Ontario Appellate Court Reverses Trademark Injunction: Franchisor Had Not Registered or Used Trademark

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By: Anthony Pugh, Law Works
Editor: Ben Hanuka, Law Works

In 2788610 Ontario Inc. v. Bhagwani, a November 2, 2022, decision of the Ontario Divisional Court (an appellate division of the Ontario Superior Court of Justice for certain appeals), a panel of three judges overturned a motion judge’s injunction order against the appellants on the use of the trademark “Bombay Frankies”.

The plaintiff, and applicant on the original injunction motion, was in the process of developing a franchise system of restaurants called “Bombay Frankies”.  The defendants (appellants on the appeal) claimed competing rights to this trademark.  The original judge on the motion granted an injunction in favour of the plaintiff, would-be franchisor, restraining the defendants/appellants from using the term “Bombay Frankie” as the name of any restaurant or franchising business, from using “Bombay Frankie” on their social media accounts, and from using the website, www.bombay-frankie.com.

On appeal, the Divisional Court set aside the motion judge’s injunction order.  The Divisional Court held that the would-be franchisor had neither registered nor used its trademark, and thus had no legitimate interest to protect.  As such, it failed to satisfy the interlocutory injunction test of serious issue to be tried.

Key facts

The plaintiff would-be franchisor was incorporated in October 2020 and, at the same time, filed an application to register the trademark “Bombay Frankies”.  That trademark had not been registered as of the date of the proceedings.  It was in the process of developing a system of franchised restaurants under that name.  However, at the time of the motion, it had not opened or advertised a restaurant under that name.

Related companies to the plaintiff had established other Indian food restaurants which offered “frankies” as a menu item.  A “frankie” is a type of Indian street food.

The defendant/appellant, Bombay Frankie Inc., was incorporated in March 2021.  It registered domain names and social media accounts using that name, and a related company filed its own trademark application.  It also opened two restaurants under the Bombay Frankie name – in July and October 2021.

The plaintiff brought the action against the defendants in September 2021 and an injunction motion in October 2021, to restrain the defendants from using the term “Bombay Frankie”.  It alleged that it had priority because it had started its trademark application before the defendants had started their own.

The motion judge granted the application, holding that the plaintiff had raised a novel issue about whether its claim crystallized on the trademark application date.  She also held that the plaintiff would suffer irreparable harm if the injunction was not granted, because the defendants would gain a significant advantage regarding name recognition and goodwill and that the balance of convenience laid with the plaintiff.

The Divisional Court held that there was no serious issue to be tried

The Divisional Court held that in order to have an action for trademark infringement under the federal Trademarks Act, the plaintiff must have registered its trademark.  It is not sufficient merely to have applied for the trademark.

In addition, the Divisional Court held that it was a legal error to presume that a trademark would be registered.  Among other things, another party may oppose the trademark registration, which the court held was likely in this case, given the dispute with the defendants.

About the passing off claim, the Divisional Court held that the plaintiff had no goodwill attached to the name “Bombay Frankie”, since it had not started operations.  Merely engaging lawyers and a marketing firm and conducting negotiating with landlords did not constitute goodwill.

The court noted that goodwill could exist with prospective franchisees, but the plaintiff did not bring evidence about any goodwill with prospective franchisees.

The Divisional Court held that there was no irreparable harm

The court also held that the plaintiff’s evidence of irreparable harm – i.e., that landlords were concerned about the confusion and were hesitating to lease space – was speculative and did not amount to clear evidence of irreparable harm.  First, that harm may be quantifiable in damages, if a landlord refuses to lease space, and the plaintiff then leases another space at a higher rate.  Second, confusion among landlords is not equivalent to confusion among the public, which is the legal requirement.

Further, since the court held that the plaintiff did not have any goodwill attached to the “Bombay Frankie” name, there could be no irreparable harm.

Finally, the court noted that there was no basis to find that the plaintiff was entitled to some ‘first mover’ advantage, since it was not using the name.

About the balance of convenience, the court noted that it may lie with the defendants, given that they were compelled to take down various signage and internet sites, which is another factor against the injunction.

As a result, the Divisional Court ruled in favour of the defendants, and set aside the original injunction order.