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March 11 --Iconic motorcycle manufacturer Harley-Davidson could continue to use its “Screamin’ Eagle” trademark on clothing despite the ownership and use for 20 years of a “Screaming Eagle” trademark by a Canadian clothing store chain, the Federal Court of Canada ruled on March 4 (H-D U.S.A. LLC v. Berrada , Fed. Ct., No. T-605-07, 3/4/14).
Jamal Berrada, president of 3222381 Canada Inc. and El Baraka Inc., which operated the Canadian clothing stores, failed to establish that H-D U.S.A. LLC's sale of “Screamin’ Eagle” clothing caused confusion for consumers or depreciated his stores' goodwill, the court ruled.
“This Court finds that Harley-Davidson is entitled to distribute, advertise, offer for sale, and sell collateral items, including clothing, in connection with its trademark Screamin’ Eagle, in association with its registered trademark Harley Davidson, throughout Canada, but exclusively at Harley-Davidson dealerships, as this will not infringe any valid rights of defendants,” the court said.
The ruling did not address costs, and the court said that, at the parties' mutual request, it would render judgment on that issue at a later date based on written representations.
The ruling also addressed the issue of the parties' good faith, concluding that Harley-Davidson's conduct had not demonstrated bad faith but that the behavior of Berrada and his companies in some circumstances bordered on bad faith.
Harley-Davidson has adopted varying positions on Berrada's existing and expunged trademarks, but changes in corporate policy are not evidence of bad faith, the court said. And there was no basis for Berrada's allegations that Harley-Davidson had failed to enforce its policy prohibiting sale and shipment of its Screamin’ Eagle clothing in Canada from its online store in the United States, the court said.
Berrada, on the other hand, had attempted to register the Screaming Eagle trademark for motorcycles, had sold clothing bearing the words “rolling thunder”--an event associated with Harley-Davidson--and admitted to selling products bearing registered Harley-Davidson trademarks, the court said.
“It is clear to the Court that defendants are barred from any equitable relief,” Justice Andre F.J. Scott said.
The ruling will be of considerable interest to owners of well-known or famous brands, as it recognizes that Harley-Davidson's Screamin’ Eagle trademark is unlikely to cause confusion despite the Canadian clothing stores' 20-year history with a similar trademark, Mark K. Evans of Smart & Biggar, Toronto, who represented Harley-Davidson in the case, said on March 10.
Harley-Davidson's customers would be “acutely aware” of the difference between its products and those of an unrelated clothing business, and the court recognized that Harley-Davidson has a “very unique and dedicated” customer base, Evans told Bloomberg BNA. The level of loyalty of Harley-Davidson customers is rare, but the ruling would be of assistance to other brand owners, he said.
The ruling is also noteworthy for its detailed analysis of the provisions on depreciation of goodwill in Section 22 of Canada's Trade-Marks Act, the first time a Canadian court has conducted a detailed evidentiary analysis based on the Supreme Court of Canada's precedent-setting 2006 ruling in Veuve Clicquot Ponsardin v. Boutiques Clicquot Ltee., Evans said. Section 22, the Canadian equivalent of the anti-dilution provisions in U.S. legislation, has not often been used by Canadian litigants, he said.
Montreal lawyer Harold Ashenmil, who represented Jamal Berrada and his companies that operate Screaming Eagles clothing outlets--3222381 Canada Inc. and El Baraka Inc.--did not respond to a March 7 email seeking comment on the ruling and an indication of whether Berrada intends to appeal to the Federal Court of Appeal.
The Federal Court rejected Berrada's arguments that the association made by customers of his Screaming Eagles stores with Harley-Davidson's Screamin’ Eagles trademark damaged his businesses' goodwill.
Section 22 of the Act allows for depreciation of goodwill in the absence of any confusion over the trademark, but Berrada was unable to meet the four-part test for goodwill depreciation established in the Supreme Court's ruling in Veuve-Clicquot, the court said in rejecting Berrada's counter-claim.
Berrada sought declarations confirming his exclusive use of Screaming Eagle and similar trademarks and that Harley-Davidson had infringed those exclusive rights and depreciated the trademark's goodwill, an injunction against Harley-Davidson's further use of the trademark and sale of clothing and accessories carrying it, and delivery for destruction of infringing goods and advertising materials.
Harley-Davidson provided convincing evidence that it has used its own trademarks and not those used by Berrada and his companies, which are used only in relation to clothing retail stores, the court said. Berrada provided evidence of the sale of Screaming Eagle-branded apparel, but not a sufficient volume of sales to confirm significant market recognition.
“The Court finds that there is some goodwill attached to the defendants' trademark, but that Harley-Davidson's marks are better known and enjoy much greater brand recognition and fame,” the court said.
Berrada failed to meet the Supreme Court's “linkage” test, which requires that a reasonable buyer of Harley-Davidson motorcycle clothing would think of the Screaming Eagle stores' trademark, the court said. The evidence confirmed that the mental association made by the stores' customers was with the senior trademark, Harley-Davidson, not the Screamin’ Eagles trademark, he said.
Finally, Berrada offered scant evidence to support his assertion that people have refused to shop at his stores because they do not want to be associated with Harley-Davidson, the court said. “Customers enquired as to their relationship with Harley, but that does not necessarily equate to a depreciation of their goodwill.”
The ruling also rejected Berrada's claims under Sections 7 and 20 of the Trade-Marks Act, which depended on demonstrating goodwill, deception of the public, and actual or potential damage.
There was no evidence that the average Harley-Davidson motorcycle owner knows of the Screaming Eagle stores' existence or the existence of the trademark, the court said. Berrada proffered evidence of spending more than 10 million Canadian dollars ($9 million) over a 20-year period on advertising, but there was no evidence on the degree of recognition of his trademark.
Berrada had also failed to demonstrate that the average Canadian Harley-Davidson rider or owner had been led to believe by Harley-Davidson that they were purchasing Screaming Eagle clothing at Harley-Davidson dealerships, the court said. Evidence that customers who ride motorcycles not manufactured by Harley-Davidson refused to be associated with Berrada's brand is further evidence that Screamin’ Eagle equates with Harley-Davidson.
“There just cannot be confusion if non-Harley owners also make the mental association between Screamin’ Eagle and Harley-Davidson,” the court said.
Some evidence supported Berrada's claims, including the sale of some Screaming Eagle clothing to Harley-Davidson dealers in Canada, but there was no evidence that Harley-Davidson had been aware that its dealers had bought the merchandise and there was direct evidence such conduct was prohibited under its dealership agreements, the court said.
There was also evidence, despite Harley-Davidson's claims to the contrary, that Berrada had been able to purchase Harley-Davidson Screamin’ Eagle clothing from Harley-Davidson dealers in Canada and that on the other hand, Berrada and his companies had associated their trademark with Harley-Davidson, including through cooperative programs with two Harley-Davidson licensees to display the Harley-Davidson trademark and colors on some of their items, the court said. Berrada had sold Harley-Davidson licensed products in his retail outlets, had applied to become a Harley-Davidson licensee, and had attempted to register a trade-mark for Screaming Eagle motorcycles and toy motorcycles. Berrada had also infringed a Harley-Davidson trademark by selling leather jackets with an orange stripe.
“The Court has difficulty reconciling the defendants' actions over the years, since they accuse Harley-Davidson of passing-off and confusion and yet they have clearly taken several initiatives to associate themselves with the Harley-Davidson mark and reinforce that association with their own customers,” the court said. “Such actions could lead to question [sic] the defendants' good faith.”
The ruling said Harley-Davidson had manufactured and sold motorcycles for more than 100 years, and in 1983 had adopted and introduced the Screamin’ Eagle trademark, both alone and in association with its high-performance motorcycle parts and accessories. Harley-Davidson held a Canadian trademark registration (No. TMA511,652, registered May 10, 1999) for Screamin’ Eagle motorcycle parts and accessories.
The company also held a U.S. trademark registration for “Screamin’ Eagle” for use on clothing, and had gross worldwide sales of goods with that trademark exceeding $60 million between 1983 and 1997, the court said. In Canada, sales of Screamin’ Eagle motorcycle parts and related goods had exceeded 17 million Canadian dollars.
Berrada had registered “Screaming Eagle” in November 1999 (Canadian Trademark No. 519,633) for the business of operating retail stores selling clothing and accessories, the ruling said. He opened the first Screaming Eagle store in Montreal in 1992 and operated, for short periods, stores in a number of other cities, but currently had stores only in Montreal and Laval, Quebec. Since 2000, Berrada had also sold Screaming Eagle clothing and accessories at “road shows” across Canada.
Berrada had registered “Screaming Eagle” (Canadian Trademark No. TMA401,214) in August 1992 for use on clothing and clothing accessories, but that registration had been expunged in March 2008. In September 1994, he registered “Screamin’ Eagle” (Canadian Trademark No. TMA433,020) but that registration had been expunged in April 2010. Despite the expungement, Berrada continued to use the Screaming Eagle trademark on clothing and accessories.
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Text is available at http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/67091/1/document.do.
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