Thought leadership from our experts

Canadian trademarks law – “to improve is to change; so to be perfect is to have changed often” Are trademark owners ready for more change?

On April 26, 2018, World IP Day, Canada's Minister of Innovation Science and Economic Development Navdeep Bains announced a national IP strategy that included further legislative amendment to combat trademark squatting. The remedial effort appeared aimed at achieving a workable strategy for challenging bad faith registrations. The announcement was perhaps even more notable in its recognition of a need to reintroduce a limited requirement for trademark use. While details of the coming changes are not yet known, proof of use will at least be necessary before the owner of a registration less than three years old may enforce the associated rights. The restrictions on enforcement seem to parallel announced changes to Canadian patent law setting minimum requirements before patent demand letters may be sent. Requirements to prove use, depending on how these are legislated, could go a long way towards ameliorating several serious flaws anticipated in respect of the coming Canadian legislative change.

The surprising Ministerial announcement came on the heels of several years of government efforts to enacting sweeping changes to Canada's Trade-marks Act brought in by the previous Conservative government. The restructuring of the Canadian trademark registration system has been widely opposed by businesses and the IP profession as being harmful to trademark owners while conferring few benefits.

The coming into force of Bill C-31 currently slated for 2019, will modify virtually every aspect of Trademark law and practice in Canada. The pending statutory regime will decouple the common law, notable for its reliance use to derive rights, from statutorily granted rights that contain no requirement for use. In moving away from a US-style registration system whereby owners must demonstrate use of a mark to maintain rights, the legislation paves the way for abuse. Absence of use requirements would have been problematic were this the only change, but companion provisions truly set the stage to make Canada a haven for trademark squatters and those not concerned with register clutter.

The Act and Regulations, currently awaiting coming into force, not only remove the requirement for an applicant to have used its trademark in Canada or abroad prior to registration but have set the newly established class fees at a relatively low $Cdn100 ($US77). The fact that the per class fee does not apply retroactively to pending applications currently on file covering multiple classes perhaps explains the recent rise in the number of classes per application that the Canadian Intellectual Property Office (CIPO) experienced following announcement of the changes.

A further problem created by the pending laws is the lack of any sort of requirement for a bona fide intention to use the mark or indeed any statutory or regulatory provision that would afford trademark owners an obvious means of challenging a bad faith application. Under the planned legislation, trademark squatters can, in spite of having no true commercial interest in a mark, file an application covering all classes at a very low cost and have such an application issue to Registration under the new Act, with no clear means of challenge available until after the third anniversary of the registration.

Once the new Act comes into force the only hurdle squatters will face is a per class fee of $Cdn100, notably lower than many other jurisdictions. Under the current system a Declaration of use in Canada, a Statement of Use in Canada or reliance on registration and use elsewhere in the world is essential. Not so when the new laws take effect. Rather an applicant may cover a lengthy listing of goods and services not in use anywhere and for which there is no bona fide intention to use the trademark in Canada while trademark owners with a legitimate commercial interest will have few if any means available to prevent this. Again, since the transitional framework contemplates all existing Applications as of the coming into force date will issue to registration regardless of use, there has been a marked increase in applications covering many or all classes. While hard to discern conclusively an apparent increase is also observable in the number of abusive applications.

The Minister's newly announced changes appear to be aimed at ensuring registrants having no use of their marks in Canada are prevented from enforcing rights against others. However, any provision that re-aligns registered rights and common law stands to improve future prospects for legitimate trademark owners.

The legislation currently expected to come into force in 2019 will change many areas of trademark practice in Canada but there are a few prospective changes that trademark owners might wish to consider building into their near-future enforcement strategy.

Distinctiveness

Once the new Act comes into force all pending applications not yet having reached the publication stage will be subjected to fresh examination to determine if the mark is distinctive. Now Canadian examiners have limited ability to issue objections on the basis a mark is not distinctive. However, marks relating to shape are traditionally ones for which distinctives is assessed.

In Canada marks comprising some aspect of shape fall generally into three categories. First, distinguishing guise protection relates to the shaping of the goods or packaging/container. For distinguishing guise registrations an Applicant must submit evidence of distinctiveness during examination. The second category of marks relating to shape comprise the very narrow category of true three-dimensional marks. These marks are restricted in that the shaping must not relate to the goods themselves. Such protection might for example be granted for the shaping of a small plastic animal hanging from the neck of a bottle. The third category of "shape" marks involves those containing a colour claim. Following the decision Smith, Kline & French Canada Ltd. v. Registrar of Trade Marks (No. 2.), [1987] 2 F.C. 633 (T.D.), colour applied to the whole or part of an article was deemed capable of functioning as a trademark. While Canadian courts held such marks registrable, the Act and Regulations gave Examiners no means of assessing distinctiveness at the time of examination. Since then many colour-shape marks have been protected with no assessment as to distinctiveness at the examination stage.

Under the current Act many non-traditional marks are considered prima facie unregistrable. However, the new Act permits registration of virtually anything capable of functioning as an identifier of source provided there is proof that the mark was distinctive at the filing date. Currently, Examiners tend to apply a very high threshold when assessing distinctiveness. CIPO seems poised to apply the same stringent criterial used now, for example, when assessing distinguishing guises to all non-traditional marks and even to word or design marks considered to be lacking inherent distinctiveness.

The non-examination of marks claiming colour(s) applied to an entire article or part of an article will soon end as will non-examination of marks lacking inherent distinctiveness. Owners with marks falling into these categories who wish to avoid long and complex examination on the issue of distinctiveness should apply now with an aim of completing examination before the new provisions come into force. Outside the pharmaceutical area such marks are frequentlhy unopposed and registrations issue. With initial examination times currently at 12 months and the new Act expected to come into force in 2019 applicants could soon be out of time.

Letters of Protest

Letters of Protest in which a third party may submit written communication to inform an Examiner about a registrability issue affecting an application will become available under the new Act. This simple and hopefully effective procedure utilizes the efforts of third parties to help ensure marks that should not be registered do not advance past examination. Letters of Protest can contain submissions that a mark is primarily merely a surname, clearly descriptive, confusing, functional, contains reference to a trademark in its statement of goods and services or is not inherently distinctive. These are not inter partes proceedings rather the Examiner will simply consider the merits of the protest before making a determination as to registrability. It is hoped Letters of Protest might reduce unnecessary Opposition Proceedings in clear-cut cases where, for example a citation as to confusion should have been raised but was overlooked by the Examiner. While the new Director General, Mesmin Pierre, has publicly stated a laudable commitment to improving quality of Canadian examination, the availability of letters of protest can only help achieve this goal. This form of limited intervention could give trademark owners an effective and inexpensive means of preserving rights as the process envisioned by the CIPO involves limiting the length of any such letter and ensuring there is no possibility of exchanges between the Examiner and the party protesting after the initial letter has been submitted.

Classification and Renewal

The new legislation calls for the provision of classification information and indeed even now CIPO is sending out courtesy notices inviting voluntary classification. Classification before publication will be required for new applications and for applications filed before the coming into force but not yet published. Applications at a stage beyond the publication at the coming into force date need to be classified prior to registration even if no fee is payable at that time. Existing registrations after the coming into force date will be required to include classification information prior to publication and pay fees accordingly at the time of registration.

Applicants should be aware of CIPO's continued warning that failure to voluntarily classify prior to coming into force could result in registration delays. Delays might be a minor concern to most Applicants but for those who at the coming into force date might have otherwise completed examination except for proper classification fresh examination based on new requirements for distinctiveness could cause strife. While some consider it odd to comply with what are now merely "courtesy requests" to classify, not to mention to do so within a system with no legislative provisions relating to classification, voluntary classification might nonetheless be advisable if there is any danger of re-examination at the time of coming into force.

The pending changes to fee structure might, for some trademark owners, dictate preferred filing strategies as well. Under the new regime the filing fee of $Cdn250 that is applicable regardless of the number of classes will change to $Cdn 330 plus $Cdn100 per additional class. After the coming into force date no registration fee will be payable. Renewal fees will change from $Cdn350 for any number of classes to. $Cdn400 plus $Cdn125 per additional class.

As such, prospective applicants planning multi-class applications would be well advised to apply now, availing themselves of a more favourable fee structure. If fortunate in respect of timing, applicants may also avoid payment of registration fees even if per class renewal fees will apply 10 years after registration (a change from the current 15 year term of protection).

Under the current system, registrants may renew a registration at any time. However, CIPO has decided that registrations with a renewal date on or after coming into force that are renewed now will be limited to the coming 10-year term even if under current laws renewal is for a 15-year term. It remains to be seen whether the current treatment will survive judicial scrutiny. The significant take away point is that registrants renewing early must diary for a 10, not 15 -year term of protection, regardless of what the registrant has been advised via the registration certificate. In spite of this pitfall, owners with registrations covering multiple classes may choose to renew now thereby avoiding a fee per class payment.