2011 FCA 235 (August 11, 2011)
Overview
The Federal Court of Appeal dismissed an appeal by Archmetal and upheld a decision of the Federal Court ordering the expungement of Archmetal's registration of the trademark FUSION on the basis that Archmetal was not entitled to registration of the mark because it was only the importer of the valves bearing the trademark FUSION.
Abstract
Archmetal Industries Corporation ("Archmetal") was the North American importer of industrial valves manufactured by Fortune Manufacturing Co. Ltd ("Fortune") and entered into a Consignment Agreement with Jag Flocomponents N.A. ("JAG") whereby JAG was to be Fortune's exclusive distributor of the FUSION valves in Canada. The issue in the appeal was the validity of Archmetal's registration of the trademark FUSION. Applying the principle that an "importer of goods to which a trademark has been affixed by the manufacturer does not acquire the right to register the trademark simply because it imported the goods and resold them in Canada," the Federal Court of Appeal found Archmetal's registration invalid as only Fortune was entitled to register FUSION as the manufacturer who affixed the trademark on the valves.
Case summary
Facts. Fortune manufactures industrial valves for the oil and gas industry and wholly owns Archmetal, who serves as Fortune's importer of industrial valves. Fortune agreed to do business with JAG, who was to be Fortune's exclusive Canadian distributor of its current and future industrial valves. Archmetal, who used to assume this role, entered into a Consignment Agreement with JAG in 2002 whereby JAG would be required to pay for the valves only after their sale. Fortune agreed to use FUSION in connection with the valves and started manufacturing the valves bearing the FUSION trademark and the Fortune logo. Archmetal never had any involvement in the design of the valves or the selection of the trademark.
In 2003, the business relationship began to abate between the parties and the question of ownership of the FUSION trademark became an issue. In March of the same year, Archmetal (on Fortune's instructions) successfully filed an application to register FUSION as its trademark based on first use in Canada. JAG did not oppose Archmetal's application; however, a month later, JAG filed a trademark application for the trademark FUSION on the basis of a prior date of first use. Archmetal successfully opposed JAG's application. Thereafter, JAG sought to have Archmetal's trademark registration for FUSION expunged.
The Federal Court found that, pursuant to the Consignment Agreement, the shipment of the valves from Achmetal to JAG did not amount to "use in Canada" under sections 2 and 4 of the Trademarks Act ("Act") since neither Archmetal nor Fortune intended to transfer property in, or possession of, the goods to JAG in the normal course of business. According to the Federal Court, "use in Canada would only occur when JAG sold the products to the next level of trade."
The Federal Court therefore found that Archmetal failed to establish use of the trademark FUSION in Canada, and granted JAG's request on the following grounds: (1) Archmetal was not the sole owner of the trademark; (2) Archmetal's evidence of first use in Canada did not fall within the definition of "use" under the Act; (3) the alleged trademark lacked distinctiveness; and (4) the application was tainted by a material omission as to the ownership of the trademark.
Archmetal appealed from this decision.
Analysis. While reaching the same conclusion as the Federal Court, the Federal Court of Appeal decided that it was not necessary to deal with the effect of the Consignment Agreement in order to find that Archmetal did not "use" the FUSION trademark in Canada. The Federal Court of Appeal relied on a well-established jurisprudence supporting the proposition that an importer of goods does not acquire the right to register the trademark simply because it imported the goods and resold them in Canada. Applying this principle, the Federal Court of Appeal held that whoever (Archmetal or JAG) imported Fortune's FUSION valves into Canada did not acquire the right to register the FUSION trademark. Therefore, any subsequent use of the FUSION trademark can only be to the credit of the manufacturer, Fortune, who first used or made known the trademark in Canada (i.e. affixed the trademark on the valves and owned the valves until they were sold).
The Federal Court of Appeal found the registration of the trademark FUSION invalid, dismissed the appeal on the ground that Archmetal was not entitled to such registration, and confirmed the Federal Court decision ordering the expungement of Archmetal's trademark registration.
Conclusion
The Federal Court of Appeal decision reiterates the principle that an importer does not acquire the right to register a trademark simply by importing the goods into Canada and reselling them. The manufacturer who affixed the trademark on the goods remains the sole person entitled to registration and does not transfer this right to intermediaries in the chain of trade such as importers and distributors. This case clarifies the issue of entitlement to registration of a trademark in the chain of trade involving imported goods.
Elvina Chow, articling student, Ottawa
Alexandrine Huck-Ananou, articling student, Montreal
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