A recent decision of the Canadian Registrar of Trademarks acknowledged that the path to launching a franchise system may have some bumps along the road and underscored that to preserve a franchisor’s trademark rights, it is essential to document the efforts to launch the system. Specifically, the Registrar maintained a franchisor’s trademark despite the absence of evidence that the associated services had in fact been offered to the Canadian public. While there were unique circumstances that assisted the Registrar in reaching this decision, the case serves as a reminder as to how important it is to document the time and effort involved in launching a franchise system, as it might just save the franchisor’s trademark.
In Life Maid Right – 2799232 Ontario Inc. and Maid Right, LLC (2022 TMOB 104),1 Maid Right, LLC (Maid Right) purchased a franchise system in 2018 that included a trademark registration for MAID RIGHT for various cleaning services. In December 2020, summary cancellation proceedings were commenced against the MAID RIGHT trademark registration, which required Maid Right to provide evidence of the trademark’s use in Canada at some point in the prior three year period. If Maid Right could not provide evidence of use, the MAID RIGHT trademark registration would be expunged for non-use unless Maid Right could establish that there were “special circumstances” justifying this non-use.
Ultimately, Maid Right was successful in establishing the requisite “special circumstances” to save its trademark registration. Whether the special circumstances excusing the non-use had been established required consideration of three criteria: (i) the length of time during which Maid Right had not used the trademark; (ii) whether the reasons for non-use were beyond the control of Maid Right; and (iii) whether Maid Right had a serious intention to shortly resume use.
Maid Right satisfied these three criteria by putting forward the following evidence:
(i) it could only recruit pre-qualified individuals or businesses, making it more difficult for Maid Right to find franchisees who could offer the cleaning services;
(ii) that the Maid Right onboarding process involved an initial training program with 40 hours of on-boarding training, 80 hours of online training, 36 hours of classroom training and 4 hours of field training, meaning it was a very involved process;
(iii) that Maid Right had gone through a significant effort to produce a Canadian Disclosure Document to be used in marketing to potential Canadian franchisees, and that franchisees would need to obtain legal advice prior to entering into a franchise agreement, which would further slow down the process;
(iv) that franchisees needed to make a sizeable investment to begin the operation of the franchise, thus further narrowing the potential pool of candidates who could offer the services; and
(v) that Maid Right had engaged in recruitment efforts throughout 2019 and 2020, and provided disclosure documents to several Canadians, resulting in the sign-up of a single franchisee (who ultimately backed out, so they never offered cleaning services).
Collectively, this evidence allowed the Registrar to conclude that Maid Right had engaged in a good faith effort to launch the franchise and offer the services during the relevant period, and that the delays were ultimately beyond Maid Right’s control.
While this decision may prove to be an outlier in the Canadian jurisprudence, there are some helpful broad takeaways.
- As noted at the outset, if you are a franchisor, carefully document your efforts to launch your franchise system and to offer goods or services in Canada – it can ultimately preserve your registered trademark rights. This is especially important given that at present it is taking at least three years before Canadian trademark applications are examined, so the majority of marks take a minimum of 4 years to proceed to registration. Therefore, if you have a registration, you want to do everything in your power to avoid losing it given that trademarks are a pillar of a healthy franchise system.
- Ensure your trademark application adopts broad language and includes goods or services that you think will be quick to market. For example, had the MAID RIGHT trademark registration included a service description like “providing information to franchisees in the field of cleaning services via a website”, having a .ca website displaying the MAID RIGHT trademark with informative content targeted at potential Canadian franchisees would have more likely meant there was trademark use. Therefore, at least part of the services for the MAID RIGHT mark would not have been in as much jeopardy when the summary cancellation proceedings were commenced.
All that being said, the trademark lawyer’s mantra is “if you don’t use it, you lose it.” So while there are exceptions like the one discussed above, engaging in continuous trademark use is by far the best way to securely create and maintain your trademark rights in Canada and allow your franchise business to grow on a solid foundation.
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1 Life Maid Right – 2799232 Ontario Inc. and Maid Right, LLC, 2022 TMOB 104 (CanLII), <https://canlii.ca/t/jpnfb>