Canada: Bad Faith Trademark Applications And Invalidity

Last Updated: July 25 2018
Article by John McKeown

A recent decision of the UK High Court of Justice raises some interesting issues concerning trademark applications alleged to have been obtained in bad faith.

The Facts

The plaintiffs were the owners of EU trademark registrations for the trademark SKY for use in association with a lengthy series of goods and services. The plaintiffs alleged that Skykick UK Limited and Skykick Inc. (the Defendants) infringed the plaintiffs' registered trademarks.

The Plaintiffs

The plaintiffs made extensive use of the trade mark SKY in relation to a range of goods and services, and in particular goods and services relating to Sky's core business areas of (i) television broadcasting, (ii) telephony and (iii) provision of broadband services. The Defendants accepted that, by November 2014, SKY was a household name in the UK and Ireland in those areas.

The plaintiffs have been very active in enforcing their trademarks on a worldwide basis, against use of their trademarks by others. Most of the plaintiffs' enforcement actions concerned the use or registration of SKY formative marks, that is, the word SKY followed by another word (or sometimes part of a word), whether combined to form a single word (e.g. SKYLAND) or as two separate words (e.g. SKY MOTION).

The Defendants

The defendants' business relates to the development and commercialization of a product which helps to automate the migration process involved when Microsoft customers change the Microsoft products they are using. For example, a business changing from the Microsoft Office to Office 365 must "migrate" its email accounts and associated settings and configurations from one infrastructure to another.

The statement of goods and service for which plaintiffs trademarks are registered were very lengthy and broad in a fashion consistent with past practices in the EU. In addition the statements were imprecise since in some instances they referred simply to "computer software".

The plaintiffs' admitted they had not made use of their trademarks in relation to all of the specified goods and services. They contended, however, that they had a reasonable commercial rationale for seeking a broad scope of protection for their trademarks given that the SKY brand was (and remains) a key asset of the business.

The defendants denied infringement and brought a counterclaim for a declaration that the plaintiffs' trademarks were wholly or partly invalidly registered on the grounds that the statement of goods and services lacked clarity and precision and the applications were made in bad faith.

The Decision

The judge reviewed in detail the existing case law in the UK and the EU but decided that it was necessary to refer the following questions to the Court of Justice of the European Union;

(1) Can an EU trademark or a national trademark registered in a Member State be declared wholly or partially invalid on the ground that some or all of the terms in the specification are lacking in sufficient clarity or precision to enable the competent authorities and third parties to determine the extent of the protection conferred by the trademark?

(2) If the answer to (1) is yes, is a term such as "computer software" lacking in sufficient clarity or precision to enable the competent authorities and third parties to determine the extent of the protection conferred by the trademark?

(3) Can it constitute bad faith to apply to register a trademark without any intention to use it in relation to the specified goods or services?

(4) If the answer to question (3) is yes, is it possible to conclude that the applicant made the application partly in good faith and partly in bad faith if the applicant had an intention to use the trade mark in relation to some of the specified goods or services, but no intention to use the trade mark in relation to other specified goods or services?

This reference to the CJEU is currently outstanding.

The Canadian Position

Currently oppositions are filed on the ground, among others, that the applicant could not have been satisfied that it was entitled to use the trademark applied for. This ground is the primary method used to attack a trademark application which it is alleged to have been filed in bad faith. Noncompliance can be found where there are exceptional circumstances such as bad faith which renders the applicant's statement untrue or there is a potential violation of a Federal statute. However, most of the cases dealing with this ground that have been successful turn on the strong facts which can be very difficult to prove.

Amendments to the Trademarks Act

This particular ground of opposition is being removed under the current amendments to the Trademarks Act. A new ground of opposition is to be added which is based on the fact that the applicant was not using or did not propose to use the trademark in Canada in association with the goods or services set out in the application. Unfortunately this new ground seems to be more limited than the old ground.

Perhaps in response to this concern and as a result of the continuing chorus of complaints concerning bad faith trademark registrations and other trolls, the government has recently announced a further amendment to the Act. They have said that to reinforce the importance of use in the trademark regime and to prevent cluttering and misuse of the regime, sometimes referred to as "trademark squatting' a new bad faith trademark opposition and invalidation ground will be introduced. In addition, use will also be required to enforce a trademark within the first three years after registration. The specific wording of these additional amendments has not yet been published.

Comment

It seems that there have been some decisions in the EU that have taken the position that the existence of bad faith at the time the application was filed results in the invalidity of the entire applcation. Presumably this prompted the reference.

It makes sense to follow these issues and their resolution as they may affect the case law in Canada as well as the wording of the amendment the Government has promised. If the result of abusing the system by over claiming goods and services was the potential invalidly of any subsequent registration this would provide a strong disincentive to such a practice. However, it would be necessary to distinguish between cases of obvious abuse and cases where the problem occurred as a result of legitimately changed plans and the like.

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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