Trademarks and the Evolution of Software

Picture of computer discHistorically there has always been a difference between “goods” and “services” under Trademark law. Section 4(1) of the Trademarks Act states that a Trademark must be marked on the goods themselves or on the packaging. Software was always a type of “goods”. For those of us old enough to remember, software used to be sold on floppy disks. As technology evolved, the floppy disks were replaced with a CD-ROM format. The Trademark for the software could be found on the CD-ROM, on the written instruction manual and on the box that held them. With the rise of the internet, software came to be sold “on line” with the software and the instruction manuals only available through electronic download. The “goods” remained essentially the same, just their mode of delivery changed. The Trademark still appeared on the “goods” at the time of download and on the boot-up screen every time the software was initialized. This was captured in the catch all portion of Section 4 (1) of the Trademarks Act that indicates that marking can be “in any other manner so associated with the goods that notice of the association is given”. In recent years, the software business has increasingly evolved into a “service” arrangement (referred to as Software as a Service or SaaS). Customers pay a fee to access software that is resident in the “cloud” accessible over the internet. There are no longer “goods” changing hands in the traditional sense. No software is downloaded. This “cloud” environment sets the backdrop of the recent case of Specialty Software v. Bewatec. Bewatec was successful before the Registrar of Trademarks in invalidating Speciality Software’s Trademark MEDINET on the basis that the Trademark was not being used for “goods” as claimed. Specialty Software asked the Federal Court to overrule the Register of Trademarks and declare the MEDINET Trademark valid based upon the sale of licenses for use of software in the cloud. February 18, 2016 Justice O’Reilly rendered his decision indicating that software licenses are “goods”, albeit “intangible goods”. Wikipedia defines an “intangible good” as a good that is intangible, i.e. incapable of being touched. I have now read a number of articles on the recent decision of the Federal Court of Canada in the Specialty Software v. Bewatec case. The case is being heralded as a ground breaking decision that “demonstrates that courts will adapt legal concepts to modern technology”. I think the fanfare is premature. Firstly, the case may be overturned on appeal. Secondly, if the case stands it could give rise to some unintended consequences. I can certainly understand Justice O’Reilly wishing to uphold the MEDINET Trademark. However, his decision blurs the traditional distinction between “goods” and “services”, by including “intangible” goods in the definition of goods. The “intangible” good was a license. We use licenses every day in various forms. A license is simply a form of permission to use. For example, a ticket to ride on the ferry is a form of license. B.C. Ferries provides a transportation “service”. I am of the view that the Specialty Software v .Bewatec decision is just the start of the discussion and not the end. I am currently contacting my software clients to review their Trademarks. If they are now delivering their software through the “cloud”, I am recommending that they update their Trademark Applications to specify “services” in addition to “goods” and avoid the controversy altogether.