Branding is crucial to most businesses, whether it means creating a positive trade-mark, or protecting itself from others. For that reason, this column has covered many trade-mark topics over the years.
Trade-mark law is complicated when famous marks are involved. Brands that are very well known tend to get broader protection, and owners of those marks seldom hesitate to exercise those powers. This can crush a small business, but the Supreme Court of Canada has recently confirmed that the power is not unlimited.
First, remember that trade-marks are based on use, and on actual reputation. This means that one cannot register trade-marks in advance, in the hope that they will be useful in the future (there is a minor exception for pending marks, but the potential use already has to be identified). If the mark is not already being used in conjunction with specific wares or services, a trade-mark cannot be fully registered.
One consequence of this rule is that trade-marks are registered by classes, and therefore similar marks can apply to different categories of products. For example, one can purchase all sorts of goods with the brand name “Excel”, including automobiles, computer spreadsheets, chewing gum and dishwashing soap. Each of these is allowed to co-exist in the marketplace, because there is no reasonable chance of confusion between the classes.
The rules work well for common words like “Excel”, but what happens when the trade-mark is inherently distinctive, or develops global brand recognition? Marks like “Kodak”, or “Coca-Cola” fall into this category.
Or “Barbie”. Almost everyone thinks of Mattel’s doll when hearing that word, and the company spends a huge amount of time and money to protect the brand name. They have to; if “Barbie” ever loses its distinctiveness, and starts being used in conjunction with other products, trade-mark law says that Mattel could lose its rights altogether.
This may help explain why Mattel fought so hard against a small restaurant chain in Montreal named “Barbie’s”. The restaurant claimed that it was simply a play on words, referring to its barbecued food. Mattel disagreed, and argued that the restaurant was playing on the doll’s fame. After Mattel’s opposition to the mark was turned down by the trade-mark examiner, the case made it all the way to the Supreme Court.
The Court sided with the restaurant, although famous mark holders did find something to be happy about as well. Relying on the classic trade-mark test of potential confusion, Mr. Justice Binnie found that the two marks were used in different channels of trade, and were directed at different consumers. There was, according to the Court, little chance of confusing Mattel’s line of dolls and doll clothes with the restaurant’s products.
Owners of famous marks did find some consolation in the ruling, since the Court recognized protection of famous marks to a greater degree than previous cases had allowed. Still, the ruling is clear that there are limits to protecting famous marks, and confusion is still a prime consideration.
Unfortunately for small businesses, the legal rules may not be the most important issue. Very few companies have the resources to fight a giant such as Mattel, especially to the Supreme Court of Canada. Most cases like this are quickly settled, or dropped in favour of the famous mark owner. But the ruling in this case shows that there is still hope if the facts warrant it.
Despite the success of Barbie’s restaurant, the case gives us another lesson: prevention can be a far less costly route. When choosing a name for a new business or product, extensive searches should be done. If any existing marks show up that could cause confusion, think long and hard before adopting something that might lead to litigation in the future. It is much easier and cheaper to change a name early in the business life cycle.