Brand new strength: Canadian trademark law changes to give brand owners more enforcement muscle

01 February 2015

This article first appeared in The Trademark Lawyer (Issue 1, 2015) and is republished with permission.

The Combating Counterfeit Products Act, which received royal assent on Dec. 9, 2014, has strengthened the rights and remedies afforded to brand owners in Canada. Key amendments to the Trademarks Act target important civil, criminal and administrative changes. Taken with recent procedural advances before the Federal Court of Canada, a fundamental shift in the enforcement of trademarks in Canada is afoot. This is excellent news for brand owners, who can now enjoy a broader scope of rights and swifter enforcement mechanisms in Canada.

Civil rights – expansion of the definition of infringement

The definition of “infringement” under Section 20 of the Act has been expanded to capture a more comprehensive range of activities.

The sale, distribution and advertising of goods or services in association with a confusing trademark by a person who is not entitled to its use under the Act has always been prohibited. However, the Act now captures a person who manufactures, causes to be manufactured, possesses, imports, exports or attempts to export any goods in association with a confusing trademark for the purpose of their sale or distribution.

The Act also captures infringers who attempt to evade the law by trading labels and packaging independent of goods, if the person knows or ought to know that the label or packaging is intended to be associated with goods or services that are not those of the owner of the registered trademark, and that the sale, distribution or advertisement of the goods or services in association with the label or packaging would be a sale, distribution or advertisement in association with a confusing trademark.

It is vital to note that infringement only applies to registered marks in Canada, underscoring the importance of obtaining registration, and ensuring that the brand’s filing strategy reflects both current usage and expansion plans.

The definition of infringement exempts bona fide use of an individual’s personal name as a trade name, as well as any bona fide use, other than as a trademark, of the geographical name of a person’s place of business or of any accurate description of the character or quality of a person’s goods or services. The exemptions have been broadened to provide that registration of a trademark does not prevent a person from using any utilitarian feature embodied in the trademark, nor does it prevent the use of certain indications protected under the Act.

Based on the above, the Act provides brand owners with a wider net with which to prevent infringement, capturing activities that once eluded enforcement. A particularly welcome change for proponents of brand protection is that, at long last, the importation of infringing goods is an offence under the Act.

Criminal sanctions

Another exciting change to the Act is the introduction of criminal offences, giving much-needed teeth to a statute that has long failed to meet the needs of brand owners in this arena. The changes bring the Act in line with similar provisions in the Copyright Act.

The new criminal provisions make it an offence to sell or offer for sale, distribute, manufacture, cause to be manufactured, possess, import, export or attempt to export any goods on a commercial scale in association with a trademark, if that sale or distribution is or would be contrary to Sections 19 (which grants exclusive rights to use across Canada) or 20 (which defines infringement and is discussed above).

It is also an offence to sell or advertise services in association with a confusing trademark if such sale or advertisement would be contrary to Sections 19 and 20.

In addition, the Act also aims to shut down trade of labels or packaging independent of goods and services.

The criminal provisions apply where (i) the label or packaging bears a trademark that is identical to or cannot be distinguished in its essential aspects from a registered trademark, (ii) it is intended to be associated with goods or services for which the registered trademark is registered, and (iii) the owner of the registered trademark has not consented to the use of the trademark on the label or packaging.

It remains to be seen how law enforcement will choose to enforce these new provisions. The Act certainly targets large-scale infringers and counterfeiters. It sets out stiff penalties for these offences, ranging from:

a) on conviction on indictment, to a fine of not more than $1,000,000 or to imprisonment for a term of not more than five years, or to both; or

b) on summary conviction, to a fine of not more than $25,000 or to imprisonment for a term of not more than six months, or to both.

Brand owners will be pleased to know that, on a finding of guilt, the court may order that any goods, labels, or packaging in respect of which the offence was committed, any advertising materials relating to those goods and any equipment used to manufacture those goods, labels or packaging be destroyed or otherwise disposed of.

Administrative changes

The flagship change under the Act is a new border regime, which, under Section 51.03, bars the import or export of goods or their labels or packaging which bear – without the consent of the owner of a registered trademark for such goods – a trademark that is identical to, or that cannot be distinguished in its essential aspects from, that registered trademark.

The Act exempts parallel imports, transshipments and goods intended for personal use.

The Act allows the owner of a registered trademark to file a request for assistance in pursuing remedies under this Act with respect to goods imported or exported in contravention of Section 51.03. The government began accepting these forms on Jan. 1, 2015. The request is valid for two years, after which time it can be extended. The trademark owner has an ongoing obligation to inform the government as to changes to the validity, ownership and scope of the registration.

Much uncertainty reigns in the administration of the border regime, as it is new and operating without clear guidelines. In particular, there is uncertainty as to the costs to brand owners. The Minister of Public Safety and Emergency Preparedness may require that the trademark owner furnish security, in an amount and form fixed by the Minister, for the payment of an amount for which the trademark owner becomes liable under Section 51.09.

The new regime allows customs officers, in their discretion, to obtain information about whether the importation or exportation of the goods is prohibited under Section 51.03. To do so, they may provide the owner of a relevant registered trademark with a sample of the goods and with any information about the goods that the customs officer reasonably believes does not directly or indirectly identify any person.

However, where a registered owner has filed a Request for Assistance, a customs officer may provide that owner with a sample of the goods and with information about the goods that could assist them in pursuing a remedy under the Act, such as a description of the goods, the identity and coordinates of the owner, importer, exporter and consignee, and of the person who made them; the quantity; the countries in which they were made and through which they passed in transit; and the day on which they were imported, if applicable.

There is no doubt that this information is highly useful, as in the past it has not been available to brand owners due to privacy legislation.

However, the regime establishes that there is a limit to the detention time with customs: 10 working days – or, if the goods are perishable, five days – after the day on which the customs officer first sends or makes available a sample or information to the owners. Nonperishable goods can be detained for an additional period of not more than 10 working days.

An owner can extend this detention by commencing court proceedings and advising the Minister thereof. Customs shall then continue to detain the goods until the Minister is informed in writing that the proceedings are finally disposed of, settled or abandoned; a court directs that the goods are no longer to be detained for the purpose of the proceedings; or the trademark owner consents to the goods no longer being so detained.

The legal profession is working with the Canada Border Services Agency to better understand the implementation of the changes for brand owners.

Procedural advances

The above changes could not come at a better time given recent and important procedural advances.

For the past 20 years, an interlocutory injunction, one of the most important tools for trademark owners, has essentially been unavailable in the Federal Court. Trademark owners have in effect been denied a quick and efficient means to deal with infringement. Instead, they were condemned to take their case all the way to trial – a lengthy and expensive proposition. However, new tools in use in the Federal Court have opened the way to a speedy resolution of straightforward trademark actions.

Infringement proceedings brought by way of application: An action for trademark infringement is a complex proceeding involving a lengthy examination process in which each party is required to produce relevant documents and make available a representative for oral examination, leading up to a trial. While the Federal Court’s goal is to hold a trial within two years of the commencement of an action, it often takes longer to reach trial.

An application, on the other hand, is an expeditious proceeding commenced by a notice of application. Evidence is based on affidavits and cross-examination on those affidavits. Written arguments are exchanged, and a hearing is held before a judge. Unlike a trial, there is no testimony from witnesses at the hearing.

Until quite recently, infringement litigation proceeded by way of action. However, the Federal Court of Appeal has confirmed that infringement proceedings may proceed by way of application, opening the door to secure judgment quickly, possibly as quickly as a few months from the commencement of the application. However, it should be kept in mind that, since all evidence in an application is by way of affidavit and there is no examination for discovery, trademark owners must ensure that their affidavits set out the entire case clearly and in sufficient detail to support the allegations. Furthermore, not every case will be suitable for the application process – the decision as to whether or not to proceed by way of application will be very much dependent on the circumstances of each case. A significant factor will be the importance of monetary damages. As several decisions have noted, the absence of a discovery process makes it difficult, if not impossible, to assess damages.

Proceeding by way of summary trial: Another useful tool in order to get to trial quickly is the summary trial.

The Federal Court Rules provide that either party may bring a motion for a summary trial on some or all of the issues raised in the pleadings at any time after a defence has been filed, and before a time and place for trial has been fixed.

The advantage of a summary trial over a regular trial is that the matter is heard on the basis of a motion record containing affidavits and admissions. While a summary trial may not be suitable where issues of credibility are of concern (and you need the judge to see and hear the witness), it is suitable for many trademark cases and will help in getting a matter before a judge quickly.

An advantage of summary trial over proceeding by way of application is that the discovery process is available and will enable the trademark owner to make a proper assessment of damages.

A word of caution

While these tools can be used to enforce common law rights (in other words, passing off), trademark owners would be wise to consider the benefits of obtaining registration. As noted above, the expanded causes of action in the Act require a registration. They cannot be pursued by way of passing off. Furthermore, in order to succeed in a passingoff matter, the trademark owner must establish three elements (goodwill, misrepresentation and damage flowing from the misrepresentation). While these elements can be established by way of affidavit evidence, the case will be easier and stronger if a registration is in place. Accordingly, trademark owners are encouraged to ensure that their key brands are registered in Canada.

Interlocutory injunctions

While the Federal Court has been reluctant to grant interlocutory injunctions, the superior courts at the provincial level have taken a different approach. They have granted a number of interlocutory injunctions over the past several years in trademark infringement and passing-off matters. The only problem is that the jurisdiction of the court is limited to the province in which it is located. Not all cases will be suited for such an approach.

Conclusion

All of the above is excellent news for owners of Canadian trademark rights. Not only do they enjoy expanded causes of action as a result of the recent amendments to the Act, but new tools and procedures in the Federal Court will assist in getting expeditious results. As these changes benefit those with registered rights, it would be wise to review filing strategy and portfolio maintenance to ensure that registrations are set to match both current usage and future plans.


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