Executive Summary: Key Legal and Evidentiary Issues

• Validity of four THERME trademark registrations under sections 57 and 58 of the Trademarks Act was challenged in respect of certain listed services.
• At issue was whether the composite THERME WOMAN and THERME WOMAN'S HEAD marks, when sounded, are clearly descriptive in French under paragraph 12(1)(b), turning on whether the word element dominates the design element.
• Deceptive misdescriptiveness in French of the THERME, THERME WOMAN, and THERME WOMAN'S HEAD marks under paragraph 12(1)(b) was contested, including whether such a finding requires a prior finding of descriptiveness.
• Confusion under paragraph 12(1)(d) between the THERME and THERME GROUP marks and Nordik's prior THERMËA registrations turned on the English pronunciation of the marks.
• Admissibility of Dr. Shana Poplack's affidavit as expert evidence on linguistic matters was challenged, raising the question of necessity under Cathay Pacific and Masterpiece.
• Appellate intervention was governed by the Housen v. Nikolaisen standard, with palpable and overriding error required to disturb factual or mixed findings.

This appeal arose from a decision of the Federal Court (2024 FC 1765, the Decision) that granted in part an application by the respondents Auberge & Spa Le Nordik Inc. (now Nordik Spa Village Chelsea Inc.) and Nordik Immobiliers Winnipeg Inc. (collectively, Nordik) under sections 57 and 58 of the Trademarks Act, R.S.C. 1985, c. T-13 (the Act). Nordik sought to strike out some services listed in association with four trademark registrations owned by Therme Development (CY) Ltd. (TD): the word marks THERME (TMA1110500) and THERME GROUP (TMA1110501), and the composite marks THERME WOMAN (TMA1110061) and THERME WOMAN'S HEAD (TMA1110502). All four were filed on March 16, 2018; THERME WOMAN was registered on September 22, 2021 and the other three on September 29, 2021. Nordik relied on its own prior THERMËA registrations, TMA897305 and TMA897306, both filed on May 30, 2013 and registered on February 24, 2015.

The Federal Court's conclusions that remained in issue on appeal were: (A) when sounded, the THERME WOMAN and THERME WOMAN'S HEAD marks are clearly descriptive in the French language of the character of some of their listed services, contrary to paragraph 12(1)(b) of the Act; (B) when sounded, the THERME mark (and allegedly also the THERME WOMAN and THERME WOMAN'S HEAD marks) is deceptively misdescriptive in French of the character of some of its listed services, contrary to paragraph 12(1)(b); and (C) the THERME and THERME GROUP marks, in respect of some of their listed services, are confusing with Nordik's THERMËA registrations, contrary to paragraph 12(1)(d). The specific services for each issue were identified at paragraphs 50, 77, and 130 of the Decision, respectively. TD also challenged the Federal Court's conclusion that the affidavit of Dr. Shana Poplack sworn May 4, 2023 (the Poplack Affidavit), submitted as part of TD's response materials, was inadmissible as expert evidence. At the hearing, Nordik separately requested an amendment to the style of cause to reflect the change of name from Auberge & Spa Le Nordik Inc. to Nordik Spa Village Chelsea Inc.

Standard of review The parties did not dispute that the applicable standard of review was that set out in Housen v. Nikolaisen, 2002 SCC 33: questions of law are reviewed on correctness, while questions of fact or of mixed fact and law from which no question of law is extricable attract intervention only where there is a palpable and overriding error. A palpable error is one that is obvious, and an overriding error is one that goes to the very core of the outcome of the case.

Clear descriptiveness of the composite marks when sounded TD's argument focused on the fact that the THERME WOMAN and THERME WOMAN'S HEAD marks include both word and design elements. TD acknowledged that Best Canadian Motor Inns Ltd. v. Best Western International, Inc., 2004 FC 135, is the leading authority on the "when sounded" test for composite marks, and that the focus is on whether the words are the dominant feature. Citing the Government of Canada's Trademarks Examination Manual at paragraph 4.4.10, TD argued that the detail, distinctiveness, and size of the design elements made those design elements dominant, and that the Federal Court had itself acknowledged at paragraph 106 of the Decision that those design elements "would draw the eye of the consumer." Locke J.A. found that the Federal Court erred in its analysis on this point: the Federal Court had determined that the word elements were dominant because the design elements could not be sounded, but whether a mark is clearly descriptive when sounded is the second question in a two-stage analysis that is only reached after the word element is first found dominant. The Court of Appeal therefore set aside the Federal Court's reasoning that the word elements were dominant because of their "accessibility for sounding compared to the design elements" (paragraph 68 of the Decision). However, rather than remit the matter, the Court of Appeal decided the issue itself, with TD's counsel agreeing this was appropriate. Applying the guidance in the Trademarks Examination Manual and considering the relative size of the elements and the inherent distinctiveness of the design, Locke J.A. concluded that, despite the size and complexity of the design elements, a prospective consumer, as a matter of first impression, would have the word THERME at the front of their mind, and the word element therefore dominates. On that basis, the Court of Appeal confirmed the Federal Court's ultimate conclusion that, when sounded, each of the THERME WOMAN and THERME WOMAN'S HEAD marks is clearly descriptive in French of the character of the services identified at paragraph 50 of the Decision.

Deceptive misdescriptiveness in French TD interpreted the Federal Court's statement at paragraph 71 of the Decision—that "the only trademark that will be analysed in this section is the THERME Registration"—as limiting the finding of deceptive misdescriptiveness to the THERME mark alone, and argued that the Federal Court's Judgment was inconsistent with its reasons. Locke J.A. agreed with Nordik that the statement was meant to refer back to the clear descriptiveness analysis, which had already concluded that the THERME WOMAN'S HEAD and THERME WOMAN marks were just as clearly descriptive as the THERME mark; the Judgment was therefore not inconsistent with the reasons. TD also argued that a trademark cannot be misdescriptive without first being found to be descriptive, citing the Federal Court's finding at paragraph 51 of the Decision that certain services "can cover a health spa resort and wellness center that are completely unrelated to thermal baths." Locke J.A. rejected this argument: while a mark must be descriptive of something (citing The Oshawa Group Ltd. v. Canada (Registrar of Trade Marks), 1980 CanLII 4192), clear descriptiveness and deceptive misdescriptiveness are alternatives under paragraph 12(1)(b), and a finding of deceptive misdescriptiveness of certain services does not require a prior finding of descriptiveness of those same services. The prohibition aims to prevent registration of a trademark that could mislead the public as to the character or quality of those services. The Court further held that the Federal Court did not misunderstand the applicable law, that its findings were properly based on common sense and were factually suffused, and that TD's argument about absence of evidence on consumer deception did not assist because the focus is on the ordinary consumer and the Court applies common sense. The possible absence of thermal baths appeared to be the principal concern that led to the Federal Court's conclusion (paragraphs 75 and 76 of the Decision). The Court of Appeal found no reviewable error and confirmed that the conclusion on deceptive misdescriptiveness applied equally to the THERME WOMAN and THERME WOMAN'S HEAD marks.

Confusion with Nordik's THERMËA marks TD argued there was a paradox in finding the word THERME descriptive (such that anyone should be able to use it) while also finding the THERME and THERME GROUP marks confusing with Nordik's THERMËA marks. Locke J.A. found no paradox: the finding of descriptiveness rested on the French word "thermes" (which has identical pronunciation to THERME in French), while the finding of confusion was based on the English pronunciation, and the Federal Court had found as a fact at paragraph 92 of the Decision that THERME is pronounced "THER-MA" in English—a factual conclusion that could not be set aside absent palpable and overriding error. On the admissibility of the Poplack Affidavit, the Federal Court had found it unnecessary, and therefore inadmissible as expert evidence, because the issue of confusion concerned the perspective of an average consumer, relying on Cathay Pacific Airways Limited v. Air Miles International Trading B.V., 2016 FC 1125, at paragraphs 80 to 83. TD argued the Federal Court misapplied Cathay Pacific and Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27, distinguishing those cases as not involving coined words or uncertain pronunciations. Locke J.A. was not convinced of any error in law, noting that the Federal Court did not suggest expert evidence is unnecessary in all trademark cases or in all cases involving coined words. Nor was there any palpable and overriding error, as it was unclear how an expert could significantly assist in determining how an ordinary consumer would pronounce THERME in English. TD's further arguments concerning the suggestiveness and low inherent distinctiveness of the "THERM" prefix, the importance of the distinction between the "E" at the end of THERME and the "ËA" at the end of THERMËA, and the striking features of THERMËA under paragraph 64 of Masterpiece, related to factually suffused conclusions that could not be disturbed absent palpable and overriding error. Locke J.A. expressed comfort with the Federal Court's conclusion that the THERME mark, pronounced in English as "THER-MA," is confusing with Nordik's THERMËA trademarks, pronounced in English as "THER-MAY-A" or "THER-ME-A."

Outcome The Federal Court of Appeal dismissed the appeal with costs and granted Nordik's informal motion to amend the style of cause to reflect the change of name from Auberge & Spa Le Nordik Inc. to Nordik Spa Village Chelsea Inc. Roussel J.A. and Heckman J.A. concurred in the reasons of Locke J.A. The successful parties were the respondents, Nordik Spa Village Chelsea Inc. and Nordik Immobiliers Winnipeg Inc., who were awarded costs of the appeal; the specific quantum of costs and any other monetary award cannot be determined from the decision.