July 6, 2021
In Subway IP LLC v. Budway, Cannabis & Wellness Store, 2021 FC 583, the Federal Court granted Subway IP LLC’s (“Subway”) application to enjoin Budway, Cannabis & Wellness Store and William Matovu (collectively, the “Respondents”) from using the “BUDWAY” trademark in association with a “cannabis & wellness store”.
Subway’s application raised a number of issues, including infringement, passing off, and depreciation of goodwill.
None of the Respondents responded to the application. Despite a lack of response, Subway was required to establish its entitlement to the order sought on a balance of probabilities.
The Federal Court’s Decision:
The Court held that the use of the BUDWAY trademark constituted a violation of Subway’s trademark rights. In addition to using the BUDWAY trademark, Budway’s Instagram page posted a video using what Justice McHaffie described as an image "of a 'mascot' in the form of a submarine sandwich filled with cannabis leaves, with what are apparently bloodshot and half-opened eyes. This mascot appears in the video clip, smoking what is presumably a joint.”
The Court noted that a trademark registration grants the owner the exclusive right to use the mark throughout Canada in respect of the goods and services in the registration. This right is infringed when another party conducts business under a confusing trademark. The test for confusion, as outlined in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée, 2006 SCC 23, is “first impression in the mind of a casual consumer somewhat in a hurry” with an imperfect recollection of the registered mark and without scrutinizing the two (Veuve Clicquot, paras 18-20). The main factors the Court considered were the resemblance and the considerable length of use and public awareness surrounding Subway’s trademarks.
Another factor in determining whether a trademark violation occurred is the nature of the goods, services, and business of the parties. In Toys “R” Us (Canada) Ltd v. Herbs “R” Us Wellness Society (Herbs “R” Us), 2020 FC 682, Justice McHaffie concluded that the cannabis products offered by Herbs “R” Us and the toys offered by Toys “R” Us were fundamentally dissimilar and unlikely to cause confusion. He distinguished Herbs “R” Us on the basis that the goods at issue between Budway and Subway were much more similar. Both offered baked goods, and while Budway’s included cannabis, Subway’s registration would include cookies containing cannabis.
Based on the similarity of the trademarks and the overlap of the goods, the Court held that there was a likelihood of confusion.
The Court then turned to the issue of passing off. The Court found that Subway’s trademarks had goodwill, and that there was a likelihood of confusion between the trademarks. Finally, Subway did not argue to have lost sales by this infringement, but rather that they lost control over the use and commercial impact of their marks. This has been recognized as an actual damage sufficient to meet the requirement for the third part of the passing off test, and led to the Court’s conclusion that Subway had established passing off.
The Court was also satisfied that Subway had shown a likely depreciation of goodwill. The damage to Subway’s goodwill was increased by the nature of Budway’s products, compared to Subway’s “healthy and active” lifestyle promotion.
Since there was doubt as to whether Budway was a properly established corporation (due in large part to the lack of response by the Respondents), the person identified as the owner and directing mind of Budway, William Matovu, was also included in the order for damages. The Court ordered delivery up or destruction of all goods, packaging, labels, and advertising materials bearing the Budway trademark in any form, as well as damages of $15,000 and costs of $25,000.
Author: Max Borins