In late April 2018, Canada’s Federal Government announced the launch of a new Intellectual Property Strategy designed to improve awareness of IP by Canadian businesses, and encourage creators, entrepreneurs and innovators to participate more actively in the IP system. The strategy is partly in response to relatively low trademark, patent and other IP filings by Canadian businesses compared to many other trading partners. A major focus is on educating Canadian businesses of the benefits of addressing IP rights early in the development of a business strategy, and proactively taking steps to protect IP in Canada and abroad.
The announcement contains several proposals for legislative reform, including two specific issues relating to trademarks. First, the Government has promised new opposition and invalidation grounds to deal with trademark squatting. Second, the Government proposes legislation requiring use to enforce a trademark registration within three years of registration.
So far, there is no specific draft legislation to implement these changes, and timing of enactment is uncertain, although a government spokesperson, Mark Schann, the Director General, Marketplace Framework Policy Branch, recently wrote in comments published at the May 2018 International Trademark Association Meeting, that the Government is “committed to aggressively moving forward with implementation”.
Canada’s Trademarks Act is already scheduled for a major overhaul, following passage in 2014 of amendments now scheduled for implementation in early 2019 (the coming-into-force, or CIF Date). A major feature of the amendments is to remove “use” as a registration requirement. Mr. Schann, in his published comments, describes this change as removing a mere “administrative requirement”, presumably referring to the necessity of applicants relying on proposed use as a filing basis to file a declaration of Canadian use before obtaining a registration. That comment misstates the impact of “use” in Canadian trademark law. Eliminating use as a registration requirement is a fundamental change to Canadian trademark law. Based on Supreme Court of Canada decisions, use is the basis of trademark rights and has been a necessary pre-condition to registration for more than a hundred years. Far from being an administrative requirement, use has been the keystone of Canadian trademark rights.
The announcement of plans to address trademark squatting and enforcement responds to two concerns immediately identified by trademark owners, practitioners and academics when the 2014 amendments were introduced. First, removing “use” as a registration requirement was seen as taking the brakes off the system that until then had effectively controlled over-claiming of trademark rights. In fact, opportunists were quick to respond with hundreds of Canadian filings for 45-class applications with pages of goods and services that the applicants presumably hope will register once the amendments come into force. If unchecked, this practice will present long term issues for risk analysis and clearance, prosecution and future enforcement.
Clearly, something needed to be done to stop such abuse, and a legislative response to curb this is welcome. The National IP Strategy promises new grounds of opposition and expungement, but as yet offers no other details. Currently, an opponent has an initial evidentiary onus to prove facts to support any ground of opposition. Similarly, in an expungement action, the onus is on the party seeking expungement to prove its case. While the mere act of filing 45-class (or similar) applications might suggest bad faith, it is not clear how an opponent or party seeking expungement will, or even could, prove this. Also, the government’s proposed concept puts the onus on third parties, and not the registrar, to take steps to police possible abuse. For example, the Government might have considered permitting examiners to question, and require some proof of bona fide intent when abuse is suspected – but it appears the Government’s preference is to shift this burden to others. It remains to be seen how easy it will be to prove bad faith – if difficult, and the cost and time-commitments are significant, this new concept is unlikely to be helpful in addressing apparent abuse.
The second announcement, namely to confirm that “use” is required to enforce a registration “within the first three years of registration” addresses a clear enforcement issue arising from removal of use as a registration requirement. Immediately after the introduction of the proposed amendments in 2014, trademark experts noted that all benefits of registration, including the exclusive right to use a mark across the country (under s. 19), would be given to registrants, including those who have not used their marks in Canada or anywhere. Would Canadian courts be prepared to grant injunctions, damages and costs to owners of unused registrations, particularly given the direction of the Supreme Court of Canada that use is the basis of trademark rights? Laws in other countries differ. Courts in countries with a long tradition of registration without use do in fact grant injunctions to registrants without proof of use. On the other hand, in countries such as the United States, where “use” is as important to trademark rights as has been the case in Canada, jurisprudence confirms that enforcement is unlikely to succeed without use.
The announcement of a proposed requirement to show use when enforcing a registration, but only in the first three years of registration, addresses a timeframe that was clearly left open for uncertainty and possible abuse by the amendments to the Trademarks Act. Before a mark is registered, established passing off laws in Canada require use or significant reputation arising from use elsewhere before enforcement of the unregistered mark. After the third anniversary of any registration, summary non-use proceedings (s.45) are available, making it generally inadvisable to rely on registrations in an infringement action without clear proof of use in Canada. Without the proposed amendments, there was a risk that during the period from registration until that third anniversary, a bully registrant with no Canadian (or any) use could sue for infringement, relying on the clear statement of exclusive rights in the Trademarks Act, and obtain an injunction without ever having used its own mark. The promised legislation thankfully reaffirms that use is always key to enforcement, before and after registration.
The Government’s announcement to re-open the Trademarks Act to address these two specific issues may also signal an opportunity to pursue other changes – from the unnecessarily broad rights granted to owners of published official and university marks, to the protection of marks and symbols of Canada’s indigenous peoples.
The Government widely consulted on its IP Strategy, and such broad-based consultations reflects the approach to implementation of the 2014 amendments – the Government has engaged in a welcome collaboration with trademark owners and professionals on practical issues dealing with new procedures and requirements. It is hoped that this spirit of collaboration will continue and that the Government will be open to addressing other improvements that support a strong and practical trademark rights system.