Date: 20100309
Docket: T-1020-09
Citation: 2010 FC 267
Ottawa, Ontario, March 9, 2010
PRESENT: The Honourable Mr. Justice Barnes
BETWEEN:
TUCUMCARI
AERO, INC.
Applicant
and
CASSELS,
BROCK & BLACKWELL LLP
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
This
is an appeal by Tucumcari Aero, Inc. (Tucumcari) brought under s. 56 of the Trade-marks
Act, R.S.C. 1985, c. T-13 (Act). Tucumcari challenges a decision of the
Registrar of Trade-marks (Registrar) dated April 9, 2009 expunging its Trade-mark
Registration No. 496,171 for the trade-mark, “Moto Mirror and Design” (Moto
Mirror Trade-mark). The Moto Mirror Trade-mark is registered in Canada for use with
truck and automobile mirrors (wares).
I.
Background
[2]
On
November 3, 2006 the Registrar, acting under s. 45 of the Act, gave notice to
Tucumcari requiring it to show that the Moto Mirror Trade-mark was in use in Canada between
November 3, 2003 and November 3, 2006 (the relevant period). Tucumcari
responded with an affidavit sworn by Mr. James Williams attesting to use of the
Moto Mirror Trade-mark in association with truck and commercial vehicle mirrors
during the relevant period and referring to Tucumcari’s control over the
quality of those mirrors under an unspecified licensing arrangement.
[3]
The
Registrar was satisfied that Tucumcari had established the use of the Moto
Mirror Trade-mark in Canada during the relevant period in association
with truck and commercial vehicle mirrors. However, the Registrar found the
Williams affidavit to be ambiguous with respect to the issue of Tucumcari’s
control over the character or quality of those products as required by ss.
50(1) of the Act. Subject to appeal, the Moto Mirror Trade-mark was ordered to
be expunged under ss. 45(5) of the Act. It is from this decision that
Tucumcari brings this appeal.
The
Evidence Before the Court
[4]
For
the purposes of this appeal Tucumcari has submitted an additional affidavit
sworn by a Vice-President with Commercial Vehicle Group, Inc.,
Mr. Raymond Miller, clarifying the evidence with respect to control
over the trade-marked wares. That affidavit confirms the following facts and
chronology of relevant events:
(a) Throughout
the relevant period, Tucumcari was the owner of the Moto Mirror Trade-mark.
(b) On
July 15, 1997 Tucumcari licensed to Echlin Inc. and Moto Mirror Inc. under
agreement (the License Agreement) the exclusive use of the Moto Mirror
Trade-mark in the United States, Canada and elsewhere (Echlin
and Moto Mirror were merged in 1999 and became Echlin Inc. (Echlin)).
(c) In
March 2000 Echlin sold all of its assets including the License Agreement to
Commercial Vehicle Systems, Inc. (CVS) and Tucumcari consented in writing to
the assignment of the Licence Agreement to CVS. CVS changed its name in 2005
to Sprague Devices, Inc. (hereafter referred to as CVS/Sprague). At the time
of this sale, representatives from CVS/Sprague travelled to North
Carolina
to obtain information about the design and specifications for mirrors using the
Moto Mirror Trade-mark.
(d) On
March 1, 2001 CVS/Sprague entered into a Service and Supply Agreement (Supply
Agreement) with National Seating Company, Inc. (National Seating). CVS/Sprague
and National Seating are related companies. The Supply Agreement provided for National
Seating to manufacture exterior mirrors for commercial vehicles on behalf of
CVS/Sprague and to sell those products to its customers.
(e) Every
mirror manufactured by National Seating on behalf of CVS/Sprague and sold into Canada during the
relevant period had attached to it a metal tag displaying the Moto Mirror
Trade-mark.
(f) During
the relevant period National Seating sold the trade-marked mirrors to Canadian
customers with the value of those transactions exceeding $2.8 million (U.S.D.).
II. Issue
[5]
Should
the registration of the Moto Mirror Trade-mark be expunged or amended on the
basis of non-use by Tucumcari during the relevant period?
III. Analysis
Standard
of Review and Burden of Proof
[6]
A
thorough discussion concerning the standard of review for an appeal under s. 56
of the Act can be found in the Federal Court of Appeal decision in Molson
Breweries v. John Labatt Ltd. (2000), [2000] 3 F.C. 145 at para. 51, 252
N.R. 91 (C.A.), from which
I adopt the following:
51 I think the approach in Benson
& Hedges and McDonald's Corp. are consistent with the modern
approach to standard of review. Even though there is an express appeal
provision in the Trade-marks Act to the Federal Court, expertise on the
part of the Registrar has been recognized as requiring some deference. Having
regard to the Registrar's expertise, in the absence of additional evidence
adduced in the Trial Division, I am of the opinion that decisions of the
Registrar, whether of fact, law or discretion, within his area of expertise, are
to be reviewed on a standard of reasonableness simpliciter. However,
where additional evidence is adduced in the Trial Division that would have
materially affected the Registrar's findings of fact or the exercise of his
discretion, the Trial Division judge must come to his or her own conclusion as
to the correctness of the Registrar's decision.
[7]
In
this case substantial additional evidence has been adduced on behalf of Tucumcari in the form of
the affidavit by Mr. Miller. Attached to that affidavit are the License
Agreement and the Supply Agreement which deal with control over the quality of
the mirrors associated with the Moto Mirror Trade-mark. I am satisfied that
this new evidence addresses the ambiguities in the evidence which concerned the
Registrar and would have materially affected her findings of fact on the
determinative issue of indirect control. In the result, I am required to reach
my own conclusion with respect to that issue.
[8]
In
terms of the evidence required to establish “use” under s. 44 of the Act, I
would apply the well-known statement from Philip Morris Inc. v. Imperial
Tobacco Ltd. (1987), 13 C.P.R. (3d) 289 at 293, 8 F.T.R. 310 (F.C.T.D.):
It is well established that the purpose
and scope of s. 44 is to provide a simple, summary and expeditious procedure
for clearing the register of trade marks which are not bona fide claimed
by their owners as active trade marks. The procedure has been aptly described
as one for removing "deadwood" from the register. The section does
not contemplate a determination on the issue of abandonment but rather simply
places on the registered owner of the trade mark the onus of furnishing
evidence of use in Canada or of special circumstances
excusing non-user. The registrar's decision is not one that finally determines
substantive rights but only whether the trade mark entry is liable to be
expunged under s. 44 or not. If user is relied on then the evidence filed in
response to the notice must "show" the use, or at least, sufficiently
relate the facts from which such use can be inferred. Mere statutory tracking
in the nature of a bare statement that the registrant was currently using the
trade mark in the normal course of trade in association with the wares is
insufficient to establish user unless coupled with facts that are descriptively
corroborative of the same. Evidence of a single sale, whether wholesale or
retail, in the normal course of trade may well suffice so long as it follows
the pattern of a genuine commercial transaction and is not seen as being deliberately
manufactured or contrived to protect the registration of the trade mark.
Evidence in response to a s. 44 notice should be forthcoming in quality, not
quantity, and there is no need nor justification for evidentiary overkill.
[authorities removed]
Also see Barrigar & Oyen v. Canada (Registrar
of Trade Marks) (1994), 54 C.P.R. (3d) 509 at 511, 46 A.C.W.S. (3d) 948
(F.C.T.D.).
Should
the Moto Mirror Trade-Mark be Expunged?
[9]
The
Registrar’s decision is unimpeachable on the evidence presented to her. That
evidence was found sufficient to establish use of the Moto Mirror Trade-mark in
Canada during the
relevant period in association with truck and commercial vehicle mirrors and
that part of the decision is not challenged by the Respondent. What was
lacking before the Registrar was evidence that Tucumcari had direct or indirect
control over the character or quality of those mirrors such that the licensed
use of the trade-mark would enure to the benefit of Tucumcari. The Registrar
found that the evidence of control was ambiguous, and it was.
[10]
What
Tucumcari failed to produce in the hearing below, but has produced to the Court,
is detailed affidavit evidence which specifically describes the corporate and
contractual relationships among Tucumcari, CVS/Sprague and its related company,
National Seating. Copies of the licensing and sub-licensing agreements form
part of the record before the Court.
[11]
The
central issue before me is whether the evidence is now sufficient to establish
Tucumcari’s control over the character or quality of the trade-marked wares.
[12]
The
Respondent acknowledges that sub-licensing of a trade-mark is permitted in Canada, and,
indeed, the reference to indirect control in ss. 50(1) of the Act seems to me
to be a recognition of that possibility. There appears to be little authority
which discusses what is required to establish indirect control by a registrant
over the quality of wares produced under sub-license. The Respondent argues
that, at a minimum, the sub-license agreement should explicitly be made subject
to the terms and conditions of control contained in the master licensing
agreement. In Sara Lee Corp. v. Intellectual Property Holding Co. (1998),
76 C.P.R. (3d) 71, [1997] T.M.O.B. No. 95 (QL) (T.M.O.B.) that form of contractual
linkage was held to be sufficient to meet the statutory requirement for
indirect control. Admittedly the agreements that are relied upon by Tucumcari
to establish control are not as clear as those which were considered in Sara
Lee. Nevertheless, for the purpose of meeting the requirements under s. 45
of the Act, I am satisfied that the evidence of indirect control by Tucumcari
is sufficient to meet the required threshold.
[13]
The
License Agreement between Tucumcari and CVS/Sprague deals effectively with the
issue of product quality in Article 4.01:
4.01 Licensees agree that they will
apply the Licensed Trademarks only to products which are of a quality equal to
those samples which have previously been examined and approved by Licensor.
Licensees shall deliver to Licensor at Licensees’ expense at its above address,
one sample each year of each new product being offered for sale by Licensees
under the Licensed Trademarks. Licensor shall also be entitled to verify the
quality of marked products by personally examining a representative sample
thereof, provided that any such inspection shall be accomplished during normal
business hours and in such a manner as to avoid interference with Licensees’
business. The verification of quality authorized in this section shall not
extend to destructive testing of more than one unit of each new product model
at no cost to Licensor. Licensor shall be eligible to purchase at cost any
number of additional units for testing and evaluation.
[14]
The
Supply Agreement between CVS/Sprague and National Seating provides for National
Seating to supply exterior mirrors for commercial vehicles manufactured in
accordance with the terms, conditions, quality and specifications defined by
CVS/Sprague. Article 5.1 of that agreement deals with product quality as
follows:
5.1 Quality and Specifications. All Products manufactured
and supplied by Supplier under this Agreement shall be of CVS’ approved design
and manufacture. The review or approval by CVS of any designs, engineering
drawings, quality control procedures, or any other aspect of the design and
manufacture of Products hereunder shall not relieve Supplier of the
responsibility for producing Products which comply with all applicable
provisions of Federal, state and local laws, ordinances, rules, codes and
regulations.
[15]
I
do not agree that in the context of sub-licensing the indirect control
contemplated by ss. 50(1) of the Act requires an express condition in the
sub-licensing agreement that the registrant will continue to determine whether
the quality of the wares produced has been maintained. What is required is
that the registrant be able to control product quality through the exercise of
its contractual rights vis-à-vis the intermediary which, in turn, is entitled
to control product quality under contract with the sub-licensee. So long as
there is a continuity of quality control that can be effectively maintained by
the registrant under the chain of contracts no special conditions or language are
required.
[16]
I
am satisfied that the agreements that were created among Tucumcari, CVS/Sprague
and National Seating are sufficient to establish Tucumcari’s indirect control
over the quality of the trade-marked mirrors during the relevant period.
[17]
I
also do not agree that paragraph 8 of Mr. Miller’s affidavit is as vague
or ambiguous as the Respondent contends and certainly it was open to the
Respondent to cross-examine him if it thought that clarification was required.
As I read paragraph 8 when Echlin sold its assets to CVS/Sprague in March 2000,
representatives from CVS/Sprague went to Canton, North Carolina to obtain
quality control information that was necessary to ensure continuity in the
design and quality of mirrors using the Moto Mirror Trade-mark. It is implicit
from this evidence that this information was provided by Echlin as part of the
sale of its assets. Mr. Miller further deposed that after the Supply
Agreement with National Seating was put in place mirrors using the Moto Mirror
Trade-mark were built “in accordance with drawings and manufacturing
instructions provided by Sprague Devices”. At the time of the sale of Echlin’s
assets to CVS/Sprague, Echlin sought and obtained Tucumcari’s consent to the
assignment of the License Agreement to CVS/Sprague. Echlin also advised
Tucumcari that day-to-day operations under CVS would be substantially unchanged
and that the new owner would continue to provide “the same high-quality
products and services...”. Although there is no provision in the License
Agreement that expressly authorizes sub-licensing, there is also nothing specific
to prohibit it. In any event, the evidence before me is sufficient to at least
infer that Tucumcari acquiesced to this sub-license arrangement. If an
effective trade-mark licensing arrangement can be found by implication, I see
no reason why a registrant cannot consent to a sub-licensing arrangement on the
same basis: see Wells' Dairy Inc. v. U L Canada Inc. (2000), 7 C.P.R.
(4th) 77 at paras. 38-40, 98 A.C.W.S. (3d) 189 (F.C.T.D.).
[18]
The
Respondent contends that under the License Agreement Tucumcari effectively relinquished
control over the Moto Mirror Trade-mark as part of an arrangement for the
payment of royalties culminating in the assignment of ownership of the Moto
Mirror Trade-mark after 10 years. I do not agree that the License Agreement
can be interpreted in this way. It is correct that under the License Agreement
CVS/Sprague was ultimately buying the Moto Mirror Trade-mark, but until the
agreement had been fully executed, Tucumcari retained ownership of the mark and
had a corresponding interest in preserving the goodwill which attached to it.
That is so because under Article 6.01 of the License Agreement CVS/Sprague was
required to meet all of its material obligations under the threat of termination
of the agreement and the restoration of Tucumcari’s right to the use of the
trade-mark. What is important is that Tucumcari retained the right under the
License Agreement to control the quality of the products produced under the Moto
Mirror Trade-mark including the right of annual inspection. If the products
produced by National Seating under sub-license were deficient, Tucumcari could
terminate the License Agreement with CVS/Sprague and thereby effectively bring
an end to the sub-license arrangement. This is sufficient to establish
indirect control by Tucumcari as required by ss. 50(1) of the Act.
Amendment
to Registration
[19]
Having
found that Tucumcari had failed to establish its use of the Moto Mirror
Trade-mark as required by ss. 50(1) of the Act, the Registrar ordered its
expungement. It was accordingly unnecessary for her to deal with whether the
evidence of the use of that mark was sufficient to cover all of the wares
specified in that Registration - that is, for truck and automobile mirrors.
[20]
In
my view in order to prove use there must be some evidence to show that the trade-mark
was used in association with each ware specified in the registration: see McCarthy
Tétrault v. Hilary’s Distribution Ltd. (1996), 67 C.P.R. (3d) 279,
[1996] T.M.O.B. No. 71 (QL) (T.M.O.B.). Because there is no evidence before me
of any use of the trade-mark in Canada during the relevant
period in association with automobile mirrors, the Registration must be amended
to delete that reference.
IV. Conclusion
[21]
On
the basis of the foregoing, this appeal is allowed in part with the Registration
of the Moto Mirror Trade-mark to be amended to delete the reference to
automobile mirrors.
JUDGMENT
THIS COURT ADJUDGES that this appeal is allowed, in part, with the Registration of
the Moto Mirror Trade-mark bearing No. 496,171 to be maintained in the Register
of Trade-marks but with an amendment to delete therefrom the reference to
automobile mirrors.
THIS COURT FURTHER
ADJUDGES that the Respondent pay to the Applicant the costs of this
proceeding under Column II.
“ R. L. Barnes ”
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