Industry Committee on Nov. 18th, 2013

[The Chair, Conservative, David Sweet]

You have about 10 seconds.

[Phil McColeman, Conservative, Brant, ON]

Well, I'll end it there, then, won't I, Mr. Chair?

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. McColeman. As always, you're profoundly reasonable.

[Voices]

Oh, oh!

[The Chair, Conservative, David Sweet]

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

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for being here. I'm going to continue with what Mr. McColeman was talking about.

Mr. de Beer, specifically on parallel imports, as written, is it possible that this legislation could lean to the detainment of goods that are being legitimately imported, using, for example, parallel importation? And if so, at whose expense would that be?

[Prof. Jeremy de Beer]

It is my understanding that it is possible to detain goods that are being imported in parallel, particularly copyrighted goods that are made with the consent of the rights holder in another jurisdiction but are being imported into Canada to offer Canadians pricing parity—better, fairer prices.

I think the issue there again goes to one of the live matters before the committee, that is, statutory damages. I have no sympathy whatsoever for pirates or counterfeiters, but in cases of legitimate disputes the threat of statutory damages can dramatically shift the balance of power. A trademark owner or a copyright owner can actually bully the other party away from even taking an issue because the consequences of losing with statutory damages are so serious, whereas the status quo of proving trademark infringement damages seems to work reasonably well and, in cases of legitimate disputes, allow the parties to make their arguments in court.

[Glenn Thibeault, NDP, Sudbury, ON]

In your opinion, do you believe that the government or the border officials have an accurate picture of the extent to which businesses in Canada are using parallel importation? If so, how will those businesses be protected from detainments that are not legitimate? If not, how would border guards know that imports like these would be lawful?

[Prof. Jeremy de Beer]

I don't know that anybody really has a handle on the scope of this problem or, frankly, the problem of counterfeiting and pirated goods crossing borders in general, so I applaud the efforts of the organizations that my fellow witnesses represent to gather better data. To me, that's something that has to be done on an ongoing basis to really understand the scope of this problem, rather than having only anecdotal examples such as we mostly have at present.

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Lipkus, I went onto your website earlier today to try to get a little bit of a handle on parallel importation, because I thought the word “grey” really focuses in on this, particularly because it's such a complex issue and very hard to get a handle on.

Would you have anything you wanted to add on that?

[David Lipkus]

Right now, the grey market is legal, so this bill does not include grey market goods. This should be of no concern to the committee because this bill addresses counterfeit goods. There is a big difference. A grey market good is legitimate and was authorized to be manufactured by the rights holder.

I can tell you on a personal level that every counterfeiter who calls me says, “This stuff is real; it's grey market”, and in the end it is determined as being counterfeit. That's the reality of what the counterfeit world is like out there. But this bill addresses counterfeit goods, goods that were not manufactured by the rights holder. That's what is going to be stopped by this bill, so I don't think it's an issue that requires further concern, because grey market goods are legal in Canada, and I would say this bill addresses that issue as I previously stated.

[The Chair, Conservative, David Sweet]

You have one-and-a-half minutes left.

[Glenn Thibeault, NDP, Sudbury, ON]

Right back to you, Mr. Lipkus. We often hear of the health and safety risks posed by counterfeit goods. You eloquently mentioned those before, I think.

Do you think we should specify in this bill which counterfeit goods pose a health and safety risk, and should they be prioritized for enforcement, especially given the limited resources we are seeing?

[David Lipkus]

It's a very good question. I'll give you two very quick examples, as I have under a minute, I believe.

We don't know what we're up against. That's the reality. You take something you might not think is harmful to you, and it ends up being of great harm. People buy counterfeit sunglasses. People sell counterfeit sunglasses in Canada all the time. The legitimates have a sticker that says 100% UV protection, and the counterfeits have a sticker that says 100% UV protection, but the counterfeits do not provide any UV protection. Instead, they only shade the eyes and increases the size of the cornea. As a result, you are letting additional UV rays into your eyes.

So are sunglasses harmful? You might not think so, but based on the story I've told you, wouldn't you want to move them to the top of the list, considering that you can increase the damage to your eyes?

At the end of the day I think all counterfeits need to be stopped. I gave a quick example of the luxury goods that many people don't have a problem with. People in New York go to Canal Street and seek them out, but the same people selling luxury goods are selling drugs, and counterfeits are the issue on a global scale in every industry. We need to stop this crime.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lipkus.

Now to Mr. Holder, for five minutes.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I'd like to thank our guests for being here today as well. The sense I have from all of your opening comments is that you're all in support of the bill and you think it's going in the right direction. We appreciate your testimony, which has given us some ideas to look at to potentially improve the bill.

Mr. Ptycia, as I was going to approach you, I was thinking that I would start with the hockey song, until I realized it was breaking a trademark, so I will not do that. You mentioned in your testimony that back in 2010, some 16,000 jerseys were confiscated, which worked out to $32.5 million in counterfeit jerseys. When you spoke in front of our committee back in 2012, you brought to our attention in a very real way the issue of these jerseys and the gravity of the circumstance surrounding the Vancouver Olympics. It was rather interesting, because our minister brought in a fake, a counterfeit jersey, at the last meeting, and it's obviously hard for the untrained eye to tell the difference.

Do you think since that time, as it relates to your specific business, the problem of counterfeit jerseys coming into our country has gotten better or worse? Do you have any sense of that?

[Dale Ptycia]

Do you mean are there more counterfeits coming in?

[Ed Holder, Conservative, London West, ON]

That's exactly what I mean.

[Dale Ptycia]

I think we're probably on the same track as we were back in 2009-2010, at least at this early stage. I think it will continue to be magnified and to become of even greater concern. As a real-life example, I recently spoke to a small business operator who deals expressly in licensed-product goods. He is based in Winnipeg and has upwards of 12 additional stores. He told me last week, as we spoke about my coming here this week, that his Internet business, his bona fide e-commerce business in Canada, has dropped by over tenfold since the introduction of the counterfeit jersey supply chain coming out of China with our Team Canada product in addition to his NHL-branded and NFL-branded product and so on.

It continues to impact bona fide small businesses across the country. Unless we can put the onus back on the counterfeiter or the importer of record if you will...they're the ones who really need to step up and say why they are authentic products.

[Ed Holder, Conservative, London West, ON]

Do you not also want your retailers to ensure that they're buying quality product from the right source as directed by you?

[Dale Ptycia]

That's correct. I think, sir, that this is going on currently in our economy and in our commerce supply chain here in Canada. I suspect, dealing with my other fellow brand owners with the NHL and the other major leagues such as NFL and MLB, that they all have the same sort of approach to the business with bona fide retailers connected with bona fide licensing partners or the supply chain. We always share that common concern about counterfeit goods entering into the stream of regular commerce.

[Ed Holder, Conservative, London West, ON]

This may be directed to Mr. Lipkus. I was noting your comment that all counterfeit goods should be stopped, not just broad shipments as it were. It makes me think about when my wife went with two dozen other friends to China for a five-day shopping spree. That's all I can call it. Most of the women went to those markets where you could buy what we call “knock-offs”. You'll be pleased to know my wife doesn't believe in knock-offs. I'm not sure I have the same energy that she shows with these things.

Does it become an issue that it's probably easier to handle broader shipments than it is to handle one-off knock-offs? I'm just trying to think of what it would take to try to adjudicate or police it. How do you get to the point where you find somebody on the street who happens to have a Versace knock-off purse, and then somehow the purse police come in and say that's a knock-off? Where does it start or stop? Is it all at border points? Do you have any sense of that?

[David Lipkus]

I can tell you that counterfeiters today are getting very sophisticated. The current business model that's being used by these counterfeiters is to enter into a retail store and put very few items per brand out on display. They do that because the rights holders have an interest too. They don't want to spent large amounts of legal fees on cases that handle, for example, five units.

[Ed Holder, Conservative, London West, ON]

Do you not think that often the rights holders know those items are counterfeit?

[David Lipkus]

Sorry—say that again.