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.

So, Trademark Registration in the U.S. and Canada Works the Same, Right? Well, Sort of…

Though Canada the United States shares general principles relating to trademark law, differences do exist. As is often the case, the devil is in the details. Businesses that contemplate offering their products or services in the U.S. would do well to take these into consideration, especially when searching or filing trademark applications across the border. With that in mind, I thought I’d share a few of the difference I’ve come across practicing in the area of trademark over the past 20 years or so:

  • The trademark registers of our two countries aren’t organized the same. While Canada has a single federal register, the U.S. has both a federal register and state ones. This should be taken into account with performing an availability search. Furthermore, at the federal level, the U.S. also offers applicants with the possibility of opting to try and register their mark on the main register (the usual one) or on the Supplemental register, a 2nd register meant to offer a lesser protection to marks that are descriptive or lacking in distinctive character to a point where they don’t qualify for normal trademark registration.
  • The concept of “use” and how it is applied also differ to a degree between the U.S. and Canada. Though the idea of insisting that a mark have been used in the marketplace to grant it legal protection is common to both jurisdictions, the details of how that’s put into practice do differ. For example, the U.S. does generally insist that a mark be used in the U.S. to obtain registration there. In fact, not only is that the rule but applicants are required to show it is the case, prior to obtaining a registration certification, at the end of the trademark prosecution process. Not so in Canada, where you can now obtain registration without so much as claiming you’ve used a mark. On that front, one should note that use still technically IS a requirement, just not one the Canadian Trademarks Office wants to bother checking for. The result is that marks that have not actually been used in Canada may be applied for and registered, subject however to third parties potentially either blocking the application (by an opposition) during the process, or invalidating the registration, once it has been given, based on the lack of actual use.
  • Speaking of use, Canadian business that obtain U.S. registrations should also beware of a peculiar requirement, under U.S. law, that use be demonstrated again, after the 5th year of registration, mid-way through the 10 year registration term. Foreign applicants may receive notice but should take note of the fact that the USPTO will not notify foreign trademark agents, only American ones. Registrations that fail to show use after the 5th anniversary may later be surprised to find it out their registration has been stricken from the register. Canada has not such requirement, and the 10 year anniversary is the only one to docket, once you manage to register a mark.
  • Yet another difference between Canadian and U.S. trademark practice has to do with a requirement that 2019 amendments to the Canadian Trademarks Act removed but which still exists in the U.S. The requirement at issue relates to bases of filing, which split trademark application in different types of applications, if you will, depending on what the applicant is relying on to justify its application. The Canadian system included such a requirement until 2019, but now simplified its system by eliminating this refinement. In the U.S., however, applicants are still required to opt for a specific type of application, namely applications based on foreign registrations and the more usual applications based on actual use or those for marks for which the applicant merely has “intent to use” (or ITU). Each of these types of application has its own rules and requirements that may change how prosecution is handled and what the applicant will need to submit, and when.
  • Along with bases of filing, Canada’s 20190 overhaul of its trademark system also got rid of what we refer to as “waivers”, something that is still very much a part of U.S. trademark practice. Waivers correspond to a statement made by a trademark applicant and recorded against a given application (and the resulting registration) that the owner of the mark waives its right to pretend, later one, that a specific part of the mark may not be used by third parties. In practice, such waiver will generally be required when a mark includes a portion that completely lacks distinctive character or that is outright descriptive. A good example would be a mark associated with brewed beverages that includes the word “BEER”. Though the USPTO still requires such waivers, CIPO no longer does, rather looking at the whole mark to determine whether it is descriptive or so completely lacks distinctive character so as to be unregistrable.
  • The two countries also differ as to acceptable descriptions of goods and services, in trademark applications. Though both jurisdictions now apply the Nice classification (of goods and services), both of their own list of specific descriptions that are acceptable, and each applies specific rules as to language in applications. As a result, a description that sails through examination in one country may be objected to by an examiner in the other country. The description of goods and services contained in an application should generally be reviewed to make sure it complies with the requirements being applied in the country at issue, or face an objection during prosecution of the application.
  • Foreign applicants confronted with an objection by the examiner may be surprised to learn that Canadian practice also differs from the American one, in that CIPO examiners will generally (always, in my own experience) refuse to give any real weight to third-party consents. As you may know, abroad, such “consents” will often be sought from third-parties the marks of which have been cited by examiners against pending trademark applications. After all, once the owner of a conflicting mark tells the trademark office that it does not object to the new mark because it does not foresee any confusion resulting from both marks coexisting, why should the examiner keep objecting? As in many foreign jurisdictions, this works fine in the U.S., where such consent letters are often provided to the USPTO, as a way of getting around confusion-based on objections. In Canada, however, CIPO unfortunately often takes the position that its examiners make the call as to what may lead to confusion, not the parties themselves. As a result, though we do sometimes try to use such consent letters, Canadian examiners are notoriously difficult to convince to rely on them to allow problematic applications through.

The foregoing are but some of the differences I’ve noticed as to how trademark applications and registrations are handled in the U.S. and in Canada. As you can see, our system do look alike, but important differences also do exist.

I would end this post cautioning trademark owners against assuming that registration in one country does mean foreign protection may be sought or obtained, or even that opting to use that mark in that other country is viable. Indeed, one should always keep in mind, and that goes for trademark but also many other type of intellectual property rights, that availability or protection of a mark in one country may mean nothing once a border is crossed. In practice, we often see cases where a mark is used and registered in Canada, only to prove unusable and/or impossible to register in the U.S., or conversely. The same goes for any other country, I would add. Don’t assume, check, earlier on in your process; ideally, check upon selecting the mark, even if your plans don’t involve use of the mark in the foreign mark at issue before a few years. Doing so will be money well spent, trust me. Search for Canada, search for the U.S., and don’t perform an available by simply looking for exact matches  on the Web, a real trademark availability search requires more, much more.