Parties engaged in the purchasing of trademarks received good news recently with the Federal Court of Appeal confirming that recent arms-length acquisitions of trademarks may excuse non-use of those trademarks.
The watchword of trademarks is "use it or lose it". Ordinarily, if a trademark owner does not use its trademark for three years, any registration for that trademark is vulnerable to expungement. In expungement proceedings, a trademark owner who cannot show use of the mark within the previous three years can only preserve its registration if it is able to show "special circumstances" that excuse non-use of the trademark.
In Centric Brands Holding LLC v. Stikeman Elliott LLP ("Centric"), the Federal Court of Appeal made three holdings that may benefit buyers of trademarks:
- When an arms-length acquisition of a trademark occurs during the three years before commencement of expungement proceedings, no special circumstances excusing non-use of the trademark need to be shown for the period of time before the acquisition.
- Where the acquisition occurs several months before the commencement of expungement proceedings, the acquisition itself may excuse non-use of the trademark by the new owner, who may need some time to begin using the mark.
- Where expungement proceedings are initiated between the signing date of an agreement (to acquire the trademark) and the closing date of the agreement, the circumstances excusing non-use of the trademark may be assessed from the signing date.
All together, Centric significantly increases certainty relating to the purchase of trademarks. This decision confirms that non-use of a mark by a previous owner cannot necessarily be used against the new owner, and that the acquisition itself may excuse a short period of non-use by the new owner. Additionally, the clarification of the material date for assessing the circumstances excusing non-use mitigates the possibility that expungement proceedings initiated between signing and closing of a transaction could expunge the registration of the trademark being acquired.
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.
