Canada: Profit And Trademark Use

Last Updated: April 17 2019
Article by John McKeown

A recent decision of the Federal Court of Appeal adds clarity to the requirement to show use under the Trademarks Act for goods.

The Facts

The appellant is a cosmetics company that operates through licensees worldwide. These include Lush Canada, which operates LUSH stores. T-shirts and tank tops bearing the LUSH trademark are sold by Lush Canada in limited quantities to LUSH store employees in both Canada and the United States to wear as part of their uniform, and sometimes to give as gifts to family and friends. The appellant also creates limited edition t-shirts bearing the LUSH mark to promote its public awareness and lobbying campaigns, which address social and environmental issues of importance to the cosmetics industry. The proceeds from these items go to direct action and charitable groups.

The respondent caused a notice under section 45 of the Act to be issued. The section authorizes the Registrar, on a request made after three years from the date a trademark was registered, to require the owner of the trademark to provide evidence showing that it was in use in Canada during the preceding three-year period. If the owner fails to show use in Canada within that period, or a good reason for non-use, the registration will be expunged.

The Trademarks Opposition Board

The appellant filed evidence in response to the notice that suggested that the t-shirts were sold to employees at cost, and even though the trademark owner's primary business was personal care products and cosmetics, the LUSH-branded t-shirts were "themselves objects of trade" and "not merely promotional" (emphasis in original), since they had been sold to employees, invoices had been issued, and taxes had been collected on the sales.

The definition of "use" for a mark in association with goods is as follows:

4 (1) A trademark 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 transferred.

The Hearing officer accepted that the evidence was sufficient to show use. He did not consider it appropriate to expand the jurisprudence to suggest that a registered owner needed to show that it sold its goods strictly for monetary profit for such sales to be considered "in the normal course of trade".

The Federal Court

On appeal, the Federal Court judge found that the hearing officer had unreasonably failed to consider evidence submitted by the appellant indicating that the t-shirts and tank tops were identified as "swag" by their supplier and were sold by Lush Canada to employees at prices approximating their acquisition cost. On a review of the evidence, the judge found the hearing officer's conclusion that the sales were in the "normal course of trade" to be unreasonable. The judge based this view on the absence of evidence of profit, the limited extent of the sales and their promotional nature, and that the appellant was not normally in the business of selling clothing. He, therefore, struck the trademark from the register.

The Federal Court of Appeal

On appeal it was found that the Hearing officer correctly determined that subsection 4(1) does not require that a transfer of trademarked goods be for actual profit to constitute a transfer in the "normal course of trade." A conclusion that actual profit is required would mean that such common business practices as selling last year's trademarked merchandise at a discount would never amount to use sufficient to maintain registration of a trademark. In addition, to require a trademark owner to establish that sales did or would generate profit – something that can be a complex evidentiary task – would put at risk the summary nature of section 45 proceedings.

It was also found that the Federal court judge incorrectly applied the "reasonableness standard" of review. A judge reviewing a decision of a Hearing officer for reasonableness should not reassess the evidence and substitute his or her own appreciation of the evidence for that of the Hearing officer. That would amount to applying the correctness and not the reasonableness standard: Rather, the question for the Federal Court was whether the Hearing officer's decision was unreasonable.

The reasonableness standard is a genuinely deferential standard. It is based on the idea that there may be multiple valid answers to a legal dispute and that courts ought not to interfere where the Hearing officer's decision is rationally supported. A decision is not unreasonable because the evidence would support another conclusion. The Hearing officer is entitled to deference regarding both findings of fact and inferences of fact.

Comment

This decision clarifies that a registered owner need not establish that it sells its goods strictly for monetary profit for such sales to be considered "in the normal course of trade". It also clarifies the application of the reasonableness standard in appeals from a decision of a Hearing officer in section 45 proceedings. The same standard can also apply in appeals form a decision in an opposition.

Finally, the court referring to the Supreme Court of Canada, said unlike other forms of intellectual property, the gravamen of trademark entitlement is actual use. In trademarks law the watchword is "use it or lose it".

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
John McKeown
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions