On October 29, 2018, the Canadian Government introduced Bill C-86. This legislative instrument was said to put into place additional aspects of the February 27, 2018 Federal Budget. Question: What does a Budget Bill have to do with Canadian trademark law? Answer: A lot.
The sweeping 850-page Bill amends Canadian laws ranging from First Nations Land Management to Air Travel, and includes significant revisions to Canada’s Patent Act, Trade-marks Act and Copyright Act, as well as other legislation involving intellectual property (IP) rights.
Bill C-86, currently before legislators, contains some provisions aimed at correcting deficiencies in the quickly passed and believed by many to be ill-conceived, Economic Action Plan 2014 Act, No. 1 (Bill C-31). At the time Bill C-31 was introduced by the former Conservative government, it was widely criticized both for fundamentally changing the foundation of Canadian trademark law without adequate consultation and because these monumental changes were implemented through omnibus legislation rather through independent legislative initiatives resulting from broad study and consensus. The current Government, in spite of having promised the end of such Bills on the basis these were undemocratic and precluding sufficient review and debate, has adopted precisely the same strategy it criticized as the Opposition.
The recently tabled new legislation contains some surprising new content that has not been the subject of extensive study and debate with IP owners, and perhaps even more importantly, IP Practitioners who are engaged daily in the practice of Intellectual Property Law and who represent the interests of not some but all IP owners, domestic and foreign.
Bad Faith Claims Will Be Available Again
Criticism about the process of tabling the legislation aside, several of the proposed changes are welcomed, none more so than the provisions that reintroduce the concept of bad faith as a ground of Opposition. In addition, under the planned legislation, bad faith can form the basis of a Federal Court validity challenge to a Trademark Registration. These provisions close off a significant loophole created by Bill C-31, the legislation awaiting coming into force, that will preclude an Opponent from relying on an Applicant’s bad faith adoption of a mark to Oppose. Under today’s legislation, such a challenge is possible; but if, as seems likely, Bill-86 comes into force after Bill C-31 there will be an interim period during which bad faith Applicants cannot be stopped through Opposition. The legislation is likely to come into force next year and the legislative process may be expected to take two years, we can expect a gap of 1-2 years when owners of marks adopted in bad faith cannot be stopped through Opposition. The simple fix might have been to allow, as is currently the case, Opponents to seek leave to amend a Statement of Opposition to include an additional ground once that ground becomes available under the new legislation. Unfortunately, this option is specifically precluded under the proposed legislation, which contains a provision that the new ground does not apply to Applications advertised before the legislation comes into force. A small improvement would be to change the wording of the provision from “advertised” to “opposed” as this could close the gap by a few months. Another option would be to afford some lee-way to Opponents seeking extensions of time to Oppose, thereby allowing time for the legislation that permits bad faith claims to come into force – at least to the extent Canada’s Madrid Protocol obligations permit this.
Official Marks May Be Challenged
A second extremely welcomed change involves “Official Marks”. While there has never been absolute consensus, the feeling of most Canadian IP practitioners is that Canada’s current trademark system gives an unjustifiable advantage to “public authorities” in respect of their ability to protect official marks; also known as prohibited marks. These public entities may give notice of adoption and use of a mark, badge, crest or emblem precluding others from adopting trademarks that consist of or are so nearly resembling as to be likely to be mistaken for those of the public entity. Perhaps most notorious was a provincial lottery commission that staked claim to a large number of ordinary words, using these in a very commercial way and at the same time, as requiring substantial payments from trademark owners who required the consent to overcome an objection involving a prohibited mark. The current system of official marks has been criticized as unfair; in that it affords trademark owners no ability to argue that differences in goods, services, channels of trade or any of the other criteria used for assessing confusion prevent the parties being mistaken for each other. Rather, once a s. 9 official mark is adopted and used, the owner obtains rights across all classes of goods and services. To compound the problem, there exists no simple administrative means of challenging such marks and appeals or judicial reviews at Federal Court are rarely viable options. To put it simply – official marks are frequently unassailable and represent a complete bar to a trademark’s registration.
While the current overly broad protection for official marks has not changed under the proposed legislation, at least these marks can now be challenged on the basis that the owner is not a public authority or that it no longer exists. This is helpful since the one measure a trademark Applicant had of overcoming a citation involving an official mark was to obtain consent of the public authority. This was of course impossible in instances where the public authority was no longer active. These new provisions will also be helpful as there are many official marks holders who may not meet the test for being a public authority, including many non-Canadian entities who obtained official marks before 2007, when the Courts decided these marks were available only to Canadian public entities. It is unclear how challenges to official marks will be implemented, but it seems likely that Examiners will be tasked with making the assessment.
It is unfortunate that the opportunity of further legislative reform was not used to implement a requirement for trademark owners to prove use of a mark at some point during the term of protection. A simple measure such as this could have resulted in retention of the integrity of the Canadian register, allowing it to better reflect commercially derived rights. Absent a requirement to prove use, there is no check on claims and some companies will register rights well beyond the goods and services they sell and offer. Unfortunately, the knock-on effect is greater search and clearance expense and difficulties for newly established companies. Prosecution and enforcement will be become more, not less difficult. Rather than require a trademark owner to prove it truly does possess the rights claimed through registration, legislators chose instead to focus on means of preventing Registrants from enforcing rights during the first three years of registration in instances wherein that entity had not used the mark in Canada. These measures seem aimed at solving a problem not routinely encountered. Most trademark owners who have not commenced use of their marks in Canada during the first three years of registration are disinclined to engage in lengthy and expensive Federal Court infringement proceedings – this is particularly the case for Canadian small and medium-sized companies who might instead look to the option of re-branding. One has to wonder if these provisions were the product of lobbying by a specific industry that might stand to benefit from such a provision? The scope for abuse associated with this new restriction seems great. An entity with malicious intent need only locate a pending application for a mark that is unlikely to be used early in the life of the registration and commence early its own use of the mark. That entity would then have a ready-made argument of long co-existence and/or lack of distinctiveness of the registered mark by the time the Registrant is able enforce its rights. The measure may be intended as a balance against trademark owners claiming overly broad rights, but the true cost and danger associated with registrations covering any and all classes of goods and services is not that these are being used as enforcement tools early in the life of the registration, but rather that they clog the register and require positive action on the part of those with legitimate business interest in the area in which the Registrant has no real rights to ground the registration. As such, the fix does not address the true problem.
Perhaps one of the most surprising inclusions in the proposed legislation is the introduction of registrar awarded costs in Opposition proceedings. This is not something widely advocated by interest groups. Use of costs awards in many or all Opposition proceedings could have unintended consequences, for example making it far less likely small and medium-sized companies will engage in these proceedings regardless of whether their rights are well founded. However, early commentary from the Government is that an award of costs will be an exceptional response to sanction abusive practices. If the scope of such awards is limited in this matter these provisions seem to be entirely reasonable. We need now only deal with the current problem our European friends face in enforcing an award of costs.