When is “promotional use” of a trademark “Use”?

In a recent case which considered the meaning of the term “use”, a third party sought cancellation, under the Section 45 non-use provision, of a trademark registration, covering t-shirts.  The trademark owner submitted evidence that the trademark LUSH, was marked on t-shirts worn by employees as part of their uniforms, sold to employees at cost, and exported from Canada.  The Registrar held that this use constituted trademark use within the meaning of the Trademarks Act, and the registration was therefore maintained.

On appeal, the Federal Court, in Riches, McKenzie & Herbert LLP v. Cosmetic Warriors Limited 2018 FC 63, held that the evidence of use did not constitute use of the trademark under either Section 4(1) or 4(3) of the Act. 

Section 4(1) provides that “use” occurs when a trademark is marked on the goods or their packaging at the time of the transfer of the property in or possession of the goods, in the normal course of trade (emphasis added). Since the shirts were sold at cost for promotional purposes to generate goodwill for a business unrelated to the t-shirts (namely the registrant’s cosmetic business), and in the absence of any profit, the Federal Court concluded that the use was not in the ordinary course of trade for a cosmetics company.  The use was held to be merely promotional use, and not use in the normal course of trade.

Section 4(3) of the Act provides that use can also occur when goods are exported from Canada.  There is no reference in this provision to a requirement that the exports be “in the normal course of trade”.  However, the Court held that where activities would not amount to use in Canada if the transactions took place in Canada, the Court would not allow an end run around the requirement for a commercial transaction to be necessary by simply allowing the trademark owner to ship the goods across the border. It was therefore held that there was also no use of the trademark pursuant to this provision in cases where there was no commercial transaction.

When seeking trademark protection for trademarks in Canada, it is important to be aware at all times of the activities necessary to maintain use of the trademark so that the trademark rights will not be subject to cancellation.