Non-Use of a Trademark – Evidence of Special Circumstances Required

Jose Cuervo S.A. de C.V. v. Bacardi & Company Ltd. and the Registrar of Trade-marks was the second time that Bacardi had sought summary expungement, pursuant to section 45 of the Trade-marks Act, of the trade-mark CASTILLO for use in association with rum. This time, the Federal Court Trial Division agreed with the Registrar and expunged the mark for non-use. At issue before the Federal Court was the standard of review and whether special circumstances justified the non-use.

In the course of the earlier expungement action, the Appellant’s predecessor in title to the trademark had, on appeal, produced evidence of a sale of 41 cases of CASTILLO rum on November 21, 1994 to the Ontario Liquor Control Board. Thus, in Quarry Corp. v. Bacardi & Co (1996) 124 F.T.R. 264, the Court concluded the transaction was in the normal course of trade and set aside the Registrar’s decision to expunge. On further appeal, the Federal Court of Appeal upheld the Trial Division’s decision, but commented that a “single sale divorced from all context” would not normally be sufficient use. In other words, a single sale contrived to protect a trademark was not sufficient.

On October 26, 2005, at Bacardi’s request, the Registrar again issued a section 45 notice requiring evidence of use within the previous three years. The manager of Jose Cuervo’s legal department provided an affidavit dated June 23, 2006 attaching the invoice of November 21, 1994 evidencing the sale to the Ontario Liquor Control Board and an invoice of November 24, 1999 evidencing 100 cases sold to the Alberta Liquor and Gaming Commission (neither sale being within the 3-year limit). The manager also deposed that the Appellant had undertaken a new marketing strategy in 2002 to incorporate a secondary trademark, COHIBA, into the label (owned by a related company), but the co-branding strategy had triggered a worldwide dispute, including threatened litigation that was not yet resolved.

The Registrar concluded there was no use within the requisite 3-year period and, while threatened litigation might be a reasonable excuse for a short period, six years was not reasonable. Relying on the reasoning in Scott Paper Ltd. v. Smart & Biggar (previously discussed) the Registrar concluded that there were no special circumstances.

On appeal, Jose Cuervo provided an affidavit stating that it had resumed use of CASTILLO on August 4, 2008 and attached an invoice for a consignment to the Alberta Liquor and Gaming Commission. The Court noted that the standard of review should be resonableness. The new evidence was not such that it would have affected the Registrar’s decision (being evidence of use well after the 3-year limit) and therefore the standard of review was not correctness.

The Court affirmed the Registrar’s decision, noting that Jose Cuervo produced no evidence as to why the co-branding could not be suspended, stating that it ws “illogical to suspend the use of a valid Canadian trade-mark because of a threat of impending trade-mark litigation with respect to a secondary trade-mark”. The decision to suspend use of CASTILLO in Canada was voluntary and a trade-mark dispute over a secondary mark did not constitute exceptional circumstances.

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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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