Written by Daniel Standing LL.B., Editor, First Reference Inc.
Businesses that have a registered mark, name or symbol have to properly manage it if they seek to maintain their brand image as a source of economic value and stability. The value of proper trademark management is the key takeaway in the recent Federal Court decision Milano Pizza Ltd. v 6034799 Canada Inc, 2022 FC 425. In that decision, poor trademark management came back to haunt the plaintiff’s pizzeria.
The claim at the heart of the case was brought forward by the Ottawa-based Milano Pizzeria, which sought to protect its rights to a particular design mark bearing its name and the image of a pizza slice that it registered in its name in 2002, having used it since March 1994. In addition, the plaintiff sought to protect its rights in various unregistered work marks, each with a slight variation on the name Milano Pizzeria.
In legal terms, the plaintiff claimed against the defendants for trademark infringement passing off, and depreciation of goodwill, while the defendants counterclaimed for expungement of the trademark by reason of non-distinctiveness, abandonment and non-entitlement.
The relationship between the plaintiff and defendant licensees is a complicated web of familial connections. The plaintiff had entered oral or written licence agreements with most of the defendants. Generally, these were understood to involve “purchasing” and “territory” in exchange for permission to use the name “Milano Pizza” or “Milano Pizzeria.”
The court’s decision
The court ruled against the plaintiff and in favour of the defendants. The court’s key finding was that the Milano trademark was not distinctive. There were other independently owned and operated Milano Pizzeria locations, meaning that the Milano trademark had not enured to the plaintiff’s benefit. For example, there was a lengthy period of time when a separate entity was operating as Pizzeria Milano in Masson, Quebec, not far from Ottawa.
At a telling portion of the judgment, the court states that the plaintiff “woke up late to the importance of the Internet and online ordering to the Milano Pizzeria business.” By that point, another party had acquired the domain milanopizzeria.ca, and had developed a website to use in conjunction with online ordering platforms. At least a decade went by without any input or oversight from the plaintiff.
Additionally, the plaintiff’s business was described as “fluid.” It failed to show that it exercised the required control over the character and quality of the finished pizzas to garner the protection of the Trademarks Act. It is only when the owner of a trademark has direct or indirect control of the “character or quality of the wares or services” that the use of a trademark by a licensee is deemed to be used by the owner. The evidence was that the various licensees could use their own ingredients, and their own recipes for dough. There were no uniforms and no control over the pricing. The licensees were basically free to operate their businesses as they saw fit.
From the court’s conclusion that the Milano mark had lost its distinctiveness because of insufficiently controlled licensing, it concluded that the plaintiff had no enforceable rights in the registered trademark.
For many businesses, a trademark-which can be a company name, logo or the way the goods or services are identified-is a valuable piece of intellectual property that adds value to a brand by helping to build the company’s reputation and goodwill.
Monitoring the trademark is a necessity since the trademark registration must be renewed every ten years. While in use, consistent monitoring of the trademark for infringement is required to avoid situations where another party uses an imitation of a trademark or uses it in a way that will hurt the goodwill of the owner’s brand.
Like Milano Pizzeria, if a company allows its trademark to become diluted in a commercial field where other parties use the trademark and operate their businesses, it will be difficult to argue that the trademark remains distinctive. Organizations facing similar situations are encouraged to seek the help of an intellectual property professional.