Mr. Speaker, I rise today to speak to the second reading of Bill C-56, the combating counterfeit products act, and to bring to the attention of the House: first, the risks presented to Canadian consumers by commercial counterfeiting; and second, to the problems this creates for businesses that employ Canadians.
Not that long ago, consumers did not need to worry about the risks and dangers of counterfeit products. The term “counterfeiting” itself was generally associated with making false currency and few people had even heard of intellectual property crime. Then, over time, things began to change. Counterfeit T-shirts or brand name replicas showed up in flea markers. Travellers from abroad returned home with supposedly brand name watches bought at cheap prices from street vendors. Yet, within a few days, the watches stopped working or the bands left coloured stains on their wrists. Supposedly, brand name luggage or footwear was bought at such bargain prices that it seemed too good to be true, and it was. Generally, these products fell apart in very short order.
Today, Canadian consumers are wiser and more wary. Sadly, we are increasingly exposed to counterfeit goods in our domestic market and Canadians and Canadian businesses have been victimized and hurt. Today, the problems imposed by counterfeit products extend far beyond the breakdown of a cheap wristwatch or a pair of shoes. Today, counterfeiting can pose a range of very serious health and safety risks to consumers.
Today, fraudulent reproductions of many trusted trademark or copyrighted products infiltrate the legitimate market. Every day counterfeit products enter Canada, from electronics and electrical components to automotive parts and machinery, from batteries and toys to perfumes and pharmaceuticals. The level of sophistication of counterfeit products has increased, along with the range and diversity of products which are counterfeited. On the one hand, some counterfeit operations may not be sophisticated at all. The RCMP reports instances where counterfeiters simply went through dumpsters at construction sites to recover used and discarded circuit breakers. They repackaged them and sold them as new.
However, other operations are very sophisticated, indeed, where dangerous items are made in large quantities for sale to Canadians who may not know the origin of the materials in the products that they buy. For example, investigators intercepted a package at a Vancouver postal authority. It led them to a warehouse that contained 15,000 counterfeit pills packaged in blister packs. The estimated total value of these seized counterfeit drugs exceeded $1 million. At the same warehouse, the investigators also seized clothing and accessories that had been labelled with counterfeit brands, which threaten the production and work of our own Canadian innovators and workers. The resale value of these counterfeit goods was estimated to be in excess of $5 million.
There is no doubt that counterfeit products have become more sophisticated. In addition, the production and supply chain has also become more sophisticated, as well as the method of importation. Some counterfeiters ship the counterfeit labels separately from the products to avoid detection. Once in Canada, the labels are then affixed to the finished products.
Shockingly, counterfeit labels are not only limited to brand names but to the safety certification labels. These are labels that consumers trust to show that a product meets certain industrial standards, knock-off labels that purport product testing and certification by the underwriters, laboratories or the Canadian Standards Association. These labels are meant to deceive the consumer into believing the product meets Canadian safety standards. In fact, electrical equipment that carries a false CSA label may pose hazards to the unsuspecting consumer through malfunction, fire or electrocution.
The falsification of safety certification labels clearly demonstrates some of the risks that consumers face when they buy a counterfeit product, but there are many more examples.
In the past three years, the number of RCMP investigations involving counterfeit pharmaceuticals has more than doubled. Counterfeit pharmaceuticals have already caused a death in Canada. In 2006, a woman from British Columbia bought medication from an unlicensed pharmaceutical website that purported to be Canadian. The medication was, in fact, manufactured overseas. It had been contaminated with toxic metals during its production and the woman subsequently died.
Last year, the RCMP investigated another case of counterfeit caplets that purported to be bee pollen. They actually contained carcinogenic substances that were banned for sale in Canada.
There are many examples of how counterfeit or pirated products have victimized the people who have purchased them, whether through the health and safety risks that I have outlined, or the inconvenience and monetary loss of buying products that do not live up to the standards of the brand. Counterfeit products make it more difficult for consumers to trust the marketplace.
The bill before us represents a major step forward in protecting consumers from counterfeit products and counterfeit services. It gives the enforcement authorities and rights holders the tools they need to crack down on counterfeiters.
Rights holders can submit a “request for assistance” to the Canada Border Services Agency, CBSA, to provide information to border service officers about their brand and products. With this information, border service officers will be able to contact the rights holders when commercial shipments that are suspected of containing counterfeit products are detained at the border. The rights holders can then launch civil proceedings. In fact, rights holders can seek civil remedies for the manufacturing, distribution and possession with intent to sell counterfeit goods instead of waiting until those goods are put up for sale in the marketplace as is currently the case today.
As well as these civil remedies, there are also new criminal offences in the Trade-marks Act for which law enforcement agencies can lay charges. Selling, distributing, possessing, importing or exporting counterfeit goods for the purposes of trade will be prohibited.
Let me emphasize the phrase “for purposes of trade”. This is important because the bill would not target individual consumers who knowingly or inadvertently bring back a counterfeit product to Canada for personal use. Border services officers would not seize private iPhones suspected of containing pirated copies. Nor would they seize a suspected counterfeit wristwatch or a handbag. In fact, the bill contains a specific exception at the border for goods intended for personal use as part of the traveller's personal baggage. Therefore, Bill C-56 would target counterfeiters who make a business of importing and exporting knock-off products.
Many may ask this. Where is the harm in cheap products? However, Canadians recognize the dangers of purchasing counterfeit items.
Last year, Microsoft Canada commissioned a survey. The survey revealed that 84% of Canadians said that they did not knowingly purchase a counterfeit product, less than half of the consumers surveyed felt they knew how to identify counterfeit and genuine products and 71% of Canadians agreed that counterfeit goods were harmful to the economy.
It is clear from these survey results that the Canadian public agrees with this bill and has a strong interest in and a growing understanding of the problems posed by counterfeiting. Again, 71% of Canadians agree that counterfeit goods are harmful to our economy.
I would now like to draw the attention of members to the problems that large-scale commercial shipments of counterfeit goods create for the businesses that employ Canadians. Indeed, we see significant support for the measures in Bill C-56 from innovative Canadian entrepreneurs and creators who are the most impacted.
In a globalized economy, strong, modern marketplace framework rules protect innovation. In a knowledge-based society, this is particularly true of the laws governing intellectual property, or IP.
Intellectual property covers a broad range of innovation, and I will focus my remarks today on trademarks and copyright, the protection of which are at the heart of Bill C-56.
Over the years, this government has taken important steps to update IP laws to keep them in line with the demands of the 21st century. Hon. members will recall that last year we passed the Copyright Modernization Act. Since then, many of its provisions have come into force as of last November. As a result, I am proud to say that Canada has now implemented a responsive copyright regime that balances the needs of content creators and users.
The bill before us today would update Canada's IP enforcement regime governing trademarks and copyright and would provide new tools to strengthen the protection of these rights. It would give rights holders the tools they need to work with law enforcement authorities to protect their intellectual property at the border and domestically.
Counterfeiting threatens Canadians' health, safety and economic well-being. It is not a victimless crime.
Over these past months, the Standing Committee on Industry, Science and Technology, chaired by the hon. member for Ancaster—Dundas—Flamborough—Westdale, heard from many witnesses as it prepared its report on Canada's intellectual property regime. That report was tabled March 18. I recommend it to anyone who seeks a better understanding of the IP regime in Canada.
During the hearings, the committee learned about the impact that counterfeiting has had on the competitiveness of Canadian businesses and the Canadian economy as a whole. Hon. members can imagine what impact a low-quality, counterfeit product could have on a customer who has paid for what was assumed to be a high-quality and genuine product. One can imagine how difficult customer relations might be when dealing with a consumer who has bought a product in good faith and found it to be not up to the company's standards. Certainly, a counterfeit product would damage the reputation of the brand, as well as the store or the company selling it. This makes both the company, as well as the consumer, a victim of counterfeiting.
The integrity of our economy is threatened when consumers are exposed to counterfeit items and as a result lose confidence in the marketplace. It leads to reduced revenue for the rights holders and therefore, reduced growth, reduced incentive to invest and hire, and reduced incentive for the creation of innovation. Commercial counterfeiting carried out by criminal organizations is not a victimless crime.
A company like Canada Goose Inc. makes a concerted effort to combat counterfeiting. Its website gives tools to help potential customers determine whether the product they are buying is genuine. However, as the committee report outlines, some companies prefer not to draw attention when counterfeiters knock off their products. The chair of the Canadian Anti-Counterfeiting Network told the committee that having a name associated with a counterfeit product may damage the market for some products, so some companies do not want to tarnish the image of their own brand.
Although some businesses can be reluctant to sound the alarm about their products, there has been a marked rise in the number of counterfeiting cases that the Royal Canadian Mounted Police has documented. It estimates that between 2005 and 2012, the value of counterfeit and pirated goods seized has increased fivefold from $7.6 million to $38 million. Last year, for example, there were 726 occurrences of intellectual property crimes reported by the RCMP. Some 45% of those cases involved apparel and footwear. Another 20% involved piracy of audiovisual and copyrighted works. Nine per cent involved consumer electronics and a further 9% involved personal care products, like toothpaste, shampoo and soap that Canadian families rely on to be safe and healthy.
The bill before us would give the RCMP, the Canada Border Services Agency and the rights holders the tools that they need to combat and curtail counterfeiting.
Under the current system, a court order is required before border services officers can seize commercial shipments of counterfeit products. The Entertainment Software Association of Canada pointed out that this in effect requires a rights holder to know beforehand that goods are about to be smuggled across the border. As one can imagine, this would be difficult.
Under Bill C-56, however, if rights holders suspect that shipments of counterfeit goods may be crossing the border, they would need only send the CBSA a request for assistance, with information to help identify their brand. The border services officers would have access to information needed to identify, detain and refer suspected shipments to rights holders. The rights holders could then pursue the matter civilly with the courts.
The bill also provides a new criminal offence for the commercial possession, manufacture or trafficking of trademark counterfeit goods. The rights holders community has welcomed this bill. For example, Canada Goose Inc. has said, “The strengthened border measures will play a vital role in protecting jobs for Canadian manufacturers, as well as unsuspecting consumers looking for bargains from those that would do them harm.”
The Entertainment Software Association of Canada stated:
Equipping border service agents with the necessary tools to seize counterfeit products...will help take a bite out of this ongoing problem. Protecting IP is critical to the Canadian economy, especially for content industries like ours, which depends on talent, imagination and creativity to generate returns.
The Canadian Anti-Counterfeiting Network stated:
...counterfeiting has grown into a criminal activity that supports everything from organized crime to terrorism.... [That is mainly because] in the current landscape the risk of getting caught is low while the profit margin is extremely high. With this new legislation the risk assessment will begin to change.
These are just some examples of the support that has come from businesses and business organizations.
Finally, I would like to quote from the Canadian Chamber of Commerce. The collective businesses state, “We urge all political parties to support the bill and to ensure the speedy passage of this important legislation.”
I could not agree more. Canadian employers and law enforcement are working to prevent the damage caused by commercial counterfeiting to Canadian lives, our economy and Canadian jobs. Let us do our part in this House. I urge all hon. members to join me in supporting the swift passage of this bill.
