Trademark Assignments: “Inexcusable Activity” Will Cost You

March 26, 2018

By Amrita V. Singh

“A lie is like a [red] cat: You need to stop it before it gets out the door or it’s really hard to catch.” – per Charles M. Blow

In a recent Federal Court decision, Justice Barnes issued a harsh rebuke to parties who had deliberately misled the Registrar of Trademarks into recording a trademark assignment, by omitting relevant parts of the underlying agreement and the dispute between the parties about the agreement.

In 2012, Red Cat and Dayton Enterprises entered into a poorly drafted asset acquisition agreement filled with prospective language, such as “will acquire”, “will provide”, and “will be granted”. As part of the agreement, the parties were also to keep its terms and conditions confidential.

Despite this agreement and in the face of Dayton disputing Red Cat’s entitlement to use the Dayton trademark, in 2016 Red Cat made an ex parte request to the Trademarks Registrar claiming the agreement effected an assignment of the Dayton trademark to Red Cat. In support of its claim, and in a clear violation of the confidentiality term, Red Cat provided six clauses of the 28-clause asset acquisition agreement to the Registrar. It omitted the confidentiality clause and neglected to inform the Registrar that use of the Dayton trademark was in dispute between the parties, as was compliance with the rest of the agreement.

Upon notice from the Registrar that its Dayton trademark registration ownership had changed from Dayton to Red Cat, Dayton brought an application to the Federal Court to remedy the wrongfully recorded change. Justice Barnes ordered that change in registration ownership be set aside, noting:

It was inexcusable for Red Cat to submit a transfer application to the Registrar as though it was a routine transaction carried out in good faith and effectively on consent. Red Cat and its then legal counsel took unfair advantage of the Registrar’s pro forma approach to such transactions in the knowledge that if the background facts were disclosed the transfer would almost certainly be refused.

He also noted that a party, who seeks this type of administrative relief (e.g. an assignment recordal) and knows there is a dispute relating to the ownership of the trademark, should “rarely, if ever, proceed ex parte.” If it decides to proceed ex parte, that party owes “an exceptional duty of full and frank disclosure” to the Court. Clearly, Red Cat did not meet that threshold.

To address Red Cat’s conduct and that of its former counsel before the Registrar, Justice Barnes noted that the “facts of this case are sufficiently troubling that an elevated award of costs is justified”, resulting in a costs order at the highest scale of the Federal Courts’ Tariff.

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