Yes, I do. Thank you.
I'm a former chairman of the Ontario Arts Council and former president of the Academy of Canadian Cinema and Television, and currently I have faculty positions in the Harvard Law School and at York University.
This morning I'd like to discuss some threats and dangers of counterfeiting and piracy from perhaps a perspective different from the one this committee has heard in the past. To begin, perhaps it's helpful to look at these issues as being in three particular categories. Category one, I would suggest, is the sale of physical goods in physical stores, what we hear about a lot with the Gucci watches and handbags and plush toys and that sort of thing.
The second category, which the committee has also heard some testimony about, is the sale of physical goods, but in this regard, instead of being bounded territorily into the country of Canada by physical borders, so perhaps coming from outside the country, we have goods that are purchased on the Internet—everything from prescription drugs to movies or CDs and the same handbags—essentially, the same goods you could get in a physical store, but also probably augmented by goods that would not pass muster with the physical examination in a store, where the consumer has the opportunity to look the goods over and perhaps, as was suggested, look for a tag that says 100% original material and that sort of thing.
The third category, about which I ask the indulgence of the committee, and which may or may not be central to your purview, is the sale of intellectual property goods online directly, in the form of files, whether it's software, or music, or educational courses that may be branded with trademarks, such as McGill University or any other institution.
There are three large implications of those three categories of counterfeiting and piracy, in my view. In one situation, and in many cases, we have citizens who are duped, are fooled. They basically have product substitution; they think they're getting one thing and in fact they're getting another. They pay for one thing, and they think they're getting another thing. I think we would all agree that that's not a good outcome.
The second outcome, which hasn't been dealt with, and which I would suggest to the committee is at least as harmful, is the encouragement of citizens to break the law. In this case, to use the example that was just given, a Gucci watch is purchased for $10. I think it would perhaps strain our belief that a consumer would buy a Gucci watch for $10 and be duped into believing he's getting the real thing. That consumer understands that full well because of, in some cases, the absurdly unreasonably low price. Another case of this is the wilful circumvention of protections that have been put on products—as happens when a consumer goes to a shop and says, here's my game machine, remove the protection, or here's my cell phone, remove the protection, or something like that. We are encouraging a culture and a society that have a kind of disregard for law in general.
The third outcome, which has been discussed, and on which I won't dwell, though I think it's quite important, is that companies and individuals who invest in creating businesses and intellectual property lose money because they can't sustain a business model that's viable, because others are poaching their business at unfair low prices through counterfeiting.
I suggest that insufficient action by government has some rather severe consequences, one of which is that, in general, innovation is stifled, because if we don't have a society in which people are rewarded for the investments they make in innovation through normal business practices, then there's less incentive for them to make those investments.
Secondly—and I would suggest to the committee that this comes under the heading of what I would suggest is the broad health and safety not just of individual citizens but of our culture, our government, and our ability to receive good government and live in the kind of society Canadians believe they are entitled to—there is a general breakdown of a sense of law and order, whereby we begin to accept that if you get a good deal at somebody else's expense, it's okay; that it's okay if the government does not provide a framework for commerce, a framework for entertainment, and a framework for getting information that's secure and reliable.
In that regard, I would ask that the committee indulge me for a moment. I just returned from China, where I have a business that I've been getting going for the last nine months or so. I've had a chance to see first-hand in another jurisdiction what I believe has some relevance for potential outcomes of government inaction on counterfeiting and piracy.
I'm sure the members of this committee are familiar, at least from the press, with the almost 100% non-compliance in countries such as China with any intellectual property, trademark, or other regimes that would prevent counterfeiting and piracy. I've had first-hand knowledge, speaking to companies in China—Chinese companies, not just foreign companies—who are unable to sustain business models because of the counterfeit and pirated goods that are available there.
In fact, the outcome of what has been a general government disregard for counterfeiting and piracy is that in the realm of counterfeit goods, there are now levels. The Chinese words are “daoban” or “zhaoban”. One is legal and one is counterfeit.
The quality of the counterfeit goods that have been accepted by the general population as okay has differentiated into tiers. You can buy a DVD of a movie on the street for about 70¢ or 80¢, but the quality of that movie is going to be pretty poor on the DVD, because somebody perhaps went to the back of a theatre with a video camera and basically just shot the movie. But if you pay more, you can get the same movie. And consumers are willing to pay more for differentiated levels of counterfeit. They'll pay more to get a movie that has Chinese subtitles and a better quality.
There are companies that are establishing brands that have value as counterfeit brands, based on the fact that they have different levels of quality for the intellectual properties they steal.
The question is, what's wrong with this? What's the impact?
In my view, there are some serious impacts that are pretty obvious in countries like China. The greatest one would be what I suggest is the overwhelming evidence throughout the world, and particularly in China, that this has led to a copycat economy, one that is not innovative. One does not go to China to design new and innovative stuff; one goes to China to get cheap knock-offs.
This is a problem for the Chinese, and it's one of the reasons they're interested in this issue and are trying hard, I believe, to begin to address it. It's one of the reasons for the government to address piracy and to address counterfeit. They simply realize that they can't disregard it if they are going to become a country that can innovate and have successful indigenous industries that will be able to thrive in a business world.
Those are my opening remarks.