Bad Faith TrademarkApplications
Arecent decisionof the Federal Court affirmed the Trademarks Opposition Board’s decision toallow an opposition as a result of bad faith on the part of the applicant.
The Facts
JuliaWine Inc. (“the Applicant”) is a Quebec company that sells affordable wines to largeretailers. On August 19, 2009 the Applicantfiled three trademark applications for the trademarks IRRESISTIBLES, PRESIDENT’SCHOICE and COMPLIMENTS in association with wines.
LesMarques Métro, S.E.N.C. (“the Respondent”) owns the trademark IRRESISTIBLES,although it had not obtained a trademark registration for the mark in 2009. The Respondent used the trademark in associationwith more than a thousand food products of all kinds, including juices,sparkling water, sparkling juices, wine vinegars and related items. In the past, the Respondent’s predecessor hadmarketed a beer in association with the IRRESISTIBLES mark.
The Opposition
TheApplicant’s application was advertised and the Respondent opposed theapplication on the grounds that the applied-for mark was not distinctive as itwas confusing with its IRRESISTIBLES common law trademark. In addition, the Respondent said that the Applicantcould not have been satisfied that it was entitled to use the applied-for trademarkin association with wine.
Paragraph30(i) of the Trade-marks Act requiresthat an Applicant for registration of a trademark file with the Register a statementthat the Applicant is satisfied that it is entitled to use the trademark inCanada in association with the applied-for goods or services. Grounds of opposition based on this paragraphare only allowed in exceptional cases such as when there is evidence of badfaith on the part of the Applicant.
TheRespondent’s evidence included a description of the food market in Quebec andOntario. It was said there was onlythree major chains, Metro, Loblaws and Sobeys. Each of these companies marketed their respective private label productsin association with the following trademarks IRRESISTIBLES, PRESIDENT’S CHOICEand COMPLIMENTS.
TheRespondent’s evidence referred to meetings with the Applicant’s representativewho suggested marketing IRRESISTIBLES brand wine solely in the Respondent’sstores and that the mark could be potentially assigned to the Respondent sothat it could take advantage of an alleged loophole in the Quebec legislationregarding the sale of wine in grocery stores. It was also said that a similar proposal had been made to Loblaw’s andSobey’s representatives. The Respondentdid not agree to proceeding in this fashion.
The Trademarks OppositionBoard
Ahearing officer, of the Trademarks Opposition Board allowed the opposition anddismissed the application. The hearingofficer agreed that the Respondent’s mark had a low degree of inherentdistinctiveness because it was a common adjective but found that the mark hadbecome well-known. The Respondent submittedevidence that its predecessor had commenced using a version of the mark around2002 in connection with various food products and decided on the final versionof the mark in September of 2007. Sincethis time the mark had been used in association with about 1,100 food productsin 370 stores mainly in Quebec and Ontario. The sales of these products totalled over $940,000,000. In addition, since 2011 almost 6.5 millionflyers advertising IRRESISTABLES brand products had been distributed inCanada.
Thehearing officer did not accept that the Applicant’s mark, used in associationwith “wine”, was distinct from the Respondent’s food products. The Respondent’s mark extended to fruitjuices, non-alcoholic beverages, sauces and marinades and wines could beconsidered a natural extension of this range of products. She also referred to the fact that wines weresold in the Respondent’s stores and the potential channels of distributioncould overlap.
Finally,the hearing office allowed the ground of opposition based on paragraph 30(i) ofthe Act. She said that it was difficult to understandwhy the Applicant on the same day filed applications to register marksidentical to the three private label brands registered by the Respondent andits primary competitors. Since the Applicantfailed to explain itself on this issue the hearing officer found that theApplicant did not discharge its burden of proving that it was entitled to usethe mark at the time the application was filed.
The Federal Court
TheApplicant appealed from this decision to the Federal Court. Such an appeal is not restricted to therecord before the Board and additional evidence may be filed.
MadamJustice Tremblay-Lamer found that additional evidence filed by the Applicantdid not materially affect the findings made by the hearing officer. As a result, this meant that the hearingofficer’s expertise must be given deference and the applicable standard ofreview was that of reasonableness.
Whena court reviews a decision under this standard it will only intervene when thedecision is not transparent, justified and intelligible and does not fallwithin the range of possible acceptable outcomes which are defensible on thefacts and the law. Applying thisstandard the judge dismissed the appeal.
Withrespect to the paragraph 30(i) ground of opposition, the judge said there wereno other reasons for the Applicant to want to use the applied-for mark exceptto benefit from the reputation acquired by the Respondent’s IRRESISTIBLES markover the years.
Whilethere was not a significant body of case law concerning the concept of “badfaith” in this context the Applicant’s attempt to benefit from thewell-established reputation of a trademark was the type of situation that theparagraph 30(i) was designed to apply to.
The Amended Trade-marks Act
Themost significant amendments to Canada’s trademark legislation since 1954 havereceived Royal Assent but have not yet been proclaimed into force. This will not likely occur until 2018 sincethe regulations and other matters required by the changes have yet to befinalized.
Paragraph30(i) will no longer remain in the Act unlessa specific regulation is passed to prescribe that such a statement continue tobe included in an application. Inaddition, the grounds for opposition have been restricted and noncompliancewith this requirement will no longer be a ground of opposition.
Anew ground of opposition based on the fact affect that an applicant was notusing or did not propose to use the trademark in Canada in association with thegoods or services specified in the application is available. Unfortunately itis difficult to prove that an applicant did not propose to use atrademark. However, the concept of badfaith is relevant in this context.
Comment
Inthe past the concept of bad faith in the opposition process left the Board orthe Federal Court with some leeway to avoid abuses in appropriate cases. Leaving aside “proposed use” cases, theamended Act does not provide the sameflexibility to deal with abusive applications.
John McKeown
Goldman SloanNash & Haber LLP
480University Avenue, Suite 1600
Toronto,Ontario M5G 1V2
Direct Line:(416) 597-3371
Fax: (416)597-3370
Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legaladvice as individual situations will differ and should be discussed with alawyer.
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