Overview

[1] The Appellants, Hemant Bhagwani, Fatima Bhagwani, 1727799 Ontario Inc. and Bombay Frankie Inc., appeal the order of C. Brown J. dated February 10, 2022 granting the Respondent, 2788610 Ontario Inc., an interlocutory injunction: 2788610 Ontario Inc. v. Bhagwani, 2022 ONSC 905 (the “Order”). The Order restrained the Appellants from using the term “Bombay Frankie” as the name of any restaurant or franchising business, from using “Bombay Frankie” on their social media accounts, and from using the website, www.bombay-frankie.com.

[2] The Appellants submit that in granting the interlocutory injunction, the motion judge erred in law by finding that the Respondent had legal rights to the Bombay Frankie trademark or name, in the absence of a registered trademark or goodwill.

[3] For the reasons that follow, I would allow the appeal.

Factual Background

The Dispute Over the Bombay Frankie Trademark

[4] The Respondent was incorporated in October 2020. At the same time, it filed an application to register the trademark “Bombay Frankies.” The Respondent is in the process of developing a franchise system of restaurants called “Bombay Frankies.” When it commenced the proceeding and when the motion was heard, the Respondent had not yet opened or advertised a restaurant with the name “Bombay Frankies.” At the hearing, counsel advised that the Respondent had recently opened a restaurant under that name.

[5] The Appellants are also in the restaurant business. Bombay Frankie Inc. was incorporated on March 12, 2021. In March 2021, 1727799 Ontario Inc. filed a trademark application to register the trademark “Bombay Frankie.” The Appellants registered the domain name www.bombay-frankie.com in February 2021 and had social media accounts using the Bombay Frankie name. The Appellants opened a restaurant called “Bombay Frankie – the Original Bombay Roll” in July 2021 and a second “Bombay Frankie” restaurant in October 2021.

[6] Prior to 2021, the Appellants established other Indian food restaurants including Amaya, Indian Street Food Co., Leela Indian Food Bar, and others. They used the term “frankie” on menu items at those restaurants. It is undisputed that a “frankie” is a type of Indian street food snack developed in the 1930s and refers to a type of wrap filled with various fillings.

[7] In September 2021, the Respondent commenced an action against the Appellants in this court for trademark infringement and passing off under ss. 7(b), 7(c), 19 and 20 of the Trademarks Act, R.S.C. 1985, c. T-13.

The Decision

[8] In October 2021, the Respondent brought a motion for an interlocutory injunction prohibiting the Appellants from using the term “Bombay Frankie” as the name of any restaurant or franchise business it owns or operates and from using the term as the name of any social media account or website. The Respondent argued that pursuant to the Trademarks Act, it had priority to register the trademark over a subsequent applicant. The Respondent submitted that the Appellants would have had notice of its trademark application prior to opening their restaurants because it would have appeared on a trademark search.

[9] Applying the RJR-MacDonald test, the motion judge granted the interlocutory injunction. First, the motion judge detailed the parties’ respective submissions as to who had prior use of the trademark and found that there was a serious issue to be tried. The motion judge made reference to a “novel issue” raised by the Respondent as to whether its claim crystallizes on the application date or on the registration date.

[10] Second, the motion judge found that the Respondent would suffer irreparable harm if the injunction was not granted. She found that until the “priority issues” were resolved, the Appellants would have “a significant advantage in terms of name recognition, goodwill and first mover advantage” if they were permitted to continue to operate under the Bombay Frankie name, despite having opened the restaurants after the Respondent applied for registration. The motion judge found that the Respondent would suffer undue disadvantage that could not be compensated monetarily.

[11] Finally, the motion judge found that the balance of convenience favoured the Respondent. She recognized that there would be some inconvenience to the Appellants but that one party should not have an advantage over the other in developing a reputation and goodwill under a confusing trademark.

[12] Before the motion judge, the question of which party began using the name “Bombay Frankie” first was hotly contested. However, for the purposes of the appeal, the Appellants do not claim to have used the name “Bombay Frankies” as the business name for their restaurant before the Respondent filed its application to register the name as a trademark. The Appellants take the position that their appeal must succeed irrespective of whether the Appellants used the name before the Respondent applied for registration of the trademark for two reasons: firstly, because when the action was commenced by the Respondent, the Respondent did not have a registered trademark in the name and, secondly, the Respondent had not used the name in the public marketplace and, as a result, had not established any goodwill in the name.

Issues

[13] This appeal raises the following issues:

(a) Did the motion judge make an error in principle in finding a serious issue to be tried?

(b) Did the motion judge make a palpable and overriding error in finding that the Respondent would suffer irreparable harm?

(c) Did the motion judge make a palpable and overriding error in finding that the balance of convenience favoured the Respondent?

Analysis

The Applicable Principles

[14] The appellate standards of review apply to this appeal. Questions of law are reviewable on a correctness standard. Questions of fact and questions of mixed fact and law from which the legal principle is not readily extricable are reviewable on a standard of palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8, 10, 36-37.

[15] A “palpable” error is an error that is plainly seen. An “overriding” error is an error that is sufficiently significant to vitiate the challenged findings of fact: Housen v. Nikolaisen, at paras. 1, 6. An example of a palpable error is a finding made in the absence of evidence or misapprehension of relevant evidence: Waxman v. Waxman (2004) 2004 39040 (ON CA), 186 O.A.C. 201, at para. 296.

[16] I recognize that the decision to grant an extraordinary remedy such as an interlocutory injunction is a discretionary one. On an appeal of an order granting an interlocutory injunction, a motion judge’s exercise of discretion is entitled to deference, unless the motion judge erred in principle or was clearly wrong: Easyfinancial Services Inc. v. Ezmoney Tario Inc., [2018] O.J. No. 1275 (Div. Ct.). However, where an erroneous finding of fact can be attributed to the application of an incorrect legal standard, a failure to consider a required element of a legal test, or a similar error in principle, the error is one of law that must be reviewed on the standard of correctness: Housen v. Nikolaisen, at paras. 35-36.

Serious Issue To Be Tried

[17] In this case, the motion judge correctly stated the test for an interlocutory injunction and that the threshold for the first part of the test, a serious issue to be tried, is low.

[18] However, in my view, in finding a serious issue to be tried the motion judge made an error in principle. In finding a serious issue, the motion judge had to have found that the Respondent had a right to the Bombay Frankie’s trademark merely by virtue of its application or had to have presumed that the trademark would be registered. Either finding is an error of law.

[19] Under s. 19 of the Trademarks Act, the registration of a trademark in respect of goods or services gives the owner of the trademark the exclusive right to use the trademark throughout Canada in respect of those goods or services. Subsection 20(1) states that the right of the owner of a registered trademark to its exclusive use is deemed to be infringed by any person who, among other things, sells, distributes or advertises any goods or services in association with a confusing trademark or trade name. Therefore, in order to state a cause of action for trademark infringement under ss. 19 or 20 of the Trademarks Act, the claimant must have a registered trademark that is alleged to have been infringed.

[20] In this case, the Respondent has no registered trademark for “Bombay Frankies”. While the Respondent has filed an application to register the trademark, its application has yet to be examined, approved or advertised for opposition by the Registrar of Trademarks. A mere application to register a trademark is insufficient to support a cause of action for trademark infringement under the Act.

[21] Further, it is an error to presume that a trademark for which an application has been filed will be registered. Registration is not a foregone conclusion. The Registrar may refuse to register the trademark on the basis that it is, for example, not distinct within the meaning of the Act: Trademarks Act, s. 37(1). In addition, another party may oppose the registration of the trademark (s. 38(2)), as is likely to happen here.

[22] Because the Respondent has only made an application for a trademark and no registered trademark, it has no claim for trademark infringement under the Act. It has no right that could ultimately be vindicated at trial. As a result, its claim cannot meet even the low threshold of a serious issue to be tried.

[23] Having found that the Respondent met the serious issue part of the RJR-MacDonald test based on its cause of action for trademark infringement, the motion judge did not specifically consider whether the Respondent’s claim raised a serious issue in respect of its passing-off claim. In considering irreparable harm, however, the motion judge implicitly accepted that the Appellants should not be permitted to dilute or appropriate the Respondent’s goodwill.

[24] In my view, the Respondent’s claim for passing off under ss. 7(b) and (c) of the Act also fails to meet the threshold of a serious issue to be tried. The elements of a cause of action for passing off are: (i) the existence of goodwill in a trademark in association with the claimant’s goods or services; (ii) a misrepresentation to the public that creates or is likely to create confusion to the public; and (iii) actual or potential damages to the claimant: Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 302, 2005 SCC 65, at paras. 66-68; Ciba-Geigy Canada Ltd. v. Apotex Inc., 1992 33 (SCC), [1992] 3 S.C.R. 120, at para. 12. The plaintiff must also show ownership of a valid registered or unregistered trademark: TFI Foods Ltd. v. Every Green International Inc., 2020 FC 808, at para. 21, citing Sandhu Singh Hamdard Trust v. Navsun Holdings Ltd., 2019 FCA 295, at paras. 36-39.

[25] In Veuve-Clicquot Ponsardin v. Boutiques Cliquot Ltée, [2006] 1 S.C.R. 824, 2006 SCC 23, at para. 50, the Supreme Court of Canada noted that goodwill is not defined in the Trademarks Act, but that “in ordinary commercial use, it connotes the positive association that attracts customers towards its owner’s wares or services rather than those of its competitors.” In Ciba-Geigy v. Apotex, the Supreme Court held that goodwill “must be understood in a very broad sense, taking in not only people who are customers but also the reputation and drawing power of a given business in its market.”

[26] In Kirkbi v. Ritvik Holdings Inc. (at para. 67), the Supreme Court further clarified that “the claimant must establish goodwill in respect of the distinctiveness of the product. Evidence of goodwill solely attached to the techniques and processes which create the product will not do. The doctrine of passing off did not develop to protect monopolies in respect of products but of guises, get-ups, names and symbols which identify the distinctiveness of a source.” (Internal citations omitted.)

[27] The case law demonstrates that goodwill attaches to a name or mark as it relates to the reputation or association with the goods or services provided by the owner of the mark. The Respondent’s evidence was that it had retained franchise lawyers and a marketing firm to develop the franchise. The Respondent also had discussions with landlords about renting locations for franchises and with suppliers of food products. In all of the interactions detailed by the Respondent, it was obtaining goods or services in connection with starting up a franchise business. The Respondent’s start-up activities do not constitute goodwill as that concept has been recognized in the case law.

[28] Given the Respondent’s franchising business, I recognize that goodwill in the Bombay Frankie’s name could exist from the perspective of potential franchisees, as opposed to customers of the restaurants or the general public. However, there was no evidence on the record from the perspective of potential franchisees that could support a finding that the Respondent had developed goodwill in the Bombay Frankie’s name as a franchising business. The Respondent’s evidence was that they had previously developed relationships in the course of conducting franchise businesses under a variety of different names. The Respondent provided no evidence of use of the Bombay Frankie’s name in providing any goods or services, including franchise services, to customers or to the public. See: Trademarks Act, ss. 4(1) and (2).

[29] Given the absence of evidence of goodwill, a finding that the Respondent’s passing-off claims raised a serious issue to be tried constitutes an error in principle.

[30] Having failed to meet the first part of the RJR-MacDonald test for an interlocutory injunction, in my view, the Respondent’s motion ought not to have been granted.

Irreparable Harm

[31] Given my finding above, it is not necessary to consider whether the trial judge erred in finding that the Respondent satisfied the other elements of the RJR-MacDonald test. However, and in case I have erred in my finding of an error in principle, I would also find that the motion judge made a palpable and overriding error in finding that the Respondent would suffer irreparable harm if an injunction was not granted.

[32] In Centre Ice Ltd. v. National Hockey League, 1994 19510 (FCA), [1994] F.C.J. No. 68 (C.A.) at para. 9, the Federal Court of Appeal held that “confusion does not, per se, result in a loss of goodwill and a loss of goodwill does not, per se, establish irreparable harm not compensable in damages.” The Court further held that the loss of goodwill and resulting irreparable harm cannot be inferred, but must be established by clear evidence. In that case, the plaintiff had some evidence of confusion, but none demonstrating that the plaintiff’s reputation had been impeached or lessened in any way or that confusion led any customer to stop, or consider not, dealing with them.

[33] In this case, the motion judge found that the Respondent had demonstrated irreparable harm because “[l]andlords have questioned whether the plaintiff is affiliated with the term Bombay Frankie, have expressed concern at this confusion and are hesitating to lease space to the plaintiff as a result. They submit this will also affect any goodwill developed by them and that the potential exists to have any such goodwill appropriated by the defendants.”

[34] This finding, however, does not constitute clear, non-speculative evidence of irreparable harm, harm that cannot be compensated in money damages. If the potential harm is that landlords will not rent to the Respondent because of the confusion with the Appellants’ business, that harm is quantifiable. If the Respondent then has to rent an alternative premises at a higher price, it could then be compensated for the difference. Alternatively, if the Appellants secure a location because a landlord rents to them on the mistaken belief that they were the Respondent, that harm too could be quantified. Moreover, the available evidence suggesting confusion among prospective landlords was speculative hearsay.

[35] In any event, the confusion generated among landlords does not constitute confusion among customers or the public resulting in a loss of goodwill. Moreover, the motion judge’s reference to “any goodwill developed by them” speaks to prospective goodwill. The cause of action for passing-off protects existing goodwill. In order to demonstrate irreparable harm, the Respondent had to show that it had goodwill in the Bombay Frankie name and that it would lose its goodwill because of the Appellants’ confusing use.

[36] Further, the basis for the motion judge’s finding that the Respondent would suffer “undue disadvantage given the present circumstances and will suffer irreparable harm which is not compensable monetarily” is unclear. If the motion judge is referring to first mover advantage, based on my earlier analysis, absent a registered trademark or goodwill there is no basis to support a finding that the Respondent was entitled to first mover advantage when they were not “using” the Bombay Frankie’s name to sell goods or services.

Balance of Convenience

[37] As a result of the above determinations, I need not consider whether the motion judge erred in finding that the balance of convenience favoured that an injunction be granted. I note, however, the balance of convenience may have weighed in favour of the Appellants who, as a result of the relief claimed, were required to take down the signs bearing the Bombay Frankie’s name, as well as their website and social media accounts.

Conclusion

[38] Accordingly, the appeal is allowed and the Order is vacated.

[39] At the hearing, the parties agreed that the successful party would be entitled to costs of the appeal in the amount of $23,000. On the motion for leave to appeal, the panel ordered costs of $5,000 to the successful party on the appeal. As a result, the Respondent shall pay the Appellants $28,000 in costs of the motion for leave to appeal and the appeal.

[40] On the costs of the motion, the motion judge ordered costs in the cause. I see no reason to interfere with this determination.

[41] The parties are directed to request a case management conference with a judge on the Civil Team of the Superior Court of Justice to schedule next steps in the proceeding to ensure that the matter proceeds expeditiously.

“Nishikawa J.”

I agree “R. Smith J.”

I agree “Stewart J.”

Released: November 2, 2022

CITATION: 2788610 Ontario Inc. v. Bhagwani, 2022 ONSC 6098

DIVISIONAL COURT FILE NO.: 120/22

DATE: 20221102

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

R. Smith, Stewart and Nishikawa JJ.

BETWEEN:

Hemant Bhagwani, Fatima Bhagwani, 1727799 Ontario Inc. and Bombay Frankie Inc.

Appellants/Defendants

and -

2788610 Ontario Inc.

Respondent/Plaintiff

REASONS FOR DECISION

Released: November 2, 2022

2788610 Ontario Inc. v. Bhagwani, 2022 ONSC 6098

Case Summary

Overview

Factual Background

The Dispute Over the Bombay Frankie Trademark

The Decision

Issues

Analysis

The Applicable Principles

Serious Issue To Be Tried

Irreparable Harm

Balance of Convenience

Conclusion

Judges

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 8

Legal Tests 3

Legislation 1