Evidence of meeting #56 for Industry, Science and Technology in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was problem.
A recording is available from Parliament.
Conservative
The Chair Conservative James Rajotte
We'll call this meeting to order, members. We are here at the 56th meeting of the Standing Committee on Industry, Science and Technology.
There are a couple of housekeeping items I need to address before turning to the witnesses. The first thing we have to do is to formally elect a vice-chair because our second vice-chair, Monsieur Crête, has moved to the finance committee. So I will technically vacate the seat as chair and ask the clerk to take over for the election of the vice-chair.
The Clerk of the Committee Mr. James
So pursuant to Standing Order 106(2),
you need to elect someone to the position of second vice-chair.
I am prepared to hear motions to that effect.
The Clerk
Mr. Vincent moves that Ms. Brunelle be named vice-chair.
Are there other motions?
Liberal
Dan McTeague Liberal Pickering—Scarborough East, ON
I would ask the chair to close the floor to any more motions so that we may proceed to the vote.
The Clerk
Seeing no other motions, is it the pleasure of the committee to put the question?
The Clerk
Very good. All those in favour of Madame Brunelle being second vice-chair? All those opposed?
(Motion agreed to)
Conservative
Conservative
Dave Van Kesteren Conservative Chatham-Kent—Essex, ON
Mr. Chair, could I just make a comment? I hope the Bloc doesn't find it offensive, but she's much better to look at than the former vice-chair.
Conservative
The Chair Conservative James Rajotte
Thank you for that comment.
I have just two items for the information of members. First of all, with respect to the issue that has been raised on briefing material that is from the researchers to the members, one member, at least, has raised with me the request that it be in a more timely manner. People could certainly raise it with me outside of the committee, but I would just respond by saying all information has to be produced in both official languages, and translation takes about four days.
The second item is that it's up to the members themselves to set the agenda as far in advance as we can so that the researchers can produce that material as far in advance as they can. I wanted to address that, first of all. Secondly, if any members ever want to approach the researchers of the library independently, they can certainly do so.
The second item is with respect to the report on the issue we will be starting on today. I need some indication from members, and they can certainly do so after the session today, as to what kind of document they want, whether it's a report or timelines, when they want to discuss what we hear with the witnesses over the next four sessions on counterfeiting and piracy. If members could indicate that to me or to the clerk, we would appreciate that.
We will go now to the witnesses. Pursuant to Standing Order 108(2), we are beginning our study at the industry committee of counterfeiting and piracy with respect to intellectual property. We have with us here today six witnesses, I believe, and I will just go down the list, and then we will have the members give their presentations.
First of all, from the Department of Industry we have Susan Bincoletto, director general, Marketplace Framework Policy Branch. Secondly, from the Department of Canadian Heritage we have Ms. Danielle Bouvet, director, legislative and international projects, Copyright Policy Branch. From the RCMP we have Mr. Ken Hansen, superintendent director, Federal Enforcement Branch. From Canada Border Services Agency we have Mr. Steve Sloan, director, investigations division, Enforcement Branch. From the Department of Health we have Diana Dowthwaite, director general, Health Products and Food Branch Inspectorate. Finally, from the Department of Foreign Affairs and International Trade we have Mr. Douglas George, director, intellectual property, information and technology trade policy division.
My understanding is there's an agreement that we will start with DFAIT. We will start with Mr. George, with your presentation. We have five minutes each for your presentations.
Mr. George, we'll start with you. Welcome.
Douglas George Director, Intellectual Property, Information and Technology Trade Policy Division, Department of Foreign Affairs and International Trade
Thank you, Mr. Chair.
I am pleased to be with you today and I want to thank you for the opportunity to speak to the committee.
As the chair said, I am the Director of Intellectual Property, Information and Technology Trade Policy Division within the Department of Foreign Affairs and International Trade. I am also the principal negotiator regarding intellectual property issues and trade agreements.
I am also appearing here today as chair of the interdepartmental working group on intellectual property issues. The working group is comprised of 10 departments and agencies, all of which have an interest or responsibility for intellectual property rights. This helps to explain the number of officials you have before you today.
I intend to provide you with an overview of the issue, outline international efforts to combat counterfeiting and piracy and explain the purpose of the working group. My colleagues, Ms. Bincoletto from Industry Canada and Ms. Bouvet from Heritage Canada, will describe Canada's current intellectual property legal framework. Then, Mr. Hansen from the RCMP, Mr. Sloan from the Canada Border Services Agency and Ms. Dowthwaite from Health Canada will describe their authorities and efforts with regard to the enforcement of intellectual property rights in Canada.
First and foremost, counterfeiting and piracy is a growing global problem. The Government of Canada takes the issue seriously and is working toward addressing the problem. Although the issue has been presented by opponents of stronger IP enforcement as a “victimless crime” and one that is only a problem for rich countries, this truly is not the case. The problem poses negative consequences for economies, industries, governments, societies, and consumers. My colleagues will address these issues in further detail during their presentation today.
Counterfeiting and piracy has gained the attention of the international community, as witnessed by the prominence of the issue on the agendas of the North American Security and Prosperity Partnership, SPP; the G-8; the OECD; APEC; the WCO, World Customs Organization; the WTO, World Trade Organization; and the WIPO, World Intellectual Property Organization.
For instance, the SPP enables closer cooperation between Canada, the U.S., and Mexico on IPR protection and awareness initiatives; the G-8 is providing leadership and guidance by making IP innovation and protection a priority; the OECD is undertaking a process to measure the economic impact of counterfeiting and piracy; APEC has a system to encourage experts from member countries to discuss and share best practices on a range of IP issues, including counterfeiting and piracy; the World Customs Organization is discussing instruments for border authorities to improve their efforts to address counterfeiting and piracy violations, including model legislation; the WTO provides a forum for members to discuss a wide range of issues related to IP, including enforcement; and finally, WIPO is the forum for all countries to address key issues related to the international legal framework, including being the main focus for technical assistance to developing countries.
Let me return to the efforts of the OECD. This point deserves further emphasis. There is a challenge in measuring the impact of counterfeiting and piracy as a great deal of it goes undetected. Enforcement data only summarizes those instances where goods and efforts are intercepted. That is why you will see a range of estimates from different parties attempting to quantify the total impact, and this may cause confusion.
This is only the multilateral side of our international work. Bilateral interests and activities are equally focused on IP issues. The U.S. has allocated significant resources to this issue for the bilateral diplomacy efforts with specific countries, Canada included.
Canada appeared in the U.S. Trade representative's 2006 Special 301 Report, which is driven by U.S. industry and is typically used by the United States representative to apply pressure on trading partners. Canada has been on the lowest level of lists for the last 11 years, along with the European Union, Italy and Mexico.
Both domestic and international factors have led the Government of Canada to undertake a review of our domestic IP enforcement regime. That's where the interdepartmental working group comes in. Ten key agencies and departments are examining the issues to identify and analyze potential solutions. The group is currently studying options to improve our regime, with the intent to prepare recommendations for consideration. Significant progress has been made, but the work is not yet complete.
In order to be effective as government officials, we work closely together and call on stakeholders such as the Canadian Chamber of Commerce and the Canadian Anti-Counterfeiting Network, among others, for input and advice through surveys, round tables, and seminars. This partnership is essential to better understand our respective interests and concerns.
Canada believes that cooperation between countries, including industry, not just governments, is essential as the problem is global.
On that note, I will hand it over to my colleagues from Industry Canada and Canadian Heritage.
Susan Bincoletto Director General, Marketplace Framework Policy Branch, Department of Industry
Thank you very much, Doug.
Good afternoon, and thank you for inviting us to speak today on counterfeiting and piracy.
My name, as was mentioned, is Susan Bincoletto. I'm the director general at Industry Canada dealing with marketplace framework policies.
You had the pleasure of meeting one of my staff members, Doug Clark, in the review this committee conducted a couple of weeks ago. You might actually have the pleasure of meeting me and Doug again on the Olympics bill that is before Parliament as well.
We have been very busy on intellectual property, and counterfeiting and piracy is clearly one of our main focuses in the branch.
My colleagues and I are here today because we're each responsible for an aspect of the file. Industry is responsible for IP laws, and we share this task with the Department of Canadian Heritage as far as copyright policy is concerned. My colleague, Danielle Bouvet, is here, and she is more than happy to answer any of the questions that you may wish to direct to her department. I will be happy to answer your questions as to Industry Canada's role.
The federal working group represented here is actively engaged, with a view to providing advice to ministers on how to better address the global problem of counterfeiting and piracy. But there are no easy solutions to a problem that is global in nature, not easily quantifiable, and inherently underground.
I will focus my remarks on two points: measurement challenges and the role of intellectual property laws in curtailing counterfeiting and piracy. My colleagues from law enforcement agencies can provide greater insight into the reality on the ground. I will focus on global figures.
On measurement—and my colleague, Doug George, already alluded to it—first, the basic principles. Why is counterfeiting and piracy a problem? IP laws are in place to promote creativity, research, innovation, and growth. To the extent that counterfeiting and piracy undermine IP protection, these activities can have serious negative effects on innovators, creators, and the economy as a whole, through lower tax revenues and increased cost for anti-counterfeiting activities.
Consumers as well can be worse off if they unknowingly purchase counterfeit or pirated goods. Worse yet, in some cases, their safety may be at risk. In addition to economic and social costs, there may be a link to criminal activity. My RCMP colleague will expand, I'm sure, on that point. More recently, the Internet has also become an attractive distribution channel, more difficult to monitor and enforce.
The second question is, how big is the problem? Current knowledge is wanting. The OECD has been tasked to examine this issue, to inform governments of its magnitude and to facilitate the development of coherent policies to effectively combat counterfeiting and piracy. They have yet to finalize their report and have already indicated that there are significant gaps in information. Nevertheless, their most recent preliminary finding suggests that counterfeiting in pirated items traded internationally accounts for about $176 billion U.S. or 2% of world trade in goods. The OECD itself acknowledges that this figure is not final, as it does not take into account exclusively domestic trade in counterfeit and pirated goods, or digital piracy, among other things.
The most widely cited international statistics date back to 1997, from a report originating with the International Chamber of Commerce. The report concluded that counterfeiting and piracy represented between 5% and 7% of world trade. This would be between $350 billion and $600 billion based on today's global trade. But caution must be exercised when using these figures as the report did not rely on hard data.
The OECD refers to the fact that close to 60% of seizures originated from only five countries: China, Thailand, Hong Kong, Korea and Malaysia. The products intercepted differ quite significantly between countries but most of them include clothing and apparel, electrical equipment, leather articles, toys, clocks and watches.
In Canada—this is for the international estimates—industry estimates situate the cost at $20 billion to $30 billion. There seems to be little supporting methodology to arrive at this figure, and if these estimates are accurate, Canada would be responsible for between 6% and almost 18% of global counterfeiting, despite accounting for only 2.5% of world GDP.
More work is clearly required to get a better handle on the size and nature of the problem. This is central for policy-makers such as ourselves to make evidence-based recommendations on how to tackle the problem. Why? Because combating counterfeiting costs money, for IP rights-holders and for governments.
Let me turn to my second point, which is the IP regime. Intellectual property rights are, by definition, private rights, which, when transgressed, are the responsibility of the individual rights-holder to enforce through the commencement of civil proceedings. In contrast, criminal law is public law, in that it is concerned with acts thought to constitute an offence against society as a whole or to a government's authority and legitimacy.
The decision to criminalize behaviour, which has traditionally been addressed civilly, should not be taken lightly. Thus, it is all the more important to have a true and accurate picture of the degree to which counterfeiting and piracy pose a societal harm before introducing further criminal sanctions in this respect. This is one of the clear challenges facing the federal working group and is a focal point of our efforts.
In a civil context, businesses and persons already have considerable means at their disposal to enforce their intellectual property rights. Both the Trademarks Act, for which my department is responsible, and the Copyright Act, for which responsibility is shared with the Department of Canadian Heritage, allow rights holders to bring an action for infringement, and to obtain remedies by way of damages, and accounting of profits, interlocutory or final injunctions and the return of goods in the even a court finds in the rights holder's favour. Similarly, both acts empower rights holders to commence civil proceedings seeking a court order directing the CBSA to detain suspected counterfeit or pirated goods at the border.
That's on the civil side.
On the criminal side, Parliament has already deemed some activities involving counterfeit and pirated goods to be sufficiently harmful at the societal level to warrant criminal sanction.
Thus, there are long-standing provisions in the Criminal Code prohibiting persons from forging trademarks and possessing equipment for the purpose of forging trademarks. There are also criminal prohibitions in the Copyright Act for various activities involving pirated goods, such as selling, renting, offering for sale or rent, exhibiting or distributing for the purpose of trade, or importing for the purpose of sale or rent. The list goes on.
The industry has raised some concerns about the effectiveness of these provisions, and the working group is taking their claims very seriously. For example, in spite of criminal copyright offences being punishable by fines of $1 million or imprisonment not exceeding five years, or both, private industry contends in their recent CACN report, which was issued in March, that sentencing is usually a fraction of this.
Presumably, the introduction of new or stronger criminal offences may not change that per se. A better system would also require that IP cases be given priority and the courts take them more seriously.
For us in the working group, this requires an examination of the interface between police, the involvement of prosecutors and judges, and an assessment of the amount of resources required for effective enforcement.
It stands to reason that this approach would either cost a lot more or displace current efforts in other areas. That is a choice to make.
Other jurisdictions have put in place different regimes for dealing with counterfeiting and piracy at the border. Some, such as the United Kingdom, rely more heavily on rights holders involvement; others, such as the United States, shift the responsibility and costs of enforcement to governments. Identifying the advantages and drawbacks of these various approaches, and their relative fit with Canadian legal, administrative and procedural structures, is a big part of the analytical work being done by the federal working group. As always, cost considerations are central to this undertaking.
To conclude, new rights alone cannot be the solution. A multipronged approach, with consideration of resource requirements, consumer awareness, and international industry cooperation, is also required. In this regard, this group is focusing on all these elements. We appreciate the efforts and contribution of the Canadian private sector in helping us better understand the reality and their concern.
Merci beaucoup.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Ms. Bincoletto.
We'll go directly to Mr. Hansen.
Ken Hansen Superintendent, Director, Federal Enforcement Branch, Royal Canadian Mounted Police
Mr. Chair, committee members, thank you for inviting me here today. After a brief statement, I would be happy to answer any questions you may have.
Ten years ago, IPR crime was generally not considered a major criminal problem in Canada. Counterfeit goods usually consisted of luxury items such as fake Rolex watches or brand-name clothing. They were generally sold at flea markets, and most consumers knew what they were buying.
Although many members of the public, and even some police officers, still have this perception, it's no longer accurate. The situation has changed dramatically over the last few years. Counterfeit goods seized in Canada now include almost any product you can think of—and I brought some examples here today—such as auto parts, electrical products, pharmaceuticals, food products, cosmetics, and so on.
In some cases, these goods have infiltrated the supply chains. The major retailers often aren't aware and, as a result, unknowingly sell these counterfeit goods to unsuspecting consumers.
In many cases, these products pose serious health and safety risks, and may even have contributed to deaths in Canada. Of particular concern are the cases involving counterfeit pharmaceuticals, though thankfully these cases are relatively rare in Canada. Many people unknowingly purchase these products via the Internet.
At the moment the RCMP is involved in several ongoing long-term investigations involving Internet pharmacies. These cases are very difficult for the police because the companies may appear to have a Canadian address but in fact the server is actually in another country.
Counterfeit batteries are another concern. We've seen them leak and even explode. Although it is not known if all cases of leaking or exploding batteries involve counterfeits, the RCMP is aware that numerous such cases have been reported to Health Canada, and many involve children's toys, including eight cases where children were burned.
I have personal experience with this risk, as a package of counterfeit batteries, which I gave to my supervisor, recently exploded spontaneously in his desk drawer.
In Quebec, investigators seized over two and a half tonnes of counterfeit batteries in 2005 alone. They pose a serious disposal and storage problem. I did not bring any batteries here today, but I brought a package to show you that it's very difficult to determine if the packages are counterfeit. Why would anyone knowingly create such dangerous products? There are really two answers: high profits and low risk.
Strategic intelligence reports indicate that profit margins are very high. For example, a kilo of cocaine is worth about $40,000 on the street, while a kilo of counterfeit pharmaceuticals in pill form can be sold for over $100,000. The risk of being caught and then incarcerated is very low.
In Canada, virtually all major organized crime and, at least in one confirmed case, terrorist groups are heavily involved in the manufacture, importation, and distribution of counterfeit products. While we expect the private sector to handle minor retail issues, serve cease and desist orders, and take civil action cases where their copyright is violated, we cannot expect them to handle organized crime.
While it is not possible to give exact figures—as my colleague, Ms. Bincoletto, mentioned—from our experiences with this crime, I'm comfortable stating that the impact is in the billions of dollars, and it is growing. Canada is not alone in this phenomenon. For the last five years I've been co-chairing an Interpol subgroup on this issue. As my colleague, Mr. George, stated, this is a global problem, usually involving international criminal networks.
Partially for these reasons, the RCMP has designated economic integrity, which specifically includes IPR crime, to be one of its five strategic priorities. We are making some progress. The RCMP conducts about 400 criminal investigations into IPR crime annually, and the number of charges has increased from an average in past years of about 400 to over 700 in 2005.
As I mentioned, the RCMP co-chairs the Interpol Intellectual Property Crime Action Group, based out of Interpol in Lyon, France. This consists of representatives from law enforcement and the private sector around the world. It is working on implementing initiatives such as an international IPR databank to improve enforcement coordination.
There is also recognition among law enforcement agencies that we have to work more closely together to successfully target the major organized crime networks, which are often connected internationally.
Recently the RCMP teamed up with the Canadian Anti-Counterfeiting Network in a public awareness campaign, creating posters with tips for identifying counterfeit product, as well as making radio public service announcements.
The RCMP also works with many government departments, such as the Canada Border Services Agency and Health Canada, to investigate these crimes. Municipal police forces are recognizing the importance of such investigations, and they have made some major seizures and also laid numerous charges.
That said, we still have a long way to go and many challenges to overcome. Presently we have no authority to seize criminal proceeds under the Copyright Act. There are no criminal provisions in the Trade-marks Act, which means we have to prove that a fraud occurred and lay charges under the Criminal Code. Under the Criminal Code, the maximum penalty is two years. As my colleagues said, that is extremely rare.
Criminals will often import hang-tags and labels separately from the product, and there is no legislation to counter this technique. The current criminal penalties imposed by the courts pose little deterrent, and it is not unusual to charge the same group multiple times for IPR crimes, as they see fines or seizure of product as simply the cost of doing business.
While CBSA is willing to help, and their assistance is appreciated, we recognize that they do not have the necessary authority at the ports of entry to stop such goods. Neither does the RCMP, which is responsible for the Customs Act between the ports of entry, as counterfeit goods are not illegal under the Customs Act.
There is also a major issue with resources. Other than small joint RCMP-CBSA project teams in Montreal and Toronto, there are no dedicated investigational teams for IPR crime. To reduce the impact on our resources, we have developed guidelines with the Department of Justice that our priority will be at the manufacturing, importation, and wholesale level. Generally, we expect the private sector to handle retail, unless health and safety issues are involved or we need to target upwards.
In Vancouver alone, the number of counterfeit containers referred by CBSA to the RCMP for investigation went from about 50 or 60 annually in 2002-03 to over 300 in 2005, and this is under the current regime, under which CBSA is not specifically searching for such goods but simply comes across them during the course of their duties.
Similar statistics are found in other major centres. For example, due to a lack of resources, the RCMP in Toronto can conduct criminal investigations on only about 25% of the cases referred to them. Given that most of these investigations should be conducted as projects to try to take down the group involved, which most likely has an international component, investigational resources are simply overwhelmed. In most cases a criminal investigation is not conducted and the goods are simply relinquished by the importer, who again sees this as the cost of doing business.
On a positive note, public awareness is increasing, and the federal government's interdepartmental IPR working group, led by DFAIT, has brought together all government stakeholders to determine the gaps in the legislation and resources and to recommend ways of filling those gaps.
On that note, I would like to thank the committee for this opportunity to speak with you about IPR crime. I feel that reaching out to build a better understanding of these issues is important and will be very constructive.
Thank you.
Conservative
Steve Sloan Director, Investigations Division, Enforcement Branch, Canada Border Services Agency
Thank you.
I'm Steve Sloan, the director of investigations for CBSA.
I want to thank you for the opportunity to present the manner in which Canada Border Services currently helps to combat the proliferation of counterfeit and pirated goods.
The first is via a civil remedy. Both the Copyright Act and the Trade-marks Act permit rights-holders to obtain a court order directing CBSA to detect and detain shipments of goods that are suspected of violating their intellectual property rights. However, it should be noted that as rights-holders have difficulty obtaining the necessary information for a court order prior to the arrival of a shipment, the court order process in Canada is seldom used. It is used less than once a year; I think the exact figure is five times in the last eight years.
Additionally, CBSA may detain IPR-infringing goods pursuant to the criminal process. The Copyright Act provides for criminal sanctions, as does the Criminal Code. When the RCMP shares intelligence regarding importations that would be evidence of a criminal offence, the CBSA will assist a system lookout for the goods. When the shipment is intercepted, CBSA will seize the goods as evidence and transfer the goods to the RCMP, which will proceed with the prosecution. CBSA may also seize and prosecute if the goods are smuggled or are otherwise in contravention of the Customs Act.
Finally, if the CBSA, in the course of examining a shipment for the purpose of administering the Customs Act, consequentially finds goods that may be infringing intellectual property rights, it will ask the RCMP if the shipment meets prosecution criteria that Ken just described, and if so, the goods will be seized as evidence. It is not practical, however, for the RCMP to pursue criminal charges for every suspected violation involving IPR-infringing goods. When the shipment is not significant enough to warrant criminal action, the importer is advised of the suspect authenticity of the goods and in these instances will often choose to abandon the shipment.
This brings us to one of our challenges as an agency. The Customs Act permits the CBSA to detain goods that are prohibited, controlled, or regulated by any act of Parliament until satisfied that they are dealt with in accordance with the applicable act. Currently, however, there is no legislation that specifically identifies counterfeit goods themselves as prohibited, controlled, or regulated. Under the Copyright Act the goods themselves are not prohibited; rather, the offence is against a person who knowingly makes, sells, or imports for sale counterfeit goods. The Trade-marks Act is also silent. There is no ancillary legislation defining counterfeit goods as prohibited. They cannot be targeted or detained by the CBSA under authority of the Customs Act.
Over the years, CBSA has collected some statistics on shipments that border services officers have suspected to be counterfeit. The shipments were examined for unrelated purposes, and the data are therefore not inclusive of all offices.
Nevertheless, over 1,000 shipments of suspected counterfeit goods were observed in the course of a year. The goods consisted mainly of designer clothing, but the CBSA has also come across a wide range of other goods, including DVDs, CDs, MP3 players, software, memory cards, ink cartridges, cellphones, satellite cards, transit tokens, jewellery, watches, perfume, sunglasses, pharmaceuticals, batteries, tobacco, electrical fireplaces, Olympic labels, and military hats. Just recently, CBSA officers in Vancouver and Montreal uncovered a $2 million shipment of suspected counterfeit designer goods smuggled in a marine container.
As you have heard, CBSA is working with interdepartmental partners to explore options that will address the growing concerns over the risks of unsafe counterfeit products, loss of revenue, and involvement of organized crime.
Thank you very much. I look forward to answering any questions you may have.
Conservative
Diana Dowthwaite Director General, Health Products and Food Branch Inspectorate, Department of Health
Good afternoon, Mr. Chairman and committee members. My name is Diana Dowthwaite. I am director general of the inspectorate with the health products and food branch of Health Canada.
One of the ways in which Health Canada fulfills its mandate is by playing the role of regulator. This is a stewardship role that involves both protecting Canadians and facilitating the provision of products vital to the health and well-being of citizens. The department regulates and approves the use of thousands of such products, including pesticides, consumer goods, and toxic substances. We deliver a range of programs and services in environmental health and protection and have responsibilities in the areas of substance abuse, tobacco policy, workplace health and safety, and safe use of consumer products. Each of these areas is regulated by a regulatory framework or by a combination of regulatory frameworks, all designed to protect the health and safety of Canadians by facilitating access to quality products.
However, I'm here to speak to the connection of IPR and one specific set of products only, namely, health products, which fall under the mandate of the Health Products and Food Branch. I am going to start by providing a brief overview of the role and the mandate of the inspectorate, the group that I work in.
The inspectorate's role is to deliver a national compliance and enforcement program under the Food and Drugs Act for all products under the Health Products and Food Branch mandate, with the exception of products regulated as foods. This includes pharmaceuticals, veterinary drugs, biologics, natural health products, and medical devices. We deliver these services across the country, with inspectors in B.C., Manitoba, Ontario, Quebec, and the Atlantic provinces.
We have four core functions that help us verify that health products on the Canadian market are legally authorized for sale and are safe.
First is our proactive role in compliance promotion. Our various inspection programs require companies intending to conduct activities such as manufacturing, importation, packaging, labelling, wholesaling, testing, and distribution of drugs in Canada to pass an inspection before they are licensed to operate. Companies are inspected on a regular cycle that can vary from two to four years, depending on their activities, and these inspections are linked to licensing requirements.
Second is the reactive role we play with compliance verification and investigation. We actively look at mitigating risks, based on information from sources such as complaints from consumers, industry, or other regulatory authorities. It is in this area that the majority of our work takes place with counterfeit health products.
Third is our laboratory capacity. Our two ISO-certified labs in Ontario and Quebec provide lab analysis, which is a necessary part of compliance investigations and is especially relevant in counterfeit investigations.
Last is our fourth core activity, which is our establishment licensing program. In this program we issue a drug or a medical device establishment licence for the licensing activities I've just mentioned.
To help in carrying out our mandate and to help reduce the potential for counterfeit health products to enter the supply chain, we work with other enforcement and regulatory organizations, such as the CBSA, the RCMP, and the provincial colleges of pharmacy. We also work with our international partners through MOUs and treaties and other international forums to increase our capacity for detection and identification of counterfeit health products.
Counterfeit products pose a health and safety risk because they may contain an incorrect dose, the wrong ingredients, dangerous additives, or no active ingredients at all, which could result in potentially serious health risks to patients. These products are an emerging trend in the supply chain of developing countries--and yes, even in Canada.
In the summer of 2005, the RCMP laid charges against two separate pharmacies for selling counterfeit pharmaceuticals at the retail pharmacy level. In both of these cases, as counterfeiting is a criminal activity, the inspector worked with the RCMP and the relevant college of pharmacy to provide investigative and laboratory expertise and advice pertaining to the Food and Drugs Act.
Incidences regarding counterfeit health products are very complex, often involving numerous domestic and international regulatory agencies and policing bodies. In Canada, the sale of counterfeit health products is a violation of the Food and Drugs Act and regulations, as these products fall within the scope of unapproved products. The sale of these products may also violate other acts, such as the Copyright Act and the Criminal Code, and as such can be referred to other regulatory authorities.
It is clearly impossible for any one entity to combat counterfeiting alone; a multi-partner, multinational approach is essential.
The inspectorate is currently developing an anti-counterfeiting strategy to help reduce the opportunities for counterfeit health products to enter the Canadian supply chain, to increase our capacity for detection and identification, to increase our awareness of the associated risks, and to reduce the incentives that facilitate the counterfeiting of health products.
We have many challenges ahead of us. For example, our current regulatory oversight mechanisms are outdated. The act is over 50 years old, and there are no prohibitions in the Food and Drugs Act or regulations that pertain to counterfeiting directly. As well, within the act the penalties are related more to health risk and are less oriented toward punishment, so they may not provide a sufficient disincentive to fraudulent activities such as counterfeiting. Prosecutions, as we're all aware, are very resource-intensive, and we are not well equipped at this point to identify fraud; it is in this area that the RCMP helps us with their expertise. We are working to modernize our regulatory framework to more effectively address these types of violations.
We are currently not experienced or equipped in investigating intent. Our traditional approach is focused on mitigating risks to health, so that it is a regulated party's responsibility to take appropriate action to comply with legislative and regulatory requirements. Within this new paradigm of counterfeiting, those responsible not only have deceitful intentions but also complete disregard for the regulatory system.
We are now operating within an environment of rapidly changing, expanding global trade. We see complex drug supply chains, increased sales via the Internet of cheaper and possibly counterfeited health products, and a higher volume of imported health products. Their deceptive characteristics make it difficult to assess the validity of these products.
The established regulatory oversight mechanisms alone are insufficient to appropriately address the threats posed by such products. Protecting the health and safety of Canadians is a responsibility shared between federal and provincial and territorial authorities, health care professionals, industry, and consumers. Our anti-counterfeiting strategy will work to mitigate the health and safety risks posed to Canadians by these products. It will focus on new legislative authorities, an education plan for consumers, and, most importantly, building stronger partnerships with regulatory authorities and with industry.
Thank you.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Ms. Dowthwaite.
We'll go immediately to questions. We'll start with Mr. Brison, for six minutes.
Liberal
Scott Brison Liberal Kings—Hants, NS
Thank you, Mr. Chair.
Thanks to all of you for being here today.
I want to focus on one specific area, and that is film piracy--specifically, camcorder piracy. Recent statistics indicate that more than 90% of pirated films seized throughout the world are coming from camcording; 190 of these films have been camcorded in Canada since 2003. Copies of these films have been downloaded from over 130 different Internet release groups and found on pirated discs in over 45 countries. Camcordings sourced to Canadian theatres actually accounted for about 20% of the worldwide total of copies identified under theatrical camcording.
This has become a huge issue, and our understanding is that both the RCMP and the police are limited in terms of actions they can take to address this issue. Local police refuse to respond on the basis that the copyright is a federal enforcement mandate. There's no specific prohibition in the Criminal Code against camcording; that has been cited by local police as justification for refusal to take action. Similarly, the RCMP sometimes do not respond to, or fail to respond to, camcording incidents, and they point to the current provisions of the Copyright Act as requiring proof that the copy of the film being camcorded is actually being made for commercial purposes.
I have some suggested verbiage, Mr. Chair, for amendments to the Criminal Code that would make camcording in a theatre an offence in Canada's Criminal Code. Would you, as witnesses with some understanding of this issue and the broader issue of copyright law, believe it could be an appropriate measure to actually change the Criminal Code? To cut off this practice, which seems to be an underground growth industry in Canada, would you support changing the Criminal Code and amending it to make camcording in a theatre an offence under the Criminal Code?
