Knowledge & News

Trademark “Services” Online Finally Defined in Canada by Federal Court of Appeal

11 September 2020

The Federal Court of Appeal’s long-awaited decision on what constitutes trademark “use” in association with services in the Internet age has finally been released. On September 9, the Court of Appeal dismissed Miller Thomson’s appeal and maintained Hilton’s Canadian trademark registration for its WALDORF ASTORIA mark in association with “hotel services”, despite there never having been a “bricks and mortar” Waldorf Astoria hotel anywhere in Canada.

The Backstory

The first Waldorf Astoria hotel opened in New York City in the 1930s, and Hilton has since expanded the chain to include hotels around the world. Hilton applied to register its WALDORF ASTORIA mark claiming use of the mark with “hotel services” since at least 1988. Miller Thomson represents a client with outstanding trademark applications for WALDORF, THE WALDORF, WALDORF HOTEL and other similar names. Hilton has been actively opposing these applications, and its WALDORF ASTORIA mark was cited by the Trademarks Office against the applications.

To overcome the citation raised by the Trademarks Office, Miller Thomson initiated a section 45 proceeding against the WALDORF ASTORIA mark. This required Hilton to demonstrate use of the mark in Canada in association with “hotel services” between October 23, 2011 (the date of the Section 45 notice) and October 23, 2014, which is called the “Relevant Period”.

In response, Hilton filed affidavit evidence attesting that the term “hotel services” is understood in the hotel industry to include “reservation services, booking and payment services, and access to hotel rooms”; that hotels “could not operate unless customers were able to reserve, book and pay for rooms in advance of their stay”; that reservation, booking and payment services are “integral to the provision of hotel services”; and that the cost of providing these services and other ancillary services is incorporated into the room rate.

Hilton’s evidence also included that 41,000 people with addresses in Canada had stayed at Waldorf Astoria hotels during the Relevant Period, generating approximately $50 million in revenue; 1,300 people from Canada had received discounted room rates during that period in exchange for upfront payment for their hotel reservations, receiving email confirmations of the bookings that included the WALDORF ASTORIA mark; and that during the Relevant Period Canadians enrolled in Hilton’s loyalty program and for each booking would receive points that were redeemable for stays or benefits at hotels in Canada and elsewhere.

The Registrar applies “common sense” and orders the expungement of the WALDORF ASTORIA mark

Despite Hilton’s evidence, the Registrar concluded that the absence of a “bricks and mortar” Waldorf Astoria hotel in Canada was fatal to Hilton’s claim that it had used the WALDORF ASTORIA mark in Canada in association with “hotel services” during the Relevant Period. The Registrar relied heavily on another decision where use of a mark with “hotel services and hotel reservation services” was at issue, and found that in ordinary commercial terms “’booking’, ‘planning’ and ‘reservation’ services are not ‘hotel services’”. She also held it was “contrary to common sense to equate the ability to make hotel reservations or other bookings with the operation of a hotel”, looked at the then-current version of CIPO’s Goods and Services Manual to support her conclusion, and ultimately found that while customers could book hotel rooms at Waldorf Astoria hotels from within Canada, the “hotel services” could only be performed by customers travelling outside of Canada. As a result, the Registrar ordered the WALDORF ASTORIA mark expunged from the Trademarks Register.

The Federal Court conducts a de novo review, and overturns the Registrar’s Decision

Hilton appealed the Registrar’s decision to the Federal Court, and filed additional evidence – two affidavits, one from a trademark searcher providing evidence regarding the inclusion of certain terms at various times in the Manual, and one providing better copies of website printouts found in Hilton’s evidence before the Registrar. The Federal Court found the trademark searcher evidence relevant to the key issue in the case – namely, whether use of the WALDORF ASTORIA mark had been demonstrated with “hotel services” – justifying a de novo review of that issue.

In particular, the earliest version of the Manual that the trademark searcher could locate, dated 2006, included “hotel services” and “management of hotels” as acceptable services, but did not include “reservation services”, “hotel reservation services” or “booking services” (the latter two were in the version used by the Registrar). Hilton argued that this evidence supported its position that when the WALDORF ASTORIA mark was registered in 1988, the term “hotel services” included “hotel reservation services”.

The Federal Court noted that the concept of “services” is to be liberally interpreted, and that “services” may include those that are “incidental” or “ancillary” to the primary services identified in the registration. It observed that the jurisprudence regarding trademark “use” in the Internet age is evolving, and that it was essential that some aspect of the registered services be offered directly to Canadians or be performed in Canada, who could derive a tangible, meaningful benefit from use of the mark in association with the registered service in Canada. That could establish use in Canada. Determining use required a case-by-case assessment, analyzing the scope of the services referred to in the registration and the nature of the benefits delivered to people physically in Canada.

After finding the Registrar had made a number of errors (e.g., failing to consider the only evidence as to the ordinary commercial understanding of “hotel services”; failing to follow binding authority establishing that the scope of services includes primary, incidental and ancillary services; applying the current version of the Manual to interpret the meaning of a registration dating from 1988; failing to consider the actual words used in the registration itself), the Federal Court allowed Hilton’s appeal, set aside the Registrar’s decision, and maintained the WALDORF ASTORIA registration. It also awarded Hilton $9,000 for legal fees and $6,600 for disbursements.

The Federal Court of Appeal Dismisses Miller Thomson’s Appeal

The Federal Court of Appeal applied the appellate standard of review to the Federal Court’s decision, and observed that findings by the Registrar as to meaning of “use” for the purposes of section 45 proceedings are subject to review on the correctness standard. This entitled the Federal Court to determine whether the Registrar’s decision regarding “use” was correct. It also entitled the Federal Court of Appeal to apply the correctness standard to the Federal Court’s findings on the issue.

The Federal Court of Appeal held the Federal Court had correctly understood the test for “use” in a section 45 proceeding – namely that a mark is used with services if it is used or displayed in the performance or advertising of the services, but is not used where no aspect of the services themselves are performed or delivered in Canada. The Court observed that the ordinary commercial meaning of “hotel services” was central to whether Hilton had established use of the WALDORF ASTORIA mark in Canada with such services, and rather than addressing head-on why she did not accept Hilton’s uncontradicted evidence as to the meaning of “hotel services”, the Registrar instead relied on her “common sense” understanding of “hotel services” as requiring a “bricks and mortar” hotel. The Registrar’s failure to consider this uncontradicted evidence was a material omission that warranted the Court’s intervention.

Using the Current Version of the Manual to Interpret a Registration from 1988 was Incorrect

While the Registrar had relied on the 2017 Manual, based on the searcher’s affidavit, the Court of Appeal found it was a logical inference that “hotel reservation services” or “booking services” did not appear in pre-2006 versions of the Manual. Further, the meaning of terms used in trademark registrations evolve over time, particularly where there have been rapid developments in online commerce that have an impact on the ordinary commercial understanding of a term by both the trademark owner and the customer. The Court of Appeal agreed that Hilton could not be faulted for using a pre-approved term found in the Manual at the time the mark was registered in 1988, and held it was an error for the Registrar to interpret the scope of a registration from the pre-Internet era based on the current version of the Manual.

“Services” include Primary, Incidental and Ancillary Services

While Miller Thomson argued there was no Court of Appeal jurisprudence holding that providing a service incidental or ancillary to a registered service is performance of the registered service itself, the Court of Appeal observed there was jurisprudence from both the Registrar and the Federal Court holding an incidental or ancillary service to a registered service can be considered performance of the registered service itself. In light of those cases, the Court of Appeal observed that as long as some consumers, purchasers or members of the public receive a material benefit from the activity in issue, it will amount to the performance of the service in this country.

Hilton’s activities constitute Performance of “Hotel Services” in Canada

The Court of Appeal reviewed the Federal Court’s decision and findings of fact, concluding that it had not committed a palpable and overriding error – it was open to the Court to conclude, based on the evidence before it, that the ability to reserve a particular type of hotel room at a specific Waldorf Astoria hotel in a particular location for a specified (and potentially discounted) price constituted a material benefit to the Canadian customer.

The Court of Appeal did hold that the Federal Court erred in finding that the transactions of people in Canada enrolled in Hilton’s loyalty program receiving points for each booking at Waldorf Astoria properties that could be redeemed for stays or other benefits at hotels in Canada were completed entirely within Canada. While the Court of Appeal found that the record did not support this holding, and the error was “palpable”, it was held not to be “overriding” because other material benefits enjoyed by Canadians constituted performance of “hotel services”. Finally, the Court provided some guidance as to evidence that could assist in showing use in Canada of a mark displayed on a website from outside Canada, and observed that every case will turn on its own facts and whether the trademark owner has provided evidence that establishes that people in Canada can derive a material benefit from services that are performed in Canada.

There was no error in Hilton’s Costs Award

Before the Federal Court, Hilton had sought half the fees it had incurred in the Federal Court proceeding (close to $50,000). The Federal Court ultimately awarded $9,000 in accordance with mid-point Column III of its Tariff. As costs are “quintessentially discretionary”, the calculation of fees in accordance with the Tariff is not an exact science, and the fees award was at something below the upper end of Column III, the Federal Court of Appeal concluded the Federal Court had not erred in awarding $9,000.

Regarding disbursements, the Federal Court awarded $6,600 based on Hilton’s evidence from a law clerk but without a detailed breakdown. While the Federal Court of Appeal noted more information on the disbursements would have been helpful, because the amount on its face was not excessive and the clerk’s affidavit confirmed the disbursements were incurred, there was no basis to interfere with the Federal Court’s award.

The Federal Court of Appeal concluded that because the Federal Court did not err in finding use of the WALDORF ASTORIA mark in Canada during the Relevant Period nor in the costs award, Miller Thomson’s appeal was dismissed, with costs to Hilton.

The Takeaway

This decision clarifies that trademark “use” for “services” includes the performance of primary, incidental and ancillary services in Canada as long as the evidence establishes that people in Canada can derive a material benefit from those services. It also reaffirms that whether there is use of a mark in relation to services is determined on a case-by-case basis, and that the requirements for use must adapt to accord with the Internet age and 21st century commercial practices.

This is the first Federal Court of Appeal decision addressing whether a “bricks and mortar” hotel in Canada is required for there to be use of a mark for “hotel services” – and on the facts of this case, it was not required. A request for leave to appeal to the Supreme Court of Canada is still possible.

*Jonathan G. Colombo and Amrita V. Singh were counsel for Hilton Worldwide Holding LLP in this case

Authors

Jonathan Colombo

Jonathan Colombo Partner Toronto (Canada) Canadian Trademark Agent, Barrister and Solicitor

Amrita V Singh

Amrita V Singh Partner Toronto (Canada) Barrister and Solicitor

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