200-17-010206-084PAGE: 1
Chocolat Lamontagne inc. c. Humeur Groupe-conseil inc. / 2010 QCCS 3301SUPERIOR COURT
CANADA
PROVINCE OF QUEBEC
DISTRICT OF / QUEBEC CITY
(Civil Division)
No.: / 200-17-010206-084
DATE: / July 20, 2010
______
THE HONOURABLE / PAUL CORRIVEAU, J.S.C., / PRESIDING
______
CHOCOLAT LAMONTAGNE INC., a body corporate legally incorporated, having its head office at 4045 Garlock Street, Sherbrooke, J1L1M9, province of Quebec
Plaintiff
v.
HUMEUR GROUPE CONSEIL INC., a body corporate legally incorporated, having its head office at 63 Saint-Achillée Road, Château-Richer, G0A1N0, district of Quebec,province of Quebec
Defendant
______
JUDGMENT
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[1]The plaintiff, Chocolat Lamontagne inc. (Lamontagne), is engaged in the manufacture and sale of chocolate, which it offers to consumers, generally for fundraising drives.
[2]It has registered several trademarks that it uses to operate its business.
[3]It has developed a website to promote its products and services.
[4]It alleges that the defendant, Humeur Groupe Conseil inc. (Humeur), a business operating in the same field and a direct business competitor, used its trademark in the Google search engine to divert its customers to Humeur’s website, which in its opinion constitutes a type of illegal and unfair competition.
[5]The defendantacknowledges that it works in fundraising drives,just as the plaintiffdoes, and targets essentially the same customers.
[6]In 2007, it purchased various keywords – including Chocolat Lamontagne – from Google for comparative advertising.
[7]A Google search using the words “Chocolat Lamontagne”generated a “Search results” page with a hyperlink in the “Sponsored Links”or “Sponsored Sites”section that would take the searcher to the defendant’s site.
[8]Humeur denies that this could have caused any harm to Lamontagne or created confusion in any reasonable person showing normaldiligence in analyzing and reading the website he was visiting.
[9]Arguing that it had not committed any fault, the defendantasks that the action to introduce proceedings be dismissed.
[10]Diane Langevin testified for the plaintiffthat she had been a volunteer at her son’s school from 2003 to 2009.
[11]She belonged to the school’s foundation, and every year the school had to conduct a fundraisingdrive.
[12]Its main source of funds was a chocolate-selling drive around Easter time.
[13]Before 2008, the foundation dealt mainly with the plaintiff.
[14]In 2008, while looking for Lamontagne’s telephone number, shedid a Google search for “Chocolaterie Lamontagne”, and [translation] “wound up”– she did not know how – with information about Humeur.
[15]She does not remember exactly how it happened since, as she points out [translation]“when you’re looking for something on the Internet, it’s very fast, things happen quickly”.
[16]She was not looking for an alternative to Lamontagne.
[17]After this search, Lucie Gauthier, a representive for Humeur, sent her an e-mail on January 24, 2008 (P-6), informing her that she had obtained her contact information and her request concerning a fundraisingdrive at Eymard School.
[18]The foundation did business with the defendantlast year, but she does not remember much about it because other people looked after the contract for buying chocolatefrom Humeur.
[19]As demonstrated in P9, she acknowledgesthat, by clicking on [translation] “fundraisingdrive”on the first line identified as a sponsored link, she arrived at the defendant’s website.
[20]Donald Morissette has been a chartered accountant since 1983 and has worked at the Sherbrooke office of Samson Bélair, which is in charge of auditing the plaintiff’s financial statements, since 1999.
[21]After requests from the defendant, he sent its accounting specialists some percentages for the plaintiff’s gross and net profit margins over several years.
[22]By his reckoning, Lamontagne had net earnings of 2.9, 2.9 and 2.2 for 2008, 2007 and 2006.
[23]The parties have admitted that from 2000 to 2009, the plaintiffgenerated gross sales of $176,000,000.
[24]During these years, its sales quintupled.
[25]The defendanthas also admitted that the plaintiffinvested $6,000,000 in advertising and marketing during this period, and that its investments in advertising and marketing increased sevenfold.
[26]Humeur’s president, Guy Émond, was questioned by the plaintiff.
[27]He states that he founded the defendantcompany around 2001.
[28]When it entered the market, several other companies were already there, including Lamontagne, Chocolat Perfection inc. andWorld’s Finest Chocolate.
[29]Lamontagne and Humeur have always been direct competitorsbecause they have the same target market and the same clientele.Both resell chocolate to organizations interested in their products for fundraising.
[30]The school market is a large one, and the parties’ representatives often encounter each other at trade fairs open to schools.
[31]In 2007, the defendantbought some keywords from Google, including Chocolat Lamontagne, which, when they were used, would cause a link referring to the defendant to appear on the search results page.
[32]It did not ask the plaintifffor permission to do so, because it always thought that in a comparative advertising situation, it did not have to ask anyone for anything.
[33]When someone went to the defendant’s website, he would see a description of its products and services, as shown in P6.
[34]The defendantbought keywords concerningnot only theplaintiffbut also all of its competitors.
[35]As soon as the company received the formal notice from theplaintiff’s lawyers on March 20, 2008 (P8), it stopped using the words “Chocolat Lamontagne”on Google.
[36]In fact, he thinks that they even stopped a little before that, after receiving a letter from the vice-president of Lamontagne, Richard Laliberté, with whom he had good relations at the time.
[37]He never wanted to provoke Lamontagne or engage in unfair competition.
[38]After advertising with Google, he determined that his company had made sales of $5,988.02 that were directly related to the Google search engine.
[39]His computer system was able to provide this precise information (D4).
[40]According to the data from his computer system, six requests to purchase chocolate came to the defendantas a result of the Google marketing campaign, and these six requests generated $5,988.02 in sales.
[41]If all these sales were the result of using the keywords“Chocolat Lamontagne”,this would be the maximum amount of sales that the plaintiff could dispute.
[42]He was unable to say anything more about the origin of these customers.
[43]The campaign ran from October 12, 2007 to March 31, 2008.
[44]It was possible to trace the history of the company’scommunications with Mrs.Langevin (D9) through the data held by the defendant.
[45]According to the data, Mrs. Langevin did not complete the form to obtain information from the defendant. She telephoned the company.
[46]After opening the file with the information she gave during her contact with the defendant’s representative, she was contacted by Lucie Gauthier, on behalf of the defendant, to follow up on her call.
[47]Richard Laliberté has been vice-president of sales at the plaintiffcompany since 1996, and is a shareholder as well.
[48]He started working for the plaintiffcompany after the plaintiff bought the chocolate factory his father operated.
[49]The plaintiffcompany specializes in fundraisingdrives throughout Canada and the United States.
[50]In his opinion, it is the top[translation] “performer” in this field.
[51]The company is recognized throughout Quebec, in the rest of Canada and in some U.S. states.
[52]The plaintiffhas a website that provides all the information about its products and services.
[53]It also has a logo (P3) that it has registered as a trademark.
[54]Chocolat Lamontagne inc. has also registered in the United States (P4).
[55]In March 2008, he received a call from the president of the plaintiffcompany informing him that he had gone to look at the plaintiff’s website and saw an ad entitled [translation] “Alternative to Chocolat Lamontagne”.When he clicked on this ad, the defendant’s site appeared.
[56]Mr. Laliberté checked this himself and it made him angry at the defendant. In his opinion, this is a prohibited practice and he immediately sent an e-mail to Guy Émond of Humeur, advising him that the defendant’s attitude was [translation] “disgusting”.
[57]He then sent a formal noticeto the defendantto stop this practice. He also complained to Google.
[58]As he sees it, proceeding in this manner diverted customersbecause they were being directed to sites other than the plaintiff’s, when they in fact wanted to go to the plaintiff’s website.
[59]He checked with all the plaintiff’s vendors to try to find out how many of them might have done business with Humeur after this advertising on Googlebetween November 2007 and March 2008.
[60]The informationhe gathered indicated that the plaintiffmight have lost $112,000 in sales during that period.
[61]He attributes this loss to the defendantand claims the amount of $120,000 from it.
[62]He believes that the losses could have been much greater but has no way to prove it.
[63]Because of the defendant’s actions, theplaintiffwas forced to contact each customer after Humeur’s campaign. It therefore suffered considerable inconvenience in having to do so, which is why the plaintiffclaims $50,000for damages, trouble and inconvenience.
[64]It also claims $50,000as exemplary damages because, as the plaintiff points out theplaintiffspent more than $24,000to register trademarks in 2010 alone.
[65]If the defendant's way of doing things is accepted, then anyone will be able to use any trademark, which would make registering trademarks illusory and unnecessary.
[66]The plaintiffis also seeking an injunction to prevent the defendantfrom using its trademark in any way.
[67]In cross-examination, he acknowledged that his company sells a product line that is similar to its competitors’, but what differentiates the plaintiffis that it manufactures its own chocolate products.
[68]In 2007-2008, the plaintiffdid not have an account with Google.
[69]When he did his search using the words “Chocolat Lamontagne”in March 2008, he saw a hyperlink appear in the “Sponsored Links” or [translation]“Sponsored Sites (Ads)” section of the “Search results” page that is described in paragraph 25 of the defence as follows:
[translation]
Alternative to Lamontagne
chocolateand other products
for all fundraising activities
or
Fundraisingdrive
Chocolatefor sale for all fundraising activities.
[70]This information was found in a yellow shaded box at the top of the screen. DocumentD10 shows this box.
[71]He did not check with customers about sales lost during Humeur’s campaign.
[72]None of the plaintiff’s representatives said that the customers lost had left the plaintiffbecause of the defendant’s advertising.
[73]No customer had said anything at all of the kind.
[74]In defence, Claude Dontigny, an accountant, filed an expert report concerning the analysis of the percentage of the profit margin applicable to the estimate of earnings lost as a result of the theoretical drop in sales at Lamontagne.
[75]He based his analysis on data sent by the accountant, Mr.Morissette, for the plaintiff (P10).
[76]In his opinion, an average net profit margin of 14.59% must be drawn from the information provided by the plaintiff (P10).
[77]Guy Émond returned to complete his testimony for the defendant.
[78]He stated that the defendant's operations are concentrated in Quebec and that its main market consists of schools that conduct fundraising drives.
[79]The sales made by the defendant through its website are very marginal. Sales are booked instead through direct contact between the defendant's representatives and the users of its products.
[80]The defendant's main strength with regard to its customer base is the assistance and help provided to those who purchase its products.
[81]The defendant's website (P6) does not mention any of its competitors whatsoever.
[82]The defendant is not the only user of keywords in Google; Patchi Le Chocolat (D1 A) and Chocolat Perfection (D1 B) have also used them.
[83]In his view, the Internet is a new product that allows new ways of doing things. The defendant was looking for a type of comparative advertising that Google provided through its AdWords.
[84]He is convinced that nothing prohibits what his business did.
[85]The defendant never wanted to harm the plaintiff or speak ill of it. It never strayed from what is legally acceptable in comparative advertising.
[86]It always insisted that the expression [translation] “Alternative to” be used in this advertisement.
[87]It reiterates that, following verification from its computer system, an Internet sale could not be made without the defendant identifying it as such, as it did for the six cases about which it had testified.
[88]In argument, counsel for the plaintiff claimed that it was unlawful to have used “Chocolat Lamontagne” to cause a link to the defendant to appear in Google's search results as soon as one of the two words belonging to it were used in a search.
[89]The defendant committed the delict of unfair competition, for which damages are claimed.
[90]Recalling the provisions of section7(b) of the Trade-marks Act (c.T-13), counsel argues that the three components required for a passing-off action – namely the existence of goodwill, the deception of the public due to a misrepresentation, and actual or potential damage – have been established.
[91]Since the goodwill associated with its sales volume and the notoriety of its products have been clearly shown, it must be assumed that the plaintiff suffered damages as a result of the defendant's campaign on Google between November2007 and March2008.
[92]The claim of $120,000results from the sales lost by its client during the defendant's campaign.
[93]The trouble and inconvenience claimed by the plaintiff have also been established. The plaintiff's representative testified about the time spent by all the representatives to counteract what the defendant did.
[94]With regard to punitive damages, henotes that a trademark constitutes property protected by law, and it cannot be appropriated by anyone.
[95]Counsel for the defendant states that her client has not breached the law in any way by acting as it did.
[96]The concept of competition must take into account the existence of new ways of interacting with consumers. There is nothing reprehensible with regard to Quebec civil law in the search method proposed by Google.
[97]According to the system used by consumers, as shown by the evidence, the response to the consumer's search request is such that it is up to the consumer to use or not use the information obtained in the results of a search.
[98]In the present case, the defendant's website was accessible only at the consumer's request and resulted from the consumer's decision to click on the link provided.
[99]The defendant in no way acquired the exclusive use of the keywords that it had purchased from Google, which are available to anyone.
[100]In an economy of open competition, information meant to provide an alternative to other business cannot be prohibited.
[101]According to the defendant,it is permitted to proceed as it did under the Trade-marks Act. The defendant never created confusion as a result of its course of action. No such evidence was established.
[102]In this regard, the plaintiff's vice-president stated that none of its customers informed it of any confusion whatsoever. Even Mrs. Langevin's testimony supports such a conclusion.
[103]As for the losses claimed by the plaintiff, its vice-president's testimony does not allow such a finding to be made. There is nothing to associate the $112,000inlosses referred to by Lalibertéto the defendant's campaign.
[104]On the contrary, the defendant's president convincingly stated that if all the sales made from November 2007 to March 2008 – for a total of six– from Lamontagne's customers were added up, the plaintiff could claim up to around $6,000 in gross losses.
[105]The defendant asks that the plaintiff's other claims be dismissed because there is no evidence showing the defendant's bad faith or any actual inconvenience or trouble suffered by the plaintiff.
[106]As for the requested injunction to prohibit the defendant from using the plaintiff's name or its trademark, no evidence has shown that the defendant used this name or that it is planning to do so.
[107]Following the evidence and arguments of counsel, it should be remembered that the matter is a result of the offer made by Google to advertisers to have the addresses of sites associated with a promotional message appear on part of the screen that provides the search results.
[108]Advertisers can purchase the use of keywords for this purpose, which will bring persons looking for something to another site which, in most cases, offers products and services that are equivalent to those sought by the consumer.
[109]Guy Émond, the defendant's representative, therefore purchased dozens of keywords for the defendant's campaign from November2007 to March2008.
[110]“Chocolat Lamontagne” was one of these keywords.
[111]A web user entering the words “Chocolat Lamontagne” in a Google search would see the following hyperlink under the heading“Sponsored Links”in the search results for “Chocolat Lamontagne”:
[translation]
Alternative to Lamontagne
chocolate and other products
for all fundraising activities
[112]The plaintiff argues the unlawful use of the words “Chocolat Lamontagne” by the defendant, who purchased these words from Google AdWords for its advertising campaign.
[113]It alleges that the defendant’s actions constituted unfair competition against it.
[114]In order todetermine that there was unfair competition, the Court must conclude from the evidence that the defendant created a state of confusion through its way of proceeding that resulted in the migration of customers from Lamontagne to Humeur.
[115]The state of confusion that Lamontagne attempted to prove was based only on the testimony of Mrs.Diane Langevin, who, while working as a volunteer for Eymard School, where her son attended, wanted to contact [translation] “some chocolate companies” in 2008 for the school's annual fundraising drive.
[116]Normally, the school's foundation dealt with Lamontagne.
[117]In an attempt to find the plaintiff's telephone number, she initiated a search in Google, and in the list of results, she read the advertisement associated with this list, informing her of an alternative to Lamontagne for fundraising drives.
[118]After clicking on this information, she reached Humeur; subsequently, other people in the foundation dealt with Humeur.
[119]When she was doing her search in Google, she had Chocolaterie Lamontagne in mind, and she believes that it is strange that she should have clicked on the link to Humeur.
[120]Notwithstanding this statement, it must be concluded that she did indeed click on this link because Humeur contacted her and the foundation thereafter; this could only be the result of her act at the time of her search and of the discussion she had on the telephone with the Humeur representative.