Trade-mark Licenses (Canada)

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According to the Federal Court of Canada decision Spirits International B.V. v. BCF S.E.N.C.R.L, rendered in June, 2011, if you own a trademark and are allowing other companies, including wholly owned or other affiliates or subsidiaries to use your trade-mark, it is important that you enter into a license or other agreement to authorize the other entity to use the trade-mark, sufficient to satisfy the requirements of the Trade-marks Act (Canada) RSC 1985 c T-13.

Under Section 50 of the Trade-marks Act, if a license grants the licensee direct or indirect control of the character or quality of the wares or services, then the use, advertisement or display of the trade-mark by the licensee has the same effect as the use, advertisement or display of the trade-mark by the owner.

Spirits International (“Spirits”) was the registered owner of a trademark for vodka (which included the word MOSKOVSKAYA).  The trademark was being used in Canada by Spirits’ affiliate.  Another party wanted to use the word “moskovskaya” and therefore challenged Spirits’ trademark.  Spirits’ provided evidence that its use of the MOSKOVSKAYA trade-mark was based on the use of the trade-mark by Spirits’ affiliate.  It was therefore necessary for the Federal Court to determine if such use was sanctioned by and was for the benefit of Spirits as the registered owner, in compliance with Section 50 of the Trade-marks Act.

In other words, the Federal Court had to determine whether Spirits had given its affiliate sufficient control to use the trade-mark in Canada.  The Federal Court stated that while the test of control may be satisfied if there is a common directing mind of both the corporate registered owner and the user of the trade-mark, the corporate structure alone is insufficient.  Clear evidence of control is required. 

A properly drafted license agreement between the owner of the trade-mark and any person or corporation authorized to use the trademark is a practical solution.

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