New Guidance on the Subject of Comparative Advertising and Dilution of Goodwill | International Lawyers Network
In 2023, the Federal Court of Canada released its decision in Energizer Brands, LLC and Energizer Canada Inc. v. Gillette Company (2023 FC 804). The decision clarifies some of the laws applicable to comparative advertising in this country and should guide the conduct of parties that engage in this form of commercial activity.
Energizer sued Duracell over a sticker advertising campaign that claimed that Duracell’s batteries lasted longer than their Energizer equivalents. The Duracell advertisements referred to Energizer both directly and indirectly with phrases such as “the bunny brand” or “the next leading competitive brand”.
The Court found in favour of Energizer for the labels bearing the marks ENERGIZER and ENERGIZER MAX and held that Duracell’s activity contravened S. 22 of the Trademarks Act. S. 22 prohibits “depreciation of goodwill” and is similar to the U.S. cause of action for trademark “dilution”.
In particular, the Court held that, in the case of those labels, the 4 S. 22 criteria were met, namely:
- Duracell was using the marks of Energizer (though not to distinguish its goods);
- The Energizer marks were sufficiently well known and enjoyed a sufficient degree of goodwill;
- There was a link between Duracell’s use of the Energizer marks and the goodwill in those marks; and
- A likelihood that that goodwill would be depreciated had been shown.
The Court concluded that Duracell’s use of the ENERGIZER/ENERGIZER MAX marks diluted their value, made them less distinctive and potentially caused them to lose goodwill.
On the other hand, for the labels referring to “THE BUNNY BRAND” and “THE NEXT LEADING COMPETITIVE BRAND”, the Court did not find in favour of Energizer. The reasons why the Court reached that conclusion are important to keep in mind for companies that engage in comparative advertising in Canada going forward.
In particular, the Court referred to the fact that consumers would need to make a connection between “THE BUNNY BRAND” and Energizer. The Court also referred to how the labels appeared on the packaging – finding that the positioning and size of the labels would make it unlikely for a consumer in a hurry to read those labels and to connect them with Energizer.
The Court’s reliance on the context in which the defendant displays the plaintiff’s marks, and to their size and placement, is a departure in the application of S. 22.
Furthermore, the Court appears to have possibly broadened the scope of S. 22 by stating that it is intended to prohibit the use of a registered owner’s mark “for the purpose of appealing to the owner’s customers in an effort to weaken their habit of buying what they have bought before”. This could imply that simply causing consumers to change their buying habits would count as a form of damage for which a plaintiff can be compensated.
In fact, in this case, the Court awarded damages of $179,000 to Energizer, even though it had not demonstrated any losses directly caused by the campaign, and issued a permanent injunction against Duracell.
