Hope everyone has been doing well and getting geared up for the upcoming exam on Tuesday! While I was immersing myself in the world of IP, I also started contemplating where I should treat myself to a well-deserved dinner after the exam. That’s how the Beijing Judian Restaurant Co. Ltd. v. Meng decision of the Federal Court came to my mind.
I read it in the news last summer, but without taking a course in IP, I didn’t really get the gist of it. Now I think I should be more than capable to revisit it and provide a bit of my own commentary for this decision. It is also a fun decision to share with the class since it is of local significance to us foodies in Vancouver.
Credit to Bruce Chang (Google Maps)
If anyone is into Chinese-style barbecue skewers, you might have heard of a restaurant called The Meat Up on No. 3 Road in Richmond (there used to be another one on Granville Street in Vancouver but it is unfortunately shown as permanently closed on Google Maps) This restaurant is owned by the Applicant, Beijing Judian Restaurant Co. Ltd., of this decision. The Applicant owns and operates a restaurant chain with close to 40 restaurants in China as of June 2020. The trademark in dispute (as depicted below) was registered to the individual Respondent in Canada. The Chinese characters of the trademark can be roughly translated as “Judian skewer pub”, and this trademark is actually a registered trademark owned by the Applicant in China.
This situation is quite interesting, although probably not surprising, because a well-known trademark/brand in China was registered by someone else not affiliated with this restaurant chain in Canada. According to the evidence submitted by the Applicant, one week after the trademark was registered in Canada, the “squatter” approached the “rightful owner” and offered to sell the trademark for $1,500,000. After the Applicant rejected this offer, the Respondent resorted to selling this trademark to third parties by posting a public advertisement online.
As you might have guessed, the focus of this decision was not really about trademark “infringement” per se because the Applicant was applying to strike the disputed trademark from the Register under s. 57(1) of the Trademark Act on the basis of invalidity under s. 18(1). The Court addressed two main issues raised by the Applicant: 1) whether the disputed trademark was obtained by the Respondent in bad faith under s. 18(1)(e); and 2) whether the Respondent’s conduct constitutes passing off and gives rise to an order of injunction and damages.
In terms of s. 18(1)(e) and the concept of “bad faith”, here are a few points made by the Court that I think are my biggest takeaways from this decision:
- “Bad faith” is concerned with whether the trademark was registered with the sole intention of extorting money from its legitimate owner, or using the reputation in the trademark to obtain money from others. While the timing of the application is the relevant date for the s. 18(1)(e) analysis, later circumstantial evidence may also be relevant if it helps to clarify the reason for filing the application.
- The intentional filing of an application for a foreign mark in and of itself is not sufficient to invalidate the registered trademark, if there is no reputation for this foreign mark in Canada (which is not the case here with Judian).
- A pattern of acquiring multiple such registrations may indicate that the Respondent filed the application without a legitimate commercial purpose.
“Bad faith” might be the most obvious ground to invalidate and expunge this trademark, and the Court did rule in favour of the Applicant, but I think it might also be possible for the Applicant to succeed under s. 18(1)(d) on the ground that the Respondent was not entitled to secure the registration. In the Masterpiece v. Alavida decision we talked about in class, Alavida was found not to be entitled to the trademark’s registration because Masterpiece’s use preceded Alavida’s proposed use. We could potentially draw an analogy between these two cases, although the catch is that Judian’s trademark was only used outside Canada before the Respondent’s registration. Another ground on which the Applicant could potentially succeed is s. 18(1)(c) since the Respondent registered the trademark without any actual intention to use it in business, but the catch is that non-use can only be claimed three years after the registration date and would therefore cause undesirable delay for the Applicant.
In terms of the claim of passing off, the Court held that the Applicant was unable to establish deception of the public due to the Respondent’s misrepresentation (the second element of the test) because the Respondent only used the trademark in an advertisement to sell the mark, rather than in carrying on any business. This important distinction in “use” explains the reason why my first impression of the case is that it was not about infringement. It is also interesting that the Court distinguished this case from a precedent we briefly talked about in class (Law Society of British Columbia v. Canada Domain Name Exchange Corporation) where the defendant used the Law Society’s official mark in domain names to divert Internet traffic to a pornography website. The Court rejected the proposition that listing a trademark on the Trademarks Register would be sufficient on its own to establish confusion in the marketplace as to the source of any goods, services or business.
As we learned from Orkin v. Pestco and Sadhu Singh Hamdard Trust v. Navsun, it is totally possible for goodwill to be established by a foreign company in Canada through advertising, marketing and international reputation, so it seems most likely that a claim of passing off can succeed even if the Respondent did not obtain the trademark in bad faith but used it to carry on actual business instead. In this imaginary scenario, another fact that could add a twist to the analysis is that Judian used and registered a different design for its trademark in Canada (as depicted below) without knowing its trademark in China had been “squatted” by someone else.
At the end of the day, the Court declined to order punitive damages in this case by reasoning that bad faith does not constitute a separately actionable tort. It raises some policy questions in terms of whether it would be fair for the trademark squatters to walk away without any actual consequences. The only remedy available to the claimant in trademark squatting cases seems to be expungement of the registered trademark so that the claimant could have a chance to register it themselves (even though they may not have wanted to in the first place). Because the squatters are only squatting on these trademarks without actual use, it would be difficult for the court to find passing off and the claimant would not be entitled to any damages as a result, except for costs in bringing the application to strike (which might not even cover its actual legal cost). However, on the other hand, trademark squatting is also inherently different from trademark infringement because no harm has been caused in the same sense that consumers have been confused or goodwill has been damaged. Legislatures or courts should consider whether trademark squatting should be developed into a new tort in order to best serve a deterrent purpose.
Communications Law
Hi Jessie
This is a most excellent review of trademarks and passing off.
Having not read the case, so take what I am saying with a grain of salt, I am surprised that confusion did not play a bigger role in the analysis.
I like the idea of a tort that could address the “squatting” for trademarks profit trolling though. I can see though the alternative of waiting 5 years for trademark non use is also entirely unpalatable.
Good luck on Tuesday!
Doris
Arrrgh! abandonment is s45.1 and it’s 3 years not 5years!!