Canada: USMCA v NAFTA: What's Changed And What It Means For IP In Canada

Introduction

After more than a year of negotiations, Canada reached a new free-trade agreement with Mexico and the United States minutes before the midnight deadline on September 30, 2018.

The United States-Mexico-Canada Agreement (USMCA) will replace the North America Free Trade Agreement (NAFTA).  NAFTA came into force on January 1, 1994, creating what was at that time the largest free-trade region in the world. 

The USMCA contains 34 chapters and 12 side letters and covers a range of topics, including those related to agriculture, rules of origin, dispute resolution and e-commerce. Among other impacts on Canadian business, the USMCA will open Canada's dairy market to U.S. producers, impose a quota on automotive-content originating in Canada and Mexico, and increase the duty-free limit for Canadians who buy U.S. goods online from $20 to $150. 

The agreement also includes chapters designed to modernize trade between the three parties, adding a chapter relating to digital trade, and updating several chapters that were present in NAFTA, such as Telecommunications, Competition Policy and Intellectual Property.  

The changes included on intellectual property 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 provisions, our update today explores what is different, and the potential impact on Canada's intellectual property laws.

Key changes to Canadian Intellectual Property Law Required by the USMCA

Chapter 20 of the USMCA, entitled "Intellectual Property Rights," runs to 63 pages, 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 in Canadian law, the following four changes are likely of greatest significance:

  1. Data protection term for biologics increased from eight years to ten years
  2. Copyright term increased from life of the author plus 50 years to life of the author plus 70 years
  3. Introduction of a patent term adjustment procedure to compensate for Patent Office delay in issuing a patent
  4. Pre-Established Damages for trademark counterfeiting

Patents, Undisclosed Tests and Other Data

International Agreements

The USMCA requires the Parties either to give due consideration to ratifying or acceding to the Patent Law Treaty, or to adopt or maintain procedures standards consistent with the objectives of the Patent Law Treaty. 

The Economic Action Plan 2014 Act, No. 2, Statutes of Canada 2014, Chapter 39, contains not yet in force provisions amending the Patent Act for compliance with the Patent Law Treaty.  It is expected that these provisions may come into force in 2019.

Patent Term Adjustment for Unreasonable Granting Authority Delays

The USMCA specifies that a Party shall provide adjustment of the term of a patent to compensate for Patent Office delays in issuing patents.  Patent term adjustment may accrue if the patent issues more than five years from the date 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 some 20 years, but patent term adjustment to compensate for Patent Office delay will be entirely new to Canadian patent law. 

Canada must implement its obligations under this provision within 4.5 years of the date the USMCA enters into force.

Biologics

The USMCA requires a party to provide a data protection term (market exclusivity) for biologics of at least ten years from the date of first marketing approval. 

Current Canadian data protection law does not distinguish between biologics and small molecule drugs, and provides an eight 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 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(s) plus 50 years.  Under the USMCA, that term will increase to no less than life of the author(s) plus 70 years.  This will align the term of protection in Canada with the United States and European Union. 

In addition, the USMCA contemplates providing "safe harbors" for internet service providers (ISPs).  Such safe harbors will shield ISPs from liability for copyright infringements that they do not control, initiate or direct, which take place through their networks.  In order to be eligible for the safe harbor protection, ISPs will need to expeditiously remove or disable access to infringing content and implement a policy of terminating the accounts of repeat infringers.  Notably, however, ISPs will not be required to monitor their networks for infringing activity.

Otherwise, it appears that Canada's Copyright Act is largely already in compliance with the provisions of the USMCA, including with respect to Technological Protection Measures (TPMs) and Rights Management Information (RMI).

Trademarks

In relation to trademarks, Canada is already greatly in compliance with the provisions of the USMCA, or will be once the amendments to Canada's Trademarks Act come into force, which is expected to occur early in 2019. For instance, the USMCA requires that Canada ratify or accede to the Madrid Protocol, adopt a trademark classification system consistent with the Nice Classification system and not deny registration to scent marks. All of these changes were already in place for implementation next year.

Collective Marks, Country Names, Well-Known Marks and more

It does appear likely, though, that Canada will need to implement legislation to permit the registration of "collective marks" (i.e. 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 also be interesting to see if any legislative changes arise from the USMCA's requirement that each country accord treatment no less favourable than it does to its own nationals. For instance, currently "prohibited" or "official" mark protection under the Canadian Trademarks Act is restricted to public authorities that are Canadian.  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") 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, as well as guidelines for determining whether a term is deemed generic.

In accordance with Canada's GI laws, Canada will not be required 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 shall not preclude the possibility that the protection of a GI could cease, exceptions to this 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 Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which are essentially immune to cancellation proceedings under the Trademarks Act. It appears that, in the future, Canada will not be able to protect GIs for agricultural product or food through bilateral or multilateral agreements without providing a mechanism to oppose and to remove from the list of protected GI's.

"Pre-Established Damages" for Trademark Infringement

In relation to enforcement of marks, Canada will 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 Canada has been long overdue in implementing statutory damages for trademark counterfeiting.

Border Measures

In relation to border measures, USMCA is much more than just a re-branding 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 or admitted into or exiting from a FTZ or a bonded warehouse. Currently, "in transit" goods are off-limits and may not 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, the provisions 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, then 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 that Canada have a domain name dispute mechanism modelled on the principles of the Uniform Domain-Name Dispute-Resolution Policy (UDRP) for its .ca domain registry. In addition, there must be adequate remedies, such as 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 CIRA Dispute Resolution Policy (or CDRP), 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 to reveal their contact information in the event of a dispute.

Industrial Designs

The provisions contained in the USMCA largely reflect amendments to Canada's Industrial Design Act and Regulations that will come into force on November 5, 2018. These amendments include ratification of the Hague Agreement, and with these Canada will be in compliance with the Industrial Design provisions contained in the USMCA.

Conclusion

While agreement on the USMCA has been reached in principle, it must still be ratified by all three countries. For example, in the U.S., the agreement must be sent to Congress for a 60-day review period, during which time Congress can suggest changes, before it can be signed by President Trump. 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 timeline to ratification is not certain.  We will keep our readers informed of further developments.

For more information, please contact a member of our trademarks or patents group.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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David Schwartz
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