In granting a licence, a trademark owner consents to its use by a third party.
A license contract allows a licensee to use the trademark to perform acts that might otherwise constitute infringement of the trademark, dilute the distinctive character of the mark, constitute unfair competition, or depreciate the goodwill attached to the mark. Section 50 of the Act serves to protect the rights of the trademark owner and reads, in part, as follows:
“(1) For the purposes of this Act, if an entity is licensed by or with the authority of the owner of a trademark to use the trademark in a country and the owner has, under the licence, direct or indirect control of the character or quality of the wares or services, then the use, advertisement or display of the trademark in that country as or in a trademark, trade-name or otherwise by that entity has, and is deemed always to have had, the same effect as such a use, advertisement or display of the trademark in that country by the owner.
(2) For the purposes of this Act, to the extent that public notice is given of the fact that the use of a trademark is a licensed use and of the identity of the owner, it shall be presumed, unless the contrary is proven, that the use is licensed by the owner of the trademark and the character or quality of the wares or services is under the control of the owner.” (emphasis added)
Subsection 50(1) can be crucial in overcoming an action against a trademark owner for summary cancellation or expungement based on lack of distinctive character by reason of the use by the licensed third party.
The right of control required under subsection 50(1) can be expressed in terms of a general right to control the character or quality of the wares or services, or in terms of specific standards to be observed by the licensee. The control can extend to approval of all advertising or promotional material used by the licensee. The right of control is usually accompanied by a right of pre-approval before commercialization, and a right to inspect or obtain samples in order to verify that the standards are being observed.
While a written agreement is not a requirement, it is strongly recommended in order to facilitate proof of the licence. However, the existence of an oral or implied licence, or the actual exercise of control by the owner during the term of the contract, may satisfy section 50.
Subsection 50(2) provides a benefit to a trademark owner who has provided public notice of ownership and licence, in that it creates a dual presumption that the use is licensed and that the necessary control exists. However, a presumption is just a rule of evidence, and does not replace the need for actual control under the licence.
However, subsection 50(2) does not address the preferred manner of announcing public notice. In practice, it is generally sufficient that the name of the trademark owner and that the mark is used under licence be stated on the product or its packaging. It is customary to use the symbol ® (or its French equivalent MD) if the mark is registered, or TM (or its French equivalent MC) next to the trademark if it is not. A legend on the product or packaging could also appear and be worded as follows:
- “[MC or MD: Trademark] est une marque de commerce de [name of owner], employée sous licence”;
- “[TM or ®: Trademark] is a trademark of [name of owner], used under licence”
The licensing scheme provided by the Act is both comprehensive and flexible in that it covers both registered and unregistered trademarks as well as trade-names, and in that it allows a wide variety of licensing schemes to exist, provided that they include the necessary element of control.
(With thanks to Florence Maran-Bullot (French jurist).)