Industry Committee on June 7th, 2012
A recording is available from Parliament.
On the agenda
The Chair David Sweet
Good morning, ladies and gentlemen. Bonjour à tous. Welcome to the 35th meeting of the Standing Committee on Industry, Science and Technology.
As always, we have an issue with our clocks. You'll see they're all over the map, so we're running by our BlackBerry time, which says 8:45 exactly right now--at least for the members of Parliament. Our witnesses probably have different personal digital devices, but we'll be going by this time.
We have four witnesses before us today. The first witness is from UBM TechInsights, Harry Page, chief executive officer. As an individual we have Richard Gold, who is a professor in the faculty of law, McGill University. From Microsoft Canada Inc. we have Chris Tortorice, corporate counsel; and from Hockey Canada we have Dale M. Ptycia, senior manager of licensing.
We'll give each person six to seven minutes for their opening statement, and then we'll go to our rounds of questions.
I will just go by our agenda here. Mr. Page, would you please go ahead, for seven minutes?
The Chair David Sweet
Thank you very much, Mr. Page.
Now we go on to Mr. Gold.
Richard Gold Professor, Faculty of Law, McGill University, As an Individual
Thank you to the committee.
It's always a pleasure, as an academic, to be able to talk to the people who allocate the funds to the research agencies that fund my research, and I'm happy to give back. I feel it's a part of our mission to assist government committees whenever possible.
To tell you a little bit about who I am, I have about 20 years' experience in IP and innovation, both as a practising lawyer in Toronto in the technology area, and then as an academic at the University of Western Ontario, and for the last 11 years at McGill University, where I am the James McGill chair in the faculty.
I work in the area at the intersection of patents and innovation, and have provided advice to the World Intellectual Property Organization, the Organisation for Economic Co-operation and Development, the World Health Organization, UNITAID, both federal and provincial governments, and university tech transfer organizations in Canada and the United States. I've met with House of Representatives members and the Senate in the U.S. on innovation matters. I've been involved in traditional education in Canada, France, and the U.S., and I teach regularly in France. In fact, in August I will be meeting with similar high-level decision-makers in France to look at the issue of collaborations.
I come to you not with any particular agenda, but to share the result of our research in some areas where this committee may want to look.
I have two things I want to bring up. One is building the capacity of some of the institutions that administer IP, particularly the Canadian Intellectual Property Office, and giving it a little bit more power to determine the scope of patent law. I'm going to be concentrating on patent law today.
The second thing I want to bring up is looking at building incentives to help build collaborations and partnerships that develop IP in Canada, which can be used to build the complementary assets that are necessary to make the IP system work.
I submitted a brief, but I'm not going to go through it.
To start with, Canada meets all international obligations. We could still discuss whether we should have more or less, but the bottom line is that we're not in violation of any rules. We fall somewhat in the middle of the pack, except in patent law. In patent law, in fact, I would argue that, except in a couple of areas—not necessarily insignificant areas—we are actually ahead of many countries in terms of the protection of the patent holder. This is in comparison to the United States.
First of all, the criteria to obtain a patent are generally lower in Canada than in the U.S., if you look at what the courts say. There are fewer reasons to invalidate a patent in Canada than in the United States; they have a whole bunch of rules around estoppel and clean hands. We have no jury trials, which set confusion within patent litigation in the United States, whether you're prosecuting or not. We have a better selection of damages. The United States only allows damages and treble damages. We allow damages, and punitive damages—that would be the equivalent of the treble—but we also allow accounting of profits, which is something that does not exist in the U.S. system. It is a very powerful tool to patent holders because it makes the other side open their books, not the patent holder. In addition, our provinces are subject to patent law. In the United States, in fact, under their constitution, the states are not subject to patent law unless they pass special legislation, and not all have.
For all of those reasons, there are many areas within patent law where we actually have higher standards from the point of view of a patent holder. Having said that, though, patents are really only one of many factors necessary to create an innovation system. So while we have strong patent laws, we've neglected many of the other things, the complementary assets that make innovation possible, such as having home-grown ability to enter into distribution channels; bundling different types of technology to be able to buy it and put it together and have the science to be able to do that; expertise in taking innovations through the regulatory system, not only in Canada but internationally; and of course financing.
We spend a lot of time talking about patent law, looking at the minutiae, and saying, “Well, in this one little area, we're not as good as them”, ignoring the big picture, which is that you can fiddle around all you want with the patent system, but if you don't concentrate on the complementary assets, you don't have an innovation system.
Let me talk about the two things I mentioned, investing and institutions. Patent law is complex, rather like the Income Tax Act. Having either Parliament or even, by regulation, the government act often throws more confusion into the mix than anything else. When we look at the notice of compliance linkage rules, every time those are changed, litigation is spawned, and this creates more uncertainty than not.
One of the bodies best able to deal with patent law is the Canadian Intellectual Property Office. But under a decision of the Federal Court of Appeal last fall they basically have no policy function. They had made a policy around the Amazon.com “one click” patent, and the court told them they didn't have a say in this. Given that they are closest to what's happening in the world of innovation and patent law—they can follow what's happening in the United States—they should be given more authority to make certain fundamental policy decisions.
On top of that are the courts. We do our best in Canada, but we only have one sitting judge with any substantial experience in patent law, and he'll be retiring in two years. We don't need a speciality court—we don't have enough patent cases—but we do need judges who have patent experience to be appointed to the bench and we need more training.
Finally, we need to build the complementary assets. The only way to really do that is to build collaborations in which Canadian universities, industry, finance, and so on work together in collaborations.
We have a few examples. I mentioned some in my brief: the Structural Genomics Consortium and CRIAQ in Quebec. Those collaborations not only allow for the creation of Canadian IP, but of knowledge about how to get through the regulatory system, and they bring them and the other assets into conjunction with university research.
We could also use that effort to build policies about not only having patents created in Canada but seeking patents in key areas of innovation in which we're interested that are held by Canadians under some funding mechanism whereby we can leverage the patents in order to attract further investment.
The Chair David Sweet
Thank you very much, Mr. Gold.
We'll move on to Mr. Tortorice for seven minutes.
Chris Tortorice Corporate Counsel, Microsoft Canada Inc.
Good morning. Thank you, Mr. Chair and honourable members.
My name is Chris Tortorice. I'm corporate counsel with Microsoft Canada, where my responsibilities include overseeing Microsoft's Canadian anti-piracy program. I'm also a registered Canadian patent agent and trademark agent.
I welcome the opportunity to appear before the committee today, particularly to discuss the importance of effective protection and enforcement of intellectual property rights, with a special focus on the software industry.
Software piracy and counterfeiting have many negative economic consequences and create significant risks for Canadians. Make no mistake: software piracy is big business. It's estimated that piracy robs the software industry of in excess of $60 billion globally every year. But the costs go much beyond that lost revenue for software makers. They directly impact local economies and people's lives. Software piracy costs jobs in Canada and deprives the government of tax revenues. It's the entire software ecosystem in a country, from developers to resellers to systems integrators and IT specialists, who depend on effective intellectual property protection for their livelihood.
Beyond the economics of piracy, pirated and counterfeit software can create significant risks for the Canadians who use it. Unsuspecting consumers and businesses who acquire counterfeit software can expose their computers to spyware, malware, and viruses that can lead to identity theft, loss of data, and system failures. There are studies by the IDC and the Harrison Group that confirm that pirated software frequently contains viruses and malicious code that causes serious damage to computer systems, resulting in expensive repairs and lost productivity due to extensive downtime.
In one study, nearly one in four pirated or counterfeit operating systems became infected at installation or independently downloaded and installed malicious software when first connected to the Internet.
Beyond the dollar figures, the consequences of piracy and its impact on software innovation are even more important. There's no doubt that piracy, which is really a byproduct of an inability to protect intellectual property rights, is a disincentive to society's most innovative enterprises. We know that software companies and other innovative companies consider the strength of a country's IP laws and its ability to enforce IP rights when deciding where to locate research and development facilities.
This issue should be of particular importance to Canadians. Many of our trading partners have been more active and have done a better job protecting their domestic innovation.
In my remaining time, I'd like to highlight three areas in which legislative reforms could make Canada's intellectual property regime more effective.
First, I have to emphasize the importance of copyright law reform as reflected in Bill C-11. The Copyright Modernization Act will bring Canada into compliance with its obligations under the World Intellectual Property Organization's Copyright Treaty and Performances and Phonograms Treaty. It will provide authors, artists, and other rights holders with important tools in our increasingly online world. We support speedy passage of Bill C-11.
Second, the government needs to take action to strengthen enforcement at our borders. The World Customs Organization has noted that customs officers often are the only ones to know when counterfeit goods are being transported. Unless those customs officers are empowered to act on their own to stop suspected shipments at the borders, border measures are simply ineffective.
Currently, customs officials in Canada do not have the authority to seize suspected counterfeit goods. Rather, the Canada Border Services Agency may only detain goods if the IP rights owner has obtained a court order, which is extremely rare—you have to know when the goods are coming in and where the shipment is going and all sorts of information that rights holders just wouldn't have—or if the RCMP or local police agree to seize the goods. There's no legislation that specifically prohibits the importation of counterfeit goods.
To address these deficiencies, the government should enact legislation to strengthen border enforcement. That legislation should provide customs officials with express authority to detain or seize counterfeit goods, it should permit disclosure of information and provision of samples of suspect goods to rights holders, it should specifically prohibit the importation of counterfeit goods, and it should make non-compliance subject to both civil and criminal remedies.
Third, I'll speak briefly to Canada's trademarks legislation, which really needs some amendments to address counterfeiting issues. In this area, the government should look at enacting legislation to introduce criminal provisions for trademark counterfeiting and to provide for statutory damages in trademark counterfeiting cases. Statutory damages have been part of the Copyright Act since 1999, but there's no similar provision in the Trade-marks Act. To address this deficiency, the government should amend the Trade-marks Act to provide for statutory damages, which should be at least as great as the nominal damages currently awarded by Canadian courts in trademark infringement cases.
Before I conclude, today, June 7, is World Anti-Counterfeiting Day. It is an interesting day to be appearing before the committee to talk about these issues. World Anti-Counterfeiting Day is an initiative of the Global Anti-Counterfeiting Network, which is a coalition of national and regional anti-counterfeiting organizations. On World Anti-Counterfeiting Day there are all kinds of events and public awareness campaigns in countries around the world to highlight the problems with counterfeiting.
In that vein, here in Canada, today marks the release of a new report by the Canadian Intellectual Property Council, which is an arm of the Canadian Chamber of Commerce. The report, which is entitled “Counterfeiting in the Canadian Market: How do we stop it?”, provides an overview of the counterfeiting problem and makes a series of recommendations to improve Canada's intellectual property rights regime to help combat counterfeiting. I have been told that the report is going to be tabled with the committee, and I certainly would be happy to provide the committee with a link to the document as soon as it's available online.
In conclusion, we need government to clearly and frequently convey the importance intellectual property plays in developing knowledge-based economies and ensuring our country's ability to compete globally. For Canadians to derive the benefit of and compete in that global economy, it's imperative that Canada's legal and enforcement regimes be strengthened to encourage development and protection of intellectual property.
On behalf of Microsoft Canada, I wish to express my appreciation for the committee's interest in this issue, and for the opportunity to appear before you today.
The Chair David Sweet
Thank you, Mr. Tortorice.
Before we go on to Mr. Ptycia, Mr. Tortorice mentioned a study that's coming from the Canadian Intellectual Property Council. We also have a message sent to us through the clerk from George Addy, who is referring us to a study called “Mind the Gap: Economic Costs and Innovation Perils in the Space between Patent and Competition Law”. It can't be distributed because it's not in both official languages, but if you're interested in accessing that yourself, the clerk can advise you how to get a copy of that.
Now on to Mr. Ptycia for seven minutes, please.
Dale Ptycia Senior Manager, Licensing, Hockey Canada
Good morning, Mr. Chair, honourable members, ladies and gentlemen. Thank you very much for inviting Hockey Canada to participate this morning in the standing committee's study of the intellectual property regime in Canada.
Hockey Canada is the country's national sport organization. Our association is responsible for the creation and implementation of hockey-specific programming for Canadians from entry-level beginners through to high-performance athletes competing at world championships and in multi-nation games, such as the Paralympic and Olympic Games.
Our programming extends to volunteer coaches, officials, and administrators from coast to coast to coast. Over the last 20 years, through retail licensing Hockey Canada's brands—Team Canada, Équipe Canada, our logos, our trade dress, etc.—have all been diligently cultivated to provide a substantial revenue stream for the association. The growth in the popularity of the Team Canada brand over this time period has caught the eye of counterfeiters not only here at home but abroad as well.
Counterfeiting of the Team Canada brand has developed into a robust form of underground commerce, as expressed by my colleagues here today with their specific product lines. It's regularly found in the marketplace alongside a multitude of other brands and intellectual properties. It's found at bona fide retailers, among mass merchants, in convenience stores, at flea markets. It's found on Internet auction sites. We even found counterfeit Hockey Canada products advertised on downtown Toronto parking meters.
Counterfeiting of Hockey Canada products not only dilutes the value of the intellectual property itself; it takes millions of dollars away from legitimate Canadian retailers selling Hockey Canada products. Counterfeiting also affects our licensing partners. It reduces Canadian jobs and services in the Canadian supply chain and elsewhere, all leading to a multitude of direct and indirect domino-type effects, such as lost taxes that would be paid by legitimate Canadian businesses.
In our particular case, counterfeiting means lost royalty revenue. Lost revenue for Hockey Canada equates to lost opportunities to support wholesome athletic opportunities for all Canadians.
Several recent observations by my colleagues at the NHL and the NHLPA have indicated that as many as 75% of all jerseys worn to an NHL game are counterfeit.
We saw a similarly high ratio of counterfeit to authentic jerseys during the 2010 Olympic Games. In a time span of less than two weeks during the 2010 games, the RCMP and the Canada Border Services Agency at the Vancouver mail facility only intercepted and detained more than 16,000 counterfeit jerseys with a retail value above $2.3 million. Once we were contacted and the RCMP provided us with background information on the escalating arrival of suspicious Team Canada jerseys, together we estimated that less than 20% were intercepted compared with the number of counterfeit jerseys imported into Canada leading up to and during the Winter Games.
At the request of the RCMP, Hockey Canada arranged for additional personnel to assist with the processing of these counterfeit jerseys. Costs were absorbed by our association for this step, which highlights the limited resources available to front line officials.
There are substantial costs and inherent difficulties to the enforcing by brand owners of intellectual property rights through civil avenues. We are dealing with criminals who do not adhere to any laws and do not keep any records for anyone to be able to establish what profits may have been made. As a double whammy, many counterfeiters simply view any exposure to civil remedies here in Canada as a cost of doing business. Monetary penalties or awards are generally small and much less than the actual costs associated with the enforcement and civil action, even assuming that we can collect on those. Without statutory damage awards or appropriate border seizure capabilities, Canada's current civil remedy toolbox is somewhat limited.
Counterfeit product cannot be considered safe by any means whatever, with no adherence to the Canadian Consumer Product Safety Act, the Competition Act, the Consumer Packaging and Labelling Act, etc.
Unknown origins also lead to a whole sector of unknowns, all too numerous to list and all too common to everyone in the room. The current supply chain of counterfeit Team Canada jerseys is dominated by manufacturers based overseas, and counterfeit commerce is conducted through the Internet. This channel makes it virtually foolproof for any individual with a credit card and a mailing address to participate as an importer of counterfeit goods.
For example, our case file has civil action conducted in Ontario against a barber shop owner and a school teacher; in Manitoba, against a butcher shop owner; and in Alberta, two students who attempted to offset their Olympic ticket expenses by selling Team Canada counterfeit jerseys that they imported from Asia.
This underscores the need for better education of the public. Industry is prepared to partner with government in the education process, but cannot do it alone. The ease of access via the Internet has exponentially added to the counterfeit Team Canada products in the country. Importing or for that matter exporting counterfeit products should be treated with strong measures. With virtually no deterrent currently for importing or possessing counterfeit goods in Canada, this channel will continue to be utilized by counterfeiters to ply their unauthorized goods.
As a registered brand owner with the Canadian Intellectual Property Office, Hockey Canada has the responsibility to monitor and police our intellectual properties and brands. The tools afforded to brand owners such as ourselves through the Trade-marks Act and the Copyright Act realistically are limited. Hockey Canada regularly engages the services of anti-counterfeiting experts, dedicated legal counsel, and trained investigators to assist with the ever-elusive task of counterfeit enforcement, consuming very valuable financial resources for our association.
Hockey Canada continues to support and participate in actively engaging the efforts of the Canadian Anti-Counterfeiting Network and the Canadian Intellectual Property Council, as Chris mentioned earlier. We support the need to strengthen Canadian legislation to empower front-line enforcement officers to target and seize counterfeit goods. Greater resources are also necessary for the officers to process seized counterfeit goods and effectively deal with these items. We strongly support the recommendations these two organizations have proposed.
The Chair David Sweet
Thank you very much, Mr. Ptycia. That's the end of your time.
Did you have one quick point?
Senior Manager, Licensing, Hockey Canada
I have one more paragraph, if I could, Mr. Chairman.
The Chair David Sweet
Okay. Make it very quick.
Senior Manager, Licensing, Hockey Canada
Counterfeiters are not regular day-shift workers. Officers need to be able to contact authorized brand representatives at any time to validate and assist with the situation at hand. We look to support the exchange of information and intelligence on a national basis for our partners in enforcement. Perhaps this can be achieved through a national database containing pertinent information, with front-line officers who can readily access such information as brand owner contact information, counsel of record, etc.
The Chair David Sweet
All right, we need to hold it there. If you need to add anything, when you're questioned you can do that, Mr. Ptycia.
Hélène LeBlanc LaSalle—Émard, QC
Mr. Chair, the motion did not clearly state whether there would be a report or, if so, whether it would be tabled in the House of Commons. I would like us to reserve a few minutes at the end of the meeting to clarify that, unless it is possible to get that information directly from the clerk.
The Chair David Sweet
I think it's best, when we have witnesses here, that we chat about it at the end.
Mr. Braid, you have seven minutes.