Tianchu Gao is an IPilogue Writer and a 1L JD Candidate at Osgoode Hall Law School.
If you see an alternative for your favoured product—with similar quality and even cheaper prices—in a grocery store, would you consider trying it?
Comparative advertising is an effective marketing technique, in which a company’s product or service is compared to its competitor’s. Consumers are more willing to try out new things if they are assured that the new product is comparable or superior to those made by well-known brands. Companies sometimes enhance their credibility by including survey results or lab data that supports the comparisons in their ads. This provides consumers with more information and allows small businesses to compete with mega corporations.
Despite these advantages, comparative advertising is a dangerous field to navigate from a legal perspective. Companies that include other companies’ trademarks or products in their own advertisements are subject to various constraints from the Trademarks Act, Copyright Act, Competition Act, tort law, and the Canadian Code of Advertising Standards.
In 2019, Quebec wine producer Société de Vin Internationale Ltée (“SVI”) faced a copyright and trademark infringement claim raised by its competitor, Constellation Brands U.S. Operations (“Constellation”). In the leaflet SVI designed to promote its new product ‘Apollo Découvertes’, images of wine bottles manufactured by Constellation, as well as its registered “MEIOMI” trademark, stand alongside images of SVI’S wines. Beside the images are statements that claim the SVI wines are comparable to those from Constellation in terms of taste. Constellation brought an action against SVI based on copyright and trademark infringements and wanted to recover lost profits as calculated from SVI’S Apollo Découvertes wine sales.
One of the provisions that governs the use of third-party trademarks from Trademark Act is section 22: “[n]o person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto.” The term “goodwill” encompasses all the intangible assets of a business. In the context of trademarks, it refers to the recognition and trust that consumers have with a particular brand.
This section, upon first look, may appear to be a catch-all prohibition of any use of competitor’s registered trademarks in a comparative ad. Yet, judicial interpretation of this section has effectively limited its applicability. Referencing the American Trademark Act (Lanham Act), the Supreme Court of Canada confined the use of section 22 to cases “in which the protectable interest is clear and the threat of interference is substantial” (Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée, 2006 SCC 23). A review of the case law reveals that courts rarely prohibit the use of marks for goods or wares in comparative ads. In contrast, section 22 is more applicable to trademarks for services. Therefore, it is unsurprising that both the trial and the appellate courts denied Constellation’s claim for trademark and copyright infringements.
The result of the case indicates that the protection and benefits granted by the Trademark Act are not without limits. The use of a competitor’s trademark, “for the purpose of comparing the goods with the goods of the plaintiff [para 26],” does not necessarily amount to a trademark infringement.
