2012 ONSC 1852 (March 22, 2012)
Overview
The Ontario Superior Court of Justice held that the respondent Boatsmart had breached a settlement agreement prohibiting the use of the term "EXAMEN DE BATEAU," or any translations thereof, by using the terms "boat exam" and "boating exam." This case demonstrates the importance of contextual interpretation as to the intention of the parties as well as specificity in matters of prohibited and permitted terms in settlement agreements.
Abstract
Two companies that administer online training and exams for boat operators seeking to obtain a Pleasure Craft Operator Card as required by Transport Canada executed a settlement agreement to end a trademark infringement and passing off action. The settlement agreement specifically prohibited Boatsmart from using the term "EXAMEN DE BATEAU" or any translation thereof. However, after the execution of the settlement agreement, Boatsmart used the terms "boat exam" and "boating exam" in its website's metatags. The Court considered the wording of the entire settlement agreement to determine the intention of the parties, including notably the fact that the settlement agreement contained reciprocal prohibitions to limit Internet hits one party would receive from the use of certain expressions and the fact that the prohibitions on translations were not in any way limited. The Court held that such use of the terms "boat exam" and "boating exam" by Boatsmart was indeed in breach of the settlement agreement.
Case summary
Facts. Skipper Online Services (SOS) Inc. ("Skipper") and 2030564 Ontario Inc. ("Boatsmart") are both companies that operate websites on which boat operators can take the online exam to obtain a Pleasure Craft Operator Card as required by Transport Canada. Prospective customers find the websites of both companies mainly through Internet search engines. In order to increase their ranking in Internet search results, each company registered a variety of trademarks. On August 4, 2010, Skipper commenced a trademark infringement and passing off action before the Federal Court of Canada against Boatsmart alleging that Boatsmart had used Skipper's "boater exam" trademark or variations thereof in the metatags of its website. The parties eventually entered into a settlement agreement, which contained prohibitions on each party from using certain terms. Specifically, section 2(a) of the settlement agreement prohibited Boatsmart from using the terms BOATER EXAM, EXAMEN DE BATEAU, EXAMEN BATEAU, BOATEREXAM and EXAMEN BATEAU, or any reversals, misspellings, translations or plurals thereof. However, after having executed the settlement agreement, Boatsmart continued to use the terms "boat exam" and "boating exam" in its website's metatags, pursuant to which Skipper instituted an action for breach of the settlement agreement.
Analysis. Skipper alleged and provided evidence of two interpreters indicating that the terms "boat exam" and "boating exam" could be translated "EXAMEN DE BATEAU," such that their use by Boatsmart was contrary to section 2(a) of the settlement agreement. In response, Boatsmart argued that the "translations" prohibited in such section only included translations in languages other than English or French as the list of prohibited terms already covered prohibited expressions in both English and French.
The Court canvassed the law regarding the interpretation of settlement agreements and, in particular, considered the fundamental principles that intent of the parties is to be determined by reference to the words of a contract, and that the wording of the entire contract, and not only the provisions at issue, are to be considered to determine such intent. Taking this into consideration, the Court found that the settlement agreement was a reciprocal one that was intended to limit each party's use of terms in their websites or metatags, so as to affect the number of hits resulting from Internet searches, as well as their search engine ranking.
Considering this intention of the parties and the prohibition regarding translations in the settlement agreement, the Court held that, upon a plain reading thereof, the use of the term "EXAMEN DE BATEAU" and its English translations "boat exam" and "boating exam" were prohibited by the settlement agreement and issued a declaration against Boatsmart accordingly.
Conclusion
This decision reiterates fundamental precepts of how a settlement agreement is interpreted, including notably that the intention of the parties is to be determined by considering the document as a whole, and such intention in turn informs the scope of any mutual covenants or prohibitions contained therein. The decision also stresses the importance of specificity and clarity in drafting settlement agreements, indicating that perhaps the safest way to avoid litigation relating to terms prohibited by a settlement agreement may very well be to consider and include permissible terms as well.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.