The Federal Court reverses decision to expunge PASTA ZARA trademark

In FFAUF S.A. v Industria de Diseno Textil, S.A., 2020 FC 520, the Federal Court (the “Court”) set aside the decision of the Registrar of Trademarks (the Registrar) to expunge FFAUF S.A.’s (“FFAUF’s”) PASTA ZARA & DESIGN mark. Instead, the Court directed the Registrar to maintain the registration of the mark, as it was proven to be properly in “use” as per section 45 of the Trademarks Act (the “Act”).

Background

FFAUF is a family holding company for the Bragagnolo family that sells and distributes Italian food products around the world and is a majority shareholder of Pasta Zara. The PASTA ZARA & DESIGN registration is owned by FFAUF for use in association with alimentary pasta. During the relevant period of this case, Pasta Zara was the exclusive worldwide licensee of the design mark.

At the request of Industria de Diseno Textil, S.A. (“Industria”), a section 45 proceeding under the Act was commenced requiring FFAUF to prove use of the mark in Canada for the period of December 2009 to December 2012. In response, FFAUF filed an affidavit from an administrator of FFAUF, but the affidavit had no signature of any person authorized to receive the oath and was partially blank. Furthermore, the affidavit included an attached page in Italian with no translation to either English or French; the Italian text appeared to indicate that the person signing was attesting to the identity of the affiant but made no mention that the affidavit had been duly sworn.

The Registrar found the document inadmissible, but noted that the evidence otherwise provided by the affidavit - including information on the business and the mark, a copy of the licensing agreement, information on quality control measures, invoices of sales during the relevant period displaying the mark and a sales catalogue - would have established use. The Registrar ordered the mark expunged.

FFAUF appealed and filed new evidence under section 56(5) of the Act. The newly filed affidavit was identical in substance to that submitted to the Registrar but was properly sworn by the Deputy President of the Board of Directors of Pasta Zara.

Issues

The Court identified two issues. First, the Court needed to determine the appropriate standard of review. Second, the Court needed to decide whether FFAUF had established “use” of its trademark during the relevant period, as required by Section 45 of the Act.

What is the appropriate standard of review?

To be admissible, the newly filed evidence was required to meet the test for admissibility summarized in Seara Alimentos Ltda v Amira Enterprises Inc, 2019 FCA 63: “could this new evidence, because of its significant and probative value, have had a bearing on a finding of fact or the exercise of discretion of the [Registrar]?” The Court held that the answer was a resounding yes, as the new affidavit constituted the entire evidentiary record.

As the newly admitted evidence had not been the subject of a decision by the Registrar, the Court looked to the Supreme Court of Canada’s recent decision in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, among other cases, to determine the proper standard of review. The Court held that two standards of review apply to an appeal under section 56 of the Act. Where no new evidence is admitted, the usual appellate standard of review applies. This means that a question of law, statutory interpretation, or the scope of a decision maker’s review are subject to a standard of correctness. Alternatively, a question of fact or mixed fact and law is subject to a standard of palpable and overriding error.

However, where new evidence is admitted on appeal through the unique provision of subsection 56(5) of the Act, the usual appellate standard only applies to any issues that are not affected by the new evidence. The remaining issues to which the new evidence relates must be considered afresh by the appellate court.

As the new evidence significantly affected the main issue of the case, the Court conducted its own review of whether the mark was “used” as per the Act.

Did FFAUF establish “use” of the trademark during the relevant period, as required by section 45 of the Act

Trademark applicants do not face an onerous burden in proving use. Rather, the trademark owner must merely establish a prima facie case of use in Canada within the relevant period. “Use”, as per section 4 of the Act, requires the trademark to be marked on the goods or the packages in which they are distributed to provide notice of association between the mark and the goods to the customer.

FFAUF argued that its affidavit evidence demonstrated use of the marks in the relevant period, but Industria objected because the mark used was significantly dissimilar in appearance from the mark registered by FFAUF. The Court acknowledged that an owner of a registered design mark takes a risk when choosing to use a modified version of its design, as FFAUF did.

The Court held that the key question was “whether the deviations from the registered mark change[d] the distinctiveness of the mark, and whether it retains its dominant features” such that the differences are so unimportant, they do not mislead an unaware purchaser. The dominant features of the mark in question – the woman holding the sheaves of wheat and the words “Pasta ZARA” in an ellipse – were preserved. The Court found the difference in the placement of the words or the absence of a background circle to be insignificant variations.

Since the PASTA ZARA & DESIGN mark was used by a licensee, the Court considered whether the relationship between FFAUF and Pasta Zara was sufficient to meet the requirements of section 50 of the Act; namely, does the owner of the mark have direct or indirect control of the character or quality of the goods to which the mark is applied by the licensee?

The affidavit provided clear evidence that FFAUF exercised control over Pasta Zara through rigorous ongoing quality control checks. The licensing agreement indicated that Pasta Zara was obligated to conduct all pasta production at its own factories and required the consent of FFAUF to outsource the production of ancillary products. The Court held that the requirements of section 50 were met.

Outcome

The Court declared that FFAUF had demonstrated use of its trademark during the relevant period as required by section 45 of the Act. The Court further set aside the Registrar’s decision to expunge the PASTA ZARA & DESIGN mark and directed the Registrar to maintain the Registration of the mark.

Author: Jaclyn Tilak