The developing landscape for detaining counterfeit goods

March 10 2014

The manufacture and sale of counterfeit goods is a global phenomenon, which has been referred to as “the crime of the century”. Canada has not been immune to this issue, and brand owners frequently wish to explore the available measures for detaining counterfeit goods at the Canadian border before they enter the country. The procedures available at present have proven to have limited success, but the government has introduced new measures that are expected to pass into law in the near future.

Counterfeit goods are sometimes imported into Canada in large container shipments, often with imitations of various brands intermixed. Increasingly, however, goods arrive in small shipments by mail or courier. The arrival of goods at borders throughout the world in a similar manner has been recognised internationally, and there are treaties, agreements and model laws providing that measures should be available to facilitate the seizure of products infringing trademarks and copyrights before they enter the country. However, the laws of some countries, including Canada, require legal proceedings in court by brand owners whenever products are detained at the border. Consequently, stopping small numbers of counterfeit goods of a single brand has often proven not to be cost effective.

Many of Canada’s trading partners have implemented border measures allowing for action by customs authorities of their own accord (ex officio), including rights registration systems and provisions for disposition of confirmed counterfeits without court orders in uncontested cases. Indeed, the European Union has adopted a new Customs Regulation, effective January 1 2014, which provides for mandatory simplified proceedings that do not require court orders for disposal of counterfeits seized in uncontested cases and optional new procedures intended to address the reality of small shipments.

At present, Canada Border Services Agency (CBSA) officers have no mandate or authority to detain counterfeit products, or to disclose information regarding shipments of suspect products to right holders, unless a rights holder commences legal proceedings. Further, CBSA generally requires detailed information regarding specific shipments, which rights holders seldom have, before it will stop shipments under the provisions. Those requirements, combined with the fact that shipments of limited numbers of knock-offs of a particular rights holder’s goods may make the cost of proceeding under the provisions outweigh the economic benefit, has resulted in the existing provisions seldom being used.

Recognising the difficulties described above, the CBSA and the Royal Canadian Mounted Police set up less formal joint-forces operations at primary Canadian entry points to deal with products at the border suspected of being counterfeit. The system was prioritised, primarily dealing with health and safety issues, connections to organised crime and cases involving large distributors. However, following a reorganisation of the Royal Canadian Mounted Police in 2013, the continued effectiveness of the joint operation is currently unclear.

In 2013 the Canadian government, recognising the need for reform of Canada’s trademark and copyright border measures, introduced new border measures in Bill C-8, the Combating Counterfeit Products Act. The bill has now passed through second reading and committee review and will likely be proclaimed into law during the current session of Parliament. The bill provides for the addition of new border provisions to the Trademarks Act and Copyright Act. The provisions clearly prohibit the import or export of counterfeits and provide CBSA with ex officio detention powers and the ability to provide limited information to rights holders. However, detention, seizure and forfeiture are subject to legal proceedings being commenced by rights holders that have made a ‘request for assistance’ within 10 days of CBSA providing information to the rights holder and appear to contemplate re-export of confirmed counterfeit goods in cases where no right holder has made a request for assistance.

The new border measures will require regulations that have not yet been detailed. Once the regulations are in place, it will be possible to assess more clearly optimal strategies for obtaining expeditious and cost-effective relief against the entry of counterfeit goods across the Canadian border.