Canada’s Federal Court of Appeal recently issued a decision regarding section 50 of Canada’s Trade-Marks Act, the governing provision regarding licensing of a trade-mark. In Spirits International BV v. BCF and Registrar of Trade-marks, 2012 FCA 131, the Court of Appeal set aside the Federal Court’s decision from 2011. The lower court decision was an appeal from a summary expungement decision of the Registrar of Trade-marks, wherein the Federal Court upheld the Registrar’s decision to expunge the registered trade-mark since the mark had not been used during the relevant time period. The lower court had concluded that the requirements of section 50 had not been met and, as such, the trade-mark owner was not entitled to the benefit of the licensee’s use of the mark in Canada.

Section 50 provides that use by a trade-mark licensee is deemed to be use by the owner if the owner has direct or indirect control over the character or quality of the wares or services (vodka in this case). In the lower court decision, the judge reviewed the evidence and found there was only a bare allegation of a trade-mark licence between the trade-mark owner (Spirits BV) and the alleged licensee (Spirits Cyprus). The lower court concluded that “the mere fact that there is some common control between a registered trade-mark owner and other corporate entities is not sufficient to establish that the use of the trade-mark was controlled such that a licensing agreement can be inferred from the facts. Clear evidence of control has to be adduced.” The lower court also found that the evidence was too vague to establish that the owner controlled the nature and character of the vodka in order to satisfy the requirement under section 50 that the owner had control over the character or quality of the wares or services.

On this latter point, the Court of Appeal disagreed and found that Spirits BV set the standards of character and quality for the vodka to be labelled with the subject mark, notwithstanding that the actual compliance testing was delegated to other corporate entities. The Court of Appeal concluded by stating that the trade-mark owner ensured that only vodka that met its standards was labelled with the subject mark.

With respect to the first aspect of section 50 regarding whether Spirits Cyprus was licensed with the authority of Spirits BV to use the trade-mark, as noted above, the Federal Court found the evidence to be a “bare” allegation of a trade-mark licence, without any indication of what Spirits Cyprus did under the alleged licence. However, the Court of Appeal looked more broadly at the sales invoices to infer that Spirits Cyprus acted under the licence as the “selling agent for Canadian sales of vodka bearing the subject mark.” The Court of Appeal found that the trade-mark owner satisfied section 50 and, therefore, that the trade-mark had been used during the relevant time period.

This statement appears to be an unfortunate co-mingling of the concepts of an agent and a licensee, but nevertheless shows that  resort can be made to surrounding facts to establish that a trade-mark licence exists, instead of relying on details of a licence or even production of the licence itself. Trade-mark owners should continue to diligently review their licensing arrangements to ensure they are sufficient to satisfy the requirements of section 50 to obtain the benefit of that provision in defending or enforcing their rights in Canada.