Businesses should prepare for trademark trolls

Intellectual property lawyers expect to see an increase in trademark trolls or squatters after long-awaited amendments to the Trade-marks Act come into force early next year.

Businesses should prepare for trademark trolls
Anthony Prenol says changes to the Trade-marks Act means businesses will have to address a more cluttered trademarks registry and they need to spend more time and money to determine which trademarks they can challenge.

Intellectual property lawyers expect to see an increase in trademark trolls or squatters after long-awaited amendments to the Trade-marks Act come into force early next year.

The amendments, which were approved in 2014, include: removing the requirement that an applicant prove they have been using their trademark before they file for registration in Canada; introducing registration fees for every classification; and broadening the definition of trademark to include non-traditional signs such as smells, tastes, textures and moving images, such as holograms. 

The changes are meant to bring Canada’s laws more in line with international treaties such as the Nice Agreement Concerning the International Classification of Goods, the Singapore Treaty on the Law of Trademarks and the Madrid Protocol Concerning the International Registration of Marks. The federal government says these changes will simplify the registration process.

But intellectual property lawyers are concerned the new law will clutter the registry with applications for trademarks that could likely never be used.

“Today, legitimate brand owners can only get registrations for what they’re actually selling,” says Philip Lapin, partner at Smart & Biggar LLP and chairman of the firm’s trademark operations group. “In the new law, you’re going to have legitimate brand owners who are selling certain products, but they’re going to become more generous in that list of goods and services, so they’re going to cover a lot more than they’re actually going to sell. What’s going to happen is you’re going to have more marks coming into conflict with each other because there’s no longer a requirement of sales.”

Right now, s. 13 of the Trade-marks Act says an applicant has to prove they are using their trademark before it can be registered. The amendments remove this section. 

This will allow applicants to register trademarks they never intend to use, says Lapin. Instead, they may register a trademark to block someone from registering the same mark or to sell the trademark to a third party later, he says.

Lawyers were warning about these problems for years, says Ken Clark, a partner at Aird & Berlis LLP in Toronto. 

“The removal of use is going to simplify the application process at the expense of letting in the trolls,” says Clark. “It’s already happened. We said it would happen. We said it would happen and no one listened to us.”

Clark predicts there will be chaos in the trademarks registry for the next few years as people adjust to the system and try to separate legitimate brands from trademarks owned by the trolls.

The federal government’s intellectual property strategy, announced in April, will add more amendments to the Trade-marks Act. The strategy, says the government, will introduce legislation to change the Trade-marks Act to require users to prove a trademark has been used within three years of its registration. The exact wording of the potential change isn’t known and is not part of the amendments taking force in 2019. 

Trademark registration fees will also change next year. 

This is a good thing, says Anthony Prenol, a partner at Blake Cassels and Graydon LLP in Toronto. Applicants currently pay $250 to file a trademark that can be used for many goods and services. When the laws change, Prenol says, applicants will have to pay a separate fee for each of the goods and services they want. There are 45 different classifications under the Nice Agreement that applicants can seek.

“I’m pleased to see that the trademarks office will be introducing per-class filing fees,” Prenol says, noting that these changes could discourage companies from filing broad applications for classes they don’t intend to use.

“I am worried that you’ll see people filing applications for a long list of goods and services where they don’t have a true intention to use their trademark with all of those goods and services,” he says. “Under the current system, we have a single filing fee that you pay when you file an application, regardless of the number of classes . . .  [We] often see people filing applications with a very long list of goods and services.”

Not only will businesses have to worry about a cluttered trademarks registry, but they’ll also need to spend more time and money to determine which marks they can challenge, says Lapin. Applicants are currently required to include the date when they started using a trademark, but that won’t be necessary once the amendments come into force, he says. This will make it more difficult to know who has prior rights to a mark and if a challenge against a possibly conflicting mark is possible, he says. Applicants will need to hire investigators to determine what competing trademarks exist, he adds.

“It’s going to be a good time to get into the private investigation business,” says Lapin.

“Applicants and trademark owners will need to hire investigators to determine when someone else’s rights began, and it’s going to be more stressful to attack or threaten someone else  because it’s going to be rare that you’ll have enough certainty to know if your rights pre-date someone else’s rights,” he says.

Applicants will need to keep a close eye on trademark filings globally, says Lapin. Often, he says, companies don’t want to file for a trademark at all unless they are confident it can’t be challenged anywhere in the world.

Some changes make it easier for Canadian businesses to obtain trademark rights in other countries, says Prenol. In order to comply with the Madrid Protocol, the law is being changed to allow Canadians to apply for trademark registration in several countries at once without needing to hire a local trademark agent in each country where they want to file. 

Clark says this will benefit companies that want to do business elsewhere.

Allowing Canadian businesses to file in multiple countries more quickly will be “helpful,” says Clark, “but we’ll have to see how it’s implemented.” 

The Trade-marks Act will also change the definition of a trademark to explicitly include things such as scents, tastes, textures and moving images, such as holograms. Clark says this amendment won’t likely have a big impact. 

“While it’s interesting and people like to talk about it, most businesses are not likely to take advantage of the broadened definition,” he says. 

There are a lot of practical problems, says Clark. The speed of technological change would make it difficult to register something such as a hologram and smells will fade over time, he says.

“How are you supposed to record a smell or a taste?” Clark says. “I want to register the taste of ‘rose buds’? How would you do that?”

It isn’t clear how to register non-traditional marks, says Lapin. Applicants need to describe their marks, and applications can be rejected if they’re not clear, he says.  

But some things, such as textures or smells, could be difficult to describe in words, says Clark.

“I think it’s going to be a while for the office to fine-tune what it wants for descriptions,” he says. “I think we’re all going to have to come up with a new vocabulary to describe what these new marks smell like or feel like.”

Prenol says applications for non-traditional marks “won’t rival the applications for traditional marks at all” and that this change is being made to bring Canadian law more in line with international intellectual property law.

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