In a recent Federal Court decision, a Canadian company named “Smart Cloud” appealed a Trademarks Opposition Board (“TMOB”) decision which had rejected its opposition to IBM’s trademark application for the mark “IBM SMARTCLOUD”.
Smart Cloud Opposes IBM’s Trademark Application
The case involved IBM, an international computer hardware, software and services company, and Smart Cloud, a Canadian company. Smart Cloud had been incorporated in October 2010 for the purpose of developing and offering business computing and consulting services centred on cloud computing, digital security, data storage and technical support in Canada and elsewhere.
IBM had filed a trademark application on October 5, 2011, which was advertised for opposition purposes in the Trademarks Journal on November 6, 2013. The application by IBM was for registration of the trademark “IBM SMARTCLOUD” (the “Mark”) in association with a broad range of computer hardware and software and business management, development, network and consulting services.
Smart Cloud filed its statement of opposition on November 26, 2013, claiming that under the Trademarks Act (the “Act’), there was a likelihood of confusion between the Mark and Smart Cloud’s trademark and tradename “SMARTCLOUD”. Smart Cloud’s opposition to the application was primarily based on its position that the Mark was confusing with its prior use of the trademark SMARTCLOUD and the tradenames SMART CLOUD and SMARTCLOUD in association with services, including cloud computing services.
Trademarks Opposition Board Rejects Smart Cloud’s Opposition
On July 31, 2019, the TMOB, on behalf of the Registrar of Trademarks, rejected Smart Cloud’s opposition to an application. The question was whether clients purchasing IBM’s goods and services under the Mark would believe the goods and services were provided by Smart Cloud.
In its decision, the TMOB stated that Smart Cloud’s trademark and tradename consisted of two ordinary dictionary words and referenced the definitions of those words in the online Oxford English Dictionary. As Smart Cloud’s services were essentially cloud computing services, the TMOB considered its trademark and tradename to be highly suggestive, possessing a low degree of inherent distinctiveness. The TMOB found the Mark to also have a low degree of inherent distinctiveness as it shared the element SMARTCLOUD and the IBM prefix was a combination of letters. As Smart Cloud had provided minimal evidence of use, the TMOB was unable to find that its trademark and tradename had any measure of acquired distinctiveness “that would result in an ambit of protection greater than what would ordinarily be accorded to a weak mark”.
The TMOB further held that Smart Cloud had not shown that its trademark and tradename had acquired any distinctiveness through use or promotion as of April 5, 2011.
While the TMOB acknowledged a fair degree of resemblance between the parties’ marks, it concluded that the Mark clearly signalled cloud computing-related goods and services emanating from IBM. Additionally, it held that IBM’s reputation and its use as the prefix of the Mark would assist consumers in distinguishing the source of the goods and services associated with the Mark; as such, the surrounding circumstances strongly favoured IBM.
The TMOB then reviewed jurisprudence concerning weak trademarks, stating that it is well-established that a weak trademark (a mark of low inherent distinctiveness) is not entitled to a wide ambit of protection and that comparatively small differences will be sufficient to distinguish between weak marks. It held that because Smart Cloud had not shown extensive use of its trademark and tradename, the low degree of distinctiveness of the SMARTCLOUD mark had not been enhanced. As such, the TMOB concluded that the jurisprudence concerning weak trademarks favoured IBM.
Finally, the TMOB held that Smart Cloud had not satisfied its evidentiary burden of establishing that the SMARTCLOUD trademark and tradename had become sufficiently known in Canada to negate the distinctiveness of the Mark as of November 26, 2013. The TMOB found that Smart Cloud had provided no evidence of sales generated by the provision of services under SMARTCLOUD. Additionally, Smart Cloud’s evidence of advertising and promotion was narrow and limited to the period from late 2010 to mid-2011. Despite Smart Cloud’s president’s statement that its website had been continuously active since 2010, the TMOB ultimately found that there was no evidence indicating the number of Canadian consumers that may have visited the site.
In the result, the TMOB therefore rejected Smart Cloud’s opposition.
Smart Cloud appealed the decision.
Court Rejects Smart Cloud’s Appeal
At issue before the court was whether the TMOB had erred in its analysis and conclusions regarding the likelihood of confusion between the Mark and Smart Cloud’s trademark and tradenames.
After reviewing the parties’ new evidence, the court concluded that:
“I find that the TMOB incorrectly relied on a dictionary definition of the term ‘cloud’ that was added after the material date for Smart Cloud’s grounds of opposition… However, my review of the admissible new evidence in this appeal demonstrates that the SMARTCLOUD trademark and tradename was comprised of two ordinary words on April 5, 2011. There are no errors in the TMOB’s conclusions that SMARTCLOUD is a highly suggestive mark and possesses a low degree of inherent distinctiveness. The TMOB correctly relied on these conclusions and its finding that the mark SMARTCLOUD had not acquired any measure of distinctiveness through use in its review of the jurisprudence regarding weak marks. The TMOB did not err in concluding that the SMARTCLOUD trademark was a weak mark on the material dates in the opposition.
[T]he two words comprising Smart Cloud’s trademark and tradename SMARTCLOUD were words in common usage by April 5, 2011, and necessarily by September 2011, and were understood by the casual Canadian consumer of computer goods and related services.”
As such, the court held that there was no palpable and overriding error in the TMOB’s analysis and conclusions and dismissed Smart Cloud’s appeal.
At Bader Law, we have been successfully advising tech start-ups and business owners for a number of years. In that time, we have built a reputation for our forward-thinking guidance and sound legal advice. We regularly help companies in up-and-coming areas including cloud computing, blockchain, other crypto-currency, and FinTech. We are familiar with the various challenges that start-ups face, particularly in the tech sector, and understand that entrepreneurs need a law firm that is going to be able to prioritize the most critical aspects of their venture with them.
The business law team at Bader Law has decades of experience in helping tech start-ups grow and expand, including negotiating licensing agreements and preparing companies for exit events. We are thorough, efficient, and focused on delivering the best possible outcome for every single client. Contact us online or at (289) 652-9092 to discuss your matter with a member of our team.