Yesterday’s Speech from the Throne (#SFT13) contained two
items that will require detailed consideration of amendments or clarifications
of existing Canadian intellectual property law and amendments or clarifications
to the anti-counterfeiting Bill C-56 from the previous session – or
whatever it is numbered if and when it is resuscitated.
#SFT13 says:
·
“Our Government will ...Take further
action to end geographic price discrimination against Canadians."
·
“And our Government will take
additional action to protect Canadian consumers. Canadians are tired of hidden
fees. They deserve to know the real cost of paying by debit or credit card. And
they should not be charged more in Canada for identical goods that sell for
less in the United States.”
Achieving these goals requires dealing with some extremely
complex issues that have bedevilled courts and legislatures for decades. The
elephant in the room is the issue of “parallel imports” or “grey market” goods –
namely perfectly legitimate and authentic products that have been legally made
and put on the market outside of Canada and which can be imported into Canada
at a cheaper price than that demanded by the so-called “exclusive” distributor.
These good are by no means whatsoever “counterfeit”
or “pirate” in any sense.
Despite the complexity of the “parallel imports”
issue in terms of copyright law, some propositions are very simple.
Truly “free” trade cannot permit the imposition of
“private tariffs” in the form of IP laws that permit geographic price
discrimination or market segmentation. That would allow copyright law to become
an unintended “instrument of trade control”, in the
words of retired Justice Fish of the Supreme Court of Canada, and a very
effective and unregulated “private tariff”.
Canada has explicit provisions in its Copyright
Act regime that permit and encourage just such a regime for books. The
situation for goods other than books is more complicated.
In 2007, the Supreme Court of Canada in the Kraft decision allowed a victory for the importer of “parallel
import” or “grey market” Toblerone chocolate bars, largely based upon arguments
that I made on behalf of the Retail Council of Canada. For a number of reasons,
including the complexity of the decision and the issue itself, that victory has
not been fully understood, even by some those importers who might benefit from it.
Here’s an analysis I did for the
Law Society of Upper Canada in 2008 that’s still useful.
Here is a summary of where the law now stands:
- The sui generis book regime in the Copyright Act works well to keep out commercial scale importation of parallel imports and my much missed “remainder” fine art books, but is ineffective to stop personal importation by travellers and by Canadians who cross-border shop from the comfort of their own home or with their smart phone via electronic commerce in very large quantities.
- Trade-marks law is ineffective to stop parallel
imports.
- In theory, copyright on elements of packaging and
labelling can be used to exclude parallel imports if the copyright is assigned
to a Canadian entity that is different than the foreign entity that made the
packaging.
- However, there’s a very good chance that such an
assignment will trigger one or more of the following unintended and unfortunate
consequences:
- Undesirable corporate and tax law consequences
- “Loss of distinctiveness” resulting in invalidity
of trade-mark registrations
- Defence and Counterclaim allegations in any
vigorously fought litigation relating to sham transactions, copyright misuse,
abuse, and/or various Competition Act issues. (I have raised such allegations
in a test case proceeding which then fizzled and never went forward).
Thus, copyright law – other than in respect of
books – is essentially a toothless tiger when it comes to excluding legitimate
parallel imports. But a lot of supposedly well-informed importers don’t get that,
for the reasons stated above and for other reasons, which I won’t go into here.
Therefore, clarification of the law would be useful and
maybe even essential. Even experienced IP lawyers have been baffled by it for
decades. It is little wonder, then, that many of their clients and even the
general counsel of their clients often don’t understand it. Maybe Parliament
needs to make it sufficiently clear in simple terms so that even a copyright lawyer
can understand it. I look forward to helping to find the appropriate language.
In the case of books, unless we want to keep an arguably
anachronistic, anomalous and clearly protectionist regime that guarantees
higher prices to Canadian consumers and higher profits to Canadian “exclusive
distributors” but little else in terms of benefits to Canada, it is essential
that the Copyright Act be amended. Otherwise, we are certain to continue
have higher book prices overall in Canada than the USA, unless the current
market forces of Amazon and others put Canadian exclusive distributors and some
publishers out of business, which would not be a desirable result. As for the
rest of Canadian copyright law, clarifying language seems necessary for the
reasons stated above.
The anti-counterfeiting Bill C-56 – which may or
may not get revived in the new session – has countless confusing references
that deal with parallel imports. While
the intention seems benign, the result may not be. Much more scrutiny and simplification
may be required to ensure consistency with the Speech from the Throne statements.
In any event, these Speech from the Throne items
cannot be achieved without considerable attention to IP details.
No doubt, the lawyers and lobbyists who would like
to preserve the “private tariff” of IP to prevent real free trade and to geographically
segment the Canadian market for price discrimination purposes are already hard
at work to thwart the Government’s intention and to recover from their failed attempt
in the Kraft case to hijack copyright law for this purpose.
And last but not least, let’s hope that the #CETA
and #TPP agendas don’t derail the perfectly laudable sentiments in #SFT13.
In that connection, beware of the predictable
efforts from the US Government and lobbyists representing American interests who
will take their frequent posture of “do as we say, not as we do”. The US Supreme
Court recently clarified in the Kirtsaeng decision that copyright
law cannot be used to stop the parallel importation of goods – indeed the case was about books –
largely based upon a “parade of horribles” that would result had it ruled
otherwise.
As I occasionally explicitly reiterate, the views
expressed on this blog are solely my own.
HPK