Currently, the requirement under the Trade-marks Act that goods and services be stated “in ordinary commercial terms” in applications has been interpreted as requiring very detailed listings of goods and services.�� Further, under Bill C-31, the language of the requirement will not be changed, such that it is expected that the current Canadian practice will be continued, at least initially, after the amendments are implemented.�� Accordingly, it is not immediately evident and therefore interesting to consider what the benefits of adopting the Nice classification system will be.

To put the issue in context, it has to be understood that the requirements in Canada for specifying goods and services are stricter than requirements in almost all other countries of the world.�� Further, requirement for statements “in more specific terms” of goods and services listed in applications filed in the Canadian Trade-marks Office are the most common reason for issuance of Examiner’s reports by the Trade-marks Office.�� Considering sufficiency of descriptions is time consuming for examiners and responding to description requirements is time consuming for practitioners and costly for applicants.�� Accordingly, there is no doubt that there would be significant cost benefit to the Government and trade-mark applicants if adopting the Nice classification system will minimize issues arising in respect of sufficiency of descriptions of goods and services in Canadian Trade-mark applications.

Another benefit to the adoption of the Nice Classification system is that it will facilitate implementation of the , which provides for the international registration of trade-marks (or more correctly a system for cost-effectively obtaining domestic registrations in multiple jurisdictions). Article 3(2) of the Protocol provides for classification under the Nice system in international applications under the Madrid Protocol.�� Accordingly, adoption of the Nice Classification system goes hand in hand with the provisions in Bill C-31 for implementation of the Madrid protocol.

One issue that has been discussed in the context of descriptions of goods and services in international applications under the Madrid Protocol arises from the fact that international applications and registrations under the Protocol are based on home country applications and registrations.�� However, different countries provide different scope of registration as a result of different levels of detail being required in descriptions of goods and services.�� For instance, while some countries like Canada and the United States require specific descriptions, other countries like Italy and Australia accept broad specifications including Nice Classification class headings.�� There are variations lying at different points along the spectrum of specificity, including many countries that will accept descriptions of goods or services provided under Nice Classification class headings and others requiring individually defined specificity.�� The concern is that the scope of international registrations under the Protocol based on registration in countries requiring high specificity may be significantly narrower than those based on countries accepting broad descriptions.

The issue of scope of registrations under the Madrid Protocol was the subject of much debate leading up to the ratification of the Protocol by the United States in 2003.�� Further, the scope of protection issue has been raised as a reason why there have been fewer Madrid Protocol filings originating in the U.S. than were expected (see e.g. Donald Prutzman, (2010) 25:2 Int’l Practicum p. 173 at 177).

��In light of the foregoing, it is clear that the benefit to Canadians of adopting the Nice Classification system may depend upon the extent to which the strict requirements for descriptions of goods and services are maintained by the Canadian Trade-marks Office after implementation of the Nice Classification system.�� However, one also has to consider the overall effect on the trade-mark system in Canada, including the fact that registration provides a monopoly with respect to use of the registered trade-mark for the registered wares and services across Canada, and that proposed amendments to the Trade-marks Act in , the Combating Counterfeit Products Act, limit offences and remedies to unauthorized use of trade-marks in association with registered goods and services.

The extent to which descriptions of goods and services in trade-mark registrations should be broadened is not a trivial question.�� It will be interesting to see whether and how the regulations, policies and practices of the Canadian Trade-marks Office evolve in respect of such requirements under the updated Trade-marks Act.�� Hopefully, we will end up with needed clarity as to what descriptions will be acceptable; and scope for registrations that achieves a fair balance between the need to provide for effective enforcement of rights to protect brand owners and consumers, and the need to maintain a sufficient stock of language to facilitate effective selection, adoption and use of distinctive trade-marks by traders in Canada.

Brian P. Isaac is a partner at the Toronto office of��Smart & Biggar/Fetherstonhaugh.��Mr. Isaac's practice has involved litigation in all areas of intellectual property for over 20 years and has appeared before the Federal Court of Canada, the Ontario Superior Court of Justice, and the Federal and Ontario Courts of Appeal. He has also acted on numerous matters before the Canadian Trade-marks Opposition Board and Patent Appeal Board. Mr. Isaac received his L.L.B. from the University of Ottawa ('89) and was called to the Ontario Bar in 1991.��

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While the Bill will enable Canada to implement several international trade-mark treaties and make other welcomed changes to the law, the proposed elimination of the requirement to “use” a trade-mark before obtaining a registration for the mark is a major departure from the foundation of Canadian trade-mark law.�� This is significant because the law of trade-marks is based on use.

It is understood that the goal of Bill C-31 is to improve the position of Canadian businesses, including by reducing their costs.�� However, the proposed amendments to the TMA to delete the requirement for an applicant to have made “use” of a trade-mark before obtaining registration in Canada will negatively impact Canada’s trade-mark system.�� This will result in significant adverse consequences to Canadian businesses by increasing costs, causing delays, adding uncertainties and creating risks.

The proposed change will also increase litigation, which will stress the already overburdened resources of the Trade-marks Opposition Board and the federal court system. The elimination of “use” as a precondition for registration is not required by any of the treaties Canada intends to join pursuant to the amendments.

Use as a Cornerstone of Trade-mark Law

For over 150 years, the Canadian trade-mark system has required that a person “use” a trade-mark.�� The requirement has been repeatedly confirmed by the Supreme Court of Canada (see, for example, Justice Rothstein’s comments in the decision). A trade-mark is typically “used” with goods by displaying the mark on the goods or their packaging or labelling when the goods are sold.�� A trade-mark is typically “used” with services when the mark is displayed in advertising the services, such as on letterhead and signage.

Currently, in order to acquire rights in a trade-mark in Canada, a person must use the mark.�� Unregistered rights at common law are obtained through the acquisition of a reputation in the trade-mark as the identifier of the source of goods or services with which the mark is used in the marketplace.

To obtain a registration of a trade-mark, use is also a requirement.�� A Canadian trade-mark application may be based on one or more bases, all of which require use of the trade-mark, in Canada or elsewhere, before a registration is issued.

Elimination of Use of Mark as Requirement for Registration

The changes proposed in the Bill will permit an application to be filed, and a registration to be obtained, without any “use” of the mark by the registrant having occurred in Canada or elsewhere.�� The proposed changes will also remove the requirement that an application for a trade-mark identify whether the applicant has “used” the trade-mark and, if so, where, when and in association with which particular goods and services.

The proposed deletion of the requirement of “use” of a trade-mark by the applicant prior to registration is a fundamental departure from the Canadian trade-mark system that many in the international community consider to be the best in the world.

The government has stated that deletion of the “use” requirement is necessary for Canada to comply with two of the treaties, the Madrid Protocol and the Singapore Treaty.�� However, that is not the case.�� Specifically, the treaties do not preclude requiring “use” of a trade-mark as a prerequisite to registration.

A written for the Canadian Intellectual Property Office (CIPO) by the Department of Justice expressly acknowledges that deletion of the “use” requirement is not necessary for accession to the treaties.�� In fact, when the United States implemented those treaties, it did so without eliminating its equivalent “use” requirement.

It is true that many countries in the world have a system like the one that is being introduced. ��While, at first blush, one might think that the new system would make life easier for Canadian businesses, it will have the exact opposite effect for a number of reasons.

Increased Clearance Costs, Delays, Risks and Uncertainty

In the proposed system, businesses will suffer the consequences of a reduction of available trade-marks.�� Since there will be no requirement to “use” a trade-mark before registration, trade-marks which have never been “used” anywhere may be registered, including by trade-mark trolls who make no investment in the economy, and removed from availability to Canadian businesses.

Applications and registrations will cover long lists of goods and services for which there will be no “use” of, or even any intention to “use”, the trade-marks so a person who “uses” the trade-mark ALPHA with clothing might register the trade-mark for furniture, food and landscaping services, and prevent two other unrelated businesses from using the same mark.

This will likely to be a significant increase in cost for Canadian business and uncertainty in clearing trade-marks for use and registration.�� There will be more applications and more registered marks and, without investigation, there will be no way of determining from the application or registration information whether such marks have ever been used in Canada or elsewhere.�� When faced with these challenges, costs, delays, risks and uncertainties, businesses may choose alternate marks from a smaller available pool.

Trolls

Trade-mark trolls have not been a significant factor in Canada to date.�� The current use requirement has impeded the ability of a troll to secure registrations in Canada without any investment in a real business.�� Outside North America, trade-mark trolls often are able to register a mark used by others in another country, without the trolls being required to have used the mark before registration.�� The Bill invites trade-mark trolls to Canada.

Increased CIPO and Court Litigation

A very significant cost, in money, delay, risk and uncertainty, to applicants, registrants and third parties will be the administrative and court litigation that will result.�� The basic requirement of use prior to registration of a trade-mark will no longer act as a gate to registration.�� Businesses will have to incur the responsibility and the costs of adversarial proceedings to prevent and cancel third party registrations for confusing trade-marks that are not in “use” or that have overreaching lists of goods and services.

The increased litigation will take several forms, including opposition, non-use, infringement and expungement proceedings:

Once an application is approved by CIPO, it is advertised so that third parties can make a decision as to whether they wish to oppose the application to prevent or limit registration of the trade-mark.�� Oppositions have many of the hallmarks of traditional litigation and can take years to complete, both within CIPO and on appeals through the federal courts.

Given that trade-marks which have never been “used” will be the subject of applications covering long lists of goods and services, there will be many more oppositions by parties seeking to prevent or limit such registrations.�� The European experience is instructive. ��Currently in Canada only about 2-3% of all trade-mark applications are opposed.�� In Europe, which has a system similar to the one being introduced by the Bill, over 15% of applications are opposed.

After the third anniversary of a registration, a person may seek to cancel or limit the registration for non-use of the trade-mark.�� With registrations having been obtained without “use”, there will be many more non-use proceedings in CIPO by parties seeking to cancel or limit such registrations and appeals therefrom to the federal court system.

With an increase in the number of registrations, there is likely to be an increase in infringement and related litigation.�� Good faith common law use in Canada may be alleged to infringe a registration for a trade-mark that has never been used anywhere.

Lawsuits by trolls are likely to be settled by legitimate businesses paying “go away” money.�� Also, under other pending amendments to the TMA, a registrant may be permitted to avail itself of border measures to stop “counterfeiting” even where the registrant has never used the mark.

Applications to “expunge” registrations for reasons other than non-use are also likely to increase.

Constitutional Issues

The federal government has constitutional limitations that most other national governments do not.�� Specifically, trade-mark law is governed both under the federal Trade and Commerce power and the provincial Property and Civil Rights power. There are those who are of the view that aspects of the amended TMA will not be constitutionally valid because a system that grants registrations in the absence of “use”, namely without the trade-mark being “used” in trade or commerce, cannot be supported on the basis of the federal Trade and Commerce power.

Some have even suggested that the Bill might encourage provincial legislatures to enact their own trade-mark legislation. This would result in a patchwork quilt of both federal and provincial trade-mark rights, which is the case in the United States with both federal and state trade-mark registrations.

��What is the Status of the Bill?

Many Canadian large and small businesses and trade associations, such as the Canadian Chamber of Commerce, have communicated to the government their strong objections to the change in the use system.�� These voices have been joined by Canadian and international intellectual property organizations, and most of Canada’s leading trade-mark lawyers, despite the possibility that the new regime will create more legal work for lawyers.

The government is also being criticized for introducing this fundamental change by way of a budget bill, which has traditionally been the subject of less opportunity for analysis. ��Businesses, trade associations and the trade-mark bar have asked the government to, at least, remove three sections and one transitional section from the Bill in order to have meaningful analysis and debate.

However, to date, the government has not shown a willingness to engage in meaningful debate on the proposed changes.�� It is difficult to understand why or how a government that says it is committed to assisting Canadian businesses is taking such a bold step to create more cost, delay, risk and uncertainty for them.

Sheldon Burshtein and Antonio Turco are partners at the Toronto office of Blakes, Cassels & Graydon LLP. ��Mr. Burshtein's practice includes the clearance, prosecution, acquisition, enforcement and exploitation of patents, trade-marks, copyright, industrial designs and other forms of IP.��Mr. Turco's��practice focuses on litigation related to intellectual property rights, including disputes related to patents, copyright, trade-marks, industrial designs and trade secrets.��

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The 2014 budget, , is an omnibus bill that includes changes to several pieces of legislation, including the Trade-Marks Act. While some of the proposed changes are relatively insignificant issues of terminology, others have the potential to alter fundamental aspects of Canadian Trade-mark law.

According to the , the changes are intended to make the Act consistent with treaty obligations and will adopt the .��Changes to terminology include an end to the hyphenated “trade-mark” and changing “wares” to “goods”. Simplified registration requirements will also reduce the term of registration from 15 to 10 years.�� The new definition of a trade-mark will include a sign or combination of signs including; 3D shapes, holograms, moving images, mode of packaging goods, sound, scent, taste, texture, and position of sign. The new Act will also remove distinguishing guises and introduces utilitarian function as a limit to registrability. In addition, the Act will permit divisional applications.

The change causing the most consternation is the apparent move from a use-based system to one that is established merely on registration. In the current system, one can apply to register a proposed mark not yet in use. However, if approved, the proposed mark is not actually registered until the owner files a declaration of use. As recently as the decision, the Supreme Court has��stated that:

Registration itself does not confer priority of title to a trade-mark. At common law, it was the use of a trade-mark that conferred exclusive right to the trade-mark. While the Trade-Marks Act provides additional rights to a trade-mark holder than were available at common law, registration is only available once the right to the trade-mark has been established by use.

Under the amended legislation, this would no longer be true. Applicants will be able to gain registration for proposed marks without any proof of use of that mark. This departure from fundamental statements of law is likely to result in some tumultuous case law in the coming years.

The shift away from use will necessitate new statements on modes of analysis. For instance, tests for confusion rely on the use of confusing marks or the potential for confusion if the mark is used in any manner open to it under the registration, as the court held in Depreciation of goodwill also has an element of use. How can one depreciate the goodwill in a mark if the owner has not established any goodwill or consumer associations with the mark through use in the marketplace? Theoretically, an owner may be able to argue that even absent their own use, use of the mark by another could depreciate the goodwill and value in the mark. For example, if the junior user had an inferior or hazardous product or created a poor reputation in the marketplace. The senior rights holder may be able to argue that they will have to overcome this depreciation if they actually enter the marketplace. However, it is still difficult to conceive of how courts will protect marks that are unused.

Some fear that the changes will result in an increase in “trade-mark trolls”, entities willing to pay the fees and go through the application process to then sit on marks, which will congest the register and result in costly litigation for individuals who may wish to actually use the marks. Yet, the marks will still be vulnerable to expungement proceedings under of the Act three years after the date of registration, which will provide a check on rampant registration. At that point, interested third parties will still be able to make a request that the registrar demand proof of use. If the registered owner does not produce evidence of use, then the registrar may expunge the mark. It would then be open to the interested party to apply for registration. However, nothing would prevent the initial rights holder from simply re-applying for the mark and sitting on it for another three years.

Although the bill represents an attempt to simplify the registration process, its likely effect will be an increase in litigation. ��Without use to act as a guide, courts will have to navigate new tests and precedents as rights holders engage in disputes to clarify their rights under the changed legislation.��For now it is��, but if enacted as is, Bill C-31 is sure to bring some interesting years to trade-mark law.

Allison McLean is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.��

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