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FEDERAL COURT OF APPEAL DECISION CLARIFIES THE MEANING OF “NORMAL COURSE OF TRADE”

Use is an important concept in Canadian trademark law. The watchword is “use it or lose it”. After three years of registration, a trademark registration may be expunged for non-use if the trademark is not used in the “normal course of trade.”

Last year, the Federal Court of Canada cancelled the registration of the trademark LUSH in association with t-shirts for non-use: 2018 FC 63. The court held that sales of t-shirts to employees bearing the LUSH mark did not constitute use of the mark in the normal course of trade (at para. [20]):

I find that in the circumstances of this case, given the absence of profit, the promotional and de minimis nature of the sales to employees, and the fact that the Respondent is not normally in the business of selling clothing, the Registrar’s determination that these sales were ‘in the normal course of trade’ is unreasonable. 

Further, the Court held that in the absence of any profit, the sales of t-shirts to employees were only promotional use and not in the normal course of trade (at para. [24]):

in the absence of evidence of profit, it is difficult to see what purpose these sales could serve other than promotion of Lush Canada’s primary business and charitable campaigns, except perhaps as a favour to employees and their families. However, this could hardly be considered use in the normal course of trade.

In a more recent decision, the Federal Court of Appeal disagreed and clarified that the normal course of trade does not require a trading profit be made: 2019 FCA 48. The court held that a trademark may be used in the normal course of trade even if the transfer of trademarked goods was made without any actual profit. An actual profit requirement would be inconsistent with the principle that normal course of trade is not synonymous with commercial success (at para. [22]). Further, the court reasoned that an actual profit requirement would mean that common business practices of selling last year’s trademarked goods at a discounted price may not constitute normal course of trade, which is contrary to the intention behind trademark law (at para. [22]). 

Instead, the Court held that the normal course of trade requires the pursuit of an ultimate profit-making purpose through the transfer of the trademarked goods (at para. [29]). A trading profit is not required, but it can be a relevant factor when determining if the transfer of trademarked goods was made for the pursuit of an ultimate profit-making purpose.

Despite the fact that Canadian trademark law will undergo significant changes this summer, use remains relevant. Use has a technical meaning in trademark law and the Federal Court of Appeal decision provides some clarity to the meaning of use in the normal course of trade so that registrants know how to “use it” and not “lose it”.

 

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