Special Circumstances Excuse Non-Use of Trademark


Cobalt Brands, LLC v. Gowling Lafleur Henderson LLP concerned the registration of the mark USQUAEBACH & Design for use in association with blended Scotch Whiskey. The mark was registered in 1977 by a U.S. company which suspended production and sales in 2003 after the death of two owners holding a 95% interest. Van Caem, a Dutch liquor company and creditor, acquired the mark and assigned it to its Belgian subsidiary, but the owner of Van Caem died and Van Caem and its subsidiaries were forced to liquidate, which involved a lengthy process. The registered owner, Cobalt Brands, purchased the mark in 2007 and the assignment to Cobalt Brands was recorded by the Registrar. However, the section 45 expungement notice sent by the Registrar was not received by Cobalt Brands and the Registrar expunged the registration.

Cobalt Brands appealed. Cobalt Brands agreed the mark had fallen into disuse, but argued that special circumstances excused the non-use and the Court agreed.

The Court noted that Cobalt Brands was not prohibited from adducing evidence before the Federal Court simply because none was produced before the Registrar and that it was entitled to produce more than one affidavit.

The Court cited Scott Paper Ltd. v. Canada (Attorney General) for what constitutes “special circumstances”, noting that it must consider the duration of the absence of use and the likelihood of its continuation along with the extent to which the absence of use is due to a deliberate decision on the part of the owner (not permissible) or factors outside the owner’s control (permissible).

The mark had not been used for nine years, but the Court concluded that the ownership of the mark was plagued by a series of unfortunate events, including the deaths of the principal owners and a lengthy liquidation process. Cobalt Brands, upon acquiring the mark, immediately took steps to recommence production and distribution, but this involved locating a Scottish distiller and complying with the regulatory scheme in each Canadian province. These events were largely beyond the control of the registered owner. Moreover, while an intention to resume use does not excuse the absence of use, there was clear evidence the period of non-use was coming to an end. Thus, the registration was restored.