Canada: Bad Faith Trademark Applications

Last Updated: September 21 2016
Article by John McKeown

A recent decision of the Federal Court affirmed the Trademarks Opposition Board's decision to allow an opposition as a result of bad faith on the part of the applicant.

The Facts

Julia Wine Inc. ("the Applicant") is a Quebec company that sells affordable wines to large retailers. On August 19, 2009 the Applicant filed three trademark applications for the trademarks IRRESISTIBLES, PRESIDENT'S CHOICE and COMPLIMENTS in association with wines.

Les Marques Métro, S.E.N.C. ("the Respondent") owns the trademark IRRESISTIBLES, although it had not obtained a trademark registration for the mark in 2009. The Respondent used the trademark in association with more than a thousand food products of all kinds, including juices, sparkling water, sparkling juices, wine vinegars and related items. In the past, the Respondent's predecessor had marketed a beer in association with the IRRESISTIBLES mark.

The Opposition

The Applicant's application was advertised and the Respondent opposed the application on the grounds that the applied-for mark was not distinctive as it was confusing with its IRRESISTIBLES common law trademark. In addition, the Respondent said that the Applicant could not have been satisfied that it was entitled to use the applied-for trademark in association with wine.

Paragraph 30(i) of the Trade-marks Act requires that an Applicant for registration of a trademark file with the Registrar a statement that the Applicant is satisfied that it is entitled to use the trademark in Canada in association with the applied-for goods or services. Grounds of opposition based on this paragraph are only allowed in exceptional cases such as when there is evidence of bad faith on the part of the Applicant.

The Respondent's evidence included a description of the food market in Quebec and Ontario. It was said there was only three major chains, Metro, Loblaws and Sobeys. Each of these companies marketed their respective private label products in association with the following trademarks IRRESISTIBLES, PRESIDENT'S CHOICE and COMPLIMENTS.

The Respondent's evidence referred to meetings with the Applicant's representative who suggested marketing IRRESISTIBLES brand wine solely in the Respondent's stores and that the mark could be potentially assigned to the Respondent so that it could take advantage of an alleged loophole in the Quebec legislation regarding the sale of wine in grocery stores. It was also said that a similar proposal had been made to Loblaws' and Sobeys' representatives. The Respondent did not agree to proceeding in this fashion.

The Trademarks Opposition Board

A hearing officer, of the Trademarks Opposition Board allowed the opposition and dismissed the application. The hearing officer agreed that the Respondent's mark had a low degree of inherent distinctiveness because it was a common adjective but found that the mark had become well-known. The Respondent submitted evidence that its predecessor had commenced using a version of the mark around 2002 in connection with various food products and decided on the final version of the mark in September of 2007. Since this time the mark had been used in association with about 1,100 food products in 370 stores mainly in Quebec and Ontario. The sales of these products totalled over $940,000,000. In addition, since 2011 almost 6.5 million flyers advertising IRRESISTABLES brand products had been distributed in Canada.

The hearing officer did not accept that the Applicant's mark, used in association with "wine", was distinct from the Respondent's food products. The Respondent's mark extended to fruit juices, non-alcoholic beverages, sauces and marinades and wines could be considered a natural extension of this range of products. She also referred to the fact that wines were sold in the Respondent's stores and the potential channels of distribution could overlap.

Finally, the hearing office allowed the ground of opposition based on paragraph 30(i) of the Act. She said that it was difficult to understand why the Applicant on the same day filed applications to register marks identical to the three private label brands registered by the Respondent and its primary competitors. Since the Applicant failed to explain itself on this issue the hearing officer found that the Applicant did not discharge its burden of proving that it was entitled to use the mark at the time the application was filed.

The Federal Court

The Applicant appealed from this decision to the Federal Court. Such an appeal is not restricted to the record before the Board and additional evidence may be filed.

Madam Justice Tremblay-Lamer found that additional evidence filed by the Applicant did not materially affect the findings made by the hearing officer. As a result, this meant that the hearing officer's expertise must be given deference and the applicable standard of review was that of reasonableness.

When a court reviews a decision under this standard it will only intervene when the decision is not transparent, justified and intelligible and does not fall within the range of possible acceptable outcomes which are defensible on the facts and the law. Applying this standard the judge dismissed the appeal.

With respect to the paragraph 30(i) ground of opposition, the judge said there were no other reasons for the Applicant to want to use the applied-for mark except to benefit from the reputation acquired by the Respondent's IRRESISTIBLES mark over the years.

While there is not a significant body of case law concerning the concept of "bad faith" in this context the Applicant's attempt to benefit from the well-established reputation of a trademark is the type of situation that the paragraph 30(i) was designed to apply.

The Amended Trade-marks Act

The most significant amendments to Canada's trademark legislation since 1954 have received Royal Assent but have not yet been proclaimed into force. This will not likely occur until 2018 since the regulations and other matters required by the changes have yet to be finalized.

Paragraph 30(i) will no longer remain in the Act unless a specific regulation is passed to prescribe that such a statement continue to be included in an application. In addition, the grounds for opposition have been restricted and noncompliance with this requirement will no longer be a ground of opposition.

A new ground of opposition based on the fact affect that an applicant was not using or did not propose to use the trademark in Canada in association with the goods or services specified in the application is available. Unfortunately it is difficult to prove that an applicant did not propose to use a trademark. However, the concept of bad faith is relevant in this context.

Comment

In the past the concept of bad faith in the opposition process left the Board or the Federal Court with some leeway to avoid abuses in appropriate cases. Leaving aside "proposed use" cases, the amended Act does not provide the same flexibility to deal with abusive applications.

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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