Federal Court Decisions

     T-699-96

     IN THE MATTER OF SECTIONS 45, 56 and 59 of the

     Trade-marks Act, 1993, Ch. 15

     - and -

     IN THE MATTER of an appeal from the decision

     issued by the Registrar of Trade-marks against

     Registration No. 341,290 for the trade-mark

     CASTILLO

BETWEEN:

     QUARRY CORPORATION LIMITED,

     Appellant,

     - and -

     BACARDI & COMPANY LIMITED,

     Respondent.

     REASONS FOR JUDGMENT

LUTFY J:

     In a decision of January 23, 1996, the Registrar of Trade-marks ("the Registrar") expunged the trade-mark CASTILLO ("the trade-mark") from the register pursuant to subsection 45(4) of the Trade-marks Act ("the Act"). The expungement resulted from the failure of the person then registered as the owner of the trade-mark to file the evidence required by the Registrar's notice of September 21, 1995, which was issued pursuant to subsection 45(1) of the Act and at the request of the respondent Bacardi & Company Limited.

     In March 1996, the appellant Quarry Corporation Limited appealed the decision of the Registrar pursuant to sections 56 and 59 of the Act. The appellant alleges that it is the current owner of the trade-mark as the result of an assignment from Jose Cuervo International Inc. ("Jose Cuervo") which had obtained an earlier assignment from J. Wilckens, Inc. ("Wilckens"), the corporate entity to whom the Registrar had sent the subsection 45(1) notice on September 21, 1995.

     The Registrar's notice of September 21, 1995 was addressed to Wilckens at its offices located at 8930 Fourwinds Drive, suite 371, in San Antonio, Texas, with a copy to its solicitors. Counsel for both the appellant and the respondent agree that the reasons for the failure of Wilckens and its solicitors to respond to the notice are not relevant to this appeal.

     At the time of the Registrar's notice of September 21, 1995, subsection 45(1) of the Act had been amended to implement certain provisions of the North American Free Trade Agreement ("NAFTA") and read as follows:

45. (1) The Registrar may at any time and, at the written request made after three years from the date of the registration of a trade-mark by any person who pays the prescribed fee shall, unless the Registrar sees good reason to the contrary, give notice to the registered owner of the trade-mark requiring the registered owner to furnish within three months an affidavit or a statutory declaration showing, with respect to each of the wares or services specified in the registration, whether the trade-mark was in use in Canada at any time during the two year period immediately preceding the date of the notice and, if not, the date when it was last so in use and the reason for the absence of such use since that date.

(italics added)

     The new words of subsection 45(1), which are italicized in the version repeated above, replaced the words "whether the trade-mark is in use in Canada" in the earlier version of the provision. This is an important amendment. With the new provision, use of a trade-mark "at any time during the two year period immediately preceding the date of a notice" meets the requirements of section 45¹. The case law interpreting the earlier version with the words "whether the trade-mark is in use in Canada" (emphasis added) required the registered owner to establish contemporaneous use².

     The earlier case law also suggested that evidence of a single sale contemporaneous with the issuance of the notice was sufficient³. This view seems to be reinforced with the new statutory provision. The words "at any time" introduced by the amendment would seem to make clear that a single sale during the two year period immediately prior to the notice will suffice. Paragraph 8 of Article 1708 of NAFTA, the provision which is being implemented by the new wording in subsection 45(1), supports this view:

8. Each Party shall require the use of a trademark to maintain a registration. The registration may be cancelled for the reason of non-use only after an uninterrupted period of at least two years of non-use, unless valid reasons based on the existence of obstacles to such use are shown by the trademark owner. Each Party shall recognize, as valid reasons for non-use, circumstances arising independently of the will of the trademark owner that constitute an obstacle to the use of the trademark, such as import restrictions on, or other government requirements for, goods or services identified by the trademark.

     The purpose of a section 45 proceeding is to "rid the register of dead wood"⁴. The same judgments which characterize section 45 in these terms have also distinguished its purpose from the expungement proceedings under section 57

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of the Act where the primary interest is a resolution of competing commercial interests with respect to the trade-mark.

     This appeal is from the equivalent of a default judgment handed down by the Registrar because of the failure of the registered owner of the trade-mark to file any evidence to establish its use. Upon appeal, this Court considers the issue de novo in the place of the Registrar and on the basis of the affidavit evidence filed by the appellant with its appeal record. Strayer J. dealt with a similar situation in Lewis Thomson & Sons Ltd. v. Rogers, Bereskin & Parr⁵ when he explained this procedure as follows:

...The nature of these proceedings is such, it seems to me, that it is not considered that the facts of use are to be infinitely contestable before the registrar or the Federal Court. It seems to me that what is required is that the registrant establish a prima facie case of use and that that is all that is expected of him. There is usually no cross-examination permitted with respect to affidavits filed either before the registrar or before this court in these matters, and there is no provision for respondents filing any evidence before the registrar. It seems to me that that indicates quite clearly that these are not considered to be proceedings where there should be an infinite contestation of the facts.

     The courts have also consistently held that the registered owner must proffer reliable evidence. A bare unsubstantiated statement of use and an ambiguous allegation in an affidavit are unacceptable⁶.

     In summary, to succeed in this appeal, the registered owner must "show" the use of the trade-mark with reliable evidence of at least one sale within the two year period immediately preceding September 21, 1995. The appellant relies on the single sale of forty-one cases of CASTILLO rum on November 21, 1994 to the Liquor Control Board of Ontario.

     The respondent challenges this appeal on the ambiguity and reliability of the evidence concerning: (a) the appellant's title as registered owner; (b) the status of the appellant's licensee, if any, at the time of the sale; and (c) the sale itself and whether it constitutes use in the normal course of trade.

     Concerning its legal status as registered owner of the trade-mark, the appellant relies on two affidavits, each of which asserts the chain in title in the trade-mark from Wilckens, prior to its dissolution, to Jose Cuervo and to the appellant. In addition, the appellant relies on a memorandum of Jose Cuervo to its legal counsel on October 25, 1991 which states in part:

Jose Cuervo International, Inc. is a new corporation and not a change of name from J. Wilckens.

We incorporated Jose Cuervo International, Inc. in March, 1990. Jose Cuervo International assumed all the operations from J. Wilckens on 10/91.

     The assignment of a trade-mark from Jose Cuervo to the appellant is said to have taken place on June 15, 1992 in a document executed by both companies on April 30, 1996.

     On May 21, 1996, the Registrar received from the appellant's solicitors the more relevant of the two affidavits that have been filed with the Court together with the nunc pro tunc assignment from Jose Cuervo to the appellant. On May 22, 1996, the Canadian Intellectual Property Office issued a notice advising that the appellant had been entered as the registered owner of the trade-mark.

     One of the appellant's deponents, Mr. Ricardo Chapa, is the vice president, operations of Jose Cuervo and was the treasurer of Wilckens. The other deponent, Mr. Alejandro Cantu, is a director of the appellant, a signing officer of Jose Cuervo and was a director of Wilckens. The office addresses for Wilckens and Jose Cuervo are identical.

     On the face of the record, in my view, there is acceptable evidence of the assignments. The absence of contemporary documents may be explained by the apparent close nexus among the companies. On the basis of the appellant's evidence, I am satisfied that it acquired its rights as owner of the trade-mark in 1992.

     The appellant's evidence concerning its licensee is brief but, in my opinion, reliable. It is not contested that use by a licensee will enure to the benefit of the trade-mark owner. The Cantu affidavit states that the appellant "has a license with Casa Cuervo, S.A. de C.V." and that the products produced by the licensee "are subject to the quality standards" of the appellant. This statement is evidence and more than a mere allegation⁷. The respondent argues that there is no evidence that the license was in force during the relevant time period. The NAFTA certificate of origin concerning the sale of CASTILLO rum to the Liquor Control Board of Ontario on November 21, 1994 identifies the producer of CASTILLO rum as Casa Cuervo, S.A. de C.V. The brief facts in the Cantu affidavit and in the certificate of origin are consistent and establish for the purpose of this section 45 proceeding that the producer of the rum at the time of the transaction is the party the appellant identifies as its licensee.

     Finally, the respondent urges that the invoice of Tequila Cuervo, La Rojena, S.A. de C.V., the distributor of Casa Cuervo S.A. de C.V. for the transaction under review, is inadmissible as hearsay evidence because the invoice was produced with the Cantu affidavit and not by the distributor or the purchaser. In any event, the respondent submits, the sale was not use in the normal course of trade.

     The respondent's argument concerning the hearsay aspect of the evidence might have greater weight if the statement of the appellant's deponent stood on its own and was not supported by the invoice as documentary corroboration of his assertion. In addition, the Cantu affidavit is careful to distinguish between "personal knowledge" and matters which "are stated to be on information and belief". The invoice is produced in support of the deponent's statement of personal knowledge that "rum bearing the CASTILLO trade-mark has been sold in Canada during the last two years". For these reasons, I accept the production of the invoice and the certificate of origin through the Cantu affidavit.

     In my view, the evidence discloses a bona fide sale. The invoice and the NAFTA certificate of origin do not reflect a transaction of a kind "...being deliberately manufactured or contrived in an attempt to protect the registration of a trade-mark rather than to establish its genuine use in the normal course of trade"⁸. The transaction took place long before it could have anticipated the respondent's request for the issuance of a section 45 notice in September 1995. These considerations support the statement in the Cantu affidavit that the transaction was "in the normal course of trade".

     I have also concluded that the transaction of November 21, 1994 was the single use of the trade-mark in Canada during the two year period immediately preceding the date of the notice. Evidence of a single sale "divorced from all context"⁹ might well have resulted in a different outcome in applying section 45 as it read prior to the NAFTA amendment of January 1, 1994. However, paragraph 8 of Article 1708 of NAFTA provides for expungement in a section 45 proceeding "only after an uninterrupted period of at least two years of non-use". The amendments to section 45 should be interpreted to give effect to the NAFTA provision that is being implemented.

     In summary, I have concluded that the transaction of November 21, 1994 was a bona fide use in Canada and in the normal course of business of the appellant's trade-mark by its licensee through the latter's distributor. Acordingly, the appeal will be maintained and the Registrar's decision to expunge the trade-mark CASTILLO from the register pursuant to subsection 45(4) will be set aside.

     The appellant succeeded in this contested appeal only after the failure to respond to the Registrar's notice. There shall be no order as to costs.

                         A. Lutfy

                         Judge

Ottawa, Ontario

December 13, 1996

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¹      Subsection 45(1) was further amended as of January 1, 1996 by replacing the two year period with a three year period. The retroactivity of this amendment was considered in Brittsport Limited v. Pacific Rim Sportswear Company Ltd., (December 6, 1996) T-476-96, without determining the issue. The facts of this case do not turn on whether the period is two years or three years and again the question of retroactivity need not be addressed definitively.

²      See Boutiques Pro-Golf Inc. v. Canada (1993), 164 N.R. 264 (F.C.A.), where a transfer of the wares some twenty-three months prior to the Registrar's notice was deemed to be insufficient.

³      Philip Morris Inc. v. Imperial Tobacco Ltd. (No. 2) (1987), 17 C.P.R. (3d) 237 (F.C.T.D.) at 241 and Coscelebre, Inc. v. Canada (Registrar of Trade Marks) (1991), 35 C.P.R. (3d) 74 (F.C.T.D.) at 82.

⁴      Meredith & Finlayson v. Canada (1992), 43 C.P.R. (3d) 473 (F.C.T.D.) at 480; see also Philip Morris Inc. v. Imperial Tobacco Ltd. (No. 2), (supra) no. 3.

⁵      (1989), 21 C.P.R. (3d) 483 (F.C.T.D.) at 486.

⁶      Aerosol Fillers Inc. v. Plough (Canada) Ltd. (1980), 45 C.P.R. (2d) 194 (F.C.T.D.) at 199, confirmed in 53 C.P.R. (3d) 62 (F.C.A.).

⁷      Smith & Nephew Inc. v. Glen Oak Inc. (1996), 68 C.P.R. (3d) 153 (F.C.A.) at 167.

⁸      McNair J. in Philip Morris Inc. v. Imperial Tobacco Ltd. (No.2) (1987), 13 C.P.R. (3d) 289 at 295.

⁹      This phrase is adopted from Reed J. in Coscelebre, Inc., supra, note 3, at p. 82. The expression was used to distinguish Coscelebre, Inc. from Sim & McBurney v. Magdell Manufacturing Co. (1986), 11 C.P.R. (3d) 306, where the circumstances of a transaction consummated nine days prior to the issuance of the section 45 notice came under the closest scrutiny.