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Federal Court of Appeal Confirms that Trademark Services Should Be Liberally Construed

A recent decision of the Federal Court of Appeal [2020 FCA 134] has confirmed a trial decision [2018 FC 895] which considered the concept of the use of a trademark in association with services when the method of distribution has changed.


Under the Trademarks Act, a trademark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services. However, the mere advertisement of services in Canada, where no aspect of the services themselves are performed or delivered in Canada, does not constitute use within the meaning of the Act.

The meaning of terms used in trademark registrations can evolve. This is especially so where, as here, there have been significant technological advancements that have changed the way services are offered.


If warranted on the facts of a specific case providing a service that is incidental or ancillary to a registered service can be considered the performance of the registered service itself. In this type of case, the key is to file the evidence to support such a conclusion.


From a brand owner’s viewpoint, it is preferable to deal with changes of this nature by obtaining new registrations in association with the new means of distribution to avoid the prospect of uncertain litigation.


Facts

The requesting party caused a notice under s. 45 of the Trademarks Act to be sent to Hilton Worldwide Holding LLP, (Hilton), the registered owner of the trademark WALDORF-ASTORIA. The notice required Hilton to show its use of the mark at any time within the three-year period immediately preceding the issuance of the notice.


The trademark WALDORF-ASTORIA is registered for use in association with “hotel services.” Hilton claimed to have used the mark in association with hotel services in Canada since at least 1988 and filed evidence as to its use of the mark.


While there was no WALDORF-ASTORIA branded hotel physically located in Canada during the relevant period, the evidence showed there were several benefits available to customers in Canada and that many people in Canada took advantage of such benefits. Customers in Canada would see the WALDORF-ASTORIA trademark when they visited the Hilton website, where they could book reservations. The WALDORF-ASTORIA trademark appeared on the website at the time of making the booking and payment and on email confirmations sent to customers.


During the relevant period, 41,000 people with addresses in Canada stayed at a WALDORF-ASTORIA hotel, generating approximately $50 million in revenue. In addition, 1,300 people from Canada received a discounted room rate in exchange for paying for the hotel reservation in advance. These individuals received an email confirmation of their booking, again showing the WALDORF-ASTORIA trademark.


Decision of the Trademarks Opposition Board

The Hearing Officer ruled that the absence of a WALDORF-ASTORIA hotel in Canada was fatal to Hilton’s claim it had used the trademark for “hotel services” in Canada during the relevant period. To show the use of the trademark for such services required a physical location in Canada. Similar conclusions had been reached in recent decisions, where Hearing Officers had found that operating a “bricks and mortar” hotel in Canada was necessary to establish the use of a trademark for “hotel” or “hotel services.

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This approach was said to follow the plain meaning of the statement of services. “Booking,” “planning,” and “reservation” services are not “hotel services,” and the registration should not be maintained simply because the service available “in Canada” was tangentially related to those services.


Appeal to the Federal Court

Hilton appealed the decision to the Federal Court. The Judge said there are several decisions where courts have found that where the trademark owner takes steps to enable Canadians to benefit directly from the delivery of the service in Canada, this can help establish use in Canada. This has evolved in parallel with the changes in the delivery of retail services and with the expansion of the delivery of services “online.

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Case law has interpreted the term “services” broadly, sometimes using the concept of “primary, incidental and ancillary” services. This reflects that some services can reasonably be understood to include only one thing, while others may encompass a variety of related activities which, together, constitute “the service” or are reasonably understood to be included in it.


Since the time of the original registration, the scope of services delivered online has expanded greatly, and the meaning of “hotel services” must adapt to reflect that an ordinary customer would expect to be able to book a hotel room online today, either directly or through an intermediary. The scope of registration must be considered in light of the ordinary meaning of the words, and this is influenced by the development in online commerce as it relates to the ordinary commercial understanding of both the business and the customer.

Currently, an ordinary customer making a contract for the reservation of a hotel room is receiving “hotel services” in Canada when this transaction is completed by a person in Canada. Because of this, the term “hotel services” naturally includes a series of related things, some of which can only be delivered at the physical hotel, but some of which can now be “performed” (from the owner’s perspective), or “enjoyed” (from the customer’s perspective) in Canada.


Applying this approach, the judge concluded that the term “hotel services” included hotel registration services when it is shown that people in Canada obtained some tangible, meaningful benefit from such use. The evidence filed clarified that customers in Canada received a meaningful benefit from the delivery of hotel services by Hilton through the online reservation service, and in particular, the discounted room rate available for a pre-paid room. Based on these findings, the appeal was allowed, and the registration was maintained on the register.


Federal Court of Appeal

The requesting party appealed to the Federal Court of Appeal. The first substantive issue was the determination of the ordinary commercial understanding of the term “hotel services.”

There was evidence before the Registrar regarding the ordinary commercial meaning of the term, at least from the perspective of the owner of the mark. Hilton’s affidavit stated that the term “hotel services” was customarily understood in the hotel industry to include “reservation services, booking and payment services, and access to hotel rooms.” In addition, it was stated that hotels “could not operate unless customers were able to reserve, book and pay for rooms in advance of their stay,” reservation, booking and payment services were “integral to the provision of hotel services,” and the cost of providing these services and other ancillary services is incorporated into the room rate. The Hearing Officer did not mention this evidence which warranted the Federal Court’s intervention.


The second substantive issue was to determine the meaning of the term “services.” The term is not defined in the Act. However, the case law has established that the term should be liberally construed and that each case should be decided on its own facts. In addition, the Act does not distinguish between primary and incidental or ancillary services. As long as some members of the public, consumers or purchasers, receive a benefit from this activity, it is a service. Further, decisions from both Hearing Officers and the Federal Court have concluded that providing a service that is incidental or ancillary to a registered service can be considered the performance of the registered service itself.


As a result, the Federal Court did not error in finding that the term “hotel services” included other, incidental or ancillary services such as reservation or payment services. The question remained, however, as to whether consumers or purchasers received a material benefit in Canada from these incidental or ancillary activities sufficient to constitute “use” of the WALDORF ASTORIA mark in this country.


The Federal Court said that the evidence established there were several benefits available to people in Canada, over and above their eventual enjoyment of their stay in a “bricks and mortar” Waldorf Astoria hotel. Many people in Canada had taken advantage of such benefits. They would see the WALDORF ASTORIA mark when they visited the Hilton website, The Mark would also appear on the e-mails sent to customers confirming their reservations.

The meaning of terms used in trademark registrations can evolve. This is especially so where, as here, there have been significant technological advancements that have changed the manner in which services are offered to consumers.


The Federal Court did not error in arriving at the conclusion it reached. As a result, the appeal was dismissed.


John McKeown1

Goldman Sloan Nash & Haber LLP 480 University Avenue, Suite 1600 Toronto, Ontario M5G 1V2 Direct Line: (416) 597-3371 Fax: (416) 597-3370 Email: mckeown@gsnh.com


If you have questions, please contact me at 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.

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