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Canada on U.S. watch list for IP rights

Focus on Intellectual Property Law
|Written By Michael McKiernan
Canada on U.S. watch list for IP rights
Lorne Lipkus says he’s embarrassed to tell people where he comes from when appearing at international conferences focused on intellectual property protection and enforcement.

Canada fully deserves its spot on the U.S. Trade Representative’s notorious priority watch list for intellectual property rights thanks to its failure to stop the flow of counterfeit goods through the country’s ports, according to a Toronto lawyer.

The USTR’s annual Special 301 Report named Canada as the only G7 nation on the 2018 priority watch list, the elite collection of the 12 worst offenders among U.S. trading partners on the IP protection and enforcement front.

Canada was downgraded from its position on the regular watch list last year, joining China, a 14-year stalwart on the priority watch list, as well as Algeria, Argentina, Chile, Colombia, India, Indonesia, Kuwait, Russia, Ukraine and Venezuela.

According to a press release from the USTR, Canada’s demotion came as a result of its failure “to make progress on overcoming important IP enforcement challenges.”

“Key concerns include poor border enforcement generally and, in particular, lack of customs authority to inspect or detain suspected counterfeit or pirated goods shipped through Canada,” reads the USTR statement, which also identified pharmaceutical procedures and inadequate copyright laws as reasons for heightened U.S. concern.

Lorne Lipkus, a founding partner at Toronto firm Kesten­berg Siegal Lipkus LLP, who regularly acts for rights holders, says he’s embarrassed to tell people where he comes from when appearing at international conferences focused on intellectual property protection and enforcement.

“They can’t believe how little Canada appears to care about intellectual property rights,” says Lipkus, who is also a member of the Canadian Anti-Counterfeiting Network. “Unfortunately, there’s no question that we belong on the priority watch list. Our position is entirely justified, because we don’t take the theft of intellectual property seriously.

“Canada has a very poor track record when it comes to protecting our border from the influx of counterfeit goods, preventing its export to other countries and from getting rid of counterfeit products within our country,” he adds.

Still, intellectual property litigator Andrew Brodkin, a partner at Goodmans LLP, says Canada’s placement on the list is unfair. 

“Intellectual property rights in Canada require a very careful balancing to ensure that we are encouraging innovation, while at the same time preventing monopolistic regimes, and, overall, I think we land on a pretty good balance,” he says.

Canada first appeared on the USTR’s priority watch list back in 2009, but Lipkus says this country has spent the last few years on the less serious watch list due in part to the federal Combating Counterfeit Products Act, which received royal assent in 2014 under the previous federal government led by prime minister Stephen Harper.

Then-industry minister James Moore hailed the legislation as giving “our border guards the tools they need to work with Canadian rights holders to stop illegal counterfeit goods from entering the country.”

“Canadians are now one step closer to having a modern, effective protection scheme at our borders,” Moore added in his statement.

However, Lipkus says the bill has failed to deliver on its promise.

“In theory, it sounds great,” he says. “The difficulty comes with how it’s actually been used.”

Unlike laws in other jurisdictions, Lipkus explains, the act does not permit the Canada Border Services Agency to seize and destroy counterfeit goods. Instead, the agency detains suspect cargo temporarily, while rights holders determine whether to take legal action. But only rights holders who have taken the additional step of filing a Request for Assistance with the CBSA can ask the agency to take action. 

The CBSA has intercepted just 70 suspected counterfeit or pirated goods shipments since the act came into force more than three years ago, according to spokesperson Jayden Robertson, who noted in a statement to Law Times that the agency’s priorities “in the commercial stream are to identify shipments that pose health, safety and security risks and to facilitate those that do not raise such concerns.”

By comparison, U.S. Customs and Border Patrol made almost 35,000 seizures in the 2017 fiscal year alone.

Even allowing for the larger population south of the border, Lipkus says, the Canadian effort is inadequate and is compounded by the lack of criminal prosecutions brought against alleged counterfeiters.

The USTR report noted that there was not a single known criminal proceeding in 2017, which it said “makes Canada a striking outlier among OECD countries.”

Lipkus says the anti­counterfeiting cause suffers from a widespread perception that the sale of fake goods is a victimless crime. But it’s a mistaken view, he adds, noting that the trade is one of the largest income generators for organized crime gangs in the country. 

“People think ‘it’s just a purse; who cares?’ But, in my world, I see people who bought makeup that was supposed to be hypoallergenic and ended up rushed to the hospital,” he says. “I see children’s toys made with toxic chemicals, shampoos with e-coli and batteries that are an explosive hazard because they don’t have the proper venting technology.”

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