Trade-mark law in Canada is poised for transmutation thanks to the 2014 Federal Budget of all things.

The 2014 budget, Bill C-31, is an omnibus bill that includes changes to several pieces of legislation, including the Trade-Marks Act. While some of the proposed changes are relatively insignificant issues of terminology, others have the potential to alter fundamental aspects of Canadian Trade-mark law.

According to the legislative summary, the changes are intended to make the Act consistent with treaty obligations and will adopt the Nice Classification. Changes to terminology include an end to the hyphenated “trade-mark” and changing “wares” to “goods”. Simplified registration requirements will also reduce the term of registration from 15 to 10 years.  The new definition of a trade-mark will include a sign or combination of signs including; 3D shapes, holograms, moving images, mode of packaging goods, sound, scent, taste, texture, and position of sign. The new Act will also remove distinguishing guises and introduces utilitarian function as a limit to registrability. In addition, the Act will permit divisional applications.

The change causing the most consternation is the apparent move from a use-based system to one that is established merely on registration. In the current system, one can apply to register a proposed mark not yet in use. However, if approved, the proposed mark is not actually registered until the owner files a declaration of use. As recently as the Masterpiece decision, the Supreme Court has stated that:

Registration itself does not confer priority of title to a trade-mark. At common law, it was the use of a trade-mark that conferred exclusive right to the trade-mark. While the Trade-Marks Act provides additional rights to a trade-mark holder than were available at common law, registration is only available once the right to the trade-mark has been established by use.

Under the amended legislation, this would no longer be true. Applicants will be able to gain registration for proposed marks without any proof of use of that mark. This departure from fundamental statements of law is likely to result in some tumultuous case law in the coming years.

The shift away from use will necessitate new statements on modes of analysis. For instance, tests for confusion rely on the use of confusing marks or the potential for confusion if the mark is used in any manner open to it under the registration, as the court held in Mr. Submarine Ltd v Amandista Investments Ltd. Depreciation of goodwill also has an element of use. How can one depreciate the goodwill in a mark if the owner has not established any goodwill or consumer associations with the mark through use in the marketplace? Theoretically, an owner may be able to argue that even absent their own use, use of the mark by another could depreciate the goodwill and value in the mark. For example, if the junior user had an inferior or hazardous product or created a poor reputation in the marketplace. The senior rights holder may be able to argue that they will have to overcome this depreciation if they actually enter the marketplace. However, it is still difficult to conceive of how courts will protect marks that are unused.

Some fear that the changes will result in an increase in “trade-mark trolls”, entities willing to pay the fees and go through the application process to then sit on marks, which will congest the register and result in costly litigation for individuals who may wish to actually use the marks. Yet, the marks will still be vulnerable to expungement proceedings under s(45) of the Act three years after the date of registration, which will provide a check on rampant registration. At that point, interested third parties will still be able to make a request that the registrar demand proof of use. If the registered owner does not produce evidence of use, then the registrar may expunge the mark. It would then be open to the interested party to apply for registration. However, nothing would prevent the initial rights holder from simply re-applying for the mark and sitting on it for another three years.

Although the bill represents an attempt to simplify the registration process, its likely effect will be an increase in litigation.  Without use to act as a guide, courts will have to navigate new tests and precedents as rights holders engage in disputes to clarify their rights under the changed legislation. For now it is just a bill, but if enacted as is, Bill C-31 is sure to bring some interesting years to trade-mark law.

Allison McLean is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.