A decision of the Federal Court of Appeal, released on December 9, 2020, Group III International Ltd. v. Travelway Group International Ltd.  FCA 210, clarifies the law concerning the impact of a registered trademark on pre-expungement claims when it has been expunged by the court. The decision emphasizes the importance of obtaining a trademark registration and opposing applied for trademarks when advertised.
This case has been before the courts on several occasions and most recently in 2019. In substance the applicant successfully expunged two trademark registrations owned by the respondent but was unsuccessful in obtaining damages for infringement during the period the respondent used the trademarks because the defendant could rely on the fact that it obtained registrations. Our comment which summarizes the facts is here http://www.gsnh.com/damages-after-expungement/
At first instance the applicant was unsuccessful but succeeded when it appealed to the Federal Court of Appeal. The Court granted to the applicant the relief it had initially sought including an injunction and delivery up. The claim for expungement and applicant's claim for damages or an accounting of profits was referred to the judge who initially heard the application since there was not sufficient time to deal with these issues in the time allotted for the hearing of the appeal.
The application judge subsequently ordered that the registrations be expunged but relying on the fact the respondent was entitled to the exclusive use of the marks under section 19 concluded that it was precluded from obtaining damages for pre-expungement use of the two trademarks.
The applicant appealed again to the Federal Court of Appeal. The applicant argued that the trademarks used by the respondent were infringing and were always invalid and never registrable and that the respondent should be dis-entitled from relying on their registrations.
In its decision the Federal Court of Appeal emphasized the importance of the legislative framework. Although in Canada trademarks need not be registered to be protected under the Act, one of the central features of the Trademarks Act is its scheme of registration. Parliament chose to protect trademarks through a robust registration process. The Registrar of Trademark's core duties include the receipt of applications to register trademarks and the processing of those applications. Applications for trademarks are advertised in the manner prescribed in the regulations to allow potentially interested parties notice of the pending application. The bulk of the Act deals with the administrative structure for registration, requirements for registration, and remedies for the infringement of registered trademarks.
The administrative scheme under the Act highlights the specialized and comprehensive nature of the trademark registration process. The integrity of the administrative scheme is critical and underscores the importance of section 19 of the Act. Once the owner obtains a certificate of registration, the protection afforded to a registered trademark under section 19 of the Act is essential for the proper functioning of the trademark system and trademark law overall. There are policy reasons for this protection as it protects the public and the owners of trademarks by affording transparency, stability and certainty of the trademark system in Canada.
The respondent's trademarks were registered under the scheme of registration specified in the Act. As a result, the trademarks were presumed to be valid and the respondent was entitled to the exclusive right to the use throughout Canada of the trademark in respect of the goods or services in association with which it was registered
In the expungement proceeding liability for damages was engaged only after the Federal Court struck the trademarks from the Register. Absent a finding of fraud, willful misrepresentation or bad faith in the application for registration, the owner of the registered trademarks was not liable for any damages accruing before the expungement of its trademark. There are sound reasons why the use of a registered trademark does not result in liability in damages or profits for the period arising before expungement because of the protection afforded it under section 19
With respect to the claim for passing off since it related to the period before the respondent's registrations were expunged the case law was clear, apart from the unusual circumstances of this case that the registrations of the trademarks would be a complete defence to a claim for passing off.
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