The online sale of a software licence constitutes a
"use" in relation to a good for the purposes of Canadian
trademarks. This was the recent holding of the Federal Court of
Canada in Specialty Software v Bewatec,
2016 FC 223. This decision strengthens trademark protection for
software in Canada and demonstrates that courts will adapt legal
concepts to modern technology. Here, the traditional model of
purchasing software on tangible media, such as a CD-ROM, is simply
outdated. Software as a service (SaaS) offerings have greatly
increased in recent years with the explosion of cloud computing,
which essentially provides users with access to a software program
over the Internet, usually though a subscription or licence fee.
The Specialty Software decision is important because it
confirms that the sale of a software licence – whether by
diskette or via online subscription access – can constitute a
transfer of property for the purposes of a "use" in
association with goods under section 4(1) of the Trade-marks
Software has traditionally been specified as a "good,"
rather than a "service," on trademark applications. In
the Specialty Software case, Bewatec sought to expunge the
trademark MEDINET for non-use. Initially, Bewatec succeeded in its
application to the trademark Registrar because Specialty did not
have evidence of use of the mark for a three-year period. Specialty
appealed the decision to the Federal Court with fresh evidence.
Specialty's MEDINET trademark was registered for use in
association with computer software programs as wares (now known as
"goods" under the Trade-marks
Act). But, like many modern software companies, Specialty
had begun offering its software online by allowing customers
to access it on the Internet rather than purchasing physical disks.
Bewatec argued that since Specialty's customers were not
physically acquiring or even downloading anything, its use of the
mark was in relation to software as a service, not a ware/good.
Specifically, Bewatec asserted that there was no "transfer of
property" when software was accessed through Specialty's
website as required under the Trade-marks Act.
Section 4(1) of the Trade-marks Act sets out what
constitutes a "use" of a mark in association with
4 (1) A trade-mark is deemed to be
used in association with goods if, at the time of the transfer of
the property in or possession of the goods, in the normal course of
trade, it is marked on the goods themselves or on the packages in
which they are distributed or it is in any other manner so
associated with the goods that notice of the association is then
given to the person to whom the property or possession is
Bewatec asserted that Specialty's clients were obtaining
access to an online service, rather than acquiring the goods
through a transfer of property as required in section 4(1).
Justice O'Reilly disagreed, finding that the real goods
being sold were the software licences:
Even though Specialty used to sell its software on disks –
which are obviously tangible and easily identified as wares –
it was always really selling a license to use the software, which
is an intangible good. Specialty did not actually sell the software
itself; it sold an entitlement to obtain access to it by way of
licenses. The disks merely represented the means by which the
transfer of the goods occurred. The real goods were, and are, the
He considered as evidence of "use" the fact that
purchasers of the software licence receive an invoice with the
MEDINET mark on it and that the mark is visible on the user's
login screen. Justice O'Reilly also noted that "use"
is a "fairly low threshold that a registered owner must meet
to demonstrate that its mark is not merely 'deadwood' on
the register" (at para. 19).
Moreover, the Court relied on earlier Trademarks Opposition
Board decisions where trademark use in association with software
goods was found to exist based on the existence of the mark on
software licensing agreements and installation screens.
Under the Federal Court's ruling, the sale of a licence to
use software (including in the context of a "novel"
software access delivery model) constitutes a use in association
with goods. This concept could foreseeably apply beyond
software. For example, music and video streaming services may also
be treated as goods, which is significant given that they continue
to displace CDs, DVDs and other tangibles, which have been
traditionally considered goods for trademarks.
Finally, it remains to be seen whether the reasoning in this
case will only be narrowly applied to trademark cases, or whether
it might be relied on for the proposition that a software licence
is in fact "property". Generally, a licence has been
considered a mere grant of specific rights, rather than an interest
The Federal Court dismissed a motion by Apotex seeking particulars from Allergan's pleading relating to the prior art, inventive concept, promised utility and sound prediction of utility of the patents at issue.
Last year we saw the Canadian Courts release trademark decisions that granted a rare interlocutory injunction, issued jailed sentences for failure to comply with injunctive relief, grappled with trademark and internet issues...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).