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Court leaves trail of sour grapes for Locust Lane wineries

Friday, March 26, 2021 @ 2:34 PM | By May Cheng and Mani Kakkar


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May Cheng
Mani Kakkar %>
Mani Kakkar
In Hidden Bench Vineyards & Winery Inc. v. Locust Lane Estate Winery Corp. 2021 FC 156, Justice Richard Southcott of the Federal Court issued a judgment on an application brought by Hidden Bench Vineyards & Winery Inc. (Hidden Bench) against neighbouring winery Locust Lane Estate Winery Corp. (LLEW), that sought damages for passing off based on prior rights to the name and mark LOCUST LANE.

The facts of the case are not unusual. Hidden Bench is clearly the senior winery, having founded its operations in 2003, including two vineyards located on Locust Lane in Beamsville, Ont. Just down the street, LLEW commenced operations in July 2020, from the distressed sale of the Mike Weir Winery, renaming the location “Locust Lane Estates Winery” with prominent signage in December 2019.

Both wineries are on Locust Lane, but Hidden Bench had first adopted the name and mark LOCUST LANE on its wine labels depicted here and here. It is notable that on these labels the more prominent mark is HIDDEN BENCH, but the wines themselves are identified either as “Locust Lane Rosé” or “Locust Lane Vineyard.”

These Hidden Bench wines were alleged to have been sold as early as 2003, but there was no trademark registration obtained for LOCUST LANE. Therefore, Hidden Bench’s application to stop LLEW from using the name and mark was based on the common law tort of passing off. Hidden Bench’s application also sought injunctive relief, relying on evidence of sales totalling $2.4 million for LOCUST LANE branded wines from 2007 to 2019.

LLEW received a first demand letter from Hidden Bench in January of 2020, but refused to cease use of the name and mark, despite also being served with the application returnable in the Federal Court in March of 2020. Undeterred, LLEW started to sell its wines in August 2020 and racked up sales of $63,287.44 by September of 2020. The use of LOCUST LANE made by LLEW was much more prominent, serving to identify the winery as opposed to the varietal or vineyard, as depicted here and here.

Justice Southcott’s approach to the problem is telling in posing as the first question: “Has Hidden Bench established that it possesses a valid and enforceable trademark in the geographic name “Locust Lane”? The framing of the question underscores his acceptance of LLEW’s arguments to the effect that the geographic location renders the mark descriptive and potentially lacking inherent distinctiveness as an initial threshold question.

Justice Southcott nevertheless accepted that Hidden Bench satisfied this initial threshold issue and demonstrated first use with wines, but then went on to conclude that LOCUST LANE lacks inherent distinctiveness.

The threshold issue as articulated by the court finds its roots in two prior Federal Court of Appeal decisions: Sandhu Singh Hamdard Trust v. Navsun Holdings Ltd. 2019 FCA 295 and Nissan Canada Inc v. BMW Canada Inc. 2007 FCA 255. Both of these cases were acknowledged by the court as requiring the establishment by the claimant of a valid and enforceable mark before embarking on an analysis of the other elements of a passing-off claim.

The court held that Hidden Bench did not demonstrate acquired distinctiveness in its use of the mark, so as to establish sufficient goodwill and reputation to make out its passing-off claim. In effect, the court concluded that Hidden Bench did not demonstrate that the geographic name as used on Hidden Bench’s labels had developed a secondary meaning, identifying it as the source of LOCUST LANE branded wines. The court held that Hidden Bench’s limited sales volumes, secondary positioning of the mark on its labels and minor website use didn’t meet the high threshold to demonstrate acquired distinctiveness.

Having concluded that a key ingredient to the passing-off claim was missing, Justice Southcott refused to award any remedy to Hidden Bench.

The decision leaves much to be desired in terms of clarity for the parties, who now appear to both be using descriptive marks that they cannot enforce against each other and, consequently, might not even be in a position to defend against third-party encroachments in future.

The end result is sour grapes for both sides, since neither party has been recognized a clear entitlement to use the mark to the exclusion of the other. Since a trademark must identify a single source for a product, the decision effectively puts the LOCUST LANE mark in generic territory.

As of writing, no appeal had been taken of the decision. However, Hidden Bench has also filed to register the mark LOCUST LANE, so it remains to be seen if this fight between the neighbouring wineries will continue to play out in opposition proceedings.

Last but not least, it’s important to note that this decision emphasizes the importance of obtaining trademark registrations, which would have greatly assisted Hidden Bench in asserting inherent distinctiveness and goodwill by providing valuable presumptions to this effect, had such been obtained at an earlier stage.

May M. Cheng is a certified specialist in intellectual property (IP) law and a partner in the IP group at Osler. She has 25 years of experience. Mani Kakkar is an associate in Osler's litigation department, with expertise in domestic and international arbitration.
 
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