Canada enters into a new chapter on this Canada Day, as the US-Mexico-Canada Agreement (USMCA) comes into force July 1, 2020. The USMCA brings to fruition three years of efforts to modernize the framework of the previous NAFTA agreement of 1994 between the three countries, that replaced the Canada-United States Free Trade Agreement of 1988. It is expected to reinforce Canada’s strong economic ties with the United States and Mexico.
The USMCA is the result of negotiations, between Canada, the United States and Mexico, that led to the agreement and eventual signing on November 30, 2018 of the Protocol to replace NAFTA, the subsequent Protocol of amendment signed on December 10, 2019, and more recent ratification by all three countries.
The USMCA maintains the tariff-free market access from NAFTA and includes updates and new chapters to modernize various aspects of trade, notably in respect of intellectual property (see here). What does the USMCA mean for Canadian IP practice as it relates to businesses in Canada and abroad?
Like the implementation of the Hague Agreement on November 5, 2018, the Madrid Protocol on June 17, 2019 and the Patent Law Treaty on October 30, 2019, the USMCA will require Canada to further amend its Intellectual property legislation in favour of harmonization.
While Canada already complies with some of the intellectual property provisions of the USMCA, notable changes will be required in the areas of patents, copyright, trademarks and trade secrets. Some selected highlights follow.
Patent Term Adjustment
The USMCA will require Canada to amend its patent legislation to introduce patent term adjustment to compensate for unreasonable delays in the prosecution of patents, under Article 20.44 of the USMCA. This concept will be new to Canada and will bring it into closer harmonization with existing US patent term adjustment provisions, and would allow adjustments to the patent term resulting from not only the Patent Office delays but possibly also applicant delays.
For the purposes of the USMCA, an unreasonable delay refers to: (i) delay in the issuance of a patent of more than five years from the date of filing of an application; or (ii) three years after a request for examination of the application has been made, whichever is later.
The USMCA additionally provides some guidance on calculating the patent term adjustment. The USMCA indicates that a party may exclude, from the determination of those delays, periods of time that: (i) do not occur during the processing of, or the examination of, the patent application by the granting authority; (ii) periods of time that are not directly attributable to the granting authority; and (iii) periods of time that are attributable to the applicant.
Canada must implement patent term adjustment within 4.5 years of the USMCA coming into force (July 1, 2020).
A proposed change that was expected but not implemented relates to the extension of term of data protection for biologics. The proposed change, which was removed following the December 2019 amendment to the USMCA, would have required Canada to extend data protection from eight years to ten for biologic drugs. Canada will, however, continue to offer an eight year period of market exclusivity for innovative biological and small molecule drugs through a six year “no filing” period followed by a two year “no approval” period with an additional six months of protection available to drugs that are intended for use in pediatric patients.
The USMCA will require Canada to extend the basic term of protection for copyright to 70 years after the life of the author, from the term of 50 years after the life of the author currently provided under the Copyright Act.
Canada must implement this extended term of protection within 2.5 years of the USMCA coming into force (July 1, 2020).
For copyright and related rights where the term of protection is calculated by means other than the life of a natural person (cinematographic works, performances, sound recordings), amendments made to extend the term of copyright protection to at least 75 years from the end of the year of the first publication, and in the case where the work is not published within 25 years of creation, at least 70 years from the end of the year of first publication, will come into force on July 1, 2020.
As such, the harmonization objectives of the USMCA will bring the term of protection for copyright under Canadian copyright legislation in line with the US (and other jurisdictions like the EU).
With respect to trademarks, Canada is already in compliance with many of the trademark provisions of the USMCA as a result of acceding to the Madrid Protocol, the Singapore Treaty and the Nice Agreement and implementing significant amendments to the Trademarks Act and Trademarks Regulations that came into effect on June 17, 2019. However, Canada will be required to make additional amendments to fully comply with the trademark provisions of the USMCA.
The USMCA calls for a presumption of a likelihood of confusion where third parties have used an identical mark in relation to identical goods or services to those of a registered trademark. As such, Canada has implemented a deemed infringement provision that presumes infringement of a registered trademark where a person imports goods on a “commercial scale” that bear a trademark that is identical to, or cannot be distinguished in its essential aspects from, a registered trademark. This essentially reverses the onus of proving infringement onto the importer, which is traditionally on the trademark owner to prove unauthorized use and a likelihood of confusion. This provision, which comes into effect on July 1, 2020, will assist trademark owners in streamlining a finding of infringement in clear cases of counterfeit products imported on a commercial scale, but may also increase the burden on importers to prove the provenance of parallel or grey market goods.
The USMCA also calls for the registration of collective marks, which are defined under United States law as trademarks used by the members of a collective, association, organization, or cooperative to indicate membership in the group or to distinguish the products and services of members from those of others. While the definition of a trademark was expanded with the amendments to the Trademarks Act that came into force on June 17, 2019, it does not provide for collective marks. There was also a similar provision in NAFTA requiring registration of collective marks; however, the pre-June 17, 2019 Act was not amended to reflect this change. It remains to be seen how Canadian Parliament intends to comply with this requirement. If the Trademarks Act is updated to include collective marks, it will provide a new opportunity for these organizations to obtain trademark protection that had not been available to them before.
The USMCA also appears to require that greater protection be afforded to well-known marks; however, given that acquired distinctiveness, the extent to which the marks have become known, and length of time in use are already enumerated in the Trademarks Act as factors to be considered when assessing confusion, it seems likely that no additional amendment to the Trademarks Act will be required to accommodate this provision. Whether the fact that the USMCA requires broader protection for famous marks will influence the assessment of confusion remains to be seen.
In accordance with the USMCA, Canada will also be required to establish a system of “pre-established damages” and “additional damages” for trademark or copyright infringement which should be “in an amount sufficient to constitute a deterrent to future infringements and to compensate fully the right holder for the harm caused by the infringement”. The Canadian Copyright Act already provides for an election statutory damages and the availability of punitive and exemplary damages as a matter of common law. The Trademarks Act currently does not expressly provide for statutory damages, although an award of punitive and exemplary damages are available under common law in addition to nominal or established damages. Canadian Parliament has not yet made any amendments to the Trademarks Act to expressly introduce the availability of statutory damages. It is possible that the Canadian Parliament has taken the position that the existing judicial practice of awarding nominal or established damages in addition to punitive and exemplary damages would be sufficient to meet the system of pre-established and additional damages required under the USMCA. It remains to be seen how Parliament intends to comply with this requirement.
Border Control Measures against Counterfeit Goods
The USMCA requires the expansion of current protections afforded to brand owners with respect to counterfeit and pirated goods that are “in transit” through Canada’s borders. Canada’s current system permits Canadian Border Services Agency (CBSA) officials to temporarily detain goods that are suspected to be counterfeit or infringing under the import/export prohibitions under the Trademarks Act and Copyright Act. The system also allows for rights holders who have listed their trademarks and copyright with the CBSA to receive notification and information relating to the suspected counterfeit or infringing goods and for rights holders to then seek legal redress through the courts. Under the current system, the scope of the CBSA’s ex officio power to detain suspected counterfeit or pirated goods expressly excludes shipments of goods that are merely “in transit” through Canada’s borders – i.e. goods that, while being shipped from one place outside Canada to another, are temporarily in customs transit control in Canada.
The USMCA requires that competent authorities be given the explicit authority to initiate border measures against in transit goods suspected of being counterfeit or pirated goods. As a result, Canada has made amendments to the Trademarks Act and Copyright Act to repeal the exclusion of in transit goods from the scope of the CBSA’s ex officio powers to inspect and detain suspected counterfeit or pirated goods, which will come into effect on July 1, 2020.
It remains to be seen how all of the required amendments will be incorporated into Canadian IP law but, once all of the amendments come into force, it will ensure harmonization of IP rights across the three countries party to the USMCA.