"That which does not exist cannot be expunged”, says court

In SC Prodal 94 SRL v Spirits International BV (Case 2009 FCA 88, March 17 2009), the Federal Court of Appeal has overturned a decision of the lower court on the grounds that the failure to ensure provision of notice as to the relief requested was procedurally unfair.
On September 28 1998 SC Prodal 94 SLR obtained a Canadian registration for the trademark STALINSKAYA for use in association with vodka (Registration 501,347). In 2006 SC Prodal fought off an attempt by Spirits International NV to cancel the registration under Section 45 of the Trademarks Act based on non-use in Canada (see Spirits International NV v Canada ((2006) 49 CPR).
Subsequently, Spirits sought to expunge the registration for STALINSKAYA on the grounds that the mark was confusingly with its STOLICHNAYA mark, which is also used for vodka.
In response, on November 2 2007 SC Prodal filed a new application to register STALINSKAYA and voluntarily cancelled its registration three days later. Having done so, SC Prodal did not respond to Spirits’ application to expunge its registration, since the registration no longer existed. Nonetheless, Spirits proceeded with its application, which came on for hearing on April 1 2008.
The trial judge allowed the application and, without any reasons in support, issued:
  • a declaration that STALINSKAYA was not distinctive because it was confusingly with STOLICHNAYA; and
  • a stay of proceedings and a “permanent mandatory injunction” prohibiting the registrar of trademarks from considering the new trademark application.
The Federal Court of Appeal overturned the decision of the trial judge, noting that “that which does not exist cannot be expunged”.
In its original application, Spirits sought to expunge the registration for STALINSKAYA and also requested “such other relief as counsel may advise and this honourable court deem just”, a phrase commonly included as part of the overall claim for relief. On the basis of this “basket clause”, Spirits’ written submissions filed with the court requested:

  • a stay of proceedings;
  • a mandatory injunction; or
  • an order of prohibition relating to the processing of the new trademark application. 
The stay and the mandatory injunction were granted by the trial judge.
On appeal, the Court of Appeal found several errors. With respect to the stay of proceedings, the court noted that no evidence was put before it to address the basic test for a stay. The test not having been addressed, let alone satisfied, a stay should not have been granted. Further, the Court of Appeal noted that the trial judge could not issue both a stay and a mandatory injunction against the registrar of trademarks since the two orders could not coexist - a mandatory injunction requires someone to act positively, in contrast to a prohibitive injunction which restrains an individual from committing a specified act.
Turning to the basket clause argument, the Court of Appeal noted that a basket clause can extend to declaratory relief that is necessarily ancillary to the requested relief only in circumstances where the opposite party is not taken by surprise or prejudiced in any way. The court noted that there was no support for the proposition that this could be extended to the sort of relief requested by Spirits and, even if it could, SC Prodal had no notice of the relief requested by Spirits in its written submissions. The court noted that to ensure procedural fairness, the relief requested by Spirits should not have been granted until such time as SC Prodal was given notice and offered the opportunity to respond. On that basis, the appeal was allowed and the order of the trial judge set aside.
The Court of Appeal declined to deal with the issue of whether it was proper to grant ancillary declaratory relief where the primary relief (ie, the expungement of the registration) was not available. However, the court noted that the injunctive relief granted by the trial judge could not be characterized as ancillary to the relief requested by Spirits.

Spirits was also recently involved in proceedings in the United States with regard to its RUSSKAYA and MOSKOVSKAYA marks (for further details please see "Geographic misdescriptiveness standard clarified in MOSKOVSKAYA Case" and "Spirits International loses US rights to RUSSKAYA mark").
Robert A MacDonald, Gowlings, Ottawa

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