Trademark hygiene: A cautionary tale

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By David J. French

Businesses, particularly when they are starting out, often make the mistake of assuming that by merely incorporating they have reserved their name. They have acquired some rights, but only in the smallest sense. The corporate register that issues a corporate name, for example the province or the federal government, will not create another corporation with the same name. But that does not mean that merely because a corporation has been formed that such company has the right to stop others from using its name simply because it has been incorporated.

To have any exclusive rights in a name at all a company must carry on business under that name using it as a trademark. Being registered as a corporation is not enough. Without registering a name as a trademark the rights that the business has are modest. Under the Trademarks Act, in a manner similar to the common law, the business is entitled to stop other persons from “directing public attention to their wares, services or business in such a way as to cause or be likely to cause confusion in Canada,” between the two wares, services or businesses. Proving confusion is very challenging. First you have to demonstrate that you are known in the market.

Fallacy of business name registration

Another fallacy is that if a business registers its name under the Business Names Registration Act of a province, it has the right to stop others from using a similar name. This is not what the names registrations acts are for. These registrations are to allow others to find out who really operates a business so that they can sue them, if they have a cause of action. No rights arise from registering your name under a Business Names Registration Act.

Superior power of a trademark

The best way for a company to reserve a mark for its use in Canada and acquire the power to stop others from using specific trade designations such as a name, logo, slogan or other brand identifier, is to adopt one of those symbols as a “trademark” in Canada. A trademark is “adopted” in Canada when either it is first used in commerce in respect of specific wares or services, or an application is filed to register the mark at the Federal Trademarks Office in Gatineau, Québec. A registration when made is always in respect to specific goods or services which must be identified. This is relevant to the issue of “confusion.”

The person who is first to adopt a mark in Canada by either method can prevent anyone else from using a mark that is confusingly similar. Whether marks are confusing requires taking into consideration what the market is accustomed to experiencing and the similarity of goods and services. Specific considerations for determining whether confusion is likely are specified in the Trademarks Act, Sections 2, 3, 4 and 6.

It is not possible to register a corporate name or tradename unless such name is being used as a trademark. Enforcement of rights without being registered in respect of such names is limited by the requirement to prove a reputation in the name and the likelihood of confusion. If a registration as a trademark is acquired, a prima facie presumption of reputation is created. Accordingly, if you wish to acquire the right to be the only user of your mark in Canada for specific goods and services, it is very appropriate to file an application for registration under the federal Trademarks Act.

However, you are not entitled to have your mark registered unless you are the first to adopt the mark in Canada. It is therefore prudent to do a prefiling search to determine whether anyone else is already using a confusingly similar mark that might interfere with your entitlement to be registered.

A tale of imprudent research

A large company once decided to change its name, intending to use the new name on the Toronto Stock Exchange. It went to a prominent law firm and asked if it were clear to register this new name, which it was going to use as a trademark for its trucking services, securing the exclusive right to its use in Canada.

The law firm diligently searched at the Canadian Trademarks Office database and also ordered a search under the NUANS system, a registry of business names and corporate names across Canada, in order to see if a similar mark was already in use. It found no reference. Accordingly, an application was filed to register the mark federally in Canada and a symbol very similar to this mark was adopted on the Toronto Stock Exchange.

Unfortunately, the first person entitled to eventually acquire control over a trademark in Canada is the first person to “adopt” a mark in Canada. A mark is adopted either by filing an application for registration or by using a mark in Canada in respect of specific goods and services. In this case, an American company had the identical name for a very similar service. While the Canadian company was using its mark for trucking services, the American company was using the same mark for providing drivers for trucks. Not identical, but very close.

It turned out that this American company had been sending drivers on trips up to Canada before the Canadian company adopted the new identical mark by filing an application for registration in Canada. The law firm that did the prefiling search had searched in Canada. But it did not search in the United States. If it had, it would have found that this American company had registered a mark with the United States Trademarks Office. More significantly, even though the U.S. registration did not extend to Canada, the Canadian law firm could have investigated whether the owner of the U.S. mark had ever done business in Canada under the mark.

Of course, if the marks were confusing, a Canadian company could never use its mark in the United States without infringing the rights under the U.S. federal registration held by the U.S. company. Similarly, in Canada, if the Canadian company were the first to adopt the mark in Canada, then it could exclude the American company from operating its service of providing truck drivers in Canada under its common brand name. But in this case, the American company had already provided driver services in Canada prior to the filing of the Canadian application by the Canadian company.

In due course, the Canadian application was placed before the Canadian examiner who, searching the Canadian Register, saw no conflict. The mark was therefore approved to advance to the next stage: publication for opposition. However, the American company noticed this publication and filed an opposition objecting that it had been first to adopt the mark Canada. It had supplied truck drivers for clients in the U.S. using the same trademark to advertise such services and these drivers had driven their trucks up to Toronto to deliver goods.

The issue came down to whether the two marks were confusing; one was for operating trucking services and the other was for providing drivers for trucks. Not quite the same; but so close that confusion would be likely if other requirements were met. If the American company were to win the opposition then it could file to register its mark in Canada, relying on its earlier date of use and eventually force the Canadian company to stop using that mark. This might even have extended to the listing on the Toronto Stock Exchange.

But the American company lost. The reason it lost is that a mark is only used in Canada if it is displayed so as to identify goods or services being provided in Canada, or as part of advertising for delivery of services in Canada. In the case of goods the mark has to be displayed with the goods when they are delivered, identifying the goods and indicating to the customer the source of the goods. In the case of services, the mark has to be displayed either at the time that the services are delivered to the customer or by advertising the services. Unfortunately, the American company did not display its trademark when its truck drivers visited Canada. And it did not advertise in Canada or sell services to Canadians. So it did not really get to use its mark in Canada at all. It lost the opposition. A close call for the Canadian company!

What is the moral of this story? If you are going to invest a lot of money in a very big trademark advertising campaign, it is worthwhile to spend the right amount of money to find out whether you are going to end up controlling that trademark or, worse yet, being accused of violating someone else’s trademark.

David French is the principal and CEO of Second Counsel Services, which provides guidance for companies that wish to improve their management of Intellectual Property. For more information visit www.SecondCounsel.com.

 

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