Zara Natural Stones Inc. sought to register the design trademark
in association with paving blocks, paving stones, and paving tiles.
At the time of the application, Industria de Diseno Textil, S.A. held several registered trademarks that included the word “ZARA”, as well as a pending application for the trademark “ZARA HOME” in association with floor planks and pavement tiles. Industria opposed the application on grounds pertaining to non-conformity, non-distinctiveness, and likelihood of confusion.
The Trademarks Opposition Board rejected Industria’s opposition on the ground that the applied for trademark would not likely cause confusion with “ZARA HOME”. Industria appealed the Board’s decision to the Federal Court on the issue of likelihood of confusion, arguing that by failing to focus on the most striking element of the trade-mark—the word “ZARA”, the Board failed to apply the same reasoning that it applied in a parallel decision involving the same parties and the word mark “ZARA”. In the latter decision, the Board refused to register ZARA as the Applicant, Natural Stones, had failed to demonstrate that the trade-mark was not likely to cause confusion with Industria’s trade-mark “ZARA HOME”.
In allowing the appeal, Justice St-Louis agreed that the Board’s failure to treat the most important component of the two marks in the same manner caused a breakdown in the rationality of the Board’s decision in respect of the design mark:
 In both situations, the Board was analysing the resemblance between marks whereby the first word or the only word is “ZARA”. In one decision, the Board examined the first component and its impact, concluding that the word “ZARA” is the most important component of each party’s trademark, while in the other decision it failed to make any mention of the importance of the word “ZARA”. The Supreme Court of Canada held, at paragraph 63 of Masterpiece, that in the assessment of the resemblance of two marks, the first word is important. However, it is impossible to conclude, from the Board’s reasons in these proceedings, that the Board considered this element in its analysis of the likelihood of confusion between the Design Mark and ZARA HOME (Newfoundland and Labrador Nurses’ Union v Newfoundland and Labrador (Treasury Board), 2011 SCC 62).
 The Federal Court stated in Pizzaiolle FC, decision upheld by the Federal Court of Appeal, that “this differentiation in the treatment of the issue as to the likelihood of confusion, and in particular the concept of subsequent use, of the two marks that the respondent seeks to register, has, in my view, caused a breakdown in the rationality of the Registrar’s decision” (Pizzaiolle at para 78). Similarly, in the case at bar, the Board’s differentiation in the treatment of the importance of the first word “ZARA” in its two decisions caused a breakdown in the rationality of the impugned decision, thus placing it outside of the range of possible, acceptable outcomes which are defensible in respect of the facts and law (Dunsmuir v New Brunswick, 2008 SCC 9 at para 47).
 The unintelligibility of the Board’s decision is even more apparent as it did not limit its exam to the visual effect of the Design Mark. It concluded that “the parties’ marks differ visually, orally and in the ideas suggested by them”. Even if I were to assume that the Board considered the Design Mark’s graphic elements distinctive enough to constitute the dominant and most important portion of the Design Mark – and thus found that the parties’ marks differ enough visually – this reasoning does not support a conclusion that the marks also differ orally. It seems clear that, orally, the dominant element of both marks is the word “ZARA”, as was found in the Board’s parallel decision.
Accordingly, Justice St-Louis granted the appeal and sent the matter back to the Board for a redetermination.
A copy of the Judgment and Reasons may be found here.