Procedures and strategies for anti-counterfeiting: Canada

By Jim Holloway, Baker McKenzie

Legal framework

In Canada, the following legislation can be relied on to prevent or combat counterfeiting:

  • the Trademarks Act (RSC 1985, c T-13);
  • the Copyright Act (RSC 1985, c C-42);
  • the Criminal Code (RSC 1985, c C-46);
  • the Canada Consumer Product Safety Act (RSC 2010, c 21);
  • the Consumer Packaging and Labelling Act (RSC, 1985, c C-38); and
  • the Customs Act (RSC 1985, c 1).
Canada Consumer Product Safety Act

The Canada Consumer Product Safety Act contains provisions that prohibit the manufacture, import, advertisement or sale of certain consumer products that pose a danger to the health or safety of Canadian consumers. In circumstances where a counterfeit product poses some reasonable danger, brand owners and copyright owners can ask the individual or department designated under the legislation to issue a notice of violation, which can contain a substantial penalty. Dangerous consumer products can also be recalled under this legislation.

Consumer Packaging and Labelling Act

The Consumer Packaging and Labelling Act prescribes rules for the packaging and labelling of consumer products, and contains provisions whereby any party that packages and labels consumer products in a manner that does not comply with the legislation or associated regulations can be convicted of an offence and face penalties ranging from a relatively modest fine to up to two years’ imprisonment. There are similar provisions in the Food and Drug Act, governing the products covered by that legislation. In some cases involving counterfeit products, packaging and labelling may run afoul of this legislation, warranting a complaint to authorities.

Border measures

Canada adopted a new border enforcement system on January 1 2015, which empowers Canada Border Services Agency (CBSA) officials to act ex officio to detain suspected counterfeit or pirated products. Before those changes, CBSA officials could detain suspect goods only pursuant to a court order. While court orders can still be sought to direct the detention of inbound products, CBSA officials can now act on their own.

An IP rights holder may file a request for assistance (RFA) with the CBSA, identifying its relevant intellectual property. An RFA is valid for two years and may be extended for subsequent two-year periods. While there are no costs associated with filing an RFA, the CBSA may require the rights holder to furnish security to cover storage, handling and destruction charges.

Once the RFA is accepted, the CBSA is empowered to intercept and detain suspect products. When it does, it notifies the rights holder via email and provides a sample of the goods and related information, which may or may not include the identity of the importer, exporter or consignee. The CBSA will detain suspect goods for up to 10 working days (five days for perishable goods), which may be extended for another five to 10 days, to allow the rights holder to inspect the goods to see whether they are genuine, and to commence legal proceedings if they are not. The rights holder must commence legal proceedings within the limited period of approved detention, and is liable to the government for the costs related to the storage, handling and destruction of detained goods.

The CBSA has provided further practical guidance in Memorandum D19-4-3, most recently updated on September 21 2017. This memorandum provides that where the CBSA detains suspect goods, it will give the rights holder three business days after notification (not 10 days) to advise whether it wishes to pursue a remedy, failing which it will release the goods. Where the rights holder advises the CBSA that it will be pursuing a legal remedy, the CBSA will issue a notice of detention via email and continue to detain the goods to allow the rights holder to commence proceedings. However, the CBSA will only detain the goods for 10 days (subject to extension) to allow the rights holder to commence those proceedings. Once the rights holder provides the CBSA with a copy of initiated legal proceedings, the CBSA will continue to detain the goods to allow for the disposition or resolution of those proceedings. A court may award damages against a rights holder that commences proceedings pursuant to these provisions and where those proceedings are dismissed or discontinued.

In addition, a rights holder (or anyone else) may contact the CBSA without charge on +1 888 502 9060 to provide information about a dangerous goods shipment that is suspected to be counterfeit or pirated.

Criminal prosecution

There are provisions in Canadian criminal law that address counterfeiting and piracy, including new provisions introduced by the Combating Counterfeit Products Act and now contained in the Trademarks Act. In particular, Section 51.01(1) of the Trademarks Act provides that it is an offence for any party to sell, offer to sell or distribute on a commercial scale goods in association with a trademark, if that sale or distribution is or would be contrary to Section 19 or 20 of that legislation (ie, would infringe that trademark) and where the party knows that:

  • the trademark is identical to, or cannot be distinguished in its essential aspects from, a registered trademark associated with such goods; and
  • the owner of that registered trademark has not consented to these activities.

Section 51.01 of the Trademarks Act also includes offences relating to activities involving labels or packaging made and sold in furtherance of counterfeit activities.

To secure a conviction under these provisions, it is necessary to establish that the accused acted with the requisite intent (ie, knowledge), although it is not necessary to prove that the accused knew that the trademark was registered. Any party found guilty under these provisions can receive a penalty including a fine of up to C$1 million and imprisonment for up to five years.

Similar provisions can be found in the Copyright Act, which state that it is an offence for any party that knowingly engages in certain activities that infringe copyright, including manufacturing, selling, offering for sale, renting, distributing, importing or exporting subject matter which infringes copyright. These provisions do not apply to parallel goods (ie, where the copy was made with the consent of the copyright owner in the place where the copy was made). As with the Trademarks Act provisions, any party found guilty can receive a penalty including a fine of up to C$1 million and imprisonment for up to five years.

The Criminal Code itself also contains offences relating to the forgery of a trademark with the intent to deceive, which also cover intentionally passing off goods as those of another, as well as making use, in association with goods, of a description that is false in a material respect regarding the kind, quality, quantity or composition of those goods, their geographical origin, or their mode of manufacture, production or performance. Under these provisions, the penalties are a maximum fine of C$10,000 and imprisonment for up to two years.

As a practical matter, while those found guilty of the above offences can be imprisoned, there is a tendency among those in the criminal justice system to seek fines in lieu of imprisonment, and these tend to be much lower than the maximum amounts noted above.

Civil enforcement

Counterfeiting and piracy will also often constitute trademark infringement, depreciation of trademark goodwill or copyright infringement, giving the rights holder the right to initiate civil proceedings in conjunction with or in lieu of criminal prosecutions.

In trademark proceedings, the rights holder can seek declaratory relief, interim custody of the goods, an injunction and damages (or an accounting of the defendant’s profits derived from any infringing activities). The court may also award punitive damages and compensation for some or all of the rights holder’s legal costs, although punitive damages awards remain relatively low. While it is difficult in Canada to secure interlocutory or pre-trial injunctive relief, the courts should be more willing to grant this relief in cases involving counterfeit or pirated products.

In copyright proceedings, the rights holder can generally seek the same remedies as in trademark proceedings, and in certain circumstances it may recover both damages and the defendant’s associated profits. In addition, the Copyright Act allows the rights holder to seek statutory damages in lieu of proving its otherwise recoverable losses.

In Canada, a rights holder can seek an Anton Piller order, allowing for the pre-trial seizure of allegedly counterfeit or pirated products and related evidence. This can be of tremendous value in stopping these activities, and securing and preserving evidence for trial. These orders are usually granted without notice to the other party, although the alleged infringer has the right to challenge the order after it is granted and executed. The court will appoint an independent solicitor to supervise execution of an Anton Piller order, and he or she is responsible for explaining the order, supervising any searches and addressing issues relating to privileged documents. Most rights holders arrange to have law enforcement on site when an Anton Pillar order is executed. The court may also issue a rolling Anton Piller order, if the rights holder is not yet aware of the identity of the infringing parties.

Anti-counterfeiting online

Increasingly, counterfeit and pirated goods are being distributed via online sales, making it more challenging to identify and pursue infringers.

With respect to trademark claims, those who sell counterfeit products in association with another’s trademarks either from or into Canada via the Internet can be sued for trademark infringement or depreciation of trademark goodwill, in accordance with the civil claims set forth above. Further, where such activities are intentional, the police may investigate and lay charges, particularly where the volume of product is significant or there is some risk to the health and wellbeing of Canadian consumers.

With respect to copyright claims, those that engage in infringing activities in Canada are liable pursuant to the civil and criminal laws discussed above. The Copyright Act also includes provisions directed to online activities, including a provision that defines infringement to include the provision of services for the primary purpose of enabling acts of infringement, subject to certain enumerated considerations, including whether the party knew that its services were being used for such activities. That said, the Copyright Act provides that a party providing internet or digital network services that allow for the reproduction or telecommunication of a work or that provides related hosting services (eg, digital memory) does not, solely by virtue of doing so, itself infringe copyright in a work thus reproduced or distributed. Provisions in the Copyright Act also prohibit the circumvention of technological protection measures, and the manufacture, import or sale of devices used to break digital locks.

Canadian courts will not hold an internet service provider (ISP) or host liable merely because its services are used to facilitate acts of infringement. To enable rights holders to combat online infringement, Canada employs a ‘notice and notice’ approach, introduced in the Copyright Modernisation Act. This essentially provides that where a copyright owner believes its rights are being infringed online, it can send a notice of that infringement to the ISP, which must then send that notice to the alleged infringer (ie, its customer). Once the ISP does so, it is no longer potentially liable for the infringing activities. However, if it fails to do so, it can face a C$5,000 to C$10,000 fine.

While ISPs and other neutral service providers are not typically liable for infringing activities taking place via their services, in appropriate circumstances Canadian courts will issue orders directing them to take down infringing (ie, counterfeit or pirated) content. In one recent case, the Supreme Court even granted an injunction restraining a non-party service provider from allowing acts of alleged third-party infringement to take place via its search engine function, globally, in support of an earlier injunction preventing the third party from engaging in certain operations via various websites. Whether the Supreme Court exceeded its jurisdiction by granting a ‘global’ injunction in that case has been a topic of much discussion.

With respect to those who provide information location tools (eg, search engines and other tools that allow people to locate content via the Internet or a digital network), and who have infringed or enabled the infringement of copyright by making a reproduction of a work or by communicating that reproduction to the public by telecommunication, Canadian courts will only enjoin their activities; those parties will not be liable for any further damages, provided that they are essentially passive participants who make or cache a reproduction in an automated way, and do not modify the reproduction except for technical reasons.

Since it is often difficult to identify who is engaging in infringing activities via the Internet, Canadian courts can direct non-parties (including ISPs) to disclose relevant information in furtherance of claims against infringers, including the identity of their customers. In one recent file-sharing case, the Federal Court ordered an ISP to disclose the names and addresses of its customers, who were alleged to have infringed the copyright in an Academy Award-winning film via online file sharing. A service provider may be able to recover some of its costs associated with such disclosure from the rights holder – which can be expensive for the rights holder. The Supreme Court will soon consider whether and to what extent those costs are recoverable.

Where a rights holder is being victimised by the use of a confusingly similar domain name, including where counterfeit or pirated products are sold via the associated website, it may seek relief in one of two ways. First, it can lodge a complaint with the appropriate registration authority (eg, the Canadian Internet Registration Authority) to recover that domain name. Second, it can bring a claim against the owner or operator, typically for passing off, and Canadian courts may grant an order shutting down that website in circumstances where its operation is causing confusion or deception among Canadian consumers, even before a full trial on the merits of the case.

Canadian Anti-fraud Centre

In collaboration with other public authorities, the Royal Canadian Mounted Police have created the Canadian Anti-fraud Centre (CAFC), which can investigate the sale of counterfeit or pirated goods in circumstances where the underlying activities constitute fraud. The CAFC is the central Canadian agency now collecting information and intelligence on matters that include fraud via mass marketing and the Internet, and can be contacted on +1 888 495 8501. Where consumers are victimised by fraudulent counterfeit activities over the Internet, the CAFC can work with payment processors to implement steps to cancel the counterfeit merchant’s accounts, thus impeding its ability to process payments and making its dishonest website activities much more difficult.

Preventive measures/strategies

While progress has been made in Canada in enhancing the tools available to combat counterfeiting, lobbying efforts are ongoing for new or amended legislation to better equip rights holders in the fight against counterfeit and piracy activities. Organisations such as the Canadian Anti-counterfeiting Network continue to work with trademark and copyright owners to increase awareness of these issues in Canada and to push for further legislative change to tackle them. Meanwhile, rights holders in Canada continue to bear the primary responsibility for actively policing the market and initiating steps to address counterfeit activities. Rights holders should look for proactive measures, including website monitoring, the use of emerging or established technologies (eg, radio-frequency identification chips, near-field communications chips and QR codes), and at least register their intellectual property at the border to enable customs officials to detain suspect goods for inspection and potential seizure. In situations involving repeat offenders, relatively large quantities of product or health and safety risks, rights holders should not hesitate to contact and work with public authorities, including the police.

Baker McKenzie

181 Bay Street, Suite 2100

Toronto ON M5J 2T3

Canada

Tel +1 416 863 1221

Fax +1 416 863 6275

Web www.bakermckenzie.com

Jim Holloway
Partner

jim.holloway@bakermckenzie.com

Jim Holloway is a partner in Baker McKenzie’s Canadian IP practice. He graduated with a BA from McMaster University, an LLB from the University of Western Ontario and an LLM from Osgoode Hall Law School in IP law. Mr Holloway’s practice focuses on IP law, particularly relating to trademark, copyright and trade secret disputes. He is well versed in handling disputes involving counterfeiting, piracy and grey marketing. Mr Holloway has written and published numerous articles in these areas and has represented many leading companies in related litigation at all levels of the Canadian court system.

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Issue 74
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