An interlocutory injunction granted in relation to the trademark BOMBAY FRANKIE (2788601 Ontario Inc. v. Bhagwani et al., 2022 ONSC 905) caused a stir in the trademark community for two reasons: (1) the granting of an interlocutory injunction in trademark matters is a relatively rare occurrence, and (2) it has long been accepted that the mere filing of a trademark application does not convey an enforceable right.

On October 30, 2020, 278861 Ontario Inc. (First Filer) filed an application to register the trademark BOMBAY FRANKIES in association with restaurant and related services. At the time of the interlocutory injunction hearing (January 28, 2022), First Filer had not opened a BOMBAY FRANKIES restaurant in Canada.

Subsequently, Bhagwani et al. (First User) registered the domain name www.bombay-frankie.com, created social media accounts, filed a trademark application for BOMBAY FRANKIE (on March 15, 2021) and proceeded to open two restaurants in Ontario under that name. 

The marks were obviously confusing with only a one letter difference between them (BOMBAY FRANKIE vs. BOMBAY FRANKIES) and the services were essentially the same. 

First Filer commenced an action alleging trademark infringement and passing off and brought a motion for an interlocutory injunction. First Filer’s position was that it was entitled to an injunction on the basis of its trademark application which was filed before First User filed its own trademark application and started using its mark in Canada. 

The motion judge granted the interlocutory injunction, taking into consideration the tripartite test set out in RJR MacDonald v. Canada [1994], S.C.R. 311 which requires that: 1) there exist a serious issue to be tried; 2) the plaintiff would suffer irreparable harm which cannot be compensated in damages should the injunction not be granted and 3) the balance of convenience favors the plaintiff.

The motion judge held that there was a serious issue to be tried and that First Filer would suffer irreparable harm if the injunction was not granted as First User would have “a significant advantage in terms of name recognition, goodwill and first mover advantage” if it was permitted to continue to operate under the BOMBAY FRANKIE name, despite having opened its restaurants after First Filer filed its trademark application. The motion judge held that First Filer would suffer undue disadvantage that could not be compensated financially if the injunction was not granted and that the balance of convenience accordingly favored First Filer.

On appeal, Justice Nishikawa for the Divisional Court vacated the order of the motion judge (2788610 Ontario Inc. v. Bhagwani, 2022 ONSC 6098). While noting that an interlocutory injunction is a discretionary remedy which is subject to deference, the motion judge’s finding that First Filer had a right to the trademark merely by virtue of a trademark application was an error of law which meant that the decision was to be reviewed on a correctness standard.

Serious question to be tried

The Divisional Court noted that in order to have a valid cause of action under sections 19 or 20 of the Trademarks Act, a claimant must have a trademark registration and that a trademark application is insufficient. Without a trademark registration, First Filer had no right to claim trademark infringement, and therefore, even the low threshold of serious issue to be tried had not been met.

Further, the Divisional Court found that First Filer’s claims of passing off also did not meet the low threshold of serious issue to be tried, as a passing off action requires that a trademark have goodwill attaching to it. While First Filer had retained franchise lawyers and a marketing firm, the Court held that such activities in and of themselves were not sufficient to generate goodwill. The Court opined that while theoretically goodwill could exist from the perspective of potential franchisees, there was no evidence on record to that effect. Having failed to meet the first part of the three-part test for an interlocutory injunction, the Divisional Court found that First Filer’s motion should not have been granted.

Irreparable harm

Madame Justice Nishikawa stated that it was not necessary for her to consider the other elements of the three-part test in light of her conclusion that there was no serious issue to be tried. However, in case she had erred in that regard, she stated that she would have also found that the motion judge made a palpable and overriding error in finding that First Filer would suffer irreparable harm if an injunction was not granted.

Loss of goodwill and resulting irreparable harm must be established by clear and non-speculative evidence. The motion judge held that irreparable harm had been established on the basis of evidence that potential landlords had questioned if the parties were affiliated, and were hesitant to lease space to First Filer as a result. The Divisional Court noted that the alleged landlord confusion was not the same as consumer or public confusion, and that passing off protects existing goodwill, not possible goodwill. The Divisional Court found that there was no actual goodwill in evidence, which would have been required in order to establish irreparable harm.

Balance of convenience

As the first two parts of the test were not met, the Divisional Court held that it did not need to address the issue of which party the balance of convenience favored. Madame Justice Nishikawa stated, however, that the balance of convenience may have weighed in favour of First User who, as a result of the injunction, was required to take down signs bearing the BOMBAY FRANKIE name, as well as their website and social media accounts.

Conclusion

This case confirms that a trademark application alone, without use, and resulting goodwill, is insufficient to support a claim for an interlocutory injunction against a subsequent user of a confusing trademark. The decision also underscores the importance of applying to register trademarks as early as possible in order to secure enforceable rights, ideally prior to commencing use. It also emphasizes the potential significance of obtaining a trademark availability opinion prior to launching a product or service in order to be made aware of the potential for complicated entitlement situations.  

For more information of this insight, reach out to Jennifer McKay or Anna Clark or any member of Dentons Canada’s Intellectual Property and Technology group.