Social media is fundamentally about sharing content, making the risk of copyright infringement ever-present in a climate of legal uncertainty.  Consider this scenario:  A customer posts a photo from her cell phone on Facebook of herself eating a burrito at a Mexican restaurant that was taken by her friend.  Who is the copyright owner of the photograph?

The Law in Canada

The question of who owns the rights in a photograph has an answer in Canada’s Copyright Act as amended by the Copyright Modernization Act in 2012. Prior to 2012, photographers were not the automatic copyright owners of their photographs; if a photographer took photos for a customer, copyright instead belonged to the individual who commissioned the photographs, as opposed to the individual who took them.  Since 2012, photographers have the same rights as other creators under the law, regardless of the nature of their work. Generally speaking, if you take a photo, you are the copyright owner.  In the case of the burrito photograph, it was the burrito-eater’s friend who snapped the photo.  While there are exceptions under the law, in this instance, the copyright owner is, in all likelihood, the burrito-eater’s friend.

Social Media and Copyright

Is it an infringement of copyright to post someone else’s photo on social media? Under Section 27 of the Copyright Act, “[i]t is an infringement of copyright for any person to do, without the consent of the owner of the copyright, anything that by this Act only the owner of the copyright has the right to do.”  So, if you post a photo on Facebook without permission of the copyright owner, generally speaking, it is an infringement of copyright.  There are, however, exceptions to this foundational rule:

1. Fair Dealing: This exception permits the use of copyrighted photographs in certain circumstances, including research, private study, criticism or review and news reporting.
2. User-Generated Content: Another exception applies to non-commercial user-generated content created using existing work which was published or otherwise made available to the public.
3. Personal Purposes: It is generally not an infringement of copyright for an individual to use for private or non-commercial purposes a photograph that was commissioned by the individual for personal purposes and made for valuable consideration.
4. Determining the applicability of these exceptions (as well as others) in practice raises a host of questions beyond the scope of this article. We will walk through copyright infringement exceptions in our next blog post in this series.

Now let’s take the example of the burrito-eater and her friend. The burrito-eater posted the photo on Facebook, but is not the copyright owner.  However, her friend encouraged her to post it, but asked to be tagged in the photo. In this scenario, it could be said that the burrito-eater’s friend gave her permission to use the photo on Facebook on condition that she be associated with the photo.  When the photo is publicly posted to Instagram by the burrito-eater, it is wildly popular and is shared on Instagram by hundreds of people within a few hours.  In fact, it becomes so popular that the Mexican restaurant owner sees a promotional opportunity and copies the photo and posts it to the restaurant’s Instagram account.  Does the Mexican restaurant owner have the right to do this?

Social Media Terms and Conditions

Navigating copyright laws is complicated by social media platform terms and conditions.  In a recent Quebec case, Chung c. Brandy Melville Canada Ltd., a photographer took photos for a company but limited the right of the company to use the photos.  The company was only permitted to use the photos on Instagram and Facebook as long as the photographer’s name was associated with the photos – any other use required a licence in writing.  The company later went on to use one of the photos in promotional postcards. The court found that the photographer was the author of the photo used commercially by the company and he had not authorized such use.

However, in the case, the question arose as to the impact of using Instagram to share photos. The company argued that Instagram’s rules and regulations stipulate that posting photos on the platform results in the loss of all intellectual property rights.  However, the matter was not proven as the rules and regulations were not produced into the court record. Nevertheless, the company’s argument raises an important question: how do social media platform terms and conditions affect copyright owners’ rights when photos are posted and shared publicly? How about when the photos are posted and shared by someone other than the copyright owner? The short answer is: it depends on the terms and conditions.

In the case of the burrito-eater, the photo was posted on Facebook with the permission of the copyright owner.  When you post a photo on Facebook, you grant Facebook (via its current Statement of Rights and Responsibilities) a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any intellectual property content that you post.   Basically, you grant Facebook the right to use your photos in advertisements or for other commercial purposes, to generate a profit from your photos, and to allow others (including other companies) to use your photos (all while not paying you a dime).  That being said, if you are the copyright owner of a photograph that you have posted on Facebook, you do not give up or dispose of all of your intellectual property rights when the photo is posted.

In the case of the Mexican restaurant owner, assuming he did not obtain permission from the copyright owner or a licence from Facebook, posting the photo on Instagram was an infringement of copyright and a violation of Instagram’s current Terms of Use.  Under Instagram’s Term of Use, you must comply with copyright laws and warrant that you own the photos posted by you on Instagram. Now let’s assume that the burrito-eater’s friend contacted the Mexican restaurant owner about the infringement and they end up entering into a licence agreement so that the Mexican restaurant can now use the photo for promotional purposes. However, let’s not forget about the burrito-eater who is the subject of the photo.  In this case, she is not comfortable with all of the attention the photo has generated.  So, what rights does our burrito-eater have?  The use of the photo in association with the promotion of the Mexican restaurant may involve certain rights held by the burrito-eater, including privacy and publicity rights.  We will save discussion of these rights for a later blog post.

Exercise Caution

In this age of social media, the rules around copyright and photography can be blurry. However, ignorance is not an excuse when it comes to copyright law.  An innocent copyright infringement is still an infringement and while, in most cases, the worst case scenario involves a demand to remove the copyrighted content, you may face more severe repercussions, especially if a photo is being used for commercial purposes. When in doubt, do some digging: review the terms of the social media platform you are planning on using, obtain permission in writing, consult a lawyer, and exercise caution.

John Yiokaris, Sotos LLP

John Yiokaris is a partner with Sotos LLP in Toronto, Canada’s leading franchise law firm. He has been recognized by Chambers Canada, LEXPERT, Who’s Who Legal, Lexology, and Best Lawyers in Canada as a leading Canadian franchise law practitioner. John can be reached directly at 416.977.3998 or jyiokaris@sotos.ca.

The post Social Media and Copyright: Can I Post that Photo? appeared first on Sotos LLP.

Before entering into a dealership or retailer agreement, both dealers and automakers should carefully consider the terms governing the duration of their relationship as well as the circumstances which could lead to the termination of the agreement. Often, dealer agreements will automatically renew after a set period of time, so long as certain conditions are met. In those instances, if neither party breaches the agreement, the relationship may continue indefinitely.

This brings us to a discussion of indefinite term contracts containing what are commonly referred to as “evergreen” clauses. An indefinite term contract is an agreement that does not have an “expiry date”. An “evergreen” clause entails the automatic renewal of the agreement year after year. What does this mean in practice? Well, in most cases, if both parties are acting in accordance with the terms of the agreement, the relationship may continue indefinitely. However, what if one party wants out in circumstances where there have been no events of default entitling the innocent party to terminate the agreement?

In some instances, indefinite term contracts may be terminated on reasonable notice in the absence of any clause permitting such right. Courts have been willing, in some cases, to find an implied term which permits the termination of a contract without cause. The Ontario Court of Appeal has stated that when the term of a contract is not fixed and there is no provision for the termination of the contract on reasonable notice, a court may treat a contract as either perpetual in nature or as an indefinite term contract with an implied unilateral termination right on reasonable notice. In the latter instance, either party to the agreement can terminate the contract if they give the other party reasonable notice. How the court determines what is ‘reasonable’ is largely dependent on the facts of each particular situation. In order to make this determination, the court must consider the following:

1. the relationship between the parties;
2. the specific terms of the contract; and
3. all surrounding circumstances.

Type of Relationship: Some types of contracts which depend upon mutual trust between the parties naturally give rise to an implied right to terminate upon reasonable notice. For example, distributorship agreements are generally of a class of agreements that can be terminated upon reasonable notice without cause. This is because distributorship agreements are the type of contract that involve mutual trust, and each party should have the right to terminate the contract unilaterally on notice in the event there is a breakdown of that trust. In other words, trust between the parties is so important in this type of relationship that the absence of it is sufficient grounds for either party to end the contract. Similarly, franchise relationships depend upon mutual trust between the contracting parties. Accordingly, franchise agreements will generally be found to contain an implied right to terminate upon reasonable notice in situations where the agreement does not contain terms related to termination.

Given that dealers and automakers are in a franchise relationship with each other, there is a strong likelihood that an implied right to terminate upon reasonable notice would be found to exist, although final determination must be balanced against other factors, as described below.

Specific Terms: There may be specific terms within the dealer contract which either point towards or away from an implied right to terminate without cause on reasonable notice. For example, if an agreement stipulates that it can only be terminated by mutual agreement or for a material breach of contract, then likely only in those two circumstances mentioned could the parties actually terminate the agreement. When an agreement contains specific terms which set out when termination may occur, it is more difficult to establish an implied right to terminate on reasonable notice without cause. In the context of an agreement with numerous termination provisions, an additional implied right to terminate would arguably be inconsistent with the intention of the parties.

Surrounding Circumstances: In addition to the nature of the relationship and specific terms in the contract, the surrounding circumstances help determine whether there is an implied right to terminate on reasonable notice. These factors include:

• the level of sophistication of the parties;
• whether the parties were strangers at the time they entered into the agreement;
• whether the parties had done prior business together;
• whether the relationship involved the need for trust, confidence, and satisfaction; and
• the amounts invested by each party pursuant to the agreement.

Maybe Not Forever

What appears to be a long-term, an endless relationship may not be forever.

Before moving forward with a dealer agreement, think about the kind of relationship you want to have with your dealers or your automaker. Are you prepared to offer your dealers automatic renewals year after year? Are you prepared to enter into an agreement that allows your automaker to terminate you without any cause on 60 days’ notice? What will happen to the dealer’s investment if the agreement is terminated? No one expects a relationship to end on unhappy terms, but it happens, and it is better to contemplate termination scenarios at the beginning of the relationship, rather than at the end.

John Yiokaris, Sotos LLP

John Yiokaris is a partner with Sotos LLP in Toronto, Canada’s largest franchise law firm. He has been recognized by Chambers Canada, LEXPERT, Who’s Who Legal, and Best Lawyers Canada as a leading Canadian franchise law practitioner.

John practices business law with a specific focus on the automotive industry, franchising, and disputes. He is trusted counsel to both automotive manufacturers and dealers. John can be reached directly at 416.977.3998 or jyiokaris@sotos.ca.

The post Dealership Agreements: They’re Not for as Long as You Think appeared first on Sotos LLP.

In Beijing Judian Restaurant Co. Ltd. v. Wei Meng, 2022 FC 743,[1] the Federal Court struck a trademark from the register because it was registered in bad faith. By finding the trademark was registered contrary to s. 18(1)(e) of the Trademarks Act,[2] (“TMA”), the Court issued its first ever decision assessing bad faith trademark registrations.

This post will explain the important takeaways that trademark applicants, and registrants, must consider when seeking to register and maintain their trademark registrations.

Background

Beijing Judian Restaurant Co. Ltd. (“BJR”) operated a successful restaurant chain across China, where it used a series of marks, including the specific trademark at issue (“JU DIAN & Design Mark”). BJR expanded its business to Canada and applied to register a number of its trademarks, including the JU DIAN & Design Mark. Unbeknownst to BJR, an individual by the name of Wei Meng (“Meng”) had already registered the JU DIAN & Design Mark in Canada on the basis of proposed use.

Upon learning of BJR’s trademark application, Meng demanded payment of $1.5 million for the right to use the JU DIAN & Design Mark in Canada. BJR also learned of online advertisements posted by Meng in Canada to license the JU DIAN & Design Mark, which directly referenced BJR’s business success in China.

BJR sought to strike Meng’s registration of the JU DIAN & Design Mark, alleging that Meng only registered it with the intention of profiting from, or interfering with, BJR’s business and reputation.

The Court agreed with BJR that Meng had registered the JU DIAN & Design Mark because of its international popularity associated with BJR’s brand. However, the Court confirmed in its decision that copying and registering a foreign trademark in Canada is legal. Canadian courts have consistently held that where there is no reputation for a third party’s mark in Canada, a party may register that exact third party’s mark legitimately.[3] In other words, registering someone else’s trademark in Canada can be legitimate, and will not necessarily result in a finding of bad faith.

In this case, the Court struck Meng’s trademark registration because it found that he only registered it to extort BJR. There was no evidence that Meng intended to use the JU DIAN & Design Mark for any legitimate commercial purpose. In fact, Meng had established a pattern of registering foreign trademarks in Canada without ever using them, having done so six times before. All of these unique facts led the Court to find that Meng had registered the JU DIAN & Design Mark in bad faith.

Takeaways

• Register your trademark. If nothing else, this case is a warning to international trademark holders: if you don’t register your mark in Canada, someone else might. It is legal for international trademarks to be identically copied and registered by an unrelated party in Canada, where there is no reputation of that international trademark in Canada. Once registered, the holder of the registration gets exclusive rights to use that trademark throughout Canada, and gains access to legal rights and remedies unavailable to unregistered trademark holders.

• Trademarks can be registered before they are used. In Canada, an applicant may file a trademark application even though the applicant has not started using that trademark. Where there are two trademark applications for the same or similar mark that have been filed, and which have not been used in commerce, the TMA gives priority to the trademark filed first. Accordingly, if a foreign brand has plans of using its trademarks in Canada, it is a good idea for that brand to register its trademark in Canada to prevent a third party from registering the mark first. It should be kept in mind that if a trademark has been registered in Canada for three years or more but never used, anyone can request that trademark to be expunged (i.e., struck from the Register of Trademarks) or amended as a result of such non-use, as per section 45 of the TMA.

• The burden to prove bad faith may be hard to meet. The burden of proving that a trademark was registered in bad faith lies with the party alleging bad faith. An applicant to strike the registration of a trademark under bad faith must prove on a balance of probabilities (meaning more likely than not), with “clear, convincing and cogent evidence” that the mark was registered in bad faith.[4] In other words, a party would have to prove that it is more likely that a trademark was registered to be used for extortion than for any other legitimate commercial purpose.

At Sotos LLP, we have acted for countless trademark owners in every aspect of protecting their intellectual property for more than 40 years. We have extensive knowledge of intellectual property issues, and regularly act in the procurement and licensing of trademarks, as well as in defending our clients’ trademark rights and opposing trademark applications on our clients’ behalf.

Please contact John Yiokaris at 416.977.3998 or jyiokaris@sotos.ca to discuss your intellectual property and trademark issues.

[1] Beijing Judian Restaurant Co. Ltd. v. Meng, 2022 FC 743 (CanLII).
[2] Trademarks Act, RSC 1985, c T-13.
[3] USA PRO IP Limited v Courtaulds Textiles America, Inc., 2018 TMOB 90 (CanLII) at para 21; Santa Barbara Restaurant Group, Inc. v Jay Veto, 2014 TMOB 286 (CanLII) at para 32.
[4] Beijing Judian Restaurant Co. Ltd. v. Meng, 2022 FC 743 (CanLII) at para 39.

The post Bad Faith and the Importance of Trademark Registration appeared first on Sotos LLP.

A cookie is essentially a small storage unit that gathers data or information about you when you are on a website. Cookies are used to monitor your activity on a website to allow the website to remember things about you for the next time you visit that website. The use of cookies allows websites to tailor the service it provides around you and your needs, as observed through cookies. This includes targeting ads to you, autofill search terms in a search bar, provide recommended items on e-commerce websites, and so on.

Given the different activities that you can perform on websites, there are different types of cookies which have different functions:

• Session cookies are used only while an individual is navigating an active session on a website and promptly disappear once you leave the site.
• Permanent or persistent cookies remain even after you close a web browser. These cookies are what allow websites to remember things like search terms or log in details. These cookies expire after a set time, or they must be manually deleted by the individuals.

Does the website visitor need to know they are being used?

Not necessarily.

In Canada, website cookies attract “deemed consent” under Section 10(8) of Canada’s anti-spam legislation (CASL), so long as the person’s conduct is such that you can reasonably believe that they consent. According to guidance from the Canadian Radio-Television and Telecommunications Commission, you generally need express consent to install computer programs. However, for certain types of programs, including website cookies, you are considered to already have express consent without requesting it. The issue is that there is no explicit guidance on when it is “reasonable” to believe that a person consents to the use of website cookies in such a way that you can rely on the “deemed consent” provision, and so the safest approach is still to obtain such consent. Further, obtaining express consent with respect to using website cookies is required by law in the European Union, pursuant to the General Data Protection Regulation (GDPR). Thus, if you are designing a website for the European market and are expecting visitors from the EU, the safest approach is to still obtain consent (e.g., using a “cookie banner”).

What should visitors to your website be told?

Typically, consent for the use of website cookies is obtained through pop-ups or “cookie banners” that appear when you open a website. Under Canadian anti-spam legislation, when obtaining consent for the installation of a computer program, the request for consent must set out: (1) the purpose for which consent is sought; and (2) the identity of who is seeking the consent. Note that at present, Bill C-11, which attempts to enact the Consumer Privacy Protection Act, has been proposed in Canada. While Parliament has yet to pass the bill, it would introduce a handful of new requirements to obtain consent, including setting out:

1. the purposes for, the methods of, and any foreseeable consequences of collection of personal information and the uses and disclosure of this information;
2. the specific type of personal information to be collected, used, or disclosed; and
3. the names or types of any third parties to which the organization may disclose the personal information.

The addition of these new requirements would also comply with the GDPR in Europe, which has very strict requirements for obtaining consent from users with respect to the collection of personal information and the use of cookies. This typically includes a notice that sets out:

1. an explanation of the use of cookies and the cookies that the website uses;
2. an option for users to opt-in or opt-out of the collection of their data; and
3. how to access further information about the collection of data, the use of that data, and any related third-party activity (g., through a cookie policy).

Why?

Given that consent to the use of cookies is not as strictly required in Canada, the purpose of such disclosure ought to be viewed in the grander scheme of Canada’s privacy laws. Canada’s anti-spam legislation (CASL) is designed “to promote the efficiency and adaptability of the Canadian economy by regulating commercial conduct that discourages the use of electronic means to carry out commercial activities”. The general rationale for the requirement to obtain consent when collecting personal information is to protect users. By obtaining consent, the users are informed of the collection of their personal information and given the option to agree to that collection. Further, by obtaining this express consent, those operating websites can ensure compliance with Europe’s GDPR.

What if the visitor refuses to use cookies? What are the consequences for the visitor and for the website?

If a user chooses to opt out of the use of cookies, there are not very many consequences that can result. Consequences for the visitor could include:

• an inability to use the website, as many websites require that a user accept the use of cookies to continue to use the site;
• impaired performance due to a website’s inability to rely on cookies to quickly load pages; and
• the lack of personalized service on that website.

There may also be consequences for the website host seeking to rely on the use of cookies. This is the case for website hosts who need to be able to track or follow a user’s movement across their website. Without the use of cookies, website hosts will tend to run into issues with two common features of websites:

• Website hosts may not be able to use a “log in” feature that requires users to input a username and password to access parts of the website. This is because cookies are relied on to be able to track and manage an individual’s session on a website and ensure that they stay “logged in” while they navigate the different web pages.
• Website hosts may not be able to participate in e-commerce by providing an online shopping feature. Cookies are relied on to ensure that a “cart” stays updated and is consistent with a visitor’s activities on a website and so refusal of cookies would mean that the “cart” feature would reset to an empty cart each time a visitor clicks on a different link.

Except for cookies such as these—which are often deemed “necessary”—a visitor’s decision to opt-out of the use of cookies used primarily for personalization or tracking, will likely not have much of an impact on a website host’s ability to run their website, but monitoring website activity will become more difficult. The impairment of the monitoring function also includes the fact that web beacons (discussed below) would be rendered unusable. Effects on the monitoring function include tracking website traffic, the effectiveness of ads, and other such analytics. That said, it is also important to note that the refusal of the use of cookies allows for better mitigation of the risk of privacy breach for visitors because their personal data is not being collected and stored.

What are web beacons or clear gifs?

Web beacons, which are also known as clear GIFs, record, or capture, a visitor’s activity on a particular webpage. They are typically not activated until a web page is loaded. Web beacons are often used in conjunction with website cookies, but they do not collect any personal information on their own. Rather, they are transparent, invisible graphic images that are on websites, which act as a tag or identifier that then interacts with website cookies to allow dealers to monitor a visitor’s activities on a website. Although you cannot disable web beacons, disabling cookies will keep web beacons from tracking your activity.

How can a website host best use web beacons?

Web beacons are best used for tracking advertising, downloads, and the general monitoring of the website’s analytics. Web beacons can be used by website hosts to know how many users visit a particular website, or web page of that site. Essentially, they allow website hosts to know where visitors are spending their time. Web beacons can also be used in conjunction with ads so that advertisers can track how often a particular advertisement is viewed, as well as whether individuals are interacting or responding to ads (e.g., by clicking on it).

Web beacons can also be used by website hosts who send purely promotional emails. If you embed a web beacon in the email graphics of your promotional emails, those beacons will not activate unless the email is opened, allowing website hosts to track if users are opening their promotional emails.

Should the visitor to your website be warned that web beacons are in use?

In 2011, the Privacy Commissioner of Canada took a strong stance against the use of web beacons generally. In releasing a set of guidelines, they stated that

If an individual can’t say no to the technology being used for tracking or targeting, then the industry shouldn’t use that technology for behavioural advertising purposes. So, in the current online behavioural advertising environment, that means no use of web bugs or web beacons, no super cookies, no pixel hacks, no device fingerprinting and no to any new covert tracking technique of which the user is unaware and has no reasonable way to decline.

This explicit prohibition against web beacons did not actually make it into the guidelines. The guidelines only state the following:

[I]f an individual is not able to decline the tracking and targeting using an opt-out mechanism because there is no viable possibility for them to exert control over the technology used, or if doing so renders a service unusable, then organizations should not be employing that type of technology for online behavioural advertising purposes.

Given that on their own, web beacons have no ability to collect information or track visitors, this would not be an issue. However, when combined with cookies, these functions are available for website hosts to use. Thus, the “warning” of the use of web beacons should accompany any consent sought for the use of cookies given that cookies are what allow web beacons to be used for tracking and targeting purposes.

What options should the visitor to your website have – if any?

As mentioned, with respect to tracking and targeting through data collection, the Office of the Privacy Commissioner of Canada requires that visitors are given the option to decline or opt out of the collection and use of their personal information on websites. Thus, while “cookie banners” are not explicitly required in Canada, website hosts will need to use one if they seek to make use of web beacons or clear GIFs. Remember, that in the case of web beacons, the only way for visitors to “opt out” of the tracking and targeting function is if they opt out or decline the use of website cookies.

What if the visitor refuses to use web beacons or clear gifs? What are the consequences for the visitor and for the host of the website?

Visitors cannot refuse the use of web beacons. Given that web beacons or clear GIFs are just transparent, invisible images on a web page, they cannot just be removed. To disable tracking/targeting functions that are of concern with respect to web beacons, a visitor would have to opt out of or decline the use of website cookies. Thus, any consequences for the visitor or website hosts would be the same as the effects of refusing or opting out of the use of website cookies.

Remember

Given the global nature of the internet, even where website hosts may not anticipate visitors from other jurisdictions, they may still attract foreign visitors. This means that they may still be caught under a foreign jurisdiction such as the European Union, which has strict requirements regarding the collection and use of the personal information of Europeans. Overall, the best approach is to use cookie banners to obtain consent from visitors and to implement a comprehensive “cookie policy” where dealers set out information about the data they are collecting, the purposes for doing so, any third parties involved, and any such information that is pertinent for visitors to know in relation to their privacy and personal information.

Making this information readily available for visitors and giving them the option to opt-out of the collection and use of their personal information will allow website hosts to cover all their bases and ensure compliance with all the various—and complex—privacy requirements.

At Sotos LLP, we have acted for thousands of businesses and trademark owners in every aspect of privacy and intellectual property issues, including, drafting terms of use and privacy terms for their websites, and protecting their intellectual property for more than 40 years.

Please contact John Yiokaris at 416.977.3998 or jyiokaris@sotos.ca to discuss your intellectual property, trademark, and privacy issues.

The post What do I need to know about using “Cookies” on my dealership website? appeared first on Sotos LLP.

Registered trademarks are different from common law trademarks where you have rights to trademarks if you can show you have established use and recognition. The point of registration is that it gives you rights and remedies that are above those available at common law.

With extra rights, come extra restrictions. The purpose of imposing additional requirements on registrable trademarks is to ensure that all persons in the marketplace can use the names and descriptions of their goods and services without a claim being made that they are proprietary. For example, we as a society don’t want someone to be able to trademark the word apple in the context of the actual fruit because that would take that word away from the general public’s use and only allow one person or corporation to use it. To guard against this, the Registrar of Trademarks (the “Registrar”) has to balance what they allow to be taken away from the public and what they will allow to be trademarked.

An examiner’s job when faced with an application for registration is to, among other things, look at the application and see if the trademark on its face or through acquisition has distinctiveness so as to be registrable.

Two Types of Distinctiveness – Acquired and Inherent

Trademarks must be distinctive and not merely descriptive in order to be registrable.

The Trademarks Act (the “Act”)[1] provides for two different situations in which a trademark can be said to possess distinctiveness. An applicant can claim that a mark has acquired distinctiveness or that it is inherently distinctive.

The difference between acquired and inherent distinctiveness is that one is developed through use and the other is intrinsic to the mark such as an invented word.[2] To establish acquired distinctiveness, an applicant must show that the trademark has become known to consumers as originating from one particular source.[3] In contrast, inherent distinctiveness refers to a mark’s originality such that the mark can only refer to one thing.[4] To establish inherent distinctiveness, the trademark must not be associated with any sources related to the good or service the applicant is applying to have their trademark registered with.

For example, before Apple computers associated the word “Apple” with computer products and services, consumers did not have a prior association of the word with computers. The trademark was inherently distinctive. Now, however, the word “Apple” has developed distinctiveness by being associated in the minds of consumers with computer products and services. Now the trademark has acquired distinctiveness.

Determining whether a trademark has distinctiveness is a determination of fact.[5] Merely descriptive words will not have distinctiveness. Acquired distinctiveness is established with evidence that consumers have come to associate the trademark with the relevant goods or services. In contrast, the closer a trademark gets to being completely random, the more likely it is to have inherent distinctiveness.

New Legislation on Inherent Distinctiveness

Distinctiveness has always been a prerequisite to registration. However, inherent distinctiveness was not expressly set out in the Act until the major reform of June 17, 2019.

Since the 2019 reform, the Registrar may now object to a mark on the basis that it was not inherently distinctive at the time of application and request evidence to the contrary. Section 32(1)(b) of the Act provides:

32 (1) An applicant shall furnish the Registrar with any evidence that the Registrar may require establishing that the trademark is distinctive at the filing date of the application for its registration, determined without taking into account subsection 34(1), if any of the following apply:

[…]

(b) the Registrar’s preliminary view is that the trademark is not inherently distinctive

The phrase “not inherently distinctive” refers to a trademark having “no inherent distinctiveness” (not registrable) as opposed to a trademark possessing a “low degree of inherent distinctiveness” (registrable).

This process outlined in section 32(1)(b) is new, but the test is the same. All the old jurisprudence is just as relevant today as it was before the change. A court would read section 32(1)(b) harmoniously with the rest of the Act; it does not differ from previous iterations of the requirement for distinctiveness except that the examiner can take the initiative

How to Determine Distinctiveness?

The distinctiveness of a trademark is always considered in the context of the goods and services associated with the trademark and considered from the perspective of the eyes of the public. To use the same example, Apple is a perfectly good trademark in tech, but would not be in the context of a company offering fruits as goods.

In light of the amendments, the Canadian Intellectual Property Office has provided examples of trademarks that are presumed not to be inherently distinctive:[6]

• Trademarks that consist primarily of geographic locations;
• Trademarks that depict generic designs common to the trade, unless the designs are depicted in a special or creative manner;
• Trademarks that are the name of a colour, when in relation to products or goods that are typically or ordinarily that colour;
• Trademarks that consist of a single letter or number;
• Trademarks in English or French which, pursuant to Section 12(1)(b) of the Act, are clearly descriptive or deceptively misdescriptive;
• Trademarks that are primarily the surname of an individual person;
• Trademarks that consist of laudatory words or phrases;
• Trademarks that provide general information about a good or service; and
• Trademarks that are primarily a numerical phone number.

A trademark can be many things; generic, descriptive, suggestive, arbitrary, or fanciful. To determine whether a trademark of any type is distinctive, a prospective applicant should ask themselves:

• What is the trademark? The examiner will consider the trademark as a whole, not as individual parts, but the mark may or may not have a dominant feature.[7]
• What are the goods or services? The examiner will look at the trademark in the context of the goods or services for which you are attempting to register the trademark. This includes all the goods or services which may be encompassed by the application not just those in respect of which the applicant is using or intends to use.[8] For example, if you are applying for a trademark for a retirement home, you must look at the context of all retirement homes; high end, low end, anywhere in the country, etc.
• Who is the public? The examiner will look at the trademark from the perspective of the public for which the goods or services are intended and not the general public.[9] The mark will also be considered from a perspective of its first impression on a casual consumer somewhat in a hurry.[10] This approach largely mirrors the first impression approach to “clearly descriptive” and “deceptively misdescriptive” trademarks caught under Section 12(1)(b) of the Act.[11]

The Burden of Proof

The burden of proof is on the applicant to demonstrate on the evidence that the mark has acquired distinctiveness or has inherent distinctiveness so as to be registrable.[12] The amount of evidence required to meet this burden depends on how obviously distinctive the mark is. If a trademark is not very clearly distinctive, you will have to put in a lot of evidence to show that the trademark is distinctive.

Although section 12 of the Act lists when a trademark would not be registrable, contravention of section 12 is not necessary to find that a trademark lack inherent distinctiveness. A trademark that is believed to be not merely descriptive does not imply that it will therefore be distinctive.^[13] The trademark either is or is not distinctive. This is a binary determination. There is sometimes the misconception that applicants only have to show that their mark is ‘distinctive enough’ to be successful. However, the trademark either is or is not distinctive and it is the applicant’s responsibility to provide enough evidence to show that the mark is distinctive. It is not a matter of how much distinctiveness there is or reaching a certain threshold.

Types of Evidence

Applicants can file factual and opinion evidence.

• Factual Evidence – Is the strongest form of evidence available. It is important to say more than just the amount of product sold or the amount of money spent on advertising. The court must be shown that as a result of this extensive use and advertising that the mark has become distinctive in the minds of the public.
• Opinion Evidence – Will be considered very cautiously by an examiner, but can be helpful during an examiner’s review.
• Expert Evidence – Will only sometimes be helpful. The criteria for receiving expert evidence is outlined in Masterpiece Inc. v. Alavida Lifestyles Inc.[14] To be accepted, the evidence will have to meet the below test:

• Is the evidence relevant;
• Is the evidence necessary;
• Is there any reason the evidence should be excluded; and
• Is the expert properly qualified?

• • For example, evidence from a professional logo maker on their position on whether a trademark is distinctive is not necessarily useful. The expert is not in a better position to weigh the distinctiveness of a trademark because the test is from the perspective of a person who is likely to use the product. The judge may be more likely to use the product than the expert and certainly will look at the trademark more like the average consumer than a trademark expert.
• Survey Evidence – May be valid in some cases, but its reliability and validity are open to question.[15] It is very difficult to qualify survey evidence as reliable as there is no one on the other side saying whether the survey is accurate.

Appealing the Examiner’s Decision

The examiner’s decision as to whether distinctiveness has been demonstrated is final subject to appeal to the Federal Court (section 56 (1) of the Act). This is different from the US and UK systems where you can appeal to other boards within the trademark office. In Canada, to appeal the decision of an examiner of the Registrar, you have to go directly to the courts.

On appeal to the Federal Court, it is possible to submit new evidence if the court determines that evidence is material. This is an unusual and almost unique aspect of the Canadian legal system as new evidence is almost never allowed to come in after the decision is made at the administrative level. However, to be considered material and be allowed to come in at the appeal level, that evidence must fill a gap or be overwhelmingly different from what was seen before.

Additional Resources for Applicants – the Trademark Examination Manual (“TEM”)

The TEM is a reference guide for trademark applicants and agents on how examiners will interpret and apply the legislation. It is meant to provide greater consistency and predictability to applicants submitting applications for trademarks.

The manual is “soft law” which means it falls below the Act and regulations in authority but should still be used by the public so they know what the trademark office’s position is on a matter.

The manual is revised from time to time in consultation with stakeholders. It is created with the intent of being even-handed, well thought out, and taking into consideration any new jurisprudence or legislation.

Registering your Trademark

Registration is critical because it gives the registered owner cross-Canada rights to exclusive use of the mark even if the owner’s business is not yet represented across the country. Owners of registered marks are able to ensure the full protection of their intellectual property afforded to them under law. Common-law marks, on the other hand, allow the trademark owner to stop only those competitors who “pass off” their services or goods for those of the owner in the particular market area where the owner already operates and not elsewhere. This can lead to you losing your rights to your intellectual property and be an impenetrable barrier to rapid growth and expansion of a successful business.

At Sotos LLP, we have acted for hundreds of trademark owners in every aspect of protecting their intellectual property for more than 40 years. We have extensive knowledge of intellectual property issues, and regularly act in the procurement and licensing of trademarks, as well as in defending our clients’ trademarks rights and opposing trademark applications on our clients’ behalf.

Please contact John Yiokaris at  416.977.3998 or jyiokaris@sotos.ca to discuss your intellectual property and trademark issues.

[1] RSC, 1985, c T-13.

[2] Astrazeneca AB v. Novopharm Ltd., 2003 FCA 57 (CanLII).

[3] Tommy Hilfiger Licensing Inc. v. Produits de Qualité I.M.D. Inc., 2005 FC 10 (CanLII) at para 53.

[4] ITV Technologies Inc. v. WIC Television Ltd., 2003 FC 1056 (CanLII), aff’d 2005 FCA 96 (CanLII) at paras 119–21.

[5] Bodum USA Inc. v. Meyer Housewares Canada Inc., 2012 FC 1450 (CanLII) at para 150, aff’d  2013 FCA 240.

[6] Canadian Intellectual Property Office, Trademarks Examination Manual (2019), s 4.9.5.

[7] Battle Pharmaceuticals v. The British Drug Houses Ltd., 1945 CanLII 49 (SCC), [1946] SCR 50 (CanLII); Ultravite Laboratories Ltd. v. Whitehall Laboratories Ltd., 1965 CanLII 43 (SCC), [1965] SCR 734 (CanLII)

[8] Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27 (CanLII), [2011] 2 SCR 387 (CanLII) at para 52-53.

[9] MC Imports Inc. v. AFOD Ltd., 2016 FCA 60 (CanLII), [2017] 1 FCR 413 (CanLII) at para 45-52.

[10] Battle Pharmaceuticals v. The British Drug Houses Ltd., 1945 CanLII 49 (SCC), [1946] SCR 50 (CanLII)

[11] See Deputy Attorney-General of Canada v. Jantzen of Canada Ltd. (1964), 46 CPR 66 at 71 (Can. Ex. Ct.).

[12] Molson Breweries v. John Labatt Ltd., 2000 CanLII 17105 (FCA), [2000] 3 FC 145 (CanLII)

[13] Canadian Council of Professional Engineers v. Apa – The Engineered Wood Assn., [2000] FCJ No 1027 (QL), 2000 CanLII 15543 (FC) at para 49.

[14] Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27 (CanLII), [2011] 2 SCR 387 (CanLII)

[15] Masterpiece Inc. v. Alavida Lifestyles Inc., 2011 SCC 27 (CanLII), [2011] 2 SCR 387 (CanLII)

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