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Watch Out: Is Canada as Bad as China when it comes to Intellectual Property Infringement?

Thursday, July 23, 2009

By David Wotherspoon, Fasken Martineau

This year, and for the first time, Canada was named to the U.S. Trade Representative’s "Priority Watch List," effectively putting the country on par with China, India and Russia for trade-mark, patent and copyright infringement.

Though the U.S. Trade Representative (USTR) has a case for including Canada in its top list of countries to watch, many say the surprise inclusion of Canada is unjustified. Others go further and criticize the report as an unreliable lobbyist document. Regardless of your opinion on the Special 301 report, effective management of Intellectual Property Rights (IPR) in Canada should be an essential part of any company’s global Intellectual Property strategy.

The Special 301 Report

Section 301 is the principal statutory authority under which the USA can discourage trade partners from breaching trade agreements. Every April, the USTR releases its Special 301 Report, ranking the intellectual property laws of countries worldwide. This year, Canada was elevated from the "Watch List" to the "Priority Watch List" (PWL). The USTR chastised Canada for not delivering on certain commitments including "promptly and effectively implementing key copyright reforms." The report says that Canada has "failed" to follow World Intellectual Property Organization treaties, signed in 1997, and needs to "enact legislation in the near term to strengthen its copyright laws and implement these treaties."


Some elements of the report are entirely justified, while others are not. The report cites Canada’s "weak border measures" and the need to "curb the volume of infringing products transshipped and transiting through Canada." The unfortunate truth is that Canada is considered one of the worst jurisdictions in the world for policing against fakes at our borders. Its proximity as a port to countries notorious for counterfeit production – notably China – has further exacerbated the problem.

Pharmaceuticals, home building products and knock-off handbags pass through Canada daily. While other countries have procedures in place that allow for intervention by customs officers at the borders when counterfeiting is suspected, Canada lags behind on this kind of enforcement.

However, the U.S. government’s criticism of Canada’s intellectual property rights system may not be so easily justified. Canada enacted Anti-Camcording legislation in 2007, is an original partner in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations, and joined the USA as a 3rd party in the World Trade Organization complaint against China over its copyright rules. (Geist April 30) Canada also tabled Bill C-61, legislation similar to the U.S. Digital Millennium Copyright Act, but that bill died on the order table when a Federal Election was called in September 2008. (Jackson)

Canada’s rate of counterfeiting software is lower than any other country on either the Watch List or the PWL (Geist). The Business Software Alliance’s 2008 Statistics shows Canada has the lowest rate of software piracy of those countries on the PWL for whom statistics are available. The lowest rate of the other countries is 66%. Canada software piracy rate is 32%, lower that all the other countries named in the 2009 Special 301 Report. (Geist, May 5; BSA Report, 2008)

As a point of contrast, Taiwan and South Korea were both removed by the USTR from the PWL this year. However, they rank as the 4th and 5th largest exporters of counterfeit goods to the US, at least according to the 2008 data from the U.S. Customs and Border Protection Agency. (Geist, May 5; US Border Statistics)

Some commentators argue that the Special 301 watch list is unreliable and that industry lobbyists skew the results. Michael Geist, Canadian Research Chair for Internet and E-Commerce Law at the University of Ottawa, argues that the 2009 Special 301 Report is little more than a lobbyist document that is best ignored. (Geist, May 5) He suggests that groups such as the Motion Picture Association of America, the Entertainment Software Association and the International Intellectual Property Alliance drive who goes where on the list. Geist says the Canadian government agrees with him and cites an official at the Department of Foreign Affairs to a House of Commons committee in 2007 as saying:

"In regard to the watch list, Canada does not recognize the 301 watch list process. It basically lacks reliable and objective analysis. It’s driven entirely by the U.S. industry. We have repeatedly raised this issue of the lack of objective analysis in the 301 watch list process with our U.S. counterparts." (Geist April 30)

Furthermore, this year some 20 countries – including Italy, Spain and Finland – challenged the USTR process. Israel argued strongly that the absence of anti-circumvention legislation could not be a basis for inclusion on the list:

…given the industry objections to (Technical Protection Measures and Digital Rights Management (TPM)), it (sic) lack of uniform implementation worldwide and its nascent obsolescence, non implementation of TPM can not be the basis for determining that a country, as in the words of the Trade Act of 1974 (19 USC 2242) "denies adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. (Israel, page 9)

Finally, an editorial in the Bangkok Post called Canada’s inclusion in the PWL "absurd" and commented:

…Canada has stolidly refused to ape the US government in enacting a punishing law protecting the movie and music distributors. The Digital Millennium Copyright Act is a blatantly anti-consumer law which has little to do with IP protection, and everything to do with stifling digital copying of material owned by huge and profitable companies which help to finance US political campaigns.

Thus Washington seems to be using its annual IP report to hammer nations to enact and enforce US IP laws, or suffer the consequences. This appears to be nothing but ham-handed protection of big businesses at the expense of free trade. The US Trade Representative must accept that there are many ways to protect IP rights, and cease its threats against those who take different courses. (Bangkok Post)

Protecting your IPR in Canada

Notwithstanding the 2009 Special 301 Report, Canada has substantial laws and procedures in place to address counterfeiting. Canada is a signatory to numerous international IP conventions, including the Paris Convention, which establish international IP standards. Canada also has statutes in place to protect copyrights, trade-marks and patents as well as provisions in the Criminal Code. These are regularly used to enforce the IP rights of domestic and international companies. Nevertheless, the 2009 Special 301 Report should be a reminder that Canada can still do better in the fight against fakes.

Note: David Wotherspoon is a litigation partner in Vancouver with Fasken Martineau and a member of the firm’s Technology and Intellectual Property groups. He frequently advises clients on matters stemming from counterfeiting of intellectual property.

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