Introduction
Facts
Decision
Comment


Introduction

The Federal Court of Canada, in a May 2022 decision,(1) has ordered a British Columbian man's trademark registration to be expunged for "bad faith" after finding it had been filed solely for the purpose of resale. This is the first decision in Canada applying the new bad-faith ground for trademark expungement, added to the Trademarks Act in 2019.

The trademark registration in question copied the logo of a well-known restaurant chain in China with which the applicant had no affiliation.

Brand owners will welcome the decision as confirming Canada's stance against would-be trademark squatters. The decision also highlights the benefit of monitoring advertised marks in Canada for opposition purposes, which provides a less expensive route to blocking bad-faith applications before they get registered.

Facts

Beijing Judian is the owner of a popular restaurant chain in China. Building on its profile at home, the chain expanded to Canada in 2018 with initial locations in British Columbia and Toronto. Among the trademarks used at these restaurants is the design shown in Figure 1.

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Figure 1: JU DIAN trademark

Unbeknown to Beijing Judian, a man named Wei Meng had previously applied to register this mark in Canada in June 2017 (along with the logos of several other popular Asian restaurant chains). Since the application was unopposed before the Trademarks Office, it proceeded to registration in April 2019.

One week after obtaining registration, Meng visited a Beijing Judian-affiliated restaurant in Vancouver and demanded to speak to the owner. Finding a manager, Meng told her Beijing Judian "stole his trademark" and insisted he had "the paperwork in Canada" for it. This was followed by a demand of C$1.5 million to acquire the mark in a subsequent meeting. Meng then sent a letter stating he would contact the "registry department" and the Canadian Revenue Agency if Beijing Judian did not stop using the JU DIAN trademarks within one week.

The company refused. Within a month, Beijing Judian became aware that Meng was advertising the sale of the registration online. In response to an inquiry sent by a contact of Beijing Judian, Meng acknowledged Beijing Judian was a well-known brand:

If you open a store with no reputation, you'll lose even more money . . . You can search Judian Chuan Ba on Baidu and you will see how many stores are in Beijing. Anyone in the industry knows powerful brands attract customers.

In March 2021, Beijing Judian filed an application to the Federal Court of Canada seeking to strike Meng's registration from the register as well as damages, an injunction for passing off and court costs.

Decision

In a brief decision, Justice Furlanetto expunged Meng's mark from the trademark eegister. She acknowledged, first, that filing for a trademark used by someone else in another country is not in itself enough to invalidate a registration.

In this case, however, all the evidence indicated Meng had registered the mark with the intention of extorting money from Beijing Judian or using its reputation to obtain money from others. The Court found it implausible that Meng would have created the same original design mark on his own, and emphasised Meng's efforts to sell the mark within a week of obtaining the registration. Further, there was no evidence Meng had used or had any intention of using the mark himself. Lacking any "legitimate commercial purpose", Justice Furlanetto found the application had been filed in bad faith and held the registration to be invalid.

Since Meng had not used the mark in any way, except to try to sell it, the Court found no basis to order damages or an injunction for passing off. However, the Court made an order for costs payable by Meng to Beijing Judian, with the amount to be determined.

Comment

Brand owners have long awaited a decision providing guidance on the new bad-faith ground for opposition and invalidity since the Trademarks Act does not define "bad faith". The key factors, in this case, appeared to be that:

  • The trademark in question was identical to that used by Beijing Judian in China.
  • Beijing Judian's trademarks had some reputation in Canada, and Meng had known they had some reputation in Canada.
  • Meng had applied to register several well-known restaurant trademarks.
  • Meng had tried to sell the registration to Beijing Judian a week after obtaining it, at a cost "well above any cost associated with obtaining the mark", and to the public after this offer was refused.
  • Meng had not used and had no intention of using the mark for his own restaurant.

Beyond noting that bad faith "is generally characterized as a breach of a legal or moral obligation on the part of an applicant towards a third party", Justice Furlanetto did not provide an exhaustive definition of what the term means in a trademark context. The Court looked to UK, EU and academic sources in making its finding – so it can be expected these sources will remain informative as the law develops further. Other hallmarks of bad faith suggested in these sources include filing applications:

  • to stockpile for future use;
  • to prolong the life of an unused mark in danger of being expunged;
  • to block a competitor from entering the market; or
  • that include multiple classes of goods and services though the applicant could not possibly run a legitimate business over the whole range.

Beijing Judian v Meng highlights the additional costs that may be incurred if bad-faith applications are not opposed upon advertisement. Regular monitoring of advertised applications, cease and desist letters, and (where necessary) opposition proceedings should be considered as part of a brand owner's IP strategy.

In addition, early filing of Canadian trademark applications for non-Canadian brands can secure priority over potential bad-faith applications, as well as potentially confusing good-faith applications. In this regard, it should be noted that Canada does not require use to obtain a registration. For further information, see "Bricks to Clicks: Protecting your brand and copyrights online in Canada from trolls to counterfeiters and media pirates".

For further information on this topic please contact Daniel Anthony or Reagan Seidler at Smart & Biggar by telephone (+1 613 232 2486) or email ([email protected] or [email protected]). The Smart & Biggar website can be accessed at www.smartbiggar.ca.

Endnotes

(1) Beijing Judian Restaurant Co Ltd v Meng, 2022 FC 743.