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Toys “R” Us v. Herbs “R” Us

On June 11, 2020, the Federal Court of Canada rendered the following decision: Toys “R” Us (Canada) Ltd. v. Herbs “R” Us Wellness Society, 2020 FC 682. The salient details of this decision are detailed below.


Fact Pattern


Toys “R” Us (Canada) Ltd. (hereinafter “Toys “R” Us” or the “Applicant”) is the registered owner of a family of trademarks, including Canadian trademark registration no. TMA777,641 (hereinafter the “Toys “R” Us trademark”), which are all similar due to the fact that they all contain the “R” Us portion.


Toys “R” Us brought this action before the Federal Court of Canada in order to enforce its trademark against the Herbs “R” Us Wellness Society, a cannabis boutique located in Vancouver, Canada. The Applicant argued that: (1) the Herbs“R” Us trademark depreciated the goodwill attached to the Toys “R” Us trademark, contrary to section 22 of the Trademarks Act, (2) the Herbs “R” Us trademark constitutes infringement pursuant to section 20 of the Trademarks Act, and (3) the Herbs “R” Us trademark constitutes passing off pursuant to subsection 7(b) of the Trademarks Act.


Decision


For the reasons detailed below, the Court concluded that the Herbs “R” Us trademark would likely depreciate the goodwill associated with the Toys “R” Us trademark and as a result, granted an injunction preventing use of the Herbs “R” Us trademark, nominal damages and costs associated with the application, but did not grant punitive damages. In addition, the Court concluded that the Herbs “R” Us trademark did not constitute infringement nor passing off.


The Court’s Reasoning


Infringement


The Court weighed the following factors, which are listed in subsection 6(5) of the Trademarks Act, in judging whether or not infringement had occurred: (a) the inherent or acquired distinctiveness of the trademarks or trade names; (b) the length of time they have been in use; (c) the nature of the goods, services or business; (d) the nature of the trade; and (e) the degree of resemblance between them, including in appearance or sound or in the ideas suggested by them.


While the Court established that: (i) there was a high degree of resemblance between the trademarks, (ii) the Toys “R” Us trademark has both an inherent and an acquired distinctiveness and (iii) the length of use of the Toys “R” Us trademark was significantly longer than that of the Herbs “R” Us trademark, the Court nonetheless concluded that no infringement had occurred. The basis of its decision emanated from the third factor listed in subsection 6(5) of the Trademarks Act: the nature of the goods, services or business. Due to the fact that the two corporations sold entirely different products, the Court surmised that a casual consumer, when encountering the Herbs “R” Us trademark would not think that the products associated with it originated from the same source as the goods and services associated with the Toys “R” Us trademark. In addition, the nature of the trade also contributed to this decision, as Herbs “R” Us sold products labelled for adults aged 19 and over while Toys “R” Us’ products were more directed to young children and families.


Passing Off


In order to successfully prove a passing off claim, the Applicant must prove that the existence of goodwill, the deception of the public due to a misrepresentation, and an actual or potential damage. The Applicant argued that the misrepresentation emanated from the confusion between the two trademarks. The Court, after establishing in its analysis of infringement that there was no likelihood of confusion, judged that the passing off also failed, as there was no likelihood of confusion and thus, no misrepresentation.


Depreciation of Goodwill


In order to obtain a remedy under this claim, the Applicant must prove the use of its registered trademark by the Defendant, that the Applicant’s trademark has a significant goodwill associated with it, the likelihood of a link made by consumers between the Herbs “R” Us trademark and the Applicant’s goodwill, and the damage that the goodwill would suffer as a result of this linkage.


The Court concluded that the significant resemblance between the Toys “R” Us trademark and the Herbs “R” Us trademark is sufficient in concluding that the Defendant did employ the Applicant’s trademark. In addition, based on a number of factors (including the degree of recognition of the mark, the volume of sales, the extent of advertising and publicity, etc.) the Court maintained that the Toys “R” Us trademark had a significant goodwill associated with it. Due to the similarities that the trademarks at issue, the Court held that a linkage between the Herbs “R” Us trademark and the goodwill associated the Applicant’s trademark would arise in the mind of the consumer. Lastly, the Court concluded that the goodwill associated with the Applicant’s trademark would be damaged or depreciated by the Herbs “R” Us trademark, such as reducing the distinctiveness associated with the Toys “R” Us trademark.


Key Takeaways


This case law further proves that the nature of the goods, services and business is crucial in determining whether or not an infringement claim is successful even when the trademarks in question share a significant resemblance with one another.


Also, this case law is notable as the Applicant was successful in obtaining a remedy pursuant to section 22 of the Trademarks Act.


Lastly, given the current state of affairs, it is worth noting that the hearing was held by videoconference.


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