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“Distinguishing Guise” – The Captain Morgan Case

On June 12, 2017 Judgement was rendered in the case of Diageo Canada Inc vs. Heaven Hill Distilleries Inc.  This case has come to be known as the “Captain Morgan Case”.  It is noteworthy because it is one of the few recent cases on “distinguishing guise”.   As defined is the Trademark Act a “distinguishing guise” means
(a) a shaping of goods or their containers, or
(b) a mode of wrapping or packaging goods
the appearance of which is used by a person for the purpose of distinguishing or so as to distinguish goods or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others;

The facts are that Diageo Canada is the owner of the highly successful “Captain Morgan” brand of rum. Heaven Hill launched their Admiral Nelson brand in an attempt to compete with the Captain Morgan brand.  The gist of the dispute can be understood from the following excerpts taken from the Judgement:

“ I agree with Diageo that there is no requirement that a distinguishing guise must be registered under the Act in order to be a valid trademark enforceable as against Heaven Hill.”

“Diageo’s trade dress or distinguishing guise is embodied in the bottles of Original Spiced Rum, 100, Silver Spiced Rum, Gold, Dark, and White varieties of CAPTAIN MORGAN rum which bear a fanciful depiction of Sir Henry Morgan located generally at the center of the label, the CAPTAIN MORGAN brand name above the CAPTAIN MORGAN character with the rum variety below it, a classic sailing ship in the background, the bottle caps, the collar labels bearing the CAPTAIN MORGAN brand, and the colour scheme and design of the main label. All of these elements constitute the distinguishing guise of the CAPTAIN MORGAN rum products within the definition of a distinguishing guise under the Act and, accordingly, are a valid and enforceable trademark under the Act.”

“Diageo must establish goodwill in respect of the distinctiveness of its CAPTAIN MORGAN rum products. Although goodwill is not defined in the Act, the Supreme Court of Canada has described the goodwill associated with a trademark as being: “the positive association that attracts customers towards its owner’s wares or services rather than those of its competitors”). The evidence adduced by Diageo at trial shows there is considerable goodwill associated with the CAPTAIN MORGAN brand and the current manifestation of its associated trade dress. This is most evident by the quantity of sales of CAPTAIN MORGAN rum products, especially in relation to other rum producers and their rum products in Canada. Mr. Kourtis’ testimony was that approximately 200 million bottles of CAPTAIN MORGAN rum have been sold in Canada since 1994, with retail sales of roughly $5 billion, and that about 20% to 23% of Diageo’s total sales of spirits are attributable to CAPTAIN MORGAN. Mr. Kourtis further testified that: approximately 12 million bottles of CAPTAIN MORGAN rum and over 7 million bottles of CAPTAIN MORGAN Original Spiced Rum are sold annually in Canada; this is roughly equivalent to $320 million in retail sales annually in Canada, of which approximately $220 million is attributable to sales of CAPTAIN MORGAN Original Spiced Rum; CAPTAIN MORGAN was the best-selling rum in Canada in 2016, with some 32% share of the market for rum products, ahead of other well-known brands of rum such as BACARDI, LAMB’S and APPLETON ESTATE; and that, approximately 71.9% of the spiced rum market share in Canada is held by CAPTAIN MORGAN spiced rums.   The goodwill associated with the CAPTAIN MORGAN brand is also evident by the extensive promotion, marketing, and advertising of CAPTAIN MORGAN. In the last 15 years or so, Diageo has spent about $150 million for promoting, marketing, and advertising its CAPTAIN MORGAN rum products, and within the last year roughly $17 million was expended.”

“As to the second element of a passing-off claim, namely the deception of the public due to a misrepresentation, it bears repetition to note here that the misrepresentation creating confusion in the public may be willful, negligent, or careless. Although Diageo pointed to some evidence and argued at trial that Heaven Hill intentionally or deliberately set out to mimic or copycat the trade dress of the CAPTAIN MORGAN rum products when it refreshed the ADMIRAL NELSON’S packaging, I find this evidence does not clearly or cumulatively establish any such intention on the part of Heaven Hill. The occasional references to CAPTAIN MORGAN in the documentation surrounding the redesign of the ADMIRAL NELSON’S bottle and labels and the testimony at trial, notably that of Hanna Venhoff, Heaven Hill’s Senior Brand Manager for its rum portfolio, do not, in my view, establish on a balance of probabilities that Heaven Hill intentionally or willfully set out to mimic or copycat the trade dress of the CAPTAIN MORGAN rum products. As the Court in Mr Submarine Ltd v Emma Foods Ltd, [1976] OJ No 806 at para 6, 34 CPR (2d) 177 (Ont H Ct J), remarked, citing Baker et al v Master Printers Union of New Jersey (1940), 47 USPQ 69 at 72: “Of course, few would be stupid enough to make exact copies of another’s mark or symbol. It has been well said that the most successful form of copying is to employ enough points of similarity to confuse the public with enough points of differences to confuse the courts.”

“What the evidence does show, however, on a balance of probabilities, is that a casual or ordinary purchaser of rum products would likely be confused as to the source of ADMIRAL NELSON’S rum products as currently packaged and sold in Canada. At trial, Diageo tendered the expert report of Dr. Ruth Corbin who designed and oversaw the implementation of a consumer survey of 629 Canadian adults of legal drinking age, residing in four Canadian cities, who had recently purchased a bottle of rum. The survey’s mandate was two-fold: one, to assess general impressions of ADMIRAL NELSON’S Premium Spiced Rum; and two, to measure the extent, if any, to which purchasers of rum mistakenly infer that a bottle of ADMIRAL NELSON’S Premium Spiced Rum originates from the same source as CAPTAIN MORGAN rum. The in-person mall-intercept survey was conducted during July and August, 2016, in shopping malls in Moncton, Montreal, Toronto, and Edmonton, cities chosen to provide geographical coverage across Canada as well as to allow for a comparison between cities where ADMIRAL NELSON’S Premium Spiced Rum is available for sale (i.e., Moncton and Edmonton) and cities where it is not (i.e., Montreal and Toronto). A total of 629 persons participated in the study; 413 participants were shown a bottle of ADMIRAL NELSON’S Premium Spiced Rum (the Test Group), a picture of which is shown below, while 216 were shown a bottle of SAILOR JERRY Spiced Rum (the Control Group) which is also shown below:

Upon review and analysis of the survey results, Dr. Corbin concluded and testified at trial that there is statistically significant evidence that CAPTAIN MORGAN rum is spontaneously and almost exclusively brought to mind by the ADMIRAL NELSON’S Premium Spiced Rum bottle. Among the ADMIRAL NELSON’S Test Group, 21% noted similarity between ADMIRAL NELSON’S Premium Spiced Rum and CAPTAIN MORGAN rum (but did not reference the two brands as coming from the same source elsewhere in the survey). Dr. Corbin further concluded and testified that there is statistically significant evidence of misapprehension of source, meaning that rum purchasers are likely to mistakenly infer that a bottle of ADMIRAL NELSON’S Premium Spiced Rum originates from the same source as CAPTAIN MORGAN rum. In total, 23% of the 413 participants in the Test Group had a misapprehension as to source (whereas only 7% of the 216 participants in the Control Group mistakenly inferred that SAILOR JERRY Spiced Rum originates from the same source as CAPTAIN MORGAN). The most frequent reason given by the Test Group participants for inferring the same source as CAPTAIN MORGAN was the character displayed on the label. However, Dr. Corbin also noted during her testimony that more than just the character on the bottle was a source of confusion, testifying that:
…one can conclude with 95 per cent confidence that the inference of a same source between these two bottles, Admiral Nelson and Captain Morgan, arises from some elements on the Admiral Nelson’s bottle as opposed to the things we have controlled for, the placebo elements we have controlled for, random guessing or other irrelevant elements.

In short, the evidence adduced by Diageo at trial, notably the Corbin survey report, supports a finding that there is, on a balance of probabilities, confusion or deception of the public due to Heaven Hill’s misrepresentation as to the source of its ADMIRAL NELSON’S Spiced Rum. This finding also extends to each of the other varieties of ADMIRAL NELSON’S rum products, namely, Premium Dark, Premium Silver, Premium Gold, and Premium Coconut, because, save for some of the words on and the colouring of the ADMIRAL NELSON’S labels and the colour of the rum inside the bottles, each variety utilizes the same Admiral Nelson character with a ship behind the character and the same shaped bottle. Accordingly, I conclude that there would likely be confusion in a consumer’s mind as to the source of the ADMIRAL NELSON’S rum products. It is readily conceivable in this case that an ordinary or casual purchaser of rum products, somewhat in a hurry, could be caught off guard when reaching for what he or she perceives to be a bottle of CAPTAIN MORGAN rum but which is in fact a bottle of ADMIRAL NELSON’S rum.

If you had looked only at the brand names and asked a Trademark lawyer whether the Trademark Admiral Nelson would be considered confusing with the Trademark Captain Morgan, you would likely have been advised that the Trademarks are not confusing.  However, as can be seen from the foregoing, when the “distinguish guise” with all surrounding circumstances were placed before the Court, the Court reached the conclusion that a case for confusion had been made out. Clearly the value of a distinguishing guise cannot be underestimated with well-known national brands.

Complaint Websites use of Parody

The Federal Court decision by Mr. Justice Phelan on June 23, 2017 in the case of United Airlines, Inc v. Jeremy Cooperstock provides some guidance to persons considering establishing complaint websites.

Cooperstock operated a complaint website under the domain name UNTIED.com, which he registered and launched on or about April 24, 1997. Cooperstock chose the domain name UNTIED.com as a play on the word “United”, so as to highlight the disconnection and disorganization that he perceived in the company.  UNTIED.com operated as a consumer criticism website where visitors  could find information on United, submit complaints about United, and read complaints about United dating back to 1998 in the database of complaints.

Following a redesign of UNTIED.com in September 2011, United became aware of a strong resemblance between UNTIED.com and the United Website. UNTIED.com was updated again in June 2012 to mirror the United Website design launched in March 2012.  United contacted Cooperstock, and Cooperstock made certain alterations to UNTIED.com.  He changed the colour of the T and I in the Untied Logo to red (from blue) and changed a frown on the Frowning Globe Design to red (from blue).  He also added a disclaimer and a pop-up dialogue box to the website indicating that this was not the website of United. The disclaimer, stating “(This is not the website of United Airlines)”, was placed at the top of the website in small black type – next to  a graphic identifying “Untied” as “An Evil Alliance Member”.

Justice Phelan noted that parody and satire are not defences to trademark infringement.  Justice Phelan quoted from the Green v Schwarz case, “notwithstanding that the Defendant is obviously spoofing the Plaintiff’s trade mark, he is also cashing in on the goodwill that the Plaintiff has obtained for its trade mark”.    A Trademark confusion analysis was then performed.
“ Cooperstock’s obvious imitation of the United Marks and the United Website is meant to cause visitors to associate UNTIED.com with the United. The small details differentiating the marks are less important than the general appearance of the marks and of the websites. Cooperstock attempted to differentiate the two Globe Design marks by “zooming in” on the image to show that his globe mark included a red frown. This would not be the approach of the hurried consumer with an imperfect recollection. Further, consumers would not be engaging in a side-by-side comparison of the two marks, particularly if they are unaware that there is any need to be diligent in this regard (i.e., if they are not aware that a “spoof” website exists).  I find that there was ample evidence adduced to support a finding that there is a likelihood of confusion.  The changes that Cooperstock made to the United Marks were small and were designed to maintain his core purpose: identification of his website with United.”

Justice Phelan noted that although parody is not a defence to trademark infringement. parody may be a defence to copyright infringement in that parody is now an allowable purpose under s 29 of the Copyright Act, which  reads:
29 Fair dealing for the purpose of research, private study, education, parody or satire does not infringe copyright. (emphasis added)

Mr. Justice Phelan  held that the alterations to  United’s copyright materials  constituted parody:
“Parody should be understood as having two basic elements: the evocation of an existing work while exhibiting noticeable differences and the expression of mockery or humour. In my view, UNTIED.com falls within the definition of parody described above: it evokes existing works (the United Website, the United Logo, and the Globe Design) while showing some differences (such as content and disclaimers), and it expresses mockery (and criticism) of the United.”

Justice Phelan then  considered whether the use of parody in this context was “fair dealing”; as Cooperstock  was required to prove that his dealing with the work of United  had been fair in order to obtain the protection of s. 29 of the Copyright Act.
“It is unclear why substantial copying of the United Website or the other copyrighted works was necessary in order to meet the parodic goal of humorously criticizing the United; as discussed above, parody requires humour, whereas Cooperstock’s website was simply mean-spirited. The minimal use of certain parodic elements in the past (i.e., “fly the unfriendly skies” and the wordplay between “united” and “untied”) present an example of an alternative to the current dealing. Indeed, if the Cooperstock truly wished the best outcome for the United’s passengers, it is unclear why he would run any risk of confusing passengers.   In my view, it is the substantial copying of the United’s copyrighted material that is having a harmful impact, not the criticism contained on UNTIED.com. Negative commentary regarding the United abounds on the internet. United is not so much concerned with the informational aspect of UNTIED.com (which may lead customers to purchase tickets with other airlines) as it is with the potential that customers will believe they are interacting with the United when they are actually interacting with UNTIED.com (which may, in turn, cause customers to believe that the United is unprofessional or that it does not respond to complaints).”
In his reasons for Judgement, Justice Phelan summarized Mr. Cooperstock’s position as follows:
“Parody is not simply a defence to copyright infringement – it is also an aspect of free speech. However, like all free speech, it is not unrestricted.  Cooperstock’s website meets the first step of the CCH test, as it is for the allowable purpose of parody, but it does not meet the second step of the test. The questionable purpose of the dealing, amount of the dealing, and effect of the dealing all weigh in favour of the conclusion that this dealing is not fair.”
“in this case, Cooperstock sailed too close to the wind – and he was put up on the rocks”.

CAT CHASES DOG (DANGERS ASSOCIATED WITH PUBLICLY ACCUSING A COMPETITOR OF INFRINGEMENT)

A client called me the other day to discuss some steps he wished to take against a competitor who was infringing his patent.    The client wanted to write letters to some major companies that were purchasing product from the competitor, to make them aware of the infringement and advise them that he would be forced to sue them if they continued to purchase the competitor’s product.  The second step he wished to take was to place an advertisement in a magazine widely read in the industry, to inform companies in the industry of the alleged infringing activity by the competitor.  I advised my client that there were some practical reasons why taking these steps might end in disaster.   Firstly, when you threaten companies with legal action, they are not inclined to do business with you.  In other words, it is bad for business to sue customers.  Secondly, when you make statements tending to discredit the business of a competitor you are “potentially” breaching section 7 (a) of the Trademarks Act which reads:
“No person shall make a false or misleading statement tending to discredit the business, wares or services of a competitor.”
My client protested that everything he was going to place in the letters and the advertisement was absolutely true.    In the recent Federal Court case of Excalibre Oil Tools V. Advantage Products, a businessman with the same attitude as my client found out the hard way the risks of making statements about a competitor that turned out to be false.   Advantage sent letters to customers of Excalibre alleging infringement of three patents. However, when the patent infringement action subsequently proceeded to Court, Advantage Products lost; the Court found key claims to be invalid and the remaining valid claims not to be infringed by Excalibre.  The case is presently proceeding to the “damages” phase to determine the amount Advantage Products is going to have to pay as compensation to Excalibre for making false and misleading statements that discredited the business of Excalibre.   Why give your competitor grounds to counter-claim?  If you believe your competitor is infringing, communicate directly with the competitor and, if the matter remains unresolved, sue.

Copyright, Design and Trademark – A Cautionary Tale

There is a relationship between copyright, design and trademark as they apply to physical products.  Copyright protects “works of artistic craftsmanship”.   Design protection can be obtained for features of shape, configuration, pattern or ornament of useful articles.  Trademark rights may extend to the shaping of wares (products) with such unique shapes being referred to as “distinguishing guises”.  (The old-style glass bottle used by Coca Cola is a good example of a distinguishing guise trademark; the consumer knows what the product is merely from the container.)   It is possible for a product to be subject to all three, copyright, design and trademark at some time during the product’s life cycle.  However, copyright, design and trademark each have their limitations.

When an entrepreneur launches a new product, he or she does not know how successful the product may become.  Sometimes public apathy toward a new product is deflating.  At other times, the response exceeds even the entrepreneur’s expectations.  For that reason, it is not unusual for an entrepreneur to introduce a product into the marketplace and to wait and see how the product sells before seeking protection.

The Court decision rendered on December 14, 2016 in the case of Corocord Raumnetz v. Dynamo Industries is a cautionary tale that helps explain aspects of the relationship between copyright, design and trademark.  Corocord is a manufacturer of playground equipment. Some years ago, Corocord introduced into the market a new playground structure.  Under Canadian law, the playground structure was protected by copyright as a work of artistic craftsmanship at the time of introduction into the marketplace.  Copyright protection does not require any active steps to file paperwork with a government office, although there are advantages in doing so.

Fast forward ahead several years.  By that time, Corocord’s playground structure had become quite successful.  The law suit against Dynamo Industries was triggered when Dynamo introduced a similar product into the marketplace and they ended up bidding against each other on a contract for a playground installation. Corocord sued Dynamo.

Corocord tried to enforce their copyright against Dynamo.  Unfortunately for Corocord, copyright is only intended to protect “works of artistic craftsmanship” that are sold in limited quantities.  The right to sue Dynamo under copyright law was lost, due to the fact that the playground structure had been reproduced in quantities exceeding fifty (50).  Corocord had been too successful to continue to rely upon copyright.  Corocord could have sued Dynamo under design law.  Unfortunately for Corocord, an application must be filed with the Canadian Intellectual Property Office for design protection within 12 months of the playground structure being introduced into the marketplace.  The time had passed, Corocord had waited too long. Corocord tried to sue Dynamo under trademark law, which does not have a time deadline. In order to succeed Corocord had to establish that their playground structures had become so well known that the relevant market would automatically associate the distinctive shape of the playground structure with Corocord.  Unfortunately for Corocord, they had not, as yet, become successful to the extent that the distinctive shape of the playground structure was associated with them.

What could have or should have Corocord done?  It was okay for Corocord to rely upon copyright in the beginning.  Within 12 months Corocord knew that their playground structure was achieving success in the marketplace.  It was a fatal error of Corocord to not apply for design protection before the 12 months deadline for doing so expired.  With design protection, Corocord could have stopped similar products from entering the market.  Subsequently, when design protection was about to expire, they could have applied for trademark protection  in the hope of extending their protection indefinitely on the basis that the distinctive shape of the playground structure had become well know and is associated solely with Corocord.  However, now their ability to obtain trademark protection in future is doubtful.  The distinctive shape of the playground structure will no longer be associated solely with Corocord.  Dynamo is in the market providing playground structures with the same distinctive shape and other competitors may soon follow.