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How the USMCA will affect Canadian IP




The USMCA includes provisions for Canadian IP that extend protection for biologics and copyright, exporting what some observers see as the worst of US IP law to its northern neighbour. Ellie Mertens reports


The USMCA’s main changes for Canada

The chapter on IP rights in the USMCA (Chapter 20) is 63 pages, touching on a wide range of issues. The four biggest changes are:

  • Data protection term for biologics increased from eight years to 10 years
  • Copyright term increased from life of the author plus 50 years to life of the author plus 70 years
  • Introduction of a patent term adjustment procedure to compensate for Canadian Intellectual Property Office delay in issuing a patent
  • Pre-established damages for trade mark counterfeiting

The United States-Mexico-Canada Agreement (USMCA) finally formed late on a Sunday night, hours before the October 1 deadline.

The USMCA is essentially NAFTA, rebranded. President Donald Trump had long made his dislike of NAFTA known.

The deal increases protections granted to IP rights holders across the board. IP practitioners have welcomed many of its provisions. But other observers are less pleased.

Richard Gold, IP professor at McGill University in Montreal, calls it "a net loss for Canada in terms of IP." He says this is because "every time you grant expanded rights, you make it harder for future innovators. When the majority of incumbents are outside Canada, the increased protection is to our detriment."

Michael Geist, IP professor at the University of Ottawa, agrees, describing the deal as "Canada caving to US pressure on IP." This wouldn't be the worst thing as long as Canada adopted the good with the bad from the US, but it hasn't, Geist believes: "The US has exported some of its rights-holder-oriented provisions, but it hasn't exported some of the balancing and flexibility that it has under its law." For example, Geist wishes that the US's robust fair use provision could have been included, or that Canada's Crown copyright – which protects public documents – could have been abolished.

Gold adds that a "major flaw" in the US patent litigation system is unfairness to foreigners. "If you're located in the US, you have procedural advantages [including venue options] that you do not have if you're a Canadian firm," Gold explains. "You can have all the patents you want, but if you can't enforce them they have no value." The USMCA will establish a committee to work on harmonisation issues going forward, including venue.

The USMCA introduces the following changes:

Patents

The biggest change for patents is that the term of data protection for biologics has been extended from eight to 10 years. This is a win for brand-name pharmaceuticals, which lobbied for the change to secure longer exclusivity. Cheaper biosimilars will be prevented from entering the market for an extra two years, causing drug prices to stay higher for longer.

Another big change is that Canada will adopt the US practice of patent term adjustment. Patents traditionally expire 20 years from filing an application. Under the USMCA, patent applicants can begin accruing day-for-day patent term extensions if the patent office is "unreasonably delayed" in its determination. This is defined as a delay of more than five years from application, or three years from a request for examination – whichever is later. If applicants intentionally delay the process, this time will be subtracted from any extension. This is a big change for Canada because the US has been unique in having this system of patent term extension.

Copyright

The USMCA settled a much-disputed topic when it established that internet service providers (ISPs) are not liable for third-party content. The University of Ottawa's Geist is happy with this point. "It's one of the few examples of things I do think are a useful addition to Canadian law," he says. "The absence of those rules has put Canada at a disadvantage in being able to attract some companies to Canada."

The USMCA maintains the existing notice-and-notice system for handling infringing content online. Rather than taking down allegedly infringing content immediately, like in the US's notice-and-takedown system, Geist explains that Canada is "more focused on trying to educate internet users and the public on the scope of copyright, and alerting them that they may have been infringing."

McGill professor Gold says it works well in Canada. "Maybe it's because we're Canadian," he laughs, "but people generally abide by it. It preserves the ability [to leave content online] if there is a legitimate reason."

The biggest change to Canadian copyright law as a result of the USMCA is that the term of copyright protection has been extended from the life of the author plus 50 years to the life of the author plus 70 years, and the change is retroactive. Those who own a lot of copyrights, such as major labels and studios, lobbied for the change, according to Gold. "This doesn't provide any greater incentive for innovation, because creators get no benefit," he says. "It just pays the IP owners even more."

Gold says this is the latest in a long line of "protection increases," and that the trend is worrying. "It won't shut down innovation," he says, "but every time you increase the rights, it becomes that much harder. It's like the frog in heating water. It's the cumulative effect of all this ratcheting up that concerns me."

The more data there is, the more accurate the result. However, private datasets will be blocked for an additional 20 years, which limits researchers' and even artificial intelligence's ability to access certain information.

The final notable copyright-related change is that the USMCA cancels an arrangement that has allowed US commercials to be aired in Canada during the Super Bowl. Geist at the University of Ottawa says: "It's very unusual because it's calling on the government to rescind the decision of an independent regulator."

The detail made it into the USMCA because "the NFL and Bell Media – Canada's largest broadcaster – made it an issue," Geist explains. He adds: "There was a fair amount of lobbying pressure in the United States for it. They think they can sell the rights to their broadcast in Canada for more than Canadian companies."

Canada’s industrial design regime gets underway!

On November 5, Canada finally acceded to the Hague Agreement Concerning the International Registration of Industrial Designs and implemented changes to modernise Canada's industrial design regime. There are now 69 contracting parties to the Hague Agreement.

The Hague System provides a mechanism for acquiring, maintaining and managing design rights in multiple countries through a single application filed with WIPO.

Canada's Industrial Design Act was amended in 2014 – the first substantive update since 2001 – and new Industrial Design Regulations were finalised in the Canada Gazette, Part II, in 2018.

Highlights of changes in the Industrial Design Regulations this year include:

  • Electronic communications will be deemed received 24/7, regardless of whether the office is open or closed to the public.
  • Filing date requirements have been simplified to align with international standards. The title, description and complete mailing address are no longer required. To obtain a filing date, applicants need only provide: an indication that registration of a design is sought; a means of identifying the applicant; contact information; and a representation of the design.
  • Application requirements have been simplified. The prescribed application form is no longer required. The description is now optional because the application is deemed to relate to all four features of the design (shape, configuration, ornamentation and pattern) unless specified in a statement of limitation. Designs no longer need to be shown applied to a finished article. Applications are no longer limited to a single environmental view.
  • A new provision allows a divisional application to be filed for any design disclosed in a previously filed application, including in environmental views.
  • An applicant no longer needs to provide signed authorisation to appoint an agent. The previous requirement to have a representative for service, in the case of foreign applicants, has been removed.
  • The Regulations contain specific provisions that apply only to international registrations that designate Canada and that are received from WIPO.

Trade marks

The USMCA will not require too many changes on the trade mark side of IP. As a result of Canada's 2016 trade deal with the EU and other past agreements, amendments to update and expand Canada's Trade-marks Act are already underway, and are slated to come into force in early 2019.

It is still unclear whether any big changes will be needed. But some minor changes will be required for Canada to comply with the USMCA. First, it will need to implement statutory damages for trade mark infringement, which IP practitioners believe was long overdue.

Second, Canada must now recognise collective marks as a distinct type of mark, which will require an amendment to Canada's Trade-marks Act. Certification marks already exist in Canada. These focus on quality and standards, whereas collective marks are about distinguishing members from non-members.

Lastly, measures for handling counterfeits at the border will be strengthened by the USMCA. Previously, infringing goods were only detained at the border when rights holders filed a request for assistance, and were only able to be destroyed when a court found them to be infringing.

Compliance with the USMCA will allow Canadian Customs to detain and destroy goods that have been determined to be infringing by "competent authorities," which could include customs officials themselves.

What next?

There are varying implementation deadlines for each part in the USMCA. For example, there's a five-year implementation period for the biologics data protection term change, while the period for implementing the patent term adjustment system is four-and-a-half years. Changes to copyright rules must be implemented within only two-and-a-half years.

The reason for the difference is unclear, but more time allows for continued negotiation and a softer transition. If the Agreement is ratified by the US, Mexico, and Canada by the end of November, as expected, this will start the clock on the various implementation periods.

In the meantime, IP practitioners in Canada are left reflecting on the big impact the USMCA will have on their country.


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