The following legal framework can assist in fighting counterfeits in Canada:
- Trademarks Act (RSC 1985, c T-13);
- Copyright Act (RSC 1985, c C-42, as amended);
- Criminal Code (RSC 1985, c C-46);
- Consumer Product Safety Act (RSC 2010, c 21);
- Consumer Packaging and Labelling Act ( RSC, 1985, c C-38);
- Competition Act (RSC, 1985, c. C-34).
Product counterfeiting typically involves a violation of trademark rights or copyright. The Combating Counterfeit Products Act ( S.C. 2014, c. 32) amended the Trademarks Act to expand the rights conferred by registration to include the right to preclude others from manufacturing, possessing, importing, exporting or attempting to export any goods, labels or packaging for the purpose of their sale or distribution if:
- they are identical or confusingly similar to a trademark registered for such goods;
- the owner of that registered trademark has not consented to have the goods, labels or packaging bear the trademark; and
- the sale or distribution of the goods would be contrary to the Trademarks Act.
Additionally, in 2019, significant changes were implemented to the Trademarks Act dealing with trademark eligibility, examination procedure, ratification of the implementation of the Madrid Protocol and alignment of Canada’s Trademark regime with that of the United States and European Union.
In addition to registered trademarks, common law rights can be acquired through use of the mark in association with goods and services in Canada. As goodwill attaches to the mark, rights owners are able to assert claims against others who use the mark by bringing an action for passing off.
1 . Criminal prosecution & civil enforcement
1.1. Criminal prosecution
In Canada, trademarks and copyrights are typically the subject matter for criminal proceedings, with the Trademarks Act and Copyright Act provisions addressing counterfeiting and piracy. While provincial superior courts have concurrent jurisdiction for enforcement of intellectual property rights, the country-wide jurisdiction of the Federal Court gives it the cost effective and practical ability to grant relief throughout Canada in a single proceeding.
The Trademarks Act incorporates offence provisions under Article 51.01 and the Copyright Act includes several offence provisions relating to the use of works that infringe copyright (Section 42(1)), as well as for the circumvention of technological protection measures (Section 42 (3.1)) and the infringement of rights management information (Section 42 (3.2)).
The Criminal Code also outlines offences relating to forgery of a trademark, fraud, passing off goods as those of another, and making use, in association with goods, of a description that is false in a material respect respecting certain enumerated items such as quality, mode of manufacture and geographical origin, among others. While the Trademarks Act and Copyright Act both provide for penalties upon conviction of indictment to a fine of up to CAD 1 million, imprisonment for up to five years or both; and upon summary conviction to a fine of up to CAD 25,000 or imprisonment for a term of not more than six months, or both, in practice the penalties awarded by Canadian courts are at the lower end of the spectrum except in the most egregious and extreme cases. It is extremely rare for the court to impose jail time.
Criminal prosecutions in Canada require proof, beyond reasonable doubt, of the act itself (actus reus) and subjective knowledge (mens rea) of the prohibited act to secure a conviction. Courts have found that mens rea can be proved by circumstantial evidence, such as prior civil lawsuits or judgments of infringement or possession of previously delivered cease and desist letters from rights holders.
When imposing penalties for copyright or trademark offences, courts apply statutory principles of sentencing. The fundamental purpose of sentencing is to contribute, along with crime prevention initiatives, to respect for the law and maintenance of a just, peaceful and safe society by imposing just penalties that have one or more of the following objectives:
- to denounce unlawful conduct;
- to deter the offender and other persons from committing offences;
- to separate offenders from society where necessary;
- to assist in rehabilitating offenders;
- to provide reparations for harm done to victims or the community; and
- to promote a sense of responsibility in offenders and acknowledgement of the harm done to victims and the community.
A sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender.
1.2. Civil enforcement
Civil remedies are the most commonly employed means to address counterfeiting issues. The framework for civil actions is primarily statutory through the Trademarks Act and the Copyright Act. While there are common law prohibitions against passing off registered or unregistered trademarks, Section 7 of the Trademarks Act embodies the substance of common law passing off and is most frequently used. Actions commenced for infringement under these statutes may be brought in a provincial court or in the Federal Court. The applicable statutes may include the following remedies:
- preservation orders;
- accounting of profits;
- destruction of infringing goods;
- punitive damages; and
- recovery of a portion of legal costs.
Under the Trademarks Act, damages and accounting for profits are alternative remedies. Under the Copyright Act, damages and disgorgement of the infringer’s profits are both recoverable.
The Federal Courts Rules expressly provide for the preservation of the subject matter of litigation. Typically, motions for preservation are brought on notice to the alleged infringer and, if successful, an order is issued requiring the alleged infringer to deliver up the subject merchandise pending the final outcome of the lawsuit.
An Anton Piller order (typically granted ex parte) allows the plaintiff, with the defendant’s permission, to enter the defendant's premises and remove applicable evidence, including documents, devices and items. While refusal potentially subjects a party to contempt of court proceedings, compliance is nevertheless voluntary and parties executing Anton Piller orders cannot breach the peace if the party served refuses to cooperate. An independent supervising solicitor, who does not represent the rights holder, supervises the execution of Anton Piller orders and must fully explain the terms of the order, supervise any permitted searches of the subject premises and ensure that any potentially privileged documents are preserved in a manner that allows the party served to assert privilege before they are disclosed. Law enforcement typically attends to keep the peace and to assure the party served that the process is legitimate.
Canadian courts have issued rolling Anton Piller orders in John Doe and Jane Doe actions, in which the identities of the infringers are not yet ascertained. Following execution of a rolling Anton Piller order, the courts have an established mechanism for reviewing execution of the service and adding the party served as a named party defendant.
Civil remedies for trademark and copyright infringement have the potential for greater damages than have been awarded as fines in the criminal context. However, where counterfeiters fail to keep business records, ascertaining appropriate damages or quantification of profits is difficult. In such circumstances, the Federal Court jurisprudence has accepted the concept of minimum compensatory damage awards for trademark counterfeiting and piracy. Where no documents are delivered up by the defendant to quantify sales, profits and/or damages, the court regularly awards damages to successful litigants using a defined scale of damages, depending on the nature of the business (for example, itinerant vendor, fixed retail, wholesaler or importer). Minimum compensatory damages have been awarded on a ‘per instance of infringement’ basis or on a ‘per inventory turnover’ basis.
1.3. Grey market and counterfeit goods
Most recently, in the Federal Court decision of Lululemon Athletica Canada Inc. v. Campbell, 2022 FC 194, the Court awarded an injunction, compensatory damages, and punitive damages to the rights holder by way of summary trial. On a summary trial, the Court renders judgment on the basis of affidavit evidence, which may be subject to cross-examination out of Court. As noted in the decision, a summary trial may lead to a quicker and less expensive resolution of the matter and is increasingly becoming an attractive option for rights holders seeking an efficient alternative to a complex trial. When there is unquestionable evidence of trademark infringement, summary proceedings should be considered by rights holders and their counsel.
In Canada, grey market goods, also referred to as parallel imports, are trademarked goods that are imported into a market where they were not intended to or authorized to be sold. Since the goods were manufactured by the brand owner, they are not considered to be counterfeit, and traditional trademark and copyright avenues may not be readily available. However, if the activity depreciates the value of the goodwill of the trademark/rights holder or the goods do not adhere to the labelling requirements in Canada, a successful action may be brought. A successful action may also be brought if an unauthorized seller is using rights holder’s trademarks and/or copyrights to facilitate and market the sale of the goods. Additionally, Canadian courts have found, specifically in Mars Canada Inc. v. Bemco Cash & Carry Inc. (2018 ONCA 239), that a settlement agreement was sufficient and enforceable to enjoin the defendant from continuing in grey marketing activities.
In addition to the legislation discussed in the sections above, the Consumer Product Safety Act (RSC 2010, c 21) and Consumer Packaging and Labelling Act (RSC, 1985, c C-38) prohibit the manufacture, import, sale or advertisement of consumer products that could pose an unreasonable danger to the health or safety of Canadians. Other prohibitions relate to the packaging, labelling or advertisement of a consumer product in a manner that is false, misleading or deceptive in respect of its safety. For example, the unauthorised use of certification marks is prohibited. The prohibitions and powers in the act, including a right of recall, may prove to be useful tools in the fight against counterfeit consumer products, provided that the consumer product poses a danger to human health or safety. The Competition Act (RSC, 1985, c. C-34) also contains both criminal and civil provisions that are geared towards the prevention of anti-competitive practices in the marketplace, which include the marketing and promotion of a product in a false and/or misleading way.
1.4. Criminal v. civil enforcement
While it is often difficult to convince law enforcement to proceed with a criminal investigation/enforcement litigation of counterfeiting and piracy cases are often a cost-effective strategy if the illegal conduct is clear and the evidence is easy to obtain.
2 . Border enforcement
Canada Border Services Agency’s (CBSA) border enforcement program has been in place since 2015. IP rights holders can file a Request for Assistance (RFA) document with Customs (valid for two years and renewable in two-year increments) and, in doing so, record their registered trademarks, copyrights and geographical indications with Customs. Customs has ex officio powers to detain (pending a civil remedy being pursued by the IP owner) suspected shipments of counterfeit products or pirated works.
If a request for assistance is filed (there is no government fee to file), Customs is authorized to detain suspected shipments of counterfeit products or pirated works pertaining to the recorded rights, and to share information with the rights holder to give it an opportunity to pursue a civil remedy. Detention by Customs cannot exceed 10 working days (subject to a further 10 working days (or five days for perishable goods) on request of the rights holder). If the goods are counterfeit or the works pirated, and the importer does not agree to a settlement of the matter, the rights holder must use this detention period to commence proceedings in court against the importer and seek an order for seizure and destruction of the counterfeit products or pirated works. The rights holder is responsible for all applicable storage, handling and destruction charges of the detained goods. Customs has no authority to seize or destroy counterfeit products or pirated works on its own. In practice, in the vast majority of cases in the past several years the importer has paid the cost of storage and destruction as part of the settlement process.
There is significant permitted disclosure by Customs to the rights holder that includes providing a sample of the goods and information about the goods that could assist the rights holder in pursuing a remedy. Limitations restrict the use of that information for any purpose other than to determine whether the import or export of the goods at issue is an infringement of the recorded rights, or to pursue civil proceedings in court or for the purpose of reaching an out-of-court settlement.
If the rights holder commences proceedings, substantive remedies – both equitable and statutory – are available under the Trademarks Act and the Copyright Act, including declaratory relief, injunctive relief, mandatory relief (i.e., forfeiture and destruction) damages and costs. Statutory damages are available, only under the Copyright Act. Notwithstanding that the legislation permits Customs to exercise discretion when contacting registered rights holders to initiate enquiries regarding the authenticity of goods at the border, in practice, Customs does not exercise that discretion unless the registered rights holder has filed a request for assistance.
Since 2020, the CBSA’s RFA program has seen significant and promising growth. More than 3,600 IPRs have been recorded at the Border and over 1,000 shipments have been intercepted in the past 12 months. In addition to the encouraging work done by the Border Services Officers, the response by Rights Holders has also been positive and nearly 90% of the detained shipments (based on the statistics from the past two years) result in either the abandonment of the shipment or an out-of-court settlement and subsequent destruction of the goods.
The RFA program in Canada is a beneficial and inexpensive tool for rights holders and provides an opportunity for enhanced brick and mortar and online enforcement. Rights Holders are strongly encouraged to register their rights with the CBSA and engage in training customs, in addition to law enforcement, on their relevant and well-known counterfeiting concerns and product identification.
2.2. Recent trends and COVID-19
The COVID-19 pandemic created a new normal and law enforcement, brand owners, and IP practitioners in Canada shifted their focus to targeting unlawful activities connected to individuals attempting to exploit the pandemic for quick profit and personal gain. A heightened importance was placed on the health and safety of Canadians and rights owners will likely continue to focus on the fraud and illegal activities that accompany the increased demand for medical supplies, protective wear and related accessories as they monitor their global brand protection efforts. In Canada, specifically, from 2020 through 2021, there was an increase in protective wear, specifically cloth masks, detained at the border and involved in enforcement by rights holders both online and at physical storefronts. This trend will likely continue for the immediate future.
3 . Online anti-counterfeiting enforcement strategies
Apart from the Copyright Act, Canada has no specific legislation addressing the online sale of counterfeit goods. Instead, traditional methods are used. By way of example, copyright owners alleging infringement against unidentified BitTorrent users have advanced motions to compel third-party discovery of the ISP, requesting the handover of subscriber information. In addition, rights holders submit takedown requests directly to the ISP, registrar, third-party marketplace or social media platform in an effort to remove the counterfeit goods, citing the Trademarks Act, Copyright Act and often the terms of service / use prescribed by the online platform.
Generally, when faced with an online infringer that may also advertise and sell goods through a physical storefront, before engaging with law enforcement or determining a plan that includes enforcement on the ground, additional OSINT is performed to determine quantities and the breadth of goods and rights holders involved.
3.1. Domain names
The CDRP is the administrative procedure set up by the Canadian Internet Registration Authority (CIRA) to assist rights holders that meet CIRA’s Canadian Presence Requirements in obtaining quick, out-of-court and low-cost dispute resolution of bad faith registration of [dot]CA domain names. A complaint may be filed against the registrant of a domain name if:
- the rights holder can prove its rights in the trademark;
- the registrant has no legitimate interest in the domain name; and
- the domain name was registered in bad faith.
The Canadian International Internet Dispute Resolution Centre (CIIDRC) was approved by ICANN in 2019 to become a UDRP service provider.
Though not specific to Canada, there has been an increasing trend towards the registration of domains related to the COVID-19 pandemic. Also, in recent months, there has been a significant rise in the registration of domains that infringe on well-known brands and rights holders as it relates to the virtual world, “Metaverse” and popular, new relevant gTLDs.
3.2. Social media
Canadians have spent most of the last two years online following ongoing restrictions due to the COVID-19 pandemic. This shift has been accompanied by an increase in the need and demand for the online sale of goods and many social media outlets and online marketplaces have ramped up their technologies and functionalities to cater to the new normal. Unfortunately, counterfeit networks have been able to capitalize on the live stream features and selling functions that many online platforms have incorporated. The updates and changes to Canadian specific marketplace do not differ from the global marketplace with a Canadian extension (eBay, Amazon, Etsy).
The use of abbreviations, pseudonyms and typographical devices, among other techniques, have assisted bad actors in their attempt to evade enforcement online. Additionally, the proliferation of hidden links on popular e-commerce platforms is a popular strategy, often based on an “Order This – Get This” model where, typically, sellers advertise for sale a generic, non-branded item and then send a different product to the purchaser - which is oftentimes counterfeit or infringing. With respect to live streams through online and social media platforms, it is increasingly difficult to detect, capture, and enforce against sellers who use these various features to “go live” and sell through a livestream because the content can be deleted immediately at the end of the sale. Additionally, the recent surge of NFTs in the counterfeit space and new online platforms catering to the digital world will be an important area for rights holders and brands to monitor. The rampant surge of counterfeit NFTs and digital content will certainly create a shift in priorities with respect to online brand protection for the foreseeable future.
4 . Additional information
Currently, Canada does not have a national intellectual property law enforcement coordination body, though it has been the subject of recent discussions had by the Canadian Anti-Counterfeiting Network (CACN). CACN represents a coalition of brand owners, legal, certification and investigative firms and associations that have united in the fight against product counterfeiting, fraud and copyright piracy in Canada. Additionally, in March 2022, the Ontario government announced the launch of a new agency aimed to assist businesses and serve as a “go-to- resource for IP expertise.” The provincial government has stressed the importance of driving long-term competitiveness through the prioritization of IP and IP-related initiatives.
5 . Frequently asked questions
1. Can I record pending trademark registration (Applications) at the Border with CBSA?
No. You can only file registered trademarks and geographical indications. While not mandatory, it is recommended to register one's copyright before filing an RFA as well. You can update your RFA on file as necessary, this includes adding newly registered trademarks and identification documents to your file. It is imperative to notify the CBSA of a change or lapse in ownership of copyright, trademarks, or geographical indications.
2. Is there a fee to file a Request for Assistance with Canada Border Services Agency?
There is no government registration fee to file an RFA with the CBSA. Although rare, a bond may be required in certain circumstances.
3. Are there statutory damages for trademark counterfeiting and piracy?
There are no statutory damages for trademark counterfeiting, but several groups have been urging the government to amend its legislation to incorporate statutory damages. There are statutory damages provisions contained in the Copyright Act, although there is discretion for the court to reduce the amounts even below minimum limits.