Anonymised, illustrative composite. A specialty manufacturer's brand had been built over twenty years of continuous use — by the company. The registered owner of the trademark had never worked there, never held a share, and never exercised a day of control over what the mark was actually put on.
At a glance
OpCo had operated under the same brand name for twenty years, built a regional reputation under it, and the buyer's appraiser attributed $2,100,000 of the $9,200,000 purchase price to that brand. Title diligence at the Canadian trademarks database found the registration held not by OpCo, but by an individual — the person who had registered the name back in 2005 when the business was first getting started. That individual had never held OpCo shares, never sat on its board, and had no operational role in the company at any point in the twenty years that followed. OpCo had simply gone on using the mark by informal, unpapered arrangement.
The first-pass fix on the deal checklist was the obvious one: get the registrant to sign a trademark assignment at closing. That solves who holds legal title to the registration going forward. It does not answer a separate and more important question — whether the twenty years of goodwill the buyer was paying $2,100,000 for actually belongs to that registration at all, given that the company using the mark and the person who owned it were never connected by any licence, formal or informal.
$9,200,000 total consideration, $2,100,000 of it specifically attributed to the brand. The registrant was ultimately paid $85,000, negotiated separately from the main purchase price, for the assignment, a release, and confirmatory representations. Restructuring the ownership of the registration and resolving the diligence point added roughly $34,000 in legal fees before closing.
Trademarks Act s.50(1) is what makes a licensee's use of a mark count as the owner's own use in law: “if an entity is licensed by or with the authority of the owner of a trademark to use the trademark in a country and the owner has, under the licence, direct or indirect control of the character or quality of the goods or services, then the use, advertisement or display of the trademark in that country… by that entity has, and is deemed always to have had, the same effect as such a use… by the owner”. Two things have to be true: a licence, and control. Here there was neither. The registrant had no involvement in OpCo whatsoever — no inspection rights, no quality standards communicated, no say in what the mark was put on. Twenty years of OpCo's use had nothing connecting it back to the person who held the registration.
That does not stop the registration from being assignable. Section 48(1) provides that “a trademark, whether registered or unregistered, is transferable, and deemed always to have been transferable, either in connection with or separately from the goodwill of the business…”. The registrant could sign a valid assignment at closing regardless of the s.50(1) question — that part of the deal was never actually blocked.
What was at risk is the strength of what gets assigned, not whether it can be assigned. If OpCo's use never enured to the registrant under s.50(1), the registrant's own claim to have used the mark in Canada in the sense the Act cares about is itself weaker than twenty years of visible commercial use would suggest — the registration on paper and the goodwill actually built in the market were never reliably the same thing in law. That is a real diligence finding about the asset's quality, distinct from the separate, unrelated title question one of this file's sibling cases turns on — a post-closing licence-back stripping a mark of distinctiveness after closing is a defect the buyer creates; this one existed before the buyer ever showed up.
The parties did not try to manufacture historical control that never existed — that is not something a document signed today can retroactively create. Instead, the deal closed on three pieces: the s.48 assignment of the registration itself, which was never in doubt; a specific representation and indemnity from the registrant covering any known third-party use or challenge to the mark; and, most importantly, a structural fix going forward — the registration and OpCo's operations would sit in the same entity from closing on, permanently removing the split between who owns the mark and who controls its use. The gap that had existed for twenty years could not recur, because there would no longer be two separate parties for a licence to run between.
Treating the assignment as the whole fix — sign the transfer, move on — would have closed the deal with the buyer owning a clean chain of title to a registration whose underlying strength had never actually been tested against the reason s.50(1) exists. A future challenger with a confusing mark of its own would have inherited exactly the argument this diligence surfaced: twenty years of use that may never have belonged, in the sense the Act uses that word, to the person who held the paper.
Asked why the mark had never been formally licensed to the company that used it, the answer was that everyone involved considered it “obviously the company's brand” and never thought to paper anything. That is precisely the assumption s.50(1) does not share — the Act asks whether control was actually exercised, not whether everyone assumed it did not need to be.
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