Federal Court Allows New Evidence Pursuant to Section 56 of Trade-marks Act, Allows Appeal

Federal Court Allows New Evidence Pursuant to Section 56 of Trade-marks Act, Allows Appeal

Swatch AG (Swatch SA) (Swatch Ltd) v Hudson Watch, Inc, 2018 FC 853

This case illustrates that marks which are merely descriptive of the wares, or of their geographic origin, will generally be awarded less protection – an important lesson for today’s business world that is built on branding.

The Federal Court (“FC”) allowed Swatch AG’s (“Swatch”) appeal of a decision of the Registrar of Trade-marks (“the Registrar”) allowing Hudson Watch Inc’s (“Hudson”) opposition to Swatch’s registration of its “iSWATCH” mark. Hudson believed it would be confusing with their “i watch” mark. [2, 54]. The issue was whether the new evidence provided by Swatch pursuant to Section 56 of the Trade-marks Act was sufficient to demonstrate that their mark “SWATCH” had acquired distinctiveness, thus eliminating the possibility of confusion. [12] Mr. Justice Roy found that the new evidence demonstrated the notoriety of the “SWATCH” mark, and that despite a certain resemblance between the marks, they are sufficiently distinctive to avoid confusion. [37, 46]

Background

In July 2013, Swatch applied for registration of the trade-mark “iSWATCH” in design form:

Hudson opposed to the registration of the mark, claiming that it was confusing with its mark, “i watch”. [2] The Registrar concluded there was a degree of resemblance between the marks in appearance and sound, and further found that the stylized lettering in “iSWATCH” gives the appearance that the mark is composed of two words – therefore increasing the degree of resemblance between the marks. [13]

In terms of inherent distinctiveness, the Registrar noted that Hudson’s mark had a low degree of distinctiveness, and that while Swatch’s mark was more distinctive, it was not very strong. [15] The Registrar also found there was no evidence of promotion, use or length of time either marks had been in use. [15-16] The Registrar indicated that such evidence would have been enough to “shift the balance of probabilities in favour of the Applicant (Swatch)”. [12]

New Evidence Demonstrated Acquired Distinctiveness of Swatch’s Mark

In their appeal to the FC, Swatch presented new evidence to attempt to bridge the gap identified by the Registrar. This new evidence included proof that Swatch had been selling their products in Canada since 1984 under the “SWATCH” mark, that their annual sales averaged between $4 million and $7 million from 2008 to 2016, and that their mark has a considerable presence on the Internet and social media. [24] Hudson did not cross-examine or contest this new evidence. [27] Swatch argued that this evidence was sufficient to demonstrate that there is no reasonable probability of confusion between the marks. Swatch further contended that Hudson’s mark is particularly weak since their mark is simply composed of an “i” with the name of the product itself (“i watch”). [29]

Hudson, on the other hand, did not offer any evidence related to the quality or distinctiveness of its mark. The FC held that “the statements in [Hudson’s] factum on the product’s growing popularity […] are not filed as evidence and they may therefore not receive any weight. At any rate their relative weight, had they been admitted, would have been minimal.” [30] The FC agreed with Swatch’s arguments and concluded that the new evidence submitted helped fill the gaps identified by the Registrar. [36]

The FC further noted that Hudson’s “i watch” mark has a weak distinctiveness, as it is generally descriptive of their product, [39] while the Swatch mark is an invented word or refers to a word whose meaning is not the product itself. [41] However, the FC decided not to conclude on inherent distinctiveness because it found that Swatch’s mark had acquired distinctiveness through the promotion of the product in Canada, to a degree that Hudson’s “i watch” mark does not have. [41] The FC found there was no reasonable likelihood of confusion of the marks, given Swatch’s known mark. [50]

Commentary

While the FC allowed the Appeal because the new evidence demonstrated that Swatch’s mark had acquired distinctiveness, the FC also emphasized on the possible repercussions of having a mark that is descriptive of the product. Citing Pink Panther Beauty Corp v United Artists Corp, [1998] 3 FC 534, the FC reminded that a mark that is descriptive of the wares or of their geographic origin will generally be awarded less protection, as “[i]t is not appropriate to allow a trade-mark registration to monopolize a word that is used regularly and frequently.” [39,43]

obviousness