Federal Court Addresses the Hallmarks of Unregistrable, Laudatory Trademarks

Rick Spagnuolo and Joseph Syposz (the “Opponents”) opposed Re/Max’s application to register “HALLMARK” in association with real estate services. The Trademarks Opposition Board (“TMOB”) rejected the opposition. The Opponents appealed under s. 56 of the Trademarks Act, arguing the TMOB erred in failing to find “HALLMARK” was not registrable because:

• It is clearly descriptive as a laudatory term contrary to paragraph 12(1)(b);
• It lacks distinctiveness as required by s. 2; and
• It has become recognized by ordinary commercial usage as denoting quality of services and is therefore a mark prohibited by s. 10 and not registrable under paragraph 12(1)(e).

The Opponents also argued that if trademark rights subsist in “HALLMARK”, Re/Max cannot claim ownership because use of “HALLMARK” was licensed to Re/Max under a 2011 franchise agreement. On this basis, any use enured to the franchisor’s benefit under s. 50 and Re/Max’s application could not comply with ss. 30(b) and 30(i).

Due to the timing of the trademark advertisement date in this case, all references to provisions of the Trademarks Act below refer to provisions of the pre-June 17, 2019 version of the Act.

“HALLMARK” was not clearly descriptive of Re/Max’s services – s. 12(1)(b)

A trademark is registrable if it is not clearly descriptive of the quality of services associated with it. The TMOB held that while “HALLMARK” had laudatory connotations, it was not “clearly descriptive” of Re/Max’s real estate services. “HALLMARK” is not a descriptor or adjective that clearly describes Re/Max’s services as excellent. The Opponents argued that the TMOB erred by adding an extra requirement to the 12(1)(b) test: that a general laudatory word must also describe the applicant’s services beyond its general meaning to be “clearly descriptive”.

Justice Pallotta held the TMOB committed no errors of law, or of mixed fact and law, in rejecting the 12(1)(b) ground of opposition. The TMOB stated the correct 12(1)(b) test and did not require proof that “HALLMARK” described Re/Max’s services beyond the word’s general meaning. Section 12(1)(b) is not so wide that it captures all words with laudatory connotations. Some descriptive connotation is permissible. To be captured, the mark must be “clearly descriptive” of the quality of the associated services. The TMOB’s finding that “HALLMARK” had some laudatory connotations did not compel the conclusion that it clearly describes that Re/Max’s services are excellent or that “HALLMARK” was unregistrable.

The Opponents failed to establish that “HALLMARK” lacks distinctiveness – s. 2

A trademark must distinguish its owner’s services. The Opponents argued the TMOB erred in failing to find that “HALLMARK” is not a trademark as defined by s. 2 because “HALLMARK” is a laudatory term for any service and has not acquired distinctiveness. Such a term can only acquire distinctiveness if evidence demonstrates its established dominant meaning as a trademark from the consumer’s point of view. The Opponents argued Re/Max had not met this burden.

Justice Pallotta held the TMOB made no palpable and overriding error in rejecting the s. 2 ground of opposition. The Opponents bore a preliminary evidential burden to establish the allegations of fact supporting non-distinctiveness. The TMOB held the Opponents failed to meet this burden for the same reasons as the 12(1)(b) ground and, as a result, the TMOB was not required to assess whether Re/Max demonstrated “HALLMARK” had acquired distinctiveness. Having relied on the same evidence and argument to support its ss. 2, 12(1)(b), and 12(1)(e) grounds, the Opponents failed to offer any reason why the TMOB should have reached a different conclusion on whether “HALLMARK” could function as a trademark under s. 2.

“HALLMARK” is not used by the public in relation to real estate services – ss. 10 and 12(1)(e)

Under s. 12(1)(e), a mark prohibited by s. 10 (i.e. a mark recognized by ordinary and bona fide commercial usage as denoting quality of certain services) is not registrable. The Opponents argued the TMOB erred in law by applying a “clearly descriptive” test from 12(1)(b) to the question of whether “HALLMARK” is prohibited under s. 10, and erred in fact and law by requiring proof that the mark was used by the public in relation to Re/Max’s specific services.

Justice Pallotta held the TMOB made no reviewable error. The Opponents had not met their initial burden to show that the term “HALLMARK” had become recognized in Canada through ordinary and bona fide commercial usage as designating real estate services as excellent.

“HALLMARK” was not owned by Re/Max’s franchisor – ss. 30(b), 30(i), and 50

The Opponents argued that the TMOB erred in fact and law by finding that Re/Max could claim ownership of any trademark rights subsisting in “HALLMARK” in light of its 2011 franchise agreement. Since s. 50 precluded a licensee from claiming rights to an element of a licensed mark, any past use and entitlement grounding Re/Max’s application under s. 30 enured to the franchisor’s benefit. In other words, Re/Max’s application was an improper assertion of ownership of part of its licensor’s trademark.

Justice Pallotta concluded that the TMOB made no reviewable error in rejecting the ss. 30(b) and 30(i) opposition grounds. The TMOB did not err in interpreting the 2011 franchise agreement to apply only to the use and ownership of the corporate name “RE/MAX”, not the trademark “HALLMARK”. While Re/Max signed the agreement as “RE/MAX HALLMARK REALTY LTD.”, there was no term in the agreement stating that the franchisee’s corporate name would become property of the franchisor, or that “HALLMARK” or “Hallmark Realty Ltd.” are property of the franchisor.

Justice Pallotta dismissed the appeal.

A copy of the decision is available here.