Court File and Parties

COURT FILE NO.: CV-22-688196 DATE: 20230727 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Unitop Spolka Z Ograniczona Odpowiedzialnoscia, Applicant AND: Exclusive Candy and Novelty Distributing Limited, Respondent

BEFORE: Pollak J.

COUNSEL: Leon j. Melconian, for the Applicant Ahmed Bulbulia & Sarah Rustomji, for the Respondent

HEARD: April 3-4, and May 1, 2023

Endorsement

[1] The Applicant, Unitop Spolka Z Ograniczona Odpowiedzialnoscia (“Unitop”) is a producer and distributor of sesame snacks called “SESAME SNAPS”, which are sold in over 22 countries worldwide.

[2] On January 22, 2015, Unitop (through its predecessor company Agros) obtained a default Judgment (the “Default Judgment”) against a former authorized distributor of SESAME SNAPS, K-Max Corp. The Default Judgment prohibited the sale of a similar product, named “CLASSIC SESAME”, being sold by the former distributor and the sale of products which violated Unitop’s intellectual property rights in SESAME SNAPS. The Default Judgment also prohibited the sale of any other product whose name and packaging passes off goods as being those of, associated with, endorsed or approved by the plaintiff.

[3] The respondent, Exclusive Candy and Novelty Distributing Limited (“Exclusive”), was another authorized distributor of SESAME SNAPS in Canada until July of 2021. The respondent had begun selling CLASSIC SESAME and was therefore affected by the Default Judgment. It moved to set aside the Default Judgment but was unsuccessful.

[4] In early 2022, Unitop became aware that Exclusive, which was no longer an authorized distributor of SESAME SNAPS, had started selling a new product called “ORIGINAL SESAME” that Unitop alleges used similar packaging and was sold at the same places as where Unitop’s SESAME SNAPS had been sold.

[5] As a result, the applicant sought to schedule a contempt motion in Civil Practice Court (“CPC”) in which the following Endorsement was issued:

The applicant initially asked to bring a contempt motion. A contempt motion is not appropriate. The issue arises out of a judgment that precludes anyone with notice of the judgment from infringing on the applicant’s intellectual property. The issue is whether the defendant has so infringed. A two day hearing has been set for that relief. The applicant should bring an application requesting a declaration that the defendant has breached the judgment. The Application will be heard in accordance with the timetable below.

[6] The applicant seeks the following relief:

a) A declaration that the respondent's sale and marketing of ORIGINAL SESAME breaches the Default Judgment;

b) An injunction prohibiting the respondent, its servants, employees, agents, assigns, officers, directors, retailers, purchasers and anyone else acting on the respondent's behalf or in conjunction with it, and any and all persons with notice of the order be restrained from directly or indirectly, by any means whatsoever:

(i) Advertising, selling or otherwise distributing sesame candies identified as ORIGINAL SESAME and any other name and packaging which infringe the trade-marks of the applicant

(ii) Advertising, selling or otherwise distributing sesame candies identified as "Original Sesame" and any other name and packaging which pass off the respondent's goods as being those of, associated with, endorsed or approved by the applicant;

c) An order that the respondent and all persons to whom a copy of the order is provided take all steps necessary to cause any advertising, selling or other distribution of ORIGINAL SESAME and any other confectionery items which infringe on the rights of the applicant to be terminated forthwith;

d) An order that the respondent within seven days of the date of the order, deliver to Melconian Law Office a complete list of all retailers and commercial direct purchasers of ORIGINAL SESAME;

e) An order directing a damages hearing or other procedure to assess damages resulting from the respondent's sale of ORIGINAL SESAME and breach the Default Judgment;

f) An order that the respondent pay to the applicant punitive, aggravated and exemplary damages;

g) Costs of this application; and

h) Such further and other relief as counsel may request and this Court may deem just.

[7] Before 2018, Agros manufactured and distributed SESAME SNAPS. In 2018, Unitop merged with Agros and acquired the rights and intellectual property with respect to SESAME SNAPS. In 2020, Unitop changed the packaging of its SESAME SNAPS sold in Canada.

[8] The SESAME SNAPS name and design logo trademark were registered by Agros, now Unitop, in 1987. The applicant alleges that in 2008, it registered a trademark for the blue, white, red and clear cellophane wrapper design, with red lettering surrounded by a blue border. Also in 2008, a trademark for the words “Sesame Snaps” was registered without any disclaimer. However, Exclusive submits that only one of Unitop’s registered trademarks (TMA 728,998) covering its Old Design claims colour, and that the colour claim is only for “red letters surrounded by a blue border”. White is not claimed as a colour. This registration does not cover the blue, white and red colour scheme as claimed by Unitop in this Application.

[9] On March 7, 2014, Agros commenced an action in this Court against its former distributor, K-Max Corp. In the action, it claimed passing off and trademark infringement relating to the sale of CLASSIC SESAME. The claim was for:

(a) damages for unfair competition and passing off;

(b) damages for trademark infringement; and

(c) injunctive relief.

[10] In 2015, Agros obtained the Default Judgment.

[11] When Exclusive moved to set aside the Default Judgment, certain findings of fact were made against Exclusive, which are relied on by Unitop in this Application. Although Exclusive was not a named defendant in that action, it brought a motion to set aside the Default Judgment on the basis that it was affected by the Judgment since it was a distributor of CLASSIC SESAME. The motion was dismissed on May 19, 2015. The following findings were made:

(a) From the point of view of a consumer looking for a quick snack, SESAME SNAPS and CLASSIC SESAME are the same thing (at para. 39);

(b) In fact, the name “Classic Sesame” is doubly confusing, as it suggests to any consumer that might by chance notice the difference between the two products that the “Classic” one is the original one that the consumer has long purchased. That, of course, would be a false and misleading impression in itself. SESAME SNAPS are the Classic product in Canada, and CLASSIC SESAME is the not-so-Classic newcomer (at para. 40);

(c) Unitop’s distinctiveness, which has been established in Canada over the past four decades, obviously remains intact, and the good will generated by this distinctiveness is diminished by the Moving Parties’ [Exclusive’s] introduction of a brand that creates consumer confusion (at para. 41);

(d) The evidence before me makes it clear that the Moving Parties went out of their way to find a product that would sow confusion in the mind of the consuming public, and that they succeeded in this task (emphasis added) (at para. 42);

(e) The Moving Parties’ continued use of the CLASSIC SESAME box design constitutes a violation of the Plaintiff’s copyright (at para. 52); and

(f) The Moving Parties themselves have profited from the passing off of their product for the Plaintiff’s (emphasis added) (at para. 59).

[12] I am of the view that these findings are not relevant in this Application as it deals with a different product and different packaging.

[13] Exclusive was an authorized distributor of SESAME SNAPS in Canada for Unitop from 2002 to November 2013 and from July 2015 through July 2021. Exclusive was aware of the packaging for SESAME SNAPS (from 2006 to 2020), which was changed in 2020. Unitop submits that its new packaging in 2020 kept its distinctive red and white lettering with a navy blue and clear background, and that it advised Exclusive of its new packaging, sharing its market research data and marketing strategies.

[14] In December of 2021, Exclusive advised Unitop that it would no longer be purchasing SESAME SNAPS because it had found another manufacturer.

[15] On March 8, 2022, Unitop alleges that Exclusive was selling its own version of sesame snacks, still called original sesame, at the same locations where it used to sell SESAME SNAPS. Specifically, Unitop relies on the following evidence in this Application:

(a) Under the SESAME SNAPS shelf sign at the MVR Cash and Carry store located at 3655 Weston Rd., North York, Ontario, the product being sold was not SESAME SNAPS but another product named ORIGINAL SESAME, which was produced in Greece and distributed by Exclusive;

(b) the bar code on the sign above ORIGINAL SESAME was that of SESAME SNAPS; and

(c) the receipt for the purchase of ORIGINAL SESAME from MVR indicates that SESAME SNAPS were purchased.

[16] Unitop relies on the fact that Exclusive’s ORIGINAL SESAME individual packaging has the identical UPC code as Unitop’s SESAME SNAPS packaging.

[17] Unitop submits that if Exclusive had kept its colour scheme of packaging for its ORIGINAL SESAME, Unitop would not have commenced this Application. There are other sesame snacks on the market with which Unitop takes no issues as they do not “pass off” as being SESAME SNAPS.

[18] Further, Exclusive’s principal witness acknowledged in cross-examination that its approach was to sell ORIGINAL SESAME at the same places it had been selling SESAME SNAPS and to increase the market beyond that. Exclusive now sells ORIGINAL SESAME to 85-90% of the locations where they were previously selling SESAME SNAPS.

[19] Unitop relies on the fact that, when Exclusive began selling ORIGINAL SESAME in place of SESAME SNAPS, it did not advise retailers that the product was made by a different manufacturer. It instead wrote to them advising as follows:

(a) “Subject: FW: Sesame – Transition/New Artwork …Question: do I add a mention of this being the new artwork to the prior offering?” (emphasis added);

(b) “We’re now in stock with the new version! … I’m excited to share that [sic] our new Sesame 30g offering with you! Here is what the old version looks like alongside our new offering. This is the version you currently list.”;

(c) “As you saw, we have invested in new packaging and design + A Honey Based Formula versus refined Sugar and added more Sesame Seeds”; and

(d) “Can you please … update or change the name in your system on our Sesame Bars. … The UPC codes, dimensions, costing and vendor of record are identical. It’s just the name that conflicts with another supplier”.

[20] The respondent’s position in this Application is that Unitop seeks to use the Default Judgment to improperly extend trademark rights relating to its SESAME SNAPS prospectively. It submits that Unitop seeks to obtain overly broad trademark rights (which it does not now have), particularly with respect to the colours blue, red, and white generally along with clear cellophane wrapper in the packaging for its sesame bars.

[21] The Default Judgment order states as follows:

• This Court orders and adjudges that the defendant, its servants, employees, agents, assigns, officers, directors, retailers, purchasers and anyone else acting on the defendant’s behalf or in conjunction with it, and any and all persons with notice of this Judgment be and are hereby restrained from directly or indirectly, by any means whatsoever:

  (a) Advertising, selling or otherwise distributing sesame candies identified as “Classic Sesame” and any other name and packaging which infringe the trade-marks of the plaintiff;

  (b) Advertising, selling or otherwise distributing sesame candies identified as “Classic Sesame” and any other name and packaging which infringe the copyrighted works of the plaintiff;

  (c) Advertising, selling or otherwise distributing sesame candies identified as “Classic Sesame” and any other name and packaging which pass off the defendant’s goods as being those of, associates with, endorsed or approved by the plaintiff.

• This court further orders and adjudges that the defendant shall within 7 days of receipt of a copy of this judgment, deliver to Melconian Law Office a complete list of all retailers and commercial direct purchasers of Classic Sesame.

[22] The endorsement of the court supporting the Default Judgment is as follows:

The plaintiff moves for judgment against the defendant, who has been noted in default. The plaintiff seeks to restrain the defendant from advertising, selling, or otherwise distributing sesame candies identified as “Classic Sesame” and any other name and packaging which infringes the trademarks or copyrighted works of the plaintiff. Having reviewed the affidavit of Pawel Celinski and examined sample packages of the Plaintiff’s “SESAME SNAPS” product and the product which the defendants have sold and distributed, I am satisfied that the “Classic Sesame” candies infringe the copyrighted works and trademarks of the plaintiff (see TLG Canada Corp v. Product Source International LLC, 2014 FC 924 per McVeigh J at para 53 and s. 6(5) Trademarks Act, R.S.C. 1985, c. T-13).

Having so found, and there being ample evidence of the defendant’s infringements of the plaintiff’s intellectual property and associated commercial interests, it is appropriate that the injunctive relief sought by the plaintiff is granted, together with a mandatory order requiring the defendant to provide the plaintiff with a list of all retailers and commercial direct purchasers of the infringing product, so as to give effect to the injunctive relief sought.

[23] The respondent’s defence is that the Default Judgment is unclear and ambiguous and cannot apply to Exclusive in this Application. The respondent submits that the Default Judgment:

(a) does not specifically identify Exclusive as a party bound by the Judgment;

(b) does not specifically identify Unitop’s trademarks and copyrighted works (Unitop has provided no evidence and made no submissions on its copyright for sesame snacks);

(c) only identifies CLASSIC SESAME as an infringing product;

(d) does not identify Unitop’s New Design as a trademark because it did not exist until 2020; and

(e) does not refer to Exclusive’s use of its ORIGINAL SESAME name and ORIGINAL SESAME packaging because Exclusive’s ORIGINAL SESAME products did not exist in 2015.

I agree with these submissions. In particular, it is important to note that Unitop’s new design on which this Application is based did not exist until five years after the Default Judgment.

[24] In this Application, Unitop submits that it has the burden of proving that the respondent is in breach of the Default Judgment, as a person “who has notice of the order” and the existence of its valid and enforceable trademark rights and of proving passing off its product by Exclusive.

[25] The respondent emphasizes that the Notice of Application does not identify any of the trademarks or copyright rights being claimed. Further, these “rights” are also not identified or described in the Default Judgment.

[26] In its supporting affidavit in this Application, Unitop claims its rights in its packaging are “The SESAME SNAPS name, particularly coupled with a distinctive blue, white, red and clear cellophane wrapping”. The respondent notes that “this broad claim for rights in a colour scheme associated with its SESAME SNAPS sesame product”, is not referred to in the Notice of Application or the Default Judgment.

[27] The applicant’s deponent, Ms. Vnucko, admitted in cross-examination that Exclusive’s use of “the colour scheme is the biggest issue for us”, not Exclusive’s product name ORIGINAL SESAME, and not the clear cellophane wrapping.

[28] The respondent submits that Unitop’s Application is entirely based on the Default Judgment in which it was not a party. In that action, the only infringing product complained of was the K-Max Corp.’s sesame bar product. The applicant objects to this submission, asserting that the Application is much broader and also deals with a separate claim for infringement of its rights, which is in addition to the breach of Judgment allegation.

[29] The respondent submits that in a trademark case (normally commenced by a Statement of Claim), the pleading must precisely identify the trademarks that are alleged to be infringed and provide sufficient material facts to indicate when, where and how the defendant infringed the trademark rights being asserted. This requirement applies to this Notice of Application. I agree with this submission. What are the trademarks associated with Unitop’s SESAME SNAPS product? What are the copyright rights? The relief sought at paragraph 1(a) of the Notice of Application is for a declaration that Exclusive’s “sale and marketing of ‘ORIGINAL SESAME’ breaches the 2015 Default Judgment.” The Default Judgment does not identify Unitop’s trademarks. It refers generally to “the trademarks and copyrighted works of the plaintiff”. The respondent argues that the effect of this failure would be to permit Unitop to rely on the Default Judgment to grant trademark rights prospectively in the new SESAME SNAPS packaging in 2022. I also agree with this submission. The Default Judgment deals with trademarks and copyright existing on the date of the Judgment in 2015. It can not grant new trademark or copyright rights to Unitop. Further, Unitop has not provided evidence with respect to its rights in its Old Design and New Design of SESAME SNAPS. This is clear from the Endorsement of the Court, wherein the findings are based on the rights of the Plaintiff as they existed at the time of the Court’s order.

[30] It is only in Unitop’s supporting affidavit sworn by Ms. Vnucko that Unitop describes its trademark rights as “[t]he SESAME SNAPS name, particularly coupled with a distinctive blue, white, red and clear cellophane wrapping”.

[31] I am of the view that the scope of this Application is limited to a claim that the respondent is in breach of the Default Judgment. This is the question for the court to decide. This is evident from the CPC court’s endorsement scheduling this Application and the Notice of Application, in which the grounds for the Application are largely based on the default judgment. I find that Unitop has not met its burden of proof to establish a breach of the Default Judgment or a violation by Exclusive of Unitop’s trademark rights or “other” rights.

[32] If the submission of the applicant with respect to the scope of the Application were to be accepted, notwithstanding the above noted finding, I also find that the evidentiary record does not support the alleged trademark rights or copyright rights in the colour scheme and overall packaging get-up as claimed by Unitop in its affidavit evidence. I further, make no ruling on the appropriateness of the Application.

[33] The burden of proof is on Unitop would have been to establish that it has a valid and enforceable trademark or “other” right in the SESAME SNAPS packaging at the time that Exclusive began offering for sale and selling ORIGINAL SESAME in Ontario in 2021. Unitop has not done so.

[34] The evidence is that Unitop’s New Design in 2020 appears to be significantly different in appearance from the Old Design. The rights asserted in the supporting affidavit of the applicant are not granted by its existing trademark.

[35] The evidence is that Unitop has a pending application for its new design, which was filed in October 2020 and does not claim any colours. That application is for:

The words “SESAME SNAPS” are red and appear on a white background. The small oval shapes to the left and above the words “SESAME SNAPS” are light brown with white highlights and appear on a blue background. The vertical image to the right of the words “SESAME SNAPS” is light brown with white highlights. [Emphasis added.]

[36] The three specific and isolated instances of alleged confusion relied upon by Unitop, at the MVR wholesaler, the Circle K retailer, and the online Amazon purchase, were not the result of Exclusive’s actions.

[37] Unitop’s reliance on the use of UPC codes is not persuasive. The evidence is that Exclusive has the sole right to use the UPC codes in Canada.

[38] Although Exclusive has always owned the disputed UPC Codes, it gave permission to Unitop to use these codes when it was an authorized Canadian distributor for SESAME SNAPS. They do not belong to Unitop.

[39] With respect to the claims of “passing off”, Unitop changed to its New Design packaging for its SESAME SNAPS in 2020 and Exclusive started selling its ORIGINAL SESAME in 2021. The respondent submits that there has not been enough time to acquire distinctiveness in the New Design packaging for SESAME SNAPS, particularly the blue, white and red colours per se, so as to become a source identifier in eyes of the ordinary consumer. I agree. If a trademark is newly adopted, it is argued that it is generally to be presumed that it cannot have received wide acceptance in the eyes of the public.

[40] Section 7(b) of the Trademarks Act, R.S.C. 1985, c. T-13 (“Trademarks Act”) is a statutory codification of the common law of passing off. To succeed in a claim for passing off, Unitop must prove all of the following elements:

a. the existence of goodwill in Unitop’s purported trademarks;

b. deception of the public due a misrepresentation causing confusion; and

c. actual or potential damage suffered by Unitop.

[41] As noted by the Supreme Court in Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65, [2005] 3 S.C.R. 392, at para. 39, “[t]he foundation of a trade-mark is distinctiveness because only a distinctive mark will allow the consumer to identify the source of the goods.”

[42] In get-up cases, mere similarities between products are not sufficient; rather, the appearance of the plaintiff’s goods must act as a source identifier in the minds of relevant consumers. The Ontario Court of Appeal in Ray Plastics Ltd v. Dustbane Products Ltd., (1994), 57 C.P.R. (3d) 474 (Ont. C.A.) stated:

In an “appearance” or get-up case it is not enough simply to say that the former are very like the latter. It must be established that consumers have, by reason of the appearance of the goods of the plaintiff, come to regard them as having some one trade source or provenance, whether manufacturing or marketing, though it matters not that they have no idea at all of the identity of that trade source. [Emphasis added.]

[43] In this Application, there is no evidence that Unitop’s overall packaging get-up (New Design or Old Design), comprised of “distinctive blue, white, red and clear cellophane wrapping”, has become distinctive and acts as source indicator in the minds of relevant Canadian consumers.

[44] The second element of passing off requires deception of the public due to a misrepresentation by the respondent causing confusion in the public’s mind between a manufacturer’s product and a competing product. The test for confusion is one of first impression and imperfect recollection from the perspective of the casual consumer when he or she encounters the marks at issue: Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, [2011] 2 S.C.R. 387, at para. 40.

[45] The key target is the customer buying a sesame bar in the grocery aisle, not the wholesaler or retailer.

[46] Section 6(5) of the Trademarks Act sets out factors to be considered in determining whether trademarks are confusing. Section 6(5) provides:

In determining whether trade-marks or trade-names are confusing, the court or the Registrar, as the case may be, shall have regard to all the surrounding circumstances including,

(a) the inherent distinctiveness of the trademarks or trade-names and the extent to which they have become known;

(b) the length of time the trademarks or trade-names have been in use;

(c) the nature of the goods, services or business;

(d) the nature of the trade; and

(e) the degree of resemblance between the trade-marks or trade-names, including in appearance or sound or in the ideas suggested by them.

[47] The Supreme Court of Canada in Masterpiece held that the last confusion factor in section 6(5) – (e) resemblance in appearance, sound and meaning – is likely to have the greatest impact in any confusion analysis and should be considered first. If the marks do not resemble one another, then it is unlikely that even a strong finding on the other confusion factors will lead to a likelihood of confusion.

[48] Exclusive submits that there is no resemblance between its packaging for its ORIGINAL SESAME bars and Unitop’s packaging (both Old Design and New Design) for the SESAME SNAPS bars. I agree. Importantly, as mentioned above there is no evidence establishing that the purported “distinctive blue, white, red and clear cellophane wrapping” in SESAME SNAPS packaging has become distinctive in the minds of ordinary consumers.

[49] I find that, as there is no confusion between Exclusive’s ORIGINAL SESAME and Unitop’s SESAME SNAPS packaging, Unitop’s claims for passing off must fail.

[50] I also make no ruling on whether Unitop’s failure to produce any evidence on damages would have been determinative on this Application or its submission that this Application should have been bifurcated if it had been successful, as it is not necessary to do so.

[51] In light of my findings above, it is not appropriate to make an order for Exclusive to provide Unitop’s counsel with a list of all purchasers of ORIGINAL SESAME.

[52] For all of the above noted reasons, this Application is dismissed.

Costs

[53] As Exclusive is the successful party in this Application, it is entitled to its costs on a partial indemnity basis (which I find just and reasonable having regard for the factors set out in the Rules) in the amount submitted at the hearing of the Application. If the parties are unable to agree on costs by reason of the operation of the Rules as a result of offers to settle, Exclusive may make submissions of no more than two pages, double spaced copied to Unitop, uploaded to CaseLines with a copy sent to my assistant Roxanne Johnson at Roxanne.johnson@ontario.ca by 12 p.m. on August 7, 2023. Unitop may make submissions of no more than two pages, double spaced copied to Exclusive, uploaded to CaseLines with a copy sent to my assistant by 12 p.m. on August 16, 2023. No reply submissions will be accepted. If no submissions are received in accordance with these terms, they will not be considered and it will be assumed that the issue has been resolved by the parties.

Pollak J. Date: July 27, 2023