The new standard of review in trademark opposition appeals: Federal Court of Appeal calls for a “fresh start”

In two recent decisions, both the Federal Court¹ and the Federal Court of Appeal² have confirmed that the new Vavilov standard of review applies to a Trademark Opposition Board (TMOB) decision appeal under the Trademarks Act.

What you need to know

• Previously, the applicable standard of review on appeals of TMOB decisions was highly deferential. Absent new evidence on appeal that would have materially impacted the outcome, the courts were unlikely to interfere with these decisions. However, the Federal Court of Appeal has confirmed that the Supreme Court of Canada’s recent decision in Vavilov changes that approach.
• This has three major implications for companies or individuals considering an appeal from a TMOB decision:
  • The courts will be more willing to interfere in these decisions where they raise pure questions of law.
  • Depending on the issues raised in the appeal, parties may not need to incur the substantial costs of providing new evidence in order to attract a less deferential standard of review.
  • Parties should be cautious about relying on past jurisprudence where the court applied a deferential standard of review.

Historically deferential approach to appeals from TMOB decisions

The standard of review has an important impact on appeals from administrative decision-makers. It dictates how much deference the appellate court will give to that decision. If the correctness standard applies, the court will grant the decision-maker no deference and will conduct the analysis afresh. If the reasonableness standard applies, the court will defer to the decision-maker absent fatal flaws that may make the decision unreasonable, such as a decision that is not based on internally coherent reasoning or where the decision is not justified in light of the legal and factual constraints bearing on the decision.

Historically, the courts have been highly deferential to TMOB decisions on both factual and legal issues. Even though there is an express appeal provision in the Trademarks Act to the Federal Court, the Court provided considerable deference to the TMOB because of its expertise.

Until recently, the applicable standard of review from the TMOB was well-settled. While the parties have the right to file new evidence, if they did not do so, or if the evidence was found to be immaterial, the standard was reasonableness.

In two recent decisions, the courts confirmed that this historic approach has been replaced by a correctness standard on issues of law. In other words, the court will ask itself whether it would have decided the legal question the same way as the TMOB did, and if the answer is no, it will correct the decision.

Vavilov

In December 2019, the Supreme Court of Canada issued its decision in Canada (Ministry of Citizenship and Immigration) v. Vavilov³ that revamped administrative law, setting out a new framework for judicial review of administrative decisions and providing much-needed guidance on its application (see our full summary on this decision). Particularly relevant to TMOB decisions, the Supreme Court held that statutory appeals will be reviewed on the same basis as appeals from a trial court to an appellate court: questions of law will be reviewed on a correctness standard, and questions of fact or mixed fact and law will be reviewed for palpable and overriding error.

Federal Court applies Vavilov to TMOB decisions

It took only a few months after Vavilov for the Court to confirm (in Pentastar Transport Ltd. v. FCA US LLC) that these new rules applied to appeals from the TMOB.

In that case, Pentastar Transport Ltd. (PTL) owned the word mark “PENTASTAR” in association with services relating to the oil industry. FCA, formerly known as Chrysler Group LLC, is an American automobile manufacturer and applied to register the word mark “PENTASTAR” in association with goods relating to engines for passenger motor vehicles. PTL opposed the trademark application. The TMOB rejected PTL’s opposition. PTL appealed.  Although it dismissed the appeal, the Federal Court confirmed that Vavilov applied to its review of the TMOB’s decision, as the Trademark Act created a statutory right of appeal.

Federal Court of Appeal confirms Vavilov calls for a “fresh start”

In April 2020, in The Clorox Company of Canada, Ltd. v. Chloretec S.E.C., the Federal Court of Appeal confirmed the finding of the Federal Court in Pentastar and explained in more detail how Vavilov has changed the standard of review applicable to TMOB decisions.

In Clorox, Chloretec filed applications to register the word mark “JAVELO” and a related design mark in association with liquid bleach goods. Clorox opposed the applications, relying on its registered JAVEX trademarks. The TMOB rejected Clorox’s opposition and concluded that the JAVELO trademark did not violate the Trademarks Act and did not lead to a likelihood of confusion with the JAVEX marks. The Federal Court dismissed Clorox’s appeal.

The Federal Court of Appeal first assessed the extent to which Vavilov has changed the applicable standard of review on appeals of TMOB decisions, and made two key determinations. First, it held that there is no change to the standard of review where there is a finding that new evidence introduced on appeal is material. Second, Vavilov has impacted the standard of review in circumstances where no new evidence is adduced before the Federal Court or the new evidence is found not to be material. In such circumstances, the Federal Court of Appeal confirmed that “Vavilov calls for a fresh start.” In such circumstances, the reasonableness standard no longer applies. Rather, questions of law will be determined on a correctness standard, while questions of fact or mixed fact and law will be evaluated on the basis of whether the TMOB made a palpable and overriding error. The Federal Court of Appeal noted that this standard was applied by the Federal Court in Pentastar, which was “the only reported case so far involving an appeal under the regime of the [Trademarks] Act.”

These two decisions will mark a significant change to trademark opposition practice. In the past, parties spent significant costs filing new evidence on opposition appeals in order to attract a less deferential standard of review and re-argue the merits of the case. However, unless that new evidence met the threshold of having a material impact on the outcome, a litigant before the TMOB could previously be reasonably confident that its decision would withstand most appeals. Vavilov has thrown that into serious question.

_________________________

¹ Pentastar Transport Ltd. v. FCA US LLC, 2020 FC 367

² The Clorox Company of Canada, Ltd. v. Chloretec S.E.C., 2020 FCA 76

³ 2019 SCC 65

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

© 2024 by Torys LLP.

All rights reserved.