Implied Trademark Licenses: A Case Study

When will a trademark license granted from one party to another be implied? The Federal Court in the Core Consultants Realty1 decision ("Core Consultants") recently had an opportunity to revisit this question. The general fact pattern described in Core Consultants is not particularly unique, and many business-people likely have undergone similar experiences at some point during their business life-cycles. However, the Court's decision ultimately turned on a number of nuances that trademark owners would likely be interested in knowing - if they wish to continue to preserve their rights in their trademarks.

In Core Consultants, Party A launched a realty brokerage business using a Trademark. Party A then formed a business alliance with Party B, wherein Party A would continue its realty brokerage business using the Trademark in one city and Party B would launch an independent brokerage business using the Trademark in another city. By doing so, Party A and Party B envisioned cross-promoting each other's business between the two cities and under the Trademark. The relationship and arrangement between Party A and Party B lasted for a couple of years before it eventually broke down. At the end of the relationship, Party A exerted its trademark rights against Party B, stating that Party B's license to use the Trademark in association with Party B's realty brokerage business was terminated. Despite receiving the letter of termination, Party B continued to use the Trademark in association with its realty brokerage business.

The Court ultimately found that Party A owned the Trademark. It also held that Party A had granted an implied license pursuant to Section 50 of the Trademarks Act to Party B to use the Trademark in association with Party B's realty brokerage business, and that Party B infringed Party A's Trademark rights when it continued to use the Trademark after the license was terminated. The Court arrived at its decision after finding the following:

Party A invested significant efforts into the development of the Trademark prior to forming the business alliance with Party B, including registering domain names using the Trademark, developing the Trademark with a graphics designer, registering a business name with the Trademark, and using the Trademark in association with its realty brokerage business; by the time the alliance was formed, Party B was able to seamlessly enter the realty brokerage market in its city by using the existing...