Thank you very much for the opportunity to testify before you on the important matters in Bill C-8, Combating Counterfeit Products Act.
I would like to focus my comments to the committee today on only one issue in particular and that's the issue of parallel imports. The term “parallel imports” is one that you may or may not have heard before. I would like to help the committee understand what parallel imports are, and why they are important to Canadian families, and how Bill C-8 might help to fight price discrimination against Canadians.
What are parallel imports? Parallel imports are not pirated goods nor counterfeit products. Counterfeit products mislead consumers about the origins, quality, or other valuable aspects of goods. Assuring quality, especially in respect of health or safety standards, is among the most important functions of a trademark. It's essential that consumers not be misled by inauthentic marks, especially when it comes to compliance with health and safety standards. Bill C-8 is correctly aimed at prohibiting pirated goods and counterfeit products bearing inauthentic trademarks from entering into Canada.
Parallel imports typically pose no such problems. Parallel imports are genuine articles sold with the authority of the intellectual property rights owner outside of Canada. Manufacturers may want to segment geographic markets, so that they can keep prices higher in some jurisdictions than in others. They do this by giving certain distributors exclusive licenses or assignments of their intellectual property rights. Often those rights are to packaging, labels, logos, or other incidental aspects of the goods.
Exclusive licensees or assignees often then use these intellectual property rights to fully control their territorial markets, including pricing. Legitimate competitors who would otherwise import genuine articles from abroad and offer them to consumers at lower, fairer prices, are called “parallel importers”. Parallel importers are not exempt from Canadian health and safety standards, or from complying with all relevant regulations regarding duties, taxes, and other legal requirements. Parallel importers do, however, sell the same goods at lower prices.
Why are parallel imports important? Parallel imports help to prevent geographic price discrimination against Canadians. They are one way of encouraging pricing parity across borders, such as the one between Canada and the United States. Permitting parallel imports is also an essential aspect of free trade. For example, we want Canadians to have access to goods from the European Union on the fairest terms possible. That is among the reasons for concluding the comprehensive economic and trade agreement with the EU. Fair access is facilitated when multiple legitimate suppliers of genuine articles are able to compete to offer Canadians access to goods produced with the authority of intellectual property rights owners in other countries.
I note that the principle of eliminating price discrimination against Canadians is rightly identified in the most recent Speech from the Throne as a priority to protect Canadian families, but I worry that the bill creates the risk of inadvertently undermining these aims.
I also note that Bill C-8 might undermine certain provisions recently enacted into Canadian law through the Copyright Modernization Act, which gives copyright owners the right to control the distribution of goods only if distribution has not previously been authorized inside or outside of Canada. Certain intellectual property rights, lawyers say, are “exhausted” by the first sale of goods anywhere, but Bill C-8 seems to restore some of these rights to permit detention of such goods at the border.
Finally, I note that this aspect of Bill C-8 appears to make Canadian law inconsistent with the law concerning parallel imports in the United States, particularly following a decision of the United States Supreme Court, which I can speak to more in questions if you're interested.
I admit that it was not easy for me, or a number of other IP experts whom I consulted, to understand the intricacies of this bill's provisions affecting parallel imports. The provisions are technical and complex, and they interact with the provisions of the existing legislation with effects that may not be immediately apparent. So my recommendation is that the committee carefully review all of the provisions to ensure that parallel imports of genuine articles from abroad are allowed so that the government can live up to its promise to protect Canadians from geographic price discrimination.
If I had more time, I might also explain why I believe that Bill C-8 strikes an appropriate balance in providing effective procedural remedies and anti-counterfeiting support to rights holders without unduly burdening taxpayers with the full costs and complexities of enforcing private rights. I believe it would be impractical and excessively costly for taxpayers to impose further obligations on customs and border services officers than already provided for in the bill—certainly without increased budgetary support. Extending the act's application to in-transit shipments, for example, would increase the administrative burden on officials and the financial burden on taxpayers. So might be the imposition of an obligation upon public officials to destroy or indefinitely detain suspected, but not confirmed or of interest to the rights holder, infringing goods. I think statutory damages may also skew the balance in the bill too far away from parallel importers or other small businesses that offer choices to consumers but are not trading in truly pirated or counterfeit goods.
Thank you.