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IP Post-NAFTA: What CUSMA Coming into Force Means for Canadian IP Law

IP Post-NAFTA: What CUSMA Coming into Force Means for Canadian IP Law
June 24, 2020

INTRODUCTION

On July 1, 2020, the Canada-United States-Mexico Agreement (CUSMA) and the Canada-United States-Mexico Agreement Implementation Act (Implementation Act) will come into force, replacing the North American Free Trade Agreement (NAFTA). The intellectual property (IP) chapter of CUSMA establishes minimum legal standards for the protection and enforcement of IP rights that build upon existing international agreements and World Intellectual Property Organization (WIPO) treaties.

Although many of the IP obligations in CUSMA have already been incorporated into Canadian law through recent amendments to the Patent Act, Industrial Design Act and Trademarks Act, several key changes are set to come into force through the Implementation Act or will be required through further legislative amendment. This bulletin summarizes these key changes and their implications for Canadian businesses.

TRADEMARKS

One of the few CUSMA trademark provisions that has not yet been implemented into Canadian law is the requirement under Article 20.18, to provide trademark protection for “collective marks,” which are marks owned by a collective group or organization and used exclusively by its members. The Trademarks Act does not currently permit registration of collective marks, and this issue is not addressed in the Implementation Act. Further legislative amendment will therefore be required to comply with this obligation.

Canada may also be required to establish statutory damages for trademark infringement. Article 20.82 of CUSMA mandates a system for civil remedies for trademark infringement that include “pre-established damages” in an amount sufficient to deter infringement and compensate the right holder. Canada does not currently provide statutory damages for trademark infringement, nor are they included in the Implementation Act. However, this obligation may be satisfied by the availability of “additional damages,” such as exemplary or punitive damages, under Canadian common law. It remains to be seen whether Parliament intends to comply with Article 20.82 by establishing statutory damages or by relying on the current common law approach. For further analysis on this issue, see our December 2018 Blakes Bulletin: Demystified: USMCA’s Intellectual Property Provisions on Damages for Trademark Counterfeiting.

PATENTS

The most significant change to Canadian patent law is the obligation under Article 20.44 of CUSMA to implement a patent term adjustment to compensate patentees for unreasonable delay in the issuance of their patent. Under this provision, the term for patents filed on or after December 1, 2020, may be extended if the patent issues more than five years after the application date, or three years from an examination request, whichever is later. CUSMA explicitly excludes certain delays from this determination, including delays not directly attributable to the granting authority.

Currently, Canadian patent law does not contain a term adjustment for delays in issuance, and no such provision is included in the Implementation Act. Under Article 20.90 of CUSMA, Canada will have four and a half years from July 1, 2020, to implement this change.

Changes will not be required to Canada’s pharmaceutical data protection laws. While the original CUSMA required the extension of market protection for new biologic medicines from eight years, as it currently is under Canadian law, to a period of 10 years, this requirement was abandoned in the Protocol of Amendment to the Agreement signed December 10, 2019. Several other proposed changes to patent and regulatory protection for pharmaceutical products were also undone, the result being that in order to implement CUSMA in these areas, no legislative changes will need to be made.

COPYRIGHT

Under Article 20.63 of CUSMA, Canada is required to significantly increase the duration of its copyright protection. For the general copyright term calculated on the basis of the life of the author, the duration must increase by 20 years to at least life of the author plus 70 years. This term extension is not included in the Implementation Act. Under Article 20.90, Canada will have two and a half years to implement this obligation.

For terms calculated by other means, the duration of copyright protection must be at least 75 years from the end of the year of first publication, or if not published within 25 years of creation, at least 70 years from the end of the year of creation. The Implementation Act amends the Copyright Act to bring the terms for anonymous works, cinematographic works, performances and sound recordings in line with this requirement. These changes will come into force on July 1, 2020, and will not apply to works that have already expired by this date.

CUSMA also requires increased protection for rights management information (RMI), such as digital watermarks. Under Article 20.68, parties must provide both civil and criminal remedies for wilfully removing or altering RMIs for commercial advantage or financial gain. While Canadian law includes civil remedies for the misuse of RMIs, it does not currently provide for criminal remedies. The Implementation Act fills this gap by amending the Copyright Act to include offences for infringement relating to RMI, the penalty for which can include a fine of up to C$1-million and imprisonment of up to five years for a conviction on indictment. Consistent with Article 20.68, only conduct for commercial purposes is criminalized and exemptions are provided for those acting on behalf of libraries, archives, museums or educational institutions. These amendments to the Copyright Act will come into force on July 1, 2020.

Although CUSMA also establishes a “notice-and-takedown” system for online copyright infringement, Canada is exempted from these provisions under the Annex to Section J on the basis of its current “notice-and-notice” regime.

TRADE SECRETS

Section I of CUSMA establishes a framework for the civil and criminal protection and enforcement of trade secrets. Although Canada currently protects trade secrets through common law actions and criminalizes theft of trade secrets by or with foreign entities, it does not currently provide criminal procedures and penalties for “unauthorized and willful misappropriation” of trade secrets as required under Article 20.72.

To comply with this section, the Implementation Act amends the Criminal Code by establishing an offence for fraudulently obtaining, communicating or making available a trade secret, that is punishable by imprisonment for up to 14 years. A “trade secret” is defined in the amendment as information that: (a) is not generally known in the trade or business that uses or may use that information; (b) has economic value from not being generally known; and (c) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The offence only applies to knowing infringement and does not apply to trade secrets obtained by independent development or reverse engineering. These amendments to the Criminal Code will come into force on July 1, 2020.

ENFORCEMENT

The enforcement section of CUSMA establishes enhanced border measures for IP enforcement that depart significantly from NAFTA and current Canadian law. Under Article 20.84, customs officials must be given the authority to initiate border measures ex officio against counterfeit trademark goods or pirated copyrighted goods that are in transit. Currently, customs officials are not authorized to seize in-transit goods or initiate border measures without first receiving a complaint from the right holder.

Customs officials must also be permitted to destroy or dispose of suspected counterfeit or pirated goods outside the channels of commerce if they are determined infringing by “competent authorities,” which may include customs officials and other law enforcement and administrative authorities. These powers are not currently provided for in Canadian law and could permit customs officials to make determinations of trademark and copyright infringement—an authority which is currently only possessed by the Canadian Intellectual Property Office and the courts.

The Implementation Act includes amendments to the Trademark Act and the Copyright Act that extends the prohibition on importation and exportation of infringing goods to those in customs transit or transhipment control; for more information, see sections 31 and 109(3) of the Implementation Act. However, the Implementation Act does not include amendments to expand the powers of customs officials as required by Article 20.84. Compliance with this section will therefore require further legislative changes.

Another important change to enforcement of IP rights under CUSMA is the elimination of the investor-state arbitration mechanism currently found in Chapter 11 of NAFTA for investors from, or in, Canada. For more information on this issue, see our June 2020 Blakes Bulletin: Enter CUSMA: Protecting Cross-Border Investment in North America Post-NAFTA.

CONCLUSION

As July 1, 2020, rapidly approaches, businesses should carefully review the IP provisions coming into force under CUSMA and the Implementation Act to ensure that their practices are consistent with the new legal rights and obligations arising from these changes. Of particular importance will be the extension of copyright terms for certain works such as performances and sound recordings, new criminal offences relating to RMIs and trade secrets and the prohibition on infringing goods in transit to another country.

Organizations should also prepare for changes required by CUSMA that are likely to be introduced at a later date, such as trademark protection for collective marks, the implementation of a patent term adjustment for unreasonable office delay, the 20-year extension of the general copyright term and enhanced powers of customs officials to determine infringement and destroy or dispose of infringing goods.

For further information, please contact:

Melanie Baird              416-863-5262 
Andrew Skodyn           416-863-4029 

or any other member of our Intellectual Property group.

Please visit our Navigating CUSMA: Key Changes for Businesses hub to learn more about how CUSMA may impact your business.