Getting Canada in Line with International IP Standards

By Alan Cohen

Corporate Counsel

2012-07-24 00:00:00.0

Each year, in a document known as the "Special 301" report, the U.S. Trade Representative lists those countries whose policies on intellectual property have raised eyebrows, and blood pressure readings, back in the States. These are the nations—40 of them in 2012—where U.S. companies may find their IP rights in peril, whether from piracy, insufficient protections, or lax enforcement (and usually all three). The most egregious offenders go on a special code-red subsection in the report, known as the Priority Watch List. It's full of the usual suspects. China? Check. India? Check. Russian Federation? Check.

Oh, and Canada.

Opinion may be mixed on whether to forgive or thank our northern neighbor for giving us William Shatner and Celine Dion. But on one point, the U.S. government, key trade associations, and even some top Canadian politicians have been in agreement: Canada's intellectual property laws—specifically, its Copyright Act—could use an overhaul. They haven't been shy about their feelings, either. In a February press release urging Canada's continued presence on the Priority Watch List—where it has been since 2009, after 14 years on the less ominous Watch List—the International Intellectual Property Association, a coalition of trade groups representing the U.S. software, motion picture, music, and other industries, said the country stands "virtually alone among developed economies in the OECD (and far behind many developing countries) in failing to bring its laws in compliance with the global minimum world standard. . . . [Canada] is cementing its reputation as a haven where technologically sophisticated international piracy organizations can operate with impunity."

Canada's prominence on the Special 301 report has been "a sort of black eye" for the country, says David Weslow, a partner at Washington, D.C.'s Wiley Rein, who often works on cross-border IP matters. The problem, he and other IP experts say, boils down to this: Unlike the United States and the European Union, Canada didn't rush—or even amble—to adopt the provisions of two key 1996 treaties ratified by the World Intellectual Property Organization (WIPO). These provisions, which were incorporated by the U.S. in 1998's Digital Millennium Copyright Act (DMCA), set ground rules for copyright in the age of online and digital media. Chief among these are a prohibition against circumventing technologies that control access to copyrighted works, such as encryption that prevents easy copying of a DVD. The DMCA also spells out the obligations of Internet service providers and other companies that host online content. They would be granted safe harbor from any infringement by their users if they carried out specific actions mandated by the law, like taking down allegedly infringing content until the matter was resolved by negotiation or court.

There have been other IP trouble spots, too. Canadian law has been less clear than its American counterpart on the dos and don'ts of reverse engineering software, a practice that often requires accessing copyrighted computer code so your own product will be interoperable with it. Canada's policies on counterfeit goods have also been a problem. "In the U.S., if a trademark owner has taken steps with Customs, agents can seize counterfeits at the border," says Weslow. "In Canada, agents don't have the authority to make the seizure."

American complaints haven't exactly fallen on deaf ears. For one thing, as the largest trading partner of the United States—nearly $600 billion flowed between the nations in 2011—Canada has a vested interest in smoothing out any kinks in the relationship. But it has an interest, too, in boosting its own industries and markets, and becoming a bigger player on a bigger world stage. "There is a recognition today that countries that are out of step with global norms are impacted negatively in relation to foreign investment and opportunities in research and innovation," says Jane Caskey, global practice leader of Norton Rose's intellectual property practice in Toronto. "So there is an incentive for such countries to better align with global norms."

Since 2005, there have been four attempts to amend Canadian copyright law. Every one of them has been controversial within Canada; the biggest sticking point being their embrace of and prohibitions on skirting—so-called digital locks, the access control technologies blessed by the DMCA. The first three bills were introduced by minority governments and died when new elections were called.

The fourth has fared better. Introduced last September by a now majority government under Conservative party Prime Minister Stephen Harper, Bill C-11—the Copyright Modernization Act—passed Canada's House of Commons on June 18 and, as of press time, was before the Senate, where it is widely expected to pass by the start of the summer recess.

Yet for U.S. companies, this "modernization" may not be all they were hoping for, and understanding what it gives, what it doesn't give, and what it may take away will be important for those who want to protect or leverage their IP rights in Canada.

The Canadian amendments adopt digital locks in a big way. Copyright owners can use technological measures not only to prohibit unlawful copying, but even the making of personal-use backups (a process that is legal when no locks are present). Circumventing these locks is prohibited, as is the sale of devices that can crack them. That last provision is no small point, says Jesse Feder, director of international trade and intellectual property at the Business Software Alliance, a U.S.–based industry association and member of the IIPA: "Canada has become a distribution hub for things like mod chips used to break the protection measures in game consoles." For content creators in the U.S., he says, the new provision is "a great step forward."