Vancouver Community College v Vancouver Career College: Rights of Trademark Owners versus Online Advertising
Canadian legislation differentiates between “official marks” and “trademarks.” The Trade-marks Act, RSC 1985, c T-13 [TMA] legislates both trademarks and official marks. Any entity which qualifies as a “public authority” may request that the Registrar of Trademarks give public notice of the adoption of a mark by that entity. The process of giving notice does not require an examination of the mark or notice period and there is no need for renewal of an official mark. Any challenge to the validity of the mark must be done through an application for judicial review of the decision of the Registrar of Trademarks.
The use of official marks on the internet has added an extra dimension to the potential for misuse of official marks by competitors. Search engines generate income by selling keywords to businesses. Businesses often bid on keywords that are the trademark of their competitors so that they can leverage the search for exposure of their own products. “Passing off” is a common law tort that is used to seek remedy against the misuse of trademarks. Passing off refers to a deceptive marketing of goods and services of an entity by a competitor, in a manner that confuses consumers. In addition to being a tort, passing off is also a cause of action under the TMA.
In Vancouver Community College v Vancouver Career College (Burnaby) Inc, 2015 BCSC 1470 [VCC 1], the British Columbia Supreme Court (“BCSC”) affirmed that the owner of an official mark cannot succeed in a passing off claim unless they can prove that the use of the official mark by the competitor causes confusion to the consumer. The BCSC also held that, in the context of online advertising, the potential for confusion cannot arise before an online searcher actually reaches the advertiser’s website. This second finding added an extra layer of difficulty to making a successful passing off claim. However, earlier this year the British Columbia Court of Appeal (“BCCA”) in Vancouver Community College v Vancouver Career College (Burnaby) Inc, 2017 BCCA 41 [VCC 2] struck down the BCSC decision, and made significant clarifications on the timing of online impressions in making a passing off claim.
War of Community Colleges
Vancouver Community College (“Appellant”) is a public institution designated under the College and Institute Act, RSBC 1996, c 52. Vancouver Community College dates back to 1964 when it was created as Vancouver City College, opening its doors in 1965. The name was changed to Vancouver Community College in 1974 and it has since operated under that name. The Appellant caused the Registrar of Trademarks to publish notice of “VCC” as an official mark in 1999 and “Vancouver Community College” as an official mark in 2005. Vancouver Career College (“Respondent”) is a private business founded in 1995. As a private college, Vancouver Career College is regulated under the Private Training Act, SBC 2015, c 5.
The Appellant sought an injunction and damages for passing off and trademark infringement by the Respondent on the use of the acronym “VCC” in the Respondent’s internet advertising. More specifically, the Appellant claimed the passing off and trademark infringement with respect to the Respondent bidding on “VCC” and “Vancouver Community College” as keywords to direct online searches to its website, VCCollege.ca. It was undisputed that “VCC” was the keyword that generated the most clicks to the respondent’s website.
The Supreme Court of Canada (“SCC”) in Ciba-Geigy Canada Ltd v Apotex Inc,  3 SCR 120 outlined that the three necessary components of a passing off claim are: 1) the existence of goodwill; 2) deception of the public due to a misrepresentation; and 3) actual or potential damage to the plaintiff. The first step of this analysis requires the establishment of “goodwill.” In Veuve Clicquot Ponsardin v Boutique Cliquot Ltée, 2006 SCC 23, Justice Binnie described goodwill as connoting “the positive association that attracts customers towards the owner’s wares or services rather than those of its competitor” (para 50).
On the issue of goodwill, the BCSC looked at whether in 2009, when the Respondent assumed its internet domain, the appellant had goodwill in the acronym “VCC.” The trial judge found that to impose liability on the Respondent for the tort of passing off it must be established that the Appellant: a) enjoys goodwill attached to the educational services it provides, and b) its services have acquired a distinctiveness in the marketplace (VCC 1, para 180). The trial judge found that while the Appellant enjoyed goodwill in the education services it provides, it had not achieved a secondary meaning in the marketplace (para 190). As such a claim for passing off could not be successful.
The BCCA, on the other hand, framed the question by looking at whether the acronym “VCC” carried sufficient distinctiveness in its primary sense to be recognized as designating the Appellant and the educational services it provides. According to the BCCA, the Appellant did not need to establish that the acronym in dispute had acquired a secondary meaning to succeed in its action (VCC 2, para 40); all that was required was that a sufficient portion of the marketplace in 2009 knew that “VCC” indicated Vancouver Community College.
Further, the BCCA found an error in VCC 1 findings on the degree of public association between the acronym and the ability of the Appellant to establish goodwill. The trial judge’s conclusions pointed to something akin to “universally known” in order for goodwill to be established. The BCCA pointed to Fox on Canadian Law of Trade-marks and Unfair Competition (Toronto: Carswell, 2002, 4th Ed) to argue that:
[i]n fact the question is not really what proportion of the relevant market must know that the indicia indicate a trade source, which suggest some minimal percentage threshold for the action to be successful, but rather how many people recognize it. It is generally significant and sufficient if even a small percentage of the relevant market recognizes the indicia such as a trademark (VCC 2, paras 39 to 41).
As such, the BCCA found that goodwill in “VCC” by the Appellant had been established.
Deception Due to Misrepresentation
The second step of the test for passing off requires an analysis of confusion of consumers. In relation to the online searches, the trial judge had found that the critical moment to look at confusion was at the time when the first impression was formed. The judge observed that this critical moment was after the searcher clicks on the search results and arrives at the landing page (VCC 1, para 183). The BCCA relied on Law Society of British Columbia v Canada Domain Name Exchange Corporation, 2005 BCCA 535 [LSBC] to conclude that it did not require the searcher to arrive at the site as a condition of establishing the confusion necessary for passing off (para 66). In LSBC, the court had found that the use of such a similar name, or name by which the plaintiff is specifically known, would misrepresent that the domain name was associated with the plaintiff (para 31). Similarly, it was apparent from the use of “VCCollege.ca” by the Respondent that there is nothing that distinguishes the website from the name of Vancouver Community College, the Appellant (VCC 2, para 70).
Coming to this conclusion, the BCCA also relied on the SCC decision in Masterpiece Inc v Alavida Lifestyles Inc, 2011 SCC 27 [Masterpiece]. In Masterpiece, Justice Rothstein observed that:
before source confusion is remedied, it may lead a consumer to seek out, consider or purchase the wares or services from a source they previously had no awareness of or interest in. Such diversion diminishes the value of the goodwill associated with the trademark and business the consumer initially thought he or she was encountering in seeing the trademark. Leading consumers astray in this way is one of the evils that trademark law seeks to remedy (para 73).
As such, confusion is created at first impression in the name of the website, not when the searches reach the website of the competitor.
In keyword advertising the most difficult issue is whether keyword use is likely to cause confusion. The Appellant had argued that bidding on the online search keywords “VCC” and “Vancouver Community College” by itself satisfied the second component of the passing off test. However, the BCCA found that merely bidding on words is not delivery of a message and is not sufficient to amount to a component of passing off (VCC 2, para 72). The BCCA seems to confirm that the process of bidding on keyword advertising is a fair competition act and is not enough to meet the threshold test for passing off. Bidding on the keyword does not cause confusion because the advertiser does not actually control the bidding process.
Keyword advertising allows companies to pay to have its advertisement associated with a specific keyword. When the user searches that keyword, a sponsored link by the bidding company will be displayed along with the organic searches generated. The sponsored link is usually marked as such and is clearly distinguished from the rest of the organic links generated. The bottom line is that business owners may continue to bid on competitor’s keywords without violating the rights of those competitors. However, the use of competitor keywords in advertising may be the deciding factor in a passing off claim. For now, search engines will get richer and wise companies will be able to avoid liability by being careful in the use of competitor trademarks on which they have bid.