Appellate court sets higher bar for defending registrations after non-use

Canada
In Scott Paper Ltd v Smart & Biggar (2008 FCA 129, April 4 2008), the Federal Court of Appeal has ruled that plans to reintroduce a trademark cannot be used to protect against expungement procedures under Section 45 of the Trademarks Act, even if those plans are concrete and ultimately executed. This decision explicitly overrules the court’s decision in Oyen Wiggs Green & Mutala v Pauma Pacific Inc ((1999) 84 CPR (3d) 287)  and sets a higher bar for defending trademark registrations after a period of non-use.
 
The appeal sought to avoid expungement of the trademark VANITY, held by Scott Paper Ltd. The senior hearing officer initially allowed the registration to stand (despite a 13-year period of non-use) on the grounds that:
  • Scott had begun planning a reintroduction six months before the mark was challenged; and 
  • Scott was selling products under the mark by the time it filed its own affidavit in defence.
On appeal, the Federal Court expunged the trademark, relying on Canada (Registrar of Trademarks) v Harris Knitting Mills Ltd ((1985) 4 CPR (3d) 488). The court likened Scott to a "truant schoolboy" who "although he had no explanation for his past absences, genuinely intended to go to school the next week". The Court of Appeal accepted this metaphor and the reasoning it implied. 
 
In denying Scott's appeal, the court returned to the decision in Harris Knitting Mills, particularly the statement that "[i]t is difficult to see why an absence of use due solely to a deliberate decision by the owner of the mark would be excused". Instead of following Oyen Wiggs, where reintroduction plans were sufficient "special circumstances" to excuse a three-year period of non-use, the court held that any special circumstances must, "under Subsection 45(3), be circumstances to which the absence of use is due”.
 
The court held that the test for special circumstances, which had often been cited from Harris Knitting Mills, was in fact "a gloss" put on by the Federal Court in a later decision, and that the following new factors better represented the reasons in that decision:
  • The general rule is that absence of use is penalized by expungement;
  • There is an exception to the general rule where the absence of use is due to special circumstances;
  • Special circumstances are circumstances not found in most cases of absence of use of the mark; and
  • The special circumstances which excuse the absence of use of the mark must be the circumstances to which the absence of use is due.
Given this revised test, the court decided that:
"It is apparent from this analysis that a registrant’s intention to resume use of a mark which has been absent from the marketplace, even when steps have been taken to actualize those plans, cannot amount to special circumstances which excuse the non-use of the trademark."
The conclusion consciously departs from the policy justification normally ascribed to Section 45 of 'removing deadwood' from the register. Evidence before the court indicated that Scott planned to use the VANITY mark when the challenge was filed, and used it soon thereafter. Therefore, the mark still had value, at least to Scott. However, the court referred to the decision in Aerosol Fillers Inc v Plough (Canada) Ltd ((1980), 53 CPR (2d) 62), where the court opined:
"There is no room for a 'dog in the manger' attitude on the part of registered owners who may wish to hold on to a registration notwithstanding that the trademark is no longer in use at all or not in use with respect to some of the wares in respect of which the mark is registered."
The decision - and the policy apparently behind it - suggests that trademarks that are not in use will be more susceptible to challenge. As the court limited the defence of special circumstances to those that cause non-use, registered owners may not have any defence where non-use was due to an internal decision. On the other hand, this may allow for trademarks to return quickly to circulation, either by encouraging swift reintroduction or by allowing unused marks to be employed for new products.
 
Mat Brechtel, Fasken Martineau, Vancouver

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