Intellectual Property

Bricks and mortar store not necessary for trademark protection

By AdvocateDaily.com Staff

High-end stores based outside of Canada could reap the rewards of an American dollar store’s trademark victory at the Federal Court, Toronto intellectual property lawyer Taras Kulish tells AdvocateDaily.com.

The decision resulted in the dollar store’s trademark being restored to the register after a judge ruled it did not need to have a physical presence in Canada in order to demonstrate the use of the mark in connection with retail variety store services.

“This is a huge decision that will impact the luxury market, not just dollar stores,” says Kulish, a senior associate with Steinberg Title Hope & Israel LLP. “There are so many companies now that operate online and don’t need a bricks-and-mortar presence in Canada. They can make plays and have distribution through Amazon and other modes of delivery.

“I think this is the right decision for the correct reasons in a modern business context,” he adds.

The dollar store in the matter operates a chain of shops across the U.S., and was initially granted protection in Canada for its name in 2010, but saw its mark expunged by the Registrar of Trademarks in 2017 after a rival challenged it to show use in Canada.

The store runs an e-commerce website that provides Canadians with an opportunity to review product pricing and availability. Canadian customers can make purchases but must have their items delivered to a U.S. address or use a third-party shipping agent to cross the border.

The online presence was not enough to convince the registrar, who found the limited shipping options and lack of physical presence meant the trademark was not in use here, because the applicant was not offering “retail variety store services” in Canada.

However, the company likened its website to a physical store, submitting screenshots that showed how customers can browse products and place them in their online shopping cart. In addition, it presented evidence that customers with a Canadian billing address had completed purchases on the site.

The judge ruled the registrar’s decision was wrong and unreasonable.

“To find that by use of a third party mode of delivery from the U.S. would, in-of-itself, result in non-use of retail services in Canada‎ ignores the commercial reality of the normal course of e-commerce trade and would frustrate trademark owners' legitimate rights in Canada,” the judge wrote.

“Viewing the evidence as a whole, I find it is sufficient to show that the applicant used the mark in Canada in association with the services during the relevant period. The logical inference from the facts is that Canadians benefitted from use of the applicant’s website by using it as a substitute for visiting a brick-and-mortar store, as well as either purchasing products for delivery to a U.S. address for pick-up or to a trans-shipper for delivery in Canada.”

Kulish, who was not involved in the matter and comments generally, says the decision is particularly significant for high-end brands whose reputation for quality persists in Canada, despite never actually conducting operations here.

“Harrods in the U.K. and Macy’s in the U.S. have built a following and become known due to references in popular culture and film,” he says.

The decision may also make life more difficult for start-ups and entrepreneurs looking to settle on a name for their new business. In a recent article, Kulish said it’s not good enough to limit searches to the city or province a business is located in to check that the name isn’t already taken.

“In the days of bricks and mortar businesses, it was easier, but now there are virtual plays all around,” Kulish says.

While the ruling is particularly relevant to non-Canadian businesses operating in this country, Kulish says it should also spur domestic businesses who sell their wares abroad to think about registering trademarks in other countries.

“If you’ve established an American presence through an online portal, you should think about registering there. You can benefit not only from trademark protection but also from customs protection in the U.S.,” he explains.

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