“Bad Faith” Decisions Bad News for Trade-mark Applicants?

Jeffrey Vicq is a member of Clark Wilson LLP’s Technology & Intellectual Property Group.  He regularly writes about Canadian trade-mark issues on the Canadian Trademark Blog.

Those of us who provide trade-mark prosecution and counselling services—and particularly those of us who work with clients that have multi-national trade-mark portfolios—know that clients are sensitive to developments not only in Canadian practice, but also in other key markets around the world.  Many of my clients were concerned about a line of United States cases, decided over the last several years, that regarded innocent filing errors in applications, renewal forms, and other correspondence with the US Patent and Trade-mark Office as attempts to perpetrate a fraud on the Office, justifying refusal, expungement, or some other highly punitive penalty.  These decisions had effectively broadened the notion of “fraud” on the USPTO to include innocent mistake and negligence. 

However, it appears generally acknowledged that this trend halted in 2009 with a decision titled In re Bose Corp. In the most general terms, Bose served to restore the concept of fraud on the Office to a more conventional meaning.  Now, only if an applicant knowingly makes a false, material representation with the intent to deceive does their action rise to the level of fraud, meriting harsh punishment.

However, I am becoming concerned we may be seeing the start of a trend in Canada toward permitting challenges to applications for alleged lack of good faith akin to what our US friends experienced pre-Bose.  In decisions released over the last two years, the Canadian Trade-marks Opposition Board appears to be breathing new life into the ability of opponents to challenge applications on the basis of good faith. 

Now, to be clear, opposition proceeding claims that an application has not been filed in good faith, and therefore does not conform to the requirements of the Trade-marks Act, are nothing new.  Many opponents’ counsel have been inserting claims to this effect in statements of opposition for years, if not decades, almost as a matter of course.  Seemingly frustrated by the claims’ prevalence in the 1974 case of Sapodilla Co. Ltd. v Bristol-Myers Co. (15 C.P.R. (2d) 152), the Canadian Trade-marks Opposition Board queried whether such claims actually created a valid ground of opposition, and expressed regret that the provision was so commonly asserted in opposition proceedings where “it serves no purpose other than to clutter up the proceedings.”

What is new, however, is that the Board now appears increasingly willing to entertain claims challenging the truthfulness of statements contained in applications, and to refuse applications where the Board has suspicions about the verity thereof, independent of other grounds.  Two recent decisions of the Board illustrate this.

The first—Cerveceria Modelo, S.A. de C.V. v. Marcon (2008, 70 C.P.R. (4th) 355)—was issued in 2008.  There, the Board upheld an opposition brought by Cerveceria Modelo against Marcon’s application to register the trade-mark CORONA for use in association with both a variety of beverages and with beverage bottling services.

Marcon’s application was opposed on several grounds, including alleged confusion with Cerveceria Modelo’s familiar CORONA trade-mark. Additionally, the opposition was also founded on Marcon’s alleged failure to comply with s. 30(i) of the Trade-marks Act, which provides that an application must contain a statement that the applicant is satisfied that he “is entitled to use the trade-mark in Canada in association with the wares or services described in the application.”

Certain trade-mark commentators, including the esteemed Hugues Richard, have previously suggested that the requirement to include this statement in an application amounts to a representation on the part of the applicant to the public that the application has been submitted in good faith, and that the applicant approves of the application. 

In Marcon, relying upon an earlier decision purported to suggest that s. 30(i) challenges could be successful in “exceptional circumstances”, the Board concluded that the opponent had adduced sufficient evidence to properly support its allegation relating to s. 30(i), by:

• establishing that Marcon had filed applications for a number of other allegedly well-known marks contemporaneously with or following his application for the CORONA mark; and
• pointing out that when initially filed, Marcon’s CORONA application claimed beer, just as was claimed in the CORONA registration owned by the opponent, even though the statement was later revised to remove these directly overlapping wares, which Marcon claimed under cross-examination to have been included by mistake.

In addition, the Board appeared to draw a negative inference from Marcon’s failure to have approached a manufacturer to produce many of the proposed wares he desired to offer in association with the trade-mark.  In the Board’s view, these facts together constituted the sort of “exceptional circumstances” to put the good faith “entitlement” issue into question, requiring Marcon to establish grounds for his belief in his entitlement. 

Despite some efforts to establish his bona fides as an entrepreneur (from which, it appeared, he hoped the Board would infer his genuine interest in using the marks), Marcon failed to persuade the Board of his good faith belief.  Instead, the Board queried “how any reasonable person would be satisfied that he/she was entitled to file trade-mark applications for over 18 arguably well known marks for arguably related wares and/or services.” Of course, this is not the proper analysis: the consideration ought to focus on the good faith entitlement assertion for the particular application in which it appears—and in this regard, it is worth noting that the Examiner initially assigned to consider Marcon’s application didn’t think its claims to be entirely unreasonable, approving the application for advertisement, which ultimately lead to the opposition proceeding.  In any event, the Board found the opponent’s arguments persuasive, and Marcon’s application was refused.

This decision is somewhat troubling insofar as the rights of applicants are concerned: arguably, it has the effect of requiring an applicant to have a knowledge of the niceties of trade-mark law—and specifically,  questions around confusion and scope of protection—that the legislation does not require.  Under cross-examination Marcon made clear that he did not believe that he should have the right to claim CORONA in association with beer, but believed that no one would be confused as to the source of CORONA-branded water, juice or even wine products he might offer.  In this light, it appears Marcon turned his mind to the entitlement issue, and came to a (seemingly) honest, but (arguably) incorrect, conclusion.  Nonetheless, the Board concluded that Marcon’s actions brought his good faith into question, tainting the application.

In this way, the decision appeared to open the door to a slightly different line of attack against applications than had previously been available, imposing a standard not merely of the presence of the required s. 30(i) statement, but extending to the need for both some evidence of the bona fides of the applicant’s belief in his entitlement, and the correctness of that belief in entitlement at law.

The Board seemingly took another troubling step in this direction in a subsequent decision— FreemantleMedia North America Inc. v Wright Alternative Advertising Inc. (2009 77 C.P.R. (4th) 311).  In this case, the Board considered Freemantle’s opposition to Wright’s application to register the trade-mark CANADIAN IDOL.  Freemantle is the North American affiliate of the co-owner of the British Pop Idol television series, which developed the popular American Idol, Canadian Idol and World Idol television programs. 

Wright, a marketing and advertising agency, had been engaged by Sears Canada to assist in the development of a national youth talent competition which it proposed be called CANADIAN IDOL.  The competition was to involve an open audition call: the top 20 performers from each region would compete at their local Sears store, with shoppers choosing the winner. Sears representatives suggested to Wright that they would like to see the competition receive some television exposure.

Wright filed an application to register CANADIAN IDOL for use in association with “entertainment services namely, television talent show, talent search show, national contest searching for talented individuals, and talent search services.” Freemantle opposed the application on a variety of bases, including that the application did not conform to s. 30(i) of the Act. 

Relying upon its own decision in Marcon, the Board took the position that it could look behind an applicant’s s. 30(i) statement in “exceptional circumstances”, like those where “there is evidence of bad faith on the part of the applicant.”  However, the Board then redefined the test to an examination of “whether there was sufficient evidence …to suggest there may have been bad faith” [emphasis added]—arguably, a lower standard.

In applying the test to the facts at hand, the Board redefined it further.  The Board noted testimony by a Wright employee, unfamiliar with the niceties of Canadian trade-mark prosecution, who advised that a reference to television talent shows was inserted in the application before she had discussed the topic with Sears.  As the employee explained, the hope was simply that Sears would be happy and that Wright would get the work, and that she did not have any specific thoughts about making television programs at that time.  The Board took this as evidence that “raise[s] suspicion about the Applicant’s good faith in submitting the application”—again, a different standard than first expressed—and therefore required Wright to establish grounds for its belief in its entitlement as expressed in s. 30(i).

As was the case in Marcon, Wright failed to convince the Board of its bona fides with respect to its belief in its entitlement to use the CANADIAN IDOL mark in Canada in association with the claimed services. Despite testimony that its investigations led it to believe that no “Canadian Idol” program would be introduced in Canada—and in fact, no public announcement had been made in this regard prior to the time of Wright’s filing—the Board concluded that Wright had not sufficiently established that it was satisfied that it was entitled to file the application for CANADIAN IDOL, nor that its intentions were bona fide when it did so.

This decision too is troubling: in recasting the threshold to be met to put s. 30(i) into question from “exceptional circumstances” where there is “evidence of bad faith” to one merely requiring evidence that “raise[s] suspicion about the Applicant’s good faith”, the Board appears to have materially lowered the standard required to bring s. 30(i) into play on its own. 

Whether these decisions are mere anomalies, or whether they signal the start of trend where the bona fides of an applicant’s s. 30(i) claims will, in and of themselves, regularly be in play remains to be seen.  Certainly the success of the opponents in these two cases will do nothing to stem the practice of “cluttering up the proceedings” with the sort of s. 30(i) challenges that the Board itself complained about in the Sapodilla decision, so many years ago.

Yet, neither of these two recent decisions appears to be well-supported by jurisprudence.  Somewhat curiously, both the Marcon and Freemantle cases in fact rely upon the Sapodilla decision to support the approach of alleging defects in the bona fides of an applicant’s s. 30(i) as a legitimate and independent ground of opposition.  Review of Sapodilla suggests that such an interpretation is not clearly tenable. 

Moreover, the Federal Court has previously endorsed the view that an opponent cannot properly successfully oppose an application by merely challenging the verity of an applicant’s s. 30(i) claim without some other shortcoming first being found.  As the court put it:

Scholarly analysis also appears to indicate that unless a person alleging the validity of a trade mark can base his argument on other grounds, he cannot rely on s. 30(1)(d)(i) [as it then was, now s. 30(i)] simply by saying that the applicant does not have the right to use the trade mark. That is simple common sense. If the applicant is entitled to registration of his trade mark in accordance with the relevant provisions of the Act, a fortiori he is entitled to say that he is the person authorized to do so. (Optagest Canada v. Services Optometriques (S.O.I.) (1991), 37 C.P.R. (3d) 28 at 32)

In any event, until the Board eschews this approach—or until there is new jurisprudence from the Federal Court clearly pronouncing on the ability of an opponent to challenge the bona fides of an applicant’s s. 30(i) claims independent of other grounds—it remains clear the allegation will stay a part of many statements of opposition.  The trend, though, is unfortunate: it serves to introduce more indeterminacy in the law, which will make pre-filing application due diligence slower and more expensive, and will most likely claim self-represented filers as victims. 

In the interim, applicants ought to be reminded of the need to take care in confirming both the propriety of their belief to their entitlement to use a trade-mark in Canada in association with prescribed wares and services, and to ensure the availability of evidence to support such a claim.