EXPERT INSIGHT 56 WWW.LAWYER-MONTHLY.COM | JUN 2022 Pizza Ltd’s trademark registration for the “Milano Design Mark” registered on 22 November 2002 and claiming use in Canada since at least as early as March 1994 for the services “take out restaurant services, with delivery”. The plaintiff is an Ottawa-based company that licenses independent pizzeria owner-operators to use the MILANO PIZZERIA trademark, including the “Milano Design Mark” and other related marks the “Milano Marks”. The licensing arrangements involved a complex web of familial connections and subsequent non-familial owner/ operators. The licenses were not always put in writing and essentially involved requirements for licensees to purchase branded products and inventory from approved suppliers within an agreed-upon territory. Eventually, after a breakdown of the commercial relationship between the plaintiff and the defendants, the plaintiff’s permission to use the Milano Design Mark and related marks was revoked. The plaintiff claimed against the former licensee defendants for trademark infringement, passing off, and depreciation of goodwill based on Milano Design Mark. The defendants counterclaimed inter alia for expungement of the Milano Design Mark by reason of non-distinctiveness, abandonment, and non-entitlement. In its decision , the court dismissed the plaintiff’s action and the defendants’ succeeded in their counterclaim challenging the validity of the Milano Design Mark for non-distinctiveness under the s18(1)(b) of the Trademarks Act on the basis that the plaintiff did not exercise sufficient control over the character and quality of the of the licensed goods and services to attract the benefit of s50(1) of the Trademarks Act. The court also found that, due to the use of a similar trademark by a third party, the Milano Design Mark was diluted and thus no longer distinctive of the plaintiff. The decision of the federal court has been appealed by the plaintiffs, though the cautionary lessons discussed below remain relevant notwithstanding the ultimate disposition of the matter. Can you describe the implications that this carries for franchisors and trademark control? This case is a cautionary tale reminding trademark owners in general – and franchisors specifically – of the need to ensure that they exercise sufficient control (directly or indirectly) over the character and quality of the goods and services licenced to franchisees, along with the importance of documenting and implementing a consistent licensing regime. Controlling how a mark is presented, and trademark notices that name the licensor, for example, may be inadequate. The plaintiff 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. The evidence showed that the various licensees could select and use their own ingredients (subject to inconsistently enforced supplier requirements), create their own menus Reducing all license agreements to writing is best practice and highly recommended.
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