Winter 2011 - (Intellectual Property Brief Winter 2010-2011)
The recent Federal Court decision in Indigo Books v. C & J Clark 1 places significant restrictions on what constitutes "special circumstances" permitting the Federal Court to review an interlocutory decision 2 of the Trade-marks Opposition Board (the "Board"). The Board decision in issue concerned a refusal to permit an opponent to add a new ground to a statement of opposition. Although Justice O'Keefe considered the decision in Parmalat Canada Inc. v. Sysco Corp. 3 , in which the Federal Court had previously held that special circumstances exist in the context of an application for judicial review of a Board decision refusing an opponent leave to amend a statement of opposition to add a new ground of opposition, the decision in Indigo Books has made the state of the law unclear. The Parmalat Decision
The opponent in Parmalat had, prior to filing its opposition evidence, sought leave to amend its statement of opposition to include s. 22 as a basis for a ground of opposition under s. 30(i). Section 22 of the Trademarks Act (the "Act") states that "no person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value and the goodwill attaching thereto". The Board refused leave, finding that it had no jurisdiction to entertain s. 22 issues and that s. 22 is not a proper ground of opposition. Because this was an interlocutory decision as opposed to a final decision, the opponent brought an application for judicial review to the Federal Court. The Court, per Lemieux, J., observed that it was well settled that interlocutory judgements should not be reviewed unless there are "special circumstances", but held that special circumstances exist in the context of trade-mark opposition proceedings where a decision has been made not to grant leave to add a new ground of opposition. The basis for this conclusion was that the Federal Court, when sitting as the appeal court from final decisions of the Opposition Board, does not have jurisdiction to deal with an issue that is not in the statement of opposition. 4 An appeal of a final decision of the Board, although a trial de novo in which the parties are permitted to file additional evidence, is nevertheless limited to those issues raised in the original proceeding. Accordingly, because of the Board's interlocutory refusal, the opponent could not have raised the proposed new ground on an appeal of the Board's final decision. Thus, the court held that the opponent had no adequate remedy other than to bring an application for judicial review. After determining that the special circumstances existed so as to permit the Court to conduct a judicial review, the Court went on to find that the Board had erred on a matter of law, and found that the decision to refuse leave was incorrect. 5 The Court set aside the Board's interlocutory decision and the application for leave to amend to include a new ground of opposition was referred back to a differently constituted Board for reconsideration. The Indigo Books Decision
As in Parmalat, this application for judicial review arose from the Board's refusal to grant an opponent, in this case Indigo Books & Music Inc. ("Indigo"), leave to amend its statement of opposition to add a new ground relating to s. 22. However, unlike in Parmalat where leave to amend was requested at a relatively early stage of the opposition proceedings, Indigo sought its amendment only after the parties had filed evidence, conducted cross-examinations and were in receipt of notices from the Board inviting the parties to file written arguments.
Indigo attempted to justify the lateness of its request in part by the fact that the Parmalat decision, which confirmed for the first time that an opponent could rely on s. 22 in combination with s. 30(i) as a ground of opposition, had been issued by the Federal Court around the time that the parties completed cross-examinations. The Board nonetheless denied the request for leave to amend the statement of opposition on the basis that Indigo had not satisfied the Board that the amendment was in the interests of justice having regard to all of the surrounding circumstances, including considerations as to the stage of the opposition, why the amendment was not made earlier and the prejudice to the applicant seeking to register the trade-mark. Indigo consequently brought an application for judicial review of the Board's interlocutory decision.
Justice O'Keefe determined that there were three issues to be considered: (1) can the Court review the Board's interlocutory decision; (2) if so, what is the appropriate standard of review; and (3) did the Board commit a reviewable error? However, the Court's analysis in this case never moved beyond the first issue as the Court concluded that Indigo had "not established special circumstances that would justify the judicial review of this interlocutory decision." 6
In considering the issue as to the Court's jurisdiction to review the Board's decision, the Court observed that its supervisory jurisdiction is discretionary. As a judicial review of an interlocutory decision tends to have the effect of fragmenting and protracting administrative proceedings, the judiciary typically refuses to consider such requests. Similarly, jurisdiction is frequently refused owing to the reality that the completion of the administrative process may render the matter moot. The Court found that, in both cases, the general rule is that interlocutory decisions will not be judicially reviewed unless there are "special circumstances" present. This conclusion was entirely consistent with the Court's decision in Parmalat.
While the Court in Parmalat explicitly found that special circumstances existed in the context of the very situation at issue in Indigo Books, Justice O'Keefe diverged from Parmalat and refused to conclude that special circumstances existed in this case. According to O'Keefe, "special circumstances will exist where, at the end of the proceedings, no other appropriate remedy exists… In all material respects, this reflects inquiries into the availability of an adequate alternative remedy which arise in other contexts where courts consider their discretion to refuse judicial review". 7 While the Court agreed that the limited scope of s. 56 may warrant special circumstances in certain situations, it held that Indigo had two alternatives available: (i) Indigo could commence an action against the applicant, alleging a breach of rights under s. 22; or (ii) to the extent that the opponent was unsuccessful in the balance of the opposition proceeding and the applicant's application matured to registration, Indigo could bring an action to expunge the applicant's registration under s. 57 of the Act, based on an allegation under s. 22. 8 The Court opined that such alternative remedies were adequate to address any concerns that Indigo may have regarding depreciation of goodwill of its registered trade-marks, and thus negated a finding of special circumstances that would justify the judicial review of the Board's interlocutory decision. Consequently Indigo's application for judicial review was dismissed. Given the outcome of the first issue, the Court was silent on the remaining issues concerning standard of review and whether the Board committed a reviewable error.
Unfortunately, the decision in Indigo Books fails to address the fact that the very same "adequate alternatives" that were adjudged to be available to Indigo had been available to the opponent in the Parmalat decision. Under the Indigo Books test for special circumstances, the Court in Parmalat would not have gotten to the issue of whether or not the Board had committed a reviewable error, and the opponent's request for leave to amend its statement of opposition would not have been referred back to the Board. By refusing to follow the reasoning in Parmalat without distinguishing those reasons or establishing a justification for the departure, and by finding that an opponent has adequate alternatives despite the strictures of a s. 56 appeal from final decisions of the Board, the law is left in a state of doubt. Specifically, it is now unclear what special circumstances will be required to permit a court to judicially review a decision of the Board to refuse leave to amend a statement of opposition.
Moreover, by finding that the two suggested alternatives were adequate remedies for the opponent, the Court appears to have missed the whole point of an opposition proceeding, the purpose of which is to provide an administrative framework by which an opponent can object to the proposed registration of a trade-mark. Although the initial evidentiary burden is on the opponent to make out a case for its grounds of opposition, the ultimate burden is on the applicant to demonstrate on a balance of probabilities that the application complies with the requirements of the legislation, that the trade-mark is registrable, that the applicant is the person entitled to the registration and that the trade-mark is distinctive. The Board can decide only to either refuse the application (in whole or in part) or to reject the opposition (in whole or in part). The very reason an opponent commences an opposition is to seek the refusal of the applicant's application, thus preventing registration of the trade-mark; if an opponent instead sought damages, an account of profits, injunctive relief, destruction of offending wares and materials, etc., it would seek such relief from the courts, not the Board. Additionally, there are no costs awards in opposition proceedings and parties thus bear their own expenses irrespective of outcome or success.
However, the alternatives suggested by the Court in Indigo Books are judicial proceedings requiring the opponent to commence an action against the applicant in a court. As a plaintiff party-litigant, the opponent would bear the burden of proving the elements of its cause(s) of action, would face the prospect of a counterclaim, and would be responsible for paying a portion of the defendant applicant's costs in the event that the action was not successful. In any event, neither alternative suggested by the Court provides the opponent with the opportunity to seek the refusal of an applicant's pending application in an administrative context, and thus neither is "adequate", nor truly an alternative.
The decision in Indigo Books ignores the fact that Parmalat had already confirmed that a theory of depreciation of goodwill under s. 22, in combination with a ground under s. 30(i), could sustain a ground of opposition under s. 38(2)(a). The fact that Indigo's proposed amendment was thus a judicially recognized ground of opposition was conflated by the Court in Indigo Books with the fact that Indigo could also seek redress from the courts regarding a breach of s. 22 concerning the applicant's use of the impugned trade-mark. Moreover, O'Keefe, J.'s stated justification for his suggested alternatives exhibit an air of paternalism, as evidenced at the following excerpts from paragraphs 44 and 45 of Indigo Books:
These are appropriate remedies to any breaches of a substantive right under section 22. I would agree that these are appropriate realistic remedies.
Arguably, the above mentioned actions provide a more appropriate method of defending alleged rights under section 22 than opposition proceedings. 9
Had the special circumstances test from Parmalat been applied in Indigo Books and the Court seen fit to judicially review the Board's decision, the ultimate outcome in Indigo Books likely would not have changed. Given the circumstances of the opponent's request for leave, the Board's decision was certainly reasonable and probably correct, and thus the opponent's application for judicial review was likely to have been dismissed in any event.
However, the fact that O'Keefe, J. denied Indigo the ability to have the Court review the Board's interlocutory decision as a preliminary gate-keeping matter will potentially have dire consequences for future opponents seeking leave for judicial review of a Board's interlocutory decision to refuse leave to amend a statement of opposition, even where s. 22 is not the amendment of interest. Where, for example, the ground of opposition sought to be added concerns confusion (e.g. under s.12(1)(d), or s.16(3)(a) or s. 38(2)(d)), a court choosing to follow the assessment of special circumstances in Indigo Books is open to find that an opponent could avail itself of a court action for infringement or passing off as an adequate alternative to an opposition proceeding, or to simply bring an expungement action should the opposed application mature to registration.
This article appeared in the Lang Michener LLP Intellectual Property Brief Winter 2010-2011.
1 Indigo Books & Music Inc. v. C. & J. Clark International Limited (2010) 86 CPR (4 th ) 349, 2010 FC 859. At the time of writing, the statutory appeal period had expired and no notice of appeal had been filed with the Federal Court of Appeal.
2 An interlocutory decision is one made in the course of a proceeding dealing with an intervening issue, but is not a final decision on the merits of the matter ultimately in issue in the proceeding.
3 Parmalat Canada Inc. v. Sysco Corp. (2008), 69 CPR (4 th ) 349, 2008 FC 1104.
4 Like the Court sitting on appeal of a Board's final decision, generally the Board will also not deal with an issue that is not raised in a statement of opposition; but, see Coastal Culture Inc. v. Wood Wheeler Inc. (2007), 57 CPR (4 th ) 261, 2007 FC 472. In Coastal Culture the opponent did not raise a s. 30(b) ground in the statement of opposition, but submitted affidavit evidence on the point and raised the issue in its written argument. The applicant's evidence also addressed the issue of non-use. The opponent never sought leave to amend its statement of opposition to include the s. 30(b) issue, and there was no oral hearing. In rejecting the opposition the Board commented that although s. 30(b) would have been a proper ground of opposition, because it was not raised in the statement of opposition the Board was precluded from considering it. On appeal from the Board's final decision rejecting the opposition, the Federal Court, also per O'Keefe, J., ruled that the applicant was clearly aware of the non-use issue and that the Board had erred in failing to consider the opponent's submissions respecting the s. 30(b) issue in light of the evidence filed; essentially the issue was found to have been properly before the Tribunal even though it did not appear in the statement of opposition. O'Keefe, J. went on to find that the opposed mark had not been used since the date claimed by the applicant and so granted the appeal and set aside the Board's decision.
5 The Court found that the Board had misstated the issue before it; the proper issue was not whether s. 22 could form a stand-alone basis for a ground of opposition, but rather whether s. 38(2)(a) of the Act could have resorted to s. 22 to sustain an opposition on the grounds that the application did not comply with the requirements of s. 30(i). Parmalat was the first case to conclude that an opponent in a trade-mark opposition proceeding could rely on a theory of depreciation of goodwill of a registered trade-mark under s. 22 of the Trade-marks Act , in combination with s. 30(i) of the Act , as a ground of opposition.
6 Indigo Books , supra note 1, at para 48
7 Indigo Books , supra note 1, at para 36.
8 O'Keefe, J. is silent as to how this expungement is to be accomplished. Section 57(1) provides that the Federal Court has exclusive original jurisdiction to order that any entry in the register be struck out or amended on the ground that at the date of application to the Court the entry on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the mark. Although there are limited instances in which non-statutory grounds of invalidity have been successfully advanced as a basis to amend or expunge a registration under s.57, such as cases of a breach of fiduciary duty, or where fraudulent or material misrepresentations formed part of the application for registration, per Blais, J. in Omega Engineering, Inc. v. Omega SA (2006), 56 CPR (4 th ) 210 , an expungement of a registration under s. 57 is generally invoked by a ground of invalidity under s.18 of the Trade-marks Act . However, the Federal Court of Appeal in Remo Imports Ltd. v. Jaguar Cars Ltd. (2007), 60 CPR (4 th ) 130,  2 FCR 132, in reversing the trial judge's finding that a breach of s. 22 served to invalidate a registered trade-mark, held that depreciation of the value of the goodwill in a registered mark is not a ground of invalidity under s. 18 (at para 54) and that s. 22 is not a ground of invalidity of a registration (at para 56). This finding by the Federal Court of Appeal is clear that a breach of s. 22, in and of itself, is neither a statutory ground of invalidity nor an acceptable non-statutory ground of invalidity. Consequently, it is unclear how the suggested alternative of bringing an action for expungement under s. 57 based on " an allegation pursuant to section 22" could prove successful; the Court in Indigo Books apparently had in mind another, though unstated, means by which the opponent could successfully invoke s. 57 by virtue of s. 22.
9 Continuing at paragraph 45 of Indigo Books , O'Keefe, J's comments seem to suggest that he believes that a remedy under s. 22 would not be available on a quia timet basis: "As discussed by the Supreme Court in Veuve Clicquot above, a section 22 plaintiff has to show that the defendant has already used the mark in a manner that is likely to depreciate the value of the goodwill attaching to the plaintiff's trade-mark. (paragraphs. 46, 47, 56 to 61). Thus, section 22 is premised on an analysis of what a defendant has done, not what a defendant proposes to do, such as in the context of most opposition proceedings. Reiterating this point, the Supreme Court stated specifically that the linkage between the defendant's use and the plaintiff's goodwill, which is the third element of a section 22 claim, is a matter of ‘evidence not speculation' (paragraph 60)." The Court's statement that "most opposition proceedings" concern what an applicant proposes to do rather than what he has done is not supported by reference to any evidence.