At What Point Can Trademark Owners Claim Damages When a Registered Mark Infringes?

Under section 19 of the Canadian Trademarks Act, “… the registration of a trademark in respect of any goods or services, unless shown to be invalid, gives to the owner of the trademark the exclusive right to the use throughout Canada of the trademark in respect of those goods or services.” (our emphasis) That exclusive right is said to be infringed if another person, among other things, sells goods in association with a confusingly similar trademark or trade name. (s. 20(1)(a)) The owner can then institute legal proceedings against the allegedly infringing party (s. 52 ff) and, if they are successful, obtain monetary compensation or other remedies.

But what happens if a registered trademark is later expunged and the use of that mark is held to be infringing another trademark owner’s trademark rights? When does the protection of section 19 cease? In other words, when can another registered trademark owner obtain damages for that infringing use?

In its recent decision in Group III International Ltd. v. Travelway Group International Ltd., the Canadian Federal Court of Appeal has provided some guidance. According to this decision, in the absence of misrepresentation or bad faith, there can be no damages for the period prior to expungement.

The first decision in the case was issued in 2013, and involved the registered trademarks of GROUP III INTERNATIONAL LTD., HOLIDAY GROUP INC. and WENGER S.A. (collectively “GROUP III”), namely the “Wenger Cross Logo” as well as related marks with the words “WENGER” or “SWISSGEAR” registered in association with luggage and bags.

GROUP III alleged trademark infringement and passing off by TRAVELWAY GROUP INTERNATIONAL LTD. (“Travelway”) with respect to the use of Travelway’s registered trademarks on its luggage related products:

In this first judgement, the Federal Court ruled that Travelway’s registered marks were not confusingly similar to GROUP III’s, and therefore, that there was no infringement. Similarly, GROUP III’s claim that Travelway had attempted to pass of their goods as those of the GROUP IIIs failed.

On appeal, however, the Federal Court of Appeal ruled that the trial judge had misapplied the test for confusion, overemphasizing the resemblance of the logos, and ruled that there was indeed confusion and passing off. The issues of whether Travelway’s registered marks ought to be expunged, and the applicable quantum of damages were referred back to the Federal Court.

In 2019, the Federal Court ordered Travelway’s trademarks expunged, but refused to grant GROUP III compensation as there could only be damages after the expungement of Travelway’s marks. At this stage GROUP III attempted to rely on the judge’s discretionary power with respect to remedies, alleging that Travelways had blatantly infringed GROUP III’s marks. Under the circumstances, they claimed, there was “no basis to deny compensation altogether.” According to GROUP III, the expungement should have rendered Travelway’s marks invalid from the beginning (e.g. void ab initio) and as such, the shield of Section 19 should never had existed. However, the judge agreed with Travelway, and followed the precedent established in Remo Imports Ltd v Jaguar Cars Limited, which held that absent a finding of bad faith, a registration would not be deemed void ab initio. The judge noted that in the present case, the Travelway had “ceased all sales on the date of the Judgement of the Federal Court of Appeal,” and that there had in fact been no finding of bad faith. Damages were only available after the expungement of the mark, not prior thereto.

GROUP III appealed on the basis that the Federal Court erred and should have found that the infringing marks have always been invalid and never registrable, therefore disentitling Travelway from relying on section 19 and entitling GROUP III to financial compensation from the moment Travelway started using its infringing trademarks. The Federal Court of Appeal ruled that Travelway “could rely on its registrations as protection until such time as the Federal Court expunged its trademarks from the Register.” In reaching this conclusion, it noted that trademark registration is subject to a complex, specialized administrative scheme, which militates against trademarks being deemed invalid from the outset. Furthermore, it distinguished between the time at which a trademark becomes invalid and the time at which it is expunged from the register. The latter, it concluded, must be the starting point for any liability arising from the use of a registered trademark that has been invalidated.

The case underlines the importance of obtaining registered trademarks. They continue to serve the dual purposes of protecting members of the public by allowing them to identify the source of goods and protecting owners’ business interests by preventing others from using their marks. However, they may also serve a defensive purpose: they can protect the owner, in certain circumstances, in infringement claims by third parties. That being said, this protection could, however, be lost where the trademark is obtained fraudulently or in bad faith.