On March 20, 2018, the Federal Court of Canada (the Court) set aside the Registrar of Trademarks’ transfer of Registration No. TMA792,915 for DAYTON (Dayton Boot Co Enterprises Ltd v Red Cat Ltd, 2018 FC 316). The Court set aside the Registrar’s decision on the grounds of an absence of evidence, procedural fairness and improper purpose. The party requesting the transfer failed to provide full and frank disclosure to the Registrar that the ownership of the registration was under dispute and failed to provide notice to the registered owner of the request for a transfer.

Dayton Boot Co Enterprises Ltd (Dayton Boot) entered into an asset acquisition agreement (the Agreement) with Red Cat Ltd. (Red Cat) that provided for the sale of assets (including the DAYTON trademark) to Red Cat. The Agreement included a confidentiality provision. The relationship between the parties deteriorated and the parties began exchanging legal threats. Red Cat took the position that: (1) Dayton Boot was an unsecured creditor of Red Cat’s successor; and (2) that Dayton Boot had failed to arrange for the transfer of the registration pursuant to the Agreement. Dayton Boot advised Red Cat that it considered Red Cat to be in breach of the Agreement, and demanded that Red Cat cease and desist from using or asserting ownership of the DAYTON trademark.

Red Cat made an ex parte request to the Registrar for the transfer of the DAYTON registration. In support of the request, Red Cat submitted a redacted copy of the Agreement, which included redactions of the confidentiality provision. The Registrar recorded the transfer, and Red Cat subsequently transferred the registration to a third party, Hutchingame Growth Capital Corporation (HGCC). Dayton Boot filed a notice of application seeking to set aside the Registrar’s decision.

The Court recognized that the evidence submitted by Dayton Boot to the Court was not before the Registrar, and that there is a general principle that only the evidence before the decision-maker can be considered in assessing the reasonableness of the resulting decision. Nevertheless, the Court considered Dayton Boot’s new evidence, based on two exceptions to the general principle: (1) proof of an absence of evidence, as the Registrar’s decision cannot be assessed without knowing what Red Cat deliberately withheld from the Registrar; and (2) procedural fairness and improper purpose, as Red Cat’s actions were “inexcusable” and Red Cat “took unfair advantage of the Registrar’s pro forma approach” to recording transfers.

The Court noted that a party seeking administrative relief in the face of a disagreement with an interested party should rarely, if ever, proceed ex parte - but if it does, it carries an exceptional duty of full and frank disclosure. The unfairness of the Registrar’s decision did not arise from a failing by the Registrar, but by Red Cat’s deliberate withholding of material information to effect a change that otherwise would not have been obtained. The Court also found the facts of the case sufficiently troubling to award costs on an elevated scale.

Summary By: David Bowden

E-TIPS® ISSUE

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