Bad Faith and the Importance of Trademark Registration
In Beijing Judian Restaurant Co. Ltd. v. Wei Meng, 2022 FC 743,[1] the Federal Court struck a trademark from the register because it was registered in bad faith. By finding the trademark was registered contrary to s. 18(1)(e) of the Trademarks Act,[2] (“TMA”), the Court issued its first ever decision assessing bad faith trademark registrations.
This post will explain the important takeaways that trademark applicants, and registrants, must consider when seeking to register and maintain their trademark registrations.
Background
Beijing Judian Restaurant Co. Ltd. (“BJR”) operated a successful restaurant chain across China, where it used a series of marks, including the specific trademark at issue (“JU DIAN & Design Mark”). BJR expanded its business to Canada and applied to register a number of its trademarks, including the JU DIAN & Design Mark. Unbeknownst to BJR, an individual by the name of Wei Meng (“Meng”) had already registered the JU DIAN & Design Mark in Canada on the basis of proposed use.
Upon learning of BJR’s trademark application, Meng demanded payment of $1.5 million for the right to use the JU DIAN & Design Mark in Canada. BJR also learned of online advertisements posted by Meng in Canada to license the JU DIAN & Design Mark, which directly referenced BJR’s business success in China.
BJR sought to strike Meng’s registration of the JU DIAN & Design Mark, alleging that Meng only registered it with the intention of profiting from, or interfering with, BJR’s business and reputation.
The Court agreed with BJR that Meng had registered the JU DIAN & Design Mark because of its international popularity associated with BJR’s brand. However, the Court confirmed in its decision that copying and registering a foreign trademark in Canada is legal. Canadian courts have consistently held that where there is no reputation for a third party’s mark in Canada, a party may register that exact third party’s mark legitimately.[3] In other words, registering someone else’s trademark in Canada can be legitimate, and will not necessarily result in a finding of bad faith.
In this case, the Court struck Meng’s trademark registration because it found that he only registered it to extort BJR. There was no evidence that Meng intended to use the JU DIAN & Design Mark for any legitimate commercial purpose. In fact, Meng had established a pattern of registering foreign trademarks in Canada without ever using them, having done so six times before. All of these unique facts led the Court to find that Meng had registered the JU DIAN & Design Mark in bad faith.
Takeaways
- Register your trademark. If nothing else, this case is a warning to international trademark holders: if you don’t register your mark in Canada, someone else might. It is legal for international trademarks to be identically copied and registered by an unrelated party in Canada, where there is no reputation of that international trademark in Canada. Once registered, the holder of the registration gets exclusive rights to use that trademark throughout Canada, and gains access to legal rights and remedies unavailable to unregistered trademark holders.
- Trademarks can be registered before they are used. In Canada, an applicant may file a trademark application even though the applicant has not started using that trademark. Where there are two trademark applications for the same or similar mark that have been filed, and which have not been used in commerce, the TMA gives priority to the trademark filed first. Accordingly, if a foreign brand has plans of using its trademarks in Canada, it is a good idea for that brand to register its trademark in Canada to prevent a third party from registering the mark first. It should be kept in mind that if a trademark has been registered in Canada for three years or more but never used, anyone can request that trademark to be expunged (i.e., struck from the Register of Trademarks) or amended as a result of such non-use, as per section 45 of the TMA.
- The burden to prove bad faith may be hard to meet. The burden of proving that a trademark was registered in bad faith lies with the party alleging bad faith. An applicant to strike the registration of a trademark under bad faith must prove on a balance of probabilities (meaning more likely than not), with “clear, convincing and cogent evidence” that the mark was registered in bad faith.[4] In other words, a party would have to prove that it is more likely that a trademark was registered to be used for extortion than for any other legitimate commercial purpose.
At Sotos LLP, we have acted for countless trademark owners in every aspect of protecting their intellectual property for more than 40 years. We have extensive knowledge of intellectual property issues, and regularly act in the procurement and licensing of trademarks, as well as in defending our clients’ trademark rights and opposing trademark applications on our clients’ behalf.
Please contact John Yiokaris at 416.977.3998 or jyiokaris@sotos.ca to discuss your intellectual property and trademark issues.
[1] Beijing Judian Restaurant Co. Ltd. v. Meng, 2022 FC 743 (CanLII).
[2] Trademarks Act, RSC 1985, c T-13.
[3] USA PRO IP Limited v Courtaulds Textiles America, Inc., 2018 TMOB 90 (CanLII) at para 21; Santa Barbara Restaurant Group, Inc. v Jay Veto, 2014 TMOB 286 (CanLII) at para 32.
[4] Beijing Judian Restaurant Co. Ltd. v. Meng, 2022 FC 743 (CanLII) at para 39.