Two recent decisions of the Federal Court have given effect to an oral license of a trademark.
Licenses under the Trademarks Act
Section 50 of the Trademarks Act provides that if an entity is licensed by the owner of a trademark to use the trademark and the owner has, under the license, direct or indirect control of the character or the quality of the wares/services then the use advertisement or display of the trademark by the licensee is deemed to have the same effect as use by the owner of the trademark.
The section is frequently utilized to help maintain the distinctiveness of the licensed trademark but care needs to be taken to make sure that licensing is done correctly. A recent case sheds some light on the workings of the section.
The Oppositions
Middlefield Capital Corporation (“Middlefield”) filed an application to register the trademark INDEX PLUS INCOME FUND DESIGN in association with financial services. The application was based on use since as early as August 15, 2003. Allianz Global Investors of America (“Allianz”) filed a trademark application for the trademark INDEX PLUS based on proposed use in association with financial services. Each of Middlefield and Allianz opposed the application that had been filed by the other. One issue that was central to the oppositions was whether Middlefield was entitled to rely upon the use of its mark by its licensees.
In support of the oppositions Middlefield filed a significant amount of evidence of use both by itself and by its licensees of its mark. On cross-examination the key witness said that the license was an oral one and that Middlefield established quality standards to be met by its licensees and then actively ensured that the standards were in fact met. However, there was nothing in writing concerning either the license or the quality standards.
Since Allianz’s evidence was not seriously questioned on cross-examination, the Hearing Officer concluded that there was in fact an oral license and that the character/quality standards had been enforced. As a result, the Hearing Officer found that the use of the Middlefield’s mark by the named licensees accrued to the benefit of Middlefield. Relying on this evidence and other evidence the Hearing Officer found in favour of Middlefield in each of the oppositions.
The Appeals
Allianz appealed from the decisions to the Federal Court. Allianz argued that Middlefield did not control the character or the quality of the wares/services. However, the judge disagreed and said that use of the Middlefield’s mark in association with the distribution of a prospectus and solicitation of interest in the purchase of units in the fund by investment dealers or brokers constituted use and there was not a loss of control over the character of the service in question.
The lack of a written license agreement weakened the claim to control of the mark but a written agreement is not required to maintain control. A licensing agreement can be inferred and the evidence supported Middlefield’s assertion of control. As a result the appeals were dismissed.
Copies of the decisions are available here:
http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/72399/index.do
http://decisions.fct-cf.gc.ca/fc-cf/decisions/en/item/72355/index.do
Comment
There is an element of uncertainty concerning when it will be found that an oral license was in place. To avoid this it is strongly recommended that a written license be entered into which contains provisions, among other things, relating to obtaining approvals for all materials used in association with the licensed trademarks, a right of inspection and an agreement to conform with standards and guidelines to be provided by the licensor. In addition, it is prudent to ensure that a program is in place that will allow the licensor to show that the control has been exercised.
Consideration should also be given to the use of an appropriate trademark notice by the licensee. The Act provides that to the extent that public notice is given of the fact that the use of the trademark is a licensed use and the identity of the owner, it is presumed, unless the contrary is shown, that the use is licensed by the owner and that the character or quality of the services are under the control of the owner. While this is a presumption only it certainly is of assistance.
John McKeown
Goldman Sloan Nash & Haber LLP
480 University Avenue, Suite 1600
Toronto, Ontario M5G 1V2
Direct Line: (416) 597-3371
Fax: (416) 597-3370
Email: mckeown@gsnh.com
These comments are of a general nature and not intended to provide legal advice as individual situations will differ and should be discussed with a lawyer.