Industry Committee on May 2nd, 2007

[Colin Carrie, Conservative, Oshawa, ON]

One of the things we've been arguing about a little bit is where you draw the line. We've heard this is more harmful to society, less harmful to society. How would you suggest the Canadian government handle this? Should we have minimal penalties for this type of crime? Would that serve as a deterrent, in your opinion?

[Daniel Drapeau]

The problem I have with the current legislation is that the Copyright Act,for example, is the only act—between the Copyright and the Trade-marks Acts that are applicable in this case—where statutory damages are provided. There's a discretion provided to the court, and the discretion can go as low as $200 or as high as $20,000. Because counterfeiting is not seen as the problem it is, the maximum has only been applied once. My suggestion that there be a minimal penalty that is attached to counterfeiting, and that there then be a discretion granted to the court to increase that penalty—depending on the circumstances—I think would be a way of sending a message.

Now, in terms of how one assesses that penalty, there are a number of ways. Currently in the Copyright Act, the statutory damage is between $200 to $20,000 per work that is infringed. There could also be a component of an infringer who has a minimal quantity or an infringer who has a much bigger quantity. Another measure, like the compensatory conventional damages that have been set by the Federal Court, would be at what level of the chain the infringer is located. Is he a street vendor, a retailer, or a manufacturer? Those are options that can be explored.

I don't think we'll have the time today to determine the best option, but there are numerous ways in which this could be done.

[The Chair, Conservative, James Rajotte]

Mr. Geist has indicated he wants to respond. Then, unfortunately, Mr. Carrie, we're going to have to move on. Is that okay?

[Colin Carrie, Conservative, Oshawa, ON]

Okay.

[The Chair, Conservative, James Rajotte]

Mr. Geist.

[Prof. Michael Geist]

Thank you, Mr. Chair.

The issue of minimum penalties for counterfeiting perhaps makes sense in theory, but the problem is that the Copyright Act doesn't distinguish between counterfeiting and pure copyright infringement. The prospect of elevating the minimum penalties could apply equally to the grandmother who had someone use her Wi-Fi to engage in file sharing as it would to a clear case of counterfeiting.

I'd also note that if we're talking about respect for property, that's a two-way street. Consumers are concerned about a lack of respect for the property they've purchased: the DVD that won't play because it's locked down, and the prospect of copyright laws that might further take away their rights to use that; the song they download from an authorized music store like iTunes, or Napster that won't play on their iPod.

So when we're talking about property rights, I think it's important to emphasize that it's a two-way street. In many instances I don't think the industry—in combination with copyright—has shown enough respect for the property that individual Canadians are purchasing.

[The Chair, Conservative, James Rajotte]

I'm sorry, we're going to have to move on to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

My final question is about a topic that still has not been broached, even in previous meetings. Witnesses have told us that defending their counterfeited patents can be extremely costly. They often end up dropping any legal action because of the astronomical costs.

Do you think the legal system could be simplified when there are lawsuits of this type? The timeframes could be shortened and the evidence procedure simplified. Would this be a potential solution, in your opinion?

I understand that there may be legal action and that there are people out there copying our pharmaceuticals, however the legal process, as you are aware, is very lengthy. Maybe a way could be found of shortening the time required for lawsuits in this field. What do you think?

[Daniel Drapeau]

You're entirely right. In English, you call that a rocket docket, which basically means a simplified procedure.

You have to understand that we're talking about counterfeit pharmaceuticals here. It is relatively easy to demonstrate whether or not a pharmaceutical is a counterfeit. Sometimes, the indicators are not so much for public consumption, but it is not really that hard to demonstrate that a pharmaceutical product is a fake. So this may be a potential solution in order to simplify the process when it comes to counterfeits. We're not talking about full-blown violations here, but about something that is similar, without being identical.

I'm a little bit concerned about today's testimony. You have before you two gentlemen arguing different points of view, but the problem is that we're not necessarily talking about the same things.

I'm talking about counterfeit pharmaceuticals that are trademarked; I'm not referring to a grand-mother using Wi-Fi, etc. When you consider the testimony, you should perhaps bear this difference in mind.

Furthermore, if dealing with counterfeiting involves amending legislation, not only the Copyright Act would need to be amended. It would have to be a different piece of legislation which dealt specifically with counterfeiting. This would ensure other areas wouldn't be encroached upon.

[Robert Vincent, Bloc, Shefford, QC]

Even if you're talking about a brand name counterfeit, these are still products which have been copied. For example, if a bag carries the brand name Cartier, or some other name, you may be dealing with a copycat product which carries the same trademark.

[Daniel Drapeau]

That's right.

[Robert Vincent, Bloc, Shefford, QC]

In those cases, there could be another legal process to verify and confirm that you're dealing with a counterfeit. The case would be examined and quickly settled.

How much do you think it costs to defend a patent?

A company representative from my riding, in Granby, testified before us and told us that his insulating foam had been copied here, in Canada. He dropped the lawsuit because it would have cost him almost $100,000 to get something concrete. So if we were able to, in a sense, shrink the legal process, it may lead to costs savings.

How much would it cost a company to file a lawsuit these days?

[Daniel Drapeau]

Mr. Vincent, you have raised something that is probably the infringement lawyer's dream—the establishment of an infringement tribunal. I think that is an idea we should pursue. The costs of filing a lawsuit, particularly in the area of patents, is very high.

We should not confuse trademarks, copyright and patents. The patent is probably an instrument which does not fall within our discussions today. Infringement applies primarily to trademarks and copyright.

When we come to patents, there could be an identical copy of a patent, but that happens rather rarely. Generally, the copies are similar, and that is where litigation becomes expensive. One has to demonstrate that the idea has truly been copied. I think the figures you put forward are quite accurate. A patent-related lawsuit is very expensive.

[The Chair, Conservative, James Rajotte]

Mr. Geist and Mr. Erdle want to respond.

[Michael Erdle]

In response to your question, one of the things the Intellectual Property Institute is doing right now is working with the Federal Court to try to streamline some of the processes to make them more effective, to reduce the costs, and to allow people to enforce the patents, in particular. It costs a lot of money and takes a lot of time. We're working with the Federal Court now. One of our former presidents is a judge of the Federal Court and has asked for a group to work with him to streamline the process and make it more effective.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. Geist, briefly.

[Prof. Michael Geist]

That's all true, but again, we ought to have some context here. Canadian litigation costs pale in comparison to what our counterparts south of the border, in the United States, would pay for all sorts of litigation, whether counterfeit, patent, or copyright litigation. In fact, it's a cost of doing business there that far exceeds what our companies typically expect. That's not to say we can't do better here, but regarding the extent to which this is a problem, when we compare it to some of our counterparts in other jurisdictions, we're not even close. When you do start talking about costs, that's why cases drive towards settlement in so may instances, because it's too expensive to litigate. So when you have high thresholds, that really does push people in the direction of settlements, sometimes settlements they can ill afford to make.

[The Chair, Conservative, James Rajotte]

Thank you.

Merci, monsieur Vincent.

We have votes here in about 10 minutes, including on one important bill—mine.

Mr. Thibault asked if I could clarify Anton Piller orders. Mr. Drapeau, I don't know if you can clarify that briefly or if you want to perhaps send a statement to the clerk.

[Daniel Drapeau]

I can do both.

Briefly, an Anton Piller order is an order from a court—it can be the Federal Court or a provincial court—ordering someone to let a lawyer go onto the premises and seize evidence to preserve the evidence, pending litigation. It's an evidence preservation mechanism. As you can imagine, it's used a lot in anti-counterfeiting, because you can preserve the counterfeit goods.

[The Chair, Conservative, James Rajotte]

Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Earlier, you said that since 1987 you had data from the Federal Court indicating how much money had been lost. Could we have those data?

[Daniel Drapeau]

That is not quite accurate. In fact, I said that Anton Piller orders had existed in Canada since 1982. Personally, I have been executing seizures since 1997. There are no financial data.

I know that if we look up every order granted by the federal court—orders obliging counterfeiters to have their counterfeit goods seized—we might have all the counterfeit products seized on the Canadian market during a given number of years. That said, finding that information would not be easy.

[The Chair, Conservative, James Rajotte]

Merci.

I want to thank you very much. I'm sorry to rush out like this, but we do have votes. I thought it was an absolutely fascinating session we had today. Thank you very much for your presentations.

If there's anything further you want to pass on to the committee members, please do so through the clerk, and we'd be happy to pass it on. Thank you.

The meeting is adjourned.