October 13, 2020
The Federal Court in Michaels v. Unitop Spolka Z Organiczona Odpowiedzialnoscia recently dismissed an appeal regarding an application brought to cancel the registration of three “Sesame Snaps” trademarks, which were challenged on the basis of non-use by their owner.
The trademarks in question (TMA728997, TMA728998, and TMA332105) were owned by a Polish production company, Agros Trading Confectionery Spolka Akcyjna (“Agros SA”) at the time of the original application, but have since been registered to the respondent in this appeal, Unitop Spolka Z Organiczona Odpowiedzialnoscia. These trademarks concern use of the phrase “Sesame Snaps” and the stylized lettering used to market the “sesame bars” in both a colourized and monochromatic fashion.
Decision of the Trademarks Opposition Board
At the initial hearing before the Trademarks Opposition Board (the “Board”), 2018 TMOB 157, the self-represented applicant, David Michaels, sought the cancellation of these trademarks on two grounds. Firstly, he claimed that Agros SA had not sufficiently demonstrated use of the marks, or that such use had not been for their benefit. Secondly, Michaels claimed that while the trademarks are described to protect “confectionery products, namely, sesame bars”, the product being sold by Agros SA were not “bars” but rather “snaps”.
Michaels brought this application under section 45(1) of the Trademarks Act, R.S.C., 1985, c. T-13 (the “Act”), which reads as follows:
45 (1) After three years beginning on the day on which a trademark is registered, unless the Registrar sees good reason to the contrary, the Registrar shall, at the written request of any person who pays the prescribed fee — or may, on his or her own initiative — give notice to the registered owner of the trademark requiring the registered owner to furnish within three months an affidavit or a statutory declaration showing, with respect to all the goods or services specified in the registration or to those that may be specified in the notice, whether the trademark 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.
The Board rejected Michaels’ application based on the affidavit evidence provided by Agros SA. This evidence included exhibits showing the Sesame Snaps marks displayed on packaging for sesame bars, and evidence of their sale in Canada dating back decades into the past. The affidavit explained that the sesame bars sold in Canada were manufactured by a wholly owned subsidiary of Agros SA, to whom the Sesame Snap marks had been licensed. The affidavit evidence also demonstrated sales revenues of the Sesame Snap bars in Canada for the three years preceding the application, which totaled CAD$6.5 million.
In rejecting the section 45 application, the Board cited subsection 4(1) of the Act, which states that use of a trademark can be established if it is “marked on the goods themselves or on the packages in which they are distributed”. Based on the affidavit evidence and the language of subsection 4(1), the Board found that use of the Sesame Snaps marks had been established and therefore maintained their registration.
Appeal to the Federal Court
Michaels appealed the Board’s decision to the Federal Court. In appealing this decision to the Federal Court, Michaels submitted arguments centered around the fact that Agros SA had licensed the Sesame Snaps marks to a subsidiary rather than using them directly in the Canadian market. To rebut general claims of this nature, the respondent was able to rely on subsection 50(1) of the Act which deems any use, advertisement, or display of a trademark by a licensee to be that of the licensor so long as the latter exercises “control of the character or quality of the goods”. Based on the affidavit presented by Agros SA at the Board, Justice Fuhrer determined that Agros SA had a sufficient degree of control over its Canadian subsidiary to attribute to them all usage of the relevant marks.
Michaels also brought an argument that the court described as “novel”, which concerned the public’s perception of trademark usage in a licensee context. The appellant argued that, because there was no notice given to the public regarding the licensing of the Sesame Snaps marks, the public would naturally perceive that Agros SA was not making use of them. This argument is grounded in subsection 50(2) of the Act, which states that notice to the public of a licensing agreement will create a presumption that the licensor exerts sufficient control over the licensee to rely on subsection 50(1). Michaels’ submission was that, if no notice of the licensing agreement is provided to the public, there should be a presumption against the requisite control being established.
Justice Fuhrer rejected this argument, holding instead that subsection 50(2) is permissive in nature rather than mandatory. In other words, subsection 50(2) was found to allow a licensor to give public notice as a means of establishing a presumption of control of the product or service at issue, but not to place any burden on a party that chooses not to. Therefore, if a licensor chooses to forego providing notice of its licensing agreement to the public, as Agros SA did, they must only establish control through the ordinary means of evidence. There is not, as Michaels argued, a presumption created that they do not possess control over the licensee simply for failing to provide notice to the public.
Throughout her judgment, Justice Fuhrer continually referenced the applicable standard for reviewing the Board’s decision, which was palpable and overriding error. This led to the dismissal of various challenges that Michaels levied against the Board’s rulings. For example, Michaels submitted that the product being produced is sesame “snaps” or “wafers” rather than “bars” and that the packaging of the products sent a “mixed message” as to what level of control Agros SA exerted. These submissions were considered, but Justice Fuhrer largely agreed with the reasoning of the Board and, in any event, found that the Board made no palpable or overriding errors in its decision.
For these reasons, the Federal Court dismissed the appeal and upheld the decision of the Board in its entirety.
Authors: Scott Kerr and Sasha Seeber