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.