NOTE: Substantial changes to Canada’s Trademarks Act took effect on June 17, 2019 Learn more at New Canadian Trademarks Regime Effective June 17, 2019.

Soon, there’ll be big changes to Canada’s Trademarks Act – the law that protects, essentially, a brand – fundamentally altering Canada’s trade-mark ownership and protection regime. Most Canadian businesses, from start-ups to large corporations, identify their business, products or services with a unique trademark. Some companies own many; for some, it’s their only asset. They can be extremely valuable (think, for example, of McDonald’s golden arches), so protecting them is important – and is about to become harder and costlier.

Here’s the good, the bad – and the ugly – of the key changes to Canada’s trademarks law.

THE BIG PICTURE

In June 2014, the Federal Government passed Bill C-31 (the omnibus budget implementation bill), including changes to Canada’s Trademarks Act that will fundamentally shift Canada’s trade-marks regime.

The biggest change? Elimination of the requirement for use of the trademark before registering it. Trademark rights come from using the mark. Now, to get a trade-mark registration in Canada, an owner must use that mark in association with the goods and services on her registration documents, and the resulting registration indicates the owner’s rights in that mark. The changes will eliminate this requirement of use to get a registration – and the resulting registration will no longer indicate the owner’s rights in the mark.

This will have a significant impact on Canadian businesses in practice: businesses will now have to determine the rights in those marks themselves when deciding whether to register or to protect their own trademarks. Canadian business will bear these additional costs – and that could have a very ugly impact on their development of new brands in Canada and on the Canadian economy.

The changes will only take effect when the government finalizes the related regulations, likely in late 2015 or early 2016. But if you plan to renew or apply for trade-mark registrations, get a good handle on the changes and decide whether to act now to renew or apply before they take effect, or to wait. For many, the decision will be to act now.

THE GOOD

At first blush, many of the changes appear (and some are) positive:

Simplified Application Process. Now, an applicant for a trademark registration must identify the date on which she says she first used the trademark or intends to do so. This ensures the Canadian Intellectual Property Office (CIPO, the agency that regulates trade-marks) only grants a trademark registration to applicants who have used it. The changes will simplify the application process: Canadian-based applicants won’t have to identify a date of first use or file a declaration of use, and applicants from outside of Canada won’t have to show evidence of use or registration – and if it isn’t opposed, a trademark will be registered after an application is filed.

International Consistency. Some changes bring Canadian trademark laws into line with international ones and will help Canadian-based companies protect their brands internationally, increasingly important given the growing number of international trade agreements Canada is inking:

• Description. Now, applicants describe the goods and services in commercial terms. They will be required to also group them according to the “Nice Classification” scheme. This scheme is widely accepted and used internationally, including in the US and the EU, and adopting it is a condition for integrating Canada’s trademark laws with international ones.
• Registration Term. The registration term will be reduced from 15 to 10 years, consistent with most other countries, including the U.S.

International Registration Scheme. This consistency was necessary for Canada to adopt the Madrid Protocol, an international registration scheme accessed by registering a trademark in the owner’s home country. Canadian-based trademark owners wishing to register their marks outside of Canada will see substantial cost savings because they’ll no longer have to incorporate outside of Canada or incur additional filing fees to register marks in other countries. Non-Canadian based owners will also benefit, since now they must hire Canadian trade-mark agents to file applications in Canada.

Divisional Applications. Now, registration is “all or nothing”: if a trademark application has a problem part (e.g. an opposed part), the applicant must excise it from the application to get it registered – and lose the original filing date for those parts. “Divisional Applications” will allow an applicant to “divide” an opposed part of an application from the remainder – without sacrificing the original filing date.

“Non-traditional” Trademarks. The definition of “trademark” will expand so in addition to registering “traditional” trade-marks (like words, a personal name, design, letter(s), numbers, colours, figurative elements and shapes), applicants will be able to register “non-traditional” trademarks like a hologram, a moving image and a mode of packaging goods, and even a sound, scent, taste, texture and the positioning of a sign.

THE BAD

Closer examination of the “good” changes reveals some “bad” consequences:

Trade-mark Trolling.  Remember dot.com, when opportunists registered domain names they never intended to use, then auctioned them off? Dropping the requirement to use the trademark to get it registered could lead to the same result vis-a-vis trademark registrations (aka “Trademark Trolling”). This will mean more trade-mark registrations, many by “trademark trolls”, cluttering the register with marks that the registrants have no intention of using – but of exploiting.

Greater Complexity. CIPO maintains a publicly searchable database of registered trade-marks. Now, someone can search that database to determine if a trademark’s already registered and easily decide to file an application, or if there is a registration then to challenge (or “oppose”) it or just move on – all based on the use date evident on the registration. The changes will make the trademark selection and investigation processes more onerous and expensive: use isn’t required for registration increasing the registration volume. Worse still, the use date won’t be on any registrations, so the business will have to investigate whether and when the registrant actually used the trademark.

More Oppositions & Lawsuits. Technically, someone can oppose a registered trademark on the basis the registrant didn’t use it at all, or only used it after the opposer did, so the opposer is the actual owner. But practically, an opposing party will likely struggle to prove this because it won’t have access to the same evidence as the registrant – or will have to hire an investigator (if she can afford the often significant costs) to get it. There will also be a greater need for legal opinions assessing the risks and benefits of opposing another registration. And even if an opposition succeeds, in some cases the original registrant will be able to just file a new registration application. The same issues apply to a business defending a challenge to its registered trademark.

Increased Uncertainty & Fees. Similarly, some create uncertainty. For starters, the outcome of all lawsuits – including “oppositions” – is uncertain. Making matters worse are rumblings about a court challenge to the changes and concern that this abrupt change from a use-based registration system will disrupt the Canada-U.S. economic relationship. More specifically, registration of non-traditional trade-marks could be good, but it seems daunting for a court to determine, for example, whether one texture causes confusion with another one. CIPO says the reduced registration term will affect trade-mark applications submitted before the law comes into effect but only registered after – but it’s not yet clear how. Some changes could also mean higher fees. For example, countries following the Nice Classification Scheme generally use a fee-per-class filing system, leading to speculation that Canadian filing fees will increase. The shorter registration term means more frequent renewals – and renewal fees – for trademark owners.

THE UGLY

More complexity, lawsuits and uncertainty means more time, risk – and ultimately more cost to register or to protect a trademark. Canadian business will bear these additional costs – and that could have a very ugly impact on their development of new brands in Canada and on the Canadian economy. The bottom line: if you plan to renew or apply for trademark registrations, get a good handle on these changes and decide whether to act now to renew or apply before they take effect, or to wait; for many, the decision will be to act now.

*Brendan Hughes, Articled Clerk, assisted with this Legal Update

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Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Intellectual Property Team to discuss this topic or any other legal issue.

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