Industry Committee on Nov. 4th, 2013

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen. Welcome to the second meeting of the Standing Committee on Industry, Science and Technology for this session.

Before us today we have the Honourable James Moore, the Minister of Industry. We also have, from the Department of Industry, John Knubley, deputy minister, and Paul Halucha, director general of the marketplace framework policy branch.

Welcome, gentlemen.

Also, from the Canada Border Services Agency, we have Martin Bolduc, vice-president, operations branch. From the Royal Canadian Mounted Police, we have Superintendent Eric Slinn, director general, support services for federal policing.

We will get right to the witnesses' statements now. We'll be going to the minister first, but let me say for some new members of the committee that we end up in rooms with different clocks at different settings so we'll always take the BlackBerry time, because all of us are synchronized, due to the House of Commons, to the time we operate by. I just wanted to clear that up in case you were looking over my shoulder at the clock behind me.

Now we'll go to the minister's comments. Of course, ladies and gentlemen, you know how this will go: the witnesses will give the testimony and then we'll go to the usual rounds of rotations.

Minister, please go ahead with your comments.

[James Moore, Conservative, Minister of Industry]

Thank you, Mr. Chairman.

Thank you, colleagues.

First, congratulations to the new critics from the opposition, certainly, but also to the new government members. As you know, this committee, over the sweep of the past many years in this place, has been known as a committee that tackles some of the more challenging and in-depth policy questions of the day. To have the leaders of all our respective parties entrust you with the tasks of some of this legislation, which can be pretty complex and technical, is a testament to your abilities. I look forward to working with you both today and beyond on a number of matters that are before us.

Also, having read the testimony that was offered before the committee, before the new members were brought to this committee, and the debate in the House of Commons, I think there's a commonality of view that something needs to be done about this piece of legislation. There's general support for this legislation, though I know the opposition is looking at possibly bringing forward some amendments, and the government members have expressed an openness to accepting some amendments. Hopefully, this will be a good beginning to a policy process that will serve Canadians well.

Again, Mr. Chair, I want to thank you for inviting me to appear to speak about Bill C-8, the Combating Counterfeit Products Act, and our government's work to stop pirated goods from entering the Canadian economy.

As the committee well knows, our government worked hard to modernize Canada's intellectual property laws in order to bring them into the 21st century. We promised to modernize the Copyright Act, and our government delivered on that promise. We introduced and passed a bill that balanced the needs of creators with those of consumers, but this was only part of the solution that was needed.

Globalization continues to open up new markets and expand trade around the world. As you know, Canada recently signed the most comprehensive trade agreement in history with the European Union that will provide preferential market access to more than 500 million consumers and to the union's annual $17 billion in economic activity.

Technology continues to change and has revolutionized the way we conduct business, and that has also made trade faster and more sophisticated. The world is quickly realizing the importance of modern, responsive and effective laws to ensure sustained economic growth and job creation.

We are no longer simply trading goods and resources with a few close allies on our continent. In today's modern economy, we are trading physical goods and intellectual property with more countries, more people, and more often. With this increased trade comes great opportunity and reward, but in trying to maximize these opportunities, we cannot ignore increased risks, namely, those presented by the theft and resale of Canadian intellectual property. We have taken the necessary steps through the Copyright Modernization Act to bring our domestic—and that's of course the key word, “domestic”—copyright laws in line with international standards.

But as the committee well knows, having studied this issue on several occasions, work still remains to be done in ensuring that goods which violate the Canadian intellectual property laws not be allowed into this country for commercial resale. Not only do such goods undermine the business success of legitimate Canadian companies, but they also represent a threat to the health and well-being of our families.

I have here, by the way, a number of examples of counterfeit goods that have been captured coming into Canada, such as counterfeit batteries, counterfeit clothes, a counterfeit Sidney Crosby Olympic jersey, and a number of items that cross boundaries, not only in terms of national identity and the hollowing out of the intellectual property of Canadian companies, but also in terms of being items that bring with them a number of public safety concerns that need to be taken into account, such as circuit breakers, batteries, extension cords, and so on, that are counterfeit and would not meet Canadian standards for sale.

This bill will amend the Trade-marks Act and the Copyright Act, and will give rights holders, border service officers and law enforcement the tools they need to work together to directly confront the growing threat of international counterfeiting and piracy.

In today's world, intellectual property is at constant risk. Counterfeit and pirated goods are increasingly finding their way through our borders and into the Canadian marketplace. The retail value of counterfeit goods seized by the RCMP has steadily increased, from $7.6 million in 2005 to $38 million in 2012. That is a 400% increase just in the past few years, and that's money and jobs being taken away from Canadians.

I'll give you some examples of how counterfeit goods are affecting Canadians. First, counterfeit goods threaten the safety of Canadians. We are not only talking about counterfeit Gucci bags sold on the street, but also how these pirated goods can be real threats to our daily lives. There have been many reports of counterfeit airbags, counterfeit toothpaste, children's toys, as well as food and beverages, that put the health and safety of our families at risk.

Second, counterfeit goods have often been linked with serious organized crime. Criminal groups use the profits from pirated goods to fund criminal activities, about which we all are very concerned.

Third, counterfeit and pirated goods are a threat to economic growth and jobs in Canada. When counterfeiters steal intellectual property for commercial purposes, it is Canadian businesses that are most affected. This is not only through the lost revenue from products gone unsold, but also through the damage done to brand integrity. When criminals bring counterfeit and pirated goods into this country, they are looking to make a quick profit, and they can very easily tarnish the strong reputations forged by quality Canadian brands.

Take, for example, Canada Goose, which has built a reputation as a world leading manufacturer of high-quality winter wear. Here is a company that has spent valuable time, energy and money to create a brand that is known the world over and is synonymous with quality. That being said, last year, Canada Goose's branding took a huge hit from subpar knock-offs coming into Canada.

As you can see, Mr. Chairman, it's not only our government that knows actions need to be taken. Stakeholders have overwhelmingly offered their support for the legislation we are here to discuss. For example, the vice-president of global marketing at Canada Goose and co-chair of the Canadian Intellectual Property Council said that “Canadians have long been victims to the illicit counterfeit trade” and the Combating Counterfeit Products Act is “welcome news for consumers, businesses and retailers alike”.

Food & Consumer Products of Canada said:

Counterfeit goods are a very real threat to the health and safety of Canadians. Their presence in the marketplace poses a risk to Canadians, hurts our economy....our members applaud the Harper government for taking strong and decisive action to address counterfeit....

Canadian Manufacturers & Exporters said, “We congratulate the government on taking action to improve the business conditions for companies investing and creating jobs right here in our communities.”

The need for the bill is quite clear. In order to help stop the spread of counterfeiting and piracy, this legislation gives Canadian rights holders and law enforcement agencies the tools they require to confront this threat at the border and to take action against those who profit from the commercial trade of counterfeit and pirated goods.

Specifically, the bill will give the authority to border officers to detain suspected counterfeit shipments and notify rights holders of the detention, whether the suspected goods are being imported or exported.

It will also create a new process called a request for assistance, which will allow rights holders to work with border officers and request that they detain commercial shipments suspected of containing counterfeit goods. In addition, this bill will provide rights holders with new tools to protect their own intellectual property rights and the ability to take legal recourse against infringers. It adds new civil causes of action that cover manufacturing, possessing, importing, exporting and attempting to export, counterfeit goods for commercial purposes. This will give rights holders a chance to stop infringers before the goods in question are sold in the market.

These changes are necessary and overdue. But I want to make it clear that this bill is intended to target only those who violate intellectual property with the intention to make money from it; personal use of counterfeit goods will not be targeted.

This bill was created to respond to the concerns of consumers and stakeholders and to ensure the security of our economy. Ensuring the health and safety of Canadians and helping stop criminal activity profiting from this trade are central to this legislation as well.

Mr. Chair, I want to thank the committee again for taking the time to study this important bill. I would urge all members of the committee to return this bill to the House as soon as possible so that we can ensure Canadian rights holders, customs officers, and law enforcement agencies have the tools they need to fight counterfeiting and piracy domestically at our borders.

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you very much, Minister.

Are there other supplementary opening remarks from any of the other witnesses?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

No, Mr. Chairman, but I would point out that Minister Blaney, the Minister of Public Safety, was to be here as well. He was called away to another meeting and couldn't attend, but we have two folks here from his department who are prepared to answer any of the technical questions on the enforcement side. Of course, I have officials here from the Department of Industry, who will answer other questions as well.

[The Chair, Conservative, David Sweet]

Thank you very much for that clarification, Minister.

We'll go to our first round of questioning, with seven minutes per member.

Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

Thank you, Minister, for coming here today.

I think I'm going to start on a broad level, if I could. Obviously, in the Speech from the Throne, Canadians will have had the opportunity to see the government's focus on consumer issues. Could you elaborate a little more on how this bill might align with that focus on consumers?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

Sure. I think it's self-evident that not only do we want to empower consumers. We say very often that the best way to empower consumers in our society is to give them more power, money, and control in the choices about how they want to live their lives. We believe in doing that through tax relief, economic freedom, and personal responsibility, but at the same protecting consumers from those who would do them harm.

As I say, we have a number of examples here of products that would do consumers harm, particularly when they are presented in the marketplace and look absolutely identical to the parallel products that are put forward by the actual manufacturers of these products. As an example, as the former minister for the Olympics, I think anybody passing through a store would see this jersey here and think this looks exactly as it ought to. It actually feels the same. The fabric feels the same, the numbers are twill, and everything looks as it ought to, but these are counterfeit goods that are bogus and that are in our marketplace and ripping off consumers.

They're also taking great Canadian brands and maligning them. It's not only a problem for the sake of national identity, I think, but when companies like Canada Goose and others have their products ripped off, and people take these products home and use them, and they malfunction, they tell their friends and their friends' friends not to buy those products because they are defective. It hurts the economy.

Certainly, in protecting consumers, we've heard stories in the past, some of them from Canada and some from other jurisdictions around the world, of unsafe toothpaste and of toys that have lead in them. These are things that are self-evident we need to fight against, and this is why we need legislation like what is before you: so those whose rights are being violated have recourse in order to protect intellectual property that is being abused in the marketplace.

As an aspect of the broader consumer agenda, I think the benefits of the legislation are self-evident.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

All right.

You mentioned that of course as the former heritage minister you were quite involved in the copyright legislation. Maybe you could speak a little bit to, first of all, the impact that legislation has had in this area, and maybe to how this legislation complements the work that's been done on the Copyright Modernization Act.

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

Of course, the Copyright Modernization Act, which spanned two Parliaments, the previous Parliament and the current Parliament, and which we adopted after having considered a great many amendments from opposition parties—some of which were included in the legislation, I should point out as well—was also arrived at after a great deal of consultation. You will remember that when Minister Clement was the Minister of Industry, you were the parliamentary secretary to him at the time, I was the Minister of Heritage, and we went across the country, consulted with Canadians, and drew ideas on how to best address the need for modernized copyright legislation. We arrived at a pretty effective, if I might say so, piece of legislation that protects Canadian intellectual property rights.

This legislation is not about the domestic aspect of intellectual property protection, but the international, which is to say, empowering the CBSA and the RCMP with the tools they need to actually prosecute, and also empowering rights holders with the mechanisms they require to trigger action at a border when they know their goods are being pirated and counterfeited and their intellectual property is being betrayed in the marketplace. This is an obvious follow-through. We have the domestic legislation and its teeth and its infrastructure to protect intellectual property domestically. This is about protecting intellectual property on an international scale.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

In your opening statement—this question may actually be more for the officials in getting into the details—you talked about the increase from $7.6 million in 2005 to $38 million in 2012. That's a pretty significant increase. Can you or someone elaborate and give us some idea of where that increase is coming from and what particular areas of the economy would be contributing to that increase? Maybe as a follow-up to that, if there's time, does that sort of profile look different in different parts of the world in terms of where counterfeit would have its impact?

[Superintendent Eric Slinn, Director General, Support Services for Federal Policing, Royal Canadian Mounted Police]

I can speak to that.

You're quite right: there has been an increase since 2005. As to the types of products we're seeing, they essentially run the gamut, although over the last number of years apparel and footwear seem to be the most prolific. About 49% is the statistic that we have on our public website.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

In other parts of the world, do they face the same problem? In terms of recipient countries, I imagine it's more of a problem in the developed world than it is in the developing world, in a sense.

[Supt Eric Slinn]

I can't speak to other countries, other than perhaps the United States, which faces very much the same situation that we do. I can't speak specifically to situations in other countries.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Finally, and it might be coming back to you again here, the opening statement says:

In order to help stop the spread of counterfeiting and piracy, this legislation gives Canadian rights holders and law enforcement agencies the tools they require to confront this threat....

What's the difference between the tools you have now and the tools you require?

[Supt Eric Slinn]

With our colleagues at CBSA, now we have that extra tool we can use, controlled deliveries, which is an effective law enforcement tool for us to carry out goods that are potentially going to organized crime figures or individuals who are prolifically involved in this type of activity.

In one sense, it brings us closer to our colleagues at CBSA, and I think we can produce greater results.

It also gives us flexibility. In the law enforcement world we're in today, organized crime is extremely diverse; it is not singular. They don't just look at drugs; they're looking at multiple pieces of contraband.

This gives the RCMP the opportunity to be much more flexible in how we prioritize our operations and target those organized crime groups for greater effect and disruption.

[The Chair, Conservative, David Sweet]

Thank you very much.

That's all the time for that question round.

Now over to Madam Charlton for seven minutes.

[Chris Charlton, NDP, Hamilton Mountain, ON]

Thank you very much, Chair.

Thank you, Minister, for spending some time with us today. You were quite right in your opening remarks that we do indeed share your concerns about counterfeiting and piracy. We're pleased we have the bill before us today so we can look at it in more detail and make sure we are actually addressing the concerns that have been raised by both businesses and consumers. Of course, it's a particular concern for us when we're talking about matters that affect the health and safety of Canadians.

In my questions, I want to focus a bit on the enforcement side.

First of all, I think I'm correct when I say it used to be the courts that made the determination about whether something was counterfeit or was a pirated good, and the courts used to have some difficulty in making that determination from time to time. Now we're taking the courts out of that process, or at least diminishing the courts' role, and we're asking Canada Border Services agents to make that determination.

I wonder if you can tell us a little about the additional training that border officials will receive and what kind of additional resources you'll make available so they can take on this new role. I wonder whether you can also talk a bit about what gives you the confidence that our border officials will be able to make the determinations that the courts have found difficult.

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

I'll let Mr. Bolduc answer on behalf of Public Safety.

[Martin Bolduc, Vice-President, Operations Branch, Canada Border Services Agency]

Basically, the bill provides us with an additional tool by creating a system trademark and copyright owners will use to inform us that they own those rights.

Our officers inspect commercial shipments crossing our borders on a daily basis. They can even inspect shipments that contain items likely to be counterfeit. If we believe that the goods could be counterfeit, the bill will make it possible for us to check whether the trademark owner has submitted a request for assistance and to share the samples with the companies so they can seek legal recourse. In addition, the bill will give the Border Services Agency the authority required to detain the shipment while the trademark owner is appearing before the courts, defending their rights.

[Chris Charlton, NDP, Hamilton Mountain, ON]

Thank you very much.

Minister, you know because we've raised it in the House, and we've had conversations elsewhere about this, but border officials are already having a difficult time managing the very serious mandates with which they deal every day, such as stopping illegal weapons and drugs, stopping potentially threatening individuals, and things like that.

I find it difficult to see how this bill will be implemented and how those additional responsibilities will be dealt with, in light of the fact that CBSA is dealing with a $143-million budget cut from the last budget. Do you plan to reverse those cuts? What other priorities can the border officials now drop because they've got these additional responsibilities?

Can you guarantee that adequate funding will be provided to ensure that the other functions border guards are now performing won't be impacted as a result of the passage of Bill C-8?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

You're quite right.

This is an addition of greater responsibility at our borders, but it's an obligation that we think is expected by Canadians. However, through the sweep of our government from 2006 through until today, we have increased overall funding for border security across this country. Yes, recently there was a reduction, but if you look at where we were in 2006 compared to where we are in 2013, and where we'll be, going forward, we have net increased our support for the Border Services Agency's increased hiring. Certainly, this will require new training and new approaches to how they do their job, given the new powers provided in this legislation.

I know that the government would not bring forward this legislation without having consulted with CBSA, the RCMP, and others, to ensure that these new powers wouldn't be offered without the adequate resources to have them realized on the ground. We have done our due diligence in that regard.

On your previous question, John Knubley said he had something else to add.

[John Knubley, Deputy Minister, Department of Industry]

Thank you, Minister.

Mr. Chair, I want to emphasize that the role of the CBSA is, of course, strengthened to identify suspicious goods, and now under the Trade-marks Act and the Copyright Act, this can be done across the whole supply chain, which previously was not possible.

Ultimately, and this is my second point, the court decides, as you were suggesting, honourable member, whether the good is counterfeit or not. I want to stress that the courts can and do award compensatory and punitory damages in that context.

[Chris Charlton, NDP, Hamilton Mountain, ON]

Minister, can I just clarify?

I think you said that there will be additional training required for our border agents and that there will be adequate resources. Does that mean you will be reversing some of the cuts, or at least providing some additional resources to CBSA?

[James Moore, Conservative, Port Moody—Westwood—Port Coquitlam, BC]

They have the resources adequate to effectively put in place this legislation and protect our borders. As I said, we arrived at the budget decisions that we made in consultation with CBSA, in consultation with the RCMP, and others. We put forward legislation that would not in any way diminish their capacity to do what they're already doing, and they have the resources necessary to take on these new responsibilities. These are powers, by the way, that they've requested. The organizations I've mentioned support this legislation, and we have every confidence that the CBSA can fully implement this and protect Canadians with the resources that they have.

[Chris Charlton, NDP, Hamilton Mountain, ON]

So, they have additional responsibilities but a flatline budget.

I'm going to leave it there and move on to something else.

As you know, the government has, or will soon have, the ability to declare which public servants are deemed essential, for the purposes of collective bargaining. Are you anticipating that border guards will be deemed essential?