Changes Heading to Canada’s Trade-Marks Act

Businesses are rushing to register trademarks ahead of what one lawyer calls the biggest shakeup to the regime in decades.

Controversial amendments to the Trade-marks Act, expected to take effect in 2019, will eliminate the requirement for applicants to show use of a mark in Canada before they can get registration in this country.

Cynthia Rowden, head of the trademarks practice group at intellectual property law boutique Bereskin & Parr LLP, said the demise of the use requirement is “huge,” calling it the most significant change to the law since the 1950s.

“Use has been the basis for trademark rights for basically as long as Canada has been a country, whether through statute or common law,” she said. “So taking it out is going to have a big impact on the meaning of registration as well as on the risk analysis for brand owners going forward.”

Rowden, who works out of the firm’s Toronto office, said companies fear the looser rules could clear the way for trademark trolls to start registering marks as a way to squeeze payments out of brand owners.

And she said there are signs that a predicted flood of defensive applications by legitimate businesses for marks they never intend to use has already begun, well in advance of the changes taking effect, judging by the Canadian Intellectual Property Office’s database of all registered trademarks and outstanding applications.

“If you search it, you’ll see applications in there where they list 75 pages of goods and services. I don’t think they’re planning to use the trademark for all of them; in fact, for some applications, it looks like they’ve just gone through the list of accepted goods and services and filled them all in from A to Z,” Rowden said. “The plan seems to be that if they can keep the application pending until 2019, then they can register the trademarks for all goods and services without showing use. It’s an attempt to significantly broaden their rights.”

She said prospective trademark holders have an additional incentive to claim a wide variety of uses for their marks because of this country’s current flat-fee charging for applications.

That is likely to end with the upcoming enacting of the legislative changes, because they will also ensure Canada’s compliance with the Nice Agreement, an international accord that standardizes the classification system for goods and services covered by a particular trademark registration.

At that time, it’s expected that applicants will have to pay separate fees for each of the goods and services listed in the 45 distinct, internationally recognized groupings laid out by the Nice Agreement.

“If you file now with your huge list, all you have to pay is the regular fee, which is already low by any measure,” Rowden said.

In a recent letter to the federal government, the Canadian Bar Association’s national intellectual property law section also raised concerns about the potential prevalence of overly broad marks in the absence of the use requirement, known in the industry as “cluttering.”

It noted that since the Trade-marks Act changes received royal assent in 2014, the number of applications waiting to be registered has ballooned to almost 70,000 from 40,000.

“The more cluttered the register, the more difficult it is to provide quality clearance opinions for the adoption and use of new marks. Even if there is a perception that a registration is overbroad, businesses may hesitate to launch a product ‘at risk,’” the letter reads.

Claiming the benefits of scrapping the use requirement will be outweighed by the costs and burdens of such a move, the section urges the government to postpone implementation until “all stakeholders have an opportunity to fully explore trademark policy options that achieve our common goal—an effective and efficient Canadian trademark system.”

But Rowden said she doesn’t rate the chances of an about-turn from the federal government, despite the change in leadership since the amendments were first introduced in Parliament.

They arrived to an immediate howl of protest for the way Stephen Harper’s administration pushed them through as part of Bill C-31, a 2014 omnibus budget bill, without consulting interested parties.

“Lots of companies submitted reports raising concerns about this, as well as professional groups and academics,” Rowden said. “But the impact of all the commentary was nil. Between the bill’s first reading and its passage, not a single comma changed.”

Although those concerns have been raised repeatedly since by lawyers and others in the intellectual property community, Rowden sees no sign they have had any more impact on Justin Trudeau’s Liberal government.

But Stephanie Vaccari, partner in the intellectual property practice group at Baker and McKenzie LLP in Toronto, said the reaction to the changes hasn’t been universally negative.

A good chunk of her practice involves representing international companies that want to add Canadian rights to their global IP portfolio.

“They’re quite excited, because it puts Canada in sync with most of the rest of the world,” she said, noting that key jurisdictions, such as the European Union, do not require use as a prerequisite for trademark registration.

Although she expects some short-term cluttering, Vaccari said classification-based pricing will serve as a pressure valve, forcing brand owners to focus their trademark applications to keep the price down.

“Dropping the use requirement complicates things for now, but, ultimately, it will resolve itself in a few years,” she said.

According to Vaccari, the amendments also provide additional tools that will help tackle potential misuse of the application process by trolls.

When they take effect, they will add a new ground of opposition to s. 38(2) of the Trade-marks Act, allowing registrations to be challenged where the applicant was not using and did not intend to use the mark in association with a specified good or service at the time it was filed.

“Oppositions are going to increase, and that’s something they have seen in Europe, too. Some squatters are going to be trolls who see it as an opportunity to make money, but I’m not sure how successful they will be,” Vaccari said.

But Rowden said even those tools could bring “many years of uncertainty” as cases work their way through the courts.

“Showing an intent to use a trademark is a devilishly difficult thing to do. I think we will need to establish some case law, but it’s going to take some time to put together a body of jurisprudence,” she said.

Either way, she said Canadian companies will have to develop defensive techniques that weren’t really needed in this country before to protect their trademarks.

“They may find it prudent to effectively build a wall around themselves, so that the onus is shifted to other parties who want to challenge their marks,” Rowden said.

Vaccari also expects the changes to spark an influx of third-party trademark watch services into the Canadian market.

“They monitor marks and advise registrants when somebody else has applied for something similar,” she said. “Brand owners are already investing in these services, but once the legislation is implemented, there’s going to be a lot more joining them. And global companies (that) already employ them will be adding Canada under their jurisdictional umbrella.”

Michael McKiernan is a reporter for Law Times, a Thomson Reuters publication, where this article originally appeared. It is reprinted here with permission.