INTA Bulletin

February 15, 2013 Vol. 68 No. 4 Back to Bulletin Main Page

Tricky Trademark Use Issues: United States and Canada

Innovations in mobility and communication, notably Internet sales and online mobile applications, afford manufacturers and merchants novel ways to launch new trademarks. Companies are no longer limited to affixing a mark directly on a product or its packaging to support a finding of trademark use in commerce. Moreover, the use of trademarks on the Internet in association with the sale of products and the provision of services has extended traditional concepts of trademark use beyond geographic boundaries. In jurisdictions that maintain strong trademark use requirements, such as the United States and Canada, it is, therefore, important for foreign applicants to ensure that the manner in which their marks are used will support a finding of use in commerce with their goods and/or services.

United States
Trademark rights in the United States stem from use, rather than registration. Indeed, since a federal trademark registration does not generally issue without showing real use of the mark in the ordinary course of trade, questions concerning how a trademark applicant can establish use are important. 15 USC § 1127. The U.S. Patent and Trademark Office and U.S. courts have interpreted this requirement flexibly, so as to encompass various genuine, but less traditional, trademark uses.

Test Markets and Sample Sales
It is becoming more and more common for a manufacturer or merchant to promote the sale of its product or service well before even a “beta” version is available to the public. In the United States, a trademark applicant may not file a trademark application claiming actual use of the mark if the use was merely pre-sale advertising or promotion of the goods or services. Era Corp. v. Electronic Realty Associates, Inc., 211 U.S.P.Q. 734, 745 (T.T.A.B. 1981), cited in Cake Divas v. Charmaine Jones, Opposition No. 91177301 (T.T.A.B. Feb. 23, 2010) (not precedential).

The rules change, however, where two parties dispute which has priority. In the United States, “use analogous to trademark use,” including advertising campaigns to announce the launch of a new product, or taking orders for a product that will soon be on the market, can sometimes be “tacked” onto actual use for the purposes of establishing priority. The key is that the trademark owner must show this kind of prior use created an association in the minds of the purchasing public between the mark and the goods. T.A.B. Systems v. PacTel Teletrac, 77 F.3d 1372 (Fed. Cir. 1996).

The issue is more complex with the promotion of a service mark. In Aycock Engineering, Inc. v. Airflite, Inc., 90 U.S.P.Q.2d 1301 (Fed. Cir. 2009), the U.S. Court of Appeals for the Federal Circuit held that the use in commerce requirement is not met when an applicant uses a service mark in the preparatory stages of a service’s development but never offers the service to the public. The court observed that the Trademark Act “makes plain that advertisement and actual use of the mark in commerce are required; mere preparations to use a mark in commerce are insufficient to constitute use in commerce. Rather, the mark must be actually used in conjunction with the services described in the application for the mark.” The court thus held that the application was void ab initio.

Pharmaceutical trademarks, however, present the classic example of special circumstances, given the market realities within the pharmaceutical industry. A pharmaceutical product cannot be sold commercially without approval by the U.S. Food and Drug Administration; however, before the drug is put on the market, it will undergo clinical trials and testing that are very much a part of ordinary business.

Indeed, the House Judiciary Committee noted that

… “the ordinary course of trade” varies from industry to industry. Thus…a pharmaceutical company that markets a drug to treat a rare disease will make...a few sales in the ordinary course of its trade; the company’s shipment to clinical investigators during the Federal approval process will also be in its ordinary course of trade….

H.R. Rep. No. 1028, 100th Cong., 2d Sess. 15 (1988). Thus, U.S. courts have indicated that shipping a drug to a clinical investigator for use in clinical trials during the Food and Drug Administration approval process can constitute use sufficient to file a trademark application with the USPTO. See G.D. Searle & Co. v. Nutrapharm, Inc., No. 98-6890 (S.D.N.Y. Oct. 29, 1999).

This understanding has been consistently upheld by U.S. courts. In Automedx, Inc. v. Artivent Corp., 95 U.S.P.Q.2d 1976 (T.T.A.B. 2010), the Trademark Trial and Appeal Board held that the sale of medical ventilators for testing, and before the Food and Drug Administration’s approval of the ventilators for human use, was a bona fide sale for a legitimate commercial purpose.

Unlawful Use
Although the Board in Automedx held that use of a mark in association with the sale of a medical device, before the FDA approved it for commercial sale, was trademark “use,” trademark applicants should tread lightly in grounding trademark rights on sales of products and services that have not yet crossed all legal hurdles. As a general rule, use of a mark must be legal use to establish trademark rights. This principle would clearly apply, for instance, if the goods or services were themselves illegal—such as an application to register a mark for use on illicit drugs. In such cases, U.S. courts will generally apply the unlawful use doctrine preventing a trademark owner from securing trademark rights from unlawful sales of goods or services.

A recent case involving the unlawful use doctrine is ZAO Gruppa Predpriyatij Ost v. Vosk International Co. (Opposition No. 91168423 (T.T.A.B. Aug. 9, 2011)). The defendant in that case alleged that the opposer’s use of its trademark on soft drinks was unlawful because its labels violated FDA regulations. The Board, however, maintained a narrow application of the doctrine. Trademark use would be considered unlawful under a regulatory act only if the issue of compliance was previously determined by a court or government agency having competent jurisdiction under the statute involved. ZAO Gruppa has recently been appealed to the United States District Court for the Western District of Washington.

Trademark “Use” and the Internet
Use of trademarks on the Internet can raise questions concerning whether “use” has actually occurred at all and, if so, the territorial reach of the trademark rights. While mere advertising or promotion of a trademark on a web page is not “use in commerce,” a website page that displays the trademark, the product and a means to buy the product is considered to be “use in commerce.” See In re Sones, 590 F.3d 1282, 93 U.S.P.Q.2d 1118 (Fed. Cir. 2009). There must be a means of ordering the goods directly from the web page, such as a telephone number for placing orders or a pull-down menu for online ordering. In re Quantum Foods, Inc., 94 U.S.P.Q.2d 1375, 1380 (T.T.A.B. 2010).

The question of a trademark’s territorial reach based on Internet use was recently considered in the case of Dudley v. HealthSource Chiropractic, Inc., No. 6:07-cv-6631 (W.D.N.Y. Aug. 7, 2012). In this case, a federal court declined to grant a broad territorial reach based on common-law trademark use over the Internet. While the court was satisfied that the plaintiff was the senior user of the common-law trademark HEALTHSOURCE CHIROPRACTIC for chiropractic services, the plaintiff’s rights were limited to his use in the greater Rochester, New York, area. The judge reasoned, “The rights of concurrent users would be substantially harmed if one user were able to monopolize the internet to the exclusion of other lawful users of the same mark. If, as the Plaintiff suggests, a senior common law user could claim exclusive use on the internet, then it would undermine the benefits and security provided by federal registration.”

In Canada, the concept of trademark “use,” and therefore what constitutes “use,” is an important consideration when filing applications, when opposing another trader’s application and when seeking to maintain registrations once issued. However, the issue of what constitutes actual trademark “use” in Canada is not always clear, and there are some “gray” areas that can lead to difficult judgment calls.

Test Markets and Sample Sales
Generally, test shipments or sample sales do not constitute trademark “use” in Canada in the “ordinary course of trade,” and would not likely support a use-based application or an opposition claiming prior use, or provide a defense to a non-use attack. However, Canadian courts have, in some instances, acknowledged that sample shipments or test-marketing sales of products could constitute trademark use in the normal course of trade if it appears that test marketing is part of the normal business practice of the trademark owner and is done in advance of, or to further, sales in the normal course of trade. BFE, Inc. v. Broadcast Designs Ltd. (1993), 48 C.P.R. (3d) 240 (T.M.O.B.); Thomas J. Lipton Inc. v. Dial Corp. (1995), 61 C.P.R. (3d) 123 (T.M.O.B.); Fetherstonhaugh & Co. v. ConAgra Inc. (2002), 23 C.P.R. (4th) 49 (F.C.T.D.).

The jurisprudence in this area is fairly fact- and industry-specific, and accordingly, trademark owners should exercise caution when relying on pre-market activities to support trademark use in Canada in the ordinary course of trade. For example, it is not clear whether use of a mark in clinical trials in the pharmaceutical industry would constitute trademark use in the ordinary course of trade. While there are strong arguments in favor of this interpretation, relying on such use to support an application or registration is not without risk.

Unlawful Use
It is generally accepted that trademark use in Canada, whether to support a use-based application, to maintain a registration, or as a ground of opposition, must be a lawful use. McCabe v. Yamamoto & Co. (America) Inc. (1989), 23 C.P.R. (3d) 498 (F.C.T.D.). The Opposition Board has held, in several instances, that an application for registration of a trademark in Canada can be successfully opposed where the opponent has established a prima facie case that the applicant’s use of the mark was in violation of a federal statute. E. Remy Martin & Co., S.A. v. Magnet Trading Corp. (HK) Ltd. (1988), 23 C.P.R. (3d) 242 (T.M.O.B.); Co-operative Union of Canada v. Tele-Direct (Publications) Inc. (1991), 38 C.P.R. (3d) 263 (T.M.O.B.).

Absent such prima facie evidence, however, an applicant is presumed to act legally. Hence, in Cadbury Confectionery Canada Inc. v. Valliant-Saunders ((2002), 22 C.P.R. (4th) 388 (T.M.O.B.)), use of the trademark CANNABIS CRUNCH was not prohibited in association with chocolate bars containing cannabis seeds, as it was established that certain types of cannabis seeds were legal and it was reasonable to assume that the applicant would comply with the law.

Trademark Use and the Internet
Use of trademarks on the Internet in cross-border and international commerce has had a significant impact on the concept of trademark use in Canada in the ordinary course of trade. Canadian courts increasingly have moved away from traditional notions of territoriality and trademark rights and have found various ancillary activities, many conducted via the Internet, to support a finding of trademark use in Canada. Doctor’s Associates Inc. v. American Multi-Cinema, Inc. (2012), 101 C.P.R. (4th) 253 (T.M.O.B.).

Canadian courts have held that if a company responds to Canadian inquiries via its website, and/or displays the mark in its catalogues from which Canadian customers can order products, and/or are shipped products from the United States, such activity would constitute trademark “use” with “retail services” in Canada even without a “bricks and mortar” retail store in Canada, provided that there is at least some level of “interactivity” with potential customers in Canada. Lapointe Rosenstein LLP v. The West Seal, Inc., 2012 TMOB 114 (T.M.H.O.) (unreported); Saks & Co. v. Canada (Registrar of Trade Marks) (1989), 24 C.P.R. (3d) 49 (F.C.T.D.); McCarthy Tetrault v. Autozone Parts Inc. (2011), 93 C.P.R. (4th) 322 (T.M.O.B.).

Similarly, “railway passenger services” was understood to include “train reservation and ticketing services,” without the actual operation of a train in Canada (Venice Simplon-Orient-Express, Inc. v. Société Nationale des Chemins de Fer Français SNCF (2000), 9 C.P.R. (4th) 443 (F.C.T.D.), aff’g (1995), 64 C.P.R. (3d) 87 (T.M.H.O.)), and use of a trademark for “reservation services” in Canada was held to support use of the mark for “automobile rental and leasing services” in Canada, even though the actual automobile rentals were not provided in Canada (Advantage Car & Truck Rentals v. Advantage Rent-A-Car Inc. (2003), 27 C.P.R. (4th) 342 (T.M.O.B.)).

In the hotel industry, however, use of a mark in association with various ancillary services such as reservation services will not necessarily support trademark use with actual hotel accommodation services. In a 2006 decision of the Opposition Board, the concept of “hotel services” was interpreted broadly and the Board found that there was trademark “use” with “hotel services” based on the provision of reservation services, even without the presence of a hotel facility in Canada. Borden Ladner Gervais LLP v. WestCoast Hotels, Inc. (2006), 53 C.P.R. (4th) 361 (T.M.H.O.). However, in a November 2012 decision of the Opposition Board, the Hearing Officer distinguished the facts of the WestCoast decision and held that use of a mark merely with hotel reservation services did not constitute trademark “use” with hotel accommodation services. The decision may yet be appealed, which would clarify the issue in the hotel industry. Georgio Stamatis Maillis o/a Bellagio Limousines Against Registration Nos. TMA540,882 and TMA355,865 for the Trade-mark BELLAGIO in the Name of Mirage Resorts, Incorporated, 2012 TMOB 220.

With new ways of going to market and the increasing importance of the Internet in manufacturers’ marketing plans, traditional concepts of trademark “use” in commerce are being tested by courts in both Canada and the United States, often with surprisingly novel and flexible outcomes. Where there is a sufficient nexus between the trademark and the local consumer, use of the mark in other countries and via the Internet may support a claim to trademark use in Canada or the United States without an actual physical presence there. However, this very flexibility is leading to uncertainty in many industries as to what, exactly, constitutes “use” of a mark in commerce. It is increasingly important for foreign applicants to carefully evaluate the manner in which their marks are used, to ensure that such use will support a finding of actual trademark use.

Although every effort has been made to verify the accuracy of items in the INTA Bulletin, readers
are urged to check independently on matters of specific concern or interest.

© 2013 International Trademark Association