Federal Court of Appeal considers “special circumstances” in appeal of trade-mark expungement

In a recent decision of the Federal Court of Appeal (“FCA”), the FCA took the rare opportunity to consider an appeal from a section 45 expungement proceeding. In One Group LLC v Gouverneur Inc, the FCA reviewed the Registrar’s decision not to expunge One Group LLC’s (“One Group”) trade-mark registration for STK (the “Mark”) on the basis of non-use, as well as the subsequent Federal Court (“FC”) decision to overturn the Registrar’s ruling.

One Group operates high end restaurants using the Mark outside of Canada.  In preparation for a new restaurant in Toronto, One Group registered the Mark in Canada. However, due to failed discussions with hotels and developers, a Toronto restaurant never materialized.

In due course, Gouverneur Inc. (“Gouverneur”) brought a section 45 proceeding, alleging that One Group failed to use the Mark in the three preceding years. The Registrar refused to expunge the Mark on the basis that there were special circumstances that excused the non-use, namely that the non-use was not in the control of One Group, and that there was evidence that One Group was close to coming to an agreement with a hotel chain which would see the Mark used in Canada.

Gouverneur appealed to the FC on the basis that the Registrar misunderstood or misapplied the test for special circumstances. The FC agreed and overturned the decision of the Registrar on the basis that it was not a reasonable finding that special circumstances excused the non-use of the Mark, and ordered the Mark expunged.

One Group then appealed to the FCA. In a relatively brief decision, the FCA allowed the appeal and reinstated the ruling of the Registrar.

This decision highlights a number of points:

  • First, the FCA emphasized that deference must be given to the Registrar in expungement proceedings, as well as in those instances where the Registrar is applying its “home statute”. As a result, courts should not disturb the Registrar’s findings of fact except in those circumstances where such findings are clearly not correct.
  • Second, it appears that there is a general willingness of the Registrar to preserve registrations. Hence, to the extent the Registrar makes factual findings in support of preserving a registration, the court’s deference to those findings on an appeal presents a potentially difficult hurdle to overcome.
  • Third, this case is a reminder that there is a “special circumstances” exception to non-use which can be used to preserve registrations. The criteria for determining if “special circumstances” exist are:

- the length of time during which the trade-mark has not been used;

- whether the reasons for non-use were beyond the registered owner’s control; and

- whether the registered owner has a serious intention to shortly resume use of the trade-mark.

Whether special circumstances exist will be determined by the Registrar from the evidence. Such findings, as stated above, will be given deference by the courts.

With this deference in mind, the FCA found no error in the Registrar’s decision that justified judicial intervention, and restored the decision of the Registrar.

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Canada’s Federal Court of Appeal Provides Welcome Guidance on Geographically Descriptive Trademarks

Canada’s Federal Court of Appeal (the “Court of Appeal”) has recently had the opportunity to clarify the test for  registrability of geographically descriptive trademarks in two separate decisions. The most recent of these is the decision in MC Imports Inc. v. AFOD Ltd., 2016 FCA 60.  In the proceedings underlying the appeal, MC Imports Inc. (“MC Imports”) brought an action for infringement against AFOD Ltd. (“AFOD”) on the basis that AFOD’s use of the words “Lingayen Style”, which appeared on AFOD’s imported Philippines food products in a relatively small font, infringed MC Imports’ registered trade-mark LINGAYEN. MC Imports’ registration issued in 2003 and covered Filipino food products, including fish sauce and fish paste. Invoking the old adage that the best defence is a good offence, AFOD counterclaimed and sought to invalidate MC Imports’ LINGAYEN registration on the basis that it was either clearly descriptive or deceptively misdescriptive of the place of origin of the claimed goods and therefore not registrable under the Trade-marks Act, and also on the basis that it was not distinctive of MC Imports as the source of the claimed goods.

The lower court (the “Federal Court”) found that LINGAYEN was the name of a geographical location in the Philippines, known for bagoong products; that the LINGAYEN brand goods of MC Imports originated from Lingayen; and that the ordinary consumers of those products were Canadians of Filipino or South East Asian origin.  The Federal Court ruled in AFOD’s favour and declared the registration for LINGAYEN invalid on the basis that it is clearly descriptive of the place of origin of the goods.  However, the Federal Court declined to settle the issue of whether the perspective of the “ordinary consumer” is relevant to a finding that a trade-mark is clearly descriptive of place of origin on the basis that, in this case, the end result would have been the same. On the issue of distinctiveness, the Federal Court also found in AFOD’s favour and held that the mark had not acquired sufficient distinctiveness in Canada through long term advertising and use by MC Imports. Accordingly, the Federal Court ordered that the LINGAYEN registration be struck from the Register.

On appeal, the key issues reviewed by the Court of Appeal were the appropriate legal test for assessing a finding of clear descriptiveness of a place of origin and the definition of the relevant “ordinary consumer”.  In dismissing the appeal of MC Imports and upholding the Federal Court’s decision, the Court of Appeal found that the perspective of the ordinary Canadian consumer is not always relevant for a finding that a mark is clearly descriptive of its place of origin. The Court of Appeal went on to clarify the legal test to be followed when assessing whether a trade-mark is clearly descriptive of place of origin, setting out a three-step assessment:

(1) whether the trade-mark is the name of a geographic place. The Court of Appeal stated that if the primary meaning of the trade-mark is as a geographic place, it was not relevant whether the place was known to Canadian consumers.  If there is more than one meaning (other than geographic) attached to the trade-mark, then the perception of the relevant “ordinary consumer” comes into play in determining the primary meaning of the trade-mark;

(2) whether the goods or services associated with the trade-mark originate from that geographic place. If the goods/services do not originate from that geographic place, the analysis switches to whether the trade-mark is deceptively misdescriptive; and

(3) an assessment of the trade-mark owner’s claims of use, if any. The Court of Appeal concluded that since registration of a descriptive trade-mark can be obtained under Section12(2) of the Trade-marks Act if the trade-mark had become distinctive at the time of filing the application for registration, the perception of the relevant “ordinary consumer” becomes significant at this stage. The Court of Appeal noted that MC Imports’ evidence of use in Canada, although spanning a long period of time (since 1975), was insufficient to support a finding of acquired distinctiveness.

The Court of Appeal agreed with the Federal Court that the ordinary consumer whose perspective should be considered is not the general public in Canada, but the person who would ordinarily buy the products or services associated with the trade-mark. In this case, the actual consumer would have been Canadians of Filipino or South East Asian descent.

The Court of Appeal found that MC Imports’ registration for LINGAYEN was invalid and not distinctive, and dismissed the appeal.  In doing so, the Court of Appeal pointed out that the name of a geographic place “should remain open to all producers of goods and services to describe the origin of what they are selling, even if the ordinary consumer might not be previously familiar with that place”.

This decision comes close on the heels of Lum v. Dr. Coby Cragg Inc., 2015 FCA 293, another Court of Appeal decision on the issue of clear descriptiveness of place of origin in which the registration for OCEAN PARK – registered in association with dental services performed in the Ocean Park neighborhood in Surrey, BC – was similarly invalidated.  While the OCEAN PARK decision was not referred to in the LINGAYEN decision, the analysis and conclusions were similar and serve to consolidate the Court of Appeal’s approach in considering registrability of trade-marks that refer to a geographic place which is the place of origin of the goods or services associated with the trade-mark.

 

 

 

Order prohibiting Google from delivering search results heads to SCC

The Supreme Court of Canada has agreed to hear an appeal from a decision of the B.C. Court of Appeal which upheld a worldwide injunction against Google Inc. (“Google”), wherein Google was ordered to stop delivering search results to its users that pointed to certain websites.

You can find my commentary on the B.C. Court of Appeal’s decision in Equustek Solutions Inc. v. Google Inc., 2015 BCCA 265, here.

The facts underlying the appeal arose from Equustek Solutions Inc.’s (“Equustek”) attempts to enforce its intellectual property rights against a former distributor, Datalink Technologies Gateways Inc. (“Datalink”).  Allegedly, Datalink was passing off Equustek’s products as its own and using Equustek’s confidential information and trade secrets to manufacture a competing product.  Equustek was successful in obtaining various interlocutory orders against Datalink; however, Datalink failed to comply with those orders, and continued “clandestine” operations online to market and sell its infringing products.

In order to more effectively stop Datalink’s infringing activities, Equustek sought an injunction against Google (which was not a party to the dispute), restraining it from publishing search results that included Datalink’s websites, on the basis that this was the only way to give effect to the orders already in place.  The B.C. Supreme Court granted the order, and the B.C. Court of Appeal upheld the order on appeal.

In its brief reasons granting leave to appeal, the Supreme Court of Canada outlined the issues for its consideration:

-          Under what circumstances may a court order a search engine to block search results, having regard to the interest in access to information and freedom of expression, and what limits (either geographic or temporal) must be imposed on those orders?

-          Do Canadian courts have the authority to block search results outside of Canada’s borders?

-          Under what circumstances, if any, is a litigant entitled to an interlocutory injunction against a non-party that is not alleged to have done anything wrong?

Whatever the Supreme Court of Canada decides in this matter will hopefully provide direction and clarify the law regarding the ability of a Canadian Court to grant a worldwide injunction, as well as with respect to access to information and freedom of expression in the digital age.

We will keep you updated.

About the Blog

The authors of the Canadian Trademark Blog are all members of the Canadian law firm Clark Wilson LLP, based in Vancouver, Canada. Each author's practice focuses–either in whole or in substantial part–on Canadian intellectual property law. Together, they manage the trade-mark portfolios of local, national and international brand owners in nearly all industries and markets.

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