Industry Committee on Dec. 2nd, 2013

[Christopher Nelligan]

I might be able to add to that.

I had the honour of helping to represent Canada at the Anti-Counterfeiting Trade Agreement negotiations, and I've had some dealings as well on the comprehensive economic and trade agreement with the European Union. I certainly will not speak to their reasons for doing what they do, but one thing I did learn is that the laws of different countries are actually different in some very material particulars. That is one thing that treaties are all about—trying to come to a common agreement with different laws.

One of the issues here is consistency with other border legislation, and particularly the Customs Act. The Customs Act recognizes in several places that importers are not necessarily the owners of goods. Consignees are not necessarily the owners of goods. In fact, I dare say that there is probably a fairly high percentage of people in this room who are probably right now consignees. There are probably goods for Christmas or whatever on the way here from other countries—ordered online, given from relatives, and so on—and the consignee is the person who is entitled to receive delivery of that shipment under international law.

There may be many unwitting consignees who don't know that it's on the way. Depending on the commercial transaction, they may or may not be the owner. The transactions are complex and ownership can change at any stage in the shipment process, it seems.

If you have a very speedy, simplified process that just says, “Well, the owner disappeared. We're going to destroy those goods”, you end up with what amounts to expropriation without notice in the context of a private dispute. The owner will perhaps ask a few days after the goods are destroyed what happened to his Christmas present, and it's gone. That is the one issue that we have to wrestle with when it comes to a simplified process. It does not quite jibe with how the Customs Act works.

Some courts have called the Customs Act draconian in the ways in which the government seizes and deals with property under that act, but even the Customs Act, when nothing is done, gives you far more time than what has been suggested for a simplified process.

[The Chair, Conservative, David Sweet]

Thank you very much.

Mr. Warawa, do you have a comment?

[Mark Warawa, Conservative, Langley, BC]

Thank you, Chair.

I have a question.

I intend to support the government's position and the NDP's position not to support the amendment, but I do have a question on the amendment being proposed by my Liberal friend across the way.

We heard from Canada Goose as one of the witnesses. Its products have been counterfeited. Its jackets and vests are very popular international products known for their excellence in keeping people warm, and their product quality. Canada Goose did not say this, but it relates to what they had said. If there were a suspected container of counterfeit Canada Goose jackets and those counterfeit jackets were worth $3,000 to $4,000, if they had been the real product, the actual market value would have been 10, 15, or 20 times that amount.

There are a lot of ways that Canada Goose makes sure their products are very easily identified as real or counterfeit. They do this with little holographs, and they're very careful.

You used an anecdote so I want to give a scenario. If the container were opened and the products were missing all of these identifiers and Canada Goose said they believed the products were counterfeit and the CBSA officer also had a legitimate suspicion that the products were counterfeit, at this time they would have 10 days to detain the products. After 10 days it's gone, released to wherever it's going, unless Canada Goose wants to pay to have it detained longer.

In my hypothetical scenario, which may have a ring of truth to it, they may have to spend well in excess of the value of that container in order to have it detained, just to keep it out of the market. It may be one of many that has finally been caught.

In the scenario that I think Ms. Sgro is suggesting, the rights holder is paying to keep counterfeit goods from entering the Canadian market. In order to protect Canadians from buying junk instead of the real thing, they would have to detain those goods for how long at their cost? To detain something that may be worth $5,000 they might have to pay legal fees and storage and whatnot, maybe hundreds of thousands of dollars, just to keep this from getting into the market.

I think that's what Ms. Sgro is trying to reach a balance on.

Could you speak to my scenario?

[Megan Imrie]

There's just one point of clarification I hadn't mentioned earlier. If they go through the court process, and, in fact, those goods are found to be infringing, they could be awarded damages through the court, which would include the cost of storage and holding onto those goods. If they are successful through the court process, they will be refunded those fees.

What we're saying, in terms of the way Bill C-8 is constructed to put the onus on the rights holder, is that they're the ones who have an incentive or a predominant interest in this. The danger with impacting the importer is that it may not turn out to be an infringing good or they may not be the actual owner of that property. We don't want to alter the balance in the way Bill C-8 is currently designed and put the onus elsewhere.

[Mark Warawa, Conservative, Langley, BC]

Mr. Chair, may I continue with a question on that?

[The Chair, Conservative, David Sweet]

You may.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

You've said that Canada Goose, in this scenario, would be paid back if they found that the goods were indeed counterfeit. But in my scenario, the importer and the manufacturer of these counterfeit goods have not been part of the process. Canada Goose has paid for the lawyer, gone to court, and had the courts deem that the goods are counterfeit, and they've paid a lot of money to store these and go through the process. You said they would be paid back. Who is paying them back when nobody's paying them back?

[Paul Halucha]

Are you asking if the importer...? Because in that situation, the court could award compensatory damages to the rights holder for the cost of detention and destruction.

[Mark Warawa, Conservative, Langley, BC]

That's providing the importer has assets to grab hold of.

[Paul Halucha]

That's providing they have money.

[Mark Warawa, Conservative, Langley, BC]

If they don't have it, in my scenario, the importer is not replying; the rights holder is going through the system; they've paid a lot of money to finally get permission to destroy the goods; and there's no money to come back to them to pay these costs because the importer has not been part of the process. They've refused to, because it's a cost of doing business.

[Paul Halucha]

So they have the value of having the goods removed from the market in that case. That's one thing.

Secondly, they do receive information as part of the exchange with customs officials. To the extent that they can arrive at an out-of-court settlement with the importer, there's nothing that prohibits that from happening. That can be done more effectively and efficiently than by going to court, if court is not viewed as something that the rights holder wants to pursue.

But, ultimately, it is a private right and the importer has rights as part of their.... The crown cannot just seize their goods and destroy them based on an allegation without a court determination that they are indeed infringing.

[Mark Warawa, Conservative, Langley, BC]

Thank you.

[The Chair, Conservative, David Sweet]

Are there any other questions or debate?

Shall amendment LIB-1 pass?

(Amendment negatived [See Minutes of Proceedings])

[An hon. member]

Yes.

[Voices]

Oh, oh!

[Judy Sgro, Liberal, York West, ON]

We should have recorded votes on these things.

[Voices]

Oh, oh!

[Judy Sgro, Liberal, York West, ON]

Thank you, Mark. I appreciate your comments.

[The Chair, Conservative, David Sweet]

On amendment G-1, go ahead, Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

It's along the same lines as some of the discussion we've had, and it's a fairly straightforward amendment, so I'll throw the ball to the officials to give us just a quick explanation of it, if they could.

[Paul Halucha]

It follows along very nicely on the discussion we were having. This amendment proposes to provide clarity that the information that is shared between border officials and rights holders can be used for the purposes of reaching an out-of-court settlement. This goes to the point that was just raised by Mr. Warawa, in the context of a situation in which they want to avoid legal costs, and they would like to get the goods off the market.

The committee heard testimony from witnesses that in some cases one container is opened up and it has infringing goods or suspected infringing goods from many different rights holders. In that case, we wanted to make very clear that an out-of-court settlement would be provided and that there would be a mechanism for that to happen on a simplified basis. That's the purpose of this amendment: to clarify that the rights holders can use the information they receive from the border agents for the purposes of obtaining an out-of-court settlement.

[The Chair, Conservative, David Sweet]

Ms. Sgro.

[Judy Sgro, Liberal, York West, ON]

Let's run through that for a minute. A rights holder will see who has signed the bill of landing, the document that accompanies a truck load of suspected counterfeit goods. We'll use the Canada Goose jackets as the continuing example.

You're saying that once notified there's a possibility of having counterfeit merchandise in a particular container, the rights holder goes over and says he believes it is counterfeit based on his rights holding. Then you're suggesting that the rights holder tries to contact what you call an importer. I would call it the counterfeiter, but an “importer”, as you call it. Then the rights holder is going to try to get in contact with the importer.

[Paul Halucha]

Yes.

Basically, a lot of the legal community that represents rights holders right now advise us that this is frequently how they clear goods at the border. They were concerned when they first read the bill that we hadn't made it explicit that an out-of-court settlement was one of the reasons for which the information could be provided. For example, it doesn't have to be a counterfeiter; it could be a supplier who doesn't know they have a bad supply deal with somebody. It turns out they've imported the stuff, it's detained at the border, and then they learn that they have a supply problem.

If a rights holder comes to them in that circumstance, it's most likely that if they haven't done anything wrong, or if they have done something wrong and they don't want to go to court, they will have an incentive at that point to turn the goods over. Then you have an expedited process, where the crown would provide those goods to the rights holder for storage and destruction.

A cease and desist letter is the format that they use, and it's a well-established practice.