Evidence of meeting #57 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 product.
A recording is available from Parliament.
Vice-President, Sales and Business Development, Polyform Foam Plastics Inc.
Let me respond to Mr. Arthur. Yes, I think that the owners of such businesses should be harshly prosecuted. There would be a heavy fine for the first offence, a heavier for the second offence, and if there is a third offence, the business would be shut down. Under these conditions, business owners would be mindful of their sources of supply.
This is a big problem. What applies to me does not apply to them, but if we could solve the problem on their side, it would be a step forward. We would solve half of the problem, which is better than doing nothing at all. We have to start somewhere.
Conservative
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
Mr. Beauchesne, what percentage of your business is affected by counterfeit? Do you have any idea?
Vice-President, Sales and Business Development, Polyform Foam Plastics Inc.
At least 20% of the business is affected. We're going after companies on a weekly basis.
Being in plastics, there are no mom-and-pop shops in Canada that are going to do something like this because it's not possible. So we have that chance. Our problem is on a much larger scale. We're talking about nations that are counterfeiting. They are not strict with their intellectual property. The whole sports equipment area is affected, including the hockey stuff, helmets. We do thousands of construction helmets. If somebody falls and the helmet is not good enough.... There could be some very, very bad consequences if products are not legal.
We are fighting. We do okay, but we're getting exhausted. We're tired. We need some regulations that will help on our side of the deal, to develop and be cost-effective for the business and the product.
Conservative
Colin Carrie Conservative Oshawa, ON
With all the testimony, I'm starting to see how difficult a problem it is.
I was at a trade show with electricians and plumbers and they were saying they can't even tell the difference. They're concerned because of the insurance and the liability. If they ever installed some of it, they would feel horrible. As Monsieur Arthur said, we've really got to slap the guy at the end. But sometimes customers get the product and it looks like the official one.
I am wondering if you're aware of any international efforts. I know a lot of these products have this ISP code and that it can be photocopied, but I've heard about a little chip that could be coming or something along those lines. Have you gentlemen, or Madame Parr, heard about international ways of tracking these things? I know we have these codes on our products that get scanned at the retail point. Are there international efforts being made so that each factory in the world that is importing to Canada has to have a unique chip or code that we could identify? Are you aware of any international things?
Director, Corporate Audits and Investigations and Chair of the Canadian Anti-Counterfeiting Network, CSA International
I'm certainly aware there's a number of techniques they use. I think what you're referring to are the RFID chips they're putting into products so they can do the traceability from the factory through the distribution network. That's certainly one of the applications.
There are two types of labels. We have overt, which is easy to see. That might be a hologram, but that too can be copied. It's a cat-and-mouse game. There are also covert techniques that can be used. In the testing area, I think industry, and I know our association, the UL, are also trying to take actions to determine anything legitimate. There's a whole bunch of techniques that are being used, and there's a business that has actually come out of this.
So there are different techniques being used by manufacturers and testing organizations and traceability systems.
President, Caccia Fashion, Groupe Imperial
I'd like to tie in to something that you and Mr. Arthur are saying.
I tell people I see with counterfeit, if you want to be sure, buy it from the legal distributor. Most of the counterfeiting we encounter is through secondary and third distributors--stuff that is brought in. In our industry, the retailer has no excuse. If they want to know it's real, they buy from the real guy. When this stuff is bought and there are five or six distributors, nobody knows where it came from. If they go to the original guy, they're not going to have a problem.
Conservative
Colin Carrie Conservative Oshawa, ON
Are your associations working on educating the public about these things? I heard a stat that about 39% of Canadians have bought a counterfeit product, either knowingly or unknowingly, whereas only 13% of Americans have done so. Is there something that we or you could be doing as associations to help educate the end consumer? Or are you doing things right now?
Director, Corporate Audits and Investigations and Chair of the Canadian Anti-Counterfeiting Network, CSA International
At CSA, we always have the education about that out to consumers, manufacturers, industry, and retailers. CACN also has a group that does education. There's always more you can do.
We have a poster campaign to educate people, and we're getting cooperation from transit authorities and different organizations to put that out. It's really a matter of changing people's perspective that this is a serious problem. It's not a victimless crime, it's not just a commercial issue, and it can be a safety issue. That's all part of it.
Conservative
The Chair Conservative James Rajotte
Thank you, Mr. Carrie.
For the last member, we go to Monsieur Vincent.
Bloc
Robert Vincent Bloc Shefford, QC
Thank you, Mr. Chairman.
First, in answer to the question from the Conservatives, who asked why the government should invest money to protect intellectual property, I have a very simple answer. Counterfeiting costs the industry between $20 and $30 billion a year. I think that government has responsibilities in this regard and that it is able to provide funds to protect us and to protect our industries.
Moreover, Mr. MacInnis, do you think that by going to the source, and by that, I mean the point of entry into Canada of the counterfeit goods, we could display a patent along with the stamp as the product comes into Canada? In this way, we could tell whether the object is patented, where it is coming from and whether it is counterfeit. If there is no patent accompanying the product, we can be sure that it is counterfeit. Then, we can simply block it at customs or send it back to where it came from.
When a product enters Canada, the patent could be directly attached to the container, be it in an airport or anywhere else. I understood what Mr. Geralde said earlier, about the possibility of forged documents. In anticipation of such cases, we could assign someone who would verify the documents. This person could verify whether the product was ordered by some specific industry or whether it was made outside Canada, and so forth. Then, we could trace its source and determine whether it was manufactured according to the rules.
Manager, Criminal Law Enforcement, Underwriters Laboratories Inc.
It would be really hard to do something like that. There are so many different types of products and industries that have different products coming in.
I don't know what the current statistics are even for legitimate products being examined at the border, but I think about 1% to 2% of containers and shipments imported into Canada are actually examined.
So to put that other burden of trying to contact rights holders or other people on the CBSA or another agency, I don't know that they'd ever have the resources or the time.
The thing with counterfeiters is that no matter what type of security features are added on to a product—on packaging or anything—the counterfeiters catch up.
Bloc
Robert Vincent Bloc Shefford, QC
However, the simplest thing is to find out whether proof of authenticity, or a patent, is displayed when the product comes into Canada. If there are 10 containers, the customs official will have to know, for instance, that these containers are suppose to contain electrical products which are accompanied with a patent as evidence. We can find out who ordered the products. If it is a Canadian company and if the shipment is labelled with its patent, we can presume that the products are authentic and respectful of the patent.
Would it be possible to proceed in this way? Regarding resources, the fact that we are losing $20 or $30 billion per year should encourage us to invest in an effort to mitigate these losses.
Manager, Criminal Law Enforcement, Underwriters Laboratories Inc.
A lot of companies already do that. Depending on the type of product, they have certificates with the product. With software and things like that, they have to have certificates of authenticity, or COA, labels affixed. A lot of companies are doing this, so when they do come across, if it's handed over to the police, they contact the companies to verify that.
Once again, you're dealing with counterfeiters who are very sophisticated. If a legitimate manufacturer puts a power cord together and it costs them $5, the counterfeiter may only spend 50 cents. So they can spend a little more money falsifying or forging documents or certificates, and so on.
Once again, it's always about catch-up with the counterfeiters. The companies are always trying to change their technologies with certificates of authenticity and things like that. The counterfeiters are always doing the same thing.
Bloc
Robert Vincent Bloc Shefford, QC
I specifically mean the patent. We could use all kinds of stickers, but if the patent of the electrical equipment says that it should contain certain components, the components should actually be in the product.
Manager, Criminal Law Enforcement, Underwriters Laboratories Inc.
With patents, you're looking at a whole different type of law as well. In Canada, currently the patent laws on the criminal side of it are weak. In my 10 years I never did a patent case, because we never looked at that sort of thing.
In any system you put in place to help identify counterfeit products and take them off the market, the biggest line of defence in Canada is the border. Once it comes in, it's death by 10,000 cuts, because once a container enters the marketplace, there is no way to stop it. If you can take that container out of the legitimate chain before it even enters the country, that's our first line of defence. Regardless of any other legislation or changes, the border system has to be in place so that they can actually attack this problem.
Conservative
The Chair Conservative James Rajotte
Okay. Thank you.
I want to thank all of you for coming in today. I want to thank you for your presentations and your discussion.
If there is anything further you'd like to pass on to the committee and its members, please do so through me or through the clerk.
I want to thank you for your time today and thank members for their questions. I think it was a very good session today. Thank you.
The meeting is adjourned.