Thank you very much, and good afternoon, ladies and gentlemen.
My name is Michael Erdle. I'm the managing partner of Deeth Williams Wall, a law firm in Toronto, and I'm the president of the Intellectual Property Institute of Canada.
I am very pleased to be here before the committee today. I would have preferred to speak in French and English before the committee, but my daughters, who are at ease in French, heard me speak French and suggested that I give my presentation in English. I am sure you will all agree.
I'm here today to tell you why our institute believes that counterfeiting and piracy of intellectual property is a very serious problem. We believe that the Government of Canada should take action to address it for the benefit of all Canadians.
With me here today is Michel Gérin, who is the executive director of the institute.
I'd like to make three key points to you today.
First, there is a fundamental difference between infringement of intellectual property and counterfeiting. As Professor Geist has said, we are all on the same side of the fence when it comes to counterfeiting, but I want to explain a little bit more about that.
Second, we believe Canada's laws are generally adequate to deal with ordinary infringement, but not counterfeiting.
Third, we need stronger border enforcement, effective criminal penalties, and more effective legal remedies to deal with counterfeiting and piracy.
Before I explain these further, I'll give you a brief background about the Intellectual Property Institute of Canada, which is also known as IPIC. IPIC is the national association of IP professionals. We have about 1,700 members. Monsieur Drapeau and Professor Geist both are members of the institute. We represent the vast majority of IP lawyers, patent agents, and trademark agents. Our members work in private practice, from sole practice to the largest law firms in the country. They also work for private industry, government, universities, and hospitals, a wide variety of organizations. In my own case, I've practised exclusively in the field of technology and intellectual property law for almost 20 years.
Our members help IP owners obtain patents and trademarks and other IP rights. We represent plaintiffs in court—those are usually the IP owners—and defendants, the alleged infringers. In almost every IP case in the country, we have members on both sides. So I'm not here to speak for a special interest group of IP owners. I'm here to speak in favour of a strong IP framework for Canada as a whole.
Now, going to my main points, first I'd like to explain the difference between infringement and counterfeiting. I think this sometimes gets lost in the debate over piracy and counterfeiting.
Infringement is really a normal part of business competition, to a certain degree. In the patent field, inventors seek a patent for their inventions. If it's successful, others will try to imitate it. They'll also try to improve it. If they can do this without infringing the patent, they will. Sometimes competitors cross the line, and then they're sued for infringement. This could be a long and expensive process, but generally the system works when you're dealing with legitimate competitors.
Similarly with trademarks, a company will register their mark to indicate the source of a product or service, as Monsieur Drapeau has explained. If it's successful, others will try to imitate it or try to come close. The trademark owner will sue if they think this causes confusion in the marketplace. There's a constant kind of cat-and-mouse game, and this is normal competition.
With copyright also, rights owners and users are constantly testing the boundaries. Copyright tries to strike a balance between the rights of owners and the rights of users, the rights of the public, and there are always questions relating to new technologies, new uses of works. These questions can be resolved through the normal court process.
But counterfeiting and piracy are entirely different. They are a form of theft; it's as simple as that. In many cases, it involves organized crime; at least, the criminals are very organized in how they do the counterfeiting and piracy.
Despite what you may have heard, it's not just a problem of luxury goods. It's not fake watches and handbags. Our members have been involved in all kinds of cases of counterfeit goods. I'm sure you've already heard about the drugs—and Professor Geist mentioned one case in B.C.—where they have a harmful ingredient or maybe simply no active ingredients. There are fake automotive parts, aircraft parts, other industrial goods, electrical products. Virtually every kind of product will be knocked off if somebody can make a profit doing it, and the profits in doing it are huge.
We're not talking about so-called grey market goods, which are legitimate products that are purchased abroad and then resold in Canada. We're talking about absolute fakes.
Parallel imports are a different topic. The wholesalers and retailers who sell these products may actually be deceived into thinking they're the real thing—I would say they should be suspicious when it sells for a fraction of the price—but consumers are certainly deceived. People are deceived by these products all the time.
In some cases it's a health and safety issue. No one really knows what's in these products. But in all cases, there's a consumer protection issue. It's an issue that directly affects innovation in Canada.
As this committee itself noted in the recent report on the manufacturing sector, a strong IP system is essential to our economy. Counterfeiting and piracy hurt Canadian companies. They cost jobs in Canada—jobs in manufacturing, in research and development, and even in the retail sector. Counterfeiting is a serious problem and it hurts Canada.
My second point is that our existing private enforcement of IP rights isn't enough to deal with counterfeiting.
Owners of IP have four big problems when it comes to private enforcement. First, they have to find the counterfeiters. Second, they have to get injunctions to stop the activity. Third, they have to seize the counterfeit products and get them off the market. Fourth, they have to enforce a court judgment and collect an award of damages at the end of the day.
Counterfeiters don't put their names and addresses on the products. They can operate anywhere. Products come across the border by the container load. They're sold very quickly. Pirated software, movies, music CDs, and the like can be made in large volumes with equipment that anyone can buy at virtually any electronics store.
When IP owners find out about the counterfeits, the first step is to go to court to get an injunction to stop the activity before trial. But it's very difficult to do that. The court may decide a payment of money damages is good enough. Then the case has to go to a full trial. The IP owner never recovers all of the expenses and damages.
Owners also need to get court orders to seize infringing goods. They need to know where they are, but they can't get a court order until they know where the goods are and can prove they're fakes. They can't prove they're fakes without getting a court order. It's a catch-22.
Finally, even if the IP owner is successful in court and wins damages, after sometimes months or years of effort, it's virtually impossible to collect. The defendant is likely a shell company with no assets. The counterfeiter can set up a new shell company and be back in business within 24 hours.
Let me give you a typical example from my own experience. My firm represents a large Canadian automotive manufacturer. Last year they discovered someone selling counterfeit products, aftermarket products, online. It took more than six months to track down the counterfeiter. The address on the website and the Ontario corporate records were false. We then had to serve a statement of claim. We finally had to hire a private detective to stake out the owner's home. We had to get a default judgment because no defence was ever filed.
In the end, we managed to shut down the website. But there was no financial compensation for the goods that had been sold, only a couple of thousand dollars in legal costs, which didn't cover their legal costs. The individual now says the company has no assets and he can't pay.
Asking private parties to do all of this by themselves is like asking a homeowner to sue a burglar to recover stolen jewellery or a stereo or a car owner to track down the stolen car and get a court order to get it back. We all accept some degree of personal responsibility to protect our property. We buy locks to prevent theft and insurance to replace stolen goods. But we also expect the criminal laws against theft and the police to enforce the law, especially when it involves organized crime.
What do we need to have? We need to have three things. We need stronger border enforcement. We need effective criminal penalties in the law. We need more effective civil remedies.
I'd be happy to explain those further. I think I've used up my time, but I'd be happy to explain those further if there are any questions.
Thank you.