The Latest Take on Canadian Trademark Ownership Issues Amendments to Canada’S Trademarks Act Are Set to Directly Affect Licensing Strategies

COUNTRY CORRESPONDENT CO-PUBLISHED EDITORIAL Canada Bereskin & Parr LLP

The latest take on Canadian trademark ownership issues Amendments to Canada’s Trademarks Act are set to directly affect licensing strategies

Amendments to Canada’s Trademarks trademark is used with goods if it is displayed the licensed goods or services. Section 50 Act look set to have interesting and on the goods themselves, or possibly on preserves the distinctiveness of a licensed unforeseeable implications with respect to point-of-purchase materials, and the goods mark by attributing any use of it to only one licensing and, particularly, ownership of must be sold in Canada in the ordinary source – the trademark owner – provided trademarks. Recent Federal Court decisions course of trade”, while a trademark is used that the licensor and licensee comply with have also illustrated some of the issues with services if it is “used or displayed in the its control requirements. that can arise with corporate relationship performance or advertising of those services”. Section 50 does not specify the form that licensing where no written licence is in place. Once the bill enters into force, Canadian the licence must take, while case law has Bill C-31 – the Economic Action Plan courts will need to reconcile the apparent held that the licence can be written, oral, 2014 Act, Part 1 – makes major changes to disconnect between registered trademark tacit or implied. In the absence of a written Canada’s trademark law, most notably by rights, trademark use and source. Some agreement, the critical problem becomes removing use as a registration requirement. question whether courts will find that use proving the agreement’s terms and The bill was passed by Parliament in June is a necessary prerequisite for ownership conditions – in particular, that the rights 2014 but will not come into force until late and enforcement of trademark rights, so holder controls “the character or quality of 2016 or, more likely, early 2017. as to ensure that the new regime is not the goods or services” licensed. Canada’s trademark law originally unconstitutional (see Daniel Bereskin, evolved from the perspective that “Canada’s Ill-Conceived New “Trademark” Section 50 case law trademarks provide an indication of Law: A Venture into Constitutional While it is always best practice to set out source, with use having been a registration Quicksand” (2014) 104 TMR 1112). However, the licence terms and conditions in writing, requirement right from the start. In if use is then per se required to enforce written licence agreements may not always Masterpiece Inc v Alavida Lifestyles Inc (2011 ownership, what might this mean for exist. Courts have repeatedly held that a SCC 27) Justice Rothstein of the Supreme licensing? Bill C-31 might well bring corporate relationship alone is insufficient Court of Canada underlined that use is the uncertainty, at least in the short term, for to establish the control required under cornerstone of Canadian trademark law: trademark licensing and ownership. Section 50, although recent decisions have It is important to recall the relationship shown some relaxation of this rule. between use and registration of a trade- Current situation In Spirits International BV v BCF (2012 mark. Registration itself does not confer Given the necessary association between FCA 131) the Federal Court of Appeal priority of title to a trade-mark. At trademark rights, trademark use and source, set aside the lower court’s finding that common law, it was use of a trade-mark licensing was originally problematic under the requirements of Section 50 had not that conferred the exclusive right to the Canadian law and assigning a trademark been met. In the absence of a written trade-mark. While the Trade-marks Act without goodwill – an assignment in gross agreement, the Federal Court found the provides additional rights to a registered – required specific statutory language in evidence, beyond a “bare allegation” of a trade-mark holder than were available the Trademarks Act. The act’s workaround trademark licence, too vague to establish at common law, registration is only for licensing was originally a registered user that the owner controlled the nature and available once the right to the mark regime, which required a licensee to be character of the vodka produced and sold has been established by use… [i]t is not registered in order that its use of a mark not among a related group of companies. On the registration that makes the party erode its distinctiveness. appeal, the Federal Court of Appeal took proprietor of a trade-mark; he must be In 1993 the registered user regime was a broader approach: evidence of control proprietor before he can register. replaced with a quality – or character – was seen as proven, as the rights holder control regime. Specifically, Section 50 set the standards of character and quality Until Bill C-31 comes into force, a rights of the Trademarks Act governs proper of the vodka to be labelled with the mark holder must use its mark in order to obtain licensing and requires that the rights holder at issue, notwithstanding that the actual registered trademark rights in Canada. maintain and exercise direct or indirect compliance testing was delegated to other ‘Use’ is defined in Section 4 of the act: “a control over the character and quality of corporate entities.

96 | OCTOBER/NOVEMBER 2015 www.WorldTrademarkReview.com This broader view of evidence Scott MacKendrick Noelle Engle-Hardy showing control was applied in Air Miles Partner Associate International Trading BV v Cathay Pacific Airways Ltd. There, the Federal Court held [email protected] [email protected] that use of the trademark ASIA MILES Scott MacKendrick is a partner with Bereskin Noelle Engle-Hardy is an associate with by a corporate subsidiary could accrue to & Parr LLP and a member of the litigation Bereskin & Parr LLP. Her practice focuses the parent company in the absence of a practice group. He has been involved in on trademarks, licensing and litigation, written licence agreement. The licensee’s patent litigation across a broad range of in addition to new media/copyright, sole reason for existing was to operate the technologies, including pharmaceutical, marketing and advertising law. loyalty programme for which the mark chemical and mechanical, and has been was used; further evidence of control involved in trademark, copyright, industrial included an agreement detailing the design and trade secret litigation, as well reporting relationship between the parent as in domain name dispute resolution. Mr and subsidiary, and marketing materials MacKendrick has an active practice before developed by the corporate parent for the the Canadian Trademarks Opposition Board subsidiary’s use. On this evidence, the court and also advises clients on IP portfolio held that indirect or direct control existed. strategies, with a particular emphasis on Control by the licensor must be trademark portfolio management. ongoing. In College of Dietitians of Alberta v 3393291 Canada Inc (2015 FC 449) the Federal Court declined to find that the use of a professional designation accrues out a licence governing how the licensee usager lic. Acme Canada Inc. (for to the professional body regulating that may use the licensed mark. Practical tips registered marks only)”; or designation. Control over access to the include the following: “TM/MC Acme Inc., lic. user/usager practice of dietetics – including the • Prepare a written licence agreement lic. Acme Canada Inc. (for registered college’s right to revoke a graduate’s use setting out the terms and conditions of and unregistered marks)”. of the designation, establishing the course the licence, regardless of whether there • There may be specific marketing reasons of student study, administering and is a corporate relationship between the for not using the rights holder’s name grading final examinations, and requiring licensor and licensee. This will eliminate on packaging and this is not required compliance with its code of conduct – was any ambiguity in the licence terms or under Canadian law. However, if the insufficient to satisfy the control required in proving that a licence exists should rights holder’s name does not appear, under Section 50: “This control, however, issues arise later. it must be able to demonstrate that it is not relevant to subsection 50(1) since it • Give public notice of the licence. To take controls the licensee’s use in order to pertains only to controlling who gets to use advantage of the deeming provision rely upon the deeming provision. Any the Marks rather than how they are used.” under Section 50(2), the public must notice identifying the licensee should The Federal Court has also held that have notice that the use is licensed. not mislead consumers into believing the use of a trademark by co-licensees Even if a trademark is used by a related that trademarks on the packaging or does not undermine any alleged company, notice that the use is licensed advertising belong to it. distinctiveness, even in the absence should be added to the ownership • Set out the standards under which of a written licence agreement, in legend. After the mark, one of the the licensed trademark may be used, Allianz Global Investors of America LP following symbols should appear: ®, ™/ specifying that the rights holder has, v Middlefield Capital Corporation (2014 MC or *, followed by one of: under the terms of the licence, direct FC 620). What is critical is the manner “Registered trade-mark of Acme or indirect control over the character or in which the mark is perceived by the Inc., used under license (or with quality of the goods and services with relevant consumers of the goods and permission) by Acme Canada Inc./ which the trademark is used. services offered in association with the Marque déposée, utilisée sous license • Show that the rights holder maintains trademark. Where the consumers are par Acme Canada Inc. (for registered control over the mark through, among sophisticated, it suffices if the rights holder marks only)”; other requirements, periodic rights of is identified in marketing materials. “Trade-mark of Acme Inc., used under inspection and the right to terminate the license (or with permission) by Acme agreement. Recommendations Canada Inc./Marque de commerce • Consider providing training manuals to While the case law indicates that courts de Acme Inc., utilisée sous license par licensees, instituting mandatory training are willing to consider all surrounding Acme Canada Inc. (for registered and programmes and providing regularly circumstances to determine whether a unregistered marks)”; updated reference manuals showing licence exists, it is always best to clearly set “Reg. TM/MD – Acme Inc. – lic. User/ how the mark must be used.