Famous Brand Names and the Curbing of Trademark Sprawl: Mattel and Veuve Clicquot

In light of The Court’s recent encounter with trademark laws, this seems an apt time to review the Supreme Court of Canada’s (“SCC”) update on trademark laws in this country as found in two recent cases, Mattel, Inc v 3894207 Canada Inc, 2006 SCC 22 [Mattel], and Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23 [Veuve Clicquot].

Both of these cases dealt with a famous brand name contesting the use of a similar name by a lesser-known company to sell wares or services that were decidedly dissimilar. In Mattel, the SCC upheld the registration by Barbie’s, a restaurant chain, of its trademark in association with food services despite opposition by the makers of Barbie dolls. In Veuve Clicquot, the upscale champagne maker failed in its bid to expunge the “Cliquot” trademark registered by a mid-priced women’s clothing store.

In this world of ubiquitous advertising and cross-market promotions, these two decisions momentarily stem the tide of trademark sprawl. The SCC refused, under s. 20 of the Trade-marks Act, RSC 1985, c T-13, to extend protection for the two famous trademarks into areas beyond their apparent reach. The SCC held that neither the fame of a particular brand name nor the dissimilarity in product lines is controlling, but both are factors to be considered in determining whether the existence of both trademarks in the marketplace creates the likelihood of confusion amongst consumers.

In both cases, the Supreme Court judges unanimously concluded that a casual, hurried consumer would not confuse the lesser-known brand as having some connection with the famous brand name. The gap between the two types of businesses was much too wide to leap, even for such a well-known brand as the Barbie doll.

The Mattel Case

In Mattel, the SCC provided a comment on the rationale for trademark protection and how it differs from patents and copyright:

Trade-marks are something of an anomaly in intellectual property law. Unlike the patent owner or the copyright owner, the owner of a trade-mark is not required to provide the public with some novel benefit in exchange for the monopoly … The trade-mark owner … may simply have used a common name as its “mark” to differentiate its wares from those of its competitors. Its claim to monopoly rests not on conferring a benefit on the public in the sense of patents or copyrights but on serving an important public interest in assuring consumers that they are buying from the source from whom they think they are buying and receiving the quality which they associate with that particular trade-mark.

The focus of trademark law is consumer protection. The trademark owner, by appropriating from the common stock of words and images in the public domain, is entitled to protection only to the extent necessary to protect the public from confusion with other wares or services but no further. Otherwise, the public would be deprived of its rightful use of the commons without reason.

This is not to say there is no rights-based rationale underlying trademark law. The test for confusion, while aimed at consumer protection, also addresses concerns about unjust enrichment by less established businesses leeching off of the goodwill created by a well-known company through its own efforts and expenses. If a business is prohibited from using a trademark because it creates confusion amongst consumers, this would also stop it from gaining from the goodwill caused by that confusion. If no actual confusion has resulted, then the business has not gained from the goodwill accrued by another, whether or not it attempted to do.

Interestingly, the SCC in obiter raised suspicions about the motives of Barbie’s Restaurant in its use of the Barbie name, referring to an abandoned trademark application by the restaurant which depicted a Barbie-like waitress with a “B” monogram on her top. However, the SCC concluded that mens rea is not a component of the test for confusion.

A further rights-based remedy available for trademark owners is found in s. 22 of the Trade-marks Act, which prohibits the use of another’s trademark in a way that will likely depreciate the goodwill attached to it. There is no requirement that such use causes consumer confusion. Thus, this provision is aimed directly at protecting the trademark owner’s brand equity as a proprietary right, not at consumer protection at large.

The Approach in Veuve Clicquot

In Veuve Clicquot, the champagne maker argued that the association of its name with a mid-priced women’s clothing store would dull the lustre of its reputation as a high-class champagne maker: “The association of a luxury mark with products of lesser quality than those traditionally associated with this sector has the effect of undermining the reputation and credibility of the luxury mark.” To me, this claim evokes the image of a snooty rich woman in a fur coat bemoaning the presence of a poor person in rags standing beside her, worried that it would affect her reputation within high society. Not surprisingly, the SCC laughed off this claim, citing a lack of evidence.

While the analyses for depreciation under s. 22 and infringement under s. 20 are conceptually distinct, it does not follow that the threshold for s. 22 is necessarily lower. Instead of proving the likelihood of confusion, the SCC held that s. 22 required concrete evidence to show a likelihood of depreciation in goodwill, a similar if not more onerous burden. Simply stating, as Veuve Clicquot did, that depreciation was the logical result just would not cut it. However, it is difficult to see what type of evidence can be presented to meet this burden, particularly when psychology shows us that associations of this nature often take place within the subconscious (as with classical conditioning).

Further, the SCC, despite its claim to the contrary, seems to import some of the elements of the confusion test: the third stage of its test for s. 22 is that consumers are likely to make a link or association between the two trademarks. This test assumes that a conscious and immediate link between the two trademarks by consumers upon seeing a violating trademark is necessary for it to affect the goodwill attached to the other.

As the SCC admitted, jurisprudence on the application of s. 22 is quite sparse, likely due to some of the difficulties in establishing proof discussed above. However, given the increasing importance of goodwill and brand equity to businesses in today’s economy, this is probably an area of trademark law that will receive greater attention in the future, as famous brands attempt to extend its reach as far as possible out into the wilderness of the commons.