Trademark and Passing Off within Amer Sports Canada Inc. v Adidas Canada Limited
On January 2, 2024, the British Columbia Supreme Court granted an interlocutory injunction for the plaintiff preventing the defendant from using a specific name on their retail store prior to the trial proceeding. The pending trial is between two corporations arguing trademark infringement. The plaintiff in this proceeding is Arc’teryx, a retail company that was founded in Vancouver in 1989. Arc’teryx is the owner of the Canadian trademark registration TMA954353 which allows them to use the Arc’teryx trademark with retail stores and online services in Canada.
Arc’teryx claimed that the defendant, adidas Canada violated their trademark protections when they opened a retail store in Kitsilano under TERREX in January 2023.[1] Arc’teryx stated that the TERREX retail store capitalized and depended on their company’s reputation and goodwill to attract misguided consumers.[2] Because of the harm Arc’teryx suffered, they applied for an interlocutory injunction preventing adidas Canada from using TERREX as the name of their retail stores.
In August 2022, adidas Canada signed a lease for a retail store in Kitsilano and officially opened their doors to the public on January 21, 2023, two blocks away from the Arc’teryx store location.[3] The storefront banner presented their logo (Performance Bars) and had TERREX, no mention of adidas. Arc’teryx argued the storefront banner that showed the logo, along with the word TERREX created consumer confusion between the two retail stores because of their close proximity.[4] TERREX employees stated that at least 100 consumers entered their store believing it was Arc’teryx originally.[5] To determine this case, Justice Kent stated that “time will presumably tell whether David will defeat Goliath at trial.”[6]
A trademark is a feature of a product or service (generally a name or image) that helps distinguish itself from other products in the marketplace.[7] Section 2 of the Trademarks Act states a trademark has three requirements: must be a sign, must be used, and must be distinctive.[8] A trademark owner has the exclusive right to use the trademark within Canada with the goods or services registered, and prohibits anyone without rights to use the trademark.[9] Section 20 of the Trademarks Act states infringement is present when someone without approval uses, sells, and advertises goods or services associated with a trademark resulting in confusion with the registered trademark.[10] Section 22 of the Trademarks Act protects the value of goodwill tied to trademarks. A trademark infringement is present under section 22 when someone uses a registered trademark of another without approval and depreciates the value of goodwill.[11] Both of these trademark infringements were mentioned in the Arc’teryx court summary.
In Canada, passing off is a cause of action for trademark and is done by common law tort to protect the “use” of a name or image.[12] Passing off serves as protection to ensure that no one passes off their goods as something other than what it is.[13] Essentially, an owner of a trademark wants to protect themselves against competitors who use misrepresentation to confuse consumers. Ciba-Geigy established three elements that must be present for passing off. (1) There must be an existence of goodwill or reputation with the trademark at issue; (2) there is deception of the public based on misrepresentation; and (3) actual or potential harm to the plaintiff.[14]
The existence of goodwill or reputation helps preserve the quality of goods and services. To determine whether goodwill exists, plaintiffs must demonstrate that the mark (trademark) has a benefit or advantage of the good’s name, reputation, and connection to their business. This can be done by demonstrating consumers associate a good or service with a specific source based on the mark (trademark).
Plaintiffs in the second element of the Ciba-Geigy test must prove deception based on misrepresentation. This can be done by illustrating the defendant misrepresented their goods or services to something of the plaintiff that likely caused consumer confusion. This element is important because this shows no one can represent their goods or services as something that belongs to someone else. In order for passing off to succeed there must be a misrepresentation that leads to actual or potential confusion.[15] To help determine the likelihood of confusion, the Supreme Court in Ciba-Geigy looked at the ”test person,” an ordinary consumer who is looking to consume a good or service at issue. For example, if it was found that a consumer was confused, at least a limited amount, the second element of the Ciba-Geigy test would succeed.
The final element of the Ciba-Geigy test looks at the actual or potential harm of the plaintiff. This can be looked at in two forms. A plaintiff might show evidence that they have or will lose a loss of trade because of passing off done by the defendant as seen in Institut National. The second form of harm deals with a loss of goodwill and reputation. This can result when a competitor enters a market and passes off the plaintiff’s product. The defendant’s product may be inferior, and because of the passing off, consumers who believed they had purchased from the plaintiff may not purchase future products based on their dissatisfaction.
The judge provided many reasons demonstrating that Arc’Teryx had a legal claim against adidas Canada resulting from the trademark issue. The judge stated because Arc’Teryx has a trademark registration in international class 35 for Arc’Teryx retail store service, they have an exclusive right to use their trademark on the Fourth Avenue storefront banner.[16] Secondly, adidas Canada created confusion resulting from their Performance Bars trademark with the TERREX trademark displayed above their store looking similar to the Arc’Teryx trademark. The judge said that the confusion resulting from this may bring an action against adidas Canada in tort or under the Trademarks Act. Lastly, the judge stated that it is probable adidas Canada knew that they did not have the trademark registration in international class 35 when they opened this store knowing legal actions could result.[17] Although the reasons provided by the judge sound promising for Arc’Teryx, it will be a David versus Goliath legal battle.
This case has been helpful to get a better understanding of trademark and passing off rules. After analyzing this case, it appears adidas Canada has infringed Arc’Teryx’s trademark based on sections 20 and 22 of the Trademarks Act. Confusion among consumers was present and deprivation of the value of goodwill can result because of the area of retail that these companies are involved in.
The common law tort of passing off looks like it could succeed in this case as well. Arc’Teryx has been located on Fourth Avenue for many years and has created a strong presence in the Kitsilano community. Arc’Teryx goodwill is known to their consumers in this location because of their valued goods and services that are associated with its name. The evidence provided by TERREX demonstrates that some consumers were misguided about entering their store believing it was Arc’Teryx initially. Actual or potential harm to Arc’Teryx can be seen in many forms such as losing potential consumers who go to TERREX believing it is Arc’Teryx, or consumers experiencing faulty products from TERREX believing it is Arc’Teryx.
Intellectual property is an interesting legal practice because it provides the rules and protections that users have and the ways they can use their ideas. All businesses have the opportunity to sell products and services to consumers, but they must be aware of governing trademarks to not infringe anyone’s rights.
[1] Armer Sports Canada Inc. v Adidas Canada Limited, 2024 BCSC 3 at para 13. (“Arc’teryx”)
[2] Ibid at para 18.
[3] Ibid at para 13.
[4] Ibid at para 16.
[5] Ibid at para 41.
[6] Ibid at para 67.
[7] Trademarks Act, R.S.C. 1985, c. T-13, s.2 (“Trademarks Act”)
[8] Ibid at s 2.
[9] Ibid at s 19.
[10] Ibid at s 20.
[11] Ibid at s 22.
[12] Ibid at s 7.
[13] Ciba-Geigy Canada Ltd. v Apotex Inc., [1992] 3 SCR 120 (“Ciba-Geigy”)
[14] Ciba-Geigy
[15] Institut national de appellations d’origine des vins… v Andres Wines Ltd., (ONSC, 1987) (“Institut National”)
[16] Arc’teryx at para 66.
[17] Ibid at para 45.
Communications Law