Canada’s Intellectual Property Firm

Reverse confusion: It's still confusion when the tables are turned

Traditional trademark infringement involves a new user coming into a marketplace (the "junior user"), and adopting a trademark similar to that already in use by another entity (the "senior user"), such that the public is confused into believing that the junior user's goods or services originate from the senior user, or that there is some sort of association or connection with the senior user.

But what happens when a small, relatively unknown company has been using a trademark for many years (i.e., it is the senior user), and a big corporation with a large advertising budget enters the marketplace with a confusingly similar trademark (i.e., as a junior user) and inundates the public with a massive marketing campaign for their new trademark? The result may well be that the public, now very familiar with the junior user's trademark as a result of such marketing, will be confused into believing that the senior user's goods and services originate from the junior user, a state known as "reverse confusion."

The doctrine of reverse confusion, which has long been accepted in the United States as an actionable form of trademark infringement, arises when the plaintiff alleges that use of the defendant's trademark is likely to cause customers to mistakenly believe that the plaintiff's goods originate with the defendant. In effect, the doctrine protects smaller, lesser-known trademark owners whose trademarks are infringement upon by big, multi-national companies with large advertising budgets.

As an example, imagine a small, independent clothing store in Halifax that sells a limited line of clothing under the registered trademark DESIGNS BY EVELYN. Then, possibly unaware of the registration or use by this store, a well-known Canada-wide department store starts using the trademark DESIGNED BY EVELYN, which is launched with a multi-million dollar advertising campaign to build brand awareness in the new clothing line. An average Canadian consumer, upon seeing the department store's clothing, would believe that such clothing originated from the department store, and the traditional test for infringement would not be met. However, the same consumer, upon seeing clothing originating from the small store in Halifax, may well believe that the senior user's clothing originated from the department store, i.e., there would be reverse confusion. The concept can be shown diagrammatically as follows:

Traditional confusion
Step 1 Step 2 Step 3
Company A adopts a trademark in 1986 Company B adopts a similar trademark in 2012 The public is confused – believes that the goods purchased from Company B came from Company A
Reverse confusion
Step 1 Step 2 Step 3
Small Company A adopts a trademark in 1986 Large Company B adopts a similar trademark in 2012, with a substantial marketing campaign The public is confused – believes that the goods purchased from small Company A came from large Company B

In Canada, the courts have accepted that the concept of confusion in considering trademark infringement under the Trademarks Act is broad enough to include reverse confusion. It is not considered an independent cause of action, but is assessed on the same statutory criteria as traditional confusion, with the presence or absence of likelihood of confusion being the key issue. It does not matter whether or not the likelihood of confusion is the belief that the defendant's products are those of the plaintiff (i.e. traditional, "forward" confusion) or the belief that the plaintiff's products are those of the defendant (i.e. "reverse" confusion). While Canadian courts have yet to make a finding of infringement based on a true case of reverse confusion, several courts have accepted evidence of actual reverse confusion in support of a finding of a likelihood of confusion.

The reasoning for protecting senior users from this type of reverse confusion also differs from the traditional reasoning for protecting trademark owners from infringement. In the case of traditional, forward confusion, the laws are generally designed to protect the senior user from a junior user who trades off of the goodwill of the senior user, and siphons off sales and business that would otherwise have gone to the senior user. However, where reverse confusion is at play, the senior user may actually benefit from confusion and may see a jump in sales when the larger, junior user starts promoting the new product line or services.

Harm to the senior user in the case of reverse confusion therefore flows not from lost sales or business, but from diminished value to and loss of control over the senior user's trademark, not to mention the loss of distinctiveness in the senior user's trademark. For example, the marketability of the senior user's trademark would likely be damaged, and, in extreme circumstances, consumers may actually consider the senior user an infringer of the junior user's trademark, resulting in injury to the senior user's goodwill and reputation. Similarly, if the junior user and its products or services are somehow tarnished through a corporate misstep or poor quality offerings, the goodwill of the senior user would suffer along with that of the junior user.

While not as quantifiable as a "lost sale" may be, this harm is significant and real, which is why the courts in the United States have often intervened in cases of reverse confusion to protect the senior user's trademark.

Some critics have pointed out downfalls in the courts broadly accepting reverse confusion claims. Reverse confusion claims can penalize a junior user who, after spending a significant amount of money promoting a trademark, could then be blocked from using it by a senior user who has not promoted or invested in its trademark. Reverse confusion could also prevent larger companies from expanding product lines, which is generally thought to benefit the public.

The significant damages awards in U.S. cases have also led some to see reverse confusion cases as encouraging extortion or blackmail of large companies by smaller players who may not, in reality, be invested in the trademarks being relied upon. The counter to this argument is, of course, that taking "reverse confusion" out of the equation in trademark infringement would allow powerful and large companies to undermine the trademark protection afforded to smaller companies, simply through use of their vast economic strength.

Karen F. MacDonald, Vancouver

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.