Industry Committee on May 2nd, 2007

[The Chair, Conservative, James Rajotte]

We'll call the 58th meeting of the Standing Committee on Industry, Science and Technology to order. We are here pursuant to Standing Order 108(2), continuing a study on counterfeiting and piracy of intellectual property.

We have with us three witnesses today. First of all, we have Mr. Daniel Drapeau, a lawyer with Ogilvy Renault. We have Professor Michael Geist, a professor of Internet law at the University of Ottawa. And third, from the Intellectual Property Institute of Canada, we have Mr. Michael Erdle, the president.

Gentlemen, you were originally scheduled to be part of a five-person panel, and we had you for five-minute opening statements. But because there are three of you, I can be a little liberal—small l liberal—with your opening statements. We've added five minutes, but if you go a little over, I'll certainly accommodate you in terms of time. Then we'll get right into questions from members.

I think we'll start with Mr. Drapeau.

[Daniel Drapeau, Lawyer-Partner, Ogilvy Renault]

To begin, I would like to thank the committee for the invitation to appear and to give me the opportunity to contribute to its work.

I distributed a one-page summary of my presentation. Should there not be enough time to finish my presentation, you will at least have the essence of the various points I will make. Of course, I submitted the document in both official languages.

I am a partner with the law firm Ogilvy Renault. I have been doing anti-counterfeiting work for the last 10 years. I coordinate the anti-counterfeiting efforts worldwide and in Canada of Canadian clothier, Parasuco. I also do the work in Canada of anti-counterfeiting for a number of famous marks, including Chanel and Lacoste. This is my day-to-day work, whether I'm pleading before the court, conducting seizures, drafting proceedings, or negotiating with adversaries—infringers.

I'm also the author of a number of publications, but more precisely, my main topic of interest is Anton Piller orders. These are orders for seizures that are granted by Canadian courts, and in particular by the Federal Court of Canada, which we often use in the fight against counterfeits.

I have one article in English and I have one article in French, which I've given copies of to Mr. Latimer, should any members of the committee wish to consult them.

In conclusion, I am also the chair of the Anti-counterfeiting Committee of the Intellectual Property Institute of Canada. So I don't think anyone will be surprised at my position on this issue.

I am here in my capacity as a private legal practitioner. You will hear later on from the Intellectual Property Institute of Canada. You will also hear, at another time, from the Canadian Anti-Counterfeiting Network. While I belong to these organizations, what I can bring to you is the view of a practitioner, a coordinator of anti-counterfeiting efforts, and an observer of decisions rendered in this field by the Federal Court over the last 25 years.

When I was preparing my testimony two weeks ago, my main point to make in front of you was to show you the deficiencies in Canadian laws as they pertain to anti-counterfeiting. I may have been a bit ahead of my time, because when I was reading the minutes of the security committee meetings, I realized that before going on to that topic, which is summarized in the written document I provided, I probably needed to address other, more fundamental, issues.

You may hear from some that counterfeiting is not a big deal—that counterfeiting does not affect Canadian businesses, or does not seriously affect Canadian businesses. I've also read in some minutes that no one is duped, because counterfeits are sold at such a low price that a purchaser knows what he's getting is fake. I need to address these points before I can tell you how our laws are deficient.

This country has adopted laws to protect intellectual property, the underpinnings of which are the respect for property and the encouragement to innovate. Counterfeiting is a particular breed of offence that the current laws are not well equipped to deal with. Should counterfeiting be considered any less important than other types of intellectual property infringement? Bearing in mind that counterfeiting seeks to reproduce exactly what is protected—so it's not an inadvertent violation, because you have somebody who is taking a trademark and reproducing it identically on a product that has not been manufactured by the trademark owner—I propose to you that counterfeiting should be afforded an even higher level of importance by the legislator.

In terms of counterfeiting affecting Canadian businesses, one of our firm's clients is Parasuco, a company that has been designing, manufacturing, and selling cutting-edge clothing in Canada since 1975. Salvatore Parasuco has 250 employees scattered across Canada, but mostly in Ontario, Quebec, and British Columbia. He is the first Canadian designer who has been showcased at the Milan fashion week in Italy, and I think he's truly a source of national pride.

Parasuco is affected by counterfeiting. The brand is becoming hot; more and more people want it, and we are noticing instances of counterfeiting on the Canadian market. I will not even mention to you here instances of people in other countries attempting to register the mark Parasuco; that, of course, is not something over which this committee has jurisdiction.

The harm that's suffered here by Parasuco is lost sales, but not just lost sales; there is also a loss of goodwill to the trademark. A loss of goodwill occurs when people who buy the real thing stop buying the real thing because the brand has lost cachet or lost appeal because it's been too massively distributed. On the government side, of course, there is a loss of tax revenue.

There's another loss I'd like to raise to your attention, and this is in my capacity as a practitioner, a guy who works in trademarks all day long. There's a loss of distinctiveness of the Parasuco trademark when counterfeits are sold.

Here's how it works. Our Trade-marks Act provides that a trademark is there to identify the source of a product. In a way, the Trade-marks Act was probably the first piece of consumer protection legislation. A trademark is meant to identify to the consumer that you can rely on this trademark as indicating that the product comes from a given source. Well, if a whole bunch of people start using that very same trademark, the trademark no longer performs its distinctive function. It doesn't distinguish the product as coming from a source.

Let me give you an example. For Montrealers or for people in the room who know Montreal, there is a Montreal car dealership called Decarie Motors. Yet the Decarie Motors brand was removed from the trademark register in 2000 under a federal court of appeal order because too many people were using the brand name Decarie. Therefore, the brand had lost its original distinctiveness. Therefore, as far as counterfeiting is concerned, when a person copies the trademark of someone else, it negatively affects the holder of the trademark.

I'm talking right now of harm that is caused to a Canadian manufacturer. There may be people who say a lot of these famous trademarks are also held by foreigners, so why is it so important and why should we be concerned by it? Well, a foreign right-holder also often employs Canadians, whether as independent distributors or as direct employees, and counterfeiting also impacts at this level.

I have one last point before I go on to the substantive changes that can be made. When I hear somebody say nobody is duped because counterfeits are sold at such a low price that the purchaser knows that what he's buying is a fake, my response is that anybody who practises in my field will tell you that the number of counterfeits on the markets goes up drastically just before Christmas. Why is that? Because people are busy buying Christmas presents for their loved ones.

I propose to you that if the buyer isn't duped—and by the way, I don't subscribe to that position; I think that some people genuinely are duped. But let's assume for argument's sake that the buyer isn't duped. I can assure you that when the buyer gives these counterfeits as presents on Christmas morning, he doesn't say, “Honey, don't you love the knock-off Lacoste polo shirt that I've bought for you?” I should add that last December I conducted a seizure of over 700 items of counterfeit Lacoste clothing in Montreal 10 days before Christmas.

In terms of being duped, it's not only the person receiving the product that's being duped, it's the whole public being duped. Anybody who sees sub-quality garments bearing a trademark will think that trademark is no longer indicative of a quality product. In the end, this goes to the depreciation of the market.

As I have limited time, my suggestions for legislative reform are set out in my written representations. The highlights of them are as follows.

In terms of criminal prosecution, the RCMP and crown prosecutors will only act pursuant to the Copyright Act, and not pursuant to the Trade-marks Act, because there is no criminal dispositions in the Trade-marks Act. That needs to be changed. Counterfeiting needs to be criminalized. Why? Because counterfeiters are not regular litigants. They have covert operations, they make their assets disappear, and they make evidence disappear. They are not habitual participants in the litigation process, which presumes good faith.

From a cooperation point of view, we need a greater exchange of information between the RCMP and Customs. We need stronger border measures. The current system, under which you need to identify a shipment and obtain a court order to block goods, doesn't work.

Finally, from a deterrence point of view, we need stronger penalties. If I have time later on, I can talk about the damages that are awarded by the Federal Court, which are very restricted.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Drapeau.

I'm sure there will be questions about the specific measures during the question session from the members themselves.

We'll go now to Mr. Geist for your opening statement.

[Prof. Michael Geist, Professor, Internet Law, Ottawa University, As an Individual]

Thank you, Mr. Chair.

Good afternoon. My name is Michael Geist. I'm a law professor at the University of Ottawa, where I hold the Canada research chair in Internet and e-commerce law. I'm also a syndicated weekly columnist on law and technology for the Toronto Star and the Ottawa Citizen.

As I prefaced when I last came before you during your review of telecommunications reform, I appear before the committee today strictly in my personal capacity, representing my own views.

I actually appeared last week before the Standing Committee on Public Safety and National Security on the counterfeiting issue as well, and rather than simply repeat those remarks, I've provided the committee with a copy of my prepared comments, and I believe a full transcript will be available shortly.

I do, however, want to briefly reiterate four points that I made last week and then expand on two other issues.

The first of the four points—and this is in a sense stating the obvious—is that counterfeiting is not a practice that anybody with any credibility supports. When Mr. Drapeau talks about being on one side of the fence, there are only people on one side of the fence on this issue. Counterfeiting is not a good or a bad issue; I think it's broadly recognized as a bad issue. At its worst, it may pose a public safety issue. Even when viewed in the best possible light, when some activities may be relatively harmless, it's not a practice to be condoned.

The issue, though, is not whether counterfeiting is bad or good, but whether or not it merits a strong legislative response, and I believe that depends on two things: one, the state of counterfeiting in Canada; and two, the state of Canadian anti-counterfeiting law. On these issues I would submit that the situation is far less certain. Indeed, once we get past the attention-getting props and dig into the details, I believe it becomes clear that there is an awful lot we don't know.

Second, I think that public safety and security concerns should be accorded the highest priority with the counterfeit file. As a parent of three young children, I too find stories of exploding batteries and counterfeit pharmaceuticals deeply concerning. That said, I note that according to the RCMP, significant physical harm from counterfeiting is extremely rare. In fact, a recent B.C. case that involved fake pharmaceuticals that may have led to the death of a woman is the first such case in Canada on record.

Third, while I appreciate the impatience with perceived inaction, I think it's important to reiterate that Canadian law has not left law enforcement powerless. Canada is compliant with its international copyright obligations. Moreover, claims of police inaction do a great disservice to law enforcement across the country who are active in pursuing IP crime.

Indeed, the RCMP notes that from 2001 to 2004 it conducted more than 1,800 investigations and laid charges against 2,200 individuals and more than 100 companies, and just last week, before this committee, those numbers were updated, with the RCMP indicating that in 2005 there were 700 charges laid. With roughly two charges per day, this is a country that has laws to address counterfeiting and a law enforcement community that is committed to doing so.

Fourth, while advocates for reform argue that there is an obvious blueprint for addressing counterfeiting, we know that there is no silver bullet. Indeed, the experience elsewhere illustrates that most anti-counterfeiting measures have been exceptionally unsuccessful. The proof is in the data. Counterfeiting is widely viewed as a growing international phenomenon, even in those countries that have adopted tougher border measures or criminal penalties. Despite U.S. action, for example, it is easier to obtain counterfeit products in Manhattan than it is in Markham, home to the much-discussed Pacific Mall.

If we know anything, we know that many legal reforms will do no more than provide the illusion of dealing with the counterfeiting issue.

With this background, let me spend my last couple of minutes focusing on two additional issues.

First is the issue of inconsistent data. I believe this committee could make an enormous contribution in addressing counterfeiting by calling for the collection of better independent data. As I'm sure you know, the RCMP has acknowledged that there has been no comprehensive independent study on counterfeiting.

While we know that only a fraction of counterfeit goods are actually manufactured in Canada, that organized crime is involved in some, though certainly not all, counterfeiting, and that counterfeit and genuine products are not perfect substitutes, I would disagree with my fellow panellists. I think it is rather obvious that a person who purchases a $10 fake Rolex watch knows they're not getting the $5,000 genuine article and has no expectation that that is so.

Consider, for example, the issue of camcording in Canadian movie theatres and allegations that Canada is a leader in contributing to DVD piracy. Earlier this year there were reports that Canada was responsible for 50% of camcorded movies that later appeared on pirated DVDs worldwide. Over the weeks that followed, industry sources began to alter that number with suggestions that the figure was actually 20%, then 23%, then 30% or 40%. In fact, just this morning there was a report out of New York that indicated that New York City is home to 40% of all global camcorded movies that are used for pirated purposes.

The reality, I would submit to you, is that we simply do not know. In fact, some of the data I've seen from the industry suggest that the number is closer to 3% of all motion picture released movies, as opposed to the 50% that we've heard.

When combined with the fact that few, if any, Canadian movies are said to be affected, and that Canadian copyright law already addresses the issue—it's an infringement to camcorder movies, and camcording a movie for the purpose of distribution brings with it the prospect of huge fines and jail time—the issue highlights the need to avoid knee-jerk legislative proposals by instead focusing on obtaining independent, reliable data.

Secondly, I want to talk for a moment about the absence of a connection between the World Intellectual Property Organization's Internet treaties and counterfeiting. I must say that I think there's been a surprising link made between counterfeiting and the fact that Canada has yet to ratify the WIPO Internet treaties. I believe it's important to understand that there is simply no connection between the two. Indeed, I believe that the inclusion of the WIPO Internet treaties within this debate has actually slowed progress on the counterfeiting front. I say this for two reasons.

First, the heart of the WIPO Internet treaties is anti-circumvention provisions that provide legal protection for technological protection measures. These provisions do nothing to address counterfeit pharmaceuticals, counterfeit clothing, counterfeit handbags, counterfeit watches, or dozens of other counterfeit targets. Moreover, they do nothing to address counterfeit DVDs and CDs since the act of commercial counterfeiting is simply not addressed in the treaties.

Second, the WIPO Internet treaties are extremely controversial. In recent months there has been public opposition from Canadian security companies. Four Canadian privacy commissioners have voiced misgivings. Consumers are deeply troubled by the potential impact, and many artists' groups have themselves come out against ratification of these treaties. Indeed, even the U.S. architect of the treaties has admitted that they have been a failure.

With the inclusion of the treaties within the counterfeiting issue, I believe that addressing counterfeiting becomes unnecessarily controversial. As I said, everybody is on the same side of the fence here. The committee would do well to bifurcate this issue by clearly stating that the counterfeiting file should proceed independently from the WIPO Internet treaties and the broader issues of copyright reform.

In conclusion, once again, no one supports counterfeiting, but I believe we should all support a reasoned, effective approach based on hard data and realistic goals. I fear that some of the possible Canadian reforms would do little to advance the battle against the real problems associated with counterfeiting in Canada.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Geist.

We'll now go to Mr. Erdle, please.

[Michael Erdle, President, Intellectual Property Institute of Canada]

Thank you very much, and good afternoon, ladies and gentlemen.

My name is Michael Erdle. I'm the managing partner of Deeth Williams Wall, a law firm in Toronto, and I'm the president of the Intellectual Property Institute of Canada.

I am very pleased to be here before the committee today. I would have preferred to speak in French and English before the committee, but my daughters, who are at ease in French, heard me speak French and suggested that I give my presentation in English. I am sure you will all agree.

I'm here today to tell you why our institute believes that counterfeiting and piracy of intellectual property is a very serious problem. We believe that the Government of Canada should take action to address it for the benefit of all Canadians.

With me here today is Michel Gérin, who is the executive director of the institute.

I'd like to make three key points to you today.

First, there is a fundamental difference between infringement of intellectual property and counterfeiting. As Professor Geist has said, we are all on the same side of the fence when it comes to counterfeiting, but I want to explain a little bit more about that.

Second, we believe Canada's laws are generally adequate to deal with ordinary infringement, but not counterfeiting.

Third, we need stronger border enforcement, effective criminal penalties, and more effective legal remedies to deal with counterfeiting and piracy.

Before I explain these further, I'll give you a brief background about the Intellectual Property Institute of Canada, which is also known as IPIC. IPIC is the national association of IP professionals. We have about 1,700 members. Monsieur Drapeau and Professor Geist both are members of the institute. We represent the vast majority of IP lawyers, patent agents, and trademark agents. Our members work in private practice, from sole practice to the largest law firms in the country. They also work for private industry, government, universities, and hospitals, a wide variety of organizations. In my own case, I've practised exclusively in the field of technology and intellectual property law for almost 20 years.

Our members help IP owners obtain patents and trademarks and other IP rights. We represent plaintiffs in court—those are usually the IP owners—and defendants, the alleged infringers. In almost every IP case in the country, we have members on both sides. So I'm not here to speak for a special interest group of IP owners. I'm here to speak in favour of a strong IP framework for Canada as a whole.

Now, going to my main points, first I'd like to explain the difference between infringement and counterfeiting. I think this sometimes gets lost in the debate over piracy and counterfeiting.

Infringement is really a normal part of business competition, to a certain degree. In the patent field, inventors seek a patent for their inventions. If it's successful, others will try to imitate it. They'll also try to improve it. If they can do this without infringing the patent, they will. Sometimes competitors cross the line, and then they're sued for infringement. This could be a long and expensive process, but generally the system works when you're dealing with legitimate competitors.

Similarly with trademarks, a company will register their mark to indicate the source of a product or service, as Monsieur Drapeau has explained. If it's successful, others will try to imitate it or try to come close. The trademark owner will sue if they think this causes confusion in the marketplace. There's a constant kind of cat-and-mouse game, and this is normal competition.

With copyright also, rights owners and users are constantly testing the boundaries. Copyright tries to strike a balance between the rights of owners and the rights of users, the rights of the public, and there are always questions relating to new technologies, new uses of works. These questions can be resolved through the normal court process.

But counterfeiting and piracy are entirely different. They are a form of theft; it's as simple as that. In many cases, it involves organized crime; at least, the criminals are very organized in how they do the counterfeiting and piracy.

Despite what you may have heard, it's not just a problem of luxury goods. It's not fake watches and handbags. Our members have been involved in all kinds of cases of counterfeit goods. I'm sure you've already heard about the drugs—and Professor Geist mentioned one case in B.C.—where they have a harmful ingredient or maybe simply no active ingredients. There are fake automotive parts, aircraft parts, other industrial goods, electrical products. Virtually every kind of product will be knocked off if somebody can make a profit doing it, and the profits in doing it are huge.

We're not talking about so-called grey market goods, which are legitimate products that are purchased abroad and then resold in Canada. We're talking about absolute fakes.

Parallel imports are a different topic. The wholesalers and retailers who sell these products may actually be deceived into thinking they're the real thing—I would say they should be suspicious when it sells for a fraction of the price—but consumers are certainly deceived. People are deceived by these products all the time.

In some cases it's a health and safety issue. No one really knows what's in these products. But in all cases, there's a consumer protection issue. It's an issue that directly affects innovation in Canada.

As this committee itself noted in the recent report on the manufacturing sector, a strong IP system is essential to our economy. Counterfeiting and piracy hurt Canadian companies. They cost jobs in Canada—jobs in manufacturing, in research and development, and even in the retail sector. Counterfeiting is a serious problem and it hurts Canada.

My second point is that our existing private enforcement of IP rights isn't enough to deal with counterfeiting.

Owners of IP have four big problems when it comes to private enforcement. First, they have to find the counterfeiters. Second, they have to get injunctions to stop the activity. Third, they have to seize the counterfeit products and get them off the market. Fourth, they have to enforce a court judgment and collect an award of damages at the end of the day.

Counterfeiters don't put their names and addresses on the products. They can operate anywhere. Products come across the border by the container load. They're sold very quickly. Pirated software, movies, music CDs, and the like can be made in large volumes with equipment that anyone can buy at virtually any electronics store.

When IP owners find out about the counterfeits, the first step is to go to court to get an injunction to stop the activity before trial. But it's very difficult to do that. The court may decide a payment of money damages is good enough. Then the case has to go to a full trial. The IP owner never recovers all of the expenses and damages.

Owners also need to get court orders to seize infringing goods. They need to know where they are, but they can't get a court order until they know where the goods are and can prove they're fakes. They can't prove they're fakes without getting a court order. It's a catch-22.

Finally, even if the IP owner is successful in court and wins damages, after sometimes months or years of effort, it's virtually impossible to collect. The defendant is likely a shell company with no assets. The counterfeiter can set up a new shell company and be back in business within 24 hours.

Let me give you a typical example from my own experience. My firm represents a large Canadian automotive manufacturer. Last year they discovered someone selling counterfeit products, aftermarket products, online. It took more than six months to track down the counterfeiter. The address on the website and the Ontario corporate records were false. We then had to serve a statement of claim. We finally had to hire a private detective to stake out the owner's home. We had to get a default judgment because no defence was ever filed.

In the end, we managed to shut down the website. But there was no financial compensation for the goods that had been sold, only a couple of thousand dollars in legal costs, which didn't cover their legal costs. The individual now says the company has no assets and he can't pay.

Asking private parties to do all of this by themselves is like asking a homeowner to sue a burglar to recover stolen jewellery or a stereo or a car owner to track down the stolen car and get a court order to get it back. We all accept some degree of personal responsibility to protect our property. We buy locks to prevent theft and insurance to replace stolen goods. But we also expect the criminal laws against theft and the police to enforce the law, especially when it involves organized crime.

What do we need to have? We need to have three things. We need stronger border enforcement. We need effective criminal penalties in the law. We need more effective civil remedies.

I'd be happy to explain those further. I think I've used up my time, but I'd be happy to explain those further if there are any questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Erdle.

We'll now go to questions from members.

We'll start with Mr. Thibault, for six minutes.

[Robert Thibault, Liberal, West Nova, NS]

Thank you for your presentation and for being here.

Mr. Geist, I was a bit surprised by your comment on the pharmaceuticals, that maybe the problem isn't huge—although you're not supporting counterfeiting in any way—because we only know of one death. What we don't know is how many people might have had the loss of expected outcomes. People who might have been buying counterfeit pharmaceuticals who were not having the outcomes they thought, thinking they're getting treatment and taking care of their health and not doing it. I think that's another area where we're fearful. We had people talking to us last time about the electrical equipment out there, safety electrical equipment that you buy thinking you're protecting yourself, and then it is counterfeit and substandard. If we're not looking for it, we wouldn't know.

But the question I want to put to you is on the enforcement side. I find it difficult. I agree with strengthening laws and strengthening the fines and these things. But one element that wasn't suggested in the areas that we should attack is the resellers, because a lot of these goods, especially the large amounts of imports, are being sold through our large chain stores or through those things, probably inadvertently. But I would think that the responsibility would be to the person who is selling it to the consumer, that there is a level of responsibility there. Somebody in the chain made too much profit. Somebody in the chain at one point made a lot more money on the goods than they would have if they had sourced a legitimate good.

So I think that might be an area we should perhaps include. I put the question to you. Is that an area you would recommend we include in recommendations for legislation or adding to the Criminal Code.

[Daniel Drapeau]

Is the question directed to me or to Mr. Geist?

[Robert Thibault, Liberal, West Nova, NS]

Either/or, as you wish. You probably just have two minutes. Four minutes—

[Prof. Michael Geist]

I'd at least like to respond to your first comment about fake pharmaceuticals, just to make sure my comments are clear.

I first noted that I felt health and safety issues were the top priority on this particular file. When I suggest there was only one such incident, I'm quoting the RCMP. It is our law enforcement authorities themselves who have indicated that we don't have that other information. And while I would agree with you that there is the prospect or at least the possibility that other people may have been harmed, we should put this in context as well. According to some research I was doing based on Canadian Medical Association data, more than 10,000 Canadians a year die due to bad drug interactions when the drugs they've been prescribed are not the right ones interacting with other drugs. So that's obviously an enormous problem as well.

But the point is that, yes, it's possible other people are being affected, and this issue—the health and safety issue—ought to be, from my perspective, the top priority on the counterfeit file. But in the broader scheme of the consequences of pharmaceutical use, at least for the moment, the data we do have suggest it's a relatively minor problem.

[Daniel Drapeau]

I will speak from what I know. I will not address pharmaceutical issues.

As you've seen from my presentation, my view is that all counterfeiting is bad. Of course, pharmaceuticals that injure or kill are even worse, but the fact that it's worse doesn't diminish the fact that counterfeiting itself is bad.

Why is it bad? I think we have the obligation, but also the chance, to reflect on what kind of society we want Canada to be. Our founding fathers gave us peace, order, and good government, and I think respect for the rule of law is an integral part of our culture. Do we want to send the message that it's okay to counterfeit some things and we'll just give the counterfeiters a slap on the wrist, and that for other things it's much more serious? I think when you lie, when you sell a counterfeit, it's wrong, no matter what the product is.

To answer your specific question, in terms of retailers, you are right, a number of retailers are selling counterfeits. In my line of work, we call that “brick and mortar” stores.

I thought your comment about the profits made by those retailers very interesting, because that is indeed an argument I use when I'm up against retailers. Here's how it works. We were saying earlier that when you have a consumer who buys a product at a low price, he probably knows he's buying a fake. I don't agree, because consumers are a special breed of people. They're people who need protection sometimes.

[Robert Thibault, Liberal, West Nova, NS]

The consumer might be paying the full price.

[Daniel Drapeau]

Of course.

But just for the price argument, that's why we have consumer protection legislation, because a legislator has deemed that consumers merit a special protection.

However, when you look at a retailer, he knows what's going on in the market. He's got a pretty good idea, when he's buying something grossly underpriced, that something's going on. You're right, that is one of the places where a very substantial amount of profit is made, especially if the counterfeit product is being sold at a price that is in keeping with the prices at which legitimate goods are sold.

[The Chair, Conservative, James Rajotte]

You have 30 seconds, if you have a quick question.

[Robert Thibault, Liberal, West Nova, NS]

I find it difficult to see how our border people, without the help of the industry, even if we put more in place, would know whether a trailerload of extension cords or a trailerload of sweaters is authentic or not. You still need that interaction with the industry itself, the people who are being infringed upon, to trigger it.

[Daniel Drapeau]

Sir, I'm here in my personal capacity. I'm not here representing an industry, although I have a number of clients who are part of the industry.

I don't think anybody in the industry is saying that they don't want to participate, that they don't want to help. Indeed, industry has shouldered much of the responsibility in the fight against counterfeits. Industry, from what I see, is more than prepared to interact with the borders.

I have prepared products for Canadian customs, for various clients I handle, which clearly show how to recognize a counterfeit item through indicators: these are the places through which authentic merchandise usually transits, and this is the manner in which authentic merchandise is presented. Really, what that does is give border authorities, first, an alert signal. When they see something that's not in conformity with this, they can say that maybe we have a counterfeit, and the border authority can then liaise with the rights holder, or the Canadian representative of the rights holder, to ask if we have a counterfeit shipment here. This is being done to some extent today, but it could be done much more frequently and with a greater exchange of communication, namely, the identification of who the importer is, which we cannot get at present.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

I was pleasantly surprised—perhaps the word pleasantly is not quite accurate, but yes, I was surprised—by what Mr. Geist said a little earlier, namely that there is no international remedy for intellectual property infringement.

That is a huge problem. I don't know how we will solve it. I listened to all three witnesses. We may have legislative frameworks, emergency measures, stronger border enforcement, patents, etc.

You also referred to a “minimum mandatory threshold with judicial discretion to increase the amount of pre-established damages”.

What can really be done to help these people? In your opinion, what is the total amount of losses each year in Canada due to intellectual property infringement? How much money do Canadian companies lose?

Next, how can we best protect these businesses? Do we have to go to the source? Should we turn to the businesses or to the stores which sell these products? Where does the solution lie?

Based on my understanding of what you said, there is no silver bullet, but where should we begin to address the problem? We may not get rid of it entirely, because I gather that it is fairly frustrating because there is no single guilty party. I wonder where we could start to help businesses protect their intellectual property rights.

I would like to hear all three witnesses on this point. What is the best solution? What is the best approach to put an end to the problem or, at the very least, lessen its impact?

[Daniel Drapeau]

Was there an order in which you wish us to address you?

[The Chair, Conservative, James Rajotte]

No, it's whoever would like to go first.

We'll go to Mr. Erdle.

[Michael Erdle]

I think the best thing we could do is improve the tools that customs has to intercept and seize products and give police more resources. They are taking action now. But I have spoken with a number of police officers over the last few years, and they say that their biggest problem is the lack of resources and manpower. They have to focus solely on the health and safety issues. They don't have the time and resources to deal with any of the other problems. They're simply unable to respond, even when there is a complaint, when IP owners say that they know this is going on and here's where to find the people. They will take action if they can, but they're stretched too thin.

So I think the number one thing we could do is provide those resources. The second most important thing is to have more serious penalities, because right now, if the penalty is a few thousand dollars fine, or maybe not even that, there's no deterrent for somebody who wants to sell counterfeit goods. The goods may be seized, but there will be another shipment very soon, and they'll make that money back very quickly. So there has to be enough of a penalty to be a deterrent.

[The Chair, Conservative, James Rajotte]

Mr. Geist.

[Prof. Michael Geist]

Chair, I have just a few things. You started by asking a question about how big a problem this is, and as I mentioned in my opening remarks, we don't know. So you will hear of many stock horror stories about the problems associated with counterfeiting, but there has not been in this country any independent data from someone who is truly reliable in this area to give us a sense of how much it actually does affect us.

That said, we do know that even if it's only one incident, let's say from fake pharmaceuticals, it's an issue that we ought to find some way to address. I believe before your committee you had someone from Health Canada talk about regulations that are 50 years out of date. Surely that's an ideal place to start in terms of trying to address this issue, dealing with that health and safety side, because from my perspective that is certainly an enormous problem.

With regard to stronger penalties, it's as if it's this magic elixir, that if only we had stronger penalties, suddenly people would stop because of the deterrent. Yet from Mr. Erdle's own remarks, it's pretty clear that that's ineffective as well, because his story indicated that after you've gone through the whole process with someone, they end up by saying they have a shell company with no assets whatsoever.

So I'm less convinced that strong penalties are effective. Indeed, in other countries where they have penalties that in some instances may be stronger than we're seeing, their counterfeiting problems are greater than ours.

[The Chair, Conservative, James Rajotte]

Thank you.

Finally, Mr. Drapeau.