Trademark Use by an Affiliate
A recent decision of the Federal Court of Appeal clarifies when the use of a trademark by an affiliate of the trademark owner accrues to the benefit of the owner. Under subsection 50(1) of the Act, use by a licensee is deemed use by the owner if the owner has “under the licence, direct or indirect control of the character or quality of the goods or services.” The Court also discusses the use by another entity with the authority of the owner of a trademark.
On November 3, 2017, the Registrar of Trademarks issued a notice to the trademark owner under section 45 of the Act, requiring it to show the use of the mark in issue in Canada in the three years immediately preceding the date of the notice (the Period).
The trademark owner is a company based in Baltimore, Maryland. According to the evidence filed on behalf of the company, it is an affiliate of a group of hundreds of privately-held limited liability companies. The owner itself has no employees and is not involved in the businesses carried out by other affiliated companies. It is a holding company that owns Canadian trademark registration in the issue.
The Federal Court also found that even if the trademark had been used in Canada by the appellant’s affiliates during the Period, any such use did not enure to the appellant’s benefit. The appellant had not shown that it had direct or indirect control over the character or quality of the services in issue during the period, as required by subsection 50(1) of the Act.
Federal Court of Appeal
The Court said in section 45 proceeding the trademark owner must show the use of the trademark in association with the registered goods or services during the Period by either the owner of the mark or by another person “whose use accrued to the owner’s benefit
The appellant asserted that the mark was used in Canada by affiliated companies that were part of a corporate group, which was sufficient to constitute “use” of the mark by the appellant for the purpose of section 45 of the Trademarks Act.
Use of a trademark in Canada by its owner in association with registered goods or services will satisfy the requirements of section 45 of the Act. However, subsection 50(1) of the Act also contemplates use by another entity, either under a licence from or with the authority of the owner of a trademark, provided that the owner has direct or indirect control over the character or quality of the goods or services in question.
There are three primary ways a trademark owner can demonstrate the control required to benefit from subsection 50(1) of the Act:
1. The owner can clearly swear that it exerts the requisite control;
2. The owner can provide evidence that demonstrates that it exerts the requisite control; or
3. The owner can provide a copy of a license agreement that explicitly provides for the requisite control.
There was no evidence before the Federal Court that the appellant had licensed the use of the mark in issue to any specific company or companies. Nor was there any evidence as to the identities of the affiliated companies that allegedly used the mark in Canada, their corporate structure, or their relationship to the appellant beyond the bare assertion that the companies were affiliated.
As there was no evidence before the Federal Court in this case that the appellant exerted any form of control over the character or quality of the services offered by the affiliated companies in association with the mark during the Period, the appeal was dismissed.
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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.