Spillover advertising does not constitute use, confirms court

In Clark O'Neill Inc v PharmaCommunications Group Inc, the Federal Court of Canada has confirmed a registrar of trademarks decision to expunge the plaintiff's SINGLE SOURCE SAMPLING mark on the grounds of non-use. The court held that use of the mark only stemmed from spillover advertising from the United States and there were no special circumstances justifying non-use of the trademark in Canada.

Clark O'Neill Inc, a US company that distributes pharmaceutical samples, registered the trademark SINGLE SOURCE SAMPLING in Canada in 1993 based on its corresponding registration and use of the mark in the United States (ie, it did not base its registration on use in Canada).

In 1997, Clark O'Neill and PharmaCommunications Group Inc discussed the possibility of establishing a joint venture to develop a sample distribution business in Canada. These plans failed and PharmaCommunications decided to develop such a business on its own, using the trademark DIRECT SOURCE SAMPLING. Clark O'Neill filed an action for passing off and trademark infringement against PharmaCommunications. In reply, PharmaCommunications filed for summary administrative proceedings under Section 45 of the Trademarks Act.

Section 45 allows a third party to request the registrar of trademarks to call upon the owner of a registered trademark to prove use of the mark in Canada. The mark owner must demonstrate that it used the mark:

• in the normal course of trade;
  
  
• in association with each of the goods and services covered by the registration; and
  
  
• during the preceding three years.

Failure to prove such use will leave the registration open to expungement. However, the mark owner can put forward special circumstances excusing its non-use of the trademark.

Following the Section 45 proceedings, the registrar held that Clark O'Neill had failed (i) to prove use of the mark in Canada, and (ii) to provide adequate reasons justifying non-use. Clark O'Neill appealed.

The Federal Court rejected Clark O'Neill's appeal and upheld the registrar's decision. It noted that Clark O'Neill's trademark was registered in Canada, in association with services (as opposed to goods). It added that the mark had been in continuous use in the United States but had only been used in Canada as a result of spillover advertising. The court stated that this did not constitute use in Canada.

The court also agreed with the registrar that Clark O'Neill's non-use was not justified by special circumstances. It held that there were no external factors outside Clark O'Neill's control to prevent its use of the mark. The court found that there had not been any significant legislative change in Canada or in the United States during the relevant three-year period and Clark O'Neill had not gone through any corporate reorganizations that could have stopped it from using the mark during that time. In addition, the court stated that it had not proved that it had an intention to use the mark during the relevant period.

Finally, the court rejected Clark O'Neill's claim that PharmaCommunications acted in bad faith by initiating Section 45 proceedings. It stated that PharmaCommunications' behaviour was irrelevant because such proceedings are summary in nature and can be initiated by either a third party, who need not have a special interest, or the registrar himself. Furthermore, only Clark O'Neill could submit evidence at such proceedings.

Michèle Thibaudeau, Léger Robic Richard, Montreal