A decision of the Ontario Supreme Court clarifies what is required to obtain an interlocutory injunction and shows the risks of not complying with those requirements. Biosteel Inc. v. Cizzle Brands Ltd., 2024 ONSC 5515 (CanLII)
The BIOSTEEL brand was founded in 2009 by BioSteel Sports Nutrition Inc. (“BSNI”). Its founders included John Celenza, who was the Chief Executive Officer and a director of BSNI until March 2023. BSNI has developed and sold sports hydration drinks and powder mixes since its founding. Its drinks are sold in ready-to-drink cartons and its hydration mixes are sold in powder form in packages and containers. The drinks and hydration mixes come in approximately 29 flavours. Over time, BSNI’s revenues grew to tens of millions of dollars annually and its market share grew to 12% of the Canadian sports beverage market
In November 2023, D.C. Holdings Ltd. acquired certain BSNI assets. The purchased assets included BSNI’s intangible assets and intellectual property. BioSteel Inc. was incorporated and entered into a bare trust agreement with D.C. Holdings Ltd. through which it received the purchased assets and all interests in the asset purchase agreement.
In May 2024, Mr. Celenza and other former BSNI executives incorporated the Cizzle Brands Ltd. and Cizzle Brands Inc. (the” Defendants”) and launched the CWENCH branded sports hydration drinks in four flavours, in ready-to-drink cartons and in powdered hydration mixes in containers.
BioSteel Inc. and D.C. Holdings Ltd. (the “Plaintiffs”) alleged that the Defendant’s passed off on the goodwill of the BIOSTEEL products. They sought an interlocutory injunction restraining the Defendants from:
At its core, the tort of passing off is concerned with one individual passing off their goods as those of another. The Supreme Court has identified the three elements of passing off as goodwill attached to the plaintiff’s goods, deception of the public due to the Defendants’ misrepresentation, and potential or actual damages.
The test for interlocutory injunctive relief is well-established. The party seeking this relief must show that their action raises either a serious issue to be tried or a strong prima facie case, that they will suffer irreparable harm if an injunction is not granted until the completion of the trial, and that the balance of convenience favours granting the relief sought because they would suffer greater harm than the responding party if the injunction is not granted. The three criteria are not to be viewed as self-contained. They are inter-related considerations, and weakness in one may be compensated for by strength in another.
The Plaintiffs argued that “serious issue to be tried” standard applied. Essentially, it requires a determination that the case is not frivolous or vexatious.
The Defendants argued that the Plaintiffs were seeking a series of affirmative acts on the part of the Defendants that were mandatory. The Judge agreed that the injunction sought was rightly characterized as a mandatory injunction and was subject to the more onerous “strong prima facie case” standard. Under this standard the Plaintiffs must show “a case of such merit that it is very likely to succeed at trial” based on the law and the evidence presented in support of the injunction.
The Judge said the Plaintiffs must show a goodwill or reputation attached to the goods which they supply in the mind of the purchasing public by association with the identifying “get-up” (whether it includes simply a brand name or a trade description, or the individual features of labelling or packaging) under which their particular goods are offered to the public, such that the get-up is recognised by the public as distinctive of the Plaintiffs’ goods. It is not enough for a plaintiff claiming the tort of passing off relating to get-up to simply establish a broad goodwill or reputation in its brand name or logo.
The Plaintiffs evidence related to goodwill in its business, brand, and full suite of products as a whole and could not support a claim relating to product get-up.
The question to be determined was whether there has been a misrepresentation by the Defendants, which may include having a similar get-up to the Plaintiffs and whether that misrepresentation leads or is likely to lead the public to confuse the respective products.
The Judge could not conclude that the Plaintiffs had made out a strong prima facie case of misrepresentation by the Defendants or raised a serious issue to be tried. While there are clear similarities between their respective products, those similarities point to features found in sports drinks and other health and wellness beverages generally. These features reflect industry practice and in many cases are based on consumer research. They do not support the assertion that the Defendants are misrepresenting their products as those of the Plaintiffs. In addition, on much of the Defendants packaging, its logo appears in large, prominent lettering that is difficult or impossible to miss. On its drink cartons, for example, this lettering reads vertically in large capital letters and occupies most of the front of the carton. This undermines the suggestion that the Defendants are misrepresenting their goods as those of the Plaintiffs.
The Judge also could not conclude that the Plaintiffs have made out a case establishing confusion by the purchasing public. The Plaintiffs evidence on consumer confusion consists largely of comments posted on social media by unnamed individuals about the apparent similarities between the respective products. This evidence is inadmissible hearsay. Even if admitted, the evidence does not make it clear that the individuals commenting are members of the Canadian purchasing public. Nor is it self-evident they are confused: many of them refer to both respective products, which implies that they are aware that there are two different brands.
The Plaintiffs presented no evidence of damages or the likelihood of damages to the Plaintiffs because of the Defendants alleged conduct. They argued that the likelihood of damages should be inferred since both of the parties engage in the same trade with very similar goods and loss of sales and business can be inferred due to a misrepresentation. The Judge was not prepared to draw the inference.
The burden is on the Plaintiffs to present sufficient evidence to show they will suffer irreparable harm, which is harm that “either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other”. The Judge found that the Plaintiffs had not presented this evidence.
The Judge said the balance of convenience favoured not granting the injunction. No branch of the test for the tort of passing off has been satisfied. Also, the Defendants provided evidence on the impact an injunction would have on their business, including their revenue stream and relationships with vendors. It was appropriate for the parties to continue as they are, pending trial.
From what is said in the decision the claim for relief did not seem mandatory in nature because there was no request to restore anything to the status quo, but nothing turns on this.
Decisions in the Federal Court of Appeal have made it clear that the plaintiff must present evidence of irreparable harm which is clear and not speculative. Proof of irreparable harm cannot be inferred, and it is not enough that this harm might likely be suffered. It must be shown that it would be suffered. Where interlocutory injunctions have been granted considerable time and effort has been spent to ensure this test is satisfied.
Section 45 provides a summary procedure for clearing “dead wood” from the Register of Trademarks. It is not intended to resolve contentious issues between competing commercial interests.
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These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.
