Canadian Intellectual Property Bulletin

Volume 3 - September, 1996

This newsletter is not intended to constitute a legal opinion on any of the issues discussed. Readers should seek professional legal advice on issues of concern to them - we would be pleased to elaborate on any of the articles herein and discuss how it might apply to specific problems. Contact us for more information.

Phase 2 Copyright amendments:

The federal government has introduced the latest set of proposed amendments to the Copyright Act. Among the proposals contained in that bill are a levy on blank recording media such as cassettes and tapes, provisions for the payment of royalties to the producers and performers of sound recordings, provisions to strengthen the position of exclusive book distributors in Canada vis-à-vis customers who purchase from distributors from outside of the country, as well as a set of exemptions from the copyright laws for groups such as libraries, archives, non-profit educational institutions, as well as persons with perceptual disabilities.

It is expected that the committee study of this Bill will begin in the fall. The proposed changes are in some ways sweeping - please feel free to contact me for further advice or opinion with respect to the potential effects of this Bill, if you are involved in any area which is affected by copyright law.

European Community adopts harmonized trade mark system

Following upon the successful launching of the European-wide patent filing system, the European community have now taken a second step towards pan-European intellectual property protection with the introduction of the European Community trademark. By using a European Community trademark, it permits a seller to mark goods and services with one single trademark for the entire European community without having to account for varying state borders throughout Europe. Given its unitary character, the European mark has effect throughout the entire European community and has the same effect of having been registered nationally in the individual member states of the European community.

The possibility of filing an application for a European Community trademark has various advantages. One major advantage of course is that only one trademark application need be filed and prosecuted. The protective affect of a European Community trademark will commence throughout all member countries of the European union simultaneously as soon as examination proceedings of the trademark application have been terminated. The European Community trademark is for a term of 10 years and can be extended in terms of 10 years.

Presently the European Community trademark extends to the countries of Belgium, Denmark, Germany, Finland, France, Greece, United Kingdom, The Netherlands, Italy, Luxembourg, Austria, Portugal, Sweden and Spain.

What can be filed as a European Community trademark? Anything which can be represented graphically may be filed under this new regime. This in particular includes words and personal names, pictures, letters and numerals as well as the distinguishing guise of an article as long as those markings are suitable for distinguishing the particular goods of the applicant from those of other similar undertakings.

Another advantage to the new European Community trademark system lies in the treatment of the application upon filing of opposition to the registration of the mark. If an opposition is filed on the basis of either a pre-existing mark from a member country of the European Community, and if that opposition is successful, the European Community application can be subdivided into national applications and might be pursued in all countries other than the country in which a conflicting pre-existing mark exists. European Community trademarks will be subject to obligatory use after 5 years. This however is limited in that continuous use is only required in one of the member countries of the European Community in order to maintain the registration.

The consolidated European Community trademark process does appear to be a step forward. If a potential trademark applicant plans to obtain trademark protection in more than 4 member countries of the European Community, or if the market share for the product or service upon which the proposed mark is to be used is increasing in Europe, it is likely a financial advantage to make a European Community application rather than individual countries.

I would be pleased to offer assistance in the preparation and filing of European Community trademark applications, or of trademark applications in isolated member countries of the European union or other countries throughout the world. Please feel free to contact me if I can be of assistance in this regard.

Limitations Upon Lenders' Security Imposed by the Licensing of Intellectual Property

Where a debtor has licensed its intellectual property rights to a licensee, the secured creditor may not automatically receive the royalties which are payable to the licensor under the license. As a contractual right the licensee itself is distinct from the underlying intellectual property rights. In order for a lender to be sure to obtain the right to receive royalty payments in the place of the debtor, the security interest which is taken by the lender should specifically cover the benefits flowing to the debtor under the license of the specific intellectual property. If a security interest is taken in an intellectual property license granted by the debtor, it is advisable to have the licensee execute an acknowledgment of the security interest.

Where the debtor itself is a licensee of certain intellectual property rights, it may be possible for the debtor's licensed rights to form part of the collateral. In this case, the lender should become aware of the debtor's obligations under the license, such as royalty payments, restrictions on use of the intellectual property, and rights of termination by the licensor and the security agreement should include provisions requiring the debtor to remain in good standing under the license. As it is common for license agreements to preclude any assignment by the licensee of its rights without the express consent of the licensor, it may be necessary for the secured creditor to obtain acknowledgment and consent from the licensor to any subsequent assignment of the license upon the debtor's default and the secured creditor's realization under the security agreement.

Lending institutions and potential borrower both should be aware of the necessity of clear communication in borrowing transactions hinging upon or containing intellectual property rights as all or a portion of the collateral.

Please feel free to contact me for specific legal opinion on any particular licensing/borrowing scheme, or for the purposes of verifying the validity, enforceability or chain of true title to any intellectual property rights.

Assessment of Evidence in Trade Mark Applications:

Gainers Inc. v. Tammy L. Marshaldon and the Registrar, Federal Court Trial Division, unreported, March 12, 1996.

Gainers appealed a decision of the Registrar of Trademarks to reject an opposition filed by Gainers in respect of the proposed trademark "Sugar Plum Fairy" to be used in association with candy and catering services. Gainers claimed that the proposed mark would cause confusion with their own registered mark "Sugar Plum", for use in association with sliced and prepared meats.

The Court upheld the decision of the Registrar, who was justified in assuming, for lack of any evidence before him to the contrary, that catering services were not a secondary business for companies involved in the wholesale and retail supply of sliced and prepared meats. Although a respondent to an opposition has the burden of proof, the question of whether or not catering services are provided by suppliers of meats is not something that the respondent could reasonably be expected to prove without notice.

Interlocutory Injunction Applications in Trade Mark Cases:

1036029 Ontario Ltd. v. Crown Life Insurance Company (1995), 64 C.P.R. (3d) 342, Fed. Ct. T.D.

Defendant receiver was operating a hotel in receivership using a number of trademarks. In an application by the Plaintiff as alleged owner of the trademarks for an interlocutory injunction restraining the receiver's continued use, the application was dismissed. The receiver demonstrated that without the use of the marks there would be irreparable harm to the business of operating the hotel, while the Plaintiff could show no irreparable harm to support the granting of the injunction.

Castlemore Marketing Inc. v. Intercontinental Trade and Finance Corporation et al, Fed. Ct. T.D., unreported, January 8, 1996.

The Plaintiff had licensed the Defendant to distribute a number of beauty products in their name in Russia under the trade name "Jocelyne Beauty Products". After the distribution relationship had ended between the two parties, the Defendant had continued distributing their own products under the marks "Jocelyne" and "Jaclyne". The Plaintiff argued that an injunction should be granted restraining the Defendant on the basis that the Defendant's products were priced lower than those of the Plaintiff, were of lesser quality and bore counterfeit labels and packaging.

Held: The injunction application was rejected on the basis that no irreparable harm could be shown - any losses which might eventually be found to have been incurred on the Plaintiff by the Defendant could eventually be measured in monetary terms, at the trial of the issue.

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