The Supreme Court of Canada recently explained many of the basic principles of trade-mark protection and enforcement in its decision in Masterpiece Inc. v. Alavida Lifestyles Inc. In this decision, the Supreme Court also set out much needed clarification on several significant aspects of the process of determining the likelihood of confusion between trade-marks. This case is important to all businesses and individuals who use trade-marks and whose trade-mark use is a significant part of their corporate identity.

The dispute before the Supreme Court of Canada was whether there was any likelihood of confusion between Alavida’s registered trade-mark “MASTERPIECE LIVING” and Masterpiece’s previously-existing unregistered trade-mark “MASTERPIECE ART OF LIVING”, both for the operation of retirement residences. In reversing all previous decisions, the Supreme Court concluded that Alavida’s registered trademark was to be cancelled on the basis of prior use of the unregistered trade-mark by Masterpiece. In arriving at this decision, the Supreme Court arrived at several key conclusions.

The geographic locations where trade-marks are actually used are irrelevant for the purposes of determining whether there is confusion between trade-marks.

The Supreme Court reaffirmed the test set out in the Trade-marks Act, specifically, that in regards to determining if there is confusion between two trade-marks, one must assess the impression created by the two trade-marks as if they were used in the same area. Since Canada’s trade-mark system is national in scope, the registered owner of a trade-mark has the exclusive right to use that trade-mark throughout Canada. Thus, in order for the trade-mark owner to have the exclusive right to the registered trade-mark throughout the country, there must not be a likelihood of confusion with another trade-mark anywhere in Canada.

The proper test for confusion between trade-marks, as they relate to luxury goods and services, is identical to the test for all other goods and services.

The proper test as it relates to luxury goods and services remains as one of first impression of the consumer when the consumer encounters the trade-marks in question. That test remains as what is left in the mind of a casual consumer somewhat in a hurry when they first see the trade-mark, while having only an imperfect recollection of the prior trade-mark they have has seen, and whether that consumer would be likely to be confused. Although consumers of luxury goods and services may educate themselves about the source of those goods and services, that by itself does not reduce the likelihood of confusion between trade-marks.

The use of experts in conducting a confusion analysis should be limited.

The Supreme Court held that when conducting a confusion analysis, judges should consider each trade-mark as a whole and focus on its most prevailing elements. Moreover, judges should use their own common sense to determine if a casual consumer having an imperfect recollection of one trade-mark would, as a matter of first impression, be likely to be confused upon encountering another trade-mark. Judges should only permit experts to testify if the evidence they will give is likely to be outside the experience and knowledge of the judge.

This decision reaffirms the importance of applying to register your trade-marks as soon as practicably possible; this is especially true for those outside and within Canada that have not yet started operating their businesses in Canada. In this instance, had Masterpiece actually applied to register its trade-mark prior to Alavida’s application date, Alavida would not have been able to register its trade-mark. Further, prior to using a new trade-mark and before you file an application to register a new trade-mark, it is vital that you carry out a detailed trade-mark availability search to avoid the risk that your proposed trade-mark is confusingly similar to an existing trade-mark. We can assist you with conducting and interpreting the relevant trade-mark searches and providing you with advice to avoid the inherent pitfalls with registering your trade-marks.