Ridout & Maybee successful in invalidating trademark registered in bad faith and obtaining punitive damages award

Jan 13 2023

On December 23, 2022, the Federal Court invalidated four registered marks owned by Quebec-based Alliance Autopropane Inc. (“AAP”). AAP obtained the right to use the trademark ALLIANCE AUTOGAS as a sublicensee of US-based propane gas company, Blossman Gas, Inc. (“Blossman”). While still a sublicensee, AAP applied to register in its own name the ALLIANCE AUTOGAS Design trademark used by Blossman since 2009 in the US and 2012 in Canada. It also applied to register three other design trademarks incorporating the words ALLIANCE and AUTOPROPANE [the AAP Marks]. Blossman, represented by Ridout & Maybee LLP, brought an application to strike the trademark registrations from the Trademark Register, and to stop AAP from using the AAP Marks and the trademark and trade name ALLIANCE AUTOPROPANE.

The Court invalidated the four registered trademarks. Specifically, with respect to the ALLIANCE AUTOGAS Design trademark the Court found that AAP acted in bad faith by registering the mark based on agreements in place and its knowledge of the mark:

[124] At the time of its application for the ’034 Mark in September 2014, therefore, AAP had actual knowledge of Blossman’s ALLIANCE AUTOGAS Design trademark. It knew that Caledon was Blossman’s licensee of the ALLIANCE AUTOGAS Design trademark. It knew it was only a sublicensee of that mark and not the owner of it. It knew that it had not yet used that mark pursuant to the license. And it knew that it had agreed that its rights to use the mark were dependent on the continuation of the Blossman-Caledon Agreement and the Caledon-AAP Agreement. It nonetheless applied to register the ALLIANCE AUTOGAS Design in its own name, without advising Blossman it was doing so. In such circumstances, I conclude that AAP cannot reasonably or in good faith have applied to obtain for itself the exclusive right to use the trademark in Canada.

The finding of a bad faith registration means that the mark was invalid ab initio (i.e. never validly registered). As such, AAP was not entitled to use the ALLIANCE AUTOGAS Design trademark registration as a defence to a claim of passing off and the associated damages, which the Court found were established by Blossman.

Additionally, based on the conduct of AAP, the Court awarded Blossman punitive damages:  

[182] Bad faith is an important factor in assessing whether punitive damages are warranted:

Fidler v Sun Life Assurance Co of Canada, 2006 SCC 30 at paras 60–75. Nonetheless, in my view, a finding of bad faith under paragraph 18(1)(e) does not automatically give rise to a claim for punitive damages. Consideration must also be given to whether other remedies—in which I would include the remedy of invalidity imposed by the Trademarks Act—are adequate in the circumstances to achieve the objectives of retribution, deterrence, and denunciation. In the current case, I have concluded that AAP acted in bad faith by applying to register the ’034 Mark when it knew that it was merely the licensee of the ALLIANCE AUTOGAS Design and that Blossman was the owner of the mark. It did not advise Blossman of its application or registration and, importantly, it maintained its registration for several years, refusing to abandon or transfer the registration long after it should have become apparent that it had no legal justification to do so.

 Blossman was also successful in obtaining a permanent injunction in restraining the use of marks at issue and costs.

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Tags: Abbas Kassam, IP Litigation & Enforcement, Timothy Bourne