Not deadwood: New trademark owners can prevent expungement for non-use

It is risky to let a registered trademark go unused in Canada. If not used for three years, a trademark registration is liable to be expunged if a challenge is brought under section 45 of the Trademarks Act (Act) and there are no special circumstances that excuse the non-use. The special circumstances test that excuses non-use under section 45 is the subject of a new Federal Court of Appeal (FCA) decision. This decision establishes that the recent acquisition of a trademark can be special circumstances that excuse non-use and provides guidance as to when and how this exception applies. 

In practical terms, the FCA’s decision provides confidence to trademark purchasers that in many, if not most, cases they will have a grace period to start using their newly acquired trademark before it becomes vulnerable to expungement for non-use.

Section 45: The “use it or lose it” provision 

Under section 45 of the Act, “any person who pays the prescribed fee” can request that the Registrar of Trademarks (Registrar) issue a notice to the registered owner of a trademark. The notice commences a summary proceeding in which the registered owner must provide evidence that the trademark was in use in Canada within the previous three years or, if not, the reason for the absence of use. 

If the Registrar concludes that the trademark was not used during the three-year period and special circumstances do not excuse the non-use, then the registration will generally be expunged. Previous jurisprudence on section 45 has established that special circumstances must be both: (i) circumstances not found in most cases of non-use of a trademark and (ii) the reason for the non-use.

New ownership can constitute special circumstances under section 45

In its recent decision in Centric Brands Holding LLC v. Stikeman Elliott LLP, 2025 FCA 161, the FCA grappled with the question of whether the recent acquisition of a trademark constitutes special circumstances that excuse non-use under subsection 45(3). This question engaged a 30-year line of lower court “New Owner Jurisprudence,” which held that a new owner is generally only required to demonstrate that special circumstances excusing non-use existed during the period after they acquired the trademark. 

In reasons drafted by Locke JA, the FCA panel determined that nothing in the text, context or purpose of section 45 excludes the recent acquisition of a trademark from constituting special circumstances excusing non-use. The FCA endorsed the principle—developed in the lower courts’ New Owner Jurisprudence—that a new owner generally does not have to demonstrate that special circumstances excused non-use by the previous owner. The justification for the principle is that “a new owner of a mark will likely need some time to make arrangements” to use the trademark and it is “an overly technical approach” to require a new owner to justify why the previous owner did not use the trademark. Significantly, the FCA held that, “This principle should apply unless there are reasons that it should not.” 

The FCA’s decision represents the first time the FCA has analyzed in depth and expressly endorsed the section 45 New Owner Jurisprudence.

A purchase and sale agreement was special circumstances excusing non-use

After making the above findings on section 45 and recently acquired trademarks, the FCA overturned the Federal Court’s decision, which upheld the Registrar’s decision to expunge the trademark at issue. 

The key facts were not in dispute. In brief, the appellant Centric Brands Holding LLC had signed a purchase and sale agreement on June 27, 2018, to acquire hundreds of trademarks and other subject matter, including Canadian trademark registration no. TMA 423,520 for the trademark AVIREX (the Mark). Evidence established that the agreement was in good faith and with a seller at arms’ length. The transaction closed and the Mark was assigned to Centric on October 29, 2018. However, in the days prior to closing, on October 12, 2018, the respondent had caused the Registrar to issue a section 45 notice against the Mark. 

As the new owner of the Mark, Centric led evidence and engaged in the section 45 proceeding. The Registrar decided that the Mark should be expunged. The Federal Court then dismissed Centric’s appeal, finding that Centric could not rely on the New Owner Jurisprudence because it was not a new owner during the relevant period (i.e., the three years prior to the October 12, 2018, section 45 notice), since the actual change in ownership of the Mark was at closing on October 29, 2018 – just outside of the relevant period. 

The Federal Court’s finding was rejected by the FCA as an error of law. The FCA found that it was “unduly harsh and technical” to find that the New Owner Jurisprudence could not apply to a purchase and sale agreement that was signed, but had not yet closed, in the relevant period. The key issue was “whether the trademark in issue should be considered deadwood.” The FCA was also concerned that the Federal Court’s ruling “could invite mischief,” namely issuing section 45 notices after trademark acquisitions are publicly announced but before they have time to close. Encouraging such mischief “would be inconsistent with the intent of section 45” as trademarks are usually acquired to be put to use. 

New owner Centric required to defend non-use for 3.5 months after signing agreement

The FCA concluded that the New Owner Jurisprudence applied on the facts to excuse non-use of the Mark. 

The evidence indicated Centric did not have ready access to the previous owner’s records and so “was not in as good a position as the previous owner to explain non-use of the Mark during the period prior to the signing of the Agreement.” As such, the relevant period for considering special circumstances was the 3.5 months from Centric signing the purchase and sale agreement to the section 45 notice issuing. 

The brevity of this period and the recent acquisition of the Mark constituted special circumstances excusing Centric’s non-use of the Mark during the relevant period. The court noted, “The acquisition itself of the Mark as part of the Transaction suggests that it was not deadwood; it suggests an intention to commence use of the Mark.” The FCA set aside the expungement of the Mark. 

The successful appellant Centric Brands Holding LLC was represented by Norton Rose Fulbright Canada LLP at the Federal Court and Federal Court of Appeal.

The authors would like to thank Beatrice Kaiser, articling student, for her contribution to preparing this IP monitor.