The new Canadian trademarks regime presents a host of opportunities and challenges

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The initial success of every foodservice-and-hospitality business begins with product offerings and services that resonate with its target audience. Eventually, its growth and rates of expansion become very dependent on its marketing and branding strategies. For a franchisor or any business thinking about franchising, having a protected name and protected logo(s) is a fundamental requirement. The licensing of the name and logo(s) is a critical part of the franchise offering.

Fundamental to these strategies is the selection of a name and identifying logo(s) that can be protected. Once selected, from an intellectual property perspective, a business’ name and logo(s) must be protected from those who may intentionally or unintentionally usurp the value of these critical assets for themselves.

In 2019, Canada overhauled its system for the registration of trademarks and as a result, the Canadian Trademarks Office has been flooded with applications. Combined with the impact of the pandemic affecting the ability of the office to process these applications and the influx of cannabis-related applications resulting from the legalization of cannabis, the time it’s taking to get trademark approval has more than tripled, with waits of three years or more to be expected.

The changes to Canada’s trademark regime provided a tremendous opportunity for people to register trademarks that they may have no intention of ever using for themselves. Prior to the recent changes, an applicant would not be able to have a trademark registered unless it was using its mark. Now, the only basis on which they will be denied their applications is if there is already a user of the trademark in Canada or if the trademark being applied for does not meet the qualifications for a trademark to be registered as specified by the legislation.

As a result, Canadian businesses engaged in foodservice and hospitality, or thinking of entering the industry, should ensure they have undertaken, or should undertake, the following measures:

Review their existing registered trademarks. It’s critical that the goods and services encompassed by their original applications were comprehensive and reflect today’s actual use and any contemplated future use. Additional coverage using the “Nice” [named after the city in France] system of classification introduced in 2019 is essential to cover any missing existing uses and even possible prospective uses. The Nice classification was intended to bring the Canadian system in line with the vast majority of the world and allows registrations in Canada to have more global reach. In respect of existing uses that are not captured by the existing registered trademark and prospective uses, a search should be undertaken to determine if any business has been using or has applied for registration for the use of the trademark in respect of such use.

Conduct regular monitoring of the trademarks’ database to uncover any possible infringing applications (or registrations). These should be addressed immediately. The new laws permit a possible form of early intervention rather than the previous requirement to await the advertisement of an application in order to oppose it (which now takes place some 18 months or so after the initial trademark application has been filed). This applies to a business’ registered and unregistered trademarks. Apart from intervening through the Trademarks Office, early communications to cause the would-be infringer to cease and desist from its efforts need to be considered and likely undertaken without delay.

In addition, it’s critical to understand the significance and exposure of applying for a new trademark where use has not yet occurred. By applying to register a trademark which is not yet in use, a business gains the advantage that, once registered, the protection as a registered trademark dates back to the date of application. On the downside, by applying for the registration of a trademark that is not yet in use, a business will be providing notice to the world of its intended trademark and the uses to which it intends for it to be put. In some instances, an application to register may also provide competitors with an early indication of any new product or service that the applicant may be planning to offer.

Trolling for Trademarks
People who troll the trademarks database can find applications for trademarks and research for themselves whether they are in use or not. Aggressive trolls might then seek to use the very trademark that has been applied for before it is used. What are the rights of the person who has applied for the trademark in that situation?

In a recent court decision, our firm secured an injunction to prevent a third party from using a trademark which a would-be franchisor had applied to use and which it had incorporated into its franchise-system design in which it was deeply investing to launch. The injunction had been opposed on the basis that the opponent was already “first to use,” allegedly both prior to the application to register being made and subsequently (but of course prior to the application being granted). The opponent asserted that it had the right to use the trademark given that the application had not yet been granted even if its claim of prior use was not accepted.

If we ignore the factual findings of the court, which did not accept that the opponent had in fact used the proposed trademark prior to the date of application, the court agreed with the position of our client that the party applying where there had not been demonstrated use prior to the date of application, was entitled to protection for the trademark it had applied for even prior to the application being granted. As a result, and as the client was able to prove that it was suffering irreparable harm, the court enjoined the opponent’s use of the proposed trademark requiring the opponent to take down its signs, change its menus and remove references to the trademark from its online presence and all social-media accounts pending the trial of the action. Third-party delivery apps have respected the court order. The opponent is seeking the court’s permission to appeal this result. In the meantime, the message remains that its crucial that brand owners look to protect their existing brands and those which it may potentially look to develop. Legal advice should be sought to strategize the best means of protecting unregistered trademarks for which trademark applications will be filed particularly where those marks are not yet in use. For those currently using marks which have not been registered, they should seek to file trademark applications to protect their rights in those marks and obtain registration status.

Challenges & Opportunities
The new Canadian trademarks regime presents a host of opportunities and challenges. Given the importance of branding and marketing to any business looking to expand, particularly by way of franchising, it is crucial that such business conduct a health check on the security of its intellectual property assets. It should further ensure that it has an effective program in place for the ongoing protection of its registered and unregistered existing trademarks and prospective marks.

The concerns set out in this article apply equally to foreign franchisors and other businesses which may be contemplating expanding into Canada. Such businesses should be applying to have their marks registered in Canada as soon as possible. Prior to the recent changes to Canada’s trademark regime, registration would not be granted unless the foreign applicant had started using the mark. But that is no longer the case. We’ve experienced instances where a foreign franchisor or other business which has finally decided to enter the Canadian market is surprised to discover that someone else has already registered their mark(s) in association with the same goods and services.

Potential franchisees will be reluctant to invest in any franchise system that does not have registered trademarks or which has not applied to register its marks with a strong likelihood that such applications will be approved by the Trademarks Office. Potential investors will require business to demonstrate that it has good title to those trademarks.

A business that believes that its registered or unregistered trademarks have been infringed have a variety of legal recourses available to them depending on the nature of the marks, whether they are registered or unregistered and the nature and degree of infringement. Apart from such legal remedies, experienced legal counsel may be able to recommend and seek interim relief to those affected by trolls and other unauthorized users of a business’ intellectual property. Given the changes to Canada’s trademark regime as outlined above, we have experienced a significant increase in the amount of work directed to the prevention of trolling and unauthorized uses of registered and unregistered trademarks.

By Allan D.J. Dick. Sotos LLP assists many franchisors in the design of their systems. Many of the aforementioned leasing considerations are also applicable to single-unit or multiple-unit non-franchised restaurant operations. If you have any questions about your leases or land control issues, please contact the author at adjdick@sotos.ca or 416-805-8989.

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