Bill C-8 (the Combating Counterfeit Products Act, previously known as Bill C-56) passed third reading in the House of Commons on October 2, 2014, and is now before the Senate for further review. The Bill proposes a number of legislative changes to the Canadian IP regime. One of its main objectives is to create border security measures by establishing a system empowered with the tools necessary to detain shipments of suspected counterfeit goods before they cross into Canada. Like many pieces of proposed legislation, the Bill has faced scrutiny on numerous grounds. One particular aspect of the Bill that has attracted criticism relates to its detention provisions (Section 51.09[i]), which place the costs of detention on right holders (RHs) – the very individuals whose trademarks have been potentially infringed.[ii]
At first glance, this appears counter-intuitive. Yet if one considers the structure supporting the cluster of agencies charged with maintaining control at the border, this might be the most pragmatic means of addressing the monumental task of intercepting counterfeit goods.
Bill C-8 intends to open a channel of communication between RHs and border officers through a “request for assistance” (RFA) system (Section 51.04). Under the Act, RHs will be able to submit information regarding their registered trademarks to the Canadian Border Services Agency (CBSA) by filing an RFA. If a shipment is thereafter stopped at the border for any reason, officers can consult a database derived from these RFAs in order to identify any potential trademarks that the goods may be infringing. The RH is then contacted, at which point a 10 day detention period begins. The RH can then decide whether to pursue litigation against the potential infringer.
There are, of course, certain caveats associated with the detention of goods. However, the end result is that by opting to participate in the system as a means of enforcing their IPRs, the RH will be on the hook for any costs associated with the detention of suspicious shipments.
Some critics, such as the Canadian Anti-Counterfeiting Network and various law firms, have suggested that the system should look first to the perpetrators of the crimes – that is, the importers/owners – to bear the costs. Pushing aside the notion that this might enable RHs to target importers in an effort to engage in surreptitious anti-competitive practices, this proposal overlooks the simple fact that protecting any trademark you might own constitutes a private right. RHs opt-in to the RFA system and any disputes arising from their attempts to enforce the protection of their IPRs should be initially borne by them. The reality is that if an RH responds to the CBSA and pursues litigation against the infringer, they can potentially recover any and all detention costs in court. If not, the 10 day detention period can be cut short if the RH indicates the goods are non-infringing (Section 59.09[1][c]) or declines to take action (Section 59.09[1][c]), at which point the goods are typically released (barring an instance of eventual forfeiture, a concept that is deserving of its own independent analysis).
From the importer’s perspective, some might question whether this system is vulnerable to abuse by RHs by being harnessed as a means of engaging in anti-competitive practices by delaying imports unnecessarily. Although the Bill does not include specific remedies for such a scenario, a number of safety valves are in place to prevent this from occurring. First and foremost, the RH will be subject to any detention fees, meaning their anti-competitive practice will cost them from the outset. Second, pursuant to Section 54.04(3), the Minister retains the discretionary authority to refuse to renew RFA applications. Consequently, an RH who attempts to use the system in this manner could be precluded from enjoying continued access. Finally, the importer always has the option of pursuing litigation against the RH for a bad faith use of the system, which could allow them to recover damages (for example, based on the tort of economic interference).
Others have suggested that based on this positive obligation imposed on RHs, if an individual is unwilling to pursue litigation against an infringer, “the counterfeits will enter Canada.” Litigation costs are indeed a fair concern. However, this is a broad oversimplification of the process, and reflects the need to view the system in its totality rather than its constituent parts. There still exist various mechanisms separate and apart from Bill C-8 that empower officers to sustain the detention of counterfeit goods. Legislatively, the Customs Act and the Canadian Border Services Agency Act describe multiple grounds upon which officers must detain dangerous goods from entering the country. Administratively, the RCMP lists a number of indicators that can be used to identify certain counterfeit goods, such as packaging and place of origin, while the CBSA lists a number of standard methods for dealing with different categories of goods, including the use of x-rays and density readers. With or without the input of RHs, border officers will have systems in place to deal with counterfeit goods to an extent.
It is important to remember that no piece of legislation is perfect. There will always be competing values and interests at play and concerns will persist and evolve into the future. By establishing a line of communication via the RFA system, Bill C-8 looks to ensure efficiency through collective expedience, which is precisely why the costs of detention must rest on those harnessing the system for their own benefit.
Jason Hayward is a JD Candidate at Osgoode Hall Law School and is enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.
[i] For ease of reference, all “Sections” mentioned in this blog refer to proposed amendments of the Trademarks Act, not the clauses of the Bill itself.
[ii] It is important to note that when detailing “detention costs”, this blog is referring to costs incurred by the Crown.