On 30 September 2018, after more than one year of negotiations, Canada reached a new free trade agreement with Mexico and the United States minutes before the midnight deadline.
The US-Mexico-Canada Agreement (USMCA) will replace the North American Free Trade Agreement (NAFTA). NAFTA came into force on 1 January 1994, creating what was at that time the world's largest free trade region.
The USMCA contains 34 chapters and 12 side letters and covers a range of topics, including agriculture, rules of origin, dispute resolution and e-commerce. The USMCA will, among other things:
- open up Canada's dairy market to US producers;
- impose a quota on automotive content originating in Canada and Mexico; and
- increase the duty-free limit for Canadians who buy US goods online priced between C$20 and C$150.
The agreement also includes chapters designed to modernise trade between the three parties. It has added a chapter relating to digital trade and updated several chapters that existed in NAFTA, such as Telecommunications, Competition Policy and Intellectual Property.
The changes regarding IP law are particularly notable as they modify the landscape for pharmaceuticals and for patent, copyright and trademark owners. While Canada is already compliant with many of the USMCA's provisions, this article explores the key changes and the potential impact on its IP laws.
Key changes to Canadian IP law required by USMCA
Chapter 20 of the USMCA (Intellectual Property Rights) is 63 pages long and encompasses a wide range of IP issues. Much of the text concerns statements of policy, objectives and best practices, largely reflecting current Canadian IP law. While the USMCA may require a variety of changes to Canadian law, the following are likely to have the greatest significance:
- the data protection term for biologics has increased from eight years to 10;
- the copyright term has increased from life of the author plus 50 years to life of the author plus 70 years;
- a patent term adjustment procedure has been introduced to compensate for Canadian Intellectual Property Office (CIPO) delays in issuing patents; and
- pre-established damages have been introduced for trademark counterfeiting.
Patents, undisclosed tests and other data
International agreements The USMCA requires the parties to:
- give due consideration to ratifying or acceding to the Patent Law Treaty; or
- adopt or maintain procedures standards which are consistent with the Patent Law Treaty's objectives.
The Economic Action Plan 2014 (Act 2, Statutes of Canada 2014, Chapter 39) contains yet-to-come-into-force provisions which amend the Patent Act for compliance with the Patent Law Treaty. These provisions may come into force in 2019.
Patent term adjustment for unreasonable granting authority delays The USMCA specifies that a party will provide for a patent term adjustment to compensate for patent office issuance delays. Patent term adjustment may accrue if the patent is issued more than five years from the date on which the application is filed or three years after examination is requested, whichever is later.
The United States has had such provisions in its patent laws for approximately 20 years, but patent term adjustment to compensate for CIPO delays will be entirely new to Canadian patent law.
Canada must implement its obligations under this provision within four-and-a-half years of the date on which the USMCA enters into force.
Biologics The USMCA requires a party to provide a data protection term (market exclusivity) for biologics of at least 10 years from the date on which the first marketing approval is granted.
Current Canadian data protection law does not distinguish between biologics and small molecule drugs and provides an 8-year data protection term (with a possible six-month paediatric extension) for both biologics and small molecules. Therefore, for compliance with the USMCA, Canada must extend the existing data protection term for biologics by two years.
Canada must implement its obligations under this provision within five years of the date on which the USMCA enters into force.
Copyright and related rights One of the most significant changes flowing from the USMCA will be to increase the basic term of copyright protection in a work by 20 years. Currently, the basic term of copyright protection in Canada is life of the author plus 50 years. Under the USMCA, this term will increase to no less than life of the author plus 70 years. This will align the term of protection in Canada with that of the United States and the European Union.
In addition, the USMCA contemplates providing safe harbours for internet service providers (ISPs). Such safe harbours will shield ISPs from liability for copyright infringements which take place through their networks but which they do not control, initiate or direct. In order to be eligible for the safe harbour protection, ISPs must expeditiously remove or disable access to infringing content and implement a policy of terminating the accounts of repeat infringers. However, ISPs will not have to monitor their networks for infringing activity.
Otherwise, it appears that the Copyright Act largely already complies with the USMCA, including with respect to technological protection measures and rights management information.
Trademarks Canada already largely complies with the trademark provisions of the USMCA or will once the amendments to the Trademarks Act come into force, which is expected to occur in early 2019. For instance, the USMCA requires Canada to:
- ratify or accede to the Madrid Protocol;
- adopt a trademark classification system consistent with the Nice Classification system; and
- accept the registration of scent marks.
All of these changes were already in place for implementation in 2019.
Collective marks, country names and well-known marks It is likely that Canada will need to implement legislation to permit the registration of 'collective marks' (ie, marks used by members of an association or collective). The USMCA also includes explicit provisions relating to country names and well-known marks, although it is presently unclear whether Canada's existing protection will be supplemented by legislative changes.
It will be interesting to see whether any legislative changes arise from the USMCA's requirement that each country accord treatment to the others' nationals which is no less favourable than that which they accord to their own. For instance, at present, prohibited or official mark protection under the Trademarks Act is restricted to Canadian public authorities. This might eventually result in additional legislative changes.
Geographical indications The USMCA provides a number of provisions relating to the protection of geographical indications (GI) which are similar to provisions in the Trans-Pacific Partnership.
These provisions notably relate to:
- the administrative procedures for the protection or recognition of GIs;
- grounds of denial;
- opposition; and
- cancellation.
The USMCA also includes guidelines for determining whether a term is deemed generic.
In accordance with its GI laws, Canada will not have to provide interested persons with objection procedures based on prior trademark rights with respect to GIs for wines and spirits, unlike GIs for agricultural product or food.
Also, while the USMCA provides that a country cannot preclude the possibility that the protection of a GI could cease, exceptions to these rules have been set out to protect GIs that became protected through previous international agreements. This exception further confirms the protection of GIs that became protected through the EU-Canada Comprehensive Economic and Trade Agreement, which are essentially immune to cancellation proceedings under the Trademarks Act. It appears that, in the future, Canada will be unable to protect GIs for agricultural product or food through bilateral or multilateral agreements without providing a mechanism to oppose and remove them from the list of protected GIs.
Pre-established damages for trademark infringement In relation to the enforcement of marks, Canada may need to implement a system that provides for pre-established damages in civil proceedings with respect to trademark counterfeiting "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". This will be welcomed by brand owners, as the implementation of statutory damages for trademark counterfeiting in Canada is long overdue.
Border measures In relation to border measures, the USMCA is more than just a rebranding of NAFTA. Under the new agreement, customs officials will be given more authority on a number of levels, including the authority to initiate border measures against suspected counterfeit trademark goods or pirated copyright goods that are imported, destined for export, in transit, admitted into or exiting from a free trade zone or bonded warehouse. Currently, in-transit goods are off limits and cannot be detained. Customs officials may also initiate such border measures without a request for assistance on file.
Customs officials will also be permitted to inspect, detain and destroy suspected counterfeit trademark goods or pirated copyright goods following a determination that the goods are infringing. Notably, these provisions do not require a court to make a finding of infringement. Rather, they provide for "a procedure by which competent authorities may determine within a reasonable period of time after the initiation of the procedures… whether the suspect goods infringe an intellectual property right".
If they do, the goods will be destroyed or "disposed of outside the channels of commerce in such a manner as to avoid any harm to the right holder".
Domain names The USMCA requires Canada to have a domain name dispute mechanism modelled on the principles of the Uniform Domain Name Dispute Resolution Policy for its '.ca' domain registry. In addition, there must be adequate remedies, (eg, transfer or cancellation) for registration of a domain name with a bad-faith intent to profit that is confusingly similar to a trademark. Canada already complies with these provisions through the Canadian Internet Registry Authority (CIRA) Dispute Resolution Policy, which has been in place since 2002.
Another requirement of the USMCA is to provide online public access to a reliable database of contact information for domain name registrants, subject to any policies regarding privacy and personal data. CIRA's WHOIS policy likely complies with this requirement. While CIRA's policy provides that individual registrants have default privacy protection over their contact information, there is a mechanism to communicate with individual registrants and reveal their contact information in the event of a dispute.
Industrial designs The provisions contained in the USMCA largely reflect the amendments to Canada's Industrial Design Act and Industrial Design Regulations that will come into force on 5 November 2018. These amendments include the ratification of the Hague Agreement and will bring Canada into compliance with the USMCA's industrial design provisions.
While agreement on the USMCA has been reached in principle, it must still be ratified by all three countries. For example, in the United States, the agreement must be sent to Congress for a 60-day review period, during which Congress can suggest changes, before it can be signed by the US president. Similarly, in Canada, the agreement must be tabled in Parliament, where it can be debated, before ratification is possible.
Accordingly, further changes may be possible and the ratification timeline is uncertain.
For further information on this topic please contact Mark K Evans at Smart & Biggar/Fetherstonhaugh's Toronto office by telephone (+1 416 593 5514) or email ([email protected]). Alternatively, please contact David Schwartz at Smart & Biggar/Fetherstonhaugh's Ottawa office by telephone (+1 613 232 2486) or email ([email protected]). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
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