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A Fight to the Finish

A decision of the Federal Court deals with abandonment of registered trademark as well as bad faith. Travel Leaders Group, LLC v. 2042923 Ontario Inc. 2023 FC 319

The Facts

In late 2004 the defendant decided to offer travel agency services in association with the trademark TRAVEL LEADERS. The defendant concurrently applied for the business licenses and obtained the domain name <travelleaders.ca>. The plaintiff, a US company, first adopted the trademark TRAVELEADERS in 2001 in the U.S. and filed for registration on April 19, 2005. A registration was obtained on November 14, 2006. The US Registration was amended to two words, TRAVEL LEADERS, on September 11, 2008.The plaintiff and its predecessors have used the trade name and trademark TRAVEL LEADERS in the US since 2008.


The plaintiff applied for the TRAVEL LEADERS mark in Canada in August of 2008. The defendant successfully opposed the application and then applied for the trademark TRAVEL LEADERS. A registration was obtained without opposition.


The plaintiff attempted to negotiate to purchase the plaintiff’s registered trademark without success. The defendant posted a public advertisement that said it would sell its registrations for $80 million USD.


The plaintiff then applied for the trademarks TRAVEL LEADERS NETWORK, TL NETWORK and TL NETWORK & Design. The defendant opposed both TL NETWORK applications unsuccessfully.


The plaintiff’s business has been successful, but the defendant’s business failed.

The plaintiff brought an action in the Federal Court for a declaration that the defendant’s trademark registration for the trademark TRAVEL LEADERS was invalid on the grounds that the registration had been abandoned and the registration was registered in bad faith by the defendant, among other grounds. In addition, it was alleged that the defendant engaged in passing off contrary to paragraph 7(b) of the Act.


Abandonment

Paragraph 18(1)(c) of the Trademarks Act provides that the registration of a trademark is invalid if the trademark has been abandoned.


As the party alleging invalidity, the plaintiff bore the onus of proving, on a balance of probabilities, that the registration for the TRAVEL LEADERS trademark was invalid. The relevant date for assessing abandonment is the date the plaintiff filed the statement of claim seeking expungement.


In order to show abandonment the plaintiff must establish (1) nonuse in Canada of the trademark, and (2) an intention to abandon the trademark. An intention to abandon may be inferred from a person’s failure to use the mark for an extended period but an owner’s intention to abandon is a factual determination in which a long period of nonuse is not necessarily required.


Paragraph 18(1)(c) is concerned with abandonment of a trademark and not abandonment of a business. Each party introduced evidence to support its respective assertion that the defendant’s travel agency business has, or has not, ceased except for passive and minimal activity. People intend the natural and probable consequences of their actions. The cessation of the defendant’s business leads to the natural and probable inference it is no longer using and has abandoned its trademark. That defendant may maintain business signage and undertake minimal business activity as a travel agent, but this by itself cannot establish use andnon abandonment of its trademark. Use of a trademark requires evidence of both its use in connection with services provided and its communication to the relevant consumers.


Detailed evidence of the activities of the defendant presented through the testimony of investigators was presented to the court. After a careful review the Judge found that the plaintiff had met its burden of proving, on a balance of probabilities, that the defendant had not used the registered trademark TRAVEL LEADERS in association with its travel services for a lengthy period before the relevant date of February 14, 2017, and that such nonuse continued through the ensuing period. The defendant produced no evidence of its use of the TRAVEL LEADERS trademark in association with its travel services in the years leading up to February 2017. The only evidence of use after the relevant date consisted of one email from the defendant to a client in 2018. The defendant’s limited business activity after February 14, 2017, was activity undertaken in response to the plaintiff’s claim.


The evidence of nonuse supported an inference that the defendant intended to abandon the trademark as it progressively curtailed and ceased its business operations and its use of its office and has (and had) little online or advertising presence.


Bad faith

Paragraph 18(1)(e) provides that the registration of a trademark is invalid if the application for registration was filed in bad faith.


The plaintiff as the party, alleging bad faith, bears the burden of proving it on a balance of probabilities with clear, convincing, and cogent evidence. The assessment of the conduct of the defendant involves considering its subjective intention at the time of filing as determined by reference to the objective circumstances.


The developing jurisprudence of the Court imposes a high bar for a party to establish bad faith by a trademark applicant.


The defendant knew of the plaintiff’s use of the identical trademark in the US and of the plaintiff’s intention to carry on business in Canada using the trademark TRAVEL LEADERS in Canada when it applied for registration on May 10, 2010. The defendant’s attempts to continue its business and to protect its use of the trademark may appear irrational, but they do not establish that its sole or primary intention on May 4, 2010, was to extort the plaintiff or to harm the plaintiff’s business in Canada. The defendant had the dual purpose of (1) protecting its ability to continue using the mark in connection with its troubled travel agency business and (2) preventing the plaintiff from using the same mark in its Canadian expansion.


The defendant attempted to harm the plaintiff’s Canadian business after the plaintiff filed its statement of claim when it adopted the domain name www.travelleadersnetwork.ca and updated its web page to refer to its business using “TL Network”. No persuasive reason was given for taking these actions and they were undertaken in direct response to the plaintiff’s action for expungement and for no bona fide business purpose. Similarly, the defendant’s January 1, 2020, formal complaint to TICO, alleging that the plaintiff’s was operating without registration, or a proper travel agency license was unfounded.


The date of the defendant’s application to register the TRAVEL LEADERS trademark is the starting point of the paragraph 18(1)(e) inquiry. The evidence surrounding the defendant’s application to register on May 4, 2010 reflects at most a questionable business decision.

The defendant’s later actions from 2015 onwards, can reasonably be characterized as conduct in bad faith and included a series of incidents intended to harm TLG’s business. The fiveyear interval between the date of application and the date of the subsequent conduct is significant and the conduct does not assist materially in establishing bad faith at the date of application.


There was insufficient evidence to warrant a finding of bad faith by the defendant on the date it applied to register the TRAVEL LEADERS trademark within the meaning of paragraph 18(1)(e) of the Act.


Relief

The court granted an injunction enjoining the defendant from using the trademark TL NETWORK as well as using the domain name <travelleadersnetwork>. The court awarded nominal damages of $2,000 for the deliberate and retaliatory adoption of the TL NETWORK mark by the defendant.


Finally, the court awarded punitive damages of $20,000 as a result of the defendant’s deliberate conduct in the years following its application for the registration, namely its 2015 attempt to sell the TRAVEL LEADERS trademark to TLG’s competitors to prevent TLG from using the mark in Canada, its course of action following the commencement of the action, its use of the plaintiff’s TL NETWORK mark and the unfounded TICO complaint. This conduct was planned, malicious and highhanded. The defendant’s motive in pursuing these actions was to harm the plaintiff’s business in Canada and its likelihood of success in the action.


Comment

The court’s treatment of the determination of abandonment is instructive particularly when this issue is contested. The approach concerning bad faith adds to the case law concerning this issue and seems to take a position similar to that taken in the U.K.


If you have questions, please contact me at mckeown@gsnh.com.


John McKeown

Goldman Sloan Nash &amp; Haber LLP

480 University Avenue, Suite 1600

Toronto, Ontario M5G 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370

Email: mckeown@gsnh.com


These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.


A version of this article originally appeared in the Law360 Canada published by LexisNexis Canada Inc.


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