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Policing Trademark Rights during a Pandemic

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In our last blogpost, we discussed some specific steps that trademark owners can take during the COVID-19 pandemic to maintain their trademark rights. Here, we look at the implications of COVID-19 on trademark rights from a different but related perspective – namely, the importance of policing trademark rights even, and especially, in the midst of a pandemic.

It is always important for trademark owners to “police” their trademark rights against infringers. Unauthorized use of your trademark or a similar trademark, no matter how trivial, can erode its ability to distinguish you as a trade source. When a trademark loses this ability and becomes non-distinctive, it ceases to function as a trademark and can no longer be enforced.

This is as true as ever during a pandemic when fraudsters or competitors may use the pandemic as a cover to engage in infringing activities.

What follows is a brief overview of what it means for a trademark to be “distinctive”, how a trademark can lose its distinctiveness and some steps that trademark owners can take during the COVID-19 pandemic to ensure their exclusive rights are not put at risk.

Distinctiveness: the essence of a trademark

A trademark is only a trademark so long as it is distinctive of its owner. But what does it actually mean for a trademark to be distinctive?

According to Section 2 of the Canadian Trademarks Act:

distinctive, in relation to a trademark, describes a trademark that actually distinguishes the goods or services in association with which it is used by its owner from the goods or services of others or that is adapted so to distinguish them.

What this means in practice is that a trademark is distinctive if it identifies the specific source of the particular goods or services which the trademark is used in association with. Conversely, a trademark is not distinctive if the mark points to any number of possible trade sources. If a trademark cannot function as a unique indicator of a single source, then no one trader can have a monopoly over its use.

The importance of distinctiveness is highlighted by how frequently the concept appears in Canada’s Trademarks Act. Under the new amendments to the Act, a trademark can be refused registration if it is not “inherently” distinctive or has not acquired distinctiveness through use. A trademark’s distinctiveness is also relevant when assessing a likelihood of confusion. And a trademark application can be opposed on the ground that the applied-for mark is not distinctive. Finally, under Section 18 of the Act a registered trademark can be invalidated if it has lost its distinctiveness.

How does a trademark lose its distinctiveness?

As noted above, a trademark’s distinctiveness depends on whether it actually distinguishes one trader’s goods or services from those of others in the trade. Therefore, a trademark’s distinctiveness can be diminished by use of the trademark or a confusingly similar trademark by some other than its owner or a licensee.

For example, in a 2019 decision of the Federal Court, a registration for the trademark DIAL-A-BOTTLE, which covered alcohol delivery services, was invalidated under Sections 18 and 57 of the Trademarks Act because “the Mark had lost its distinctiveness due to the use of the DIAL-A-BOTTLE name and variations of it by many businesses and many persons for many years.”[1]

In that case, the Court relied on two basic facts. First, other than the trademark owner, there were numerous businesses throughout Ontario that offered alcohol delivery services and used the term “Dial-A-Bottle” in their names. Second, the trademark owner was aware of most if not all of these infringers but failed to be vigilant in enforcing its exclusive rights in DIAL-A-BOTTLE. It had entered into licensing agreements with some users of the mark but not others. And for those who were licensees, it was unclear what control (if any) the owner had over the services offered under the DIAL-A-BOTTLE name. And while the owner did commence some actions for trademark infringement, all the actions were abandoned without any effect on infringing use of the mark. As a result, the Court concluded that the DIAL-A-BOTTLE trademark was not distinctive because it could not and did not distinguish the registered owner’s services from those of other alcohol delivery companies.

While certainly a worst-case-scenario, this decision shows that if a trademark owner knows that others are using its mark, but fails to take action or takes an inconsistent approach to enforcement, then the owner runs the risk of losing its exclusive rights in its trademark.   

Practical steps for policing trademark rights

  1. Court actions

Commencing an action for trademark infringement, depreciation of goodwill, and/or passing off is perhaps the most obvious way for a trademark owner to enforce its rights since a plaintiff can seek relief in the form of an interlocutory or permanent injunction restraining an infringer from continuing their infringing use. A successful plaintiff can also be awarded monetary relief in the form of damages or legal costs, and sometimes the threat of financial consequences can be enough to put a stop to infringing conduct.

However, litigation can be a time and cost intensive process and, therefore, it is not generally the first step taken when policing trademark rights. Furthermore, many courts in Canada, including the Federal Court, have suspended many litigation deadlines in light of COVID-19 – which simply means some of the delays inherent in the litigation process have been further exacerbated. That said, Canadian courts remain open and parties can still commence proceedings – a strategy worth pursuing where other options have failed.  

  1. Demand letters

Perhaps the most common policing tool is a demand letter, or what is sometimes referred to as a “cease and desist.” Generally speaking, a demand letter is sent by a lawyer on behalf of a trademark owner to another party that is, or has been, infringing the owner’s exclusive rights to the trademark at-issue. A demand letter puts the infringer on notice of the trademark owner’s rights and will generally require the infringer to cease their infringing use and refrain from infringing the owner’s rights in the future. Generally, a demand letter will also include an express or implied threat of litigation, should the infringer ignore the sender’s demands.

A demand letter is usually sent early in the process because it is a time and cost-effective tool. It can also open the door to good-faith negotiations between an unintentional infringer and a trademark owner, which can culminate in licensing agreements or other amicable resolutions. A demand letter can also serve as a useful piece of evidence if the distinctiveness of a trademark is brought in to question in a court proceeding, since it demonstrates that the trademark owner is actively policing its rights.

  1. Licensing agreements

Controlling how other parties use a trademark is another form of “policing” that becomes important when an owner wants to authorize others to use its trademark, without sacrificing the trademark’s distinctiveness. This is generally done through a contract – or licensing agreement – whereby the trademark owner allows the user (licensee) to use the owner’s trademark, subject to the owner’s control over how the trademark is used.

Having licensing agreements in place with any authorized users is essential because use of a trademark by a licensee does not diminish the trademark’s distinctiveness. This is because, under Section 50 of the Trademarks Act, use of a trademark by a licensee accrues to the benefit of the trademark owner. However, it should be noted that it is nonetheless important to monitor how a licensee is using a licensed trademark, to ensure that the trademark owner maintains control over the character or quality of the trademark and the goods and/or services it is used with.

As COVID-19 continues to influence how businesses offer their goods and services to consumers, particularly over the internet, the importance of proper licensing agreements is more important than ever. If you are a trademark owner and you are collaborating with other businesses or individuals to promote or deliver goods and services over the internet, and those businesses or individuals will be using your trademark, it is important that such use is permitted subject to a licensing agreement. Absent a license, allowing someone else to use your trademark could result it a loss of distinctiveness.

  1. Opposition proceedings

Another policing tool to consider is an opposition, which is an administrative proceeding that allows the owner of a trademark to “oppose” an application for a trademark filed with the Canadian Intellectual Property Office (a similar process also exists in the United States). An opposition can be filed on multiple grounds, including that the applied-for trademark is confusing with the opponent’s existing trademark. While this post is not the place to comment on the myriad ins-and-outs of the opposition process, suffice it to say that an opposition is an important tool for preventing a third-party from registering a trademark that is similar to yours.

  1. Seizure of counterfeit goods

Lastly and briefly, it should be noted that if a trademark is being used on counterfeit goods, there are steps the trademark owner can take to have the Canadian Border Services Agency (CBSA) seize the counterfeit goods at the border (provided, the goods are coming from outside Canada). Given that Canada’s borders are not closed to trade during COVID-19, counterfeit goods are still entering the country. That said, enforcement measures involving the CBSA are only applicable in specific circumstances. Therefore, as with all the above policing options, an experienced lawyer should be retained to help navigate the process.

Take-Aways

Given the importance of policing trademark rights, even during crises such as COVID-19, trademark owners should follow the below steps for maintaining their trademarks’ distinctiveness:

  1. Monitor – Keep tabs on whether other parties are using trademarks that could be confusing with your own. Particularly during COVID-19, much trademark use occurs online so keep track of competitors’ online presence, including on social media. For opposition purposes, also consider monitoring the Canadian Trademarks Journal to see whether others are seeking to register confusingly similar trademarks.
  2. Notify – If you believe that another party is using your trademark, or a confusingly similar one, put that party on notice of your existing rights in the trademark. This is best done through a demand letter prepared by an attorney that sets out your rights and what the other party must do – which could include refraining from using the trademark or entering into a license agreement.
  3. Enforce – If you have put another party on notice of your rights but they have not complied with your demand, then you should take steps to enforce your rights. Consider having an attorney commence a court proceeding for trademark infringement, depreciation of good will, and/or passing off. Alternatively, if the issue relates to another party’s attempt to register a confusingly similar trademark, consider having a trademark agent commence an opposition proceeding. Lastly, if the infringement involves counterfeit goods, then CBSA seizure may be available and/or warranted.

If you believe that another business or individual is infringing your trademark rights, or you have questions about policing your trademark rights, feel free to contact a member of the Shift Law team.

 

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[1] 8073902 Canada Inc. v. Vardy, 2019 FC 743 (CanLII) at para 3.

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