January 11, 2021
In Group III International Ltd. v. Travelway Group International Ltd., 2020 FCA 210, the Federal Court of Appeal reminded parties of the purpose and the power of the trademark registration scheme under the Trademarks Act.
Group III International, Holiday Group Inc., and Wenger S.A. (“Group III”) appealed the judgment of the Federal Court in Wenger SA v. Travelway Group International Inc., 2019 FC 1104, ordering the expungement of Travelway Group International Ltd.’s (“Travelway”) registered trademarks and dismissing Group III’s claim for monetary compensation. Group III argued that they were owed damages for the pre-expungement use of Travelway’s infringing trademarks by Travelway, which the Federal Court of Appeal found to be invalid under s. 18 of the Trademarks Act in 2017 (2017 FCA 215).
Ultimately, the Federal Court of Appeal found that the rights conferred by the registration of a trademark serve to protect the public and owners of trademarks and that there are important reasons the use of a registered trademark does not give rise to damages or profits absent fraud, wilful misrepresentation or bad faith.
As Travelway had a registered trademark under s. 19 of the Trademarks Act, they were not required to pay Group III monetary compensation for the period during which their registration was valid. Given that the Federal Court of Appeal had previously found that Travelway was liable for passing off Group III’s marks and Travelway did not invoke their registration as protection against that claim of passing off, the Federal Court of Appeal did award an accounting of profits against Travelway.
In 2013, Group III brought an application before the Federal Court for infringement of their registered trademarks and passing off, which was dismissed (2016 FC 347). Group III appealed and, in 2017, the Federal Court of Appeal allowed the appeal and granted relief, referring two issues to the Federal Court for further adjudication.
The issues were whether it was appropriate for the Federal Court to order the striking out of Travelway’s trademarks from the register and whether damages were recoverable. The Federal Court ultimately granted a judgment in 2019 regarding the trademarks but dismissed Group III’s claim for damages. Group III appealed the Federal Court’s decision dismissing their claim for damages. Given that the appeal raised a question of law, the Federal Court of Appeal applied the correctness standard.
The Federal Court of Appeal was clear that there are sound reasons why s. 19 of the Trademarks Act affords protection to the registered trademark holder prior to a trademark being struck from the register. The Federal Court of Appeal found that the protection is essential for the proper functioning of the trademark system and further serves to protect the public as well as the owners of trademarks by affording transparency, stability and certainty of the trademark system.
Group III argued that, when the Federal Court of Appeal found that Travelway’s trademarks were invalid in 2017, this finding rendered Travelway’s trademarks invalid from the moment they were registered under s. 18(1) of the Trademarks Act.
The Federal Court of Appeal rejected Group III’s interpretation. Instead, the Federal Court of Appeal found that, absent fraud, wilful misrepresentations or bad faith in the application for registration, it was not open to the Federal Court of Appeal to make a finding that Travelway’s trademark was invalid from the moment it was registered, and Travelway could rely on its registrations as protection until the Federal Court expunged its trademark. Following Remo Imports Ltd. v. Jaguar Cars Ltd. (2007 FCA 258) and Veuve Clicquot Ponsardin v. Boutiques Cliquot Ltée (2006 SCC 23), the Federal Court of Appeal found that the declaration of infringement did not render Travelway liable to pay damages or loss of profits to compensate Group III during the period of registration.
On top of the findings in 2017 by the Federal Court of Appeal that Travelway had infringed Group III’s registered trademarks, the Federal Court of Appeal also found Travelway liable for passing off. Damages are generally not available for passing off if an impugned mark is registered, as the registration acts as protection from an action in passing off.
However, given that Travelway did not appeal the Federal Court of Appeal’s 2017 decision, the Federal Court of Appeal found monetary compensation should be awarded to Group III.
Authors: Mark Leonard and Emma Baumann