Eveready and Squirt Cognitively Updated Jerre B. Swann. A Plea for the Proper Citation of the Lanham Act Paul Horton

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1 Eveready and Squirt Cognitively Updated Jerre B. Swann A Plea for the Proper Citation of the Lanham Act Paul Horton Commentary: Fashion Dos: Acknowledging Social Media Evidence as Relevant to Proving Secondary Meaning Ronald Coleman Commentary: The Donald Trumps Claim for Misrepresentations by Licensee Sheldon Burshtein Commentary: Descriptive, or Not Descriptive That Is the Question: A Review Under Turkish Law of Likelihood of Confusion When Trademarks Share Descriptive Terms Uğur Aktekin, Güldeniz Doğan Alkan, and Zeynep Çağla Özcebe July August, 2016 Vol. 106 No. 4

2 Vol. 106 TMR 783 COMMENTARY THE DONALD TRUMPS CLAIM FOR MISREPRESENTATIONS BY LICENSEE By Sheldon Burshtein United States presidential candidate Donald Trump avoided liability in a Canadian action for alleged misrepresentations by a licensee of one of his corporate affiliates. The alleged misrepresentations made by a developer licensed by one of Mr. Trump s affiliates to use Mr. Trump s name and trademarks for the seventy-story mixed-use TRUMP TOWER complex in downtown Toronto related to the revenue attributes of hotel condominium units. I. BACKGROUND In Singh v. Trump, 1 the developer distributed a document to prospective purchasers of the condominium units that set out the hypothetical revenue stream from the occupancy of the units and the anticipated expenses to predict a return on investment. The buyers were given the document before they signed purchase agreements. The purchasers alleged that the document contained numerous misrepresentations upon which they relied in making their decisions to buy the units. The buyers were told that customers flock to TRUMP hotels so that high average rental and high occupancy rates would be ensured, and the buyers said that they took comfort from the TRUMP name. Two dozen actions were filed by different purchasers against a number of defendants, including Mr. Trump, two of his affiliated companies Trump Marks Toronto LP ( Trump Toronto ) and Trump Toronto Hotel Management Corp. ( Trump Hotel ) (collectively, the Affiliates ) and the developer. At the relevant times, the TRUMP name and trademarks (the Trump Marks ) 2015, 2016 Sheldon Burshtein. Earlier versions of this commentary appeared in Blakes Bulletin on Intellectual Property, July, 2015; Lexology, July 22, 2015; Mondaq.com, July 22, 2015; JDSupra, July 22, 2015; World Trademark Review, July, 2015; and The Licensing Journal, September, The author has revised the piece for publication in The Trademark Reporter. Partner, Blake, Cassels & Graydon LLP, Toronto, Ontario, Canada, Associate Member, International Trademark Association. The author acknowledges the helpful comments on a prior version of this article of his partners Gary Daniel and Antonio Turco ONSC 4466.

3 784 Vol. 106 TMR were owned by Mr. Trump. 2 Trump Toronto is a Delaware partnership that licenses the Trump Marks for use in Canada. Trump Hotel is the operator of the TRUMP INTERNATIONAL hotel in the TRUMP TOWER complex. Mr. Trump is the principal of Trump Hotel. The purchasers sued on the basis of: conventional common law and equitable negligent misrepresentations, misrepresentations under the Ontario Securities Act, 3 and an illegal contract in light of an alleged violation of a ruling of the Ontario Securities Commission (the OSC ) in relation to the sales of the units. The decision was rendered on a summary judgment motion brought by the plaintiffs in two test cases. At one level, the actions were conventional real estate actions in which a vendor allegedly misrepresents the attributes of a property and a purchaser seeks rescission of the agreement and damages. However, the decision also considered the impact of the OSC ruling, and the liability of Mr. Trump for the use by the developer of the Trump Marks. For various reasons, the Ontario Superior Court of Justice (the Court ) concluded that all claims failed and issued summary judgment for the defendants. Only the licensor liability issue is discussed below. II. LICENSOR CONTROL AND LIABILITY IN CANADA In Canada, a trademark is a guarantee of origin, so the distinctiveness of a trademark is the essential requirement to acquire, maintain, and enforce rights in a mark. 4 Distinctiveness means that a trademark identifies the goods or services offered in association with the mark as emanating from a single source. 5 The Supreme Court of Canada recently said that a trademark allows consumers to know, when they are considering a purchase, who stands behind those goods or services. 6 The distinctiveness of a trademark may be impaired where a person other than the trademark owner, such as a licensee, uses the mark. This is because the public may not be able to identify the source of the goods or services offered in association with the mark In early 2016, after the decision was rendered, the trademarks were assigned from Mr. Trump to another affiliated company. 3. R.S.O. 1990, c. S-5, as amended. 4. Mattel, Inc. v Canada Inc., [2006] 1 SCR Trade-marks Act, R.S.C. 1985, c. T-13, as amended, Masterpiece Inc. v. Alavida Lifestyles Inc., [2011] 2 SCR Id.

4 Vol. 106 TMR 785 The Trade-marks Act (the TMA ) addresses this issue by a statutory fiction that deems the use of a trademark by a licensee to be use by the trademark owner, provided that, under a license, the owner directly or indirectly controls the character and quality of the goods and services with which the mark is used by the licensee. 8 Character means an attribute, property, feature, trait, or characteristic of the goods or services. Quality means the degree, class, or grade of the goods or services, namely their relative merit. The owner must exercise, rather than merely have the right to exercise, control. If the owner does not exercise such control, rights in the trademark may be lost. The TMA does not prescribe how control must be exercised. In the case of services, the trademark owner typically defines a standard of performance of the services and monitors their performance by the licensee. Although the TMA does not provide for the liability of a trademark licensor for product, regulatory, or other third-party liability, the greater the control exercised by the trademark owner or the expectation by the public of such control, the greater is the risk that the owner may be held liable for the acts or omissions of a licensee. Canadian courts have not imposed an affirmative obligation on a trademark owner in favor of a third party. However, there may be an implicit duty, to the extent that a trademark owner intends to maintain the distinctiveness of, and its rights in, its trademark. In Canada, licensors of trademarks to a franchisee 9 or other licensee 10 have been held liable for defective goods 11 or services TMA, supra note 5, See, e.g., LaFlamme v. Groupe TDL Ltée, 2014 QCCS 312: Both a franchisor and a franchisee were held liable to a woman who was burnt by hot soup served at a franchised restaurant; and Leahy v. McDonald s Restaurants of Canada Ltd., [1993] O.J. No (Gen. Div.): An employee of a franchisee was injured in a slip on ice while leaving the premises of the franchisee. The employee did not know that her employer was a franchisee. The franchisor was liable because it leased the premises to the franchisee and exercised significant control over the franchisee through the franchise and lease agreements. See also Percival v. Mayes, [1986] O.J. No. 137 (Ont. H.C.J.), rev d (1998), 9 A.C.W.C. (3d) 300 (Ont. C.A.): Homeowners sued both a franchised contractor and the franchisor for a defective and incomplete home renovation. At trial, the franchisor avoided liability because the homeowners did not comply with the rules of the franchisor, but the Court said that because the contractor used the same trademark as the franchisor, it was reasonable for the homeowners to rely on the guarantee of the franchisor. On appeal, the decision was affirmed, but the Court said that because the franchise agreement provided that the franchisor would not be responsible for the obligations of the franchisee, the homeowners were not entitled to the guarantee of the franchisor. 10. Fraser v. U-Need-A-Cab Ltd., (1983), 43 O.R. (2d) 389 (Ont. H.C.J.), aff d (1985) 50 O.R. (2d) 281 (Ont. C.A.): A dispatcher operated its own taxis and permitted other operators to use its trademark in the operation of their own taxis. The dispatcher had no policy of inspection, maintenance, or repair of the independently owned and operated taxis. A consumer had no way of knowing that a taxi was not owned or operated by the dispatcher. A consumer was injured by a defective door while exiting a taxi ordered from the dispatcher and operated by an independent owner. The dispatcher was held liable for breach of an

5 786 Vol. 106 TMR or damages suffered by a third party in the course of the performance of, 13 or in relation to, 14 services offered by the licensee. Liability has been based on the trademark owner exerting significant control over the licensee s activities, especially in a franchise relationship, 15 or on the perception of the plaintiff that it was contracting with the trademark owner because the licensee used the owner s mark. 16 III. DECISION ON LICENSOR LIABILITY In Singh, Trump Toronto entered license agreements with the developer for the use of the Trump Marks. The role of Trump Hotel was to operate the hotel and distribute the income from the hotel s operation to the owners of units, but not to sell units. For the purpose of the summary judgment motion, the purchasers withdrew the motions against the Affiliates for reasons that are not discussed in the decision. 17 The purchasers alleged that, by Trump Toronto s licensing the Trump Marks to the developer, Mr. Trump misrepresented that the developer had the experience to build the hotel properly and sell the units professionally. The buyers argued that it was foreseeable to Mr. Trump that, if he did not vet and supervise the developer properly, harm might be caused to the purchasers. The implied contractual warranty that the taxi was reasonably safe. The contract was formed when the order was placed with the dispatcher. The dispatcher was also held liable for negligently failing to take steps to ensure that the operator s taxi was safe. The decision was affirmed on appeal. 11. E.g., LaFlamme v. Groupe TDL Ltée, 2014 QCCS E.g., Fraser v. U-Need-A-Cab Ltd., (1983), 43 O.R. (2d) 389 (Ont. H.C.J.), aff d (1985) 50 O.R. (2d) 281 (Ont. C.A.); LaFlamme v. Groupe TDL Ltée, 2014 QCCS E.g., Fraser v. U-Need-A-Cab Ltd., (1983), 43 O.R. (2d) 389 (Ont. H.C.J.), aff d (1985) 50 O.R. (2d) 281 (Ont. C.A.); LaFlamme v. Groupe TDL Ltée, 2014 QCCS 312. But see Percival v. Mayes, [1986] O.J. No. 137 (Ont. H.C.J.), rev d (1998), 9 A.C.W.C. (3d) 300 (Ont. C.A.). 14. E.g., Leahy v. McDonald s Restaurants of Canada Ltd., [1993] O.J. No (Gen. Div.). But see Toshi Enterprises Ltd. v. Coffee Time Donuts Inc., (2008), 246 OAC (Ont. Sup. Ct. Just Div. Ct.), rev g [2008] O.J. No. 5325: A franchisor was held liable for smoke damage caused by a fire at a franchisee s store. On appeal, the court said that a franchisor may be vicariously liable for the negligent act of its franchisee where a third party believed that he or she was dealing with the franchisor, or relied on a representation by the franchisor to this effect, in adopting a certain course of conduct, which ultimately led to the damage. However, in the circumstances of the case, there was no such reliance and the franchisor avoided liability. 15. E.g., LaFlamme v. Groupe TDL Ltée, 2014 QCCS 312; Leahy v. McDonald s Restaurants of Canada Ltd., [1993] O.J. No (Gen. Div.). But see Toshi Enterprises Ltd. v. Coffee Time Donuts Inc., (2008), 246 OAC (Ont. Sup. Ct. Just Div. Ct.), rev g [2008] O.J. No E.g., Fraser v. U-Need-A-Cab Ltd., (1983), 43 O.R. (2d) 389 (Ont. H.C.J.), aff d (1985) 50 O.R. (2d) 281 (Ont. C.A.); Leahy v. McDonald s Restaurants of Canada Ltd., [1993] O.J. No (Gen. Div.). 17. Singh v. Trump, 2015 ONSC 4466, 13.

6 Vol. 106 TMR 787 purchasers contended that Mr. Trump had an obligation to ensure that the developer had the experience and integrity to develop the hotel properly. The buyers took the position that the licensing of the Trump Marks was an implied representation that he had done this. 18 The Court said that the action against Mr. Trump was devoid of any merit. Mr. Trump did not make any express representation regarding the developer. Nor could any such representation be implied merely because Mr. Trump is an icon, his name is a brand, or his association with the project caused buzz. The Court took the view that Mr. Trump s liability must be determined by reference to his own contractual or tort duties to the purchasers, and said that he had none. 19 The Court said that just having one s name associated with a project does not establish the degree of proximity required to give rise to a duty of care to purchasers of units. Trump Toronto, not Mr. Trump, granted the license. Even if the Affiliate licensor could be liable for the actions of its licensee, that is not a basis for imposing liability on Mr. Trump personally. 20 The Court went on to say that, in any event, granting the license was not a representation that the developer had the experience to sell the units in a competent, professional manner. The allegation in the action was not that the developer did not meet the standard of care of a developer or professional seller of units, but that it made misrepresentations and breached a ruling of the OSC. 21 Most importantly for trademark licensors, the Court said that there is no support in law for the proposition that, if the licensee of a brand is egregiously negligent, the licensor is responsible. 22 IV. COMMENT If, in granting the license of the Trump Marks to the developer, Trump Toronto acted as an agent for Mr. Trump, Mr. Trump was the licensor. If, on the other hand, Mr. Trump licensed the Trump Marks to Trump Toronto with the right to sublicense them, the developer was a sub-licensee and Mr. Trump was a head licensor. No matter how viewed, Mr. Trump should have had the right to exert some control over the activities of the developer in association with the Trump Marks. The Court s comment that there is no support in law for the proposition that a licensor is liable for egregious negligence by a 18. Id Id Id Id Id. 32.

7 788 Vol. 106 TMR licensee of its brand appears to have been made without consideration of the requirement for control by a trademark owner of the activity by a licensee in association with a licensed mark or reference to any of the Canadian decisions that have imposed liability on a trademark licensor for acts or omissions of its licensee. 23 This suggests that, on the issue of licensor liability, the decision may be reversible on appeal. The Singh decision, if not reversed, suggests that, to limit liability for acts or omissions of a trademark licensee in Canada, a celebrity or other trademark owner only needs to interpose an intermediate entity to enter a license agreement with a licensee. However, for the reasons noted above, and because of the unique facts of this case, this decision may not, in the end, enable a trademark owner to trump claims by those who suffer damages as a result of the acts or omissions of brand licensees. For trademark and business purposes, it is essential that a trademark owner set standards for, and have and actually exercise the right to control, the character and quality of the goods or services offered by a licensee and the licensee s other activities in association with a licensed trademark. 24 The owner should also ensure that the same standards and control are imposed, directly or indirectly through a licensee, on a sublicensee. However, to avoid liability, the trademark owner should have the right to terminate a license in the event of a failure to comply with the requisite standards and should, in the license agreement, also provide for a right to be indemnified by a licensee and sublicensee for, among other things, the consequences of a breach of the standards. 23. E.g., Fraser v. U-Need-A-Cab Ltd., (1983), 43 O.R. (2d) 389 (Ont. H.C.J.), aff d (1985) 50 O.R. (2d) 281 (Ont. C.A.); LaFlamme v. Groupe TDL Ltée, 2014 QCCS 312; Leahy v. McDonald s Restaurants of Canada Ltd., [1993] O.J. No (Gen. Div.). But see Percival v. Mayes, [1986] O.J. No. 137 (Ont. H.C.J.), rev d (1998), 9 A.C.W.C. (3d) 300 (Ont. C.A.); Toshi Enters. Ltd. v. Coffee Time Donuts Inc., (2008), 246 OAC (Ont. Sup. Ct. Just Div. Ct.), rev g [2008] O.J. No Sheldon Burshtein, Trademark Licensing in Canada: The Control Regime Turns 21, 104 TMR 1001 (2014).

Royal Host GP Inc. in its capacity as the general partner of the Royal Host Limited Partnership, Plaintiff ENDORSEMENT

SUPERIOR COURT OF JUSTICE - ONTARIO CITATION: Royal Host v. 1842259 Ont. Ltd., 2017 ONSC 3982 COURT FILE NO.: 1906/13 DATE: 20170705 RE: BEFORE: COUNSEL: Royal Host GP Inc. in its capacity as the general