Notable Trademark Decisions in 2020
2020 has been a difficult year for trademark owners and their advisors. The pandemic has tested us all in profound and unexpected ways. We also continue to be faced with unacceptably long processing delays and waits for hearing dates in the Trademarks office.
Despite these impediments, there have been several notable decisions. Decisions have considered the status of official marks, what is required to show the use of a mark in section 45 proceeding, the standard of review in appeals under section 56, the onus in expungement proceedings under section 57 and the impact of a registered trademark on pre-expungement claims when the registered mark has been expunged by the court.
In Ontario (Energy) v. Quality Program Services Inc., 2020 FCA 53 the court referred to subparagraph 9(1)(n)(iii) of the Trademarks Act, which prohibits the use of a mark that has been “adopted and used by any public authority in Canada as an official mark for goods and services” where “the Registrar has, at the request…of the…public authority…given public notice of its adoption and use”. The court said the subparagraph allowed public authorities to seek recourse against those who use an official mark. In no way did the subparagraph confer on a public authority any protection against claims for trademark infringement or other claims under the Act. A public authority that uses a mark that is confusing with a registered trademark does so at its peril. Clear legislative wording would be required to effect a different result. An application for leave to appeal to the Supreme Court of Canada was dismissed.
In Pentastar Transport Ltd. v FCA US LLC 2020 FC 367, the Federal Court confirmed and reminded us that section 45 provides a simple, summary and expeditious method for removing from the register trademarks that have fallen into disuse. It is designed to clear deadwood, not to resolve issues in contention between competing for commercial interests, which should be resolved in expungement proceedings under section 57. The evidence put forward by a registrant needs to supply only facts from which, on balance, a conclusion of use may follow as a logical inference.
In The Clorox Company of Canada, Ltd. v. Chloretec s.e.c 2020 FCA 76, the appellant had filed additional evidence under subsection 56(1). The court said that the recent decision of the Supreme Court in Vavilov did not affect the standard of review to be applied when examining the Federal Court’s finding in relation to the materiality of such new evidence. When making such a decision, the Federal Court is not acting as a reviewing court but as a court of the first instance. Its decision must be assessed on an appellate standard, and since it is a question of mixed fact and law, it will stand or fall based on the palpable and overriding error standard.
When the new evidence is material—which has been interpreted to mean “sufficiently substantial and significant” and of “probative value,” subsection 56(5) of the Act states that the Federal Court “may exercise any discretion vested in the Registrar.” This is in effect, makes it an appeal de novo subject to the correctness standard because it is a statutory appeal.If no new evidence is adduced before the Federal Court, or if the supplementary evidence is found not to be material or “sufficiently substantial and significant,” Vavilov calls for a fresh start. The Supreme Court’s jurisprudence on appellate standards of review should apply when dealing with an appeal under subsection 56(1) of the Act in both the Federal Court and Federal Court of Appeal. For questions of fact and mixed fact and law (except for extricable questions of law), the standard is that of the “palpable and overriding error.” For questions of law, the standard is correctness.
In Bedessee Imports Ltd. v. Glaxosmithkline Consumer Healthcare (UK) IP Limited 2020 FCA 94, the Federal Court of Appeal made it very clear that in proceedings for expungement of a trademark under section 57, the burden is on the attacking party to establish the facts supporting the issues they have raised to attack the validity of the registration in the issue. For example, when considering distinctiveness, it is not sufficient to rely on evidence of multiple assignments alone; the attacking party must present evidence that consumers associate the mark with a source different from the registered owner of the mark. The burden of proof is on the attacking party, and it is not appropriate to draw an adverse inference against the registered owner for not introducing evidence concerning the bald allegation.
In Sim &McBurney v. Gayle Gordon 2020 FC 710, 173 C.P.R. (4th) 338, the court reminds us of the technical requirements to show that a mark has been used in association with goods. The requirements were summarized as follows:
the mark must be a trademark as defined in section 2, that is, used for the purpose of distinguishing the goods;
the mark must be associated with the goods, so that notice of the association is given; and
the transfer of the property or possession of the goods must occur in the normal course of trade.
In Live! Holdings LLC v Oyen Wiggs Green & Mutala 2020 FCA 120, the Federal Court of Appeal considered the application of section 50(1) of the Trademarks Act, which provides that for the Act, if an entity is licensed by or with the authority of the owner of a trademark to use the trademark and the owner has, under the licence, direct or indirect control of the character or quality of the goods or services, then the use, advertisement or display of the trademark 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.
There was no evidence before the Federal Court that Live! had licenced the use of the LIVE mark to any specific company or companies. Nor was there any evidence as to the identities of the affiliated companies that allegedly used the LIVE mark in Canada, their corporate structure, or their relationship to Live! beyond the bare assertion that the companies were affiliated. It is well established that a corporate relationship alone is insufficient to establish use that accrues to the benefit of the owner of a trademark. There must also be evidence that the owner controls the character or quality of the goods or services.
In Miller Thompson LLP v. Hilton Worldwide Holding LLP 2020 FCA 134, the decision related to contested section 45 proceedings concerning whether the registered owner had shown the use of its mark in association with hotel services. The Federal Court was satisfied the registered owner had shown the use of its mark. An appeal was made to the Federal Court of Appeal. 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.”
Hilton said 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 Court said the case law has established that the term “services” 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.
The term “hotel services” included other, incidental, or ancillary services such as reservation or payment services. The question remained 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 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 Court dismissed the appeal. 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 to consumers.
In Group III International Ltd. v. Travelway Group International Ltd., 2020 FCA 210 the court clarified the law concerning the impact of a registered trademark on pre-expungement claims when the registered mark had been expunged by the court. Section 19 applies and gives the owner of the registered trademark the exclusive right to the use of the mark throughout Canada in association with the goods and services listed in the registration in the expungement proceeding liability for damages was engaged only after the Federal Court struck the trademarks from the Register. Absent a finding of fraud, willful misrepresentation, or bad faith in the application for registration, the owner of the registered trademarks was not liable for any damages accruing before the expungement of its trademark. There are sound reasons why the use of a registered trademark does not result in liability in damages or profits for the period arising before expungement because of the protection afforded it under section 19.
Regarding the claim for passing off since it related to the period before the respondent’s registrations were expunged the case law was clear, were it not for the unusual circumstances of this case that the registrations of the trademarks would be a complete defence to a claim for passing off.
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.