Docket: T-776-14
Citation:
2015 FC 128
Ottawa, Ontario, February 3, 2015
PRESENT: The
Honourable Madam Justice Bédard
BETWEEN:
|
GOUVERNEUR INC.
|
Applicant
|
and
|
THE ONE GROUP LLC
|
Respondent
|
JUDGMENT AND REASONS
[1]
This is an appeal pursuant to section 56 of the Trade-marks
Act, RSC 1985, c T-13 [the Act] arising from a decision by a Hearing
Officer of the Trade-marks Opposition Board of the Canadian Intellectual
Property Office on behalf of the Registrar of Trade-marks (the Hearing Officer).
In his decision, the Hearing Officer maintained the respondent’s trade-mark
registration, pursuant to section 45 of the Act. The sole issue before the
Registrar was whether the respondent had established special circumstances
excusing the non-use of its trade-mark. For the following reasons, the appeal
is allowed.
I.
Context
[2]
The respondent is a New York based company that
owns and operates what it describes as “high energy,
female-friendly steakhouse[s]” in the United States bearing the
trade-mark STK (the Mark). It registered the Mark in Canada on September 4, 2008, in association with the services “bar
services; restaurants” (Registration TMA 722,923).
[3]
At the applicant’s request, the Registrar issued
a notice to the respondent under subsection 45(1) of the Act. The notice required
the respondent to show use of the Mark at any time within the three year period
immediately preceding the date of the notice, or to show special circumstances
excusing non-use. The relevant period was from October 3, 2008 to October 3,
2011.
[4]
Section 45 of the Act reads as follows:
Registrar may
request evidence of user
45. (1) The Registrar may at any time and, at the written request
made after three years from the date of the registration of a trade-mark by
any person who pays the prescribed fee shall, unless the Registrar sees good
reason to the contrary, give notice to the registered owner of the trade-mark
requiring the registered owner to furnish within three months an affidavit or
a statutory declaration showing, with respect to each of the wares or
services specified in the registration, whether the trade-mark was in use
in Canada at any time during the three year period immediately preceding
the date of the notice and, if not, the date when it was last so in use and
the reason for the absence of such use since that date.
Form of evidence
(2) The Registrar shall not receive any evidence other than the
affidavit or statutory declaration, but may hear representations made by or
on behalf of the registered owner of the trade-mark or by or on behalf of the
person at whose request the notice was given.
Effect of non-use
(3) Where, by
reason of the evidence furnished to the Registrar or the failure to furnish
any evidence, it appears to the Registrar that a trade-mark, either with
respect to all of the wares or services specified in the registration or with
respect to any of those wares or services, was not used in Canada at any time
during the three year period immediately preceding the date of the notice and
that the absence of use has not been due to special circumstances that
excuse the absence of use, the registration of the trade-mark is liable
to be expunged or amended accordingly.
|
Le registraire
peut exiger une preuve d’emploi
45. (1) Le registraire peut, et doit sur demande écrite présentée
après trois années à compter de la date de l’enregistrement d’une marque de
commerce, par une personne qui verse les droits prescrits, à moins qu’il ne
voie une raison valable à l’effet contraire, donner au propriétaire inscrit
un avis lui enjoignant de fournir, dans les trois mois, un affidavit ou une
déclaration solennelle indiquant, à l’égard de chacune des marchandises ou de
chacun des services que spécifie l’enregistrement, si la marque de commerce a
été employée au Canada à un moment quelconque au cours des trois ans
précédant la date de l’avis et, dans la négative, la date où elle a été
ainsi employée en dernier lieu et la raison de son défaut d’emploi depuis
cette date.
Forme de la
preuve
(2) Le registraire ne peut recevoir aucune preuve autre que cet
affidavit ou cette déclaration solennelle, mais il peut entendre des
représentations faites par le propriétaire inscrit de la marque de commerce
ou pour celui-ci ou par la personne à la demande de qui l’avis a été donné ou
pour celle-ci.
Effet du
non-usage
(3) Lorsqu’il
apparaît au registraire, en raison de la preuve qui lui est fournie ou du
défaut de fournir une telle preuve, que la marque de commerce, soit à l’égard
de la totalité des marchandises ou services spécifiés dans l’enregistrement,
soit à l’égard de l’une de ces marchandises ou de l’un de ces services, n’a
été employée au Canada à aucun moment au cours des trois ans précédant la
date de l’avis et que le défaut d’emploi n’a pas été attribuable à des circonstances
spéciales qui le justifient, l’enregistrement de cette marque de commerce
est susceptible de radiation ou de modification en conséquence.
|
[Emphasis added]
[5]
In response to the notice, the respondent filed
the affidavit of Jonathan A. Segal, its managing member, dated April 25, 2012.
In his affidavit, Mr. Segal declared that the respondent had not been able to
open an STK establishment in Canada, specifically in Toronto, during the
relevant period. He enumerated the steps he took and the discussions he held
with different organizations to find a suitable location for the respondent’s first
STK establishment in Toronto. Among the discussions he held, Mr. Segal
mentioned discussions he had with the Gansevoort Hotel Group and the Thompson
Hotel Group, both of which had plans to open hotels in Toronto that were later aborted.
[6]
The respondent also filed the affidavit of Mr.
Michael Achenbaum, owner of the Gansevoort Hotel Group. Mr. Achenbaum stated
that he had discussions with Mr. Segal in 2008 regarding the possibility of
locating an STK bar or restaurant in the planned Gansevoort Hotel in Toronto,
and except for the Group’s decision not to proceed with their project, he
expects that an agreement with the respondent would have been reached.
II.
The decision under review
[7]
The Hearing Officer found the respondent had
established that the absence of use of the Mark was due to special
circumstances which excused the non-use of the Mark, and he maintained the
registration of the Mark.
[8]
First, the Hearing Officer outlined the general
principals applicable to section 45 proceedings. He then stated the legal test
he would apply to determine whether the respondent had established there were
special circumstances excusing non-use of the Mark.
[9]
Referencing Registrar of Trade Marks v Harris
Knitting Mills Ltd (1985), 4 CPR (3d) 488 (FCA), [1985] FCJ No 226 [Harris
Knitting], the Hearing Officer indicated that the determination of whether
special circumstances exist involves the consideration of three criteria: (1)
the length of time during which the trade-mark has not been used; (2) whether
the reasons for non-use were beyond the registered owner’s control; and (3)
whether the registered owner has a serious intention to shortly resume use of
the trade-mark. The Hearing Officer added that in Scott Paper Ltd v Smart
& Biggar, 2008 FCA 129, 65 CPR (4th) 303 [Scott Paper], the
Federal Court of Appeal stated that the second criterion was mandatory. As a
result, although the two other criteria are relevant, they could not by
themselves constitute special circumstances. Finally, referencing John
Labatt Ltd v Cotton Club Bottling (1976), 25 CPR (2d) 115, [1976] FCJ No 11
(FCTD) [John Labatt cited to FCJ], the Hearing Officer noted that the
reason for non-use of the Mark should be “unusual,
uncommon or exceptional”.
[10]
The Hearing Officer then proceeded to analyze
the evidence with respect to each criterion.
[11]
Regarding the length of non-use, he determined that
since the respondent had never used the Mark, its date of registration would
serve as the relevant starting date of non-use. Since the Mark was registered
on September 4, 2008 and the section 45 notice was issued on October 3, 2011,
he found that the period of non-use was relatively short.
[12]
Regarding the second criterion he applied, the Hearing
Officer concluded that the non-use of the Mark was attributable to
circumstances beyond the respondent’s control.
[13]
The Hearing Officer noted that Mr. Segal was attributing
the non-use of the Mark to special circumstances beyond the respondent’s control,
and referenced specifically the two aborted hotel projects of the Gansevoort Hotel
Group and the Thompson Hotel Group. He also noted the corroborative evidence
provided in Mr. Achenbaum’s affidavit.
[14]
The Hearing Officer acknowledged that poor or
unfavourable market conditions were generally not considered special
circumstances excusing non-use. However, he found that the respondent had been
proactive and diligent in its efforts to secure a location for an STK bar and
restaurant in Canada, and these efforts were consistent with the legislative
intent of allowing a reasonable amount of time to commence commercial use of
the Mark.
[15]
Therefore, the Hearing Officer accepted the
respondent’s assertion that its inability to secure a location and use the trade-mark
did not result from a deliberate choice, but rather, it resulted from the decisions
of the Gansevoort Hotel Group and the Thompson Hotel Group not to proceed with
their projects.
[16]
The Hearing Officer added that the cumulative
nature of the circumstances made them “unusual,
uncommon, and exceptional” and qualified as “circumstances
not found in most cases of absence of use of the mark” (citing Scott
Paper at para 22). Concluding his remarks on this point, the Hearing
Officer expressed the view that given the nature of the services involved and
the relatively short timeframe, the circumstances in this case were akin to
those where the loss of a distributor or comparable link in the chain of
commerce were accepted as constituting circumstances excusing non-use for a
certain period of time. He relied on Ridout & Maybee v Sealy Canada
Ltd/Ltée (1998), 83 CPR (3d) 276, [1998] TMOB No 76 [Ridout]; Sim
& McBurney v Hugo Boss AG (1996), 67 CPR (3d) 269, [1996] TMOB No 64 [Hugo
Boss]; Wolfe & Bazinet v Labelmasters Canada (1995), 60 CPR (3d)
106, [1995] TMOB No 26 [Labelmasters cited to CPR]; and Rogers,
Bereskin & Parr v Canada (Register of Trade Marks) (1987), 17 CPR (3d)
197, [1987] FCJ No 863 (FCTD) [Rogers, Bereskin & Parr].
[17]
Turning to the third criterion, the Hearing
Officer was satisfied that the respondent had established its intention to
shortly begin using the Mark. The Hearing Officer noted that Mr. Segal’s
affidavit evidenced the respondent’s diligent and continued efforts to open an
STK bar and restaurant in Canada. He was satisfied that those efforts
demonstrated a serious intention to commence use of the Mark. Further, he indicated
that although Mr. Segal equivocated somewhat by referring to a “hopeful” date of use in 2012 or 2013, this constituted
a reasonable timeframe in the circumstances. He added that this equivocation did
not detract from the totality of the evidence which established that the
respondent did have a serious intent to commence use of the Mark in Canada. Nevertheless, he added that while the circumstances excused the absence of use of
the Mark, they would not excuse it over a much longer period.
III.
Issue and standard of review
[18]
The only issue raised in this application is
whether the Hearing Officer’s decision is reasonable. No additional evidence
was filed before this Court, and the parties submitted, and I agree, that the
decision is to be reviewed under the reasonableness standard of review (Ridout
& Maybee LLP v Hj Heinz Company Australia Ltd, 2014 FC 442 at para 27,
[2014] FCJ No 505; Brouillette Kosie Prince v Great Harvest Franchising,
2009 FC 48 at para 23, [2009] FCJ No 76).
IV.
Submissions of the parties
A.
The applicant’s arguments
[19]
The applicant argues that the Hearing Officer erred
in his interpretation of both the legal principles and the evidence.
[20]
First, the applicant argues that the Hearing
Officer applied the wrong legal test to determine whether the respondent had
established special circumstances. The applicant submits that a finding of special
circumstances that excuse non-use involves a two step analysis. The first step
involves a determination as to whether the non-use was caused by special
circumstances. If the Hearing Officer finds that the non-use of the Mark is
caused by special circumstances, he must then determine whether those
circumstances excuse the non-use and to make that determination, he must examine
the three criteria enunciated in Harris Knitting. The applicant submits that
the Hearing Officer conflated the determination of special circumstances with
the question of whether the circumstances were beyond the respondent’s control,
which is only relevant in the second step of the analysis.
[21]
Second, the applicant argues that the evidence
could not reasonably support a finding that the non-use of the Mark was due to
circumstances that were exceptional or uncommon. The applicant relies on Mr.
Segal’s own statement that the process of implementing an STK bar and
restaurant is usually long (between two to four years). Accordingly, the
applicant submits that there was nothing unusual in the process the respondent
followed to open a bar and restaurant in Canada, and that these types of delays
were normal and common. Moreover, while the Hearing Officer noted that
difficult market conditions are not considered special circumstances, it was difficult
market conditions which, according to the respondent, caused its failure to
open a location. On this point, the applicant insists on Mr. Segal’s statement
at paragraph 17 of his affidavit that the hotels were never built “in the current bad economy”.
[22]
Third, the applicant argues that the Hearing
Officer also made an unreasonable finding when he concluded that the
respondent’s failure to open an STK bar and restaurant during the relevant
period, was attributable to factors outside its control rather than to its
deliberate choices. The applicant submits that the evidence shows that the
failure to use the Mark was attributable to the respondent’s deliberate
commercial strategy and business decisions regarding the implementation of its
STK bar and restaurant in Canada. The respondent wanted a location that
corresponded to very specific criteria; this strategy made it more time
consuming and difficult for the respondent to secure a suitable location. There
was nothing beyond its control.
[23]
The applicant relied on Johnston Wassenaar LLP
v George V Eatertainment, 2012 TMOB 136, [2012] TMOB No 5136 [Johnston
Wassenaar], in which the Registrar determined, in very similar
circumstances, that the absence of use of the trade-mark was due to deliberate business
decisions that the registrant made in following its strategy to penetrate the
Canadian market. Therefore, the circumstances could not excuse the absence of
use.
B.
The respondent’s arguments
[24]
The respondent argues that the Hearing Officer’s
decision is reasonable in that it is clear, intelligible, and it falls within
the range of valid possible outcomes in view of the facts and the law.
[25]
First, the respondent submits that the Hearing
Officer did not err in his statement of the applicable legal test. More specifically,
although the Hearing Officer applied the three criteria from Harris Knitting,
he was also mindful that special circumstances excusing non-use need to be
unusual, uncommon or exceptional. Further, it is also clear that the Hearing
Officer understood that the second criterion – reasons for non-use were beyond
the owner’s control – was mandatory (as required by Scott Paper). For
each of the three criteria, the Hearing Officer properly considered and weighed
the relevant evidence and came to conclusions that are within his expertise and
that are reasonable.
[26]
Second, the respondent submits that although the
applicant’s arguments are couched in the language related to the reasonableness
standard of review, in substance, the applicant is asking the Court to reweigh
the evidence and review the decision under the correctness standard of review.
The respondent adds that each case turns on its own facts, and even if another
possible outcome could have been reached from the same factual matrix, it is
not determinative as to whether the Hearing Officer’s decision falls within the
range of acceptable outcomes.
[27]
In the respondent’s view, it was entirely reasonable
for the Hearing Officer, based on the evidence, to conclude that the reasons
for the absence of use were attributable to the Gansevoort Hotel Group and the
Thompson Hotel Group deciding to cancel their projects. The respondent states
it had no control over these decisions, and it was put in a situation where it
had to start over on a two to four year process, to secure another location.
Therefore, it was reasonable for the Hearing Officer to conclude that those
circumstances were beyond its control. Further, the respondent states that the
situation in this case is different from a situation where, as in Johnston
Wassenaar, it was the registrant itself that failed to open a location due
to poor market conditions. In the specific context of this case, the respondent
alleges that it was reasonable for the Hearing Officer to compare its situation
to that where a registrant loses a distributor.
[28]
The respondent also submits that there was an evidentiary
basis for the Hearing Officer’s findings that the length of the period of
non-use was relatively short, and that it had showed its intention to commence
use shortly.
[29]
Finally, the respondent notes that the Hearing
Officer properly considered the legislative intent and purpose of section 45 of
the Act, which is to clear “deadwood” from the
register, and not to expunge active trade-marks. The Hearing Officer was alive
to the fact that section 45 proceedings are meant to be summary and
expeditious, and as such, the evidentiary threshold is quite low. The
respondent adds that special circumstances under subsection 45(3) of the Act
should encompass circumstances where a registrant is actively following its business
model to implement a business and start using its trade-mark, even though its strategy
takes longer than three years to produce results, especially when the period of
non-use is relatively short.
V.
Analysis
[30]
Since the applicant questions the Hearing
Officer’s understanding of the law, it is useful to review the relevant legal
principles. The purpose of section 45 of the Act was articulated in Philip
Morris v Imperial Tobacco Ltd (1987), 8 FTR 310, 13 CPR (3d) 289 at 293
(FCTD):
It is well established that the purpose and
scope of s. 44 [now s. 45] 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 [sic]. 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.
Under subsection 45(3) of the Act, a trade-mark
that has not been used in the relevant three year period will be expunged unless
the registrant can establish that the absence of use is attributable to special
circumstances that excuse the non-use. The guiding principles in assessing
whether special circumstances exist and whether they can excuse non-use were
enunciated in John Labatt, Harris Knitting and Scott Paper.
[31]
In John Labatt, at para 29, the Court
stated that special circumstances “means circumstances
that are unusual, uncommon or exceptional”.
[32]
In the following excerpt from Harris Knitting,
492-93, the Federal Court of Appeal enunciated the guiding principles of an
assessment under subsection 45(3) of the Act:
Under section 44 [now section 45], where it
appears from the evidence furnished to the Registrar that the trade mark is not
in use, the Registrar must order that the registration of the mark be expunged
unless the evidence shows that the absence of use has been "due to special
circumstances that excuse such absence of use". The general rule is thus
that absence of use of a mark is penalized by expungement. For an exception to
be made to this rule, it is necessary, under subsection 44(3), for the
absence of use to be due to special circumstances that excuse it. With
regard to this provision, it should be noted first that the circumstances it
mentions must excuse the absence of use in the sense that they must make it
possible to conclude that, in a particular case, the absence of use should not
be "punished" by expungement. These circumstances must be
"special" [See John Labatt v. Cotton Club Bottling Co, 25 CPR
(2d) 115.] in that they must be circumstances not found in most cases of
absence of use of a mark. Finally, these special circumstances that excuse
the absence of use must, under subsection 44(3), be circumstances to which
the absence of use is due. This means that in order to determine whether
the absence of use should be excused in a given case, it is necessary to
consider the reasons for the absence of use and determine whether these reasons
are such that an exception should be made to the general rule that the
registration of a mark that is not in use should be expunged. I would add,
finally, that the absence of use that must thus be excused is the absence of
use before the owner receives the notice from the Registrar.
It is impossible to state precisely what
the circumstances referred to in subsection 44(3) must be to excuse the absence
of use of a mark. The duration of the absence of use and the likelihood it will
last a long time are important factors in this regard, however;
circumstances may excuse an absence of use for a brief period of time without
excusing a prolonged absence of use. It is essential, as well, to know to
what extent the absence of use is due solely to a deliberate decision on the
part of the owner of the mark rather than to obstacles beyond his control.
It is difficult to see why an absence of use due solely to a deliberate
decision by the owner of the mark would be excused.
[Emphasis added]
[33]
In Lander Co v Alex MacRae and Co (1993),
46 CPR (3d) 417 at 420, [1993] FCJ No 115 (FCTD) [Lander], Justice
Rouleau canvassed the principles enunciated in Harris Knitting as a
three-criteria test:
The applicable test, when dealing with
special circumstances justifying non-use of a trade mark, can be found in Registrar
of Trade marks v. Harris Knitting Mills Ltd. (1985), 4 C.P.R. (3d) 488, 5
C.I.P.R. 53, 60 N.R. 380 (F.C.A.). Three very important criteria must be
considered. First, the length of time during which the trade mark has not been
in use; secondly, it must be determined whether the registered owner's reasons
for not using its trade mark were due to circumstances beyond his control;
thirdly, one must find whether there exists a serious intention to shortly
resume use.
That three-criteria test has since been
referenced and applied on numerous occasions as the test to assess whether
special circumstances excusing non-use of a trade-mark exist.
[34]
In Scott Paper, the issue was whether the
third criterion alone—the intention to resume use of a trade-mark—was
sufficient to amount to special circumstances excusing the absence of use. The
Federal Court of Appeal answered negatively, and it outlined the evolution of
the law from the test enunciated in Harris Knitting to its expression as
a three-criteria test in Lander. The Court explained its reading of the
principles set out in Harris Knitting, and it departed from the way
those principles were canvassed in Lander. The Federal Court of Appeal
enunciated, at paragraph 22 of its judgment, the following four guiding
principles:
22 The conclusions to be drawn from
this analysis are, it seems to me, the following:
1- The general rule is that absence of use is penalized by
expungement.
2- There is an exception to the general rule where the
absence of use is due to special circumstances.
3- Special circumstances are circumstances not found in most
cases of absence of use of the mark.
4- The special circumstances which excuse the absence of use
of the mark must be the circumstances to which the absence of use is due.
[35]
Further, at para 31, the Federal Court of Appeal
distinguished between explaining an absence of use and excusing it:
31 It is important to distinguish
between explaining an absence of use and excusing an absence of use. Under
subsection 45(3) "special circumstances" refers to the explanations
offered for the absence of use. On the other hand, to excuse the absence of use
is to attenuate the consequences of the absence of use. Whether or not a
trade-mark is expunged is a function of the explanation offered for the non-use
(the special circumstances) and of the characteristics of the period of
non-use. The Senior Hearing Officer's error consisted of ignoring the
explanation and treating one aspect of the circumstances of not use, the
intention to resume use, as special circumstances.
[36]
I understand from this review that the
principles outlined both in Harris Knitting and Scott Paper are
complementary and lead to a three-step analysis that the Registrar must conduct
in order to determine whether special circumstances excuse non-use in a given
case.
[37]
First, he must identify the reason, the
explanation for the non-use of a trade-mark. Put another way, the Registrar
must determine, in light of the evidence, why the registrant did not use its trade-mark
during the three year period.
[38]
The Registrar must then enquire as to whether the
circumstances that explain the non-use constitute “special
circumstances”. In order to be considered “special”,
the circumstances must be circumstances not found in most cases of non-use.
They must be uncommon, unusual or exceptional.
[39]
Third, if the Registrar is satisfied that non-use
of the trade-mark is due to “special circumstances”,
he must then determine whether those “special
circumstances” excuse the non-use. To excuse the absence of use, the
special circumstances must be such that, in that particular case, the trade-mark
should not be expunged. To decide on that question, the Registrar must consider
three criteria: the length of the non-use, whether the registrant has an
intention to shortly resume use and, most importantly, whether the absence of
use was attributable to circumstances beyond the registrant’s control. This
last factor is mandatory.
[40]
The applicant argues that the Hearing Officer
did not state and apply the correct legal test. I recognize that the Hearing
Officer stated he would apply the test enunciated in Harris Knitting as
it was expressed in Lander, and that he did not ask himself first
whether the non-use of the mark was attributable to circumstances which could
qualify as “special circumstances”, as prescribed
by Scott Paper. Nonetheless, it appears from his decision that he considered
the principles enunciated in Scott Paper and John Labatt. The
Hearing Officer assessed whether the circumstances were unusual, uncommon or
exceptional, but he made this assessment within his analysis of whether the circumstances
of non-use were attributable to circumstances beyond the respondent’s control.
Accordingly, I am of the view that the Hearing Officer erred in the manner in
which he expressed the applicable test, but this error is not determinative
since he discussed the relevant elements.
[41]
However, I consider that the Hearing Officer’s
application of the criteria, in light of the evidence, was unreasonable and
justifies the Court’s intervention.
[42]
I acknowledge that the Court’s role when
reviewing the Registrar’s decision is not to substitute its own appreciation of
the evidence to that of the Tribunal (Canada (Citizenship and Immigration) v
Khosa, 2009 SCC 12 at para 59, [2009] 1 S.C.R. 339), but in my view, and for
the reasons set out below, the evidence taken as a whole, does not support the
Hearing Officer’s findings and does not provide an acceptable basis for his
decision (WW Lester (1978) Ltd v United Association of Journeymen and Apprentices
of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644 at
para 50, [1990] SCJ No 127; Toronto Board of Education v Ontario Secondary
School Teachers’ Federation, District 15, [1997] 1 S.C.R. 487 at para 45,
[1997] SCJ No 27 [Toronto Board of Education]; Kanthasamy v Canada
(Citizenship and Immigration), 2014 FCA 113 at para 99, [2014] FCJ No 472.
[43]
In the case at bar, the unreasonableness of the
Hearing Officer’s decision can only be understood upon conducting a review of
the evidence on record. The following comments from Justice Cory in Toronto
Board of Education directly apply to this case:
47 In order to decide whether a
decision of an administrative tribunal is patently unreasonable, a court may
examine the record to determine the basis for the challenged findings of fact
or law made by the tribunal. As Gonthier J., writing for the majority in National
Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, at p.
1370, observed "[i]n some cases, the unreasonableness of a decision may be
apparent without detailed examination of the record. In others, it may be no
less unreasonable but this can only be understood upon an in-depth
analysis." In Lester, supra, this Court conducted a
review of the record to determine if there was any evidence which could reasonably
support a particular factual finding made by a labour relations board.
48 Therefore, in those
circumstances where the arbitral findings in issue are based upon inferences
made from the evidence, it is necessary for a reviewing court to examine the evidence
that formed the basis for the inference. I would stress that this is not
to say that a court should weigh the evidence as if the matter were before it
for the first time. It must be remembered that even if a court disagrees with
the way in which the tribunal has weighed the evidence and reached its
conclusions, it can only substitute its opinion for that of the tribunal
where the evidence viewed reasonably is incapable of supporting the tribunal's
findings.
[Emphasis added]
[44]
In the first step of the analysis, the Hearing
Officer needed to identify the reason, the explanation for the absence of use
of the Mark. He determined the respondent had been proactive and diligent in
trying to secure a location, and he found that its inability to find a location
for an STK establishment resulted from the decisions of the Gansevoort Hotel Group
and the Thompson Hotel Group not to proceed with their hotel projects in Toronto.
[45]
I consider that the evidence cannot reasonably
support a finding that the non-use of the Mark was attributable to the
decisions made by the Gansevoort Hotel Group and the Thompson Hotel Group.
[46]
During the relevant period, the respondent had
discussions with several organizations. The evidence shows that the Gansevoort
Hotel Group and the Thompson Hotel Group were two out of several organizations
with which the respondent held discussions. Further, the evidence shows that
the discussions with these two groups occurred at the beginning of the three
year relevant period.
[47]
The discussions that Mr. Segal had with the
Gansevoort Hotel Group started seven months before the beginning of the relevant
period, and the evidence is not clear regarding the end date of these
discussions. However, one can infer from other statements contained in Mr.
Segal’s affidavit that these discussions were terminated—or at least that Mr.
Segal understood that they would not lead to an agreement—in May 2009, when he began
negotiations with Ocean Port Management Ltd.
[48]
The discussions Mr. Segal had with the Thompson Hotel
Group, for their part, took place in October and November 2009, and they were
likely finished by December 2009 when Mr. Segal commenced discussions with
the Westmont Hospitality Group of Toronto.
[49]
Therefore, the discussions the respondent had
with both groups were likely completed by the end of the first year of the
relevant period. Moreover, the evidence does not indicate whether agreements
were reached or were close to being reached when both groups decided not to go
forward with their respective projects.
[50]
In addition and as I indicated earlier, the
evidence establishes that the discussions the respondent held with the
Gansevoort Hotel Group and the Thompson Hotel Group were followed by several discussions
with other organizations. However, the evidence is vague and general as to why
these discussions did not lead to agreements. In his affidavit, Mr. Segal
limited himself to stating that the search for a location had fallen short for
various reasons. He indicated as an example that in one instance, the hotel in
which it was to open an establishment was never built due to the bad economy,
whereas in other instances, parties could not agree on terms of leases. I
understand from this that aside from the discussions he had with the Gansevoort
and the Thompson Hotel Groups, the discussions Mr. Segal held with various other
organizations did not lead to agreements because the parties could not reach an
agreement for unexplained reasons.
[51]
I acknowledge that the evidentiary burden in
section 45 proceedings is not very high, but one must keep in mind that
expunging a trade-mark that has not been used during the relevant period is the
general principle, while maintaining the registration of such a trade-mark is
an exception. Accordingly, the evidence must be sufficient and sufficiently
detailed to allow the assessment of the factors set forth in the jurisprudence.
[52]
In Plough (Canada) Ltd v Aerosol Fillers (1980)
53 CPR (3d) 62 at 66, [1980] FCJ No 198 (FCA) [Plough], Chief Justice
Thurlow, writing for the Federal Court of Appeal, expressed as follows the need
to inform the Registrar in detail of the situation prevailing regarding the
use:
What subsection 44(1) [now 45(1)] requires
is an affidavit or statutory declaration not merely stating but
"showing", that is to say, describing the use being made of the trade
mark within the meaning of the definition of trade mark in section 2 and of use
in section 4 of the Act. The subsection makes this plain by requiring the
declaration to show with respect to each of the wares and services specified in
the registration whether the trade mark is in use in Canada and if not the date
when it was last used and the reason for the absence of such use since that
date. The purpose is not merely to tell the Registrar that the registered
owner does not want to give up the registration but to inform the Registrar
in detail of the situation prevailing with respect to the use of the trade mark
so that he, and the Court on appeal, can form an opinion and apply the
substantive rule set out in subsection 44(3). There is no room for a dog in
the manger attitude on the part of registered owners who may wish to hold on to
a registration notwithstanding that the trade mark is no longer in use at all
or not in use with respect to some of the wares in respect of which the mark is
registered.
[Emphasis added]
[53]
In 88766 Canada Inc v Monte Carlo Restaurant
Ltd, 2007 FC 1174 at para 8, [2007] FCJ No 1527, Justice Pinard indicated
that “[t]he special circumstances in section 45 create
an obligation on the Registrar to ensure that the evidence adduced is solid and
reliable”. In Jose Cuervo SA de CV v Bacardi & Co, 2009 FC
1166 at para 56, [2009] FCJ No 1469, aff’d 2010 FCA 248, [2010] FCJ No 1208,
Justice Kelen reiterated that “[a] plea of special
circumstances that excuse non-use must be substantiated with reliable evidence
of sufficient specificity and detail so that the registrant assertions may have
an evidentiary foundation”.
[54]
In the context of the case at bar, I consider
that the evidence submitted by the respondent is neither sufficient nor
specific enough to support a finding that the non-use of the Mark was
attributable to decisions made by third-parties. The most favourable inference
I can draw from the evidence, and that is without taking into consideration the
lack of details regarding the evidence about the discussions Mr. Segal had with
the Gansevoort Hotel Group and the Thompson Hotel Group, is that at the
beginning of the relevant period, the respondent had discussions with two
potential landlords who decided to abandon their respective projects. However,
I consider that when taken as a whole, including the discussions Mr. Segal had
with other organizations that did not produce results for unexplained reasons,
the evidence cannot reasonably support a finding that the reason for non-use of
the Mark during the relevant period was attributable to the decisions made by
the Gansevoort Hotel Group and the Thompson Hotel Group.
[55]
Regarding the second step of the analysis, the
Hearing Officer found that the circumstances explaining the absence of use were
“special circumstances”, that is to say the
cumulative nature of the circumstances made them unusual, uncommon and
exceptional. With respect, I consider that the evidence could not reasonably
support that finding.
[56]
First and as mentioned earlier, the discussions
with the Gansevoort Hotel Group and the Thompson Hotel Group were followed by
discussions with several other organizations that did not lead to agreements
for unexplained reasons.
[57]
Second, it is clear from the evidence that the
respondent’s business model for opening new STK establishments involves a long
process. In his affidavit, Mr. Segal indicated that it often takes years to
identify the correct location and negotiate with landlords and that opening an
STK establishment is the result of a process that can take several years. He
stated that the search and negotiation took two years with respect to the
establishments in New York and Los Angeles, three years for the establishments
in Miami and Atlanta and four years for the establishment in Las Vegas.
[58]
It is clear from Mr. Segal’s evidence that there
was nothing uncommon, unusual or exceptional in the fact that the respondent
had not been able to secure a location that it found suitable to establish an
STK bar and restaurant in the three year relevant period. In his affidavit, Mr.
Segal himself stated that it was not surprising that “it
has been over 3 years of searching and failed negotiations in Canada”.
[59]
Accordingly, I find the evidence is insufficient
to support a finding that the cumulative nature of the circumstances explaining
the absence of use of the Mark made them uncommon, unusual or exceptional.
[60]
The Hearing Officer found that the respondent’s efforts
were consistent with Parliament’s intent to afford a reasonable amount of time
to commence use in Canada. However, it is worth noting that Parliament saw that
a three year period to commence use of a mark was a sufficient start-up period.
Beyond that period, in order to avoid expungement, there must be something out
of the ordinary to explain the non-use. The fact that a given business model
requires a longer start-up period is not per se a circumstance that is uncommon,
unusual or exceptional, nor a circumstance that is not seen in most cases of
non-use.
[61]
Considering my conclusion regarding the Hearing
Officer’s finding with respect to “special
circumstances”, I need not pursue the analysis further to determine
whether the circumstances could excuse the non-use of the Mark. However, I
consider that the analysis is relevant because it relates to the Hearing
Officer’s main conclusion and my analysis stems from my previous conclusions.
[62]
The Hearing Officer concluded that the
circumstances explaining the non-use of the Mark were beyond the respondent’s
control. He added that considering the types of services and the relatively
short period of non-use, the circumstances were akin to those where the loss of
a distributor or a comparable link in the chain of commerce were accepted as
constituting circumstances excusing non-use for a certain period of time.
[63]
For the reasons I expressed with respect to the
first step of the analysis, I am of the view that the evidence does not
reasonably support a finding that the circumstances explaining non-use of the
Mark were beyond the respondent’s control.
[64]
As I indicated earlier, aside from the
discussions the respondent had with the Gansevoort and the Thompson Hotel Groups,
we do not know why the negotiations with the other entities did not lead to
agreements. As for the discussions with the Gansevoort Hotel Group and the Thompson
Hotel Group, as previously stated, the evidence does not indicate whether the
parties were close to reaching an agreement when the hotel projects were
cancelled, and these discussions took place in the first year of the three year
period. Accordingly, the respondent still had ample time to continue its search
and undertake discussions with other organizations. Mr. Segal’s affidavit shows
that the respondent did indeed meet with several other organizations after the
failed negotiations with the Gansevoort Hotel Group and the Thompson Hotel
Group. Therefore, I do not think that the evidence, taken as a whole, could
reasonably support a finding that the respondent’s failure to commence use of
its trade-mark was attributable to circumstances beyond its control.
[65]
On the contrary, I agree with the applicant that
those circumstances were attributable to business decisions and choices that
the respondent made and which, while legitimate, cannot be said to be beyond
the respondent’s control.
[66]
I also find it difficult to draw a parallel
between the circumstances of this case and those in Ridout, Hugo Boss,
Labelmasters and Rogers, Bereskin & Parr, on which the
Hearing Officer relied.
[67]
First, these decisions were all rendered before
the Federal Court of Appeal determined in Scott Paper, that the factor
relating to the circumstances being beyond the registrant’s control was
mandatory. Second, the circumstances in those cases were distinct from the
circumstances in this case.
[68]
In Ridout, the Registrar refused to
expunge Sealy’s FANTASY trade-mark, which was registered for use with mattresses
and box springs. The evidence established that for a period of 8 years, the FANTASY
line of mattresses and box springs had been sold through an exclusive retailer,
Eaton’s, but that the agreement with Eaton’s had ended in November 1993. The
evidence was silent as to why the agreement with Eaton’s came to an end. However,
the evidence showed that the registrant had attempted to locate another retail
partner, and it reached an agreement with The Brick just before the end of the
three year period. It was also established that use of the trade-mark had
resumed shortly after the end of that period.
[69]
The Registrar concluded that the termination of
the agreement with Eaton’s had a disruptive effect on the use of the mark and it
constituted circumstances beyond the registrant’s control that would excuse use
for a certain period. He also concluded that the criterion related to intention
to resume use of the mark was met, given that a distributor had been found
before the end of the relevant period and use of the mark had resumed shortly thereafter.
[70]
That decision was challenged before this Court (Ridout
& Maybee v Sealy Canada Ltd, (1999) 171 FTR 69, 87 CPR (3d) 307 (FC)).
Justice Lemieux upheld the Registrar’s decision based on the Registrar’s finding
regarding the intention to resume use. However, it is clear from Justice
Lemieux’s decision that he found the evidence insufficient to support the
Registrar’s finding that the circumstances of non-use were beyond the
registrant’s control, because the evidence lacked details and specificity. The
following excerpt of Justice Lemieux’s judgment is interesting:
40 The second required test is that
non-use must be beyond the control of the registered owner. Here, I also agree
with counsel for the appellant that Mr. Dunlop's affidavit does not establish
that non-use was beyond Sealy's control. Mr. Dunlop's affidavit speaks to the
termination of the exclusive retail partnership with Eaton's in November 1993
and Sealy's efforts to find another retail partner for continuous talks with
Eaton's with a view to re-establishing the previous retail partnership, efforts
hampered by economic downturn.
41 In my view, Mr. Dunlop's
affidavit does not meet the test in Plough Canada (supra). It
lacks details and specificity; what it does not say is also important. Mr.
Dunlop's affidavit does not say, for example, who terminated (Sealy or Eaton's)
the exclusive arrangement and the reasons for the termination. Mr. Dunlop's
affidavit does not say why Sealy could not continue to market FANTASY
mattresses and box springs to other retail outlets during the period of
non-use. Three years or more of non-manufacturing and sale is a very long
period for a manufacturer. Mr. Dunlop's affidavit does not give details of
on-going new product development activities nor does it detail the nature of
the continuous talks with Eaton's or another new retail partner. Sealy does not
say if it continued to manufacture and sell mattresses and box springs under a
product line other than FANTASY.
[…]
43 The onus was on Sealy to so
demonstrate. In my view, Sealy did not establish that its decision not to use
the FANTASY mark was not a voluntary one. In this respect, this case is similar
to the decision of Richard J. (as he then was) in Service Intelpro v.
Fiorucci S.p.A. (1995), 60 C.P.R. (3d) 464 (F.C.T.D.).
44 In my view, in terms of the second
factor, the Registrar erred in finding that Sealy's non-use was beyond its
control. He did not have before him sufficient evidence to enable him to make
that determination.
[Emphasis added]
[71]
Considering Justice Lemieux’s conclusion that
the non-use was not due to circumstances beyond the registrant’s control, I do
not see how the Ridout case can be of any support to the Hearing Officer’s
decision. On the contrary, I find that the case has numerous similarities with the
case at bar, and that the Court’s judgment outlines the importance for a
registrant to provide detailed evidence to support an allegation of special
circumstances that excuse non-use.
[72]
In Hugo Boss, the circumstances were
different from those in the present instance. First, the registrant had
purchased the trade-mark 29 months after the beginning of the three year period,
and the Registrar considered that the period of non-use to be assessed should
start from the date of the acquisition of the mark. Therefore, the period of
non-use was only seven months, and not three years as in this case. Further,
unlike the case at bar, the Registrar stated that the registrant filed an
affidavit in which the affiant detailed the steps and difficulties that
the registrant encountered in its search to find a supplier with sufficient
manufacturing capability to meet the demand of the product and the registrant’s
quality standards. The evidence also showed that the registrant found a supplier
shortly after having received the section 45 notice, and it had effectively
commenced use of the trade-mark a few months after the notice date. Therefore,
the Registrar was satisfied that the registrant had shown an absence of use for
a short period and a serious intention to resume use, and that the delay in
commencing use of the trade-mark was beyond its control.
[73]
The Labelmasters case also does not
support the Hearing Officer’s decision: it is not a case where the loss of a
distributor was accepted as circumstances excusing non-use. In Labelmasters,
the registrant had suspended use of its mark pending the outcome of litigation
with its distributor. While the Hearing Officer said that the loss of a
distributor “could conceivably constitute special
circumstances excusing non-use” (at para 108), the Officer went on to
reject that possibility on the facts of the case. The Officer found that the
non-use was due to the registrant’s voluntary decision not to appoint another
distributor. Therefore, nothing in the facts of Labelmasters supports
the Hearing Officer’s decision in the case at bar.
[74]
In Rogers, Bereskin & Parr,
the Court concluded that the Registrar’s decision to maintain a registration was
reasonable. The explanation for a two and one-half year period of non-use was
based on poor market conditions and on the need to renovate a production
facility. The Court concluded that the facts setting out the explanation for non-use
were specific and satisfied the requirements of subsection 44(3) [now 45(3)]
and the Plough decision. However, as stated earlier, in the case at bar,
the evidence adduced before the Hearing Officer did not contain sufficient
details to justify such a finding.
[75]
By contrast, I agree with the applicant that the
context of this case is similar to that in Johnston Wassenaar, where the
Registrar found no special circumstances excusing non-use. In that case, the evidence
established that the absence of use was due to the registrant’s failure to
secure licensees of the mark and suitable Canadian locations for its
restaurants and hotels. In one instance, the registrant had entered into
negotiations, but due to difficult economic times, had been unable to conclude
an agreement. In another instance, the proposed project involved restorations
and renovations that were refused by the Government of Quebec. The registrant alleged
that the project remained active; however the registrant had not provided
details on its progress. Even with two negotiated agreements that did not
materialize for reasons beyond the registrant’s control, the Registrar declined
to characterize the circumstances as circumstances beyond the registrant’s
control. She found that the absence of use of the trade-mark resulted from
deliberate business decisions. The Registrar added that “it is difficult to see why an absence of use due solely to
deliberate decisions by the owner of a trade-mark to find suitable licensees
and locations for its establishments would be excused” (at para 13). The
Registrar also found that the registrant’s evidence regarding its intention to
shortly resume use was vague and insufficient.
[76]
I acknowledge that each case turns on its own
facts but there are numerous similarities between the circumstances in Johnston
Wassenaar and those of this case. Moreover, in Johnston Wassenaar,
even though there was evidence that the registrant had reached agreements to
use its trade-mark, which is not the case here, the Registrar refused to
conclude that the reasons for non-use were special circumstances excusing the
non-use.
[77]
I also consider that there was little evidence to
support the Hearing Officer’s finding that the respondent has established its
intention to shortly resume use. The relevant period went from October 3, 2008
to October 3, 2011 and the notice was delivered on October 3, 2011. The
evidence establishes that six months following the section 45 notice, the
respondent had still not reached any agreement regarding a potential location
for an STK establishment. In his affidavit of April 25, 2012, Mr. Segal stated
that he was merely “hopeful” that an agreement
would be reached and that the respondent could commence use of the trade-mark
in late 2012 or early 2013. At best, the evidence shows a possibility that use
of the Mark would commence more than one year after the end of the relevant
period. In my view, such a context is far from that in Ridout, Hugo
Boss and Rogers, Bereskin & Parr.
[78]
For all of these reasons, I consider that, in
the specific circumstances of this case, the outcome reached by the Hearing
Officer is not defensible in respect of the facts and the law (Dunsmuir v
New Brunswick, 2008 SCC 9 at para 47-49, [2008] 1 S.C.R. 190).
[79]
For all of these reasons, the appeal will be
allowed.