Industry Committee on June 7th, 2012

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen. Bonjour à tous. Welcome to the 35th meeting of the Standing Committee on Industry, Science and Technology.

As always, we have an issue with our clocks. You'll see they're all over the map, so we're running by our BlackBerry time, which says 8:45 exactly right now--at least for the members of Parliament. Our witnesses probably have different personal digital devices, but we'll be going by this time.

We have four witnesses before us today. The first witness is from UBM TechInsights, Harry Page, chief executive officer. As an individual we have Richard Gold, who is a professor in the faculty of law, McGill University. From Microsoft Canada Inc. we have Chris Tortorice, corporate counsel; and from Hockey Canada we have Dale M. Ptycia, senior manager of licensing.

We'll give each person six to seven minutes for their opening statement, and then we'll go to our rounds of questions.

I will just go by our agenda here. Mr. Page, would you please go ahead, for seven minutes?

[Harry Page, Chief Executive Officer, UBM TechInsights]

Mr. Chairman, thank you for the opportunity to come and speak this morning. Obviously intellectual property is a very important issue with our country in general, and is something we have some very strong experience in and opinions on.

As the chairman mentioned, I am CEO of UBM TechInsights, which is a company located here in the west end of the city. We have been here for the entire time of our almost 25-year history.

Our primary mandate is to protect intellectual property for creators and owners. We are like the CSI crime lab. We assist inventors and owners in intellectual property. We employ some very exotic and extensive reverse engineering forensic techniques to help people identify instances of infringement and to help them prove that to be able to enforce their intellectual property rights.

We are part of a growing cluster. Most of the world-renowned companies that help people protect intellectual property rights are located here in Ottawa as a result of the genesis of NRC, CRC, the defence research community, and some of the early commercial activities around Microsystems International. We have now grown a global and internationally renowned cluster of technology companies, with revenues probably exceeding $300 million a year and probably employing somewhere north of 300 people as well in the city.

We say we play a critical role in helping Canadian innovators and people on the global stage protect their intellectual property.

I'm sure the committee is aware that intellectual property takes many more forms than copyright itself. There's a variety of legal regimes for inventors to help them protect their intellectual property. Obviously Parliament is moving forward in modernizing the Copyright Act, but there are a number of other forms of intellectual property we feel are just as important in promoting and protecting Canadian innovators and owners. These include patents, trademarks, and integrated circuit topologies, to name but a few.

That's where we see the anomaly of how this has been proceeding. The protection of intellectual property relies on international laws and regimes, but technology is borderless. In many instances the rights of creators and innovators in Canada rely upon their access to international markets, and rely heavily on ensuring that the intellectual property rights of foreign intellectual property holders remain intact and sacrosanct here within Canada. Similarly, when foreign-based companies come to Canada and participate in our market, they believe they will receive the same comprehensive intellectual property protection here in our country as they do within their native regimes.

It's in that context that creators and innovators work hard to monitor and detect infringement of their intellectual property in the rapidly evolving and highly complex technology environment we see today. We have to look at intellectual property as intellectual assets. People have to be able to get a return on their investment in order to be able to refresh that cycle of innovation. That's where the protection of intellectual property becomes so important.

We applaud the government in all its activities in pushing forward on modernizing and improving intellectual property protection, but I would like to stress to the committee the importance of ensuring that these efforts do not unintentionally impede the ability to protect other forms of intellectual property. In this regard, we have a concern that aspects of the Copyright Act may actually have an unintended consequence with respect to our local technology community and our ability to help people in the protection of their intellectual property.

Specifically, our concern is that the anti-circumvention provisions could create legal uncertainty and could actually discourage the use of forensics to detect infringement of other forms of intellectual property, even though the circumvention of those protection measures actually has nothing to do with the copyright material under protection.

While the copyright legislation will soon be enacted, we will continue our pledge to continue to work with the government and the appropriate bodies to ensure that the regulatory language bringing the act into force is clear and precise so it does not hinder the full and forceful protection of Canadian intellectual property and the protection of intellectual property creators and owners in the international marketplace.

May I say we are very encouraged to date with the discussions we've had. We've had access to a number of people, some of whom are here today. We have every faith that these matters will be addressed proactively through the regulatory phase. However, this experience has underscored the importance and the complexity of the intellectual property regime.

Canada is a global leader in the protection and validation of intellectual property rights. The cluster of technology companies to do this through global companies resides within a 20-mile radius of where we sit here today. We recognize that Canada is the champion of international property rights for global creators and owners.

I'm confident that our role in the in the local cluster will continue to grow in importance and scope. It has been increasingly recognized—as I'm sure this committee does itself—that intellectual property is the engine of the new economy. Canada must do everything possible to ensure the full and complete protection of IP in all of its respective forms and manifestations, but also to respect how each intellectual property regime must be enabled to complement and not interfere with the protection and rights that are provided from other forms.

We are committed to working with the appropriate committee and the appropriate government and regulatory bodies to advance the cause of intellectual property protection. For our part, we'll continue to invest in improving and enabling our skills to make sure that Canada remains at the forefront of global leadership in intellectual property protection and innovation in its own right.

Thank you, committee.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Page.

Now we go on to Mr. Gold.

[Richard Gold, Professor, Faculty of Law, McGill University, As an Individual]

Thank you to the committee.

It's always a pleasure, as an academic, to be able to talk to the people who allocate the funds to the research agencies that fund my research, and I'm happy to give back. I feel it's a part of our mission to assist government committees whenever possible.

To tell you a little bit about who I am, I have about 20 years' experience in IP and innovation, both as a practising lawyer in Toronto in the technology area, and then as an academic at the University of Western Ontario, and for the last 11 years at McGill University, where I am the James McGill chair in the faculty.

I work in the area at the intersection of patents and innovation, and have provided advice to the World Intellectual Property Organization, the Organisation for Economic Co-operation and Development, the World Health Organization, UNITAID, both federal and provincial governments, and university tech transfer organizations in Canada and the United States. I've met with House of Representatives members and the Senate in the U.S. on innovation matters. I've been involved in traditional education in Canada, France, and the U.S., and I teach regularly in France. In fact, in August I will be meeting with similar high-level decision-makers in France to look at the issue of collaborations.

I come to you not with any particular agenda, but to share the result of our research in some areas where this committee may want to look.

I have two things I want to bring up. One is building the capacity of some of the institutions that administer IP, particularly the Canadian Intellectual Property Office, and giving it a little bit more power to determine the scope of patent law. I'm going to be concentrating on patent law today.

The second thing I want to bring up is looking at building incentives to help build collaborations and partnerships that develop IP in Canada, which can be used to build the complementary assets that are necessary to make the IP system work.

I submitted a brief, but I'm not going to go through it.

To start with, Canada meets all international obligations. We could still discuss whether we should have more or less, but the bottom line is that we're not in violation of any rules. We fall somewhat in the middle of the pack, except in patent law. In patent law, in fact, I would argue that, except in a couple of areas—not necessarily insignificant areas—we are actually ahead of many countries in terms of the protection of the patent holder. This is in comparison to the United States.

First of all, the criteria to obtain a patent are generally lower in Canada than in the U.S., if you look at what the courts say. There are fewer reasons to invalidate a patent in Canada than in the United States; they have a whole bunch of rules around estoppel and clean hands. We have no jury trials, which set confusion within patent litigation in the United States, whether you're prosecuting or not. We have a better selection of damages. The United States only allows damages and treble damages. We allow damages, and punitive damages—that would be the equivalent of the treble—but we also allow accounting of profits, which is something that does not exist in the U.S. system. It is a very powerful tool to patent holders because it makes the other side open their books, not the patent holder. In addition, our provinces are subject to patent law. In the United States, in fact, under their constitution, the states are not subject to patent law unless they pass special legislation, and not all have.

For all of those reasons, there are many areas within patent law where we actually have higher standards from the point of view of a patent holder. Having said that, though, patents are really only one of many factors necessary to create an innovation system. So while we have strong patent laws, we've neglected many of the other things, the complementary assets that make innovation possible, such as having home-grown ability to enter into distribution channels; bundling different types of technology to be able to buy it and put it together and have the science to be able to do that; expertise in taking innovations through the regulatory system, not only in Canada but internationally; and of course financing.

We spend a lot of time talking about patent law, looking at the minutiae, and saying, “Well, in this one little area, we're not as good as them”, ignoring the big picture, which is that you can fiddle around all you want with the patent system, but if you don't concentrate on the complementary assets, you don't have an innovation system.

Let me talk about the two things I mentioned, investing and institutions. Patent law is complex, rather like the Income Tax Act. Having either Parliament or even, by regulation, the government act often throws more confusion into the mix than anything else. When we look at the notice of compliance linkage rules, every time those are changed, litigation is spawned, and this creates more uncertainty than not.

One of the bodies best able to deal with patent law is the Canadian Intellectual Property Office. But under a decision of the Federal Court of Appeal last fall they basically have no policy function. They had made a policy around the Amazon.com “one click” patent, and the court told them they didn't have a say in this. Given that they are closest to what's happening in the world of innovation and patent law—they can follow what's happening in the United States—they should be given more authority to make certain fundamental policy decisions.

On top of that are the courts. We do our best in Canada, but we only have one sitting judge with any substantial experience in patent law, and he'll be retiring in two years. We don't need a speciality court—we don't have enough patent cases—but we do need judges who have patent experience to be appointed to the bench and we need more training.

Finally, we need to build the complementary assets. The only way to really do that is to build collaborations in which Canadian universities, industry, finance, and so on work together in collaborations.

We have a few examples. I mentioned some in my brief: the Structural Genomics Consortium and CRIAQ in Quebec. Those collaborations not only allow for the creation of Canadian IP, but of knowledge about how to get through the regulatory system, and they bring them and the other assets into conjunction with university research.

We could also use that effort to build policies about not only having patents created in Canada but seeking patents in key areas of innovation in which we're interested that are held by Canadians under some funding mechanism whereby we can leverage the patents in order to attract further investment.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Gold.

We'll move on to Mr. Tortorice for seven minutes.

[Chris Tortorice, Corporate Counsel, Microsoft Canada Inc.]

Good morning. Thank you, Mr. Chair and honourable members.

My name is Chris Tortorice. I'm corporate counsel with Microsoft Canada, where my responsibilities include overseeing Microsoft's Canadian anti-piracy program. I'm also a registered Canadian patent agent and trademark agent.

I welcome the opportunity to appear before the committee today, particularly to discuss the importance of effective protection and enforcement of intellectual property rights, with a special focus on the software industry.

Software piracy and counterfeiting have many negative economic consequences and create significant risks for Canadians. Make no mistake: software piracy is big business. It's estimated that piracy robs the software industry of in excess of $60 billion globally every year. But the costs go much beyond that lost revenue for software makers. They directly impact local economies and people's lives. Software piracy costs jobs in Canada and deprives the government of tax revenues. It's the entire software ecosystem in a country, from developers to resellers to systems integrators and IT specialists, who depend on effective intellectual property protection for their livelihood.

Beyond the economics of piracy, pirated and counterfeit software can create significant risks for the Canadians who use it. Unsuspecting consumers and businesses who acquire counterfeit software can expose their computers to spyware, malware, and viruses that can lead to identity theft, loss of data, and system failures. There are studies by the IDC and the Harrison Group that confirm that pirated software frequently contains viruses and malicious code that causes serious damage to computer systems, resulting in expensive repairs and lost productivity due to extensive downtime.

In one study, nearly one in four pirated or counterfeit operating systems became infected at installation or independently downloaded and installed malicious software when first connected to the Internet.

Beyond the dollar figures, the consequences of piracy and its impact on software innovation are even more important. There's no doubt that piracy, which is really a byproduct of an inability to protect intellectual property rights, is a disincentive to society's most innovative enterprises. We know that software companies and other innovative companies consider the strength of a country's IP laws and its ability to enforce IP rights when deciding where to locate research and development facilities.

This issue should be of particular importance to Canadians. Many of our trading partners have been more active and have done a better job protecting their domestic innovation.

In my remaining time, I'd like to highlight three areas in which legislative reforms could make Canada's intellectual property regime more effective.

First, I have to emphasize the importance of copyright law reform as reflected in Bill C-11. The Copyright Modernization Act will bring Canada into compliance with its obligations under the World Intellectual Property Organization's Copyright Treaty and Performances and Phonograms Treaty. It will provide authors, artists, and other rights holders with important tools in our increasingly online world. We support speedy passage of Bill C-11.

Second, the government needs to take action to strengthen enforcement at our borders. The World Customs Organization has noted that customs officers often are the only ones to know when counterfeit goods are being transported. Unless those customs officers are empowered to act on their own to stop suspected shipments at the borders, border measures are simply ineffective.

Currently, customs officials in Canada do not have the authority to seize suspected counterfeit goods. Rather, the Canada Border Services Agency may only detain goods if the IP rights owner has obtained a court order, which is extremely rare—you have to know when the goods are coming in and where the shipment is going and all sorts of information that rights holders just wouldn't have—or if the RCMP or local police agree to seize the goods. There's no legislation that specifically prohibits the importation of counterfeit goods.

To address these deficiencies, the government should enact legislation to strengthen border enforcement. That legislation should provide customs officials with express authority to detain or seize counterfeit goods, it should permit disclosure of information and provision of samples of suspect goods to rights holders, it should specifically prohibit the importation of counterfeit goods, and it should make non-compliance subject to both civil and criminal remedies.

Third, I'll speak briefly to Canada's trademarks legislation, which really needs some amendments to address counterfeiting issues. In this area, the government should look at enacting legislation to introduce criminal provisions for trademark counterfeiting and to provide for statutory damages in trademark counterfeiting cases. Statutory damages have been part of the Copyright Act since 1999, but there's no similar provision in the Trade-marks Act. To address this deficiency, the government should amend the Trade-marks Act to provide for statutory damages, which should be at least as great as the nominal damages currently awarded by Canadian courts in trademark infringement cases.

Before I conclude, today, June 7, is World Anti-Counterfeiting Day. It is an interesting day to be appearing before the committee to talk about these issues. World Anti-Counterfeiting Day is an initiative of the Global Anti-Counterfeiting Network, which is a coalition of national and regional anti-counterfeiting organizations. On World Anti-Counterfeiting Day there are all kinds of events and public awareness campaigns in countries around the world to highlight the problems with counterfeiting.

In that vein, here in Canada, today marks the release of a new report by the Canadian Intellectual Property Council, which is an arm of the Canadian Chamber of Commerce. The report, which is entitled “Counterfeiting in the Canadian Market: How do we stop it?”, provides an overview of the counterfeiting problem and makes a series of recommendations to improve Canada's intellectual property rights regime to help combat counterfeiting. I have been told that the report is going to be tabled with the committee, and I certainly would be happy to provide the committee with a link to the document as soon as it's available online.

In conclusion, we need government to clearly and frequently convey the importance intellectual property plays in developing knowledge-based economies and ensuring our country's ability to compete globally. For Canadians to derive the benefit of and compete in that global economy, it's imperative that Canada's legal and enforcement regimes be strengthened to encourage development and protection of intellectual property.

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

[The Chair, Conservative, David Sweet]

Thank you, Mr. Tortorice.

Before we go on to Mr. Ptycia, Mr. Tortorice mentioned a study that's coming from the Canadian Intellectual Property Council. We also have a message sent to us through the clerk from George Addy, who is referring us to a study called “Mind the Gap: Economic Costs and Innovation Perils in the Space between Patent and Competition Law”. It can't be distributed because it's not in both official languages, but if you're interested in accessing that yourself, the clerk can advise you how to get a copy of that.

Now on to Mr. Ptycia for seven minutes, please.

[Dale Ptycia, Senior Manager, Licensing, Hockey Canada]

Good morning, Mr. Chair, honourable members, ladies and gentlemen. Thank you very much for inviting Hockey Canada to participate this morning in the standing committee's study of the intellectual property regime in Canada.

Hockey Canada is the country's national sport organization. Our association is responsible for the creation and implementation of hockey-specific programming for Canadians from entry-level beginners through to high-performance athletes competing at world championships and in multi-nation games, such as the Paralympic and Olympic Games.

Our programming extends to volunteer coaches, officials, and administrators from coast to coast to coast. Over the last 20 years, through retail licensing Hockey Canada's brands—Team Canada, Équipe Canada, our logos, our trade dress, etc.—have all been diligently cultivated to provide a substantial revenue stream for the association. The growth in the popularity of the Team Canada brand over this time period has caught the eye of counterfeiters not only here at home but abroad as well.

Counterfeiting of the Team Canada brand has developed into a robust form of underground commerce, as expressed by my colleagues here today with their specific product lines. It's regularly found in the marketplace alongside a multitude of other brands and intellectual properties. It's found at bona fide retailers, among mass merchants, in convenience stores, at flea markets. It's found on Internet auction sites. We even found counterfeit Hockey Canada products advertised on downtown Toronto parking meters.

Counterfeiting of Hockey Canada products not only dilutes the value of the intellectual property itself; it takes millions of dollars away from legitimate Canadian retailers selling Hockey Canada products. Counterfeiting also affects our licensing partners. It reduces Canadian jobs and services in the Canadian supply chain and elsewhere, all leading to a multitude of direct and indirect domino-type effects, such as lost taxes that would be paid by legitimate Canadian businesses.

In our particular case, counterfeiting means lost royalty revenue. Lost revenue for Hockey Canada equates to lost opportunities to support wholesome athletic opportunities for all Canadians.

Several recent observations by my colleagues at the NHL and the NHLPA have indicated that as many as 75% of all jerseys worn to an NHL game are counterfeit.

We saw a similarly high ratio of counterfeit to authentic jerseys during the 2010 Olympic Games. In a time span of less than two weeks during the 2010 games, the RCMP and the Canada Border Services Agency at the Vancouver mail facility only intercepted and detained more than 16,000 counterfeit jerseys with a retail value above $2.3 million. Once we were contacted and the RCMP provided us with background information on the escalating arrival of suspicious Team Canada jerseys, together we estimated that less than 20% were intercepted compared with the number of counterfeit jerseys imported into Canada leading up to and during the Winter Games.

At the request of the RCMP, Hockey Canada arranged for additional personnel to assist with the processing of these counterfeit jerseys. Costs were absorbed by our association for this step, which highlights the limited resources available to front line officials.

There are substantial costs and inherent difficulties to the enforcing by brand owners of intellectual property rights through civil avenues. We are dealing with criminals who do not adhere to any laws and do not keep any records for anyone to be able to establish what profits may have been made. As a double whammy, many counterfeiters simply view any exposure to civil remedies here in Canada as a cost of doing business. Monetary penalties or awards are generally small and much less than the actual costs associated with the enforcement and civil action, even assuming that we can collect on those. Without statutory damage awards or appropriate border seizure capabilities, Canada's current civil remedy toolbox is somewhat limited.

Counterfeit product cannot be considered safe by any means whatever, with no adherence to the Canadian Consumer Product Safety Act, the Competition Act, the Consumer Packaging and Labelling Act, etc.

Unknown origins also lead to a whole sector of unknowns, all too numerous to list and all too common to everyone in the room. The current supply chain of counterfeit Team Canada jerseys is dominated by manufacturers based overseas, and counterfeit commerce is conducted through the Internet. This channel makes it virtually foolproof for any individual with a credit card and a mailing address to participate as an importer of counterfeit goods.

For example, our case file has civil action conducted in Ontario against a barber shop owner and a school teacher; in Manitoba, against a butcher shop owner; and in Alberta, two students who attempted to offset their Olympic ticket expenses by selling Team Canada counterfeit jerseys that they imported from Asia.

This underscores the need for better education of the public. Industry is prepared to partner with government in the education process, but cannot do it alone. The ease of access via the Internet has exponentially added to the counterfeit Team Canada products in the country. Importing or for that matter exporting counterfeit products should be treated with strong measures. With virtually no deterrent currently for importing or possessing counterfeit goods in Canada, this channel will continue to be utilized by counterfeiters to ply their unauthorized goods.

As a registered brand owner with the Canadian Intellectual Property Office, Hockey Canada has the responsibility to monitor and police our intellectual properties and brands. The tools afforded to brand owners such as ourselves through the Trade-marks Act and the Copyright Act realistically are limited. Hockey Canada regularly engages the services of anti-counterfeiting experts, dedicated legal counsel, and trained investigators to assist with the ever-elusive task of counterfeit enforcement, consuming very valuable financial resources for our association.

Hockey Canada continues to support and participate in actively engaging the efforts of the Canadian Anti-Counterfeiting Network and the Canadian Intellectual Property Council, as Chris mentioned earlier. We support the need to strengthen Canadian legislation to empower front-line enforcement officers to target and seize counterfeit goods. Greater resources are also necessary for the officers to process seized counterfeit goods and effectively deal with these items. We strongly support the recommendations these two organizations have proposed.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Ptycia. That's the end of your time.

Did you have one quick point?

[Dale Ptycia]

I have one more paragraph, if I could, Mr. Chairman.

[The Chair, Conservative, David Sweet]

Okay. Make it very quick.

[Dale Ptycia]

Counterfeiters are not regular day-shift workers. Officers need to be able to contact authorized brand representatives at any time to validate and assist with the situation at hand. We look to support the exchange of information and intelligence on a national basis for our partners in enforcement. Perhaps this can be achieved through a national database containing pertinent information, with front-line officers who can readily access such information as brand owner contact information, counsel of record, etc.

[The Chair, Conservative, David Sweet]

All right, we need to hold it there. If you need to add anything, when you're questioned you can do that, Mr. Ptycia.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Mr. Chair, the motion did not clearly state whether there would be a report or, if so, whether it would be tabled in the House of Commons. I would like us to reserve a few minutes at the end of the meeting to clarify that, unless it is possible to get that information directly from the clerk.

[The Chair, Conservative, David Sweet]

I think it's best, when we have witnesses here, that we chat about it at the end.

Mr. Braid, you have seven minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you very much to all of our witnesses for being here this morning and contributing to our important study on the role of IP in fostering innovation in Canada.

Mr. Page, you're from the Ottawa area, as you indicated, and part of an important tech cluster that has developed here. You mentioned that the cluster has developed because of government supports through government agencies because of a climate of innovation here in Ottawa.

Can you point to anything with respect to the current IP regime that has contributed to the forming of this tech cluster in Ottawa? What has worked, beyond those other conditions?

[Harry Page]

Obviously there's a growing focus and importance being put on this. My colleague Mr. Gold talked about how effective CIPO is in allowing people to obtain intellectual property rights. It's actually allowing Canadian companies to become competitive and to understand that on a global basis, if they don't have a solid intellectual property position they're not going to be able to compete and also be able to maintain their competitive position within the country.

The ability within Canada to obtain intellectual property rights is helping us grow our business with emerging companies. Obviously, the more established companies have long had well-established intellectual property rights programs. But for emerging companies now, the ability to rapidly obtain intellectual property rights and the strengthening of the Copyright Act are going to help them compete better globally.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

With respect to the Copyright Act—and I don't want to spend a lot of time on this, because I spent hundreds of hours on copyright—

[Harry Page]

I'm sure you have.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

—I don't recall hearing the concerns about the Copyright Act that you expressed today, as part of either Bill C-11 or Bill C-32. Did you take the opportunity to either appear or to provide a submission?

[Harry Page]

We tried to get in. We were a bit late getting into the process.

We have submitted a briefing to the committee. We do no work around copyright, but it came to our attention that some of the focus being put on the TPMs actually, in our opinion, subordinated the rights of other intellectual property holders. It appeared that TPMs became more important than the underlying intellectual property rights, and that's what spurred us to become involved in the process.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Yes, and that discussion was fully aired, now that you've clarified that.

Mr. Regan was there too. He remembers.

Are you confident that whatever concerns you have will be addressed through regulatory change?

[Harry Page]

I think so. As I said, we're committed—

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great. Thank you.

Mr. Gold—

[Brian Masse, NDP, Windsor West, ON]

At least let him take a breath.