Canadian Intellectual Property Bulletin

Volume 8 - August, 1999

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.

IP Under Construction: Cases and Commentary

Of grapes, conspiracy and official marks: The Federal Court allows a time extension in the "ICEWINE" case:  Magnotta Winery Corp. v. Vintners Quality Alliance of Canada, [1999] F.C.J. No. 326, Reed J.

The Federal Court, in a decision rendered in March of this year, has allowed an extension of time in which Magnotta Winery Corp. can file an application for judicial review of a decision by the Registrar of Trade-marks.

THE FACTS:Magnotta manufactures and sells icewine. Vintners Quality Alliance of Canada (VQA) is an organization comprised of wine producers. VQA had applied for registration of "ICEWINE" as a trade-mark (certification mark) prior to September of 1997, but had allowed the application to lapse after a rejection from the examiner. Magnotta had planned to oppose the application and expressed this to VQA.

In November of 1997 VQA requested that the Registrar give public notice that VQA had adopted and was using this mark as an "official mark" pursuant to s.9(1)(n)(iii) of the Trade-marks Act. The Registrar acceded and published the notice, but Magnotta didn’t find out until a press release by VQA in August of 1998. Magnotta complained to VQA twice in September of 1998 regarding this matter and objected to VQA’s position that it could use ICEWINE as a trade-mark now that it controlled it as an official mark. A reply from VQA was not forthcoming, so in November of 1998 Magnotta commenced these proceedings. Magnotta sought to oppose any such control by VQA of the word ICEWINE, which is used by a number of producers in Canada as a descriptive term.

Magnotta sought a motion for an extension of time in which to file an application for judicial review of the Registrar’s decision, since the normal means of opposition, seeking expungement of the registration under s.57 of the Act, was unavailable as official marks aren’t actually on the Register. In the alternative, they sought a motion for directions on how to proceed.

Did Magnotta have standing to challenge the Registrar’s decision?

Reed J. had no doubt that Magnotta had an interest in the Registrar’s decision, relying on evidence of their production and sale of icewine, and this interest gave them standing. It was unnecessary in these circumstances, where there had been no opportunity to challenge the acceptance of the official mark, that Magnotta have been a party to the proceedings that resulted in the decision of the Registrar. Although not clearly accepted by the Court, Reed J. mentions that Magnotta claimed to be the market leader in production and sale of icewine at the time of VQA’s application for ICEWINE as its official mark.

Reed J. also mentions in passing Magnotta’s assertion that the move by VQA was a cover for an attempt by a subsidiary (a competitor of Magnotta) of one of the largest wineries in VQA to regain a previously-held market share. Since the proportionate voting in VQA is grounded in members’ percentage of market share, the argument is certainly interesting.

Did Magnotta respond in an expeditious fashion upon finding out about the decision?

Although the action was brought after the deadline, Reed J. held that Magnotta always sought to oppose the control of this mark by VQA, and they "moved reasonably expeditiously" given that they first gave VQA the opportunity to voluntarily amend the situation. 

Would there be prejudice to Magnotta if it could not challenge the decision?

Reed J. states that "there is considerable prejudice to the applicants if they cannot challenge the decision." Presumably, given her comments earlier in the decision, this relates to the importance of the icewine product in Magnotta’s business and the potential negative impact of VQA’s control of the mark.

Which procedure should be followed in seeking judicial review?

Reed J. made no decision regarding which of the two paths, s.56 of the Trade-marks Act or s.18 of the Federal Court Act, was the appropriate one, but rather suggested that concurrent actions could be brought. The decision regarding which was appropriate should be left to the Court of Appeal, she says.

Having found that Magnotta had standing to challenge the Registrar’s decision, Reed J. proceeded to grant an extension of time in which to start a judicial review proceeding based on the reasonableness of Magnotta’s behavior in the circumstances.

Some Comments

Reed J. makes only passing mention of the conspiracy theory that Magnotta proposed. It is unfortunate that she failed to pursue this, but perhaps the evidence was insufficient.

The question of whether such a trade organization can be included under "public authority" is one which the Court will have to address when the action for judicial review is brought. It is somewhat difficult to imagine such an organization meeting the requirements of substantial connection to government, a duty owed to the public, and duties which are performed for the public’s benefit rather than profit. But we’ll have to wait and see what the future decision holds.  The action for judicial review should be very interesting, including issues of "public authority" definition, the impact of the alleged initial hiding of the decision from Magnotta, as well as the question of proper means of proceeding.  Another point to note is where Reed J. questions whether publication in the Trade-marks Journal is really notice to the world. Her position is clearly reasonable in the circumstances, but great reliance is placed on this fiction in intellectual property and other administrative systems incorporating a registry. The Federal Court may have to return to this comment and address it in a decisive manner. 

THE FACTS: At the request of the applicant law firm and trade-mark agency, the Registrar issued a notice to the respondent under s.45(3) of the Trade-marks Act, requiring evidence of use of the trade-mark FANTASY or special circumstances excusing non-use. Such a move is made to expose non-use of a trade-mark to allow expungement and afford a new applicant the opportunity to register the mark for similar wares. As the Court said in the Philip Morris case of 1987, "The procedure has been aptly described as one for removing ‘deadwood’ from the register."

Sealy had been producing a line of mattresses and box springs under the FANTASY mark and these were sold exclusively to a large retailer in Canada. In November of 1993, this agreement was terminated by the retailer and Sealy was left without a buyer. The Senior VP and COO stated that an attempt was made for almost three years to find another retailer, but that the downturn in economic conditions in Canada during that period made it an even more difficult task. Finally, they were able to secure an arrangement with another furniture retailer for these products.

THE DECISION: The Court applied the three-part test set out by the Federal Court of Appeal in the Harris Knitting Mills case of 1985. First, the duration of non-use must be considered. Second, the reasons for non-use must be due to circumstances beyond the registered owner’s control. Third, there must be a serious intention to shortly resume use.

However, the test was altered somewhat by reference to the intent behind this provision from the Act. After determining the duration of non-use, the Court went on to state that the second part of the test had not been met; there was insufficient evidence to establish that the non-use was beyond Sealy’s control. But the third part of the test was met, in that there was sufficient evidence that the new retailer had in fact placed orders for the products, and the Court found that this met the intent behind s.45(3). In the words of the decision:

"[The purpose of the provision] is to expunge from the trade-mark register trade-marks which have not been used and there is no reasonable prospect will be used. This is not a case, as I see it, of a registered owner after receiving a section 45 notice from the Registrar scurrying to find a buyer to establish an intention to use the mark ... In my view, Parliament did not intend a mark should be expunged in these circumstances."

This an important trade-mark case not only because it deals with an unusual and significant provision in the Act, but in that it also discusses at length the reasons behind the provision and how it should be reasonably applied.

Top of page     |    Print this page