There has been a revolution in how software is delivered to customers. Traditionally software was licensed in a physical form. The customer traditionally received a copy of the computer program in a tangible form (disk or downloaded) and installed the software on its computer and operated the software in that manner. This also meant that the customer had to obtain and either install updates from time to time directly, or by virtue of automatic updates installed by the software supplier.

The revolution is a change to the business model. The new model has the software supplier maintain the software on its server and the customer accesses it via a network connection, commonly on the Internet. The software vendor keeps the software current and the customer now merely has to use the software. The customer never gets a tangible copy of the software but merely accesses the vendor’s server to use the software. This business model is called “software as a service” or cloud computing.

So the issue comes up – if you are a software vendor and you registered your trademark with software claimed as a good (but not as a service) then is your trademark registration subject to challenge?

This is what happened in Specialty Software Inc. v. BEWATEC Kommunikationstechnik GmbH2016 FC 223, where the Federal Court had to consider a non-use cancellation action filed against a software vendor’s registration of its trademark registered in relation to goods and not for services. The opponent argued which the vendor continued to use the software in the marketplace because its business model had evolved to a “software as a service” model, it was no longer using the trademark in association with goods, as registered.

The opponent argued that use in relation to goods required a transfer of property to occur under Section 4 of the Trade-marks Act, RSC 1985, c T-13. The essence of the argument is well summarized at para. 8:

Bewatec argues that Specialty’s mark is associated with data and software available only through an Internet browser. Specialty has not met, in its view, its burden of demonstrating that there has been a transfer of ownership or possession of any goods. It points out that Specialty’s clients do not download or install or physically acquire anything. In reality, Bewatec says, clients merely obtain access to a service that Specialty provides over the Internet.

The Federal Court did not agree. While the software vendor no longer sold software on a disk, it is really in effect selling a license to use the software, an intangible good. The Court saw the disk as merely the way the software was delivered and the “real” good was the license.

In this case the Court found that software vendor had provided evidence that the registered “mark was used in a manner that gave notice to purchasers of software licenses of an association between those goods and the registered mark and therefore, the requirements of the Act regarding use have been met.”

Software vendors who migrate their business model to a software as a service model will find the decision in this case helpful to support their older good-based registration. However they should note carefully the difficulties of associating a trademark with a license and consider whether it may be worthwhile revising their trademark filings in order to fully reflect how they conduct their business. Perhaps some aspects of a Software as a Service model may also be well aligned with a service claim.