417394 ALBERTA LTD. v. H2O Co. Beverages Ltd., 2005 FC 224

Date: 20050210

Docket: T-1007-02

Citation: 2005 FC 224

BETWEEN:

                                                         417394 ALBERTA LTD.

                                                                                                                                               Plaintiff

                                                                           and

                                                    H2O CO. BEVERAGES LTD.,

                         carrying on business under the style and firm name of H2O CO.

                                                And H2O CO. WATER COMPANY

                                                                                                                                           Defendant

                                                    REASONS FOR JUDGMENT

SIMPSON, J.

[1]                In this matter, 417394 Alberta Ltd. (the "Plaintiff") has moved for summary judgment under Rule 213 of the Federal Court Rules, 1998, SOR/98-106. The Plaintiff's action is for trademark infringement and, in oral submissions, counsel for the Plaintiff indicated that it primarily relies on section 19 of the Trade-marks Act, R.S.C. 1985, c. T-13 (the "Act"). In the alternative, it relies on section 20 of the Act together with section 6.

[2]                The Plaintiff is an Alberta corporation. It began its water cooler business in the spring of 1999 and registered H2OCOOL as Trade-mark No. TMA537,840 (the "Mark") on November 28, 2000. The Mark is described by the Plaintiff as a sequence of seven characters which combines the symbol "H2O", meaning water, and the adjective "cool" to form the Mark which the Plaintiff submits is inherently distinctive and unique in the water cooler market.

[3]                From July of 2001, when it began its operations, until shortly after the Plaintiff delivered its Statement of Claim, H2O Co. Beverages Ltd. (the "Defendant") carried on business in British Columbia associating the names H2O Co. and H2O Co. Water Company (the "Names") with its water coolers.

[4]                The parties install and service a relatively new product known as a "point of use" water cooler (the "Cooler"). It is a dispenser which has a large water bottle inverted on its top (the "Bottle").    However, unlike traditional water coolers, the Bottles are not changed. The Cooler filters water from the municipal water supply. The purified water is then stored in the Bottle so that it can be dispensed on demand.

[5]                Neither party operates with a storefront or a street sign. The Plaintiff's head office is in Edmonton and the Defendant carries on business in Richmond and in Vancouver, British Columbia ("B.C."). Both parties lease Coolers under long term agreements that also provide for installation and service.

[6]                The Mark is registered for the following wares and services:

(i)          bottled water cooler dispensers and systems and drinking water purification;

(ii)         installation, servicing and maintenance of bottled water cooler dispensers and drinking water purification systems (the "services").

[7]                The Defendant argued that there are two genuine issues for trial. Firstly, it said that the Mark is not inherently distinctive and that the Plaintiff has not provided sufficient evidence to support a finding of acquired distinctiveness. Secondly, the Defendant said that there is a genuine issue of law for trial dealing with whether the appearance or "get up" of the Mark and the Names can be considered under subsection 6(5) of the Act when the action is for infringement.

[8]                The Defendant also said that the Plaintiff's motion should be defeated by laches because the Plaintiff knew of the Defendant's use of H2O Co. for one year before it filed its Statement of Claim. Finally, the Defendant said that the Plaintiff's action is an abuse of process.

[9]                The Statement of Defence was dated August 14, 2002 and does not challenge the validity of the Mark. Counsel for the Plaintiff advised at the hearing that, one day earlier, he had received a copy of an amended Statement of Defence which, for the first time, alleged invalidity on the basis of loss of distinctiveness. The Defendant's memorandum of argument, for this motion, does mention distinctiveness as a genuine issue for trial but it nowhere alleges that the Mark is invalid. Since distinctiveness is a topic to be considered when assessing the likelihood of confusion, mention of distinctiveness, without more, does not suggest an attack on validity. It was therefore my conclusion that the Plaintiff had no reason to expect, before yesterday, that the validity of the Mark would be challenged on this motion.

[10]            The Plaintiff refused to consent to the amendment of the Statement of Defence and I ruled at the hearing that, because it was not raised in a timely fashion, the issue of validity was not before me. Accordingly, this motion was argued on the basis that the Mark is valid.

PRESENTATION

[11]            The evidence shows that, on the labels affixed to the Plaintiff's Bottles and in its brochures and on its website, the Mark is presented as two separate words. H2O appears in small script inside a circle and the word COOL is emphasized in that it is placed on a separate line and is written in large bold type.

[12]            The label on the Defendant's Bottle reads H2O Co. in regular type with WATER COMPANY below in much smaller script. There are mountain peaks at the top of the label and double underlining appears below the 2 in H2O. However, the mountain peaks and underlining are only found on the labels. In advertisements in the Vancouver Yellow Pages, the name H2O Co. appears in plain type without adornment.

[13]            The Plaintiff says that, once the presentation and the words "water company" are discounted, its Mark is virtually identical to the Defendant's Names, especially in the context of identical wares and services. The Plaintiff says that the word Co. in the Names is properly construed as an abbreviation of Cool and that this is clear because the longer version of the name includes both Co. and the word company. This makes the short form Co. redundant unless it means Cool. The Plaintiff essentially says that the Defendant's Names are abbreviations of its Mark.

[14]            The Plaintiff also submits that the words "Water Company" in the Defendant's name are merely descriptive and can be ignored when comparing the Names and the Mark. In this regard, the Plaintiff relies on Cartier Inc. v. Cartier Optical Ltd. (1988), 20 C.P.R. (3d) 68 F.C.T.D. at page 75. The Plaintiff adds that, in an infringement proceeding, it is not relevant to consider how the Mark is presented. Specifically, the prominence given to the word COOL in the visual presentation of the Mark and the presence of mountain peaks and underlining in the Defendant's Names are of no significance. In this connection see the Federal Court of Appeal's decision in Mr. Submarine Limited v. Amandista Investments Limited (1988), 19 C.P.R. (3d) 3 at p. 11.

THE ISSUES

[15]            (i)          Is this a case under section 19 or section 20 of the Act?

(ii)         If section 20 applies, are the Mark and the Names confusingly similar?

(iii)        Is there a genuine issue for trial?

(iv)        Should this motion be dismissed due to the laches or abuse of process?

Issue I Sections 19 and 20 of the Act

[16]            Section 19 reads as follows:

Section 20 provides that:

[17]            The Plaintiff submits that, under section 19, it need not demonstrate that the Names are likely to cause confusion. It says that, if the Defendant copies and uses the Plaintiff's Registered Mark or a "virtually identical" mark, all the Plaintiff need show is a lack of authorization to establish infringement.

[18]            I have not been persuaded by this submission. In my view, by reason of the decision in Mr. Submarine, if section 19 creates a cause of action for infringement (which is left as an open question), it does so only if the Mark, as registered, is taken. There is no room for a "virtually" identical Mark under section 19. Since, in this case, the Names are not identical to the Mark, this is a case of deemed infringement which falls under section 20 of the Act.

Issue II             Are the Mark and Names confusingly similar?

[19]            Section 20 requires the Court to consider whether infringement of the Mark has occurred by reason of the Defendant's use of the Names. This will have occurred if the Names are likely to cause confusion with the Mark. Confusion is dealt with in subsection 6(5) of the Act. It provides that:

[20]            I will deal with each topic in turn.

Inherent Distinctiveness and Extent Known

[21]            The evidence of Mr. Hinch, President of the Plaintiff, is found in an affidavit sworn on December 9, 2003. He deposed that, in Canada, the Plaintiff had leased and sold the following Coolers:

(a)         British Columbia                        332                   Rentals

43                   Sales to one dealer

(b)         Alberta                          687                   Rentals

360                   Sales to one dealer

(c)         Saskatchewan                           43                   Rentals

(d)         Manitoba                                   108                   Rentals

(e)         Ontario                          198                   Sales to dealers

[22]            There is no evidence about whether the dealers actually distributed the Coolers. Accordingly, leaving them aside, the evidence shows that, at the end of 2003 the Plaintiff had leased 1,170 Coolers and that the Mark appeared on the labels affixed to their Bottles.

[23]            The rental of Coolers does not result in a public display of the Mark. The labels on the Bottles and the tent shaped cards left on the Plaintiff's Bottles after installation are not in the public eye. For the most part they are seen only by the leasee's employees.

[24]            Public use of the Mark is made in the Plaintiff's brochure. However, there is no information about the number of brochures printed and distributed over the years. Presumably, the public also sees the Mark on the Plaintiff's website and on its service vehicles. However, there is no evidence about how long the website has been in operation or how many "hits" it has received. Further, there is no information before the Court about how many service vehicles display the Mark.

[25]            What is provided are the annual amounts spent by the Plaintiff on print advertising. However, Mr. Hinch's affidavit does not describe the nature of the advertising or indicate where it was placed. The sums spent were as follows:

1999                                                     $ 5,168

2000                                                         6,246

2001                                                     20,733

2002                                                     18,412

2003                                                     25,551

[26]            Counsel agreed that the only admissible evidence of confusion was found in the affidavit of Mr. Ron Chan sworn on the Defendant's behalf on February 13, 2004. Mr. Chan is the Chief Operating Officer of Four Seasons Food Ltd. in Vancouver and, in my view, he could be described as a discerning buyer. His evidence was that, for seven years, his company had used the computer consulting services of Mr. Richard Tse. Mr. Tse recommended the Defendant's Cooler. Thereafter, Mr. Chan spoke by phone with the Defendant's salesperson and had two Coolers installed at his office. According to Mr. Chan's affidavit, the contracts with the Defendant were signed because of his personal friendship and business relationship with Mr. Tse.

[27]            Mr. Chan was cross-examined on his affidavit and acknowledged that, at about the time Mr. Tse recommended the Defendant's H2O Co. Cooler, one of the Plaintiff's sales representatives made a cold call at Four Seasons Food Ltd.    Mr. Chan thought she was a Defendant's representative and he was later surprised to find that he had not installed her Coolers at his office. This reaction was confirmed in his letter to the Plaintiff of August 3, 2002 in which he said:

I would like to thank you for coming in to see me with all your company's great water cooler products. However, I regret to inform you that our company has recently put a similar system in place. But to my dismay, I have just recently realized that we had installed another company's product thinking that it was your company. A tremendous amount of confusion was encountered when our plant manager attempted to look [sic] your company name for installation of "your" products. We managed to find another company in the same business that has a similar name to your company. We had called on H2O Co. instead of H2O Cool; we thought it was the same company. As a company, we had all the best intentions to use your products. I hope in the future that this confusion will resolve itself!

[my emphasis]

[28]            Mr. Chan also acknowledged, in cross-examination, that he thought that Mr. Tse had recommended the Plaintiff's Cooler and, when he looked at the Bottle, it was the H2O on the label that caught his attention and he was not sure which party was his leasor.

[29]            In my view, neither the Plaintiff's Mark nor the Defendant's Names are inherently distinctive. In every day conversation, H2O has become a synonym for water. Further, the H2O is the prominent feature in both in the Mark and the Names. The other words are relatively insignificant. This conclusion is borne out by Mr. Chan's evidence to the effect that he only noticed the H2O on the label.

[30]            It is also my conclusion that neither the Mark nor the Names became known to any significant extent in the short time they were in use. Neither acquired distinctiveness. Rentals of both parties' Coolers were very limited and there is no evidence about whether the Coolers sold by the Plaintiff to dealers ever reached the public. Neither party had an office which displayed a sign. The Defendant leased Coolers only in British Columbia and, although the Plaintiff leased and sold Coolers across Canada, the volumes were very small. Further, the Plaintiff's advertising budget was, on an annual basis, a modest amount.

Length of Time in Use

[31]            The Names were used by the Defendant for one year from July 2001 to July 2002. The Plaintiff began to use the Mark in the Spring of 1999 and registered the Mark in November of 2000. It discontinued its use of the Mark, at least in British Columbia, before the 2003/2004 Vancouver Superpages were printed. That publication lists the Plaintiff under the name EAUCOOL PACIFIC. The Plaintiff registered this mark on February 5, 2003.

Nature of Wares or Services

[32]            The Coolers were, for all practical purposes, identical. However, the nature of the trade was not. The Plaintiff leased and sold Coolers from Ontario to the West Coast. The Defendant only leased Coolers and its business was restricted to British Columbia. As well, the Defendant's business included residential installations while the Plaintiff restricted itself to commercial accounts. The overlap appeared to be in the lease, installation and maintenance of commercial Coolers in British Columbia.

Nature of Trade

[33]            There is very little evidence in the record about how the Plaintiff and the Defendant marketed their respective Coolers. In British Columbia, the Plaintiff had a sales representative who made cold and follow-up calls. The Defendant appears to have used an advertisement in the Vancouver Yellow Pages and the services of Mr. Tse along with a flyer which was sent, by fax, in the Vancouver area. The Defendant also appears to have relied on some telemarketing and a website but no details were in evidence.

[34]            The Defendant suggested that the service and maintenance of Coolers was a different business from their lease and installation and that, if I were inclined to grant summary judgment, maintenance and service should be excluded. However, since the evidence showed that one contract covered leasing, installation and service, I have not accepted that submission.

[35]            Mr. Bailey said that the Plaintiff's installation of 375 Coolers in British Columbia was a tiny number when compared with the 90,000 British Columbia customers served by Canadian Springs Water Company. The Defendant estimated that there are about 300,000 potential commercial customers in the province.

Degree of Resemblance in Appearance, Sound or the Ideas Suggested

[36]            The Plaintiff says that, when used in everyday conversation, the Names and the Mark sound the same because the tendency is to drop or de-emphasize the last part of the word Cool. In contrast, the Defendant says that H2O rhymes with Co. to create a distinctive name with a sound that is entirely different from the Plaintiff's word COOL.

[37]            In my view, when they are pronounced properly, the Mark and the Names do not sound the same. I agree that, in the Names, Co. rhymes with the 2O to produce a distinctive sound which is not at all like the sound of the word COOL. However, this finding is not determinative because it is my conclusion that the H2O, in its entirety, is the significant sound. From the point of view of appearance, the H2O also stands out and, in my view, it overwhelms the other words in the Names and the Mark. Accordingly, although the Mark and the Names do not sound alike when pronounced in full, as a matter of first impression, they do look alike and sound alike. Because of the dominance of the H2O, I have concluded that the Names and the Mark are confusingly similar.

Issue III           Is there a genuine legal issue for trial

[38]            The introductory language in subsection 6(5) of the Act requires the Court to have regard for all the surrounding circumstances. The Defendant says that a genuine issue for trial arises in this context. As noted earlier, the question is whether the "get up" or presentation of the Mark and Names should be considered in infringement cases.

[39]            In its decision in Mr. Submarine, supra, the Federal Court of Appeal indicated that, in infringement cases, get up is not relevant. The Court said::

At this point the learned judge considered and appears to have taken into account that there was no similarity in the style of lettering used and the colouring of the signs of the parties and that the appearances of the two marks as actually used on signs, boxes, etc., is quite different. These in my opinion would be very relevant considerations if the proceeding were a passing-off action at common law. They are irrelevant in a proceeding for infringement of a registered trade mark and should have been given no weight in determining whether the trade marks and trade names in issue are confusing with the appellant's registered mark.

The case arose under section 20 of the Act and, for that reason, the Court of Appeal was considering the provisions of 6(5) of the Act.

[40]            Pink Panther Beauty Corp. v.. United Artists Corp. (1998), 80 C.P.R. (3d) 247 (F.C.A.) was a subsequent case in which the Federal Court of Appeal considered a registrar's decision to reject an opposition to the registration of a trademark. The opposition was based, in part, on subsection 16(3) of the Act which provides that certain marks which are confusing cannot be registered. This led the Court to an analysis of confusion under subsection 6(5) of the Act. During that analysis, without referring to Mr. Submarine, the Court looked carefully at the presentation of the competing marks. This approach opened the question of whether "other surrounding circumstances" in subsection 6(5) includes presentation or "get up" in an opposition case but not in an infringement case.

[41]            In both Warner-Lambert Co. v. Concord Confections Inc. (2001) 11 C.P.R. (4^th) 516(F.C.T.D.), 2001 FCT 139and Ten Ren Tea Co. v. Van Cheong Tea Inc. (2003), 27 C.P.R. (4^th) 265 (F.C.T.D.) 2003 FC 819 , summary judgment was refused, in part, because of uncertainty over the relevance of a mark's appearance when infringement was alleged. However, in both cases, there were also outstanding issues of fact.

[42]            The Defendant says that, based on this conflicting case law, there is a genuine issue for trial and says that the issue is material because, the presentations of Mark and the Names H2O Co. are very different. However, I have not found this submission persuasive. Due to the overwhelming impact of H2O, it is my view that the differences in presentation are not material. Accordingly, the conflicting case law on the relevance of presentation is not a bar to summary judgment in this case.

Issue IV           Laches and Abuse of Process

[43]            The Defendant's evidence shows that, in July of 2001, its General Manager contacted Mr. Hinch of the Plaintiff asking whether the Plaintiff could supply Bottles for the Defendant's Coolers. She advised Mr. Hinch that the Defendant was entering the point of use Cooler business and that she worked for H2O Co. Water Company. Mr. Hinch did not mention the Plaintiff's Mark and did not object to the Defendant's name.

[44]            Six months later, in January of 2000, Mr. Hinch contacted the Defendant and expressed concern that its Cooler infringed his patent. During that conversation, he also advised that his product was marketed as H2OCOOL and said that he felt that potential customers were becoming confused. He was agitated and said that the Defendant would hear from him again on this issue. Nothing happened until May of 2002 when the Defendant received a cease and desist letter from the Plaintiff's lawyers. Thereafter, the Statement of Claim was issued in July of 2002.

[45]            The Defendant says that the Plaintiff should be barred from bringing this motion because it knew of the Defendant's name for ten months before taking action. However, in my view, the relevant period is the one in which the Plaintiff considered the Defendant's Names to be problematic. The Plaintiff did not identify an infringement situation until January of 2004 and it proceeded to address the issue within four months. That is not a period of delay that suggests acquiescence.

[46]            The Defendant also alleged, in its Memorandum of Argument, that the Plaintiff's action is an abuse of process. The suggestion is based on the fact that the Plaintiff has not asserted its trademark rights against any parties who have registered marks which are confusingly similar to the Mark. I have considered the data provided in the affidavit of Donna Barnes dated February 9, 2004 and have concluded that there is no evidence to suggest that the Plaintiff's action has been brought for ulterior or collateral purposes.

SUMMARY JUDGMENT

[47]            I have considered the law dealing with motions for summary judgment. The relevant principles have been described in detail in two recent cases and do not require repetition here. In this regard, see Ten Ren Tea Co., supra and Warner-Lambert Co., supra.

CONCLUSION

[48]            The Plaintiff is entitled to summary judgment with costs to be assessed with reference to column III of the table to Tariff B in the Federal Court Rules, 1998, SOR/98-106 as amended.

              "Sandra J. Simpson"            

JUDGE

Ottawa, Ontario

February 10, 2005

FEDERAL COURT

NAME OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                          T-1007-02

STYLE OF CAUSE:                         417394 ALBERTA LTD. v.

H2O CO. BEVERAGES LTD.

PLACE OF HEARING:                    Edmonton, AB

DATE OF HEARING:                       September 14, 2004

REASONS FOR JUDGMENT:      SIMPSON J.

DATED:                                              February 10, 2005

APPEARANCES:

Tony Lambert                                                                         FOR PLAINTIFF

Scott Turner                                                                            FOR DEFENDANT

SOLICITORS OF RECORD:

Thompson Lambert LLP

Edmonton, AB                                                                        FOR PLAINTIFF

Blake, Cassels & Graydon LLP

Vancouver, BC                                                                       FOR DEFENDANT