Law Times

Law Times • sepTember 22, 2014 Page 9 www.lawtimesnews.com Parsing the finer points of Canada's trademark overhaul Divisional applications among lawyers' concerns with new system By arshy maNN Law Times anada's trademarks regime is undergoing a total overhaul, and many lawyers aren't happy about it. Bill C-31, which received roy- al assent in June, has upended Canada's trademarks regime by eliminating any requirement that a trademark be in use before reg- istering it. "It's the biggest change in more than 60 years," says Scott MacK- endrick, a partner at Bereskin & Parr LLP. The amendments to the Trademarks Act were part of an omnibus budget bill and have drawn the ire of Canada's intellec- tual property bar. "They were unanimous in their criticism of the bill and spe- cifically with respect to the sec- tions that address the removal of use as a requirement for registra- tion," says MacKendrick. "And they were consistent in their request that those sections be removed from the act with the suggestion that there should be further consultation of those sections." According to Cynthia Row- den, the head of the trademarks practice group at Bereskin & Parr, e-mails expressing dismay about the bill began circulating minutes after the government introduced it in the House of Commons. "By early the following week, we started working on letters to be sent to the government," she says. "One of the letters had more than 200 signatures to it." Despite a variety of other letters and briefs from lawyers, chambers of commerce, indus- try groups, and major corpo- rations, the government went ahead with the bill. "I can tell you that between the introduction of the bill in Parlia- ment in March and the passage of the bill and giving of royal assent, not one comma was changed," says Rowden. The use requirement has been a key aspect of the trademarks regime in Canada and actually precedes Confederation. MacK- endrick says a number of civil law jurisdictions don't require use as a prerequisite for registration. "And what comes from that is that typically in those jurisdic- tions, unless there's some type of other break or fetter put on the system, those trademark registers have many more trademark reg- istrations on them and become crowded and also have marks which are unused, described as deadwood marks, present on them," he says. "If you require use for registra- tion, then the trademark register ref lects actual rights," says Row- den. "If you eliminate use as reg- istration requirement, then the trademarks register ref lects, in my humble opinion, hopes and dreams only." The government justified its decision by arguing that eliminat- ing the use requirement would mean fewer administrative bur- dens on businesses. But trade- mark lawyers expect the changes will actually increase costs. "The government justified all of this legislation in the name of streamlining trademark pro- cedures, reducing costs and ad- ministrative burdens, although I think it's becoming widely agreed by trademark practitioners that it's going to have in fact the oppo- site effect," says John Simpson, a trademark lawyer with Shift Law. "It's going to significantly increase administrative burdens and costs, particularly for small- and medi- um-sized businesses." Simpson says businesses will likely have a much harder time finding available trademarks be- cause the register will be full of speculative marks. "You can compare it a little bit to domain names and you know how hard it can be to find an avail- able domain name," he says. Once the new regime comes into force, lawyers suspect a num- ber of companies are likely to im- mediately register trademarks for wares and services they aren't pro- viding but anticipate they might offer in the future. "You can imagine marketers at packaged-goods companies thinking of a whole number of names for potential products and services and thinking, if in doubt, let's just get a registration for it," says Simpson. "I see that as be- ing a real burden on small- and medium-sized businesses that are going to have to navigate this new world." Rowden agrees. "Sophisticated brand own- ers will decide that it is probably in their interest to seek what is known as defensive trademark registrations, registrations far be- yond the list of specific goods and services that the company has," she says. But Rowden also anticipates a more nefarious group will also start snapping up trademarks. "I think that it is indisputable that there will be applications filed for a broad list of goods and services by companies who are simply seeking to take advantage of the system and will then hold subsequent owners for ransom," she says. The prospect of so-called trademark trolls has many intel- lectual property lawyers worried. Rowden thinks Canadian com- panies could be particularly vul- nerable to this sort of scheme. "If you were to look at Cana- dian businesses, many of them are relatively unsophisticated and have not adopted the practice of filing trademark applications for their goods and services," she says. "And I think that if they're not in the system now, there is a real risk that they will find their rights trumped by others who are much more sophisticated." The government, however, has brushed off any concerns about trademark trolls. During a parliamentary hear- ing on the bill, Darlene Carreau, chairwoman of the Trademarks Opposition Board, said there are already ways to deal with the is- sue. "We're not concerned," she told the committee. "There are already bad-faith provisions in the Trade- marks Act that prevent businesses from filing and obtaining trade- mark rights on that basis. Why would a business do that? Who would be in the business of filing trademarks for which they have no business professed?" MacKendrick says while s. 45 of the act does provide a means to expunge trademarks, the process is lengthy and expensive. "To schedule an oral hearing after the written arguments have been submitted is at least nine months out," he says. MacKendrick expects the number of s. 45 proceedings will rise considerably under the new regime and suspects that if the Canadian Intellectual Property Office doesn't increase staffing levels, it will be overwhelmed. Even without trademark trolls, lawyers believe opposition pro- ceedings are likely to increase sig- nificantly under the new regime. "Currently in Canada, be- tween 1.9 and 2.3 per cent of Ca- nadian trademark applications are opposed," says Rowden. "In Europe, which is a system that the Canadian government has looked to as a model, opposition is closer to 16 to 19 per cent." According to Simpson, anoth- er aspect of the new regime that could cause issues relates to divi- sional applications. They'll permit trademark applicants to file for a number of marks and obtain a partial registration without hav- ing to hold up the entire applica- tion because of a few problematic goods and services. "It's potentially going to en- courage applicants to overreach," he says. "And so long as they have a pending application there and those deadlines can be extended for years, they're going to be hold- ing up other people who actu- ally do intend to use a confusingly similar mark that are the subject of a divisional application." Simpson thinks that will have a similar effect to the removal of the use requirement. "It's going to create adminis- trative burdens for the govern- ment and it's going to potentially increase trademark applicants' costs," he says. While many intellectual prop- erty lawyers have questioned whether the new regime will be effective, some are going so far as to question its constitutionality. In order for the Trademarks Act to be valid federal legislation, it has to fall under one of the iden- tified federal heads of power since the Constitution doesn't explicitly mention trademarks. According to Rowden, a number of cases have identified the federal govern- ment's trade and commerce au- thority as the right head of power. 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