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Report on Business Flood of Canadian trademark applications ahead of Monday’s changes could hurt legitimate brand owners, lawyers say

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The company that filed the most trademark applications in Canada last year isn’t a household name. Brandster Branding Ltd. is a relative unknown. But it is one example of what intellectual property lawyers say is a concerning trend: a rush of applications that have been an unintended consequence of changes to Canada’s Trade-marks Act taking effect on Monday. Experts worry that opportunistic applicants spurred on by those changes are preventing legitimate brand owners from protecting their trademarks as the new rules take effect.

Lawyers call such applicants trademark “trolls.” It’s a problem because as long as an application is pending – even if it is not eventually approved to be registered – it blocks other companies from applying to register that mark. And the number of applications has been rising.

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Among a number of changes – which also add new trademark protections in Canada for scents, tastes, colours and moving images, among other things – are two in particular that have led to the increase in applications.

First, the cost of “all-class” applications, which protect a mark across all 45 categories of goods and services. These used to be covered under a single filing fee, but as of Monday a separate fee will apply for each class, boosting those costs significantly. That has led to a rush of activity as applicants seek to file before the new prices take effect.

The second change is that Canada will no longer require proof of use in order to register a trademark (although such proof is required later). So people who may not actually use a brand have been applying – under the old, cheaper fees – possibly assuming that by the time they’d have to prove they use it, the rules would have changed.

The changes, designed to “align Canada’s trademark regime with international norms,” were first approved in 2014 and helped to bring Canada into a more unified international trademark registration system under the World Intellectual Property Organization.

Lawyers have noticed two types of dubious applications coming through: some for regular words found in the dictionary, and others for foreign brands owned by others that have a reputation elsewhere, but are not yet used in Canada.

A person or company cannot sue others for using their trademark until it is registered, unless they can prove a reputation exists for the brand; but even while applications are still in progress, they can block others from applying to protect those marks.

“It means that legitimate owners can’t proceed,” said Philip Lapin, a partner at the Ottawa-based law firm Smart & Biggar/Fetherstonhaugh.

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Brandster is not the only applicant whose activities have raised eyebrows, but it is among the most active. The company, which lists a mailbox rental service in Vancouver as its office address, was the top trademark applicant in 2017-18, according to the Canadian Intellectual Property Office’s most recent annual report. Brandster filed 405 applications in that period, significantly more than the next-highest filers, Target Brands Inc. with 302 applications, L’Oréal Société Anonyme with 220, and Procter & Gamble Co. with 187.

In many cases, Brandster has applied for “word mark” protection on common words, including “tequila,” “screen” and “angle." It also has applied across all 45 possible classes of goods and services, covering everything from paints to firearms to TV programs and medical services.

A man listed as the sole director of Brandster in its incorporation documents did not respond to a request for comment.

Lawyers have been urging legitimate brand owners to apply for trademark protection ahead of Monday’s changes as well, to shore up their rights while it’s still cost-effective. The costs are significant. It costs $250 to file an application covering all 45 classes; under the new law, the price will be nearly $5,000.

But in some cases, those clients are finding that applications for related marks that have already been filed.

Lawyers pursuing applications for their clients have "faced a number of frustrating objections based on these all-class applications,” said Jennifer Ponton, a senior associate with the Toronto-based firm Borden Ladner Gervais LLP’s intellectual property group. That takes up time and money for clients. "[When] we get an objection from the trademarks office, we have to report that; we have to recommend a strategy to overcome it. Often it means filing a response to try to overcome the objection. That all costs money.”

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The motivation for such filings is not entirely clear. However, there are concerns that some of these other applicants may try to ask for money from companies wanting to register marks that others are squatting on.

In a statement, the Canadian Intellectual Property Office said that the higher fees introduced on Monday are designed to “discourage overly broad trademark applications.” The Office also pointed out that anyone approved to register a mark must prove within three years that it is being used. It also said the new rules give businesses firmer rights to oppose a trademark registration on grounds of “bad faith.” That could include a situation where someone can prove they are using a trademark but only “for the purpose of extracting value from a business desiring to register or continuing to use its trademark (i.e. ‘trademark squatting’)."

Now that filing costs are rising, the influx of applications is likely to slow. But a backlog remains, and some may be in bad faith. Even when the Canadian Intellectual Property Office files an objection to an application, the applicant may file minimal responses and drag out the process.

“In the past this has gone on for a long time,” Mr. Lapin said. "... We’re trying to protect our clients’ rights, and marks are having applications cited against them. They cover everything, literally thousands of goods and services from nuclear reactors to chewing gum. All you can do is wait.”

Editor’s note: An earlier version of this story incorrectly stated that the law firm Smart & Biggar/Fetherstonhaugh was based in Toronto. In fact, it is based in Ottawa.
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