Federal Court Expunges Licensee's Trademark Registrations For Bad Faith

• Published date: 20 January 2023
• Subject Matter: Intellectual Property, Trademark
• Law Firm: Aird & Berlis LLP
• Author: Amy Grenon and Lawrence Veregin

The Federal Court recently expunged a sublicensee's registration of the brand owner's trademarks on the basis of bad faith and awarded punitive damages to the brand owner. Blossman Gas, Inc. v. Alliance Autopropane Inc., 2022 FC 1794 is one of the few successful trademark expungements on bad faith grounds, for which the courts have imposed a high bar.

The ALLIANCE AUTOGAS Trademark

Blossman Gas, Inc. ("Blossman") had been selling propane under an ALLIANCE AUTOGAS trademark since 2009 in the United States and since 2012 in Canada through a licensed dealer.

The licensed dealer sublicensed use of the ALLIANCE AUTOGAS trademark in Quebec to Alliance Autopropane Inc. ("AAP"). The sublicence was clear that the ALLIANCE AUTOGAS trademark was owned by Blossman. While a sublicensee, AAP applied to register Blossman's ALLIANCE AUTOGAS trademark in Canada, in addition to three other similar trademarks (the "AAP Marks") without the consent of the licensed dealer or Blossman.

Blossman subsequently brought an application in the Federal Court of Canada to strike the AAP Marks from the register and stop AAP from using them on the basis of passing-off. Blossman alleged that the AAP Marks were invalid for a number of reasons, including by Blossman's prior use of the mark in Canada and bad faith.

Blossman's Prior Use

The Court easily accepted that Blossman did not acquiesce to AAP's registrations and that a licensee's "use" of trademarks will not entitle it to a trademark registration. It is well-established in Canadian trademark law that distributors, agents and licensees are not entitled to register a licensor's trademark on the basis of their licensed use, regardless of whether the licence agreement expressly prohibits such action. The Court further found that Blossman had used the ALLIANCE AUTOGAS trademark in Canada through its Canadian licensed dealer prior to any registration by APP - which in of itself could defeat the registrations.

Bad Faith: A High Bar

As we previously reported, Canada amended its Trademarks Act in 2018 to allow a person to invalidate a registered trademark for bad faith. However, since that time, the provision has rarely been successfully invoked as the courts have imposed a high bar for establishing bad faith; the courts have required evidence of pre-existing awareness of the brand by the registrant and/or an intention to harm the true brand owner. For example, the Federal Court refused in APEC Water Systems v. iSpring Water Systems, LLC to...