Date: 20060428
Docket: T-1303-04
Citation: 2006 FC 537
Halifax, Nova Scotia, April 28, 2006
PRESENT: The Honourable Mr. Justice John A. O'Keefe
IN THE MATTER OF an Appeal under Section 56
of the Trade Marks Act, R.S.C. 1985, c. T-13,
from a decision of the Trade Marks Opposition Board,
delivered May 13, 2004 in relation to
Trade-mark Application No. 854,265 NO FRILLS
BETWEEN:
LOBLAWS INC.
Applicant
- and -
NO FRILLS AUTO AND TRUCK RENTAL LTD.
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
O'KEEFE J.
[1] This is an appeal by Loblaws Inc. (Loblaws or the appellant), pursuant to subsection 56(1) of the Trade-marks Act, R.S.C. 1985, c. T-13 (the Trade-marks Act), from a decision of the Trade-marks Opposition Board (the Registrar) dated May 4, 2004, which rejected the appellant's opposition to the registration of the trade-mark NO FRILLS by No Frills Auto and Truck Rental Ltd. (No Frills, the respondent, or the trade-mark applicant).
[2] The appellant requests that:
1. This appeal be allowed with costs;
2. The decision of the Registrar be set aside; and
3. The Registrar be directed to refuse the respondent's application for registration of the trade-mark NO FRILLS.
Background
[3] On August 22, 1997, No Frills applied to register the trade-mark NO FRILLS (the "mark") for use in association with services described as "car and truck rental, leasing and sales". No Frills claimed registration on the basis that it had used the mark in Canada since September 1992.
[4] Following the advertisement of the application for the mark, Loblaws filed a statement of opposition. The grounds of opposition are that:
1. The application does not conform to the requirements of subsection 30(b) of the Trade-marks Act because No Frills had not used the mark since September 1992 as claimed by the application;
2. The mark is not registrable under subparagraph 12(1)(d) of the Trade-marks Act because it is confusing with registered trade-mark no. TMA 498,769 for the trade-mark NO FRILLS Design which was previously registered by Loblaws;
3. No Frills is not the person entitled to register the mark under subparagraph 16(1)(a) of the Trade-marks Act since the mark is confusing with the trade-marks NO FRILLS and NO NAME which had been used by Loblaws prior to the date upon which No Frills first used its mark; and
4. The mark is not distinctive within the meaning of section 2 of the Trade-marks Act, in that the mark fails to distinguish the services offered by No Frills from the wares and services of others, namely those of Loblaws provided under the trade-marks NO FRILLS and NO NAME.
[5] No Frills filed a counterstatement denying each ground of opposition.
[6] Both parties filed affidavit evidence as well as written arguments. Loblaws filed the affidavits of Robert G. Chenaux, sworn June 11, 1999, and Robert Adams, sworn June 14, 1999. No Frills filed the affidavit of Guy Beaulieu, sworn November 1, 2000.
[7] An oral hearing took place before the Registrar, at which only Loblaws was represented. By decision dated May 4, 2004, the Registrar rejected Loblaws' opposition to the registration of the mark.
Reasons for the Registrar's Decision
Evidence
[8] Loblaws tendered evidence that it had licensed the use of its trade-marks NO FRILLS and NO NAME. The Registrar found several weaknesses in this evidence. The corporate relationships within the "Loblaw Group" were so poorly and vaguely defined that it was difficult to know which company was licensing the marks to whom. Moreover, the only reference to a source on the NO FRILLS and NO NAME packaging labels was "Sunfresh Limited" which was allegedly a licensee. The Registrar found it was not clear that Sunfresh Limited was related to Loblaws or authorized to use the marks. Thus, the Registrar found that Loblaws had failed to show that use of its NO FRILLS and NO NAME trade-marks by licensees would enure to its benefit. Even if the use of the marks did enure to its benefit, the Registrar found that there was no evidence to support Loblaws' allegation that it exercised control of the character or quality of the wares and services under the license. Loblaws had not provided a copy of a license agreement, and Loblaws' evidence merely parroted the words of subsection 50(1) of the Trade-marks Act.
[9] No Frills, the trade-mark applicant, tendered affidavit evidence from its shareholder. The Registrar stated that according to this evidence, No Frills had changed its name to its current name on July 22, 1992 and commenced business dealings under that name and the mark NO FRILLS shortly thereafter. The Registrar noted that No Frills evidenced advertising and business activities from 1992, but did not provide sales figures for the company's services.
First Ground of Opposition: Subsection 30(b)
[10] The Registrar noted that Loblaws did not file any evidence to prove its allegation that the trade-mark applicant did not use the mark from September 1992. The Registrar also found that there was nothing in the trade-mark applicant's affidavit that would be inconsistent with its claim to have continuously used the mark from September 1992. Thus, the Registrar summarily dismissed the first ground of opposition.
Second Ground of Opposition: Paragraph 12(1)(d)
[11] The Registrar assessed the reasonable likelihood of confusion between the marks at issue, in light of the surrounding circumstances including those specifically set out in subsection 6(5) of the Trade-marks Act.
[12] First, the Registrar found that both marks are inherently very weak marks since the words NO FRILLS are highly suggestive, if not descriptive, of any wares or services. The Registrar also found that because Loblaws had not shown that licensed use of its registered mark would enure to its benefit, its mark had not become known to any extent in Canada.
[13] Second, with respect to the length of time that the marks have been in use, the Registrar concluded that it could not determine the date of first use of Loblaws' registered mark in light of the deficiencies in the evidence concerning licensed use.
[14] Third, the Registrar found that the wares, services and trades of the parties are entirely dissimilar. No Frills' mark is for a car and truck rental operation whereas Loblaws' registered mark is for a grocery store operation. Loblaws had failed to demonstrate a connection to ancillary businesses through licensed use of the NO FRILLS mark.
[15] Finally, the Registrar noted that the marks at issue are identical, apart from the minor design element in Loblaws' registered mark.
[16] Overall the Registrar concluded that the marks are not confusing, particularly in view of the inherent weakness of the marks, the absence of any significant reputation for Loblaws' mark, and the disparity between the wares, services and trades of the parties. As a result, the Registrar dismissed the second ground of opposition.
Third Ground of Opposition: Paragraph 16(1)(a)
[17] The Registrar found that given the weaknesses in Loblaws' evidence concerning the licensing of its marks, Loblaws had not discharged its evidential burden to show prior use of the mark NO FRILLS. The Registrar consequently dismissed the third ground of opposition.
Fourth Ground of Opposition: Section 2
[18] Similarly, in light of the inadequacies in Loblaws' evidence, the Registrar dismissed the fourth ground of opposition, as Loblaws had not established that use of the mark NO FRILLS enured to its benefit.
Issues
[19] The issues in this appeal are:
1. What is the appropriate standard of review?
2. Did the Registrar err in rejecting the appellant's opposition to the registration of the mark by the respondent?
New Evidence
[20] On this appeal, the appellant filed additional evidence, consisting of the affidavits of Robert Adams, sworn August 13, 2004; Iain Beaudoin, sworn August 25, 2004; and Cheryl Bowden, sworn August 24, 2004.
[21] Robert Adams deposed that he is currently Executive Vice President of the NO FRILLS Division of Loblaws Supermarkets Limited. His new affidavit explained the corporate structure of Loblaws and its related companies, the operation of the NO FRILLS stores, and the licensing arrangements. The affidavit deposed the following facts:
1. Loblaws and its related companies operate and function as an integrated operation, with certain directors and officers occupying similar corporate offices within the related companies.
2. Loblaws, through its subsidiaries, operates retail grocery stores throughout Canada.
3. Loblaws Supermarkets Limited and Sunfresh Limited, both subsidiaries of Loblaws, are authorized under license by Loblaws to use and sublicense the NO FRILLS and NO FRILLS Design trade-marks.
4. Sunfresh Limited is involved in the marketing of controlled label products.
5. Loblaws Supermarkets Limited operates retail stores under the banner LOBLAWS and acts as the franchisor of the NO FRILLS stores.
6. Loblaws directly or indirectly controls the character or quality of the goods and services provided under the NO FRILLS trade-mark by virtue of the licensing agreements, the corporate relationship and manner of operation of Loblaws and its related companies.
7. Loblaws opened its first NO FRILLS store in Toronto on July 5, 1978. The NO FRILLS line of stores has since expanded to include stores owned and operated by independent franchisees as well as those owned by companies that are closely related to the trade-mark owner, Loblaws. There are now 119 NO FRILLS stores.
8. The licensing agreements between Loblaws Supermarkets Limited and its franchisees require labeling and advertising to be approved or authorized by Loblaws and regular sales reports to be sent to Loblaws. Under these agreements, Loblaws sets out which products can be sold in NO FRILLS stores and may visit premises to ensure compliance with the minimum standards.
9. Consumers can recognize NO FRILLS stores by their outside and inside signage, consistent colour scheme, and shopping bags bearing the trade-marks NO FRILLS and/or NO FRILLS Design.
10. Since 1996, the NO FRILLS stores have sold pre-packaged meat products bearing the NO FRILLS trade-mark. The NO FRILLS stores also carry NO NAME products.
11. The NO FRILLS concept continues to expand to include a greater variety of wares and services. At least four gas bars are currently operating in Canada under the banner NO FRILLS AT THE PUMPS.
12. Canadian sales by NO FRILLS stores have grown from greater than $71 million in 1988 to $2 billion today. The total advertising costs for the NO FRILLS stores in Canada were approximately $69 million since 1988.
[22] Iain Beaudoin deposed that he is a summer student with Borden Ladner Gervais LLP. His evidence consisted of his observations and photographs from his visits in August 2004 to several big-box stores in Ottawa, namely Wal-Mart, Loblaws, Home Depot, Canadian Tire and Costco. His evidence shows that retail services are expanding to encompass unrelated products and services. The premises of Loblaws, for example, have a number of ancillary businesses such as photo development, dry cleaning, retail sales of wine, banking, optical services and floral services.
[23] Cheryl Bowden deposed that she is a paralegal at Borden Ladner Gervais LLP. Her evidence consisted of the results of her corporate searches, domain name searches and telephone inquiries pertaining to the respondent. Her evidence suggests that there may not have been a continuous existence since September 1992 of a single corporate entity with the corporate name "No Frills Auto & Truck Rental". The last return for that corporation was filed in 1997. Another Alberta corporation with the name AAA No Frills Auto & Truck Rentals was still active in Alberta as of August 9, 2004. A B.C. corporation with the name No Frills Auto and Truck Rentals (BC) Ltd. was incorporated on April 22, 1996 and was still active as of August 9, 2004.
[24] The respondent did not file evidence or written submissions.
Appellant's Submissions
Standard of Review
[25] The appellant submitted that on a statutory appeal under section 56 of the Trade-marks Act, where new evidence is filed that would have materially affected the Registrar's findings, the Court must come to its own conclusion as to the correctness of the Registrar's decision (see Molson Breweries, a Partnership v. John Labatt Ltd., [2000] 3 F.C. 145, 5 C.P.R. (4th) 180 at paragraph 51 (C.A.)). The appellant submitted that it has tendered evidence which highlights inconsistencies with respect to the respondent's claim to have used the mark in Canada since 1992, clearly shows licensed arrangements between Loblaws and related entities and third party franchisees, and illustrates the convergence in the marketplace between the respective businesses and services of the parties. The appellant submitted that the Registrar's decision turned on these factors, and as such, the applicable standard of review is that of correctness.
Licensed Use of the Appellant's Mark
[26] The appellant submitted that it has agreements with its licensees to use the trade-mark NO FRILLS, and which allow the appellant to control, either directly or indirectly, the quality of the services provided by its licensees and its licensees' sublicensees. The appellant submitted that section 50 of the Trade-marks Act does not require a written license agreement to be provided, as long as there is some evidence from which it can be inferred the existence of a license (see Wells' Dairy Inc. v. U L Canada Inc. (2000), 7 C.P.R. (4th) 77 at paragraph 38 (F.C.T.D.)). The appellant submitted that its new evidence clarifies the relationship between the corporate entities, and supports use of its marks within the meaning of section 50. The appellant submitted that it has established that use of the trade-mark NO FRILLS enures to the benefit of the appellant.
First Ground of Opposition: Subsection 30(b)
[27] The appellant submitted that the original applicant of the mark was struck from the Alberta corporate registry on March 1, 2000. The appellant submitted that this suggests that the corporation may not have been actively carrying on business by the filing date of the application in 1997. The appellant submitted that subsequent use of the mark appears to have been effected by a different corporate entity in B.C. The appellant submitted that where there is a gap in use occasioned by dissolution of a corporate applicant, the requirements of subsection 30(b) are not met.
[28] The appellant further submitted that the respondent evidenced use of the trade name and corporate name No Frills Auto and Truck Rentals Ltd. as opposed to use of the trade-mark NO FRILLS. The appellant submitted that the requirements of subsection 30(b) are not fulfilled if the mark applied for has not actually been used as a trade-mark within the meaning of section 4 of the Trade-marks Act.
[29] Thus, the appellant submitted that the evidence of the respondent did not establish that NO FRILLS had been continuously used as a trade-mark by the respondent since September 1992, as claimed in the application.
Second Ground of Opposition: Paragraph 12(1)(d)
[30] The appellant submitted that the Registrar erred by overlooking the fact that when Loblaws first commenced using its NO FRILLS trade-mark in 1978, the NO FRILLS banner discount grocery store was a novel concept. The appellant submitted that the mark NO FRILLS thus possessed some inherent distinctiveness at the time of its adoption, and has become well known through Loblaws' extensive use and advertising over a period of more than 20 years (see Miss Universe, Inc. v. Bohna (1994), [1995] 1 F.C. 614 at paragraphs 16 to 17, 58 C.P.R. (3d) 381 (F.C.A.)). The appellant submitted that in contrast, there is no evidence that the respondent's mark has acquired reputation or distinctiveness.
[31] The appellant submitted that as its mark has been extensively used for over 20 years, it becomes a strong mark entitled to a broad scope of protection (see Danjaq, S.A. v. Zervas (1997), 135 F.T.R. 136, 75 C.P.R. (3d) 295 (F.C.T.D.)).
[32] The appellant submitted that the nature of the businesses of the parties is not as disparate as the Registrar had noted, because grocery store services are now expanding to cover ancillary services. The appellant referred to its evidence that some of its NO FRILL stores also operate a retail gas bar selling gasoline and some automotive related products under the banner NO FRILLS AT THE PUMPS.
[33] The appellant submitted that there is a very real possibility that a consumer will infer an association between the respondent No Frills and the NO FRILLS stores operated by Loblaws' licensees, and accordingly there is a likelihood of confusion between the marks.
Third Ground of Opposition: Paragraph 16(1)(a)
[34] The appellant submitted that with its new evidence it has overcome the Registrar's objection to the inadequacies in the evidence concerning licensed use. Thus, the appellant submitted that it has, through its licensees, used the trade-mark NO FRILLS in Canada since 1978, which pre-dates the claimed date of first use of the respondent's mark.
Fourth Ground of Opposition: Section 2
[35] The appellant submitted that the Registrar erred in finding that No Frills had discharged the burden of showing that the mark, as applied for, is adapted to distinguish or actually distinguishes its services from those of Loblaws. The appellant submitted that the reputation it has acquired in the NO FRILLS mark over the past 20 years is sufficient to displace and negate distinctiveness of the NO FRILLS mark in the hands of the respondent.
Analysis and Decision
[36] I am of the view that the appellant has filed new evidence on appeal that would have materially affected the Registrar's decision. The standard of review to be applied to decisions of the Registrar in cases such as this case was stated by the Federal Court of Appeal in Molson Breweries, a Partnership v. John Labatt Ltd., [2000] 3 F.C. 145 at paragraph 51:
. . . However, where additional evidence is adduced in the Trial Division that would have materially affected the Registrar's findings of fact or the exercise of his discretion, the Trial Division judge must come to his or her own conclusion as to the correctness of the Registrar's decision.
[37] The Registrar rejected all four grounds of opposition put forward by Loblaws to the registration of the respondent' NO FRILL mark. Many of the Registrar's conclusions were based on what he found to be inadequacies in Loblaws' evidence regarding licensed use of its trade-marks.
[38] Loblaws' first ground of opposition was that the NO FRILLS trade-mark application did not meet the requirements of subsection 30(b) of the Trade-marks Act as No Frills had not used the trade-mark since 1992 as claimed in its application. It is accepted that an opponent who bases a ground of opposition on subsection 30(b) has an initial evidentiary burden but the burden is a light one. For ease of reference, subsection 30(b) is reproduced here.
30. An applicant for the registration of a trade-mark shall file with the Registrar an application containing
. . .
(b) in the case of a trade-mark that has been used in Canada, the date from which the applicant or his named predecessors in title, if any, have so used the trade-mark in association with each of the general classes of wares or services described in the application;
[39] When an applicant seeks to register a trade-mark on the basis that it has been used by the applicant prior to the filing of the application, such use must be continuous and in the normal course of trade. The Registrar concluded that Loblaws had not adduced any evidence to support its opposition based on non-use nor was any of No Frills' evidence inconsistent with the claimed date of first use.
[40] Further, a trade-mark application will be refused for non-compliance with subsection 30(b) of the Trade-marks Act where the evidence is inconsistent with the prior use claimed in the application.
[41] The appellant's new evidence filed on this appeal puts into question the respondent's claim that it has continuously used the mark since September 1992
[42] The appellant's evidence indicates that the respondent changed its name from an existing Alberta company on July 21, 1992, and then was struck from the Alberta corporate register on March 1, 2000 for failure to file an annual return. Meanwhile, another business which was incorporated in B.C. in 1996 purported to use the respondent's mark.
[43] Further, the respondent's evidence of use is lacking in many respects. The Beaulieu affidavit, sworn November 1, 2000, evidenced advertising and business activities from 1992 to about 1996. There is no evidence to support that the mark was used after 1996 and until the date the affidavit was sworn. The respondent did not trace the changes in its corporate entity, other than to say that it had changed its name from an existing Alberta company. There is no evidence that would establish continuous use of the mark after the original trade-mark applicant was struck from the Alberta Registry.
[44] I am not satisfied that the respondent had continuously used the mark since September 1992. The registration of the mark should thus be refused under subsection 30(b) of the Trade-marks Act.
[45] I am of the view that the Registrar was not correct in his subsection 30(b) conclusion. The appeal must be allowed and the decision of the Registrar is set aside.
[46] The Registrar is directed to refuse the Canadian trade-mark application no. 854,265 for the trade-mark NO FRILLS. The appelant shall have its costs of the appeal.
[47] Because of my conclusion on the foregoing matter, I need not deal with the remaining grounds of opposition.
ORDER
[48] IT IS ORDERED that:
1. The decision of the Trade-marks Opposition Board dated May 4, 2004 is set aside.
2. The Registrar of Trade-marks is directed to refuse registration of Canadian trade-mark application no. 854,265 for the trade-mark NO FRILLS.
3. The appellant shall have its costs of the appeal.
"John A. O'Keefe"
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