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Section 45 Proceedings, a Change in the Ownership of the Mark and Special Circumstances

The impact of the special circumstances exception in section 45 proceedings where there has been a change in the ownership of the mark has again been the subject of proceedings in the Federal Court.

Comité Interprofessionnel du Vin de Champagne v. Coors Brewing Company 2024 FC 169 


Subsection 45(1) of the Trademarks Act allows the Registrar to require that the registered owner of a trademark furnish to the Registrar evidence of use of the mark within the three-year period immediately preceding the date of the notice and, if there has been no such use, evidence of the date of last use and the reason for the absence of such use since that date.

Subsection 45(3) contains an exception relating to “special circumstances”. It provides that expungement under the section is not mandatory if the absence of use was due to special circumstances that excuse the absence of use.


The Facts

Effective October 13, 2016, Molson Coors Brewing Company acquired all assets of Miller Brewing International, Inc., including ownership of three marks which included the words “The Champagne of Beers”, (the Marks). This acquisition included many assets, involving dozens of brands and numerous Canadian trademark registrations. The evidence before the Registrar showed that the overall acquisition was valued at $12 billion, and that it doubled the size of Molson Coors Brewing Company. Molson Canada is the Canadian licensee of the owner of the Marks.


At the request of the requesting parties on April 3, 2017 the Registrar issued section 45 notices to the requiring Coors Brewing Company (“Coors”) to show whether the Marks had been used in Canada in association with each good specified in the registration at any time within the three-year period immediately preceding the date of the notice, and, if not, the date when they were last in use and the reason for the absence of use since that date. Coors was the owner of the Marks, which were licensed to Molson Canada. The relevant period was from April 3, 2014, to April 3, 2017.


Because it had no evidence of use of the Marks, Coors relied on sub-section 45(3) of the Trademarks Act and sought to demonstrate the reason for the absence of use during the six-month period after acquisition. The Registrar concluded that since Coors only acquired the Marks six months before the expiry of the three-year period, the acquisition date should be the starting point for the period of non-use.  It was also found that the non-use was beyond the Coor’s control because it needed regulatory approval from provincial liquor regulators before it could begin to use the Marks and had to undertake certain preparatory work before submitting its applications for approval. The Registrar concluded that Coors met the test under subsection 45(3) of the Act.


The Appeal

The requesting parties appealed to the Federal Court. There are three issues to be determined:

  1. What was the appropriate standard of review?

  2. Did the Registrar err in using the acquisition date as the starting point for the period of non-use?

  3. Did the Registrar apply the wrong test when assessing whether special circumstances excused the non-use of the Marks?

The Standard of Review

Questions of law are assessed on a correctness standard. Findings of fact and inferences of fact are reviewed under the palpable and overriding error standard, which is a deferential standard. Findings of mixed fact and law are assessed on the same deferential standard, unless an extricable legal error can be demonstrated, in which case the error must be reviewed on the correctness standard.


The Judge concluded that the two factual issues listed above were questions of mixed fact and law and there were no extricable legal errors shown. This meant they were to be considered under the palpable and overriding error standard. The requesting parties were required to convince the court that the Registrar made an error that was obvious and went to the core of the outcome.


The Acquisition Date as the Starting Point

The determination of the appropriate date for assessing the period of non-use involved a question of mixed fact and law. The Registrar did not state she was bound, as a matter of law, to use the acquisition date as the starting point for the period of non-use. Instead, the Registrar examined the relevant jurisprudence on this point, and applied the tests derived therefrom to the facts of this case. This also involved an assessment of whether there were special circumstances that excused the period of non-use.


The Judge was not persuaded that the Registrar erred in choosing to follow a long-established line of authority on the question of the starting point for assessing non-use where the owner recently acquired rights to the trademark in issue. He noted that in the more recent cases, the Hearing officer stated that the date of assignment or acquisition is “generally” used as the starting point for assessing non-use:

This wording indicates that the hearing officers dealing with these cases did not feel bound to apply the assignment or acquisition date but recognized that they could choose to do so in the circumstances of each case.


Special Circumstances

The Judge summarized the law concerning special circumstances as follows:

1-The general rule is that absence of use is penalized by expungement.

2-There is an exception to the general rule where the absence of use is due to special circumstances.

3-Special circumstances are circumstances not found in most cases of absence of use of the mark.

4-The special circumstances which excuse the absence of use of the mark must be the circumstances to which the absence of use is due.


The duration of the absence of use, the likelihood it will last a long time, and whether the absence of use was due solely to a deliberate decision by the owner of the mark rather than to obstacles beyond his control are important considerations.


The Judge concluded that measured from the time of acquisition, the evidence supported the findings made by the Registrar: the period of non-use was not long; Coors needed time to deal with the large and complex acquisition and it required the approval of several provincial regulators before it could begin to use the Marks; and to obtain such approval certain preparatory steps were needed, including the design of labels that met Canadian requirements. The special circumstances explained the absence of use and were the reason for it. Given this, there was no basis for intervention.


Comment

There are at least two things we can learn from this decision. First, in the cases when there has been a change in the ownership of the mark the date of determination may change but it is tied to the existence of special circumstances. Second, it is advantageous to file the appropriate evidence at first instance on the assumption that the palpable and overriding error standard will apply should the matter be appealed.


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


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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