Second store did not use first store's proprietary designs, marks, branding as per settlement
The Ontario Court of Appeal has affirmed an application judge’s ruling that, while the products, businesses, and overall impression of two companies were similar, their branding details were different enough that consumers could distinguish them.
Unicity Holdings Ltd. v. Great British Vape Co., 2022 ONCA 545 involved a franchise agreement between the parties which ran from September 13, 2020, to January 31, 2021. In numerous cities across Ontario, the appellants operated Signature Vape store franchises that sold vaping equipment and cannabis accessories.
The respondents – consisting of a former franchisee and principal of a Signature Vape store in Windsor – operated London Vape, a Windsor-based retail outlet that sold products similar to the appellants’.
When a dispute arose between the parties, they engaged in mediation and entered into minutes of settlement. The minutes required the respondents to stop using Signature Vape’s designs, marks, and branding, as well as obligated the appellants to pay the respondents $100,000 upon fulfilling certain conditions.
The respondents filed an application asking for the $100,000 after the appellants refused to pay. The appellants claimed that the respondents failed to comply with their obligation and that the franchise agreement’s provisions specified what designs, marks, and branding the respondents should not use.
The appellants asked the respondents to make the following changes:
- paint their store’s wall a different colour
- remove the signature chandelier
- stop using or cover grey porcelain floor tiles
- modify or to remove high-gloss black and full-glass display cabinets
- stop using an open-concept display case.
Later, the appellants accepted that the walls had been painted and that the chandelier had never been placed. However, they still demanded the other changes.
Distinctive store features distracted from common ones
The application judge held that the respondents did not violate the terms of the minutes of settlement. He ordered the appellants to pay $100,000 to the respondents for breaching the franchise agreement and their duty of good faith by withholding the funds.
The judge compared and contrasted the two stores and determined that the respondents were not using the appellants’ proprietary designs, marks, or branding, and that London Vape’s store design was sufficiently distinct from Signature Vape’s such that no customer would be confused into assuming the stores were associated.
Even if there was something distinctive about the design features of Signature Vape’s stores – allegedly, their grey tiles and glossy black display cases – the addition of Union Jacks and coloured stripes in London Vape’s store distracted from those features and distinguished the two stores, the judge found.
He noted that the appellants did not own the concept of an open floor with shelving along the walls, which the respondents also used in their store.
The Ontario Court of Appeal dismissed the appeal on the basis that the application judge committed no errors in interpreting the minutes of settlement and the franchise agreement and made factual findings entitled to the appellate court’s deference.
The minutes and the franchise agreement did not include any list of objects, designs, marks, or branding over which the appellants – who had counsel representing them at that time – claimed a proprietary interest, the appellate court said.
