Two recent decisions of the Federal Court have considered the prohibition in the Trademarks Act that no person shall make a false or misleading statement tending to discredit the business, goods or services of a competitor.
The provision creates a statutory cause of action for which damages may be awarded if a person is damaged by false or misleading statements by a competitor tending to discredit the claimant’s business, goods or services. The essential elements required to be established by evidence are:
- a false and misleading statement;
- tending to discredit the business, wares or services of a competitor; and
- resulting damages.
In one case, the statement related to the claim that the sale of a product infringed a patent. In the other, the claim was that the defendant owned a trademark registered in Canada as a result of a statement in a press release and use of the ® symbol. In both cases the claims were misleading.
A Competitor
In the first case, the entity that made the misrepresentation was a competitor of the plaintiff and damages were awarded against it. The entity was a licensee of the patent in issue. At trial, the plaintiff also claimed against the patent owner/licensor, but the trial judge refused the claim on the basis the patent owner/licensor was not a competitor.
The plaintiff appealed to the Federal Court of Appeal. It was submitted that the fact that patent owner/licensor earned royalties would make them a competitor. It was also clear that the misrepresentation had been made on behalf of the patent owner/licensor.
The appeal was dismissed on the basis that an indirect advantage (royalties) flowing to the patent owner/licensor was not sufficient to make them a “competitor”.
Resulting Damages
In the second case, both the plaintiff and the defendant claimed against the other concerning alleged misleading statements alleged to have been made. The plaintiff established that the statement was misleading and discredited it. The plaintiff argued that damages should be presumed because the parties were direct competitors selling the same goods in the same market. The trial judge said the showing damages have been suffered is an essential element of a claim. Actual damages must be shown, and a presumption of damages was not sufficient.
The defendant had no better luck. Its claim was dismissed on the basis that there must be a causal link between the misleading statement and the alleged damage.
Comment
It is easy to state the three essential elements of the statutory cause of action relating to a false or misleading statement discrediting the business, goods or services of a competitor. However, it can be difficult to present evidence to support such a claim particularly with respect to resulting damages.
John McKeown
Goldman Sloan Nash & Haber LLP
480 University Avenue, Suite 1600
Toronto, Ontario M5G 1V2
Direct Line: (416) 597-3371
Fax: (416) 597-3370
Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.