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We had previously written about a case in which Toys “R” Us won its claims against a cannabis dispensary for using the trademark and trade name Herbs “R” Us.

More recently, in a similar case, the Federal Court of Canada ruled that a cannabis store called Budway had infringed the Subway restaurant chain’s trademarks.

Subway Files Claim Against Budway

Subway IP LLC, which owns Canadian registered trademarks used in association with SUBWAY-branded sandwich restaurants, brought an application to enjoin a cannabis retailer from using the “BUDWAY” trademark in association with its cannabis and wellness store.

Subway holds a number of registered trademarks associated with its name, one of which was registered in 1987 for use in association with restaurant services and the second of which was registered in 1999 for use in association with “sandwiches, prepared salads, buns and rolls, cookies, muffins, pastries, beverages. Subway also holds three design marks associated with the name Subway, which had been registered in different variations in 2000, 2007 and 2019.

In 2020, Subway became aware of a cannabis store’s use of the Budway design at its retail location in Vancouver, British Columbia. Additionally, Instagram posts showed the use by the account “budwayonclark” of a “mascot” in the form of a submarine sandwich filled with cannabis leaves and bloodshot, half-opened eyes.

Subway alleged that the cannabis store’s use of its Budway trademark infringed Subway’s registered trademarks, which amounted to both passing off and depreciation of the goodwill in those marks, contrary to sections 7(b), 20, and 22 of the Trademarks Act. Subway requested an injunction and damages. 

Budway did not respond to the court application and the case was therefore heard without its involvement.

Court Finds in Favour of Subway

The court began by explaining that a trademark registration grants the owner the exclusive right to use the mark throughout Canada in respect of the goods and services in the registration. Further, the right to exclusive use will be deemed infringed by the sale, distribution, or advertisement of goods or services in association with a confusing trademark. To establish whether a trademark is confusing with another trademark, the applicant must prove that the use of both trademarks in the same area “would be likely to lead to the inference that the goods or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person, whether or not the goods or services are of the same general class”. The court then explained:

“In determining whether trademarks are confusing, the Court has regard to all of the surrounding circumstances, including the particular circumstances identified in subsection 6(5) of the Trademarks Act, namely inherent or acquired distinctiveness; length of time the trademarks have been in use; the nature of the goods, services, business, and trade; and the degree of resemblance between the trademarks. While all factors must be considered, the weight given to each factor will depend on the circumstances, with the degree of resemblance often likely to have the greatest effect…. The test for confusion is to be applied as a matter of “first impression in the mind of a casual consumer somewhat in a hurry” at a time when they have “no more than an imperfect recollection” of the registered mark and without giving the matter “detailed consideration or scrutiny”.”

After reviewing the evidence, the court ultimately concluded that the cannabis store’s use of the Budway trademark infringed the registered trademarks of Subway, and amounted to both passing off and depreciation of the goodwill in those marks, contrary to the Trademarks Act. The court therefore issued an injunction against Budway prohibiting it from using the mark and awarded damages in the amount of $15,000, and costs in the amount of $25,000.

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Deciding how to structure your business is a task best undertaken with the guidance of an experienced corporate lawyer with noteworthy experience advising business owners on risk and liability.  At Bader Law, our business services lawyers have been advising clients who are looking to make the best choices about how to organize their business venture for several years.  We work hard to protect your financial and legal interests while ensuring your company operates successfully.

The business services our team offers include experience advising and assisting cannabis start-ups with business structure and licensing matters.

The business law team at Bader Law has decades of experience in establishing new legal identities for businesses throughout Mississauga and the Greater Toronto Area, be it as a private corporation, a limited liability partnership, a sole proprietorship, or a corporation needing to make a private placement of securities. Contact us online or at (289) 652-9092.