May 3, 2022
In Milano Pizza Ltd v 6034799 Canada Inc, 2022 FC 425, the Federal Court (the “Court”) dismissed a case of trademark infringement involving the plaintiff, Milano Pizza Ltd., and a breakaway pizzeria.
The Court held that the plaintiff had failed to demonstrate sufficient controlled licensing of the trademark. The Court also granted the defendant’s counterclaim for expungement of the design mark.
The Plaintiff/Defendant by Counterclaim, Milano Pizza Ltd. is an Ottawa-based company that licenses independent pizzeria owner-operators. The Milano Design Mark, the company’s logo, was registered in the Plaintiff's name under registration number TMA571,144, dated November 22, 2002 for "take out restaurant services, with delivery" based on use in Canada.
The Defendant/Plaintiff by Counterclaim, 6034799 Canada Inc., was the owner of a Milano Pizzeria location on Baxter Road in Ottawa. In 2016, following disputes surrounding suppliers and use of particular pizza boxes, the Plaintiff removed the Defendant’s location from its website and online ordering system, which in turn caused the Defendant to launch a new website to restore online ordering and begin operating under a new logo in order to continue operations. These events culminated with the Plaintiff launching the within action in early 2017.
The Plaintiff alleged trademark infringement, passing off, and depreciation of goodwill, while the Defendant counterclaimed for expungement of the Milano Design Mark’s registration by reason of non-distinctiveness, abandonment, and non-entitlement. In addition, the Defendant sought redress in its counterclaim for false or misleading statements allegedly made by the Plaintiff tending to discredit the Defendant’s business, goods or services, passing off, as well as a declaration that it had established Milano Baxter as a trademark.
The Court’s Decision
A. Is the Milano Design Mark’s Registration Invalid?
The Court first examined whether the Milano Design registration was invalid on the basis of non-distinctiveness, abandonment and non-entitlement.
The Court held that the Defendant had met its onus of establishing, on a balance of probabilities, that the Milano Design Mark is not distinctive and, hence, the Milano Design Registration is invalid under s. 18(1)(b) of the Trademarks Act .
The Court based this conclusion on the evident lack of control exercised by the Plaintiff, its “hands off approach” in the licenses and the fact the Plaintiff was not involved formally in the sale of the Defendant’s Milano Pizzeria location from the Khorrami brothers to the Defendant or in the sale of other Milano Pizzeria locations. The Court concluded that the insufficient control exercised by the Plaintiff over the character or quality of the services, including the finished food products, notwithstanding oral or written licence agreements, rendered the Milano Design Mark non-distinctive, and hence, the Milano Design Registration invalid.
The Court also held that the lengthy coexistence of Pizzeria Milano, in Masson, QC, undermined the distinctiveness the Plaintiff might have enjoyed in the Milano Design Mark, and the Milano Word Marks, were they validly licensed.
On the issue of invalidly on the ground of abandonment, the Court noted that there are two requirements to show abandonment – first, that the trademark no longer is in use in Canada, and second, that the owner intended to abandon the trademark: Diageo Canada Inc. v Heaven Hill Distilleries, Inc., 2017 FC 571 at para 43. While the Plaintiff had not used the Milano Design Mark for “take out restaurant services, with delivery” for many years, it had used the trademark in association with private label pizza sauce. As a result, the Court held that the two requirements for establishing abandonment were not met.
In view of the Court’s finding of invalidity for lack of distinctiveness, the Court held that the question of whether the Plaintiff was entitled to secure the registration was no longer relevant.
B. The Defendant’s counterclaims: Did the Plaintiff make false or misleading statements about the Defendant’s products or otherwise attempt to pass off their product as its own?
With respect to the Defendant’s claim pursuant to section 7(a) of the Trademarks Act, the Defendant had to show that: (1) the Plaintiff had made a false and misleading statement, (2) tending to discredit the business, wares or services of the Defendant, and (3) the Defendant had suffered damages as a result: S. & S. Industries Inc. v Rowell, 1966 CanLII 53 (SCC),  SCR 419 at 424. The Court dismissed this claim, finding that the Defendant failed to show that the Plaintiff had made any false or misleading statement at all, as the email evidence provided by the Defendant purporting to show the Plaintiff’s false or misleading statements actually contained purely factual statements.
With respect to the Defendant’s claims under s. 7(c) of the Trademarks Act, the Court found that these claims also could not succeed. While the Defendant argued that they had an excellent reputation among their longstanding customers, the Court found that there was no direct evidence that the public had identified the Defendant’s store’s get-up with their business.
C. Has the Defendant used the trademark “Milano Baxter” and acquired any reputation or goodwill in this mark?
Finally, the Court found that there was insufficient evidence to establish that the Defendant had used “Milano Baxter” as a trademark and, therefore, found that the Defendant had not acquired either reputation or goodwill in this asserted trademark.
The Defendant had put forward general ledger entries and screenshots of its website in support of its claim. The Court examined this evidence and found that there was no use of “Milano Baxter” per se. For example, the general ledgers identified the Corporate Defendant as “6034799 Canada Inc. (Milano Pizzeria – Baxter)”. In the Court’s view, these references to “Baxter” were meant to identify that particular Milano Pizzeria store. Accordingly, there was not enough evidence to suggest that the Defendant had used “Milano Baxter” as a trademark.
Authors: Bukola Adelusi and Mark Leonard