Canada Introduces New Border Remedies to Address Importation of Counterfeit Products
In 2005, the retail value of counterfeit goods seized by the RCMP was $7.6 million. By 2012, this number had climbed to $38 million. Last year, the Canadian government passed the Combating Counterfeit Products Act (CCPA) to better address this increasingly prevalent issue. The CCPA included certain amendments to the Copyright Act, the Trade-marks Act and the Customs Act to provide the Canada Border Services Agency (CBSA) and rights holders with new tools to help stem the flow of counterfeit goods into or out of Canada. These measures came into force on January 1, 2015.
The CCPA creates a new class of goods of which importation or exportation is prohibited: counterfeit goods. These are defined as goods in which copyright subsists but which are made without the consent of the owner of the copyright in the country where they were made or which infringe copyright or would infringe copyright if they had been made in Canada by the person who made them. Similarly, the CCPA prohibits the import or export of goods which bear a label or packaging containing a trade-mark identical to or indistinguishable in its essential aspects from a registered trade-mark without the trade-mark owner’s consent.
The Request for Assistance Program
Another critical change for rights holders is the implementation of a Request for Assistance (RFA) program under both the Copyright Act and the Trade-marks Act. The RFA program allows rights holders to formally request the assistance of the CBSA in enforcing their rights under these two Acts. Each RFA must include the rights holder’s name and address in Canada together with any other information which the Minister of Public Safety (Minister) will prescribe.
An RFA is valid for a period of two years, after which it may be renewed by the Minister at the request of the rights holder. More specifically, if the CBSA has received a formal RFA from a rights holder, it is empowered to provide that individual with information on any goods which are detained under suspicion that they are the goods detailed in the RFA. The new provisions allow for a greater degree of information sharing, including sharing of samples of the allegedly counterfeit materials, between the rights holders and the CBSA.
The CBSA has outlined the steps of the RFA procedure as follows:
- Rights holders should ensure the trademark is registered with the Canadian Intellectual Property Office (this is recommended, but not mandatory, for copyright).
- Rights holders complete the RFA form and submit it to the CBSA.
- Rights holders wait for confirmation of enrolment and an approval letter outlining program-specific details.
- If approved and suspected counterfeit goods are intercepted by the CBSA, rights holders will be notified and given the opportunity to take appropriate action.
- The RCMP will be responsible for leading any criminal investigations related to commercial-scale counterfeiting and piracy.
The Detention of Counterfeit Goods
The CBSA has also been granted additional time to detain goods which are suspected of being counterfeit and which are subject to an RFA. Initially, the CBSA is authorized to detain the suspect goods for 10 days, with the possibility of an extension of up to another 10 days. However, if the rights holder can produce a document showing that court proceedings have been commenced under either the Copyright Act or the Trade-marks Act during this time, the CBSA is authorized to continue holding the goods in detention until the proceedings have been disposed of or a court directs that the goods be released.
The Responsibility of Rights Holders
There are also certain responsibilities that attach to filing an RFA with the CBSA. First and foremost, a rights holder may be asked to provide the Minister with security in an amount and manner fixed by the Minister. This security is to cover the potential liability a rights holder will face for the storage, handling and possibly destruction of the goods for the period between a sample being provided to the rights holder and the day on which the goods are released by the CBSA under the CCPA. This latter event can occur either due to the expiration of the time limit on detention (up to 20 days) or if the rights holder determines that the goods are not contravening either its copyright or its trade-mark.
Furthermore, if the goods are being detained subject to a court proceeding, the owner of the goods may apply to the court for their release. While the court may allow the continued detention of the goods by the CBSA, rights holders must be prepared to provide additional security that the court requires should their claims under the Copyright Act or Trade-marks Act prove unsuccessful. Furthermore, the rights holder will be liable for any storage charges while the goods are held during a proceeding and for any damages sustained by the owner of the goods due to their continued detention.
New Offences and Civil Causes of Action
The CCPA also creates additional burdens for those who attempt to subvert the intellectual property of rights holders. The Copyright Act will now contain provisions that criminalize the possession, sale or distribution of infringing works. These criminal prohibitions will also apply to any persons who attempt to import or export for sale or rental any infringing products. Similar prohibitions will apply to those importing products which violate the trade-mark of a current rights holder, and these prohibitions have been incorporated into the Trade-marks Act. Persons found to contravene these provisions are subject to fines of up to $1 million and imprisonment for up to five years.
In additional to the new criminal penalties, the CCPA has created a new cause of action designed explicitly to assist rights holders to protect their intellectual property. This new cause of action does not apply just to the infringing products but is designed to target all actions that sustain commercial activity in infringing copies or counterfeit trade-marked goods.
The new provisions also allow rights holders to deliver notice to the CBSA of any works which they know of that violate their copyright and which they do not wish imported. Such goods will be deemed subject to tariff item No. 9897.00.00 under the Schedule to the Customs Tariff, and their importation shall be prohibited under that provision. This provision exists independent of the criminal prohibitions being established regarding the import or export of counterfeit works.
International Impact and Responsibilities
While these provisions are being implemented primarily for domestic policy reasons, these measures are also necessitated by recent trade agreements into which Canada has entered. Most obviously, the Canada-Korea Free Trade Agreement required further modernization of Canada’s counterfeit goods importation regime to provide additional protection for rights holders. These legislative changes will bring Canada into compliance with its obligations under that agreement.
This focus on domestic policy also explains a feature of the CCPA which has caused conflict with the American government. Canada has refused to extend these measures to goods that are moving only in transit through Canada. The CCPA includes an exemption against the application of these new measures to any goods which are being shipped from one place outside Canada to another and are in customs transit or transhipment control in Canada.
The U.S. government has consistently pushed Canada to adopt the measures within the CCPA and apply them to all goods, including goods simply in transit. In particular, the U.S. is keen on using Canada as an additional filter or buffer for counterfeit goods entering the U.S. The Canadian government has consistently taken the view that it is the responsibility of the U.S. government to inspect and prevent entry of counterfeit goods, and that it will not take on this responsibility.
Next Steps for Rights Holders
At this stage it will be important to monitor how the RFA program is implemented, and for rights holders to begin taking steps to work with the CBSA to better protect their intellectual property. There will naturally be something of a learning curve for both rights holders and the CBSA to enable the system to work smoothly and naturally. However, the system will function only for rights holders that actively participate in the program; there is no ability to free ride on the system.
McCarthy Tétrault’s International Trade and Investment Law Group and its Intellectual Property Group have extensive expertise in dealing with import-export matters as well as copyright and trade-mark issues, and are available to assist our clients in pursuing these new remedies under the Combating Counterfeit Products Act.