Seven deadly sins of joint ventures under competition law
Joint ventures in the energy and resources sectors.
The Federal Court of Appeal has released another decision solidifying the court’s recent trend1 of refusing to recognize geographical marks that are descriptive of place of origin: MC Imports Inc. v. AFOD Ltd., 2016 FCA 60.
The appellant, an importer, packager and distributor of fish and seafood products, registered and used the trademark LINGAYEN in association with its products. When the appellant brought an action for infringement of its trademark, the respondent argued the trademark was invalid as being clearly descriptive or deceptively misdescriptive of the place of origin—Lingayen is a municipality in the Philippines known for its shrimp paste products.
The court confirmed that the purpose of the rule against trademarks that are clearly descriptive of the place of origin is to prevent a monopoly over a location description to the detriment of competitors in the same geographic area.
The court then went on to consider what has been viewed as conflicting approaches to geographical marks in the cases Parma2 and Leyda3. In Parma, the issue was whether PARMA was deceptively misdescriptive when used for meat products not from Parma, Italy. The court concluded that the ordinary consumer in Canada was not generally aware of Parma as a region of Italy known for meat products. Therefore, the trademark was not “deceptively misdescriptive” of a place of origin. That line of reasoning is consistent with Justice Cattanach’s well known decision in The Noshery4, where he wrote that the issue is whether there is “a well known and generally recognized connection of the article with the locality.”
In contrast, in Leyda, the court rejected LEYDA, a proposed trademark for use in association with wine produced in Leyda, Chile, on the basis that “place of origin” is not dependant on the knowledge, or lack thereof, of the average Canadian consumer.
The approach in Leyda has been criticised by several commentators on the basis that public perception is and should be relevant. However, in the present case, the Court of Appeal expressly disagreed, holding that the findings in Parma and Leyda are not inconsistent because different considerations apply to whether a mark is “clearly descriptive” or “deceptively misdescriptive” of a place of origin. The Court then set out three considerations for marks alleged to be clearly descriptive.
The first consideration is whether the trademark is a geographic name. This is a factual consideration, and whether or not a place is widely known to Canadians is irrelevant. Only when a geographic place has multiple meanings—for example, “Sandwich” is the name of a number of towns, but also a food item—will the perception of ordinary consumers be relevant to determine which is the primary meaning. In such cases, the relevant consumer is the ordinary consumer of the products or services with which the trademark is associated.
The second consideration is the place of origin of the goods or services in question. If the goods or services originate from the place referred to by the trademark, then the trademark is “clearly descriptive” of the place of origin. If the trademark refers to a geographic place that is not the place of origin of the goods or services, then it cannot be “clearly descriptive” and the question becomes whether it is “deceptively misdescriptive”. In this case, the fish products did originate from the municipality of Lingayen. The court therefore declined to elaborate on the test for when a trademark is deceptively misdescriptive of a place of origin, other than to note that consumer perception is relevant in such cases.
The third consideration is the trademark owner’s assertion of prior use. The court maintained that if the trademark has acquired distinctiveness at the date of application, it will nevertheless be registrable, pursuant to s. 12(2). However, the burden is on the registrant to prove that its trademark has acquired distinctiveness from the perspective of the relevant ordinary consumer—people who actually use the product or service in question. In this case there was no evidence the trademark had become distinctive at the date of application, and the mark was therefore expunged.
This decision clarifies the approach to “place of origin” under s. 12(1)(b) of the Trade-marks Act, and makes it apparent that in future it will be very difficult to register a trademark that accurately describes the place of origin of the goods or services, unless the trademark has acquired distinctiveness.
This case also suggests that the test prohibiting “clearly descriptive” trademark registrations is objective: consumer perception is irrelevant; while the test prohibiting “deceptively misdescriptive” trademarks is subjective and thus depends on consumer perception. To take a practical example, this means that for oranges grown in California, one could not register CALIFORNIA as a trademark (because it is clearly descriptive of the place of origin, irrespective of consumer perception), nor FLORIDA (because the state is well known for its oranges and thus deceptively misdescriptive), but VANCOUVER would be registrable for the oranges because they are not grown in Vancouver and Vancouver is not, and is not known as, a citrus growing region.
In this way, the relevance of consumer perception has crystalized, reconciling two lines of authority on the subject and distinguishing between the tests for clearly descriptive and deceptively misdescriptive trademarks.
Authored by Madeleine Hodgson.
1 See Lum v. Dr. Coby Cragg Inc., 2015 FCA 293
2 Consorzio del Prosciutto di Parma v. Maple Leaf Meats Inc.,  2 FCR 536.
3 Sociedad Agricola Santa Teresa Ltd. v. Vina Leyda Limitada, 2007 FC 1301.
4 Great Lakes Hotels Ltd. v. Noshery Ltd. (1968), 56 CPR 165 (Ex Ct); see also, Atlantic Promotions Inc. v. Canada (Registrar of Trade Marks) (1984) 2 C.P.R. (3d) 183 (F.C.T.D.)
Joint ventures in the energy and resources sectors.