Industry Committee on May 7th, 2007

[Michael Hilliard]

A couple of weeks ago, Bill Gates appeared in China and made an announcement about an initiative that Microsoft is engaging in.

As you may know, there's a concept around of the “digital divide”. The reality is that while many of us, particularly in Canada, have the benefit of technology, there are billions of people in the world who do not. What Microsoft has said it will do—and this is part of its corporate citizenship initiative—is say to governments, and China was where we announced it, that if they're prepared to invest in purchasing computers for students for school and home use in the very poorest parts of their country, we're prepared to make a special suite of software available to them, called Microsoft student innovative solution, which has some Windows and some Office, and we'll make it available to governments for bulk purchase for $3.

[Robert Thibault, Liberal, West Nova, NS]

Thank you for clarifying. From the article I read, I thought it was the same program as we were buying.

On the question of the camcorders, Mr. Frith, it seems odd to me that you could go into a theatre with a camcorder and record the film, and that the quality would be good enough for reproduction and distribution. Everybody is looking for 5.1 Dolby in the North American market, not camcording with a single speaker. But I suppose the market is out there.

When I go to a concert, I'm asked to not bring in a camera or such things. But it is the promoter who organizes that; it's not done by law. It seems to me quite simple to have a law that would make it illegal, in order to protect IP. It's not very expensive; it's just a question of drafting the law itself.

Why hasn't it happened? Is there a jurisdictional dispute? Are there charter disputes? What are the arguments? What are the blocks?

[Douglas Frith]

In particular, at the present time the only way we can lay charges is to prove that the camcording was going to be used for commercial purposes, for distribution. The onus then is left with—First of all, we have our own internal surveillance and ex-police officers who are tracking this. It's not as easy as you think to be able to—

[Robert Thibault, Liberal, West Nova, NS]

That's under the current law. What's the resistance to bringing in tougher laws under privacy or IP protection?

[Douglas Frith]

We believe that if you were to do a Criminal Code amendment to make camcording, if you're caught knowingly camcording in the theatre, part of the Criminal Code, it would go a tremendously long way to solving our issues. It's not the be-all and end-all of the problem, but it allows us to—

[Robert Thibault, Liberal, West Nova, NS]

We understand that. What I'm trying to get at is what the resistance is. What is Department of Justice saying? Why are they not doing anything?

[Douglas Frith]

My understanding at the moment is—and we're hoping—that they're taking this issue extremely seriously. I personally have met with many of the opposition parties to gather momentum and support for a Criminal Code amendment, and I'm still hopeful that this is going to be taken seriously by the government, which could address it by the Criminal Code amendment.

[Robert Thibault, Liberal, West Nova, NS]

Mr. Lipkus, I have a one-minute question, so I'll try to keep it short.

We have heard a lot about prioritization, about public safety as opposed to economic activity. There's also the consumer protection of “intended benefits” of a purchase of a product, and all those attacks. If we did everything that's being suggested to us at the committee, there would probably still be some prioritization required.

Do you agree with that, or do you think you should act on the leads that come in?

[Lorne Lipkus]

I think that would be something decided out in the field, because the reality is that every police force is going to prioritize their work. Every business prioritizes their work in some way. The problem is that you have to have enough resources to handle everything. Otherwise, you're only making a law for the more serious parts of the crime, and that wouldn't be solving the problem. You would be pushing people from one end to the other.

[Graham Henderson]

If we had an intellectual property rights council that could consider these issues, that could prioritize them...that's part of what we're lacking. Part of it is to get some laws. The next step is to have some coordination between a variety of departments, where we actually sit down as Canadians, stakeholders and otherwise, and set priorities.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Arthur.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, Chair.

I don't know what we'll be doing in a few months about that, but I know we'll have to do something. This Parliament will have to do something, depending on the kind of leadership that comes from the government and from the possibility of having two departments, heritage and industry, talk to each other, but we'll have to do something. We have a certain number of routes we can take. We can go this route, this route, or this route.

People talk to us about customs. I go through customs a fair number of times every year, and I'm still convinced that if any problem has as its solution the good judgment of a customs officer, we're in trouble. Every time I go through customs I could have a big robe and an AK-47 and still be asked, “Are you carrying cigarettes?” That's the way it goes in Canada. Maybe the day we have a continental policy as far as borders are concerned, we'll be more serious, and so, maybe customs.

The Criminal Code that everybody wants to have modified is a complex thing in Canada. We've all those different jurisdictions having responsibility for applying a law that's centrally edicted, and the problems of criminal intent and the complexity of evidence gathering certainly constitute quite a formidable obstacle.

We talk about education, as Mr. André just said. Maybe we'll tell people, don't buy counterfeit things; it might not be the quality you think. But when in Quebec 60% of your revenue goes up in smoke in taxes, I think that one day, necessarily, price will speak louder than quality for those consumers.

Which brings us to a very simple notion: you have to attack the retail level. We've been able everywhere, in all jurisdictions in Canada, to say to a restaurant owner, if you have carrion in your refrigerator, you are in infraction. You don't have to say that you were intending to sell it. There is no defence against the fact that you own it. It's there on your premises; therefore, it's an infraction, now. The chain of evidence is easy; it's there. You cannot put the responsibility on somebody who sold it to him. It's there, so it's an infraction.

So of all those routes, we'll have to listen to simplicity at one point. What are your reactions to the fact that we should attack the retailer?

[Graham Henderson]

We've provided you with one case study of what happens when a retailer is treated the way they're currently treated. It's an extraordinary story. He's charged repeatedly, and he keeps doing it. What is the common feature here? He's not going to jail.

That's sending a very serious message to the criminal community. You've heard that from the RCMP, we hear it from police forces all the time, and you'll hear it from the business community. We agree.

In this case, this gentleman, the second time he was charged, had 75,000 blank DVDs and burners sufficient to turn them all into counterfeit product. So yes—

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

But that's not the retailer.

[Graham Henderson]

He is a retailer. He has a store in a mall.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

But if you go to the flea market and you seize those things in the hands of somebody and there's a hefty fine, that will send a message up the line.

[Graham Henderson]

No, that person needs to be charged, as opposed to just fined.

But what's happening—and I think Mr. Lipkus can attest to this, because he sees it on the ground every day—is that this is moving into retail. It's not just flea markets; these are stores in malls. And in the case of the Pacific Mall, there are 50 or more of them. When Lorne goes in there with his teams, doors are slammed and people go running for the hills, because they don't want to get charged. It's incredible. You should tour it sometime.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

It works for the restaurant.

[The Chair, Conservative, James Rajotte]

Mr. Lipkus.

[Lorne Lipkus]

I agree with your comment. It is moving into retail.

When we went in recently to the Pacific Mall, we walked into our first store location at 1:30 p.m. We did three stores. We had about 15 people there. The mall closed at 8 o'clock at night. From the time we walked into the first store, within five minutes—and if I'm exaggerating, it was within four minutes—approximately 45 businesses closed for the entire time we were there. They were made up of approximately 28 or 29 stores selling DVDs and music, and three stores that we had raided, with cellular accessories, were closed for the entire time. There were purse stores that had counterfeit there; they were closed. We weren't even there for purses, but they were closed the entire time.

So yes, the retailer needs to be looked at, and the road map for change that we're advocating will deal with that. It may be not exactly the way you've mentioned, by equating it to restaurants, but we have to deal with the retailers.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Arthur.

We'll go to Mr. McTeague.

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

Thank you again, Chair.

Mr. Frith, maybe you could explain to the committee your concern. I think you raised the issue of the proceeds of crime and that for some reason there seems to be some evasion, or that the Copyright Act is certainly not covered by the proceeds of crime. Can you explain to us why that might be?

[Douglas Frith]

It's not only to the movie industry, Mr. McTeague, that this came into being. When the proceeds of crime legislation was introduced—I believe it was a decade ago, in that timeframe—without any consultation with the copyright industries, we were exempt from it. It's baffling to us because we don't want to be exempt from the proceeds of crime.

That is an issue we have raised with departmental officials. If you want to just signal one part, you don't even have to go through a legislative process. This can be done by order in council.

[Lorne Lipkus]

Mr. Chair, I deal with these cases in the following way. When we have a civil case, or when we're dealing with the police without the proceeds legislation, we go in— Let's say, we go in with a court order. We want to get their assets, but we don't have sufficient information about their assets. As a civil remedy, we don't have access to the information the police do, so we can't grab the assets. Even though under the legislation we're allowed to, we just don't know what their assets are, so we can't get the assets. We find the counterfeiter who's been doing this for a long period of time, we take whatever product they have, but we never get the assets.

If we have the legislation changed, now we go in with the police. The police have the information, and they grab the assets as they're going in. They grab the product. Now they have somebody who has been charged, who is going to go through the court process, and lo and behold, at the end of the day the government has all the assets, which, as I said before, will likely be more than the cost to the government of actually doing that case.

[Graham Henderson]

I was going to say that the RCMP has done an interesting study to illustrate just how profitable this activity is and why the proceeds of crime legislation is so important. It's in our report here. They do this comparison, drugs compared to intellectual property crime, a risk analysis: cocaine, three kilograms, worth $90,000 to the criminal, it fits in a small box, and conviction is five to seven years; Windows XP, a thousand of them, worth $450,000--not $90,000, but $450,000--or five times as much to the criminal, it fits in a small box, and conviction is a minimal fine. No wonder they're moving into it.