Even though online commerce has been around for decades, Canadian courts have provided little guidance on the permissible use of competitors’ trade names in internet advertising. In the absence of an explicit statutory framework, courts have relied on section 7(b) of the Trademarks Act and the tort of passing off to assess whether such practices mislead consumers, occasionally granting injunctions where confusion is likely.

Businesses are becoming increasingly dependent on search engine optimization (“SEO”) and paid search ads (pay-per-click, or “PPC”), where keywords and “meta tags” may – whether inadvertently or by design – encroach on a competitor’s branding. Understanding what courts have allowed and where they have drawn the line is essential to managing digital advertising risk.

What are meta tags and why can they be problematic?

Meta tags are invisible snippets of code embedded in a website that help search engines categorize content.  For instance, a company can use a competitor’s trade name as an invisible meta tag on its website, allowing its business to appear in search results when the competitor’s trade name is entered into a search engine.

However, this tactic can raise issues of confusion and unfair competition, as courts may view it as an attempt to divert potential customers. This was the concern in the 2007 Ontario Superior Court of Justice decision Pandi v. Fieldofwebs, where the defendant, Fieldofwebs, used Pandi’s store name – “Jumpin Jammerz” – as a hidden meta tag on its website. Justice Low noted that “in [her] view, the practice of using another trader’s domain name, trade name, trade mark or logo as a meta tag for a website selling competing wares is objectionable unless the name or mark itself is merely descriptive of the wares sold” (para 39). However, because Fieldofwebs had already removed the offending meta tag, the court did not issue an injunction restricting its use of “Jumpin Jammerz” in internet advertising.

How have Canadian courts addressed keyword advertising?

In Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc. (2010 BCSC 765) (“Private Career”), the British Columbia Supreme Court (the “BCSC”) and the British Columbia Court of Appeal (the “BCCA”) took a broader view of keyword and PPC advertising. In that case, the Private Career Training Institutions Agency (the “Agency”) published a bylaw interpretation that Vancouver Career College’s practice of bidding on competitors’ trade names – so that its ads appear first in search results – contravened the Agency’s Bylaw 29.  

Bylaw 29 provided that:

An Institution must not engage in advertising or make a representation that is false, deceptive or misleading. Deceptive advertising includes but is not limited to an oral, written, internet, visual, descriptive or other representation that has the capability, tendency or effect of deceiving or misleading a consumer.

Because limited Canadian case law existed on the issue, Justice Gaul reviewed U.S. authorities on keyword advertising, which identified situations where customer confusion resulted from seeing a competitor’s information instead of that of the business they were searching for. The BCSC noted that although no Canadian authorities had addressed the use of keyword advertising involving competitors’ names, the Canadian Trademarks Act similarly addresses “confusion” under s. 7(b) on passing off, consistent with the U.S. case law reviewed.

The BCSC concluded that Vancouver Career College had not breached the Agency’s bylaw because potential customers who inadvertently reached its website could still view other pages listed in the search results. Justice Gaul analogized the situation to companies placing advertisement next to a competitor’s phone number in a phone book: the competitor’s potential customers simply become aware of another company offering similar services, but still make their own choice about which business to engage.

This pragmatic analogy illustrates how courts may tolerate keyword bidding when transparency and consumer choice remain intact.

What role does “passing off” play in these cases?

The Federal Court in Red Label Vacations Inc. (redtag.ca) v. 411 Travel Buys Limited (411travelbuys.ca) (2015 FC 18) applied the tort of passing off under section 7(b) of the Trademarks Act in considering the use of competitors’ trade names in internet advertising. Red Label Vacations Inc. (“Red Label”) brought an action against 411 Travel Buys Limited for passing off, among other claims. Justice Manson noted that to establish passing off under s. 7(b) of the Trademarks Act, Red Label was required to prove three elements:

  1. the existence of goodwill;
  2. the likelihood of deception of the public due to a misrepresentation; and
  3. actual or potential damage.

Goodwill refers to “a consideration of whether the plaintiff was recognized by the trade name and whether the trade name was distinctive within the relevant field of activity.” The court assessed these elements as follows:

  1. Goodwill: Red Label had sufficient goodwill in its “redtag.ca” and “Shop. Compare. Payless!! Guaranteed.” trademarks based on extensive marketing campaigns using this name and slogan.
  2. Deception (Confusion): The use of a competitor’s trademark or trade name in a meta tag does not, on its own, create a likelihood of confusion, as consumers still land on the search engine results page and can choose which business to pursue.
  3. Damage: Because the court found no likelihood of deception, it did not address the issue of damage.

Although Red Label had sufficient goodwill in its trademarks, the absence of deception and damage meant that the court did not find 411 Travel Buys Limited liable for passing off, particularly since Red Label’s trademarks and trade names were not visible on 411 Travel Buys Limited’s website.

How did later cases refine the rule?

The leading case on the use of competitors’ trade names in internet advertising, Vancouver Community College v. Vancouver Career College (Burnaby) Inc. (2017 BCCA 41) (“VCC”), confirmed that using a competitor’s name as a keyword can constitute passing off when confusion is likely.  Similar to Private Career, the BCCA in VCC addressed Vancouver Career College’s bidding on keywords containing its competitors’ trade names and trademarks, including “VCC” and “Vancouver Community College.” Vancouver Community College brought an action for passing off, and Justice Saunders noted that courts must consider both section 7(b) of the Trademarks Act and the common law when assessing a claim of passing off.

In applying the elements of passing off, the BCCA found the following:

  1. Goodwill: Vancouver Community College had goodwill in “VCC” because it had registered the initials as a trademark and was widely recognized under that acronym, including through media use and the naming of the nearby SkyTrain station “VCC/Grant Station.”
  2. Deception (Confusion): Confusion could reasonably result from both entities operating under the same “VCC” initials.
  3. Damage: The court stated that “the interference with the appellant’s goodwill [was] sufficient to establish damage.”

The BCCA concluded that Vancouver Career College (Burnaby) had committed the tort of passing off contrary to section 7(b) of the Trademarks Act, and Vancouver Community College was entitled to a permanent injunction prohibiting Vancouver Career College (Burnaby) from using “VCC” in its internet advertising.

Although few Canadian cases on the use of competitors’ trade names in internet advertising have emerged since VCC, the Court of Appeal of Quebec (“QCCA”) applied similar principles in a dispute between competing shed and garage manufacturers and distributers. In Cabanons Fontaine inc. v. 9036-4316 Quebec inc. (Cabanons Mirabel) (2022 QCCA 1243), Cabanons Mirabel brought a passing off action against Cabanons Fontaine after the latter used “cabanonsmirabel” in its internet advertising for the Mirabel area, including registering the domain name “cabanonmirabel.ca.”

In its assessment of passing off, the QCCA found:

  1. Goodwill: Although Cabanons Mirabel had not registered a trademark for its name, more than 30 years of marketing under that name led the court to find that Cabanons Mirabel had established sufficient goodwill. 
  2. Deception (confusion): The court focused on the domain names “cabanonsmirabel.ca” (used by Cabanons Mirabel’s) and “cabanonmirabel.com” (which redirected customers to Cabanons Fontaine’s website). The QCCA agreed with the trial judge that “the consumer who wishes to visit the … cabanonsmirabel.com website, but who types ‘.ca’ or forgets the ‘s’ is automatically and erroneously directed to the Cabanons Fontaine website.”
  3. Damage: The court inferred that Cabanons Mirabel likely lost sales because potential customers were inadvertently redirected to Cabanons Fontaine’s misleading domain.

Finding that Cabanons Fontaine had committed the tort of passing off, the QCCA upheld the lower court’s decision granting Cabanons Mirabel a permanent injunction restraining Cabanons Fontaine from using “cabanonmirabel.com” or similar keywords in its internet advertising.

Key takeaways

In assessing the use of competitors’ trade names in internet advertising, Canadian courts are likely to apply a passing off analysis that considers the following:

  1. Goodwill: Does the competitor have sufficient goodwill in the trade name to distinguish it from other similar businesses or products?  In other words, is the competitor’s name recognized and distinctive?
  2. Deceit (Confusion): Would the business’ use of a competitor’s trade name cause confusion among consumers seeking the competitor?
  3. Damage: Would the business’ use of the competitor’s trade name cause damage (e.g., loss of sales) to the competitor?

If a court finds that all three elements are met, it may grant a permanent injunction preventing the business from using its competitor’s trade name in internet advertising.  A key consideration appears to be whether the competitor’s trade name is visible on the business’ website or remains invisible to consumers in meta tags.

What’s next for businesses advertising online?

Case law on this topic remains limited, but the trend is clear: Canadian courts appear to permit the use of a competitor’s name in internet advertising, provided it does not cause customer confusion. This approach is likely to continue in the absence of new statutory or regulatory provisions specifically addressing internet advertising. Businesses should therefore avoid using competitors’ names in any manner that could confuse consumers or suggest an affiliation.

If your business advertises online, ensure your marketing practices comply with trademark and competition laws.  Please contact a member of our Commercial Litigation Group to assess your risk and protect your brand.