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Author: Marsha Simone Cadogan
The Trademark Act does not prevent businesses from using similar names unless infringement, unfair competition or trademark depreciation can be established.[1] When a plaintiff asserts that another company is passing off its product or service as its own, the claim fails if it cannot be proven. This case note is about passing off and is discussed with substantial reference to Enigmatus v Playtika,[2] a recent case in which the passing off claim was dismissed for lack of goodwill and misrepresentation. These two elements of a passing-off claim are addressed below. Both businesses are in the same industry and operate under similar names: SLOTOPOLY and SLOTOMANIA. Enigmatic operates its online business under the unregistered word mark “SLOTOPOLY,” and Playtika Canada Inc. (a foreign company with a branch located in Canada) operates under the registered word mark “SLOTOMANIA.”
Laws about Unfair Competition
Unfair competition pertains to dishonest business practices or any contrary business activity undermining a business’s ability to sell its products and services. These acts are addressed by common law, federal (the Trademarks Act and Competition Act) and provincial (consumer protection laws) laws. The Trademarks Act prohibits dishonest business practices that impact or are likely to harm the goods and services associated with a trademark or tradename. Passing off is one form of unfair competition.[3] Acts that direct public attention to their websites, products, or services and cause (or are likely to cause) confusion between them and those of another constitute passing off.[4] Another way that passing off can happen is when a business supplies its goods to consumers when they plainly order or request another product.[5]
Components of Passing off
Passing off is established when goodwill exists in the business, the public is deceived because of the defendant’s misrepresentation, and actual damage has occurred or can likely happen.[6] The claim will fail if any of these grounds cannot be established. Therefore, all three components of a passing-off action must be satisfied and pleaded[7] to prove that passing-off has happened.
Goodwill and Implications for Businesses Without It
Start-ups and companies with little or no reputation in the business associated with the mark will not succeed in these claims. Goodwill relates to the reputation that a business has developed over time. Here, the extent to which consumers associate the trademark with the plaintiff’s goods or services is important. The consistent display of the trademark on invoices, the company’s website, packages, advertising and promotional materials are some examples that indicate the extent of this relationship.
Caselaw holds that goodwill can be specific to a place within a province, country-wide, or international. In Dragona Carpet Supplies Mississauga Inc.,[8] For example, the Federal Court of Appeal held that a carpet supplier had established goodwill in Scarborough, Mississauga, and other areas of Greater Toronto, notwithstanding an identical-named business in Mississauga.[9] This was different in the Enigmatus dispute. Here, the plaintiff, an online mobile game developer of slot-themed games, had no goodwill in its business. Operated from the Czech Republic, its online presence in Canada was minimal. Compared to Playtika’s website and gaming app, far fewer users interact with its platform and download its app. The court ruled that consumer awareness of the company in Canada was minimal and, therefore, no goodwill was established.
Is the Public Deceived
Several non-exhaustive factors determine whether there is a likelihood of confusion in the coexistence of word marks:[10] (i) the inherent distinctiveness of the mark and how much it is known, how long the mark or tradename has been in use, the nature of the trade, and how closely the marks resemble each other in terms of appearance, sound, or ideas they suggest.[11] These factors are usually assessed contextually, based on the case’s surrounding circumstances.
In Enigmatus, both trademarks are coined words, indicating a degree of distinctiveness in the marks. While Enigmatus operated a website for a lengthier period than its counterpart, its website was not always used to sell or promote its products and services but that of others. There was no use of its word mark in these periods, as its domain name was not associated with its content. The target market of the businesses is the same – people who want to play slot-based games. However, these were not the decisive factors in the likelihood of confusion analysis.[12]
How closely trademarks resemble each other is often very important. Enigmatus shows how complex the degree of resemblance analysis can be. The court reasoned that the competitors’ trademarks, SLOTOPOLY and SLOTOMANIA, do not resemble each other and that consumers were not deceived by their co-existence. Both companies had been operating their businesses online for over twelve years, and there was no evidence that the public was confused by their presence over this period. While marks may seem similar, the sound, appearance or ideas they evoke matter in the confusion analysis. The dominant feature of the mark is important in this consideration. The court held that although the first section of the word marks bears the same meaning, the dominant feature is the last part of the mark – OPOLY and MANIA. “Mania” means excessive excitement, craze or unreasonable excitement[13], while OPOLY is likely to remind consumers of “monopoly,” “duopoly,” and “oligopoly.”[14]
Final Point
Passing off seeks to prevent another from presenting its goods, services, or business as the plaintiff’s or causing consumer confusion by such acts. It is not suitable in all circumstances, particularly if the plaintiff has little (compared to the defendant) to no goodwill, there is no likelihood of confusion by the co-existence of the trade names or trademarks in the consumer market, and actual or potential damages cannot be proven.
This article is for general information purposes only and is not legal advice.
[1] Dragona Carpet Supplies Mississauga Inc. Appellant v Dragona Carpet Supplies Ltd. v Flooreno Building Supplies Inc, 2023 FCA 228.
[2] Enigmatus S.R.O v Playtika Ltd., Caesars Interactive Entertainment Llc, v Playtika (Canada) Inc v Playtika Ltd., 2024 FC 751. (“Enigmatus”). To date, this Federal Court decision has not been appealed.
[3] Trademarks Act, RSC 1985, c T-13, (Trademarks Act).
[4] Ibid, Trademarks Act. s. 7b.
[5] Supra note 4, s. 7c.
[6] Ciba-Geigy Canada Ltd v Apotex Inc, [1992] 3 SCR 120.
[7] Heather Ruth Mcdowell Plaintiff v A Drip Of Honey, 2024 FC 453.
[8] . Dragona Carpet Supplies Missisauga Inc. v Dragona Carpet Supplies Ltd. and Flooreno Building Supplies Inc., 2023 FCA 228.
[9] Ibid. The surrounding circumstances usually determine the outcome of these cases; this case involved two businesses started by family members.
[10] Trademarks Act, supra note 4, s. 6(5).
[11] Ibid.
[12] But see McDowell v A Drip of Honey, 2024 FC 453.
[13] Supra note 2, para. 142-148.
[14] Enigmatus, supra note 2, para. 147.