MBM Prevails as Federal Court Awards Unprecedented 50% Lump Sum Award of Costs in Trademark Dispute

By Scott Miller and Deborah Meltzer, August 24, 2022

On August 15, 2022, the Federal Court of Canada issued its decision with respect to costs in Dragona Carpet Supplies Missisauga Inc. v Dragona Carpet Supplies Ltd and Flooreno Building Supplies Inc., 2022 FC 1200, ordering one of the highest lump sum costs ever awarded in a trademark dispute, representing 50% of aggregate fees incurred, plus disbursements.

The decision was the culmination of a factually complicated family dispute related to the right to use and own the trademark “DRAGONA” in specified pockets of the GTA. The Defendants/Plaintiffs by Counterclaim were wholly successful in (1) defending against the Plaintiff’s motion for summary trial with respect to its claim of passing off, and (2) their own motion for summary trial with respect to their claim for expungement of three of the Plaintiff’s registered “DRAGONA” trademarks.

Ultimately, the Federal Court preferred the evidence of the Defendants. Although there was disagreement on the majority of the facts presented throughout the proceedings, the parties unequivocally agreed that the Defendant, Dragona Carpet Supplies Ltd., was the first to use the trademark DRAGONA. Based on the evidence, there was no basis for the Plaintiff to argue that it was entitled to the trademark registrations. In granting an exceptional lump sum cost award of 50% to the Defendants, the Court emphasized that in light of the facts, the Plaintiff ought never to have maintained the legitimacy of the trademark registrations, much less, waited until the commencement of the hearing to abandon its position.

This precedent-setting decision not only expanded the law on concurrent-use passing off and care and control in the context of a license, but further substantiates the Federal Court’s recent trend of opting for lump sum cost awards in lieu of the tariff, which represents a more reasonable and realistic recovery of legal fees for the successful party.