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By LegalMatters Staff • Rights can be lost if an owner lets others use their trademark without a clear agreement on terms, says Toronto intellectual property lawyer John Simpson.
In a recent court victory Simpson, principal of IP and new media law boutique Shift Law Professional Corporation, acted for the successful plaintiff in a trademark infringement action that dealt with the issue of what happens when a partnership ends.
“This is yet another case where parties enter into a loose arrangement and they are a little cavalier on the legal details and it can end badly,” he tells LegalMattersCanada.ca. “Business arrangements don’t always work out and when they don’t, you want to be clear about what happens. If that means taking an extra bit of time in the beginning, then do the work. Seek legal advice.”
Business arrangement
Simpson’s client, who runs a commercial realty brokerage in Montreal, developed an association with a Toronto broker in October 2015 and the two began discussing a business arrangement.
Simpson’s client offered the broker use of his branding and website to open a commercial realty brokerage in Toronto.
The Toronto broker was interested in the proposal believing it was “a cost-efficient way to launch an independent brokerage,” the court heard.
The Toronto broker brought in a friend and in early 2016 the three launched the joint venture operating under a single “national” brand.
However, the relationship between the two Toronto partners deteriorated by the summer of 2018 and the Toronto broker sold his share in the business to his friend.
When Simpson’s client discovered what happened he moved to dissolve the arrangement, asserting sole ownership of the trademark that the two businesses were sharing.
However, the remaining partner argued that, among other things, he had been granted joint ownership in the trademark and had common rights in it, at least in Ontario.
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Simpson explains it’s not always a simple matter to determine ownership when it comes to trademarks. And whoever owns a trademark must grant a licence to allow someone to use it or risk losing it.
“For a layman, it’s clear that my client deserves to own the trademark at issue. However, if you have two people using the same trademark and there is no licensing agreement, the law may say that it doesn’t stand for a single trade source and that it’s therefore no longer a trademark,” he says.
Simpson says it is not always clear whether a licence agreement exists but that there are some basic elements that must be present.
“The owner has to say, ‘I need to have some control over the nature and quality of the goods and services you are offering under my trademark.’ Typically, there’s a royalty payment for that. That’s a classic licence arrangement,” he says.
“We had to convince the judge in this case that whether they called it a licence or not, or whether any of them really agreed what was happening, the circumstances amounted to a licence. If it walks like a duck and quacks like a duck, then it’s a duck,” Simpson adds. “We were able to persuade the judge to look past some of the inconvenient facts and, frankly, to make it seem a lot more simple than it really was.”
‘The just result’
He says in cases like these, courts “like to decide who is the good guy, who is the bad guy and what is the just result. And then they look for a way to get there.”
In the end, getting advice and taking some extra precautions when “sharing” a trademark can save much aggravation, Simpson says.
“The word share is a good one because lawyers sometimes get caught up in legal terms but in this case, that’s how these parties looked at it,” he says. “But you have to be careful when you ‘share’ a trademark because when you do you could lose exclusive rights.
“Turn your mind to all eventualities when you enter into one of these relationships and make sure all parties understand and agree. This fact situation comes up more than it should because the parties involved don’t turn their minds to what happens if this arrangement doesn’t work out. This could have been very easily handled if they had. An ounce of prevention is worth a pound of cure.”
