Canada: The IP Year 2007 In Review: Trade-marks (Part 2)

This second part of The IP Year 2007 in Review covers the year's developments in trade-marks. See parts 1 and 3 on patents and copyrights respectively.

There were a number of noteworthy 2007 Federal Court cases involving trade-marks. Following the Supreme Court of Canada in the Mattel and Veuve Clicquot decisions in 2006, the Federal Court of Appeal had the opportunity to consider trade-mark dilution and "famous" trade-marks in view of these Supreme Court pronouncements. With the Winter Olympics coming to Vancouver in 2010, there has been the introduction of new legislation for the protection of Olympics related marks. There have also been indications Canada will be participating in a multilateral agreement against counterfeiting and piracy. Finally, there have been some important practice notices issued by CIPO dealing with official marks, disclaimers and opposition proceedings.

Trade-marks Office Now Requires Evidence Of Adoption And Use Of An Official Mark It will now be more onerous for public authorities to obtain their "Official Marks" under the Trade-marks Act.⁴⁶ Not only are public authorities now required to file evidence sufficient to establish that they are entitled to public authority status, but they are now also required to file evidence of actual use and adoption of the mark in Canada.

In August, the Registrar of Trade-marks (the "Registrar") issued a Practice Notice regarding the publication of Official Marks and the notice of public authority status.⁴⁷ An "Official Mark" is any badge, crest, emblem or mark adopted and used by any public authority and designation as such prevents third parties from using or registering the Official Mark, or a confusingly similar mark, for any goods or services. As such, these marks have greater scope of protection than traditional trade-marks. Further, an Official Mark is not subject to examination in the same manner as a regular trade-mark.

According to the recent Practice Notice, the Registrar now requires entities to submit evidence of public authority status before allowing an Official Mark. A three-part test is set out to establish public authority status: (1) the entity must be a public authority in Canada; (2) the appropriate government must exercise a significant degree of control over the entity’s activities; and (3) the entity’s activities must benefit the public. The test for "government control" requires that the government be enabled directly or through its nominees to exercise a degree of ongoing influence in the public entity’s governance and decision. The fact that an entity is statutory and that its objects and powers may be amended by Legislature or that the entity is a non-profit corporation, is not sufficient evidence of "government control". For the "public benefit" test, the Registrar considers the entity’s objects, duties and powers, including the distribution of its assets. The entity must show it does something of public benefit, regardless of whether or not there is a corresponding public duty to do so.

Speeding Up Oppositions Prosecution of a trade-mark opposition before the Canadian Trade-marks Opposition Board ("TMOB") can be an extremely long and drawn out process. Since CIPO’s Practice Notice issued on October 1, 2007, trade-mark opposition in Canada may just be a little faster.⁴⁸ Oppositions for marks advertised before October 1, 2007, will now be treated differently than those advertised after that date.

The Practice Notice shortens the traditional periods for extensions of time at the various stages of the opposition. It also limits the number of extensions that will be granted. Substantive reasons necessitating an extension must now be provided to the TMOB at the time of the request, even if the consent of the other party has been obtained. Endless numbers of extensions of time will not be granted.

What does this mean in practice? If you are serious about opposing a trade-mark owned by another party, be ready to put the time into preparing the evidence so that extensions of time are not necessary. If you think settlement is a viable option, actively engage in settlement negotiations (or provide instructions to counsel to do so) so that extensions of time are either not necessary or will be granted on the grounds that substantive reasons have been provided. Either way, it’s in everyone’s best interest to speed up the opposition process.

Disclaimers No Longer Required In August, the Registrar also issued a Practice Notice regarding disclaimers under the Trade-marks Act. Generally, a trade-mark is not registrable if it is clearly descriptive (whether in depiction, writing or sound) of the wares or services sought to be registered. Previously, if a trade-mark had been filed containing both descriptive and non-descriptive words, as long as the mark is distinctive as a whole, the applicant would have to disclaim the right to the exclusive use of the descriptive words. Under the new practice, the Registrar has eliminated this requirement and while voluntary disclaimers will still be accepted, an applicant for a trade-mark is no longer required to enter disclaimers.

This change will hopefully result in applications moving faster through the examination process as examiners will no longer be issuing office actions when the disclaimer requirement is the only issue.

Preparing For The Vancouver Olympics: Taking Aim At "Ambush Marketing" The Olympic and Paralympic Act⁴⁹ (the "OPA") takes aim at "ambush marketing" by companies or individuals who try to improperly associate themselves with the Olympic Games without paying for the privilege of doing so.

Upon receiving Royal Assent on June 22, 2007, the OPA and the Rules promulgated thereunder,⁵⁰ provide greater protection for official marks of the Canadian Olympic Committee and Canadian Paralympic Committee (the "COC"). The OPA lists various marks that cannot be used by entities other than the COC (a "COC Mark") and prevents companies that are not "Official Sponsors" from using any of the prohibited "words" or "phrases" in proximity to other marks.

The OPA prevents adoption, use or registration of a trade-mark that so nearly resembles or would likely be mistaken for a COC Mark or is a translation of any of the COC Marks, unless the mark had been first used prior to March 2, 2007 and is being used with the same or same general class of wares and/or services with which it had already been used or registered. This means that the owner of a regular trade-mark that resembles a COC Mark, can continue to use its mark but only with respect to the same goods or services and cannot expand its use into other areas unless they are of the same "general class". The OPA also prohibits a person from promoting or otherwise directing public attention to their business, wares or services in a manner that is likely to mislead the public into believing they are authorized by the COC or that a business association exists with the COC.

The remedies provided under the OPA are also significant. An interim or interlocutory injunction may be granted to an applicant who is not required to prove that it will suffer irreparable harm. The threshold set by the Canadian courts to prove irreparable harm has traditionally been quite high and centres on the issue that monetary damages alone will not fully compensate the injured party. Under the traditional rules it would have been less likely that COC would be able to obtain injunctions.

It remains to be seen how the courts will interpret the OPA. As the Winter Olympics of 2010 draw nearer and more advertising hits the marketplace, it will be interesting to see how aggressively the COC attempts to enforce its rights under this new Act.

Piracy And Counterfeiting In Canada The past year has seen an increase in attention to issue of counterfeiting and piracy in Canada. It has been suggested that the protections afforded to trademark, copyright and other intellectual property right holders in Canada are insufficient and in need of reform. Two committees of the House of Commons, the Public Safety and National Security and the Industry, Science and Technology Committees, released reports on counterfeiting and piracy this year. The reports made a number of recommendations, including criminal remedies for trademark and copyright infringement.⁵¹

In October, the Canadian Government responded by expressing its support of the anti-counterfeiting measures proposed by the two reports. In particular, Canada stated its intention to bring its intellectual property regime into conformity with WIPO treaties. In addition, the Canadian government announced that Canada would participate in discussions with the United States, Mexico, the European Union and others towards producing an Anti-Counterfeiting Trade Agreement. The objective of such an agreement is to develop unified international standards that could be used to combat the trade in counterfeit trademarked goods and pirated goods. It remains to be seen whether the various nations committed to negotiating this agreement will be able to reach a firm agreement on the varied and complex issues at play.

No Use For You! BMW Fails To Establish Use With "M" Marks In March of this year, the Federal Court rejected BMW Canada Inc.’s claim against Nissan Canada Inc. for trade-mark infringement and depreciation of goodwill of BMW’s registered M3, M5 and M & Design trade-marks based on Nissan’s use of the letter M and M6 with automobiles, parts and accessories. In Nissan Canada Inc. v BMW Canada Inc.,⁵² the Court found that there was no likelihood of confusion and no evidence of lost sales or other measurable loss of goodwill in BMW’s registered marks. The Court did however, allow BMW’s claim for passing-off, codified under Section 7(b) of the Trade-Marks Act, claiming proprietary rights in the trade-marks M, M6. The Court accepted that goodwill existed based on testimony of an auto journalist and individual BMW car enthusiasts. Based on the same testimony, the trial judge accepted that BMW and Nissan were in the same market and that Nissan’s use of the letter M and the descriptor M6 caused a likelihood of confusion between the wares of Nissan and BMW. The Court held that the requirements for passing-off had been satisfied and ordered that Nissan be restrained from using the M and M6 trade-marks in association with automobiles, parts and accessories and ordered a reference as to damages.

On appeal this July, the Federal Court of Appeal allowed Nissan’s appeal finding that the trial judge had erred in two ways.

Although Section 7(b) of the Trade-Marks Act makes no mention of trade-marks, the Federal Court of Appeal stated that to attack Nissan on the basis of this section BMW first had to have a valid trade-mark. In order to have a valid trade-mark as defined in the Trade-Marks Act one must have "use" of the mark. The Federal Court of Appeal found that the trial judge had erred because he did not assess whether the M and M6 marks had actually been "used" in accordance with the special and notoriously restrictive meaning given to this term in the Trade-Marks Act. The trial judge had simply review the traditional criteria for passing off. The Federal Court of Appeal first cautioned that "use " of the letter M in association with numbers, letters, words or the M Design, was not equivalent to the "use" of M alone trade-mark. It then held that BMW’s display of the letter M on its own was limited to advertisements and promotional materials. The Federal Court of Appeal held that such display of the M would only constitute "use" under the Trade-Marks Act if such notice of association was given at the time of purchase, for example if promotional materials displaying the M were given out at the point of sale. Since there was no evidence of such association with the M or M6, the Federal Court of Appeal held that there was no "use" of the M or M6 as a trade-mark by BMW.

The trial judge was also found to have erred in presuming damages to BMW. The Federal Court of Appeal confirmed that actual or potential damage is a necessary element in finding liability under Section 7(b) of the Trade-Marks Act. Since a reference as to damages had been requested, the plaintiffs had not submitted evidence of damages, so no evidence of damages was put before the trial judge. Since there was no evidence demonstrating actual or potential damages and no finding of such damages, the test for passing-off had not been met.

This finding appears to have added a 4^th requirement to establish passing-off under Section 7(b) of the Trade-Marks Act requiring that a plaintiff first demonstrate "use" of the allegedly infringing marks before moving on to establish the three components of passing-off: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.

It is interesting that the Federal Court of Appeal did not say that the trial judge wrongly appreciated evidence but merely stated that BMW couldn’t claim passing-off at the Federal Court without first demonstrating use of trade-marks. Earlier case law in passing-off has assumed some extent of damage if it is shown that someone’s goodwill has been interfered with. This ruling begs the question, would the outcome have been different if this had instead been heard by a Superior Court of Justice on the basis of the common law tort of passing off?

This may not be the final word on this case. An application for leave to appeal has been filed with the Supreme Court of Canada.

Protection Of Famous Marks Against Dilution By Blurring: Myth Or Reality? One year after the Supreme Court of Canada decisions in the Veuve Clicquot and Mattel cases recognizing the protection of "famous" trade-marks, the Federal Court of Appeal was confronted with the delicate issue of determining the extent to which famous marks should be granted protection in Canada. In Remo Imports Ltd. v. Jaguar Cars Ltd. et al., the Federal Court of Appeal was asked by Remo Imports Ltd. to overturn a lower court decision expunging its JAGUAR trade-mark registration and permanently restraining them from using the famous Jaguar marks.

One of the main legal issues for the Federal Court of Appeal was whether it was proper for the lower court to expunge Remo’s registered JAGUAR trade-mark based on a finding of likelihood of depreciation of goodwill of Jaguar Cars Ltd. famous JAGUAR mark.

Since depreciation of goodwill is not a statutory ground of invalidity of a registered trade-mark under s.18 of the Trade-Marks Act, the Federal Court of Appeal concluded that depreciation of goodwill was not grounds for invalidity. Sadly, no further explanation was given to justify this rationale even though other non-statutory grounds of invalidity have previously been accepted in expungement proceedings.

The Federal Court of Appeal also held that Remo’s trade-mark could not be held to be invalid based on it being calculated to deceive and mislead the public, since Remo was not aware of the Jaguar Cars’ trade-mark when it originally filed JAGUAR mark. The Federal Court of Appeal left open the possibility, however, that on an appropriate set of facts, a trade-mark could be vulnerable to expungement if the use is calculated to deceive and mislead the public.

The Federal Court of Appeal also found that the trial judge improperly decided that the use of the JAGUAR mark by Remo in connection with luggage wares was likely to depreciate the goodwill attaching to Jaguar Cars’ trade-mark registrations for automobiles. The burden of showing depreciation of goodwill is on the party claiming infringement. Where a likelihood of confusion with a famous trade-mark entitled to wide protection has been established overcoming that evidence is a difficult task to assume. Further, the fact that the parties’ may operate in different markets was not sufficient to overrule the judge’s finding of likelihood of confusion since the registrations themselves did not confine the parties’ operations in a particular market. Although while assessing confusion the Federal Court of Appeal did not reject the trial judge’s finding that luggage wares were in Jaguar Cars’ "zone of natural expansion", it decided that Jaguar Cars had not met the evidentiary burden to prove depreciation even though there was linkage between the parties’ marks and filing of several thousand exhibits. While assessing damages the Federal Court of Appeal decided that Jaguar Cars had not met its evidentiary burden of proving depreciation, adding that depreciation is not to be presumed and evidence of at least likelihood of depreciation is required. The Federal Court of Appeal was not prepared to conclude that a likelihood of deprecation had been established solely on the basis of the unequal quality or price of the parties’ goods.

Prior to this decision, the protection of the advertising function of a famous trade-mark and the right of the owner to obtain injunctive relieve for depreciation of goodwill by blurring were somehow close to becoming a reality. In light of this decision and the stringent test recently developed by the Supreme Court of Canada in the Veuve Clicquot case, Section 22 of the Trade-Marks Act is at risk of losing its strength and may, sooner or later, become extinct unless the Trade-Marks Act is amended.

Policing Trade-marks On The Internet The year 2007 saw a dramatic rise in the number of domain name complaints. As of December, there have been 2025 cybersquatting complaints with the arbitration forum run by WIPO, representing the highest number of cases ever recorded. The spike in cases can be attributed to the introduction of new top level domains ("TLD") in 2006 and 2007. A new .Asia TLD was released in late 2007, which is intended to provide a regional TLD for the Pan Pacific region.

In addition, "supersquatters" are now engaging in questionable domain name practices such as "tasting", "kiting" and "spying". Tasting involves the practice of trying out domain names for less than 5 days without paying for them, made possible by a domain name registry rule called "add grace period" or "AGP". Originally intended to allow for the correction of on-line errors in registration, the AGP allows domain name buyers to try out a domain and return it within 5 days and recover registration fees fully. Kiting involves the practice of taking tasting to the next level by re-registering, potentially ad infinitum, the same domain name only for the five day AGP, taking the ad revenue and never paying for the cost of registration. Spying involves the practice of collecting data on unregistered domain names that appear to have value, in order to snap them up before brand owners do. Some Internet Service Providers (ISPs) sell this type of data to cybersquatters, which shows which addresses are frequently misspelled called Non eXistent Domains ("NXDs").

Current strategies for resolving domain name disputes continue to reply primarily on the use of demand letters and on-line arbitration complaints for all those top level domains ("TLDs") that are subject to the Uniform Dispute Resolution Policy ("UDRP") adopted by the Internet Corporation for the Assignment of Names and Numbers ("ICANN") for domain name dispute resolution. In addition to its role in dispute resolution for .com, .net, .org., .biz, .info., and .mobi, among others, another 50 countries have opted-in to the policy. The Canadian Internet Registration Authority ("CIRA") has a Canadian Dispute Resolution Policy ("CDRP"), that is a variant of the UDRP, although many would say less effective and more difficult to successfully invoke. There is a much narrower definition of bad faith registration under the CDRP, and it is seen as more distinct from lack of legitimate interest than under the UDRP.

One new challenge with the use of demand letters and dispute resolution is that some Registrars offer a "privacy shield" for WHOIS enquiries, allegedly to block spam and for privacy concerns. The practice of many Registrars in offering anonymity for domain name owners is being used to significant advantage by counterfeiters and others engaged in illegal activities on the Internet. It has also poses a significant impediment to the filing of domain name complaints in many cases where Registrars allow use of a proxy registrant and are then non-responsive to allegations of infringement. One fundamental assumption of the UDRP is that a respondent can be readily found using the WHOIS service.

There remains a shortage of cases in Canada addressing the issue of the use of trade-marks on search engines. We continue to look to the U.S., where the Courts are being faced with these issues ahead of Canada. In a 2006 decision Merck & Co v. MediPlan Health Consulting Inc., a U.S. court denied Merck the right to protect its mark ZOCOR from use by on-line pharmacies who paid Google and Yahoo! for keyword links to sell generic ZOCOR. The decision affirmed that keyword linking simply does not constitute use in commerce of the trade-mark because it is an unseen automated function that does not involve publicly using the mark anywhere on or in connection with the goods or services.

We can expect that a similar decision would result in Canada, based on the application of the "use" definition of the Trade-marks Act. This would be consistent with the approach taken in earlier Canadian case law, which held that passive use of a mark on a web site does not constitute "use" as defined by the statute (see also No Use For You! BMW Fails To Establish Use With "M" Marks, which held that mere advertisements and promotional materials do not suffice as evidence of use if the marks do not appear on the wares at the time of transfer of the wares).

In Canada, we have witnessed a proliferation of new complaints arising from clients filing trade-mark applications on-line, only to discover that the domain name is registered as soon as the data is available through the Canadian Intellectual Property Office’s web site. Therefore, it is good advice for brand owners to register a domain before filing a public trade-mark application.

Regrettably, Canada is still without any form of anti-cybersquatting legislation, requiring brand owners to resort to traditional trade-mark infringement and passing-off claims to assert their rights. In the U.S., the Anti-cybersquatting and Consumer Protection Act has significant extraterritorial reach and has been used successfully against bad faith registrants since its introduction in 1999. Similar legislation in Canada would add significant clout to our courts in granting remedies for domain name disputes, particularly in light of the narrow interpretation of trade-mark "use" afforded by our legislation.

Descriptive Trade-marks As Domain Names In Emall.Ca Inc. (CheapTickets.Ca) v. Cheap Tickets and Travel Inc.⁵³ the Canadian Federal Court had opportunity to consider the use of descriptive trade-marks as domain names. The dispute between Emall.Ca Inc., a Montreal based provider of online shopping services, and Cheap Tickets and Travel Inc., a retail travel agency from British Columbia, involved a dispute over the domain name CHEAPTICKETS.CA

Emall.Ca Inc. registered the domain name CHEAPTICKETS.CA with CIRA in 1999. Cheap Tickets and Travel, Inc., although incorporated in 1998, only obtained trade-mark protection for its marks CHEAP TICKETS AND TRAVEL and CHEAP TICKETS AND TRAVEL & Design in 2002. After registering its marks, Cheap Tickets commenced a proceeding under CIRA’s dispute procedures to have Emall.Ca’s registered domain name transferred to Cheap Tickets based on its registrations and prior date of first use. The CIRA, citing the earlier registration of Emall.Ca’s domain name, dismissed the claim.⁵⁴

In 2004, Cheap Tickets commenced an action in the B.C. provincial court against Emall.Ca citing trade-mark infringement. Emall.Ca then brought an application in the Federal Court to expunge Cheap Ticket’s trade-marks. The Federal Court summarily found that the marks were descriptive, and, therefore, not registrable. The Federal Court had no difficulty concluding that the phrase "Cheap Tickets" was descriptive of its business, and intended to be an indication of low prices. The trade-marks of Cheap Tickets were subsequently expunged. As a result of this Federal Court decision, when viewed in light of the previous CIRA decision, descriptive trade-marks, while not registrable per se, may still be protected as domain names in Canada and thus can maintain value provided such domain names are registered in compliance with CIRA policy.

Case Of Olympic Portions Vancouver will be hosting the Winter Olympics in 2010. Interestingly enough, this year the Federal Court of Canada weighed in on whether Olympics- related marks were entitled to protection as Official Marks. In See You In – Canadian Athletes Fund Corporation v. Canadian Olympic Committee⁵⁵, the Federal Court of Canada quashed the Registrar's decision to grant several marks, including the mark SEE YOU IN VANCOUVER "Official Mark" protection in the absence of adequate evidence of adoption and use of these marks. The Court held that although "adoption" and "use" were not defined in the Trade-marks Act, "… [a] common feature of both ‘use’ and ‘adoption’ is that there is an element of public display…". The Court found that there was insufficient evidence public display. The internal use of a mark in correspondence, e-mails and memoranda was not considered evidence of adoption and use of an official mark.

The Practice Notice from August discussed above, along with this decision confirm that the Registrar now requires sufficient evidence of adoption and use of a mark in order to grant Official Mark protection.

Footnotes (cont'd)

46 R.S., 1985, c. T-13, as amended. (http://laws.justice.gc.ca/en/showtdm/cs/T-13)

47 CIPO Practice Notice ( http://strategis.gc.ca/sc_mrksv/cipo/tm/tm_notice/tmn2007-08-22-e.html )

48 CIPO Practice Notice ( http://strategis.gc.ca/sc_mrksv/cipo/tm/tm_notice/tmn2007-10-01-e.html )

49 2007, c. 25 (http://laws.justice.gc.ca/en/showtdm/cs/O-9.2)

50 Canada Gazette (http://canadagazette.gc.ca/partI/2007/20071006/html/regle2-e.html )

51 See Counterfeit Goods In Canada - A Threat To Public Safety, (http://cmte.parl.gc.ca/cmte/CommitteePublication.aspx?COM=10804&Lang=1&am p;SourceId=209854) and Counterfeiting and Piracy are Theft, (http://cmte.parl.gc.ca/cmte/CommitteePublication.aspx?COM=10476&Lang=1&am p;SourceId=213200)

52 2007 FC 262 (http://decisions.fct-cf.gc.ca/en/2007/2007fc262/2007fc262.html); 2007 FCA 255 (http://decisions.fca-caf.gc.ca/en/2007/2007fca255/2007fca255.html)

53 2007 FC 243 (http://decisions.fct-cf.gc.ca/en/2007/2007fc243/2007fc243.html)

54 CIRA Decision (http://www.cira.ca/en/dpr-decisions/00004_B_cheaptickets_ca_decision_en.pdf)

55 2007 FC 406 (http://decisions.fct-cf.gc.ca/en/2007/2007fc406/2007fc406.html)

© 2007 Fasken Martineau DuMoulin LLP

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.