2019 FC, 2019 FC 1082

Date: 20190822 Docket: T-468-15 Citation: 2019 FC 1082 Ottawa, Ontario, August 22, 2019 PRESENT: The Honourable Madam Justice St-Louis BETWEEN: INDUSTRIA DE DISENO TEXTIL, S.A. Applicant and ZARA NATURAL STONES INC.

Respondent JUDGMENT AND REASONS [ 1 ] Industria de Diseno Textil, S.A. (Industria) appeals the decision rendered by the Trade-marks Opposition Board (the Board), on behalf of the Registrar of Trade-marks, on January 19, 2015, rejecting its opposition against Zara Natural Stones Inc.’s (Natural Stones) trademark application. [ 2 ] For the reasons exposed below, the appeal will be allowed and the matter remitted to the Board for a new determination. I.

BACKGROUND AND IMPUGNED DECISION [1] On May 2, 2011, Natural Stones filed application No. 1,525,938 to register the trademark " “ZARA NATURAL STONES & Design” " (the Design Mark), based on proposed use in Canada in association with the following wares (the Wares): Paving blocks, namely, calibrated paver paving blocks, circular paving block kits, cobble paving blocks, octagonal paving block kits, paving and garden slab blocks, paving blocks with brushed top, paving blocks with sandblasted top, random flagstone paving blocks or crazy paving blocks, square cut flagstone paving blocks, tumbled paving blocks.

Paving stones, namely, calibrated paver paving stones, circular paving stone kits, cobbled paving stones, octagonal paving stone kits, paving and garden slab stones, paving stones with brushed top, paving stones with sandblasted top, random flagstone paving stones or crazy paving stones, square cut flagstone paving stones, tumbled paving stones.

Paving tiles, namely, calibrated paver paving tiles, circular paving stone kits, cobbled paving tiles, octagonal paving stone kits, paving and garden slab tiles, paving tiles with brushed top, paving tiles with sandblasted top, random flagstone paving tiles or crazy paving tiles, square cut flagstone paving tiles, tumbled paving tiles.

Stones, namely, bull nosed coping stones, curb stones, edging stones, hand dressed coping stones, kerb stones, natural hand bull nosed pier cap stones, pedestrian zone, park and garden wall and masonry stones, pool coping stones, step pier cap stone with hand chiseling, step pier cap stone with molded edges, step smooth pier cap stones, stepping stones, smooth globe pier cap stones, stones for the construction of ledge rock, stones for the construction of steps, stones for the construction of wall stone, wall coping stones. [2] The Design Mark is illustrated as [ 3 ] At that time, Industria already held a number of registered trademarks that include the word " “ZARA” " .

In addition, on September 17, 2003, it had filed application No. 1,191,134 for another trademark, ZARA HOME, which covers wares enumerated over ten pages, including " “floor coverings, namely: floor planks, pavement, tiles” " . The complete description of the wares included in that application is annexed to the present. [ 4 ] On February 21, 2012, Industria filed, under

section 38 of the Trade-Marks Act , RSC 1985, c T-13 [the Act ], a statement of opposition which was subsequently amended twice. As described by the Board in its decision, the grounds of opposition pleaded by Industria can be grouped under three categories: (1) those pertaining to non-conformity issues under

section 30 of the Act ; (2) those pertaining to non-distinctiveness of the Mark under sections 2 , 48 , and 50 of the Act ; and (3) those revolving around the likelihood of confusion between the Mark and Industria’s trademarks made up of the word ZARA as well as Industria’s tradename Zara. The parties do not contest this categorization.

[ 5 ] Before the Board, each party filed evidence and written arguments, although Industria limited its written argument to three paragraphs. On November 27, 2014, the Board held a hearing, which both parties attended. [ 6 ] On January 19, 2015, the Board rejected Industria’s opposition against the Design Mark. [ 7 ] The Board first recognized Natural Stones’ burden to show that its application does not contravene the provisions of the Act as alleged in the statement of opposition, and also recognized Industria’s initial evidential burden to prove the facts inherent to its pleadings.

Then, the Board summarily rejected a number of Industria’s grounds of opposition, such that only the grounds based on likelihood of confusion were left: registrability under paragraph 12(1) (

d) of the Act , entitlement under paragraphs 16(3) (

a) and (b), and distinctiveness under paragraph 2 (a). [ 8 ] The Board then examined the likelihood of confusion of Natural Stones’ Design Mark (1) with Industria’s registered trademarks and (2) with Industria’s yet-to-be-registered trademark ZARA HOME, associated with " “floor coverings, namely: floor planks, pavement, tiles” " .

Only its analysis with regards to the trademark ZARA HOME is relevant to this appeal. [ 9 ] To determine likelihood of confusion, the Board stated the test set out in subsection 6(2) of the Act , referred to the Supreme Court of Canada decisions Mattel, Inc v 3894207 Canada Inc , 2006 SCC 22 [ Mattel ], Veuve Clicquot Ponsardin v Boutiques Cliquot Ltée , 2006 SCC 23 [ Veuve Clicquot ], and Masterpiece Inc v Alavida Lifestyles Inc , 2011 SCC 27 [ Masterpiece ], and analyzed the criteria listed in subsection 6(5). [ 10 ] The Board made the following remarks in its analysis of subsection 6(5) factors: (

a) the “inherent distinctiveness of the trademarks and the extent to which they have become known” factor favours neither party: there is no evidence of the extent to which Industria’s trademark ZARA HOME has become known in Canada; (

b) the “length of time the trademarks have been in use” factor favours neither party: there is no evidence of use of the parties’ marks in Canada; (

c) the “nature of the goods” and “nature of the trade” factors favour Industria: there is clear overlap between “pavement tiles”—goods covered by Industria’s trademark ZARA HOME—and the Wares and the assertion that their channels of trade differ is pure speculation; and (

d) the “degree of resemblance” factor is important and favours Natural Stones: the “marks differ visually, orally, and in ideas suggested by them”; “the [Design] Mark has visual distinctive features” and it “is suggestive of the Wares while [Industria’s] trade-mark ZARA HOME is suggestive of the environment where [Industria’s] wares could be used” (Board’s decision at para 64). [ 11 ] The Board thus found that the Design Mark would likely not cause confusion with Industria’s yet-to-be-registered trademark ZARA HOME, and rejected Industria’s opposition. [ 12 ] On March 30, 2015, Industria filed an application at the Federal Court, pursuant to

section 56 of the Act , to appeal the Board’s decision. [ 13 ] In support of this appeal, the parties each filed additional evidence. Industria filed the affidavit of Mr. Alain Bédard, archivist employed by Industria’s counsel, sworn on August 14, 2015. Natural Stones filed the affidavits of Mr Hasnain Ali Khatau, President of Natural Stones, sworn on September 13, 2015, and of Me Brandon Chung, summer law student, sworn on August 13, 2015. Both were cross-examined by Industria. II. PARALLEL MATTER [ 14 ] At this point, it is useful to describe a parallel proceeding involving the same parties.

On June 18, 2012, Natural Stones filed application No. 1,582,505 to register a trademark consisting of the word ZARA (the Word Mark), based on use in Canada and in association with the same Wares covered by its application for registration of the Design Mark.

On February 21, 2013, Industria filed a statement of opposition against that application as well. [ 15 ] In that parallel matter, the Board concluded, inter alia , that Natural Stones had not discharged its burden to prove at the relevant date, on a balance of probabilities, that the Word Mark is not likely to cause confusion with Industria’s trademark ZARA HOME.

The Board concluded that the marks resembled one another and that there was clearly overlap between Natural Stones’ Wares and the goods covered by Industria’s application. [ 16 ] The Board thus made the same findings as those enumerated at paragraph 11 above , except with respect to the " “degree of resemblance” " factor, for which it stated: [72] Finally I consider the marks in issue to resemble one another. The dominant portion of the trade-mark ZARA HOME is the first component ZARA.

It has been said that the first component of a trade-mark is often the most important one [see Conde Nast Publications Inc v Union des Editions Modernes (1979), 46 CPR (2d) 183 (FCTD) ;]. [Natural Stones’ Word Mark] is identical to the dominant and first portion of [Industria’s] trade-mark ZARA HOME. This important factor favours [Industria]. [ 17 ] Consequently, the Board then concluded that Natural Stones’ Word Mark resembled Industria’s trademark ZARA HOME and would likely be confused with it.

III. PARTIES’ SUBMISSIONS A. Industria’s Position

(1) Standard of Review [18] Industria submits that the applicable standard of review on appeal of a decision by the Board is reasonableness or, if new evidencesubmitted on appeal would have materially affected the Board’s decision, correctness (Mattel at para 40; United Grain Growers Ltd v Lang Michener, (2001) 2001 FCA 66 , 12 CPR (4th) 89 (FCA) at para 8). [19] Industria submits that the additional evidence filed by Natural Stones before the Court would not have materially affected theBoard’s findings.

It explains that the additional evidence does not affect any of the circumstances listed in subsection 6(5) of the Act, anddoes not support the arguments that Natural Stones intends to make. In addition, Industria stresses that those arguments are irrelevant tothe issue at stake, which is the Board’s unreasonable assessment of the degree of resemblance between the marks in light of theassessment made in the parallel matter.

(2) Likelihood of Confusion [20] Industria specifies that its appeal is limited to Board’s assessment of the degree of resemblance between the trademarks, i.e.paragraph 6(5)(

e) of the Act, and that it does not challenge the analysis of other factors under subsection 6(5) of the Act (Applicant’sMemorandum at para 49). [21] Industria submits that the impugned decision is neither correct nor reasonable, as the Board erred by not applying the samereasoning it applied to the parallel opposition matter in regard to the degree of resemblance.

Industria takes issue with the fact that thedominant portion "“ZARA”" was an important factor in the parallel decision, but was completely disregarded in the decision at bar eventhough the dominant portion is exactly the same. [22] Relying on Masterpiece, Industria submits that the Board should have found that the word "“ZARA”" is the most striking aspect ofthe Design Mark and, as it had found in the parallel decision, is identical to the first and dominant portion of ZARA HOME.

Industriaadds that the design features of the Design Mark give prominence to the first word "“ZARA”" and strengthen its position that the word"“ZARA”" is the most striking aspect of the Design Mark. [23] Industria relies on paragraph 78 of the Federal Court decision Restaurants la Pizzaiolle Inc v Pizzaiolo Restaurants Inc, 2015 FC240 [Pizzaiolle FC], which states : In short, this differentiation in the treatment of the issue as to the likelihood of confusion, and in particular the concept ofsubsequent use, of the two marks that the respondent seeks to register, has, in my view, caused a breakdown in therationality of the Registrar’s decision, thus placing it outside of the range of possible, acceptable outcomes which aredefensible in respect of the facts and law. [24] Pizzaiolle FC was confirmed by the Federal Court of Appeal in Pizzaiolo Restaurants Inc v Les Restaurants La Pizzaiolle Inc, 2016FCA 265 [Pizzaiolo FCA].

Industria relies on paragraphs 28 to 32 and argues that the same reasoning should be applied in this case, i.e.when the two marks are considered in the same context, as is mandated by Masterpiece (with the same style of lettering, colour, anddesign), ZARA HOME and the Design Mark are no more different than ZARA HOME and the Word Mark.

Industria adds that thewords "“Natural Stones”" are clearly descriptive, and hence add very little distinctive features to the Design Mark. [25] Industria stresses that the Board applied the wrong test when it focused on the "“visual distinctive features”" of the Design Mark,and that it should have focused on its striking element instead, namely the word ZARA. B. Natural Stones’ Position

(1) Standard of Review [26] Natural Stones asserts that, in the case at bar, the additional evidence would not have materially affected the Board’s decision, butwould have materially affected the factors of inherent distinctiveness, nature of the wares, and channels of trade, factors which weredecided in favour of Industria (Respondent’s Memorandum at paras 32, 39-40).

As such, the standard of correctness should be applied tothese factors and the standard of reasonableness should be applied to the Board’s decision (Respondent’s Memorandum at paras 40, 66). [27] Natural Stones does not make further submissions to support its position that the additional evidence would have materiallyaffected the "“inherent distinctiveness”" factor.

In fact, Natural Stones later states that this factor was found to not favour either party(Respondent’s Memorandum at para 118). [28] With regards to its position that additional evidence would have materially affected the "“nature of the wares”" factor, NaturalStones points out that the Board did not have any evidence of use of the ZARA HOME trademark and was therefore unable to assess theprobable type of business or trade intended by Industria for ZARA HOME.

Natural Stones asserts that, with additional evidence of actualuse of the ZARA HOME trademark, the Board would not have concluded that the parties’ goods overlap. [29] With regards to its position that additional evidence would have materially affected the "“channels of trade”" factor, Natural Stonesreiterates that the Board did not have any evidence of use of the ZARA HOME trademark and therefore assumed that the parties’channels of trade overlapped. Natural Stones contends that it filed evidence of use of the ZARA HOME trademark to explain Industria’s

business and Natural Stones’ channels of trade, and does not elaborate further.

(2) Likelihood of Confusion [ 30 ] Natural Stones submits that the Board’s decision is both reasonable and correct. Although Industria limits its appeal to the Board’s assessment of the " “degree of resemblance” " factor, Natural Stones presents arguments on other criteria as well. [ 31 ] Natural Stones states the test for confusion as " “a matter of first impression in the mind of a casual consumer somewhat in a hurry, who does not pause to give the matter any detailed consideration or scrutiny” " ( Veuve Clicquot at para 20 ).

It maintains that, considering the new evidence, the factors of subsection 6(5) of the Act weigh towards a finding that there is no likelihood of confusion in Canada. [ 32 ] In regard to the " “nature of goods and business” " factor, the Board concluded in favour of Industria. Natural Stones contends that, through the new evidence, this factor would favour Natural Stones: the new evidence shows Industria’s use in Spain and in Canada of the ZARA HOME trademark, which suggests that the trademark is used in association with home furnishings and décor.

In addition, Natural Stones pleads that there is no overlap between the parties’ goods because Industria’s goods are floor coverings classified under the Nice Classification system as class 27, whereas Natural Stones’ goods are non-metallic building materials under class 19. [ 33 ] In regard to the " “channels of trade” " factor, the Board concluded in favour of Industria.

Natural Stones contends that, through the new evidence, this factor would favour Natural Stones: the new evidence shows actual use of the ZARA HOME trademark and shows that the parties sell their goods in different types of locations marketed at different types of customers.

Natural Stones argues that evidence of actual channels of trade is preferable to speculation about possible new ventures, and that the nature of trade can be sufficiently different to discount any possibility of confusion ( Sum-Spec Canada v Imasco Retail Inc , 30 CPR (3 rd ) 7 at 13) . [ 34 ] In regard to the " “inherent distinctiveness and extent to which the trademarks have become known” " and " “length of time” " factors, Natural Stone agrees with the Board’s finding that the factors favour neither party. [ 35 ] In regard to the " “degree of resemblance” " factor, which is the one being challenged by Industria, Natural Stones maintains that it was reasonably assessed: the Board cited and applied the Supreme Court’s decision Masterpiece and determined that the Design Mark had visual distinctive features at paragraph 64 of the decision.

Natural Stones submits that the Board did not have to consider all potential and unidentified uses of Industria’s ZARA HOME trademark ( Domaines Pinnacle Inc v Constellation Brands Inc , 2016 FCA 302 at para 10 [ Domaines Pinnacle ]). In its Memorandum, Natural Stones does not respond to Industria’s argument that the Board should have applied the same reasoning it applied in the parallel decision. [ 36 ] Natural Stones adds that Industria has not provided any evidence of actual confusion and that lack of actual confusion is a significant factor ( Dion Neckwear Ltd v Christian Dior, SA , 2002 FCA 29 ). IV.

ANALYSIS A.

Standard of Review [ 37 ] The parties agree that the Board’s evaluation of the degree of resemblance, which is the only element challenged by the Applicant Industria, should be reviewed under the reasonableness standard, Natural Stones recognising that the new evidence does not materially affect this criterion. [ 38 ] The parties also agree that the Board’s final conclusion should be reviewed on the standard of reasonableness, as the additional evidence filed before this Court would not have materially affected the Board’s conclusion (Applicant’s Memorandum at paras 37-38; Respondent’s Memorandum at paras 34, 67, 126). [ 39 ] Given that the Board concluded in favour of Natural Stones and the additional evidence only pertains to factors found in favour of Industria, the Court agrees with the parties that such additional evidence would not have materially affected the Board’s conclusion of unlikelihood of confusion.

As such, the standard of reasonableness applies to the Board’s decision. B. Likelihood of Confusion [ 40 ] As stated earlier, Natural Stones applied for the registration of two trademarks: the word ZARA and the logo ZARA Natural Stones & Design.

Industria opposed both applications because of, inter alia , likelihood of confusion with its own trademarks. [ 41 ] In both proceedings, the Board analyzed likelihood of confusion of Natural Stones’ trademarks with Industria’s ZARA HOME trademark which had not yet been approved for registration at the time of the decisions. [ 42 ] The Board’s analysis of the likelihood of confusion between Natural Stones’ trademarks and Industria’s yet-to-be-registered ZARA HOME trademark is identical in both decisions, except for the degree of resemblance. [ 43 ] In the decision presently under review, the Board concluded in favour of Natural Stones, whereby the Design Mark does not resemble ZARA HOME and is unlikely to cause confusion with ZARA HOME.

In particular, it stated that: [64] As discussed previously, the [Design] Mark has visual distinctive features. It is suggestive of the Wares while [Industria’s] trade-mark ZARA HOME is suggestive of the environment where [Industria’s] wares could be used. As a whole the parties’ marks differ visually, orally and in the ideas suggested by them. [ 44 ] On the other hand, in the parallel decision, the Board concluded in favour of Industria, whereby the Word Mark resembles ZARA

HOME and is likely to cause confusion with ZARA HOME. In particular, it stated that: [72] Finally, I consider the marks in issue to resemble one another. The dominant portion of the trade-mark ZARA HOME is the first component ZARA. It has been said that the first component of a trademark is often the most important one [see Conde Nast Publications Inc v Union des Editions Modernes (1979), 46 CPR (2d) 183 (FCTD) ;]. [Natural Stones’ Word Mark] is identical to the dominant and first portion of [Industria’s] trade-mark ZARA HOME.

This important factor favours [Industria]. [ 45 ] In both situations, the Board was analysing the resemblance between marks whereby the first word or the only word is “ZARA”. In one decision, the Board examined the first component and its impact, concluding that the word " “ZARA” " is the most important component of each party’s trademark, while in the other decision it failed to make any mention of the importance of the word " “ZARA” " . The Supreme Court of Canada held, at paragraph 63 of Masterpiece , that in the assessment of the resemblance of two marks, the first word is important.

However, it is impossible to conclude, from the Board’s reasons in these proceedings, that the Board considered this element in its analysis of the likelihood of confusion between the Design Mark and ZARA HOME ( Newfoundland and Labrador Nurses’ Union v Newfoundland and Labrador (Treasury Board) , 2011 SCC 62 ). [ 46 ] The Federal Court stated in Pizzaiolle FC , decision upheld by the Federal Court of Appeal, that " “this differentiation in the treatment of the issue as to the likelihood of confusion, and in particular the concept of subsequent use, of the two marks that the respondent seeks to register, has, in my view, caused a breakdown in the rationality of the Registrar’s decision” " ( Pizzaiolle at para 78).

Similarly, in the case at bar, the Board’s differentiation in the treatment of the importance of the first word " “ZARA” " in its two decisions caused a breakdown in the rationality of the impugned decision, thus placing it outside of the range of possible, acceptable outcomes which are defensible in respect of the facts and law ( Dunsmuir v New Brunswick , 2008 SCC 9 at para 47 ). [ 47 ] The unintelligibility of the Board’s decision is even more apparent as it did not limit its exam to the visual effect of the Design Mark.

It concluded that “the parties’ marks differ visually, orally and in the ideas suggested by them”. Even if I were to assume that the Board considered the Design Mark’s graphic elements distinctive enough to constitute the dominant and most important portion of the Design Mark - and thus found that the parties’ marks differ enough visually - this reasoning does not support a conclusion that the marks also differ orally.

It seems clear that, orally, the dominant element of both marks is the word “ZARA”, as was found in the Board’s parallel decision. [ 48 ] Natural Stones also made a number of arguments with respect to the Board’s analysis of other factors, but as the Applicant Industria did not raise those issues, I will not examine them. JUDGMENT in T-468-15 THIS COURT’S JUDGMENT is that: 1 . The appeal is allowed and the matter is returned to the Board for a new determination; 2 . With costs in favor of the Applicant, Industria. “Martine St-Louis” Judge

FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-468-15 STYLE OF CAUSE: INDUSTRIA DE DISENO TEXTIL, S.A. v ZARA NATURAL STONES INC. PLACE OF HEARING: OTTAWA, ONTARIO DATE OF HEARING: mARCH 6, 2019 JUDGMENT AND REASONS: ST-LOUIS J. DATED: AUGUST 23, 2019 APPEARANCES :

Catherine Bergeron For The Applicant Adams Michael For The Respondent SOLICITORS OF RECORD : Robic, S.E.N.C.R.L. Barristers and Solicitors Montreal, Ontario For The Applicant Riches, McKenzie and Herbert LLP Barristers and Solicitors Toronto, Ontario For The RespondenT