Attacking a Transfer of a Trademark
A recent decision of the Federal Court of Appeal raises interesting issues relating to the transfer of a trademark.
In this case, the owner of a registered trademark entered into discussions with a third party relating to the sale of its business. A poorly drafted asset acquisition agreement was signed by the parties. The matter did not go well, and the owner notified the third party that it was in breach of the agreement. The owner also demanded that the third party cease all use of the registered trademark and asserting any ownership interest in the mark. The third party did not dispute it was in breach of the agreement but claimed that title to the assets including the registration had passed to it.
On May 6, 2016, the third-party indicated it would be taking the steps to ensure that the trademark was transferred to it pursuant to the agreement. On May 9, 2016, the third-party applied to the Canadian Intellectual Property Office (CIPO) to transfer the registration without notice to the registrant. The third-party asserted that the agreement was effective to transfer the registration and provided a redacted copy of the agreement CIPO.
The Office acted on the material provided to it and transferred the registration. Later the third party assigned the registration to another corporate entity.
When the owner learned of the transfer, it brought an application in the Federal Court for judicial review of the decision made by CIPO. In addition, the application asserted that the entry in the register should be struck or amended under section 57 of the Trademarks Act as the entry did not accurately express the existing rights of the person who was then shown as the registered owner of the trademark.
The owner also initiated an action in the Supreme Court of British Columbia for breach of contract and a declaration that it was the owner of the registration in issue.
The Federal Court judge agreed with the registrant and set aside the two transfers of the registered trademark. He was also troubled by the actions of the third party and ordered costs be paid to the owner on an elevated basis.
The corporate entity to which the registration was later assigned appealed from the decision to the Federal Court of Appeal.
The court first considered whether the judge below was correct to consider the issues by way of judicial review. The court concluded that judicial review was not applicable as there was a statutory remedy available to the owner. However, the court agreed that sections 57 applied and the registrant was a “person interested” under the section withstanding to apply of the court.
The matter is complicated by the nature of the jurisdiction of the Federal Court. The court does not have inherent jurisdiction and only the jurisdiction assigned to it by a Federal statute. The Federal Court Act provides that the Federal Court has exclusive original jurisdiction in all cases in which it is sought to have any entry in the register of trademarks expunged, varied or rectified. In addition, the court has jurisdiction under section 57 as discussed. However, the Federal Court has no jurisdiction to hear an action for breach of contract or determine what are the effective terms of an agreement.
In this case, the only substantive issue was the ownership of the registration in issue including the effect of the acquisition agreement. This was ultimately a contractual dispute that the Federal Court did not have jurisdiction to decide. The judge below had no choice but to stay the proceedings under section 57 pending the resolution of the ownership issue in the Supreme Court of British Columbia. The Federal Court would be in a position to decide the issue under section 57 only after this issue is determined. As observed by the court the solution is less than ideal.
The appeal was allowed, and the decision of the Federal Court quashed. The application under section 57 was stayed pending a determination by the British Columbia court. In the interim, the court directed the Registrar of Trademarks to add a notice to the registration to the effect that ownership of the mark and the validity of the transfers were in dispute with a reference to the proceedings in the Supreme Court of British Columbia.
In retrospect, given the limitations on the jurisdiction of the Federal Court, the decision of the Court of Appeal is the correct result. Unfortunately, the issues could not have been dealt with more expeditiously. However, in broad terms, the issues are similar for both patents and copyright, so this jurisdictional issue is not uncommon. It is important to assess the impact of the jurisdiction of the Federal Court at the earliest opportunity.
In addition, under the amended Act, which did not apply, the Registrar of Trademarks has jurisdiction to remove the registration of the transfer on receipt of satisfactory evidence that the transfer should not have been registered.
John S. McKeown
Goldman Sloan Nash & Haber LLP
480 University Avenue, Suite 1600
Toronto, Ontario M5G 1V2
Direct Line: (416) 597-3371
Fax: (416) 597-3370
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.