Federal Court infers intent to abandon a trademark in expungement proceedings. Can we “infer” that the Opposition Board “intends” to follow the Court’s lead?
November 6, 2019
By Cynthia Rowden, Scott MacKendrick and Meghan Dillon
In Beijing Jingdong 360 Du E-Commerce Ltd. v. Yue Zhang [2019 FC 1293] (“Beijing Jingdong”), the Federal Court, per Justice Brown, ordered the expungement of the registered mark JD Design, after finding that the registration had been abandoned.
Expungement for abandonment is rare – parties generally use the less technical and often more efficient non-use cancellation proceedings set out in s. 45 of the Trademarks Act. Significantly, the Justice was prepared to infer an intention to abandon based on surrounding circumstances, and without any direct evidence from the registrant of its intent.
Will Justice Brown’s reasoning have relevance in opposition proceedings, where lack of an intent, or more specifically a proposal, to use a mark, is relevant to the valid registration of that mark under the recent amendments to the Trademarks Act?
Registrations not in use may be expunged by the Registrar and the Federal Court
Trademark registrations can be expunged by the Registrar for non-use under s. 45 of the Trademarks Act (“Act”), or by the Federal Court for abandonment under s. 18 of the Act (which also includes several other grounds of expungement). Section 45 proceedings are far more common, since these proceedings are started with a simple written request to the Registrar (accompanied by the necessary fee) made any time after the third anniversary of registration. On receipt of such a request, the Registrar will give notice to the registrant that it must show use of the mark in Canada for all registered goods and services. The onus is on the registrant to file evidence of use of the registered mark in the three years prior to the date of the notice, or if there is no use, evidence of special reasons to excuse non-use. These proceedings take place before the Opposition Board, acting for the Registrar. The requesting party may not file its own evidence and cannot cross-examine the registrant on its evidence. Written representations may be filed by both parties, and while an oral hearing is possible, it is not required. There is only one issue – whether the mark is in use in Canada, or not. These proceedings are intended to be summary, although many prove not to be.
Seeking expungement of a registration for abandonment under s. 18 of the Act is relatively rare. The procedure is commenced by application to the Federal Court, with the ability of both parties to file evidence and conduct cross-examinations. In addition, both the criteria at issue and the onus on the parties differ from s. 45 proceedings. In an expungement action for abandonment, the applicant must show it has standing before the Court, and must meet the civil onus of showing, on a balance of probabilities, both that the registered mark has been abandoned and that the registrant has an intention to abandon the registered mark.
Unlike in other countries, in Canada there is no legislative inference that non-use over a specific period of time is deemed to constitute abandonment. Showing the registrant’s intention is difficult, making expungement for abandonment more complex and considerably more expensive. However, an expungement action can be taken at any time – including within months of registration, as opposed to the three-year wait, following registration, to commence s. 45 proceedings.
Facts: Standing, non-use and intention to abandon
The applicant for expungement, Beijing Jingdong, is a Chinese e-commerce company selling a wide range of goods, including clothing. It announced the adoption of the JD.com domain name in 2013. Three months later, the defendant, Yue Zhang, filed a trademark application for JD Design for clothing, based on use in Canada since 2010, which registered in 2017. When Beijing Jingdong later filed its own JD Design application, the Zhang registration was cited as confusing. Beijing Jingdong commenced s. 18 expungement proceedings, alleging both that the registrant had abandoned its mark, and that its 2013 application contained a material misstatement, since Zhang had not used the mark in Canada.
The Trademarks Act requires an applicant seeking expungement to show it is a “person interested”, which includes a person who “may be affected by an entry in the register”. Given that Beijing Jingdong’s application was being blocked by Zhang’s registration, Justice Brown had no trouble finding that it had standing to bring the expungement action.
Justice Brown applied the 2-part test of abandonment, namely “(1) that the mark is no longer in use in Canada and (2) an intention to abandon the mark” [para. 16]. As the moving party, the onus was on Beijing Jingdong to show the registrant’s non-use and intent not to use the mark. Beijing Jingdong filed evidence from a trademark investigator based on internet and social media searches, plus attendance at two locations identified as corporate addresses (in corporate documents and Zhang’s original trademark application), as well as Zhang’s retail addresses. The investigator found no evidence of any public display or advertising of the JD mark or of any sales associated with the JD mark, although the registrant had used other marks in retail clothing stores (at least until 2017). Zhang filed no evidence in response.
While Justice Brown confirmed that non-use for a considerable period of time could lead to an inference of an intention to abandon, he did not go so far as to suggest “how long” would be sufficient. However, he was influenced by factors such as:
- the registrant had not operated any clothing store since 2017
- no corporate returns had been filed
- the registrant was in default in paying mortgage payments on his primary residence, which was also a business address listed in corporate documents and the original trademark application
- the disrepair and impending foreclosure of another registered business address
- abandonment of internet domain names (they were listed as “for sale”)
- inactivity on social media since 2016, which the Justice suggested indicated that Zhang had no ongoing communication with former customers
- Zhang’s retail stores had ceased operations (one was in a demolished mall).
Such evidence satisfied Justice Brown on a balance of probabilities both that the registered mark was no longer in use, and that the registrant intended to abandon the mark.
Without explicitly stating so, the Justice accepted that lack of any business activity and the normal elements of an operating business, such as corporate returns and an active social media presence, equated to proof of an intent to abandon the registered mark. Having determined that there was abandonment, he held that there was no need to consider the impact of the claim relating to misstatement of the use date in the original trademark application.
Why it is important to accept an “inference” of intent
In expungement proceedings, the onus of proving intent is on the challenger, and not the owner of the registered mark. Given the difficulty, if not the near impossibility, of showing the state of mind of another party, particularly where that party does not actively participate in the proceeding, Courts need to be able to make inferences of intent from the facts before them. Otherwise it would be impossible to show abandonment under s. 18.
Intent is also relevant on filing and in oppositions. Specifically, before filing a new trademark application, an applicant must have used, or propose to use, a mark in Canada (s. 30(1) of the Act). The Act formerly required an applicant without use to include a statement in its application that it intended to use the mark. The recently amended Act no longer requires specific filing grounds to be set out in the application, but nonetheless confirms that an applicant who has not yet used its mark must “propose” to do so. Presumably a proposal to use a mark is the same as having an intent to do so.
Following the introduction of the amendments to the Act, many questioned whether permitting filing, and subsequent registration, simply based on a proposal, or intent, to use a mark would result in significant trademark squatting. The opposition grounds under the amended Act now include that the applicant did not use or propose to use its mark at the filing date (s. 38(2)(e)). However, adducing facts to show that the applicant did not “propose” to use a mark on filing was, and is, viewed as problematic by many, particularly given the opponent’s initial evidentiary burden to adduce facts to support any ground of opposition. What evidence can an opponent file to show the applicant’s state of mind when it filed the mark? Alternatively, what evidence should an applicant be prepared to produce that proves its proposal to use the mark before filing in Canada?
The Beijing Jingdong decision confirms that the Federal Court may infer intent in expungement proceedings by looking at surrounding circumstances – and in particular, specific business activity, or lack thereof, related to the mark in question. What remains to be seen is whether the same approach will be adopted in opposition proceedings. Specifically, will the Opposition Board infer that the applicant lacked the requisite intent to use the mark in Canada when it filed, and refuse the application if there is similar uncontested evidence of no business activity related to a mark? Should the Opposition Board not follow the Federal Court’s lead in making an inference of “no intent”, it would risk making the requirement to propose, or intend, to use a mark before filing essentially meaningless, as being nearly impossible to prove.
Actual use or a clear intent to use a mark in Canada does matter
Despite the removal of use as a registration requirement, evidence of use – either actual use or plans to put a mark into use in Canada – continues to be relevant. A mark can be expunged at any time in the absence of use or an intent to use, or cancelled for non-use after the third anniversary of registration. Under the new (and as yet untested) opposition grounds, an application can be refused if there was neither use of, nor a proposal to use, the mark in Canada at the time of filing.
Concerns about the evidentiary hurdles of proving “intent” seem to be alleviated by the Federal Court’s willingness to infer an absence of intent from surrounding circumstances of business inactivity. This will be relevant for both sides in any dispute, and suggests that on filing, as well as after registration, trademark owners should have at the ready real tangible evidence of actual use or intent to use.
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