Category Archives: Trademark Confusion

SUBWAY vs. BUDWAY: Federal Court Sides with Sandwich Restaurants Against Cannabis Store

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The Federal Court recently provided us with an excellent example of a company acting to curb use of a third-party trademark inspired from its own, in Subway IP LLC v. Budway, Cannabis & Wellness Store (2021 FC 583).

The facts at issue may have started by a couple of guys watching the sitcom How I Met Your Mother, and hatching a plan to open a store to sell cannabis-related products, the name of which would be a sort of play on words on a well-known restaurant chain and a word suggestive of pot selling. The unfortunate name they landed on was BUDWAY, which they then elected to present, graphically, using a logo they designed based on the very logo the SUBWAY chain uses. If you’re curious, the result was essentially the following, showing this “new” logo side-by-side with the original:

As we can all see (and as agreed by the court), the BUDWAY logo was more than likely purposely designed to imitate SUBWAY’s own, taking key features of that logo (including shape, font and arrows at the end of certain letters), even going so far as to use the green color often used throughout SUBWAY restaurants. In short, the defendant copied a third party’s name and logo, basically parodying it for their own purposes. Ah ha, funny.

Thought it may have been meant as a sort of joke, the Federal Court judge agreed with Subway restaurants that, at law, this was no laughing matter. Indeed, Subway managed to show how use of this “new” trademark was likely to cause confusion with their own trademark, constituted infringement, and how it was even likely to lead to the depreciation of the goodwill associated with the business tied to the SUBWAY trademark. The plaintiff managed to show evidence that BUDWAY store sold edibles, including cookies, which turns out to be problematic because of the presence of cookies in Subway trademark registrations. To boot, the evidence also showed that Budway created and used promotional materials showing a character in the form of a sandwich. Both these overlaps allowed the court to find sufficient commonalities and a resulting likelihood of confusion, etc.

Consequently, the court found infringement, passing off and a risk of depreciation of goodwill. Though the damages awarded were somewhat modest, all materials bearing the mark were confiscated, Budway also had to pay for costs, and the business is now enjoined from using the BUDWAY trademark.

In short, Subway managed a slam dunk, only failing to get punitive damages -something the court felt was not quite justified even under these circumstances. In the process, the court provides one with one more example of the fact that parody is NOT something Canadian trademark law allows. Trademark infringement remains infringement, even if the creator of the 2nd mark may have meant it as a tongue-in-cheek reference to another mark.

Eh, who knew: if you start a business, maybe it’s not the best idea to start by obviously copying a third party’s mark, including as to its name AND logo, and then compounding the problem by making references to the other party’s products in your promotional material, as plainly visible on social media. Whether your business is the same of the original trademark owner’s, or not, too clearly referencing another mark is ripe with risks.

Piece of Cake! Vachon Wins HOSTESS Infringement Lawsuit for Bread

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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.