A recent decision of the Federal Court, Trial Division in Little Brown Box Pizza, LLC v. DJB (2024 FC 1592) provides guidance on the question of special circumstances that can excuse an absence of trademark use in Section 45/summary cancellation proceedings. The Court’s analysis and findings should be particularly useful to U.S./non-Canadian brand owners looking to operate franchise locations in this country who first secure a trademark registration in Canada. Those brand owners should be mindful that their registration could be cancelled for non-use unless they can show “special circumstances” that excuse such non-use and that meet the guidelines now set by the Federal Court.
Canadian Law
Under Canadian trademark law, a registration can be cancelled, for non-use, three years after the registration issues. These summary cancellation proceedings can be brought by a third party, under Section 45 of the Trademarks Act, by filing a request with the Trademarks Office asking them to issue a notice to the Registrant.
Thereafter, the Registrant must file affidavit evidence showing that they have used the registered mark in Canada, in the normal course of trade, in the three-year period preceding the issuance of the notice with each of the goods/services covered by the registration.
Alternatively, a registrant can show that there were special circumstances that excuse their non-use of the mark. In such cases, the registrant’s evidence must indicate the date when the mark was last in use and the reason(s) for the absence of use since that date. The case law to date has in part defined such “special circumstances” as ones that are “unusual, uncommon or exceptional” (John Labatt Ltd. v. Cotton Club Bottling Co. (1976), 25 CPR (2d) 115 (FCTD)). In determining whether the circumstances shown by a registrant excuse the absence of use of the trademark in Canada, the Registrar will consider all three of the following criteria, namely:
- The length of time during which the trademark has not been used;
- Whether the reasons for the absence of use were due to circumstances beyond the control of the registrant; and
- Whether there exists a serious reason to resume use of the trademark shortly.
(Registrar of Trademarks v. Harris Knitting Mills Ltd. 4 CPR (3d) 488 (FCA) and Smart & Biggar v. Scott Paper Limited (2008), 65 CPR (4th) 303 (FCA))
Decision
In her decision dated October 9, 2024, Madam Justice Pallotta considered whether Little Brown Box Pizza, LLC (the “Registrant”) had shown use of their registered mark PIEOLOGY (the “Mark”) to support their Canadian registration (the “Registration”) and whether any absence of use could be excused due to special circumstances beyond the Registrant’s control.
Facts
The PIEOLOGY registration covered the following services:
- Pizza parlors; Restaurant services; Restaurant services featuring pizza, salads, side dishes, and desserts; Restaurant services, including sit-down service of food and take-out restaurant services; Restaurant services, namely, providing of food and beverages for consumption on and off the premises;
- Restaurant services; restaurant services, namely, providing food and beverages for consumption on and off the premises.
The registration issued on February 19, 2026, based on use and registration in the U.S. for the services at point 1 and based on proposed use in Canada for the services at point 2. The S. 45 notice issued on July 28, 2020, and the Registrant therefore had to show use of the Mark in Canada between July 28, 2017 and July 28, 2020 (the “Relevant Period”).
In response to the notice, the Registrant filed an affidavit sworn by its chief executive officer, Gregg Imamoto, explaining that the business had started out in 2011 as a single-location pizza restaurant in California and grew to include an international chain of over 140 pizza restaurants. The Imamota Affidavit stated that the Registrant advertised their restaurant services in Canada on websites and social media accounts that could be accessed by Canadians and that they sought out franchisees in Canada. In particular, the Imamoto Affidavit explained that the Registrant had actively sought to expand into Canada but had trouble finding qualified franchisees, in part due to the Covid pandemic.
Decision of the Registrar of Trademarks
The Registrar held that the Registrant had not shown use of the Mark with any of the services covered by the registration. The Registrar found that the Registrant had not provided evidence that Canadians accessed the Registrant’s websites and social media sites and that, even if they did, the Registrant had not shown that they were offering and prepared to perform their restaurant services in Canada.
The Registrar further held that the Registrant had not demonstrated special circumstances excusing their non-use of the Mark. The Registrar pointed out that the Registrant had not shown that the 4-year period of non-use was beyond their control or provided sufficient evidence showing a serious intention to resume use of the Mark – and noted that the Registrant did not explain why they had failed to commence use of the Mark before March 2020 when the pandemic was declared nor how the pandemic affected their ability to attract Canadian franchisees.
Appeal to the Federal Court, Trial Division
On appeal, the Registrant filed a further affidavit from its chief financial officer, Stephen Ostaszewicz. The Court found that this evidence would materially affect its decision and undertook a review de novo of the issues.
The Court considered first whether the Registrant’s evidence supported a finding of use of the Mark with “restaurant services” per se and with the remaining services covered by the Registration.
For the “restaurant services”, the Court reviewed the Registrant’s evidence showing that several thousand unique visitors in Canada had visited their website and that at least one Canadian had downloaded their mobile app. The website and the app allowed Canadians to view the Registrant’s menu, look up restaurant locations in the US, preplan and save pizzas for future ordering, and receive news about the Registrant’s offerings.
Similar facts have in the past allowed registrants to show “use” of their marks in Canada even where retail services are not offered in this country (cf. TSA Stores, Inc. v. Registrar of Trademarks 2011 FC 273 and Dollar General Corporation v. 2900319 Canada Inc. 2018 FC 778). In the present case, the Court was convinced that the Registrant’s online advertising during the Relevant Period did target Canadian consumers and that the Mark was used with restaurant services in Canada during the Relevant Period.
Regarding the further services covered by the Registration, the Registrant admitted that the Mark had not been used with those but that the absence of use should be excused due to special circumstances. The Court agreed that operating a franchise and expanding internationally takes time and effort but that the present circumstances were distinguishable from those in the Life Maid Right (Life Maid Right, LLC – 2799232 Ontario Inc. and Maid Right, LLC 2022 TMOB 104).
In Maid Right, the registrant had acquired the mark at issue during the relevant period and had signed a franchise agreement prior to the end of the relevant period. Those facts were not shown in the present case.
The Registrant had argued that the need to find local suppliers and a preference for contracting with larger franchisees who can operate multiple locations are hurdlers that a restaurant franchisor faces when opening locations outside its home jurisdiction. The Court held that those issues did not necessarily amount to “special circumstances” and pointed out that the Registrant had opened a location in Mexico in 2018 and locations in China and Spain.
The Court noted that the period of non-use in the present case was significant – more than seven years at least – and that there was no evidence that the Registrant was presently in discussions with a potential franchisee or even that it had identified a promising franchise candidate.
The Court also noted that the Registrant had initially identified a preference for large franchisees who could operate multiple locations. However, the Court seemed reluctant to find that the small pool of potential franchisees was a circumstance beyond the control of the Registrant especially because the Registrant changed its strategy during the Relevant Period to also target smaller franchisees. The Court held that the need to identify local food sources and restaurant equipment does not justify a period of non-use of seven-plus years, especially since the Registrant operates a franchising business with over 115 locations.
Conclusion
The Registration was cancelled to delete all services other than “restaurant services”.
Originally published in the November 2024 International Lawyers Network IP Group Publication.
This publication is intended for general information purposes only and should not be relied upon as legal advice.
