Industry Committee on May 7th, 2007

[The Chair, Conservative, James Rajotte]

We'll start our meeting. This is the 59th meeting of the Standing Committee on Industry, Science and Technology. Pursuant to Standing Order 108(2), we are continuing our study of counterfeiting and the piracy of intellectual property.

We have six guests with us here today. Each will have up to five minutes for an opening statement, and then we'll go immediately to questions from members. I will introduce them in the order that they are speaking.

First, we have Mr. Lee Webster, chair of the intellectual property committee of the Canadian Chamber of Commerce. Second, we have someone who is well known to us here, Mr. Jayson Myers, the senior vice-president and chief economist of Canadian Manufacturers & Exporters. Third, from Microsoft Canada Co., we have Mr. Michael Hilliard, corporate counsel. Fourth, we have Mr. Douglas Frith, president of the Canadian Motion Picture Distributors Association. Fifth, we have Mr. Lorne Lipkus, chair of the education and training committee of the Canadian Anti-Counterfeiting Network. Finally, we have Mr. Graham Henderson, president of the Canadian Recording Industry Association.

Welcome, gentlemen.

As I mentioned, we will start with Mr. Webster and go down the row. If you can keep your opening statements to five minutes, we'd appreciate that very much, so we could have as much time as possible for questions from members.

Mr. Webster, we'll start with you.

[Lee Webster, Chair, Intellectual Property Committee, Canadian Chamber of Commerce]

Good afternoon, Mr. Chairman, honourable members of the committee.

My name is Lee Webster, and I'm chair of the Canadian Chamber of Commerce intellectual property committee. I'm also a partner at the law firm of Osler, Hoskin & Harcourt in Toronto and have practised in the area of international property law for over 25 years.

I'm here to tell you that Canada is losing the war on counterfeit goods. While counterfeiting used to consist mainly of knock-off t-shirts, watches, and other luxury items, the low risk and high profit margin have encouraged criminals, including organized crime, to become very active, counterfeiting everything from drugs, brake pads, and other car parts to electrical products and personal care products. No industry is immune to this illegal activity.

Counterfeiting also may pose a serious health and safety risk due to poor and inconsistent quality and the potential hazardous nature of counterfeit products. Counterfeiters do not care if counterfeit products are unsafe for consumers; they only care about turning a profit, money alone. Some counterfeit batteries imported into Canada have been found to contain mercury, and pose a threat of explosion. Counterfeit shampoo contaminated with bacteria has been found in Canada, and has been imported from the U.S. into Canada. I'm sure you've heard of the unfortunate woman in British Columbia who purchased drugs over the Internet that poisoned her. She succumbed from the poisoning. These drugs were found to be laced with filler, including, believe it or not, lead and uranium.

The prevention of the distribution of counterfeit goods is not simply a matter of protecting the legitimate rights of designers of high-end watches and handbags. Aside from safety, we cannot lose sight of the fact that there is an issue of lost jobs and tax revenue. Counterfeiting and piracy are relatively unchecked in Canada and continue to grow at an exponential rate. It is estimated that the value of counterfeited goods in Canada is worth billions annually, and growing. The economic impact of this problem on Canadian companies and the lost tax revenue for the government are significant. This has a negative impact on Canadian business and the chamber's members.

The Canadian Chamber has the view that with the rapidly changing global economy, protecting intellectual property is critical to ensuring a competitive Canada.

Intellectual property is an essential element in a knowledge-based economy for promoting investment in research and innovation, international trade and investment, consumer protection, and overall economic growth. Some may argue that this is all about the entertainment industry trying to protect their intellectual property from illegal downloading. Although this is a very real concern, the issue is much larger. The entertainment industry's problems are simply one aspect of the broader problem of intellectual property theft. Stealing the intellectual property of another not only robs the rights holder of the economic benefits of those rights, long recognized under our traditional civil laws, such as our patent, trademark, and copyright legislation; it also lowers our country's reputation abroad, deceives the consumer, and may be putting the consumer's health and safety at risk.

This issue has not escaped the notice of our principal trading partners. Just last week, the United States trademarks representative again placed Canada on the special 301 watch list, an annual review of countries deemed lacking in the protection of intellectual property, for our 13th consecutive year.

The Canadian government must begin to take vigorous and meaningful action on this issue immediately. The Canadian Chamber has been pressing for action, and we are very encouraged that this committee and the public safety committee are giving careful study to the problem of counterfeiting in Canada. It is time that the government took this issue seriously and acted.

The Canadian Anti-Counterfeiting Network has released a comprehensive report on counterfeiting and piracy in Canada, entitled A Road Map for Change. The Canadian Chamber strongly endorses this report and its recommendations. This committee has already begun to tackle the issue by including a section on counterfeiting in its recent report on the manufacturing sector. The public safety committee will soon be releasing a report on the health and safety implications of counterfeit goods.

While my colleagues on the panel today will delve further into the specific recommendations for change for IP, I want to highlight some of the facts.

One, law enforcement agencies and prosecutors need better tools to provide them with the ability to effectively combat the importation, manufacture, distribution, and sale of counterfeit goods in this country.

Two, among other matters, customs officials need to have new powers and the associated additional resources to search and to seize suspected counterfeit goods at the border.

Much else needs to be done. Our current IP laws are not up to the task of providing an efficient—and I emphasize “efficient”—and effective relief against counterfeit goods.

To close, a thorough review of all of our IP-related statutes, such as the Copyright Act, the Trade-marks Act, and the Patent Act, as well as the IP-related provisions of other statutes such as the Criminal Code, is urgently needed so that rights holders and the authorities have the tools they need to efficiently and effectively stop the flow of counterfeit goods in this country. Counterfeiters must be stopped. Canada's IP environment must be brought up to the standard of our international trading partners.

We thank you for the opportunity to present the Canadian Chamber's views. I'd be happy to take any questions you might have at the end of our presentations.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Webster.

We'll go to Mr. Myers.

[Dr. Jayson Myers, Senior Vice-President and Chief Economist, National Office, Canadian Manufacturers & Exporters]

Thank you very much, Mr. Chair.

Good afternoon, ladies and gentlemen.

Hello, ladies and gentlemen. I will now read my presentation. I am sure that the translated will soon been ready to be distributed to committee members.

First of all, I'd like to recognize and thank all the members of this committee for your hard work, your effective representation, and your common effort on behalf of Canada's manufacturers. Thanks to your efforts, we saw a budget that contained a number of measures that picked up on recommendations made by this committee, and I'm looking forward to a very positive response from the government to your report on manufacturing competitiveness.

One of the priority issues that you recognized as you were speaking to manufacturers across the country was the issue of unfair trade and the issue, particularly, of the challenge being presented to the Canadian economy by counterfeit products and intellectual property theft. I'd like to echo what Mr. Webster has said. This is an urgent challenge affecting a wide variety of products and services in Canada.

I also want to say that industry doesn't have good economy estimates of the scope of this. I think some of the estimates we have made are reasonable, but they also understate some of the economic and social impacts of counterfeit activity.

I'd like to tell you a bit about what CME's experience has been and what we are doing to combat counterfeit trade. Also, as members of the Canadian Anti-Counterfeiting Network, we strongly endorse the recommendations that you'll hear later in this presentation.

You do have a copy of my presentation. I've listed here the number of products we've identified over the last three years that have been brought to our attention by our members.

Food, beverage, and tobacco Products: cigarettes, beer, liquor, ice wine, maple syrup, and canned fruit.

Apparel: of course, clothing, shoes, purses, jewellery. I've taken a wide and very interested look at what my wife has in her closet, and it's not a pretty sight, I can tell you that.

Electronics: microchips, semi-conductors, electronic packages, switches, CDs and DVDs, Playstations, iPods, cell phones, computers, lights, batteries, consumer appliances.

Metal and plastic products: castings. There are more automotive castings being imported and logged as imports into the United States than are manufactured in Canada, coming in as fraudulently marked product into the United States from Canada.

Automotive parts: brakes, electronics in the automotive parts, automotive textiles, automotive dyes.

Equipment: cement mixers. Our first vice-chair works with Monarch Industries in Winnipeg, and he visited a trade show in the United States and saw a cement mixer—they manufacture cement mixers—went up and thought, this looks very familiar. He looked through the catalogue that was provided by a Chinese company and there was a picture of him beside a cement mixer with the caption, “Another happy customer”.

There are a wide range of products, especially on the medical side—pharmaceutical products, medical devices—and of course, software.

The scope of counterfeit activity in Canada—we've tried to put some estimates around this—is from $20 billion to $30 billion annually. I know the estimates have been challenged, but these are pretty reasonable estimates. They represent 2% to 3% of our imports and exports combined, they're in line with the OECD estimates, and they're in line with the estimates of the International Chamber of Commerce. But I have to tell you this doesn't account for the domestic counterfeit production, and it certainly doesn't account for the social and economic impacts of counterfeit product in Canada either. But ultimately, definitive economic analysis is impossible to achieve. This is criminal black market activity. If we could count this, it wouldn't be a problem in the first place. We are unable to actually track the goods.

The one thing I do want to say, because I know you've heard a witness who said we need good solid information like this before we can proceed, is yes, we do need some economic analysis, but that shouldn't impede action being taken.

You'll be able to see the rest of my presentation when it's circulated.

The social and economic impacts are significantly higher than the scope of the activity. It's not only lost sales, wages, tax revenue or market share; it's the lost investment, and it's the lost innovation activity. But there are health and safety impacts as well, as Mr. Webster has pointed out, and there are legal and financial impacts. And the real danger is that if the American border closes because we cannot effectively secure our own borders, then this is going to tie up cross-border activity that is today, of course, $1.5 billion across the Canada-U.S. border. That's the problem when Canada is on the USTR watch list.

CME is taking action to combat counterfeit activity. We're working with CSA. We're working with the RCMP. We're working with the Anti-Counterfeiting Network itself. But our experience in this is that the onus has fallen entirely on Canadian businesses to detect counterfeit activity, that it's almost impossible to know when the counterfeit activity is taking place and therefore to get a court order to enforce the law. Civil enforcement is inadequate, it's impractical, it's costly, it's ineffective, and there are problems, too, in terms of enforcement and resourcing on the criminal enforcement side. And frankly, it's not a priority for government.

The recommendations we've made are totally in line with those of the anti-counterfeiting coalition network, and I'll pass the floor to a representative of that network to talk about specific recommendations.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Myers.

We'll go to Mr. Hilliard, please.

[Michael Hilliard, Corporate Counsel, Microsoft Canada Co.]

Thank you, Mr. Chair.

My name is Michael Hilliard and I am corporate counsel for Microsoft in Canada. I appreciate the opportunity to appear before this committee to share with you a few thoughts on the importance of protection and enforcement of intellectual property rights, in particular software.

The problem of software piracy in Canada is a significant one. According to the most recent BSA and IDC global software piracy study, the software piracy rate in Canada is 33%. Thirty-three percent of software in Canada is pirated. While this rate has declined in recent years, it is still considerably higher than the rate in the U.S., which is at 21%, New Zealand at 23%, Finland at 26%, and in many other developed countries.

The losses attributed to piracy in Canada are over $800 million. This is a problem that has many negative economic consequences. It undermines efforts of local software developers, it results in fewer jobs in the legitimate software market, and there's a loss of tax revenue. The IDC has suggested that if you could reduce the piracy rate in Canada to 26%, you would see 14,000 new jobs in the software industry and $2 billion in additional tax revenue.

In other words, it's not simply a problem for software manufacturers such as Microsoft. For every one dollar of software sold, there is at least another $1.25 in services to design, install, customize, and support software. Most of these additional services or revenue go to local firms.

Beyond the economics of piracy, there are also significant risks that pirated software creates for Canadians who use it. A recent IDC study examined websites that offer counterfeit product keys, pirated software, etc., and 25% of the websites attempted to install either malicious or potentially unwanted software. The negative impact of unwanted software like this can range from mild, such as adware, pop-ups, or home page hijacking, which are annoying; to the destructive impacts of Trojans being installed on your computer that use up the resources of the computer; and up to devastating, where bots or keyloggers take over the machine to relay spam, store illegal files, or give access to sensitive data.

For businesses, a recent survey of IT security professionals suggested that the cost to an organization to correct the problems of a virus, an unauthorized access to information, or the theft of information can be over $20,000 per incident.

At Microsoft, we take the problem of software piracy very seriously. We have focused our various activities investments into a single initiative that we call the Microsoft genuine software initiative. This has three key strategic areas. The first is education, by raising the awareness of the risks of counterfeit software and the importance of proper licensing through consumer-oriented communications. The second is engineering, in that we engineer our software with anti-counterfeiting techniques that can alert the consumer to the presence of counterfeit software, and that protect them from some of the harms that I've spoken about. And the third is enforcement, in that Microsoft actively supports government officials and law enforcement taking action against software piracy and those who would victimize unsuspecting Canadian consumers and businesses.

Furthermore, we are not simply relying upon the government to address this problem. Microsoft will take whatever legal steps are necessary to protect its honest partners and consumers.

To address the problem of software piracy, in addition to strongly supporting the recommendations of CACN, Microsoft believes the Government of Canada should do the following: first, immediately implement the provisions of the WIPO Copyright Treaty and the WIPO Performance and Phonograms Treaty; second, grant the Canada Border Services Agency the independent authority to seize or destroy counterfeit goods; three, make the manufacture, sale, and distribution of labels of authenticity an offence in the Criminal Code; and four, provide the RCMP and the Department of Justice with adequate resources to effectively address counterfeiting.

Intellectual property rights are playing an increasingly important role in the global economy. In order for Canadians to derive the benefits of, and compete in, such an economy, it is imperative that Canada's legal and enforcement regime be strengthened to encourage the development and protection of intellectual property.

On behalf of Microsoft, I wish to express my appreciation for the committee's interest in this issue and for the opportunity to appear before you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Hilliard.

We'll go to Mr. Frith, please.

[Douglas Frith, President, Canadian Motion Picture Distributors Association]

Thank you, Mr. Chairman, and members of Parliament.

I'm president of the Canadian Motion Picture Distributors Association, which serves as the collective voice and advocate of the major motion picture, home entertainment, and television studios. Our members include Sony Pictures, Universal Pictures, Warner Bros., Paramount Pictures, 20th Century Fox, and Disney--in other words, the producers who make many of the films that your kids, my kids, and my grandkids are waiting to see this summer.

Canada has a serious intellectual property crime problem, and clear action to strengthen Canada's IP enforcement system is long overdue. To quote the RCMP, from a criminal enforcement perspective it is critical to recognize who's losing and who's profiting. Rights holders, legitimate retailers, the Canadian public, Canadian businesses, and the Canadian economy lose. Criminals are the ones who profit. Therefore, the CMPDA supports all the recommendations in the report you have from the CACN.

I want to focus my comments today on our most critical area of concern, which is the impact of camcordings from Canadian movie theatres on worldwide movie piracy.

Here are the facts. All movie piracy, whether DVD piracy or Internet piracy, begins with a stolen film, and today over 90% of all newly released pirated films come from movies illegally camcorded in theatres. Camcorders make a profit by selling copies to people who distribute them on the Internet and to organized criminal networks that reproduce and sell millions of illegal DVDs around the world.

How do we know this? It's because in 2003 the major motion picture studios began tracking the problem of camcording by using sophisticated watermarking of their movie prints, so that it's possible to determine through technical analysis the very theatre where camcording took place. Pirated discs from around the world and illegal copies available on the Internet are continually analyzed to determine their source, the place where the image was first stolen right off the screen. This is why we know Canada is now a major and growing source of movie piracy.

In 2006 overall, Canadian camcorders were the source of approximately 20% to 25% of all illegally camcorded films from the major motion picture studios that appeared either online or as illegal DVDs around the world.

The illegal DVDs and online copies of major releases have been traced to theatres in British Columbia, Nova Scotia, Ontario, Alberta, and Quebec. Copies of those stolen films have been found on DVDs in over 45 countries and have been posted on the Internet by over 130 different so-called release groups, which are largely responsible for the online distribution of illegal copies of movies. With advances in digital technologies, believe me, these are highly organized thieves. They're using various methods to produce extremely good-quality copies, including techniques that utilize facilities for assisted listening to produce clean audio tracks in both official languages.

Despite the gravity of the problem, Canada has failed to enact specific legislation to effectively deter camcorder thieves. Under existing Canadian copyright law, there must be proof that the copy of the film being camcorded was made for commercial purposes. Professional camcord thieves know this all too well and simply claim they have made the copy for personal reasons. The fact that there is no specific anti-camcording provision in the Criminal Code has been cited by law enforcement repeatedly when they're called for assistance by theatre employees who have caught a camcorder in the act.

Camcorders, left alone by law enforcement, return time and time again. These thieves are intimidating and threatening to theatre employees, and the continued escalation of their actions is disturbing. Concern for the over 17,000 employees at theatres across Canada who are generally left to confront these thieves without law enforcement is obviously a significant issue for the Motion Picture Theatre Associations of Canada, and we're joined by MPTAC and all members of the major unions and guilds, as well as by the Canadian distributors, in asking for the government to take action to amend the Criminal Code to include camcording.

In terms of what we as an industry are doing, we've dedicated substantial resources toward pursuing educational, technological, security, and training initiatives to help fight this problem and we will continue to do so. But we cannot be successful without laws that act as a deterrent and ensure authorities to take effective action to stop movie theft and send a message that criminal activity will not be tolerated in Canada.

Thank you, Mr. Chairman.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Frith.

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

[Lorne Lipkus, Chair, Education and Training Committee, Canadian Anti-Counterfeiting Network]

Thank you, Mr. Chairman and members of Parliament.

Thank you for giving me an opportunity to speak before your committee. I greatly appreciate being invited to give my viewpoint on the issue of counterfeiting and piracy.

In addition to being a founding member of the Canadian Anti-Counterfeiting Network, I have been a lawyer in private practice for 26 years. My entire practice is spent dealing with several hundred counterfeiting cases per year across Canada for over 75 different brands and manufacturers. In these dealings, it is rare that I am not able to find counterfeit products in a particular area.

I'm here to explain that on a constant and continual basis I have found—and am still finding—counterfeit products at virtually every major shopping mall or shopping centre across Canada. We find counterfeits in numerous, and I mean hundreds, of retail locations per year across Canada.

I have been personally involved in raids of manufacturing facilities in Canada caught manufacturing clothing, cellular batteries, and accessories.

I have raided a distribution facility in Canada that imported hundreds of thousands of dollars of ink-jet cartridges separate from counterfeit packaging and assembled the units together for sale in the Canadian marketplace.

We recently seized large quantities of cellular headsets from an importer of counterfeit Bluetooth headsets who imported the packaging separate from the units themselves. These were destined for delivery over the Internet, into Canada and into Canadian businesses. Since the end of November of last year, I have personally opened over 50 new cases of counterfeit cellular headsets. They are not approved and not made with the proper materials.

A large number of counterfeiters or pirates are dealing only in cash. We deal with them on a regular basis, and I have every confidence that they are not reporting their income to the Canada Revenue Agency.

A few brief examples of what we've encountered include the following.

I've attended the Richmond Night Market in Richmond, B.C. with our anti-counterfeiting enforcement teams and the RCMP and Health Canada on more than one occasion in each of the past few years. Each time we've identified over 60 businesses, of the several hundred there, that had counterfeit products, ranging from—the list that was mentioned before—batteries to apparel, ink-jet cartridges, electrical products, jewellery, and sunglasses. We have only ever been able to catch, notwithstanding that we've had as many as 15 people there, 10% to 15% of those businesses, because they leave as soon as they see us.

It is a requirement of that market that every vendor also have a retail location in Richmond, so they have another opportunity to sell these goods. Dozens of businesses have been identified in Richmond and Burnaby, B.C., selling large quantities of luxury goods in the back of regular stores. You have to know someone to get in there.

On many occasions per year, I am personally contacted by members of the RCMP and CBSA, and they've informed me that they've just let a shipment of counterfeit products come into Canada without stopping it, even though they knew the goods were counterfeit. On many occasions per year, I've been advised by police or crowns that even though they have identified counterfeit products being imported into Canada, either because the goods were protected by trademark and not copyright, or more often because they don't have the resources, they've just decided not to proceed with the charges.

In many cases, I've been involved where brand owners are not formally advised of who the importers or exporters are, and therefore they have no ability, if the government doesn't seize the goods, to follow them into the marketplace. Very often I've been involved in shipments that come into Canada, are broken down, and shipped back into the United States.

Until there is an investigation, how is the brand owner supposed to know who is involved in organized crime? We don't have access to the database that keeps track of who the criminals are. The police do, and if they don't share that information, we have no way of knowing. However, I can tell you that I have been involved in numerous cases—I will put it into dozens—where I have personally been advised by the police that the case I'm working on involves members of organized crime.

I conduct training sessions and conferences on anti-counterfeiting, and I'm in my 12th year of doing so. Representatives of Canada Revenue Agency regularly attend, and when they do, they're happy having these cases referred to them. Conspicuous by their absence are many crown prosecutors and members of Canada customs.

I have recently observed, at a location called the Pacific Mall, over 50 businesses selling counterfeit products of various kinds. Every time we conduct a raid and we walk into the first location, they all close. I've tried to make purchases with my Interac card or my credit card, and they say no, they will only deal in cash. One informant told me that one business at one of the flea markets in the Toronto area—I think it was St. Jacobs—takes in $5,000 to $7,000 cash per week.

When people ask me where to find counterfeits in Canada, I have a one-word answer: everywhere. When people ask me how big the problem is, I say it's bigger than everyone thinks. When they ask me what we're doing about it, I say not enough.

Thank you very much for the opportunity to speak with you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Lipkus.

We'll go, finally, to Mr. Henderson.

[Graham Henderson, President, Canadian Recording Industry Association]

Thank you, Mr. Chairman and members of Parliament.

My name is Graham Henderson. In addition to being president of the Canadian Recording Industry Association, I'm also on the steering committee of the Canadian Anti-Counterfeiting Network. It's on their behalf that it's my pleasure to specifically address the Canadian Anti-Counterfeiting Network's recommendations.

I should say at the outset that the solutions are not complicated, nor need they be expensive. Other countries have already figured this out. There are road maps..

In many respects, we are far behind our trading partners. We can look to the intellectual property enforcement policies of Europe, the United States, and Japan, as well as the model legislation promulgated by the World Customs Organization, of which Canada is a member.

If I may, I would like to direct the committee's attention to the documents that the Canadian Anti-Counterfeiting Network has tabled for your review. The first is a press release in which a CACN/Pollara study found that 39% of Canadians have knowingly or unknowingly purchased counterfeit products. The number in the United States is 13%. It's three times higher in Canada. The second item is the questions that were asked.

The third document is a case study, a morality tale, if you will, that shows exactly how bad it is out there. It focuses on a Vancouver counterfeiter of DVD products who repeatedly flouted the system over a period of years. He was repeatedly charged, repeatedly convicted, and in his final bout with the law he received a $5,000 fine. It's worth reading.

We've also included a PowerPoint deck, which I've seen some of the members flipping through. This is included to show the shocking variety of products available in Canada as counterfeit products.

I've also included a speech that I gave to the Economic Club of Toronto, which will serve as a summary of the road map that I'll talk about momentarily.

Finally, and perhaps most importantly, is the Canadian Anti-Counterfeiting Network's road map for change. This is the executive summary, together with—and most importantly—in the last few pages, our recommendations.

We've also provided you with an excerpt from that road map that decisively links the activities with organized crime. I might add that this two-page document flatly contradicts the testimony you heard from a previous witness. Organized crime is involved, and you'll see here that CSIS, Interpol, and the RCMP have all indicated that this is the case.

What exactly do we need to do? Well, as I say, the Canadian Anti-Counterfeiting Network has drafted a detailed list of recommendations, a copy of which is in front of you. It would be impossible to cover them all in depth, so let me touch on a few.

To remedy the lack of police and prosecutorial resources dedicated to counterfeiting and insufficient criminal penalties, we must, one, provide the RCMP and the Department of Justice with adequate financial and human resources to effectively address counterfeiting; and two, adequately fund an intellectual property crime task force composed of police officers, customs officers, and federal prosecutors to guide and coordinate IP criminal enforcement. These exist in many, many countries.

To update outdated and ineffective intellectual property crime legislation, we need to, one, enact legislation that clearly defines trademark counterfeiting as a specific criminal offence under the Trade-marks Act; and two, enact legislation to make camcording in a theatre a criminal offence. To empower customs officials, we need to implement legislation clearly prohibiting the importation of counterfeit goods. And we need to provide the CBSA with the express authority, which it lacks, to detain, target, seize, and destroy counterfeit goods on its own initiative.

Finally, and perhaps most importantly—although it's difficult to pick one—to help elevate the status of intellectual property in this country and to make us a more prosperous and more competitive nation, we need to follow the lead of other nations and establish federal and provincial intellectual property coordination councils with ministerial involvement. They exist in Brazil, in the United States, in England, and they exist in Japan.

We can do this. You have heard from officials only about how hard this is and about how many hurdles have to be cleared. I think a world record was set for the use of the word “complex”. We and the other stakeholders who have appeared before you are here to tell you that it is simply not that difficult.

Starting five months ago, the Canadian Anti-Counterfeiting Network began preparing a pioneering study that examined the economic impact of counterfeiting, the legislative and regulatory weaknesses giving rise to the problem, and the intimate link between innovative economies and the robust protection of intellectual property. Finally, it surveys best practices internationally. It was officially released today and is in the process of being translated. The moment it is, it will be provided to this committee.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Henderson.

We'll now go immediately to questions from members. We have a lot of witnesses—there are six of you—and members have either five or six minutes for all the questions they have. So try to be as brief as possible in your responses. If the members direct it to one witness before us and the witness wants to answer, please do so. If another witness would like to address it, just indicate that to me, and I'll try to get you on, depending on the time.

We'll start with Mr. McTeague for six minutes.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Chair, thank you very much.

Witnesses, I want to thank you all for being here. You are complementing very much the work this committee has already heard, as Mr. Myers suggested in his comments, with respect to our industry report. It was unanimous. I think we understand the issue. We get it.

We do have some who believe that the best approach, perhaps complementing the rather complex problems that seem to be confronting the working group, is—A witness here last week suggested that we would need further study of this issue, that we should have a committee issue a report, that the government should not proceed with any measures, and that we, in effect, should look at this all over again.

Mr. Frith, you may be able to bear this out, as a former member of this committee, and others. I've never seen a situation in my 14 years here when we've had two committees study the same issue at the same time and come up very much with the same conclusion.

Mr. Henderson, perhaps I'll go to you first. Could you give us an illustration of what this would mean if we were to in fact do this all over again—begin a report, begin a study? What does this do for Canada's international reputation, let alone for the problem of counterfeiting in Canada?

[Graham Henderson]

I think it just shows that we lack the will to deal with what is an extremely obvious problem. The idea that this hasn't been studied enough is incorrect. Not only has it been studied at length in Canada—and we have produced a report, which, I might add, only took us six months, not six years—but it has been studied at great length both here and around the world.

For example, on the issue of links to organized crime, Criminal Intelligence Service Canada, in two annual reports in 2005 and 2006, linked it with organized crime. The RCMP IPR crime hazard report did so too. In testimony before the security committee, Mike Cabana said:

Our strategic intelligence reports indicate that profit margins are so high, the risk of getting caught so low [...] that virtually all major organized crime in Canada and, in at least one confirmed case, even terrorist groups are heavily involved in the manufacture, importation, and distribution of counterfeit products.

I don't know what more we need to study about that.

As far as economic loss goes, you've heard repeatedly from witnesses, today and a week ago. I have here in front of me a study that was prepared by the Los Angeles County called A False Bargain—The Los Angeles County Economic Consequences of Counterfeit Products. This is available on the web, and the website is: www.laedc.org/consulting/projects/2007_piracy-study.pdf. Do we really think we're going to come up with a different result, that in some way Canada is not going to have a serious and economic consequence? I don't think so. Our laws are worse.

So I would echo what Mr. Myers said earlier today. We've studied it. Inaction will only let this problem get worse.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Henderson, Mr. Lipkus,and Mr. Hilliard, you've all suggested some specific remedies with respect to the Criminal Code.

Mr. Lipkus, you've done some great work on this for a number of years. I attended your last session in Markham, not very far from the Pacific Mall, and I'm very familiar with the situation there.

Let me ask you, sir, given some of the options that are available, about Canada's international reputation as it currently stands--Mr. Frith and Mr. Henderson may be more willing to speak to this, as well--with respect to our inability to combat what is happening with camcorders. What could this mean for future movies in Canada? What could this mean for Canada's ability to continue to trade as a proud member of the international trading community?

[Douglas Frith]

I can tell you now, Mr. McTeague, that one studio in particular has already taken action by withdrawing the first runs from certain theatres in certain cities of Canada. It doesn't mean the product is not available in the greater area of Montreal, but the specific theatres were having specific problems. Their product has been withdrawn. Hopefully that is not a fact that's going to spread.

Clearly there is a huge concern among the Hollywood studies that within 18 hours of the opening of a movie here in Canada it is in up to 45 countries, on their streets. This has serious financial implications on the bottom line to the studios, and they're not taking this lightly south of the border, I can tell you that.

[Lorne Lipkus]

I must tell you, Mr. McTeague, that I've also gone to numerous international conferences on anti-counterfeiting--the recent global conference, conferences of the International AntiCounterfeiting Coalition, and others--and I am regularly cornered by people from other countries around the world saying, what's wrong in Canada? What is happening? It doesn't make sense. They don't understand how a nation with our reputation has the present reputation it has, which is not good.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Lipkus, let me ask you this. It was interesting. We met some individuals from the Department of Homeland Security at that conference in Markham. It was suggested to me that the Americans are so advanced in this that they in fact—and other countries have done the same—have officials in other countries where the counterfeiting may begin.

Can you give, for this committee, very briefly, an outline of what Canada could be doing to catch up to the rest of the world as far as being able to prevent counterfeiting from even leaving the ports of other countries?

[Lorne Lipkus]

In terms of some of the things that are on the road map, we can record our trademarks and copyrights. There is no recording of copyrights and trademarks in Canada. People at customs don't even know what copyrights and trademarks there are. In other countries they're recorded with customs, and customs have the ability to seize it by themselves. They don't need to call the RCMP. They don't need to call any law enforcement. They just can seize it on their own initiative, and that stops it right then and there.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

We'll go now to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chair.

You’re welcome.

In terms of intellectual property and counterfeiting, other witnesses have told us that there are patents, but that it is very expensive to defend them before the courts because of the lawyer fees and the lengthy delays before concrete action is taken.

Do you have an idea of how we can reduce the delays and establish a procedure that is significantly less costly? Do you have any suggestions in this regard?

Mr. Myers, as Senior Vice-President at Canadian Manufacturers & Exporters, can you tell us how much revenue is lost a year to theft related to counterfeiting in Canada?

[Dr. Jayson Myers]

I wish I could tell you what the total scope of this activity is. But I think that's extremely difficult, apart from applying economic estimates to try to come to an approximation. If we knew the entire scope of the activity, we'd be well ahead of the game, in that we would be able to record at least some of this counterfeiting activity much better than we do right now. But because we're not enforcing the rules, we really don't have a good sense of the scope of this in Canada. But that's just the scope of the market.

If you look at the social and economic impacts of the lost investment, the lost innovation activity, the concerns that are raised at the border because of issues around stricter enforcement because of the concerns that we are not securing our borders and that there is this inflow of counterfeit products, especially coming from Asia through Canada and being transshipped into the United States, no real economic analysis has taken a look at all those impacts, apart from the work that the CACN has done. I think that's the most authoritative analysis that has been done to date in Canada.

In terms of some of the recommendations—and again I would endorse what Mr. Henderson has said—I think the first step is to see this as a priority issue. I think that between 1999 and 2004 U.S. border authorities made something like 36,000 seizures at their ports of entry. Canadian border authorities made six seizures over that time, and even on a scale of one to ten, that doesn't come close to the activity of the Americans.

If this isn't seen as a priority for legislators, for our border agencies, and we don't have the funding that's necessary, we're not putting enough attention on this issue. I think that's probably the first step, and certainly the recommendations that have been outlined by CACN are much more specific and detailed recommendations.

[The Chair, Conservative, James Rajotte]

Mr. Lipkus wanted to comment.

[Lorne Lipkus]

I would also like to say that in my experience it's been growing exponentially. As for businesses I raided three or four years ago that maybe were just dealing in luxury purses, now you go into their stores and they might still have the purses, but now they have lighters, they have novelty items, they have toys—because counterfeiters don't specialize in one product, and they specialize in greed.