One of the Defendant companies had been a 30%  owner  of one of the Plaintiff companies and a Letter of Intent had been executed setting out the basic relationship whereby the Plaintiff s were to distribute valves manufactured by the Defendants in China.  The parties had also executed a Consignment Agreement which the Court found to be a critical document since clause 12 specified that the intellectual property arising by virtue of the Agreement was deemed to be equally owned by the parties. 

For marketing purposes, the Plainitffs adopted the trademark FUSION and proceeded to market wares manufactured by the Defendants, as well as wares sourced from a different manufacturer, using the trademark.  However, following the breakdown of the relationship, one of the Defendants registered the trademark.  The disputes arising between the parties were eventually settled under an Alberta Queen’s Bench action, which left only the intellectual property issues unresolved. The Plaintiffs had also applied to register the trademark, but the Defendants successfully opposed the application on the basis of alleged prior use. 

In light of the Consignment Agreement, the Federal Court concluded that neither the Plaintiffs nor the Defendants had a right to register the trademark.  Since neither party was prepared to acknowledge joint ownership, FUSION was essentially “poisoned” as a viable trademark. 

The Court also concluded that the Defendants could not claim first use on the basis that the Plaintiffs were distributors of a product the Defendants manufactured off-shore (similar to the conclusion reached in the 1989 case, Lin Trading Co. v. CBM Kabushiki Kaisha). Under the Consignment Agreement the Defendants retained ownership of the goods until ownership was transferred to a third party and therefore there could be no use of the trade-mark by the Defendants in Canada.

The Plaintiffs’ request that they be substituted as the registered owner of the trademark was also denied, in light of the equal ownership referenced in the Consignment Agreement, but also because the Court had no such jurisdiction.  The Court also found that the Defendants had mislead the Trademarks Office when they sought to register FUSION, having specificially omitted any reference to section 12 of the Consignment Agreement in the Affidavit filed with the Office.  Following General Motors of Canada v. Décarie Motors Inc.  the Court found there was a material misrepresentation which meant the registration could be invalidated, even in the absence of a fraudulent intent.

Finally, with regard to section 7(a) of the Trade-marks Act, which provides that no person shall “make a false or misleading statement tending to discredit the business wares or services of a competititor”, the Court found that the Defendants had mislead a client of the Plaintiffs by suggesting that the Plaintiffs’ manufacturing facility in China had been closed down.  However, the issue of damages was to be determined in a further hearing and the Court left open the possibility of further evidence from the Plaintiffs’ client.

Thus, neither party was entitled to the registration of the trademark and the issue of damages pursuant to section 7(a) was left open for a further hearing.

The plaintiff, the Private Career Training Institutions Agency (Agency) is a provincial regulatory agency charged with overseeing career training institutions that operate throughout the Province of British Columbia.  Acting on complaints received from other career training institutions in the Province, the Agency sought an injunction against VCC’s practice of using the names and trademarks of those other institutions in VCC’s keyword advertising program, on the basis that such use was false, deceptive or misleading.  The Court held that VCC’s keyword advertising program was not false, deceptive or misleading and therefore no injunction was granted.

While framed as a false, deceptive or misleading advertising complaint, rather than a trademark infringement or passing off claim, the Judge in his reasons specifically referenced trade-mark and passing off concepts when looking at the issue of what is confusing or misleading in the context of alleged improper advertising.  The Judge found that what the defendants were doing did not amount to false, deceptive or misleading advertising.  The Judge also held in his reasons that: “I also accept VCC Inc.’s argument that its practice of using Keyword Advertising is no different than the time-honoured and generally accepted marketing practice of a company locating its advertisement close to a competitor’s in traditional media (e.g., placing its Yellow Pages advertisement next to or in close proximity to a competitor’s telephone number  in the same directory so that potential customers of that competitor discover there is another company offering a similar product or service and that they, the consumer, have a choice).”

The Agency has until June 28, 2010 to file an Appeal of the decision, should it choose to do so.

(“the Standard Lager Mark”) a beer continuously sold in Canada since 1926, but almost exclusively in the province of Manitoba. Anheuser-Busch, the Applicant before the Opposition Board, had two labels that were registered as trade-marks:

(“the Registered Anheuser-Busch Marks”). The opposition arose when Anheuser-Busch sought to register an “updated” version of its two previously registered marks (“the Proposed Anheuser-Busch Marks”).

The Federal Court reviewed the litigation history arising in respect of the earlier registered marks, including a 1986 Federal Court of Appeal decision, Carling O’Keefe Breweries of Canada Ltd. v. Anheuser-Busch Inc., which concluded that the Standard Lager Mark and the Registered Anheuser-Busch Marks were confusing, that there was some sort of impropriety when the Standard Lager Mark was originally registered in 1929 since it was inspired by and designed with knowledge of the BUDWEISER label, but Carling (Molson’s predecessor in title) could rely on the equitable defence of laches and thus there was no basis for expunging either the Standard Lager Mark or the Registered Anheuser-Busch Marks.

The Opposition Board allowed the registration of the Proposed Anheuser-Busch Mark as it applied to clothing since Molson had not established that the ambit of protection accorded to the Standard Lager Mark included wares other than beer. With regards to use in association with beer the Opposition Board determined that it could limit the scope of protection afforded the Standard Lager Mark since the Court of Appeal had determined it was wrongfully obtained. Thus, Molson’s opposition with regards to use in association with beer was rejected.

The Federal Court disagreed and allowed the opposition with regards to use in association with beer. The Court was particularly concerned that the Opposition Board had exceeded its jurisdiction, since it is limited in an opposition proceeding to determining if a trademark is or is not registrable. Thus, for example, if there is a confusing mark on the register, the new mark cannot be registered. However, if the existing registration of an invalid trademark is interfering with the registration of a new trademark, it is up to the applicant for the new mark to take the necessary steps, usually an expungement application to the Federal Court, to get the register corrected. In an opposition proceeding, the validity of an opponent’s registered mark is not in issue.

The Federal Court was concerned that the Opposition Board could not limit the ambit of protection afforded the Standard Lager Mark on the basis that the Court of Appeal had questioned the lawfulness of the registration. Indeed, the Court of Appeal had not found the registration of the Standard Lager Mark was unlawful, but had instead found that the registration was not a nullity. Thus, Molson was relying on a valid registration and the question to be answered was whether the Proposed Anheuser-Busch Mark was confusing with the Standard Lager Mark. The Federal Court concluded they were confusing, applying the test in section 6(5) of the Trade-marks Act and giving particular weight to two surrounding circumstances: (1) that the Court of Appeal had found the Registered Anheuser-Busch Marks confusing; and (2) an acknowledgement in the Memorandums of Fact and Law filed by both the parties that the marks were confusing.

The beer wars continue and we may very well see an appeal.

STENNER was registered as a trademark in the Canadian Intellectual Property Office (“CIPO”) in 2005.  The Application, filed in 2003, was objected to by the CIPO Examiner on the basis that the mark was primarily merely the surname of an individual.  That objection was overcome when the Applicant provided sufficient evidence of secondary distinctiveness – i.e. evidence that the mark was recognized as the source of the Applicant’s financial services and newsletters, as much or more than than it was recognized as a surname.  The Application was not opposed by anyone.

The Federal Court found that the evidence established that the registered owner had used the STENNER mark on and off over the years, commencing in the late 1980′s, though rarely, if ever, as a standalone mark and periods of use had been punctuated by lengthy periods of non-use.  In the early 2000′s, the principal of the registered owner had a bitter falling out with his two children who were also in the financial services industry and who also used the STENNER name in association with the performance of their services.  That falling out had been the subject of a separate lawsuit, however the Court in those proceedings specifically declined to rule on the validity of the trademark registration for STENNER.

The application to expunge the registration for STENNER was based on various grounds, but the argument that won the most favour with the Federal Court was that the mark was no longer distinctive (assuming it ever had been), due to extended periods of non-use, lack of use as a standalone mark and the results of expert evidence on the recognition of the mark as a source indicator for the registered owner’s services.   The expert evidence put forward showed that the mark was recognized by virtually no one outside of the Lower Mainland of British Columbia and even within that region, the recognition factor was very low.  Also, the use of the same mark by the two children in the same industry and geographic area also pointed to a lack of distinctiveness.

In the end result, the Federal Court ordered the expungement of the registration for the STENNER mark.  There is no indication yet of whether an appeal will be filed, though the deadline for doing so is fast approaching.

Those of us who provide trademark prosecution and counselling services—and particularly those of us who work with clients that have multi-national trademark portfolios—know that clients are sensitive to developments not only in Canadian practice, but also in other key markets around the world.  Many of my clients were concerned about a line of United States cases, decided over the last several years, that regarded innocent filing errors in applications, renewal forms, and other correspondence with the US Patent and Trademark Office as attempts to perpetrate a fraud on the Office, justifying refusal, expungement, or some other highly punitive penalty.  These decisions had effectively broadened the notion of “fraud” on the USPTO to include innocent mistake and negligence.

However, it appears generally acknowledged that this trend halted in 2009 with a decision titled In re Bose Corp. In the most general terms, Bose served to restore the concept of fraud on the Office to a more conventional meaning.  Now, only if an applicant knowingly makes a false, material representation with the intent to deceive does their action rise to the level of fraud, meriting harsh punishment.

However, I am becoming concerned we may be seeing the start of a trend in Canada toward permitting challenges to applications for alleged lack of good faith akin to what our US friends experienced pre-Bose.  In decisions released over the last two years, the Canadian Trade-marks Opposition Board appears to be breathing new life into the ability of opponents to challenge applications on the basis of good faith.

Now, to be clear, opposition proceeding claims that an application has not been filed in good faith, and therefore does not conform to the requirements of the Trade-marks Act, are nothing new.  Many opponents’ counsel have been inserting claims to this effect in statements of opposition for years, if not decades, almost as a matter of course.  Seemingly frustrated by the claims’ prevalence in the 1974 case of Sapodilla Co. Ltd. v Bristol-Myers Co. (15 C.P.R. (2d) 152), the Canadian Trade-marks Opposition Board queried whether such claims actually created a valid ground of opposition, and expressed regret that the provision was so commonly asserted in opposition proceedings where “it serves no purpose other than to clutter up the proceedings.”

What is new, however, is that the Board now appears increasingly willing to entertain claims challenging the truthfulness of statements contained in applications, and to refuse applications where the Board has suspicions about the verity thereof, independent of other grounds.  Two recent decisions of the Board illustrate this.

The first—Cerveceria Modelo, S.A. de C.V. v. Marcon (2008, 70 C.P.R. (4th) 355)—was issued in 2008.  There, the Board upheld an opposition brought by Cerveceria Modelo against Marcon’s application to register the trademark CORONA for use in association with both a variety of beverages and with beverage bottling services.

Marcon’s application was opposed on several grounds, including alleged confusion with Cerveceria Modelo’s familiar CORONA trademark. Additionally, the opposition was also founded on Marcon’s alleged failure to comply with s. 30(i) of the Trade-marks Act, which provides that an application must contain a statement that the applicant is satisfied that he “is entitled to use the trademark in Canada in association with the wares or services described in the application.”

Certain trademark commentators, including the esteemed Hugues Richard, have previously suggested that the requirement to include this statement in an application amounts to a representation on the part of the applicant to the public that the application has been submitted in good faith, and that the applicant approves of the application.

In Marcon, relying upon an earlier decision purported to suggest that s. 30(i) challenges could be successful in “exceptional circumstances”, the Board concluded that the opponent had adduced sufficient evidence to properly support its allegation relating to s. 30(i), by:

• establishing that Marcon had filed applications for a number of other allegedly well-known marks contemporaneously with or following his application for the CORONA mark; and
• pointing out that when initially filed, Marcon’s CORONA application claimed beer, just as was claimed in the CORONA registration owned by the opponent, even though the statement was later revised to remove these directly overlapping wares, which Marcon claimed under cross-examination to have been included by mistake.

In addition, the Board appeared to draw a negative inference from Marcon’s failure to have approached a manufacturer to produce many of the proposed wares he desired to offer in association with the trademark.  In the Board’s view, these facts together constituted the sort of “exceptional circumstances” to put the good faith “entitlement” issue into question, requiring Marcon to establish grounds for his belief in his entitlement.

Despite some efforts to establish his bona fides as an entrepreneur (from which, it appeared, he hoped the Board would infer his genuine interest in using the marks), Marcon failed to persuade the Board of his good faith belief.  Instead, the Board queried “how any reasonable person would be satisfied that he/she was entitled to file trademark applications for over 18 arguably well known marks for arguably related wares and/or services.” Of course, this is not the proper analysis: the consideration ought to focus on the good faith entitlement assertion for the particular application in which it appears—and in this regard, it is worth noting that the Examiner initially assigned to consider Marcon’s application didn’t think its claims to be entirely unreasonable, approving the application for advertisement, which ultimately lead to the opposition proceeding.  In any event, the Board found the opponent’s arguments persuasive, and Marcon’s application was refused.

This decision is somewhat troubling insofar as the rights of applicants are concerned: arguably, it has the effect of requiring an applicant to have a knowledge of the niceties of trademark law—and specifically,  questions around confusion and scope of protection—that the legislation does not require.  Under cross-examination Marcon made clear that he did not believe that he should have the right to claim CORONA in association with beer, but believed that no one would be confused as to the source of CORONA-branded water, juice or even wine products he might offer.  In this light, it appears Marcon turned his mind to the entitlement issue, and came to a (seemingly) honest, but (arguably) incorrect, conclusion.  Nonetheless, the Board concluded that Marcon’s actions brought his good faith into question, tainting the application.

In this way, the decision appeared to open the door to a slightly different line of attack against applications than had previously been available, imposing a standard not merely of the presence of the required s. 30(i) statement, but extending to the need for both some evidence of the bona fides of the applicant’s belief in his entitlement, and the correctness of that belief in entitlement at law.

The Board seemingly took another troubling step in this direction in a subsequent decision— FreemantleMedia North America Inc. v Wright Alternative Advertising Inc. (2009 77 C.P.R. (4th) 311).  In this case, the Board considered Freemantle’s opposition to Wright’s application to register the trademark CANADIAN IDOL.  Freemantle is the North American affiliate of the co-owner of the British Pop Idol television series, which developed the popular American Idol, Canadian Idol and World Idol television programs.

Wright, a marketing and advertising agency, had been engaged by Sears Canada to assist in the development of a national youth talent competition which it proposed be called CANADIAN IDOL.  The competition was to involve an open audition call: the top 20 performers from each region would compete at their local Sears store, with shoppers choosing the winner. Sears representatives suggested to Wright that they would like to see the competition receive some television exposure.

Wright filed an application to register CANADIAN IDOL for use in association with “entertainment services namely, television talent show, talent search show, national contest searching for talented individuals, and talent search services.” Freemantle opposed the application on a variety of bases, including that the application did not conform to s. 30(i) of the Act.

Relying upon its own decision in Marcon, the Board took the position that it could look behind an applicant’s s. 30(i) statement in “exceptional circumstances”, like those where “there is evidence of bad faith on the part of the applicant.”  However, the Board then redefined the test to an examination of “whether there was sufficient evidence …to suggest there may have been bad faith” [emphasis added]—arguably, a lower standard.

In applying the test to the facts at hand, the Board redefined it further.  The Board noted testimony by a Wright employee, unfamiliar with the niceties of Canadian trademark prosecution, who advised that a reference to television talent shows was inserted in the application before she had discussed the topic with Sears.  As the employee explained, the hope was simply that Sears would be happy and that Wright would get the work, and that she did not have any specific thoughts about making television programs at that time.  The Board took this as evidence that “raise[s] suspicion about the Applicant’s good faith in submitting the application”—again, a different standard than first expressed—and therefore required Wright to establish grounds for its belief in its entitlement as expressed in s. 30(i).

As was the case in Marcon, Wright failed to convince the Board of its bona fides with respect to its belief in its entitlement to use the CANADIAN IDOL mark in Canada in association with the claimed services. Despite testimony that its investigations led it to believe that no “Canadian Idol” program would be introduced in Canada—and in fact, no public announcement had been made in this regard prior to the time of Wright’s filing—the Board concluded that Wright had not sufficiently established that it was satisfied that it was entitled to file the application for CANADIAN IDOL, nor that its intentions were bona fide when it did so.

This decision too is troubling: in recasting the threshold to be met to put s. 30(i) into question from “exceptional circumstances” where there is “evidence of bad faith” to one merely requiring evidence that “raise[s] suspicion about the Applicant’s good faith”, the Board appears to have materially lowered the standard required to bring s. 30(i) into play on its own.

Whether these decisions are mere anomalies, or whether they signal the start of trend where the bona fides of an applicant’s s. 30(i) claims will, in and of themselves, regularly be in play remains to be seen.  Certainly the success of the opponents in these two cases will do nothing to stem the practice of “cluttering up the proceedings” with the sort of s. 30(i) challenges that the Board itself complained about in the Sapodilla decision, so many years ago.

Yet, neither of these two recent decisions appears to be well-supported by jurisprudence.  Somewhat curiously, both the Marcon and Freemantle cases in fact rely upon the Sapodilla decision to support the approach of alleging defects in the bona fides of an applicant’s s. 30(i) as a legitimate and independent ground of opposition.  Review of Sapodilla suggests that such an interpretation is not clearly tenable.

Moreover, the Federal Court has previously endorsed the view that an opponent cannot properly successfully oppose an application by merely challenging the verity of an applicant’s s. 30(i) claim without some other shortcoming first being found.  As the court put it:

Scholarly analysis also appears to indicate that unless a person alleging the validity of a trade mark can base his argument on other grounds, he cannot rely on s. 30(1)(d)(i) [as it then was, now s. 30(i)] simply by saying that the applicant does not have the right to use the trade mark. That is simple common sense. If the applicant is entitled to registration of his trade mark in accordance with the relevant provisions of the Act, a fortiori he is entitled to say that he is the person authorized to do so. (Optagest Canada v. Services Optometriques (S.O.I.) (1991), 37 C.P.R. (3d) 28 at 32)

In any event, until the Board eschews this approach—or until there is new jurisprudence from the Federal Court clearly pronouncing on the ability of an opponent to challenge the bona fides of an applicant’s s. 30(i) claims independent of other grounds—it remains clear the allegation will stay a part of many statements of opposition.  The trend, though, is unfortunate: it serves to introduce more indeterminacy in the law, which will make pre-filing application due diligence slower and more expensive, and will most likely claim self-represented filers as victims.

In the interim, applicants ought to be reminded of the need to take care in confirming both the propriety of their belief to their entitlement to use a trademark in Canada in association with prescribed wares and services, and to ensure the availability of evidence to support such a claim.

In addition, both of the earlier decisions stated that in order for prior use of a mark in Canada to be grounds for successfully expunging a registration, such prior use must have occurred in the same geographic area where the applicant used its mark; otherwise there could have been no likelihood of confusion at the time the application was filed.   In coming to the latter conclusion, both Courts appear, at least with respect to an action for expungement of a registration, to have imported into the test for likelihood of confusion, the test for common law passing off.   Given this, the decision of the Supreme Court of Canada on this issue will be eagerly awaited by practitioners.

Three of the grounds advanced are of interest:

(1) that the Design was not registrable as of the filing date of the application (1994) because the Design was being applied to the wares for the purpose of decoration only and not for the purpose of distinguishing the applicant’s wares;

(2) that the Design was not registrable as of the filing date because the Design was primarily functional and registration would give Colgate-Palmolive a monopoly on functional elements or characteristics (i.e. stripes) of toothpaste; and

(3) that the Design was not registrable as of the filing date because the Design was not a “trademark” as defined in the Trade-marks Act since the Design was applied to toothpaste which was contained in an opaque package.

With regards to each of these grounds, the Court agreed with the Opposition Board that the pleadings were defective since the grounds of opposition did not exist under the Act. More particularly, a pleading dealing with registrability under section 12 of the Trade-marks Act could not cover a pleading that a trademark is not a trademark and the allegation alleging that the Design was not a “trademark” should have been plead under section 30 of the Act.

With regards to (1) above, the Court also agreed that Procter & Gamble did not provide evidence that the trademark was only applied for the purposes of decoration. In Adidas (Canada) Inc. v. Colins Inc., a 1978 Federal Court decision, there had been clear evidence the striping was only decorative and ornamental, but this was not the case at bar.

With regards to (2) above, the Court noted that different functions could be assigned to particular colour stripes (such as improving whiteness, providing flouride), but stripes were not necessary to perform the different functions. There was also no evidence of any particular function to be performed by Colgate-Palmolive’s stripes.

With regards to (3) above, the Court found that there was no evidence that as of the application date Colgate-Palmolive could not use the stripes as a “trademark”. Although it was not the usual market practice, the Court accepted Colgate-Palmolive’s evidence that it was possible to package and advertise toothpaste so consumers could see the actual wares with the stripes applied.

Thus, Procter & Gamble’s biggest hurdle was its defective pleadings. However, the Court was also not convinced the stripes were only decorative, functional or not intended as a “trademark”.

On appeal to the Federal Court the central issue was whether Tucumcari had filed sufficient additional evidence regarding its licensing arrangements, which involved a licensee and sublicensee, so as to establish that it had control over the character and quality of the wares. The Respondent agreed that sublicensing was permitted under section 50(1) of the Trade-marks Act, but argued that the indirect control contemplated by the Act required an express condition in the sublicensing agreement requiring the registrant to determine whether the character and quality of the wares are maintained. The Court disagreed, holding that the  registrant’s control of its contractual rights through the intermediary was sufficient and express language was not required.

The Court was also satisfied that an express provision authorizing sublicensing was not required and, even if Tucumcari had not specifically agreed to the sublicensing, there was evidence it had acquiesced. Moreover, a provision that allowed the sublicensee to ultimately buy the trade-mark did not mean Tucumcari was not using the mark in the interim, since it retained ownership and had an interest in preserving the goodwill until such time as it ultimately assigned its interests.

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.

The Opposition Board member found that “vibe” was not inherently distinctive, relying on an earlier decision of the Court, Vibe Ventures LLC v. 3681441 Canada Inc.  The Board also found that VIBETRAIN consisted of two ordinary dictionary words that were disconnected from their respective meanings and which, when juxtaposed, were inherently distinctive.  The Board member referred to the Oxford English Dictionary for the definition of “vibe”.  Before the Court, the  Opponent argued that other dictionaries did not define “vibe” and it was therefore not an ordinary dictionary word.

On appeal, the Court found that “vibe” may no longer be inherently distinctive, but through continuous use it had become suggestive of the Opponent’s magazine, something the Board had acknowledged in its decision.  The Opponent also submitted new evidence on the appeal to show that the word “train” suggested a series of musical performances, that no other magazine titles in Canada began with VIBE and that VIBE had been used in Canada with programs, websites, books and recordings related to music.

The Court concluded there was a broad overlap in the music, culture and clothing wares and services that the VIBE and VIBETRAIN trademarks sought to identify, as well as similar channels of trade, since both targeted people with an interest in music, entertainment and culture.  Thus, there was a likelihood of confusion for a “casual consumer somewhat in a hurry”.