Masterpiece Inc. v Alavida Lifestyles Inc., 2011 SCC 27

Why Is This Case Important?

This case is a leading authority on trademark confusion analysis and is widely cited by courts and the Trademark Opposition Board. The Supreme Court confirmed that the Canadian trademark regime is national in scope. The case clarified that the test for confusion is based upon the hypothetical assumption that both trade-names and trademarks are used in the same area, irrespective of whether this is actually the case. As a result, geographical separation in the use of otherwise confusingly similar trade-names and trademarks does not play a role in this hypothetical test. The Supreme Court discussed the importance of section 6(5)(e) in conducting an analysis of the likelihood of confusion. Specifically, the Court noted that the degree of resemblance is the statutory factor that is often likely to have the greatest effect on the confusion analysis. The other factors become significant only once the marks are found to be identical or very similar. The decision also sets important boundaries on the use of expert and survey evidence in trademark litigation. 

Summary

Masterpiece Inc. and Alavida Inc. operated in the retirement residence industry. Prior to December 2005, Masterpiece Inc. used several trademarks, which included the word “Masterpiece” and its trade-name “Masterpiece Inc.” Alavida Inc. entered the market near the end of 2005 and applied to register the trademark “Masterpiece Living” on the basis of a proposed use. Beginning in 2006, there were two Canadian companies, one operating in Alberta (Masterpiece Inc.), another in Ontario (Alavida Inc.), using the trademark “Masterpiece Living” in the retirement residence industry.

In January 2006, Masterpiece Inc. applied to register “Masterpiece” as a trademark, and in June 2006, it applied to register the trademark “Masterpiece Living”. As a result of Alavida’s prior application, which was eventually granted, Masterpiece Inc.’s applications for both the trademark “Masterpiece Living” and the trademark “Masterpiece” were denied, as the Registrar concluded that they were confusing with Alavida’s trademark “Masterpiece Living”. On March 16, 2007, Masterpiece Inc. commenced an application to expunge Alavida’s registration.

The lower courts rejected Masterpiece Inc.’s claims, finding no likelihood of confusion. The Supreme Court reversed these decisions and expunged the Alavida trademark registration.

Court Finding

National Scope of Trade-mark Rights

The Supreme Court confirmed that the Canadian trademarks regime is national in scope. The owner of a registered trademark, subject to a finding of invalidity, is entitled to the exclusive use of that mark in association with the wares or services to which it is connected throughout the country.

Pursuant to section 19, subject to exceptions not relevant here, registration gives the owner the exclusive right to the use of the trademark throughout the country. In order for the owner of a registered trademark to have exclusive use of the trademark throughout the country, there cannot be a likelihood of confusion with another trademark anywhere in the country.

The Test for Confusion

The test to be applied is hypothetical – a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the mark at a time when he or she has no more than an imperfect recollection of the prior trade-marks, and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks. 

Nature and Cost of Goods

The Court affirmed that consumers in the market for expensive goods may be less likely to be confused when they encounter a trademark, but the test is still one of “first impression”. The trial judge used the importance and cost of expensive goods and services to change the likelihood of confusion test from one of first impression of a trademark to a test of consumers being “unlikely to make choices based on first impression”. This approach is not consistent with the test for confusion under section 6(5) which has been consistently endorsed by the Court. 

It was an error to discount the likelihood of confusion by considering what actions the consumer might take after encountering a mark in the marketplace. The trial judge should have instead limited his consideration to how a consumer, upon encountering the Alavida mark in the marketplace, with an imperfect recollection of the Masterpiece Inc. mark, would have reacted. As consumers for expensive retirement residence accommodation may be expected to pay somewhat more attention when first encountering a trademark than consumers of less expensive wares or services, cost is not irrelevant. However, in circumstances where a strong resemblance suggests a likelihood of confusion, and the other section 6(5) factors do not point strongly against a likelihood of confusion, then the cost is unlikely to lead to a different conclusion.

Entitlement – Confusion

Consideration of all the circumstances of the case, including the factors set out in section 6(5) of the Trade-marks Act and particularly that Alavida’s trade-mark “Masterpiece Living” and Masterpiece Inc.’s “Masterpiece the Art of Living” are very similar, leads to a finding that Masterpiece Inc. has proven that the use of Alavida’s trade-mark in the same area as those of Masterpiece Inc.’s would be likely to lead to the inference that the services associated with Masterpiece Inc.’s trade-marks were being performed by Alavida. As Masterpiece Inc.’s use preceded Alavida’s proposed use, Alavida was not entitled under section 16(3) to registration of its trademark. As a result, Alavida was not “the person entitled to secure the registration” of its trademark under section 18(1) and this ground of invalidity has been made out. 

Expert Evidence

Expert evidence in trademark confusion cases involving goods or services marketed to the general public may not be necessary or helpful. Judges should use their own common sense when assessing confusion from the perspective of the ordinary consumer. Expert evidence may be more essential where goods are sold in specialized markets to sophisticated customers. 

Key Takeaways

The Supreme Court’s decision provides critical guidance on how trademark confusion should be assessed in Canada. It confirms that the test is based on the first impression of the average consumer, who may only have an imperfect recollection of a prior mark. Geographic separation between businesses is irrelevant, as trademark rights are national in scope.

The Court emphasized that the dominant or most striking element of a trademark—here, the word “Masterpiece”—plays a central role in evaluating resemblance. When conducting a confusion analysis, decision-makers should start with the degree of resemblance. If marks do not resemble each other, even strong findings on other factors are unlikely to lead to confusion. Conversely, where there is strong resemblance and other factors do not strongly point against confusion, a finding of confusion is likely even for expensive goods. It also cautioned against overreliance on expert and survey evidence, noting that such evidence must be necessary and relevant to the confusion analysis.