Industry Committee on May 15th, 2012

[Mark Eisen]

I think one of the most important things is to have skilled and experienced examiners at the patent and trademark office and in the profession, the intellectual property profession, to ensure that we both have the same notion of what is patentable or what is registerable as a trademark. We don't want to be working at cross-purposes.

The Amazon.com case that came down recently, and on which there's still a consultation going on, is an example of the profession and the patent office working at cross-purposes. It's extremely inefficient, resulting in many office actions and spinning wheels. I think that would be my number one priority.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Mr. Henderson, what is the cost to the Canadian economy of IP crime and counterfeiting?

[Graham Henderson]

It has been variously estimated, but you can be certain that it is in the billions. I think I remember the Ontario Chamber of Commerce doing a study that suggested it was $9 billion for Ontario. If I recall correctly, the road map for change, the Canadian Anti-Counterfeiting Network, put it in the $20-billion range.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Braid.

Now on to Madame LeBlanc.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you, Mr. Chair.

I want to pick up on the Canadian government's investment in innovation, especially through federal R and D programs. They often give rise to innovations and ideas that sometimes fall under the intellectual property category.

Do you think the current IP regime does enough to protect Canada's investments in Canadian companies, foreign companies or those bought by foreign interests? Does the intellectual property remain in Canadian hands so that we can benefit from it?

We talked about Nortel earlier. We could also cite other examples where the Canadian government invested in companies that ended up growing and being sold, resulting in Canadian intellectual property moving outside the country. Perhaps Ms. Corbin could answer first.

[Dr. Ruth Corbin]

I think we have to clarify that innovation is not intellectual property. Investing in innovation is investing in the hope that it may become intellectual property. It's not bad, but it's different from saying we have a regime that we are working to define and monetize.

Is our investment strategy on innovation producing intellectual property benefits? Maybe, but it's not directly attending to what I understand the committee wants to do.

[Graham Henderson]

I'm not sure I agree. I think the distinction is between invention and innovation, not intellectual property and innovation. The governments around the world have become very good at targeting investment. If you look at how the Government of Canada and the Government of Ontario invest money in intellectual property, you find that an enormous amount of it goes to universities. It's more directed towards invention.

Innovation requires a commercial component. It's a marketable service. It has value or it's a marketable product. I think intellectual property underlies both of them, because that's what creates the market. Once you have property in something, then you have a marketplace.

[Prof. Jeremy de Beer]

I agree with Mr. Henderson on that point. It's innovation that we should be concerned about. IP is a means to innovation, but not the only one. The distinction in the literature—and there is a huge literature on innovation—is that innovation has market value and intellectual property may or may not. It's just an output.

We have to be careful not to focus our policies on getting more intellectual property rights. We should focus on better IP, not more IP rights. Better IP will drive innovation, which has market value. That is what drives jobs and economic growth in all sectors—the knowledge economy, manufacturing, everything.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you for that clarification.

[The Chair, Conservative, David Sweet]

Mr. Eisen.

[Mark Eisen]

I'm not sure what safeguards are in place. I think the industrial research assistance program has certain conditions on the use and ownership of funded intellectual property. But I have to say that in this context the intellectual property is much more key, because you're talking about monopoly. You're talking about protecting the interests of the investment that went into the innovation.

There are many countries where it's a lot cheaper to make products than it is in Canada. The only way you can protect those interests through a monopoly is through intellectual property of one form or another.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Very well. I am going to have to think on that. In any case, thank you for the clarification.

One of you—Ms. Corbin, I believe—mentioned corporate governance. I would like to hear more about that, especially about the incentives that would make those kinds of things possible.

[Dr. Ruth Corbin]

What incentives would make that happen? Mr. Henderson said earlier that it's business's responsibility, and they had better be working on it, and he's given examples of it. What can government do to encourage it? One idea is to promote what's important to them.

I was on a board of directors of Toronto Hydro with the late Mr. Layton. Many questions he turned to the subject of environmental protection. You could be asking about workers' compensation, and somehow he would bring it back to environmental protection, until we got it. He had clear policy ideas that began to infuse the culture of the board.

That's one way you can do it. When you speak as members of Parliament, give business direction.

Here's another thing you can do. Bring it to the attention of regulators so that when they advise businesses, corporate governors, and directors with liability about what they have to do to mitigate the risks to their corporations according to such and such standards, they will understand that the risk management of intellectual property is one of the standards.

Remember that the TSX had 13 guidelines from the Dey report, and intellectual property wasn't among them, and it still isn't among them. That's where government can help business think the right way.

[The Chair, Conservative, David Sweet]

Thank you, Madame Corbin.

Thank you, Madame LeBlanc.

Now we'll go on to Mr. Richardson, for five minutes.

[Lee Richardson, Conservative, Calgary Centre, AB]

Thank you, Mr. Chairman.

This has been fascinating. Thank you. It's been a very impressive panel. I think you bring a lot to it, as you have in the past.

I'm thinking that there seems to be a broad sort of agreement on the intent of what needs to be done here.

I was following Mr. Masse's question with regard to the 2007 report and the recommendations that flowed from it before it got to be, in Mr. de Beer's view, just more banal rhetoric.

I guess I'm looking to places where we can take some action.

I only have five minutes, so rather than broadly going into what action needs to be taken now, I'd like to pursue recommendation 11 from that report. More specifically, I'll ask Mr. Henderson how you think allowing CBSA to have ex-officio powers would benefit Canadian businesses and consumers.

[Graham Henderson]

The lack of ex-officio powers, and I'm not an expert in the area, essentially means that border service agents don't have the power, on their own, to detain suspected counterfeit goods. It requires court orders. If it's Nike shoes, they can't communicate with Nike. If it's Louis Vuitton purses, they can't communicate. If it's suspected counterfeit auto parts, they can't communicate. That presents a huge problem. Those powers exist throughout the EU and throughout most of the rest of the world. It's one of the glaring areas where our border service agents simply aren't empowered. Frankly, if we want to gain access to, for example, the European trading bloc through the proposed comprehensive economic and trade agreement, we're going to have to do it anyway.

Here was a recommendation. It was actually ahead of the game. If we'd implemented it back in 2007 or 2008, it wouldn't be an issue on the table with the EU right now, but it is.

[Lee Richardson, Conservative, Calgary Centre, AB]

Are there other recommendations here? Here's one very specific one we have to get moving on. Why aren't we moving on these things, and why are we now bumping into these problems as we try to keep up with our international partners?

[Graham Henderson]

I think that's important. We're trying to keep up. We're trying to level the playing field. We're trying to harmonize our laws with those in the international community. But there's no question that it is a frustration. My experience with government is that unless you keep putting your shoulder to the wheel, it takes time. It can take years. So here we are again, shoulders back on the wheel, and we're pushing.

Mr. Masse pointed out that some of these are simply regulations that could be done in no time. Others require money. In some of the studies we've done, we've said that it's going to cost $25 million and you're going to solve a $20-billion problem. It sounds like a good investment to me.

I think what would be great would be for this committee to take these recommendations—and they're only part of the problem—and work with them.

[Mark Eisen]

I think they're good recommendations. There's certainty validity to a lot of them. There has to be a balance. Everything about this is balance. Implementing recommendations creates a push on one side—say on the brand-name side—that has to be somehow countered with the ability not to push too hard. An example is cost awards in the case of a wrongful seizure of goods. Without those types of things in play, you can create a very unbalanced situation. So I think the recommendations are valid, but they have to be looked at as a balancing act and not just as straight help, one side of the story.

[Graham Henderson]

No, there's best practices too.

[Prof. Jeremy de Beer]

I would just add, in that particular context, that one of the concerns is abuse of process when it happens. If you can deal with those concerns, that may lubricate the wheel and allow us to move forward on some of these recommendations.

On other specific recommendations, the issue is far more delicate. Oftentimes IP policy is driven by the pharmaceutical industry, and then you have very complex trade-offs between what is currently a vibrant generic industry in Canada and brand-name manufacturers, and their implications for provincial health care funders. Those are far more complicated and perhaps not quite as easy to deal with.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Richardson.

We're going to suspend in a moment for some business. I wanted to ask one question, though. As I heard all of the members asking questions and I heard the answers, there seemed to be two strong streams. One was innovation and creating more intellectual property to monetize that, to create jobs, etc. And there's another really strong aspect of protecting intellectual property presently.

We talked about education, etc., and Mr. Henderson made the good point regarding the separation between the whole notion of a movie being downloaded, etc., and what we're talking about here, except that it's almost a good education point in the sense that people can understand it. That's one of the things that I see: a good law has broad social consensus and is obeyed.

We talked about parents talking to kids, but I see a lot of parents selling hot Rolex contraband, sports-branded memorabilia. There seems to be a real need for strong education at the grassroots level. I'm wondering if there's any data out there at all. There was a strong education program on the movie industry. You would walk in and see a movie, and then they'd say if you do this, we'll prosecute you. Was there any measurement done? Has there been any broader awareness? Have they seen a reduction in the downloading or stealing of movies since they did that campaign and we actually introduced stronger legislation?

[Graham Henderson]

Well, I can give you an example where legislation was introduced and it had a profound effect on the marketplace. It wasn't film, but it was music. The legislation in question was the French law that was introduced to bolster the intellectual property regime in terms of protecting music. An economist from Wellesley College in the United States did a study that measured the impact at the introduction of that law. What he found was there was a profound change in consumer behaviour. Almost 25% of the population went from taking to buying, and it was almost instantaneous. Interestingly, when the law was introduced—the law was called Hadopi--one of the searches that he did was a search on Google. And he found this massive spike at the time the law was introduced. People were trying to learn about “What the heck is Hadopi and what does it mean to me?” What it meant to a lot of them was it's time to migrate to the legal marketplace.

This, by the way, wasn't a total surprise to me, because research that we've done over the years suggested that there's a very significant.... Canadians don't wake up in the morning thinking they're going to steal something. They may just end up doing it. Whether it's a Louis Vuitton bag or whatever, they may just do it. I don't know. But they don't wake up thinking they're going to do it. What we found in our research was that a significant number of them—if they were educated on the issue and if there were meaningful consequences—would shift into the legal marketplace. That's part of the thing that we're trying to recapture here. It's not just about promoting the supply of IP, which is a very important role of government. It's protecting the demand for it.

[The Chair, Conservative, David Sweet]

I think you're correct. It ended up mostly on our shoulders, but I know for the copyright bill, in each iteration that was tabled there were lots of inquiries. There was a strong sense of consumer demand on that.

There's a lot of education happening through our constituency offices on the fact that when people make something, even if it's a concept, a song or an idea, they have the right to remuneration from that.

Thank you very much for your testimony.

We need to suspend for a couple of minutes and then we'll go in camera for some business.

Thank you very much.

[Proceedings continue in camera]