Canada: "Evolved" Goods/Services

Last Updated: September 25 2018
Article by John McKeown

A recent decision of the Federal Court considers the concept of use of a trademark in association with services when the method of distribution has changed.

The Facts

A third party caused a notice under s. 45 of the Act to be sent to Hilton Worldwide Holding LLP, (Hilton) the registered owner of the trademark WALDORF-ASTORIA. The notice required Hilton to demonstrate its use of the mark at any time within the three-year period immediately preceding the issuance of the notice.

The trademark WALDORF-ASTORIA is registered for use in association with "hotel services". Hilton claimed to have used the mark in association with hotel services in Canada since at least 1988 and filed evidence as to its use of the mark.

While there was no WALDORF-ASTORIA branded hotel physically located in Canada during the relevant period, the evidence showed that there were a number of benefits available to customers in Canada, and that a large number of people in Canada took advantage of such benefits. Customers in Canada would see the WALDORF-ASTORIA trademark when they visited the Hilton website, where they could book reservations in several ways – either directly with the hotel, or through a third-party service provider, or via a toll-free 1-800 number available for Canadians. The WALDORF-ASTORIA trademark appeared on the website at the time of making the booking and payment, as well as on email confirmations sent to customers.

During the relevant period, 41,000 people with addresses in Canada stayed at a WALDORF-ASTORIA hotel, generating approximately $50 million in revenue. In addition, 1,300 people from Canada received a discounted room rate in exchange for paying for the hotel reservation in advance. These individuals received email confirmation of their booking, again showing the WALDORF-ASTORIA trademark.

Finally, customers in Canada who enrolled in the Hilton rewards program would receive points for each booking, which they could redeem for stays or other benefits, at hotels located in Canada or elsewhere. The evidence showed that all of the above transactions were completed entirely within Canada.

The Decision of the Trademarks Opposition Board

The Hearing Officer ruled that the absence of a WALDORF-ASTORIA hotel in Canada was fatal to Hilton's claim that it had used the trademark for "hotel services" in Canada during the relevant period. The Registrar found that use of the trademark for such services required a physical location in Canada. Hilton's operation of an interactive website, its worldwide registration service, the discounts offered to customers who pre-paid for rooms, the offer of Hilton rewards points to members of its loyalty program, and the various communications to customers in Canada displaying the trademark, were not sufficient to meet the definition of use under the Act in association with "hotel services". Similar conclusions had been reached in a series of recent decisions, where Hearing Officers had found that the operation of a "bricks and mortar" hotel in Canada was necessary to establish use of a trademark for "hotel" or "hotel services".

This approach was said to be consistent with the plain meaning of the statement of services. "Booking", "planning" and "reservation" services are not "hotel services", and the registration should not be maintained simply because the service actually available "in Canada" was tangentially related to those services. It was also consistent with current examination practice at the application stage. The CIPO Goods and Services Manual provides that the terms "hotel services" and "hotels" are pre-approved terms, separate from other hotel-related services like "hotel reservations", "hotel room booking services", "hotel management", and "hotel management for others".

The Appeal

Hilton appealed from the decision to the Federal Court.   In approaching the appeal the Judge said that he was guided by the long-standing principle that the purpose of section 45 of the Act is to provide a simple, summary procedure for clearing the Registry of trademarks which have fallen into disuse – generally referred to as "deadwood". It was not intended to be an adversarial process, nor is it a substitute for an application to expunge a registration under section 57.  The burden of demonstrating use for the purposes of section 45 is not a heavy one, and any ambiguity in the evidence should be resolved in favour of the registered owner.

Under the Act a trademark is deemed to be used in association with services if it is used or displayed in the performance or advertising of those services. However, it is clear that the mere advertisement of services in Canada, where no aspect of the services themselves are performed or delivered in Canada, does not constitute use within the meaning of the Act.

There are several decisions where courts have found that where the trademark owner takes steps to enable Canadians to benefit directly from the delivery of the service in Canada, this can help establish use in Canada. This has evolved in parallel with the changes in the delivery of retail services, and in particular with the expansion of the delivery of services "online".

Case law has tended to interpret the term "services" broadly, sometimes using the concept of "primary, incidental and ancillary" services. This reflects the fact that some types of service can reasonably be understood to include only one thing, while others may encompass a variety of related activities which, together, constitute "the service" or are reasonably understood to be included in it.

Hilton filed additional evidence concerning changes in the CIPO Goods and Services Manual. When Hilton filed its application in 1988 the practice was to not use terms such as "hotel registration services" or "booking services" but rather the broad term "hotel services".

Since the time of the original registration, the scope of services delivered on-line has expanded greatly, and the meaning of "hotel services" must adapt to reflect the fact that an ordinary customer would expect to be able to book a hotel room on-line today, either directly or through an intermediary such as Expedia, Travelocity or Orbitz. The scope of a registration must be considered in light of the ordinary meaning of the words, and this in turn is influenced by the development in online commerce as it relates to the ordinary commercial understanding of both the business and the customer.

Currently an ordinary customer making a binding contract for the reservation of a hotel room, and receiving a discounted room rate as well as loyalty points for the booking, is receiving "hotel services" in Canada, when this transaction is completed by a person in Canada. Because of this the term "hotel services" naturally includes a series of related things, some of which can only be delivered at the physical hotel, but some of which are now able to be "performed" (from the owner's perspective), or "enjoyed" (from the customer's perspective) in Canada.

Applying this approach the judge concluded that the term "hotel services" included hotel registration services, when it is shown that people in Canada obtained some tangible, meaningful, benefit from such use. The evidence filed made it clear that customers in Canada received a meaningful benefit from the delivery of hotel services by Hilton, through the on-line reservation service, and in particular the discounted room rate available for a pre-paid room, as well as the Hilton rewards points received with a hotel booking.

Based on these findings the appeal was allowed and the registration was maintained on the register.

Comment

When goods or services are delivered by different means this can cause problems concerning maintaining a trademark registration.  For example, "downloadable software for use in database management" as a result of distribution changes should be described as "software as a service (SAAS) services featuring software for use in database management".

The USPTO has initiated a pilot program that allows certain trademark owners to amend the goods/services identified in their trademark registrations. Owners may be able to participate if they provide the same fundamental goods/services through an updated means, method, or format. The goods/services in their new form are referred to as the "evolved" goods/services. The pilot is ongoing. Unfortunately this is no parallel Canadian development at CIPO to my knowledge.

From a brand owner's point of view it is preferable to deal with changes of this nature by obtaining new registrations in association with the new means of distribution to avoid the prospect of uncertain litigation.

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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