The Federal Court of Canada, in a decision of May 2022,¹ ordered the cancellation of the registration of a British Columbia man’s trademark for “bad faith” after discovering that it had been filed solely for the purpose of resale. This is the first decision in Canada applying the new bad faith ground for trademark expungement, added to the Trademark Law in 2019.

The trademark registration in question copied the logo of a well-known restaurant chain in China with which the plaintiff had no affiliation.

Trademark owners will welcome this decision as a confirmation of Canada’s position against potential trademark squatters. The decision also highlights the benefit of monitoring advertised marks in Canada for opposition purposes, which provides a less costly route to blocking bad faith applications before they are registered.

Background

Beijing Judaian owns a popular restaurant chain in China. Building on its domestic profile, the chain expanded into Canada in 2018 with initial locations in British Columbia and Toronto. Some of the trademarks used in these restaurants include JU DIAN & Design:

Unbeknownst to Beijing Judian, a man named Wei Meng had already applied for registration of this trademark in Canada in June 2017 (along with the logos of several other popular Asian restaurant chains). As the application was not opposed before the Trademark Office, it was registered in April 2019.

A week after getting her registration, Meng visited a Beijing Judian-affiliated restaurant in Vancouver and asked to speak to the owner. Finding a manager, Meng told him Beijing Judian “stole his mark” and insisted he had “the papers in Canada” for the same. This was followed by a request for $1.5 million to acquire the brand at a later meeting. Meng then sent a letter saying he would contact the “registration department” and the Canada Revenue Agency if Beijing Judian did not stop using the JU DIAN marks within a week.

The company refused. Within a month, Beijing Judian learned that Meng was advertising to sell the recording online. In response to a query sent by a Beijing Judian contact, Meng acknowledged that Beijing Judian was a well-known brand:

“If you open a store with no reputation, you will lose even more money… You can search for Judian Chuan Ba ​​on Baidu and you will see how many stores there are in Beijing. Anyone in the industry knows that strong brands attract customers.

In March 2021, Beijing Judian filed a motion with the Federal Court of Canada seeking to strike Meng’s listing from the register along with damages, an injunction for passing off and court costs.

Beijing Judian Restaurant Co.Ltd. against Meng

In a brief ruling, Judge Furlanetto removed Meng’s trademark from the trademark register. She recognized, first, that the registration of a trademark used by someone else in another country is not in itself sufficient to invalidate an entry.

In this case, however, all the evidence points to Meng registering the trademark with the intention of extorting money from Beijing Judian or using his reputation to obtain money from others. The court found it implausible that Meng created the same original design mark himself, and pointed to Meng’s efforts to sell the mark within a week of obtaining registration. Additionally, there was no evidence that Meng had used or intended to use the mark himself. In the absence of a “legitimate commercial purpose”, Judge Furlanetto found that the application was filed in bad faith and declared the recording invalid.

Since Meng had not used the trademark in any way except to try to sell it, the court found no basis to order damages or an injunction for misleading imitation. However, the court issued an order for costs payable by Meng to Beijing Judian, the amount of which is yet to be determined.

Course

Trademark owners have long awaited a decision providing guidance on the new ground for opposition and invalidity in bad faith since the Trademark Law does not define “bad faith”. The key factors in this case seemed to be:

• The mark in question was identical to that used by Beijing Judian in China.
• Beijing Judian trademarks enjoyed a certain reputation in Canada, and Meng knew they had a certain reputation in Canada.
• Meng had applied for registration of several well-known catering brands.
• Meng attempted to sell the recording to Beijing Judian a week after obtaining it, at a cost “far beyond any cost associated with obtaining the trademark”, and to the public after the offer was declined.
• Meng did not use and did not intend to use the mark for his own restaurant.

Beyond noting that bad faith “is generally characterized as a breach of a legal or moral obligation owed by a plaintiff to a third party”, Judge Furlanetto did not provide an exhaustive definition of what the term means in the context of a mark. The court looked to UK, European and academic sources to reach its conclusion – so these sources can be expected to remain informative as the law develops. Other features of bad faith suggested in these sources include the filing of claims:

• store for future use,
• to extend the life of an unused trademark at risk of being cancelled,
• to prevent a competitor from entering the market, or
• that include multiple categories of goods and services through the applicant could not be operating a legitimate business across the full spectrum.

Beijing’s Judaian vs. Meng highlights the additional costs that may be incurred if bad faith claims go unchallenged in advertising. Regular monitoring of announced applications, cease and desist letters and (if applicable) opposition proceedings should be considered part of a brand owner’s IP strategy.

Additionally, early filing of Canadian trademark applications for non-Canadian marks can ensure priority over potential bad faith applications, as well as potentially confusing good faith applications. In this regard, it should be noted that Canada does not require use to obtain registration.

Reference

¹ Decision of May 2022: Beijing Judian Restaurant Co.Ltd. against Meng2022 FC 743

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