Trademark Licensing In Canada: Control Is Key

The upcoming amendments to the Trademarks Act may bring short-term uncertainty over ownership and licensing issues. One thing that is unlikely to change is the established principle of proving a licensor's control over a mark.

The amendments to the Trademarks Act, implemented by Bill C-31 in June 2014, are expected to come into force in 2019 and will set out major changes to Canadian trademark law - the most significant being the removal of use as a requirement for registration.

As trademark owners and practitioners have been anticipating these amendments for some time, many have questioned their implications and - now that the coming into force date is in sight - have advised on early filing and renewal strategies. Debate among the Canadian legal sector has delved into issues such as the impact that so-called 'trademark trolls' may have, how trademark owners will effectively search and clear marks and whether there will be any constitutional challenges. However, few have discussed the effect that the amendments could have on trademark licensing.

The removal of the use requirement in particular may bring short-term uncertainty with regard to trademark ownership and licensing. Licensing can affect a variety of situations, including opposition and cancellation proceedings, as well as the assertion of rights in a trademark dispute. This article reviews the Trademarks Act and recent case law to provide both licensors and licensees with some guidance for effective licensing in Canada.

Section 50 of the Trademarks Act

Care must be taken when a trademark is licensed to ensure that it remains distinctive, in order for it to be valid and enforceable. Under the proposed changes, the definition of 'distinctiveness' remains essentially same (ie, a trademark must distinguish, or be adapted so as to distinguish, the goods or services of one trader from those of another).

Section 50 of the Trademarks Act protects the distinctiveness of a licensed trademark, provided that the licensor and licensee comply with the provisions set out therein. Section 50 provides that if the licensor maintains "direct or indirect control" over the character or quality of the licensed goods or services, then use of the mark by the licensee is deemed to be use by the licensor - thereby maintaining the marks' distinctiveness. Further, if public notice is given of both a trademark's licensed use and the identity of its owner, then it is presumed that the use is licensed by the...