Trademark Battle: ZARA Prevails in Federal Court of Appeal against Zara Natural Stones

Zara Natural Stones Inc. (ZNSI), a business that specializes in paving stones, and Industria de Diseno Textil, S.A. (Industria), the well-known fashion brand owner of “ZARA,” engaged in a protracted legal battle. The Federal Court of Appeal (FCA) recently decided on two appeals involving trademark oppositions filed by Industria de Diseno Textil, S.A. (Industria) against ZNSI. Although Industria won one of its appeals, it lost the other, resulting in an intriguing legal consequence.

Background:

Trademark oppositions offer a mechanism for challenging trademark registrations closely resembling an existing trademark. In this particular case, Industria opposed two trademark applications filed by ZNSI in 2011 and 2012: Trademark Application Nos. 1,582,505 and 1,525,938. These applications sought to register the word mark “ZARA” (the '505 Application) and the design mark “ZARA Natural Stones & Design” (the '938 Application), respectively.

During the opposition hearing, Industria’s legal team argued that ZNSI’s trademarks were unduly confusing with Industria’s family of “ZARA” marks, including “ZARA HOME,” which covered floor coverings. Under section 16 of the Trademarks Act, a trademark application may be refused if it is deemed confusing with a previously used or known trademark, a previously filed application, or a once-used trade name.

To support its opposition, Industria referred to its application for the “ZARA HOME” trademark, filed in 2003, predating ZNSI’s applications. However, it is crucial to note that section 16 of the Trademarks Act has undergone amendments since the initial filing of the “ZARA” wordmark. Regrettably, Industria’s statement of opposition mistakenly relied on an outdated subsection of section 16. Consequently, Industria sought permission to amend its statement of opposition to rectify this oversight.

The Trademark Opposition Board (the Board) granted Industria’s amendment request and rejected ZNSI’s '505 Application, determining it to be confusing with Industria’s “ZARA HOME” trademark. However, the opposition to the '938 Application was dismissed by the Board. Subsequently, the Federal Court (FC) deemed the Board’s analysis unreasonable, prompting appeals for both applications. The FC allowed the appeals, thereby remanding the matters back to the Board for fresh deliberations.

Analysis:

Industria pursued an appeal, urging the Federal Court of Appeal to overturn the FC’s decision and reinstate the Board’s rulings. On the contrary, ZNSI contended that remitting the matters to the Board was unnecessary; instead, they advocated for the outright approval of both applications.

Standard of Review:

The Federal Court of Appeal commenced its analysis by addressing the appropriate standard of review applicable to the Board’s decisions. Previously, the FC had adopted a reasonableness standard, which was deemed appropriate at the time. However, in light of the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov (“Vavilov”), the Federal Court of Appeal recognized that the appellate standard of review should be applied when the legislature provides an appeal mechanism. Under this standard, questions of law are subjected to correctness review, while questions of fact or mixed fact and law undergo scrutiny for palpable and overriding error. Notably, the Federal Court of Appeal emphasized that the FC should not overturn the Board’s decisions unless there were a significant error warranting intervention. Industria and ZNSI argued that the previously employed reasonableness standard was appropriate and that Vavilov should not retroactively impact the case.

The '505 Application:

Irrespective of the applicable standard of review, the Federal Court of Appeal determined that the FC erred in intervening without identifying any errors committed by the Board. Specifically, the FCA found the FC’s assertion that the Board’s decision to allow the amendment was unreasonable to be unfounded. The Federal Court of Appeal reasoned that characterizing the erroneous reference to the Trademarks Act as a mere typographical error should not have been deemed detrimental to the reasonableness of the Board’s decision. Moreover, the FCA found no grounds for the FC to doubt the Board’s conclusion that ZNSI was aware of Industria’s intention to rely on the correct subsection of the Trademarks Act. Even when considering the appellate standard, the FCA affirmed that the Board’s analysis on whether the amendment prejudiced ZNSI did not exhibit palpable and overriding error.

The '938 Application:

While evaluating the reasonableness of the FC’s decision, the Federal Court of Appeal questioned the FC’s criticism of the Board’s differential treatment in comparing “ZARA HOME” with the wordmark “ZARA” but not with the design mark. The FCA opined that this differential treatment might carry greater significance when comparing a one-word trademark with a two-word trademark but may be less consequential when comparing a three-word trademark with several design elements to the same two-word trademark. The Federal Court of Appeal disagreed with the case law cited in the FC’s ruling and held that the FC erred in deeming the Board’s analysis unreasonable. Similarly, when applying the appellate standard, the FCA concluded that the Board’s consideration of the importance of the first word and its statement regarding the oral differences between the parties’ marks did not exhibit palpable and overriding errors.

As a result, both appeals were allowed. The '505 Application was remitted back to the Federal Court for further consideration, while the opposition's rejection to the '938 Application was upheld.

Although the court refrained from commenting on the retroactive effect of Vavilov, these appeals offer valuable insights into the impact of Vavilov on Canadian administrative law, especially in the context of trademark decisions and the Trademark Opposition Board.

Are you looking to expand your knowledge on trademarks? Look no further! Our blog section is filled with informative articles that can help you better understand trademarks. Whether you are a business owner or just someone curious about trademarks, our blog posts cover everything from the basics to more advanced topics. Click the button below to read more of our blogs.

**The information provided herein is a general background of contractual, technology and intellectual property law concepts. It does not constitute legal advice, and should not be relied upon as legal advice. Athena Innovation & Legal, nor the author, make no express or implied representations or warranties in respect of the information, including but not limited to the accuracy of the information.**