A recent decision of the Federal Court, affirmed by the Federal Court of Appeal, scrutinized the applicant’s evidence relating to an application to expunge a trademark registration, and relied on the presumption of validity to dismiss the application. For all those interested in bringing such a proceeding these decisions serve as a warning to devote time and effort to gather the necessary evidence.
The Trademarks Act gives the Federal Court exclusive original jurisdiction, on the application of any interested person, to order that entry in the register be struck. Most frequently, interested parties proceed by way of application. An application is heard and determined on evidence introduced by way of affidavit unless the Court otherwise directs.
The burden of proof in such proceedings is on the party seeking to expunge. The registrant benefits from a presumption that its registration is valid, and the onus remains on the attacking party. In the past this presumption has been characterized as weakly worded since it adds little to the onus already resting, in the usual way, on the attacking party. It means that an application for expungement will succeed only if an examination of the evidence presented to the Court establishes that the trademark was not registrable at the relevant time. There is nothing more to be made of the presumption of validity.
Application to Expunge
The trademarks HORLICK’S and HORLICKS are owned by GlaxoSmithKline Consumer Healthcare (UK) IP Limited (“GSK”) and were registered in 1917 and 1952, respectively. The Bedessee Imports Ltd. (“Bedessee”) applied to the Federal Court to have the GSK registrations expunged. Bedessee claims that the trademarks were not registrable at the date of registration, are not distinctive, and have been abandoned.
Facts
The products associated with the HORLICKS Marks (HORLICKS Products) are malted beverage products originally developed in the United States by the Horlick brothers around 1873. HORLICKS branded goods continue to have strong sales in several countries, most notably in India.
The HORLICK’S trademark (with the apostrophe) was registered in Canada in 1917 to Horlick’s Malted Milk Company. The trademark owner ceased using the apostrophe and the HORLICKS trademark was registered to Horlicks Limited in 1952.
Since then the HORLICKS Marks have been assigned several times because of mergers and acquisitions. The marks are owned by GSK, which acquired the marks from Glaxo Group Limited on July 12, 2016.
Before 2016, HORLICKS Products were sold in Canada to distributors and retailers by GlaxoSmithKline Consumer Healthcare Inc. and its predecessors, under the authorization of predecessors of GSK. The dollar value of sales of HORLICKS Products in Canada ranged from approximately $300,000 to $1,000,000 from 2005 to 2015, inclusive.
In 2015, the HORLICKS Products were non-compliant with Canada’s food and drug regulations due to a failure of the formulation to include required supplements. GSK did not sell HORLICKS Products in Canada after 2015.
In 2016 and 2017, goods bearing the HORLICKS trademarks have been sold in retail outlets in Canada. Apparently, the goods, which are genuine, were imported by persons without specific authorization from GSK IP or a predecessor. Some of the goods appear to have a different formulation from the HORLICKS Products sold in Canada by GSK Inc.
There was competing evidence relating to advertisements of HORLICKS products. Bedessee presented advertisements that they suggested were consistent with generic use of the marks. GSK produced advertisements they asserted demonstrated proper trademark use.
Bedessee’s evidence also included a comment made by a GSK customer relations representative in response to a telephone inquiry by Mr. Raymon Bedessee. When Mr. Bedessee inquired about HORLICKS Products not being available in Canada, the representative suggested that HORLICKS Products had been discontinued.
Decision in the Federal Court
The judge referred to the presumption that a registration is valid, and any doubts must be resolved in favour of the validity of registration. The onus was on Bedessee to prove, on a balance of probabilities, that the HORLICKS marks are invalid. After reviewing the evidence on the three alleged grounds of invalidity the judge said she was not convinced the applicant had met the onus on it to establish invalidity.
Bedessee appealed to the Federal Court of Appeal. The questions were whether the Federal Court erred in concluding that Bedessee failed to demonstrate that, at the relevant date, the HORLICKS Marks were not distinctive and that they had been abandoned.
Distinctiveness
The Act defines the term “distinctive” as follows “distinctive, in relation to a trademark, describes a trademark that actually distinguishes the goods or services in association with which it is used by its owner from the goods or services of others or that is adapted so to distinguish them.” The HORLICKS Marks would be distinctive at the relevant date if they actually distinguished HORLICKS Products from the products of others.
Bedessee relied on the multiple assignments of the HORLICKS Marks and that other products bearing a “HORLICKS” trademark with different formulations had found their way into the Canadian marketplace.
The Court said these facts by themselves did not support a finding that the HORLICKS Marks were not distinctive of HORLICKS Products. As to the effect of assignments, the question was whether the public would believe that HORLICKS Products originating from an assignee were derived from a prior trademark owner. This cannot be inferred from the assignments themselves. As for different products finding their way into the Canadian marketplace, this would only affect the distinctiveness of the HORLICKS Marks if the public were to believe these products were derived from a different company than the owner of the HORLICKS Marks. Again, this cannot be inferred from the evidence in the record. Here, the evidence does not establish that the purchasing public would believe that the goods originated with anyone other than the owner of the HORLICKS Marks.
The Federal Court did not err in concluding that Bedessee did not satisfy its burden of proof.
Abandonment
The principles applicable in determining whether a trademark has been abandoned are well-accepted and not in dispute. It is a two-part test: the trademark must have ceased to have been used and the trademark owner must have intended to abandon the mark.
The Federal Court rejected the evidence relating to the comment made by a GSK customer relations representative as proof of the truth of its contents because it was “inadmissible hearsay.” Bedessee argued that the Federal Court erred in law because the Court failed to consider the principled exception to hearsay that the evidence may be admitted if it is necessary and reliable.
The Appellate Court disagreed. This evidence was not sufficiently reliable to warrant application of the principled exception: it is not known whether the representative’s role was to represent GSK’s decisions on branding, or whether he had specific and accurate information about the Canadian situation involving the HORLICKS Marks. There is no safeguard in place to ensure that the representative was not mistaken and given that Bedessee did not provide the representative’s full name, there is no way to further test the reliability of his comment. The Federal Court did not err in rejecting this evidence as inadmissible hearsay.
If you have questions, please contact mckeown@gsnh.com
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.
A version of this article originally appeared on the Lawyer’s Daily website published by LexisNexis Canada Inc.