As in most jurisdictions around the world, a registered trademark in Canada is vulnerable to cancellation if it is no longer in use. In Canada, three years after registration, any person may request that a “section 45” notice issue, requiring the owner to provide evidence of use in order to maintain the registration.

Under new legislation  that will likely come into force in 2017 (discussed in our March 31, 2014 IP Update), cancellation proceedings for non-use will become much more important. Since applicants will be able to obtain a registration without providing any information regarding use of a trademark, the ability to challenge a registration for non-use will be a valuable tool for those seeking to remedy situations where trademarks have been registered without any genuine use in the Canadian marketplace. At the same time, owners of registered trademarks will need to be aware of the requirements for proving use in the context of section 45 proceedings. Providing evidence of “special circumstances” justifying non-use is one option that can save a registered trademark from expungement.

The recent decision of the Federal Court of Canada in Gouverneur Inc v The One Group LLC (“Gouverneur”),2015 FC 128, examined in detail the “special circumstances” that may justify non-use of a trademark in the context of a section 45 proceeding. Gouverneur concerned the trademark “STK”, registered in 2008 in association with bar and restaurant services. At the request of Gouverneur, the Trademarks Office issued a section 45 notice to The One Group requiring proof of use of the STK trademark.

As no STK restaurant had ever been opened in Canada, The One Group sought to justify the absence of use by relying on business delays in expanding into Canada. For example, The One Group filed affidavit evidence that The One Group had conversations with a number of potential partners during the relevant period, in its attempts to secure an appropriate location to open a restaurant in Canada. These potential partners included the Gansevoort Hotel Group and the Thompson Hotel Group, both of whom had plans to open hotels in Toronto but ultimately both decided not to proceed with their Toronto-based projects. The One Group also filed an affidavit of the owner of the Gansevoort Hotel Group, who stated that he had discussions with The One Group in 2008 and that, if the Gansevoort Hotel Group project in Toronto had gone forward, he believed that an agreement with The One Group to open a restaurant would have been reached.

The test to establish “special circumstances” justifying non-use of a trademark requires an assessment of the reasons offered as explanation for non-use of the trademark. This includes a consideration of whether the circumstances are “special”, in the sense that they are uncommon, unusual or exceptional, and a consideration of whether the circumstances justify non-use of the trademark. In Gouverneur, the Hearing Officer of the Trademarks Opposition Board found that The One Group had established circumstances that justified non-use of the STK trademark and maintained the registration. The Hearing Officer specifically found that the circumstances, including the cancelled hotel projects, were beyond the control of The One Group and constituted circumstances that were “unusual, uncommon and exceptional”. Gouverneur appealed the Hearing Officer’s decision to the Federal Court of Canada.

On appeal, Justice Bédard of the Federal Court reversed the decision of the Trademarks Office and cancelled the registration. In so doing, Justice Bédard noted that the question of whether “special circumstances” exist to justify non-use of a trademark entails a consideration of:

  1. the length of time the trademark has not been in use;
  2. whether there is a serious intention on the part of the registrant to shortly resume use; and, most importantly,
  3. whether the circumstances alleged to justify non-use were beyond the registrant’s control.

Justice Bédard also found that the circumstances set out in the evidence filed by The One Group were not sufficient to justify non-use of the STK trademark. Justice Bédard found that there was no evidence that the discussions with the Gansevoort Hotel Group and the Thompson Hotel Group were close to an agreement prior to the cancellation of those projects and that, in any event, those discussions were likely finished by the end of 2009, the first year of the relevant period for proving use. The One Group also provided evidence that it had subsequent discussions with other potential partners, but Justice Bédard found that the evidence did not provide details of those conversations, including, critically, details of the reasons why they failed to produce results. Justice Bédard also found that the evidence of an intention to resume use of the STK trademark was vague and non-compelling.

Ultimately, Justice Bédard concluded that the evidence filed by The One Group could not reasonably support a finding that the non-use of the STK trademark during the relevant period was beyond its control, or that the circumstances evidenced were unusual, uncommon or exceptional. The Hearing Officer’s decision was set aside, and the STK trademark was ordered expunged from the Register of Trademarks.

The decision in Gouverneur illustrates the limited circumstances in which non-use of a trademark may be justified for the purposes of section 45 proceedings. Gouverneur also illustrates the importance of carefully preparing evidence on behalf of trademark owners whose registrations are challenged in section 45 proceedings. If possible, affidavits filed on behalf of a trademarks owner in section 45 proceedings should include detailed and specific evidence relating to all of the owner’s efforts to use the trademark throughout the relevant period, and details of the manner in which those circumstances were beyond the owner’s control and were uncommon, unusual or exceptional in the context of the owner’s business.