Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue 10 - Evidence - May 8, 2014


OTTAWA, Thursday, May 8, 2014

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:30 a.m. to examine the subject matter of those elements contained in Parts 2, 3 and 4 and Divisions 2, 3, 4, 8, 13, 14, 19, 22, 24 and 25 of Part 6 of Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014, and other measures.

Senator Irving Gerstein (Chair) in the chair.

[English]

The Chair: Good morning and welcome to the Standing Senate Committee on Banking, Trade and Commerce.

Today is our third of five meetings as part of the pre-study of Economic Action Plan 2014, namely, Bill C-31, An Act to implement certain provisions of the budget tabled in Parliament on February 11, 2014, and other measures.

This morning the committee is focusing on Part 6, Division 25 which proposes to amend the Trade-marks Act, found at tab F-25 in your binder and page 207 of the bill. Division 25 of Part 6 proposes to amend the Trade-marks Act to make it consistent with the Singapore Treaty on the Law of Trademarks, amongst others.

Today's meeting will be divided into two parts. The first half-hour will be a session with government officials, and afterwards we shall hear from various associations with a direct interest in this proposed legislation.

Let me introduce, from Industry Canada, Ms. Darlene Carreau, Chairperson, Trade-marks Opposition Board; and Ms. Anne-Marie Monteith, Director, Copyright and Trade-mark Policy Directorate.

It is with great apologies, Mr. Halucha, that I introduce you as well. I saw you sitting here, but unfortunately they didn't add you to the notes.

Who will speak on behalf of the panel? Mr. Halucha.

Paul Halucha, Director General, Marketplace Framework Policy Branch, Industry Canada: I'm the Director General of the Marketplace Framework Policy Branch with Industry Canada.

The Chair: The floor is yours.

Mr. Halucha: Thank you. I appreciate the committee's indulgence for a short statement to help position this complex issue.

In January, the government tabled in Parliament five international treaties that were developed by the World Intellectual Property Office. The five treaties are: the Madrid Protocol, the Singapore Treaty, the Nice Agreement, The Hague Agreement and the Patent Law Treaty.

The changes to the Trade-marks Act that are proposed in Division 25 of Part 6 of Bill C-31 will allow Canada to implement the Madrid Protocol, the Singapore Treaty, and the Nice Agreement. By joining these treaties, Canadian businesses will have access to a trademark regime that is aligned with best practices, reduces costs and red tape, and attracts foreign investment to Canada.

[Translation]

Let me briefly describe each of the treaties. The Madrid Protocol is an international trademark registration system. It allows businesses to fill out a single form in a single language and to pay one fee for protection in a maximum of 91 countries.

The Singapore Treaty seeks to harmonize and streamline national trademark registration systems in ways that are user-friendly, while reducing business compliance costs for trademark owners. A total of 35 countries have signed the Singapore Treaty.

The Nice Agreement governs a standardized classification system for trademarks that is used by 150 IP offices to categorize goods and services to make it easier to search and compare trademarks.

[English]

The government has decided to implement these treaties for several reasons. The first is to modernize Canada's IP regime in order to adapt to the reality of globalization and keep a competitive environment for Canadians. These treaties will benefit both businesses and consumers. They will help Canadian companies compete globally and protect their valuable intellectual property in Canada and abroad, and they will reduce the costs and complexity of IP administration. For example, the International Trademark Association calculated a 62 per cent savings in total fees for a business wishing to register a trademark in the U.S. and 10 other countries through the Madrid Protocol, when compared to filing in each country individually. Maintaining and renewing an international portfolio of trademarks will be much simpler and more cost-effective for businesses as it will be done at the same time through a single application.

From a global perspective, the vast majority of Canada's trading partners have already joined Madrid and Singapore. The world is moving toward the use of these treaties and in general harmonizing around best practices. For our trademark system, this means eliminating administrative activities that are largely unique to Canada, especially those that increase red tape for Canadian businesses but not for foreign businesses applying in Canada.

Over the past 10 years, the Canadian Intellectual Property Office held three consultations regarding Madrid and Singapore. Two formal consultations took place in 2005 and 2010; and in the fall of 2013, targeted consultations were undertaken with Canadian IP experts. The results of these consultations were mixed. While the majority supported Canada's ascension to Madrid and Singapore, views differed in the legal IP community with regard to the various options for implementation. Specifically, two main concerns were raised: first, the grounds to file an application; and second, use.

Regarding the first point, clauses 330 to 339 propose to amend sections 16 to 30 of the Trade-marks Act to allow only for trademark applications conditional on use or intention to use the trademark in Canada. This change was necessary to meet the requirements in the Singapore Treaty and to effectively accede to Madrid.

On the second point, use remains central to Canada's trademark regime. The change in clause 345 relates to updating section 40 of the act to no longer require businesses to file a form stating that the mark is being used. This change reduces the paper burden on the applicants and is consistent with the approach of our trading partners; for example, the United Kingdom, Australia, New Zealand and Singapore do not require this form. The U.S. also does not require this form for Madrid applications.

Canada's trademark system has stayed relatively unchanged since the 1950s. In this context, we appreciate that the proposed changes in Bill C-31 will require adjustments to the current practices in the legal IP community. Industry Canada and the Canadian Intellectual Property Office are committed to working with all stakeholders to ensure an effective implementation of these treaties and the best possible outcomes for the Canadian economy.

I will end my remarks here. Ms. Carreau, Ms. Monteith and I welcome questions from members of the committee.

The Chair: Mr. Halucha, I'd like to clarify. You talked about this as a reflection of the globalization of trademark law. I want to clarify several words that you used. You used the word that this is to ``harmonize'' with Singapore and Madrid, if I heard you correctly. I'd like to understand: Is harmonizing an interpretation of what was done there or is it a direct reflection of what is contained in those agreements? Is it less or more?

Mr. Halucha: It's a direct reflection of what is contained in those agreements.

The Chair: It's a direct reflection of what is in the Singapore and Madrid agreements.

Mr. Halucha: There were two elements. First, was a set of changes we needed to make to the IP administrative system in Canada in order to harmonize, and then we had to weigh how to do it to maximize the benefits for Canadian businesses. Those were the two principal objectives behind the reforms. Harmonize, but in an effective manner.

Senator Hervieux-Payette: I'd like to know if this decision to modify is related to our free trade agreement with Europe.

Mr. Halucha: That's a very good question. It's not a requirement of the CETA agreement. However, critically important to Canada is that CETA open up new markets to Canadian companies and makes it easier for Canadian companies to enter into those marketplaces. Clearly, the motivation behind the treaty was to encourage Canadian companies to enter those marketplaces.

Aligning our IP administrative practices provides an encouragement to companies that are making the decision on whether to enter those trade markets. For example, if you're a company in Canada developing a new product for the marketplace and you're looking to sell internationally, you will be able to access and protect, through one administrative channel process, your trademarks in those markets. In our view, that will encourage companies to enter those foreign markets. It's not a requirement; however, we view a high degree of alignment between those policy objectives.

Senator Hervieux-Payette: I want to know if it will reduce the cost for people coming into the market with new products for registration in all these countries. It's a very costly undertaking, and it is also quite a long process when you want to operate in other countries under the same name. So will it shorten the time and reduce the costs?

Mr. Halucha: I'll turn to Darlene Carreau to speak to that more specifically.

On a general level, a Canadian company now that would like to enter into Europe would be required to obtain an agent in any country that they intend to trademark-protect their wares. Second, they would need to file separate applications to enter into those jurisdictions.

The very fact they will be able to do it from Canada and basically pick which other jurisdictions they intend to use their mark in and where they would like to protect it will permit a degree of streamlining. So it's a principle of harmonization.

Senator Hervieux-Payette: Is it shortening time and reducing costs? I know they had to go through a nightmare of registering in many countries, hiring agents and paying fees quite extensively. I'm asking you: Will we reduce the costs and will we accelerate also the approval system?

I wanted to say to my colleague: Either we were sleeping in Canada, because the protocol of Madrid is from 1995. The Singapore one is from the 1970s and I don't remember when this was. This is just to tell you that we're talking about doing something in 2014 that was done in 1995 for the latest one. So were we sleeping in Canada? Why did we take so much time to realize there was an advantage?

Senator Massicotte: Just say ``yes.''

Mr. Halucha: Yes, there's an advantage to being there.

The debate about why Canada is only acceding now is a complicated story. IP change is not an easy thing to do in most jurisdictions. For example, the debates that took place in Canada around the Copyright Modernization Act, a set of changes that would modernize copyright for the digital world, took almost eight years to proceed through the parliamentary process. There was a large national debate on it.

I don't have an easy answer for you why now versus before other than we are moving forward with it now, and the government is committed to modernize IP regime in line with international norms, in particular around administration.

Senator Hervieux-Payette: And costs?

Darlene Carreau, Chairperson, Trade-marks Opposition Board, Industry Canada: You raised two issues: accelerating and reducing costs. Those are the primary impetus for moving forward with Madrid and Singapore. Those filers using the international system of Madrid can anticipate cost savings. As Paul said, these applicants will be filing in one language, with one fee, with one trademark application; they're not required to go to each individual jurisdiction, hire local agents, prepare new applications and comply with individual country requirements. It is easier for them to get in the door.

Madrid also has tight timelines on how long an office will take to examine the trademarks, so we can anticipate that the Madrid applications will be processed quickly.

In terms of Singapore, the impetus there is around streamlining and reducing red tape. Again, it is anticipated that our domestic process will be faster and reduce costs as a result.

Senator Hervieux-Payette: We'll see. Thank you.

[Translation]

Senator Bellemare: I am not an expert in this; however, I know that the whole issue of registering trademarks can have an impact on innovation, research and so on.

We received a letter that was signed by numerous people. I would like to read some of that letter to you and hear your thoughts on it. The letter is asking us to amend the trademark act. I haven't looked into the details of the proposal. The letter says the following:

To conclude, no longer using trademarks not only changes a century and a half of statutory interpretation in Canada, but it also puts Canadian businesses at a disadvantage when it comes to selecting, researching the availability of and acquiring trademarks and trade names in Canada. It will also increase costs, risk and disadvantages for businesses. It will open the door to —

[English]

The Chair: Are you reading from the letter dated April 17?

[Translation]

Senator Bellemare: It is the letter from May 6, addressed to Minister Moore. I am reading from the paragraph that starts with, ``The rationale behind our suggested amendment''. I have it in French, but not in English. The letter is from May 6; the paragraph starts on page 2.

I would like to read the following excerpt, which I find particularly alarming.

It would put Canada's Trade-marks Act in conflict with corporate expectations, particularly those of small and medium-sized businesses, which expect that common law will protect their interests even if the trademark is not registered. Again, it could open the Trade-marks Act up to a constitutional challenge. A bill that allows a trademark to be registered without being used might not fall under the federal authority to regulate trade and commerce.

How would you respond to that? The letter was signed by legal representatives from various provinces.

[English]

Mr. Halucha: I'll respond first.

The letter is premised on the argument that use has been de-centred from the Trade-marks Act. That is the view of the community of agents who brought the letter forward. It's not the view of the Government of Canada. And that's the basis on which the argument is made that the bill is unconstitutional.

I can provide you with a view on how use remains and will remain central to the trademark regime, even with these changes and after we assent to the treaty. Right now, new section 31(1) will require at the examination stage that:

A person may file with the Registrar an application for the registration of a trademark in respect of goods or services if they are using or propose to use, and are entitled to use . . . .

So use remains the basis for a registration application in Canada.

Second, as the grounds of opposition, use remains a basis upon which the examination process can consider whether or not a trademark is valid for Canada. New paragraph 38(2)(e) of the act says ``that, at the filing date of the application in Canada, the applicant was not using and did not propose to use the trademark in Canada in association with the goods . . . .'' It's a ground for an opposition process.

After a trademark has been granted in Canada, there's a registration process. During that entire three-year period, the trademark owner is required to start using — or continue using the trademark if they had already been using it — during that period.

Finally, at the end of that period there's a cancellation process — this is proposed section 45 of the act — that permits and requires that the user of the trademark shows actual use if they are challenged. New section 45 provides grounds for the trademark to be cancelled in Canada; failure to use during that period is a ground.

[Translation]

Senator Bellemare: Could you explain what you just told me by providing a concrete example of a trademark? I find this very complicated.

[English]

Ms. Carreau: In our current regime, if you are filing a trademark application, you would be required in the application to provide statements that you have been using your trademark, since when, or that you intend to use your trademark in Canada. If your trademark went forward in opposition, that could be challenged, and you would receive your registration.

Some of the areas where we're talking about getting rid of use statements — let's go back. In your application, you need to provide statements around use and intent to use. You would no longer be required in your trademark application to make those statements. But, as Paul said, you still need as a business to have an intention to use in Canada or be using. The business is no longer required to make the statement in their application.

[Translation]

Senator Bellemare: I did not verify that this is the case, but it says somewhere in the letter that the required amendments would, for example, take the hyphen out of the English version. How will taking the hyphen out of the term ``trade-mark'' change anything?

[English]

Ms. Carreau: There's no substantive change to the meaning of ``trade-mark''; it stops spellcheck from picking up ``trademark.'' The rest of the world doesn't spell it with a hyphen.

Mr. Halucha: That could be challenged constitutionally.

Ms. Carreau: I suppose anything could be challenged constitutionally — and has been.

[Translation]

Senator Massicotte: I would like to raise the same issues.

There are representatives from the Chamber of Commerce here. The wording is different, but I believe they are raising the same objections. In the past, trademarks had to registered and used, which created a sort of goodwill and provided a point of reference. Now, use is not as important. You have likely heard the arguments they are putting forward because I am sure they shared their opinion with you even before this bill was introduced.

[English]

You said, ``used or entitled to use.'' ``Entitled to use'' does not mean you will necessarily use it; it means you think you have a claim to use it or an ability to use it. I haven't read every word of the rest of the act, but it seems to suggest that, contrary to your argument of maintaining your rights, usage is not the only criterion. If you're entitled to use, that should be good enough. That means maybe their point is valid and that you are changing the rules of the game.

Ms. Carreau: We're not changing any of the substantive requirements around trademarks. I know you'll hear that from our agent community. As Paul said, that is not the government position on that issue. Fundamentally, trademark rights accrue through use in the marketplace, and that's how a brand becomes valuable. The more that a company uses its trademark in the marketplace, the more valuable it is. That fundamentally has not changed.

What we have changed is how the trademarks office looks at what a business needs to do in Canada in order to obtain a trademark registration. We're saying that a business no longer requires filing paperwork with us indicating when they're using and from what date they're using before we give them their certificate of registration. That really is the crux of the changes we have made.

The fundamental trademark system in terms of use is very important to us, and there has been no substantive change in that regard.

Senator Massicotte: Use is still —

Ms. Carreau: — central to the Canadian trademark system.

Senator Massicotte: Therefore, an American company cannot be entitled to the use of a trademark that they never expect to use or never do use in Canada; but after five or ten years, their trademark protection would be extinguished.

Ms. Carreau: It can be challenged for simple non-use under the summary expungement proceedings that Paul indicated. The Registrar of Trade-marks in Opposition, the Canadian Intellectual Property Office, also has the power to challenge those trademarks and ask for evidence of use in the marketplace.

Senator Massicotte: If it's not used, it is extinguished. If it can be proven that it hasn't been used after 10 years, their protection is extinguished; it disappears.

Ms. Carreau: You can challenge it after three years.

Senator Massicotte: You can challenge anything. The bottom line is the rule of law will be such that it will be extinguished.

Ms. Carreau: There's no time limit in terms of when it will die. We're assuming that all trademarks currently on our trademark register are in use. I can tell you as an official from the Canadian Intellectual Property Office that that is highly doubtful. You should know, for instance, that we currently allow for the registration of trademarks without use in Canada. So we allow foreigners to come in and file on the basis of a foreign registration and use in a foreign jurisdiction. They do not need to file a declaration of use in Canada or provide any use in formation here in Canada, and we give them a trademark registration.

Senator Massicotte: My colleague referred to a letter signed by representatives of every province. If you look at the list of people who signed it, they are very experienced and knowledgeable. I don't know if you have a copy. The Chamber of Commerce gave us a submission, which we'll hear about, as well as the Canadian Manufacturers & Exporters. They all raised the same issue. I appreciate your position, but there seem to be a lot of intelligent people saying you're wrong; that's not how they read what you're proposing. At the end of the day, the words will mean a lot. How do you feel about that issue? What did you tell these people in the last month or so before you raised these proposed amendments in this budget bill? Why aren't they convinced, if you're so convinced? Maybe you're wrong.

Mr. Halucha: We don't think we're wrong, to say the obvious. Certainly this is going to change the administrative practices, and the practices have been in place in many cases since the 1950s. There will certainly be a requirement for change. Typically any type of legislative change that happens where you're requiring a professional community to adapt to new realities, there's frequently some resistance. Other countries that have acceded to Madrid and Singapore faced similar arguments made from the agent communities in many of those countries. There is a resistance to change. It's just that an adaptation challenge needs to happen.

Senator Massicotte: The same arguments arose in other countries, and you seem to be saying that they're all wrong, not only Canadians but the whole international community is wrong.

Mr. Halucha: No, in fact it's the opposite. We looked at the assessment of what actually took place in those countries. For example, one of the arguments in here is that we will see a lot more spurious claims coming into Canada. Similar arguments were made in other countries. We've talked to policy experts who lived the experience. Canada is almost the last developed country to join the system. All of our trading partners are there, which signals that there are obviously benefits to it. Many of them went through a transition stage after the ascension to the treaties, have successfully moved forward and are now reaping the benefits of the system. There was a period of time in a number of them when these types of claims came forward.

Senator Tannas: I'm just passing through on this committee, but I couldn't resist a couple of questions.

The concern letter speaks about trolls — the dot-com thing where everybody's name or idea gets taken in anticipation of blocking the way and extracting a payment. What has been the experience elsewhere? If we're the last ones, there must be a great body of experience in other countries. Do trolls exist in the other Madrid signatories?

Mr. Halucha: Trolls potentially could exist in our system now. In fact, talking with people, there are examples of people who have tried to bring forward spurious claims. There's a system of checks and balances, which Darlene can expand upon, to deal with those types of spurious requests for trademark protection.

There doesn't seem to be any reason to believe there will be some sort of increase, other than we will be plugging into a much bigger system with a larger number of trademarks than we currently experience in Canada. We will see an increase in foreign trademarks for certain. But we are convinced that we have a robust system at the examination stage and the opposition stage to deal with those types of trademarks.

The trolling issue is a kind of import from what's happened on patent policy and to some extent on copyright. However, you don't have a phenomenon of trademarks.

We just did a series of round tables in about nine different cities and met with 100 businesses in January and February. It was specifically on the issue of trolling. Trademark trolling did not come up as any kind of consideration. We had signalled that for part of the period we were doing these round tables, the treaties were before the House of Commons.

Senator Tannas: Again in the concern letter, or maybe it was another one, it was indicated that the U.S. has maintained the use as being central in the way in which we have it now in Canada. Are they signatories to the Madrid agreement? You didn't mention them when you spoke.

Mr. Halucha: Yes, they are.

Senator Tannas: Why can they do it and we must change? Could you explain that?

Mr. Halucha: Sure.

The U.S. actually did have a constitutional issue and the U.S. government recognized that. When they implemented the treaties, they implemented a dual system where the paper use requirement remains for domestic applicants. Internationally, they don't require it, so an international trademark applicant doesn't have to demonstrate it through Madrid. However, the domestic applicants are required to do it.

The challenge is that effectively you have a greater burden on domestic businesses than you have on foreign businesses. In assessing whether that would be appropriate to Canada, we were conscious of the fact that we would have been putting a higher burden on Canadian companies than we would be placing on foreign companies. With a policy objective of actually reducing the burden on Canadian companies, it seemed contrary to that.

[Translation]

Senator Maltais: I have a very quick question. At the beginning, you said that the free trade agreement means that Canadian companies will enter into a transaction with one entity instead of 28 or 30 members of the European community. Will the reverse apply?

Ms. Carreau: Yes.

Senator Maltais: For the pharmaceutical industry as well?

Ms. Carreau: Absolutely. That is the case for any industry.

[English]

Senator Hervieux-Payette: Maybe I can help my colleagues understand. The fact is that people are not using it and I'd like to know, if it's not used and there is no product coming out, will they eventually lose? Who will stop them from using it, our own government agency or companies that would like to use the name? Actually, this is one of the biggest concerns.

I was involved with a file and a multinational corporation from the United States wanted to stop it, but they were too late and the delay was passed. Even if they wanted to oppose, there was a delay and, of course, they lost. Then when we wanted to file the name that was approved in Canada and the United States, of course, they told us that it would cost at least a million dollars to fight the agency in the United States. I'd like us to understand that we're talking about big money when it comes to trademarks, and that the game is not played in a very even way.

I'd like to know if we can be sure that when people register a name we can get rid of it if the people aren't using it and how that will happen.

Ms. Carreau: So that is assuming that they've obtained a registration and they're not using the mark in Canada presently. Our international requirements require that that mark not be challenged for three years, so for three years that mark can't be challenged now or in a future state.

Senator Hervieux-Payette: By whom?

Ms. Carreau: By anybody. It cannot be expunged for non-use. The reason is that after registration, companies are given an opportunity to get on their feet and start using their trademark legitimately in commerce. We're not going to expect the day the mark is registered, if they're not using it with all of their goods and services, that we'll take that mark away from them at that point. Companies will continue to have that three-year period to get on their feet and start using their mark.

Your question is if they stay there after those three years, how can we get rid of them? There's one avenue. Any third party in the marketplace who is entrusted can come to the Canadian Intellectual Property Office. We have a simple, expeditious administrative process to remove trademarks for simple non-use. The cost is $450, so we're not talking about a lot of money to start the process. As part of acceding to these treaties, the Canadian Intellectual Property Office is currently looking at issuing those notices on our own so we won't require all businesses to file evidence of use with us, but we will potentially conduct audits in the future and send notices to businesses to request that they give us evidence they're using in the marketplace.

Senator Hervieux-Payette: If they are not using it, are you going to remove it yourself?

Ms. Carreau: It is removed from the register. That is the primary and the only purpose of that summary cancellation proceeding with the office. The process that exists now is actually known as a very effective process internationally and is in fact offered by INTA as a model process for other jurisdictions because it is efficient and cost-effective in removing what we call deadwood marks that are not currently used in the marketplace.

Senator Hervieux-Payette: What is the difference of registering with the new system in Europe and the U.S.? What would be the treatment of a Canadian company that wants to register its trademark in both the European and the U.S. market?

Ms. Carreau: I'm not sure what you mean. Companies can make a decision whether they want to use a new front door, the Madrid registration system. If it's cost-effective for them, they can choose that avenue and select the jurisdictions, and in that case the EU and the United States. They use their Canadian application to file in those jurisdictions and they are granted protection in those jurisdictions.

They must comply with the rules of the EU and the United States the same way that if companies are coming from abroad to Canada, they must comply with our domestic legislation.

Senator Massicotte: For the sake of disclosure relative to Europe, we're being told — and I think it is by a witness that's forthcoming — that in Canada 2 per cent of trademarks are challenged, but in Europe that's up to 50 per cent because of this new system. In fact, I think there's a reference to Lord Justice Jacob who criticized immensely, out of exasperation, the whole new trademark regime. What's your response to that for the record?

Ms. Carreau: The rate of opposition in Canada fluctuates between 2 and 5 per cent. We receive about 50,000 trademark applications every year. I'm the chair of the board. Our current caseload is 1,600 trademark opposition cases. It's a very low number of cases that get challenged.

What you should know about the European Union is that their trademark office doesn't examine on substantive grounds, so their examiners are not looking at whether this business is entitled to the trademark. Is this trademark confusing with somebody else's trademark? Is this trademark in fact distinctive, so it is an indicator of source or quality for that business? European countries are not doing that and they have pushed that work to their opposition boards. As a matter of policy, that's the decision they have made.

In Canada, we have decided to continue to examine on those relative grounds. So our trademark examiners in the Canadian Intellectual Property Office will be stopping some of those marks before they even come to the opposition board to be challenged by a third party. So it's not anticipated at all that our opposition rate will look anything like the European Union. It may increase somewhat, but not to the extent we've seen in the European Union.

Senator Massicotte: What do you expect it to go up to?

Ms. Carreau: I wouldn't expect it to exceed around 7 or 8 per cent.

Senator Massicotte: Currently averaging?

Ms. Carreau: Currently averaging 2 to 5. That would be our worst case scenario.

We may see more opposition just by virtue of volume. Hopefully Canada will benefit from increased trademark registrations coming to Canada, so by virtue of volume we may see more opposition cases.

The Chair: That completes our questions. On behalf of all the members of the committee, thank you for your appearance today.

Colleagues, we are continuing with our pre-study of Part 6, Division 25, which amends the Trade-marks Act. Having heard from government officials, we now turn to witnesses from various associations who work with this legislation.

I'm pleased to welcome from the Canadian Manufacturers and Exporters: Philip Turi, General Counsel and Director, Global Business Services; from the Canadian Chamber of Commerce, Scott Smith, Director, Intellectual Property and Innovation Policy; from Bereskin & Parr, Intellectual Property Law, Dan Bereskin, Partner, and I suspect senior partner; and from the International Federation of Intellectual Property Attorneys, Coleen Morrison, Vice President, and Robert Storey, President, Membership Commission.

I will now turn the floor over to Mr. Turi.

Philip Turi, General Counsel and Director, Global Business Services, Canadian Manufacturers and Exporters: Thank you all honourable senators for the opportunity to speak this morning. I'm pleased to be here on behalf of the 10,000 members of the Canadian Manufacturers and Exporters to discuss Bill C-31 and its proposed amendments to Canada's Trade-marks Act.

Before offering CME's perspective, I would like to highlight that manufacturing is the single-largest business sector in Canada. Manufacturers employ over 1.8 million Canadians in highly productive, value-added, high-paying jobs. This contribution is critical to the wealth generation that sustains the standard of living for each and every Canadian.

More than 85 per cent of CME's members are small- and medium-sized businesses. Many of these businesses are also exporters and as such are acutely aware of the challenges inherent to entering new global markets. CME supports the government's efforts to open new markets for Canadian exporters and applauds recent trade agreement successes in Europe and Asia.

While we understand the practical and legal imperatives for bringing Canadian trademark law in line with international standards, our concern is that Bill C-31's proposed changes may give rise to unintended consequences that will adversely affect businesses operating in Canada.

I would like to focus on two aspects of Bill C-31 as it relates to the Trade-marks Act.

First, the proposed amendments seem to have been drafted with a view to simplifying and expediting the registration process. However, removing the use requirement may open the doors to applicants with little or no legitimate interest in a trademark to obtain enforceable rights to the detriment of those that have used or have a genuine intention to use the same mark in commerce. While trademark owners have been given new tools to enforce their rights, the proposed amendments will shift responsibility of ensuring the trademarks have been used before the date of registration from the Registrar of Trade-marks to trademark owners themselves.

It is our contention that this may result in increased costs to trademark owners who will need to police the market and incur the costs of opposition and expungement proceedings, which can be fairly expensive. Higher costs would also arise from investigations and searches. These additional costs will have to be borne by businesses trying to protect their trademarks and may create additional burdens that today's small businesses frankly are ill-equipped to carry.

In addition, the removal of the use requirement could expose Canadian companies to trademark squatters that could register marks without any legitimate commercial purpose and potentially extort value for them. The present amendments to the Trade-marks Act proposed by Bill C-31 need to take into account this very real possibility and provide alternative measures to ensure the role of policing of registrations is shared equally among government and industry. Provisions should also be made within the present set of legislative changes to curtail the practice of trademark squatting as we have seen in other parts of the world where registration-based systems were adopted.

Second, Bill C-31's amendments to the Trade-marks Act also appear to harmonize the trademark filing and registration process in Canada with standardized procedures found in other international trademark treaties. The implementation of the Madrid Protocol in particular is important for Canadian manufacturers and exporters because it will allow applicants to file for registration marks in multiple jurisdictions through the intellectual property office of their home country.

However, in addition to maintaining the current practice of describing goods and services in ordinary commercial terms, trademark applicants will now be required to classify their products and services according to the Nice Classification. Our concern here is that the use of the Nice Classification scheme would, among other things, increase filing fees. We are also concerned that the learning curve for examiners after the Nice Classification is implemented could increase office actions and delays.

Furthermore, the registrar will now have the ability to request that the owner of a trademark registration group the goods or services according to the Nice Classification with the threat of expungement if the trademark owner does not respond. If there is a dispute over the appropriate classification, the registrar's decision is final and this determination is presently not subject to appeal, at least based on the proposed amendments.

As such, the proposed amendments should provide for a grace period to allow businesses and their counsel with additional time to familiarize themselves with the Nice Classification system and the regulations to the act should provide for a clearly defined appeal process in the event of a dispute.

In conclusion, while CME supports amendments that modernize and harmonize Canada's trademark law, these objectives need to be carefully counterbalanced with the practical realities of running a business in Canada. Ultimately, any amendments need to create a stable business climate in Canada by fostering greater business certainty, lower costs and less regulatory burden, not more.

Scott Smith, Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce: Mr. Chair and honourable senators, I'm pleased to be here today to represent the Canadian Chamber of Commerce. Our association is a vital connection between business and the federal government. We have a network of over 450 chambers of commerce and boards of trade that represent over 200,000 businesses in this country, and that's all sizes in all sectors of the economy and in all regions.

I'm also here representing the Canadian Intellectual Property Council. The CIPC is a unit within the Canadian Chamber of Commerce, and we are dedicated to improving intellectual property rights in Canada.

The Government of Canada has tabled proposed amendments to the Trade-marks Act as part of Bill C-31. You've heard this morning that some of those proposed changes relate to the implementation of international intellectual property treaties such as the Madrid Protocol, the Singapore Treaty and the Nice Agreement.

The Madrid Protocol creates an international system for registering trademarks. The Singapore Treaty provides a common international standard for trademark registration procedures, and the Nice Agreement provides an international standard for classifying goods and services for registering trademarks and service marks. Although none of these treaties are exercises in trademark harmonization in that they do not require fundamental changes in the domestic law of treaty countries, for the record, we take no issue with the need to move forward on these treaties. Likewise, we have no complaint with the worthy objective of simplifying and speeding up the registration process. On the surface that's a good thing.

However, removing the use requirement opens the door to applicants seeking to obtain enforceable rights for marks the applicant has no intention of using. This has the potential to hurt those who have a genuine interest in using the mark. I will focus my remarks on this one element of the proposed amendments, that being those use provisions.

Canadian law does not recognize rights to a trademark ``in gross.'' In other words, what is protected is not the trademark itself; it's the goodwill the trademark symbolizes. Without use, there is no goodwill. This is why we've proposed such a radical departure from our law, because it purports to replace a goodwill-based system with a registration-based system. The elimination of the requirement of trademark use as a prerequisite to the creation of enforceable trademark rights skews the balance against the interests of the public and fair traders.

More to the point, the simplified requirements for Canadian trademark applications, including no longer requiring applicants to identify dates of first use for a mark that has been used in Canada, puts Canadian companies at a competitive disadvantage.

The change will encourage ``overreaching'' — marks being registered for many goods and services that may never be used. This amendment would mean that anybody could register a trademark for any goods of services simply by paying a government fee. This would open the door for trademark trolls to register currently existing brand names and trademarks and effectively extort value for them from current, unregistered owners. The problem of trademark trolls has become a very serious result of systems that are based on mere registration not bona fide use.

The change will also result in the trademark register becoming overcrowded with trademarks that are not in use, making it a much less useful tool for searching, creating added costs and uncertainty for Canadian businesses related to choosing and using new business names and trademarks.

To a large degree, trademarks are important in building consumer trust. Companies invest a significant amount of money and resources in building consumer confidence in a brand. Giving the enforcement advantage of registration to companies without the requirement of trademark use erodes consumer confidence because the trademark no longer is a symbol of goodwill in the absence of use.

This has the potential for creating confusion in the marketplace. It also risks a situation where a local business that uses a name for many years but does not register it then gets a challenge from a registrant who claims not to have known about them, leading to a collision between local rights and registered rights. It will be worse when the challenger has no use anywhere. This presents the risk of a constitutional challenge. Federal trademark legislation is justified under the ``regulation of trade and commerce'' head of constitutional division of powers. Without use, there is neither trade nor commerce, so this could clash with provincial property and civil rights powers.

Finally, it is important to note that these changes to the use requirements are unnecessary for treaty compliance. The U.S.A. is a member of the treaties and has kept use as a registration a requirement. The U.S.A. system also sets post- registration requirements that help to limit overreaching and trademark trolls.

The proposed changes presented in Bill C-31 diverge from regulatory harmonization with our largest trading partner. We are of the opinion that registration should be continued to be based on use in Canada, a bona fide intention to use the trademark in Canada, or either a registration in their home country together with use in one or more countries prior to filing in Canada, or use of the trademark in a country other than Canada and the trademark having become well known in Canada.

That concludes my remarks. Thank you.

Dan Bereskin, Partner, Bereskin & Parr, Intellectual Property Law: Thank you, Senator Gerstein.

The problem with allowing traders to register trademarks without any requirement of use anywhere is that this is certain to clog the register of trade-marks with deadwood, making clearance of trademarks far more expensive and uncertain than now is the case.

If I may say in response to what Ms. Carreau said, imagine a poor examiner in the trademarks office examining a trademark application filed by a foreigner, who has no use anywhere, covering 39 different classes of goods for everything from rat and vermin pesticides to veterinary services to construction services to agriculture, horticulture and forestry services. This is a registration that was issued to a Spanish company that's a department store chain for Primeriti. I found it when I did I search to see what Clearwater Seafoods had registered in Europe, and they have a registration for prime lobster. If you did a search, this would pop up. You can imagine examiners trying to clear a trademark on relative grounds, as Ms. Carreau said, confronted with trademark applications or registrations with such a huge list of goods. That's exactly what this legislation promises.

The reference to the former judge of the U.K. Court of Appeal, I think, is very apt. Sir Robin Jacob, one of the most eminent intellectual property justices ever in the United Kingdom, was not concerned about change of law and not concerned about losing revenue from not filing declarations of use. What he was concerned about and exasperated about was the European system of allowing anybody to register any trademark for anything, for any goods or services, without any requirement of use in advance. He said:

. . . these overbroad registrations are likely to hamper trade. And of course they may put up costs for anyone seeking registration of a mark or contemplating using it. The problem needs resolution. Sooner, rather than later, rules will have to be developed to stop this nonsense. It is not good enough to say that there can be later part- cancellation of wide specifications for non-use. Who would bother with the expense and time involved when they want to get on with their business?

Canadian IP lawyers from across Canada overwhelmingly oppose the conversion of our use-based statute into a registration-based statute. In his testimony before the INDU Committee last Monday, Mr. Halucha said that the reason for this is that lawyers don't want to give up the money they'd lose from filing declarations of use. He's wrong. The bill will be a bonanza for lawyers.

Years ago, when the Community Trade Mark registration first became available as an alternative to filing national trademark registrations — now with a CTM registration as it's called, you get coverage in all 29 countries of the EU.

I then asked a friend of mine in England, who is a very experienced trademark lawyer, if this is going to have a devastating effect on his business. He said, ``Not at all. What we will lose in national filings in the U.K. we will more than make up in oppositions and litigation.'' How prophetic he was.

As Ms. Carreau said, right now the opposition rate is only about 2 per cent, but we actually have 50,000 applications filed in Canada per year. Right now there are only 1,600 oppositions, and those are oppositions filed over a number of years. The annual rate is probably quite a bit less than 2 per cent. I don't know when it was 5 per cent. If so, it must have been a long time ago.

In Europe, in my initial remarks that had been printed, I said the figure was 15 per cent. In fact, the latest figures from OHIM say that it's 18 per cent. It's not going down; it's going up. This is wonderful for lawyers, but it is terrible for Canadian business.

I would say as well that Mr. Halucha had not been properly informed when he said, as he did last Monday before the INDU Committee, that the registration costs of Canadian trademark owners will go down. They are certain to go up substantially as a result of increased oppositions and litigations.

As a member of the IP bar in Canada, I must say I am very proud that more than 160 IP lawyers from across Canada, in every province, have put the welfare of Canadian businesses ahead of their own financial self-interest.

Second, Canada can easily adhere to all these various treaties without having to drop use as a condition for registration. Mr. Halucha said that the United States didn't for constitutional reasons. Well, the constitutional authority in the United States is nourished by the trade and commerce of the U.S. Constitution, and we have the same thing. We have to regulate trade and commerce to have valid federal legislation. They did this while fully complying with the requirements of the Madrid Protocol, the Singapore Treaty and the Nice Agreement.

I would also point out some statistics that you need to know in order to understand how this will affect Canadian business. U.S. applicants, domestic U.S. companies, file five times more applications in the United States than do foreign applicants. In sharp contrast, in Canada, more applications are filed by foreign applicants than by Canadian applicants. So I ask, for whose benefit are these treaties?

I would also point out that none of the treaties that Canada is to adhere to have anything to do with harmonization. It is absolutely false to state that these are exercises in harmonization. They are absolutely not. The proof of it is that the United States made no substantial changes whatsoever to their law while still adhering to it.

To show you how popular the Madrid Protocol is in the United States, which is a huge net exporter of trademarks, in 2012, U.S.-based trademark owners filed 261,893 trademark applications in the United States, yet there were only 16,436 Madrid filings by U.S. trademark owners that year. What they do instead is they do the math, and they figure out whether it will be cheaper for them to file for a community trademark or would it be cheaper to file through the Madrid Protocol. They have concluded, for that reason and others, that it's better for them to obtain CTM registrations than to use the Madrid Protocol. That shows that 10 years after the Madrid Protocol was adhered to by the United States, it's still not particularly popular, even in the United States.

It's particularly important when you try to make a case for Madrid in relation to Canada because in 2012, the last time I was able to see some figures for this, Canadian companies filed 21,741 applications in Canada. Canadian companies accounted for 9,823 applications in the United States. You would expect that Canadian companies would have a strong interest in the United States, and that's the case. They filed a mere 989 CTM applications, even though CTM is covered in 29 countries.

I'm not opposing ratification of Madrid. I'm saying that the advantages of Madrid have been wildly overblown, as these statistics demonstrate. Madrid will not lessen the cost for most Canadian companies who are interested only in the United States, and even those Canadian companies who are interested in wider coverage will do the math and figure out whether or not it's better for them.

My last point is that there are only a couple of sections of the proposed bill that need to be fixed in order to remove this problem. Those are the sections that allow anybody to register the trademark, assuming it's not similar to a previously registered trademark, for any goods or services whatsoever, without any use, either in their home country or in Canada.

In 1947, the government formed a commission of very intelligent, knowledgeable, experienced people, including representatives of the Chamber of Commerce, the Canadian Manufacturers Association, various legal associations, and three of the most eminent trademark lawyers in Canada at the time. They studied this for five years and they came up with a system that, in my submission, is the best system the world knows, and this is what this bill threatens to wreck.

The Chair: Thank you, Mr. Bereskin.

Ms. Morrison.

Coleen Morrison, Vice President, International Federation of Intellectual Property Attorneys: Good morning, and thank you for the opportunity to appear before the committee on such an important issue.

My name is Coleen Morrison. I'm appearing on behalf of FICPI Canada, which is the Canadian national association of the FØdØration Internationale des Conseils en PropriØtØ Intellectuelle, FICPI.

FICPI comprises about 5,000 intellectual property attorneys in private practice in more than 80 countries around the world. FICPI Canada has about 100 members representing almost all of the major intellectual property firms who are responsible for filing the majority of applications submitted to CIPO each year. Our members' clients represent all types and sizes of businesses, including large corporations, small and medium enterprises, and individuals.

With me is my FICPI colleague Robert Storey.

Trademark law may appear to some to be quite technical, but trademarks are a valuable asset of any business. Therefore, a well-functioning trademark system is a necessary component of a competitive, modern economy. Trademarks and their enforcement matter to Canadians for a host of reasons.

Today I would like to explain to you what we see as the significant negative impact of a specific aspect of Bill C-31. Trademarks — like Ski-Doo, BlackBerry or Scotiabank — distinguish the products or services of one business from those of its competitors. Registrations, among other purposes, establish rights and ownership claims and help avoid disputes by establishing clear parameters for the rights that are claimed.

Trademark rights are intended to prevent market confusion and to protect the owner's goodwill. In Canada, trademark rights have always been tied to use of a mark. Registration alone, not tied to use, simply signifies some type of interest in a mark, and that interest may be completely removed from commercial usage.

Certain of the changes proposed in Bill C-31 represent nothing short of a foundational restructuring of the Canadian trademark registration system — to the detriment of its users.

We have particular concerns about the removal of the established core requirement to demonstrate use of a trademark to justify the grant of rights associated with registration. For today, I would like to speak to four aspects.

First, the proposed change will lead to a greater number of legal challenges with more complicated evidence, as well as an increase in business risk. It will increase other costs, for example, by the need to pursue marketplace investigations to determine the ``real'' rights associated with a registration. We would also anticipate a large number of overreaching ``defensive'' filings for which applicants do not have legitimate commercial interests. This would create a new and costly burden on businesses, and also on CIPO, in the form of more complex examination and increased opposition proceedings, as well as on the Federal Court, where matters involving trademark registrations are generally heard.

Second, we also foresee that as a result of this change, the Canadian trademark register would become more crowded with foreign trademarks that have never been used in Canada. This will make it more difficult and costly for Canadian businesses to select new marks.

Third, Bill C-31 would also result in the scope of rights in registered trademarks becoming increasingly indefinite due to having less precisely defined goods and services. This will certainly lead to further legal uncertainty and, yet again, increased costs for all parties.

Fourth, and finally, we would flag for the committee the potential for constitutional issues, which has been raised by my colleagues. The provisions that establish Canada's trademark registration scheme have been upheld based on Parliament's trade and commerce power. By removing the use requirement — in other words, allowing the registration of marks that have never actually been used in trade or commerce — the validity of Canada's regime may be called into doubt. This would be destabilizing and economically counterproductive, to say the least.

FICPI Canada is unaware of any trademark owners or user groups who are supportive of these proposed changes to our current law. To our knowledge, at no time in prior exchanges with government agencies has any user group, including organizations like FICPI and the Canadian Bar Association, supported the removal of the use requirements.

The rationale for the introduction of this change has not been established. Certainly the amendments proposed in Bill C-31 go far beyond what we as practitioners would view as necessary in order for Canada to implement the Madrid and Singapore treaties, as the government wishes to do. We would commend the committee to look to the approach taken by the United States on these matters as more relevant and instructive for Canada.

These changes would undoubtedly generate additional confusion and uncertainties in the marketplace and perhaps lead to more demand for our services as trademark agents and lawyers. However, FICPI Canada cannot identify any discernible advantages to the Canadian business community as a result of removing the requirement for use.

Our key recommendation: The specific proposals to amend sections 16, 30 and 40 of the Trade-marks Act should be set aside by Parliament. Bill C-31 is quite simply the wrong tool for a change of this incredible impact and scope. We see no advantages to the adoption of these provisions of Division 25 at this time — only increased costs, inefficiencies and a needless burden on Canadian business.

FICPI would very much welcome and be pleased to participate in appropriate and wide-ranging consultations on trademark policy in the future. This would help ensure that the views of both Canadian trademark holders and users of the system are fully reflected.

Thank you and I look forward to your questions.

The Chair: Thank you, Ms. Morrison.

Mr. Storey, would you like to add anything?

Robert Storey, President, Membership Commission, International Federation of Intellectual Property Attorneys: I'll wait for the senators' questions. Thank you very much.

Senator Hervieux-Payette: My first question will be for Mr. Bereskin.

A civil servant told us that these changes were for harmonization. I think you have pointed out that it has no merit to talk about this. What would be the rationale? I think we're here to improve the situation for Canadian businesses and certainly not add new rules that would be in the way of the business to be efficient. I'm trying to find out what is behind it.

I ask the question, but I suspect that you might know more than I do. I tried to have the text of the EU accord, and we don't have access so far. It was supposed to be published yesterday, but it's not. I'm asking you: Where in the world have we found that — since our main partner, when we talk business, is the U.S., what would be the rationale of a government to do that?

Mr. Bereskin: I think the fact that the government has taken so long to address this issue is telling because it is not at all a given that ratification of these treaties will benefit Canadian businesses. On the other hand, I can see a significant advantage in following the Singapore Treaty, because it allows people to file a trademark application very simply, with a minimum amount of information.

In the United States, which of course complies with the Singapore Treaty, you can do this. You can get a filing date; you can establish priority in that way. But before your application can proceed, you have to ask yourself, ``Am I filing this on the basis of use in commerce?'' If so, you have to give a date. The present legislation, contrary to what you heard from Ms. Carreau, does not require you to specify the date of first use. Or you could say, ``I have a bona fide intention to use the trademark.'' Bona fide is missing from the statute, for one thing. Or you can file based on a home registration, or you can file on the basis of a Madrid registration.

The United States, unlike Canada, does not require foreign trademark owners to have used the trademark anywhere before they can apply in the United States, but they do have checks and balances. For one thing, they require the bona fide intention to use in the United States. In the second place, they require everybody to prove that they're using the trademark between the fifth and sixth years after the registration is issued, unlike what is proposed here, that it's up to a third party — or maybe the government, if they get around to it — to put action in place to challenge a registrant for non-use.

Canada has never done that. Since the committee did their work starting in 1947, they realized that the smart thing for Canadians to do is to require foreign companies to at least have used the trademark in their home country or somewhere else before they file in Canada. That puts the brakes on over-claiming, and that is a system that we have followed for all these years. We are signatories to the Paris Convention, as is the United States. Nobody has ever challenged the right of Canada to impose that requirement. I say giving up on that is a huge misstep.

Senator Hervieux-Payette: Would I be right if I say you would not oppose us signing the Madrid and the Singapore or the Nice protocols but keep the registration? Would you feel comfortable with that?

Mr. Bereskin: My preference would be to forget about Madrid, but I think that the profession in general is not opposed to Canada adhering to Madrid, provided that you don't turn our Trade-marks Act upside down.

Senator Hervieux-Payette: Under the new regime, you register a name, but you don't have to say what it will be used for, whether it's for a new piece of equipment, something to eat or for a service, no matter what, not even what the intention for use will be. Usually you will want to protect a product or a service. There is no mention of the use in that foreign country or in Canada. This is really a blank cheque. Do I interpret that correctly?

Mr. Bereskin: It's not exactly a blank cheque because you do have to specify specific goods and services, but you can make the list of goods and services as long as your arm, such as the Spanish department store chain did. Why on earth they have to have a registration in 39 different classes for goods such as preparations for killing vermin down to construction services is a mystery to me. That's what happens in Europe all the time.

Senator Hervieux-Payette: That's a chain store?

Mr. Bereskin: Yes. It's a chain department store.

Senator Hervieux-Payette: At the end of the day, it's a mystery as to why we are going in that direction because it seems that the whole industry, the chamber of commerce and all the other panellists included, just noticed this when Bill C-31 came out and fell from their chairs.

Mr. Bereskin: I don't think there's strong resistance to Madrid, frankly, even though I have some misgivings about it. I don't think that's the problem. It's like physicians say: ``Do no harm.'' Madrid can be adhered to without harming Canadian business if we do it in a smart way.

Senator Hervieux-Payette: As legislators, do not legislate?

Mr. Bereskin: Do not legislate bad legislation.

[Translation]

Senator Bellemare: I would like to have a better understanding of the issue to be able to follow up on what Senator Hervieux-Payette asked. You are lawyers, you have studied the legislation and you know the treaties. Basically, what you are proposing will not prevent us from ratifying the agreements in question. What you are calling for is similar to what the Americans did when ratifying the agreements. Is that a clear summary of what you would say this debate is about?

[English]

Ms. Morrison: That is a very astute observation, and it is precisely the position we are taking. We don't say it has to be identical to the U.S., but the U.S. adopted Madrid and in doing so caused minimum changes and alterations to their system, which was working quite efficiently. We think you can look to the U.S. as a very good guide and adapt it slightly to meet Canadian needs, perhaps.

Yes, exactly; we don't object to Madrid. It's a useful tool for a small number of companies, and it should be made available. But we suggest it can and should be done so in a way that minimizes detriment to all Canadian companies, which will be done under the new legislation.

Senator Massicotte: To take the discussion further, I think you were sitting in the audience when the government espoused their views. They're very much aware of your views, but they think you're wrong. They argue that, yes, in the registration document there's no reference to usage, but in reality, the proof in the pudding will be usage. They made a couple references, which you heard, I'm sure, to the proposed amendments, which clearly make usage and the relevant criteria important. How do you respond to that?

Mr. Smith: I think what we need to keep in mind is what is actually meant by ``efficiency.'' By changing the documentation requirement, applications may move faster, but it's putting the burden back on business at the opposition stage to be able to enforce their own rights. What they're doing is giving a registration and all of the enforcement powers that go with that registration to companies that may or may not ever intend to use a particular mark. They're leaving it up to a business in Canada to then oppose that and say, ``No, we have an existing use here.'' They have to try to fight that against the company who has the registration.

Senator Massicotte: What you're saying is you don't deny the fact that usage is the reference point to maintain your copyright or trademark rights but that it will increase the litigation costs, given there will be a higher level of disputes?

Mr. Smith: You've also given the registrant three years of perhaps not using that mark; meanwhile, the company here in Canada trying to oppose that has to wait that three-year period. Most businesses aren't willing to wait that long, and they will have to reinvest in some other trademark.

Senator Massicotte: The other argument they raised, you referred to the American system working well. I think it's in their proposal or one of yours. You've made a note that the American system is such that American companies must file for constitutional reasons. I gather they maintain the old system and the new, but the obligations and burden of American companies filing their trademark is much more significant and important than a foreign company looking to operate in the United States. Is that the case?

Ms. Morrison: Yes.

Might I add that when CIPO consulted in the past on this very issue, one of the frameworks they seemed to suggest and support was the U.S. system, which required proof of use post-registration. I don't understand why they changed their policy and decided that it was best to go with this system.

Senator Massicotte: I hope you heard me correctly. You're saying you espouse a bit of the same system here. Therefore, if we did that, it would mean that the reporting requirements for Canadian companies looking to protect their trademark would be much more significant than a foreign company looking to operate in Canada. Why would you want to disadvantage our Canadian companies, as it appears to be so in the United States?

Ms. Morrison: I don't think there is a disadvantage for foreign companies. We're saying that all applicants will have to be precise when they set out their rights.

If I can offer a situation for comparison, please think of it as a land registry system. Lots of people can live close together because they are precise in the rights they have defined. That's our system today. There are cases where there's an overhang of someone's house, but for the most part, we know what the rights are. We're going to a system where we are allowing people to say, ``I have an interest in this'' but not define their rights precisely at all. That will create something of a free-for-all when it comes time for someone to decide what mark they wish to use, just like it would in a land registry system when someone decides they'd like to put their house somewhere but don't know where to put it.

Senator Massicotte: But the evidence seems to suggest for the American system — if you have a combination of both — that those prepared to file the old way is more complicated than the new way, because the new way is simple. You fill out the box on what countries you want to apply. It seems to be more efficient. If you have a dual system — I'm repeating the same thing — aren't you disadvantaging Canadian companies? If you have the American system it's more burdensome.

Ms. Morrison: As my colleague Mr. Bereskin said, there are checks and balances in the U.S. system. Everyone in the U.S. system, foreign or domestic, is required to prove use at year five and six.

Senator Massicotte: Not when they file. We are being told that use and goodwill will eventually be based upon usage, but in the American system, if they use the Madrid system, it's not when they file the requests for protection.

Ms. Morrison: There are two differences. They need to have the bona fide request, and we don't have that. Someone who just wanted to cover every class, like the Primeriti trademark, there would be no effective way I can see to stop that application under the Canadian system. So the addition of the term ``bona fide'' in the U.S. and not in Canada is significant.

The other check and balance is that requirement to show proof of use post-registration.

Senator Massicotte: In conclusion, what you're saying is that they're wrong, and they accuse you of being resistant to change and lack of maturity and so on. That's a tough one to argue with you. You're saying they're wrong; these young kids are getting it wrong.

Ms. Morrison: Yes, I'm afraid so.

The Chair: Do you have a comment to make after the compliment paid to you?

Mr. Bereskin: To round out Ms. Morrison's answer, the Canadian system, which was created before the enactment of the present Trade-marks Act, is brilliant because those people who worked on it realized that you have to encourage business to grow through the use of new trademarks. At the same time, you must have regard for the fact that trademarks represent goodwill, and if you don't have goodwill you don't really have anything.

It took the Americans almost 40 years to decide to copy what we did in Canada in 1954. They did this by saying you can either file on the basis of use in Canada or you can file on the basis of proposed use in Canada. But if you file on the basis of proposed use in Canada, regardless of whether you're a foreigner or a Canadian, you have to prove use within a certain period of time after your application has been approved. It works out that with extensions of time that are possible, and so on, you can keep a trademark application alive for five or six years quite easily from the date that you applied before you finally have to file a declaration of use.

In addition, Canada, or the trademark law revision committee, in 1947 realized there needed to be some break on the propensity of foreign trademark owners to file for everything from soup to nuts. The way they achieved that was by saying if you can rely on home registration, then you will at least have to have used the trademark in your home country or somewhere else for specified goods or services. You cannot register in Canada based on a huge shopping list of goods and services in the absence of use anywhere. That is a compromise we've lived with for 70 years and it has worked brilliantly, much better than in the United States.

Senator Massicotte: If our system is so superior, when the international community met to decide the new system — because you said the American system finally learned better ways from our system — how come our system did not dominate the decision makers to adopt it internationally?

Mr. Bereskin: We're a young country, senator. The Europeans have been doing this for a long time. They are locked into the idea that you should register a trademark just like you can register a patent. The property right is in the registration. It's not in the underlying goodwill. That is the fundamental difference in the opinion of all five of us and the opinion of the government in this case. We say that trademark rights fundamentally have to be based on use. The government is saying, ``No, no, it's okay; we'll just let people register and eventually they will have to use, otherwise they risk the registrations being cancelled for non-use.'' But as Lord Justice Robin Jacob said, who will do the cancellation? Who will wait around for three or five years to cancel when you want to get on with your business? That's what this legislation threatens.

Ms. Morrison: Madrid is, in its origins, a European tool. That's where it started. That's where the history is. I think one thing that is frequently overlooked is that it is a system that matches much better with a civil law environment. It does not match well with the common law system, where we have extensive evidentiary requirements, cross- examination, hearings and decisions. That makes for a very complicated and expensive end procedure. Shifting the burden of sorting out rights to the end of the procedure is less expensive and more efficient in a civil law system. It works more poorly when coupled with a common law system.

Senator Massicotte: So you're saying that Quebec is again being favoured in this.

Ms. Morrison: No, not at all.

Mr. Storey: I would like to add to what Ms. Morrison has said. It has not been said here today — and sometimes we overlook stating the obvious — but in Canada, trademarks are unique as intellectual property rights in that you can obtain enforceable rights without the Trade-marks Act under the common law and in the province of Quebec under the Civil Code of Quebec. Our trademark registration regime has to be complementary to the rights granted under the common law, and now it is. But if these changes are passed, it will not be. There will be divergence between the rights that can be obtained under the common law and the rights that can be obtained simply by filing a trademark application.

I think that's the fundamental principle that everybody needs to understand. That's why the legal community is so upset about what has been proposed, plus the fact that there has been no adequate level of consultation on this matter, certainly no open consultation. If there had been, you would have seen a much faster outcry from not just the legal community but from the business community as well once they understood the ramifications.

The Chair: It is a great pleasure to call on the chair of the Standing Senate Committee on National Finance, Senator Joe Day.

Senator Day: Thank you. I appreciate that. I'd like to compliment you on the strong panel that you have of industry and practitioners in the area of trademarks.

Senator Massicotte: And committee members as well.

Senator Day: I haven't gotten there yet, but I will. Some committee members are aware of the fact that because of the way we're handling Bill C-31, there's another portion of the bill being handled by another committee that deals with trademarks, and that proposes to eliminate the position of the Registrar of Trade-marks.

Because of these provisions that we're looking at here — if I can put it in layman's terms — I wonder if the registration of a trademark is merely an administrative step and all of the opposition will be down the road a bit, opposition with industry or court cases. Is that an indication that the role of the Registrar of Trade-marks will be less? Do you have any comment with respect to eliminating that particular position?

Ms. Morrison: I'm aware of it. I interpret it as purely an administrative matter within CIPO. I certainly hope and believe that our colleagues at CIPO would recognize the importance of a strong, robust trademark system and through whatever administrative set-up ensure that Canadian trademarks are well cared for.

Mr. Bereskin: Senator Day, I don't think anybody has any objection to putting one person in charge of patents, trademarks, copyrights and so forth. You need to have strong leadership in all divisions of intellectual property. There would have to be somebody in charge of trademarks who is capable of handling all of the present and future burdens of the trademarks office.

It is not working well right now. I've been doing this for 50 years; the trademarks office is more inefficient now than it has ever been in all my 50 years of practice. It takes almost 10 months to get a response from an examiner as to any objections to an application. When you file an application, you have to wait for 10 months before you hear back. Then, they are often copy and paste jobs. Very often it looks like there's no quality control.

Yet the adherence to Madrid and allowing people to designate Canada as the international country will put an even stronger burden on the examination corps. I'm very doubtful that they can do it without significant additional resources, both human and financial.

If I were running things, which thankfully I'm not, I would try very hard to get the office moving very efficiently so that responses would come within two or three months, not ten months, and then you could say, ``Okay, now it's thinkable for us to adhere to Madrid.'' Madrid puts narrow time lines on the examination process and allowance of applications. You have to get it through in 18 months. We can't come close right now without disadvantaging Canadian applicants who were interested in only Canada or the United States versus applicants who want to file Madrid.

Senator Day: My next question is a bit different but I would appreciate any comment you may make.

You're aware that there's an agreement in principle between Canada and Europe with respect to freer trade. I wonder if there's any tie-in between these proposed changes to the Trade-marks Act and the agreement in principle in relation to trade between Europe and Canada.

Ms. Morrison: In my capacity with FICPI, I tracked the CETA agreement as closely as possible because much of the process was not done in the open. I had meetings with several of the DGs in Europe and gained information both from them and what was available in Canada.

When the document was released, I of course looked very closely at the provisions relating to intellectual property. I note that CETA calls for best efforts to join these treaties — just best efforts. It doesn't tell us that we have to do it in a way that creates tremendous upheaval and basically overturns a system that's been in place for many years.

Senator Tannas: Essentially we could achieve what we've committed to do by pointing to the United States who have achieved it with what they have, and do it with what we have. Is that what you're saying?

Ms. Morrison: Precisely.

Senator Hervieux-Payette: Mr. Bereskin, you have opened our eyes to the functioning of this office. You talked about 10 months to answer any kind of request. I was wondering about the cost for the applicants over the years. If they need more persons to apply the law, this of course would mean more cost.

Compare the time frame and the cost to that of the U.S. Are they quicker to reply in the United States? Do they cost less, the same or more? I'd like to know how we compare. Canadians who need trademarks also need to export. The market in the United States is 10 times bigger than the market in Canada. Of course, it's important for us to register on both sides. How do the two systems compare now and how would they compare with the changes?

Mr. Bereskin: Well, it's not inexpensive to register a trademark in the United States, but adherence to Madrid is not going to reduce the cost. When you file for a Madrid application, you have to pay a certain fee to the World Intellectual Property Organization, an additional fee to the country and a fee to the law firm responsible for doing all the work. You have to balance that cost against filing direct. In general, it's less expensive to file direct if you're only interested, for example, in the United States. As we saw, almost 10,000 Canadian trademark applications were filed in the States.

If you have a relatively small interest in Europe or anywhere else, why would you go to the expense of using Madrid? That's one of the reasons Madrid is not more popular than it is.

The U.S. system is hard to compare with ours because they handle probably 300,000 or so applications a year, whereas we handle 50,000. They have a much bigger examination staff, and they probably have access to more financial resources than our CIPO people. The fact that they are a lot faster than we are is not a reflection on our administration at all. I think it may be due to a lot of factors I'm not that certain about. What constraints there are on CIPO in terms of hiring additional people and training them? The United States doesn't seem to have the same constraints as we have, so it's hard to compare us fairly with them.

Senator Hervieux-Payette: At least I got an answer indirectly to my previous question: Why we do not adhere to Madrid and other treaties, because there is a cost attached to it and people don't necessarily need it. Why register and pay for something you don't need? You would do it at a later date if you want to get into these markets. Is that right?

Mr. Bereskin: Precisely. Any business would do a cost-benefit analysis.

Ms. Morrison: May I take the liberty of reading the Canadian Intellectual Property Office's description of this taken from their consultation done in 2010? It says:

However, the fee structure of the Madrid Protocol is such that the benefits in the reduction of application and renewal fees are directly proportional to the number of countries where protection is sought. In other words, a business seeking to register a trade-mark in only two or three foreign jurisdictions may find the Madrid Protocol more expensive to use than a direct application to each of the national trade-marks offices in each country.

Clearly, even CIPO recognizes, as is the case for most businesses filing in only a few jurisdictions, that Madrid is more expensive. It's a tool that will work for big businesses and certain of our clients. It's not something that will be useful to everyone.

I also raise the point in terms of seeking protection in the U.S.: Most Canadian practitioners are qualified to practise before the USPTO. A market of people offers the services to protect Canadian business interests in the U.S. You can avoid retaining U.S. counsel in the U.S.

Senator Hervieux-Payette: My last question is to the chamber of commerce. Considering the cost, at what stage can a company apply? I don't think a small company could afford it. Maybe a medium-sized business at a certain level of development could afford it. When we talk about your membership, I have no problem with Bombardier making an application, but I have a strong problem when we look at the more than 1 million small businesses in Canada trying to use that. They will probably be the last ones to have the benefit of the Madrid Protocol because if they are looking at an outside market, they will be looking at the United States.

Would you agree that your membership will not benefit from that in any way, shape or form?

Mr. Turi: If I may respond, I think this picks up on my learned colleague's point. We have many members, small businesses, especially now, with CETA looking to entry strategies to Europe. I completely agree that for large companies like Bombardier there will be significant advantages with the Madrid Protocol. It gives them the opportunity to file once and have the benefit of the protection of the law in multiple European countries. But for small businesses, it's rare that a company will come to us and say, ``We are looking at the entire European market.'' The reality is that most businesses are saying, ``We're looking at the French market or the Italian market or the German market.''

When you put that into context, considering that Europe is a large place comprised of many marketplaces, the advantages of the Madrid Protocol, while beneficial for some large companies, are not the same for small businesses that would benefit from a single-country filing on a one-off basis. That would probably be cheaper as well.

Senator Hervieux-Payette: Cost is very important. Thank you so much.

Ms. Storey: I would like to clarify for the record that the most cost-effective way to get trademark protection in Europe is to file, as Mr. Bereskin mentioned earlier, a community trademark application that covers close to 30 countries that are members of the European community. It would only be if a Canadian company wanted to file foreign applications not only in Europe and the U.S., but also at least five or six other jurisdictions around the world, that Madrid would even start to approach a cost-neutral position.

Madrid is associated with a number of other procedural disadvantages that also have slowed its acceptance by U.S. applicants, for example, even though they've been members of the Madrid Protocol for over 10 years.

Senator Hervieux-Payette: Thank you.

The Chair: Thank you very much. That concludes our questions. I know that I speak on behalf of every member of the committee. You have been an absolutely outstanding panel, and on behalf of each and every one of us, we would like to express our appreciation for your appearance today.

(The committee adjourned.)