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The Effect of Prior Use on Registered Trademark

Updated: Sep 30, 2021

A decision of the Federal Court deals with who is entitled to use and register a trademark/tradename. Norsteel Building Systems Ltd. v. Toti Holdings Inc. 2021 FC 927.


The Facts

The applicant was incorporated in British Columbia in 1992. Since its incorporation, the applicant has operated primarily under the tradename/trademark NORSTEEL as a designer and seller of pre-engineered steel buildings and related components, including foundations. In addition, the applicant has provided engineering, steel erecting, project management, and construction services that typically accompany the sale of its pre-engineered steel buildings.


The respondent was incorporated in Ontario on September 27, 2006, as a holding company. Its operating company was incorporated on March 26, 2001. The business of the operating company since its incorporation was and continues to be the design, engineering, manufacture, fabrication and sale of pre-engineered steel/metal buildings in association with the trademark NORSTEEL. The operating company assigned its rights in the trademark NORSTEEL to the respondent, which licensed the use of the NORSTEEL trademark to the operating company in perpetuity.


Both applicant and the respondent are significant companies with sales in the millions. The headquarters of the applicant is in West Kelowna, British Columbia. The applicant has completed many projects, primarily in British Columbia but also in Alberta and Saskatchewan.

The operating company of the respondent is located in Markham, Ontario. It has had sales in every province in Canada, including Nunavut and has a dealer in Golden, BC and also one in Alberta. However, its sales are primarily in Ontario.


The parties learned of their respective businesses in 2011. The respondent filed a trademark application on February 1, 2016. The applicant says that they did not learn of the application until after the opposition period expired.


Counsel for the applicant sent a letter to the respondent on February 20, 2017. The applicant said that it learned of the respondent’s trademark application after the opposition period had expired and that the applicant would seek expungement if the trademark were registered.


The Application

The applicant applied to the Federal Court under subsection 57(1) of the Trademarks Act to strike from the register the respondent’s registration for NORSTEEl. The grounds for invalidity were based on:

  • its prior use and making known of the NORSTEEL BUILDING SYSTEMS trademarks and trade names under paragraphs 18(1)(b) and (d) of the Act,

  • the application for the NORSTEEL trademark was made in bad faith under paragraph 18(1)(e) of the Act.


Acquiescence and Delay

The respondent alleged that the applicant’s acquiescence and delay in bringing the application was a full and complete defence. The respondent relied on its operating company's having conducted its business openly. It was incorporated in 2001 and has been in operation from the Toronto area since then using the NORSTEEL name. Further, by July 27, 2017, the applicant knew the NORSTEEL trademark had been registered. The applicant did nothing for over three and half years, during which the respondent’s operating company continued to carry on business as usual.

Acquiescence is an equitable defence. If a party to an action acts passively in the face of something to which it objects, they can be said to be giving tacit agreement. However, typically there must be something beyond mere delay to encourage the wrongdoer to believe that the allegedly passive party does not intend to rely on its strict rights, and the wrongdoer must have acted to its prejudice in that belief.

The Judge rejected this defence since the applicant did not encourage the respondent to continue using the mark (and most certainly not to register it), and the respondent did not act to its prejudice in reliance on any such encouragement.

The Applicant’s Prior Use

  1. Distinctiveness

The applicant established that it commenced use of the word Norsteel in its trademark NORSTEEL BUILDING SYSTEMS in 1992 and that it has used the mark continuously since then. Its period of use was greater than that of the respondent’s use of NORSTEEL. The nature of the goods, services, or business and the nature of the trade of the parties was very similar, if not identical. The resemblance between the registered trademark of the respondent and the applicant’s trademark was high, and there was some evidence of consumer confusion.

As a result, the respondent’s registered trademark was not distinctive because the mark did not distinguish the goods and services of the respondent from those of the applicant and was invalidly registered.

  1. Entitlement

Subsection 16(1) of the Act clarifies who is entitled to obtain a registration and contains an important exception relating to prior use by another. An applicant who has filed an application is entitled to secure its registration in respect of the goods or services specified in the application unless, at the filing date of the application or the date of first use of the trademark in Canada, whichever is earlier, it was confusing with

  1. a trademark that had been previously used in Canada or made known in Canada by any other person, or

(c) a trade name that had been previously used in Canada by any other person.

At the date of application, the trademark and tradename NORSTEEL had been previously used by the applicant. The respondent was not the person entitled to secure the registration, and the registration was invalid.


Bad Faith

The applicant relied on previous decisions of the Trademark Opposition Board dealing with the prior requirement, as a part of an application, for a statement that the applicant is satisfied that it is entitled to use the trademark in Canada in association with the goods or services described in the application. Unfortunately, these decisions do not provide an analytical framework for applying the current section.

The Judge concluded the respondent was willfully blind as to whether it had the right to file the application in the face of its competitor’s business. However, he was not willing to conclude that a failure to make the obvious inquiries amounted to bad faith.

Comment

Some of the problems, in this case, could have been avoided by doing timely trademark searches and filing trademark applications. If the applicant had done this, they could have secured a registration at an early date.

The same goes for the respondent: if it did an appropriate trademark search and investigation, they would have known of the applicant’s business and could have avoided future problems.

If the applicant monitored filed trademarks applications, they could have opposed the respondent’s application before the Trademark Opposition Board, which would have been advantageous for them.


Toronto September 2021


John 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.


A version of this article originally appeared in the Lawyer’s Daily published by LexisNexis Canada Inc.


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