A Trademark Overhaul! Amendments To The Canadian Trade-Marks Act And Their Effect On U.S. Trademark Owners

This article originally appeared in Landslide a publication of the American Bar Association section of Intellectual Property Law.

The Canadian government recently introduced the most sweeping amendments to Canada's trademark legislation since 1954. Some of the amendments are of concern, although they will likely not take effect until late 2018 because the regulations required by the changes have to be finalized, among other things.

The government has also introduced the Combating Counterfeit Products Act to provide the Canada Border Services Agency (CBSA) with the authority to take action against counterfeit goods at the border, and to add new criminal offences relating to counterfeit goods. Rights holders can file a request for assistance (RFA) with the CBSA enabling border officers to share information with them regarding suspect shipments. Some portions of the act, including those relating to the RFA and stronger penalties for infringement, are already in place.¹

This article reviews the most relevant amendments, considers the effect on U.S. trademark owners, and provides a European perspective.

Amendments to the Canadian Trade-marks Act

Registration without Use

The Trade-marks Act has been amended so that applicants no longer need to specify a date of first use or any other ground supporting the application.² In addition, the requirement to file a declaration of use has been removed.³ As a result, it will be possible to obtain a registration without ever using the mark.

"Use" has been one of the bedrock principles behind protecting trademarks since the first trademark statute was enacted in 1868. The Supreme Court of Canada has recognized "use" as being fundamental to the creation and enforcement of trademark rights on numerous occasions. This is consistent with the common law cause of action for "passing off," which is the predecessor to trademark protection and continues to provide parallel protection.

There are significant concerns with respect to this change and its potential negative impact. The concerns relate to the following problems that the change will cause:

1. It will be more difficult and expensive to make decisions concerning the selection and use of trademarks and trade names in Canada because parties will not be able to rely on the register to determine whether a mark is in use. Instead, marketplace investigations will need to be conducted for that purpose.
2. For the same reasons, expensive investigations will need to be carried out before meaningful advice can be provided concerning the chances of success in a trademark opposition or an action for infringement.
3. Because it will be easier to obtain a registration, it is likely that more costly trademark oppositions will be required to protect the interests of trademark owners.
4. Given that use is no longer a requirement, the potential exists for the creation of trademark "trolls."
5. While registrations that are not supported by use can be attacked under section 45 of the act, this cannot occur until three years have passed. In addition, section 45 proceedings can take a significant period of time.
6. The creation of trademark rights "in gross" invites constitutional challenge.

Distinctiveness

During the examination of a pending application, an examiner will be able to consider the distinctiveness of the applied-for trademark and refuse an application on the ground that the mark is not distinctive.⁴ At this time, the scope of examination for "distinctiveness" is not known.

In addition, if a trademark is found to be not inherently distinctive, an examiner may require that the applicant submit evidence establishing that the trademark was distinctive as of the filing date. Based on that evidence, the examiner can restrict the registration to the goods or services and to the territorial area in Canada in which the trademark is shown to be distinctive.⁵

Broadened Scope for Applications

The new definition of the term "sign" significantly broadens the scope of what may be registered as a trademark. In addition, the process of dealing with applications will be changed.

Amended section 31 provides that an applicant who seeks to register a trademark that consists only of letters, numerals, punctuation marks, diacritics, or typographical symbols, or of any combination of them, without limiting the trademark to any particular font, size, or color, must file a representation that consists only of characters for which the registrar has adopted standard characters.⁶

The registrar may require evidence that the trademark was distinctive as of the filing date if the trademark consists exclusively or primarily of one or more of the following signs:

Based on that evidence, the registrar can then restrict the registration to the goods or services and to the territorial area in Canada in which the trademark is shown to be distinctive.⁸

The requirement of establishing distinctiveness for the above marks likely means that it will be possible to secure a registration only after use of the mark in Canada. The evidentiary burden to prove distinctiveness can be significant—requiring considerable time and effort to locate evidence on a regional basis and prepare suitable affidavits. Previously the situations in which evidence of acquired distinctiveness needed to be filed were limited.

It is anticipated that new regulations or revised practice directions will clarify the specific requirements for each of these signs.

Entitlement

Amended section 16 provides that an application may be refused if on the filing date or the date of first use, whichever is earlier, the mark is confusing with: "(a) a trade-mark that had been previously used or made known in Canada by any other person; (b) a trade-mark in respect of which an application had been previously filed in Canada by any other person; or (c) a trade name that had been previously used in Canada by any other person."⁹ The change raises concerns because the amendments also provide that an applicant is no longer required to specify a date of first use of the mark. Parties using the register to assess entitlement will no longer have useful information to confirm priority of use.

Claims relating to entitlement are considered during examination, in opposition proceedings, or proceedings seeking to expunge a registration. It remains to be seen how such claims can be effectively assessed in the absence of a requirement on the part of an applicant to state a date of first use.

Practitioners have submitted that the regulations should allow an applicant or a registrant to voluntarily file a statement of the date of first use of the mark in association with specific goods or services. The trademark register would reflect the information set out in the statement. In addition, and to encourage the filing of such statements, the regulations should provide that in an opposition, the information set out in the statement would be presumed, subject to being rebutted by specific evidence, to be the date used for the purpose of determining entitlement under section 16. Unfortunately, there has been no indication that the regulations will include this helpful provision.

Not to Limit Any Art or Industry

Amended section 18.1 provides that the registration of a trademark may be expunged by the Federal Court, on the application of any person interested, if the court decides that the registration is likely to unreasonably limit the development of any art or industry.¹⁰

Utilitarian Function

A trademark is not registrable if, in relation to the goods or services in association with which it is used or proposed to be used, its features are dictated primarily by a utilitarian function.¹¹ The concept of "utilitarian function" is not defined. Presumably reference will be made to existing case law relating to functionality as a bar to registration.¹²

Amended section 20 dealing with infringement provides that the registration of a trademark does not prevent a person from using any utilitarian feature embodied in the trademark.¹³

The Nice Classification System

Canada will comply with the Nice Classification system, and an applicant must group the goods and services according to its classes. Applications that have been received by the registrar before the Amending Act is in force and that have not been advertised must comply with the above requirement.¹⁴ For applications that have been advertised before the Amending Act is in force, the registrar may require an applicant to amend the statement of goods or services to comply.¹⁵

The registrar may require that a registered owner of a trademark provide a statement of goods or services grouped in the manner noted above and amend the register. If no statement is provided after an expiration of an additional notice period, the registrar may expunge the registration or refuse to renew it.¹⁶

It is anticipated that there will be a separate filing fee for each class of goods or services included in an application, but this has yet to be determined.

The Canadian Intellectual Property Office (CIPO) has started, as of September 28, 2015, to informally classify all active applications and registrations. In addition, applicants are now permitted to voluntarily classify goods and services.

Applications

Amended section 2.1 provides that a reference to "person" in relation to a trademark includes two or more persons who, by agreement, do not have the right to use the trademark in Canada except on behalf of both or all of them.¹⁷

Claiming Convention Priority

Section 34 has been amended, but the basic rules relating to making a claim remain unchanged.¹⁸ However, an application and claim to priority can be based on a filing of an application in any country of the Union other than Canada and is no longer restricted to the applicant's "home" country.

The section has also been amended to allow for the withdrawal of a claim of priority and extending the six-month period to add a convention claim by not more than seven days.¹⁹

Oppositions

Grounds of opposition relating to the matters that were previously required to be set out in an application will no longer be available to an opponent, including grounds based on the failure to use the mark continuously from the claimed date of first use. However, an opposition may be based on the fact that the applicant did not propose to use the mark (likely very difficult to prove) or has not used the mark in Canada.²⁰ The application does not require any statement be made concerning use or proposed use!

The failure to require an applicant to specify a date of first use raises concerns with respect to determining entitlement in an opposition. In the absence of direction in the regulations, presumably the default position will be that entitlement will be determined as of the filing date of the application. But amended section 16(1) refers to the "the filing date of the application or the date of first use of the trademark in Canada, whichever is earlier." Nothing has been said to date concerning when and how the applicant may assert a claim based on use.

Divisional Applications

The amendments make provision for dividing an application into two or more applications.²¹ This can be particularly useful where the characteristics of some goods or services raise an issue but the balance of the goods or services do not, and may help to resolve oppositions if the issues relate to only some goods or services.

Amended section 41(1) allows the registrar to merge registrations of the trademark that stem from the same original application.²²

Correction of Errors

The registrar may withdraw the advertisement of an application if the registrar is satisfied that the application should not have been advertised or was incorrectly advertised.²³ In addition, the registrar may, within three months after the registration of a trademark, remove the registration from the register if the mark was registered without considering a previously filed request for an extension of time to file a statement of opposition.²⁴

The registrar is given jurisdiction to correct obvious errors within six months after an entry in the register is made.²⁵ This is helpful because the registrar previously refused to fix errors on the basis that there was no jurisdiction to do so.

Associated Trademarks

The act has been amended to remove the reference to associated trademarks and the limitations relating to their transfer.²⁶ It will be up to trademark owners to ensure that assignment of a trademark does not negatively impact the distinctiveness of their trademarks.

Infringement

Bill C-8 has expanded the definition of infringement in section 20 of the act to include anyone who:

Nonuse Cancellation

Section 45 has been amended to allow the request and decision to be limited to specific goods or services.²⁸ In addition, the ability to grant extensions is clarified.²⁹

Previously the registrar, at its own initiative, could commence a proceeding under the section at any time. Under the amended section, the registrar must, like any other person, wait for three years following the registration date.

Transfer of Trademarks

The act has been amended to allow a transfer by the registered owner without requiring any evidence of the transfer and to deal with the removal of the registration of a transfer that should not have been registered.³⁰

Term of Protection

The act has been amended to reduce the term of protection from 15 years to 10 years and to make it possible to apply for an extension of time to effect the renewal not more than seven days after the renewal date has expired.³¹

The transitional provisions provide that the 15-year period continues to apply to a registration that is on the register before the amended section comes into force until the registration is renewed.³² Any renewals processed before the implementation date, but not actually due until afterward, will have the time reduced to 10 years.

Regulations

The power of the governor in council to make regulations under the Trademarks Act is significantly expanded.³³ In addition, amended section 65.1 provides that regulations can be made for implementing the Madrid Protocol and the Singapore Treaty on the Law of Trademarks.³⁴

The Effect on U.S. Trademark Owners

U.S. trademark owners are a very large user group of the Canadian trademark system. In the period 2011–2012, more than 15,500 of the 50,000 applications filed in Canada were submitted by applicants from the United States. The amendments to the Canadian trademark legislation mirror those of the United States in a number of ways. For example, once the amendments are in force, the goods and services in both Canadian and U.S. applications will be grouped under the Nice Classification system. Similarly, the CIPO will require applicants seeking to protect marks that are not inherently distinctive to provide evidence of acquired distinctiveness. While these changes will harmonize the U.S. and Canadian systems, the removal of the longstanding requirement of specifying a first use date in an application will have a negative impact on trademark owners seeking to protect their trademarks in Canada, who will face additional expense and economic disadvantage.

First, the amendments will likely necessitate more in-depth clearance searches to better identify potential risks of conflict. Unlike U.S. registrations, which generally include dates of first use, the new Canadian provisions eliminate the requirement to specify a first use date. While this change may streamline the application process, it will create uncertainty in establishing entitlement. To determine the actual priority date or whether a pending or registered mark is in use, potential applicants will need to conduct investigations beyond a standard clearance search. Similarly, because the amendments do not require applicants to demonstrate use, applications will no longer reflect marketplace realities as they may include a broad range of goods and services for which no use is occurring or will occur. As a result, to rule out possible obstacles to use and registration, further research into and investigation of these marks may be necessary to properly identify their scope of protection.

Second, the changes will result in additional protection efforts at both the filing and opposition levels. Because applications for inherently distinctive marks will not require use for a registration to issue, trademark owners may file defensive applications to preserve their rights in Canada. Moreover, the absence of a use requirement may cause an increase in applications filed by trademark "trolls." To better protect their rights, trademark owners may, in addition to closely monitoring published applications through a watch service, end up filing more oppositions or sending demand letters. Furthermore, without the use requirement, trademark owners will likely file applications with broad goods and services, which will crowd the register and create uncertainties as to the scope of protection for a mark. This in turn may push trademark owners to file more oppositions to at least preserve the right to object, while they conduct investigations and possibly engage in discussions with the owners of conflicting marks.

Finally, the amendments include nuances that require heightened attention from practitioners and owners. For example, although use will no longer be a prerequisite for registration, applicants for certain types of marks should be prepared to demonstrate acquired distinctiveness through evidence of use in Canada in order to obtain a registration. The collection of this evidence and preparation of submissions to the CIPO can be time consuming and costly. Furthermore, because registrations issued after the adoption of the amendments will expire after 10 years, as opposed to 15 years, practitioners will need to ensure that they properly docket renewal deadlines to prevent a registration from lapsing.

Although many of the amendments will result in a system that is in harmony with U.S. practice, trademark owners who have not prepared for these changes may be faced with unanticipated legal efforts and costs caused by the need to conduct more thorough searches, file new applications, monitor the trademark register, and enforce trademark rights through demand letters and oppositions. These provisions in the new act have been opposed by U.S. and Canadian practitioners as well as by professional associations such as the ABA Sections of IP Law and International Law. It appears that the Canadian government is now drafting implementing regulations for the new legislation. It is hoped that ongoing efforts by the U.S. and Canadian trademark IP groups to ensure that the implementing regulations minimize the expected adverse effects of the new legislation will continue.

Community Trademarks in the European Union and Requirement of Use

One of the major concerns Canadian stakeholders have with regard to the imminent reform of their trademark system is the abolition of the use requirement to obtaining a trademark registration in Canada. Although such step might appear radical, trademark protection without showing use or an intent to use is not uncommon when the global landscape is taken into account.

Community Trademark System

The Community Trade Mark (CTM) system that has been established as a regional trademark registration system in the European Union (EU) for almost 20 years serves as a good example. A CTM registration provides protection in all current 28 member states and in any future new member states by filing one application in one language. Its renewal, recordation of assignments and licenses, limitations of goods and services, etc., are taken care of centrally by filing requests with the Office for Harmonization in the Internal Market (OHIM).

In 2013, U.S. trademark owners accounted for 41 percent and Canadian trademark owners for 3 percent of all CTM applications, making U.S. stakeholders the second largest user group of the system. To place the North American and EU systems in context: in 2013, more than 415,000 trademark applications were filed in the United States, more than 49,000 in Canada, and around 114,000 as a CTM.

Application

For a CTM application, a filing basis—particularly, an actual use or an intent to use the trademark—is neither required nor available. As a basic rule with some exceptions, the class headings of the Nice Classification can be claimed to identify the goods and services. OHIM checks the application for formal requirements and for absolute grounds of refusal only.

Registration and Renewal

After publication of the application and the expiration of a three-month opposition deadline, the CTM is registered. The registration is valid for 10 years and can be consecutively renewed for the same period. At the time of registration, proof of use of the CTM is not required.

Use Requirement

While use or even an intent to use is not required at the beginning of a CTM's lifecycle, this changes at the end of the fifth year calculated from the mark's registration date. Article 15(1) of the Community Trade Mark Regulation (CTMR) provides:

A CTM in practice is not enforceable if the mark has not been used in the EU within this period.

Proof of Use

A CTM will not become active on its own. After the lapse of the nonuse grace period, the owner of a CTM has to prove use of its mark whenever the opposite party explicitly demands it; namely, the opponent in opposition proceedings based on a prior CTM, the invalidity applicant in invalidity proceedings based on a prior CTM, the owner of a CTM in revocation proceedings based on nonuse of its mark, and the plaintiff in trademark infringement actions before the community trademark courts in member states. The onus to prove use of the mark is then solely on the trademark owner.

Perspectives

While abolishing the use requirement for Canadian trademarks at the stage of registration is systematically mistaken, particularly taking the current trademark practice in the United States as Canada's largest trading partner into account, a view to the CTM shows that systems without such a requirement work effectively as well. While doubts remain, such as concerns about the cluttering of the register by nonused marks, more complex proceedings, additional searches, and increased costs, the ongoing success story of the CTM shows that a nonuse-based system can make the application process simpler, quicker, and less costly. In addition, the system makes it easier to prove and check the priority of a mark by the registration date rather than by the date of first use.

In the end, there is no doubt that Canadian trademark owners will adapt to the new challenges ahead.

Conclusion

From all of the above the one thing that is clear is that there will be significant changes to the Canadian trademark system. While there are significant concerns relating to the changes that involve trademark use, many of the other changes are positive in nature. In addition, it is possible that the regulations, when released, may address some of the potential problems. No doubt, users of the new system will find ways to adapt. However, the amendments will bring new challenges and likely add new costs to trademark acquisition and enforcement.

These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.

Footnotes

^{1 Combating Counterfeit Products Act, S.C. 2014, c. 32 (Can.) [hereinafter CCPA] (amending Copyright Act, R.S.C. 1985, c. C-42 (Can.), and Trade-marks Act, R.S.C. 1985, c. T-13 (Can.)).}

^{2 Economic Action Plan 2014 Act, No. 1, S.C. 2014, c. 20, s. 339 (Can.) [hereinafter Amending Act] (amending Trade-marks Act s. 30).}

^{3 Id. at s. 345 (amending Trade-marks Act s. 40).}

^{4 Id. at s. 342(2) (adding this ground of refusal to Trade-marks Act s. 37). "'Distinctive,' in relation to a trademark, describes a trademark that actually distinguishes the goods or services in association with which it is used by its owner from the goods or services of others or that is adapted so to distinguish them." Id. at s. 367(8) (amending Trade-marks Act s. 2).}

^{5 Id. at s. 339 (amending Trade-marks Act s. 32).}

^{6 Id. (amending Trade-marks Act s. 31).}

^{7 Id. (amending Trade-marks Act s. 32).}

^{8 Id.}

^{9 Id. at s. 330 (amending Trade-marks Act s. 16).}

^{10 Id. at s. 331 (adding Trade-marks Act s. 18.1).}

^{11 Id. at s. 326(4) (amending Trade-marks Act s. 12(12)).}

^{12 See, e.g., Remington Rand Corp. v. Philips Elecs. N.V. (1995), 64 C.P.R. (3d) 467, leave to appeal dismissed, 67 C.P.R. (3d) vi (Can. S.C.C.); Thomas & Betts, Ltd. v. Panduit Corp. (2000), 4 C.P.R. (4th) 498 (Can. F.C.A.).}

^{13 Amending Act s. 332 (amending Trade-marks Act s. 20).}

^{14 Id. at s. 359 (adding Trade-marks Act s. 69).}

^{15 Id. (adding Trade-marks Act s. 70(3)).}

^{16 Id. at s. 348 (adding Trade-marks Act s. 44.1).}

^{17 Id. at s. 320 (adding Trade-marks Act s. 2.1).}

^{18 Id. at s. 340 (amending Trade-marks Act s. 34).}

^{19 Id. at s. 340(3) (adding Trade-marks Act s. 34(4), (5)).}

^{20 Id. at s. 343(2) (adding Trade-marks Act s. 38(2)(e), (f)).}

^{21 Id. at s. 344 (adding Trade-marks Act s. 39).}

^{22 Id. at s. 346 (adding Trade-marks Act s. 41(1)(f)).}

^{23 Id. at s. 342(3) (adding Trade-marks Act s. 37(4)).}

^{24 Id. at s. 342(1) (adding Trade-marks Act s. 41(4)).}

^{25 Id. at s. 346(3) (adding Trade-marks Act s. 41(3)).}

^{26 Id. at s. 328 (amending Trade-marks Act s. 15).}

^{27 CCPA s. 22 (effective Dec. 9, 2014) (amending Trade-marks Act s. 20(1)).}

^{28 Amending Act s. 349 (amending Trade-marks Act s. 45(1)).}

^{29 Id. at s. 351 (adding Trade-marks Act s. 47.1).}

^{30 Id. at s. 352 (amending Trade-marks Act s. 48(3)).}

^{31 Id. at s. 350 (amending Trade-marks Act s. 46).}

^{32 Id. at s. 359 (amending Trade-marks Act s. 69 and adding s. 73(4)).}

^{33 Id. at s. 357 (amending Trade-marks Act s. 65).}

^{34 Id. at s. 358 (adding Trade-marks Act s. 65.1).}

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.