Canada's Federal Court refuses to adopt American doctrine of "fraud on the trademarks office"

On January 8, 2009, the Federal Court of Canada issued its decision in Parfums de Coeur, Ltd. v. Christopher Asta (2009 FC 21). The Court refused to expunge a trademark registration obtained through a Declaration of Use that contained false information. This outcome highlights a significant difference in the consequences arising from misstatements on a Declaration of Use under Canadian and American law.

Mr. Asta originally applied for the trademark BOD on the basis of proposed use in Canada in connection with wares such as hair-care products, skin-care products, cosmetics and body-care products. Registration for the BOD trademark was issued on March 11, 2004, based on a Declaration of Use in which Asta declared that he (either by himself or through a licensee) had begun use in Canada of the trademark in association with all of the wares in the application. However, Asta had actually commenced use of the trademark in Canada only in association with shampoo and conditioner. Asta explained the incorrect declaration as arising from his misunderstanding of the trademark system. He believed that he could file the Declaration of Use with respect to all of the wares, as long as he had used the BOD trademark in association with just one of the original wares.

Asta's BOD registration came to the attention of Parfums de Coeur (PDC) when PDC filed a trademark application in Canada for BOD MAN. The BOD MAN application faced a preliminary rejection from the Canadian Intellectual Property Office (CIPO) on the grounds of confusion with Asta's BOD registration. In order to overcome this citation, PDC applied to the Federal Court for an expungement order pursuant to section 57 of the Trade-marks Act. Section 57 permits the Federal Court to strike or amend trademark registry entries that are not accurate in their expression or definition of the existing rights of the person who appears to be the registered owner of the mark.

PDC argued that Asta's registration was void or invalid because it was obtained with a Declaration of Use that contained either a fraudulent misrepresentation or a materially false statement that was fundamental to the registration. The law in Canada is that two types of misstatements can invalidate a trademark registration: fraudulent, intentional misstatements, or innocent misstatements that are material to the extent that without them the registrant would not have overcome the barriers to registration found in section 12 of the Trade-marks Act.

The Court found that Asta's misstatement was potentially negligent, but not fraudulent. As a result, for PDC to succeed in having Asta's registration removed from the register, it would be necessary to show that Asta obtained his amended registration through material misstatement. The Court found, however, that an over-broad misstatement is not sufficient to render a mark unregistrable in connection with the wares with which it has actually been used. The Court further distinguished Asta's case from situations in which an owner had made no use of the trademark at all at the date that the owner filed a Declaration of Use. In such a case, amending the registration (which Asta had already done, to limit it to shampoo and conditioner) could not repair the essential flaw of the Declaration of Use.

PDC had urged the court to adopt the American approach to erroneous statements of use. The United States Patent and Trademark Office treats errors in the descriptions of the goods and services used in association with a trademark as a "fraud on the Office." The penalty for the transgression can be the denial of an application or the cancellation of an existing registration.

In rejecting PDC's submissions, the Court noted that "while there is something initially attractive in the notion that a material misstatement in the trademark process renders the monopoly granted in the registration void, Parliament has not embraced that principle and, absent an amendment to the Trade-marks Act, this court will not do so." Further, in commenting on the policy reason advanced by PDC in support of adopting the U.S. doctrine - namely, that the risk of one's entire registration being expunged provides an incentive to be truthful in one's application - the court noted that the U.S. doctrine leads to "draconian results for even an innocent mistake." The Court preferred the Canadian approach, which leads to more balanced and nuanced outcomes.
 

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