Evidence of meeting #59 for Industry, Science and Technology in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was problem.
A recording is available from Parliament.
Robert Vincent Bloc Shefford, QC
But based on your experience, what would be the most effective way to stamp out counterfeiting? What can you suggest to the committee so that it can issue a recommendation in a report?
President, Canadian Recording Industry Association
I think the answer to that is to accept our report. This has been languishing in the wilderness. The recommendations are not overly complex; they're very straightforward. Some of them could be done by regulation. It doesn't require overhauling statutes; it's very straightforward.
I would also add that in addition to embracing the recommendations, we have to take a step afterwards, and that step is into education.
The French have known about this problem for a long time and have been very active. In March they announced an initiative by—and it's interesting to look at who is involved in this--the ministry of economy, finance, and industry, in cooperation with a national anti-counterfeiting committee. They have that; we don't. The national IP office has a campaign going that you can see at http://www.non–merci.com. It's rather breathtaking to see what happens when a government takes this as a priority and acts.
President, Canadian Motion Picture Distributors Association
Mr. Chairman, let me give you one example. Under the proceeds of crime legislation, the copyright industries were exempt. There's an issue. It doesn't require legislative change; it means an order in council. We're not interested in protecting.... We want, at the Pacific Mall or elsewhere, forces that can go after the owner's car, the house, the cash. There's something that doesn't even require legislative change, but an order in council.
Chair, Education and Training Committee, Canadian Anti-Counterfeiting Network
I believe that if we have the right laws and—especially with what Mr. Frith has said—if they go in under proceeds of crime, the government is going to recover perhaps more than the cost of the resources necessary to do a lot of this work.
Conservative
The Chair Conservative James Rajotte
Thank you.
I just want to remind witnesses and members, if you do have a BlackBerry, please put it as far away as possible from the microphone. It does sometimes interfere, and it certainly interferes with the translation as well.
We'll go now to Mr. Carrie, for six minutes.
Conservative
Colin Carrie Conservative Oshawa, ON
Thank you very much, Mr. Chair.
Mr. Frith, I have a quick question. We just saw Spider-Man 3, and I heard that they had a copy or a counterfeit in Beijing two days before that. Now, you mentioned how they have it figured out as far as these watermarks and stuff go, as far as theatres go, but how would that have come about?
President, Canadian Motion Picture Distributors Association
That was a report in The Globe and Mail that came out about a week ago. I'm told that it was erroneous.
President, Canadian Motion Picture Distributors Association
Yes, because the only way that could occur is that you would have to have a breach of security prior to it going into the theatre. They investigated that, and it was a false report that was in The Globe and Mail.
President, Canadian Recording Industry Association
What they found when they examined it was that they had the artwork for Spider-Man 3 and they stuck in Spider-Man 2. That's what it was. So there is no honour among thieves.
Conservative
Colin Carrie Conservative Oshawa, ON
Well, thanks for clearing that up on the record, that's for sure.
I had a question specifically for Microsoft too. My understanding is that you did just win a case—I think it was $500,000—and I'm curious. Could you elaborate on the case a little bit for us? Was that Windows 95 or Windows 98? How long did it take to get into court to be a successful resolution for you? And are these cases constantly ongoing for you?
Corporate Counsel, Microsoft Canada Co.
In answer to your latter question, yes, we bring probably 10 to 20 anti-piracy cases a year. The particular one to which you're referring we call the Interplus case. It was quite a significant achievement for us in that it took us, I believe, six years to get it to trial. It went through 10 days of trial. We got the largest award of damages under the statutory damages provisions of the Copyright Act. In addition, we also got personal liability against two of the leading players, aside from the corporate entities.
The thing you should know about that is that in spite of the large award, it pales in comparison to the costs we've incurred. And the defendants have gone on to appeal, so we will now pay the costs of appealing this, and I wouldn't be surprised if, at the end of this, we are found to simply have a bankrupt set of individuals and companies.
Conservative
Colin Carrie Conservative Oshawa, ON
Would you have numbers of how much you're actually spending per year to fight this problem?
Corporate Counsel, Microsoft Canada Co.
In Canada we are spending over $1 million a year.
Conservative
Colin Carrie Conservative Oshawa, ON
Can you explain your policy recommendation on labelling and trademarks, and how this would benefit Microsoft?
Corporate Counsel, Microsoft Canada Co.
Our policy recommendation in terms of labels?
Corporate Counsel, Microsoft Canada Co.
Probably all of you who have laptops have, underneath, a certificate of authenticity label. What you're seeing is a movement away from high-end counterfeit of products like Windows and Office to people who are just distributing the label. What they'll do is take cheap knock-offs, they'll put them on a computer, and then they'll slap that label on the bottom.
The problem is that the label is an indication to the consumer that this is a legitimate product, and that it's in great shape and they'll get all the benefits of the genuine software. The fact is that they won't.
Our concern is that it's very difficult to go after the people who distribute just those little labels. And it's not a problem unique to Microsoft. This is a problem that many of the sports companies in the U.S. had, and as a result, they lobbied Congress and got a provision similar to one that we're requesting to deal with this very issue.
Conservative
Colin Carrie Conservative Oshawa, ON
I have a question for Mr. Myers. Because the majority of Canada's trade is with the U.S. now, maybe I can throw this to a few people to answer.
We've heard from other witnesses that this really isn't a big deal, that organized crime isn't involved in it. But it seems that everybody else is agreeing this is a major problem. If we don't do something, what is our relationship with the States going to be over the next few years, if we don't handle this as far importing and exporting our business with the States?
Senior Vice-President and Chief Economist, National Office, Canadian Manufacturers & Exporters
I think that's a very important concern. Our trade with the United States is the largest component of our trade, and in fact of the economy. So it is a concern when Canada is on the watch list of the USTR for as long as it has been, as a major exporter of counterfeit product into the United States, both because it's produced here and because it's being transshipped through Canada.
I think the real danger is that if we cannot secure our borders, those borders will be secured for us. And if they are not closed to particular products, then the delays that companies will incur for exporting their line of product into the United States will significantly increase. What we're seeing right now is already a thickening of the border: many, many more delays, and many more costs incurred in regulation and then inspections at the border. That is already very onerous for Canadian exporters.
The real concern here is that if the Americans decide to enforce their restrictions at the border against counterfeit product coming from Canada, those costs would significantly increase and of course then have major implications for investment in Canada.
President, Canadian Recording Industry Association
I was just going to add that we know that intellectual property rights have now soared to the top of U.S.-Canada trade issues. For those of us here who are in business, we find that perplexing. We're a sophisticated democratic nation. This doesn't make sense. When you look at these recommendations, you'll see how simple these fixes are. I think this goes to the whole issue of reputation, both at the government level and among average people around the world. They just can't understand it.