Vol. 138, No. 6 — February 7, 2004

Order Amending Subsections 11.18(3) and (4) of the Trade-marks Act

Statutory Authority

Trade-marks Act

Sponsoring Department

Department of Industry

REGULATORY IMPACT
ANALYSIS STATEMENT

Description

The Order Amending Subsections 11.18(3) and (4) of the Trade-marks Act (the Order) is being introduced to implement one of Canada's obligations under the Agreement between Canada and the European Community on trade in wine and spirit drinks (the Agreement). The negotiations concluded on April 24, 2003, and the Agreement was signed on September 16, 2003. The Agreement will enter into force on the first day of the second month following the date on which Canada and the European Community (EC) have exchanged diplomatic notes confirming the completion of their respective procedures for the entry into force of the Agreement. The coming into force of the Agreement is contingent on approval of the proposed Order.

One of Canada's commitments as part of the Agreement was to phase out the list of generic names for wines, as well as two generic spirit names, "Grappa" and "Ouzo," found respectively in subsections 11.18(3) and (4) of the Trade-marks Act (TMA). This initiative seeks to progressively eliminate the use of European wine and spirit names on Canadian labels to allow European producers to apply for the protection of these names as geographical indications (GIs) in Canada. GIs constitute a category of intellectual property and are protected specifically in respect of wines and spirits in Canada as part of its international trade obligations under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). A GI is an indication (name or symbol) that identifies a good as originating in a particular locality or region. The reputation, quality or other characteristic of the good must be essentially attributable to its geographical origin. "Grappa" and "Ouzo" need to be protected under a separate legislative regime, as they do not identify spirits originating in a particular geographical area (i.e. they are not place names).

With respect to wines, the Agreement stipulates that the following names will be removed from the list on the date of entry into force of the Agreement: "Bordeaux," "Chianti," "Claret," "Madeira," "Malaga," "Marsala," "Medoc," "Médoc," "Mosel" and "Moselle." The names "Bourgogne," "Burgundy," "Rhin," "Rhine," "Sauterne" and "Sauternes" will be deleted on December 31, 2008. Wine names that bear significant importance to Canadian wine producers, i.e. "Chablis," "Champagne," "Port," "Porto" and "Sherry," will be removed from the list on December 31, 2013.

With regard to spirits, the spirit drink names "Grappa" and "Ouzo" will be removed from the list of generic spirit names in subsection 11.18(4) of the TMA on the date of entry into force of the Agreement.

"Tokay," a wine mainly produced in Hungary, was not added to the Agreement as Hungary has not yet completed its accession to the European Union. Nevertheless, this wine name will be deleted from the list under subsection 11.18(3) of the TMA on the date of entry into force of the Agreement, given that Hungary is set to accede to the European Union shortly and that it would therefore have both rights and obligations under the Agreement. Canadian stakeholders did not raise any objections to this approach during the consultations on this matter.

Steps must be taken to progressively delete, in accordance with the transitional periods stated above, the list of generic wine names from subsection 11.18(3), as well as "Grappa" and "Ouzo" from subsection (4), in order to bring the Agreement into force. Subsection 11.18(5) of the TMA clearly identifies a procedural instrument to bring about the required changes. It provides that the Governor in Council may, by order, amend subsection (3) or (4) by deleting therefrom an indication in respect of a wine or spirit.

Alternatives

There are no alternatives to this Order, because it is required for the proper implementation of the Agreement. Subsection 11.18(5) of the TMA clearly defines the Order as the instrument of choice for making amendments to the lists of generic names for wines and spirits.

Without an order to carry out the amendments to the lists of generic wine and spirit names, the Agreement cannot come into force. Considering that the protection of European GIs was one of the key aspects of the Agreement, any other option would simply negate Canada's commitment to phase out the generic names and, therefore, its commitment to the Agreement.

Benefits and Costs

As the Order responds to a specific request from the EC to progressively eliminate the use of generic names on Canadian labels, European producers will directly benefit from the amendments to subsections 11.18 (3) and (4). Once generic wine names are removed from the TMA, Canada shall no longer deem that they are customary in the common language of Canada as common names for wines, and the EC wine producers may apply to have these names entered on the list of protected GIs in Canada at the end of the respective transitional periods. EC GI holders could then enforce their intellectual property rights in Canada.

On the other hand, as a result of the TMA amendments, Canadians will derive global benefits which will help sustain and enhance different segments of the industry. In return for the commitment to phase out generic names from the TMA, Canada obtained significant concessions which will allow easier access to the EC market for Canadian wine and spirits. It is anticipated that these concessions will boost Canadian exports and offset to some extent the disproportionate bilateral trade ratio which currently favours the EC by a measure of $860 million per year in sales versus less than $16 million per year for Canadian wines and spirits.

Moreover, the Agreement maintains stability in Canada's domestic marketing and distribution practices. These practices allow wineries in British Columbia and Ontario to operate private wine store outlets that sell only wine produced in Canada, and allow Quebec to maintain its requirement that wine sold in grocery stores be bottled in that province.

Finally, the Canadian wine and spirit industries will enjoy advantages ensuing from better bilateral relations between Canada and the EC. The Agreement, and more particularly the Order amending the TMA, will appease a long-standing area of contention between Canada and the EC. Last year, an internal complaint procedure was initiated in the EC regarding Canada's WTO TRIPS obligations and the generic status of Bordeaux and Médoc under the TMA. With the Agreement phasing out the generic names from the TMA, this issue will become moot.

The Order is expected to have a minor impact on the Canadian wine and spirit industries and on Canadian consumers. The great majority of wines and spirits produced in Canada do not bear any of the generic names found in subsections 11.18(3) and (4) of the TMA. The Vintners Quality Alliance certification program already prevents the use of foreign geographical names as a pre-condition to obtain VQA certification for Ontario and British Columbia wines. VQA producing facilities, as well as other wine and spirit producers which do not use generic names, will be unaffected.

Very few Canadian wine and spirit producers will need to take proactive steps to comply with the amendments to the TMA. In particular, three producers hold a total of eight registered trade-marks which contain the following wine names: "Champagne," "Port," "Sherry," "Chablis," "Rhine" and "Bordeaux." These registered trade-mark holders provided, on the date of signature of the Agreement, voluntary undertakings to phase out the use of their trade-marks by the end of the applicable transitional periods. With regard to spirits, the registered trade-mark "Ice Grappa" will remain valid.

The few Canadian wine and spirit producers affected will incur costs as a result of giving up the use of generic names after the transitional periods. For instance, they will be required to re-brand some of their products (e.g. Canadian sparkling wine instead of Canadian champagne). This change may involve expenses related to new marketing strategies, research, registration of new trade-marks and re-labeling. These costs would only affect a handful of businesses and are difficult to quantify. As most Canadian wine labels bear Canadian place names or trade-marks and are sold on the basis of grape varietal names, it can be expected that any adverse impact on Canadian wine sales would be minimal and time-limited.

Finally, the impact on Canadian wine and spirit consumers is expected to be negligible. Of the thousands of products that are offered daily in provincial liquor stores and in private outlets, only a handful of Canadian wines will need to have their labels changed in the next few years. Labelling changes are unlikely to result in higher wine prices, to confuse consumers or to affect their purchasing habits. Consumers of the affected wines will undoubtedly need to adapt to labelling changes, such as new trade-marks. Producers will be responsible for marketing their new product names to consumers in order to maintain their market share in Canada.

Consultation

The Government of Canada conducted consultations to procure public opinion on the possible removal of generic wine and spirit names enumerated in the Order. The consultations were held from October 4, to November 8, 2002, via the Internet. A consultation document, which contained ten questions and a general call for comments, was accessible on the Industry Canada, Intellectual Property Policy Directorate Web site. To ensure that all potential interested parties would be informed of the consultations, the Directorate contacted 164 Canadian stakeholders representing 119 wineries, eight distilleries, eight organizations of producers and research groups, and 29 individuals from provincial and territorial governments and liquor boards. European stakeholders were also given an opportunity to comment on the consultation document. A list of the stakeholders consulted may be obtained from the Intellectual Property Policy Directorate.

Out of the 23 responses received, 10 were from Canadian stakeholders and the remainder originated from various European wine or spirits organizations. The low number of responses is not surprising given that the Department of Foreign Affairs and International Trade (DFAIT) had informally consulted the Canadian wine and spirit industries and provincial governments on the overall approach to the Canada-EC negotiations long before these public consultations took place, and the industries had already communicated their support for Canada's negotiating commitment to phase out generic names in the context of a mutually beneficial agreement.

The consultations indicated that the Canadian wine and spirit industries did not oppose the staged removal of generic names from the TMA, provided that Canada obtained better access to the EC market and that sufficient transitional periods to allow Canadian producers to develop new marketing or branding strategies were obtained. Both of these elements were negotiated with the EC and form part of the Agreement. The European industries expressed approval for the TMA amendment.

Compliance and Enforcement

The courts will continue to exercise jurisdiction over these matters to ensure compliance, since GI and trade-mark rights are enforced by rightholders according to the TMA. Therefore, the Order does not require any further measures for the enforcement of the proposed amendments.

Contact

Susan Bincoletto, Director, Intellectual Property Policy Directorate, Industry Canada, 235 Queen Street, Ottawa, Ontario K1A 0H5, (613) 952-2527 (Telephone), (613) 941-8151 (Facsimile).

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to subsection 11.18(5) (see footnote a) of the Trade-marks Act, proposes to make the annexed Order Amending Subsections 11.18(3) and (4) of the Trade-marks Act.

Interested persons may make representations with respect to the proposed Order within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of this notice and be addressed to Susan Bincoletto, Director, Intellectual Property Policy Directorate, Industry Canada, 235 Queen Street, West 5^th Floor, Ottawa, Ontario, K1A 0H5.

Ottawa, February 3, 2004

EILEEN BOYD
Assistant Clerk of the Privy Council

ORDER AMENDING SUBSECTIONS 11.18(3) AND (4) OF THE TRADE-MARKS ACT

AMENDMENTS

1. (1) Paragraphs 11.18(3)(a) to (e) of the Trade-marks Act (see footnote 1) are repealed.

(2) Paragraphs 11.18(3)(f) to (k) of the Act are repealed.

(3) Paragraphs 11.18(3)(l) to (v) of the Act are repealed.

(4) Paragraphs 11.18(4)(a) and (c) of the Act are repealed.

COMING INTO FORCE

2. (1) Subsections 1(3) and (4) come into force on the day on which this Order is registered.

(2) Subsection 1(2) comes into force on December 31, 2008.

(3) Subsection 1(1) comes into force on December 31, 2013.

[6-1-o]

Footnote a

S.C. 1994, c. 47, s. 192

Footnote 1

R.S., c. T-13

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