Anita Gogia is an IPilogue Writer and a 2L JD Candidate at Osgoode Hall Law School.
On November 2, 2022, in the case of Hemant Bhagwani, Fatima Bhagwani, 1727799 Ontario Inc. and Bombay Frankie Inc. v 2788610 Ontario Inc (“Bhagwani”), the Ontario Superior Court of Justice upheld trademark principles which state that an enforceable right does not exist on the mere filing of a trademark application absent use of the mark.
In Bhagwani, the divisional court vacated an order for an injunction prohibiting Bhagwani from using “Bombay Frankie” in any restaurant they operate. The motion judge had granted the injunction to 2788610 Ontario Inc. because it was the first to file a trademark application for “Bombay Frankies” despite not having yet used the mark. The divisional court reversed this decision and held that an applicant cannot sue for trademark infringement until the mark actually issues to register. If they are to sue for passing off when registration is pending, they cannot do so successfully unless the mark has developed goodwill.
2788610 Ontario Inc. applied to register the mark in October 2020 but that application had yet to be examined, approved, or advertised. It was in the process of developing a franchise system of restaurants but had not opened or advertised any restaurant or obtained any reputation associated with the mark. In contrast, Bhagwani had used the mark on various menu items and filed an application to register “Bombay Frankie” in 2021. They also opened two restaurants with the “Bombay Frankie” name.
In granting the injunction, the motion judge applied the RJR-MacDonald Inc v Canada (AG) test:
- First, a serious issue to be tried is present. The issue is whether 2788610 Ontario Inc.’s entitlement to the trademark manifests on the application date or registration date. The judge accepted that this is a novel claim and thus meets the threshold to establish a “serious issue to be tried”.
- Second, the judge held that 2788610 Ontario Inc. would suffer irreparable harm that is not compensable without the injunction. The judge concluded that Bhagwani would have a significant advantage if they continued operation with the marks in issue on their restaurants.
- Third, the balance of convenience favoured the granting of an injunction.
The divisional court reviewed the motion judge’s decision on a standard of correctness because it is an error in principle attributable to the application of an incorrect legal standard. The divisional court applied the RJR test in accordance with established trademark principles:
- First, in finding a serious issue to be tried, the motion judge incorrectly concluded that 2788610 Ontario Inc. had a right to the marks by virtue of the trademark application or that its trademark would be registered (both errors of law). Per 19 and s.20 of the Trademarks Act, a trademark must be registered to give rise to a cause of action. There is no certainty that 2788610 Ontario Inc.’s application will be granted. In considering a possibility of a passing off claim, the court upheld that to establish passing-off per s.7(b) and s.7(c) of the Trademarks Act, 2788610 Ontario Inc. must have shown existing goodwill. While 2788610 Ontario Inc. was engaged in start-up activities, those did not constitute goodwill per the jurisprudence. In this analysis, the court notably recognized that goodwill could exist from the perspective of potential franchisees (but was not established on the facts of this case).
- Second, the court held that the motion judge made a palpable and overriding error by ruling that 2788610 Ontario Inc. would suffer irreparable harm without an injunction because the loss of goodwill cannot be inferred, only established by clear evidence. The cause of action protects existing, not potential goodwill. The court cited Centre Ice Ltd v National Hockey League, noting that confusion does not per se result in “irreparable harm not compensable in damages.” Irreparable harm is a high bar.
- Third, although the divisional court did not consider the balance of convenience, the court did note that such consideration may favour Bhagwani, who had to remove signs, website content, and social media accounts bearing the “Bombay Frankie” name.
