A little over a month ago, the Canadian Government introduced a bill (Bill C-31, the Economic Action Plan 2014, No. 1) that proposes substantial reforms to Canada’s trademark system. Initially proposed for Canada to uphold its international IP treaty commitments, the proposed trademark reforms in Bill C-31 will potentially impact not only how foreign businesses obtain trademark protection in Canada, it will also influence how such businesses evaluate their global brand protection and marketing strategies.
Although Bill C-31 offers many important trademark reforms that several commentators have provided good insight on (a couple of good analyses are available here and here), the two proposed reforms that will arguably impact foreign businesses the most are: (1) the removal of date of use requirements for trademark registration; and (2) the adoption of the Nice Classification of Goods and Services.
No Date of Use Requirements For Trademark Registration: Bill C-31 will remove current requirements that a Canadian trademark application enclose a date of use in Canada or another country. Currently, Section 30(b)-(d) of the Trade-marks Act requires that trademark applicants provide the date that their trademark has been used in Canada, is intended to be used in Canada, or details of any registration abroad. However, Bill C-31 removes these requirements and only requires that an applicant “use or propose to use, and are entitled to use” a particular trademark in Canada, effectively removing any requirement of providing a specific date of use of a mark in Canada or abroad in a Canadian trademark application.
The removal of such date requirements has benefits and drawbacks for foreign businesses. It would potentially give foreign businesses time advantages and cost benefits in protecting and marketing their brands in Canada and beyond. Without mandating a showing of use or potential use in Canada, foreign businesses will likely be given time after their trademark is registered to determine whether that mark obtains legal protections in other countries without actually having to use the mark in Canada. This helps such businesses to better evaluate the risks of using a particular brand globally without having to exert funds to show actual use of the brand in the Canadian market. From a marketing perspective, removing dates of use requirements would also give foreign businesses time to determine whether their brands develop positive consumer recognition in other markets prior to use in Canada that can help such businesses to better strategize how to market their goods and services on a global scale.
The downside to the removal of date of use requirements is that it may increase trademark trolling. As other commentators have reported, removing date of use or potential use requirements may allow persons or entities to register unused trademarks in order to extort money from legitimate businesses who have not yet registered such marks with the Canadian Intellectual Property Office (CIPO). If Bill C-31 is implemented in its current form, such a scenario has substantial cross-border business implications as a party could register a mark with CIPO for an emerging foreign business not yet operating in Canada and then extort such business for rights to the mark as they expand into Canada. This often happens in trademark jurisdictions where no dates of use registration requirements exist. For example, China does not maintain date of use trademark registration requirements and famous foreign brands such as Apple, Tesla Motors and even hall of fame basketball player Michael Jordan have had their trademarks prior registered by Chinese trademark trolls.
Although it is uncertain whether Canada’s proposed removal of date use requirements under Bill C-31 will result in the same level of trademark trolling as seen in China, there is such a possibility if such reforms are enacted.
Adoption of the Nice Classification: Bill C-31 will also impact foreign businesses through Canada’s adoption of the Nice Classification of Goods and Services (Nice Classification) for trademark registrations. Under Bill C-31’s proposed reforms, a Canadian trademark application will be grouped according to classifications provided under the internationally recognized Nice Classification, instead of Canada’s own existing wares and services classifications. Being one of the last holdouts to adopting the Nice Classification, Canada’s wares and services trademark classification system has made it challenging for foreign businesses to ensure that their Canadian trademark registrations are harmonized from a classification standpoint with registrations of the same mark in other countries that have adopted the Nice Classification. Further, Canada’s reluctance to adopt the Nice Classification has effectively prohibited Canada from adopting the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks (Madrid Protocol), which allows a trademark application or registration from a Madrid Protocol country to be submitted for registration in other Madrid Protocol countries.
If Canada adopts the Nice Classification, foreign businesses can better ensure that their trademark registrations in Canada cover similar goods and services as provided in registrations of the same mark in other countries. Further, as Canada’s adoption of the Nice Classification would better allow Canada to implement the Madrid Protocol in the near future, such reforms would give foreign businesses the potential to reduce costs and logistical burdens in registering their marks in Canada and other Madrid Protocol countries. However, it is important to emphasize that Bill C-31 does not effectively implement the Madrid Protocol.
What’s The Takeaway? Bill C-31 proposes several substantial reforms that may benefit foreign businesses, while also posing some potential risks. Although Bill C-31’s proposed reforms are promising, Bill C-31’s reforms have yet to be enacted and it is uncertain whether its proposed reforms will be enacted in the same form described in this positing.
Regardless of whether Bill C-31’s trademark reforms are perceived to be beneficial or problematic, no one can deny that its proposed reforms will dramatically impact Canada’s trademark system for foreign businesses.
Apple’s recent Mexican trademark legal troubles highlight some important issues and strategies businesses and exporters should be aware of when exporting.
On November 2, 2012, a Mexican Appeals Court upheld an injunction against Apple’s use of the term IPHONE in selling its popular iPhone devices based on Apple’s similar goods and service offerings and the term’s phonetic similarity to the registered trademark IFONE, held by Mexican telecommunication service provider iFone. iFone registered its mark in 2003 for telecommunication services (International Class (IC) 38), four years prior to Apple’s first iPhone launch in 2007. That year, Apple registered IPHONE as a mark in Mexico for electronic devices (IC Classes 9 and 28).
To obtain legal protection for IPHONE in IC Class 38, Apple filed a trademark cancellation proceeding against iFone’s mark in 2009, claiming that iFone’s mark was confusingly similar to IPHONE among consumers. iFone countersued, asserting that Apple’s use of IPHONE infringed its mark, and sought damages and an injunction. To Apple’s dismay, iFone successfully proved in the Mexican Lower Court that Apple’s mark was confusingly similar to its prior registered mark and that Apple’s use of IPHONE did infringe on its mark, entitling iFone to an injunction and damages.
Although Apple and iFone’s case is not concluded, Apple may be legally prohibited from using the term IPHONE in selling or promoting its iPhone devices in Mexico. Equally as damaging, iFone may be entitled as a prior mark registrant to potentially recover up to 40% of Apple’s Mexican profits from its sales of the iPhone using the IPHONE mark, both current and retroactively. Statistics on Apple’s Mexican iPhone sales are unavailable, yet it is reported that Apple’s iPhone sales in the Americas are in the billions. To resolve its legal issues with iFone and preserve the Mexican market for iPhones, commentators have mentioned that Apple may be required to enter into a costly settlement with iFone. So what’s the takeaway from this story?
Do Your Homework Before Entering a Foreign Market: A company the size of Apple may not need to examine whether their goods and services offerings conflict with existing foreign trademarks, but doing so is an essential step for any business wishing to protect its IP and prevent legal complications abroad. A simple Mexican trademark search and examination of iFone’s promotional activities would have revealed that they had a prior registered Mexican mark that was confusingly similar to IPHONE and that they were using it in commerce. Apple may have conducted this research and disregarded it, yet doing so is a relatively inexpensive and strategic measure to identify foreign market challenges and safeguard against future legal problems.
Develop a Country-Specific IP Protection Strategy: Apple may have been able to expand legal protections for IPHONE while avoiding a legal proceeding if they had pursued an IP protection strategy with greater consideration of Mexican trademark law. Commentators have espoused that Apple likely adopted a trademark protection strategy in Mexico similar to aggressive strategies seen in the U.S. by registering IPHONE in available IC classes and initiating trademark cancellation proceedings against prior registrants in unavailable IC classes, like iFone’s IC Class 38 mark, to expand their brand’s legal protection.
If Apple had pursued a famous mark declaration, pursuant to Mexican trademark law, they could have obtained legal protection for IPHONE in IC Class 38 while averting a prolonged trial. Mexico’s Industrial Property Law permits famous marks (marks who have achieved a high degree of consumer recognition) to obtain enhanced legal protections through obtaining a declaration from the Mexican Institute of Industrial Property (IMPI). If declared, the petitioner is granted registration in the famous mark that can protect it against any subsequently registered confusingly similar marks in any IC class simply by requesting an acknowledgment from IMPI of the mark’s status and providing accompanying evidence. Obtaining a declaration would have given Apple legal protections in IPHONE in all IC Classes without having to initiate a legal proceeding. Although IMPI has only declared a handful of marks to be famous, the iPhone’s global recognition may have likely qualified IPHONE for Mexican famous mark protection. While its possible that Apple was aware of Mexico’s famous mark doctrine and chose against it, developing IP protection strategies based on local laws can provide businesses greater choices in obtaining protection for their marks abroad.
Engage Foreign Opposing Parties Before Initiating Legal Action: If Apple had reached out to iFone, it may have been able to enter into an agreement allowing Apple to obtain legal rights in IPHONE for IC class 38 without resulting to legal proceedings. The circumstances of this case show this to be especially true. iFone’s mark is classified for the entire IC 38 class, a classification trait often seen in foreign trademark registrations. Such a broad classification makes a coexisting use agreement between Apple and iFone likely possible due to the disparity of both parties goods and services within the IC 38 class as iFone is a telecommunication service provider, while Apple is a seller of telecommunication devices, the iPhone. A coexisting use agreement would have given Apple sufficient ability to obtain Mexican legal protections in IC Class 38 for IPHONE, while saving three years worth of costly legal fees, and having to pay potential damages.
Few businesses will ever reach Apple’s size or recognition, yet all businesses can adopt these mentioned measures to prevent legal complications when entering and operating in foreign markets.