Formal licence agreement not necessary, says court

Canada
In 3082833 Nova Scotia Company v Lang Michener LLP (2009 FC 928, September 17 2009), the Federal Court of Canada has overturned a decision of the registrar of trademarks expunging 3082833 Nova Scotia Company's trademark registration for ENTRE NOUS pursuant to Section 45 of the Trademarks Act.  
 
In 2005 Lang Michener LLP requested that the registrar issue a notice to Nova Scotia Company pursuant to Section 45 of the act requiring the latter to file evidence of use of the trademark ENTRE NOUS in Canada. A notice issued pursuant to Section 45 requires the registered owner to file an affidavit or statutory declaration showing its use of the mark in Canada in association with all the goods and/or services listed in the registration during the three-year period immediately preceding the date of the notice. 
 
In response to the notice, Nova Scotia Company filed an affidavit from its vice-president which demonstrated use of the mark. In its argument before the registrar, Lang Michener argued that any use of the mark shown in the affidavit was not use by Nova Scotia Company - rather, the evidence showed use of the mark by a third party. There was no evidence presented to explain the connection, if any, between Nova Scotia Company and the third party. 
 
Accordingly, the registrar found that the use of the mark set out in the affidavit was not use by Nova Scotia Company. Further, the registrar concluded that Nova Scotia Company could not claim the benefit of Section 50 of the act. Section 50 provides that use of a mark by a licensee enures to the benefit of the owner of the mark, provided that the owner has direct or indirect control over the character or quality of the goods and/or or services at issue. 
 
Since no evidence was filed to describe the relationship between Nova Scotia Company and the third party, the registrar was forced to conclude that no licence agreement was in place. In Canada, use of a mark by a third party must be licensed, even if the third party is the owner’s subsidiary, affiliate or otherwise controlled entity. Failure to govern use by a third party of a mark through an appropriate licence could lead to a finding that the mark is not distinctive.
 
On appeal, Nova Scotia Company filed a second affidavit from its vice-president which sought to explain the relationship between Nova Scotia Company and the third party. This second affidavit stated that a licence agreement existed between Nova Scotia Company and the third party for use of the ENTRE NOUS mark. Further, the affidavit asserted that Nova Scotia Company had direct or indirect control over the use of ENTRE NOUS by the third party. However, a copy of the licence agreement was not appended to the affidavit.
 
In allowing the appeal, the court noted that, in order to prove the existence of a licence relationship sufficient to trigger the benefit of Section 50 of the act, it is not necessary to produce a formal written licence agreement. A licence agreement can be oral and can be inferred from the facts. However, the mere fact that there is some common control between the licensor and licensee is insufficient to establish that use of the mark is likewise controlled. Evidence of control must be adduced.
 
In this case, the court found that the evidence adduced by Nova Scotia Company was sufficient to allow it to conclude that the use of ENTRE NOUS by the third party was licensed by Nova Scotia Company. Accordingly, the use by the third party enured to Nova Scotia Company, and the court overturned the decision of the registrar to expunge the registration for ENTRE NOUS.

Antonio Turco, Blake Cassels & Graydon LLP, Toronto

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