Industry Committee on May 7th, 2007

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Let me ask you, what about the question of other penalties? You refer to section 5.1 in your recommendation: “Strengthen civil remedies for counterfeiting. In particular, the civil legislation should provide for”, etc.

We've talked about the criminal, but it seems to me—and I think Mr. Lipkus could certainly bear this out, and Mr. Webster could as well—that it would be a lot easier to obtain the quick-fix damages that were caused by this, quite apart from the issue of proceeds of crime. Are you suggesting, then, that we ought to have more vigorous remedies in terms of civil procedure?

I'm open to anyone here on this.

[Lee Webster]

I would strongly recommend that. I've litigated actions in the Federal Court. They go along at their own pace, and I guess that's fine more or less for domestic companies litigating against each other, but it's ridiculous when it takes six years to get one counterfeiter to trial. Something has to be done to get the courts to move a lot more efficiently and a lot faster. I don't know whether that's more judges or a stricter case management system.

I've been involved in cases in the United States where very complicated patent infringement actions have been brought to trial in eight months. Why can't we do something like that here, particularly when you have infringements of the same objects over and over again--Spider-Man 3 on a DVD?

I live in the Beaches in Toronto, and every night if I park my car on the street I get a ticket, and there's no fighting it; you have to pay it. I don't know why we can't have somebody going around these malls and ticketing them for obvious counterfeit merchandise. It doesn't make any sense. Why should it cost one of my clients $125,000, or whatever it takes to go in and do a raid and--

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Mr. Webster, let me stop you at this point, if I could. If you ticket somebody, where is that money going? Is it going back to general revenue, to the Government of Canada? Are you suggesting it would be damages to the company that had been infringed?

[Lee Webster]

Frankly, I don't think it would really matter whether it goes to general revenue or to the company, provided the activity is stopped. If the infringing activity stops, then the rights holder will make money based on that. If it's a criminal charge and the proceeds of crime—the yacht—is sold, the money goes into the general revenue, that's fine. It helps fund these enforcement mechanisms we're talking about.

[The Chair, Conservative, James Rajotte]

Mr. Lipkus wanted to comment.

[Lorne Lipkus]

I think it's important to strengthen the civil remedies, and I think because we're dealing with an illegal activity, the rules of the Federal Court could be streamlined. As well, we could look at things they've done in the U.S., where they've had major task forces in New York City, and now there's one in Los Angeles, that have been money-making, revenue-producing projects for those governments.

They have gone in and targeted landlords and retailers, as you have said. They've gone in and said to the landlord that because he had a contract with someone and that person was breaching that contract, if he was going to allow people who are not allowed to sell illegal goods to be selling them, then he, the landlord, was going to be responsible. When they were caught, they had to post bonds.

I understand it has been wildly successful, and they've reported on it at a few international conferences I've been to. They're now starting it in other cities in the United States.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. McTeague.

I have one main question and perhaps a supplementary question.

Your recommendation is, “Provide the CBSA with the express authority to target, detain, seize, and destroy counterfeit goods on its own initiative”. You talk about “promoting the detection of such goods, such as mandatory reporting of brand information with shipments”.

Mr. Lipkus, perhaps you can address that, because I believe this document is yours, where you show examples of counterfeit goods. Just looking through this, frankly, I would not be able to tell, as a consumer, that these are counterfeit goods. How do you identify something? You show a Burberry tie. If you turn it around and it says Burberry, I think a consumer would say that's a Burberry tie. How do custom officials, or even retailers, or whoever, wherever you want to hit it in the supply chain, identify that as a counterfeit good?

[Lorne Lipkus]

It's simpler than most people think. It's like anything else; when you don't know at all, of course it seems overwhelming. The reality is that just by looking at some simple indicia, you can tell if something is counterfeit or not. For example, you picked Burberry, you picked a luxury bag. I've been contacted by a combination of customs and the RCMP over many years and I've yet to find once where they've contacted me and the luxury goods have been authentic.

The reality is that the legitimate companies ship from point A to point B, and the counterfeiters don't ship from point A to point B, they ship to points C, D, E, and F. Customs have the ability to put the proper addresses in there, and then literally it becomes sitting at the computer. They just put in Burberry bags, they're coming from this city to that city, is that possible? It might be possible, but 99.999% of the time it's going to be counterfeit. That's the targeting aspect.

In terms of whether the item is counterfeit or not, we regularly conduct training sessions. Companies conduct training sessions. I'm starting one on Wednesday, in Calgary, for over 100 law enforcement personnel. Over 40 companies are represented. By the end of those three days, the people who are there will be able to tell whether the goods are counterfeit or authentic.

[The Chair, Conservative, James Rajotte]

Is it practical for us to do what we've done in other areas, like human or animal health? Is it practical, without slowing down trade?

I think Mr. Masse talked about the Detroit-Windsor border. Without slowing down trade, if we can trace a steak from here back to when it was born and how many farms it was moved to, what it ingested all along the way, is it practical at all to suggest that we ought to be able to trace something from the retailer right back? If we can't trace it back, if there's a lack of information along the way, we should perhaps be suspicious and assume it is counterfeit, and then direct the reference there.

Is that practical for the government to do, from that point of view?

[Lorne Lipkus]

What's practical is to have a group of trained personnel, and you could have more than one of them across the country. They're trained to deal with these kinds of cases. All they have to do is pick up a phone to call the right people in any of these companies and they have their answer.

As a practical matter, on the few cases we're dealing with now, the identification issue isn't really a problem. We're able to identify them fairly quickly. We do web-based identification training. I have someone in Vancouver who calls my office in Toronto to ask what to do about the six companies' goods they have. We ask them to call a number, they're on the web and they're looking at a PowerPoint that shows them the indicia and that's it. It doesn't take long. Once they're at that stage, they have a shipment that they believe is counterfeit.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Henderson.

[Graham Henderson]

These regimes have been in place in other countries. Believe me, everybody would want to think about this. We have the advantage of going last. It simply hasn't presented a problem.

[The Chair, Conservative, James Rajotte]

Then just briefly— have less than a minute left—I have a question for Mr. Frith. I asked the people from Heritage and Industry about camcording. I believe the response from the Department of Heritage was that there are civil procedures, and this is going to prevent it. I just wanted you to respond to that.

[Douglas Frith]

There are civil procedures that can be followed under the Copyright Act, and frankly, at the working level they are not working. We have had cases in certain major metropolises in Canada in which we know that individuals are tied to organized crime, and we cannot get the law enforcement agencies interested in the issue. This is why, as long as you leave this under the Copyright Act, we're not going to get any traction. There are precedents for putting camcording into the Criminal Code amendment. We did it with the Radiocommunications Act for satellite.

The reason is that the RCMP does not operate in every jurisdiction. So if something happens in Peterborough, what's left? What we need is the Criminal Code amendment so we can get local police forces engaged in the issue.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Mr. Henderson, go ahead, please, just briefly.

[Graham Henderson]

Civil remedies are not appropriate for criminals. That's the bottom line.

[The Chair, Conservative, James Rajotte]

Thank you.

I have Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

You talked about awareness. RCMP officials brought us counterfeit electrical cords like these that were installed in hospitals because even electricians couldn’t tell the difference.

We should launch an awareness campaign because people have a hard time determining whether a product is really counterfeit. The price can be a factor, but we can be fooled because these cords look identical to standard ones, except that they have three wires. Couldn’t this money be better used for increasing staff at customs and border crossings?

If goods entering the country in containers are patented, we could try to contact the owner to find out if these products were manufactured abroad. This could be a possible solution.

Mr. Webster, you said that there were lengthy legal delays. It may be very clear, for example, that two handbags are counterfeit, but it takes many months before the court makes a decision. You proposed appointing more judges.

[The Vice-Chair, Liberal, Dan McTeague]

Mr. Vincent, are you directing your question to Mr. Webster or Mr. Myers?

[Robert Vincent, Bloc, Shefford, QC]

First, I would ask Mr. Myers to talk about awareness. Then, other people can add their thoughts.

[The Vice-Chair, Liberal, Dan McTeague]

I give the floor to Mr. Myers and Mr. Henderson.

Mr. Myers.

[Lee Webster]

I think I can answer that.

What I would like to see is a form of summary enforcement mechanism. I was not directly involved in the Interplus case, although my firm was, and I know the lengths to which Microsoft went to prove that this particular product was counterfeit. There was a huge amount of evidence that had to be put together to prove that. For future actions, why would Microsoft have to do that every time? Do it once. You have a summary enforcement, so a lot of these evidentiary issues that have to be proven each time in court are resolved in one proceeding. You deal with most of the case, in a summary proceeding, very quickly.

I can't recommend to you specific changes and how I would tinker with the Federal Court act or rules that I had to do that, but I think there has to be a way to be able to deal with these things more quickly by providing the proper evidence quickly for one proceeding and also by eliminating a lot of unnecessary discovery that we tend to have in our Federal Court.

[The Vice-Chair, Liberal, Dan McTeague]

Mr. Henderson.

[Graham Henderson]

My feeling is that we should implement the recommendations. That's very important. From there on, it becomes a question of working with industry and stakeholders to implement and roll out the legislation and make it have effect. I don't believe--and I think this is what Mr. Lipkus's point is--that it is impossible for people to tell the difference. What it requires us to do is to work with the government and to work with the police, which is something that we do, and which is working very effectively in jurisdictions around the world.

[The Vice-Chair, Liberal, Dan McTeague]

Monsieur Vincent.