Industry Committee on Nov. 20th, 2013

[Jim Keon]

That's correct. These trademark cases around trade dress in pharmaceuticals have been interpreted many, many times through the opposition board and then on to the Federal Court and even up to the Supreme Court, which has commented that the definition of distinctiveness is critical to the whole Trade-marks Act.

So yes, this particular aspect of trademark law has been interpreted extensively by the courts over the last several decades, and in particular with regard to pharmaceutical trade dress in Canada.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I did notice that the new definition is quite a bit different in its read than the last definition, and I'm wondering where they got it from. Often I've seen that when definitions are changed, the new definition has often come from another jurisdiction, such as Australia or the United States, etc.

Is this proven case law in any other Commonwealth country in the world?

[Jim Keon]

The explanation we were given is that they had gone to the international agreement, the trade-related intellectual property agreement, and tried to incorporate some of the elements from that into the Canadian law.

In our view, they actually didn't do that entirely correctly. But more fundamentally, the wording is quite different.

No one has ever suggested before the court, in challenging or not these opposition cases in regard to trade dress in pharmaceuticals, that Canadian law is in any way inconsistent with TRIPS. Our current law is consistent with TRIPS.

We believe, again, that the change they're suggesting would create uncertainty and actually do a disservice to the case law that's been pretty well formed now.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

From my understanding—and correct me if I'm wrong—in Canada we actually, at all court levels, have to take into consideration international agreements that are ratified by our government, or signed by our government, whereas in the United States it's a different process; I think it has to go through the federal court.

Notwithstanding that, surely we can't be the first country to decide that this is an interpretation we need to take from the TRIPS agreement. There must be other countries that are signatories to the WTO that have put together new legislation to reflect this. I can't believe our officials would come up with a new law or a new definition based upon what they believe needs to be done differently, when we have the United Kingdom, India, Australia, and many other jurisdictions that our courts actually refer to in their decisions that would use this definition.

[Jim Keon]

I think that's right.

The TRIPS agreement is signed by more than 120 countries. The wording is intended to be general, reflective of common-law countries, civil-law countries, many varying systems of business law, etc.

There's no suggestion that everyone has to change their law to be exactly, word for word, what's in the TRIPS or any other trade agreement. The substantive effect of your law has to be consistent with what's in the agreement—and our law is.

Thank you.

[The Chair, Conservative, David Sweet]

Now we'll move on to Mr. Masse for five minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair. It's good to be back here.

We've done this a number of times. It's good to see something moving forward. As New Democrats, we've been pushing this for a number of years.

Mr. Smith, you distributed an interesting chart from the Royal Canadian Mounted Police. For those who don't have the benefit of being able to see it, it shows that since 2005 the percentage of occurrences involving harmful products has gone from 11.2% up to 30.4%. As well, the total retail value of seized IP-infringing goods has spiked to $38 million. But there's an interesting anomaly on the chart, and I'll ask about this. In 2010 it was at $24 million. It went up to $67 million and then back down to $38 million in 2012. So in 2011 it was $67 million. Can you tell us what happened in that timeframe?

[Scott Smith]

That's been referred to a couple of times by several witnesses.

That was Project O-Scorpion. That was when there was a specific effort by the RCMP to target areas around Toronto.

[Brian Masse, NDP, Windsor West, ON]

We know we get the results when we put the resources there.

[Scott Smith]

Precisely.

[Brian Masse, NDP, Windsor West, ON]

What is the reason for the harmful products coming in? Are there certain types of products? Does this information also include cigarettes? I didn't notice them on—

[Scott Smith]

I believe it does.

[Brian Masse, NDP, Windsor West, ON]

Are there any particular harmful products that are coming in?

[Scott Smith]

There are all manner of products. The food and consumer products.... People are here and they'll tell you about a number of products that have issues around them, things such as air bags. You saw the circuit breakers. It could be any manner of thing.

[Brian Masse, NDP, Windsor West, ON]

I'd like to move to how we actually work this through with the CBSA. By 2015 this government will have taken $143 million out of CBSA's budget and reduced front-line officers by 325. There are also going to be 19 detector dog units retired in total. Actually, some have already been moved to the prisons as opposed to the front line of our country.

Ms. Ventin, you said more training is going to be necessary. What type of training? Will the CBSA agents be under any risk, given that harmful products are included in what they actually are looking for?

Mr. Lipkus, if you have something to say to that as well, I would like to hear that.

[Carla Ventin]

Training is definitely an ongoing challenge on this issue. As I mentioned, counterfeiters are much more sophisticated. Often it takes the rights holders' expertise within the companies—to actually go and physically do the inspection themselves and discuss with the border officers whether something is counterfeit. It is so difficult to detect now. So that's an ongoing challenge.

The turnover rate at the border is a challenge. From what I hear, border officers are already very busy and have an awful lot of responsibility.

[Lorne Lipkus]

Certainly I can't comment on what the best allocation of resources is for customs; I can only say it's a proven fact that the more resources you allocate to look for counterfeit, the more counterfeit you find. That's Project O-Scorpion.

I can also say, in respect of working with customs, that they're already working with these shipments. They're already looking at these shipments, many of them for other customs violations.

We're just talking about counterfeit, but very often for these shipments they're undervalued, they're mis-declared, and they're mis-described. There are all kinds of other issues with them. Some of these shipments have guns in them. They also have counterfeit. There are a lot of other things going on.

The training usually results in the sharing of information, a partnership between the brand and customs and the police, as a result of which the system our customs officers have allows them to target where a likely shipment of illegal product being counterfeit is going to be found. That's the 1% to 3% of shipments they look at.

[Brian Masse, NDP, Windsor West, ON]

Is the 10 days going to be enough for the information from customs to be shared, to get a responsible action back to confirm or deny whether it's counterfeit, and then, if that takes place and it is counterfeit, to contact the importer? Is that enough time in the process? Or should there also be a built-in fail-safe? For example, if they need another 48 hours, they can institute another 48 hours if necessary.

[Lorne Lipkus]

In the vast majority of cases that I've been involved in, I would say for over 95%, absolutely, for certain, when we're contacted by the RCMP, which usually is the same day they're contacted by customs, within 24 to 48 hours at the outside we let them know whether it's counterfeit or not.

We can usually tell from a picture. I can give you one example on luxury goods. I can't say that every shipment of luxury handbags coming from China to Canada is counterfeit. I can only tell you that almost every time we're contacted for a verification, they wind up being counterfeit.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Lipkus and Mr. Masse.

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

[Rob Merrifield, Conservative, Yellowhead, AB]

Thank you.

I'm new to the committee, so I'll come at it from a bit of a trade perspective, as I do have an opportunity to chair the international trade committee. We've been working very hard. There actually is a difference between this committee and the trade committee. I've noticed that already. I don't think there's a person in the room who has a disagreement, really, with the concept of what we're trying to deal with. That never happens in the trade committee. I don't know if you realize that.

[Voices]

Oh, oh!

[Rob Merrifield, Conservative, Yellowhead, AB]

Nonetheless, when it comes to counterfeiting and what we're talking about in this bill, and whether it's going to deal with the issues as directly as we need to, I'm trying to get a handle on how large a problem we actually have.

I have information here and the numbers. I think it seems to be growing, but in the last year it is down a little bit. I was struck by one thing, and that's the countries we're seeing counterfeit from.

We're seeing it from China, India, Pakistan, and Thailand. Those don't really alarm me that much. Well, maybe they alarm me, but they don't surprise me. The United States is the other one. That does surprise me a little bit.

Our largest trading partner is the United States. The United States' largest trading partner is Canada. I'm wondering if they're seeing the same thing. I'm wondering if they see counterfeit coming from Canada to the United States, if we happen to be manufacturing counterfeit, or if we're a pipeline to the United States and they're a pipeline to us.

The chamber might have some comments on that.

[Lorne Lipkus]

I would like to answer that. I've been involved in several cases involving in-transit shipments coming from China or other countries through Canada into the United States.

On cases I've personally been involved in, counterfeiters have shipped by boat goods originating in China, goods that were stopping in places in Europe and then being offloaded in Halifax to be transported by rail across the country—true cases. Counterfeits are coming in through the FedEx facility in Anchorage and being transshipped through Canada and then back into the United States.

The largest case of counterfeit cellular products, including dangerous batteries and chargers, was a result of an in-transit shipment that would have come through Canada and back into the United States, and it was caught by the combination of customs in the United States and in Canada.

So there is some sort of cooperation; perhaps there were other crimes going on with that shipment such that they caught it. But in transit is something that absolutely happens on a regular basis, where there is cooperation and there is counterfeiting.

[Rob Merrifield, Conservative, Yellowhead, AB]

Are there cases where we actually manufacture counterfeit goods either in the United States or Canada?