Canadian Trademarks year in review 2021 - Expungement

9 minute read
28 February 2022

Looking for more insights? This resource is part of a five-installment series. Click here to read our Canadian trademark law year in review for 2021.

Expungement

Yiwu Thousand Shores E-Commerce Co. Ltd. v. Lin, 2021 FC 1040

This decision provides a road map for how to expunge abandoned registrations and serves as a cautionary tale for those considering whether to bring an Amazon Takedown Request.

In this decision, Thousand Shores successfully brought an application to expunge a registered trademark and obtain a declaration that the Respondent had violated s. 7(a) of the Trademarks Act.

By way of background, Thousand Shores had operated the OHUHU Amazon storefront since October 2014 and had been very successful, with $25 million CAD in sales to customers in Canada and $150 million USD in sales to customers in the United States.

In 2017, unknown to Thousand Shores, Mr. Lin filed an application to register OHUHU, which claimed use since January 1, 2015 and the application subsequently issued to registration. In August 2020, Thousand Shores learned that many of its products had been removed from its Amazon storefront in response to an allegation by Mr. Lin that Thousand Shores' use of its OHUHU trademark constituted trademark infringement (the "Takedown Requests"). Thousand Shores brought its action after sending a cease and desist letter to Mr. Lin objecting to the impugned registration based on invalidity and received no response.

On the issue of expungement, Thousand Shores sought to strike the registration on a number of grounds.  On the issue of abandonment, the Court affirmed that "in the absence of any evidence of use, an intention to abandon may be inferred from a person's failure to use the mark for a long period of time". In this case, the Court accepted Thousand Shores' evidence that it had been doing online and marketplace searches and investigations since October 2014, and that it had not found anyone else using its trademarks or similar trademarks since that time. On the basis of six years of non-use, plus the Respondent's failure to respond to a demand letter or participate in the Court proceedings, the Court inferred that the Respondent had abandoned its marks.

In regard to the claims pursuant to s. 7(a) of the Trademarks Act, the Court held that the Takedown Requests constituted false or misleading statements tending to discredit the business, goods or services of a competitor. In particular, the Court noted that they misled Amazon and caused it to remove the listings, which resulted in a loss of sales and profits for Thousand Shores.

By virtue of the above, the Court ordered the Respondent's trademark registration be struck from the Registrar, and awarded damages for lost profits and storage costs in the amount of $138,800, and costs in the amount of $25,000.

Norsteel Building Systems Ltd. v. Toti Holdings Inc., 2021 FC 927

This decision provides guidance regarding laches and acquiescence, as well as bad faith.

On October 4, 2017, Norsteel Building Systems Ltd. [Systems] filed two trademark applications for NORSTEEL and NORSTEEL BUILDING SYSTEMS. These applications were refused by the TMOB on the grounds that they were confusing with the Toti Holdings Inc. [Toti Holdings] previously registered NORSTEEL trademark. Systems applied under TMA s.57(1) to expunge the NORSTEEL registration which was previously issued to Toti Holdings on March 20, 2017.

The Court granted Systems' applications and ordered expungement of Toti Holdings' Registration. In so doing, the Court began by dismissing Toti Holdings' argument that its marks should not be expunged on the basis of acquiescence or laches on the basis of emails between the parties and the fact that Systems had waited three and one half years before filing its application to strike Toti Holdings' marks:

These and other authorities cited by the parties make it clear that mere delay is insufficient to establish a defence of acquiescence. Accordingly, the fact that Systems knew since 2011 of the existence of NBL and its use of NORSTEEL alone does not support the defence.

… in my view it is relevant to the examination of the defence of acquiescence what Systems knew and did after it became aware of the registration of the trademark. Upon learning of the registration, Systems informed Toti Holdings of its prior use and that it would seek to expunge the trademark. Toti Holdings faults Systems for taking more than three and one-half years to bring this expungement application.

In that period, there is evidence that NBL incurred significant expense to advertise the trademark, some of which appears to have been to the benefit of Systems. I give no weight or consideration to Toti Holdings' suggestion that Systems delayed bringing this application in order to benefit from its continuing advertising of the NORSTEEL name. That suggestion is nothing more than speculation. Having appraised Toti Holdings of its intention to seek the expungement of the NORSTEEL trademark, the actions of NBL and Toti Holdings thereafter were taken at their own risk.

Contrary to the submission made by Toti Holdings, I do not read the email exchange in 2011 to represent Systems encouraging NBL to continue using the mark and advertising it. Rather, I see it as a tongue-in-cheek statement carrying no legal consequences. If there were any doubt of that, Systems' lawyer's letter in 2017 informing NBL that it would be seeking to expunge the trademark registration should have put an end to NBL's view that Systems was encouraging its continued use of the mark.

Even if one reads the 2011 email exchange as subtle encouragement to use the trademark in its advertising, that was well before it applied to register the trademark. That action, as noted, shed a new light on the relationship between these parties.

For these reasons, I find neither encouragement by Systems to NBL that it continue using the mark (and most certainly not to register it), nor do I find that NBL or Toti Holdings acted to its prejudice in reliance on any such encouragement. The defence of acquiescence is not made out.

The Court then went on to grant System's application to strike on the ground that NORSTEEL Registration was invalid because of Systems' prior use and making known of the NORSTEEL BUILDING SYSTEMS trademarks and trade names. This prior use meant that Toti Holdings' NORSTEEL trademark was not distinctive in that it did not distinguish Toti Holdings' wares from those of Systems'. In particular, the Court noted that System's use of its trademarks predated that of Toti Holdings'; the goods, services, nature of the trade, and business of both parties was very similar; the degree of resemblance between the parties' trademarks was very high; and there was evidence that consumers for the parties goods and services had confused the two.

The Court declined to find bad faith, stating that a failure to make obvious inquiries does not amount to bad faith.  

The NORSTEEL registration was expunged, and costs were awarded to Systems.  

These cases provide useful guidance to brand owners, showing that vigilance is required to develop a strong trademark portfolio, licensing agreements, and market usage that can be relied upon to reliably enforce rights in Canada. 

If you would like to discuss this article further or have any specific questions about it, please contact a member of our Trademarks, Brands & Designs Group.

The authors would like to thank Melissa Cheng, Richard Du, YooJung Jung, Luke Robert and Chloe Ilagan.


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