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TRADEMARKS - Expungement - Non-use

Tuesday, April 09, 2019 @ 10:14 AM  

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Appeal by Cosmetic Warriors from a Federal Court decision allowing an appeal from a decision of a hearing officer of the Trade-marks Opposition Board maintaining the appellant’s registration of the trademark “LUSH” for use in association with T-shirts due to non-use. The hearing officer found that the trademark had been used in the “normal course of trade” within the meaning of s. 4(1) of the Act. The appellant, a cosmetics company, operated through licensees worldwide, including Lush Canada. T-shirts and tank tops bearing the LUSH trademark were sold by Lush Canada in limited quantities to LUSH store employees in both Canada and the U.S. to wear as part of their uniform, and sometimes to give as gifts to family and friends. The appellant also created limited edition T-shirts bearing the LUSH mark to promote its public awareness and lobbying campaigns, which addressed social and environmental issues of importance to the cosmetics industry. The Federal Court judge found that the hearing officer had unreasonably failed to consider the appellant’s evidence indicating that the T-shirts and tank tops were identified as “swag” by their supplier and were sold by Lush Canada to employees at prices approximating their acquisition cost. The judge found the hearing officer’s conclusion that the sales were in the normal course of trade to be unreasonable due to the absence of evidence of profit, the limited extent of the sales and their promotional nature, and the fact that the appellant was not normally in the business of selling clothing.

HELD: Appeal allowed. The hearing officer correctly determined that s. 4(1) did not require that a transfer of trademarked goods be for actual profit to constitute a transfer in the normal course of trade. To require the trademark owner to establish that particular sales did or would necessarily generate profit would put at risk the summary nature of s. 45 proceedings. A strict profit requirement could render s. 4(1) insufficiently flexible to respond to the many different commercial contexts in which it might need to be applied. The Federal Court judge failed to correctly apply the reasonableness standard by improperly substituting his own findings of fact and mixed fact and law for those of the hearing officer in concluding that the appellant’s clothing sales were for promoting its cosmetics business, and not in the normal course of trade. The hearing officer proceeded, correctly, on the footing that actual profit was not required. He found that the T-shirts were not merely promotional and that their sales appeared to form a pattern of genuine commercial transactions in the normal course of trade. These conclusions were rationally open to the hearing officer on the record before him.

Riches, McKenzie & Herbert LLP v. Cosmetic Warriors Ltd., [2019] F.C.J. No. 286, Federal Court of Appeal, W.W. Webb, D.J. Rennie and J.B. Laskin JJ.A., March 11, 2019. Digest No. TLD-April82019005