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Brand clearance challenges in ‘use-less’ regime

Monday, June 17, 2019 @ 1:21 PM | By Philip Lapin and Erica Gotfrit

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Philip Lapin
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Erica Gotfrit
After years of anticipation, on June 17 Canada rolled out significant changes to its trademark law. Among the important changes is the elimination of “use” as a pre-requisite to trademark registration. While this change will simplify trademark applications, it also opens the door to an increase in “clutter” of the Trademarks Register, contentious proceedings and trademark squatters. Accordingly, suitable trademark searching, clearance and monitoring will become increasingly important — and challenging — under the new trademark regime.

Benefits of “use-less” regime 

Prior to June 17, 2019 in Canada, an applicant filing a trademark application must specify whether or not a mark is currently being used in Canada, and if so, since when. However, as of June 17, 2019, such information will no longer be necessary upon filing.

A “use-less” regime presents an opportunity for brand owners to develop new branding strategies by filing applications for goods and/or services that might not currently be for sale but which might be for sale in the future. However, filing applications and obtaining registrations for unused lists of goods and/or services is not without its pitfalls, as discussed below.
Rise of contentious proceedings

There will certainly be an increase, likely a dramatic increase, in the number of trademark applications for goods and/or services which are not for sale and where future sales are unlikely. This new reality will have the unfortunate side effect of increasing contentious trademark proceedings as a result of “cluttering” the Trademarks Register. This clutter, will, in turn, increase pressure on rights holders to put watch services in place.

Currently, in Canada, fewer than five per cent of trademark applications are opposed. This percentage is likely to increase for two reasons. First, because use will no longer be a requirement to obtain a trademark registration, more applicants are likely to file more trademark applications. Second, as part of Canada’s new law, Canada will join the Madrid Protocol, which makes it easier and cheaper for foreigners to file trademark applications in Canada.

As the number of applications rises, we are likely see the number of oppositions increase, perhaps to a similar level observed in Europe (where apparently 15 per cent of applications are opposed). Likewise, we are also likely to see an increase in the number of s. 45 (summary cancellation) proceedings, to clear deadwood from the Register.

The elimination of use as a requirement to obtain Canadian trademark registrations will also create challenges for trademark clearance opinions. If a third party is using an arguably confusing mark and is considering opposing an application or expunging a registration, the absence of “use” information in trademark applications and registrations will increase the challenge for third parties to determine who has prior rights.

Given the temptation of applicants to file applications with long lists of unused goods and/or services under the new regime, practitioners will have increased challenges when reviewing trademark search results — since it will often no longer be clear as to whom has prior rights. Together, these challenges will often result in increased costs and greater uncertainty.

Brand owners beware 

Over the past two years, brand owners have been encouraged to take advantage of the cost savings associated with this filing “sweet spot,” prior to the law change — with relatively cheap application filing fees (with no per-class fees) and no use requirement for registrations issued as of June 17, 2019. Unfortunately, trolls have also begun to capitalize upon these impending changes, further increasing the “clutter” in the trademark database.

Trolling activity usually takes on one of two forms. The first type of troll is the more malevolent, where a foreign brand owner has a reputation abroad, but not in Canada. In such cases, trolls can obtain trademark registrations in Canada, with the goal of forcing (extorting) the legitimate brand owner to negotiate with the troll when they enter the Canadian market. The second type of troll is equally opportunistic. This second type of troll or squatter files applications for common dictionary words in association with some or all of the 45 classes of goods and services, with no intention of using the mark in association with any of those goods or services. This second type of troll/squatter then extorts money from legitimate brand owners who subsequently seek to use or register arguably confusing marks.

Seemingly baseless applications have been dramatically on the rise since 2017, with hundreds of 45-class applications currently pending. This does not include the likely hundreds, if not thousands, of additional new applications that were recently filed by trolls listing fewer than 45 classes, which are more difficult to identify. This activity is troubling and is already creating problems for brand owners looking to launch or expand into the Canadian market. There have already been countless instances of these troll applications being cited against legitimate applications of brand owners. Unfortunately, overcoming these citations can be difficult. The key is to stay ahead of the trolls.

Where a foreign brand has a reputation abroad but not in Canada, and if the owner is considering expanding into Canada, the owner should consider promptly filing a trademark application in Canada. Similarly, brand owners should review their Canadian trademark portfolios to ensure that all essential trademarks are protected and that all relevant, or possibly relevant, goods and services are covered.

Philip Lapin chairs the Trademark Operations Group at Smart & Biggar. With more than 20 years’ experience, he has handled the clearance, prosecution and registration of thousands of trademarks and has particular expertise in trademark opposition and cancellation. Erica Gotfrit is an associate with Smart & Biggar. Based in Ottawa, she regularly performs trademark clearance searches and provides availability opinions, prepares and files trademark applications and prosecutes trademark applications before the Canadian Intellectual Property Office.

Photo credit / MatiasEnElMundo ISTOCKPHOTO.COM 

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