Bringing trademark infringement proceeding by application may have effect on damage award

December 19, 2013

On November 26, 2013, the Federal Court issued its decision in Trans-High Corporation v. Hightimes Smokeshop and Gifts Inc. The proceeding, which claimed trademark infringement, passing-off and depreciation of goodwill, was brought by the applicant, Trans-High Corporation (Trans-High) by way of a summary application to the Federal Court.  This option (which sees evidence confined to affidavit evidence, and no rights of discovery) was confirmed to be available by the Federal Court of Appeal in its 2011 decision in BBM Canada v. Research in Motion Limited. The respondent, Hightimes Smokeshop and Gifts Inc. (Hightimes Smokeshop), did not file any submissions in the proceeding or appear at the hearing.

In upholding the claims for trademark infringement and passing-off, the Court found that Hightimes Smokeshop had infringed Trans-High’s trademark “HIGH TIMES”, which has been registered in Canada since 1980 for use in association with magazines.  The Court found that Trans-High had tendered sufficient evidence to show a likelihood of confusion between its use of the mark in association with High Times magazine and website (with a focus on medical and recreational uses of marijuana) and Hightimes Smokeshop’s retail sale of marijuana-related paraphernalia and merchandise.  However, the Court declined to find depreciation of goodwill, citing insufficient evidence.   In particular, the Court noted that the evidence of volume of sales and depth of market penetration of magazines and related wares sold by Trans-High in Canada was limited, as was evidence in respect of the extent of advertising and publicity accorded to Trans-High’s HIGH TIMES trade-mark.  Further, there was little evidence of the degree of inherent or acquired distinctiveness of the HIGH TIMES trade-mark, and the products associated with the mark were confined to a specialized channel of trade.

Evidentiary issues were also at play when the Court refused to award the $200,000 in damages claimed by Trans-High.  The claimed amount purported to include the license fee Trans-High would have charged Hightimes Smokeshop to operate a 1500 square foot retail store under the HIGH TIMES brand in a major tourist centre such as Niagara Falls.  The Court noted that by deciding to proceed by way of application, Trans-High chose to forego any opportunities for discovery, to compel further and better information concerning depreciation of goodwill of its HIGH TIMES trade-mark by reason of the activities of Hightimes Smokeshop, as well as to elicit facts relating to damages caused by these activities.

While recognizing that it is difficult to quantify damages when a respondent refuses to participate in a proceeding, Mr. Justice Manson found no evidence to support the quantum of possible license fees and damages, other than a “bald assertion” in affidavit evidence filed by Trans-High.  Noting that Trans-High had never granted any voluntary licenses, the Court found that the “amount of damages requested is purely speculative”, and a damages claim must be based on more than pure speculation.

That said, the court did allow damages in the amount of $25,000, given the apparent wilful infringement of Hightimes Smokeshop, its failure to even acknowledge High Time’s trademark rights or to negotiate any form of settlement or to participate in the Court’s process.   The Court also fixed costs in the sum of $30,000, and ordered the transfer of the domain name www.hightimesniagarafalls.com.

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