2011 FC 212 (February 22, 2011)
Overview
The Federal Court reiterated the burden of proof on the plaintiff under default judgment, the significant weight that will be given to circumstantial evidence of actual confusion, and the significant influence that party conduct can have on the determination of the quantum of damages and costs awarded on a solicitor-client basis.
Abstract
On a motion for default judgment, the Federal Court ("the Court") found that the defendant had infringed the plaintiff's registered trademark AQUASMART & DESIGN by offering for sale, selling and installing water purification systems under the confusing trademark/trade name AQUASMART. Further, despite no evidence of actual sales by either party, the Court awarded lump-sum damages in accordance with the scale customarily applied by the Court based on the type of business activities and reprehensible conduct of the defendant, as well as costs on a solicitor-client basis.
Case summary
Facts. Aquasmart Technologies Inc. ("the plaintiff") is the registered owner of Canadian Trademark No. TMA437,536 for AQUASMART & DESIGN, shown below, in association with "water-conserving plumbing fixtures, swivel sprays, aerators, showerheads, water purifiers, shower massagers, in-sink shower sets, hand-held shower guns, showerheads with flow control valve." 
The plaintiff's trademark AQUASMART & DESIGN had been extensively used, promoted, advertised and sold in connection with the registered wares in Canada since 1991, and as such, had acquired a valuable reputation and goodwill.
In 2010, the plaintiff received a complaint from a customer who had purchased a water treatment system from a business under the name AQUASMART owned by Robert Klassen ("the defendant"), and was under the impression that this business and the defendant were associated with the plaintiff.
On July 7, 2010, counsel for the plaintiff contacted and advised the defendant of the plaintiff's exclusive rights to the use of the trademark AQUASMART, and on October 8, 2010, the defendant was served with a Statement of Claim.
The defendant did not file a Statement of Defence or any evidence in this case.
The plaintiff, however, submitted evidence that the defendant not only used the trademark AQUASMART in association with its business since May 2010, but had also used the trademark on business cards, product literature, sales invoices, vehicles used by the employees who installed the water purification systems, signage, warranty certificates, bulletins, letters, to identify its business in online job postings and on the Canada411 online telephone directory, and in YouTube advertisements.
Further, the plaintiff submitted evidence that the defendant had been deceitful when attempting to persuade customers to purchase water purification systems, and that the defendant's activities had promoted a public sharing of negative opinions in connection with the AQUASMART trademark.
In addition, the plaintiff submitted evidence that the use of the trademark AQUASMART by the defendant had caused confusion among members of the public. Specifically, the plaintiff submitted (a) direct evidence of reverse confusion (i.e., that the defendant's use of the AQUASMART trademark led to the inference that the defendant's products and business were associated with the plaintiff), and (b) circumstantial evidence of actual confusion in the form of a customer affidavit.
Issues. The issues before the Court included (1) whether default judgment under Rule 210 of the Federal Court Rules was appropriate in this case, (2) whether the evidence submitted met the burden of proof under default judgment to establish that the plaintiff's trademark had been infringed, and (3) the appropriate quantum of damages.
Analysis
Default judgment. The Court found that, as the defendant was personally served with a Statement of Claim and did not file a Statement of Defence, this was an appropriate case for default judgment under Rule 210 of the Federal Court Rules.
Infringement. As stated by the Court, "[o]n a motion for default judgment where no defence has been filed, every allegation in the Statement of Claim must be treated as denied." As such, in order to meet the burden of proof, the plaintiff must file evidence that enables the Court to find, on a balance of probabilities, that there is liability, and the plaintiff must establish its entitlement to the relief claimed.
In assessing whether the trademark had been infringed, the Court reiterated that under section 20 of the Trademarks Act, the rights of the owner of a registered trademark shall be deemed to be infringed by a person who sells, distributes or advertises wares or services in association with a confusing trademark or trade name.
The Court found that the evidence presented by the plaintiff established that the defendant had, either personally or through its employees, advertised, offered for sale, sold and installed water purification systems in association with the trademark AQUASMART.
In assessing the likelihood of confusion under the factors set out in section 6(5) of the Trademarks Act, the Court held that (a) the very high degree of resemblance between the marks, (b) the fact that the nature of the wares and target markets were highly overlapping, (c) the length of time the marks had been in use, (d) acquired and inherent distinctiveness, and (e) the evidence of actual confusion, all strongly favoured a likelihood of confusion.
Based on the foregoing, the Court found that the plaintiff had led evidence that, on a balance of probabilities, showed that there was liability, and that liability itself established the plaintiff's entitlement to the relief claimed.
Damages. As the defendant did not participate in the proceedings and denied the plaintiff discovery, thereby making the accurate assessment of damages impractical, the Court based its assessment of the plaintiff's damages on past decisions and on the defendant's activities.
In particular, the Court stated that "past decisions of the court have defined a scale that sets appropriate plaintiffs' damages, in 1997 dollars, at $3,000 in the case of street vendors and flea market operators, $6,000 in the case of sales from fixed retail premises, and $24,000 in cases of manufacturers and distributors. The court has recognized that this scale should be adjusted for inflation, and that finer gradations may be possible."
In view of these established precedents and:
- the scope of the defendant's business, including the fact that the defendant carried on business five days a week from a physical premises and employed a network of "dealers" to distribute the wares in association with the infringing mark;
- the defendant's extensive use and advertising of the infringing mark, including on external signage and vehicles;
- the price of the defendant's wares;
- the defendant's reprehensible conduct, including the fact that the defendant continued to use the infringing mark after (a) he was made aware of the plaintiff's trademark rights, (b) telling counsel that he was changing and had changed its business name, and (c) being served with the Statement of Claim; and
- evidence that the defendant's conduct had generated significant ill will that was linked to the plaintiff and thereby diminished the plaintiff's goodwill,
the Court awarded damages of approximately $15,600 ($12,000 1997 dollars).
The Court also awarded $10,000 in solicitor-client costs due to the defendant's flagrant and deliberate disregard for the plaintiff's intellectual property rights, and failure to defend the action.
Conclusion
This case reiterates the significant weight that will be given to evidence of actual confusion, even if circumstantial, and the influence that party conduct can have on the determination of damages even without evidence of actual sales.
Jayda A. Sutton, Toronto
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