Swatch Successfully Appeals “iSWATCH” Decision

On August 24, 2018, Justice Roy of the Federal Court released his judgment in Swatch AG (Swatch SA) (Swatch Ltd.) v. Hudson Watch, Inc, 2018 FC 853.

The case dealt with an appeal, brought by Swatch AG (“Swatch”), of a decision by the Registrar of Trade-marks which refused to accept the company’s application for registration of the “iSWATCH” mark. The crux of the appeal was Swatch’s effort to present additional evidence, which is permitted pursuant to s. 56(5) of the Trade-marks Act, to demonstrate that its mark was not confusing with Hudson Watch’s (“Hudson”) “i watch”. Ultimately, Swatch’s additional evidence was sufficient to sway the Court, which allowed the appeal.

Registrar’s Decision

On July 3, 2013, Swatch, a well-known Swiss timepiece company, applied for registration of the trademark “iSWATCH”. Swatch’s statement of goods and services regarding the trademark listed “horological and chronometric instruments, namely watches” as well as a variety of men’s and women’s jewelry.

Although Hudson argued several grounds of opposition, all were dismissed except the argument that Swatch’s mark was easily confused with Hudson’s “i watch”, which was registered under No. TMA371,727, in association with “men’s and ladies wristwatches”.

Under the Trade-marks Act, a mark cannot be registered if it is “confusing with a registered trade-mark”. A mark will be considered confusing if it is likely that consumers will infer that the good in question is associated with another trademark. The test is one of a “hasty first impression by the consumer” and the Trade-marks Act lists several, non-exhaustive factors that are to be considered in this determination.

In this case, the Registrar held that the degree of resemblance between the trademarks was the weightiest factor in the determination. The Registrar held that Swatch had failed to meet its burden of establishing that its iSWATCH mark was not confusing. Notwithstanding this finding, the Registrar commented that additional evidence with respect to the acquired distinctiveness of the mark, or the ownership of a family of SWATCH trademarks, may have been sufficient to tip the scales in Swatch’s favour. Swatch used this comment as a springboard for its appeal.

Federal Court Decision

The Federal Court (the “Court”) first addressed the standard of review and affirmed that the standard to be applied in cases where additional evidence is presented is one of correctness. It held that the Court must come to its own conclusion on the basis of the record before it as enhanced by the new evidence. The Court then considered the effect of the additional evidence and whether this could have influenced the Registrar’s decision.

The new evidence adduced by Swatch included evidence of sales, the existence of watch and clock products on the market, the number of stores selling Swatch products and the Applicant’s advertising campaign, which demonstrated the notoriety the mark had acquired since it began operations in Canada in 1984. The Court explicitly stated that this type of evidence would have influenced the Registrar’s decision.

Finally, in assessing the whole record, the Court emphasized the importance of the distinctiveness of the respective marks. It affirmed that invented words have greater inherent distinctiveness and this favoured Swatch’s position because its mark used a word whose meaning is not the product itself, which made it unique. Hudson’s mark, on the other hand, lacked this distinctiveness because it merely aggregated two generic English words, “i” and “watch”. Additionally, the Court stated that Swatch’s mark gained distinctiveness through the promotion of the product, its graphic design and its use in Canada.

Ultimately, Hudson’s objections failed because it was trying to monopolize a word that is frequently used, without demonstrating the inherent or acquired distinctiveness of its mark. The Court concluded that when a mark is weak, as “i watch” was, small differences are sufficient to distinguish from it. Conversely, “iSWATCH” was a mark with sufficient inherent distinctiveness and significant acquired distinctiveness through its promotion and presence in the Canadian market.