Federal Court Grants Interlocutory Injunction in Trademark Case

The Federal Court’s decision in Sleep Country Canada Inc v Sears Canada Inc, granted a rather rare interlocutory injunction prohibiting the use of a slogan pending the final determination of a trademark infringement action. Sears Canada Inc. (“Sears”) was enjoined from using their newly adopted slogan that stated “There is no reason to buy a mattress anywhere else”, as it was confusing to Sleep Country Canada Inc.’s (“Sleep Country”) trademarked slogan “Why buy a mattress anywhere else”.[1] The appeal of the order has been withdrawn.[2]

Interlocutory injunctions have extraordinary power but have been rather uncommon in the Federal Court except for cases in relation to counterfeit goods. [3] However, from the Federal Court’s decision in this case, it appears that the Federal Court may be more willing to issue interlocutory injunctions in intellectual property cases where there is sufficient supporting evidence that irreparable harm may result otherwise.[4]

Background

Sleep Country has been using its slogan since 1994 and has subsequently accumulated national acclaim for its popularity, and is the subject of two trademark registrations which grant Sleep Country exclusive use of the slogan.[5] In July of 2016, Sears began advertising with the slogan “There is no reason to buy a mattress anywhere else” in flyers, and on social media platforms such as Facebook and Instagram.[6]

Sleep Country brought an earlier motion for an interim injunction (pending the determination of the motion for an interlocutory injunction) in accordance with section 20 of the Trademarks Act.[7] Its motion was dismissed by Justice Boswell in October of 2016.[8] Justice Boswell acknowledged that a serious issue had been conceded by Sears, but found that irreparable harm had not been established. [9]  The Federal Court, when considering the interlocutory injunction, did not find the decision of Justice Boswell to be persuasive, as the judgement lacked detailed reasoning and the time period applicable to the irreparable harm was short (i.e. a few weeks until the determination of the interlocutory motion). [10]

The Federal Court reasoned that Sleep Country had established on a balance of probabilities that confusion by the public is likely, as is the depreciation of goodwill and loss of distinctiveness, between the motion and the determination of the infringement action, and that loss of sales and/or other damages would result.[11]

Key Issue

The key issue in this case was whether Sleep Country had established, with clear and non-speculative evidence[12], that it will suffer irreparable harm as a result of the alleged trademark infringement, including confusion and/or depreciation of goodwill or loss of distinctiveness, pending final judgement on the infringement matter, and whether the harm suffered could be quantified or compensated by an award of damages.[13]

The Three Part Test

The Federal Court relied on the three-part test established by the Supreme Court of Canada in RJR-MacDonald v Canada (Attorney General), (1994).[14] To succeed on a motion for an interlocutory injunction, the applicant must be able to establish and satisfy each element of the three part test[15]:

(1) that a serious issue has been raised;

(2) that it will suffer irreparable harm if the injunction is not granted (i.e., harm which cannot be quantified); and

(3) that the balance of convenience favors the applicant.[16]

(1) Serious Issue Raised

Sears conceded that a serious issue had been raised.[17] This was not in dispute.

(2) Irreparable Harm

In RJR-MacDonald v. Canada (1994)[18], the Supreme Court described “irreparable harm” as:

“the nature of the harm suffered rather than its magnitude. It is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other.”[19]

Irreparable harm is often cited as the most difficult element of the test to satisfy. The evidence of harm must be clear and non-speculative, and the harm cannot be compensated by virtue of an award for damages at trial.[20]

The irreparable harm in this case, as argued by Sleep Country, is the result of the confusion between the two slogans, as well as the depreciation of the goodwill and loss of distinctiveness of Sleep Country’s registered trademarks.[21]

In conducting the confusion analysis, the Federal Court found that the phrases were strikingly similar conveying the same “value proposition” or idea—one as a declaratory statement and the other as a rhetorical question, and that confusion amongst the public would likely result.[22] Sleep Country argued that consumers would mistakenly think that Sears’ advertisements originate from Sleep Country, that the goods and services that Sears is advertising are associated with or originated from Sleep Country, that Sleep Country’s goods are available at Sears, or that Sears and Sleep Country are associated.[23]

In a detailed analysis of all of the relevant facts and case law, and in particular, the extensive expert evidence provided by the parties, the Court held that where the allegation of confusion relates to a slogan (rather than a product), it would be “difficult to the point of impossibility” to quantify Sleep Country’s losses.[24] This also applied to potential loss sales by Sleep Country, since losses relating to use of Sears’ slogan could not be parsed out from losses relating to Sears’ other marketing activities, and to damages to Sleep Country’s well-known trademark arising from depreciation and loss of goodwill.[25]

As the application of the irreparable harm requirement can make it nearly impossible to obtain an interlocutory injunction, Justice Kane stated that a line has to be drawn between determining whether it is possible, or impossible to quantify harm.[26] If it is impossible to do so, the Court should find that the harm is irreparable.[27]

(3) Balance of Convenience

The Federal Court found in favor of Sleep Country as it has been using its trademark for 22 years, won awards, and the evidence provided by Sleep Country suggests that their slogan is etched in the mind of many consumers, whilst Sears has only recently (since July 2016) adopted the similar slogan.[28] The Federal Court ruled that Sears could easily revert to its pre-slogan marketing approach and it would be in the “public interest” in protecting trademarks.[29] As a result, the balance of convenience was ruled in favor of Sleep Country.

Significance

The decision in this case builds on the earlier decision in Reckitt Benckiser v Jameson, where an interlocutory injunction was granted against Jameson’s use of the term “Megared” for vitamins.[30] In both cases, the Court considered the issue of irreparable harm. In Reckitt Benckiser v Jameson, the Court’s judgement turned in part on the vulnerability of the moving party in terms of its new product launch. In the present case, the decision was based on consideration that any loss to the distinctiveness of Sleep Country’s long used slogan or impact on its goodwill pending trial could not be quantified.[31]