“NIC OUT” gets Kicked Out: Federal Court of Appeal upholds Trade-mark Expungement

The Federal Court of Appeal has upheld the expungement of the mark “NIC OUT” from the Register of Trademarks. Product Source International LLC owned the trade-mark for “NIC OUT” and brought an infringement action against TLG Canada Corp for selling “NIC-OUT” branded (with a hyphen) cigarette filters. In response, TLG brought a separate application under section 57 of the Trade-marks Act for an ordering striking Product Source’s mark from the registry.

Justice McVeigh of the Federal Court had ordered Product Source’s mark expunged under section 18(1) of the Trade-marks Act, which provides that the Court may invalidate a registration when the mark was not registrable as of its date of registration.

Under section 16(1)(a) of the Act, a trademark is not registrable if, as of the date of its first use, it was confusing with a trademark that had been previously used in Canada by any other person. This section is a codification of the common law principle that the use of a trademark, not its registration, is what confers a priority right to a trademark.

The Federal Court easily found that the marks would be confusing to a casual consumer somewhat in a hurry. TLG and Product Source’s marks were identical except for the hyphen. Product Source even used the hyphenated version on its products and there was a possibility that both companies’ sourced their products from the same overseas manufacturer. The following pictures show both companies’ products:



Product Source

Product Source

The evidence further demonstrated that, when Product Source registered the trademark NIC OUT, they already knew that the confusing mark NIC-OUT was being used to sell the same wares in Canada for at least 2 years. Thus, its mark was not entitled to registration at the time and the Court expunged the mark from the Registry. The Court of Appeal found no error and upheld this decision.

Product Source had also argued that expungement was inappropriate because TLG waited years and only brought the application to expunge after it was sued for infringement. Section 17(2) of the Act places a limit on when such an application can be brought. The Court noted that TLG’s predecessor-in-title had overlooked Product Source’s use and registration of the trademark, however, this did not cure the fact that Product Source registered its mark even though it knew that its mark was not registrable. The Court found that it was in the public’s interest to intervene and expunge the trademark. The Court of Appeal held that this was an exercise of discretion by the Federal Court and there was no ground to interfere with the determination.

A copy of the Court of Appeal’s Reasons for Judgment can be found here.