A PRIMER ON ANTI-COUNTERFEITING LAW IN CANADA

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1 A PRIMER ON ANTI-COUNTERFEITING LAW IN CANADA

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3 TABLE OF CONTENTS Anti-Counterfeiting Law in Canada 1 Role of Canada Border Services Agency 6 in Counterfeiting Combating Grey Market Goods in Canada 8 The Resale of Repaired and Refurbished Products 11 Conterfeiting and 3D Printing 15 Contact 19

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5 Blake, Cassels & Graydon LLP 1 ANTI-COUNTERFEITING LAW IN CANADA Counterfeiting in its most general sense refers to the unauthorized manufacturing or reproduction of goods protected by intellectual property rights. This includes the imitation of a trade-mark, copyrighted material or any other important characteristic associated with a product, with a view to misleading consumers that the product emanates from or is authorized by the owner of the rights associated with the genuine product. Although at one time counterfeiting was a localized activity centred on luxury goods, it has developed into a worldwide industry involving a vast array of products ranging from clothes to medications, consumer goods, electronics, and parts for automobiles, ships and aircraft. These products create health and safety concerns and pose a serious threat to the Canadian economy. Canada s national police force, the Royal Canadian Mounted Police (RCMP), estimates that the overall cost to the Canadian economy from counterfeiting and piracy is in the billions of dollars. Unfortunately, the problem seems to be getting worse: according to the RCMP s 2012 Intellectual Property Crime Statistics, the value of counterfeit goods seized by the RCMP has increased by 500 per cent in less than a decade. Prior to the introduction of the Combating Counterfeit Products Act (CCPA), which received royal assent on December 9, 2014, advocates for the protection of intellectual property rights had, for some time, criticized the legal framework in Canada as weak and ineffective in addressing counterfeiting and piracy concerns. Several of Canada s top trading partners, including the U.S. and the European Union, had long been critical of Canada s efforts to adequately address the counterfeit goods trade. Most notably, in April 2009, the U.S. government placed Canada on a Priority Watch List of countries that fail to uphold effective intellectual property protection and enforcement. The current anti-counterfeiting legal framework in Canada, namely the changes introduced through the CCPA to the applicable provisions in the Trademarks Act, the Copyright Act and the Criminal Code, better addresses and combats the aforementioned counterfeiting and piracy concerns. Civil Causes of Action and Remedies Pursuant to the Trade-marks Act, individuals or companies that own a trade-mark can enforce their rights through civil proceedings. Remedies may include damages, an award of the profits attributable to the infringement, interlocutory or permanent injunctions, and the surrender of counterfeit goods. Civil damages are generally only compensatory and will only be awarded for losses that the plaintiff can prove to have sustained. There are no statutory damages under the Trade-marks Act. (Statutory damages are damage awards stipulated within the statute rather than being calculated based on the degree of harm to the plaintiff proved.).

6 2 Blake, Cassels & Graydon LLP Owners of copyright in a work can challenge counterfeiters through civil proceedings under the Copyright Act. Victims of piracy may be awarded damages, an award of the profits attributable to the infringement, interlocutory or permanent injunctions, and/or the surrender of pirated goods. Copyright owners may elect to recover statutory damages under the Copyright Act, which are calculated per work infringed in cases of infringement for commercial purposes. However, traditionally, statutory damage awards have been too small to deter piracy in a meaningful way. Criminal Offences The Copyright Act includes provisions for criminal sanctions for serious infringement. These provisions can be used to address piracy. Anyone who makes for sale or sells infringing copies of a work, including pirated goods, is punishable, on summary conviction, of a fine of up to C$25,000 or a prison term of up to six months (or both) and, on indictment, of a fine up to C$1-million or a prison term of five years (or both). There are criminal offences for trade-mark counterfeiting in the Trade-marks Act that are analogous to the aforementioned offences in the Copyright Act. The offences set out in the Copyright Act and the Trade-marks Act are also part of the list of offences set out in the Criminal Code for the investigation of which police may seek judicial authorization to use a wiretap. Lack of Effectiveness Advocates for the protection of intellectual property rights have criticized the current legal framework in Canada as weak and ineffective in addressing counterfeiting and piracy concerns. Several of Canada s top trading partners, including the U.S. and the European Union, have long been critical of Canada s efforts to adequately address the counterfeit goods trade. Most notably, in April 2009, the state of Canadian law at the time led the U.S. government to place Canada on a Priority Watch List of countries that fail to uphold effective intellectual property protection and enforcement. Border Enforcement Prior to the introduction of the CCPA, the Canadian Border Services Agency (CBSA) had no mandate or ex officio power to detain counterfeit goods and was precluded from providing information or samples to rights holders. The CCPA introduced specific prohibitions against:

7 Blake, Cassels & Graydon LLP 3 import or export of unauthorized goods or packaging bearing trade-marks identical to or having all essential elements of a trade-mark registered for such goods under the Trade-marks Act import or export of copies of works made without consent of the owner of copyright in the country where they were made under the Copyright Act Both the Trade-marks Act and Copyright Act have provisions to enable customs officers to detain goods upon filing of a request for assistance by the copyright or trade-mark rights owners. This enables the CBSA to establish a system in which rights owners can provide the CBSA with information on their intellectual property rights. Customs officers may then detain goods that may be counterfeit on the basis of the information received, thus giving rights owners the opportunity to initiate a civil action.there are also provisions to enable the CBSA to share information on detained suspected counterfeit trade-mark or suspected pirated copyright shipments with rights owners. This provision provides rights owners with the opportunity to protect and enforce their intellectual property rights via a civil action. Securing Evidence Anton Piller Orders An Anton Piller order (APO) is essentially a civil search warrant that helps prevent the destruction of evidence. Once granted, an APO allows the plaintiff to search the defendant s premises and inspect and seize relevant evidence. APOs are frequently sought in cases involving counterfeit goods. An APO is obtained by seeking an urgent motion before a judge on an ex parte basis, meaning that notice is not given to the defendant. The goal is to file the statement of claim and obtain the APO at the same time, so that the defendant has no knowledge of the case prior to the search being carried out. The bar is set very high to obtain an APO. The plaintiff must demonstrate the following four essential conditions: (1) a strong prima facie case (i.e., the plaintiff must present the judge with evidence that unless rebutted would prove the case); (2) a potential for serious damage or injury to the plaintiff, if the order is not granted; (3) clear and convincing evidence that the defendant has incriminating documents or other items in its possession; and (4) a real possibility that the defendant may destroy such evidence if it were provided with notice of the plaintiff s intentions. When executing an APO, the plaintiff must retain an Independent Supervising Solicitor (ISS) to supervise the search while acting as a neutral officer of the court. Additionally, the plaintiff usually hires off-duty police officers to ensure peaceful compliance with the APO.

8 4 Blake, Cassels & Graydon LLP ROLE OF CANADA BORDER SERVICES AGENCY IN ANTI-COUNTERFEITING Advocates for the protection of intellectual property rights criticized the past border control framework in Canada as weak and ineffective in addressing counterfeiting and piracy concerns. Most counterfeit and pirated goods (collectively, counterfeits) are imported into Canada rather than being manufactured here. Prior to enacting the Combating Counterfeit Products Act (CCPA), the Canada Border Services Agency (CBSA) officers had no mandate or authority to detain counterfeit goods. The CBSA was only able to detain goods if the intellectual property rights holder obtained a court order for detention, or if the RCMP, Canada s national police force, or local police agreed to seize the goods. The costs associated with initiating legal proceedings to determine the legality of specific shipments and obtain a court order meant that detention was rare. Similarly, limited resources often prevented the RCMP or local police from storing or destroying counterfeits. Moreover, if the RCMP or local police were unable to respond when counterfeits were discovered, the goods had to be released. As a result, counterfeits were often allowed into Canada even after they had been identified as counterfeit. Most troublingly, the CBSA did not even notify intellectual property rights holders of suspicious shipments they identified unless the rights holder already initiated legal proceedings. In addition, the CBSA did not keep statistics on the shipments of counterfeits that were detected but not detained or take counterfeits into consideration when conducting risk assessments or allocating resources. In fact, CBSA officials at ports of entry lamented that they risked losing resources if they focused too intently on anti-counterfeiting or antipiracy. Combating Counterfeit Products Act The federal government introduced Bill C-56, the Combating Counterfeit Products Act, in March The bill was reintroduced in October 2013 as Bill C-8 after Parliament was prorogued and reconvened. Bill C-8, the Combating Counterfeit Products Act, received royal assent on December 9, 2014, and certain sections, including the border enforcement provisions (discussed below), came into force on January 1, In the eyes of many, the most significant provisions of the CCPA are those that enhance the powers of the CBSA.CBSA agents can detain goods they suspect infringe copyright or trade-mark rights, and share information about the detention with intellectual property rights owners in order to allow rights owners to pursue their legal remedies. This protection mechanism is comparable to procedures in other jurisdictions, such as the U.S., and is sometimes referred to as a border order. Under the procedure, trade-mark and copyright owners may file a request for assistance with the CBSA. A request for assistance is valid for

9 Blake, Cassels & Graydon LLP 5 two years and permits CBSA officers to obtain information regarding any alleged infringing nature of the goods, as well as provide the rights owner with both a sample of the goods in question and information regarding the importation of the goods without identifying any of the involved parties. To participate, a rights holder must apply for and obtain an RFA from the CBSA prior to the importation or exportation of potentially infringing counterfeit goods. CBSA officers may not detain the goods in question for more than 10 working days (or for a further 10 working days upon the request of the rights owner) or for more than five working days if the goods are perishable. The rights owner may use this detention period to commence proceedings. The rights owner is responsible for the storage and handling charges of any detained goods and, if applicable, the charges for destroying the goods The person who obtains information from a CBSA officer with respect to certain counterfeits faces certain restrictions. Generally, they may not use the information for any purpose other than to assess infringement and/or to pursue civil proceedings in court. However, an exception is made for the use of information to seek out-of-court settlements in order to promote cost-effective and efficient dispute resolution. If proceedings are dismissed or discontinued, the court is permitted to award damages against the rights owner in favour of the owner, importer, exporter or consignee of the impugned products for losses, costs or prejudice suffered as a result of the detention of the goods. The court may also require the rights owner to (1) furnish security, in advance of proceeding, to cover duties, storage and handling charges, and (2) answer for any damages that may be sustained by the owner, importer or consignee of the goods as a result of the (presumably improper) detention of the goods. CBSA officers will continue to stop goods that raise health and safety issues or that are linked to criminal activities, and refer them to the RCMP and Health Canada as appropriate. Further details of the request for assistance program are to be settled by Regulations or Customs Notices. While the enhanced role and powers of the CBSA are a welcome change to intellectual property rights holders, many wonder whether the CBSA will have the resources to accomplish the CCPA s objectives. This issue is heightened by the fact that hundreds of jobs and millions of dollars in funding for the CBSA have been cut from the federal budget in recent years.

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11 Blake, Cassels & Graydon LLP 7 COMBATING GREY MARKET GOODS IN CANADA Grey market goods, also known as parallel imports, are branded products that are imported and sold in a market without approval from the intellectual property owner in that market. Unlike counterfeit or pirated products, grey market goods are genuine in that they are not forgeries, imitations or unlicensed copies. In general, grey market goods are purchased from legitimate sources in low-price jurisdictions and then imported and resold in higher-price jurisdictions like Canada. The grey market has two main adverse consequences. First, it removes supplies of the product from lower-price jurisdictions, elevating prices and reducing demand in the target market. Second, imported grey market goods compete at lower prices with the trade-mark or copyright holder s own goods, reducing profits and diminishing brand value. Legal Framework Trade-mark Protection In order to understand the challenges associated with using trade-mark law to prevent the importation and sale of grey market goods, it is important to understand the doctrine of exhaustion. Pursuant to this doctrine (sometimes also referred to as the first sale doctrine ), the first unrestricted sale of an item exhausts the trade-mark owner s control over that particular item. In other words, the ability of a trade-mark owner to control further sales of a product bearing its mark is generally exhausted following the initial sale of that product. Under Canadian law, the sale of grey market goods does not typically constitute trade-mark infringement or passing off. This is rooted in the theory that trade-mark law is intended to protect a consumer from confusion as to the source of the product he or she is purchasing. By definition, grey market goods originate with, or are ultimately authorized by, the trade-mark owner. As a result, there can be no confusion as to the source of the product and, consequently, no infringement or passing off. Canadian jurisprudence has clearly established that products manufactured in Canada bearing a trade-mark authorized by the owner of Canadian trade-mark rights can be exported from Canada without infringing any trade-mark rights. Similarly, the importation and distribution of products manufactured outside Canada with the authority of the Canadian trade-mark owner will not infringe Canadian trade-mark rights. Trade-mark holders may have an argument for infringement if they can establish that the original seller of the goods is distinct from the trade-mark owner in Canada. If a Canadian subsidiary of a multinational corporation can sufficiently distance itself from its parent, the subsidiary may be able to assert its trade-mark rights in Canada. Though earlier case-law has suggested that a separate

12 8 Blake, Cassels & Graydon LLP corporate existence is sufficient to uphold an allegation of trade-mark infringement, more recently courts have also required that the domestic goods be materially different from those being imported. While these domestic goods may be genuine, from the perspective of the consumer in the domestic market, the differences in the products results in them being viewed as not genuine. Companies may have recourse even without a registered Canadian trade-mark through an action for passing off. The claim in such an action is that grey market goods are being misrepresented as products authorized for distribution in Canada. Trade-mark holders may also claim, under section 22 of the Trade-marks Act, that grey market goods have the effect of depreciating the value of goodwill associated with the trade-mark. Again, the grey market goods must be distinguishable from the domestic goods in order for this claim to succeed. In addition, the trade-mark holder must present actual market evidence of depreciation of goodwill. Given that this evidence is time consuming to gather and develop, a claim under section 22 is a difficult route for securing an injunction against the importation and sale of grey market goods. Additional complications arise when counterfeit products cannot be distinguished from legitimate grey market products. For example, when trademark owners outsource manufacturing to a factory, and the factory runs an illegal extra shift to create unauthorized goods, these goods are in fact counterfeit (not grey market). As well, when rejected first quality goods are meant to be destroyed but end up being sold, or when second quality goods are sold without adhering to the disposal requirements (such as black-lining trade-marks on tags and labels), these goods are in fact counterfeit because their first sale into the marketplace was never authorized by the rights owner. Copyright Protection Copyright law has also been used to effectively challenge the importation of grey market goods. Canadian courts have held that the owner of copyright in Canada can prevent the importation of goods lawfully manufactured and sold outside of Canada, based on the interpretation of certain provisions of the Copyright Act dealing with parallel imports. However, in Euro-Excellence Inc v. Kraft Canada Inc., 2007 SCC 37 (Euro), the Supreme Court of Canada did not allow the exclusive licensee of Canadian copyrights in Toblerone packaging to stop parallel importation by the European manufacturer. The court felt that there was a difference between an exclusive licence and an assignment and that the granting of an exclusive licence did not remove the right of the copyright owner to reproduce the work. The decision in Euro was split 7-2, with two different lines of reasoning in the majority. Therefore, it

13 Blake, Cassels & Graydon LLP 9 remains somewhat unclear whether an exclusive licensee can ever stop importation of works authorized by the ultimate copyright owner. It is even more unclear whether Canadian courts will uphold an assignment of copyrights between related companies as a means of preventing the importation of grey market goods. Finally, note that exclusive book distributors, in addition to copyright owners and exclusive licensees, can seek remedies when books are imported into Canada without the consent of the Canadian copyright owner. Other IP Protection and it is ultimately up to the government authority to take action. Given competing priorities and limited resources, non-compliant labelling that does not involve safety concerns generally receives a low priority from regulatory officials. Resisting Grey Market Goods Courts in Canada have not been particularly supportive of the use of trade-mark or copyright law to prevent the distribution of grey market goods. In certain circumstances, however, these legal mechanisms may provide a remedy to manufacturers and authorized distributors. If a person owns Canadian patent or industrial design rights to that product, unauthorized importation of that product would constitute an infringement of those rights. Regulatory Protection In Canada, foods, drugs, natural health products and cosmetics must comply with federal and provincial packaging and labelling requirements. Therefore, failure of grey market goods to meet certain requirements (e.g., bilingual labelling does not appear on the product or non-metric units are used) could allow a trade-mark owner to stop the importation of grey market consumer or health products. That said, there is no private cause of action with respect to such non-compliant goods,

14 10 Blake, Cassels & Graydon LLP THE RESALE OF REPAIRED AND REFURBISHED PRODUCTS The market featuring the sale of refurbished and repaired products is a lucrative industry. Typically, these products are refurbished or repaired cosmetically. However, more serious repairs are often required to resell the product. Various intellectual property issues arise in the resale of such products. Trade-mark Issues Issues surrounding trade-mark infringement often arise since refurbished or repaired products are offered for sale with the original manufacturer s trade-mark. Resellers of refurbished products must indicate on the packaging that the product is refurbished and that such products do not come from the original manufacturer. Resellers cannot hold themselves out as authorized dealers affiliated with the original manufacturer. Two key issues that arise with repaired or refurbished goods are the extent and type of differences or alterations that could result in infringement and whether the same trade-mark standards should apply to both new and repaired or refurbished goods. Under Canadian law, once goods are released into the marketplace by or under the authority of the trade-mark owner, the trade-mark owner s rights are exhausted following the first sale of goods. Therefore, a trade-mark owner cannot further restrict the subsequent transfer or use of genuine, unaltered goods in Canada through their assertion of trade-mark rights. However, trade-mark owners argue that their trade-mark rights are infringed because they can no longer control the quality of the refurbished or repaired products. Although there is no relevant case-law in Canada addressing trade-mark infringement with respect to repaired or refurbished goods, it is reasonable to expect that if the original trade-marked good is significantly altered without the consent of the trade-mark owner and then resold without indicating to the consumer that the goods have been remanufactured or otherwise altered, the trade-mark owner may have a case for trade-mark infringement or passing off on the grounds that the trade-mark owner did not authorize the resale of the altered (no longer genuine ) goods. The extent of repair that would potentially give rise to trade-mark infringement is a question of degree. If a trade-marked good has been repaired to the extent where the good has been reconstructed, such a situation may give rise to trade-mark infringement. If a trade-marked good has merely been repaired, trade-mark infringement is unlikely to result even if the repairs were completed without the approval of the trade-mark owner. However, the line between non-infringing repair and infringing reconstruction is not clear and therefore makes such a determination difficult.

15 Blake, Cassels & Graydon LLP 11 Patent Issues The owner of a valid Canadian patent has the exclusive right to make, manufacture, construct and sell the invention. Patent rights are infringed when a person interferes with the full enjoyment of the monopoly granted to the patentee. The doctrine of exhaustion of patent rights provides a purchaser with an implied right to use, repair and resell the patented product. Such a sale exhausts the patent owner s right to control further sale and use of the patented invention. The ability to enforce patent rights in refurbished products depends on whether the refurbished device is itself the subject of an enforceable patent or whether the refurbished product is a component of a larger combination that is under a patent. When a patented product is purchased, the purchaser obtains an implied licence to have that product repaired and may obtain replacement parts. Under Canadian patent law, there is no clear distinction between what would be considered a permissible repair that would prolong the life and utility of the product and what would be considered infringing reconstruction of the product that would result in its remanufacture. Courts have held that such a determination must be made on a caseby-case basis. A permissible repair may include the replacement of an unpatented component in order to maintain the utility of the patented product. Often, manufacturers will include a notification such as Single Use Only on a patented product s packaging for patent infringement purposes. However, such a label is not determinative for patent infringement. The refurbisher and the purchaser of the refurbished product may be liable for direct infringement. The supplier of the parts used in the refurbishment may also be liable for indirect (or contributory) infringement if the following three elements are met: (1) the supplier sells a component of the patented product that results in direct infringement; (2) the supplier induces or exercises influence over the direct infringer such that the infringement would not have taken place without that influence; and (3) the supplier knowingly exercised this influence. Consumer Protection Issues The resale of repaired or refurbished products also raises concerns with consumer protection legislation, specifically issues related to false and misleading representations. Consumer protection legislation provides requirements for the packaging and labelling of products. In addition, it prohibits false and misleading representations relating to consumer products. The consumer product must conform with

16 12 Blake, Cassels & Graydon LLP all claims made on its label that relate to its type, quality, performance, function, origin or method of manufacture. Accordingly, a refurbished product cannot be represented as new. Consumers should also be aware that refurbished products are not likely to be protected by the warranty or after-sale service plans available to purchases of products distributed from the original manufacturer.

17 Blake, Cassels & Graydon LLP 13 COUNTERFEITING AND 3D PRINTING Over the past several decades, 3D printing technology has been primarily used by those in the engineering and architectural industries. More recently, 3D printers have become more accessible to the general consumer market. With this market shift, challenging legal issues have begun to arise, including the risk of counterfeiting. 3D Printing 3D printing technology was developed in the mid- 1980s. When it was first introduced, the high price tag made this technology inaccessible to many people. As a result, 3D printing was mainly used by larger and established businesses. However, like every digital technology, the prohibitively expensive price has since dropped, due in large part to the fact that patents covering 3D printing s foundational technology have now expired. Consequently, 3D printing technology has become more readily available to general consumers and hobbyists. While the market for 3D printers remains small, it is growing quickly and shows no signs of slowing down. 3D printing involves a manufacturing process known as additive manufacturing in which threedimensional objects are built from a computer-driven digital model. This digital model is sliced into very thin cross-sections known as layers by a 3D computer-aided design program. Thin layers allow for the production of a complicated and intricate output. Each of these layers is then sent to a 3D printer that prints the layers in succession until the entire object is built. 3D printers can print in wood, plastic, ceramic, carbon fiber, bronze, iron, steel, cellulose and human tissue. As such, any person with a 3D printer and a high-resolution laser scanner could potentially replicate any item they desire. Concerns of IP Owners Counterfeit Goods The threat posed to intellectual property owners by unauthorized 3D printing is substantial. One primary concern is that 3D printing will result in an increase in counterfeit goods. 3D printing has the potential to allow counterfeiters to manufacture counterfeit goods in a more cost-effective manner. In addition, 3D printing will allow any consumer to create counterfeit goods. Already, consumers are able to 3D print many different items, including consumer goods and automotive parts. Difficulty in Enforcing IP Rights Intellectual property owners are rightly concerned about their ability to enforce their rights against counterfeiters who utilize 3D printing technology. Currently, most intellectual property owners are able to enforce their legal rights against counterfeiters as these infringers are often a small group of individuals. However, with 3D printers becoming widely available to individual consumers, it would

18 14 Blake, Cassels & Graydon LLP be extremely costly for intellectual property owners to enforce their rights and track down a single consumer producing counterfeit products. Furthermore, even if intellectual property owners choose to enforce their rights, it is not clear against whom these rights should be enforced. Consider a toy that is built by a 3D printer that depicts a copyrighted cartoon character. In this case, it may be difficult for the copyright holder to ascertain the person(s) liable for the counterfeiting the person who printed the toy, the person who uses the toy, the person who uploaded the cartoon character file or the website that hosts the cartoon character file. Each of these individuals or entities arguably is liable for some form of infringement of the intellectual property owner s rights. Lack of Protection Provided by IP Statutes Several of Canada s intellectual property statutes could be relied upon to help intellectual property owners enforce their rights. However, these statutes may not be all that useful for an intellectual property owner hoping to stop a consumer from 3D printing their product, particularly if the product is for the consumer s personal use. The Copyright Act states that, in general, it is not an infringement to make a copy of a product that has a utilitarian function if the product was originally produced in a quantity greater than 50. Accordingly, a consumer who 3D prints a copyrighted work that has been produced on a commercial scale will most likely not be found to be infringing an intellectual property owner s rights. However, if the product is an artistic work, the author of the work would likely be able to enjoin its reproduction. Articles printed using 3D technology may be protected by trade-mark rights, such as distinguishing guises, trade dress and threedimensional trade-marks, if the shaping or appearance of the articles is distinctive and is an indicator of source. Clearly, trade-mark protection would also be available if the 3D printed articles displayed the trade-mark of another, for example, embedded in or embossed on the articles. However, under the Trade-marks Act, private, non-commercial use is arguably not an infringing activity since use requires the goods to be transferred in the normal course of trade. Therefore, a consumer who 3D prints a product for personal use at home without selling the product will likely not be found to be infringing intellectual property rights. Patent owners may have more protection than copyright owners or trade-mark owners. The Patent Act grants a patent owner the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used. Therefore, even if a commercially available patented product is 3D printed at home for personal use, the patent is arguably still being infringed and the patent owner can pursue legal recourse against the infringer.

19 Blake, Cassels & Graydon LLP 15 Developing Solutions Against Counterfeiting in a 3D Printer World As a result of the critical issues raised by counterfeiting through the use of 3D printer technology, potential solutions are currently being developed in an attempt to curb these problems. Many argue that the solution to problems created by 3D printing involves creating a robust intellectual property portfolio that protects a product s functionality in addition to the product s appearance. For example, companies could patent both their final product and the process for making their product. Businesses could also register their industrial designs, which generally protect the look and feel of an object, such as its shape, pattern, ornamentation and configuration. In addition, intellectual property owners could package their product in a way that clearly shows the product is protected (for example, through the use of intellectual property notices and markings). This type of warning may help deter companies from agreeing to print or scan the product. Another possible solution involves the use of DNA marking to provide a verifiable and reliable way of distinguishing genuine products from counterfeit goods. Scientists at a U.S.-based company have developed the use of plant DNA to mark and identify genuine products. Another benefit to using DNA as a marker is that there is no evidence that this DNA ink can itself be reproduced by 3D printers. Further, it is anticipated that DNA ink technology could be used by a company at its own factories or by authorized 3D printing businesses at a fairly reasonable cost. This technology could be built into the 3D printers or applied to the products directly during the manufacturing process. Once the products are completed, they could be screened by authorized fabricators to verify their authenticity or potentially even by consumers with a smart-phone application. Disclaimers from liability could then be issued by these companies for any problems that may result from unmarked (i.e., counterfeit) products. It may also be that, in order to adequately address the rise in counterfeit goods produced by 3D printing, companies have to embrace the technology themselves. The creation of a web-based marketplace for 3D design files for genuine products may be a possible solution. Companies could release 3D templates, recommended materials and a guideline of best practices to their consumers. This approach would allow companies to control the 3D printing of their products and provide their consumers with any required safety warnings. This type of proactive approach to the issue of counterfeiting and 3D printing mirrors the approach taken by companies when faced with the issue of pirated music. By making it simple for a consumer to buy safe, high-quality, reasonably priced music, some companies created prosperous online music marketplaces.

20 16 Blake, Cassels & Graydon LLP As 3D printing continues to become more available to individuals, the issue of how to effectively combat counterfeit products produced by 3D printing will certainly need to be addressed by intellectual property rights owners.

21 Blake, Cassels & Graydon LLP 17 CONTACT Alan Aucoin Partner Toronto Sheldon Burshtein Partner Toronto Anthony Prenol Partner Toronto Antonio Turco Partner Toronto Gary Daniel Partner Toronto Greg Kanargelidis Partner Toronto Sarah O Grady Associate Toronto sarah.ogrady@blakes.com

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