Industry Committee on May 2nd, 2007

[Prof. Michael Geist]

Well, according to the RCMP data, obviously, organized crime is involved in counterfeiting, but they are not the exclusive purveyor of counterfeiting. Actually, Project Sham, which is their most recent study on this issue, says that depending on which part of the country you're in, it's sometimes mom and pop who are involved in this stuff, and in other instances it is indeed organized crime.

I want to point out that you're exactly right, the kinds of instances you've pointed to are exactly the problem, which is why I think we need to take certain issues right off the table.

It's not about stronger copyright laws. It's not about camcorders. It's about safety in our hospitals and in our homes, and that's not a copyright issue.

[The Chair, Conservative, James Rajotte]

Mr. Drapeau.

[Daniel Drapeau]

Whether or not it's organized crime is not a part of my testimony. The question may be directed to the RCMP.

[The Chair, Conservative, James Rajotte]

Mr. Erdle.

[Michael Erdle]

I agree. The RCMP has a much better sense of who is involved in this.

I disagree with Professor Geist to the extent that this is purely a health and safety matter and it's not a copyright or trademark law matter. It's both.

In order to be effective in stopping it, we need to have all the tools. The police need to have stronger tools, and they don't have them now in the Trade-marks Act and the Copyright Act. Individual companies and industry groups need to have those tools as well.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I think one of the things we've read, we've seen, and we've heard time and again is how lucrative this business is, and in fact, it's lucrative without many consequences. I'd like to know whether or not you think that's true.

The other part is this. Do you think legislation should be or could be amended to provide the Canada Border Services Agency officials with clear authority to target, detain, seize, and destroy counterfeit and pirated goods, either on its own initiative or at the request of an IP owner? If you don't think it should be amended, why not? I'd like your response to that.

I'll start with Mr. Drapeau.

[Daniel Drapeau]

Is it lucrative? It most certainly is—when I look at the difference between the cost of these wares and the price at which they're offered for sale, when I am able to get my hands on that information.

What are the consequences? They're absolutely minimal. In my written document, there's what is called the compensatory conventional damages that are set by the Federal Court. It's really an assessment by the court of an amount that's awarded by the court when no amount can be figured out. Those amounts are $3,000 for a street vendor, $6,000 for a retailer, and $24,000 for a manufacturer. It's nothing, and the consequences are very minimal.

Should a border be allowed to deal with counterfeits on its own initiative? Of course, with confirmation that the wares are indeed counterfeit, it absolutely should. Should it be able to be done at the request of a rights owner if the owner proves the wares are counterfeit? Yes, absolutely.

[Prof. Michael Geist]

I think we have every indication that people are generating some income out of this, but we also have to take a look at our statutes and note there are strong penalties. I think $20,000 per infringement, which can be used to force a settlement, is strong. On the criminal side, within the Copyright Act, there's the prospect of jail time and penalties in the hundreds of thousands of dollars. We are talking about serious penalties.

Of course, you can increase the penalties, but it doesn't mean a judge is going to necessarily follow that. We oftentimes see legislation increase the penalties, but the judges look at the people in front of them and still decide whatever they decide. There's no guarantee that stronger punishments will be meted out, even if you increase the penalties associated with it.

In terms of the border issue, I think there's the prospect of some legislation, but we have to be careful because of the issue of grey markets and parallel imports. There is the prospect of seizing perfectly legitimate goods, simply because a party in Canada doesn't want those legitimate goods entering the country, because it provides some real competition for them.

[The Chair, Conservative, James Rajotte]

Briefly, Mr. Erdle.

[Michael Erdle]

I agree that border enforcement has to be there, and the Border Services Agency needs to have the power to seize. There has to be a mechanism in place to ensure that they really are seizing counterfeit goods and not legitimate goods, but that can be done.

As far as other penalties go, I think maybe more needs to be done in applying the penalties that exist, but at the same time, there are a lot of activities for which there are no penalties at all now, and that should be changed.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Good afternoon, gentlemen.

A little earlier, there was a question about the financial impact of counterfeiting. The Canadian Association of Importers and Exporters believes that the financial impact of counterfeiting and the identity theft of intellectual products is between $20 and $30 billion per year.

You also said that all counterfeit goods come mainly from abroad and that not many are manufactured in Canada. Can you confirm this?

[Daniel Drapeau]

I am speaking from experience. When I was involved in the seizure of goods or when I used other means to stop counterfeiting, I only very rarely found that products were manufactured in Canada. Generally speaking, the manufacturers are located outside the country. I'm not telling you that there never has been any counterfeiting activity in Canada, I'm just saying that it is fairly rare.

[Serge Cardin, Bloc, Sherbrooke, QC]

I imagine that when Canadians and Quebeckers order products, regardless of what they may be, they deal with providers who normally certify those products, or there is a relationship of trust.

As you mentioned earlier, it is theft. If these products come mainly from abroad, the border is indeed the ideal place to tackle the problem.

A few moments ago, we talked about drugs. God knows that huge quantities of drugs cross the border. In that regard, there is obviously a lack of resources. I do not want to denigrate anyone, but if we were only dealing with Lacoste clothing, there would be no real danger in the area of security.

Furthermore, the public is an indirect accomplice because it is familiar with the products and buys them. Do recognized and known providers, whom people believe to be honest, sell these products? There are a lot of flea markets. That is possibly where a lot of these products are sold.

[Daniel Drapeau]

I found counterfeit products not only at flea markets, or at private parties, but also in department stores, chain stores and specialized boutiques. You can find counterfeit products anywhere. Of course, they are often found in places where the sellers can quickly disappear, such as flea markets. Many sellers are also street vendors.

What concerns me about your question is the idea that you can trust the supplier. Perhaps the buyer trusts the supplier, but that does not mean that the supplier is trustworthy.

[Serge Cardin, Bloc, Sherbrooke, QC]

As far as security is concerned, for example, have buyers for large organizations ever bought counterfeit products from elsewhere? The same holds true for the area of medicine. The odds of that happening there are, I imagine, not as great, because there is a better control of the procurement system by specialized buyers.

[Daniel Drapeau]

I have not looked into counterfeiting activity in the field of medicine. So I cannot answer your question. However, I can say that in that area, as everywhere else, there are bad fake products just as there are good fake products.

I would not be surprised if an expert were taken in, unless this expert is aware of secret indicators which would reveal whether a product is fake or real.

[Serge Cardin, Bloc, Sherbrooke, QC]

It's basically something that happens in every area, be it Lacoste clothing or the medical field, including drugs.

There was a wave of offers on the Internet recently. I'm referring to prescription drugs that people could order from abroad and which also probably came from abroad.

[The Chair, Conservative, James Rajotte]

That is your last question, sir.

[Serge Cardin, Bloc, Sherbrooke, QC]

These pharmaceuticals may also be counterfeit. So there's basically no end to it. You can find counterfeits across every sector, and because it's criminal, obviously, the means are also very limited.

[Daniel Drapeau]

But they are saying that the means are limited. By strengthening the laws, you can enlist the assistance of the private sector. And what Mr. Cardin has said, that counterfeiting is far-reaching and touches every segment, is one of the reasons we should be acting.

[Prof. Michael Geist]

But it also highlights why we have to prioritize. So the extent to which this is such a broad issue that it has infiltrated so many things means that we have to pick and choose. I mean, we have to ensure, first and foremost, that the real problems, the health and safety issues, the ones where Canadian manufacturers may find themselves directly affected, are the ones that we prioritize, because if this is that big an issue and that global an issue, then clearly we're not going to solve it sitting around this table. Let's ensure that the kinds of solutions that are proposed are the ones where the greatest amount of harm is taking place.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

Listening to this discussion and the previous discussions, too—I don't know, man. If you want a quick trip to the slammer, go rob a bank. And if we take the argument that it's really not hurting people, no big deal, so you take a few bucks, you take a thousand dollars, it's not killing anybody—This society has recognized that our banking institutions are fundamental to our market system staying intact, and to my way of thinking, I would think that when people labour and they have good ideas and they go about things the right way—Part of our whole market system is the advertising. There is advertising, and trademark is involved. To me, this is as serious as going to a bank and sticking a gun at the teller and stealing something.

I disagree that we should prioritize. This has to be stopped.

My question to Mr. Drapeau is, should we make it a criminal offence to manufacture, reproduce, import, or distribute—make it a serious criminal offence if we counterfeit or pirate products for commercial uses?

[Daniel Drapeau]

I am absolutely in support of that proposition.

And I'll tell you what my problem with the two tiers is. It's that if you're doing a two-tier approach—let's prioritize that these ones affect safety and those ones don't—that means there's some theft, some assault, some deception that's okay, and then there is other theft, other deception, that's not okay. So where do you draw the line?

I absolutely agree with your position, sir.