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Have Online Services Transformed Into Goods Under the Trade-Marks Act?

On February 18, 2016, the Federal Court, in Specialty Software Inc. v. BEWATEC Kommunikationstechnik GmbH, 2016 FC 223 (“Specialty”), overturned a decision of the Registrar of Trademarks. In doing so, the Court may have broadened the scope of “goods” under the Trade-Marks Act (the “Act”) and called into question many software-related marks relating to services.

Specialty Software Inc (“Specialty”) registered the trade-mark “MEDINET” to be used in association with computer software programs as goods, rather than services. Specialty previously sold its software in a tangible form on discs. However, during the relevant time period, Specialty no longer sold software on discs and instead granted users access to its software online after the user installed an icon on their computer (i.e. access to the software through a website).

Bewatec Kommunikationstechnik GmbH (“Bewatec”) initiated proceedings to expunge the “MEDINET” mark on the ground that the mark was not used in association with the goods between November 2010 and November 2013, as required by section 4 of theAct.

Justice O’Reilly disagreed with Bewatec, concluding that Specialty had always sold a licence to use its software, as opposed to selling the software on a disc. The Act requires that the mark be marked on goods “at the time of the transfer of the property in the goods.” The Court held that the disc had represented the means by which the transfer of the goods occurred, the “intangible good[s]” sold were the licences to access the software, and the property was the entitlement to enjoy the use of the licence. Therefore, the transfer of property in a ware occurred despite the fact Specialty did not transfer any physical goods to the consumer.

While undoubtedly the decision was an attempt to avoid the rather technical and unfair result of denying Specialty trade-mark protection as a result of a change in technology, the Federal Court seems to have unintentionally broadened the scope of “goods” under the Act. The Court concluded that the transfer of an intangible licence to utilize software was sufficient to demonstrate use of the mark in association with the registered good. According to the Trademarks Examination Manual, intangibles, such as “Web sites” and “Domain Names” should not be listed in a statement of goods, since they are considered to be services.

In Specialty, the Applicant essentially allowed users to log-on to a website and have access to the software. Arguably, this is no different than the services (not goods) provided by various websites, including those in the commercial music streaming and social media industries. Trade-mark applicants will now be left to wonder if activities that were previously registered as services will now meet the definition of “goods” and whether registrations for such marks will have to be made for both goods and service in order to avoid potential expungement.

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