2012 QCCA 593 (March 30, 2012)
Overview
The Court of Appeal of Quebec reversed the Superior Court of Quebec's precedent-setting decision to award $125,000 in damages and costs due to the plaintiff having commenced an unfounded and frivolous proceeding, contrary to Quebec's anti-SLAPP ("Strategic Lawsuits Against Public Participation") provisions, under Quebec's Civil Code of Procedure. This decision of the Court of Appeal of Quebec is important as it reiterates the right of a trademark owner to defend its trademarks through opposition and court proceedings, without this necessarily resulting in a finding of an abuse of process under the Quebec anti-SLAPP provisions.
Abstract
The appellants, Industries Lassonde Inc. and its subsidiary A. Lassonde Inc. (collectively "Lassonde") manufacture and sell food products, especially juices and fruit drinks, under several trademarks, including the registered trademark OASIS. L'Oasis D'Olivia Inc. ("Olivia") is a company in the business of importing, selling and distributing olive oil-based body and skin care products. Lassonde unsuccessfully opposed Olivia's registration for the trademark OLIVIA'S OASIS & Design in association with body and skin care products. While such application and opposition proceedings were still pending, Lassonde sued Olivia in the Superior Court of Quebec ("Superior Court") for trademark infringement and sought three remedies, namely 1) an injunction to refrain Olivia from using the trademark OLIVIA'S OASIS & Design, 2) an accounting of all sales generated under the trademark OLIVIA'S OASIS & Design and an order condemning Olivia to pay profits realized from those sales, and 3) exemplary damages of $20,000. The Superior Court dismissed Lassonde's action and awarded Olivia $25,000 in punitive damages and $100,000 in extrajudicial fees and costs on the basis that Lassonde's cause of action was manifestly unfounded and frivolous and constituted an improper use of the court procedure. Lassonde appealed this decision only in relation to the improper use of procedure and the corresponding award of $125,000 in damages. The Court of Appeal of Quebec ("Court of Appeal") found that there was no proof of Lassonde's bad faith or improper use of procedure under Quebec's anti-SLAPP provisions, and repealed the $125,000 award. The Court of Appeal held that the award for extrajudicial fees and costs was not supported by the evidence and that the requirements for granting punitive damages had not been met in this case.
Facts. Lassonde has manufactured and sold food products, especially juices and fruit drinks, in association with several trademarks, including the registered trademark OASIS and various versions of same, since 1965. Lassonde also registered the trademark OLINDA in 2006 in association with edible olive oil and olive oil blends. Olivia, which was incorporated in 2003, imports, sells and distributes body and skin care products produced exclusively in Turkey, which feature pure olive oil as an essential ingredient. Since 2004, Olivia has been selling a variety of body and skin care products in association with the trademark OLIVIA'S OASIS and Leaf Design. In 2005, Olivia filed an application to register the trademark OLIVIA'S OASIS & Design with the Registrar of Trademarks in association with diverse body and skin care products. Lassonde opposed the pending application, notably on the basis of confusion with the OASIS and OLINDA trademarks. However, on July 26, 2010, the opposition was dismissed and the Registrar granted Olivia's application for the trademark OLIVIA'S OASIS & Design.
OLIVIA'S OASIS & Design
Concurrently to the pending opposition to OLIVIA'S OASIS & Design, Lassonde instituted an infringement action in the Superior Court against Olivia on the basis of sections 6, 20 and 22 of the Trademark Act ("Act"). The Superior Court dismissed the action and ruled that there was no infringement or depreciation of goodwill and that Olivia's trademark was not confusing with the trademarks OASIS or OLINDA owned by Lassonde. In so finding, the Superior Court concluded that the evidence did not support a finding of confusion due to the visual dissimilarities between the trademarks and the important differences between the nature and use of the wares, their prices, targeted clientele and placement in the channels of trade. At the end of the trial, Olivia made a verbal motion under the Quebec anti-SLAPP provisions, namely articles 54.1-54.6 of the Civil Code of Procedure ("CCP"), on the basis that Lassonde's cause of action was manifestly unfounded and frivolous, and that Lassonde used "menacing and abusive conduct" to dissuade, intimidate and thwart Olivia from legitimately using its trademark. The Superior Court granted the motion and awarded Olivia $25,000 in punitive damages and $100,000 in extrajudicial fees and costs on the basis of improper use of procedure.
In September 2010, Lassonde appealed this decision to the Court of Appeal, but only on the finding of improper use of procedure and the corresponding award for extrajudicial fees, costs and punitive damages.
Analysis. On appeal, Lassonde advanced three main arguments concerning the finding of improper use of procedure. First, Lassonde claimed that their conduct was not reprehensible and did not amount to an improper use of procedure. Second, Lassonde argued that Olivia's verbal motion pursuant to articles 54.1-54.6 of the CCP should not have been considered by the Trial Court as it was made too late in the proceeding. Third, Lassonde claimed that upon a finding by the Court of Appeal that it engaged in improper use of procedure, the Superior Court should have made a determination of the amount of the award based on proper evidence of the actual extrajudicial fees and costs disbursed by Olivia. Lassonde also submitted that they should have had the right to contest this evidence.
On the issue of improper use of procedure, the Court of Appeal found that the evidence did not support Olivia's argument that Lassonde was using legal proceedings to intimidate and ultimately dissuade Olivia from registering the trademark OLIVIA'S OASIS & Design and use the word "oasis" in association with its products. In support of this conclusion, the Court of Appeal found that Lassonde had the right to use all legal proceedings established by law to defend its trademarks, even if this involved a strategy that combines an opposition proceeding with an injunction proceeding in civil court. In making this finding, the Court of Appeal relied on an article written by Ekaterina Tsimberis of our Montreal office, reiterating the principle that the two proceedings constituted a strategy with two distinct aims; i.e. the opposition proceeding before the Canadian Intellectual Property Office aims at preventing an applicant from registering the trademark in question, whereas the injunction proceeding before the court of competent jurisdiction aims at preventing use of the trademark by an infringer.
The Court also found that Lassonde's cause of action was not manifestly unfounded as there was a serious issue to litigate, which was pursued in good faith by Lassonde. This was evidenced by the five-day trial and the significant portion of the Trial Court's decision dedicated to the analysis and conclusion on the issue of confusion.
The Court of Appeal further found that the circumstantial evidence submitted by Olivia of the actual extrajudicial fees and costs it disbursed in the defense of Lassonde's action during the Superior Court trial was insufficient and irrelevant. The Court concluded that, by law, Lassonde's good faith should be presumed and that bad faith should not have been inferred from Lassonde’s past behavior with various third parties it regarded as infringers, or by a 25-year-old Federal Court decision on the weakness of Lassonde's trademark OASIS. Hence, the Court of Appeal found that Lassonde did not abuse its rights as conferred by the Act.
In response to Lassonde's second argument, the Court found that the $100,000 award for extrajudicial fees and costs was not justified or supported by sufficient evidence, and that the requirements for granting punitive damages had not been met. Consequently, the Court of Appeal reversed in part the decision of the Superior Court and repealed the total award of $125,000.
Finally, the Court of Appeal found that under articles 54.1-54.6 of the CCP, a court had the discretion to grant, at any time before judgment is rendered, an award on the basis of an apparent abuse of process, but that the rules of the adversarial system should still be followed.
Conclusion
The Court of Appeal's decision is important in that it reiterates a trademark owner's right to fiercely defend its registered trademark rights against potential infringers using a litigation strategy that involves both opposition and injunction proceedings. The Court of Appeal stated that this strategy is not only consistent with current practice, but is essentially an obligation for a trademark owner to ensure that its trademark rights are not diluted or infringed. Although the civil courts have full discretion to use Quebec's anti-SLAPP provisions, namely articles 54.1-54.6 of the CCP, in instances of improper use of procedure, this decision of the Court of Appeal is a reminder that this discretion cannot overcome evidentiary burdens and fundamental rules of Quebec's adversarial system.
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