Hilton Worldwide Holding LLP v. Miller Thomson (2018 FC 895)

A recent decision of the Federal Court has confirmed that use of a trademark in Canada with “hotel services” does not require a “bricks-and-mortar” operation physically located in Canada. 
 
In Hilton Worldwide Holding LLP v. Miller Thomson, 2018 FC 895, Justice Pentney of the Federal Court heard an appeal of the decision of the Registrar of Trademarks (“Registrar”) in respect of a section 45 non-use cancellation proceeding. At issue in the s.45 proceeding and on appeal was Hilton Worldwide Holding LLP (“Hilton”)’s registration for the trademark WALDORF-ASTORIA (Reg. No. TMA337529), which was registered in association with “hotel services”.  In line with a recent series of decisions in s.45 proceedings, the Registrar in this case found that the operation of a “bricks-and-mortar” hotel in Canada was necessary to establish use of the trademark for “hotel” or “hotel services”. Although there was evidence of Hilton’s use of the mark in association with ancillary or incidental hotel services (e.g. interactive website, hotel registration services, loyalty program, etc.), the lack of a “bricks-and-mortar” hotel operation physically in Canada was fatal to Hilton’s claim of use with “hotel services”.
 
On appeal, Justice Pentney canvassed the jurisprudence of the Federal Courts regarding the interpretation of “services” and “use” under the Trademarks Act and summarized the principles as follows: 

1. The concept of “services” should be liberally construed and can include primary, ancillary and incidental services in the appropriate circumstances (e.g. “hotel services” is broad enough to encompass primary, ancillary and incidental hotel services).
2. Mere advertisement of services in Canada, without actually performing or delivering the services in Canada, does not constitute use in Canada in association with services. It is essential that some aspect of the services be offered directly to Canadians or performed in Canada, such that some members of the public receive a benefit from the activity.
3. A determination of whether use in Canada with services has been established requires a case-by-case assessment that involves a two-part analysis of: (i) the scope of the services referred to in the trademark registration; and (ii) the nature of the benefits delivered to people physically present in Canada.  

In determining the “scope of the services”, Justice Pentney noted that the assessment must consider: 

1. the actual wording of the services set out in the registration;
2. the ordinary commercial meaning of the statement of services, taking into account: (i) the understanding from the perspective of the consumer as well as the trademark owner; (ii) the understanding at the time the trademark was registered as well as during the relevant period to the s.45 proceeding; and (iii) that terms in a registration can evolve with current usage of the words in ordinary parlance (e.g. developments in technology and methods of delivery); and
3. whether the primary, ancillary and/or incidental services would fall within the ordinary understanding of the wording of the services.

In determining the “nature of the benefits” delivered to Canadians, Justice Pentney stated that while the assessment is to be determined by the particular facts in each case, the key question to be determined is whether people in Canada can take some benefit from the provision of the service.
 
Based on the foregoing principles, Justice Pentney reviewed Hilton’s evidence filed before the Registrar as well as the supplemental evidence filed on appeal and found a number of errors in the decision issued by the Registrar:

1. failing to consider the only evidence submitted on the ordinary understanding of the term “hotel services”;
2. failing to follow binding authority regarding the scope of services as including primary, incidental, and ancillary services;
3. applying the current version of the Goods and Services Manual to interpret the meaning of a thirty year old registration; and
4. failing to consider the actual wording contained in the registration.

The evidence relied upon by Hilton before the Registrar stated that “hotel services” includes, but is not limited to, reservation services, booking and payment services, and access to hotel rooms. In rendering her decision, the Registrar made no specific reference to this evidence but rather relied on a common sense interpretation of “hotel services”, as informed by the current Goods and Services Manual. Justice Pentney determined that it was not reasonable to rely on this “common sense interpretation” in view of the evidence filed by Hilton and that, from the perspective of the service provider and customer, the ordinary understanding of “hotel services” would include the provision of ancillary or incidental services. The Registrar also did not follow binding precedent on the interpretation of “services”, which have been found to include primary, incidental, and ancillary services.
 
The additional evidence filed on appeal by Hilton included a copy of the Goods and Services Manual from 2006. The 2006 version of the manual did not contain “hotel reservation services” or “booking services” but did include “hotel services” and “management of hotels”. Justice Pentney found that Hilton could not be faulted for not using pre-approved terminology from the Manual and that there is no obligation on a trademark owner to update the wording in its registration to match current wording in the Manual.
 
In rendering her decision, the Registrar erred by stating “it is contrary to common sense to equate the ability to make hotel reservations or other bookings with the operation of a hotel”. The issue before the Registrar was whether Hilton could demonstrate use of the mark in association with “hotel services”, not the “operation of a hotel” and therefore the evidence must be assessed accordingly.
 
In considering the evidence before him, Justice Pentney held that Hilton had offered a benefit to Canadians through the provision of “hotel services”. More particularly, Hilton was in direct contact with customers in Canada, some customers entered into binding contracts by pre-paying for rooms in Canada in exchange for a discounted room rate, and these customers received points that they could use towards a hotel stay or other benefits from other Hilton hotels in Canada. As the trademark appeared on the website, emails, and booking confirmations received by Canadians, Justice Pentney found that Hilton had used the mark in Canada in association with “hotel services”.
 
Justice Pentney also considered whether “special circumstances” could excuse non-use of the mark during the relevant period in view of the fact that a third party did not complete a contract for the construction of a Waldorf-Astoria hotel in Canada in 2008; however, as there was no evidence that any efforts had been made to develop a hotel prior to this contract, Justice Pentney determined that special circumstances did not exist in this case.
 
The final issue on appeal was whether the Court has the authority to read down a registration to reflect the actual use of a trademark. As this was a novel proposition and was not central to the appeal, Justice Pentney declined to rule on this point, leaving it for another case in which it is the primary issue.

Conclusion

The decision of Justice Pentney affirms that a broad and liberal interpretation of “services” should be provided when assessing use of a trademark, particularly in s.45 non-use cancellation proceedings, and brings further clarity to the possibility of services being provided in Canada without the need for operations physically located in Canada. The approach adopted by Justice Pentney is also consistent with a recent decision of Justice Manson of the Federal Court (Dollar General Corporation v. 2900319 Canada Inc., 2018 FC 778), which held that ancillary retail store services, even in the absence of bricks-and-mortar stores in Canada, could support use of a trademark in association with “retail variety store services” – although Justice Manson’s decision was not referenced in Justice Pentney’s reasons.
 
The line of decisions requiring a broad and liberal interpretation of “services” may also impact the practice of the Canadian Trademarks Office. Under paragraph 30(a) of the Trademarks Act, an application to register a trademark must contain “a statement in ordinary commercial terms of the specific goods or services” to be used in association with the proposed mark. Currently, the Trademarks Office enforces paragraph 30(a) by only allowing statements of goods and services that are stated in ordinary commercial terms and in terms that have a sufficient level of specificity. 
 
In light of the broad and liberal interpretation of “services”, which may be considered to include primary, ancillary and incidental services, it is possible that the Trademarks Office may begin requiring an increased level of specification of services and require the identification of the primary, ancillary and incidental services contemplated by the applicant.  For example, the Goods & Services Manual currently regards the terms “hotels” and “hotel services” as compliant with paragraph 30(a) of the Trademarks Act. However, since “hotel services” is now to be interpreted to include primary, ancillary and incidental services, the Trademarks Office may begin requiring an applicant to identify the specific primary, ancillary and/or incidental hotel services contemplated by the applicant in order to comply with paragraph 30(a) of the Trademarks Act.