On Target Marketing: Avoiding Pitfalls in

Advertising and Promotions

FM Panelists:

May M. Cheng
Darrell Jarvis

Toronto Fasken Martineau Symposium

May 24, 2012

Outline
1.Trade-mark Considerations
Comparative advertising
Co-branding

2.Copyright Considerations
Commercial or political use
Waiver of moral rights

3.Promotions and Contests

Competition Act
Criminal Code
Privacy legislation
Common law of contract
Separate legislation in Quebec

Trade-mark Considerations
Comparative Advertisements
Unfair comparative advertising under the Trade-marks Act:
Section 7(a) - No person shall make a false or misleading
statement tending to discredit the business, wares or services of a
competitor
Section 22 - No person shall use a trade-mark registered by
another person in a manner that is likely to have the effect of
depreciating the value of the goodwill attaching thereto

Trade-mark Considerations
Section 7(a)
Does not require that the false or misleading statement was
made with knowledge of its falsity or with malice or intent to
injure
Does not require that the defendant lacked reasonable grounds
for believing that the statement was true
Rarely applied by courts due to a long-standing controversy
surrounding the constitutionality of Section 7 of the Trademarks Act

Trade-mark Considerations
Section 22
Supreme Court of Canada in Veuve Clicquot:
i. Defendant must have used the Plaintiffs registered TM in
association with wares or services
ii. Plaintiffs registered TM must be sufficiently well known to have
significant goodwill attached to it (but does not have to be
famous)
iii. Plaintiffs mark must have been used by the Defendant in a
manner likely to have an effect on that goodwill
iv. Likely effect must be to depreciate the value of the Plaintiffs
goodwill

Trade-mark Considerations
Section 22, contd
Court said Section 22 should only be used where the threat of
interference is substantial
Generally, use requirement not fulfilled with respect to
comparative advertising of goods because plaintiffs mark not
used at the time of transfer of the wares; easily fulfilled for
services
Will be hard for plaintiff to satisfy the 3rd and 4th criteria,
especially if the comparative advertising emphasizes the
differences between or among the goods and/or services

Trade-mark Considerations
Co-Branding
Section 50 of the Trade-marks Act
Licence to use trade-mark
50. (1) For the purposes of this Act, if an entity is licensed by or with the
authority of the owner of a trade-mark to use the trade-mark in a country and
the owner has, under the licence, direct or indirect control of the character or
quality of the wares or services, then the use, advertisement or display of the
trade-mark in that country as or in a trade-mark, trade-name or otherwise by
that entity has, and is deemed always to have had, the same effect as such a
use, advertisement or display of the trade-mark in that country by the owner.
(2) For the purposes of this Act, to the extent that public notice is given of the
fact that the use of a trade-mark is a licensed use and of the identity of the
owner, it shall be presumed, unless the contrary is proven, that the use is
licensed by the owner of the trade-mark and the character or quality of the
wares or services is under the control of the owner.
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Trade-mark Considerations
Co-Branding, contd
Owner must maintain direct or indirect control of the character
or quality of the wares or services to maintain use
May or may not require a formal, written co-license agreement
depending on the relationship between the entities
parent/subsidiary
owner/master franchisee

Be sure to identify a single source

Trade-mark Considerations
Co-Branding, contd
Presumption that a licence exists when public notice given of:
The fact that the use of a trade-mark is a licensed use
The identity of the owner

Trade-mark Considerations
Examples
Wells Dairy Inc. v. UL Canada Inc.1
Evidence of control by an owner of a registered trade-mark over a user of
that trade-mark can support the existence of a licence agreement
When public notice of licence is given, s. 50(2) creates a rebuttable
presumption that the use is licensed

Cheung Kong (Holdings) Ltd. v. Living Realty Inc.2

Informal licensing agreement did not satisfy s. 50(1)
The fact that Mr. Chan and his partner controlled Head River is not enough
to demonstrate an actual control of the quality of its services, in association
with which it used the mark, rather than a mere potential to control.

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(2000), 7 C.P.R. (4th) 77 (Fed. T.D.)

(1999), 4 C.P.R. (4th) 71

Copyright Considerations
Generally
Penalties for copyright infringement are more severe than
penalties for trade-mark infringement
Imperative that you obtain copyright in all marketing and
advertising materials
Be mindful of design marks, which may be protected under the
Trade-marks Act and the Copyright Act

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Copyright Considerations
Commercial or Political Use
If you are hiring a marketing company or an independent
contractor (i.e., not an employee) to create advertising
materials:
1. Need an assignment of copyright from the contractor/company,
AND
2. A waiver of moral rights from the individual(s) that created the
work(s)

If one of your employees is creating advertising materials:

1. Need an assignment of moral rights

Employer is the first owner of copyright unless there is a

written agreement to the contrary (s. 13(3))
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Copyright Considerations
Commercial or Political Use, contd
ex. jingle for a commercial paying SOCAN a royalty for use
of a song does not allow you to manipulate the song into a
jingle or use it for a commercial purpose you need to obtain
a waiver of moral rights from the creator
ex. Rush demanded that U.S. politician, Rand Paul, stop
quoting their lyrics in political speeches and playing their
music at political appearances

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Promotions and Contests

Governed by:
Competition Act
Criminal Code
Privacy Legislation (ex., Personal Information Protection and
Electronic Documents Act (PIPEDA))
Common law of contract
Separate legislation in Quebec (i.e., Act respecting lotteries,
publicity contests and amusement machines)

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Promotions and Contests

Competition Act
Disclosure requirements for any contest, lottery, game of chance
or skill, or mixed chance and skill, or otherwise disposes of any
product or other benefit
1. Number and approximate value of prizes
2. Disclosing the area (or areas) to which the prizes relate
3. Any fact that may materially affect the odds of winning

Total number of seeded prizes, if known, should be disclosed

Provide short rules on each specially-marked package

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Promotions and Contests

Competition Act, contd
Distribution of prizes cannot be unduly delayed
Selection of participants and distribution of prices must be made
on the basis of skill or on a random basis

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Promotions and Contests

Competition Act, contd
Beware of the general misleading advertising provisions
Civil fines of up to $750,000 (individuals) and $10M (corporations)

Disclosure requirements and general misleading advertising

provisions apply to Internet marketing
Required disclosures must be displayed in a such a way that they
are likely to be read i.e., should not require readers to take an
active step to obtain the disclosure information
Active step = sending an e-mail or placing a phone call
Maybe an active step = clicking on a clearly labelled hyperlink
Not an active step = reading disclosures on same Web site

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Promotions and Contests

Competition Act, contd
Binding Written Decisions from the Competition Bureau
Can obtain an opinion as to whether or not the Commissioner has
sufficient grounds to commence an inquiry

$1,000 + tax per opinion

2 weeks for non-complex contests
6 weeks for complex contests

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Promotions and Contests

Criminal Code
It is a criminal offence to operate illegal lotteries
Illegal lottery =
1. a prize;
2. chance; and
3. consideration

SOLUTION?

add a skill-testing question

no purchase necessary

Tried and true skill-testing question: 4-step, time limited

mathematical question

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Promotions and Contests

Privacy Legislation
Federal - Personal Information Protection and Electronic
Documents Act (PIPEDA)
Applies to private sector organizations in the course of
commercial activity

Provincial - Freedom of Information and Protection of Privacy

Act (Ontario)
Applies to Ontarios provincial ministries and most provincial
agencies, boards and commissions, as well as community
colleges, universities, Local Health Integration Networks
(LHINs) and hospitals

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Promotions and Contests

Privacy Legislation, contd
Include a provision in the contest rules whereby participants
consent to the collection, use, storage and disclosure of their
personal information
Be sure to protect personal information with appropriate
safeguards
Statement that personal information is only being collected for
the purposes of the contest
Think twice about asking contest participants for information
about third-parties (ex. their friends)

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Promotions and Contests

Common Law of Contract
Promotional contests are contracts
Terms of the rules must be precise and enforceable
Make sure the contest makes sense

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Promotional Contests
Requirements in Quebec
Materials for Quebec residents must be in French
Contest rules must contain certain prescribed information
Duties based on the value of prizes (available to Quebec
residents) must be paid in advance
A security bond may be required
Must file, with the Regie des alcools, des courses et des jeux:
Notice of the contest, with applicable duties
Copy of the contest rules
Text of any advertisement used in the contest

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Promotions and Contests

Example
Facts
Elkhorn Ranch & Resort Ltd.s contests gave the misleading
impression that the grand prize was a new SUV
In fact, the grand prize was a one- or two-year lease on an SUV,
with a host of strict conditions
Inadequate disclosure about odds of winning
Elkhorn did not ensure that winners were selected on a random basis

Result
In 2009, Elkhorn Ranch & Resort Ltd. agreed with the Competition
Bureau to pay $170,000 for running misleading promotional contests in
connection with its time share properties in Western Canada
Elkhorn also agreed to publish corrective notices in newspapers and
on its Web site
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Promotions and Contests

Apart from legal consequences, failed contests can have a
significant impact on public relations

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May M. Cheng
+1 416 865 4547
mcheng@fasken.com
Darrell Jarvis
+1 416 868 3530
djarvis@fasken.com