In a decision issued December 18, 2018 in the case of Royal Demaria Wines Co. Ltd. v. Lieutenant Governor in Council et al., Justice Sachs of the Ontario Superior Court of Justice confirmed that a registered trademark cannot be used if it contains subject matter prohibited by provincial law.
It is a common misconception that parties who own a trademark registration, patent or industrial design are entitled to use the subject matter of the registration in the jurisdiction(s) where issued. Unfortunately, this is not true and can be the subject of considerable confusion.
The exclusive rights granted by a trademark, patent or industrial design are considered 'negative' rights. The owner may exclude others from using the subject matter of their trademark, patent or industrial design. However, the registration in itself does not authorize the owner to use the same subject matter. In other words, intellectual property rights are not 'positive rights'.
With respect to trademarks, the distinction between negative and positive rights usually becomes significant where the registered mark contains a regulated word. For example, only goods that satisfy certain standards are entitled to identify themselves as 'organic'. As a result, the registration of a trademark which contains the word 'organic' may not be used by the registrant for goods that don't meet those standards.
With respect to patents and industrial designs, the distinction between negative and positive rights usually becomes significant when the subject invention/design is an 'improvement' on an earlier invention/design which is itself subject to a patent or industrial design that has not expired. If the subject matter of the 'improvement' necessarily infringes upon the earlier patent/design, it cannot be made, used or sold until the earlier patent/design expires unless a license is granted by the owner.
In Royal Demaria Wines Co. Ltd. v. Lieutenant Governor in Council et al., the dispute related to the use of the words 'ice wine' which is one of several words and phrases regulated under the Vintner's Quality Alliance Act for the wine industry in Ontario. In order to use a regulated term like 'ice wine', a winemaker must be a member of the VQAQ and the wine in question must receive approval based on a taste test administered by the VQAQ. When the applicant's wine failed the taste test, its membership in the VQAQ was revoked together with authorization to use the term 'ice wine'.
The applicant argued that that under the doctrine of paramountcy (which favours federal over provincial legislation), the law was inoperable to the extent that its did not allow the applicant to use its registered trademark. Not surprisingly, the court found that "[n]othing in the Trademarks Act suggests that winemakers should be free from the requirement to comply with provincial quality control standards simply because they choose to register a term under the Trademarks Act that is also subject to provincial regulation".