Zealous Advocacy for the Zellers Trademark: A Look into HBC’s Pending Lawsuit

Eloise Somera is a 3L JD Candidate at Osgoode Hall Law School, enrolled in Professor David Vaver’s 2021-2022 Intellectual Property Law & Technology Intensive Program. As part of the course requirements, students were asked to write a blog on a topic of their choice.

What does the colour red, an in-store family diner, and Zeddy the teddy bear remind you of? For me, it is Zellers – the discount department store that will always be a fond memory of my childhood. Today, it is at the centre of a lawsuit initiated by the Hudson’s Bay Company (“HBC”).

On October 5, HBC filed a statement of claim at the Federal Court of Canada against a Quebec family for trademark infringement, depreciation of goodwill, and passing off.

The Zellers Trademark: Then and Now

Zellers has been around since the 1930s, but in 1978, it was acquired by HBC. In 2013, the chain of Zellers stores officially closed. However, HBC’s registration over its design mark was expunged by the Canadian Intellectual Property Office on September 24, 2020 for failure to renew. This registration covered, among other services at Zellers, the overall “operation of department stores”. However, HBC retains other registered marks, such as the Zellers Optical, Zellers More Credit Card, and the Zellers Portrait Studio & Design.

Earlier this year, on April 26, a “Zellers Inc.” based out of Quebec filed a trademark application for its design mark, identical to that of HBC’s expired mark, for services including “Computerized on-line ordering and trading featuring general merchandise and general consumer goods”.

Shortly thereafter, on June 30, HBC filed a trademark application for its design mark covering “Retail department store services, [and] On-line retail department store services”. This recent registration may have to do with HBC’s recent resurrection of a Zellers pop-up in one of its stores located in Burlington, Ontario.

HBC’s Claim of Trademark Infringement

HBC presumably relies on its remaining registered marks to argue that Zellers Inc. is contravening s. 22(1) of the Trademarks Act: “No person shall use a trademark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto”.

The Supreme Court of Canada (“SCC”) in Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée provided four factors to consider in a s. 22 claim: (1) use of the registered mark; (2) proof of goodwill; (3) the likely connection of linkage made by consumers between the claimant’s goodwill and the defendants’ use; and (4) the likelihood of depreciation. In Veuve Clicquot, the claimant’s s. 22 claim had been rejected at trial, and the SCC agreed. Veuve Clicquot did not establish that the respondents had used sufficiently similar marks to lead consumers to make a mental association between the two marks that would likely depreciate the value of the goodwill attaching to the Veuve Clicquot mark.

In HBC’s case, the department store marks are yet to be examined; so s. 22 is inapplicable to them. Whether the remaining niche marks have enough of a reputation to satisfy the Veuve Clicquot Ponsardin criteria remains to be seen.

HBC’s passing off allegation must rely on s. 7(b) of the Trademarks Act: “No person shall direct public attention to his goods, services or business in such a way as to cause or be likely to cause confusion in Canada, at the time he commenced so to direct attention to them, between his goods, services or business and the goods, services or business of another”. In Kirkbi AG v. Ritvik Holdings Inc., the SCC outlined the three elements that must be established by a plaintiff to succeed under s. 7(b): (1) the existence of goodwill; (2) deception of the public due to a misrepresentation; and (3) actual or potential damage to the plaintiff.

In HBC’s case, if it were to base the existence of goodwill on its Zellers pop-up alone, its argument under the first prong of the Kirkbi test would be weak. However, goodwill may continue even where a business has ceased to operate (see Franklin Supply Co. v. Midco Supply Co. at para. 59). HBC’s remaining registered Zellers marks may also have continuing goodwill. If so, consumers would likely infer that any products purchased from Zellers Inc. are sold by HBC’s Zellers.

In Orkin Exterminating Co. Inc. v. Pestco Co., the damage suffered by the plaintiff from the defendant’s use of an identical name was the loss of control of its trade name in Canada. HBC could similarly argue that Zellers Inc.’s public rollout of Zellers-branded vehicles and plans for retail stores would cause damage to HBC in its loss of control over the Zellers brand and the loss of future customers.

Stay Tuned

Although we are only in the early stages of HBC’s lawsuit, we may be in for a trip down memory lane!

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