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Trademark update

IP lawyers are optimistic that Ottawa’s new openness to consultation will address problems with the impending trademark overhaul
Intellectual Property Legal Report
|Written By Aidan Macnab
Trademark update
Huan Tran

Set to come into effect next year, the legislative changes to the Trade-marks Act will bring Canada in line with international treaties and make trademark applications faster. But the changes will likely cause uncertainty for trademark lawyers, and the removal of the use requirement may open up the trademarks register to a flood of speculation.

These changes have “been a long time coming,” says Richard Naiberg, partner in the intellectual property group at Goodmans LLP.

“There’s good and bad for trademark lawyers and, probably, mostly uncertainty,” he says.

While the elimination of use as a requirement for trademark ownership has upended a Canadian legal tradition of over 100 years, trademark lawyers say the formerly inaccessible federal government is now open to receiving their input.

After the legislative changes to the Trade-marks Act, Bill C-31 were developed and passed with very little consultation with the profession, the current federal government has charted a new course with a collaborative approach and “significant consultation,” says Mark Evans, a partner at Smart & Biggar in Toronto. 

“In 2014, the federal government was not prepared to engage in any meaningful consultation whatsoever,” he says. 

Now, the government is listening to the profession and other stakeholders, says Cynthia Rowden, counsel at Bereskin & Parr and former president of the Intellectual Property Institute of Canada.

“There was zero collaboration and consultation with Bill C-31, and yet the amount of collaboration and consultation with respect to the next stages, the implementation, has just been diametrically opposed and it’s very welcome. . . . I think it results in a much better system at the end of the day.”

The amendments include the elimination of use of a trademark as a registration requirement, expanding the definition of a trademark to include tastes, sounds, smells and other signifiers, permitting the division and merging of trademark applications to expedite approved applications and isolate those being opposed, shortening registration terms and creating new examination and opposition grounds.

The changes to the act will also institute three international trademark treaties: the Nice Agreement, Singapore Treaty and Madrid Protocol. The Canadian Intellectual Property Office says joining these treaties will “reduce administrative burden,” “align with international best practices” and attract foreign business.

The Nice Agreement is an international classification system for registering marks, established in 1957. All goods and services that can be trademarked are divided into 45 classes and countries that are party to the agreement must register marks accordingly.

The Singapore Treaty “aims to make national trademark registration systems more user-friendly and reduce business compliance costs for trademark owners,” says CIPO. The Madrid Protocol is an international registration system that allows trademark applicants to register in multiple countries through a single application.

Naiberg says that, with the new international treaties, there is fear that work might dry up, primarily at the beginning of the registration process. Someone from Brazil who wants to register their mark for use in Canada can do so by designating Canada when they file into the Madrid Protocol and they will not need to hire a Canadian lawyer.

“Obviously, it’s going to reduce the work of trademark lawyers in Canada and trademark agents in Canada, at least up front,” he says.

But this globalization will mean that applicants file more broadly, he says. He expects this will create more business for lawyers at the opposition stage.

“So, the changes are somewhat balanced,” Naiberg says. “It remains to be seen how it flips out.”

The Nice system will make applications more expensive, while the government is already raising application fees, according to Philip Lapin, patent and trademark agent and partner at Smart & Biggar in Ottawa. A filing fee of $330 will be paid for the first class, plus $100 for every other class of goods for which the mark is registered. Currently, the fee is just $250 and applies to all goods and services. 

“Clients are being advised if they have trademarks they haven’t filed . . . and if they do cover a broad scope of goods and services, they should certainly do so before the new act comes into place to save some money,” Evans says.

In response to the backlash over certain changes to the act, Evans says, the government has proposed two amendments — one to add a ground of opposition for pending applications filed “on the basis of bad faith” and the other the ability to file a suit or injunction if use of the trademark has not commenced within three years — but Evans says these may not solve the problem with the legislation.

“I don’t think that that will fully deal with all the concerns that have been raised by business and the profession,” he says.

Currently, the filing grounds on which trademark applicants form the basis of their claims include: proposed use in Canada, current use and use in a foreign country. Under the new act, these use requirements will be eliminated.

The end of the use requirement is the most significant aspect of the changes to the law, say trademark lawyers. The common law orientation on trademarks is that those who use a mark in the marketplace, who develop goodwill and a reputation with the public in association with that mark, thereby obtain trademark rights. Now, a company can register its mark first and develop that connection later — or not.

“Under the new act, anyone can register a trademark even if use of the trademark hasn’t commenced. That’s never been the case. It’s always been the case that to obtain a registration in Canada there has to be use either in Canada or that you’ve relied upon a foreign trademark registration,” he says.

Evans says there are both advantages and disadvantages to losing the use requirement. The process for registering a trademark will be “faster, simpler and less expensive,” he says. The bad news is it will clear the way for “trademark trolls,” where a person buys up trademarks with no intention of using them, only to lay claim to them and sue or charge for licence others who want to use the mark.

The same phenomenon is seen with patents, where patents are bought up as an investment, as well as with “cybersquatting,” where people buy up domain names and sell them to businesses for a premium.

According to the Canadian Intellectual Property Office, the amendments to the Trade-marks Act are intended to put Canada in line with Nice, Singapore and Madrid.

Rowden says she attended two parliamentary hearings on Bill C-31, where she heard the government argue that these international statutes required the disposal of the use requirement.

“Which is not true and the best illustration of why it is not true is that, [in] the United States, use remains the registration requirement,” she says.

Rowden says some suggestions put to the government were that use be a necessary element of enforcement of trademark rights, so trolls could not shut down valid trade and if the use requirement was gone to make a “bona fide intent to use” a filing requirement.

“There are a number of suggestions that were made. . . . None of them found their way into the final bill. It was passed, more or less word for word, sentence for sentence, period for period as it was drafted originally.”

Rowden says that, at parliamentary hearings, the government “pooh-poohed” the notion that its changes would open the register to squatters. The government “more or less said, ‘Why would anybody do that?’” Rowden says.

“Well, it didn’t take long for more than one person to do that,” she says. 

“What has been happening is that small group of related companies have started filing applications for 45 classes of goods and services covering hundreds and hundreds of goods,” she says.

Evans says that, until 2017, you didn’t see applicants filing for trademarks to cover all 45 classes outlined in the Nice Agreement because use was required.

“We essentially went from zero to 450 or 400 applications in just one year. So, I think that this is this just a foreshadowing of what we’re about to see,” he says.

Bill C-31’s proposed end of the use requirement was met with a chorus of opposition from stakeholders, lawyers, trademark owners, academics and trade associations in Canada and the United States, says Rowden.

The government’s position was that, by removing use, they were removing an unnecessary administrative requirement, says Rowden.

“It’s not a red-tape issue; it’s fundamental to the trademark system,” says Rowden. “The comment [from stakeholders] was that use is effectively the breaks that maintains the trademark register as a valuable representation of marketplace activity.”

If the trademarks register is saturated with trademark trolls, it does not accurately reflect the market and makes it difficult for those looking to adopt a new trademark to assess risk, says Rowden.

The cluttered trademark register will be confusing for businesses, says Evans.

“There’s going to be a lot more commercial uncertainty for businesses in terms of choosing and clearing brands in the future,” he says. “Even in terms of litigation and contentious proceedings, they will become a little more complex just because you won’t know from the register itself whether a party has ever used the trademark so it’ll be very interesting times to say the least.”

There is also a constitutional aspect to cancelling the use requirement, says Rowden.

To be a valid federal law, she says, amendments to the act need to fit topics for which the federal government can make laws under s. 91 of the Constitution Act, which mentions patents and copyright but not trademarks. Case law has determined that the federal government can make trademark laws if they are the regulation of interprovincial or international trade and commerce. By removing use, actual trade is no longer necessary, she says.

“It is hard to justify the amendments as valid under a ‘trade and commerce’ heading if the granting of exclusive rights and the associated right to enforce those exclusive rights occurs without any trade at all, either in Canada or abroad,” Rowden says. 

The amended act will include another change that could make the trademark application process more challenging, says Evans. The distinctiveness of a trademark used to be challenged in opposition proceedings, but now in the application process, examiners will be able to reject an application if they deem it insufficiently distinctive.

“It’s going to become a much more challenging process to register a trademark because you will have to effectively file affidavit evidence showing that a trademark has developed a reputation or goodwill such that it now functions as a trademark,” Evans says.

But weighed against the removal of the use requirement, Evans says, registering marks will still generally be faster and easier.

The amendments to the act will also expand the definition of a trademark to include smells, tastes, textures, holograms, moving images and colours. This means a marijuana company that develops a distinctive scent will be able to trademark its brand’s aroma, so long as it can show this mark has developed distinctiveness in Canada, says Evans.

“So, what they’re really doing is saying anything, any kind of indicia that a company can have that that identifies them as a source of supply or source of services can be a trademark,” Naiberg says.

Before the additional fees are attached to the Nice classes next year, Naiberg says, companies should be proactive and imagine the possible uses they will have for their trademark in the future and file a trademark application now.

“If you’re a company that’s making shirts with a particular name but you think maybe in the future will be making wallets and jewelry and shoes, you might file for all of those things now,” he says. 

The new Trade-marks Act will shorten the term a trademark is valid to 10 years from 15. There is pressure on the trademarks offices to clear dead wood now that the removal of the use requirement will make obtaining a trademark easier, says Naiberg. Making trademark owners renew more frequently will incentivize their dropping the marks they don’t use to save money.

“If you’re not using it, you won’t renew it. And so there will be fewer marks just sitting there on the register screwing people up,” he says.

According to Naiberg, another positive aspect of the new rules for trademarks lawyers are “divisionals,” where a trademark applicant who is applying to use a mark for multiple goods can divide the application to isolate the contentious items and carry on the application process with the goods that were not opposed.