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Arterra Wines Canada v. Diageo North America


April 23, 2020

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In Arterra Wines Canada, Inc. v. Diageo North America, Inc., 2020 FC 508 the Federal Court of Canada (the “Court”) allowed an appeal of a decision of the Trademarks Opposition Board (“TMOB”) and rejected Diageo’s trademark applications for THE NAKED TURTLE and THE NAKED TURTLE Design. The Court concluded that THE NAKED TURTLE marks would likely lead to confusion with Arterra’s well known NAKED GRAPE trademark.


In reaching its decision, the Federal Court was required to revisit and adjust the applicable standard of review in appeals of the TMOB in light of the Supreme Court of Canada’s (the “SCC”) decision in Vavilov,[1] which was released between the time of argument and the date of the Federal Court’s decision in Arterra. Following Vavilov, the Court held that, in cases where no material new evidence is filed, a “reasonableness” standard is no longer applicable to appeals of TMOB decisions and instead an appellate standard of review ought to be applied. Finding that the evidence filed at bar was not sufficiently material to attract another standard, the Court reviewed the underlying TMOB decision on an appellate standard and ultimately concluded that decision contained palpable and overriding errors.


Daniel Cohen of the Goodmans IP Team successfully represented Arterra before the Federal Court in this appeal.


The TMOB Decision


The hearing before the TMOB involved five oppositions by Arterra to Diageo trademark applications. Arterra was successful in three of those oppositions but not in two others. The two unsuccessful oppositions (which were the subject of the appeal in Arterra) related to Diageo’s application to register:

  1. the word mark THE NAKED TURTLE based on the proposed use of the mark in Canada in association with “distilled spirits, namely rum and rum-flavoured beverages (vodka and beer excluded)”; and

  2. the design mark THE NAKED TURTLE Design based on the proposed use of the mark in Canada in association with “alcoholic beverages, namely rum and rum flavoured beverages”.

Arterra opposed these applications on the basis that the applied-for marks would likely be confusing with its registered trademarks NAKED GRAPE, NAKED GRAPE & Grape Design and NAKED GRAPE FIZZ.


The TMOB found in both circumstances that there was no reasonable likelihood of confusion between the marks.


The TMOB also held that NAKED GRAPE and THE NAKED TURTLE were inherently distinctive. Further, the TMOB held that, based on the availability of the NAKED GRAPE line of wines and its annual Canadian sales, the mark is quite well known, if not famous, in Canada for wine.


In considering the degree of resemblance between the marks, the TMOB found that the most striking aspect of NAKED GRAPE is the word “NAKED”, while THE NAKED TURTLE mark is likely to be viewed as a unitary phrase. The “NAKED” in NAKED GRAPE “cheekily or playfully conveyed nakedness” but it conveyed a turtle without clothes in THE NAKED TURTLE. When considered as a whole, the TMOB found the marks were “more different than alike” as a matter of first impression.


In finding that THE NAKED TURTLE Design mark was more different than alike the NAKED GRAPE trademark, the TMOB found that the words “NAKED TURTLE” were the most striking aspect, a turtle in the middle added significant distinctiveness and the two marks had very different visual impacts. On the whole, the TMOB held that the marks were “more different than alike” as a matter of first impression.


These findings of the TMOB differed somewhat from its findings in respect of the three other oppositions, heard at the same time, where Arterra was successful and wherein the TMOB concluded that the word “naked” used in the phrases “Make it Naked” and “Don’t Worry. Drink Naked.” was sufficient to create a likelihood of confusion.


Standard of Review for Trademarks Opposition Board Decisions After Vavilov


In determining the standard of review to be applied to the TMOB decision, the Federal Court considered the newly released SCC decision in Vavilov. The Court recognized that Vavilov indicates that, where there is a statutory right of appeal (as is present in section 56(1) of the Trademarks Act), an appellate standard of review should be applied; that is, the correctness standard of review will apply for questions of law and the palpable and overriding error standard of review will apply for questions of fact and mixed fact and law.


However, the Court also recognized that Vavilov is silent about the implications of an appeal mechanism that contemplates the filing of new evidence, as is permitted pursuant to subsection 56(5) of the Trademarks Act. Pre-Vavilov, where material new evidence was filed, TMOB decisions would be reviewed de novo on the issues to which the new evidence applied.


Ultimately, the Court concluded that, absent new material evidence, an appellate standard of review would apply, replacing the former reasonableness standard. However, the Court also found that Vavilov does not displace the jurisprudence applicable to the filing of new material evidence. The Court held that this jurisprudence continues to permit the reviewing Court to conduct a de novo analysis in respect of the issues materially impacted by new evidence, according no deference to the conclusions of the underlying decision-maker. This application is consistent with an earlier trademark appeal decision to consider Vavilov.[2]


After a lengthy consideration of the new evidence, filed by both parties in the appeal, the Court concluded it was not sufficiently material and the appeal standard of review should be applied.


Palpable and Overriding Errors


The Court went on to apply the appellate standard of review. The Court focussed on how the TMOB applied the legal test in question: whether Diageo proved on a balance of probabilities that there is no reasonable likelihood of confusion between the trademarks.


The Court found the TMOB decision under appeal made several palpable errors, which cumulatively were overriding:

  1. concluding that the casual consumer would view THE NAKED TURTLE trademark as a unitary phrase but not NAKED GRAPE;

  2. finding the trademarks “more different than alike” especially in light of its conclusions on the trademarks Arterra successfully opposed below;

  3. dissecting Arterra’s trademark and discounting the word “GRAPE” in NAKED GRAPE despite finding NAKED GRAPE is well known in Canada for wine;

  4. assigning different ideas to the word “NAKED” for each mark; and

  5. failing to consider that the rights Arterra already had and those that would be granted to Diageo if its applications were allowed, would permit both parties to present the marks in a more confusing manner in the future.

As a result of these errors, the Court overturned the TMOB decision. Finding that it had before it a complete record upon which to make a redetermination, the Federal Court decided the matter, rather than sending it back to the TMOB. The Court concluded that there was a likelihood of confusion between Arterra’s marks and Diageo’s marks, including because of the degree of resemblance by reason of the “shared” component “NAKED”.


The Court thus allowed Arterra’s appeal and rejected the registration of Diageo’s THE NAKED TURTLE and THE NAKED TURTLE Design marks.

Footnotes:

[1] Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65

[2] Pentastar Transport Ltd. v. FCA US LLC, 2020 FC 367.

Authors: Jaclyn Tilak and Jon Wall

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