Industry Committee on May 7th, 2007

[The Chair, Conservative, James Rajotte]

I have Mr. Henderson and Mr. Myers.

[Graham Henderson]

I'll go back to the French campaign I cited earlier, the Non merci campaign that you're talking about. It's been going for two years. Look at the partners again. The ministries of economy, finance, and industry—that tells you how significantly the French treat this. They see it as an economic issue and a financial issue. But they actually have a national anti-counterfeiting committee made up of stakeholders from business, government, and consumer groups. Why can't we do that? We can.

Education is very important. You've touched on an extremely important thing there. A lot of Canadians know that watches are counterfeit. They don't know that batteries are.

[The Chair, Conservative, James Rajotte]

Mr. Myers.

[Dr. Jayson Myers]

I think a campaign to alert the public is extremely important, but we also need to educate customers about the potential impact of purchasing counterfeit products and, from an industry point of view, the quality assurance that companies can provide.

I think part of the campaign to the public as well as businesses doesn't have to be that counterfeiting is bad, but that the CSA mark and other quality marks are an important part of that quality assurance process. It needs to support the efforts of CSA and the quality networks out there in getting that message across, not only to the public but to businesses.

[The Chair, Conservative, James Rajotte]

Do you have another question?

[Guy André, Bloc, Berthier—Maskinongé, QC]

: I agree that public pressure can lead to change when the public is aware of this kind of social problem. Citizens are often more effective than any criminal legislation. When people are more aware, they affect change through social pressure and this has a big impact!

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Henderson.

[Graham Henderson]

We don't have to amend the entire Criminal Code. When you look at the recommendations, they're very surgical. It's legislation and amendments coupled with an ongoing, down-the-road education campaign.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Van Kesteren.

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

Thank you, Mr. Chair.

And thank you, witnesses, for appearing.

I read from one of your briefs that this is theft:There's a societal interest involved here which, in my view, is very important. In my view, this kind of theft constitutes a very serious offence, more serious than the theft of some other material item or property because it strikes at the heart of what differentiates a progressive, creative society from one that is not.

I share that view. I said at the last meeting too that why governments haven't done something about this yet just baffles me.

Very briefly, I want maybe one comment. Maybe you can answer that question: why haven't governments jumped on this and already instituted legislation that would have put an end to this? Is there a reason? What's going on?

[Lee Webster]

I'll jump on board that one.

I think there's a baffling internal bureaucratic inertia to doing anything about this. I cannot honestly understand it at all. Intellectual property rights have been around for 400 years, since the English Statute of Monopolies in 1623. Why can't this government see that IP rights are important and give us the best tools we can have to restrain intellectual property infringement? We're now seeing serious safety issues out there. There are economic problems, and I don't understand why people just don't jump on board this issue.

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

I have a few more questions. Mr. Frith, maybe we can go back to that in a second. I would like to ask Mr. Myers a question.

You mentioned auto parts and aviation parts. Who's importing and selling these parts? Is it primarily a black market? Are honest distributors and retailers selling such items, and what's the auto sector doing about this?

I had a few questions I wanted to ask. Could you answer that?

[Dr. Jayson Myers]

I think to a large part it is the black market. Distributors or importers are bringing product in and then distributing it into the North American market, and this is one of the reasons it's so difficult to actually stop this activity at the border. I'll give you an example.

I've been working for 12 years with a foundry that makes automotive castings. They have had fraudulently marked product coming into the Canadian market over that period of time. We've been bounced between the Department of Finance and the CBSA. The Department of Finance, which is in charge of the regulation, says they're not prepared to rewrite the entire act; CBSA is saying that they can't enforce it unless the act is rewritten.

This is a small company. It's left to them to identify exactly who is importing this. It's probably a distributor operating a semi-black market and selling into the United States, but unless they have some evidence that this product is coming in, the security force at the border is saying that they can't stop it. So they've just basically...actually, they not only gave up, but they shut down operation.

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

I have another question for Mr. Frith. Maybe you can just hop in after that, because I didn't give you an opportunity to answer the other one.

Previously we heard contrary statements about the camcording and that it really wasn't a problem in Canada. There seem to be some conflicting statistics. Can you please clarify this issue?

[Douglas Frith]

The witness in this case appeared here a week ago. He took some of his facts from newspapers. I used to be in politics, and I know you're in politics, and when you take facts from newspapers, they're not always the correct ones.

Second, when he did his analysis, we believe he had a fundamental misunderstanding of the industry data, etc. More importantly, when he talked about those numbers, he was really referring to this pirated website over three years ago, so that data is totally irrelevant.

It's been in the last three years that we have the watermarks. We can empirically prove now where the pirated copy is originating from. Studios now have the watermark even on screeners. They've increased their production security and their post-production security. To quote a study from over three years ago is totally irrelevant today, when the majority, almost 100%, of our product now has that watermark and we can now empirically prove the numbers.

I wanted to talk though, about.... I was in government back in 1980. This whole fight on intellectual property has really been a fight at the bureaucratic level between industry and heritage for 20-some-odd years that I know of, and it really crosses political lines, because it didn't matter whether it was a Liberal government in power or the current Conservative government.

It really requires two strong ministers, the Minister of Canadian Heritage and the Minister of Industry, to have the political will to do this, because there is a bureaucratic mindset within industry that if you waited for them to come up with legislation to be tabled that would put us in conformity with WIPO, we're going to look like Rip Van Winkle by the time it's done.

[The Chair, Conservative, James Rajotte]

Mr. Lipkus, just briefly.

[Lorne Lipkus]

I want to respond to the question of what the automotive companies are doing. I'll make a general statement.

The automotive companies regularly come to anti-counterfeiting conferences worldwide, and they have sophisticated anti-counterfeiting programs, not unlike many of the people at this table. Many of the companies have these programs. The problem is that without the proper laws and without the assistance of customs, you just can't go very far.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Masse, please.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I want to go back to the recommendations you have proposed. They're very good.

I wonder how much thought has been put into how we work with the United States. Could we get some more specifics on not just stopping it on our side when it comes over, but also sending it over to the United States, if that is a real legitimate problem? Can we quantify that data and also focus it on specific types of industries? Is it DVDs, or what?

What types of suggestions do you have for dealing with that? I don't want trucks backed up again, that's for sure; there's nobody more motivated on that than me. But what can we do? We must be able to do more, on our part.

[Lorne Lipkus]

I think a lot of it has to do with getting out and doing it. Once we put the legislation in place and give people a mandate, we are going to have the intelligence we need to target shipments. Right now we're not targeting shipments.

I'm very confident in saying that if we have dedicated personnel who are able to target things, we're going to find the shipments without disrupting trade, because it's working elsewhere. When you start targeting, and you put intelligence into the system, and people are looking at it, and they have been trained, then you will find it.

[Graham Henderson]

I think you have to also remember that intellectual property rights are not a zero-sum game. Helping another country to build an effective intellectual property rights regime does not hurt you; it actually strengthens the entire international marketplace.

I think there's a terrific opportunity here for Canada and the United States to work together effectively and in close cooperation on an issue that we share. They create great intellectual property rights; we create great intellectual rights. We're incredibly good at this. They're protecting; we're not. I would think that one step, particularly because of this thickening of the border that was alluded to earlier and that you've alluded to again.... We can, working together, solve this. Sharing information would be key.

[Brian Masse, NDP, Windsor West, ON]

Is there a role as well for the trucking industry, for example, if it's predominantly coming from Canada into the United States? The shipping industry might have a role to a certain degree as well, but I would imagine it's probably the trucking industry. Is there a role for engagement with them?

I think there's a responsibility. We were talking in the last session of all the businesses involved in this. Has there been a scrutiny or engagement of Mr. Bradley and the trucking association? This is not to point a finger at them and say they're culpable in this.

Or maybe it's independents. How is it getting there through transportation modes?

[Dr. Jayson Myers]

We've spoken to Mr. Bradley and a number of transportation firms. Talking about this is part of their C-TPAT certification system and the processes that have to be put in place.

I think there are a couple of issues here. One is just the issue around enforcement. It's all well and good to say that this is an important thing to do, but from the truckers' point of view, this is just backing up more and more cost onto the trucking industry, which already sees itself as overburdened by having to deal with border costs and overall security costs.

I think the shippers, the truckers, marine transport, the airlines are all looking at doing this too, but they need some support in terms of the effect of enforcement at the border.

Let me say one other thing. You asked before, Mr. Masse, about overall trade policy. I think this is a particularly important issue when we're dealing with our major trading partner, the United States. We should be coming at our trade agreements from a common point of view. This is a major area in which the Americans and the Europeans and the Australians have brought action against other countries, particularly China, on IP issues. I think we should be there and very forceful in our representations at the WTO. We should be incorporating stronger IP protection in all of our international trade treaties, including the one that is being negotiated with Korea.

But I have to tell you that if we're not enforcing it, at the end of the day we really can't get out there and expect anybody else to be enforcing their rules. In fact, some would argue that the Chinese have had stronger enforcement of IP regulations and compliance than Canadians have had.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Masse. You had five seconds left.

We'll go to Monsieur Thibault.

[Robert Thibault, Liberal, West Nova, NS]

Merci, monsieur le président.

Thank you all for being here and thanks for the very good specific recommendations.

I should point out that I'm not a regular member of the committee, but I think this is the third panel I have heard on this subject, and the only demand for research that we've heard is from researchers. The people affected by it understand its importance and ramifications.

Mr. Hilliard, I have a quick question for you that you can perhaps clear up for me. I saw in a media report last week or the week before that Microsoft, because of the piracy problem in Asia—and I believe it was in the Chinese market specifically—was selling the same software in that market for $10 or $15 that they sell for $125 or $135 in the North American market.

Is that correct?