Canada: Intellectual Property Update

Newfoundland trade-mark registrations often turn up in clearance searches undertaken to assess the availability of new trade-marks for use in Canada, and can be a source of puzzlement to anyone unfamiliar with their historical background. An oddity of Canadian trade-marks law, the special treatment of Newfoundland trade-marks is a legacy of the terms of entry of the province into the Canadian Confederation on April 1, 1949.

Sections 67 and 68 of Canada’s Trade-marks Act provide that the registration of a trade-mark under the laws of Newfoundland before April 1, 1949 has the same force and effect in Newfoundland as if Newfoundland had not become part of Canada. The pre-1949 Newfoundland trade-mark law did not impose a requirement for use to obtain or maintain a registration. Newfoundland registrations were also without time limitation, and did not need to be renewed. Under the Trade-marks Act, all rights and privileges acquired under those laws may continue to be exercised or enjoyed, but only within the province of Newfoundland.

Section 67(2) of the Act provides that the laws of Newfoundland, as they existed immediately before April 1, 1949, also continue to apply to applications to register trade-marks under the laws of Newfoundland that were pending at the time Newfoundland joined Canada. Therefore any trade-marks registered under those applications shall be deemed to have been registered under the laws of Newfoundland before April 1, 1949. However, Section 68 provides that the use or making known of a trade-mark in Newfoundland before April 1, 1949 is not to be deemed to be use or making known of such trade-mark in Canada.

The practical result of the foregoing provisions is that a trade-mark registered in Newfoundland before 1949 is not deemed to be registered throughout Canada. However, it can be expunged or affected only by recourse to Newfoundland law as it existed before April 1, 1949. Unfortunately, Newfoundland law at that time did not provide a mechanism for the amendment of its Trade-marks Register.

In many cases, the owners of Newfoundland trade-mark registrations ceased to do business, or abandoned such trade-marks, long ago. However, the only way to expunge a trade-mark registered in Newfoundland before 1949 is to show that the trade-mark was not registrable at the date of registration. As a consequence, Newfoundland registrations can remain on the Canadian Trade-marks Register almost indefinitely: the Canadian Intellectually Property Office (CIPO) has no statutory power to expunge them. The Federal Court of Canada, which replaced the Exchequer Court, does have jurisdiction to expunge a Newfoundland registration on a showing of sufficient cause, namely that the trade-mark was not registrable on the date it was registered under the Newfoundland trade-mark law in force on the date of registration. But because evidence in such cases necessarily involves events half a century or more in the past, practical difficulties can arise.

The existence of a Newfoundland registration does not preclude the registration of the same trade-mark in Canada outside Newfoundland by another party. However, Canadian jurisprudence holds that the registered owner of such a trade-mark does not have the right to use his or her trade-mark in Newfoundland, where the Newfoundland registration continues to govern. This can have consequences in circumstances such as licensing or franchising, if Canada-wide use of a trade-mark is intended.

Irrevocable trade-mark licences are sometimes granted between associated business entities or as a component in a larger strategy involving the sale of assets. However, this practice does involve risks in light of Canadian licensing law. Historically, licensing of trade-marks was not allowed because use of a mark by anyone other than the owner would lead to public confusion as to the source of the associated goods or services, thereby leading to loss of distinctiveness (which is the ability of a trade-mark to distinguish the goods or services of the trade-mark owner from the goods and services of others). Modern Canadian trade-mark law addresses current commercial realities by means of Section 50 of the Trade-marks Act. Section 50 deems the use of a trade-mark by another entity, under license from the owner of the trade-mark, to have the same effect as use of the trade-mark by the owner, but only as long as the owner has, "under the licence, direct or indirect control of the character or quality of the wares or services."

The control requirements imposed by Section 50 of the Trade-marks Act appear to be incompatible with the grant of an "irrevocable" licence to use a trade-mark. A decision of the Canadian Trade-marks Opposition Board demonstrates the risk involved in such a licence. In Diamonique Corporation v. Rogers Broadcasting Limited, Hearing Officer David Martin rejected an opposition to registration of the trade-mark DIAMONELLE in Canada, for use in association with jewellery, cable television services and the marketing of discount and consumer products through television, direct mail and general advertising. The unsuccessful opponent, Diamonique Corporation, had argued that the trade-mark DIAMONELLE was unregistrable by reason of confusion with its trade-mark DIAMONIQUE, also registered for use in association with jewellery, and non-distinctive in view of the Diamonique Corporation’s use of its DIAMONIQUE trade-mark in Canada.

Diamonique Corporation submitted evidence that confirmed that in the past, it had sold trade-marked wares to its parent corporation, and that a copy of a licence in favour of the parent appeared on the reverse side of all purchase orders sent by the parent to Diamonique Corporation. This licence agreement stated: "Vendor hereby grants to Buyer the irrevocable right, by all means now or hereafter existing, to … (b) use the trade-marks, trade-names, service marks, patents and copyrights (collectively the "Marks") registered, owned, licensed to or used by Vendor in connection with the Merchandise".

Referring to the language of Section 50 of the Trade-marks Act, the Hearing Officer concluded that regardless of the source of the goods, no use of the DIAMONIQUE trade-mark enured to the benefit of Diamonique Corporation. In coming to this conclusion, the Hearing Officer specifically noted that advertisements in Canada included a prominent reference to a corporation other than Diamonique Corporation, namely its parent. He also noted that the address in such advertisements was not that of Diamonique Corporation, but that of an unrelated distributor. Accordingly, the Hearing Officer concluded that the public would have perceived that the use of the mark DIAMONIQUE was by Diamonique Corporation’s parent corporation or the distributor, and not Diamonique Corporation.

To the extent that the wares may have originated from or passed through Diamonique Corporation’s parent, the licence agreement printed on the purchase orders did not qualify as licensed use within the meaning of Section 50(1) of the Trade-marks Act. The Hearing Office reasoned that Diamonique Corporation’s action in granting an irrevocable licence was evidence that it had relinquished the exercise of any control over the character or quality of the associated wares. Accordingly, the Hearing Officer concluded "that the opponent has counted on non-distinctive, unlicensed or improperly licensed use of its mark DIAMONIQUE by others in Canada. Thus a number of Canadians have come to associate that mark with a source or sources other than the opponent. That fact dictates against a finding of confusion with a slightly different mark."

The Diamonique decision is an illustration of the fact that granting "irrevocable" trade-mark licenses in Canada may cause the affected trade-marks to be found, for practical purposes, to be unenforceable. A possible course of action to reduce this risk would be to ensure that licences contain language that sets out conditions upon which the licence is deemed to terminate.

On November 29, 2005, the Federal Court of Appeal summarily denied an attempt by F. Hoffman-La Roche AG (Hoffman-La Roche) to save a patent that had lapsed pursuant to Section 46(2) of the Patent Act because of a failure to pay the required maintenance fee.

The patent at issue came into existence when Hoffman-La Roche applied for a re-issuance of one of its patents, but mistakenly filed the re-issue as a new application. Section 46 of the Patent Act imposes an obligation to pay maintenance fees in order to maintain a patent. However, Hoffman-La Roche failed to pay the maintenance fee, assuming that it was only under an obligation to pay a $100.00 annual fee. The Commissioner of Patents (the Commissioner) caught the error only after the re-issued patent had lapsed, due to the mandatory effect of the Patent Act.

In an effort to save the re-issued patent, Hoffman-La Roche brought an application for judicial review of what Hoffman- La Roche characterized as the decision of the Commissioner to note that Hoffman-La Roche had not paid the requisite maintenance fees, and to allow the patent to lapse. Relying on Supreme Court of Canada jurisprudence that stands for the proposition that any administrative decision affecting the rights, privileges or interests of an individual is sufficient to trigger the application of a duty of fairness, Hoffman-La Roche argued that the Commissioner’s decision entailed a duty of fairness, namely that Hoffman-La Roche be given notice before the action was taken.

Hoffman-La Roche was unsuccessful before the Federal Court. The Federal Court of Appeal upheld the trial judgment. It found that the Commissioner had merely informed Hoffman-La Roche that the maintenance fees had not been paid, and drew its attention to the legal consequences of this oversight. The Commissioner had not made a decision affecting Hoffman-La Roche’s rights: rather, Hoffmann-La Roche’s rights were affected by the operation of the Patent Act. Consistent with previous decisions (such as the Dutch Industries case), the Court held that the Commissioner did not have any authority to vary the consequences flowing from the operation of Section 46(2). Accordingly, his actions did not constitute an "administrative decision," and did not attract a duty of procedural fairness that required the giving of notice.

The decision was especially interesting because the Federal Court of Appeal recognized that the Commissioner had made mistakes, and had not adhered to its past administrative practices. Most significantly, the Commissioner did not send notice of the missed deadline, so that Hoffmann-LaRoche could take advantage of the twelve-month extension available to rectify the mistake. However, the Court held that such omissions could not relieve Hoffman-La Roche of its statutory duties. The Commissioner’s past practice, and his failure to act in accordance with such practice, did not create, in relation to Section 46 of the Patent Act, a joint or shared responsibility that gave rise to a duty to provide notice of lapse under the doctrine of procedural fairness. Notwithstanding the Patent Office’s practice of providing notice to patent holders when the deadline for maintenance fees had been missed, the doctrine of legitimate expectations did not oblige the Commissioner to provide notice every time this occurred.

In summary, there is no provision in the Patent Act requiring the Patent Office to provide notice to a registrant that maintenance fees are payable, or that such fees have not been paid. Section 24.03.03 of the Manual of Patent Office Practice indicates that registrants have an additional twelve months from the anniversary date to pay the late fees before a patent will lapse. As an expired patent cannot be revived, registrants should carefully review their docketing and reminder systems.

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