Date: 20100305
Docket: T-1054-09
Citation: 2010 FC 260
Ottawa, Ontario, March 5,
2010
PRESENT: The Honourable Mr. Justice Martineau
BETWEEN:
COBALT BRANDS, LLC
Applicant
and
GOWLING
LAFLEUR HENDERSON LLP
Respondent
REASONS FOR JUDGMENT AND JUDGMENT
[1]
The
applicant, Cobalt Brands LLC (Cobalt), appeals the decision of the Registrar of
Trade‑Marks (the Registrar) to expunge from the Trade-Mark register (the
register), registration number TMA219908 for the USQUAEBACH trade-mark and
design (the USQUAEBACH mark) as a result of the applicant’s failure to file
evidence of use pursuant to subsection 45(3) of the Trade‑marks Act,
R.S.C. 1985, c. T-13, as amended (the Act).
[2]
For
the reasons that follow, the appeal will be allowed, the decision of the
Registrar will be set aside, and the Registrar will be ordered to reinstate on
the register, the applicant’s USQUAEBACH mark bearing the registration number
TMA219908.
[3]
Section
45 of the Act provides the Registrar with the power to expunge any registered
trade‑mark from the register, where the registered owner is unable to
show that the ware or service specified in the registration of their trade-mark
was in use in Canada during the
three-year period immediately preceding notice by the Registrar. This section
also provides, however, that a registered trade-mark will not be expunged if it
“appears” to the Registrar that the absence of use was due to special
circumstances.
[4]
For
ease of reference, Section 45 of the Act provides the following:
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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.
(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.
(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.
(4) When the Registrar reaches a decision
whether or not the registration of a trade-mark ought to be expunged or
amended, he shall give notice of his decision with the reasons therefor to
the registered owner of the trade-mark and to the person at whose request the
notice referred to in subsection (1) was given.
(5) The Registrar shall act in accordance
with his decision if no appeal therefrom is taken within the time limited by
this Act or, if an appeal is taken, shall act in accordance with the final
judgment given in the appeal.
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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.
(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.
(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.
(4) Lorsque le registraire décide ou non de
radier ou de modifier l’enregistrement de la marque de commerce, il notifie
sa décision, avec les motifs pertinents, au propriétaire inscrit de la marque
de commerce et à la personne à la demande de qui l’avis visé au paragraphe
(1) a été donné.
(5) Le registraire agit en conformité avec sa
décision si aucun appel n’en est interjeté dans le délai prévu par la
présente loi ou, si un appel est interjeté, il agit en conformité avec le
jugement définitif rendu dans cet appel.
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I. BACKGROUND
[5]
The
applicant, Cobalt, is a limited liability company under the laws of the state
of New
Jersey,
U.S.A. that was
created for the purpose of managing the production, marketing, bottling,
labelling, shipping, importing and exporting blended Scotch Whiskey. In 2007,
Cobalt purchased all the ownership rights and goodwill associated with the
global USQUAEBACH mark including, but not limited to, the registration of the
mark in Canada.
[6]
The USQUAEBACH
mark was originally registered in Canada on April 7, 1977, by Twelve Stone
Flagons Ltd. (Twelve Stone), a manufacturer and retailer of blended Scotch
Whiskey based in Pennsylvania, U.S.A. This trade-mark was registered for use
in association with blended Scotch Whiskey. Between 1976 and 1997, Twelve Stone
registered the USQUAEBACH mark in over twenty countries worldwide.
[7]
In 2003,
after the death of Mr. and Mrs. Stankiwicz, who collectively owned 95% of
Twelve Stone, the production and sales of products associated with USQUAEBACH
mark were suspended. In April of 2003, all the global rights and interests in
the USQUAEBACH mark were assigned to a Dutch liquor company and creditor of
Twelve Stone, Van Caem International, B.V. (Van Caem), by order of the U.S.
District Court for Western Pennsylvania. Van Caem then assigned all of their
rights to their Belgian subsidiary, Van Caem Belgium, BVBA (Van Caem Belgium).
[8]
On May 7,
2003, the Registrar amended the register to reflect Van Caem Belgium as the new
registered owner of the USQUAEBACH mark in Canada
[9]
Due to
unforeseen circumstances, namely the death of Van Caem’s principal owner in
late 2003, by early 2004, Van Caem and its subsidiaries were forced to
liquidate. Starting in 2005, Mr. Shai Perry, the President of Cobalt,
negotiated with the Van Caem liquidators for the purchase of the USQUAEBACH
mark. After incorporating Cobalt in 2006, Mr. Perry presented a formal written
Asset Purchase Agreement and Bill of Sale for the USQUAEBACH mark in January
2007. This agreement included the purchase of the Canadian registration in
question, and on March 28, 2007, the liquidators in charge of Van
Caem’s assets signed said agreement and had it notarized in accordance with
applicable Dutch and Belgian law. The agreement became official on April 5,
2007 when Mr. Perry accepted on behalf of Cobalt, however due to a lien on the
trade-mark file, it was not until mid-September 2007 that Cobalt had
uninhibited control over the use of the USQUAEBACH mark.
[10]
On May 23,
2007, this second assignment was communicated to the Registrar who entered
Cobalt as the registered owner of the USQUAEBACH mark bearing the registration
number TMA219908.
[11]
On
November 21, 2008, the respondent sent a letter to the Registrar requesting
that a notice pursuant to section 45 of the Act be sent to the applicant. On
December 15, 2008, the Registrar purportedly sent the applicant and its
Canadian representatives, Blaney McMurtry LLP, a notice pursuant to subsection
45(1) of the Act, requesting that within three months, the applicant, as the
registered owner, furnish an affidavit or statutory declaration showing whether
the wares listed in association with the USQUAEBACH mark had been used in
Canada at any time within the preceding three years.
[12]
Both
the applicant and their representatives submit that they never received said
notice.
[13]
The
Registrar notified the applicant and their representatives by way of a letter
dated April 28, 2009, that as a result of a failure to submit evidence of
use or evidence of special circumstances that justify a lack of use, the
registration for the USQUAEBACH mark was to be expunged from the register,
pursuant to subsection 45(4) of the Act. The applicant, as well as its Canadian
representatives, acknowledged receipt of this second notice. As a result, the applicant
filed this application pursuant to section 56 which provides a right of appeal
from any decision of the Registrar under the Act:
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56. (1) An appeal lies to the Federal Court from any
decision of the Registrar under this Act within two months from the date on
which notice of the decision was dispatched by the Registrar or within such
further time as the Court may allow, either before or after the expiration of
the two months.
(2) An appeal under subsection
(1) shall be made by way of notice of appeal filed with the Registrar and in
the Federal Court.
(3) The appellant shall,
within the time limited or allowed by subsection (1), send a copy of the
notice by registered mail to the registered owner of any trade-mark that has
been referred to by the Registrar in the decision complained of and to every
other person who was entitled to notice of the decision.
(4) The Federal Court may
direct that public notice of the hearing of an appeal under subsection (1)
and of the matters at issue therein be given in such manner as it deems
proper.
(5) On an appeal under
subsection (1), evidence in addition to that adduced before the Registrar may
be adduced and the Federal Court may exercise any discretion vested in the
Registrar.
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56. (1)
Appel de toute décision rendue par le registraire, sous le régime de la présente
loi, peut être interjeté à la Cour fédérale dans les deux mois qui suivent la
date où le registraire a expédié l’avis de la décision ou dans tel délai
supplémentaire accordé par le tribunal, soit avant, soit après l’expiration
des deux mois.
(2) L’appel est interjeté au moyen d’un avis
d’appel produit au bureau du registraire et à la Cour fédérale.
(3) L’appelant envoie, dans le délai établi
ou accordé par le paragraphe (1), par courrier recommandé, une copie de
l’avis au propriétaire inscrit de toute marque de commerce que le registraire
a mentionnée dans la décision sur laquelle porte la plainte et à toute autre
personne qui avait droit à un avis de cette décision.
(4) Le tribunal peut ordonner qu’un avis
public de l’audition de l’appel et des matières en litige dans cet appel soit
donné de la manière qu’il juge opportune.
(5) Lors de l’appel, il peut être apporté une
preuve en plus de celle qui a été fournie devant le registraire, et le
tribunal peut exercer toute discrétion dont le registraire est investi.
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[14]
The
applicant filed a motion on consent to have the respondent’s Notice of
Appearance struck out. This motion was granted by way of an order dated
September 21, 2009, by Prothonotary Milczynski. While they remain a party to
these proceedings, the respondent has not opposed this appeal and has not
appeared before or filed any submissions with the Court.
II ISSUE
[15]
The applicant
does not contest that the mark in question fell into disuse. Rather, the
question before the Court is whether there exist special circumstances that
excuse the absence of use of the USQUAEBACH mark for the purposes of section 45 of
the Act.
III ANALYSIS
[16]
In the
case at bar, the applicant failed to adduce any evidence before the Registrar. According
to the applicant, this is because neither it nor its Canadian representatives
ever received the Registrar’s notice under subsection 45(1). Subsection 56(5)
permits the applicant to adduce before the Federal Court, evidence in addition
to that adduced before the Registrar. It has been clearly established in the
jurisprudence that the applicant will not be prohibited from adducing evidence
before the Federal Court simply because none was produced before the Registrar.
This is especially so since pursuant to subsection 45(3), a registered owner of
a trade-mark may have their trade-mark expunged for a “failure to furnish any
evidence”. In order to give registered owners a meaningful right of appeal,
subsection 56(5) must be interpreted so as to enable a registered owner the same
opportunity to file evidence before the Court as he or she had before the
Registrar. This interpretation is also in line with the principle that the
Federal Court be allowed to exercise any discretion vested in the Registrar (Austin
Nichols & Co., Inc. v. Cinnabon Inc., [1998] 4 F.C. 569 at paragraphs
11 and 13 (C.A.) (Austin Nichols)).
[17]
It is the
owner of a registered trade-mark who has the obligation, under section 45 of
the Act, to furnish affidavit evidence in support of their position. That said,
the registered owner is entitled to furnish more than one affidavit and there
is no rule prohibiting these affidavits from being sworn by third parties (Canada
(Registrar of Trade Marks) v. Harris Knitting Mills Ltd. (1985), 60 N.R.
380 at page 383, [1985] F.C.J. No. 226 (F.C.A.) (QL) (Harris Knitting)).
In determining this appeal therefore, the Court has given consideration to all
of the evidence filed by the applicant, which includes the following four
affidavits and their corresponding exhibits:
1. the affidavit of Shai Perry,
President of the applicant
2. the affidavit of Arien Kroon,
previously a manager of Van Caem Belgium
3. the affidavit of Colin
Halpern, Vice President of Halpern Imports Limited (Halpern)
4. the affidavit of Aroujan
Arman, a law student working at Blaney McMurtry
[18]
Since the
evidence which forms the record before the Court was not before the Registrar,
the normal deferential standard of review does not apply. Normally, where new
evidence is adduced before the Court that would materially affect the
Registrar’s decision, the applicable standard of review is correctness (Molson
Breweries v. John Labatt Ltd., [2000] 3 F.C. 145 at paragraph 51 (C.A.)). Because the evidence before the Court
was not before the Registrar, the same standard should apply in the present
application (3082833 Nova Scotia Co. v. Lang Michener LLP, 2009 FC 928
at paragraph 29).
[19]
The
proceedings under section 45 are designed to remove the “dead wood” from the
Trade‑Marks Register in that they are intended to be a “simple, summary
and expeditious procedure for cleaning up the trade-mark register of trade-marks
that have fallen into disuse” (Osler, Hoskin & Harcourt v. United States
Tobacco Co. (1997), 139 F.T.R. 64, [1997] F.C.J. No. 1671 at paragraph 21
(QL) (Osler)). The proceedings are not meant to be contentious as is
evidenced by the fact that the requesting party is not entitled to file
evidence and is not entitled to cross-examine the registered owner on their
affidavits (Osler, above, at paragraph 17). Similarly, the proceedings
under section 45 do not impose a heavy burden on the registered owner. While a
bald assertion is not enough, the registered owner must simply demonstrate
before the Registrar, or before the Court, that the trade-mark in question was
used during the relevant period or that any disuse is due to special
circumstances (Osler, above, at paragraph 16; Swabey Ogilvy
Renault v. Golden Brand Clothing (Canada) Ltd., 2002 FCT 458 at paragraph 7).
[20]
The
Federal Court of Appeal in Scott Paper Ltd. v. Canada (Attorney General),
2008 FCA 129 (Scott Paper) recently shed light on what is
meant by the phrase “special circumstances”. According to the Court of Appeal
at paragraph 22 of its decision, the general rule is that in the absence of
use, a trade-mark will be expunged. While an exception to this general rule
exists where the absence is due to special circumstances, what are considered
to be special circumstances must be circumstances that are not found in most
cases of absence of use of a trade‑mark. Finally, the special
circumstances, which excuse the absence of use of a trade-mark, must be the
circumstances to which the absence of use is due. It is important to highlight
that the Federal Court of Appeal states that the inquiry into whether special
circumstances exist is an inquiry into the reasons for the non-use and that an
intention to resume use cannot be used to support a finding of special
circumstances (paragraphs 25 and 35).
[21]
In Scott
Paper, the Federal Court of Appeal was explaining its earlier
decision in, Harris Knitting, above. In the latter decision, the Court
stated that while it is impossible to enumerate what circumstances would
constitute “special circumstances”, in making such a determination, the
decision maker should consider the duration of the absence of use and the
likelihood of its continuation, along with the extent to which the absence of
use is due solely to a deliberate decision on the part of the registered owner
or to factors outside his or her control.
[22]
With the
foregoing in mind, and with no reason to discredit the evidence submitted by
the applicant, I believe that the applicant has demonstrated that the non-use
of the USQUAEBACH mark is excused by the existence of special circumstances.
[23]
First and
foremost, the period of non-use must be determined in order to examine the
cause. It is clear that the applicant did not obtain the rights to the USQUAEBACH
mark in Canada until April 5, 2007. The applicant
submits that in the case of an assignment of a trade-mark, the period of
non-use, with regard to the present registered owner, should be considered from
the date the owner acquired the mark (Re Rainbow Jeans Co. Ltd., [1994]
T.M.O.B. No. 152 (QL)). For the purposes of the present application, I do not
think it matters whether the Court considers the period of time since the applicant
acquired the USQUAEBACH mark or the period since the mark was last used in Canada.
[24]
The last
use of the USQUAEBACH mark in Canada is likely attributable to the
business carried out by Twelve Stone. At the time the evidence was filed by the
applicant, Cobalt had not yet resumed use of the USQUAEBACH mark in Canada. Furthermore, according to
the evidence submitted, there was never any business related to the sale of
blended Scotch Whiskey bearing the USQUAEBACH mark between Van Caem Belgium and any wholesaler or other
licensed entity in Canada. While the evidence on record
shows that as late as September 2003 the Liquor Control Board of Ontario (LCBO)
had listed for sale blended Scotch Whiskey products with the USQUAEBACH mark,
there is no evidence to support that this stock was received by way of any
business transaction with Van Caem Belgium.
On the contrary, according to Mr. Halpern, the Vice President of Halpern
Imports Limited, who acted as the import agent for Twelve Stone with respect to
the various USQUAEBACH blended Scotch Whiskey products imported into the
province of Ontario, the last shipment of products containing the USQUAEBACH
mark was 75 cases of blended Scotch Whiskey which had been ordered by the LCBO
in 2001. Therefore, the stock listed by the LCBO was likely part of the last
sale carried out while Twelve Stone was the registered owner of the USQUAEBACH
mark, which means that the last use of the mark would have been in or around
2001.
Special Circumstances
[25]
As
mentioned above, in 2001, Mr Stankiwicz and his wife, who collectively owned
approximately 95% of Twelve Stone, passed away, resulting in the suspension of
all sales of USQUAEBACH blended Scotch Whiskey. The death of the partners in
charge of the business meets the criteria of special circumstances (Re I.D.
Fashions Ltd., [1998] T.M.O.B. No. 109 at paragraph 12). While this
incident alone may not constitute special circumstances that are capable of
justifying the absence of use of the USQUAEBACH mark over the last nine years,
as is discussed below, the history of the ownership of this mark is plagued by
a series of unfortunate events.
[26]
The USQUAEBACH
mark was assigned to Van Caem, and subsequently Van Caem Belgium, pursuant to a U.S. Court order in 2003. At the end of
2003, the principal owner of Van Caem died, resulting in the suspension of all
business and ultimately a lengthy liquidation process that started in 2004 and,
according to the applicant, lasted a number of years. While the affidavit of
Mr. Kroon states that efforts had been made to find a producer of Scotch
Whiskey in Scotland, the death of the principal owner put an end to any
possibility of marketing, producing or distributing USQUAEBACH blended Scotch
Whiskey in Canada.
[27]
The
duration of the absence of use between the last shipment of USQUAEBACH products
to Ontario in 2001 and the date the applicant
acquired the USQUAEBACH mark (April 5, 2007) was approximately six years. Given
the fact that within these six years two registered owners of the USQUAEBACH
mark were forced to discontinue carrying on their businesses as a result of the
deaths of their principal owners, I think it can be said that the absence of
use within this time period was due to special circumstances. As is required by
the decision in Scott Paper, the evidence demonstrates that the absence
of use by these registered owners was directly related to the deaths in
question. Furthermore, these incidents constitute circumstances that are not
faced in most circumstances of non-use of a trade-mark and they cannot be said
to be the result of a deliberate decision on the part of the registered owner.
[28]
With
regard to the period of time since Cobalt acquired the USQUAEBACH mark, Mr. Perry
submits that he immediately began taking steps to re-commence the production
and distribution of USQUAEBACH blended Scotch Whiskey products in Canada. These
steps included, inter alia: finding a Scottish distiller that could
match the quality of the USQUAEBACH products sold by previous owners; ensuring
that each label associated with the different varieties of USQUAEBACH blended
Scotch Whiskey complies with the labelling regulations; negotiating
distribution deals in each province Cobalt wished to serve, namely Quebec,
Ontario, Nova Scotia and New Brunswick; ensuring that Cobalt complies with
local liquor regulations in the various jurisdictions it planned on serving
(which in Canada would require Cobalt to ensure compliance with each individual
province’s liquor regulations); and finding a licensed importer in Canada.
Given that the production and labelling of Scotch Whiskey must also comply with
Scottish law, it is not surprising that this process would likely take a
significant amount of time to complete.
[29]
It is
clear from the evidence that Mr. Perry was not dealing with the acquisition of
an ongoing business with existing supply and distribution networks. As a result
of the troubled history of ownership over the USQUAEBACH mark, Mr. Perry was
required to rebuild the production and distribution of USQUAEBACH Scotch
Whiskey from the ground up.
[30]
The record
before the Court establishes that as early as July 2008, Mr. Perry was
corresponding with the Société des alcools du Québec (SAQ) via e-mail. In one
e-mail dated May 11, 2009, the SAQ agrees to purchase a total of 50 cases
of USQUAEBACH blended Scotch Whiskey products. At the time this evidence was
submitted to the Court, Mr. Perry stated that these shipments were expected to
be delivered in October or November of 2009.
[31]
While it
has been made clear in Scott Paper, above, that the intention to resume
use may not be used to support a finding of special circumstances, it is not
the intention demonstrated through the applicant’s actions which excuse the
absence of use in the present case. It is relevant that the immediate
resumption of use of the USQUAEBACH mark by Cobalt was impeded by the nature of
the liquor industry, and more specifically, the regulatory schemes that must be
complied with in each Canadian province. Even more importantly, however, is the
fact that due to the two deaths between 2001 and 2007, USQUAEBACH blended
Scotch Whiskey had not been in production for six years, requiring the applicant
to start from beginning. The Court finds that in light of the foregoing, there
is a basis to conclude that the absence of use of the USQUAEBACH mark since
April 2007 was also due to special circumstances that are not normally faced in
circumstances of non use and are not due to the deliberate decision of the
registered owner.
[32]
Furthermore,
the evidence demonstrates that Cobalt intends to resume use of the USQUAEBACH
mark and while this does not excuse the absence of use, it is a good indication
that the period of non-use is likely close to an end.
[33]
Given that
the purpose of section 45 of the Act is to provide a means to have expunged
from the register trade-marks which have not been used and for which there is
no reasonable prospect that they will be used (Rideout and Maybee v. Sealy
Canada Ltd. (1999), 87 C.P.R. (3d) 307 at paragraph 50), the Court finds
that the USQUAEBACH mark should not be expunged from the register.
[34]
In light
of the foregoing, the appeal will be allowed, the decision of the Registrar
must be set aside, and the USQUAEBACH mark under registration number TMA219908
must be reinstated.
[35]
While the applicant
has not asked for its costs, it has requested that the Court specify that such
an order is not a waiver by and is without prejudice to the parties’ rights to
pursue any claims they may have against each other, including the legal costs
relating to this proceeding. Such an order will be provided.
JUDGMENT
THIS COURT ORDERS AND ADJUDGES THAT:
1.
The appeal is allowed without costs;
2.
The decision of the Registrar of Trade-Marks dated April 29, 2009, with
respect to the USQUAEBACH mark bearing the registration no. TMA219908 is set
aside;
3.
The Registrar of Trade-Marks is ordered to reinstate the applicant’s
trade-mark registration no. TMA219908 on the Trade-Marks Register;
4.
The foregoing costs order is a not a waiver by and is without prejudice
to the parties’ rights to pursue any claims they may have against each other,
including recovery of legal costs relating to this application proceeding.
“Luc
Martineau”
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