeking redress for dilution may now feel confident that there are more salient remedies available as a result of the Veuve Clicquot Ponsardin decision. 137. Howell, id. at 711. Howell does note, at 710, that the “pure reputation” of the VEUVE CLICQUOT PONSARDIN trademark was found by the Supreme Court to extend beyond the product line of wine and champagne, although the lack of use beyond wine and champagne prevented a finding of confusion. However, as is pointed out in the main text above, it is difficult to extrapolate from this observation a conclusion that the Supreme Court has begun to recognize “dilution-style relief” through section 22.

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defendant’s use interferes with this key function by creating a likelihood of confusion as to the source of goods or services in the marketplace (because both the section 20 classic infringement action and the section 22 depreciation of goodwill action would now be premised on a “confusion” analysis). As I shall argue in the following part, the renewed emphasis by the Supreme Court on the “likelihood of confusion” as a test for liability is a step in the right direction for intellectual property law in Canada. Nevertheless, while Mattel and Veuve Clicquot Ponsardin do provide some guidance on the new Canadian approach to trademark infringement and depreciation of goodwill, section 22 remains somewhat of a nebulous component of Canada’s Trade-Marks Act, whose true limits remain untested by recent jurisprudence.138

V. SOUNDING THE DEATH KNELL FOR SECTION 22 As discussed in the previous parts, Canada’s attempt to

implement anti-dilution principles can perhaps be described as a somewhat hesitant embrace. The depreciation of goodwill provision in section 22 has taken Canada down a markedly different path from the dilution doctrine in the United States. In addition to being potentially broader and less well-defined than the anti-dilution action in the United States, section 22 is the victim of an unfortunate interpretive legacy139 and appears out of place in the general framework of Canada’s Trade-marks Act. In this part, I offer four arguments in favor of repealing section 22, as part of a larger effort to restore doctrinal clarity and consistency to the Trade-marks Act and to trademark jurisprudence in Canada.

A. Lack of Specificity As a preliminary concern, section 22 has been drafted in an

open-ended and ambiguous manner.140 Its precise scope is difficult to ascertain from a plain reading of its text. The first subsection of section 22 provides that: “No person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.”

Although it is clear from section 22’s wording that the provision applies only to registered trademarks in Canada, the

138. Sartorio & Jolliffe acknowledge this point, despite their generally sanguine prognostications for section 22. See Sartorio & Jolliffe, supra note 56, at 1031. 139. See, e.g., Bibic, & Eatrides, supra note 3, at 905-06. 140. MacInnis, supra note 88, at 28; Clairol Int’l Corp. v. Thomas Supply & Equip. (1968), 55 C.P.R. 176 at 195-6.

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scope of the phrase “use a trade-mark” is open to differing interpretations.141

A primary concern relating to the interpretation of the provision is that the term “depreciating the value of goodwill” is not defined in either section 2 (the definition section) or section 22 of the Act. “Goodwill” itself is undefined—which means that section 22 could potentially be triggered by any form of use that has some kind of adverse effect on a trademark’s reputation.142 The ambiguity of section 22 was acknowledged by Justice Thurlow in the Clairol decision, in which he pointed out that trademark law was not designed to protect commercial signs from all forms of detrimental use—many non-commercial uses of a trademark, such as its use in social discourse, criticism, and review, might possibly lower the public’s impression of a particular brand without necessarily usurping its source identifying function.143 An overly expansive interpretation of section 22 would have a chilling effect on ordinary discourse and communication in civil society by giving trademark proprietors de facto control over almost all uses of their trade symbols, including the ability to prevent non-commercial uses which cast their trademarks in a less than favorable light. Such a broad ambit of protection would transform trademarks into objects of ownership in and of themselves, rather than indicators of source and quality for wares and services. This would ultimately upset the balance that trademark law seeks to maintain between the protection of private rights and the promotion of the public interest, including the preservation of fundamental civil liberties in a free and democratic society.

B. Artificial Complexity Arising from a Confusing Interpretive Legacy

A related concern pertaining to the open-ended nature of section 22 and its uncertain place in the general scheme of the Trade-marks Act arises from the ambiguities in the Act and the judicial interpretation of this provision. While section 22 has been judicially considered in several cases since Clairol, its true limits 141. MacInnes, supra note 88, at 28. See also Brit. Columbia Auto. Ass’n v. O.P.E.I.U., Local 378, 85 B.C.L.R. (3d) 302, [2001] 4 W.W.R. 95, 10 C.P.R. (4th) 423 (B.C.S.C.), in which the court commented that section 22 was a “unique provision capable of substantially divergent interpretations.” 142. See Clairol Int’l Corp. v. Thomas Supply & Equip. (1968) 55 C.P.R. 176 at 195-6. In his judgment, Justice Thurlow noted that the language of section 22 was broad enough to capture a conversation between two people where one criticizes goods or services by reference to their trademark. It was also broad enough to capture a situation in which a shopkeeper displays a list of prices indicating that certain goods (identified by their trademark) were more expensive than other similar products. Justice Thurlow emphasized that such legitimate comparisons or criticisms were not intended to fall within the scope of section 22. 143. Id.

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remain untested. The interpretation of this provision in Clairol and in the ensuing jurisprudence has also produced some artificial complexity in Canadian trademark law—complexity that is difficult to justify from a doctrinal perspective and that does not find support in either the plain text of the Act or in the legislative history behind the Act. Indeed, it is noteworthy that section 22 does not expressly state whether such “use of a trade-mark” has to be “distinguishing use” as defined under section 2, “use in association with wares or services” under section 4, or a combination of the two.144 This uncertainty has led to some rather confusing jurisprudence.

In Clairol, Justice Thurlow applied a rather rigid interpretation to the concept of “use” under section 22. As mentioned earlier, Justice Thurlow confined the meaning of “use” in section 22 to the meaning within section 4 of the Act, that is, “in association with” wares or services.145 It was on this basis that Justice Thurlow allowed the plaintiff’s section 22 claim in respect of the packages (on which the color comparison charts were marked), but not in respect of the brochures.146 Under this approach, in order for there to be depreciation of goodwill under section 22 in respect of wares, the plaintiff’s mark must be physically affixed to the wares concerned, or at the very least, to their packaging, display shelves, or point of purchase materials. A reproduction of the plaintiff’s mark in other material, such as marketing or promotional material, cannot possibly trigger liability under section 22 even if such use depreciates the value of the goodwill in the mark in respect of wares.

It might perhaps be helpful at this juncture to restate the relevant portions of section 2, section 4, section 20, and section 22 for ease of comparison:

Section 2 defines “trade-mark” as, inter alia, a mark that is used by a person for the purpose of distinguishing their wares or services from those of other traders. Section 2 goes on to define “use” in relation to a trademark, as any use that by section 4 is deemed to be a use in association with wares or services.

Section 4(1) states that a trademark is deemed to be “used in association with wares” if it is marked on the wares themselves, on the packages in which they are distributed, or in any other manner associated with the wares at the point of transfer in the normal course of trade, such that the person who receives the property or is in possession of the goods has notice of the association. Section 4(2), on the other hand, defines “use in association with services” 144. Although the question of trademark use is not expressly addressed in the text of section 22, it has been suggested that section 22 use does not have to be “use as a trade mark.” See Gill & Joliffe, supra note 1, at 7-24, 7.31. 145. Clairol Int’l Corp., 55 C.P.R. at 196. See also Gill & Joliffe, supra note 1, at 7-24. 146. Clairol Int’l Corp., 55 C.P.R. at 196.

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as a trademark being displayed in the performance or advertising of those services.

Section 20 and section 22 both address the question of “use,” the former in the context of infringement and the latter in the context of depreciation of goodwill, but neither contains any specific references to section 2 or section 4.

Justice Thurlow’s interpretation of section 22 can perhaps be defended on the ground that “use” in relation to a trademark is defined in the Act as being “use in association with wares and services,” as per section 4. Justice Thurlow might have felt that he was merely following the plain wording of section 4 when he decided Clairol. Yet it is not entirely clear why he chose to adopt a stricter reading of “use” for section 20. Justice Thurlow’s interpretation of “use” under section 20 is more stringent, requiring both distinguishing use (as per section 2) and use in association with wares or services (as per section 4). There are a number of concerns arising from this “two-pronged” approach to “use.” Firstly, this approach is not mandated by the plain wording of the Trade-marks Act. Specifically, there is nothing in either section 20 or section 22 to suggest that a different standard of “use” should be applied to each of the two sections. Secondly, Justice Thurlow’s exclusion of the “distinguishing use” requirement from the ambit of section 22 casts the net of liability far too wide, potentially targeting many forms of legitimate use, such as accurate comparative advertising, or bona fide uses of a word or sign other than as a trademark. By stripping section 22 of the “distinguishing use requirement,” Justice Thurlow’s interpretation runs the risk of giving registered trademark proprietors a de facto monopoly over the use of their registered words and signs; a monopoly that purports to recognize property rights in words and symbols in and of themselves, rather than as indicators of source or quality.

It should nevertheless be noted that there are also concerns relating to the text of the Trade-marks Act. Part of the artificial complexity arising from the Clairol decision is attributable to the rather mysterious marking or affixation requirement for “use in association with wares” under section 4. This unusual distinction between wares and services is difficult to justify, because it appears to give a broader scope of protection to trademarks used in association with services than to trademarks used in association with wares. As described earlier, section 4 requires that a trademark be marked on the wares themselves (or on associated point of sale materials) before liability under section 22 can be triggered in respect of wares. In contrast, all that section 4 requires for a trademark to be “used in association with services” is that the mark be “used or displayed” in the advertising or performance of those services. Such use or display, without any

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further affixation requirement, may be sufficient to trigger liability under section 22 in respect of services.

This differential treatment results in a narrower scope of protection for wares than for services in respect of the section 22 depreciation of goodwill action. A depreciating use of a trademark for wares will not be captured by section 22 if the use in question is merely applied to advertising, as long as the plaintiff’s mark is not displayed or indicated on the physical wares, packaging, or associated point-of-sale materials that the defendant markets and sells. This very narrow interpretation for wares is illogical. If the mischief that section 22 seeks to address in Clairol is the unfair way in which the plaintiff’s mark is being used for the purpose of comparison, then the plaintiff should be entitled to relief regardless of where the two marks are being compared, whether on the wares themselves, in an advertisement, or on some other promotional material distributed to consumers. If the plaintiff’s mark is being used in a way that unfairly depreciates the goodwill of the mark, then the focus of the section 22 enquiry should be on the effect of the unfair use on the goodwill built up in the mark, rather than on the medium (e.g., packaging material versus a flyer or newspaper advertisement) in which the use appears.147 It should be borne in mind that information on a brochure or other promotional material distributed to members of the public can potentially have a wider reach than information merely printed on the packaging of wares. A “depreciating use” of a trademark on brochures would arguably have a more widespread impact on a trademark’s goodwill than would a similar use on the packaging of wares, because the latter would primarily influence customers in retail outlets looking for hair coloring products, whereas the former could, for example, potentially reach all consumers within a particular area.

In summary, if section 22 serves a legitimate purpose, this purpose would be thwarted by two artificial complexities, the first being that the requirement that the plaintiff’s mark be affixed to goods or associated materials in the case of wares, resulting in the more lenient treatment of use in the context of services. This creates a double standard that is arguably unfair for registered owners of trademarks used in association with wares. Second, it does not follow from the wording of the Trade-marks Act that a different interpretation of “use” should be applied to section 19 and section 22. This inconsistency can be resolved by applying a single 147. See also the discussion infra, at note 203 and accompanying main text, where I argue that affixation of a competitor’s trademark on wares as part of a color comparison chart may increase the likelihood of initial interest confusion. However, the medium bearing the reproduced trademark is but one of a number of factors that should be taken into account when determining if the ordinary consumer is likely to be confused. The medium that is used, should not, ipso facto, be determinative of whether a trademark has been used in a confusing or infringing manner.

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definition of use to the entire Act. “In association with” should be given a uniform reading, based on the concept of “distinguishing use” and should be applicable equally to wares and services. In particular, the “affixation” requirement for wares should be removed from section 4(1) of the Act, because the inquiry should be on the nature of the harm caused by the defendant’s unauthorized use, rather than on where the mark appears.

C. Absence of a Convincing Doctrinal Justification for Section 22

Most of the arguments offered in support of section 22 have been largely economic in nature—that trademarks have now evolved beyond mere indicia of source and quality, and that the goodwill painstakingly built up by trademark proprietors in their registered signs and symbols is worthy of protection from the increasingly deviant practices of the modern marketplace. While the Schechterian rhetoric that animates much of this discourse is likely to hold broad appeal for trademark proprietors in general, these arguments do not provide a convincing explanation for why section 22 is a necessary component of trademarks legislation in Canada. It should be borne in mind that while section 22 has often been compared to the anti-dilution action in the United States, it is far less specific and fleshed-out than its American counterpart. In particular, the arguments submitted in favor of section 22 do not explain why the traditional “likelihood of confusion” test does not provide adequate protection for registered trademarks in Canada.

A conception of trademark infringement that does not require a likelihood of consumer confusion is arguably not welfare enhancing for society as a whole. Members of the public do not benefit from having excessively broad trademark protection, since the propertization of trademarks as assets in and of themselves would have a chilling effect on the use of words and signs in ordinary discourse and communication, or for criticism and review.148 Excessive controls over the use of “trademarked” words in ordinary discourse— that might be construed as disparaging to the proprietor—would ultimately impose a significant social cost on society by diminishing the range of vocabulary with which consumers can use to make fun of or otherwise critically discuss

148. Parodies and other forms of speech are also likely to suffer from excessive controls over the use, by the public, of words contained in trademarks. By recognizing “dilution” as a cause of action, we run the risk of transforming the trademark owner into a “monitor” of spoken and written language. See Dilution Hearing, Trademark Dilution Revision Act of 2005: Hearing on H.R. 683 Before the Subcommittee on Courts, the Internet, and Intellectual Property of the House Committee on the Judiciary, 109th Cong. 2 (2005) (statement of Marvin J. Johnson, Legislative Counsel, American Civil Liberties Union), cited in Beerline, supra note 1, at 516.

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products offered by merchants and companies.149 This would lead to the gradual impoverishment of human language and culture.150

Lemley and others have also pointed out that trademark law in general differs from other branches of intellectual property in important respects.151 In particular, copyrights and patent rights are granted for an instrumental purpose—to provide incentives for the creation of new works and inventions protected by copyright and patent law.152 These works and inventions would eventually enter into the public domain at the end of their respective terms of protection. Trademark rights, on the other hand, can potentially be renewed indefinitely (subject, of course, to continued use and distinctiveness) and are based on a different justification. The purpose of trademark law is not to incentivize the creation of more trademarks; indeed, as Lemley points out, public welfare is not necessarily enhanced by having more new trademarks clamoring for our attention in the marketplace.153 Instead, the raison d’être of trademark law can be said to be the distinction and differentiation between wares and services based on their source and quality. Trademark law enables consumers to identify and purchase wares and services that they associate with a certain source and/or level of quality, thereby also enabling merchants to benefit from the goodwill and investment in their marks. Treating trademarks as objects of property creates arguably “denatures” the link that they have with goods and services. Severing this connection defeats the very purpose of linking a mark with goods or services in the first place.154

An argument that is commonly cited in support of increasing the scope of protection for trademarks is that dilution by blurring through non-confusing use weakens the uniquely distinctive quality of a trademark and thereby increases consumer search costs.155 In the case of a similar trademark being used concurrently by traders in different fields of activity, consumers seeking a product by reference to its trademark would need to engage in a more specific search inquiry in order to locate the source of their desired product. The concern here would be that the mental association in the consumer’s mind between the trademark and the 149. Lemley, supra note 4, at 1696. 150. Id. 151. Id. at 1694. 152. Id. 153. Id. at 1695. 154. Id. at 1696. 155. See, e.g., MacInnis, supra note 88, at 27, who suggests that trademarks can promote social welfare by serving as “shorthand information” and thereby reducing consumer search costs. See also W.M. Landes & R.A. Posner, Trademark Law: An Economic Perspective, 30 J.L. & Econ. 265, 265-266 (1987) (the basis of trademark law, like tort law, is to promote economic efficiency).

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trademark proprietor would no longer be “straightforward and immediate.”156 For instance, if the famous KODAK mark were to be used for pianos, confectionary, and rubber mats, a customer seeking to purchase KODAK film would have to specify which KODAK product she is desirous of. This would particularly be the case if she is seeking information about the product on the Internet or through the Yellow Pages. Advocates of dilution law might suggest that the process of navigating through a list of non-competing KODAK products would increase the amount of time the consumer would need to spend in locating the correct product. According to this theory, anti-dilution law would play an important role in safeguarding consumer interests and reducing search costs by ensuring that brand reputation is preserved by strong, distinctive, and instantly recognizable trademarks.

Yet research by trademark scholars suggests that the increase in search costs caused by non-competing uses of a trademark may in practice be negligible. Search costs may not even be a particularly pertinent concern in real-life, practical situations, where the context usually makes it perfectly clear what (among many similar-sounding trademarks) the consumer is referring to. An interesting example provided by Rebecca Tushnet is the use of “United” or “American” in the context of airlines or transportation to the airport.157 A cab driver ferrying a passenger to a departure terminal at an airport will be able to deduce, from the context, that the use of the word “United” would be a reference to the airline, and not to “United Van Lines.” Likewise, a cab driver will, from his or her experience, know better than to drive to the nearest “American Apparel” store if a departing passenger bound for the airport with suitcases in tow refers to the trademark AMERICAN.158 And words like “American” and “United,” Tushnet points out, are relatively weak and conceptually diluted marks.159 Despite their contextual weakness, context plays an important role in helping a consumer or user disambiguate between two or more possible trademark references.160 In this vein, the argument about search costs and response time may be overstated.161 In essence, it is important to note that while non-confusing dilution by blurring may indeed increase response times if a consumer were to be 156. See Lemley, supra note 4, at 1704; Assaf, supra note 13, at 47; Burk, supra note 74, at 719. See also Stacey L. Dogan & Mark A. Lemley, Trademarks and Consumer Search Costs on the Internet, 41 Hous. L. Rev. 777, 790 (2004). 157. See Tushnet, supra note 75, at 529-30. 158. Id. 159. Id. at 529. 160. Id. at 530. 161. Tushnet adds that that dilution suffers from “significant empirical uncertainties, as well as normative problems with treating consumers’ mental images of marks as things that can be owned by other entities.” See Tushnet, supra note 75, at 511.

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presented with two or more similar but non-confusing trademarks in the abstract, consumers rarely encounter such words in isolation.162 The context and the product categories that apply specifically to a particular situation (e.g., when entering a medium-sized ladies’ boutique as opposed to purchasing famous champagne in a liquor store) help a consumer to instinctively eliminate non-relevant connections with other trademarks, keeping response times much lower than might be expected in an abstract “sight-and-recall” cognitive experiment.163

Trademark scholars have also argued that the power of fame might be strong enough to protect distinctive and well-known marks from dilution by tarnishment, provided that confusion as to source is unlikely.164 Tushnet suggests that the relative immunity of strong trademarks against tarnishment can be explained by the fact that associations with inferior junior users tend to remain “unidirectional.”165 Because of the robust mental concepts of strong brands in the minds of consumers, any negative opinions arising from unpopular brand extensions or shoddy products by junior traders in non-competing fields of activity are unlikely to return to harm the reputation of the “core brand.”166 The harm in question is described as “unidirectional” because negative opinions are confined to the unpopular brand extension or junior use, and do not weaken the goodwill already built up in the well-known trademark, given the ability of consumers to make fine distinctions between core brands, brand extensions and third party uses.167 As an example, Tushnet suggests “Coke BlaK” as an authorized extension or cobranded product of the strong trademark and parent brand COCA-COLA.168 If “Coke BlaK” is poorly received by consumers, negative opinions about the product would not likely tarnish the reputation of the core brand.169 If consumers are able 162. Id. at 530. 163. One such experiment was conducted by Morrin and Jacoby, where “Dogiva” biscuits were shown to delay recognition of Godiva chocolates by test subjects. These findings were published in Maureen Morrin & Jacob Jacoby, Trademark Dilution: Empirical Measures for an Elusive Concept, 19 J. Pub. Pol’y & Mktg. 265 (2000), and discussed in Tushnet, supra note 75, at 527. In retrospect, this might not have been an ideal experiment for determining the effect of non-confusing dilution on response times, given the closeness in fields of trade—biscuits and chocolates can both be classified as confectionery, and similar marks are more likely to cause confusion in such a situation, than in the case of widely divergent product categories. 164. See Tushnet, supra note 75, at 543-44. 165. Id. at 544. 166. Id. at 543. 167. Id. at 544. 168. Id. at 543. 169. Id., citing research by Milberg and others on the protective effects on the parent brand of “subbranding.” See, e.g., Sandra J. Milberg et al., Managing Negative Feedback Effects Associated with Brand Extensions: The Impact of Alternative Branding Strategies, 6 J. Consumer Psychol. 119, 136 (1997), whose research has yielded interesting findings on

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to seize upon fine distinctions between core brands and brand extensions, Tushnet argues that it is highly unlikely consumers would penalize the reputation of an established brand by transferring negative opinions from unaffiliated products and services.170

Insofar as section 22 seeks to emulate the American anti-dilution action by recognizing liability in the absence of consumer confusion, it can perhaps be said that Canada’s depreciation of goodwill action suffers from the same absence of a convincing theoretical justification.171 For reasons of social utility, economic efficiency, and consumer protection, trademark rights should be balanced judiciously with various aspects of the public interest. Although trademarks may differ from copyright and patents in important respects, these branches of intellectual property have one element in common—they seek to confer a limited monopoly for a statutorily defined period of time to reward creative expression, investment, and intellectual effort, while at the same time providing an avenue through which these intellectual works can eventually be disseminated freely when they enter the public domain. It is important to note that the concept of “limited” monopoly is precisely that—exclusive rights granted by the law to the owner/author/proprietor are not absolute or unbridled but are subject to public interest considerations, such as fair dealing, criticism, and review, description, research, and so forth. The new forms of “detriment” that section 22 seeks to remedy are arguably outside the scope of what trademark law is designed to protect, and threaten to upset the delicate balance between private rights and the public interest that lies at the heart of intellectual property doctrine.

D. No Clear “Anti-dilution” Requirement in International Agreements on Intellectual Property

In continuing with the discussion of whether section 22 deserves a place in the general scheme of Canada’s Trade-marks Act, it is necessary to consider whether trademark liability in the absence of consumer confusion is internationally mandated by

the effects of “subbranding”—the process of creating a brand extension effectively ensures that negative consumer opinions are confined to the products under the brand extension, and do not adversely affect the reputation of the parent brand. 170. Tushnet, supra note 75, at 544. 171. See, for instance, Bone, Schechter’s Ideas, supra note 1, at 506, for some observations on the American concept of dilution. Bone suggests that there is no convincing normative account of why trademark law should protect against dilution. In order for dilution to remain viable as a cause of action, Bone argues that dilution advocates need a rigorous policy justification. In a similar vein, Rebecca Tushnet asserts that dilution “is, ultimately, an underevidenced concept and one that invites socially wasteful litigation.” See Tushnet, supra note 75, at 510.

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multilateral intellectual property agreements to which Canada is a party. Do Canada’s international obligations require it to pass domestic legislation to protect trademarks from non-confusing diluting uses? Canada has been a member state of the TRIPS Agreement since the WTO Agreements entered into force on January 1, 1995, and has been a contracting party of the Paris Convention for the Protection of Industrial Property (Articles 1 to 12) since 1996.172 An interesting feature about Canada’s international obligations is that they are not enforceable locally until they are enabled through domestic legislation.173

Article 16 of the TRIPS Agreement sets out the rights conferred on owners of registered trademarks in member states. Section 16.1 contains a requirement that infringing use of a registered trademark in respect of “identical or similar goods or services” must result in a “likelihood of confusion.” It goes on to state that a likelihood of confusion shall be presumed in the case of an identical sign being used for identical goods or services. It is evident from Article 16 that the notion of traditional trademark infringement has been explicitly incorporated into international intellectual property law, requiring all member states to prohibit confusing or potentially confusing uses of registered trademarks.174

Of particular interest to this discussion is, however, Article 16(3) of the TRIPS Agreement, which extends the operation of Article 6bis of the Paris Convention (1967) to goods or services that are not similar to those in respect of which a trademark is registered. It states that Article 6bis of the Paris Convention shall apply mutatis mutandis to such goods and services. Article 6bis relates specifically to the protection of “well-known marks” from uses that are “liable to create confusion” (emphasis added). Article 6bis does not go so far as to require a member state to protect a well-known mark against dilution.

Article 16(3) of the TRIPS Agreement incorporates the elements of Article 6bis of the Paris Convention mutatis mutandis, which is Latin for “with the necessary changes made.” What changes would be considered “necessary” in this context remains a question of some uncertainty. The fact that Article 16(3) does not itself contain the word “confusion,” but possibly incorporates the confusion requirement by cross-reference to another treaty 172. Canada has been a contracting party to Articles 13–30 of the Paris Convention for the Protection of Industrial Property of 1883 (as revised at Stockholm in 1967) since 1970 and Articles 1–12 since 1996. See World Intellectual Property Organization, Treaties and Contracting Parties, at http://www.wipo.int/treaties/en/Remarks.jsp? cnty_id=205C. 173. See Howell, supra note 85, at 693. 174. See Mathias Strasser, The Rational Basis of Trademark Protection Revisited: Putting the Dilution Doctrine into Context, 10 Fordham Intell. Prop. Media & Ent. L.J. 375, 394 (2000): “While [Article 16 of the TRIPS Agreement] subjects all infringement cases to the likelihood of confusion test …, it presupposes a likelihood of confusion in the identity case.”

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provision may have generated some degree of contention among trademark scholars. Simon, for instance, suggests that the “connection” called for in Article 16(3) is more akin to traditional confusion, where the consumer believes that the goods were made by or under the authority of the earlier trademark user, rather than the type of association generally required for dilution to occur.175 Simon further adds that Article 6bis of the Paris Convention is clearly an expression of traditional, confusion-based trademark infringement, and because the primary purpose of Article 16(3) is to import Article 6bis into the TRIPS framework, Article 16(3) should not be construed as providing dilution protection per se.176 Howell, on the other hand, argues that Article 16(3) of the TRIPS Agreement extends the scope of trademark protection to include diluting or depreciating uses.177 He suggests that Article 16(3) goes beyond classical trademark protection by recognizing the harm caused when a registered trademark is used by a third party in relation to dissimilar goods or services, where the use in question indicates a connection with the trademark proprietor.178 However, in citing Article 6bis of the Paris Convention, Howell omits to mention that the phrase “liable to create confusion” is explicitly included in the provision. The protection granted to well-known marks in the context of Article 16(3) read with Article 6bis should therefore be interpreted in light of this important phrase.

The main interpretative challenge facing the application of Article 16(3) lies in the phrase “mutatis mutandis.” Does the presence of this phrase necessitate the striking out of “liable to create confusion” when importing Article 6bis of the Paris Convention by cross-reference? This is not an easy question to answer because well-known marks can, in theory, be applied by junior traders to dissimilar goods or services in both confusing and non-confusing ways, depending on how diversified the established trademark is. For example, the trademark “Disney” has arguably transcended its traditional product boundaries to such an extent that its use on non-competing goods (such as batteries or cooking oil) may produce a likelihood of confusion. On the other hand, a famous mark with a more specific product range and target audience (such as BARBIE for dolls) might be applied to other categories of trade without necessarily generating a likelihood of confusion. Given this ambiguity, one should not leap to the conclusion that Article 16(3) has excised from its ambit the

175. Ilanah Simon, Dilution in the US, Europe, and Beyond: International Obligations and Basic Definitions (2006), http://jiplp.oxfordjournals.org/content/ 1/6/406.full, ¶ 7. 176. Id. 177. Howell, supra note 85, at 692. 178. Id. at 692-93.

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“confusion” requirement contained in Article 6bis of the Paris Convention. It is by no means clear from the plain text of Article 16(3) that the international community meant to embrace a new dilution standard for trademark infringement by removing the confusion requirement for well-known marks used in association with dissimilar goods or services. It is submitted that fame or renown, on its own, does not necessitate a removal of the confusion requirement from the ambit of Article 16(3).

Because there is no clear evidence to suggest that Article 16(3) was designed to eliminate the “likelihood of confusion” test for trademark infringement, one should be wary of ignoring or disregarding the plain text of Article 6bis of the Paris Convention. This is arguably a more circumspect approach to adopt when interpreting Article 16(3) of the TRIPS Agreement. In addition to this confusion requirement, the unauthorized use of a well-known mark in respect of dissimilar goods and services under Article 16(3) must also indicate a connection between those goods or services and the owner of the registered trademark, thereby resulting in a likelihood of damage to the trademark owner’s interests. The test for liability under the TRIPS Agreement in respect of trademark use on non-competing, dissimilar wares is therefore similar to, if not even stricter than, the test for traditional trademark infringement. On the basis of this analysis, one might surmise that the “likelihood of confusion” test remains a criterion for trademark liability at the international level. There is no specific requirement that member states protect famous mark from “dilution” in the way the “dilution” action has been defined and applied in the United States.179 In the next part, I suggest ways in which a properly construed “likelihood of confusion” doctrine can confer an appropriate level of protection to both renowned trademarks and less well-known marks, while maintaining a balance with the preservation of fundamental civil liberties.

VI. PROPOSALS FOR REFORM IN CANADA A. Possible Responses to the Section 22 Debacle

One possible response that might find favor with members of the trademark bar is that section 22 could be broadened and clarified to mirror the U.S. anti-dilution action. Such a proposition would involve expanding and re-drafting section 22, and adding provisions relating to “dilution by blurring” and “dilution by 179. Interestingly, one commentator has suggested, somewhat ironically, that dilution should be accepted and applied “dogmatically” despite its concerns because of the global trends to adopt anti-dilution statutes. See Mathias Strasser, The Rational Basis of Trademark Protection Revisited: Putting the Dilution Doctrine into Context, 10 Fordham Intell. Prop. Media & Ent. L.J. 375, 432 (2000).

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tarnishment.” A redrafting exercise to transform section 22 into a fully fledged anti-dilution provision would also need to address the requirement of fame, and to rework the rather awkward definition of “use in association with” under section 4.

However, the above proposition presupposes that dilution should be one of the harms targeted by trademark law. For the reasons already outlined in the preceding parts, there is no clear underlying doctrinal justification for anti-dilution law. It is also not clear that a broadly defined concept of dilution would be in the best interests of Canada’s economy—because that might involve protecting well-established foreign brands at the expense of emerging, autochthonous, home-grown Canadian brands. An overly broad ambit of protection for famous marks might prevent less well-known Canadian brands from establishing themselves in non-competing, non-confusing fields of activity. Given the concerns—both economic and doctrinal—of anti-dilution law, Canada should be wary of unthinkingly hopping onto the “dilution bandwagon.” Any future amendments to section 22 must accordingly take into consideration whether anti-dilution law is a step in the right direction for Canada. Making a provision (such as section 22) more specific and detailed can hardly be considered to be an “improvement” if its underlying purpose is difficult to justify doctrinally. If the “mischief” that section 22 seeks to remedy should not be an actionable form of harm recognized by trademark law, then making the provision more detailed in its scope would clearly be a step in the wrong direction.

A second possible response to the section 22 debacle would be to simply leave the text of the statute unchanged, and to allow the interpretive uncertainties surrounding the ambit and limits of section 22 to be fleshed out through subsequent jurisprudence. The main disadvantage to this approach is that common law jurisprudence develops slowly, and substantive changes to the common law are often contingent upon there being an appeal to an appropriate court with the requisite authority to override an existing common law principle. In addition, it is important to note that judges are often constrained by the rule of Parliamentary supremacy when interpreting statutory provisions. In exercising their judicial function, judges do not have the discretion to disregard or change the clear terms of a statutory provision. This might very well have been how Justice Thurlow felt when interpreting the “use in association with wares” requirement in the context of his decision in Clairol. Legal reform through the painstakingly slow process of jurisprudential development is clearly not an effective way of solving an existing problem or concern. Section 22 was first considered judicially in the case of Clairol, and it took close to thirty-eight years for an appeal concerning this provision to be heard by the Supreme Court of

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Canada in 2006. Even then, the Supreme Court’s decision in Veuve Clicquot Ponsardin led to a denial of liability under section 22 and did not truly test the limits of the “depreciation of goodwill action.” A more proactive approach (of a legislative nature) is required to remedy the flaws in Canada’s Trade-marks Act.

A third possible response (and the strategy that I am proposing) would be to repeal section 22 entirely, and to harmonize the “use in association with” requirement under section 4 for wares and services with the definition of a trademark under section 2. These two amendments would serve to re-establish the twin pillars of trademark law, namely, distinguishing use (as a trademark) and a likelihood of confusion as requirements for trademark liability. These amendments would also assist in restoring doctrinal clarity and interpretative consistency to the Trade-marks Act. Amending section 4 and removing section 22 from the Act would result in there being only one definition of “use”—“distinguishing use” under section 2—to be applied consistently throughout the Act. In addition, such an amendment would remove another interpretive uncertainty inherent in section 22 by requiring that “likelihood of confusion” be present before a finding of trademark infringement can be made. At present, the wording of section 22 does not contain a “confusion” requirement, and yet the Supreme Court of Canada appears to have read in a link to “confusion” (à la traditional infringement) in its recent decision in Veuve Clicquot Ponsardin.180 Requiring a test of confusion for section 22 would essentially render the provision nugatory, because it would then merely mirror the traditional action for trademark infringement. Striking out section 22 from the Act would simply be an acknowledgment, by the legislature, that the “depreciation of goodwill action” is unwarranted and has become superfluous to the classic trademark infringement action.

Repealing section 22, however, is not likely to be a popular option among trademark proprietors. The scope of protection currently afforded to registered trademarks has already been criticized as being too narrow. Nonetheless, I propose to demonstrate in the next part how a properly construed “likelihood of confusion” doctrine can provide adequate “shelter” to registered trademarks from the onslaught of increasingly deviant advertising practices in the modern marketplace. With the two pillars of trademark law firmly in place, reinforced by a purposive approach to statutory interpretation, section 22 can be removed from the Act without causing undue structural damage to the remaining provisions. Indeed, given the numerous interpretative concerns surrounding the “depreciation of goodwill” action, the removal of

180. Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824, ¶ 12.

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section 22 from the Act would only result in greater clarity and consistency in the trademarks legislation of Canada.

B. The “Three Faces” of Confusion: Initial Interest, Point-of-Sale Confusion,

and Post-Sale Confusion The question that remains to be addressed in this part is

whether a Canadian trademarks regime sans section 22 would be able to provide adequate protection to owners of registered trademarks from infringing practices. A concern that trademark proprietors might raise in this context relates to whether a test for infringement based solely on the traditional confusion factors would “legitimize” many unfair trading practices that erode trademark goodwill, even if the consumer is not actually confused at the point of sale. A common-cited example of such a trading practice is the use of “initial interest confusion,” where a junior user creates some kind of association with a senior mark, luring or enticing customers to purchase goods or services in the process. However, any confusion as to the source of the product is almost invariably cleared up by the time the customer decides to pay for the goods in question. I seek to argue in this part that a properly construed “likelihood of confusion” doctrine need not necessarily be limited to confusion at the point of sale, and that the wording of Canada’s Trade-marks Act is broad enough to capture certain forms of initial interest confusion and post-sale confusion as examples of actionable infringement.

The case law in this area is not very well developed in Canada, but courts in the United States have already started to view initial interest confusion as a trading practice that contravenes the exclusive rights of a trademark proprietor. The initial interest confusion doctrine was articulated and applied by U.S. courts as early as the 1970s.

Brookfield Communications Inc. v. West Coast Entertainment Corp.181 is a classic case that is often cited in the American trademark jurisprudence as an illustration of actionable initial interest confusion. The plaintiff in that case was the registered proprietor of the trademark MOVIEBUFF, used in association with software for the entertainment industry. The defendant used the “moviebuff.com” domain to divert Internet traffic to the website of its video rental business at http://www.westcoastvideo.com. In addition, West Coast also used the word “moviebuff” in its website’s metatags.182 Although the defendant’s customers knew, at the point of sale, that they were dealing with West Coast Entertainment and not the plaintiff, the 181. 174 F. 3d 1036 (9th Cir. 1999). 182. Id. at 1042.

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court held that the defendant’s misleading use of the “moviebuff” domain created an initial interest in its website by unfairly taking advantage of the plaintiff’s goodwill in its registered trademark, and concluded that Brookfield was entitled to preliminary injunctive relief.183

The initial interest confusion doctrine therefore recognizes that actionable harm may be caused when a defendant engages in a “bait and switch” that seeks to capitalize on the goodwill of a senior or more established mark to attract a customer’s attention. Once the customer has been “baited,” they are offered a substitute product originating from the defendant. A typical example of a “bait and switch”—one that is commonly cited in the American jurisprudence—is of a consumer driving on a highway, and who sees a large sign indicating “Exit here for Blockbuster Video.”184 Suitably enticed, the consumer makes a turn and discovers, to her disappointment, not Blockbuster Video but a competing video store that leased the billboard space. The consumer nevertheless makes a purchase out of convenience from the video store even though she is perfectly aware at this point that it is not Blockbuster Video that she is doing business with.

Although the “initial interest confusion” that attracts a potential customer would have been “remedied” by the time the customer decides to make a purchase,185 courts in the United States have held that such trading practices make improper use of another party’s trademark goodwill. The legal issue at stake here is whether the “likelihood of confusion test” for traditional trademark infringement should take into account initial interest confusion, or if it should be confined to confusion at the point of sale. The position in the United States appears to favor the former approach. On September 18, 2006, the International Trademark Association (INTA) issued a recommendation that courts consider initial interest confusion using the traditional likelihood of confusion factors.186

While this recommendation is, of course, not binding on the courts, it suggests the beginnings of a concrete movement to

183. Id. at 1057; see also Jeffrey M. Becker & Purvi J. Patel, Recent Trademark Challenges in Cyberspace and the Growth of the Initial Interest Confusion and Nominative Fair Use Doctrines, 9 Computer L. Rev. & Tech. J. 1, 5 (2004). 184. This was an example provided by the court in support of its ruling in Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, at 1064. This example was also cited in the INTA Proposal on Initial Interest Confusion, http://www.inta.org/Advocacy/Documents/INTAInitialInterestConfusionResolutionReport.pdf, at 2-3. 185. Ross D. Petty, Initial Interest Confusion versus Consumer Sovereignty: A Consumer Protection Perspective on Trademark Infringement, 98 TMR 757, 757-8 (2008). 186. See INTA Proposal on Initial Interest Confusion, http://www.inta.org/Advocacy/ Documents/INTAInitialInterestConfusionResolutionReport.pdf.

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recognize the myriad variety of ways in which confusion can harm the goodwill of a trademark.

In Canada, the principle of initial interest confusion is relatively less well developed than in the United States. In the past, Canadian courts have applied the common law tort of passing off to address the unauthorized use of a confusingly similar domain name, by a defendant, to attract potential customers on the Internet. For example, in the case of Law Society of British Columbia v. Canada Domain Name Exchange Corp.,187 the court awarded an injunction to restrain the defendant from using the domain names “lawsocietyofbc.ca” and “lsbc.ca.” The Law Society had alleged in its complaint that the “lawsocietyofbc.ca” domain registered by the defendant automatically redirected an Internet user to a pornography site. The judge was skeptical of the defendant’s claim that it was planning a service to provide a list of barristers practicing in the province, and that the “law society of bc” domain name stood for “Law Society of Barristers’ Categories.”188 In arriving at its decision, the court held that the defendant’s use constituted a misrepresentation amounting to a deception,189 and that the domain names had been registered for the purpose of generating income for the defendant by diverting Internet traffic from the Law Society’s website. The court based its finding on an application of the three requirements of passing off,190 as articulated by the English court in British Telecommunications plc v. One in a Million Ltd.191 This has led one commentator to suggest that the successful application of the tort of passing off to deceptive uses of domain names on the Internet may open the door for a more explicit recognition of the initial interest confusion doctrine in Canada.192

Yet caution needs to be applied when considering cases involving initial interest confusion. In the Blockbuster example discussed earlier, a strong argument could certainly be made that the defendant has genuinely usurped the source-identifying function of the trademark by misleading the consumer into making a “detour” prior to the point of purchase. This act of deception has 187. 2002 BCSC 1249. 188. See Robert J. Lesperance, Initial Interest Confusion Doctrine: Is the Door Opening in Canada?, http://www.lmlaw.ca/pdf/initial_interest_confusion.pdf, at 3. 189. Id. at 5. 190. The three requirements of passing off are: (1) the presence of goodwill in the plaintiff’s trade name, (2) misrepresentation by the defendant and (3) actual or potential damage to the plaintiff’s goodwill. See Reddaway v. Banham, [1896] A.C. 199; Reckitt & Colman v. Borden, [1990] R.P.C. 340, and Ciba-Gigy Canada Ltd. v. Apotex Inc. (1992), 44 CPR (3d) 289. 191. [1998] 4 All E.R. 476. 192. See Lesperance, supra note 188, at 6. See also Brit. Columbia Auto. Ass’n v. Office and Prof’l Employees’ Int’l Union, Local 378 (2001), 10 C.P.R. (4th) 423 (B.C.S.C.), in which it was held that initial interest confusion can constitute the tort of passing off.

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enabled the defendant to make a sale at the expense of the plaintiff’s trademark goodwill and reputation, and there is therefore a plausible basis in trademark law for such an act to attract liability. However, not all cases involving “initial interest” should necessarily trigger liability under trademark law, particularly if the “detour” in question is made as a result of a conscious decision by the consumer, who can easily retrace her steps if she so chooses.193 On the Internet, for instance, it is not uncommon for a consumer doing a search for merchandise to be presented with a range of options, not all of which directly correspond to her search terms.194 For example, a consumer who searches for a “Blackberry” may find, among the list of results, links to sites promoting the Apple iPhone.195 Trademark scholars and commentators are generally of the view that such forms of “initial interest” should not lead to actionable infringement since there is, in fact, no likelihood of confusion on the part of the consumer.196 The bottom line is that the likelihood of confusion test needs to remain a key criterion for trademark infringement—there can be no liability in the absence of confusion as to source or quality if an individual’s attention is merely attracted by the “initial interest” generated by a competing product. This distinction is important to ensure that consumers are given freedom of choice in making product selections, particularly on a

193. See, for instance, Jennifer E. Rothman, Initial Interest Confusion: Standing at the Crossroads of Trademark Law, 27 Cardozo L. Rev. 105, 179-90 (2005), who argues in favor of a more limited analysis of “pre-sale confusion,” which requires proof of likely confusion that is more than just de minimis. Rothman notes that the mere diversion of a customer from one product to another should not, by the mere fact, be used as a basis to find trademark infringement. In determining whether there is an actionable case of “pre-sale confusion,” Rothman asserts, at 113, that courts should take into account “the complete array of factors traditionally examined in the likelihood of confusion analysis.” 194. Petty draws an important distinction between cases where consumers can easily recover from the so-called “initial interest” and resume their original search, and cases where consumers are genuinely confused by a misleading use of a trademark. Petty notes that in most Internet situations, a consumer who does not wish to learn more about a brand that she had not intended to find can simply click on the “back button” of her browser and return to her original search, at little cost to herself. Since the consumer in this case remains in control of her choices, such forms of “initial interest” on the Internet do not interfere with what Petty terms “consumer sovereignty.” In Petty’s view, initial interest confusion should lead only to actionable infringement if it would be difficult or impractical for a consumer to resume her search for her originally desired brand, and is therefore “induced” into settling for the advertised brand. See Ross D. Petty, Initial Interest Confusion versus Consumer Sovereignty: A Consumer Protection Perspective on Trademark Infringement, 98 TMR 757, 758-59, 761-62 (2008). 195. See Priya Singh, Abolish Trademark Law's Initial Interest Confusion and Permit Manipulative Internet Search Practices, 3 J. Bus. Entrepreneurship & L. 15, 16 (2009). 196. See generally Hung P. Chang, Return to Confusion: Call for Abandonment of the Initial Interest Confusion Doctrine, 12 Intell. Prop. L. Bull. 131 (2008); Ross D. Petty, Initial Interest Confusion versus Consumer Sovereignty: A Consumer Protection Perspective on Trademark Infringement, 98 TMR 757 (2008); Rothman, supra note 193; Singh, supra note 194.

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medium like the Internet, where the “transactional costs” of obtaining information are likely to be lower than in the brick-and-mortar world.197

Commentators in the United States have also observed that the doctrine of “confusion,” at least as it has been defined in the Lanham Act, should not be limited to pre-sale or point-of-sale confusion. A likelihood of confusion can also arise after the point of sale, and such “post-sale confusion” can have a significant impact on the quality of information transmitted by a trademark to potential consumers.198 It has also been suggested that post-sale confusion of the general public should lead to actionable infringement under the federal trademark law of the United States. The revisions to the Lanham Act in 1962 to remove the “purchaser” and “source of origin” limitations in the statute have been interpreted by some courts as having expanded the scope of actionable post-sale confusion to include members of the public, instead of only purchasers or potential purchasers.199 The rationale for such protection is that while consumers may not themselves be confused either prior to or at the point of sale, their use of infringing goods may cause others to be confused.200 That being said, a claim for post-sale confusion would not succeed unless there were a likelihood of confusion, whether of the general public or of potential purchasers.201 It has been suggested that this more expansive interpretation of the confusion doctrine—temporally and in terms of audience—comports with the twin goals of consumer protection and recognizing proprietary interests in a trademark.202

Although the legislation in Canada does not expressly mention initial interest or post-sale confusion, it is noteworthy that the language of Canada’s Trade-Marks Act is broad enough to encompass confusion that takes place prior to or after the point of sale. Section 6 of the Act, which defines when a trademark or trade name is confusing, does not expressly limit the doctrine of “likely confusion” to confusion at the point of sale. Neither does it limit the class of confused individuals to “purchasers” or “potential 197. For instance, the relative ease of clicking on the “back button” of a browser while surfing online as opposed to the act of making a detour on a highway to get to another location illustrates the lower “transactional costs” of obtaining information and decision-making on the Internet. 198. See, e.g., Robert G. Bone, Hunting Goodwill: A History of the Concept of Goodwill in Trademark Law, 86 B.U. L. Rev. 547, 558 (2006); Bone, Schechter’s Ideas, supra note 1, at 472. 199. Anne M. McCarthy, The Post-Sale Confusion Doctrine: Why the General Public Should Be Included in the Likelihood of Confusion Inquiry, 67 Fordham L. Rev. 3337, 3338, 3348, 3350-51 (1999). 200. Id. at 3351. 201. Id. at 3363. 202. Id. at 3368-9.

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purchasers.” Instead, the section defines confusing use as leading to the inference that wares or services associated with a particular trademark are “manufactured, sold, leased, hired or performed” by the same person. Because this definition does not contain temporal or class restrictions, it can be inferred that actionable confusion under Canada’s Trade-marks Act may extend beyond the likelihood of confusion at the point of sale, and may apply equally to actual purchasers and members of the general public. Additionally, the list of factors set out in section 6(5) of the Act provide general guidelines on some of the criteria for determining the presence of confusion, such as the inherent distinctiveness of the trademark, the length of time the trademark has been in use, the nature of the wares and business, the nature of the trade, and the degree of resemblance between the allegedly infringing mark and the original mark. These guidelines have been expressed in a manner general and broad enough to encompass both pre-sale and post-sale confusion of potential purchasers as well as the general public.

Many of the perceived “harms” identified in the jurisprudence as being proscribed in Canada under section 22 can be adequately addressed under a properly construed “likelihood of confusion” test. For example, if one were to consider carefully two cases in which section 22 liability was imposed—Clairol International Corp. and Clairol Inc. of Canada v. Thomas Supply & Equipment Co. Ltd.203 and Source Perrier (Société Anonyme) v. Fira-Less Marketing Co. Ltd.204—it becomes clear that these really involve instances of initial interest confusion. Although it would have been clear to the ordinary consumer at the point of purchase that the manufacturer of the wares was not affiliated with the plaintiff, the use of the plaintiff’s mark (or a confusingly similar variant thereof) on the wares would be sufficient to entice customers of the plaintiff to examine and possibly purchase the product in question, resulting in a diversion of custom from the plaintiff to the defendant.

In Clairol, the defendant’s reproduction of the plaintiff’s trademark in a color comparison chart on the defendant’s wares was specifically designed to enable a customer to “make the switch” from Clairol to Revlon hair coloring products after having seen the equivalent shade to which she was accustomed. Because a customer usually expects to see a manufacturer’s trademark displayed on the wares themselves, the use of a Clairol trademark on a product originating from Revlon is particularly pernicious, given the importance of visual cues derived by customers from images displayed on wares in influencing purchasing decisions. In

203. (1968), 55 C.P.R. 176. 204. [1983] 2 FC 18 (FCTD).

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contrast, a color comparison chart distributed separately by Revlon on a flyer or brochure would not likely generate the same degree of initial interest confusion. This is because customers are likely to attach a far higher degree of association, at least at the “initial interest” stage, between a product and trademarks appearing on its packaging, than on promotional material appearing in separate media not attached to the goods themselves.

In this regard, it is important to note that it is not the medium on which the trademarks appear, but rather the context in which they are used, that is essential in determining whether or not initial interest confusion is likely to arise. In particular, trademark law should not be used as a vehicle to prevent legitimate comparative advertising that portrays the competing goods in a fair and accurate manner. On the other hand, context also plays an important role in determining whether confusion as to source, even if temporary, may result in a mark being erroneously perceived by the average consumer as indicating the provenance of wares or services during the period leading up to a possible purchasing decision.

A similar argument of initial interest confusion can be made in the case of Fira-Less Marketing. In that case, the defendant company manufactured bottles of mineral water that resembled those marketed and sold under the renowned PERRIER brand. The name the defendant used to sell these wares (PIERRE EH!) was phonetically and morphologically similar to the plaintiff’s trademark, such that a customer glancing cursorily at the defendant’s goods might be inclined to believe that they originated from the plaintiff. Upon closer inspection, the ordinary Canadian consumer at the time would have realized that the defendant was engaging in a political spoof, and having been suitably impressed or amused by the defendant’s play of words, might have decided to purchase a bottle or two. On the other hand, visitors to Canada and other customers unacquainted with the political background behind the defendant’s spoof might not have understood the intended message behind the use of PIERRE EH! While satire and parodies of established trademarks do not invariably result in initial interest confusion, particularly in a non-commercial context,205 it is noteworthy that the defendant was using the term PIERRE EH! commercially to market and sell similar wares in the same class of trade as those of the plaintiff. Further, the physical similarity of the bottles the defendant used to package its water could lead to prospective customers’ post-sale confusion. Those individuals might associate the infringing articles with those

205. See, e.g., Cie Générale des Établissements Michelin-Michelin & Cie v. C.A.W.-Canada (1996), 71 C.P.R. (3d) 348 (F.C.T.D.).

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originating from the plaintiff upon seeing the confusing similarity of the wares being carried, displayed, or consumed in public.206

Interestingly, both Clairol and Fira-Less Marketing involve defendants seeking to take unfair advantage of another trader’s badge of origin, in their attempt to attract custom by some form of commercial reference—either explicit or satirical—to an established brand, even though actual confusion as to source would be unlikely at the point of purchase. Nevertheless, using a trademark in a confusing manner to attract custom in such cases should be viewed as a type of actionable harm to trademark goodwill, because it disrupts—even if momentarily—the ordinary consumer’s ability to distinguish effectively between competing wares during the period leading up to the customer’s purchasing decision.

C. Toward a Uniform Definition of “Use” in Canada’s Trade-marks Act

Taking into account the arguments in favor of striking an equitable balance between protecting private rights in trademarks and preserving fundamental liberties, it is important to delineate more clearly the difference between infringing and non-infringing conduct in the context of trademark use.207 It is submitted that anti-dilution doctrine takes the rights of trademark owners too far, while a notion of trademark infringement based solely on “point-of-sale confusion” might afford inadequate protection. It is therefore suggested that a middle of the road approach is required to strike a fairer balance between the competing interests of trademark owners, consumers, and the general public. The approach that I am proposing is based on confusion as a key criterion for trademark infringement but recognizes that the likelihood of confusion may arise at various stages of marketing and competition, and not solely at the point when a consumer purchases wares or services.

The Trade-marks Act of Canada, in its current formulation, is potentially broad enough to target infringing uses that generate a likelihood of confusion at the pre-sale, post-sale, and point-of-sale stages. However, it is suggested that courts in Canada should carefully consider the factors enumerated in section 6(5) of the Act, 206. The “nature of the wares, services or business” (e.g., the packaging used for goods and the channels of trade) and the “degree of resemblance between the trade-marks or trade-names in appearance or sound” (e.g., spelling, font, color, design, and pronunciation) are two of the factors in section 6(5) of the Trade-marks Act to be considered by a court when determining whether trademarks or trade names are confusing). 207. Mark A. Lemley & Mark P. McKenna, Owning Mark(et)s, 109 Mich. L. Rev. 137, 137, 187-89 (2010), who argue in their aptly titled essay that owning “marks” should not be equivalent to owning “markets,” and that an owner of a mark should not have the power to control all uses of that mark everywhere. They suggest that trademark law is in need of a theory of “trademark injury” to distinguish between “legitimate interests that the law should protect from a mere desire to capture a benefit enjoyed by another.”

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particularly when faced with cases of alleged infringement involving “pre-sale” and “post-sale” consumer interest, so as to ensure that there is genuine injury to the trademark arising from evidence of likely confusion that is more than simply de minimis.

As discussed earlier, there remain interpretive concerns with the statutory definition of “use” in Canada that should be remedied by legislative amendment. In order to restore the “likelihood of confusion” as a key test for trademark liability in Canada, and to formulate a uniform doctrine of “trademark use”208 that applies throughout the Trade-marks Act, it is suggested that section 22 be repealed, and that the first two subsections of section 4 be replaced with the following:

4. (1) A trade-mark is deemed to be used by a person in association with wares if it is used or displayed, in the normal course of trade, for the purpose of distinguishing wares manufactured, sold, leased or hired by him from those manufactured, sold, leased or hired by others, and where notice of such association is given to any person seeking or acquiring the property in or possession of the wares.

(2) A trade-mark is deemed to be used by a person in association with services if it is used or displayed, in the normal course of trade, for the purpose of distinguishing services performed or advertised by him from those performed or advertised by others, and where notice of such association is given to any person seeking or receiving the services. Some commentators have suggested that amending section 4

might cause problems for the trademark registration process, since “use” is contained in many substantive provisions of the Act.209 However, amending section 4 to re-define “use” as “distinguishing use,” in accordance with section 2, need not necessarily cause structural damage to the existing framework of the Trade-marks Act. Such an amendment would, on the contrary, impose a standard definition of “distinguishing use” for trademarks— one that applies to both wares and services. Furthermore, reconciling the definition of “trademark use” in section 4 with the definition of a trademark in section 2 would simply reiterate the fundamental

208. Siebrasse, supra note 8, at 59, who argues that the Trade-marks Act can be given consistency by reading “use” as “trade mark use” (i.e., distinguishing use) throughout the Act. Such a reading would permit comparative advertising that is true and accurate, as well as nominative uses of a trademark that refer to the source or identity of wares or services. In addition, see Daniel Gervais & Elizabeth F. Judge, Intellectual Property: The Law in Canada (2005) at 294, who also express the view that “use” should be given a consistent reading throughout the Trade-marks Act. They point out that if Parliament had wanted “use” to be defined differently in one section of the Act from section 2, it would have said so, as it does in section 20(1)(b). Section 20(1)(b) states that no registration of a trademark will prevent a person from making any “bona fide use, other than as a trade-mark.” 209. See, e.g., Bibic & Eatrides, supra note 3, at 936-37.

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purpose of a trademark—to indicate to consumers the origin or quality of wares or services in the ordinary course of trade and commerce—a central purpose that applies equally to infringement as it does to registration, non-use cancellation proceedings, and opposition proceedings.

Reformulating section 4 in the manner proposed above to require section 2 use (i.e., distinguishing use) would remove the somewhat bizarre distinction between wares and services that currently appears to be drawn in the legislation, and to harmonize the definition of “trademark use” throughout the Act. The removal of section 22 from the Act would also result in greater doctrinal clarity and consistency in the legislation by restoring the “likelihood of confusion” test and the “trademark use” doctrine as the central pillars of trademark law in Canada, so as to lay the foundations for a fairer, more equitable balance between intellectual property rights, consumer protection, and freedom of expression.

VII. CONCLUSION This article has sought to highlight some of the major

semantic and interpretive concerns arising from section 22 of Canada’s Trade-marks Act. It has argued that section 22 is difficult to justify from a doctrinal perspective, and that its application has produced some inconsistent jurisprudence in Canada. In recent years, the Supreme Court of Canada appears to have restored a “confusion-centric” analysis to liability under the Trade-marks Act, thereby taking a step back to the traditional principles of classic trademark infringement. This, in the view of the author, is a step in the right direction, though the jurisprudence has not fully explored the limits of section 22, thereby leaving many interpretative questions unresolved. I have sought to demonstrate, in this article, that removing section 22 from the Act, and restoring a uniform definition of “trademark use” to the legislation, would go a long way in enhancing the coherence and doctrinal clarity of the trademarks regime in Canada. Yet it is also important to develop a “confusion” doctrine in Canada that affords sufficient protection to trademark goodwill. Courts in Canada are already beginning to recognize forms of confusion that occur before or after the point of sale—and such an “expanded” form of confusion can be accommodated by the plain text of section 6 of the Act, even in the absence of section 22.

Section 22 has been a highly controversial and problematic provision in the trademarks legislation of Canada for close to sixty years, and the time is now ripe for us to act on the many concerns raised by both trademark scholars and practitioners over the decades. As Canada has yet to fully embrace an “anti-dilution” cause of action in its legislation and recent jurisprudence, it may

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not be too late to address the concerns raised by section 22 through a legislative amendment. However, decisive action is required to have this “foreign object” removed from the Trade-marks Act, and to restore properly construed doctrines of “likelihood of confusion” and “trademark use” as central pillars of trademark liability in Canada, so as to forge a fairer balance between private rights and the public interest. It is indeed “time for the pendulum to swing back,”210 as we begin to finally realize the dangers of the ambiguously amorphous “depreciation of goodwill” action in section 22 of Canada’s Trade-marks Act.

210. Assaf, supra note 13, at 82.