This article reviews material developments in Canadian legislation, case law and practice in the area of trademarks in 2019. All references in this article to the “Act” refer to the Trademarks Act, R.S.C. 1985, c T-3, as amended. This article was originally published by The Continuing Legal Education Society of British Columbia in their “Annual Review of Law & Practice – 2020”.
On June 17, 2019, long-awaited amendments to the Trademarks Act, RSC 1985, c T-3 (the “Trademarks Act”) finally came into force. These amendments were preceded by anticipatory changes to the Trademarks Act, passed in November 2018, and various consultations between practitioners and the Canadian Intellectual Property Office (“CIPO”) involving the repeal and replacement of the Trademarks Regulations, SOR/2018-227 (the “Regulations”). CIPO has also repealed and issued a large number of practice notices.
Together, these changes affect almost every aspect of trademark law in Canada. The full effects of many of these changes are not yet clear; most of the major court decisions issued in 2019 concerned proceedings commenced prior to the date on which the amendments came into force, or were based on the provisions of the Act as they read prior to the changes (due to transitional provisions contained in the relevant amending legislation). Because of the fundamental nature of the changes to trademark law which occurred in 2019, Federal and Provincial Courts will likely grapple with the implications of these changes for many years to come.
That said, Federal and Provincial Courts also rendered many decisions in 2019 which will affect the practice of trademark law moving forward. These cases temper our understanding of issues regarding standard of review, interlocutory injunctions, the definition of trademark “use”, cost awards in Federal Court, and various other aspects of the practice of trademark law.
B. Legislation and International Treaties
1. Amendments to the Trademarks Act
As reported last year in detail, numerous and significant amendments to the Trademarks Act were scheduled to, and did, come into force on June 17, 2019. These changes represent the most extensive overhaul of Canadian trademark legislation since the 1950s. These changes result from several bills passed by Parliament, beginning in 2014, including the Economic Action Plan 2014, No. 1, SC 2014, c 20; the Combating Counterfeit Products Act, SC 2014, c 32; the Budget Implementation Act 2018, No. 2, SC 2018, c 27; and the College of Patent Agents and Trade-mark Agents Act, SC 2018, c 27, s 247.
Many of these amendments have been pending for several years. A brief summary of the amendments now in force is listed below:
- Filing bases and declaration of use: The amendments have eliminated of the need to provide a filing basis for a new application or file a declaration of use prior to registration. While the filing process has been somewhat streamlined as a result, this has led to concerns among members of the profession about the potential increase in trademark trolls and squatting.
- Bad faith and use requirements: Bad faith has been added as a separate ground of opposing an application or seeking invalidation of a registration.
- Nice Classification and updated fee structure: All future applications and existing registrations will be required to group goods and/or services according to the Nice Classification System, and filing and renewal fees are now based on the number of Nice Classes included in an application or registration.
- Expanded definition of “trademark”: The amendments have expanded the definition of a “trademark” to cover a wider range of distinguishing “signs” – and the word “sign” itself is defined to include word, a personal name, a design, a letter, a numeral, a colour, a figurative element, a three-dimensional shape, a hologram, a moving image, a mode of packaging goods, a sound, a scent, a taste, a texture and the positioning of a sign.
- New ground of examination based on “lack of distinctiveness”: Examiners at CIPO can now object to an application for a trademark on the grounds that it lacks distinctiveness, in addition to historical grounds of objection such as clear descriptiveness or confusion with an earlier trademark. Practitioners have already seen a significant number of such objections raised for applications which had not been advertised prior to the coming-into-force date of this amendment.
- Shortened term of registration: For all trademarks registered or renewed after June 17, 2019, the term of protection has shortened from 15 years to 10 years.
- Divisional applications: Applicants can now divide a single trademark application into multiple “divisional applications”; for instance, to overcome an Examiner’s objection which applies to some goods and services listed in an application, but not to others.
- End of association of marks: The practice known as “association”, under which CIPO would not recognize the transfer of potentially confusing trademarks owned by a single person if the transfer results in ownership by more than one person, has been eliminated.
- Entry into the Madrid System: Canada is now a member of the Madrid System for the Registration of International Trademarks, which is designed to facilitate the registration of trademarks across borders by allowing owners of an International Registration to request extensions of protection for their trademarks in the territories of other Madrid System countries.
- Priority parity: Applicants can now claim priority filing dates based on their first application filed in any country which is a member of the World Trade Organization or the Paris Convention for the Protection of Industrial Property. Historically, CIPO only accepted priority claims where the application on which the claim is based was made in an applicant’s country of origin.
- No supporting documents for mergers and assignments: CIPO no longer requires documentary proof of assignments or mergers where the current owner requests the recordal of a merger or assignment – however where a request to record an assignment comes from an assignee, supporting documentation will generally still be required.
Other changes are pending but not yet in force. For instance, the Registrar’s powers over opposition and section 45 proceedings will be expanded under pending amendments, allowing the Registrar to impose costs on parties, to make confidentiality orders in the course of contentious proceedings, and to engage in more active case management of proceedings (such as setting timelines). Further pending amendments create a procedure for challenging the public notice of Official Marks, on the basis that the owner of the mark no longer exists or is not a public authority.
Another significant change which is not yet in force would require owners of registered trademarks to adduce proof of use of their marks in Canada, or special circumstances excusing non-use, in any action brought by the owner for infringement or depreciation of goodwill during the first three years after their registration issues. This amendment, introduced as part of the “surprise” trademark amendments contained in the Budget Implementation Act 2018, No. 2, supra, is intended to curb potential abuses which may arise under the new system of trademark registration, which no longer requires an owner to show use of its trademark in any country in the world prior to obtaining a registration.
Also awaiting a coming-into-force date is the College of Patent and Trade-marks Agents Act, supra. This legislation creates a new regulatory body for Patent and Trademark Agents, requiring such persons to meet appropriate standards of professional conduct and competence, as well as imposing penalties for unauthorized practice by persons not licenced by the College. It also, somewhat unfortunately, re-introduces the hyphen to the word “trade-mark” previously removed by the Economic Action Plan 2014, No. 1, supra, to the name of the College only – meaning, in the absence of further legislation, the College of “Trade-mark Agents” will oversee professionals practicing “trademark law” in Canada.
2. International Treaties
In 2018, Canada, the US and Mexico negotiated a new treaty to replace the North America Free Trade Agreement (“USMCA”). Bill C-100, implementing the USMCA, was introduced to the Canadian Parliament in May 2019. As of the date of this writing the USMCA had received its Second Reading in Parliament and it will likely be approved upon approval of the USMCA by the US Congress . The US House of Representatives has approved the USMCA. The US Senate is expected to approve the USMCA in 2020 bringing it into force in the US.
The USMCA contains a number of provisions which affect IP law in Canada, including the law of trademarks. These include requirements to accede to various International Treaties regarding trademarks, including the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks and the Singapore Treaty on the Law of Trademarks. Canada has already met these requirements through the various legislative amendments discussed above.
Further amendments to Canadian trademark law, necessitated by the USMCA, are included in Bill C-100. These amendments would create a presumption of infringement against commercial importers of goods bearing marks that cannot be distinguished from a trademark registered for the same goods. The pending amendments will also repeal existing exemptions for infringement concerning goods which are located in Canada only for customs control or transshipment purposes. These changes are meant to address the US’s perception of Canada’s leniency towards the global distribution of counterfeit goods.
3. New Trademarks Regulations
In order to implement the various changes to Canadian trademark law discussed above, the previous Trade-marks Regulations, SOR/96-195 have been repealed in their entirety and replaced with the Trademarks Regulations, SOR/2018-227. The new Regulations likewise came into force on June 17, 2019.
The new Regulations contain an updated Schedule of Government Fees related to trademark filing and maintenance. Government fees involving trademarks have generally increased as a result of the amendments, particularly because Canada has now moved to a fee-per-class system of charges in which the cost to file and renew trademarks is based on the number of Nice Classes included in an application or registration. In addition, the Madrid Protocol has been implemented in Canada entirely through the new Regulations as the amendments to the Trademarks Act itself, included in the Economic Action Plan 2014, No. 1, supra, included only a single provision, at subsection 65.1(a) of the amended Trademarks Act, permitting the Governor in Council to make regulations for carrying the Madrid Protocol into effect “despite anything in this Act.”
By acceding to the Madrid Protocol, Canada has joined an international system of 104 countries, designed to facilitate the registration of trademarks across territories. The Madrid System allows Canadian trademark applicants and owners of registrations to apply for an international registration through the World Intellectual Property Office (“WIPO”). An international registration allows these applicants to seek trademark protection in various other countries around the world, using the WIPO record as a centralized application mechanism. The Madrid System also allows owners of international registrations, filed at WIPO, to extend protection for their marks into Canada. However, CIPO has indicated that it will correspond directly with the owner of an international registration, in the event that an extension of protection is filed by a foreign law firm or agent, and no local Canadian agent is appointed for the extension.
Because of the unusual structure of the legislation implementing the Madrid Protocol in Canada, portions of the Regulations relating to the Madrid Protocol override the normal statutory provisions governing trademark applications and registrations – particularly those provisions related to calculation of time, filing dates, voluntary amendments to registrations, and renewal. As a result, practitioners should bear in mind that extensions for protection under the Madrid Protocol operate under a different statutory scheme than regular trademark applications. In many circumstances, the Registrar in CIPO has less discretion in considering oppositions to such marks. For instance, the Regulations prohibit Opponents from adding additional grounds of Opposition once the Registrar has sent a notification of provisional refusal as the result of an opposition to the International Bureau.
Similarly, the Registrar in CIPO must grant a certificate of protection to an international applicant where the Registrar fails to issue certain prescribed notices to the International Bureau related to a pending opposition. This latter provisions raises the possibility that an adverse registration could issue, to the detriment of an owner of a Canadian trademark as the result of the Canadian Registrar’s failure to comply with its notification obligations, even in circumstances where the owner of the Canadian trademark had duly filed an opposition to the adverse mark.
As for all of the changes which came into force in 2019, the effects of Canada accession to the Madrid System will be explored in decades to come in future decisions of the Federal Court, and, if necessary, further legislation or regulations enacted by Parliament.
C. Administrative Practice
In order to facilitate the implementation of the various changes to Canada’s trademark scheme, CIPO repealed most of the existing practice notices and issued a number of new practice notices. In total, CIPO issued 35 new practice notices in 2019: 26 relate to prosecution and maintenance of trademark applications and registrations, 8 relate to opposition and section 45 proceedings, and 1 relates to general correspondence procedures.
Most of the new practice notices relate to the changes already discussed above. For instance, the new practice notices include a practice notice which sets out the requirements for applications for non-traditional trademark types, namely, trademarks which consist of sounds, holograms, moving images, scents, tastes, colours per se, three-dimensional shapes, modes of packaging goods, textures, the positioning of signs, or combinations of one or more of these trademark types.
Of particular note, a new practice notice governs Notifications of Third Party Rights with respect to pending trademark applications. Previously, the Registrar would have no regard to correspondence filed by third parties which related to an application under examination. The Registrar took the position that correspondence during this stage of the application process could only be with the applicant or its designated Agent, and therefore would return all correspondence from third parties to the sender. Amendments to the Trademarks Regulations now allow for an informal process under which third parties can bring information bearing on registrability of an application to the Registrar’s attention.
The informal Notification of Third Party Rights procedure is limited to three grounds: (1) confusion with a registered trademark pursuant to paragraph 12(1)(d) of the Act; (2) non-entitlement by reason of a confusing copending application pursuant to paragraph 37(1)(c) of the Trademarks Act; or (3) the use of a registered trademark or trademarks in the application to describe claimed goods or services. The Registrar will place all such correspondence on file with the pending application, but will not provide a response to the relevant third party, or otherwise indicate if any action has been taken as a result of the correspondence.
In one change that appears unrelated to the amendments to the Act, CIPO has rescinded its previous policy regarding objections under paragraph 12(1)(a), regarding whether a trademark is unregistrable because it is “primarily merely the name or the surname of an individual who is living or has died within the preceding thirty years.” Previously, CIPO Examiners would raise an objection under paragraph 12(1)(a) only where searches of relevant Canadian directories showed at least 25 entries of a relevant name or surname. The new practice notice eliminates this minimum requirement. As a result, the likelihood of receiving such an objection during examination has increased.
D. Case Law
In 2019, there were a number of interesting decisions in the field of trademark law rendered by the Federal Court, the Federal Court of Appeal, and the provincial superior courts. These include the cases which follow.
1. Standard of Review
The Federal Court of Appeal addressed the issue of the appropriate standard of review for appeals of a decision of the Registrar, and in particular how the materiality of new evidence is to be assessed, in Seara Alimentos Ltda v Amira Enterprises Inc, 2019 FCA 63. In this case, Amira Enterprises Inc (“Amira”) successfully opposed two applications for SEARA trademarks, filed by Seara Alimentos Ltda (“Seara”), on the basis of its prior registration for the trademark SERA. All of the relevant trademarks covered food products. On appeal to the Federal Court from the Opposition Board decision, Seara filed additional evidence relevant to the actual use of SEARA and SERA products in Canada. The Federal Court found that the new evidence was not “material”, in the sense that it would not have changed the outcome of the Opposition Board’s decision. The Federal Court ultimately dismissed the appeal.
On appeal to the Federal Court of Appeal, it was found that the lower court had misstated the relevant test for materiality. The proper test, as clarified on appeal, involves a preliminary assessment as to whether or not the court will have to reassess the evidence on a given issue. As a preliminary assessment, this determination cannot involve a determination as to whether the evidence would ultimately change the result or outcome of the decision under appeal.
The additional evidence submitted by Seara clearly met such a standard of materiality, as it provided evidence of the actual use of the trademarks in Canada by the parties, and the absence of such evidence was the subject of express comment by the Opposition Board. Nevertheless, the Federal Court of Appeal found, after a reconsideration of the issues affected by the new evidence, that the result remained unchanged. Therefore the appeal was refused, affirming the result of the lower court’s decision, despite criticizing some of its reasons.
A pending amendment to the Trademarks Act, not yet in force, would require a party to obtain the leave of court to adduce fresh evidence on appeal from decisions of the Registrar. The statements regarding materiality in Seara may provide the court with guidance, in the future, as to how to exercise its discretion to grant leave to accept additional evidence adduced on appeal, once this amendment comes in to force.
In addition, the applicable standard of review on an appeal from a decision of the Registrar could be affected by the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 (“Vavilov”). Vavilov is not a trademark case. It involved instead a judicial review of a decision cancelling the certificate of citizenship of a person whose parents were undisclosed employees or representatives of Russia at the time of his birth. However, Vavilov involves a clarification and restatement of the law applicable to judicial review of administrative decisions as previously articulated in Dunsmuir v New Brunswick, 2008 SCC 9 (“Dunsmuir”).
An appeal of a decision of the Registrar, made to the Federal Court pursuant to section 56 of the Trademarks Act, is a judicial review of an administrative decision. Under the Dunsmuir standard, and other case law specific to trademark proceedings, the Federal Court has historically afforded a significant amount of deference to the Registrar in interpretations of the Trademarks Act, its “home statute”. As a result, even though an express appeal provision grants the Federal Court the power to review decisions of the Opposition Board, courts have exercized deference with respect to the Registrar’s conclusions on matters of law, and interfered only where the interpretation in the underlying decision appeared unreasonable.
Under the Vavilov standard, the presence of a statutory appeal mechanism, such as the one included in section 56 of the Trademarks Act, is considered more strongly indicative that the legislature intended less deference to be afforded to the relevant administrative decision maker. The court in Vavilov expressly recognizes that this interpretation of statutory appeal mechanisms departs from previous jurisprudence, which placed less emphasis on the presence of such mechanisms. While Vavilov holds that the presumptive standard of review is reasonableness, it is possible that a future court, in interpreting Vavilov, could hold that questions of law ought to be reviewed on a correctness standard due to the presence of a statutory appeal mechanism. Future decisions of the Federal Court will need to determine to what extent appeals from decisions of the Registrar will be affected by the Supreme Court’s decision.
2. Interlocutory Injunctions
Until 2015, interlocutory injunctions were virtually unheard of in trademark infringement actions in Canada. Litigants generally failed to convince courts to issue such injunctions, due to difficulties in demonstrating irreparable harm in trademark cases. This situation changed in 2015, when the Federal Court of Appeal upheld the grant of an interlocutory injunction in Jamieson Laboratories Ltd v Reckitt Benckiser LLC, 2015 FCA 104 (“Jamieson”). Some feared that this decision signalled a sea change in the judiciary’s willingness to grant injunctive relief on an interlocutory basis, particularly when the Federal Court granted another such injunction in Sleep Country Canada Inc v Sears Canada Inc, 2017 FC 148 (“Sleep Country”).
This trend potentially expanded in 2019, when a provincial court issued an interlocutory injunction in a trademark action for a trademark which had not been used by the claimant in 15 years. In Corus Radio Inc v Harvard Broadcasting Inc, 2019 ABQB 880 (“Corus”), the Alberta Court of Queen’s Bench found that the defendant’s use of an allegedly confusing POWER trademark, in association with a radio station, would subject the plaintiff to irreparable harm if not enjoined, as it would narrow any opportunity the plaintiff has to re-enter the market and undermine the distinctiveness of the plaintiff’s trademark.
The facts at issue in Corus are illustrative. Harvard Broadcasting Inc (“Harvard”) rebranded its Edmonton radio station from HOT 107 to POWER 107 in August 2019. As part of the rebrand, Harvard launched a marketing campaign which referred to the station as “something POWERfully familiar happening today” and “something different yet strangely familiar.” Marketing material invited listeners to “Turn the POWER back on.” Representatives of Harvard admitted that these marketing materials were intended to reference an earlier POWER 92 station operated by a predecessor in title to Corus, and deliberately drew on an association listeners had with the previous POWER 92 brand.
In this manner, the facts in Corus resemble those in Jamieson and Sleep Country, in which a potential infringer had entered the market with full knowledge of the other party’s trademark rights, and with the awareness of the potential for infringement proceedings. That said, it is somewhat difficult to reconcile the need for clear, non-speculative evidence of irreparable harm, generally required for the issuance of such injunctions, with the facts in Corus, in which the party seeking an injunction had not been using the trademark at issue in the relevant market for more than a decade.
3. Definition of Trademark “Use”
Although it is no longer necessary to commence use of a trademark prior to obtaining a registration in Canada, the concept of trademark “use” remains a crucial aspect of Canadian trademark law, both for the maintenance and for the enforcement of trademark rights. On this topic, a number of cases in recent years have involved companies with no “brick-and-mortar” places of business in Canada, and whether the services offered by such companies constitute trademark “use” in Canada.
In one such case, Live! Holdings, LLC v Oyen Wiggs Green & Mutala LLP, 2019 FC 1042, the Federal Court found that consumers in Canada received no tangible and meaningful benefit from the registered owner when buying tickets to events in the US or making reservations at hotels in the US in association with the LIVE trademark, and therefore no use occurred in Canada in association with such services.
In this case, the registered owner, Live! Holdings, LLC (“Live”) submitted evidence in the form of an affidavit by a representative from Cordish Companies, companies affiliated with the registered owner which were located in the US. The Court found that, despite this new evidence, the affidavit failed to provide a basis for an inference that any use by affiliated companies could be considered use by the registered owner under licence.
In addition, the court found that the evidence failed to establish use of any of the registered services in Canada. After reviewing the relevant jurisprudence, the court found that while offering hotel reservation services could fall within the meaning of “hotel services” as registered, use in Canada with respect to such services only occurs where consumers enjoy some meaningful and tangible benefit in Canada. In this regard, the court found that Canadians enjoy no tangible and meaningful benefit in Canada by accessing a website which makes them aware of events or hotels in the US, or by using reservation portals which allow them to make reservations for hotels in the US, since they must leave Canada to enjoy the benefit of such services.
The Court distinguished the facts at issue in Live! from the court’s earlier decision in Hilton Worldwide Holding LLP v Miller Thomson, 2018 FC 895 (“Hilton”), discussed in last year’s Annual Review. The court in Live! found that Hilton turned, in part, on the fact that consumers who made reservations in Canada for stays at the WALDORF-ASTORIA branded hotel in the US received reward points which could be redeemed at the registered owner’s hotels in Canada, and for that reason, Canadian consumers received a tangible and meaningful benefit which was not present in Live!. An appeal of the decision in Hilton is still pending in the Federal Court of Appeal, and it will likely fall to that court to clarify discrepancies, if any exist, between these two decisions – and to more generally resolve unsettled issues of law related to the performance of services in Canada by registered owners who lack brick-and-mortar stores in Canada.
In another important decision regarding trademark “use”, the Federal Court of Appeal confirmed in Cosmetic Warriors Limited v Riches, McKenzie & Herbert LLP, 2019 FCA 48 (“Cosmetic Warriors”) that goods need not be sold for profit to show that a trademark has been used in the normal course of trade. In Cosmetic Warriors, the Federal Court of Appeal considered a registration for the trademark LUSH registered for use in association with clothing. The evidence showed that LUSH branded t-shirts were sold by the registered owner at cost to employees, to be worn as part of their uniforms or gifted to family members. The Registrar preserved the registration on this evidence, but this decision was subsequently reversed by the Federal Court on appeal. The Federal Court found that the Registrar’s conclusion that the sales were in the normal course of trade was unreasonable, given the limited extent of sales, the promotional nature of the distribution, and the fact that the registered owner was not normally in the business of selling clothing.
On appeal of that decision, the Federal Court of Appeal found that requiring proof of profit would render common business practices, such as selling merchandise at a discount, insufficient to maintain registrations. Further, demonstrating that particular sales would generate profit could be a complex evidentiary task, inconsistent with the summary nature of section 45 proceedings. While evidence that a transfer yielded a profit can be a relevant circumstance in demonstrating that the transfer occurred in the normal course of trade, Cosmetic Warriors confirms that proof of actual profit is not required.
As may be expected, many trademark cases in 2019 involved allegations of confusion between parties’ trademarks. Confusion is generally a fact-driven exercise, dependent on the consideration of relevant evidence under the statutory confusion factors at section 6(5) of the Trademarks Act, and therefore it can be difficult to extract general principles from individual cases. That said, a couple cases in 2019 illustrated important aspects of the court’s approach to confusion analyses.
In Loblaws Inc v Columbia Insurance Company, 2019 FC 861, the plaintiff, Loblaws Inc. (“Loblaws”) commenced an action for trademark infringement against Columbia Insurance Company (“Columbia”) alleging confusion between Loblaws’ PRESIDENT’S CHOICE and PC trademarks, in word and design form, and Columbia’s PAMPERED CHEF and PC trademarks, in word and design form. Columbia counterclaimed for expungement, alleging invalidity against the PC Word Mark owned by Loblaws.
While the Federal Court found the PC Word Mark valid, and therefore dismissed the counterclaim, the court likewise dismissed Loblaws’ claims regarding trademark infringement. The court found that Columbia’s marks had some resemblance to the trademarks asserted by Loblaws – although that resemblance was not particularly strong – and found that the parties offered identical services in the form of a rewards program in association with the marks. However, the Federal Court focused on significant differences between the parties’ channels of trade. Loblaws typically sold its goods through traditional retail establishments, and Columbia sold its goods through a direct sales or “multilevel marketing model”. While both parties, to some extent, sold goods through an Internet-based website, the manner in which sales were made through these websites differed. The branding on each parties’ customers websites further minimized any likelihood of confusion. As well, the Federal Court found that the lack of evidence of actual confusion by consumers was “very probative” in finding no likelihood of confusion.
Likelihood of confusion was also considered in Triangle Tyre Co, Ltd. v. Gestion André Touchette Inc, 2019 FC 220. In this decision, Triangle Tyre Co, Ltd (“Triangle”) appealed decisions in which the Registrar refused its applications for trademarks for ICELINK and SNOWLINK on the basis of confusion with a prior registration for TIRELINK owned by Gestion André Touchette Inc (“GAT”). GAT and Triangle offered very similar goods and services, as both operated in the tire business. Nevertheless, the Federal Court allowed the appeal and directed the Registrar to allow the SNOWLINK and ICELINK applications.
The determinative issue in Triangle Tyre was the degree of resemblance between the marks. The Registrar, in the underlying decisions, had found that there was a substantial similarity between the trademark TIRELINK, on the one hand, and the trademarks SNOWLINK and ICELINK, on the other, due to the structure of the trademarks and the dominant “LINK” element shared between the trademarks. According to the Federal Court, this finding constituted a reversible error. Although the word LINK is common to both parties’ marks, the trademarks suggest different ideas: SNOWLINK and ICELINK both suggest a link, or adherence to, a driving surface in winter conditions, whereas TIRELINK does not suggest any specific kind of characteristic of tires, except possibly a reference to a chain of distribution. Therefore, as held by the Federal Court, the Registrar erred by failing to view the combination of elements in the respective trademarks as a whole in the confusion analysis. The limited degree of resemblance between the marks was insufficient to support a finding of confusion, a fact which was determinative of the appeal.
Section 57 of the Trademarks Act allows an interested party to bring a proceeding in Federal Court to strike out or amend any entry on the Trademark Register on the grounds that the entry does not reflect the rights of the registered owner. 2019 saw a number of such challenges to registered trademarks commenced in Federal Court, based both on grounds enumerated in the Trademarks Act and on non-statutory grounds.
In Jingdong v Zhang, 2019 FC 1293, a large e-commerce company located in Beijing brought an application to expunge a JD Design mark owned by an individual, Mr. Yue Zhang, based on grounds of abandonment, the statutory factor set out at section 18(c) of the Trademarks Act. Mr. Zhang owned a retail clothing business, and filed his application for the JD Design mark four months after the Beijing e-commerce company announced its adoption of various JD-formative trademarks.
The applicant sought to expunge the mark on the basis that the trademark was abandoned. In Canada, this requires the party seeking expungement to prove (1) that the mark is no longer in use in Canada, and (2) the owner of the mark has evidenced an intention to abandon the trademark. The applicant easily demonstrated that the mark was no longer in use in Canada, through uncontested evidence in the form of investigations by an experienced trademark investigator of social media and Mr. Zhang’s places of business.
While an intention to abandon is generally more difficult to prove, the court found that, in this case, evidence of non-use over a period of a couple years was sufficient to support an inference of Mr. Zhang’s intention to abandon the mark. Though this period of non-use is relatively short, and would have likely been insufficient to support such an inference on its own, the applicant also adduced evidence that Mr. Zhang ceased operating his businesses in 2017 and failed to file annual reports for his corporations since 2017. Further evidence showed that all associated residences and places of business had ceased operations, were uninhabited, were in a state of repair, or were in the preliminary stages of foreclosure. As a result, the Federal Court granted the requested relief, and issued an order that Mr. Zhang’s registration be struck from the Register.
Roots Corporation v YM Inc (Sales), 2019 FC 16, in contrast, addressed expungement on the basis of allegations of non-statutory grounds justifying expungement. In this decision, Roots Corporation (“Roots”) sought expungement of a registration for a CABIN FEVER & Design trademark registered in association with a number of apparel goods. Roots sought expungement in part based on material misstatements made by the registered owner during the prosecution of the underlying application, which were alleged to be fundamental to the registration which issued.
The underlying application for the impugned registration in this case was filed on the basis of proposed use in Canada. The registration issued prior to June 17, 2019, at which time the owner was required to submit a declaration of use to the Registrar. Such declarations included a statement that the trademark is in use in Canada for each of the goods and/or services claimed in the application. The Federal Court has historically held that such a statement is material to the registration, in the sense that the registration would not issue but for the statement. Therefore, a false declaration of use was typically considered a sufficient basis to render a registration void ab initio, even in the absence of any evidence of fraudulent intent on the part of the declarant.
The Federal Court found that the false statement made by the registered owner was indeed material, in that it was “clearly essential” to the respondent obtaining its registration. However, the Federal Court exercised its discretion to amend the impugned registration to delete the goods which had not been shown to have been sold in association with the trademark, rather than striking the registration in its entirety.
6. False and Misleading Statements
In addition to causes of action based on passing off or trademark infringement, the Trademarks Act provides a number of additional causes of action based on other acts of unfair competition. For instance, section 7(a) of the Trademarks Act prohibits a person from making false or misleading statements tending to discredit the business, goods, or services of a competitor.
Under the plain language of section 7(a) of the Trademarks Act, false and misleading statements are only actionable where they are made to discredit the business, goods, or services of a competitor. Where the party making the statement is not in competition with the aggrieved party, recourse must instead be had to common law actions of trade libel or slander of title. This distinction was determinative in Advantage Products Inc v Excalibre Oil Tools Ltd, 2019 FCA 121 (“Advantage”), an appeal from a decision of the Federal Court by several co-defendants. The appellants contended that one defendant could be liable under this provision, as the remaining defendants were not “competitors”.
“Competitor” is not defined in the Trademarks Act. In Advantage, there was very little evidence on the record about the activities of the appellants, and the Federal Court of Appeal found that the little evidence that was on the record was insufficient to support a conclusion that the appellants were competitors. In so doing, the Federal Court of Appeal confirmed that receiving an indirect advantage from a person in competition with a claimant, such as royalties, is insufficient to bring that recipient within the common understanding of the word “competitor”. While leaving open the possibility that a more substantial evidentiary record could demonstrate that a licensor and licensee could both be competitors in relation to an aggrieved party under section 7(a), the Federal Court of Appeal granted the appeal.
A party alleging that a competitor has made false and misleading statements also bears the burden of demonstrating that the challenged statements are indeed false and misleading, in that the statements have no reasonable basis in fact. In Petline Insurance Company v Trupanion Brokers Ontario Inc, 2019 FC 1450, Petline Insurance Company (“Petline”) alleged that its competitor, Trupanion Brokers Ontario Inc (“Trupanion”) made false and misleading statements for the purposes of promoting competing services in comparative advertising. The impugned statements were contained on Trupanion’s pamphlets and website, in which Trupanion compared its pet insurance services favourably with Petline’s similar services in a manner unfavourable to Petline. The court considered nine such statements, and found that none constituted “false or misleading statements”, as they were made on a reasonable basis. With regards to at least one impugned statement, Petline had changed its insurance policies in response to Trupanion’s characterization, providing additional support for the contention that the statement had a reasonable basis in fact.
Another essential element of section 7(a) which must be demonstrated by an aggrieved party is actual damage resulting from the misrepresentation. In Alliance Laundry Systems LLC v Whirlpool Canada LP, 2019 FC 724, Whirlpool Canada LP (“Whirlpool”) alleged that its competitor Alliance Laundry Systems LLC (“Alliance”) had made false and misleading statements on its website and its press releases with respect to SPEED QUEEN branded washing machines. Whirlpool alleged that Alliance falsely claimed that its SPEED QUEEN products were not previously available in Canada, and further, that Alliance’s use of the ® symbol falsely implied that it owns a registered Canadian trademark for SPEED QUEEN, which it does not.
The Federal Court agreed with Whirlpool in part, finding that the use of the ® was indeed false and misleading and tended to discredit Whirlpool’s goods by suggesting that Alliance was the rightful owner of the mark. Yet the Federal Court nevertheless dismissed Whirlpool’s claim, as Whirlpool was unable to show any actual damage. Whirlpool could not simply rely on a presumption of damages, as a party claiming under section 7(a) of the Trademarks Act must show some actual damage it experienced as a result of the misrepresentation. The Federal Court clarified, however, that this damage need not be large, and could even constitute as little as the loss of one customer.
7. Cost Awards
The Federal Court also provided a number of interesting comments on cost awards in 2019. Under the Federal Courts Rules, cost awards can be used to discourage undesirable behaviour by litigants. These type of awards can therefore act as behavioural incentives, through which judges discourage conduct which undermines the trademark registration system or which gives rise to unnecessary delay and complexity during litigation.
In Hi-Star Franchise Systems, Inc v Stemp & Company, 2019 FC 222, the Federal Court awarded costs against a requesting party in an appeal from a decision of the Registrar in section 45 proceedings, despite the fact that the party did not oppose the appeal, and eventually provided its consent to the requested relief. The Federal Court found that the court may order costs even where a party does not oppose an appeal. Further, it found that the party’s communication indicating that it wished to withdraw its opposition to the appeal came at a late stage in the proceeding, after much work had been done to pursue the appeal. As a result, the court exercised its discretion to award costs against the party.
Although the cost award in Hi-Star Franchise Systems, Inc. (“Hi-Star”) was relatively small ($1,700.00), this decision could give rise to concerns among practitioners, particularly when it comes to non-responsive clients. For instance, an appeal from a decision of the Registrar cannot be ordered by the Federal Court on the consent of parties alone – and whether the early consent of a party will reduce overall effort is a matter of speculation. The Court in Hi-Star recognized these issues, but still proceeded to award costs against the consenting party. In this regard, Forget v Charm Jewellery Limited, 2019 FC 987 (“Forget”) is potentially illustrative as a counterpoint to the award in Hi-Star. As in Hi-Star, the party did not oppose the appeal of the Registrar’s underlying decision, which resulted in the expungement of the registered owner’s evidence. In Forget, however, the requesting party withdrew its opposition to the appeal immediately upon being served with the registered owner’s request for a hearing.
Both Forget and Hi-Star involve an appeal of a decision of the Registrar, and in both, party opposing the appeal did not indicate withdrawal of its opposition until a late stage of the proceeding. Therefore the manner in which Forget distinguishes previous cases, including Hi-Star, appears to be quite narrow. As a result, Forget suggests that Courts may decline to follow the decision in Hi-Star in the future, and instead find grounds for distinguishing this precedent.
In another notable decision on cost awards – this one in the context of an appeal of expungement proceedings under section 57 – the Federal Court reduced by 50% the amount of costs to which a successful party was entitled, due to past conduct before the Registrar. In Bon Appetit Danish, Inc v 2168587 Ontario Ltd, 2019 FC 396 (“Bon Appetit”), the Federal Court found that a registered owner had obtained a number of extensions of time to file a declaration of use for its eventual registration between 2011 and 2015, despite the fact that the owner had commenced use in 2013.
The Federal Court found that, as a result, the owner had made misleading representations to the Registrar to secure these extensions. The court reduced the cost award payable to the registered owner, despite the fact that it was successful in the proceeding. Moreover, the Federal Court used a reduction in the cost award to indicate its disapproval of the party’s conduct, despite the fact that the relevant conduct did not take place in the context of the litigation, and indeed took place a few years before the litigation was even commenced. Bon Appetit demonstrates the wide scope of discretion afforded to the Federal Court to discourage what it views as inappropriate conduct through the award of costs.
 See “Trade-marks” Chapter in Annual Review of Law and Practice – 2019, 28th Ed., published by CLEBC.
 Trademarks Regulations at s. 97.
 Trademarks Regulations at s. 105.
 Trademarks Regulations at s. 133
 Trademarks Regulations at s. 143.
 Trademarks Regulations at s. 128.
 Trademarks Regulations at s. 132.
The author would like to acknowledge the assistance of David Bowden, Associate and Nicholas Carlson, Articled Student with Clark Wilson LLP, in preparation of this paper.