No stay of corporate name dispute despite pending trademark action

In Fairmont Hotels Inc v Fairmont Resort Properties Ltd, the Federal Court of Canada has refused to stay an application under the Canadian Business Corporations Act (CBCA) in respect of an administrative challenge to the registration of the corporate name FAIRMONT. The case is of interest in that the corporate name action was launched after proceedings at the Trademarks Opposition Board and the Federal Court of Canada were commenced which relate to trademark rights in FAIRMONT between the same parties.

Fairmont Resort Properties Ltd (FRP) owns and manages a time-share business. FRP commenced trademark proceedings against Fairmont Hotels Inc, which owns and runs the Fairmont hotels in Canada and elsewhere. FRP commenced proceedings before the Trademarks Opposition Board in 2000 and 2001 as well as a trademark expungement proceeding before the Federal Court in June 2005. These proceedings all related to the registrability and validity of certain FAIRMONT trademarks owned by Fairmont Hotels.

In July 2005 FRP also began proceedings under Section 12 of the CBCA before the director of Corporations Canada seeking an order that Fairmont Hotels change its corporate name on grounds of confusion (as defined in the CBCA and related regulations). Fairmont Hotels asked the director to stay those proceedings pending the outcome of the related trademark proceedings previously initiated before the Opposition Board and the Federal Court, citing the risk of conflicting outcomes, and the potentially absurd position that it could be forced to change its corporate name while still being entitled to use the FAIRMONT registered trademarks. The director declined to stay the proceedings and Fairmont Hotels sought judicial review of the decision.

The Federal Court held that the director's decision not to stay the CBCA proceeding was an interlocutory ruling, which generally is not subject to appeal or judicial review absent special circumstances and declined to intervene. Fairmont Hotels argued that any confusion under the CBCA stemmed from the use of the FAIRMONT trademarks themselves, which could only be determined in the trademark proceedings and that, in the absence of considering the trademarks themselves, the director would be compelled to order a change of corporate name since FRP had been incorporated earlier in time. Fairmont Hotels claimed that this would inevitably lead to irreparable harm to its business and greater confusion within the marketplace since it would still be entitled to exclusive use of the FAIRMONT trademarks granted to it under Section 19 of the Trademarks Act.

In refusing to stay the CBCA proceeding, the court found that the allegation of irreparable harm asserted by Fairmont Hotels was speculative. It noted that the director was bound to take account of all the surrounding circumstances, including Fairmont Hotel's exclusive right to use its registered FAIRMONT trademarks. The court concluded there were no special circumstances that justified the court's review of the director's interlocutory decision. The director's ultimate disposition of this case will be watched closely by trademark practitioners across Canada.

James Buchan, Gowling Lafleur Henderson LLP, Ottawa