By Richard Stobbe

There are a number of monumental changes coming soon (June, 2019) to the trademark regime in Canada. One small change was actually first introduced in 2018, a change that may come in handy in some trademark disputes once the rest of the new provisions are in force. 

The concept of “bad faith” became a formal part of the Trademarks Act in Canada in late 2018, and it remains to be seen how it might be developed as a tool to prevent unmeritorious applications or registrations. 

One of the fears among some trademark owners is the perception that “use” has been dropped as a requirement for registration, clearing a pathway for trademark squatters who file extortionist or opportunistic applications where legitimate use was never intended. In fact, “use” remains a fundamental requirement under Canadian trademark law, but it is true that under the revised Act, a “Declaration of Use” will be dropped as a necessary step before registration; it is currently required for applications filed on the basis of proposed use, and that requirement falls away under the revised  Act.

The ability to attack a trademark on the basis of “bad faith” is supposed to provide an easier way to challenge opportunistic applications which might be filed without any intention of actual commercial use.  This is a new ground for invalidating a trademark registration or  opposing an application, which is embedded in Section 18 of the Act (“The registration of a trade-mark is invalid …. if the application for registration was filed in bad faith”). There is no definition of “bad faith” in the Act but at least one Canadian case considered the issue several years ago:  HomeAway.com, Inc. v. Hrdlicka, 2012 FC 1467 (CanLII)  

In HomeAway, the Federal Court considered a case where an individual, Mr. Hrdlicka, filed an application for the mark VRBO, and obtained a registration for that mark in association with “Vacation real estate listing services”. 

The VRBO mark is, of course, an acronym for “vacation rental by owner”, and a well-known brand owned by HomeAway.com Inc.  Mr. Hrdlicka obtained registration of the mark in Canada because he apparently filed a blank “Declaration of Use”, thus somehow securing the registration despite the lack of any declaration of use, or any actual evidence of use in Canada.  The Federal Court found that the applicant never used VRBO as a trade-mark in Canada (until dubious evidence emerged after the dispute arose), and that, at the time he applied to register that trade-mark in Canada, Mr. Hrdlicka was aware of HomeAway’s business. The evidence showed that he registered the mark for the purpose of selling it back to HomeAway “for a large sum of money and/or for employment or royalties.”  This is reminiscent of many dot-ca domain name disputes. 

As a result, the Federal Court concluded that Mr. Hrdlicka, in filing the application for registration, “had no bona fide intent of using it in a legitimate commercial way in Canada. His intent was to extort money or other consideration from HomeAway. Such activity should not be condoned or encouraged.” The court decided to expunge the registration, relying on its general powers under Section 57 of the Act. 

This is precisely the circumstance that concerns current brand owners in light of the pending changes to the Trademarks Act: opportunistic registration, no bona fide purpose, and no evidence of actual use.

While the term “bad faith” does not actually appear in the HomeAway judgement, the result is clear: the application or registration of a mark without any bona fide intent or legitimate commercial use, will be considered to be filed for an improper purpose, and such conduct lacking good faith intent should be considered “bad faith” within the scope of Section 18(e).  

It remains to be seen whether courts apply this decision to future Section 18(e) challenges.

Calgary – 07:00 MST