Ederal Court Invalidates IQ Trademark For Lack Of Distinctiveness: Lessons For Trademark Owners And Trademark Challengers

Gentec v Nuheara is one of the rare high-stakes Canadian trademark cases to both make it to trial and to invalidate a registered trademark for lack of distinctiveness. Gentec's trademark IQ was found to be non-distinctive in light of an extensive record showing how the word "IQ" came to be used as shorthand for "smart" consumer electronics in Canada.

The Gentec decision contains important guidance about the law of distinctiveness and related litigation and business strategy considerations. This guidance ranges from the role of consumer surveys in trademark litigation, to the importance of admissions made during trademark prosecution, to leveraging marketplace and media evidence to show an absence of distinctiveness.

Case Background: Gentec v Nuheara

The defendant Nuheara is an Australian company and maker of award-winning IQbuds-branded "hearables." These are smart earbuds whose proprietary technology not only plays music and other audio, but actually allows users to hear better. The plaintiff Gentec sells a wide range of consumer electronics under the IQ brand, including wireless earbuds, although Gentec's earbuds lack the unique features of Nuheara's more sophisticated (and more expensive) products.

Gentec alleged that Nuheara's use of the IQbuds trademark was confusing with Gentec's trademark registration for IQ (which covered headphones, among other things). Nuheara denied any confusion, and also sought to have Gentec's IQ trademark removed from the register because it was not distinctive.

The Federal Court agreed with Nuheara and expunged Gentec's IQ registration for lack of distinctiveness. The Federal Court also found that even if the registration had been valid, there was no likelihood of confusion.

Fasken successfully represented Nuheara in this matter.

Takeaways for Trademark Owners and Trademark Challengers

The concept of "distinctiveness" is the central pillar of trademark law, and refers to a trademark's ability to signal that goods or services come from a single business. A trademark has no distinctiveness if it cannot fulfill that branding function and is thus not entitled to any legal protection.

Here, Nuheara argued that "IQ" was not the brand of a particular company's electronics, but rather a short-hand used by marketers from many companies to signal that a given product was a "smart" product. Nuheara pointed to the following evidence that Gentec's IQ mark was not distinctive:

Dozens of third parties selling consumer electronics that incorporated the word "IQ" as part of their branding for the smart version of their products (i.e. if a company sold widgets under the trademark ACME, the ACME IQ would be the "smart" version of their widget).
• Hundreds of registered trademarks and tradenames that incorporated the word "IQ" in the field of consumer electronics and elsewhere.
• Extensive media use of the word "IQ" as synonymous with smart products (e.g. "The 2019 Smart-home Awards... everything you need to raise your home's IQ this season").
• Admissions made by Gentec during prosecution for its IQ trademark in 2007-2008.
• Gentec's failure to police its trademark rights in Canada, leading to the ongoing entry of new IQ-formative marks to the Canadian marketplace, including marks for headphones, earbuds, and other hearables.

An expert witness analyzed this data and concluded the word "IQ" had come to act as a short-hand for a "smart product" among Canadian consumers. As a result, the word "IQ" - when standing alone and apart from any other branding element - had no trademark function. Gentec filed reply expert evidence disputing this conclusion and arguing that only a survey of consumers could prove a lack of distinctiveness.

The Federal Court ultimately agreed with Nuheara's position. The Court first ruled that surveys are not required to prove distinctiveness (or lack thereof). The Court then considered the wide array of evidence provided by Nuheara and concluded that this evidence supported a single conclusion, namely that the word "IQ" was not distinctive in relation to consumer electronics. Lacking distinctiveness, the word "IQ" had no trademark functionality, and the registration was ordered struck from the register.

Trademark owners should take note of this case, since it confirms that marketplace and media evidence are sufficient to prove non-distinctiveness, and that there is no requirement for challengers to produce consumer surveys. This reinforces the need for trademark owners to police both the Canadian marketplace and the Canadian trademark register to prevent the widespread adoption of a mark by third parties. Gentec's failure to promptly deal with third-party use of "IQ" was one of the key factors that ultimately allowed Nuheara to prove non-distinctiveness.

Additionally, trademark owners should carefully consider which arguments are made during trademark prosecution, since these arguments can come back to haunt the trademark owner at the enforcement stage. Here, Gentec admitted that IQ-formative marks were in widespread use in Canada as part of an argument designed to minimize the scope of a blocking mark during prosecution. This argument may have convinced the trademark examiner, but created a permanent hurdle to enforcement, since Gentec was now on-record as having deprecated the distinctiveness of its own trademark.

Trademark challengers hoping to replicate Nuheara's success also have important take-aways. Gentec v Nuheara shows that marshalling the proper evidence can result in the expungement of a competitor's mark, and that this evidence will often come from many different sources. A consumer survey is not the only path to expungement, and companies should consider all possible sources of evidence when preparing for trial. In this case, Nuheara's evidence ranged from expert reports to investigator affidavits to media reviews to admissions made by Gentec's own trademark agents. Much of the media evidence had to be cross-referenced with evidence of Canadian circulation or visibility of that media. Thorough preparation was key to Nuheara's victory at trial.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Michael Shortt
Fasken
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800 Victoria Square
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QC H4Z 1E9
CANADA
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