Piece of Cake! Vachon Wins HOSTESS Infringement Lawsuit for Bread

The Federal Court recently rendered a decision that seems worth discussing as a to a trademark infringement matter involving the (relatively) well known Québec bakery Vachon. The decision at issue, Boulangerie Vachon Inc. v. Racioppo (2021 FC 308) centers primarily on a matter of trademark confusion between a business known for its cakes, pies and the like, and a new comer on the Canadian market that elected to go with the HOSTESS trademark to sell bread, knowing Vachon owned the mark for other types of products.

The piece of litigation at issue started when the owner of the defendant corporations was given the impression that Vachon (and its predecessor in title), notwithstanding owning the HOSTESS trademark in Canada, wasn’t interested in bread products. Seeing this, the defendant started selling bread in Canada, which it did from 2016-2017 to 2019, only to realize too late that Vachon had in fact started to sell bread before his business did. See where this is headed?

Yup, you read this right: someone saw the mark and who it belonged to and decided that since Vachon didn’t (then) sell bread, it was fair game to do so through his own company. After all, there’s no link between bread and cakes right? Yeah, completely different things. I’m guessing this guy did not obtain advice from counsel (or an agent) before making his decision.

The case is a pretty good example of good infringement proceedings, in a case where the marks are essentially the same (notwithstanding different logos) and the goods are definitely in the same area, including by being sold in the same types of stores, generally in proximity on store shelves. Not too surprisingly, the judges ends-up siding with Vachon and agreeing that, under circumstances such as these, confusion is more than likely. Yeah, HOSTESS for bread vs. HOSTESS for cakes, cookies, muffins, etc. Who could have foreseen this coming?

One thing that seems worth mentioning as this judgment, is the court agreeing that not only was this a case of infringement but also one of goodwill depreciation, under Section 22 of the Trademarks Act. As you may know, though this is often tried by plaintiffs, it is not something Canadian courts have traditionally been too fond of granting. This time, however, the Federal Court judge agreed that use of the HOSTESS trademark on bread products from a source other than VACHON did not just infringe the rights of the mark owner but that it also depreciated the value and the distinctive character of the original mark. This is encouraging for mark owners in Canada.

That said, I should point out the end result is a little lackluster, as the Federal Court awards an injunction (of course) and… $10,000 in nominal damages. Given the fairly limited scope of the infringing activities (something like $70,000 in sales, and profits around $5,000), the court felt this was reasonable amount, under the circumstances.

Finally, one other point is somewhat unusual with this case, with the plaintiff attempting to obtain that the companies’ principal be personally held liable, something Canadian courts are often reluctant to do. Not too surprisingly, the judge held this case did not justify finding Mr. Racioppo personally liable. Though Vachon tried to argue the individual was clearly to blame for his recklessness (we knew of VACHON’s trademark full well), in the end the court elected to consider the principal’s behavior did not necessarily reach the level of culpable behavior that would justify holding him liable. For the court, one could look at this fact-pattern as a simple case of an ordinary course business decision that wasn’t entirely devoid of rational basis, if not for Mr. Racioppo’s mistaken belief that a competitor not making a specific type of product (i.e. bread) made it fair game for him and his business.

So, the lesson here, I guess, is that you shouldn’t assume that the listing of products and services in a registration are all there is to it. Sure, looking at the register is useful, but one should always remember that confusion takes much more than just the product listing into consideration.

Québec Looking to Curtail English (and Other Languages) Trademarks Through Revised French Charter

The Québec government recently tabled a bill, called Bill 69, that seeks to amend several statutes, including the province’s Charter of the French Language, so as to better protect the French language. This bill seeks to consolidate existing rules, so as to reinforce the idea that French is the sole official language of the province of Québec, including in principle in how business is conducted.

Interestingly, as to I.P., the revised Charter would do away with an exception that legislators had inserted in the original statute, namely that trademark were generally exempted from complying with normal rules, including on store signs. Indeed, up to now, the Charter accepted that trademarks, whether registered or unregistered, were essentially outside the scope of what could be regulated by this provincial statute. As such, the OQLF could hardly enforce rules meant to force businesses to use and display French (e.g. on store signage, etc.), whenever trademarks were involved. This lead many businesses to adopt and use English-based trademarks, something that Québec courts eventually confirmed as totally acceptable under the existing Charter of the French Language.

This provides context to Bill 69’s introduction, as the Québec government is clearly now attempting to slam the door shut on that trademarks exception, to the fullest extent (legally) possible. To do, the revised version of the French Charter would essentially restrict what are considered trademarks for purposes of the exception explained above. If/when the bill goes through, the only trademarks that would remain considered protected from the obligation of being shown in French, are marks that have been duly registered, period. In effect, this would do away with trademarks displayed by businesses that did not bother or did not manage to register in Canada.

Québec cannot forbid non-French trademarks (because of the Canadian Constitution), but it can try and restrict what it will consider a trademark for the purposes of its language laws, which is exactly what this is about.

Setting aside the issue of whether legally a province may do something like this, businesses may want to start preparing for the proposed changes to the French Charter, by simply registering their marks, assuming they haven’t done so already. Though large companies will usually have done so, a lot of small and medium sized businesses do not bother registering their marks, preferring to fall back on common law rights. If those marks are in a language other than French, this may soon become a problem.

Fortunately for SMEs, registering a mark in Canada is relatively inexpensive, as compared to other jurisdictions. Businesses should however take note that typical delays are now around 3 years to register a mark in Canada. Given that the French Charter’s new provisions on trademarks will come into force 3 years after adoption of the bill, businesses the trademarks of which have not already been registered may want to get on it.

Mind you, Bill 69 has not yet been formally adopted but with a majority government in Québec at the moment, it seems to make little doubt that the bill will be adopted at some point.

Allowing Insurers to Pay Ransoms from Ransomware Attacks: A Bad Good Idea

Faced with a seemingly endless series of cyberattacks through ransomware, some businesses are now turning to insurers to make sure they are in a position to pay eventual ransoms. Insurers indeed realized a while back that some companies would pay to insure against the risk of facing cyberextortion and having to pay to recover their own data. Once insured with such coverage, a business can essentially have the insurer pay the ransom that cybercriminals are requesting once the business falls victim to ransomware that encrypts its data.

Recently, the European insurer AXA decided to stop offering this type of coverage, in France, including because of certain comments from French authorities about the fact this type of coverage was essentially counterproductive and, as such, may be something that France would soon prohibit. Indeed, according to many (including the FBI), the existence of insurance coverage of this type in fact encourages the ransomware industry, because it increases the odds of managing to convince the typical victim of such a cyberattack to pay a ransom.

In what may be a clue that not offering this type of coverage does play into the hands of criminals, shortly after its announcement, AXA’s Web servers were the object of a DDoS attack from criminals, in what may be seen as retaliation. It seems criminals do want insurers to keep paying ransoms, which may be a reason to rethink allowing it, in the future, if you ask me.

Even though forbidding payments by insurers is not likely to stop ransomware, many are now calling for a global strategy that may allow us to collectively fight the problem, including by stopping  to throw oil on the fire, so to speak. Sure insuring against this risk is convenient but is it the right thing to do in the grand scheme of things? The question stands.