Boomerang! The perils of marketplace takedowns in Canada

6 minute read
12 November 2021


An takedown "boomeranged" and led to expungement of the trademark owner's mark and a damages award against it when the prior user who was the subject of the takedown took aim at the registration at issue.

In Yiwu Thousand Shores E-Commerce Co. Ltd. v. Lin, 2021 FC 1040, Justice Walker of the Federal Court of Canada granted an application by Yiwu Thousand Shores ("Thousand Shores") to strike the takedown proponent Lin's trademark ("OHUHU") from the register of trademarks, ordered injunctive relief against further takedown notices by Lin, and awarded the applicant Thousand Shores both compensatory damages ($138,800) and partial costs ($25,000).

The Court declared Lin's registration on which the takedown notices were based retroactively invalid, triggering section 7(a) of the Trademarks Act (the "Act") to compensate the applicant for the respondent's "false and misleading statements tending to discredit ThousandShores' OHUHU business and OHUHU goods" in the respondent's takedown notices.

The application to strike under section 57(1) of the Trademarks Act

The respondent Lin filed an application to register the OHUHU mark in 2017, claiming use since 2015. The applicant Thousand Shores, however, had operated an online retail store in Canada in association with the OHUHU mark since 2014.

In 2020, pursuant to a takedown notices initiated by the respondent Lin , removed many of the applicant's OHUHU goods from its site in response to the takedown requests from Lin which alleged that the applicant Thousand Shores OHUHU goods infringed the respondent Lin's registration. Thousand Shores responded by filing an application to strike Lin's registration pursuant to subsection 57(1) of the Act.

In its application, the applicant argued that the impugned registration was invalid for a variety of reasons. Most of the issues raised by the applicant revolved around the respondent's failure to use the OHUHU trademark in Canada, and the applicant's own prior and ongoing use of an identical mark. The applicant also argued that the respondent's "false inauthenticity and infringement allegations" in the form of takedown notices tended to discredit the applicant's business and goods, violating subsection 7(a) of the Act.

The respondent did not defend his registrations or participate in the proceeding in any way.

The court's reasons

The Court held that the impugned registration was invalid ab initio due to a material misstatement relating to the respondent's false statement of use. The respondent's failure to participate in the proceeding, and the lack of evidence of the respondent's use of the mark, contributed to this finding.

Importantly, in the context of takedown notices and section 7(a) of the Act, the Court found it important and emphasized that the applicant had no ability to respond directly to the respondent's "false allegations and misstatements." The respondent's conduct caused to wrongfully remove the applicant's goods from its site, resulting in lost sales. Because the impugned registration was held by the Court to be invalid ab initio for a lack of use and a likelihood of confusion, the respondent's statements regarding the applicant's infringing goods were thus held to be false and therefore violated section 7(a) of the Act.

The Court awarded the applicant $138,800 in damages to compensate for its lost profits caused by the respondent's false and misleading statements, as well as for the storage costs the applicant incurred to store the goods delisted by The Court further awarded the applicant $25,000 for costs incurred due to the respondent's conduct. However, the Court declined to award punitive damages; the quantum of compensatory damages was sufficient to deter similar conduct in the future, and the respondent's behavior was not malicious, oppressive, and high-handed.

As noted, the case was undefended. An alternative interpretation of the relevant provision of the Trademarks Act suggests that a trademark owner, having obtained a registration, has the right to represent themselves as the owner entitled to the exclusive use of the trademark until such registration is "shown to be invalid". On this interpretation, then, the respondent's allegations in his takedown request would not have been misleading, as his trademark registration was not invalid at the time of the requests and was only later invalidated by Justice Walker. Any lost profits suffered by the applicant would not have been the respondent's responsibility.

The Court in the present case clearly took the interpretation that "shown to be invalid" may include invalid ab initio, and thus a fundamental misstatement was made because the registration could not have been secured without the misstatement.

The fact that the application was undefended is notable. With counsel, the respondent may have been able to put forth evidence of use, with a different outcome.

The moral of this story?

Ask questions before you shoot, and talk to your lawyer if the bullet boomerangs.

This article was authored by Monique couture with the assistance of Doak Horne and Jay Zakaib. Should you have any questions, don't hesitate to reach out to the author or any member of Gowling WLG's Trademarks group.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.