Canada: Unregistered does not mean unprotected

In Canada, conventional wisdom is that unregistered trademarks are entitled to protection only in the geographical area where they have acquired a reputation. This is true to some extent.

Under the Trademarks Act (RSC 1985, c T-13), unregistered trademarks can be relied on to block and invalidate registration, and can frustrate the exclusive use of a mark throughout Canada. These risks highlight the importance of conducting clearance searches – both of the trademarks register and for unregistered marks – before commencing use or seeking registration of a trademark. The importance of this practice will become more pronounced once amendments to the Trademarks Act come into force – expected in Spring 2019.

Other unregistered trademarks

Unregistered trademark rights (common law rights) arise through the use and reputation of a mark. These rights are protected by the provinces’ powers over property and civil rights under Sections 92(13) and (16) of the Constitution Act 1867 ((UK), 30-31 Vict, c3). However, protection is usually limited to the geographical area in which the mark’s distinctiveness can be proven. As such, unrelated entities may have rights in the same unregistered trademark for the same or similar goods or services in different geographical areas.

To enforce their common law rights, unregistered trademark owners may bring an action for the common law tort of passing off, claims for which comprise three elements:

• a pre-existing commercial reputation in the mark;
• public deception due to misrepresentation as to the mark’s origin; and
• actual or potential damage to the plaintiff caused by this deception (eg, Ciba-Geigy Canada Ltd v Apotex Inc ((1992) 3 SCR 120 (SCC)) and Kirkbi AG v Ritvik Holdings Inc (2005 SCC 65)).

Passing-off actions are properly brought in provincial court. However, the tort is not available per se in Quebec – although general principles of civil liability in the Quebec Civil Code facilitate a similar cause of action. Remedies available for passing off include damages (including punitive damages), profits and delivery up of all infringing goods and materials, as well as a small portion of the legal costs.

Injunctive relief may also be sought. However, interlocutory or interim injunctions are rare, difficult to obtain and usually granted only in extreme circumstances. That said, the Federal Court of Appeal recently upheld the grant of such an injunction where the defendant entered the Canadian market six months before the plaintiff’s launch of a similar product, which it already sold in the United States and for which it held a Canadian trademark registration (Jamieson Laboratories Ltd v Reckitt Benckiser LLC (2015 FCA 2014 aff’ing 2015 FC 215)). In extreme circumstances, where there is a real or impending threat to property rights, a rights holder may be able to obtain a quia timet injunction. Injunctions may also serve as a remedy in successful passing-off cases.

Unregistered versus registered

Pre-registration issues

Once a trademark application has passed examination, it is published in the Trademarks Journal. Within two months of advertisement, third parties may commence opposition proceedings to prevent registration in association with all or some of the goods and services covered. Section 38 of the Trademarks Act sets out the grounds of opposition, including the claim that the applicant is not the person entitled to registration (Section 38(2)(c)). Under Section 16, a person is entitled to trademark registration unless the applied-for mark could be confused – at the date that the application was filed (or, in the case of a mark previously used in Canada, on the date that such use commenced) – with another mark or trade name previously used in Canada.

To succeed in an entitlement-based opposition, the opponent (ie, the senior user) must file evidence that its mark was used before the material date and continuously thereafter. The applicant bears the ultimate burden of showing that there was no reasonable likelihood of confusion on the material dates. If the applicant fails, the application will be rejected.

Post-registration issues

Registered trademark owners can claim the benefit of Section 19 of the Trademarks Act, which provides for the “exclusive right to the use, throughout Canada, of the trademark” in respect of the goods and services covered by the registration. Despite this exclusivity, Section 19 contains two important caveats implicating unregistered trademarks.

First, senior users of unregistered marks can invalidate confusing registered marks on the basis of entitlement for up to five years from registration of the mark. After this, the registration becomes incontestable unless it is established that the junior user adopted the mark with knowledge of the senior rights. Entitlement-based invalidity proceedings differ from entitlement-based opposition proceedings in that the former must be brought in federal court and it is the senior user that bears the ultimate burden of convincing the court, on a balance of probabilities, that the subject mark should not have been registered. However, the result is the same – the registration is struck and rendered void ab initio.

The second caveat concerns concurrent use of confusing registered and unregistered trademarks, and is a corollary to the entitlement-based invalidity ground. Section 21 of the Trademarks Act applies where the owner of an incontestable registration has commenced proceedings in the Federal Court of Canada in respect of its mark (eg, infringement proceedings) and the defendant can show that it used the disputed mark in good faith in Canada before the registered mark’s filing date. In such cases, the court may hold that the defendant can continue to use its mark in a defined geographical area with an “adequate specified distinction” from the registered mark, provided that such use would not be contrary to the public interest. The Section 21 carve-out has important implications for trademark owners, as concurrent use of a confusing trademark can affect distinctiveness, which in turn can affect the registration’s enforceability and validity. That said, this section is seldom relied on (See Brick Warehouse Corp v Brick’s Fine Furniture Ltd (T-83-88, June 9 1992 (order) (FC) involving reg TMA265607)).

Domain name issues

Unregistered trademark rights may also affect the ability to obtain ‘.ca’ domain names. The Canadian Internet Registration Authority restricts ‘.ca’ domain name registrations to individuals or entities that meet its Canadian presence requirements, almost all of which require a substantial connection to Canada (eg, Canadian citizens, permanent residents and corporations under the laws of Canada or its provinces). Registered trademark owners do qualify, but may only register domain names comprising their registered mark. Further, registration cannot usurp the junior user of an unregistered mark’s right to register the domain name in good faith for a legitimate purpose.

Changes to the Trademarks Act

In 2014, the government passed major amendments to the Trademarks Act, which are expected to be implemented in 2019.

The amendments will not substantially alter the entitlement-based grounds of opposition or invalidity, or the provisions respecting concurrent use of a confusing trademark. However, they are expected to add more creases to the fabric of registered and unregistered marks, and increase the frequency with which entitlement-based oppositions and invalidity proceedings are brought. In particular, the amendments will reduce all filing grounds to a single ‘use or propose to use’ ground. They will also eliminate use of information from applications and the register. These changes will make it impossible to discern, from a review of the register, whether a mark has been used or for how long. Moreover, while under the present Trademarks Act registration is delayed until use of the mark has commenced, the amendments will implement a system wherein applications will automatically register at the end of the two-month advertisement period – provided that no opposition is filed. In other words, registrations will be issued for marks that may not have been used in Canada, or elsewhere.

Therefore, parties looking to clear trademarks before entering the Canadian market will be faced with a trademark ecosystem in which:

• no information regarding use is held on the register;
• registration is not a guarantee of use;
• unregistered trademark rights are recognised; and
• unregistered trademark rights have the potential to block, invalidate or restrict registration.

Conclusion

Clearance searching is critical. It helps to assess the potential risk posed to proposed trademarks and applications by senior registered and unregistered trademark rights. Unregistered marks have the potential to block and invalidate registrations and affect exclusivity throughout Canada, which – in turn – can affect a registered mark’s distinctiveness. The risks posed by unregistered trademarks will become more pronounced once the amendments to the Trademarks Act come into force, after which it will be more difficult to discern whether a mark has been used. Potential rights holders ought to conduct thorough searches for both registered and unregistered marks before entering the Canadian marketplace.

Terry Edwards
Partner
[email protected]

Terry Edwards is a partner at Bereskin & Parr LLP and a member of the trademark practice group. Her practice is exclusively in the trademark field, with an emphasis on clearance, prosecution and protection, including oppositions and non-use proceedings.

Tamara Winegust
Associate
[email protected]

Tamara Céline Winegust is an associate at Bereskin & Parr LLP and a member of the copyright and digital media and trademarks practice groups. Her practice focuses on trademarks, copyright and digital media, licensing, marketing and advertising law, in addition to litigation.