FCA affirms ways to evidence control over character or quality of goods

Canada
Under Canadian law, a trademark owner may license the use of its trademark provided that it has, under the licence, direct or indirect control of the character or quality of the goods/services offered in association with the mark. In Shapiro Cohen v Empresa Cubana Del Tabaco, trading also as Cubatabaco (2011 FCA 340, December 6 2011), the Federal Court of Appeal has confirmed that there are various ways in which to prove control for purposes of Canadian trademark law.

Cubatabaco is the owner of the registered Canadian trademark COHIBA for use in association with leaf tobacco, manufactured tobacco for smoking and chewing, snuff and cigarettes. The trademark was in use in Canada in association with cigars and cigarillos, but the question to be determined was whether the use supported the registration. In a decision dated September 13 2007, the registrar of trademarks said no and ordered that the registration be expunged. The Federal Court disagreed and, on the basis of fresh evidence filed on appeal, ordered that COHIBA be maintained for manufactured tobacco for smoking.

The appeal to the Federal Court raised two issues:
  • whether cigars and cigarillos fall within the definition of 'manufactured tobacco for smoking and chewing'; and
  • whether Cubatabaco had control over the character and quality of the cigars and cigarillos sold by its licensee Habanos such that the use of the marks by Habanos would accrue to the benefit of Cubatabaco.
With respect to the definition of 'manufactured tobacco for smoking and chewing', the registrar had concluded that it did not include cigars and cigarillos. The Federal Court disagreed, noting:

The written representations made no argument before the registrar on this issue, perhaps because the registrant assumed the hearing officer would know that cigars are 'manufactured tobacco for smoking'. If she, the hearing officer, did not have personal knowledge about cigars, she may not have known this fact, which presumably was taken for granted by the registrant’s previous counsel. The new evidence before the court, which was not before the registrar, is that cigars are manufactured tobacco for smoking.”

The Federal Court of Appeal upheld the lower court’s decision.

The second issue was somewhat more complex. There was no issue that Cubatabaco had licensed Habanos to use the trademark, but the evidence with respect to control over character and quality was lacking before the registrar. On appeal, significant new evidence was filed to address this issue.

The Federal Court noted that there are three ways in which registrants can demonstrate control:

1. they can clearly swear to the fact that they exert the requisite control…;
2. they can provide evidence that demonstrates how they exert the requisite control…; or,
3. they can provide a copy of a licence agreement that explicitly provides for the requisite control.”

On the facts of this case, the licence agreement did not demonstrate the requisite degree of control. However, the evidence filed before the court demonstrated control in a number of ways. A representative of Cubatabaco attended the monthly meetings of the board of directors of Habanos, and Habanos testified that all tobacco products were produced according to the standards of Cubatabaco and that the standards were implemented under the supervision of Cubatabaco. On that basis, the court was satisfied that control was exercised and that use of the trademark by Habanos accrued to the benefit of Cubatabaco and supported the registration.

The Federal Court of Appeal found no error in law in the lower court’s decision and went on to say that there was no error in the lower court’s appreciation of the evidence or the application of the relevant legal principles to the evidence. 

This case should be read in conjunction with Spirits International BV v BCF SENCRL, also a decision of the Federal Court, in which the court emphasised that:

the mere fact that there is some common control between a registered trademark owner and other corporate entities is not sufficient to establish that the use of the trademark was controlled such that a licensing agreement can be inferred from the facts. Clear evidence of control has to be adduced...”

An appeal to the Federal Court of Appeal was filed, but was recently discontinued.

These cases serve as an important reminder to owners of Canadian trademarks that there are very specific Canadian licensing requirements. For use of a trademark to accrue to the benefit of a trademark owner, the owner must be able to show that there is a licence and that, pursuant to the licence, control is exercised over the character or quality of the goods/services offered in association with the mark. The only circumstance in which it will be presumed that there is a licence and that control is exercised is where public notice is given that the use is a licensed use and the owner is identified. 

Robert A MacDonald, Gowlings, Ottawa

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