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What Every Business Owner Must Know About Trademarks!

March 2009

Did you know that in 2006 the Coca Cola trademark was worth $67 billion US? The Microsoft trademark trailed behind at $56.9 billion US, and the IBM trademark came in third at $56.2 billion US. In fact, in 2006, the top 40 global trademarks were each worth in excess of $8.5 billion US. Successful businesses understand the power of a strong mark and the critical importance of protecting their brand. This article outlines what you also must understand about these significant business assets.

What is a trademark?

A trademark is a word (e.g., Coca-Cola®), a symbol (e.g., the Nike “swoosh”), a design (e.g., the familiar “Coca-Cola®” script font), or a combination of these that distinguishes the wares and/or services of one entity from others in the marketplace. In addition to these “ordinary marks”, other types of trademarks are certification marks, which distinguish wares or services that meet a defined standard from others (e.g., the Woolmark design owned by Woolmark Americas, Ltd.) and distinguishing guise, which distinguish an organization’s wares from those of another by using the shaping of the wares or their containers, or a mode of wrapping or packaging wares (e.g., the triangular prism shape of a Toblerone® candy bar). A trade name is the name under which an entity operates and
carries on business.

A trademark must be distinctive
All trademarks have the same function: to distinguish the wares/services of one source from others in the marketplace. Therefore, it is critical that your trademark provides you with a distinctive identity in the marketplace. For this reason, trademarks that are merely descriptive (e.g., Calgary Florist), or are the name in any language of the wares or services in association with which the mark is to be used, or are confusingly similar to another trademark or trade name in the marketplace are very weak trademarks as they do not provide you with a unique identity in the marketplace.

A trademark must not be confusingly similar
Your trademark must not be “confusingly similar” to a trademark or trade name that is already being used in your marketplace. A trademark is confusingly similar to another mark if the use of both in the same marketplace would be likely to cause the public to believe that the wares or services associated with those trademarks are manufactured, sold, leased, hired or performed by the same person, whether or not the wares or services are of the same general character. Use of confusingly similar trademarks for similar wares or services poses many risks. The first owner of the mark has the right to prevent others from using the same or a confusingly similar trademark in the same marketplace, and therefore may be able to initiate legal action against any subsequent users of the same or confusingly similar marks for imitating their market identity. Also, concurrent use of identical or confusingly similar marks can negatively affect your business reputation. If you are using a trademark that is confusingly similar to another person’s trademark, and that other person’s business reputation is harmed, or its wares or services are found to be substandard or faulty, your reputation is also likely to be harmed because the public may not recognize that you are two separate, unassociated entities. Equally, if another person is using a trademark or trade name that is the same
or confusingly similar to your trademark, the other entity can “piggyback” on your good reputation by being mistaken for the same entity in the public’s mind. You cannot register a trademark that is confusingly similar to a trademark or trade name that has been previously used or made known by another person in Canada.

Is trademark registration mandatory?
A person acquires rights in a trademark by simply using the trademark. Therefore, registration is not required to obtain rights to your trademark. However, rights in an unregistered (common-law) trademark are inferior to those of a registered trademark. If you have an unregistered trademark, your rights are limited to preventing another trader in the same area from causing the public to believe that his wares, services or business are closely associated with or the same as yours. Such rights can only be claimed against traders that are using the trademark in the same geographical area in which you have developed a significant business identity or reputation – and only if your trademark is distinctive of your wares, services or business. On this basis, if your unregistered trademark only enjoys a reputation in Calgary, you cannot prevent another trader in Newfoundland from using an identical or confusingly similar trademark in Newfoundland.

Owners of unregistered marks can use the superscript “TM” beside their trademark to notify the public that they claim rights in the mark. However, only the owner of a registered trademark can use the ® designation, and not the owner of a pending trademark application or unregistered mark.

Why register your trademark?
Registration has many benefits. The primary benefit is that registration provides the registered owner with the exclusive right to use the trademark nationwide in association with the registered wares and services – irrespective of whether the registered owner simply uses the mark in a small geographic area. Therefore, a registered owner can prevent anyone in the country from using an identical or confusingly similar mark for similar wares and services. The registered owner also has the benefit of a legal presumption that she is the owner of the trademark; therefore, a challenger to ownership has the legal burden of proving that the registered owner is not the rightful owner.

Trademark registration also provides the public with constructive notice of your claim to the mark, and can facilitate obtaining trademark registration in other countries. You can apply for registration of your mark on an “intent to use” basis, which provides you with a pre-approval process. However, the mark will only proceed to registration when your mark has actually been used in the country in which you seek registration. Registration only provides you with property in the mark in the country in which it is registered. Therefore, registration in Canada does not give you rights in the mark in the United States. Equally, the foreign registration of an identical or confusingly similar mark does not in itself affect your ability to register the mark in Canada. But if the foreign entity has previously used or made known its trademark in Canada, you may not be the person entitled to register the mark.

Who can register a trademark?
The first user of a trademark is the person entitled to register it. Therefore, you are not entitled to register the mark if someone else in Canada has previously used or made known a confusingly similar trademark or trade name, or previously applied for registration of a confusingly similar mark. If you are not the person entitled to register the mark, you are at risk of the Examiner rejecting your application, a third party opposing registration of your mark when it is published for public opposition, or the rightful owner seeking to expunge your trademark registration in Federal Court.

Use it or lose it!
Once a mark is registered it remains on the Canadian Trademarks Register for 15 years, and can be continually renewed for additional 15-year periods on payment of a renewal fee. There are no annual fees or declarations required during the time that your trademark remains on the Register. However, at any time, any interested person can ask the Canadian Intellectual Property Office to compel you to produce evidence of your continued use of the trademark. If you cannot provide such proof within three months of the notice, the Registrar can expunge your trademark registration. Therefore, the mantra of all trademark agents is “use it, or lose it!”

You can also weaken or lose property in your trademark – irrespective of whether the mark is registered or not – by allowing someone to continue to use a confusingly similar mark or by allowing your mark to become generic for your offered wares and services, like the way “Kleenex” has become generic for “facial tissues”. A mark that is not distinctive cannot be protected as a trademark.

Therefore, all business owners should choose a trademark or trade name that is highly distinctive and unique in their marketplace. Such strong marks are far easier to protect, which greatly assists you in safeguarding against infringement, taking action against confusingly similar marks, and preventing other entities from “piggybacking” on your goodwill and reputation. Moreover, it facilitates building a strong brand that can provide considerable value to your company, and become a significant asset on the financing or sale of your business.

Lisa Statt Foy is an associate trademark agent at Field LLP in Calgary. She is a mother of a two-year old daughter and specializes in intellectual property, and wills and estates law.

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