A decision of the British Columbia Court of Appeal  BCCA 323 raises concerns regarding trademark licensing.
To appropriately license a trademark, the trademark owner should comply with the Trademarks Act. Section 50 provides that, for the purposes of the Act, if an entity is licensed by or with the authority of the owner of a trademark to use the trademark in a country and the owner has, under the license, direct or indirect control of the character or quality of the goods or services, then the use, advertisement, or display of the trademark in that country as or in a trademark, trade name, or otherwise by that entity has, and is deemed always to have had, the same effect as such use, advertisement, or display of the trademark in that country by the owner.
For the purposes of the Act, use of the mark by the licensee under the control of the owner is deemed to be used by the owner. This deemed use is only for the purpose of the Act, and the trademark owner is not deemed to have sold the goods or provided the services for other purposes.
The Act says nothing about the form of such a license, but many precedents exist which satisfy the requirements of the Act relating to grant of the license and exercising control of the use of the trademark available to the trademark owner.
For the purposes of the Act, if public notice is given that the use of a trademark is a licensed use and of the identity of the owner, it will be presumed, unless the contrary is proven, that the use is licensed by the owner of the trademark and the character or quality of the goods or services is under the control of the owner.
Even though a related company controls another company by its shareholdings, as in a parent and wholly-owned subsidiary relationship, such control is not sufficient to comply with section 50. In cases involving such a relationship, there must be evidence of facts from which it can be concluded that a licensing arrangement existed and that the trademark owner had direct or indirect control of the character or quality of the licensed goods or services provided under that licensing arrangement.
Licenses that do not comply with these requirements or the absence of a license can fuel attacks on the validity of trademark registration. At a minimum, there should be a written license containing a grant reference to the services or goods described in the registration, control mechanisms which are exercised and an obligation to use a trademark legend in association with the licensed trademark such as ® trademark of XYZ used under license by ABC.
The plaintiff owned a design mark registered for use in association with “residential and commercial real estate services, “namely the purchase and sale of residential, investment and commercial properties and businesses,” among other things. A related company was authorized to use the mark under an oral or unwritten license.
The related company operates a real estate brokerage and contracts with sales representatives. This agreement said that the related company had been authorized to use the design mark and, in turn, authorized the sales agent to use the design mark subject to the terms of that agreement.
The sales agent in issue used the design mark relating to the purchase or sale of various properties but, in addition, used the mark in association with his own separate business offerings. Such use of the design mark raised issues with regulatory authorities and was unacceptable to the plaintiff.
The related company terminated the sales agency agreement and demanded that the sales agent cease all use of the design Mark. The sales agent refused to cease use, and an action was brought.
Trial and Appeal
The action proceeded to trial, and the judge determined after a review of the sales agency agreement and the evidence that
the sales agent had no right to use the design mark in connection with his own separate businesses;
no reasonable person in the position of the sales agent could have believed that the plaintiff was consenting or acquiescing to the use of the design Mark in association with his separate businesses.
As a result, the plaintiff’s action for trademark infringement and passing off was allowed.
The sales agent then appealed this decision to the British Columbia Court of Appeal. The court concluded that the trial judge had made no overriding or palpable error in his conclusions and dismissed the appeal.
In this case, the sales agent represented himself and then persisted in asserting his view of the world. However, if the license had been drafted to comply with the requirements for a trademark license set out above, there would likely have been less justification to prompt the defendant from proceeding as he did. In addition, the plaintiff’s design mark would be protected from attacks based on invalidity.
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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.