Harley-Davidson Manages to Stop Sales of a (Trademark) Infringing Bike Built With Some of its Genuine Parts

The Canadian Federal Court recently handed us an interesting decision, in H-D U.S.A. c. Varzari (2021 FC 620), in which it enjoined an individual (and his business) from continuing to offer a sort of Harley inspired motorcycle, built using a custom frame and genuine Harley-Davidson parts.

Though the above sounds a little outrageous, the story is of course a little more complicated than that and, NO, we’re not dealing with the owners of the Harley-Davidson trademarks nuking the harmless personal project of a biking enthusiast. Instead, the case deals with an individual who visibly really likes H-D bikes and who decided not only to build his own version of that type of motorcycle, but also started selling it, under a name referring expressly to Harley-Davidson, in addition to using a logo clearly copied from one of HARLEY’s, in addition to using the iconic orange color for the frame, and opting to HARLEY-DAVIDSON parts and, maybe, claiming he did so a little too enthusiastically in his promotional materials.

The bike at issue was initially offered as the “Harley Davidson Willie G Edition”, a name which the defendant changed upon being contacted by HARLEY to “The ‘H’ Edition”. To give  you an idea of what we’re dealing with, here is a picture of the bike at issue, including the copycat shield logo and the orange color reminiscent of Harley’s iconic color:

So as to set the stage as to where this is headed, I should mention HARLEY owns Canadian trademark registrations as to several logos, including the following, in connection with motorcycles and various types of parts and accessories:

Not surprisingly, the court finds several instances of infringement here, and enjoins the defendant from continuing with his sale of the motorcycle model at issue. Given that the court concludes that orange for bikes qualifies as a common law trademark, coupled with the issue of the logo itself, infringement seems easy to justify in such a case but isn’t all that interesting.

However, what IS worth mentioning is the treatment by the Federal Court in this case of the issue of the inclusion (in the “The ‘H’ Edition” bike) of genuine HARLEY-DAVIDSON parts, in addition to a custom frame that the enthusiast designed and presumably had built to imitate a Harley-type bike. According to the judgement at issue, inclusion of such genuine parts, along with repeatedly claiming the parts of this bike came from HARLEY, contributed to the giving the average person an overall impression that the whole motorcycle may have been produced by or for HARLEY, or at the very least under its authority.

For the court, the fact that the defendant conspicuously included genuine HARLEY parts that were of course visible in the end-product, contributed to giving an overall impression to the average buyer that the whole machine was a HARLEY-DAVIDSON, even though that specific name and mark did not appear on the cycle itself.

If you look at the picture above, it seems the bike may have been offered without any markings showing any original brand or name, perhaps leaving potential buyers to draw a conclusion as to the origin of the bike by seeing a H-D-like shield on the frame along with the orange color, as well as various HARLEY marks imprinted on (genuine) components like handlebars, foot pegs, etc. Indeed, looking at the resulting product, the Federal Court judge had little difficulty agreeing that an average consumer would more than likely conclude that this bike came from HARLEY-DAVIDSON, including because of the display and use of several of HARLEY’s mark on the machine and its components. Though the court rejected the suggestion that the shape of the frame itself was a problem, having found a likelihood of confusion with several registered and unregistered marks of HARLEY, it made sense to award an injunction as well as damages against the infringer.

Though the court stopped well short of saying that including genuine HARLEY parts was a problem in the general sense, it did state that, in this particular case, the presence of those genuine (branded) components WAS part of the reason for the probable confusion. Looking at the overall resulting bike, one would be naturally lead to the conclusion that this bike had something to do with HARLEY, above and beyond just supplying parts, hence the infringements.

Notwithstanding the foregoing, however, after reading the decision, I don’t think anyone should read into it any major change of Canadian trademark law in general, or that relating to trademark rights exhaustion in particular. As has always been the case, anyone may continue to resell branded goods without the need to normally worry about looking over your shoulder, so to speak. At law, generally, it remains that reusing of reselling branded products, even to make something new is NOT a problem. It is the case in the U.S. and in Canada, and that rule isn’t going anywhere.

What’s new here, I think, is a willingness by a court to read into the (re)use of numerous genuine (branded) parts, as components for a new thing, an attempt at creating an overall impression that the whole thing (i.e. the bike) was produce by or under the authority of the original trademark owner. Is this likely if a single branded component has been used? Likely not. Is this likely if the resulting product is itself adequately (clearly) branded with a non-infringing mark? Probably not. Is this likely if a resulting product is showing a patchwork of third-party marks on components? Definitely not. etc.

So, though the result of this case seems interesting, I don’t think we should read too much into it. The theory of trademark rights exhaustion is alive and well in Canada. Rest assured.

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.

Reuse of Clips from a CBC Broadcast, in Online Ads, Held Fair Dealing

The Federal Court (la «F.C.») recently gave us a copyright decision worth mentioning in Canadian Broadcasting Corporation v. Conservative Party of Canada (2021 FC 425), a judgment that provides us with a rare interpretation and application of the exception relating to criticism.

As one may remember, the Copyright Act (the “Act”) contains a series of exceptions allowing reuse of copyrighted content to certain ends that fall under the category of what the act consider “Fair Dealing”. One of those (described in Section 29.1 of the Act) allows using works for purposes of criticism, a specific exception that the F.C. had the opportunity to interpret in the recent CBC case.

This decision stems from a lawsuit by the CBC against the Conservative Party of Canada (the “CPP”) further to the use of video segments from a political debate (originally aired by the CBC) in online advertising run in 2019, without permission from the CBC. According to the CPP, given that the goal of the political ads at issue was to criticize the Prime Minister, the use of portions of CBC broadcasts should be protected as fair dealing. Contrary to the usual attempt to invoke the exception at issue, the criticism in this case was not a criticism of the work being copied (the broadcast itself) but rather criticism of an individual shown on-screen and the ideas and views he expressed. So, the question stood: could such criticism qualify under Section 29.1 of the Act so as to protect the CPP from an infringement claim?

Upon examining the issue, the F.C. had to agree that the goal of the ads at issue was clearly to criticize the Prime-Minister and his views and decisions. Given this, the F.C. concludes we are indeed in a situation where copyrighted materials was used for purposes of criticism. Given the treatment of fair dealing by the Supreme Court of Canada (and others) over the past few years, such exceptions should be interpreted broadly, so as to balance adequately the rights of creators with those of users.

According to the F.C., the exception relating to criticism may of course extend to the works that are reproduced but may also apply in other cases, including criticism of ideas, values and anything that has been expressed in the works that were reused. In the case at hand, portions of political debates during which the Prime-Minister expressed certain views could thus be reused for purposes of criticizing him, his ideas and his handling of certain issues. At law, this was clearly criticism.

Doing so, the F.C. sets aside a common interpretation of Section 29.1 of the Act, namely that this exception was included in the Act to solely allow criticizing works, including for example by literary critics. On the contrary, according to the F.C., nothing in this provision of the Act restricts what the criticism at issue can relate to. The article at issue simply allows reuse for purposes of criticism, without specifying what the criticism must relate to.

After holding this was indeed a case of reuse for purposes of criticism, the court then applied the usual test to determine whether reuse of the materials at issue in this case has been “fair”, agreeing it has been. Given the fair dealing defense applied, the F.C. rejected the infringement proceedings against the C.P.C.

The F.C. decision at issue represents yet one more example of a trend, during the last few years, as courts gradually broaden the meaning of fair dealing exceptions under Canadian copyright law.