In Canada parties should understand that rights in marks can arise through use of the mark in commerce even without registration. This complicates clearance of marks and is a reason for doing clearance searches to identify any prior users before the adoption of a mark.
What happens when a user of a mark for one category of goods begins to use that mark in another category of goods – in which a second party has a registered mark. Can those uses survive, continue and co-exist when such conduct occurs over a long period of time?
Canada’s Federal Court addressed this issue in H-D U.S.A., LLC v. Berrada 2014 FC 207 where the Court faced a claim by the Harley Davidson group (“HD”) seeking declaratory relief as to their right in their SCREAMIN’ EAGLE trademark. The defendants counterclaimed claiming that HD were selling and advertising clothing and accessories with SCREAMIN’ EAGLE in an effort to diminish, destroy or acquire the goodwill of the defendants who claimed to have been using the trademark SCREAMING EAGLE for over 20 years.
In its thoughtful judgment the Court addressed the considerable evidence of both parties and provided a useful and thorough assessment of Canada’s developing depreciation law. The facts and case may be helpful for parties to consider as they decide how to protect their trademarks in Canada.
HD is the owner of the well known HARLEY-DAVIDSON trademarks and HD is in the business of distributing and selling motorcycles, motorcycle parts and accessories as well as clothing and other wares and has been manufacturing and selling motorcycles in Canada since 1917. Among the many marks owned are HD’s well known bar and shield designs and also SCREAMIN’ EAGLE registered in relation to motorcycle parts and accessories with use as far back as 1983. HD is the registered owner of the SCREAMIN’ EAGLE trademark for clothing in the United States and other countries but does not have such a registration in Canada.
The evidence showed that Canadians were aware of and had purchased HD SCREAMIN’ EAGLE. Of importance, the evidence was that the HD SCREAMIN’ EAGLE only appeared on clothing together with the HD bar and shield design.
The defendants own marks for SCREAMIN’ EAGLE and SCREAMING EAGLE for clothing and accessories and a registration for operation of retail stores. The two registrations for clothing date to the early 1990s, claiming use since 1989, and were expunged for failure to renew the registrations. The defendants continued to use the mark SCREAMING EAGLE in association with clothing and accessories.
The defendants had been selling SCREAMING EAGLE clothing in Canada since about 1988 and they operate two SCREAMING EAGLE retail stores in Quebec. The defendants had been aware of the existence of HD and the HARLEY-DAVIDSON -mark since at least the early 80s. After opening their Montreal store and being made aware of HD’s SCREAMIN’ EAGLE trade-mark for motorcycle parts, the Defendants purchased clothing described as “H.D. t-shirt SCREAM EAGLE”, and continued to sell HARLEY-DAVIDSON brand merchandise purchased from HD licensees.
With both parties in the marketplace for a considerable period the Federal Court had to consider HD’s claim for a declaration that it was not infringing and the defendant’ claims of infringement of its marks.
The Court conducted an extensive assessment of the claim of depreciation of good will under the guidance provided by the Supreme Court in Veuve Clicquot Ponsardin v Boutiques Clicquot Ltée,  SCJ No 22. (1) Use of the Registered mark – The Court found that HD was using its own marks and not the mark of the defendant.
(2) Evidence of Significant Goodwill – The Court assessed if the defendant’s mark was sufficiently well known to have significant good will attached to it. This involved an assessment of whether the defendant’s goods are known in the market, acquired a reputation in said market by reason of a distinguishing feature and if that such goodwill or reputation was created “through the exclusive association of the name, mark or other indicia relied upon with its business, wares or services”. The Court assessed the volume of the defendant’s sales, market penetration, geographic reach, advertising, publicity and brand recognition as well as the channels of trade and relevant consumers. The Court found that HD has been using SCREAMIN’ EAGLE in association with high performance parts and accessories for its motorcycles since 1983 and therefore HD’s use predated that of the defendants. The Court also found that in terms of brand recognition the evidence was clear that HD is one of the better known brands worldwide.
(3) Effect on the Goodwill – The Court found that the relevant universe of the defendant’s consumers is made up of HD motorcycle owners/riders. This finding was of critical importance to the outcome of the case and the disposition of other passing off claims. In order to succeed in a depreciation claim the defendants had to satisfy a “linkage test”, namely, to establish a link in the mind of the average HD motorcyclist such that “on seeing the SCREAMIN’ EAGLE mark used by HD the consumer must think, even subtly or subliminally,” that it is the defendants’ mark. The Court found that that the mental association of the reasonable buyer of Harley-Davidson motorcycle clothing is instead made with the senior mark, HARLEY-DAVIDSON, rather than with the defendants.
(4) Effect to Cause Damage – The Court considered if the effect was to depreciate the good will of the defendant’s mark. There was no evidence of lost sales or damage to the defendant’s goodwill. The defendants failed on all 4 elements of the depreciation claim.
In respect of a passing off claim the Court examined the elements of the action and found that the defendants failed to establish that they had a reputation or goodwill with the average HD motorcycle rider, or owner in Canada – “that the average HD motorcycle owner knows of their existence and more importantly of the existence of their trademark and associate it with the defendants and no one else”.
The defendants failed to prove that there was a deception of the customers, namely that the “average Canadian HD motorcycle rider or owner must have been led to believe by HD that they were purchasing the defendants’ clothing at HARLEY-DAVIDSON dealerships”. The defendants also failed to prove that that” HD’s SCREAMIN’ EAGLE clothing and collateral items come from the defendants and from no other source”. After applying the confusion criteria under Canadian law the Court considered factors such as the existence of other users of SCREAMING EAGLE clothing in the market but found “For all HARLEY-DAVIDSON riders and customers SCREAMIN’ EAGLE is only associated with HARLEY-DAVIDSON and no other brand”.
The Court could not find that a linkage to the defendants will be made by a HARLEY-DAVIDSON owner or rider since the average HD customer is quite familiar with HD merchandise, all HARLEY-DAVIDSON merchandise bears the HD bar and shield mark and HD SCREAMIN’ EAGLE merchandise is packaged distinctively. As a result the passing off claim failed.
The defendant had also sued for use of the registered mark and since the registrations had lapsed such claims failed without the existence of a registration. Similarly the Court could not find HD used a mark identical to the defendant’s mark before the registration had been expunged.
The Court also considered claims of bad faith alleged against each party and its effect of possible relief. The Court could not conclude HD could be accused of bad faith conduct. With respect to the defendants, however, their behaviour “bordered in certain circumstances on bad faith inasmuch as defendants have willingly tried to associate themselves with HD and trade on that name”. As a result the defendants were barred from equitable relief.
The Court concluded that the defendants “failed to establish that HD’s SCREAMIN’ EAGLE clothing caused confusion or would depreciate their goodwill” As a result the Court found that “HD is entitled to distribute, advertise, offer for sale and sell collateral items, including clothing, in connection with its trade-mark SCREAMIN’ EAGLE in association with its registered trade-mark HARLEY-DAVIDSON, throughout Canada but exclusively at HARLEY-DAVIDSON dealerships, as this will not infringe any valid rights of Defendants”.
The decision was a major victory for Harley-Davidson but there are lessons in the case for other brand owners.
The decision is important for owners of a sub brands which appear may, in some circumstances, avoid a likelihood of confusion if consistently being associated with a strong house brand.
Foreign trademark owners frustrated with the limited ability to protect famous marks in Canada may wish to review carefully the detailed assessment of the depreciation of goodwill claim.
Legal scholars may also wish to consider the decision in light of Canada’s proposed Bill C-31 which would remove “use” as a criterion for Trade-mark registration.
The parties could have avoided the costs of this dispute had they sought to address the issues arising from the co-existence early.
Another lesson for a brand owner is that when the business begins to deviate from the registered use and begin to add other uses, it is time to make application to register those additional uses.