March 6, 2018
In 2017, the Canadian Federal Court in Sleep Country Canada Inc. v Sears Canada Inc. granted an interlocutory injunction in a trademark case for the second time in two years. The decision left many wondering whether the decision signaled a new willingness by the Federal Court to grant this equitable remedy in trademark cases, or whether the decision was restricted to its particular facts involving a well-known mark and arguably blatant infringement.
Since 1994, a Canadian retailer of mattresses, Sleep Country, has used the slogan WHY BUY A MATTRESS ANYWHERE ELSE in TV, radio, print and online advertising, and owns two trademark registrations for the slogan. Evidence showed that the slogan had acquired national recognition of "iconic" proportions. In July 2016, Sears started to advertise THERE IS NO REASON TO BUY A MATTRESS ANYWHERE ELSE in online flyers and social media. Despite a demand letter alleging infringement, Sears refused to stop.
To obtain an interlocutory injunction, the moving party must establish that (1) a serious issue exists; (2) it will suffer irreparable harm that is not compensable in damages if the injunction is denied; and (3) the balance of convenience favours the moving party. Typically, the irreparable harm requirement is very difficult to meet – since the court requires clear and non-speculative evidence of harm that could not be compensated for by an award of damages at trial.
Regarding the “serious issue”, Justice Kane held there was no dispute that Sleep Country satisfied this requirement; and regarding the balance of convenience, Justine Kane held that Sears could easily revert to its "pre-slogan approach" that had been used for years, with the result that the balance of convenience favoured Sleep Country.
The decision provides a detailed analysis of both the facts and case law on irreparable harm. Justice Kane acknowledged that the application of the irreparable harm requirement can make it almost impossible to obtain an interlocutory injunction; however, she stated that a line has to be drawn between determining whether it is possible, or impossible to quantify harm. If it is impossible to do so, the Court should find that the harm is irreparable.
To that end, she held that where the allegation of confusion relates to a slogan (vs. a product), it would be "difficult to the point of impossibility" to quantify Sleep Country's losses at trial. The impossibility was threefold: (1) potential loss of sales by Sleep Country, since losses relating to use of Sear's slogan could not be parsed out from losses relating to Sears' other marketing activities; (2) damages to Sleep Country's well-known trademark arising from depreciation and loss of goodwill; and (3) "disgorgement" of Sears' profits was too speculative since Sears may or may not have profits arising from its new marketing strategy, or other factors, and it would be challenging to attribute those profits to use of the Sears slogan. Expert evidence was tendered with respect to the quantification issue.
By acknowledging that irreparable harm can be shown when the defendant's infringing conduct is mixed with other non-infringing actions, the decision may open the door to more successful injunction motions. However, Justice Kane distinguished earlier decisions where interlocutory injunctions had been denied by noting that Sears was using a slogan vs. selling an infringing product. This distinction could limit the applicability of this decision to future cases, although it is not clear why the issue of irreparable harm would be viewed differently depending on the type of trademark that is at issue.
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