Federal Court Of Canada Expunges Trademarks On Summary Trial, Dismisses Passing Off Claim

On July 14, 2022, the Federal Court of Canada (the Court) issued its decision in Dragona Carpet Supplies Mississauga Inc. v Dragona Carpet Supplies Ltd., 2022 FC 1042, in which it dismissed the Plaintiff’s action and expunged the Plaintiff’s trademark registrations on summary trial.

The parties are two flooring businesses run by separate branches of an extended family.  Both parties use trademarks and trade names that incorporate the word DRAGONA.  Prior to 2012, the parties operated together in some respects.  At some point there was a falling out between the principals of the parties.  In 2021, the Plaintiff filed a claim for trademark infringement, depreciation of goodwill, and passing off.  The Defendants counterclaimed to expunge the Plaintiff’s trademark registrations that incorporate DRAGONA.

This decision dealt with the Plaintiff’s motion for summary trial relating to its claim for passing off, the Defendants’ motion for summary trial relating to their counterclaim, and a “unique” set of facts.  Despite finding that there was conflict in the evidence on some factual issues, the Court concluded that the claim and counterclaim were suitable for summary trial, and that summary trial would “secure the just, most expeditious, and least expensive determination of this proceeding on its merits.”

At the hearing, the Plaintiff consented to the Defendants’ motion, but without admitting any of the allegations advanced by the Defendants.  On the issue of expungement, based on the evidence, the Court determined that the Plaintiff was not entitled to register the trademarks given that the DRAGONA trademark had previously been used by the Defendants with respect to the same goods and services.  Accordingly, the Court ordered the expungement of the DRAGONA registrations.

On the issue of passing off, the Court noted that any agreement relating to the division of territory (which was disputed by the Defendants) would be an “artificial construct” between the parties, and would not affect where they actually had goodwill.  The Court concluded that the Plaintiff’s use of the DRAGONA trademark had at all times been under an oral license from the Defendant, Dragona Carpet Supplies Ltd. (DCS), and therefore, any goodwill associated with the DRAGONA trademark in Mississauga was that of the trademark owner, DCS, pursuant to Section 50(1) of the Trademarks Act.  Thus, the Court dismissed the passing off claim since it had determined that the Plaintiff had no goodwill in the mark.  The Court also noted that, even if the Plaintiff could establish goodwill, the claim would fail because there had been no misrepresentation by the Defendants, since DCS was entitled to use the mark because its existence and use pre-dated that of the Plaintiff.

Summary By: Michelle Noonan