In the world of trademarks, the catchphrase is “use it or lose it”.
Previously, a trademark application could only proceed to registration if the application itself identified the date the trademark was first used or if the applicant filed a declaration of use confirming use of the trademark in Canada. With the sweeping changes to the Canadian trademarks regime that came into force in June 2019, it is now possible to register a trademark without any indication of use. However, what has not changed is the ability to challenge a trademark registration for non-use.
In fact, under trademark laws, the Registrar at the Canadian Intellectual Property Office, either at her own initiative at any time or on the request of any person, may commence a non-use cancellation proceeding of a registered trademark. During such a proceeding, the owner of the registered trademark is required to provide evidence of use in Canada during the preceding three year period. If the owner of the registered trademark fails to do so, the trademark registration may be expunged.
So, what actually amounts to “use”?
That was exactly the issue before the Federal Court of Appeal recently in the case of Cosmetic Warriors Limited v. Riches, McKenzie & Herbert LLP.
Just by way of background, Cosmetic Warriors Limited is a cosmetics company that operates through licensees worldwide including LUSH Canada, which operates the LUSH stores in this country. The company sells clothing to store employees to wear as part of their uniform, and sometimes to give as gifts to family and friends. They also use the clothing for promotional purposes and lobbying campaigns. Cosmetics Warriors Limited applied to register the trademark LUSH in relation to clothing for which registration was granted in 2005.
Riches, McKenzie & Herbert LLP commenced a non-use cancellation proceeding on the basis that the use of the trademark LUSH on clothing does not meet the definition of “use” set out in the Trademarks Act, where the Act defines “use” in relation to goods as use in the “normal course of trade.” Here, the argument was that actual profit is required for “use” to be in the “normal course of trade” but the clothing sold to employees were sold at almost the cost price or were used for promotional purposes. Since profit was not generated and the clothing was not for commercial purposes, the “use” was not in the “normal course of trade.”
The Registrar disagreed that actual profit is required in order to demonstrate valid “use” of a trademark “in the normal course of trade.” The case made its way to the Federal Court of Appeal which agreed that actual profit is not required. Now, the decision of the Federal Court of Appeal does not mean that all promotional items or at-cost sales will amount to valid “use” of a trademark in the “normal course of trade.” Instead, the Court of Appeal emphasized that the “use” must form part of a larger pursuit of profit-making.
Why is this important for you?
For one, applicants usually include a long list of goods in their trademark applications to make sure that they have everything covered. Often, this long list includes promotional items. If you are thinking about applying to register a trademark in relation to promotional or at-cost goods, you need to ensure that you establish a connection between such transfer of goods and your overall profit-making purpose just in case you are faced with a non-use cancellation proceeding.
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