Canada's proposed trade mark "no use" provisions: are they no use?

When an intellectual property personality whose hallmark is a quiet, reasoned effectiveness in debate chooses to raise his voice, it's time to listen.  The quiet, reasonable and effective person is Dan Bereskin, Canada's sole inductee to the IP Hall of Fame and a man to whose every word we pay close attention. It is Dan's voice that has been raised, last week at the International Trademark Association Meeting in Hong Kong, and he has kindly transcribed his words for the benefit of readers of this weblog; you can read them here:

No notice, no consultation,
no discussion, no dialogue,
no respect for the IP community ...

On March 28, 2014, the Canadian government proposed in Bill C-31, the Economic Action Plan 2014, No. 1, the most important changes to the Canadian Trade-marks Act since 1953. Bill C-31 is an omnibus bill comprising 375 pages that, if enacted, would also amend more than 60 other unrelated laws.  The legislation was launched with virtually no notice to the IP community, and zero collaboration with people who have actual experience in clearing and enforcing trade marks both in Canada and abroad.  By burying the legislation in a finance bill, it may be that the government hoped the legislation would be unnoticed.  Instead, a firestorm of protest has resulted that shows no sign of abating despite the government’s refusal to date to change even one word of the proposed legislation.

The provisions of the Trade-marks Act in Bill C-31 replace Canada’s time-tested, use-based system with a poor imitation of Community trade mark (CTM) law.  It permits registration for an unrestricted list of goods and services with no requirement of prior use as a condition for registration.  Further, the legislation contains no proper safeguards to guarantee against over-claiming. 

Under the current Trade-marks Act, opposition proceedings account for only about 2% of applications filed annually.  The reason why this figure is as low as it is, is that no one can register a trade  mark in Canada without first having used it either in Canada or elsewhere, and any such registration is restricted to the goods or services for which such use has occurred. This tends to discourage over-claiming.

Preparing for Opposition ...

Prior use is, and always has been, the foundation of Canadian trade mark law.  The proposed legislation threatens to destroy this vital foundation by permitting for the first time in Canada, the right of anyone to register a trade mark without first having used the trade mark anywhere, and for a long shopping list of goods and services that have no rational connection with the goods or services the registrant is interested in or is capable of selling in Canada.  This puts additional pressure on owners of Canadian trade marks to oppose.  It is therefore no wonder that the opposition rate for CTMs is 18%. Oppositions are expensive, even if a settlement is reached, and divert management time better spent in more productive activities.

For decades, prior to the USA joining the Madrid Protocol, the USA permitted foreign applicants to register in the USA based on a registration in their country of origin and bona fide intention to use the trade mark in commerce in the USA.  When relying on a home registration, foreign applicants do not have to have used the trade mark prior to registration in the USA.  This stems from a Trademark Trial and Appeal Board decision in Crocker Bank v CIBC, 223 U.S.P.Q. 909 (T.T.A.B. 1984), the correctness of which is open to doubt.  In any case, all registrants are required to prove use in commerce in the USA between the fifth and sixth years following registration otherwise the registration is expunged or amended. No such safeguard is present in the proposed Canadian legislation, nor is it in the case of CTMs.

Canadian law at present requires that foreign applicants who wish to register based on a home registration, must have used the trade mark somewhere before they are permitted to apply validly to register the same trade mark in Canada.  In Canada and the USA all applicants, domestic and foreign alike, can register based on prior use in Canada or USA respectively, or bona fide intention to use, but any application so based cannot issue to registration unless and until use in commerce has occurred in Canada or the USA.  In Canada, foreign applicants have the ability to file both on the basis of a home registration and use abroad, and on the basis of proposed use in Canada. Canadian law provides excellent protection for the owners of famous or well-known trade marks, so defensive registrations are simply not necessary in Canada.

In encouraging deadwood, the European system has widely been criticized by many experienced practitioners, as well as The Rt Hon Professor Sir Robin Jacob, who as a judge of the Court of Appeal for England and Wales expressed his consternation with the European system in the following words (David Kitchin & David Llewelyn, Kerly’s Law of Trade marks and Trade Names 13^th ed. 2000, Preface, pp. viii-ix:

Even more seriously these overbroad registrations are likely to hamper trade.  And of course they may put up costs for anyone seeking registration of a mark or contemplating using it.  The problem needs resolution.  Sooner, rather than later, rules will have to be developed to stop this nonsense.  It is not good enough to say that there can be later part-cancellation of wide specifications for non-use.  Who would bother with the expense and time involved when they want to get on with their business?

The Canadian Intellectual Property Office (“CIPO”) justifies the proposed legislation by arguing that it is necessary to conform Canadian law to that of other countries in order to enable Canada to adhere to the Madrid Protocol, the Singapore Treaty and the Nice Agreement.  This assertion is false, as evidenced by a paper published in 2002 and updated in 2012 by Alan Troicuk, Senior Counsel, Department of Justice, Canada, entitled Legal and Technical Implications of Canadian Adherence to the Madrid Protocol, published on the CIPO website, here.

In his paper, Mr Troicuk states that neither the Paris Convention nor the Madrid Protocol prevent Canada from continuing to require use as a precondition for acquiring trade mark rights in Canada. In their representations to various parliamentary committees, CIPO officials have neglected to mention that their reasons for justifying the new law are contradicted by their own counsel.

Mr Troicuk has expressed concern that requiring use somewhere as a condition for filing in Canada based on the Madrid Protocol will impose an additional burden on CIPO.  CIPO is notoriously slow in examining applications, the first official letter now taking ten months after the filing date. The question is, what’s more important, helping CIPO solve its notorious administrative problems or helping Canadian businesses to avoid unnecessary cost, risk and delay?  Further, in the vast majority of new applications, Examiners raise one or more issues in the first official letter, and it would put no additional burden on them to remind Madrid applicants, that the applicant must declare that they have used the trade mark for specific goods or services prior to filing in Canada before the application can be approved for advertisement.  The same notice could be a part of the letter giving filing particulars.

Canada has considered adherence to the Madrid Protocol since at least the early 1990s, but until now has not shown much enthusiasm for adherence.  The question is why now?  The answer may be that CIPO is using adherence to the Madrid Protocol to justify overhauling the Trade-marks Act to simplify their administrative processes.  They appear to resent having to deal with Declarations of Use because that takes time.  That is hardly a wise justification for legislation that is certain to cause far-reaching harm to businesses especially Canadian businesses. 

Moreover, it is unlikely that many Canadian applicants will have much enthusiasm for obtaining International registrations.  Last year, Canadian applicants filed about 21,000 applications and that same year Canadian applicants filed only about 900 CTM applications.  Given the cost of an International registration, it is probable that the vast majority of Canadian applicants, when they file abroad, will file in the USA and CTM and will not obtain an International registration in view of the cost.  For this, we are to discard 150 years of legislation and jurisprudence?

More than 160 experienced trade mark practitioners literally from every province across Canada have endorsed a letter submitted to government officials proposing that the trade mark legislation be excised from the Bill, or at least those provisions be removed that abandon the requirement of use as a precondition for registration, pending further study.  In addition, a number of Canadian practitioners have appeared before various parliamentary committees urging reconsideration of the trade mark provisions of the new Bill.  Sadly, all entreaties to date have fallen on deaf ears.

This Kat hastens to add that he is quite content with the system currently in operation in the European Union, though he concedes that there is always room for improvement.  He adds that he is no great enthusiast for use-based registration systems.  However, he is most disappointed that his Canadian cousins are being subjected to the monumental discourtesy of a failure to consult before amending a system which, whatever you think of it, is the basis upon which investments are made, goodwill protected, bad faith traders fended off and infringers deterred.  This is not the only example of inadequate consultation in the field of intellectual property in recent times: readers may recall the travesty of consultation of the patent professions that accompanied the passage of the new European patent package.  In contrast, in the field of copyright, where there is no scheme of registration of rights, no structural complexity and no specialised and highly-trained profession dedicated to it, consultation seems to be piled on consultation, review on review, as the same issues are ploughed over with the regularity of clockwork.