2012 FCA 131 (April 27, 2012)
Overview
In an appeal of a section 45 proceeding, the Federal Court of Appeal held that the trademark RUSSIAN VODKA & Design in association with vodka should be maintained on the register. This case considers the evidentiary requirement for establishing control over the character or quality of the registered wares in a section 45 proceeding where a company related to the registrant acts as the selling agent in Canada. While merely attributing use to "MY COMPANY," a phrase used to refer to a group of related corporations, is insufficient to establish control, assertions of facts describing how the registrant exercises control over the character or quality of the registered wares is sufficient. The appellant was successfully represented by Brian P. Isaac and Heather E. Robertson of our Toronto office.
Abstract
In an appeal of a section 45 proceeding, the Federal Court of Appeal held that Spirits International B.V.'s ("Spirits BV") trademark RUSSIAN VODKA & Design in association with vodka (the "subject mark") should be maintained on the register. The Hearing Officer expunged the mark on the basis that an affidavit asserting that a group of related corporations, referred to as "MY COMPANY," exercised some form of control over the character or quality of the registered wares, and this was not sufficient to conclude that the sales enured to the benefit of Spirits BV. The Court of Appeal accepted the decision of the Hearing Officer. However, on appeal to the Federal Court, Spirits BV filed an additional affidavit asserting certain facts describing how Spirits BV had control under a licence and exercised the required degree of control over the character or quality of the wares by setting standards and performing periodic testing. The judge at the Federal Court level held that the additional affidavit would not have materially affected the Registrar's decision. The Court of Appeal overturned this decision, concluding that, on the basis of the two affidavits, the Hearing Officer could reasonably have held that the requisite use of the subject mark was shown during the relevant period. Accordingly, the judge should have considered the matter de novo and reached his own conclusion. The Court of Appeal engaged in its own de novo consideration of the matter and concluded that based on the two affidavits the requisite use during the relevant period was shown.
Case summary
Facts. The present case arises from an appeal from a decision of the Registrar under section 45 of the Trademarks Act to expunge trademark registration TMA208,808 for the trademark RUSSIAN VODKA & Design in association with vodka on the basis of lack of use. The trademark at issue is shown below:
On June 18, 2008, the Registrar sent a notice to Spirits BV requiring it to show that the subject mark had been used in Canada in association with vodka during the three-year period preceding the notice. Spirits BV submitted to the Registrar an affidavit sworn by Mr. Fedoryna, the Acting Manager of the Swiss Branch of Spirits BV. In Mr. Fedoryna's affidavit, all acts related to the use of the subject mark were attributed to "MY COMPANY," a phrase used to refer to a group of related corporations (the "SPI Group") that included a Swiss corporation, S.P.I. Group SA, and certain other corporations that it controlled, including Spirits BV. Invoices submitted with the Fedoryna affidavit showed the name "S.P.I. Group" and "Spirits Cyprus."
The Registrar expunged the mark on the basis that, while a group of companies designated as MY COMPANY exercised some form of control over the character or quality of the registered wares during the relevant period, there was not sufficient evidence of control to conclude that the sales enured to the benefit of Spirits BV (2010 TMOB 122).
Spirits BV appealed the Registrar's decision to the Federal Court. On appeal, Spirits BV filed additional evidence consisting of the affidavit of Mr. Denisov, the head of the legal department of Spirits Cyprus. The Denisov affidavit asserted the following relevant facts:
- S.P.I. Group SA directly owned 83.5% of the shares of Spirits BV, and indirectly owned 100% of the shares of Spirits Cyprus;
- Spirits Cyprus was licensed by Spirits BV to use the subject mark in association with vodka sold in Canada during the relevant period;
- under the licence, Spirits BV set the standards of character and quality of vodka labelled with the subject mark that was sold in Canada during the relevant period, and did so by delegating to other corporate members of the SPI Group the conduct of periodic testing for compliance with the standards of character and quality set by Spirits BV;
- under the licence, Spirits BV ensured that only vodka that met its standards was labelled with the subject mark;
- the subject mark appeared on labels affixed to bottles containing vodka that had been tested under, and met the standards of character and quality set by, the licence and that was sold in Canada during the relevant period;
- in the invoices attached to the Fedoryna affidavit, the product designated MOSKOVSKAYA is the vodka that was tested and had met the standards.
Justice Scott held that while the Denisov affidavit purports to deal with the question of control over the quality and character of vodka sold in Canada under the MOSKOVSKAYA trademark, it could not have materially affected the Registrar's decision as it was unclear what Sprits Cyprus does under the license, the beginning or end of the license between Spirits BV and Spirits Cyprus was not stated so it was impossible to link the actions taken under the licence with the sales invoices, and the statements about delegating periodic testing were vague. Justice Scott held that the Registrar's conclusion with respect to control was not unreasonable and dismissed the appeal (2011 FC 805).
Analysis. On appeal, the Federal Court of Appeal noted that the purpose of section 45 proceedings is to provide a simple, expeditious method for removing from the register marks that have fallen into disuse, and that the burden on the registrant to prove use in a section 45 proceeding is not a heavy one.
With respect to the standard of review to be applied by the Federal Court in an appeal of a decision under section 45(1), the Court of Appeal noted that if the judge concludes that the additional evidence presented on the appeal would have materially affected the Registrar's findings of fact or exercise of discretion, the judge must come to his own conclusion on the issue to which the additional evidence relates.
The Court of Appeal accepted that the decision of the Registrar, based on the Fedoryna affidavit, was reasonable. However, the Court concluded that it was not reasonably open to the judge to conclude that the Denisov affidavit would not have materially affected the Registrar's findings of fact or exercise of discretion.
The Court noted that the Denisov affidavit was intended to supplement the Fedoryna affidavit, not replace it. Based on the two affidavits, the Court of Appeal concluded that Spirits Cyprus acts as the selling agent for Canadian sales of vodka bearing the subject mark, which is sufficient use to satisfy section 4 of the Act. The Court also noted that indicating the start or end date of the licence would add nothing, as the Denisov affidavit states that Spirits Cyprus was in fact licensed during the relevant period. Finally, the Court held that assertions in the Denisov affidavit were not simply bare assertions or too vague to establish sufficient control. The Denisov affidavit contained assertions of fact describing how Spirits BV had exercised the required degree of control.
The Court of Appeal concluded that on the basis of the two affidavits the Hearing Officer could reasonably have held that the requisite use of the subject mark was shown during the relevant period, and therefore the Denisov affidavit could have materially affected the Registrar's decision. Accordingly, the judge should have considered the matter de novo and reached his own conclusion.
The Court of Appeal engaged in its own de novo consideration of the matter and concluded that, based on the two affidavits, the requisite use during the relevant period was shown.
Conclusion
This decision clarifies the standard of review to be applied by the Federal Court in an appeal of a decision under section 45(1) of the Act when additional evidence is put forth. If the judge concludes that the additional evidence presented on the appeal could have materially affected the Registrar's findings of fact or exercise of discretion, the judge must consider the matter de novo and reach his or her own conclusion. The Court of Appeal considered the evidence before the Hearing Officer along with the additional evidence filed at the Federal Court, concluding that, while merely attributing use to a group of related corporations referred to as "MY COMPANY" was insufficient to establish control, asserting factual allegations of a licence and control under that licence, along with the inferences that can be reasonably drawn, was sufficient to establish use that accrued to the registrant's benefit. This decision of the Court of Appeal indicates that where the mark is used during the relevant period by a company related to the registrant, the burden on the registrant to establish control under section 50 will be a low one.
Heather E. Robertson, Toronto
The assistance of Kyle Ferguson, Toronto articling student, is gratefully acknowledged.
The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.