May 19, 2020
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In Biofert Manufacturing Inc. v. Agrisol Manufacturing Inc., 2020 FC 379, the Federal Court (the “Court”) granted judgment in favour of the Plaintiff, Biofert Manufacturing Inc., relating to various infringements of the Trademarks Act and the Copyright Act, and denied the Defendants’ counterclaim that the Plaintiff’s registered trademark be expunged.
Background
The Plaintiff, BioFert Manufacturing Inc. (the “Plaintiff”), an organic fertilizer manufacturer, brought an action for trademark and copyright infringement against Agrisol Manufacturing Inc. (“Agrisol”), BioFert NA Manufacturing Inc. (“BNA” and, together with Agrisol, the “Corporate Defendants”) and four individuals involved in those corporations (the “Individual Defendants”). The dispute arose after a predecessor company called BioFert Manufacturing Inc. (“Old BioFert”), went bankrupt, and in 2015 had its assets (including its intellectual property) sold by the trustee in bankruptcy to the Plaintiff. One of the directing minds of Old BioFert was part of a group that placed a bid for Old BioFert’s assets after it went bankrupt. When the group was unsuccessful, they incorporated two new fertilizer companies: Agrisol and BNA.
In this case, the Plaintiff’s position was that the 2015 purchase of assets from Old Biofert included:
the Canadian trademark, TMA 854,894 (the “894 Mark”), for the BioFert word;
copyright in the BioFert logo and the “About us” section on Old BioFert’s website;
the product trademarks;
the BioFert name; and
domain names and associated emails.
The Plaintiff argued that its trademark rights and copyright were infringed by the Defendants when the Individual Defendants incorporated BNA and began to use the BioFert name and trademarks in conjunction with their Agrisol business.
The Plaintiff pointed to the use of the BioFert.net domain name by the Defendants, along with statements made in marketing materials, which it alleged created confusion. Additionally, Agrisol employees: responded to customer emails using BioFert.net email addresses; used Old BioFert product trademarks; sent physical flyers to customers stating that the “employees of BioFert were launching Agrisol”; and attempted to use promotional material containing the BioFert logo, all of which required employees of the Plaintiff to take various actions to correct confusion in the marketplace.
Liability
Did the Defendants breach any of subsections 20(1), 7(b), 7(d) or 22(1) of the Trademark Act?
Subsection 20(1)
According to ss. 20(1) of the Trademarks Act, a mark is infringed by any person who “sells, distributes or advertises any goods or services in association with a confusing trademark or trade name.” To show a breach of subsection 20(1), the Plaintiff must provide evidence of a registered trademark and use of a confusing trademark by an infringing party without entitlement or authorization. The Plaintiff pointed to advertising by the Defendants using the BioFert name and logo in association with its products.
As opposed to arguing that they did not use a confusing trademark by holding themselves out as BNA and using the BioFert name, the Defendants took the position that the BioFert trademark is not valid. This argument was not accepted by the Court, as discussed further below.
Subsections 7(b) and (d)
Subsection 7(b) of the Trademarks Act codifies the tort of passing off, and requires that the Plaintiff show goodwill attached to a trademark or trade name, deception of the public due to a misrepresentation, and actual or potential damage to the plaintiff.
The Plaintiff argued that, by incorporating BNA, which had a confusingly similar name, and through holding themselves out as “the employees of BioFert”, the Defendants passed off the Plaintiff’s name and trademark as their own. The Plaintiff further alleged that the Defendants used the Plaintiff’s product trademarks, which could be found in the Defendants’ product catalogues, pamphlets, and photographs.
The Plaintiff also advanced a claim for breach of ss. 7(d) of the Trademark Act, claiming that the Defendants were “attempting to promote their goods and businesses by misleading the public that their goods were produced by the same company and employees as before – i.e. (Old Biofert).”
In response, the Defendants argued that there was, in fact, no goodwill and reputation left in the BioFert name, pointing to quality control issues, customer concerns, lawsuits, the bankruptcy, and other factors. Additionally, the Defendants argued that farmers are not loyal to any single company and all farmers shop around for a good price, and there was “no confusion in the market created by Agrisol or its employees” since the customers who were confused never purchased products from Agrisol.
Despite the Defendants’ arguments to the contrary, the Court found that there was goodwill in the BioFert name and logo because, among other things, the Plaintiff’s parent company saw value in the BioFert brand, competitors called BioFert a “solid competitor”, BioFert attended various trade shows yearly to build the brand, and there was demand for BioFert products from the receiver, even without offering much of a discount, as is usual in liquidation scenarios. The Court also found that the Defendants used product trademarks owned by the Plaintiff, which contributed to the confusion in the marketplace.
Subsection 22(1)
The Plaintiff also advanced a claim for breach of ss. 22(1) of the Trademarks Act, which states “[n]o person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.”
Section 22 requires that: the Plaintiff show a registered trademark used in connection with goods and services; that the trademark is sufficiently well known to have goodwill attached to it; and that the mark was used in a manner likely to have an effect on that goodwill, with a likely effect of depreciating the value of the goodwill.
The Plaintiff claimed that the Defendants eroded the prestige, strength and integrity of the BioFert trademark since the public now associated the mark with both BioFert and Agrisol, or just with Agrisol, pointing to the customer confusion that occurred. As stated above, the Court found that there was goodwill associated with the BioFert name and that the Defendants’ actions were likely to depreciate the value of goodwill, as customers would have associated the registered 894 mark with the business of both the Plaintiff and the Defendants.
Did the Defendants infringe the Plaintiff’s copyright contrary to sections 3 and 27 of the Copyright Act?
Subsection 3(1) of the Copyright Act defines copyright as “the sole right to produce or reproduce the work or any substantial part thereof in any material form whatever…” and includes the sole right “to authorize such acts.” Subsection 27(1) of the Copyright Act prevents any person from doing, without consent of the owner, anything that only the owner of the copyright has the right to do.
The Plaintiff plead that it owned the copyright in the BioFert logo and the "About Us" section of the BioFert.ca website and that the Defendants infringed both. The Plaintiff argued that the infringing BioFert logo was used by the Defendants, without the authorization of the owner, on the Defendant’s BioFert.net website and at an agricultural show on display materials by the defendants. Additionally, the “Profile” section of the Defendant’s BioFert.net website was nearly identical to the "About Us" section of the Plaintiff’s BioFert.ca website.
The Court found that both the BioFert logo and the "About Us" portion of the BioFert.ca website were the property of Old BioFert and were covered by the term “intellectual property” in the asset sale to the Plaintiff. As such, the Court held that the Defendants breached both sections 3 and 27 of the Copyright Act, as they were not authorized by the Plaintiff to use these works.
The Court found both Corporate Defendants jointly and severally liable for all trademark and copyright infringements, noting that two corporations can be jointly and severally liable for infringements where one corporation is controlling another. The Court also imposed personal liability on one of the four Individual Defendants, noting that the individual defendant engaged in “deliberate, wilful, and knowing pursuit of a course of conduct that was likely to constitute infringement or reflected an indifference to the risk of it.”
Counterclaim: should the 894 Mark be declared invalid?
The Court denied the Defendants’ counterclaim against the Plaintiff, which asserted that the 894 Mark “was either clearly descriptive or deceptively misdescriptive of the character or quality of the goods in association with which it was used, at the date of registration.”
The Court stated that, in order for a trademark to be expunged because it is clearly descriptive, there must be a descriptive meaning that is “readily discernible from the combination” and the “impression the whole trade mark has on the mind must be considered.”
The Plaintiff’s defence was that BioFert is simply a “coined” term with no English or French meaning, as “bio” has many different connotations. The Court found no convincing evidence that suggested that “Bio” and “Fert”, when placed together, are clearly descriptive of the fertilizers being offered for sale. Additionally, the Court stated that, for a registered mark to be deceptively misdescriptive, it must first be descriptive of something.
Damages & Remedies
The Plaintiff argued that the infringements caused a loss in sales, relying on sales by Old BioFert from 2007 until May 2015. The Plaintiff requested four forms of remedies: compensatory damages for infringement of the Trademarks Act; statutory damages under the Copyright Act; punitive and exemplary damages; and various forms of declaratory and injunctive relief.
The Court held that, in infringement cases where the damages are not proved by the evidence, the Court can either:
approve an arbitrary value being assigned to compensate the plaintiff, which is often the case in default judgments or where there is a lack of a full financial picture before the Court; or
attempt to perform a mathematical per-incident calculation, which is often done in counterfeit cases.
In this case, the Court chose to invoke the latter method, awarding the Plaintiffs $81,000 in compensatory damages.
Additionally, the Court awarded statutory damages for copyright infringement pursuant to paragraph 38.1(1)(a) of the Copyright Act in the amount of $1,000 (i.e., $500 for each of the two infringements). The Court’s award was on the low end of the $500 to $20,000 range of statutory damages, due to, among other factors, the short period of copyright infringement.
The Court did not find that the conduct of the Defendants met the high threshold for punitive damages requested by the Plaintiff, and held that the injunctive and declaratory relief sought by the Plaintiff was unnecessary given that the infringement had clearly ceased.
Authors: Sam Galway and Matt McDonald