Bricks and mortar or is online in order? Federal Court of Appeal checks in to trademark use and hotel services

Over the past few decades, Canadian courts have grappled with what it means to provide hotel services and motel services in Canada with regard to trademarks. In Hilton Worldwide Holding LLP v Miller Thomson LLP (2018 FC 89) (Hilton FC), the Federal Court of Canada concluded that such services can be performed for the benefit of Canadians in Canada – even in the absence of Canadian hotel or motel premises – in certain circumstances. 

The decision garnered much discussion among practitioners, and the re-examination of the issues by the Federal Court of Appeal in Miller Thomson v Hilton Worldwide Holding LLP (2020 FCA 134) (Hilton FCA) was met with great interest. In this case, the appeal court agreed with and affirmed the lower court’s earlier findings.

Both decisions involved appeals of a Registrar of Trademarks decision related to a non-use cancellation proceeding advanced by the law firm Miller Thomson LLP against the WALDORF-ASTORIA trademark. To avoid cancellation, the owner had to adduce evidence of its use of the mark in Canada in the previous three years. Hilton Worldwide was unsuccessful in persuading the registrar of such use, but successfully overturned that decision on appeal to the court.

Providers of hotel and motel services can face difficulties demonstrating use in Canada, as they must physically deliver aspects of these services in a particular geographical location, but often primarily cater to consumers who reside, and place orders from, outside that location. The courts have not always taken a sympathetic view of this issue; in Motel 6 Inc v No 6 Motel Ltd [1982] 1 FC 638 (FCTD), the Federal Court Trial Division held that motel services had not been performed in Canada, even where evidence showed that Canadian travellers who had stayed in motels located in the United States had booked reservations for those motels from Canada. Instead, the court concluded that there must be some business facility in Canada for use of a trademark to occur in the country in association with motel services.

Likewise, recent decisions of the Canadian Trademarks Opposition Board have distinguished between ‘hotel services’ and ‘hotel reservation services’ in non-use proceedings. The board held that, where both of these services are included in a statement of registered services, the hotel services must be performed by a hotel physically located in Canada, whereas hotel reservation services can be performed online (eg, through the use of a hotel’s website in Canada or through third-party booking services used by Canadian travellers (see Stikeman Elliott LLP v Millennium & Copthorne International Ltd, 2015 TMOB 231 and Maillis v Mirage Resorts Inc, 2012 TMOB 220)). These decisions follow comments in Motel 6 (at Paragraph 40), which suggest that the court made a similar distinction between ‘motel reservation services’ and ‘motel services’.

However, in Hilton, the WALDORF-ASTORIA registration encompassed claims for hotel services only. The court also noted that, at the time the registration issued in 1998, the Canadian Intellectual Property Office’s Goods and Services Manual did not list separate entries distinguishing hotel services from related services such as hotel booking services or hotel reservation services. Given this, the court found that hotel services could have included hotel reservation services, which were offered online to Canadian consumers in conjunction with a rewards programme that could be used by consumers in Canada. The appeal court affirmed this finding, concurring that “it was an error for the Registrar to interpret the scope of a registration from the pre-internet era in light of the wording of the current version of the Manual” (at Paragraph 104).

Armed with this expansive understanding of ‘hotel services’, the court found that Canadian consumers had benefitted from services falling within the ambit of hotel services and that the registered owner had performed these services through direct contact with Canadian consumers. These services included allowing for booking reservations online and allowing guests to pre-pay for stays at the hotel’s US location. As the appeal court noted, “as long as some consumers, purchasers or members of the public in Canada receive a material benefit from the activity in issue, it will amount to the performance of the service in this country” (at Paragraph 115). The appeal court affirmed the court’s decision that providing these benefits to approximately 1,300 Canadian consumers served to distinguish the facts of the case from prior decisions, such as M Hotel.

In addition, the appeal court noted that older decisions should be considered in light of the significant technological advancements that have occurred in the commercial landscape over the past few decades (and on this front, the court quoted one of my prior articles in support of that finding at Paragraph 141). For example, the Motel 6 decision dates from the 1980s, and the appeal court noted that subsequent changes in the way that people perform services must be taken into account:

The internet was in its infancy at that time, and was not available to the general public in the way that it is now. There was also no concept of online commerce when the definition of “use” was introduced into the Trademarks Act in 1953, and that definition has remained substantially the same since that time (at Paragraph 140).

As a result, the concept of trademark use “must adapt to accord with 21st century commercial practices” (at Paragraph 142).

Comment

The Hilton FC and Hilton FCA decisions show the difficulties that some owners of registered trademarks face when required to demonstrate use of their marks in Canada – particularly where the nature of their industry or the performance of their services online can make it difficult to prove use through traditional means. However, the decisions also show that the courts are aware of these challenges and willing to consider the applicable law in a flexible manner that accords with the realities of current commercial practice.

That said, there are limits to the concept of trademark use, which is not open ended. Ultimately, future decisions on this point will highly depend on the quality of the evidence that the owner submits and the specific nature of the facts at issue.