New Risks Emerge as Anti-Counterfeiting Bill Fast Tracked

The government's anti-counterfeiting legislation, which died over the summer when the Conservatives hit the parliamentary reset button, is now back on the legislative fast track. Industry Minister James Moore quickly re-introduced the bill last month and speedily sent it to the Industry Committee for review. (I appeared before the committee earlier this week.)

That review has revealed that the numerous new border measures envisioned by the bill, including seizure powers without court oversight, fall short of the demands of intellectual property lobby groups. Those groups intend to use the committee hearings to seek further expansion of border seizures and to shift more enforcement costs to the public.

Since virtually everyone is opposed to harmful counterfeiting ‑- particularly when fake goods create health and safety risks ‑- it is unsurprising that the bill appears to enjoy all-party support. The focal point of the bill is that it grants customs officials broad new powers without court oversight. Officials will be required to assess whether goods entering or exiting the country infringe any copyright or trademark rights. Should a customs official determine that there is infringement, the goods may be seized and prevented from entering the country.

The bill features several safeguards designed to limit the potential for wrongful seizures or targeting of individuals. For example, it excludes both patent claims (which are very difficult to assess) and in-transit shipments (which involves goods that do not originate in Canada and are not destined to stay in Canada). Moreover, there is an exception for the personal effects carried by individual travelers as they cross the border.

Pressure may lead to increased luggage searches

While those are sensible limitations, the lobby groups are demanding several significant changes. First, the groups want to vest even more powers in the hands of customs officials, calling for reforms that would allow for the destruction or forfeiture of goods without court oversight. Moreover, the groups argue that under the proposed system, "too much is asked of rights holders." As a result, they want taxpayers to bear the burden of much of the costs associated with private enforcement of their rights.

Second, the lobby groups are demanding new statutory damages for trademark infringement. The inclusion of statutory damages would mean that rights holders would not have to prove any actual damages, but rather could potentially sue for millions of dollars without evidence of loss. In the United States, statutory damages for trademark has led to trademark trolls engaging in litigation designed primarily to obtain costly settlements against small businesses that can ill-afford to fight in court.

Third, lobby groups are seeking the removal of the exception for in-transit shipments, arguing that customs officials should be permitted to seize goods not destined to stay in Canada. Experience with in-transit seizures in Europe reveals that generic pharmaceuticals are often targeted. During 2008 and 2009, Doctors Without Borders found at least 19 shipments of generic medicines from India to other countries were impounded while in transit in Europe. This included a Dutch seizure of AIDS drugs that were en route from India to a Clinton Foundation project in Nigeria. In 2011, the Court of the European Justice ruled against in-transit seizures on the grounds that there was no infringement in the EU.

Fourth, there has been discussion at the Industry Committee about the possibility of amending the personal traveler exception. If the exception were removed, it might open the door to escalated searches of both physical luggage as well as electronic devices such as iPods, smartphones, and personal computers.

The government's counterfeiting bill would benefit from some amendments, but the current lobby group emphasis signals that there may be escalating pressure to remove many of the balancing provisions. Those changes could result in shifting the costs of enforcement to the public and increasing the expenses borne by small businesses that import goods from abroad.