The authors wish to thank articling student Kevin Bushell for his help in preparing this legal update

In an uncontested decision, Subway IP LLC v. Budway, Cannabis & Wellness Store, 2021 FC 583 (Budway), the Federal Court held that a dispensary’s use of the “BUDWAY” trademark constituted infringement, passing off, and depreciation of the goodwill of registered trademarks owned by Subway and enjoined any further use of the BUDWAY mark and awarded damages and costs to Subway.

In Budway, the logos used by the parties were as follows:

 

As with most claims of passing off and infringement, the key issue was confusion. The Court held that the BUDWAY trademark was confusingly similar to those of Subway, given both the resemblance between the parties’ marks and the degree of distinctiveness and continuous use of Subway’s trademarks.

Further, as some of Subway’s trademarks are registered in association with various food-related items, such as cookies and snacks, the Court accepted that there was an overlap between the goods sold by the respondents, which include cannabis-containing baked goods, and those associated with Subway’s trademarks.

In addition to passing off and infringement, Subway claimed depreciation of goodwill arising from the Budway marks, which the Court accepted. The Court found both that the Subway’s trademarks had sufficient goodwill, and Budway’s trademark was used by the respondent in a manner likely to depreciate that goodwill.

While the marks were not identical, the similarity was sufficient to depreciate Subway’s goodwill. In establishing depreciation of goodwill the Court confirmed it is sufficient that the marks be similar enough to evoke a “mental association” between the two. This linkage was established in Budway.

In respect of the alleged harm, the Court found damage both from a reduction of Subway’s ability to distinguish its goods and services, and from the association of Subway’s health-conscious brand with a cannabis dispensary.

The decision is reminiscent of Toys “R” Us (Canada) Ltd v. Herbs “R” Us Wellness Society, 2020 FC 682 (Herbs “R” Us), which was previously discussed on the Brand Protection Blog.

In Herbs “R” Us, the Court held that the respondent’s use of a logo bearing a similar name and design to that of Toys “R” Us constituted depreciation of goodwill. However, in that case, Toys “R” Us’ claims in infringement and passing off were unsuccessful due to the substantial differences between the goods and services provided by the parties.

For infringement and passing off claims, Budway provides a helpful contrast to Herbs “R” Us, reiterating that for infringement to arise from use of a parody trademark there must still be some overlap in the goods and services associated with each party’s trademarks.

Moreover, Budway and Herbs “R” Us suggest that cannabis-related businesses may be particularly vulnerable to depreciation of goodwill claims due to persisting negative perceptions of the services they provide.