(Illustration by James Kaczman)
Canada’s Trade-marks Act is about to undergo a major transformation, and the nation’s trademark lawyers are furious. Yes, even Canadians, noted for being unusually nice and polite, can be pushed too far. And this time it’s their own government doing the pushing.
“The Canadian government has introduced the most revolutionary changes to Canadian trademark law since the federal statute was written in 1868, hoping no one would notice,” says Daniel Bereskin, a name partner based in the Toronto office of Bereskin & Parr, one of the largest intellectual property law firms in Canada. “But we did notice—and it’s not pretty.”
The changes are coming because Canada’s Conservative government included amendments to the nation’s Trade-marks Act in its sweeping omnibus budget bill, dubbed the “Economic Action Plan 2014.” A budget bill typically exists to do what its name suggests: to implement budgetary measures. But borrowing from political tactics perfected by politicians in the U.S., the Harper government stuffed this bill with nonbudgetary items, including new rules governing food safety, rail safety and temporary foreign workers, as well as trademark law.
The trademark amendments, which take up more than 50 pages, include the elimination of the requirement that a mark be used somewhere before it can be registered and the adoption of an international trademark classification system. They were proposed without any consultation or discussion with trademark owners or attorneys, and were barely debated by members of Parliament, lawyers say. (And a minor point: The bill, which has been passed and takes effect when regulations are written later this year, even changes the spelling of “trade-mark,” which some lawyers found objectionable.)
The changes have riled not only intellectual property lawyers, but also major Canadian companies, the International Trademark Association and the Canadian Chamber of Commerce. The impact is potentially so great, there is now talk of challenging the changes on constitutional grounds.
“This is a serious issue with serious consequences,” says Brian Gray, a senior partner and IP attorney at Norton Rose Fulbright in Toronto.
The change that attorneys find most disconcerting is the elimination of the requirement that a mark be used before it can be registered. Omitting this condition, they argue, will lead to increased risk and costs associated with launching new trademarks.
Without the “use” requirement, they say, the number of “deadwood” trademark registrations will increase, making clearance of trademarks more costly and less certain. And by permitting registration without use, the number of oppositions to registrations is also likely to rise sharply, a trend that will also dramatically increase costs for Canadian companies.
“Currently, only about 2 percent of all trademark applications filed in the U.S. and Canada are opposed, because no one can register a trademark without first using it or at least showing intent to use it,” says Bereskin. “But under the European system, where registrations are granted without the need to show use, the opposition rate for trademarks is at least 18 percent.”
Oppositions may also get messier. With no use requirement, applicants are not required to list the date of use or a date of intended use. That makes it harder for trademark owners to oppose a mark based on prior use because they can’t be sure whether the mark they want to challenge existed prior to their own. “You’re supposed to be able to oppose a mark based on prior use, but with the new law there’s a disconnect between available information and the grounds on which you can oppose,” says Gray.
Also, overclaiming in trademark registrations is currently discouraged in Canada, Gray says, because a mark is restricted to the goods or services for which use has occurred. In Europe, however, a registration can be very broad.
Attorneys and businesses expect that the change will encourage increased activity by trademark trolls, entities that routinely engage in trademark litigation, trademark piracy and trademark squatting. This has not been a significant issue in Canada specifically because registrations are based on use in Canada or elsewhere, lawyers say. The use requirement has impeded the ability of trolls to secure Canadian registrations in the hope they can hold a legitimate trademark owner for ransom.
“Take away the use requirement, and things will get a lot easier for trolls,” Gray says.
So why would the Canadian government want to create laws that ultimately hurt Canadian businesses?
“They’re doing it under the guise of bringing Canada in line with international treaties,” says an exasperated Bereskin, who earlier this year became the first Canadian inductee to the IP Hall of Fame.
Indeed, Canada’s governing party has said the changes are needed so the country can finally become a signatory to international treaties, especially the Madrid Protocol. That treaty, adopted in 1989, provides a way for companies to obtain trademark protection in multiple jurisdictions around the world with one application and at a lower cost.
Bereskin and others do not object to Canada joining the Madrid Protocol, although they question its value to trademark owners. Few Canadian companies would benefit, they say, because most Canadian companies that register their trademarks in another country do so only in the U.S. In fact, of 21,000 trademark applications filed by Canadian companies, 9,000 were filed in the U.S. and only 900 were filed in the European Union, according to Bereskin. “In order to truly benefit from Madrid, you have to file in six or seven jurisdictions,” he says.
Even companies in the U.S., which unlike Canada is a net exporter of trademarks, tend not to use Madrid routinely, lawyers say. Under the treaty, a trademark filing cannot be broader than its corresponding domestic filing. But since the U.S. has a “use” requirement, a filing by a U.S. company under Madrid would have to be just as narrow as the domestic filings. Meanwhile, foreign applicants, especially those based in countries where there is no use requirement, are able to make their applications as broad as they’d like. “You can make the list of goods and services as long as your arm,” Bereskin told Canada’s Standing Committee on Banking, Trade and Commerce during one of the few hearings on the subject in May.
But if Canada wants to sign on to the Madrid Protocol anyway, it does not mean a central part of the nation’s trademark law—the requirement—has to be discarded, lawyers say. U.S. trademark law, for example, has a very clear “use” or “intent to use” requirement, and the U.S. has been a signatory to the Madrid Protocol since 2003.
Adhering to Madrid also requires the adoption of a classification system for goods and services called the Nice Classification system (named after the French city). Every type of good or service fits into a specific predefined class. Changing to this system means that applicants in Canada will now be required to group all goods and services associated with a mark into Nice classifications, although some lawyers say the categories are outdated. And companies that registered marks before the change may be forced to revise their trademarks or risk having them deleted from the registry. This will be costly to Canadian businesses, lawyers say.
“Back in 2005, the government sent a detailed questionnaire to the Intellectual Property Institute of Canada (IPIC) in which we explained why it was not appropriate for Canada to adhere to Madrid,” says Bereskin. “But that submission was totally ignored.”
This year, the government included the sweeping changes to the nation’s trademark law in the budget bill without consulting trademark lawyers or even notifying them they were coming. “They were hoping no one would notice,” Bereskin says.
But one of his partners did notice, and they spread the word. A group of irate senior trademark lawyers that included 29 lawyers who each had more than 20 years of experience in domestic and international trademark law, representing 15 major Canadian law firms, submitted a detailed brief to Joe Oliver, Canada’s Minister of Finance, expressing their opposition. “That also fell on deaf ears,” Bereskin says.
They followed up with other initiatives, including an open letter signed by more than 200 lawyers from every province in Canada, asking that the proposed amendments to the Trade-marks Act be made the subject of a separate bill that can receive detailed consideration and input from interested parties. Again, the government didn’t budge. Attorneys and corporate executives got a sympathetic hearing from the Senate Committee on Banking, Trade and Commerce, with one senator calling out the government for the “sneaky” way it went about trying to incorporate the changes in the bill unnoticed. But the committee did not have the power to convince the government to reconsider. Even representatives from some of Canada’s most iconic companies, such as BlackBerry Ltd., Air Canada and PepsiCo Canada, let the government know they did not like or approve of the changes.
“We have learned that one of the proposed changes to the Trade-marks Act is to eliminate the requirement for use before registration,” Mary Manocchio and Timothy Civil, general counsel of PepsiCo Beverages Canada and PepsiCo Foods Canada, respectively, wrote in an April 28 letter to Canada’s finance minister and other members of the government. “We sincerely believe that this will increase our costs tremendously in trying to clear and protect brands.”
David Glassberg, the chief legal officer of New Brunswick-based Irving Oil Ltd., wrote to the finance minister in May, urging him to reconsider adopting the changes, which he also said could significantly increase the company’s costs in protecting its brands. “We believe that this particular change is not good for business in Canada, and we respectfully request you to reconsider its adoption,” he wrote.
The finance minister has not responded. “It’s all been for nothing so far,” Bereskin says.
So now there is talk of challenging the change on constitutional grounds, with lawyers arguing that Canada’s Parliament does not have the authority to legislate rights conferred by registration and not use. “By removing the use requirement—in other words, allowing the registration of marks that have never actually been used in trade or commerce—the validity of Canada’s [trademark registration] regime may be called into doubt,” Coleen Morrison, vice president of the International Federation of Intellectual Property Attorneys/Fédération Internationale des Conseils en Propriété Intellectuelle (FICPI), told senators at the hearing in May. “This would be destabilizing and economically counterproductive, to say the least.”
In addition, the rights of Canada’s provinces to issue trademarks under common law, a right they currently hold, would be impinged if trademarks can only be obtained by filing a national trademark application. It’s sort of the equivalent of states’ rights in the U.S., lawyers say.
Although the government has so far ignored all these concerns, Canada’s trademark attorneys are still hoping it will back down and leave the law’s “use” requirement alone. “We won’t play the constitution trump card unless it’s necessary,” Bereskin says. “But it’s quite possible someone will find it necessary.”
Scott Smith, director of Intellectual Property and Innovation Policy for the Canadian Chamber of Commerce, says after the bill passes, companies and attorneys hope the government will hold public consultation sessions before regulations are instituted. “This won’t solve the problem, but it could alleviate some of the most egregious parts of the new law,” Smith says.
Meanwhile, other changes to Canada’s Trade-mark Act are also included in the budget bill, although these have gotten relatively little attention, given the larger issues at stake. But one such change is in the actual word “trade-mark.” The Canadian government is officially dropping the hyphen that for decades has been used to separate the two syllables. Rather than choosing to make it two distinct words, like the “trade mark” used everywhere in the English-speaking world except the U.S., Canada is instead adopting the spelling used by its neighbor to the south.
The spelling tweak hasn’t thrilled Canada’s trademark attorneys, who note that it used to be two distinct words in Canada before someone in the government hyphenated it several decades ago without telling anyone and it was passed into law in that form—much to everyone’s surprise. But the lawyers say having a one-word trademark is a minor annoyance compared with the major changes the government has in store.
“We’ve been rebuffed, humiliated and excoriated,” says Bereskin. “But the government must understand that many people are objecting to this for good reason—that we know a great deal more about trademarks than they do.”