File early and watch closely as Canada's IP rules change

File early and watch closely as Canada's IP rules change
Far-reaching changes to Canada’s intellectual property laws will force companies to keep an eagle eye on their trademark and patent applications, watching deadlines and actions by their competitors, filing before the new rules bite, and getting ready for a heftier bill.

The changes, which the government says will come into effect “in due course,” come as Canada moves into line with a series of international treaties, most importantly the simplified international trademark registration system outlined in the Madrid Protocol and the comprehensive classifications of trademarks for goods and services mandated by the Nice Agreement. But, in a decision that alarms many in the business and legal communities, the new rules remove the requirement to submit evidence of the prior use of a trademark as part of the registration process.

Industry Canada says that change is designed to meet the terms of the international treaties, to harmonize Canadian practices with those of other countries, and to eliminate “unnecessary and outdated administrative compliance requirements for businesses.” It does not expect a surge in the volume of trademark applications. But lawyers say it will become much easier to register a mark, and that is likely to trigger more applications, more opposition hearings, and an unwelcome role for trademark trolls.

“The simple advice is file now, and in particular for certain kinds of trademarks that will be harder to register once these regulations come into force,” says Mark Robbins, a partner and trademark and copyright expert at intellectual property law firm Bereskin & Parr.

“Look at your portfolio of trademarks, and look for holes, look for vulnerabilities. Imagine bad actors out there that might be trying to take advantage of your situation and try to address those by filing now, bearing in mind that if you file now probably by the time an application gets to the allowance stage, the new provisions will be coming into force. . . . The message for in-house counsel is to get ready to increase your budget. You’re going to have a lot more oppositions, a lot more non-use cancellations.”

Questioning the logic of Canada’s decision to scrap the formal prior-use requirement, he adds: “It strains at the definition of a trademark. How can a trademark be a trademark if it’s never been used? For the last 100 years or more that’s what we have understood a trademark to be. You’re opening the door to trademark trolls, or piracy, or squatting.”

Lawyers agree that the changes, which were included in last year’s omnibus budget bill, are the most significant amendments to Canada’s intellectual property landscape since the 1950s, and they expect them to take effect sometime in 2016. Eliminating the prior-use requirement will make it simpler to register many types of trademarks (the new rules also broaden the definition of a trademark), and that may increase the challenges for legitimate users who have not yet got around to filing for a mark that they’ve been using for a while.

“The fear is that there’s going to be a bit of a gold rush, a race to the trademarks office by all of these ill-intentioned applicants,” says Donna White, a trademark expert who is the managing partner at the Ottawa office of Osler Hoskin & Harcourt LLP.

“One challenge for applicants, for business owners, for professionals is just going to be to keep on top of the volume of applied-for marks and to try to engage in some policing action to protect legitimate interests in marks. I have a very robust opposition practice now, I think it’s going to be much more robust.”

There are admittedly many issues that have to be clarified before the new rules come into force. The government has not yet advised on the fee structure for the multiple filings that will be possible under the Nice classification system, and some question how CIPO, the Canadian Intellectual Property Office, will cope if the volume of filings does rise significantly. Canada’s weekly Trade-marks Journal, already an inch-thick volume, is likely to get even thicker, and more costs and responsibilities are likely to be punted down to those who might wish to challenge a trademark application.

There’s even been a spirited debate about whether eliminating the prior-use requirement might decouple trademarks from trade and commerce, a responsibility of the federal government, and tie them to property and civil rights, which is a provincial responsibility. That could, in theory, open the door to a constitutional challenge, although not in the near future.

“We’re advising clients to be proactive now, before the changes come into force, so that they can take advantage of the lower filing fee and so that they are able to put their application in before other entities are able to move more easily into Canada. Make sure that they have moved to register for all of the brands that they think are important to them and that they are using or might be using in the next little while,” says Elizabeth Williams, who focuses on intellectual property law and brand management at Norton Rose Fulbright Canada LLP in Calgary. “It’s going to require that you really police the trademarks register as well, because if you don’t, it does become more costly for clients to expunge a registration that has already moved to registration, rather than to oppose it at the opposition stage.”

The changes will bring Canadian practice more in line with the situation in Europe, where there is also no requirement to prove the prior use of a trademark as part of an application. But the United States, also a party to the Nice and Madrid rules, has kept a prior-use requirement in place in its trademark registration process, meaning that Canada’s trademark rules will diverge from those of its biggest trading partner.

“It’s going to make searches more difficult, it’s going to enable companies to register their trademarks without declaring an intent to use, which means they can get a registration without ever using the mark,” says Scott Smith, director of intellectual property and innovation policy at the Canadian Chamber of Commerce, which is one of many industry groups that has spoken out against the changes. “The changes to the Trade-marks Act are flawed. The intent was right but how they are moving forward with it is flawed and it’s going to cause some problems, mostly because of the declaration of use. CIPO’s modus operandi was to try to streamline things and make it easier for people to apply. In so doing, they’ve ended up probably making it too easy to apply, where companies can apply across the board for things and see what sticks.”

One challenge will be how CIPO itself copes with the changes, given tight deadlines to examine applications made under the Madrid Protocol and the broad budget constraints that are hitting every Canadian government department. Some lawyers say the government agency is already struggling to turn applications around in a timely manner, and many observers fear  CIPO examination standards will slip if the removal of the prior-use requirement boosts the volume of trademark applications.

“They don’t have the resources now. They really are trying, but they are strained in terms of their resources, they are under a lot of pressure from the government to be more efficient and they are criticized now for their backlog,” says White, from Osler. White says the time to first examination of a trademark application has already risen to about eight or nine months, from four to six months earlier in her career, and she expects further delays as applications start to reflect the Nice agreement’s long lists of goods and services and as CIPO prioritizes the Madrid applications.

In a response to queries, Industry Canada says it is meeting the service standards outlined on the CIPO web site, and notes these standards are reviewed annually.

But White says CIPO already appears to have stepped up the volume of doubtful cases notices, where the agency notifies a trademark holder that it plans to approve an application that could be deemed confusingly similar to one they already hold. That gives the prior holder a chance to oppose the application, but it also brings costs. Some opposition proceedings are resolved by settlement, but others can be complex matters involving boxes of evidence and hearings with lengthy cross-examinations. Costs, over several years, can exceed $25,000 or even $50,000.

“They are effectively trying to download cost, download diligence on business,” White says. “To download on business an increased burden of vigilance and an increased burden to oppose is very significant. A lot of businesses don’t have the resources, and even if you do have the resources it takes a long time to resolve these things.”

But not all the changes to Canada’s intellectual property laws are worrisome, and lawyers mostly welcome new regulations that will make it easy to co-opt trade authorities in a crackdown on counterfeit goods. The new rules, which took effect on Jan. 1, 2015, allow trademark holders to register their marks with the Canada Border Services Agency and file a request for assistance asking the border officials to seize potentially counterfeit goods. Trademark holders will then have 10 days to decide whether to file a lawsuit to halt the import and have the goods seized and destroyed.

“For the first time in Canada, customs will seize infringing items at the border and hold them, as opposed to letting them come into the country and let the trademark owner deal with them later,” says Matthew Marquardt, a partner and IP lawyer with Dickinson Wright LLP in Toronto. “If pirates are trying to rip off your mark you can not only stop the goods, but perhaps even proceed against them criminally for trademark infringement. It opens up a much larger pool of goods that can be controlled at the border.”

Marquardt notes the courts have yet to rule on the new rules, making it all the more important for trademark holders to be sure that they have a strong case, perhaps working together or with industry groups or associations, before they file suit. “I would advise them to be proactive about bringing some of these actions under favourable circumstances so they can get these definitions and interpretations set the way they want to,” he says.

There are concerns here about the cost as well, and Robbins, from Bereskin & Parr, notes that a trademark holder might have to foot a hefty bill while court proceedings roll. “The provisions have been drafted in order to make sure that the trademark owner quickly bears the cost of the detention, so there’s a lot of apprehension about jumping in right now, because you could be jumping in by filing a request for assistance and putting yourself, as trademark owner, on the hook for the cost of detaining and potentially destroying the goods,” he says.

Another set of changes will simplify rules for patents and industrial design, making it harder, and probably costlier, to abandon a patent application and then reinstate it.

“Canada was perhaps the most flexible country, and abandonment didn’t really mean anything,” says Bhupinder Randhawa, a partner and patent expert at Bereskin & Parr. Canadian fees to reinstate a patent application used to be nominal, he says, in stark contrast to the situation in Europe, where deadlines are far shorter and fees can run to “many thousands of euros.” But that is likely to change.

“Patents are tough things to deal with for in-house counsel,” he adds. “I think it’s important for in-house counsel to pay attention to the deadlines, more so than they do sometimes, and to make sure they are not relying on the flexibility of the patent system, which is going away. . . . Playing any kind of games with abandonment and reinstatement could give your competitors rights and access to your technology and is going to be obviously quite risky.”

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