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The Realities and Risks of Associated Trademarks in Canada

Grant W Lynds, Marks & Clerk, Canada

During prosecution of trademark applications in Canada, trademark owners with significant portfolios can expect to receive confusion citations based on other trademarks in the owner's portfolio. This situation is not surprising, since brand owners often have similar marks. Sometimes this situation occurs by owning historical marks that have been modified over the years of the brand development. Other times, the owner may have a series of marks for the same brand that have variations in designs, yet with similar enough words that the marks are seen as being confusingly similar by the Examiner during prosecution.

However, if the marks are owned by the same owner, the registration of a confusing mark in this situation is still permitted under subsection 15(1) of the Trade-marks Act. This subsection provides that confusing trademarks are registrable if the applicant is the owner of all such trademarks. In this scenario, the marks are referred to as associated trademarks. The notation of being an associated trademark is entered on the Register, and the other associated trademarks are also entered as a cross-reference, so one can usually determine the number of associated trademarks and each registration number by reviewing any given registration in that associated group.

Another aspect of section 15 is that all associated marks in a group must be owned by the same entity. Subsection 15(3) of the Trade-marks Act provides that no amendment of the Register to record a change in ownership or in the name or address of the owner of any one of a group of associated trademarks shall be made unless the Registrar is satisfied that the same change has occurred with respect to all trademarks in the group.

The practical effect of this provision is often problematic for brand owners that operate through subsidiaries or related companies. Due to a variety of reasons, such as tax implications, owners often conduct their operations in various countries with different related entities owning marks in a portfolio. While this arrangement may be preferable for their operations, it can lead to issues with respect to these associated marks in Canada. For example, if two marks are owned by two different entities, even if the owners are related or in a parent/subsidiary relationship, if the Trademarks Office regards them as being confusing, one will be cited against the other during prosecution and the mark with the later entitlement will be not be registrable. If the owners had been the same, though, an objection that the marks are confusing will not be raised but the marks will be associated.

Another aspect to bear in mind for related companies is that the registered owner will be required to use the trademark, or else the registration will be susceptible to a non-use cancellation proceeding. This is the overlay that impacts the licensing of a mark since even though an owner must own all of the associated marks in a particular group, it may still license others to use the mark. The licensing aspect is critical to ensure that the common owner of the associated marks in any particular group can survive an attack based on non-use.

Canada has strict licensing requirements to satisfy section 50 of the Trade-marks Act. Generally, the licensor must control the character or quality of the goods and services that are under licence. There is no requirement that the licence be a written licence, although from an evidentiary perspective, a written licence is preferable to demonstrate that the requisite control exists. Brand owners that engage in licensing of their marks should focus on these requirements for any marks and use that occurs in Canada to ensure existing and new licences comply. If the licences are found not to comply with section 50, the result could be that a Court or the Trademarks Office could determine, in a contentious proceeding, that use has occurred by multiple entities. The result of such a situation would likely be that the mark would not be viewed as distinctive, thus opening the door to use of confusing marks by other unrelated entities. The brand owner could also find itself unable to rely on its use by its licensee to establish use in a contentious proceeding. For example, in Caterpillar Inc v Puma SE, 2017 TMOB 114, an Opponent was relying on use of its mark by its licensees. The Opposition Board reviewed the written licenses and practices of the parties to determine that the evidence showed that control over the character and quality of the goods by the owner was deficient, so the use by the licensees did not enure to the benefit of the Opponent. Since at least some of the use did not satisfy section 50, this was determined to be non-distinctive use by other entities.

The most significant change to this framework is expected to occur in 2019, when current amendments to the Trade-marks Act are expected to come into force. Under the amending legislation from 2014 entitled the Economic Action Plan 2014 Act No. 1, most of the changes to the legislative regime are directed to the implementation of the Madrid Protocol, the Nice Agreement and the Singapore Treaty. However, section 15 will also be amended to eliminate the definition of "associated trade-marks" and also to eliminate the restriction on the Registrar to only record the above-noted changes in ownership unless the same change has occurred for all marks in the group. The new section 15 will simply state that confusing trademarks will be registrable as long as the applicant is the owner of all of the confusing trademarks. The removal of the requirement that all former "associated trade-marks" be owned by the same entity may be welcomed by brand owners. This change will permit marks within to be assigned to different entities, so may be more aligned with corporate practices when certain marks are divested as part of a corporate transaction. The entire portfolio may not be part of the same transaction, so permitting associated marks to be owned by different owners allows owners to have more flexibility to ensure the corporate reality is mirrored by the legislative requirements. Owners will need to understand that marks that would be regarded as confusing will still need to be owned by the same entity to comply with the new section 15 and to avoid destroying distinctiveness by having confusing trademarks owned by different entities. However, the current formality and potentially broad capture of a group of the former "associated trade-marks" will no longer apply and hopefully help align the trademark practice with commercial realities.

It is therefore important for trademark owners to regularly review their portfolios and evaluate the ownership landscape for marks that are similar or within the same brand line. This review should also focus on the corporate relationships and also the entities that are actually using the marks in Canada. This overall review will ensure that if licensing is required, the requirements of section 50 can be established to ensure that the registered owners will have licensed use attributed to the owners. The owners can then rely on the licensed use to survive a non-use cancellation attack and also to establish its own use for offensive purposes against other unrelated owners.