A "Fresh Start": Clorox appeal provides opportunity to clarify standard of review

In the Supreme Court of Canada’s (“SCC”) recent decision in Canada (Minister of Citizenship and Immigration) v. Vavilov (2019 SCC 65), the SCC provided an overview of its jurisprudence concerning appellate standards of review and clarified the standard of review regime applicable to Canadian courts going forward.

In the months since that decision, few appellate cases have provided judges with an opportunity to apply the new regime in practice. In The Clorox Company of Canada, Ltd. v. Chlorotec S.E.C. (2020 FCA 76), the Federal Court of Appeal (the “Court”) clarified the standard of review applicable to decisions of the Federal Court when dealing with an appeal under subsection 56(1) of the Trademarks Act (the “Act”) in the wake of Vavilov.

The Court confirmed that the standard of review applicable to decisions of the Federal Court with respect to material fresh evidence remains that of “palpable and overriding error”. The Court also held that, where no such evidence is adduced or where such evidence is not material, the Court ought to apply the SCC’s jurisprudence on appellate standards of review. Accordingly, the standard of review at the Federal Court for questions of fact and mixed fact and law is that of “palpable and overriding error”, and the standard of review for questions of law is that of correctness.

With those principles in mind, the Court dismissed Clorox’s appeal, finding that the Federal Court did not make any “palpable and overriding error” in its assessment of fresh evidence, its application of the test for confusion, or its findings related to third-party use and use prior to registration.

Background

On January 26, 2012, Chlorotec S.E.C. (“Chlorotec”) filed applications to register the trademarks “JAVELO” and “JAVELO & DESIGN” (together, the “JAVELO Marks”). These applications were filed on the basis of proposed use in connection with bulk quantities of liquid bleach manufactured exclusively in response to industrial orders and excluding retail sales.

In 2013, the Clorox Company of Canada, Ltd. (“Clorox”) filed statements of opposition against the applications for the JAVELO Marks on the ground that they were contrary to sections 2, 12(1)(d), 16(3)(a), 30(b) and 50 of the Act. Clorox’s primary concern was that the JAVELO Marks gave rise to a likelihood of confusion with Clorox’s trademark registrations in association with various forms of bleach and laundry detergents (collectively, the “JAVEX Marks”). Clorox’s opposition to the JAVELO Marks was summarily rejected by the Trademarks Opposition Board (“TMOB”), which concluded that the JAVELO Marks were not used in violation of the Act and did not lead to a likelihood of confusion with the JAVEX Marks.

The Federal Court’s Decision

Clorox appealed the TMOB decision to the Federal Court, and filed new evidence in the form of an affidavit sworn by the Vice President and Secretary of Clorox. The affidavit contained evidence with respect to the use of the JAVEX Marks in Canada, as well as results from brand awareness surveys of the marketplace in Canada. The Federal Court considered this evidence too cursory to allow for a determination of the extent of use or of the JAVEX Marks' acquired distinctiveness.

The Federal Court found that the TMOB’s findings that the JAVELO Marks were not improperly used prior to the registration and had not lost their distinctiveness due to their use by third parties to be reasonable. The Federal Court further found that there was no confusion between the parties’ marks.

Clorox’s appeal of the TMOB decision was dismissed by the Federal Court (2018 FC 408).

The Court’s Decision in Clorox

The standard of review of decisions under subsection 56(1) of the Act

The Court confirmed that the Supreme Court’s decision in Vavilov did not change the standard of review applicable when considering the Federal Court’s findings in relation to fresh evidence. The Court noted that, when the Federal Court considers fresh evidence, it is acting not as a reviewing court but as a court of first instance. Accordingly, the Court concluded that decisions made by the Federal Court with respect to new evidence must be assessed on an appellate standard, and, as a question of mixed fact and law, the issue would stand or fall on the basis of the “palpable and overriding error” standard.

The Court went on to distinguish between fresh evidence that is material and new evidence that is not. Where fresh evidence is material, subsection 56(5) of the Act allows the Federal Court to “exercise any discretion vested in the Registrar”, in the nature of a de novo review. Review of the exercise of such discretion would attract the correctness standard, as the clear legislative intent to apply a different standard would rebut the presumption of reasonableness stated in Vavilov. Conversely, if no new evidence is adduced before the Federal Court, or if the new evidence is not material, the Court found that Vavilov called for a “fresh start”. Accordingly, rather than presumptively applying the reasonableness standard of review, the Court concluded that, where either no new evidence is adduced or such evidence is not material, the Court ought to apply the “palpable and overriding error” standard to questions of fact and mixed fact and law, and the correctness standard to questions of law.

The approach to fresh evidence

With the foregoing principles in mind, the Court did not find any palpable and overriding error in the Federal Court’s assessment of new evidence, and therefore chose not to disturb its decision to treat Clorox’s customer surveys as inadmissible for the purposes of establishing the extent of use and distinctiveness of the JAVEX Marks in Canada. The Court held that public opinion survey evidence should be presented by a qualified expert, include relevant findings, and be properly designed and conducted in an impartial manner.

Confusion

With respect to confusion, there was no dispute between the parties as to the proper test to be applied by the Court.

The Court found that the Federal Court applied the proper test and gave regard to all surrounding circumstances as required and enumerated by subsection 6(5) of the Act. While Clorox argued that the Federal Court erred in writing that a consumer “is not always hurried to the same extent” for valuable or niche market goods, the Court agreed with the lower court’s statement and noted that consumers do not approach every purchasing decision with the same degree of attention and care.

The Court found that the Federal Court made no palpable and overriding error in determining that the JAVEX and JAVELO marks had a low degree of resemblance across their writing, sound, graphic design and ideas suggested. The Court also agreed with the Federal Court’s finding that the inherent distinctiveness of both marks was limited, because they are both derived from the French expression “eau de Javel” (which can be loosely translated to "bleach"). While the court confirmed that the assessment of inherent distinctiveness could not be limited to one of the two official languages of Canada, the Court found that, in the absence of new evidence, the findings of the TMOB and the Federal Court were owed a high degree of deference, and that Clorox had not been able to sufficiently demonstrate that a hurried consumer could discern similarities between the two marks.

Third Party and Prior Use

With respect to Clorox’s argument that the JAVELO Marks had lost their distinctiveness due to use by third parties that did not hold licences, the Court considered subsection 50(1) of the Act, which requires that an owner of a trademark have control of the character or quality of the goods or services for the use of a trademark by a licensee to be deemed a use by the owner.

However, both the TMOB and the Federal Court found that the third parties were related to Clorotec, and that certain of the companies either acted as a distributor and used the JAVELO Marks under licence or offered transportation services. Given that use in those capacities is considered use of the trademark in Canada by its owner, the TMOB concluded that Chlorotec had demonstrated use of the JAVELO Marks in Canada through its distributors and transporters and that the JAVELO Marks had not lost their distinctiveness as a result. The Federal Court found that decision reasonable. The Court chose not to disturb these findings.

Clorox also argued that Chlorotec used the JAVELO Marks before the date on which the application was filed, and therefore could not be registered pursuant to paragraph 30(b) of the Act. The TMOB examined Clorox’s argument on this point, and dismissed it on the basis of reasons that the Court found “detailed and compelling”. The Court again chose to leave such findings undisturbed.

Authors: Jaclyn Tilak and Duncan Lurie