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This is an informal case summary prepared for the purposes of facilitating exchange during the 2024 WIPO IP Judges Forum.

Session 4

Federal Court of Canada [2022]: Gentec v Nuheara IP Pty Ltd et al, 2022 FC 1715

Date of judgment: December 13, 2022

Issuing authority: Federal Court

Level of the issuing authority: First instance

Type of procedure: Judicial (Administrative)

Subject matter: Trademarks

Plaintiff: Gentec, a partnership consisting of Gentec International Ltd and 2494979 Ontario Limited

Defendant: Nuheara IP Pty Ltd and Nuheara Limited

Keywords: Descriptive Trademarks, Distinctiveness, Trademark Validity, Trademark Infringement, Passing off, Scope of legal protection

Basic facts:  Gentec, a partnership consisting of Gentec International Ltd and 2494979 Ontario Limited (the plaintiffs) (hereinafter Gentec) brought a motion for a summary trial in the context of a trademark infringement action.

The action involved four trademarks: the plaintiffs’ registered trademark, “IQ”; their two non-registered marks, “IQ Podz” and “IQ Budz”; and the defendants’ non-registered trademark, “IQbuds”.

The action included a counterclaim for invalidity with respect to the registered trademark and a counterclaim for passing off under Section 7(b) of the Trademarks Act.

Gentec sought an order confirming that its registered mark was not invalid; that the “IQbuds” trademark used and displayed in Canada by Nuheara (the defendant) in association with earbud headphones was confusingly similar to Gentec’s “IQ” trademark registered for goods, including headphones; that Nuheara had infringed Gentec’s rights to its registered “IQ” mark; and requested entitlement to an injunction and an accounting and disgorgement of profits for infringing sales.

Nuheara responded by attacking the validity of the “IQ” registration for lack of distinctiveness and arguing that even if the registration was valid, there would be no confusion between the registered “IQ” trademark and “IQbuds”. Nuheara asked for an order expunging the “IQ” registration or, in the alternative, a declaration of non-confusion. Nuheara also claimed rights in its own mark against Gentec’s sale of earbuds headphones under “IQ Podz” and “IQ Budz” and sought a declaration that this use constituted passing off.  

Both parties filed extensive evidence, including sales and product information and information from private investigators. Nuheara also filed state of the register evidence, newspaper and magazine search results, and evidence from online searches.

Both parties also delivered expert evidence. Gentec’s expert was tasked with assessing the extent to which the Nuheara expert evidence proved or supported the proposition that the term IQ was “merely descriptive” rather than “distinctive” and was not associated with the products of a single company. Gentec’s expert took issue with the fact that Nuheara’s expert did not have data from a consumer survey and used second-hand data compiled by others. 

Held: The action for infringement was dismissed.

The “IQ” registration was found invalid because the “IQ” trademark was not distinctive at the time the proceeding attacking its validity was commenced. Nuheara’s counterclaim was granted, and the “IQ” registration was expunged.

Nuheara’s counterclaim for passing off under Section 7(b) of the Trademarks Act was dismissed.

Relevant holdings in relation to the strength of trademarks: Distinctiveness is the cardinal requirement of a trademark, as only a distinctive trademark will allow a consumer to identify the source of the goods (citing Mattel Inc. v 3894207 Canada Inc., 2006 SCC 22 at para 75; Kirkbi AG v Ritvik Holdings Inc., 2005 SCC 65; D. Vaver, Intellectual Property Law: Copyright, Patents, Trade-marks (1997), at p. 190; Gill and Jolliffe, at p. 3-19). A trademark that cannot fulfill this function is not entitled to legal protection.

A trademark that comprises a unique or invented name, such that it can only refer to one thing and be identified with one source, will possess more inherent distinctiveness and will be afforded a greater scope of protection than a word that is commonly used in the trade.

Gentec had not invented or coined the term “IQ”. The “IQ” registration was for a weak trademark that deserved only a narrow scope of protection.

Gentec had not sold any “IQ” branded headphones from 2010 to 2017. All of Gentec’s post 2017 sales for earbud headphones used its “IQ Podz” or “IQ Budz” trademarks, such that there was no acquired distinctiveness for IQ alone.

Evidence of third-party use of a common term like “IQ”, whether through state-of-the-register evidence, tradename use by other businesses, print and electronic media, or retail market investigations, is reliable evidence. Survey evidence is not superior or necessary.

The evidence established that a large number of third-party “IQ”-formative trademarks associated with consumer electronics products were being used to a substantial extent in Canada during the relevant period of time. The IQ trademark was not used to distinguish the products of one particular company.

Even if the registration was valid and the confusion analysis was undertaken to assess infringement, the Nuheara trademark “IQbuds” did not infringe the “IQ” trademark. As to the degree of resemblance, the two trademarks beared an element of resemblance from the common use of “IQ”. However, even if “IQ” was viewed as the dominant feature of the trademarks, it was a descriptive word, common to both parties’ trademarks that suggested that the product was a smart one. The addition of the term “buds” was enough to distinguish the two trademarks and limit the likelihood of confusion, as it allowed for a visible difference in appearance, sound, and idea suggested.

If valid, the “IQ” trademark would only have at best a minimal level of distinctiveness because it was descriptive, and third parties were using the “IQ”-formative trademarks for headphones and earbuds. In addition, Gentec’s sales and advertising involved the “IQ Podz” trademark, not the “IQ” trademark, such that there was no acquired distinctiveness for the “IQ” trademark.

With respect to whether Gentec was passing off its “IQ Podz” and “IQ Budz” products for Nuheara’s “IQbuds” contrary to Section 7(b) of the Trademarks Act, the Court found:

·       There were insufficient sales to establish reputation and goodwill for the IQbuds trademark;

·       Even with the resemblance between “IQbuds” and “IQ Budz” and some evidence of confusion between “IQbuds” and “IQ Podz”, a negative finding on the other passing off elements was dispositive. 

Relevant legislation:

Sections 2, 6, 7(b), 18, 19, 20 of the Trademarks Act (RSC, 1985, c T-13)