Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Is There a Canadian Equivalent to Section 337 of the U.S. Tariff Act?

The answer is no and maybe. While Canada does not have a trade remedy exactly like Section 337 of the Tariff Act, Canada does have a mechanism that may be used to obtain a court order against foreign goods that infringe a Canadian trademark that can be provided to the Canada Border Services Agency (CBSA) to seize and detain foreign goods. More correctly, the court order will be against the Minster of Public Safety and Emergency Preparedness and will order him/her to direct the CBSA to seize and detain goods that were identified in the application as infringing.

The Canadian mechanism must be used on a case-by-case basis. Also, Canadian cases must be brought to the Federal Court of Canada or a provincial court and, therefore, are not heard by a single body like the U.S. International Trade Commission. The Canadian mechanism is not as helpful as the U.S. mechanism because specific goods need to be unidentified. But, that being said, the initial remedy can be quicker (as it may not be necessary for a final determination on infringement for the court order for detention). As a result, the applicant needs to provide more specific information in Canada and does not start a general inquiry with respect to all goods of a generic description.

The Canadian mechanism presents an opportunity to negatively affect trading relationships between a foreign infringer of a Canadian trademark and their retailer/distributor customers. If the court order is obtained and the infringing goods are seized and detained by the CBSA, the retailer (or distributor) does not receive the goods and this may affect their downstream relationships/planning. The retailer/distributor customer may issue a contractual fine against the foreign infringer (or importer infringer)for breach of delivery terms under a contract and may not deal with them again. This would be helpful to the trademark owner in the short term an the long run. If the Canadian mechanism is used, the issue of infringement will be a topic for discussion between the parties dealing with the infringing goods and their future relationship may be put into jeopardy (especially if concerns about reputation are raised).

The infringing goods may also be seized if they are in Canada and in a distribution warehouse.

There are two provisions relating to trademarked goods:

1) Section 53 of the Trademarks Act: Applies in respect of imported goods to be distributed; and

2) Section 53.1 of the Trademarks Act: Applies to goods to be imported (or not yet released by the CBSA).

Section 53 of Canada's Trademarks Act provides:

(1) Where a court is satisfied, on application of any interested person, that any registered trade-mark or any trade-name has been applied to any wares that have been imported into Canada or are about to be distributed in Canada in such a manner that the distribution of the wares would be contrary to this Act, or that any indication of a place of origin has been unlawfully applied to any wares, the court may make an order for the interim custody of the wares, pending a final determination of the legality of their importation or distribution in an action commenced within such time as is prescribed by the order.

(2) Before making an order under subsection (1), the court may require the applicant to furnish security, in an amount fixed by the court, to answer any damages that may by reason of the order be sustained by the owner, importer or consignee of the wares and for any amount that may become chargeable against the wares while they remain in custody under the order.

(3) Where, by the judgment in any action under this section finally determining the legality of the importation or distribution of the wares, their importation or distribution is forbidden, either absolutely or on condition, any lien for charges against them that arose prior to the date of an order made under this section has effect only so far as may be consistent with the due execution of the judgment.

(4) Where in any action under this section the court finds that the importation is or the distribution would be contrary to this Act, it may make an order prohibiting the future importation of wares to which the trade-mark, trade-name or indication of origin has been applied.

(5) An application referred to in subsection (1) may be made in an action or otherwise, and either on notice or ex parte.

(6) No proceedings may be taken under subsection (1) for the interim custody of wares by the Minister if proceedings for the detention of the wares by the Minister may be taken under section 53.1.

Section 53.1 of the Trademarks Act provides that:

(1) Where a court is satisfied, on application by the owner of a registered trade-mark, that any wares to which the trade-mark has been applied are about to be imported into Canada or have been imported into Canada but have not yet been released, and that the distribution of the wares in Canada would be contrary to this Act, the court may make an order

(a) directing the Minister to take reasonable measures, on the basis of information reasonably required by the Minister and provided by the applicant, to detain the wares;

(b) directing the Minister to notify the applicant and the owner or importer of the wares, forthwith after detaining them, of the detention and the reasons therefor; and

(c) providing for such other matters as the court considers appropriate.

 

(2) An application referred to in subsection (1) may be made in an action or otherwise, and either on notice or ex parte, except that it must always be made on notice to the Minister.

(3) Before making an order under subsection (1), the court may require the applicant to furnish security, in an amount fixed by the court,

(a) to cover duties, storage and handling charges, and any other amount that may become chargeable against the wares; and

(b) to answer any damages that may by reason of the order be sustained by the owner, importer or consignee of the wares.

(4) The Minister may apply to the court for directions in implementing an order made under subsection (1).

(5) The Minister may give the applicant or the importer of the detained wares an opportunity to inspect them for the purpose of substantiating or refuting, as the case may be, the applicant’s claim.

(6) Unless an order made under subsection (1) provides otherwise, the Minister shall, subject to the Customs Act and to any other Act of Parliament that prohibits, controls or regulates the importation or exportation of goods, release the wares without further notice to the applicant if, two weeks after the applicant has been notified under paragraph (1)(b), the Minister has not been notified that an action has been commenced for a final determination by the court of the legality of the importation or distribution of the wares.

(7) Where, in an action commenced under this section, the court finds that the importation is or the distribution would be contrary to this Act, the court may make any order that it considers appropriate in the circumstances, including an order that the wares be destroyed or exported, or that they be delivered up to the plaintiff as the plaintiff’s property absolutely.

These two provisions permit the applicant to make the application to the Federal Court of Canada without notifying the infringer or importer. As a result, the detention my occur based on a prima facie case and then the infringement issues will be dealt with. That being said, significant costs may awarded against the applicant in the event of a false claim of infringement.

The ability to find and detain goods to be imported has improved. In the current times of secure trade and advance commercial information, the CBSA is in a better position to enforce court orders relating to the seizure and detention of infringing goods because they may be able to locate goods on the water using the H.S. tariff classification number and the advance commercial information. If the applicant knows that the infringing goods are manufactured in China, they are going to be able to provide the H.S. tariff classification and the origin and the name of the infringer for the CBSA to input into their data base.

Also of importance is that "interested persons" may take advantage of the provision - meaning that the person may be a U.S.-owner of the trademark, a manufacturer with a license to use the trademark and others. Unlike Canadian antidumping/countervailing duty laws, the complainant does not have to be a domestic manufacturer in Canada.

If you would like further information, please do not hesitate to contact Cyndee Todgham Cherniak at 416-307-4168. I will be posting another post in a few days about the mechanism in the Copyright Act.

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