2012 ONSC 927 (March 01, 2012)
Overview
The Ontario Superior Court of Justice found that the respondents had violated the Competition Act by making false or misleading material representations so as to appear to be related to the Yellow Pages Group, inter alia, by using trademarks of the Yellow Pages Group, or close variants thereof, including the words "Yellow Page" and the "Walking Fingers" design. This decision is a reminder that section 74.01 (1)(a) of the Competition Act is not concerned with determining matters of trademark validity or infringement but rather whether materially false or misleading representations were made. It is also noteworthy for its international aspect, as well as for the administrative monetary penalties imposed amounting to $9 million, the highest penalties ever awarded in contested deceptive marketing proceedings in Canada, and representing the first decision in a contested proceeding to test the new penalty regime imposed three years ago.
Abstract
The Yellow Pages Group ("YPG") has used the trademark YELLOW PAGES and the "Walking Fingers" design since 1954. In early 2010, the respondents, who operate Internet directory websites in multiple jurisdictions, began using the words "Yellow Page" and the "Walking Fingers" design, or variants thereof, in various ways, including on unsolicited communications to consumers in 13 Internet domain names, and directly on their website, the display features of which were "remarkably similar" to the business directories of the YPG. In view of numerous consumer complaints, the Commissioner of Competition (the "Commissioner") applied for various orders against the respondents. These included a declaration that the respondents had made representations to the public that were false or misleading in a material respect, contrary to section 74.01(1)(a) the Competition Act ("Act"), insofar as the respondents were promoting their business interests through false or misleading representations, which caused thousands of Canadians to believe they were doing business with the YPG. In this regard, the Court held that the issue of whether the respondent's conduct constituted trademark infringement was not at issue in the application that pertained to allegations of materially false or misleading representations as part of a concerted effort to appear related to YPG.
Case summary
Facts. The respondents are entities that operate Internet directory websites and engaged in conduct causing thousands of Canadian businesses, individuals and organizations to falsely believe that they were related to YGP. YPG has distributed the well-known "Yellow Pages" telephone directory since 1908 and owns a number of associated trademarks in Canada, including YELLOW PAGES and the "Walking Fingers" design, certain of which have been in use since at least as early as 1954.
On or around December 2009, prior to having operations in Canada, the respondents proceeded to register 13 Internet domains for websites that used or closely approximated YPG's trademarks. Moreover, the respondent's website, which was operational as of January 2010, displayed features "remarkably similar" to YPG's business directories. As of January 2012, the respondent began sending unsolicited faxes, which already contained certain information, and asked the recipients to fill out, complete or update such information.
Courts and regulatory authorities had already taken legal action in a number of jurisdictions, including in the U.S., the U.K. and Australia, to end the same or similar conduct by the respondents. WIPO had also ruled that the respondents' conduct in connection with their Australian websites was seriously misleading and the Hague District Court had granted YPG an injunction prohibiting the use by the respondents of the "Walking Fingers" design. The case had a truly international aspect to it, resulting in the Competition Bureau in Canada working with its counterparts in the U.S., the U.K. and Australia.
In response to thousands of claims from Canadians that they had been misled by the respondents' communications, the Commissioner brought an application alleging that the respondents' entire business was based on false and misleading representations that they were, in fact, someone else, and seeking various remedies, including a declaration that the respondents' activities violated section 74.01(1)(a) of the Act. The Commissioner also ordered for restitution of monies paid, as well as sufficient monetary penalties to ensure the respondents' future compliance with the Act.
Analysis. Under section 74.01(1) (a), the Court had to determine whether the respondents' conduct was "false or misleading in a material respect" such that "an ordinary citizen would likely be influenced by that impression in deciding whether or not to purchase the product being offered."
In reviewing the evidence, the Court concluded that the unsolicited faxes sent by the respondents were designed to appear to have been sent from YPG and to falsely convey the idea that the recipient already had an account, thereby giving the impression that they were simply updating an existing record with YPG or obtaining a new benefit therefrom. The Court also concluded that the respondents made similar misrepresentations in their domain names, invoices, reminder notices and letters sent to the recipients.
The Court concluded that the materiality of the misrepresentations was evidenced by the fact that in purchasing the respondents' services, Canadians believed that they were dealing with YPG and would never have ordered the service if they had known they were dealing with the respondents.
In their defence, the respondents had argued that the statements could not be false or misleading, as the YELLOW PAGES trademark and the "Walking Finger" design were not distinctive of YPG, but had become generic for business directories, as had been alleged by the respondents in expungement proceedings before the Federal Court. In support of this argument, the respondents relied on survey evidence filed in such proceedings, which they alleged indicated that 50% of Canadians identify the YELLOW PAGES trademark as a descriptive term associated with more than one company or do not associate it with YPG.
However, the Court rejected this argument, noting that the issue in the application was not trademark violation, but whether the respondents had made materially false or misleading statements as part of a concerted effort to appear to be related to YPG. The Court found that, whatever the result of the expungement proceedings, it was clear from the evidence that the respondents had traded upon the reputation of YPG and had falsely represented that they had a pre-existing relationship with the customers solicited.
Moreover, the Court also noted that the survey evidence invoked by the respondents did not, in any event, fully support their case since it showed that 66% of the test group participants identified the term "YELLOW PAGES" as a brand name not associated with the respondents and 23% of that group identified YPG as the brand source.
As such, the Court ultimately found that the respondents had made representations to the public that were false or misleading in a material respect, contrary to section 74.01(1) (a) of the Act, and issued a declaration accordingly stating that any contracts entered into between the respondents and any Canadians are null and void. The Court also granted several other remedies requested by the Commissioner, including a prohibition Order pursuant to section 74.1(2) of the Act, an order that the respondents disseminate corrective notices pursuant to section 74.1(1)(b) of the Act, and restitution orders to repay all payments received from Canadians pursuant to section 74.1(1)(d) of the Act.
Most notably, the Court imposed very high administrative monetary penalties ("AMPs") pursuant to section 74.1(1)(c) of the Act against the corporate respondents in the amount of $8 million dollars, as well as AMPs of $500,000 against two individual respondents, in view of various factors, including the similar if not identical conduct of the respondents in other jurisdictions. Three years ago, the maximum AMPs payable for deceptive marketing practices in Canada were increased to $10 million for corporations. The prior cap had been a mere $100,000.
Conclusion
This Ontario Superior Court decision shows that trademarks, or close variants thereof, cannot be used as part of a concerted scheme to pass oneself off as being related to another, even in situations where the distinctiveness of such trademarks is questioned. The ultimate question in cases pursuant to section 74.01(1)(a) of the Act is whether false and misleading material misrepresentations were made.
This decision also serves as a serious warning to those businesses who seek to trade on the reputation of competitors to further their own business interests, including through the use of a competitor's trademarks, especially in view of the substantial penalties that the Court appears willing to impose in light of the new AMPs regime.
Emilie Dubreuil and Alexandrine Huck-Ananou, Montreal
The assistance of Andrea C. Kroetch, Ottawa articling student, is gratefully acknowledged.
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