COURT FILE AND PARTIES

COURT FILE NO.: 8900/12
DATE: 2013/07/24
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Rheo Thompson Candies Limited (Plaintiff)

• and -

Marni Thompson, Alvin Bolkovic and M Thompson Chocolates (Defendants)

BEFORE: Justice H. A. Rady

COUNSEL:
David A. MacKenzie and Stephanie Legdon, for the plaintiff

Simon J. Adler and Nolan Downer, for the defendants

HEARD: July 10, 2013

ENDORSEMENT

Introduction

[1] The plaintiff moves for an interlocutory injunction enjoining the defendant M Thompson Chocolates from using the words “mint smoothie” to describe a chocolate confection that both the plaintiff and that defendant sell to the public.

[2] The plaintiff has brought an action against the defendants seeking a permanent injunction, damages and a declaration that the defendants have violated its protections under the Trademarks Act, R.S.C. 1985, c. T-13.

Background

[3] The plaintiff is a company founded by Rheo Thompson and his wife, Sally, in 1969. It operates a candy and confectionary business from premises in Stratford, Ontario. It manufacturers candy, including chocolate, for sale in Canada and internationally. One of its products is called a “mint smoothie”. The parties are agreed that the plaintiff enjoys a good reputation as a purveyor of high quality product.

[4] The defendant, Marni Thompson, is the daughter of Rheo and Sally Thompson. Her husband is the defendant, Alvin Bolkovic. Ms. Thompson worked for the company as a young person but until 2010, she pursued a modeling and acting career. Mr. Bolkovic is a former employee of the plaintiff. M Thompson Chocolates is their partnership.

[5] In 2002, the plaintiff was sold to Kristine Steed and Marc Johnstone by way of a share purchase agreement for $3,000,000. Pursuant to the agreement, the vendors agreed to disclose all of the company’s recipes and techniques which “are the exclusive property and trade secrets of the corporation.”

[6] In late 2010, the plaintiff learned that Ms. Thompson was operating a candy and confectionary business outside Toronto. One of the products that she was selling under the banner “R Thompson Chocolates” was a “mint smoothie”.

[7] On January 17, 2011, plaintiffs’ counsel wrote to the defendants demanding that they cease using the name “R Thompson Chocolates” and advising them that it intended to protect its common law trademark in the name “mint smoothie”. The defendants agreed to change the business’ name to “M Thompson Chocolates” but continued to use the term “mint smoothie”.

[8] The plaintiff sought and obtained a registered trademark for the term on September 10, 2012. The defendants continued to use the term.

[9] The plaintiff commenced its action on December 19, 2012 and this motion was brought on February 12, 2013. It alleges that the defendants’ use of its trademark is confusing and that they are passing off their product to the detriment of the plaintiff. It seeks damages or an accounting for the defendants’ profits obtained at its expense.

[10] In its statement of defence, the defendants challenge the validity of the trademark registration asserting, among other things, that the term is generic. They deny that there is any confusion. They assert that their product is marketed distinctively with their own logo and packaging. They deny the plaintiff has sustained any damage.

The Evidence

[11] Rheo Thompson sells its product through its store in Stratford and through selected retailers. It is possible to order online and by telephone as well. It has some 152 different products.

[12] M Thompson has a product line of eight chocolates, which it sells through trade shows, the internet and four commercial outlets, three of which are under its own name. Its “mint smoothie” accounts for approximately 35% of its annual sales, totalling something less than $100,000.

[13] On its website, the defendant, M Thompson Chocolates, has posted articles which include photographs of Marni and her father, suggesting (to paraphrase) that Ms. Thompson is carrying on the tradition of the family business and that the family recipes are being used. The website excerpts several articles that have been published in publications such as DINE Magazine, House & Home and the National Post and in other venues containing these comments.

[14] A private investigator hired by the plaintiff spoke with a woman at an M Thompson Chocolates booth at a craft show who identified herself as Marni. She is said to have advised the investigator that she got all her recipes from her father.

[15] There are some additional allegations of confusion in the marketplace, to which I will return below.

[16] The defendants have led evidence in their responding material that shows that several other confectioners use the term “mint smoothie” or “smoothie” to describe their products.

The Parties’ Positions

[17] The plaintiff relies on the Trademarks Act, which provides that a trademark owner has the exclusive right to use that trademark (s. 19). The rights of a registered trademark owner are deemed to be infringed if another sells wares with a confusing trademark or name (s. 20). Consequently, evidence of actual confusion need not be led. The plaintiff relies on Maple Leaf Mills Ltd. v. Quaker Oats Co. of Canada, [1984] F.C.J. No. 438 and Philip Morris Products S.A. v. Marlboro Canada Ltd., 2012 FCA 201, [2012] F.C.J. No. 878.

[18] The plaintiff submits that it has the exclusive right to the use of the term “mint smoothie” unless and until the trademark has been found to be invalid: Molson Canada v. Oland Breweries, 2002 44947 (ON CA), [2002] O.J. No. 2029. It relies on certain decisions that say that once an arguable case of infringement of a trade name has been established, an injunction should issue without the need to consider issues of a balance of convenience or of irreparable harm. See Boutique Au Coton Inc. BAC v. Pant-o-Rama Inc., [1987] F.C.J. No. 858 and Joseph E. Seagram & Sons Ltd. v. Andres Wines Ltd., [1987] F.C.J. No. 504.

[19] It further submits that it has an action for passing off for which proof of actual financial loss is not required. Rather, damage may be inferred from the loss of control over one’s good will: Edward Chapman Ladies’ Shop Limited v. Edward Chapman Limited et al, 2006 BCSC 14.

[20] The plaintiff submits that in any event, it meets the three-part test articulated in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), [1994] 1 S.C.R. 311.

[21] The defendant submits that there is no serious issue to be tried because there is nothing distinctive or particularly linked to the plaintiff’s product in the use of the words “mint smoothie”. There is no confusion nor any evidence of harm, which the defendants submit must be established rather than inferred: Centre Ice Ltd. v. National Hockey League et al, 1994 19510 (FCA), [1994] F.C.J No. 68 (F.C.A.).

[22] They further rely on Lassonde Inc. v. Island Oasis Canada Inc. [2000] F.C.J. No. 2123 (F.C.A.) that held that the three-part test in RJR-MacDonald must be met even where a plaintiff relies on the rights conferred under the Trademarks Act.

Preliminary Objection

[23] The defendants raised a preliminary objection to certain of the passages of Mr. Johnstone’s affidavit because they contain passages of hearsay without any statement by the deponent vouching for their accuracy or his belief in them.

[24] I agree with the defendants that the impugned paragraphs are not strictly compliant with the rules in the sense that the formulaic expression (“I have been advised by ‘X’ and verily believe”) is not used. However, the deponent later says that it is his belief that customers have been confused and that there is an attendant impact on sales. This seems an adequate substitution and I am prepared to admit the evidence as a result.

[25] That said, the evidence is not particularly helpful because it relies on information obtained from certain persons (“Lisa’s parents”; “a friend of my father”; an unnamed “customer”) but not directly by the deponent. It is double hearsay that cannot be tested by cross-examination. Consequently, it should be accorded little weight.

Analysis

[26] In my view, the starting point in the analysis must be RJR-MacDonald v. Canada, supra. The plaintiff must establish that there is a serious issue to be tried; that the plaintiff will suffer irreparable harm if the injunction is not granted; and that the balance of convenience weighs in the plaintiff’s favour.

[27] A motion for an interlocutory motion is not the time to determine the validity of the registration of a trademark: Joseph E. Seagram & Sons Ltd., supra.

[28] The factual background, including the defendants’ initial use of the name “R Thompson Chocolates”, the various articles on the defendants’ website suggesting an association with the Rheo Thompson family and the use of protected recipes persuade me that there is a serious issue to be tried.

[29] On the issue of irreparable harm, I recognize that the Trademarks Act creates a presumption of infringement and that there are older cases suggesting that infringement having been established, an injunction should be granted without a consideration of irreparable harm or balance of convenience.

[30] However, Centre Ice Ltd. v. National Hockey League et al, supra, is the leading authority and overtakes the earlier decisions on which the plaintiff relies. In that case, the court set out what a plaintiff must prove to establish irreparable harm, namely:

(i) evidence of goodwill in the trade name or trademark;

(ii) evidence of confusion by the general public;

(iii) evidence that the confusion has caused a loss of goodwill to the plaintiff;

(iv) evidence that the loss of goodwill is not compensable in damages.

[31] In Lassonde Inc. v. Island Oasis Canada Inc., [2000] F.C.J. No. 2123 (F.C.A.) the court held that the rights conferred by the Trademarks Act does not diminish the burden placed on a moving party to establish irreparable harm. The court noted as follows:

[W]hether the registered mark is disputed or not, they cannot create a presumption of the existence or likelihood of damage, still less that there is irreparable harm within the meaning of RJR-Macdonald Inc. v. Canada (Attorney General)... namely damage that cannot be quantified in monetary terms or for which no remedy is possible. The victim must present clear evidence that it would suffer damage and that the damage would be irreparable. Similarly, the rights conferred by those sections do not reduce or diminish in any way the burden that falls on someone seeking such an injunction.

[32] It must be remembered that an interim injunction is an extraordinary remedy. It should only be granted on clear and cogent evidence. The plaintiff’s evidence on this motion falls short of the mark. The anecdotal hearsay evidence of confusion has been the subject of comment earlier. Even taking it at face value, there is little evidence of actual confusion.

[33] Indeed, there is evidence that the two products taste similar. If that is so, there is arguably no impairment of the goodwill attached to the plaintiff’s product. Victoria’s Secret Stores Brand Management Inc. v. La Senza Inc., [2006] O.J. No. 1649 (S.C.J.) is instructive on this issue. The court noted:

The evidence before me is that, while the products in issue appear to be similar, they are both quality products. The defendant appears to be a substantial company. I do not conclude that the evidence before me demonstrates that a consumer who mistakenly purchased the defendant’s product would be embittered to the extent that the plaintiff’s reputation would suffered by virtue of any lesser quality, real or perceived that the defendant’s product has or would have when measured against that of the plaintiff. I am not persuaded that there is a reasonable basis for granting an interlocutory injunction based on loss of potential reputation or goodwill or damage to the brand name of the plaintiff.

[34] Even if there were persuasive evidence of confusion and an attendant loss of goodwill, it seems to me that any damage is readily calculable. In this case, the defendants’ evidence is that mint smoothie sales accounts for 35% of its annual revenue. This, at the very least, provides a starting point for the calculation of damages.

[35] Finally, and for the sale of completeness, I am not persuaded that the balance of convenience favours the plaintiff when one examines the evidence of the parties’ respective presence in the market. The balance of convenience exercise involves a consideration of which party will suffer the greater harm should an injunction be granted or refused pending a determination of the merits.

[36] In this case, the plaintiff is bigger and longer established with more than 150 products. In contrast, M Thompson Chocolates sells eight products, one of which is the mint smoothie that accounts for 35% of its sales. An injunction would result in a large component of the defendants’ operation being stopped. There is no evidence of a proportionate or larger deprivation for the plaintiff.

[37] For these reasons, the motion is dismissed. I will receive brief written submissions on costs from the parties, on a timetable to which they will agree, by August 30, 2013.

“Justice H. A. Rady”

Justice H. A. Rady

Date: July 24, 2013