Bill C-8 (Historical)

Combating Counterfeit Products Act

An Act to amend the Copyright Act and the Trade-marks Act and to make consequential amendments to other Acts

This enactment amends the Copyright Act and the Trade-marks Act to add new civil and criminal remedies and new border measures in both Acts, in order to strengthen the enforcement of copyright and trade-mark rights and to curtail commercial activity involving infringing copies and counterfeit trade-marked goods. More specifically, the enactment
(a) creates new civil causes of action with respect to activities that sustain commercial activity in infringing copies and counterfeit trade-marked goods;
(b) creates new criminal offences for trade-mark counterfeiting that are analogous to existing offences in the Copyright Act;
(c) creates new criminal offences prohibiting the possession or export of infringing copies or counterfeit trade-marked goods, packaging or labels;
(d) enacts new border enforcement measures enabling customs officers to detain goods that they suspect infringe copyright or trade-mark rights and allowing them to share information relating to the detained goods with rights owners who have filed a request for assistance, in order to give the rights owners a reasonable opportunity to pursue a remedy in court;
(e) exempts the importation and exportation of copies and goods by an individual for their personal use from the application of the border measures; and
(f) adds the offences set out in the Copyright Act and the Trade-marks Act to the list of offences set out in the Criminal Code for the investigation of which police may seek judicial authorization to use a wiretap.
The enactment also amends the Trade-marks Act to, among other things, expand the scope of what can be registered as a trade-mark, allow the Registrar of Trade-marks to correct errors that appear in the trade-mark register, and streamline and modernize the trade-mark application and opposition process.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

And that's what you're talking about, proper balance. You suggested at the start of your submission that Bill C-8 does find the proper balance.

[Judy Sgro, Liberal, York West, ON]

In the brief you sent to us, you raised some concerns about terminology, the word “distinctive” being one. Could you elaborate a bit on your concerns about the word “distinctive” and the implications of that in Bill C-8?

[Professor Jeremy de Beer, Associate Professor, Faculty of Law, University of Ottawa, As an Individual]

Thank you very much for the opportunity to testify before you on the important matters in Bill C-8, Combating Counterfeit Products Act.

I would like to focus my comments to the committee today on only one issue in particular and that's the issue of parallel imports. The term “parallel imports” is one that you may or may not have heard before. I would like to help the committee understand what parallel imports are, and why they are important to Canadian families, and how Bill C-8 might help to fight price discrimination against Canadians.

What are parallel imports? Parallel imports are not pirated goods nor counterfeit products. Counterfeit products mislead consumers about the origins, quality, or other valuable aspects of goods. Assuring quality, especially in respect of health or safety standards, is among the most important functions of a trademark. It's essential that consumers not be misled by inauthentic marks, especially when it comes to compliance with health and safety standards. Bill C-8 is correctly aimed at prohibiting pirated goods and counterfeit products bearing inauthentic trademarks from entering into Canada.

Parallel imports typically pose no such problems. Parallel imports are genuine articles sold with the authority of the intellectual property rights owner outside of Canada. Manufacturers may want to segment geographic markets, so that they can keep prices higher in some jurisdictions than in others. They do this by giving certain distributors exclusive licenses or assignments of their intellectual property rights. Often those rights are to packaging, labels, logos, or other incidental aspects of the goods.

Exclusive licensees or assignees often then use these intellectual property rights to fully control their territorial markets, including pricing. Legitimate competitors who would otherwise import genuine articles from abroad and offer them to consumers at lower, fairer prices, are called “parallel importers”. Parallel importers are not exempt from Canadian health and safety standards, or from complying with all relevant regulations regarding duties, taxes, and other legal requirements. Parallel importers do, however, sell the same goods at lower prices.

Why are parallel imports important? Parallel imports help to prevent geographic price discrimination against Canadians. They are one way of encouraging pricing parity across borders, such as the one between Canada and the United States. Permitting parallel imports is also an essential aspect of free trade. For example, we want Canadians to have access to goods from the European Union on the fairest terms possible. That is among the reasons for concluding the comprehensive economic and trade agreement with the EU. Fair access is facilitated when multiple legitimate suppliers of genuine articles are able to compete to offer Canadians access to goods produced with the authority of intellectual property rights owners in other countries.

I note that the principle of eliminating price discrimination against Canadians is rightly identified in the most recent Speech from the Throne as a priority to protect Canadian families, but I worry that the bill creates the risk of inadvertently undermining these aims.

I also note that Bill C-8 might undermine certain provisions recently enacted into Canadian law through the Copyright Modernization Act, which gives copyright owners the right to control the distribution of goods only if distribution has not previously been authorized inside or outside of Canada. Certain intellectual property rights, lawyers say, are “exhausted” by the first sale of goods anywhere, but Bill C-8 seems to restore some of these rights to permit detention of such goods at the border.

Finally, I note that this aspect of Bill C-8 appears to make Canadian law inconsistent with the law concerning parallel imports in the United States, particularly following a decision of the United States Supreme Court, which I can speak to more in questions if you're interested.

I admit that it was not easy for me, or a number of other IP experts whom I consulted, to understand the intricacies of this bill's provisions affecting parallel imports. The provisions are technical and complex, and they interact with the provisions of the existing legislation with effects that may not be immediately apparent. So my recommendation is that the committee carefully review all of the provisions to ensure that parallel imports of genuine articles from abroad are allowed so that the government can live up to its promise to protect Canadians from geographic price discrimination.

If I had more time, I might also explain why I believe that Bill C-8 strikes an appropriate balance in providing effective procedural remedies and anti-counterfeiting support to rights holders without unduly burdening taxpayers with the full costs and complexities of enforcing private rights. I believe it would be impractical and excessively costly for taxpayers to impose further obligations on customs and border services officers than already provided for in the bill—certainly without increased budgetary support. Extending the act's application to in-transit shipments, for example, would increase the administrative burden on officials and the financial burden on taxpayers. So might be the imposition of an obligation upon public officials to destroy or indefinitely detain suspected, but not confirmed or of interest to the rights holder, infringing goods. I think statutory damages may also skew the balance in the bill too far away from parallel importers or other small businesses that offer choices to consumers but are not trading in truly pirated or counterfeit goods.

Thank you.

[Peter Giddens, Lawyer, International Trademark Association]

Thank you.

INTA believes that the Canadian Intellectual Property Office should not destroy trademark application or registration records unless and until electronic copies are made and perpetually maintained. Although INTA is mindful of the practical difficulties and costs associated with warehousing original documents, in our view the downside risk of losing public access to these documents outweighs the hardships to the Canadian Intellectual Property Office associated with maintaining those records.

Neither the United States Patent and Trademark Office nor OHIM destroys the electronic versions of the documents upon the destruction of the paper version, and paper versions are kept without limitation. If Bill C-8 does not provide for electronic copies prior to destruction, the Canadian Intellectual Property Office will be significantly out of step with both the U.S. and European intellectual property offices when it comes to trademark files record retention. In any event, INTA believes that the proposed six-year clock as a countdown to destruction of documents is at odds with many established private sector file retention policies. INTA recommends that Bill C-8 be amended to require that electronic copies be made and retained by the Canadian Intellectual Property Office before destruction is permitted.

Finally, INTA also urges you to expand clause 21 of the bill to provide for a cause of action against not only counterfeit goods that are identical to those appearing in the trademark owners' registration but also those goods that are reasonably ancillary, incidental, or connected to the goods that appear in the trademark owners' registration. Also, we urge that clause 21 of the bill be expanded to prohibit the unauthorized use or display of a trade name that is identical to or confusing with a registered trademark. Such changes, in keeping with the law concerning confusing trademarks in Canada, will assist trademark owners in combatting counterfeiters who ride on the trademark owner’s product line expansions before a Canadian trademark is issued or who try to avoid the reach of these new provisions on the basis of an argument that the impugned sign was a trade name rather than a trademark.

In conclusion, INTA appreciates the efforts of the Standing Committee on Industry, Science and Technology and its consideration of our testimony. INTA supports Bill C-8, but our members would like to see amendments to make it more effective in protecting the Canadian public, including adding tougher and effective deterrent factors against counterfeiters to protect consumers from harmful counterfeits; developing stronger measures and an operational administrative regime at the border to keep counterfeits out of Canada; and making a number of practical technical amendments regarding trademark practice.

Thank you again for this opportunity to participate in these committee hearings.

[David Lipkus]

Yes, I'll begin. Thank you.

Good afternoon. My name is David Lipkus, and I am a lawyer at Kestenberg Siegal Lipkus LLP.

I am appearing today on behalf of the International Trademark Association as chairman of the Canada subcommittee of INTA's anti-counterfeiting committee.

I am joined by Peter Giddens, partner at McMillan LLP, chair of the Canada subcommittee of INTA's trademark office practices committee.

We are honoured to appear today before this committee to share INTA's views on the Combating Counterfeit Products Act.

INTA supports the bill as a major step in improving protection against counterfeiting in Canada, but our members believe that Bill C-8 can better protect the Canadian public by including tougher deterrents against counterfeiting and developing stronger measures at the border to keep counterfeits out of our country.

INTA is a not-for-profit membership association, with 6,300 member organizations in over 190 countries. We have 179 member organizations across Canada. INTA's membership spans all industry lines and sectors and is united in the support of trademarks and related intellectual property in order to protect consumers and promote fair and effective commerce.

Our message is simple, and as you have heard from other witnesses, counterfeiting is a crime. Counterfeiting endangers the public health. Counterfeiting steals from Canadian businesses. Counterfeiting drains revenue from our government. And counterfeiting and the counterfeiting problem are growing in our country.

We believe that including our suggestions to Bill C-8 could make a huge and significant impact on this growing problem

INTA members have seen counterfeits in product categories such as food, medicines, automotive parts, electronics, appliances, cosmetics, and luxury goods. These counterfeits can be bought anywhere, from basements to shopping malls, and increasingly on the Internet. These products are bought and used by Canadians and found in Canadian homes, Canadian schools, Canadian businesses, and Canadian hospitals. We need effective laws to address this crime that harms the public and steals from our businesses.

Also, because counterfeiting is a global issue, Canada's actions on this issue will have international consequences. Canada must address counterfeit products with the same high bar as its trading partners. Bill C-8 is an essential step towards this objective. As we express support for Bill C-8, we recommend priority amendments that are important improvements to the bill.

With respect to statutory damages, INTA is recommending additional provisions to the Trade-marks Act, giving courts the power to award significant statutory or pre-established damages against counterfeiters in recognition of situations where it is difficult, or even impossible, for the trademark owners to prove the measurable monetary loss or damage. Often counterfeiters don't keep any records of the business they do and transact only in cash. The minimal compensatory damage awards currently ordered by our courts make breaking the law and selling counterfeit in our country simply the small and insignificant cost of doing business in our country.

While the bill does allow for punitive damages, they are discretionary and therefore rarely awarded by our courts. Thus, there is a need to deter the sale of counterfeits in our country against businesses, both large and small business, in order to protect the public from this crime. Statutory damages can help to accomplish this.

INTA applauds the addition of sale and distribution of counterfeits as a criminal offence in Bill C-8. These provisions align with the criminalization of counterfeiting globally, including places like the EU, United States, and China. However, after a counterfeiter is charged, the government must prove several elements of the counterfeiter's knowledge, which will make it very difficult for the government to prosecute criminal cases. More importantly, it misses the fundamental nature of mens rea, which makes these offences criminal.

As the bill is drafted today, a counterfeiter could easily deny knowing that the trademark was registered, that the mark on the goods is identical to or indistinguishable from a registered mark, and that the sale or distribution is an infringement as defined in the relevant sections of the Trade-marks Act. I'm not sure how many counterfeiters go to the CIPO database or review the Trade-marks Act on a regular basis, as I do in my practice.

The criminal offences should be written in a manner that they will be enforceable to truly act as a deterrent to counterfeiters and keep these criminals from hurting the public.

With regard to goods in transit, INTA recommends that the section of the Trade-marks Act that explicitly prohibits the Canada Border Services Agency from intercepting and seizing counterfeit goods in transit be removed from Bill C-8. Counterfeits must be stopped at any point in transit or destination. Allowing counterfeit goods in transit to pass through Canada encourages the use of our country as a convenient transit destination by organized crime. Counterfeiters rely on transit through third countries as a covert way of getting their illegal products to designated markets. Countries must therefore be vigilant about stopping counterfeits in transit, even when the products are destined for a third country.

Ensuring that national laws allow customs inspectors to seize counterfeit goods in transit is an important tool in the global fight against counterfeiting. For example, counterfeit car parts shipped to the United States could easily be installed into cars that travel to our border in Canada. Given the integration in North American manufacturing, it makes sense to intercept counterfeit goods when and where they are discovered. It is not in any country's best interest to support counterfeiting. Allowing counterfeits in transit to pass through Canada has the unfortunate effect of supporting the global trade of counterfeit goods.

An administrative regime at Canada's border to efficiently destroy counterfeits can significantly reduce the costs and resources devoted to counterfeit goods seized at the border. The alternative is litigation, which, as you know, is time-consuming. The costs associated with the request for assistance and the storage of counterfeit merchandise will undoubtedly be onerous on the rights holder and taxpayers because court actions will be issued after every seizure done by customs. Many INTA member organizations will not have the budgets to participate in this request for assistance program.

An administrative regime will eliminate many unnecessary costs, especially in cases where the importer does not even respond to a seizure notice and the goods are confirmed to be counterfeit. Many countries already have an administrative regime in place to quickly destroy counterfeit goods seized at the border. That is working. The customs officials in the European Union, Australia, and the U.K. dispose a large percentage of counterfeits seized at the border by some form of administrative regime. The inclusion of an administrative regime in Bill C-8 would be beneficial for not only brand owners but also the government.

Peter Giddens is now going to address the additional important trademark issues.

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

Mr. Chairman, honourable members, ladies and gentlemen, thank you very much for inviting Hockey Canada to participate in the committee's study of Bill C-8.

Hockey Canada is the country's national sport organization. Our association is responsible for the creation and implementation of hockey-specific programming for more than 650,000 young Canadians, from entry-level beginners through to high-performance athletes competing at world championships and such multi-nation games as the Paralympic and Olympic games.

More than 1.2 million Canadians are involved in minor hockey as players, participants, officials, and administrators, from coast to coast to coast. Over the last 20 years, the retail licensing of Hockey Canada brands—Team Canada, Équipe Canada—and our logos and trade dress all have been diligently cultivated to provide a substantial revenue stream for the association. In our particular case, counterfeiting means lost royalty revenue. Lost revenue for Hockey Canada equates to lost opportunities to support wholesome, athletic hockey opportunities for Canadians of all ages and of all abilities. Every dollar lost to counterfeits has a direct negative impact on our programs and services.

A very specific example that I'd like to bring to your attention today occurred in early February of 2010. In a time span of less than two weeks during the 2010 Vancouver Olympics, the RCMP and the Canadian Border Services Agency at the Vancouver mail facility intercepted and detained more than 16,000 counterfeit Team Canada jerseys, with a retail value of more than $2.3 million. At the request of the RCMP, Hockey Canada arranged for additional personnel to assist with the processing of these counterfeit jerseys. More than 1,500 individual shipments in those two weeks were processed, and all at substantial cost to Hockey Canada. Together, we estimated that less than 10% to 20% was intercepted of the actual number of counterfeit jerseys imported into Canada leading up to and during the games. This translates into more than 250,000 jerseys that were imported into Canada, with a retail value of over $32.5 million—all lost revenue, which negatively impacts Hockey Canada.

I understand that Bill C-8 may afford brand owners such as us the ability to work directly with the CBSA through a request for assistance process, with costs to be borne by the brand owner. At a bare minimum, the estimated cost per request to proceed with a court action is in the neighbourhood of $500 for legal fees and disbursements, and likely substantially more than that in many cases.

Using a real-life example from 2010 from a single mail facility, Hockey Canada would be asked to spend in excess of $750,000 just to action the very first step in the proceedings. This takes away from resources that are earned to reinvest into Canada's youth and from the programming involved with delivering minor hockey across the country. There are substantial costs and inherent difficulties in enforcing IP rights in Canada currently through the civil avenues afforded brand owners such as us. We are dealing with criminals who do not adhere to any laws and don't keep records for anyone to estimate what profits have been made or what revenues they generate.

As a double whammy, many counterfeiters simply view any exposure to civil remedies as a small and insignificant cost of doing business. Monetary penalties or awards are generally small and much less than the actual costs associated with enforcement in any civil action, even assuming that we can collect on those civil actions. Without statutory damage awards or appropriate border seizure capabilities, Canada's civil remedy toolbox will continue to be severely limited, with additional costs required of the brand owner just to prove what our actual damages were or what profit the counterfeiter might have made or has made.

The current supply chain for counterfeit jerseys is dominated by manufacturers based overseas. Counterfeit commerce is conducted primarily and increasingly over the Internet. This channel makes it virtually fool-proof for any individual with a credit card and a mailing address to participate as an importer of counterfeit goods.

Hockey Canada officially released the 2010 Sochi Winter Olympic Games hockey jersey on October 8. Within three weeks we have seen counterfeit jerseys enter the country and be offered from unauthorized sources from overseas factories, with minimum quantities as low as single units and with prices in the $30 neighbourhood. A bona fide retailer would pay in excess of $65 at wholesale, with a retail value of $140 per jersey. These are already being resold here in Canada by unauthorized sources for less than $100 to unsuspecting Canadians and consumers.

We currently have several covert purchases under way to validate the counterfeits, which are clearly identifiable by our brand experts. One major variable to understand is that all bona fide Team Canada jerseys have been produced elsewhere from where they're originating as counterfeits, and all by one source—our single and only official licensee—and not by multiple factories offering the counterfeits over the Internet.

The entire production of our 2014 jerseys was shipped only in container quantities by our exclusive licensee and landed in Canada earlier this summer for distribution to bona fide Canadian retailers. Please note that to date neither our office nor our investigators have been notified of a single interception by authorities of these readily identifiable and individual small-quantity shipments of counterfeit jerseys.

Ease of access via the Internet has exponentially added to counterfeit Team Canada product in the country. Importing or exporting counterfeit product should be treated with strong measures. The current model utilized by the European Union, which aims to strengthen the protection of intellectual property in the EU and reduce the administrative burden on customs authorities, is perhaps an exemplary model. The model allows for the destruction of counterfeit goods without requiring lengthy and burdensome legal proceedings on the merits to establish whether an intellectual property right actually has been infringed upon in circumstances where there is no dispute by the importer when confronted with evidence that the goods being imported are counterfeit.

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 a responsibility to monitor and police our intellectual properties and brands. The tools afforded to brand owners such as us through the Trade-marks Act and the Copyright Act realistically are limited, but with reasonable and future progress being made through this bill.

The proposed changes are a very strong step forward; however, still more can and should be accomplished.

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 valuable financial resources. We have been and continue to be prepared to do this task, but within realistic parameters. Adding significant costs to such not-for-profit entities as Hockey Canada may not be the most effective manner to deal with counterfeit goods at our borders.

Hockey Canada continues to support and participate in actively engaging the efforts of the Canadian Anti-Counterfeiting Network and the Canadian Intellectual Property Council, just to name two. We support the need to strengthen Canadian legislation to empower front line officers to target and seize counterfeit goods. Greater deterrents and resources are also necessary for the officers to process seized goods and effectively deal with them as counterfeit items.

As the honourable members of the committee continue to study how to combat counterfeit goods, you are urged to include appropriate measures for the protection and enforcement of rights associated with the intellectual property of Canadian brand owners, ultimately for all of us as Canadians. We should not and cannot continue to lose sales to these criminals, who very often deal in cash-only transactions, keep no records, and contribute nothing positive, really, to our economy.

With that, I'd like to close and say thank you very much for your attention this afternoon.

[Martin Lavoie, Director, Manufacturing Competitiveness and Innovation Policy, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair.

Thank you for inviting me to discuss Bill C-8, the Combating Counterfeit Products Act.

I represent the Canadian Manufacturers & Exporters. We are Canada's largest trade association. We represent about 10,000 manufacturers and exporters across the country. Our sector represents more than 75% of all R and D expenditure by the Canadian private sector, so you can understand that protecting intellectual rights is central to our industry.

We applaud the government for introducing this important legislation and the committee members for keeping a close eye on the details of this bill. We strongly support the objective of the bill. Canada needs strong legislation to prevent counterfeit goods crossing our borders. However, I would like to raise a number of concerns that we and our members have with the bill in its current form.

One of them is about the responsibility of the right holder—or in other words, the victim of counterfeiting—to pay the fees associated with the detention and destruction of goods. We do not understand the rationale for this.

We believe that the importers should be responsible for these costs, since they are the ones introducing these goods into our country in the first place. They should not be given a free ride. Where is the disincentive in that? Moreover, these costs, which will largely be incurred in court proceedings, are likely to be onerous and difficult to support for smaller companies that are the victims of counterfeiting. I know that you've heard this from other witnesses. We share this concern.

Our second concern is the provision that the detention of goods requires that a court action be undertaken by the IP owner. Court actions are expensive and time-consuming, and they take a long time to get results. We believe that if there is enough evidence to show that the goods in question are counterfeit, they should be destroyed, regardless of whether or not the IP owner undertakes a court action.

You have heard the stories. Not only have you seen many examples of goods that are counterfeit, but you have seen cases where even the Canadian standards association logo is being copied. Do we really need a long court process to destroy those items? I think there are many examples of where we could proceed with the destruction of goods without requiring prior legal action on the part of the victim.

As the witness from the Intellectual Property Institute of Canada said when she appeared here on November 6:

Other countries such as the United Kingdom and Australia, as well as the European Union have already introduced a summary procedure whereby goods that are truly counterfeit, where there's incontrovertible evidence that they are, and the importer of the goods does not respond to an inquiry, will be permanently detained or destroyed.

That should apply to Canada as well.

We believe that when legal proceedings do take place, the onus should be placed on the importer, or whoever is responsible for bringing the goods in question into the country, to provide evidence that the goods are not counterfeit. Has the importer undertaken sufficient due diligence to ensure that the foreign supplier is not producing counterfeit products? What steps have been taken to make sure that counterfeit goods are not harming our economy? In its current form, the bill makes it too easy for the importer to claim ignorance.

Another issue I'd like to raise, which is not necessarily within the scope of this bill but is essential if you want to succeed in combating counterfeiting, is the need for better international coordination. This may be another area in which Canada can do more.

As you know, the “Special 301” priority watch-list of the United States Trade Representative, or USTR, has included Canada for the past several years because of our failure to implement our international obligations or to take effective enforcement action against counterfeit and pirated goods, especially at the border. This priority watch-list is an annual review of the global state of intellectual property rights protection and enforcement.

In 2011, the USTR's report stated:

The United States encourages Canada to provide for deterrent-level sentences to be imposed for IPR violations as well as to strengthen enforcement efforts, including at the border. Canada should provide its Custom officials with ex officio authority to effectively stop the transit of counterfeit and pirated products through its territory.

This bill will fix some of these issues. That's why in 2013 the same report was better. It recognizes the importance of Bill C-8. As a result, the USTR is moving Canada from its priority watch-list to its watch-list. The report says that the United States “urges Canada to expand the legislation to also provide authority for its customs officials to take action against goods-in-transit”. We agree with that. I know this has been raised by some other witnesses who were here before.

Finally, we applaud the Canadian government's leadership in the negotiation of the anti-counterfeiting trade agreement, the ACTA. While most countries have not yet implemented the agreement, it is a step in the right direction. The ACTA signatories are Australia, Canada, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and the United States. The European Union and the 22 EU member states signed the agreement in January 2012, but it has not yet been approved by the European Parliament.

You will notice that none of the countries included in the U.S. watch-list is a signatory of the agreement, so we still believe that a lot of work remains to be done to bring more countries to the table.

Thank you again for your time and for inviting me. I look forward to questions.

[Judy Sgro, Liberal, York West, ON]

Professor Geist, in your opening comments you spoke of health and safety, and of the value of the existing statutes and case law. You also spoke of the danger, of course, of unintended consequences. So with all of this in mind, would you please tell me briefly what you think of Bill C-8? Will it have unintended consequences, specifically for the generics industry?

[Dr. Michael Geist, Canada Research Chair, Internet and E-commerce Law, University of Ottawa, As an Individual]

Thank you, Mr. Chair.

Good afternoon. I am a law professor at the University of Ottawa, where I hold the Canada Research Chair in Internet and E-commerce Law. I have appeared before this committee on a number of occasions and as in past occasions I appear here in a personal capacity representing only my own views.

I appreciate the opportunity to speak to you about Bill C-8. While the panel may disagree on certain elements of the legislation, I am sure that all agree that where harmful counterfeiting occurs—particularly involving health and safety—the law should provide all concerned with the legal tools necessary to address the problem. Indeed, we should not forget that the existing law in Canada is regularly used to conduct anti-counterfeiting raids and seizures, that border officials—as you heard on Monday—work with the RCMP and Health Canada on health and safety issues through their MOUs, and that the courts in Canada have awarded increasingly significant penalties in counterfeiting cases.

That said, context within a discussion on counterfeiting is important. It's easy, and rather scary as we just saw, to point to the obvious health and safety issues and, based on that, conclude that any available legal remedy should be adopted in response. Yet I'd argue that it's important to recognize that the scope of the problem remains subject to considerable debate, but even more, some proposed solutions may have unintended consequences that are themselves harmful and should be avoided. Moreover, given Minister Moore's insistence on Monday that the bill is about protecting intellectual property on an international scale, the international context, including the Anti-Counterfeiting Trade Agreement and the proposed trade agreement between Canada and the EU, merits some discussion as well.

Given that need for context, I'll actually shorten my remarks a bit by focusing on two main issues, first highlighting some of those unintended consequences, particularly those that could arise from some of the proposals for amendment that you just heard, and secondly, briefly discuss the international context of ACTA and CETA.

I should add that I won't be discussing the myriad of trademark reforms in the bill, some of which we just heard about, but I frankly think those are out of place in a counterfeiting bill. If the intent was to introduce an omnibus-style intellectual property bill, it should also deal with other live issues, including access to the blind that was the subject of a new international treaty that Canada actively participated in and was agreed to in June of this year, as well as reform of the Copyright Board of Canada that stakeholders on virtually all sides are increasingly calling for.

Let me focus though, as I suggested, on the potential unintended consequences of Bill C-8. I'll start by noting that the exception for individual travellers, the exclusion of patents and in-transit shipments, and the attempt to avoid application to grey market goods—some of the parallel import issues—I think are positive policy choices designed to ensure that the bill targets bad actors and doesn't allow border seizures to raise consumer costs. That said, there are some real concerns about potential unintended consequences, and I wish to highlight four.

First, as you know, the bill vests enormous power in the hands of customs officials, who are not copyright and trademark experts but will now be forced to assess infringement cases, including determining whether any copyright exceptions apply. The bill opens the door to detention of works if created without the consent of the copyright owner and the infringed copyright. Yet there are many works that are in fact created without consent of the owner, but rely upon exceptions such as fair dealing to do so, and are perfectly lawful. That often results in disputes over whether in fact the works infringe, an issue that is frankly best left to the courts and which even the courts often fight over. With this bill, though, it's now customs officials who are asked to make the determination and send the works to the copyright owner to consider whether they think it infringes copyright.

Some have claimed that the powers in this bill are consistent with international standards, yet the reality is that there are a number of countries—including allies such as Australia and Mexico—that do not have the ex officio powers envisioned by this bill in their laws. Using the courts for oversight is still viewed as a workable, legitimate approach to dealing with counterfeiting. As I mentioned, you heard on Monday how the CBSA works with the RCMP and Health Canada on the safety and security concerns. To vest this kind of power in non-expert customs officials, and to go even further as you've just heard, could lead to unintended consequences.

You have heard only today that some want this legislation to go further, including cost-shifting enforcement to the public, ignoring the costs that are borne by small businesses that import goods and could get caught up in the seizures. In fact, even today others have called for even more expansive powers for customs officials, including destruction or forfeiture of goods without court oversight. In my respectful view, these proposals are enormously problematic and would alter the attempt at balance in the bill by removing both important safeguards, shifting private enforcement costs to the taxpayer, and ultimately raising consumer costs.

Further, detention of goods can be used to harm small Canadian businesses that could find the goods they are seeking to import detained, oftentimes by competitors. The absence of a misuse provision in this bill is particularly notable in this regard.

Second, the bill does include an exception for personal travellers. However, the bill is oddly drafted by speaking of “works” rather than “goods”. Both the Anti-Counterfeiting Trade Agreement and leaked drafts of the Trans-Pacific Partnership focus on physical goods. By focusing on works, it could also cover things like iPod and laptop searches. In fact, if the exception were removed—and there have been some proposals that the exception could be removed—it could lead to escalated searches of iPods, smartphones, and other electronic devices, on personal travellers when they come across Canadian borders.

Third, there are groups, as we just heard, that are arguing for expanded penalties. The bill already moves copyright and trademark into the world of criminal provisions in a manner that extends far beyond what we've had in conventional IP law. Further, some are looking, and we just heard this, for statutory damages for trademark infringement. With respect, statutory damages for trademark are unnecessary. Rights holders frequently cite the value of their goods and the harms associated with counterfeiting. If the claims are accurate, demonstrating the value for the purpose of a damage award should not be difficult. Moreover, other countries that have moved in this area have run into serious problems. For example, Taiwan actually scaled back their statutory damages for trademarks when they found courts awarding disproportionate awards. In the United States, the use of statutory damages for trademarks has led to what is known as trademark trolls, similar to patent trolling. We would engage in litigation primarily designed to obtain costly settlements against small businesses that can often ill afford to fight in court.

Fourth, as you again just heard in some of the debates on what was then Bill C-56, there has been the prospect of removing targeting in-transit shipments. I'd argue that the bill wisely excludes in-transit shipments, and, with respect, a removal of that would be a mistake. The seizure of generic pharmaceuticals in transit would pose a threat to international trade, development, and public welfare. Experience with such seizures in the European Union led, in 2010, to both India and Brazil filing complaints with the World Trade Organization. They highlighted several incidents of consignments of generic medicines that were being transited via the European Union and being detained there.

In fact, Doctors Without Borders reported that in 2008 and 2009 there were at least 19 shipments of generic meds from India headed for other countries that were impounded while in transit in Europe. In one instance, German customs authorities wrongfully seized a drug shipment of amoxicillin, on suspicion that it infringed the brand name Amoxil. The cargo was detained for four weeks during investigation and ultimately revealed there was no trademark infringement. In another instance, Dutch customs authorities seized a shipment of AIDS drugs that were en route from India to a Clinton Foundation project in Nigeria.

In 2011, the Court of Justice of the European Union ruled against in-transit seizures on the grounds that there was no infringement in the EU. A similar approach to exclude in-transit seizures is appropriate here, and any arguments that it should be removed, I believe, should be rejected.

Finally, from an international context perspective, notwithstanding some claims that this legislation is responding primarily to domestic concerns, much of the pressure comes from outside the country. Ms. Sgro asked about the Anti-Counterfeiting Trade Agreement, on Monday. In fact, the United States has not yet ratified ACTA. The only country to have done so is Japan. The vast majority of signatories to ACTA, the entire European Union—all their member states—as well as Switzerland, are out. They have rejected the Anti-Counterfeiting Trade Agreement through their votes at the European Parliament. There are doubts that ACTA will ever take effect, as it may not even receive the requisite number of ratifications to take effect. Frankly, even if it does, it now stands as damaged goods and a far cry from the relevant international standard that some had hoped. It elicited an enormous public backlash, and Canada would do well to move on.

Perhaps even more relevant is CETA, which apparently contains border provisions consistent with Bill C-8. The problem, as many will know, is that the government has not yet released the CETA text, so there is no way of knowing precisely what is required under that treaty and whether there is room for change under this bill. It is perhaps consistent, but without the text we can't know if alterations to the bill might still fall within treaty requirements.

Finally, there is also the possibility, indeed, some say the likelihood, of border measures provisions in the Trans-Pacific Partnership, which is also still under negotiation.

The net effect of these international pressures—and with this I'll conclude—is, I would argue, that Canada would do well to pause for the moment until these international treaties are concluded and our obligations with regard to these kinds of border measure provisions are better understood.

I'll stop there, and I would welcome your questions.

[Cynthia Rowden, Chair, Sub-committee on Bill C-8, Past President, Intellectual Property Institute of Canada]

Good afternoon.

Good afternoon. I am pleased to be here today on behalf of the Intellectual Property Institute of Canada, the IPIC. Thank you for having invited us.

We are honoured to appear here today to give comments on Bill C-8.

IPIC is the association of intellectual property law professionals in Canada. We have over 1,700 members across the country in law firms and agencies and in business, government, and educational institutions. Our members' clients include virtually all Canadian businesses, universities, and other institutions with an interest in intellectual property, and foreign companies that hold IP rights in Canada.

IPIC is very pleased to see proposed amendments to the Copyright Act and Trade-marks Act to both improve counterfeiting and infringement remedies and make other updates to the Trade-marks Act. However, we are concerned that the bill will not greatly simplify procedures for IP owners, and it also includes many new provisions that may take years of judicial interpretation to clearly understand. I'm here today to make some suggestions for changes that we believe will improve the bill.

Since my time is very limited I thought I would list the eight changes that IPIC feels are key to amendments.

First, amend the request for assistance from customs authorities to provide for a more simplified procedure when there is little doubt that the goods being seized are actual counterfeits.

Second, do not exclude goods in transit through Canada from border controls.

Third, change the trademark criminal sanction language to focus on knowingly using another person's mark.

Fourth, add statutory damages for trademark infringement.

The other changes do not deal with counterfeiting, but instead deal with other amendments to the Trade-marks Act, which are very important for those who deal with applications and registrations of marks. Those four changes are as follows.

Fifth, for the new signs that are proposed, clarify how they will be used as well as the meaning of terms that will impact the registration of those new signs as trademarks.

Sixth, add filing grounds to the list of information required to get a trademark filing date. I'll explain that filing dates are very important.

Seventh, delay destruction of trademark registration records and trademark application records in the trademarks office until there are electronic copies.

And eighth, give the trademarks office more discretion to correct its own mistakes.

A key function of the bill is to set up a system whereby IP owners, owners of copyright and registered trademarks, may request assistance from customs authorities by recording their copyright and registered trademarks. It applies only to registered trademark owners. Many counterfeited marks that are found by border control agencies are not already registered. Registration takes a long time. We'd like to see the bill amended to cover trademarks per se.

The bill also provides for detention of goods following an initial notification to the IP owner, but only if the IP owner starts a court action. As anybody who's ever been involved in litigation knows, it's time-consuming and expensive, and it can take a long time to get to a final resolution. Meanwhile, as my friend Mr. Edwards mentioned, the IP owner is paying for goods to remain in detention.

IPIC would like to see a much more summary procedure. Other countries such as the United Kingdom and Australia, as well as the European Union have already introduced a summary procedure whereby goods that are truly counterfeit, where there's incontrovertible evidence that they are, and the importer of the goods does not respond to an inquiry, will be permanently detained or destroyed.

The bill excludes goods that are in transit from another country through Canada to another country. IPIC members see no reason to permit known or likely counterfeit goods that are passing through to be excluded. To do so damages Canada's image and can lead to goods being reintroduced through less-controlled ports of entry.

The bill creates criminal sanctions for trademark infringement. IPIC welcomes these provisions but is concerned that the language of the bill will both discourage the crown from proceeding and deter successful convictions.

If you will permit me, I'd like to refer you to the language in the bill, which states that a person commits an offence—I'll just paraphrase—if that person knows that a trademark is registered for certain goods and that the sale or distribution of the goods in association with the trademark would be contrary to sections 19 or 20 of the Trade-marks Act.

I can pretty well assure you that most criminals don't know or care whether trademarks are already registered, nor do they know what sections 19 and 20 of the Trade-marks Act mean. Instead, we would like to see a company or a person who knowingly uses a trademark improperly to find themselves liable to criminal sanctions.

The Trade-marks Act does not now include provisions permitting a court to order damages based on a statutory range. Any successful plaintiff in a trademark infringement action must either wait for the court to award damages or prove it has lost profits.

Proving lost profits is time-consuming and expensive. The Copyright Act has a provision for statutory damages and provides a predictable range of damages. We feel that system would greatly benefit trademark owners and other applicants to court systems.

The next set of comments do not apply to the counterfeiting or infringement provisions of the bill. They actually apply to what I do in my day-to-day practice—that is, help Canadian and other companies select a trademark, figure out how they're going to use the trademark, determine whether or not they can get a registration for their trademark, and enforce their trademark rights.

Currently the Trade-marks Act permits words, designs, symbols, and some shapes to be registered. For example, McCain is a Canadian company. The McCain trademark is well known. One of their brands is Smiles. The shape of these little smiley potatoes is protected as a “distinguishing guise” trademark. For the record, it took seven years to get that trademark registered.

The bill will add to the possibility of registrations for such new signs as smells, taste, and texture. However, to register trademarks right now, an owner has to use them.

The bill doesn't give any guidelines on how purchasers will use a smell when they decide how to purchase a product. Usually trademarks have to be displayed to consumers at the time they purchase their goods and services.

How is a taste going to be used? Certainly we don't want everybody tasting something before they make a selection on whether or not to buy a product. Yet the bill doesn't provide any examples of what will be “use” for those particular types of trademarks. Those terms are really important.

In addition, the bill prevents registration of trademarks that are not “inherently distinctive” or have “utilitarian function”. Those terms are really important, because they determine whether or not a trademark could be registered.

Registration is really important, because it gives the owner exclusive rights to use that trademark for those particular goods and services across the country. If we don't know what “utilitarian function” means, or what “inherently distinctive” means, we will not be able to advise our clients carefully, and that will be difficult. It will lead to uncertainty. I'm sure it will lead to lots of litigation, which is great for lawyers like me but not so good for my clients.

The bill adds a new section clarifying when an applicant for trademark registration will get a filing date. Dates are really important in the Trade-marks Act. It's a really picky act, and priority between various parties is determined by a variety of different dates. To get a filing date right now, an application has to be filed that sets out certain information, including the grounds on which the applicant is filing: use, proposed use, or use and registration somewhere else.

The bill provides for a filing date to be set by certain defined information. It does not include whether or not the filing grounds have been included in the application.

Someone else looking at that who doesn't see the filing grounds will not be able to determine if that mark will block their mark. That's important to know. When I'm advising my clients, I need to know that as soon as possible. The longer I wait, the less my client knows about whether or not they can select a mark. Delay can often mean changes in business. Having that information as part of the filing grounds is important.

I have two final points.

First, the bill permits the trademarks office to destroy certain documents and files after six years. As a trademark practitioner, I use those documents to advise my clients on whether or not their marks will be registered, what position the trademarks office has taken in the past, and what position other companies may have taken in the past. Having access to that information is very important. There is an electronic option for storing those documents. IPIC would like to see no destruction until electronic options are available.

Finally, the bill permits the registrar to correct certain errors in its registration. Occasionally the trademarks office makes a mistake. They will leave things out of a registration.

As I mentioned, the registration sets the rights of the party and it's therefore important for it to be right. We would like to see more discretion to permit the registrar to correct those mistakes for a longer period of time.

Thank you. I hope that if you have any questions you'll direct them to me later.

[Wayne Edwards, Chair, Canadian Anti-Counterfeiting Network]

Thank you very much, Mr. Sweet.

Thank you, members of the committee, for this opportunity to be here as a witness. I've done this once before. I'm no expert, but I'm not as intimidated as I was the first time. It's good fun.

I represent the Canadian Anti-Counterfeiting Network, and I also made some comments to an association that really pays my salary, and that is EFC, Electro-Federation Canada. We do a lot of work with the CACN and some of the other members around the table.

The Canadian Anti-Counterfeiting Network, CACN, applauds the introduction of Bill C-8 and looks forward to combatting counterfeit products with the help of the act as we go forward.

Our organization represents a coalition of individuals, companies, and associations that have gotten together to fight against product counterfeiting and copyright piracy in Canada and internationally. I'd also add that we do a lot of work through CACN on safety as it relates to counterfeit products that don't make the mark or have not been tested by the Standards Association.

The bill recognizes the need to address the widespread issue of intellectual property theft and it is certainly a good step forward. While CACN supports the legislation, we ask that you consider the following issues raised by our members in consideration of the content of the proposed bill. We would like to make some recommendations in that area. Again, I think you'd be surprised if we didn't have any comments. Some of you may have seen these.

Enforcement at the border is the first concern. Are there enough officers available to actually carry out the activities that are proposed in the bill?

We are concerned that the proposed border provisions will not provide an effective means for stopping counterfeit products at the border. While the provisions provide for ex officio detention and the means to confirm the counterfeit nature of suspected goods to CBSA, no provisions are provided for ex officio seizure or forfeiture of the counterfeit goods. Further, the provisions dealing with requests for assistance by rights holders provide for seizure and forfeiture only through civil court proceedings commenced by the rights holders, and we see some issues with that.

It appears that what is contemplated by the provisions is that, to the extent that a request for assistance has been made and the rights holder does not commence proceedings within a short period of time, the goods will be released to the importer or owner. To the extent that no request for assistance has been made in respect of goods, it appears that, by the workings of the Customs Act, importers will be given the option of exporting or abandoning goods confirmed to be counterfeit.

This raises the spectre that confirmed counterfeit goods are being released, or would be released into the Canadian market for export or for use in the Canadian marketplace. This is a clear breach of the prohibitions and of the criminal provisions.

The problem could be alleviated to some extent by providing a mechanism for ex officio seizure and forfeiture by providing alternate procedures contemplating forfeiture if the counterfeit nature of detained goods is not contested, such as those contemplated in article 11 of the World Customs Organization model provisions. This is to say, there is an awful lot of work that would have to be done by the rights holder if he needed to get involved. If his product is being imported into Canada and happens to be suspect, it seems the rights holder would have to do an inordinate amount of work, and he's the one being injured by this.

Some work would need to be done in that area to alleviate or at least help the rights holders achieve their goal, to stop the importation of counterfeit goods.

Increased enforcement is the next item that we would like to draw your attention to. While the bill empowers Canadian customs officers more than before, we are concerned that resources may be insufficient to allow for effective enforcement at the border.

As it currently stands, only a small percentage of the imports are inspected. Without training, the border officers are on their own to identify what might be an inappropriate product coming into the country.

At CACN, we spend some time training border officers and we work with the RCMP to train them as well. We work with our manufacturing members to try to identify authentic goods, what they should look like and what a suspect product may look like.

We draw particular attention to safety. I have some examples that we can deal with during the question period. Safety is a big concern. We want to make sure that the consumers in Canada receive goods that are not going to harm them or injure their children or burn their homes down. We spend a lot of time in that area.

Liability for charges would be the next item. Under proposed subsection 44.07 (1), the rights holder is responsible for costs associated with the storage, handling, and destruction of detained goods. This is a bit of an imposition placed on the rights holders who are being injured. We would ask, where are the perpetrators? They seem to be getting off scot-free in that kind of an assessment.

Often there are a lot of costs associated with the destruction of product, particularly if they are deemed to be hazardous goods, like mercury-containing lamps, for example. If they happen to be off-spec, or batteries. There's a fair amount of work that has to be done to handle those products effectively and make sure they don't get into the marketplace.

We suggest amending the provisions dealing with costs of detention and destruction to put primary responsibility on the perpetrators of the crime, instead of on the rights holders.

Offences and punishment would be the next item. Proposed subsection 51.01 (1) deals with situations where they know not only that the goods are counterfeit, but also that the acts of sale or distribution they are undertaking would be contrary to section 19 or 20.

One would have to ask whether counterfeiters would care, or even know. They certainly wouldn't go out of their way to find out and would probably use that to their own advantage. If they were questioned, they would say they didn't know it was illegal. That's an area that would need to be looked as well.

I'm sure some others in the group will speak more closely to the Trade-marks Act. That will be discussed at the table here.

A broader spectrum of options would be required. Under the legislation, in order for the rights holders to ensure that goods are detained for more than 10 days (or five days if the goods are perishable), they are required to prove that they’ve commenced a court proceeding to obtain a remedy under the act. We recommend that a broader spectrum of options be available to those rights holders who either cannot file in time or may not have adequate funds to immediately begin litigation. We would need to have a look at that.

Simplified procedures would be welcomed. That leads back to the rights holders commencing action. This needs to be considered. Too much is asked of the rights holders in order to take action on counterfeit goods.

I'd be pleased to answer questions later and give you some examples.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair, and thank you again to our guests.

Minister, might I ask a favour? I'd get rid of the fake Crosby, but if you get an original, I'd appreciate it if you would pass it on to me. You can give the electrical circuit gadget to the member for Brant, because he likes those kinds of things.

We've focused totally on goods that come from outside of Canada. But when we look at this, the short title of the bill is the Combating Counterfeit Products Act.

Could you imagine the circumstance where we would have the potential for counterfeiting in Canada, and if so, how would this bill respond?

[Judy Sgro, Liberal, York West, ON]

I would hope that.

But on that issue, when we talk about counterfeit clothing and other things, a major concern for all of us is the whole issue of counterfeiting drugs, taking a generic and making it look like a non-generic. We have people's health clearly in mind there.

How well is Bill C-8 going to be able to make sure that's not happening and that consumers are protected? We're talking about a health issue.

[Judy Sgro, Liberal, York West, ON]

Is Bill C-8 going to make any changes in the current case law?

[Glenn Thibeault, NDP, Sudbury, ON]

Minister, you brought up some of what we've heard are dangerous counterfeit goods, such as batteries and electrical equipment, and some of my colleagues have talked about pharmaceutical drugs that are making their way into legitimate supply chains and ending up on retailers' shelves.

Can we hear how Bill C-8 will protect Canadian consumers who unknowingly purchase potentially dangerous counterfeit products found in some of the largest retail chains?