Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2017 BCCA 41

AREAS OF LAW:  Intellectual property; Internet Law; Trade-marks Act; Passing off; Goodwill

~It is lawful to use a competitor’s name as a keyword in Internet advertising, provided the resulting advertisement does not use a confusingly similar trademark, including in the domain name displayed in the advertisement. The test requires measuring the likelihood of confusion when the consumer first encounters the trademark in the search results, irrespective of whether the website clears up any confusion once they arrive at it~

BACKGROUND:

The Appellant, Vancouver Community College, sought declarations, a permanent injunction and damages for passing off and trade-mark infringement by the Respondent, Vancouver Career College (Burnaby) Inc. The Appellant registered “VCC” in 1999 and “Vancouver Community College” in 2005 as official marks under the Trade-marks Act. The Appellant’s claim against the Respondent alleged passing off with respect to “VCC” and a breach of the official marks in respect to bidding on both “VCC” and “Vancouver Community College” as keywords to direct searches toward its website, VCCollege.ca. A bid on a keyword will make it more likely that the bidder’s advertisement with its domain name, linking to its website, will appear on the first search results page. Three components are required to make out a claim of passing off. The party alleging passing off must demonstrate reputation or goodwill related to the trade name. There must also be a misrepresentation leading the public to believe there is a business association or connection between the parties, and damage or potential damage flowing to the plaintiff as a result of any misrepresentation. It was undisputed that “VCC” was the keyword that generated the most visits to the Respondent’s site, and the Respondent’s advertisements appeared in over 97% of searches for “VCC”. However, the trial judge found that the Appellant did not have goodwill in the acronym. He found that between 1990 and 2013 the Appellant largely abandoned the acronym. The judge also found that proof of goodwill required proof that the product had acquired a “secondary meaning” or distinctiveness. The judge went on to find that the Appellant had not established the component of confusion on the part of the public. He found that the first impression would be formed after the searcher clicked on a search result and arrived at the Respondent’s own website. Furthermore, a prospective student would have the opportunity to avoid the effects of any confusion because of the many steps required before actually enrolling. Independent of the common law passing off claim, the Appellant alleged that the Respondent was in breach of ss. 9 and 11 of the Trade-marks Act by its business practices. The judge dismissed this claim on the basis that the Respondent had used “VCC” before registration of the official marks by the Appellant. As a prior user, it was protected in its use of the mark.

APPELLATE DECISION:

The appeal was allowed. The Court of Appeal found that the trial judge erred in principle in holding that a preponderance of the public must associate the acronym with the Appellant for goodwill to be established. It was also not necessary for the acronym to have acquired a “secondary meaning”. The secondary meaning component is only an aid to considering the attachment of the trade name to the plaintiff in cases of inherently unspecific language where the primary meaning does not itself point to a party. Instead, the question to be answered here was whether the acronym “VCC” carried sufficient distinctiveness in its primary sense to be recognized as designating the Appellant and its services. The Court further concluded that the judge erred in finding that the Appellant had largely abandoned “VCC” between 1990 and 2013. The trial record contained many examples of the Appellant using the acronym during this time. Significantly, the Appellant used the domain name “vcc.bc.ca” from 1998 and from 2002 used “vcc.ca”. Even were this not the case, there is nothing in the law of passing off that requires the plaintiff to establish its continuous and unvarying use of the indicia. The record also contained numerous examples of others using the acronym, from media reports to the naming of a SkyTrain station near the campus as “VCC/Grant Station”. The trial judge erred in fact in misstating the scope of the evidence and in failing to relate a significant body of evidence to the issue of goodwill. The Court of Appeal found that any evidence of a student’s opportunity to be “set straight” regarding the colleges’ identities is irrelevant, because such opportunity occurs after the relevant first impression. There is nothing in the domain name “VCCollege.ca” that distinguishes the Respondent from the Appellant. There is nothing that disclaims affiliation with the Appellant. Confusion is fully established by proof that the Respondent’s domain name is equally descriptive of the Appellant and contains its acronym. The interference with the Appellant’s goodwill was sufficient to establish damage. The trial judge did not consider several issues required to establish whether impugned behaviour violates the Trade-mark Act protections. Certain evidence going to such a determination was also missing. Accordingly, the order dismissing the claim for breach of official marks was set aside and remitted to the trial court for fresh determination.

Counsel Comments: Christopher Wilson, Counsel for the Appellant, Norton Rose Fulbright Canada LLP / S.E.N.C.R.L., s.r.l.

This decision addresses and in large part resolves a number of areas of internet law in Canada, as described below.

Confusion arises on first impression—even online

Most importantly, the court found that consumer confusion must be assessed when a consumer first encounters a trademark online, whether in a domain name or advertisement. The court overturned the trial judge’s finding that the “first impression” cannot arise on a Google search until the searcher has visited the advertiser’s website. The court also disagreed with an earlier Federal Court decision that touched on this issue in the context of metatags: see Red Label Vacations Inc. v 411 Travel Buys Limited, 2015 FC 18 at para. 115, aff’d 2015 FCA 290.

Here, the defendant’s advertisements using the domain name VCCollege.ca, displayed by search engines alongside search results for VCC, were found to create confusion and amount to passing off.

This finding requires that advertisers will need to pay the same attention in preparing online advertisements—including sponsored links—as other advertising content, to ensure that such advertising does not create a likelihood of confusion.

Domain names can create confusion

“The Court of Appeal also reconciled two existing lines of authority regarding domain names. The court confirmed that the use of a trademark in a domain name is unlawful unless a portion of the domain allows consumers to distinguish between the owner of the trademark and the owner of the domain name, without reference to the underlying website.

By doing so, the court reconciled three earlier decisions. The first two, BCAA v Office and Professional Employees’ Int. Union, 2001 BCSC 156, addressing “bcaaonstrike.com,” and Insurance Corporation of British Columbia v Stainton Ventures Ltd., 2014 BCCA 296, addressing “icbcadvice.com,” involved passing off claims that were both dismissed. In those cases the additional domain suffix—“onstrike” and “advice” respectively—permitted consumers to distinguish those websites from the websites of the owners of the BCAA and ICBC marks. Moreover, the CBC decision suggested that users must visit an underlying website before confusion can arise.

The third decision, Law Society of B.C. v Canada Domain Name Exchange Corp., 2005 BCCA 535, involved a finding that confusion arose from the use of “lawsocietyofbc.ca” and “lsbc.org, even though the domain names led to an adult website clearly not affiliated with the law society.

Applying this law to the respondent’s conduct, the court concluded that the addition of “ollege” in VCCollege.ca did not disclaim affiliation with the trademark holder, and was insufficient to avoid the likelihood of confusion. The court noted that as a suffix it is “equally reminiscent of the appellant as the respondent.”

Keyword advertising

With respect to bidding on a competitor’s trademark in keyword advertising, the court has brought Canadian law closer to the current state of UK, European and US jurisprudence. The trend internationally is that bidding on a keyword “would not in and of itself be sufficient to establish infringement because … it must also be shown that the advertisements did not enable the average consumer to ascertain whether the goods or services referred to originated from … [the trademark owner] or from [the advertiser]”: see lnterflora v Marks and Spencer plc, [2014] EWCA Civ. 1403 at paras. 69-70 and 192; Google France SARL v Louis Vuitton Malletier SA [2010] ECR I-0000; and Network Automation, Inc. v Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011) at p. 8.

Though the BC Court of Appeal’s reasons do not address the international jurisprudence directly, the court concluded similarly that merely bidding on a keyword, by itself, is not delivery of a message, and that, “The critical factor in the confusion component is the message communicated by the defendant.”: para. 72. The court’s judgment finds that bidding on keywords, combined with a confusing advertising message, can amount to passing off. In the result, the court granted a permanent injunction restraining the defendant from use of “VCC” and “VCCollege” in respect of its Internet presence, with damages and costs to be determined by the trial court.

Official marks

The court also reversed the trial judgment dismissing the claims relating to the defendant’s adoption and use of the plaintiff’s official marks, VCC and Vancouver Community College, as keywords. The court held that there were insufficient facts for it to make determinations of law in this respect, and remitted the issues to the trial court, leaving open the possibility that bidding on an official mark amounts to “use as a trademark or otherwise,” in violation of the official marks regime of the Trade-marks Act.”