It's good to be with you. Thank you for the opportunity to speak to the committee.
My branch chairs the Interdepartmental Working Group on Intellectual Property Issues. That working group is composed of representatives of the 10 departments and agencies that all have an interest or responsibilities related to intellectual property, which explains the number of officials that are here today.
I intend to provide you with an overview of the issue, outline international efforts to combat counterfeiting and piracy, and explain the purpose of the working group.
My colleague from the Department of Justice, Cal Becker, will describe Canada's current IPR system. RCMP Chief Superintendent Mike Cabana will address the criminal enforcement aspects of the issue. Kimber Johnston, from the Canadian Border Services Agency, will speak to civil procedures and border enforcement issues. Lastly, Diana Dowthwaite, from Health Canada, will speak to health and safety concerns. We would then be pleased to take any questions you have.
First and foremost, counterfeiting and piracy is a growing global problem. Although the issue has been presented by opponents of stronger IP enforcement as a victimless crime and one that's only a problem for rich countries, this is really not the case.
For example, fake pharmaceuticals represent at most 1% of our drug supply. Some developed countries are faced with a drug supply that consists of up to 50% fakes, which poses a much bigger threat to the health and safety of their societies and more severe financial impacts on their economies.
There are also concerns about fake merchandise, such as car brake pads made from sawdust, unsafe electrical goods, and a range of other products.
I will ask my colleague from the RCMP to address this concern and other emerging trends when he speaks to enforcement activities.
Counterfeiting and piracy has gained the attention of the international community, as witnessed by the prominence of the issue on the agendas of the Security and Prosperity Partnership of North America, or the SPP, the G-8, the OECD, the APEC, the WCO, the WTO, and the WIPO.
For instance, under the SPP, we drive closer cooperation among Canada, the U.S., and Mexico on IPR protection and awareness initiatives. The G-8 is providing leadership and guidance by making IPR a priority. The OECD has undertaken the task of measuring the economic impact of counterfeiting and piracy. APEC encourages IP experts from member countries to discuss and share best practices. The World Customs Organization is discussing instruments for border authorities to improve efforts to address counterfeiting and piracy violations. The World Trade Organization provides a forum for members to discuss the trade-related aspects of intellectual property rights. The World Intellectual Property Organization is a forum for all countries to address issues related to the international legal framework.
That is only the multilateral side. Bilateral activities and interests all focus on this issue. The United States has devoted significant resources to this as part of its bilateral diplomatic efforts with specific countries, including Canada.
Canada appeared in the U.S. trade representatives' 2006 special 301 report, which is driven by U.S. industry and is typically used by the United States trade representatives to apply pressure on trading partners on IP issues. Canada has been on the lowest level of the list for the last 11 years. We share the company of the EC, Italy, and Mexico, among others on this list.
Both domestic and international factors have led the Government of Canada to undertake a review of the regime. That's where our interdepartmental working group comes in.
Ten key agencies and departments are examining the issues to identify and analyze potential solutions. The group is currently studying options to improve our regime, with the intent to prepare recommendations for consideration. Broad progress has been made, but the work is not yet complete.
As government representatives, we rely on private sector groups and work closely with them. They include the Canadian Chamber of Commerce and the Canadian Anti-Counterfeiting Network. We regularly consult these groups through surveys, round tables and seminars. That partnership is absolutely critical for a better understanding of our respective interests and concerns.
Canada believes that collaboration between countries, including industry and not just governments, is essential. The problem is global.
On that note, I will hand it over to my colleague from the Department of Justice, Cal, so he can provide you with an explanation of our current IPR system.
The Department of Justice has been providing legal support to the departments with lead responsibilities on the enforcement of intellectual property rights.
You heard Nancy refer to counterfeit and pirated goods. Before I describe the legal framework I thought it might be useful to simply distinguish between counterfeited goods on the one hand and pirated goods on the other. I appreciate that the title for today's hearings relates to counterfeit, but for all practical purposes there are equivalences here in enforcement.
When we talk about pirated goods, for example, we're talking about goods that represent commercial infringement of copyright. So we're talking about DVDs, camcording, software, and music. When we talk about counterfeit goods we're talking about goods that represent a commercial-scale infringement on trademarks. So we link counterfeit with trademarks, and pirated with copyright.
The enforcement often looks very much the same, but there are different legislative regimes, depending on whether it's counterfeit or copyright, and I think you'll find that most of the witnesses today are linking the two in their presentations. In other words, we're trying to combat both counterfeit and piracy.
Today I intend to outline the legal regime we have in place with reference to counterfeit and pirated goods. I think the first thing is to appreciate--and forgive my using this word--the architecture of customs enforcement in Canada.
The Border Services Agency personnel enforce the legislation of other departments where goods are prohibited, controlled, or regulated. For example, the Hazardous Products Act is legislation for which Health Canada is responsible, but customs does the enforcement at the border on behalf of a client department, in effect. So customs personnel are enforcing the Hazardous Products Act at the border on behalf of the client department in whose legislation the goods are either prohibited, controlled, or regulated.
It's important to appreciate that customs has the same repertoire of powers and prerogatives for border enforcement in relation to all of their client departments. Put another way, to take this particular example, the prohibitions on hazardous products don't show up in any customs legislation. They have standard protocol procedures and prerogatives for enforcement of hazardous products. The prohibition per se on hazardous products is in the legislation of the host department, in this particular case Health Canada.
It's important to appreciate that, because it means if there were amendments in relation to counterfeit or pirated goods, they wouldn't be in the legislation on customs, generally speaking. They would be in the legislation of Industry Canada, in this particular case, which is responsible in large measure for the Copyright Act and the Trade-marks Act. That architecture is common to the U.S., Australia, the European community, and the U.K.
It's important to appreciate as well that in Canada we do not prohibit the entry of counterfeit or pirated goods at this time. That leaves Canada Border Services with a relatively limited role in relation to counterfeit and pirated goods.
Specifically, there are procedures that permit rights holders to apply to a court of superior jurisdiction to obtain an order intercepting goods at the border. So Border Services are authorized to intercept goods on court order. They also have a role in relation to RCMP criminal enforcement. It is possible, for example, for the RCMP to share intelligence with the CBSA on suspected importations of counterfeit or pirated goods. In those particular cases there's a role for the Border Services Agency to establish a lookout, intercept the goods, and advise the RCMP. The RCMP will effect a seizure, and there may or may not be a criminal prosecution.
Canada Border Services also have a role in reporting to the RCMP shipments of suspected counterfeit or pirated goods. In those particular cases the RCMP may attend, effect the seizure, and initiate criminal proceedings. But having said that, the principal role of Canada Border Services is to respond in civil cases to court orders, and collaborate with the RCMP in criminal investigations to advise of suspicious shipments or intercept them on intelligence from the RCMP.
Our intellectual property regime invests our border services personnel with a rather smaller role than you'll find in the other jurisdictions I mentioned. In the U.S., for example, the border services agency is the competent authority for making determinations about whether goods are counterfeit or pirated, and the U.S. border services agency will effect the seizure, store the goods, and destroy the goods, largely at the expense of the U.S. government.
You have to appreciate that the U.S. government is itself a source of considerable intellectual property. The interests of the intellectual property industries are coincidental with the interests of the U.S. government. It's said to be a $810-billion industry in the U.S. Its copyright goods are said to be its single largest export, so you can appreciate that the U.S. government will go to considerable length to enforce intellectual property rights, because often as not they're American intellectual property rights.
In the other jurisdictions of the EU, the U.K., and Australia, the tendency is to facilitate the enforcement of intellectual property rights by the rights holder. Generally speaking, in those jurisdictions I mentioned, the costs of enforcement are borne not by the government but by the rights holders. The rights holders would be responsible for the costs entailed in operating registration schemes, storing counterfeit and pirated goods, and in the destruction of those goods. Generally speaking, in the other jurisdictions I mentioned, those costs are borne by the rights holders themselves through a registration scheme compounded with bonds, sureties, and guarantees.
To sum up, basically Canada has not invested its border services with significant authorities in relation to counterfeit or pirated goods; other jurisdictions have rather more. The only real difference between those other jurisdictions, with the U.S. on the one hand and the EU, the U.K., and Australia on the other, is the point at which a determination is made with respect to whether the goods are counterfeit or pirated. The second point of decision is who's going to bear the costs of enforcement.
In the U.S., as I say, the interests of IP rights holders are considered synonymous with the U.S. government's. The other jurisdictions look on this question as being how much state support is going to be supplied to the enforcement of what are essentially private economic rights. As I say, in the U.S.A. the U.S. government supports the system; in the other jurisdictions, by and large the costs are borne by the rights holders.
That's the scheme, Mr. Chairman.
Mr. Chairman, honourable committee members, thank you for inviting us here today, and good morning.
My name is Mike Cabana, and I'm the director general for border integrity for the RCMP. Border integrity includes the federal enforcement program, which holds the enforcement mandate for the RCMP with respect to counterfeiting.
After a brief statement, I'll be happy to answer any questions you might have, as Ms. Segal has pointed out.
Intellectual property rights crime, frequently known as IPR crime, has been called the crime of the 21st century. I believe that's an apt description. Ten years ago, IPR crime was generally not considered to be a major criminal problem in Canada. Counterfeit goods usually consisted of luxury items such as fake Rolex watches and brand-name clothing. They were generally sold at flea markets, and for the most part the consumers knew exactly what they were buying. Although many members of the general public still have this perception, as do some police officers, this is no longer accurate.
The situation has changed dramatically over the last few years. Counterfeit goods seized in Canada now include almost any product you can think of—auto parts, electrical products, pharmaceuticals, food products, cosmetics, and so on. In some cases, these goods have infiltrated the legitimate supply chain. The major retailers usually aren't aware, and they unknowingly sell these counterfeit goods to unsuspecting customers as a result. In many cases, these products pose serious health and safety risks, and they may even have contributed to deaths in Canada. Of particular concern are the cases involving counterfeit pharmaceuticals.
Another layer that adds to the complexity of counterfeit medicine is that many people are purchasing products via the Internet. At the moment, the RCMP have a number of long-term, ongoing investigations involving Internet pharmacies. These cases are very difficult for the police. Although the companies may appear to have Canadian Internet addresses, the servers for the companies are in fact located abroad.
Counterfeit batteries are another major concern. We've seen them leak and even explode. Although it is not known if all cases of leaking or exploding batteries involve counterfeiting, the RCMP are aware that numerous cases have been reported to Health Canada. Many involve children's toys, including eight cases in which children were burned.
I have an empty package here, and I've had personal experience with this risk. It's a package of counterfeit batteries that actually originated from the same shipment, I'm told, as one that exploded in my desk at the office. It's surprising to see the size of the deflagration.
In Quebec, investigators seized over two and a half tonnes of fake batteries in 2005 alone. They pose a serious storage and disposal problem, so why would anyone knowingly create such dangerous products? They do it out of greed, for money, and because of the low risk. Our strategic intelligence reports indicate that profit margins are so high, the risk of getting caught is so low, and the risk of being incarcerated if caught is so low, that virtually all major organized crime in Canada and, in at least one confirmed case, even terrorist groups are heavily involved in the manufacture, importation, and distribution of counterfeit products.
The private sector estimates the impact to the legitimate economy and various levels of government to be in the range of $20 billion to $30 billion annually. While the RCMP are not prepared to give exact figures, from our experiences with this crime, I'm comfortable stating that the impact is easily in the billions of dollars, and it is growing.
Canada is not alone in this phenomenon. Interpol states that a significant portion of the world trade—a sum in the hundreds of billions of dollars—now involves counterfeit goods. Partially for these reasons, the RCMP has designated economic integrity, which specifically includes IPR crime, to be one of its five strategic priorities.
We are making some progress. The RCMP conducts approximately 400 criminal investigations into IPR crime annually, and the number of charges has increased from an average of approximately 400 in the past, to 700 in 2005.
The RCMP, for the past five years, also co-chairs the Interpol intellectual property crime action group, based out of Interpol in Lyons, France, which consists of representatives from law enforcement and the private sector around the world, and is working on implementing initiatives such as an international IPR data bank to improve enforcement coordination worldwide.
There's also the recognition among law enforcement agencies that we have to work more closely together to successfully target the major organized crime networks that are often connected internationally. Recently, the RCMP teamed up with the Canadian Anti-Counterfeiting Network in a public awareness campaign, creating posters with tips for identifying counterfeit products, as well as radio public service announcements.
The RCMP also works with many government departments, such as Canada Border Services Agency and Health Canada, to investigate these crimes. Municipal police forces are recognizing the importance of such investigations and have made major seizures and laid numerous charges as well.
That being said, we still have a long way to go and many challenges to overcome.
Presently, we have no authority to seize criminal proceeds from IPR crime. There are no criminal provisions in the Trade-marks Act, which means we have to be able to prove a fraud occurred and lay charges under the Criminal Code. Criminals often import hang- tags and labels separately from the product, and there's no legislation to counter this technique.
The current criminal penalties imposed by courts pose little deterrence. It is not unusual to charge the same groups multiple times for IPR crimes, as they see the fines simply as the cost of doing business.
While CBSA is willing to help, and their assistance is very much appreciated, we recognize that they do not have the necessary authority at the ports of entry to stop such goods. Neither does the RCMP between the ports of entry, as counterfeit goods are not illegal under the Customs Act.
There is also a major issue with resources. Other than small, joint RCMP-CBSA project teams in Montreal and Toronto, there are no dedicated investigational teams for IPR crime. In Vancouver alone, the number of counterfeit containers referred by CBSA to the RCMP for investigation went from about 50 to 60 annually in 2002-03 to over 300 in 2005. This is under the current regime, where CBSA is not specifically searching for such goods but comes across them during the course of their duties. Similar statistics are found in other major centres.
Given that most of these investigations should be conducted as projects to try to identify and take down the groups involved, which most likely have an international component, investigational resources are simply overwhelmed. In most cases, criminal investigation is not conducted, and the goods are simply relinquished by the importer, who again sees this as the cost of doing business.
On a positive note, public awareness is increasing, and the federal government interdepartmental IPR working group, led by DFAIT, has brought together all government stakeholders to determine the gaps in legislation and resources and recommend ways of filling those gaps.
On that note, I'd like to thank the committee for this opportunity to speak with you about IPR crime. Reaching out to build a better understanding of these issues is important, constructive, and appreciated.
Yes, I do. I realize that my colleagues from the RCMP and the Department of Justice have already made remarks with respect to border enforcement, so I will keep my introduction brief.
I do thank you for the opportunity to present on the manner in which the Canada Border Services Agency currently helps to combat the proliferation of counterfeit and pirated goods. As previously mentioned, the first is via a civil remedy. Both the Copyright Act and the Trade-marks Act permit a rights holder to obtain a court order directing the CBSA to detect and detain shipments of goods that are suspected of violating their intellectual property rights.
Additionally, the CBSA may detain IPR-infringing goods pursuant to the criminal process. The Copyright Act provides for criminal sanctions, as does the Criminal Code.
When the RCMP shares intelligence regarding importations that would be evidence of a criminal offence, the CBSA will create a system lookout for the goods. When the shipment is intercepted, the CBSA will seize the goods as evidence and transfer the goods to the RCMP, who will proceed with prosecution.
Finally, if the CBSA, in the course of examining a shipment for the purposes of administering the Customs Act, consequentially finds goods that may be infringing intellectual property rights, we will ask the RCMP if the shipment meets prosecution criteria, and if so, the goods will be seized as evidence.
It is not practical, however, for the RCMP to pursue criminal charges for every suspected violation of IPR-infringing goods. When the shipment is not significant enough to warrant criminal action, the importer is advised of the suspected authenticity of the goods and in these instances will often choose to abandon the shipment.
This brings us to one of our challenges as an agency. The Customs Act permits CBSA to detain goods that are prohibited, controlled, or regulated by any act of Parliament until they are satisfied they are dealt with in accordance with the applicable act. Currently, however, there is no legislation that specifically identifies counterfeit goods themselves as prohibited, controlled, or regulated.
Under the Copyright Act the goods themselves are not prohibited. Rather, there are offences against a person who knowingly makes, sells, or imports for sale counterfeit goods. The Trade-marks Act is also silent. As there is no ancillary legislation defining counterfeit goods as prohibited, they cannot be targeted or detained by the CBSA under the authority of the Customs Act.
As you've heard, however, the CBSA is working with the interdepartmental partners to explore options that will address the growing concerns over the risk of unsafe counterfeit products, loss of revenue, and involvement of organized crime.
Thank you very much, and I look forward to your questions.
Good morning. My name is Diana Dowthwaite. I am the director general of the inspectorate part of the Health Products and Food Branch of Health Canada.
I would like to start by providing a brief overview of the role and mandate of the inspectorate. The inspectorate's role is to deliver a national compliance and enforcement program under the Food and Drugs Act, for all products under the Health Products and Food Branch mandate, with the exception of products regulated as foods. This includes pharmaceuticals, veterinary drugs, biologics, natural health products, and medical devices. We deliver these services across the country, with inspectors in B.C., Manitoba, Ontario, Quebec, and Atlantic Canada.
We have four key core functions that help us verify that health products on the Canadian market are legally authorized for sale and are safe. First is our proactive role in compliance promotion with our various inspection programs, under which companies intending to conduct an activity such as manufacturing, importation, packaging, labelling, wholesaling, testing, and distribution of drugs in Canada are required to pass an inspection before they are licensed to operate. Companies are inspected on a regular cycle that can vary from two to four years, depending on their activities. These inspections are linked to our licensing requirements.
Second is our reactive role through compliance, verification, and investigation, whereby we actively look at mitigating risk, based on information from sources such as complaints from consumers, industry, or other regulatory authorities. This is where the majority of our work takes place with respect to counterfeit health products.
Third is our laboratory capacity with our two ISO-certified labs in Ontario and Quebec, which provide lab analysis, a necessary part of compliance investigations. This is especially relevant in counterfeit investigations.
Last is our establishment licensing program whereby we issue a drug or a medical device establishment licence for the licensing activities l have just mentioned.
To help in carrying out our mandate and to help reduce the potential for counterfeit health products to enter the supply chain, we work with other enforcement and regulatory organizations, such as the RCMP and CBSA and also provincial colleges of pharmacy. We also work with our international partners through MOUs and treaties and other international forums to increase our capacity for detection and identification of counterfeit health products.
Counterfeit products pose a health and safety risk because they may contain the incorrect dose, the wrong ingredients, dangerous additives, or no active ingredients at all, which could result in potentially serious health risks to patients.
These products represent an emerging trend in the supply chain of developing countries and, yes, even in Canada. In the summer of 2005, the RCMP laid charges against two separate pharmacies for selling counterfeit pharmaceuticals at the retail pharmacy level. In both of these cases, as counterfeiting is a criminal activity, the inspectorate worked with the RCMP and the relevant college of pharmacy to provide investigative and laboratory expertise as well as advice pertaining to the Food and Drugs Act.
Incidents regarding counterfeit health products are very complex, often involving numerous domestic and international regulatory agencies and policing bodies. In Canada, the sale of a counterfeit health product is a violation of the Food and Drugs Act, as the products fall within the scope of unapproved products. The sale of these products may also violate other acts, such as the Copyright Act and the Criminal Code, and therefore the investigation of these can be referred to other regulatory authorities.
It is clearly impossible, as you've heard my colleagues say, for any one entity to combat counterfeiting alone. It requires a multi-partner, multinational approach.
The inspectorate is currently developing an anti-counterfeiting strategy to help reduce the opportunities for counterfeit health products to enter the Canadian supply chain; to increase our capacity for detection and identification; to increase our awareness of the associated risks; and to reduce the incentives that facilitate the counterfeiting of health products.
As is the case with the RCMP, we have many challenges ahead of us. For example, our current regulatory oversight mechanisms are outdated. The act is over 50 years old, and there are no prohibitions in the Food and Drugs Act or regulations that pertain to counterfeiting directly.
As well, within the act the penalties are more health-risk-oriented and less penalty-oriented and may not provide a sufficient disincentive to fraudulent activities such as counterfeiting of health products. Prosecutions, as we can all appreciate, are very resource-intensive, and we are not well equipped at this point to identify fraud; this is where the RCMP provides its assistance. We are working to modernize our regulatory framework to more effectively address these types of violations.
We are currently not experienced and equipped in investigating intent. Our traditional approach is focused on mitigating risk to health where it is the regulated parties' responsibility to take appropriate action to comply with legislative and regulatory requirements. Within the paradigm of counterfeiting that we are seeing today, those responsible not only have deceitful intentions, but complete disregard for the regulatory system.
We are now operating within an environment of rapidly expanding global trade, where we see complex drug supply chains, increased sales via the Internet of cheaper and possibly counterfeited health products, and a higher volume of imports of health products, and their deceptive characteristics make it difficult to assess the validity of these products.
The established regulatory oversight mechanisms alone are insufficient to appropriately address the threats posed by such products. Protecting the health and safety of Canadians is a responsibility that is shared by the federal, provincial, and territorial governments, as well as health care professionals, industry, and consumers. Our anti-counterfeiting strategy will work to mitigate the health and safety risk posed to Canadians by counterfeit health products. It will focus on new legislative authorities, an education plan for consumers, and most importantly, building stronger partnerships with regulatory authorities and with industry.
Thank you to all the witnesses today.
I guess the part that concerns me is the time that it is taking to bring some answers, some resolution, some ideas to how we deal with this problem.
It was in 2005 that the U.S. put us on a watch list, and months before that the anti-counterfeiting coalition in Washington urged the U.S. government to designate Canada, along with China, as a priority foreign country for its woeful enforcement of intellectual property rights.
We had in 2005 the case of five deaths in Hamilton that were linked--and I don't know how that was finally resolved--with counterfeits of the pharmaceutical Norvasc. We've had recently the death of a woman on Vancouver Island because of a website pharmacy.
This is a problem we've known about for some time. In fact, Interpol states that 5% to 7% of global trade now involves counterfeit goods. The World Health Organization says that fake pharmaceuticals are worth $36 billion a year and estimated to jump to $75 billion by 2010.
If we look at trademark infringement—in my riding there's a Canadian Standards Association—goods are coming into Canada, the goods that the gentleman from the RCMP talked about, the fake batteries, the fake electrical products, with a CSA stamp.
We know roughly what the solutions are. I'm not trying to simplify. We need to beef up our Trade-marks Act. We need to increase the criminal sanctions. We had people in Montreal going into movie theatres with very sophisticated cameras in their ties now, apparently. They're taking photos of films and then putting them on DVDs within an hour. Organized crime is involved. The criminal sanctions clearly aren't stiff enough there.
We know some of the answers with respect to the Canada Border Services Agency. We talked about the fact that they don't have a mandate. They need a mandate, and they need the resources not to be an ancillary effort--because that's their current mandate now, it's quite appropriate--but they need to be given the mandate, and with that they need to be given the resources to deal with counterfeit goods and pirated goods.
To be put on a watch list by the United States and equated with China—no disrespect to China—for intellectual property violations, the penny has to drop somewhere. I'm particularly concerned about the safety of Canadians, whether it's pharmaceuticals or electrical products.
Now, I understand—and I know I was involved back in 2005 when this working group was working on this—we've known about the problem. In fact, the pharmaceutical issue was known to the RCMP in 2000, at least, and I'm sure they had briefed the department.
So we know what the problems are. I know there are some complexities because there are so many departments involved, but when are we going to find some solutions and come forward? Hopefully the government will come forward with some sort of omnibus bill that will deal with trademark law, with copyright law, with the Canada Border Services Agency, with the criminal sanctions that are required. When are we going to see something?
I agree with you. We've been working at it for a long time, and I agree that it's a very complex issue.
One of the things we have been doing in the committee is trying to get it right. This is going to have to serve to move us forward and to provide a framework to move forward with the international community as we address this problem on a global basis.
In the last year, we have actually made very significant progress both domestically and internationally. Domestically we have engaged with prominent Canadian stakeholders to hear their views, including the Canadian Standards Association and others in industry that have very strong views and a lot of experience in this. We've taken the information to look at what kinds of recommendations we can put forward to the government. Internationally, in addition to taking part in discussions in a number of international fora, we're looking at what other countries are doing. Cal described a couple of the other systems that we're looking at and trying to evaluate to see which parts we can take to incorporate within our own legal and administrative regime.
The work is ongoing. There is consensus around the table with all government departments and agencies on the broad outlines of what needs to be done, and we're working on the details right now. We're going to bring this forward as soon as possible. We do not have a timeline at this point.
You mentioned certain things. We're looking at all of the things you mentioned in terms of the Trade-marks Act, CBSA authorities, copyright, and all of those things. The complexity of it is part of the reason we have to take our time to get this right.
We are working within other fora at the same time. We're working internationally, as our RCMP colleagues have said. We are not standing still on this. We are addressing the issues in Canada and internationally right now to the best of our capacity, and we're trying to provide the best recommendations possible to move forward.
In regard to the watch list, Canada does not recognize the 301 watch list process. It basically lacks reliable and objective analysis. It's driven entirely by U.S. industry. We have repeatedly raised this issue of the lack of objective analysis in the 301 watch list process with our U.S. counterparts.
I also recognize that the U.S. industry likes to compare anyone they have a problem with, concerning their IPR regime, to China and the other big violators, but we're not on the same scale. This is not the same thing. If you aren't on the watch list in some way, shape, or form, you may not be of importance. Most countries with significant commercial dealings are on the watch list.
Like my colleague, who represents a different party, I see this as a very serious problem. I would simply like to add that it's important to realize that if our welfare and health status is what it is, that is largely due to the fact that copyright has been respected since the French Revolution. That was then maintained in the 19th century.
Clearly, when copyright is not respected in the entertainment business, a lot of profit is lost, as well as exceptional artists that cannot be paid. And then there are the technological advances that we benefit from nowadays. If we have access to them, in my opinion, it's because our societies respect copyright. Of course, neighbouring societies are always very much tempted to steal our copyright. That is what happened with China, but it is my feeling that as this country gradually becomes more of a global economic player, it will suffer the same treatment. Perhaps then it will opt for economic respect.
But let's talk about penalties. There is no doubt that they are necessary and must act as a disincentive. In my opinion, we need something more than just a prison sentence. Between prison and what we have now, it seems to me we have some way to go.
In cases where we actually arrest someone for an IPR-related offence and that person comes before the courts, what penalties are currently provided for? Can someone answer that question?
I wouldn't say there aren't any good examples out there. I think there are excellent examples out there, but the question was, is there a regime there that has addressed the problem? It is addressing the problem, but certainly there's no regime out there that I know of that actually has solved this problem, that actually stops all of it at the border or combats it within the country completely.
Things are moving very rapidly, and it's very difficult with globalization, with the increased trade, with technological advances, to stop all of these things completely. So it's more a matter of putting in the best measures that you have--sharing best practices, updating regimes as you can--to combat it, and of working cooperatively.
On the second part, obviously there are countries that are bigger problems than others. A lot of the intellectual property rights infringement, a lot of counterfeiting, is coming from places like China, like Russia, and others. We also hear from some of the countries that some counterfeit goods are created in Russia and say “Made in China” on them, so it's certainly not clear sometimes where all this stuff comes from. Yes, you can certainly track back some of it, but it takes an enormous effort, and it's a moving target. When one jurisdiction closes it down, it just moves someplace else. There are lots of jurisdictions, and it's not necessarily that those countries don't have an interest.
I think earlier it was mentioned that China is gaining a certain interest in protecting its own intellectual property rights, and I believe that China actually might have, in the last year, filed the second-highest number of patent applications. The highest number were filed by the U.S. There is going to be pressure from within the countries where there are currently large-scale problems to address it.
It is an international problem. You have to work at it on an international basis.
Thank you very much for coming here to give us such detailed information.
I share the same passion that's around the table about the seriousness of the issue. I want us to pay special attention to those counterfeits that are harming the health and safety of Canadians. Particularly when we are drafting or proposing legislation, we should maybe have minimum sentencing terms for those people who have a huge disregard for the safety of Canadians.
Also, I would like to commend Diana for the department's effort at the border. In 1996-97, when Health Canada proposed to crack down on herbal products, I think that was a serious matter, and it harmed the ethnic community greatly.
I think the most important thing that is bothering us, when we talk about China, is that they now have counterfeit food products. I don't know if you've heard, but they can make eggs that look like eggs. They have fake eggs on the market. It's amazing, right? They make eggs that look like eggs, and they still make a profit.
What really concerns me is that they are counterfeiting even cheap products, like noodles. They are stealing the trademarks, and they are manufacturing them in a very bad manner that hurts the health of people who consume them. It's a big issue in China. People are worried about the food chain that supplies them, particularly when people are stealing trademarks that are very good brands that people rely on, both for health products and for drugs, particularly compounds.
I know that we allow them to come in. It's very difficult to supervise and legislate against them and so on. I accept that sometimes we have to let them in to allow the ethnic community to have access to them. But I think the trademark issue is very important. I hope that when we draw up the new legislation, Cal, you don't overlook those kinds of trademarks on health products and medicines that are coming into the country. It's common.