The Federal Court has dismissed an appeal of the Registrar of Trademarks' (Registrar) decision to expunge the AVIREX Mark (Mark) under s. 45 of the Trademarks Act. In doing so, the Court has provided further guidance on what constitutes "special circumstances" to excuse non-use in the relevant period, specifically regarding acquisitions of impugned marks.
Centric Brands LLC (Centric) is the current owner of the Mark, and KVZ International Ltd. (KVZ) was the former owner of the Mark. On June 27, 2018 (during the relevant period), Centric entered into an agreement with KVZ's parent company to purchase various assets (Agreement), including ownership of the Mark. The Mark was officially assigned by KVZ to Centric on October 29, 2018 (after the relevant period).
Shortly before the assignment to Centric, the Registrar issued a s. 45 notice to KVZ concerning the Mark. The s. 45 notice required KVZ to provide evidence of use of the Mark in Canada within the three years prior to the issuance of the notice (Relevant Period). Centric, the new owner, responded to the s. 45 notice with an affidavit that did not provide evidence of any use within the Relevant Period but provided evidence on Centric's intention to use the Mark during that period. The Registrar expunged the Mark, and Centric appealed that decision.
Centric filed two affidavits in support of its appeal. These affidavits contained evidence concerning the transaction where Centric obtained the Mark and KVZ's efforts to relaunch the AVIREX brand during the Relevant Period. The Court found that this new evidence was material, so it conducted a de novo review.
The main issue in this appeal was whether special circumstances under s. 45(3) to excuse non-use of the Mark in the Relevant Period existed. The general rule under s. 45(3) of the Trademarks Act is that a mark will be expunged if its owner cannot provide evidence of its use within the three years before the s. 45 notice. The exception to this rule is where special circumstances exist to excuse this absence of use. There are three criteria to assess in determining whether special circumstances exist: "(a) the length of time during which the trademark has not been in use; (b) whether the registered owner’s reasons for not using its mark were due to circumstances beyond its control; and (c) whether there exists a serious intention to shortly resume using the mark".
In this case, Centric argued that the special circumstances analysis was complicated by the timing of the transaction where it acquired the Mark relative to the Relevant Period. Centric pointed to a line of case law that found that, when there has been an assignment of the impugned trademark within the relevant period, the period of non-use for purposes of determining special circumstances will generally be considered to start from the date the trademark was assigned.
The Court accepted that this was an accurate statement of the law but found that it did not apply in this case. Despite the fact that the Agreement was during the Relevant Period, Centric's acquisition of the Mark occurred after the Relevant Period (i.e. when the Mark was officially assigned). The Court interpreted s. 45(3) as requiring that the special circumstances occur within the relevant period. Centric's acquisition of the Mark occurred after the Relevant Period, so it cannot constitute special circumstances to excuse non-use. The Court rejected Centric's position that it had obtained de facto ownership of the Mark within the Relevant Period when it entered into the Agreement.
The Court also dismissed Centric's argument that KVZ's intentions to use the Mark during the Relevant Period constituted special circumstances. Intentions and plans for future use of a mark cannot, by themselves, amount to special circumstances without a further explanation to account for the period of non-use.
Since there was no use of or special circumstances excusing non-use of the Mark within the Relevant Period, the Court held that the Mark should be expunged and dismissed the appeal.
Centric Brands Holding LLC v Stikeman Elliott LLP, 2024 FC 204
