Bricks and Mortar or Online Order? Federal Court of Appeal decides what Constitutes Trademark “Use” in Association with Hotel Services

Over the last few decades, Courts in Canada have grappled with whether “hotel services” and “motel services” can be performed in Canada in the absence of physical hotel premises in the country. In its decision in Hilton Worldwide Holding LLP v. Miller Thomson LLP (2018 FC 89) (“Hilton Worldwide FC”),  the Federal Court of Canada (the “Court”) found that, in some circumstances, such services can indeed be performed in Canada, even in the absence of a physical hotel in Canada. On appeal to the Federal Court of Appeal (the “Court of Appeal”), in  Miller Thomson v Hilton Worldwide Holding LLP, (2020 FCA 134) (“Hilton Worldwide FCA”), the Court of Appeal agreed and affirmed most of the earlier findings of the Court.

The Hilton Worldwide decisions involve appeals of a decision of the Registrar of Trademarks in which Miller Thomson LLP sought cancellation of a registration for the WALDORF-ASTORIA trademark on the basis of non-use within the previous three years. “Use” in this context requires the owner of a registration to show that its services were performed in Canada during the relevant period of time. Hilton Worldwide was unsuccessful before the Registrar, but successfully overturned that decision on appeal to the Court.

The decision attracted interest among trademark owners and practitioners in Canada, as providers of hotel and motel services can face difficulties showing use in Canada; such providers must physically deliver aspects of these services in a particular geographical location, but often primarily cater to consumers who reside in, and place orders from, outside of that location. Courts have not always taken a sympathetic view of this challenge: in Motel 6 Inc. v. No. 6 Motel Ltd. [1982] 1 FC 638 (FCTD) (“Motel 6”), the Court held that motel services were not “performed” in Canada, even where evidence showed that Canadians stayed in motels located in the US and booked reservations for those motels from Canada. According to the Court in Motel 6, there must be some business facility in Canada for use of a trademark to occur in Canada in association with “motel services”.

Likewise, some recent decisions of the Canadian Trademarks Opposition Board (“TMOB”) have distinguished between “hotel services” and “hotel reservation services” in similar non-use proceedings. The TMOB has 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, for example, through the use of a hotel’s website in Canada or through third party booking services used by Canadians (see, for instance, Stikeman Elliott LLP v. Millennium & Copthorne International Ltd., 2015 TMOB 231 (“M Hotel”) and Maillis v Mirage Resorts Inc, 2012 TMOB 220). These TMOB decisions follow comments in obiter in Motel 6 (at para. 40) which suggest that the Court made a similar distinction between “motel reservation services” as distinct from “motel services”.

However, in Hilton Worldwide FC, the WALDORF-ASTORIA registration included claims for only “hotel services.” The Court also found that, at the time the registration issued in 1998, the Canadian Intellectual Property Office’s Goods and Services Manual (the “Manual”) did not list separate entries distinguishing “hotel services” from related services such as hotel booking services or hotel reservation services. In part based on this evidence, the Court found that “hotel services” could have included hotel reservation services, which were offered online to Canadians in conjunction with a rewards program which could be used by consumers in Canada. The Court of Appeal 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 para. 104).

As a result of this expanded understanding of the description “hotel services”, the Court found that Canadians had received a benefit from services that fell within “hotel services” and that the registered owner had performed these services through direct contact with Canadians. These services included allowing for booking reservations online, and by allowing guests to pre-pay for stays at the hotel’s US location. As found by the Court of Appeal, “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 para. 115). The Court found – and the Court of Appeal affirmed – that the provision of these benefits to approximately 1300 Canadians distinguished this case, on the facts, from prior decisions such as M Hotel.

Notably, the Court of Appeal found that the Court erred in finding that providing “loyalty points” to guests who booked rooms via an associated loyalty program (redeemable at non-WALDORF-ASTORIA hotels in Canada) constituted performance of a service in Canada. There was no evidence that these points were earned at the time a room is booked, rather than when a customer stayed at the hotel – the latter action of which would occur outside of Canada (at para. 134). Yet the Court of Appeal found that, in any event, Canadians can and do enroll separately in the loyalty program, which constitutes performance of a service in Canada (para 136). As a result, the Court of Appeal found this error to be palpable but not overriding, and therefore the error had no effect on the outcome of the Court’s decision.

In addition, the Court of Appeal noted that older decisions should be considered in light of the significant technological changes which have occurred in the commercial landscape over the past few decades (and on this front, the Court of Appeal quoted one of my prior articles on this point, at para 141 of the decision). For example, Motel 6 dates from the 1980s. The Court of Appeal noted that subsequent changes have occurred since then which affect the way people perform services and receive the benefit of those services:

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 para. 140).

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

Comment:

The decisions in Hilton Worldwide FC and Hilton Worldwide FCA show the difficulties some owners of registered trademarks face when required to show “use” of their trademarks in Canada, particularly where the nature of their industry or the performance of their services online can make it difficult to show “use” through the traditional means of doing so. However, these decisions also show that the Courts are aware of these challenges, and willing to consider the applicable law in a flexible manner which accords with the realities of current commercial practice. That said, there are limits to the concept of trademark use, and this concept is not “open-ended”. Ultimately, subsequent decisions on this point will highly depend on the quality of the evidence submitted by the owner, and the specific nature of the facts at issue.

The Utility of Recent Force Majeure Amendments to Canadian Trademark Law

In 2014 and 2015, Canada passed a number of amendments to its Trademarks Act allowing for extensions of time due to unforeseen circumstances. These amendments were driven, in part, by the Northeast Blackout of 2003, in which millions of people (including 10 million in Ontario) lost power for two or more days. As a result, some IP practitioners were unable to meet deadlines falling on those days – prompting calls for amendments allowing extensions for “force majeure” events to the Patent Act, the Trademarks Act, and the Industrial Design Act.

Although these amendments were enacted more than a decade after this blackout, these “force majeure” provisions have become incredibly relevant in the context of unprecedented challenges posed by the global COVID-19 pandemic.

The words “force majeure” do not appear in the Canadian Trademarks Act. However, at least three provisions now afford trademark owners and the Registrar of Trademarks some flexibility in addressing the effects of so-called “acts of God” under Canadian law—events beyond a party’s control which make performance of their obligations impossible. The relevant provisions:

  • allow for an extension of time to claim priority for a period of up to seven days in certain circumstances (section 34(5));
  • allow for an extension of time to pay renewal fees for a period of up to seven days in certain circumstances (section 46(5)); and
  • allow the Registrar to designate time periods in which deadlines are automatically extended to the next day outside of the time period, on account of unforeseen circumstances and when it is in the public interest to do so (section 66(2)).

This last provision came into force on November 5, 2018. Less than two years later, the Registrar exercised this power to designate March 16, 2020 to March 31, 2020 as days during which any deadline is automatically extended—in this case, to April 1, 2020. The Registrar may further extend this period, but at the time of writing we have no confirmation in this regard.

Parties wishing to rely upon the prior two provisions ought to refer to the Canadian Intellectual Property Office’s Practice Notice “Extensions of time due to force majeure for priority and renewal”, published June 17, 2019. Notably, the Practice Notice makes specific reference to “virus/bacterial epidemic outbreaks” as an example of a potential force majeure event.

Royal Assent Received for Most Recent Amendments to Canada’s IP Legislation

Bill C-86, the Budget Implementation Act, 2018 (the “Act”), received Royal Assent on December 13, 2018, after moving through Parliament at a blistering pace. In all, less than two months elapsed between the tabling of the bill and its passage.

These amendments will affect the Trade-marks Act, the Patent Act and the Copyright Act.  In addition, a new regulatory body for Canadian Patent and Trade-mark Agents will be created pursuant to the College of Patent and Trade-mark Agents Act. 

The most significant amendments to Trade-marks Act are as follows:

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