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.

Trademark Interlocutory Injunctions: A POWERful Tool—When Available

As Canadian trademark practitioners know, historically it has generally been difficult to obtain interlocutory (or interim) injunctions in trademark infringement matters. This has been particularly so due to the difficulty in showing irreparable harm, if the injunction were not granted.

As the recent decision of the Alberta Court of Queen’s Bench in Corus Radio Inc. v. Harvard Broadcasting Inc., 2019 ABQB 880 shows, there may be some novel ways to argue irreparable harm, including what is essentially a consideration of ‘lost opportunity’. In this case, a trademark owner was able to convince the Court to enjoin use of similar marks by another party, notwithstanding some 15 years’ absence of use by the owner in the relevant marketplace.

Read more in this Knowledge Bytes article.

Trademark, copyright, or both?

In her article (read here), our colleague Caroline Camp reviews the recent Trademark Opposition Board (the “Board”) case of Pablo Enterprise pte. Ltd. v Hai Lun Tang, 2019 TMOB 54. As Caroline discusses, this case serves as an important reminder that trademark and copyright protection can and do overlap. Moreover, the case confirms that the Board has jurisdiction to assess certain copyright claims within the context of a trademark opposition. Accordingly, if an applicant attempts to register a trademark which includes design elements that are already subject to third party copyright protection (registered or not), the copyright owner may oppose registration on grounds that the applicant is not entitled to use the mark because such use constitutes copyright infringement.

Distinctly (not) distinctive

The Supreme Court of Canada recently denied leave to appeal from the Federal Court of Appeal’s (the “FCA”) decision in Sadhu Singh Hamdard Trust v. Navsun Holdings Ltd., 2019 FCA 10 (CanLII). Caroline Camp writes about the implications of the case. Most interesting is that the FCA confirmed that intervening use of a mark by a third party, even if that use amounts to infringement of a registered trademark, can be sufficient to cause the registered mark to lose its distinctiveness and therefore become unenforceable. So the mantra “use it or lose it” is actually “use it and enforce it or lose it” in Canadian trademark practice. Read her complete article here.

A look back: What you need to remember from 2018 in trademark law

As summer comes to a close, it’s a good time to reflect on some of the significant case law developments that occurred in 2018, which have, and continue to have, an impact on Canadian trademark law and practice. Our colleague Scott Lamb is a contributor to CLE BC’s perennially anticipated Annual Review of Law & Practice, writing the Trademarks chapter. Key litigation developments from last year are succinctly summarized in an excerpt from Scott’s chapter here.

LIVE is dead in the water – The Federal Court tackles another thorny trademark use decision

In a recent Federal Court Trial Division decision, the trademark registration for LIVE, registered in association with, among other things, hotel, entertainment and advertising services, was expunged for non-use during the relevant three year period.  The Court reviewed a number of conflicting decisions on the use of marks in Canada in the context of non-use cancellation proceedings, where the primary service is performed outside of Canada – for example, the relevant hotel or entertainment establishment is physically located outside Canada – but some ancillary or related aspect of the services could be said to be performed in Canada – for example reservations for the hotel or for tickets to the entertainment venue could be made by Canadians while physically located in Canada.

The Court reiterated that in order for there to be use of a mark in Canada, it is essential that some aspect of the services must be offered directly to Canadians or performed in Canada and that it must be demonstrated that people in Canada obtained “some tangible, meaningful, benefit” from the use of the Mark in association with the registered service.  In expunging the registration, the Court found that “simply holding a reservation for a hotel in the US is not a tangible and meaningful benefit enjoyed in Canada, despite that it may ensure that a room will be available upon arrival.  The tangible benefit occurs only once the person leaves Canada and travels to the US and fulfills the reservation.”  A similar conclusion was arrived at in relation to entertainment services.  The advertising services were not performed for any third party, meaning there was no trademark use.

Barring an appeal, the decision is noteworthy as it appears to be counter to a recent Federal Court decision involving hotel services provided in very similar circumstances.  In this case, the Judge distinguished the earlier decision, on the basis that “Unlike in Hilton, there are no rewards points that can be used in Canada. …Rewards points could not be earned in Canada or redeemed in Canada. There is no evidence of a tangible, meaningful benefit enjoyed in Canada from making an online reservation.

No Hotel in Canada? No Problem – Trademark Owner Maintains Trademark Registration With Hotel Services

The Federal Court of Canada (the “Court”) recently released its decision in Hilton Worldwide Holdings LLP v Miller Thomson, 2018 FC 895. In the decision underlying this appeal, the Registrar expunged the Canadian trademark registration for WALDORF-ASTORIA, owned Hilton Worldwide Holdings LLP (“Hilton”), on the basis of non-use. The Court allowed the appeal, and found that Hilton had proven the requisite use of its trademark in Canada, notwithstanding the fact that it did not operate a physical hotel in Canada.

Under the Canadian Trade-marks Act (the “Act”) a trademark is deemed to be used in association with services if it is “used or displayed in the performance or advertising of those services.” Courts have found that this statutory provision includes a condition that the services themselves must be performed or delivered inside Canada, and the mere advertisement of services in Canada does not constitute use within the meaning of the Act.

For trademarks associated with hotels, the Registrar has interpreted this condition restrictively. The Registrar has issued a number of recent decisions which found that the operation of a “bricks and mortar” hotel in Canada is necessary to establish the use of a trademark for “hotel” or “hotel services” in Canada (see, for instance, Bellagio Limousines v Mirage Resorts Inc, 2012 TMOB 220; Stikeman Elliot LLP v Millennium & Copthorne International Limited, 2017 TMOB 34; and Ridout & Maybee LLP v Sfera 39-E Corp, 2017 TMOB 149).

In contrast to the Registrar’s decisions involving “hotel services”, the Court has increasingly recognized circumstances in which companies operating outside of Canada can establish use of their trademarks in association with services directed to consumers in Canada. In HomeAway.com v Hrdlicka, 2012 FC 1467, the Court held that the appearance of a trademark on a computer screen via a website accessed in Canada, regardless of where the information may have originated from or is stored, constitutes use and advertising of the mark in Canada. The evidence in HomeAway.com also showed that people in Canada used the service at issue to post available rental properties located in Canada, and that these postings were available online to customers in Canada.

In allowing the appeal brought by Hilton, the Court focused on the ordinary understanding of the term “hotel services”, which would include ancillary services, such as reservation and booking services. Because these ancillary services would be included in “hotel services”, the Court found the Registrar erred in equating these services with “the operation of a hotel” – services which can only be performed at a physical hotel location. The ancillary services, in contrast, go beyond the physical “bricks and mortar” hotel, and the evidence showed that Hilton had performed such services in Canada, despite operating a physical hotel in another country.

Moreover, the type of hotel services which can be delivered online had greatly expanded since Hilton’s registration issued. The scope of the registration, according to the Court, must be considered in light of the development in online commerce as it relates to the ordinary commercial understanding of “hotel services.” Technological developments which occurred post-registration meant that Hilton could provide services online to Canadians who benefited from them. This also supported Hilton’s claim that it used the mark in Canada.

The decision forms part of a growing trend of Canadian trademark decisions which recognize that companies based entirely outside of Canada can offer services in Canada, and that the performance of those services will constitute use in Canada of the trademarks associated with such services.

David Bowden