Copyright 2011, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on International Trade & Investment–China Focus, February 2011
The Anti-Counterfeiting Trade Agreement (ACTA) is in the final stages of becoming a legally binding international agreement. There are several elements of ACTA that Chinese businesses trading abroad will want to consider.
On December 3, 2010, the finalization of the text was announced and the agreement now awaits only the signing by each State party and domestic implementation. The agreement aims to combat the proliferation of counterfeit and pirated goods through enhanced international co-operation and more effective international enforcement. ACTA has been negotiated between 27 States. These States are generally so-called "developed" countries and include the United States, the EU and Canada.
China has been active in its opposition to this agreement stating that it circumvents well-developed avenues of negotiation under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Council, while also voicing concerns about certain ACTA provisions. Nevertheless, the implementation of ACTA appears to be on the near horizon, which may have a significant impact on Chinese companies trading abroad, including trade with Canada.
From the view of the ACTA negotiating countries, the impetus for the negotiation of ACTA stems from unsuccessful efforts to have enforcement discussions considered at the TRIPS Council meetings. Taking the view that they were not able to discuss these issues at a multilateral level, they have chosen a plurilateral approach in which issues of enforcement could be considered by what they consider to be 'like-minded' countries. This resulted in a number of countries not participating in the negotiations including China, India and Brazil.
The negotiated substance of ACTA creates a number of obligations upon parties clustered in the areas of civil and criminal enforcement, border measures and enforcement in the digital environment, as well as providing for increased co-operation and institutional arrangements.
China's concerns regarding this agreement are both substantive and procedural. In June 2010, the Chinese representative at the TRIPS Council, along with her counterpart from India, brought the issue of "TRIPSplus" to the table. China identified four issues of primary concern:
- potential for legal conflicts and unpredictability;
- possible distortions to legitimate trade;
- breaking the balances achieved by TRIPS; and
- forcing the allocation of public funds towards enforcement of intellectual property rights.
While the full impact of ACTA on Chinese business will be known in the course of time, Chinese businesses trading with countries signatory to ACTA will clearly be affected through the domestic legislation implementing the agreement, whether or not China becomes a party to ACTA. Accordingly, outlined below is a survey of certain key provisions in ACTA:
- Under the civil enforcement provisions, the mechanisms to be used in determining damages appears to be broad, allowing for "any legitimate measure of value submitted by the right holder" to be considered. This may include lost profits, the value of the infringed good or service, or the suggested retail price.
- In the criminal prosecution of intellectual property offences, ACTA expands the definition of 'commercial scale' beyond the concept found in the WTO dispute settlement panel in the China Intellectual Property Protection and Enforcement decision. Under ACTA, 'commercial scale' includes at least those activities "carried out as commercial activities for direct or indirect economic or commercial advantage". The WTO panel in the above-noted decision explicitly rejected the equating of 'commercial scale' to 'commercial purpose'.
- Parties to ACTA are allowed to provide for border measure procedures for suspect goods that are in transit or other situations where the goods are under customs control, regardless of whether the goods will be entering the country.
- Under ACTA, parties must provide customs authorities the ability to act on their own initiative to suspend the release of suspect goods held upon importation, with no required procedural involvement by the importer.
- Regarding evidentiary thresholds in border measures initiated by rights holders, under ACTA, required information must not be such so as to be an impediment to a rights holder making a claim.
- ACTA requires that all civil and criminal enforcement procedures be available in cases of infringement that take place in the digital environment.
In light of the breadth of these and other provisions that may impact Chinese businesses involved in trade with Canada and other ACTA parties, prudence suggests that Chinese firms engaged in trade in products and services covered by ACTA familiarize themselves with its provisions to determine and manage the potential impact on their business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.