Two recent decisions of the Federal Court have given effect to
an oral license of a trademark.
Licenses under the Trademarks Act
Section 50 of the Trademarks Act provides that if an entity is
licensed by the owner of a trademark to use the trademark and the
owner has, under the license, direct or indirect control of the
character or the quality of the wares/services then the use
advertisement or display of the trademark by the licensee is deemed
to have the same effect as use by the owner of the trademark.
The section is frequently utilized to help maintain the
distinctiveness of the licensed trademark but care needs to be
taken to make sure that licensing is done correctly. A recent case
sheds some light on the workings of the section.
Middlefield Capital Corporation ("Middlefield") filed
an application to register the trademark INDEX PLUS INCOME FUND
DESIGN in association with financial services. The application was
based on use since as early as August 15, 2003. Allianz Global
Investors of America ("Allianz") filed a trademark
application for the trademark INDEX PLUS based on proposed use in
association with financial services. Each of Middlefield and
Allianz opposed the application that had been filed by the other.
One issue that was central to the oppositions was whether
Middlefield was entitled to rely upon the use of its mark by its
In support of the oppositions Middlefield filed a significant
amount of evidence of use both by itself and by its licensees of
its mark. On cross-examination the key witness said that the
license was an oral one and that Middlefield established quality
standards to be met by its licensees and then actively ensured that
the standards were in fact met. However, there was nothing in
writing concerning either the license or the quality standards.
Since Allianz's evidence was not seriously questioned on
cross-examination, the Hearing Officer concluded that there was in
fact an oral license and that the character/quality standards had
been enforced. As a result, the Hearing Officer found that the use
of the Middlefield's mark by the named licensees accrued to the
benefit of Middlefield. Relying on this evidence and other evidence
the Hearing Officer found in favour of Middlefield in each of the
Allianz appealed from the decisions to the Federal Court.
Allianz argued that Middlefield did not control the character or
the quality of the wares/services. However, the judge disagreed and
said that use of the Middlefield's mark in association with the
distribution of a prospectus and solicitation of interest in the
purchase of units in the fund by investment dealers or brokers
constituted use and there was not a loss of control over the
character of the service in question.
The lack of a written license agreement weakened the claim to
control of the mark but a written agreement is not required to
maintain control. A licensing agreement can be inferred and the
evidence supported Middlefield's assertion of control. As a
result the appeals were dismissed.
There is an element of uncertainty concerning when it will be
found that an oral license was in place. To avoid this it is
strongly recommended that a written license be entered into which
contains provisions, among other things, relating to obtaining
approvals for all materials used in association with the licensed
trademarks, a right of inspection and an agreement to conform with
standards and guidelines to be provided by the licensor. In
addition, it is prudent to ensure that a program is in place that
will allow the licensor to show that the control has been
Consideration should also be given to the use of an appropriate
trademark notice by the licensee. The Act provides that to the
extent that public notice is given of the fact that the use of the
trademark is a licensed use and the identity of the owner, it is
presumed, unless the contrary is shown, that the use is licensed by
the owner and that the character or quality of the services are
under the control of the owner. While this is a presumption only it
certainly is of assistance.
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.
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