Good afternoon, ladies and gentlemen. Bonjour à tous
Welcome to the fourth meeting of the Standing Committee on Industry, Science and Technology.
Before us we have the following witnesses: from the Canadian Manufacturers & Exporters, Martin Lavoie, the director of manufacturing competitiveness and innovation policy; from Hockey Canada, Dale M. Ptycia, senior manager, licensing; from the International Trademark Association, David Lipkus, lawyer, and Peter Giddens, lawyer; and as an individual, Jeremy de Beer, associate professor, Faculty of Law, University of Ottawa.
I will follow the order of the agenda as I've introduced you.
From the International Trademark Association, is just one person giving opening remarks or both?
Thank you for inviting me to discuss Bill , the .
I represent the Canadian Manufacturers & Exporters. We are Canada's largest trade association. We represent about 10,000 manufacturers and exporters across the country. Our sector represents more than 75% of all R and D expenditure by the Canadian private sector, so you can understand that protecting intellectual rights is central to our industry.
We applaud the government for introducing this important legislation and the committee members for keeping a close eye on the details of this bill. We strongly support the objective of the bill. Canada needs strong legislation to prevent counterfeit goods crossing our borders. However, I would like to raise a number of concerns that we and our members have with the bill in its current form.
One of them is about the responsibility of the right holder—or in other words, the victim of counterfeiting—to pay the fees associated with the detention and destruction of goods. We do not understand the rationale for this.
We believe that the importers should be responsible for these costs, since they are the ones introducing these goods into our country in the first place. They should not be given a free ride. Where is the disincentive in that? Moreover, these costs, which will largely be incurred in court proceedings, are likely to be onerous and difficult to support for smaller companies that are the victims of counterfeiting. I know that you've heard this from other witnesses. We share this concern.
Our second concern is the provision that the detention of goods requires that a court action be undertaken by the IP owner. Court actions are expensive and time-consuming, and they take a long time to get results. We believe that if there is enough evidence to show that the goods in question are counterfeit, they should be destroyed, regardless of whether or not the IP owner undertakes a court action.
You have heard the stories. Not only have you seen many examples of goods that are counterfeit, but you have seen cases where even the Canadian standards association logo is being copied. Do we really need a long court process to destroy those items? I think there are many examples of where we could proceed with the destruction of goods without requiring prior legal action on the part of the victim.
As the witness from the Intellectual Property Institute of Canada said when she appeared here on November 6:
||Other countries such as the United Kingdom and Australia, as well as the European Union have already introduced a summary procedure whereby goods that are truly counterfeit, where there's incontrovertible evidence that they are, and the importer of the goods does not respond to an inquiry, will be permanently detained or destroyed.
That should apply to Canada as well.
We believe that when legal proceedings do take place, the onus should be placed on the importer, or whoever is responsible for bringing the goods in question into the country, to provide evidence that the goods are not counterfeit. Has the importer undertaken sufficient due diligence to ensure that the foreign supplier is not producing counterfeit products? What steps have been taken to make sure that counterfeit goods are not harming our economy? In its current form, the bill makes it too easy for the importer to claim ignorance.
Another issue I'd like to raise, which is not necessarily within the scope of this bill but is essential if you want to succeed in combating counterfeiting, is the need for better international coordination. This may be another area in which Canada can do more.
As you know, the “Special 301” priority watch-list of the United States Trade Representative, or USTR, has included Canada for the past several years because of our failure to implement our international obligations or to take effective enforcement action against counterfeit and pirated goods, especially at the border. This priority watch-list is an annual review of the global state of intellectual property rights protection and enforcement.
In 2011, the USTR's report stated:
||The United States encourages Canada to provide for deterrent-level sentences to be imposed for IPR violations as well as to strengthen enforcement efforts, including at the border. Canada should provide its Custom officials with ex officio authority to effectively stop the transit of counterfeit and pirated products through its territory.
This bill will fix some of these issues. That's why in 2013 the same report was better. It recognizes the importance of Bill . As a result, the USTR is moving Canada from its priority watch-list to its watch-list. The report says that the United States “urges Canada to expand the legislation to also provide authority for its customs officials to take action against goods-in-transit”. We agree with that. I know this has been raised by some other witnesses who were here before.
Finally, we applaud the Canadian government's leadership in the negotiation of the anti-counterfeiting trade agreement, the ACTA. While most countries have not yet implemented the agreement, it is a step in the right direction. The ACTA signatories are Australia, Canada, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and the United States. The European Union and the 22 EU member states signed the agreement in January 2012, but it has not yet been approved by the European Parliament.
You will notice that none of the countries included in the U.S. watch-list is a signatory of the agreement, so we still believe that a lot of work remains to be done to bring more countries to the table.
Thank you again for your time and for inviting me. I look forward to questions.
Mr. Chairman, honourable members, ladies and gentlemen, thank you very much for inviting Hockey Canada to participate in the committee's study of Bill C-8.
Hockey Canada is the country's national sport organization. Our association is responsible for the creation and implementation of hockey-specific programming for more than 650,000 young Canadians, from entry-level beginners through to high-performance athletes competing at world championships and such multi-nation games as the Paralympic and Olympic games.
More than 1.2 million Canadians are involved in minor hockey as players, participants, officials, and administrators, from coast to coast to coast. Over the last 20 years, the retail licensing of Hockey Canada brands—Team Canada, Équipe Canada—and our logos and trade dress all have been diligently cultivated to provide a substantial revenue stream for the association. In our particular case, counterfeiting means lost royalty revenue. Lost revenue for Hockey Canada equates to lost opportunities to support wholesome, athletic hockey opportunities for Canadians of all ages and of all abilities. Every dollar lost to counterfeits has a direct negative impact on our programs and services.
A very specific example that I'd like to bring to your attention today occurred in early February of 2010. In a time span of less than two weeks during the 2010 Vancouver Olympics, the RCMP and the Canadian Border Services Agency at the Vancouver mail facility intercepted and detained more than 16,000 counterfeit Team Canada jerseys, with a retail value of more than $2.3 million. At the request of the RCMP, Hockey Canada arranged for additional personnel to assist with the processing of these counterfeit jerseys. More than 1,500 individual shipments in those two weeks were processed, and all at substantial cost to Hockey Canada. Together, we estimated that less than 10% to 20% was intercepted of the actual number of counterfeit jerseys imported into Canada leading up to and during the games. This translates into more than 250,000 jerseys that were imported into Canada, with a retail value of over $32.5 million—all lost revenue, which negatively impacts Hockey Canada.
I understand that Bill may afford brand owners such as us the ability to work directly with the CBSA through a request for assistance process, with costs to be borne by the brand owner. At a bare minimum, the estimated cost per request to proceed with a court action is in the neighbourhood of $500 for legal fees and disbursements, and likely substantially more than that in many cases.
Using a real-life example from 2010 from a single mail facility, Hockey Canada would be asked to spend in excess of $750,000 just to action the very first step in the proceedings. This takes away from resources that are earned to reinvest into Canada's youth and from the programming involved with delivering minor hockey across the country. There are substantial costs and inherent difficulties in enforcing IP rights in Canada currently through the civil avenues afforded brand owners such as us. We are dealing with criminals who do not adhere to any laws and don't keep records for anyone to estimate what profits have been made or what revenues they generate.
As a double whammy, many counterfeiters simply view any exposure to civil remedies as a small and insignificant cost of doing business. Monetary penalties or awards are generally small and much less than the actual costs associated with enforcement in any civil action, even assuming that we can collect on those civil actions. Without statutory damage awards or appropriate border seizure capabilities, Canada's civil remedy toolbox will continue to be severely limited, with additional costs required of the brand owner just to prove what our actual damages were or what profit the counterfeiter might have made or has made.
The current supply chain for counterfeit jerseys is dominated by manufacturers based overseas. Counterfeit commerce is conducted primarily and increasingly over the Internet. This channel makes it virtually fool-proof for any individual with a credit card and a mailing address to participate as an importer of counterfeit goods.
Hockey Canada officially released the 2010 Sochi Winter Olympic Games hockey jersey on October 8. Within three weeks we have seen counterfeit jerseys enter the country and be offered from unauthorized sources from overseas factories, with minimum quantities as low as single units and with prices in the $30 neighbourhood. A bona fide retailer would pay in excess of $65 at wholesale, with a retail value of $140 per jersey. These are already being resold here in Canada by unauthorized sources for less than $100 to unsuspecting Canadians and consumers.
We currently have several covert purchases under way to validate the counterfeits, which are clearly identifiable by our brand experts. One major variable to understand is that all bona fide Team Canada jerseys have been produced elsewhere from where they're originating as counterfeits, and all by one source—our single and only official licensee—and not by multiple factories offering the counterfeits over the Internet.
The entire production of our 2014 jerseys was shipped only in container quantities by our exclusive licensee and landed in Canada earlier this summer for distribution to bona fide Canadian retailers. Please note that to date neither our office nor our investigators have been notified of a single interception by authorities of these readily identifiable and individual small-quantity shipments of counterfeit jerseys.
Ease of access via the Internet has exponentially added to counterfeit Team Canada product in the country. Importing or exporting counterfeit product should be treated with strong measures. The current model utilized by the European Union, which aims to strengthen the protection of intellectual property in the EU and reduce the administrative burden on customs authorities, is perhaps an exemplary model. The model allows for the destruction of counterfeit goods without requiring lengthy and burdensome legal proceedings on the merits to establish whether an intellectual property right actually has been infringed upon in circumstances where there is no dispute by the importer when confronted with evidence that the goods being imported are counterfeit.
With virtually no deterrent currently for importing or possessing counterfeit goods in Canada, this channel will continue to be utilized by counterfeiters to ply their unauthorized goods.
As a registered brand owner with the Canadian Intellectual Property Office, Hockey Canada has a responsibility to monitor and police our intellectual properties and brands. The tools afforded to brand owners such as us through the Trade-marks Act and the Copyright Act realistically are limited, but with reasonable and future progress being made through this bill.
The proposed changes are a very strong step forward; however, still more can and should be accomplished.
Hockey Canada regularly engages the services of anti-counterfeiting experts, dedicated legal counsel, and trained investigators to assist with the ever-elusive task of counterfeit enforcement, consuming valuable financial resources. We have been and continue to be prepared to do this task, but within realistic parameters. Adding significant costs to such not-for-profit entities as Hockey Canada may not be the most effective manner to deal with counterfeit goods at our borders.
Hockey Canada continues to support and participate in actively engaging the efforts of the Canadian Anti-Counterfeiting Network and the Canadian Intellectual Property Council, just to name two. We support the need to strengthen Canadian legislation to empower front line officers to target and seize counterfeit goods. Greater deterrents and resources are also necessary for the officers to process seized goods and effectively deal with them as counterfeit items.
As the honourable members of the committee continue to study how to combat counterfeit goods, you are urged to include appropriate measures for the protection and enforcement of rights associated with the intellectual property of Canadian brand owners, ultimately for all of us as Canadians. We should not and cannot continue to lose sales to these criminals, who very often deal in cash-only transactions, keep no records, and contribute nothing positive, really, to our economy.
With that, I'd like to close and say thank you very much for your attention this afternoon.
Yes, I'll begin. Thank you.
Good afternoon. My name is David Lipkus, and I am a lawyer at Kestenberg Siegal Lipkus LLP.
I am appearing today on behalf of the International Trademark Association as chairman of the Canada subcommittee of INTA's anti-counterfeiting committee.
I am joined by Peter Giddens, partner at McMillan LLP, chair of the Canada subcommittee of INTA's trademark office practices committee.
We are honoured to appear today before this committee to share INTA's views on the Combating Counterfeit Products Act.
INTA supports the bill as a major step in improving protection against counterfeiting in Canada, but our members believe that Bill can better protect the Canadian public by including tougher deterrents against counterfeiting and developing stronger measures at the border to keep counterfeits out of our country.
INTA is a not-for-profit membership association, with 6,300 member organizations in over 190 countries. We have 179 member organizations across Canada. INTA's membership spans all industry lines and sectors and is united in the support of trademarks and related intellectual property in order to protect consumers and promote fair and effective commerce.
Our message is simple, and as you have heard from other witnesses, counterfeiting is a crime. Counterfeiting endangers the public health. Counterfeiting steals from Canadian businesses. Counterfeiting drains revenue from our government. And counterfeiting and the counterfeiting problem are growing in our country.
We believe that including our suggestions to Bill could make a huge and significant impact on this growing problem
INTA members have seen counterfeits in product categories such as food, medicines, automotive parts, electronics, appliances, cosmetics, and luxury goods. These counterfeits can be bought anywhere, from basements to shopping malls, and increasingly on the Internet. These products are bought and used by Canadians and found in Canadian homes, Canadian schools, Canadian businesses, and Canadian hospitals. We need effective laws to address this crime that harms the public and steals from our businesses.
Also, because counterfeiting is a global issue, Canada's actions on this issue will have international consequences. Canada must address counterfeit products with the same high bar as its trading partners. Bill is an essential step towards this objective. As we express support for Bill C-8, we recommend priority amendments that are important improvements to the bill.
With respect to statutory damages, INTA is recommending additional provisions to the Trade-marks Act, giving courts the power to award significant statutory or pre-established damages against counterfeiters in recognition of situations where it is difficult, or even impossible, for the trademark owners to prove the measurable monetary loss or damage. Often counterfeiters don't keep any records of the business they do and transact only in cash. The minimal compensatory damage awards currently ordered by our courts make breaking the law and selling counterfeit in our country simply the small and insignificant cost of doing business in our country.
While the bill does allow for punitive damages, they are discretionary and therefore rarely awarded by our courts. Thus, there is a need to deter the sale of counterfeits in our country against businesses, both large and small business, in order to protect the public from this crime. Statutory damages can help to accomplish this.
INTA applauds the addition of sale and distribution of counterfeits as a criminal offence in Bill . These provisions align with the criminalization of counterfeiting globally, including places like the EU, United States, and China. However, after a counterfeiter is charged, the government must prove several elements of the counterfeiter's knowledge, which will make it very difficult for the government to prosecute criminal cases. More importantly, it misses the fundamental nature of mens rea, which makes these offences criminal.
As the bill is drafted today, a counterfeiter could easily deny knowing that the trademark was registered, that the mark on the goods is identical to or indistinguishable from a registered mark, and that the sale or distribution is an infringement as defined in the relevant sections of the Trade-marks Act. I'm not sure how many counterfeiters go to the CIPO database or review the Trade-marks Act on a regular basis, as I do in my practice.
The criminal offences should be written in a manner that they will be enforceable to truly act as a deterrent to counterfeiters and keep these criminals from hurting the public.
With regard to goods in transit, INTA recommends that the section of the Trade-marks Act that explicitly prohibits the Canada Border Services Agency from intercepting and seizing counterfeit goods in transit be removed from Bill . Counterfeits must be stopped at any point in transit or destination. Allowing counterfeit goods in transit to pass through Canada encourages the use of our country as a convenient transit destination by organized crime. Counterfeiters rely on transit through third countries as a covert way of getting their illegal products to designated markets. Countries must therefore be vigilant about stopping counterfeits in transit, even when the products are destined for a third country.
Ensuring that national laws allow customs inspectors to seize counterfeit goods in transit is an important tool in the global fight against counterfeiting. For example, counterfeit car parts shipped to the United States could easily be installed into cars that travel to our border in Canada. Given the integration in North American manufacturing, it makes sense to intercept counterfeit goods when and where they are discovered. It is not in any country's best interest to support counterfeiting. Allowing counterfeits in transit to pass through Canada has the unfortunate effect of supporting the global trade of counterfeit goods.
An administrative regime at Canada's border to efficiently destroy counterfeits can significantly reduce the costs and resources devoted to counterfeit goods seized at the border. The alternative is litigation, which, as you know, is time-consuming. The costs associated with the request for assistance and the storage of counterfeit merchandise will undoubtedly be onerous on the rights holder and taxpayers because court actions will be issued after every seizure done by customs. Many INTA member organizations will not have the budgets to participate in this request for assistance program.
An administrative regime will eliminate many unnecessary costs, especially in cases where the importer does not even respond to a seizure notice and the goods are confirmed to be counterfeit. Many countries already have an administrative regime in place to quickly destroy counterfeit goods seized at the border. That is working. The customs officials in the European Union, Australia, and the U.K. dispose a large percentage of counterfeits seized at the border by some form of administrative regime. The inclusion of an administrative regime in Bill would be beneficial for not only brand owners but also the government.
Peter Giddens is now going to address the additional important trademark issues.
INTA believes that the Canadian Intellectual Property Office should not destroy trademark application or registration records unless and until electronic copies are made and perpetually maintained. Although INTA is mindful of the practical difficulties and costs associated with warehousing original documents, in our view the downside risk of losing public access to these documents outweighs the hardships to the Canadian Intellectual Property Office associated with maintaining those records.
Neither the United States Patent and Trademark Office nor OHIM destroys the electronic versions of the documents upon the destruction of the paper version, and paper versions are kept without limitation. If Bill does not provide for electronic copies prior to destruction, the Canadian Intellectual Property Office will be significantly out of step with both the U.S. and European intellectual property offices when it comes to trademark files record retention. In any event, INTA believes that the proposed six-year clock as a countdown to destruction of documents is at odds with many established private sector file retention policies. INTA recommends that Bill be amended to require that electronic copies be made and retained by the Canadian Intellectual Property Office before destruction is permitted.
Finally, INTA also urges you to expand clause 21 of the bill to provide for a cause of action against not only counterfeit goods that are identical to those appearing in the trademark owners' registration but also those goods that are reasonably ancillary, incidental, or connected to the goods that appear in the trademark owners' registration. Also, we urge that clause 21 of the bill be expanded to prohibit the unauthorized use or display of a trade name that is identical to or confusing with a registered trademark. Such changes, in keeping with the law concerning confusing trademarks in Canada, will assist trademark owners in combatting counterfeiters who ride on the trademark owner’s product line expansions before a Canadian trademark is issued or who try to avoid the reach of these new provisions on the basis of an argument that the impugned sign was a trade name rather than a trademark.
In conclusion, INTA appreciates the efforts of the Standing Committee on Industry, Science and Technology and its consideration of our testimony. INTA supports Bill , but our members would like to see amendments to make it more effective in protecting the Canadian public, including adding tougher and effective deterrent factors against counterfeiters to protect consumers from harmful counterfeits; developing stronger measures and an operational administrative regime at the border to keep counterfeits out of Canada; and making a number of practical technical amendments regarding trademark practice.
Thank you again for this opportunity to participate in these committee hearings.
Thank you very much for the opportunity to testify before you on the important matters in Bill .
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 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 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 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 seems to restore some of these rights to permit detention of such goods at the border.
Finally, I note that this aspect of Bill 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 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.
I'd just like to give an example of the scope of the problem in our country, because you asked that question before. There are two projects I want to talk to you about regarding police and criminal enforcement efforts done in our country.
The first is project consumer safety. This was undertaken by the Toronto Police Service. It targeted retailers and wholesalers selling counterfeit goods in our country, in Ontario. During this project there was a business that was selling luxury brand merchandise, purses and wallets and those things, at a retail level. When the rights holders took action against these counterfeiters, there was a judgment of the court, and the court ordered them to stop selling counterfeit. This counterfeiter decided to continue, and what we believed was a problem with respect to luxury-brand merchandise was not so. When the police went in and conducted their criminal raid, at the back portion of the store, which obviously the rights holder would have no access to, this retailer was selling counterfeit drugs. That's just one example where we would have no idea as a rights holder what we were up against, because these civil remedies do not provide for this. Obviously, we want our border officials to ensure that these criminals are stopped.
The second is with respect to project O-Scorpion. I applaud the efforts of the RCMP here. There was a six-month period between the fall of 2011 and the spring of 2012 when containers of counterfeit merchandise were targeted and seized by the RCMP. During that six-month period the value of merchandise that was seized in our country was $78 million, but that's not the number that should shock you. What about the six-month period following the project's end? What was the value of merchandise seized? Zero. That's the number that should shock you.
Right now, rights holders are dealing with this problem on a retail and wholesale level across the board. We need to provide resources to customs to deal with this problem, and the administrative regime will help do that, will help save costs for everybody involved.
Thank you very much, Chair, and thank you very much to all of the witnesses. I wish we had more than seven minutes to spend together here.
In particular I note, David and Martin, that you have quite different views on the exclusion of goods in transit. I'd love to see the two of you debate that a bit further. I'm going to move on to something else, but if either of you want to send the committee further details on your perspectives on that, I'd sure welcome them. Because it's the same disagreement we heard about earlier, when we had testimony from the Intellectual Property Institute of Canada and from Michael Geist. They took quite opposite positions as well.
Martin, you represent manufacturers, small, medium, and large. If a shipment is held up at the border on the suspicion that goods may be counterfeit, when your manufacturers are all dealing with just-in-time delivery for parts, if those goods aren't counterfeit, how will they recover from the lost time of the goods being held up? Are you concerned about the fact that whereas there's no liability for the government in any of this, and the bill's quite explicit about that, there's no way for your members to actually be compensated for their potential losses?
Okay. That’s super. Thanks.
Dale, I want to go back to your examples with respect to hockey sweaters and others. I came back from China late last night. In Shanghai, there's a place actually called the “Fake Market”. That's the name. All you buy there are fake goods. I looked at the hockey sweaters they had, and I looked at the label. I wanted to see what it actually said. Here in Canada, most things we buy say “Made in China”, so I was quite surprised that on the counterfeit hockey sweaters, it said “Made in Canada”.
I want to ask you about the balance that this bill tries to strike between items for personal use and those used for the sale, manufacture, or possession of counterfeit goods for people engaged in commercial activities.
First, are you satisfied that the distinction can be made reasonably well about what's for personal use and what's for resale? Second, if items are brought over for personal use, is that okay? Currently, those are exempt under the bill.
First of all, to answer your question about the market, if it said “Made in Canada”, that's one of the signs we look for, because those jerseys are made in Indonesia through our licensing partner.
To clarify that, our on-ice, authentic jerseys that Team Canada will be wearing are made in Granby, Quebec, and only in Granby, Quebec. The price for those authentic jerseys is closer to $460, rather than the replica jerseys. We do have a made-in-Canada component for part of our program.
The distinguishing elements of personal use and commercial use or commercial redistribution is probably a moving line. To give a real-life example, the one element we came across here last week was a counterfeiter or importer openly advertising that he brought in 100 jerseys to resell in Canada. Is it one jersey for personal consumption or five jerseys, if you've got four or five nieces and nephews that you want to perhaps gift out? However, the real point here is that the supply chain coming that way is all counterfeit goods for us.
We have only one bona-fide licensing partner who deals with bona-fide retailers. It doesn't come through the Internet. We're not offering consumers the ability to buy individual jerseys from a manufacturer. These counterfeit manufacturers overseas openly say that they've got a manufacturing capacity from one unit to 500,000 units per week. They're not in our regular supply chain or bona-fide chain. Those are easy elements in the chain to say are not authorized supply.
We've got to be able to continue to educate our consumers and all Canadians that only bona-fide products can be bought at bona-fide retailers.
The ability of our customs officers and our border officials to work together—and I think they're all aware that this supply chain is a real, direct route of counterfeit goods.... But they don't currently have the power to stop and detain those. As in my earlier example, the RCMP officer at border integrity said, “I'm one person here. I can't deal with this. We need some help.” So we enlisted help. We hired people to help process those goods.
All those packages were detained under the Canada Post Corporation Act, not through the Customs Act, not through the Trade-marks Act, but by the Canada Post Corporation Act. That way, we were successful in using that vehicle to detain those 1,600-plus shipments from two dozen to 24 dozen to 50-dozen pieces at a time.
Sure, I'm happy to discuss that. Thank you. I think that's an excellent question.
In the hypothetical example, which accounts for 70% of the cases in Europe, the importer, after receiving a notice of seizure, does not respond to customs. When there's confirmation from the rights holder that the good is counterfeit, that's where you get the administrative regime. After there is confirmation, for what purpose do we require the rights holder to go to court to get a judge to say the item is counterfeit when the rights holders confirm it's counterfeit? That system works in those jurisdictions. Certainly, if there is an issue between an importer and a rights holder on whether the goods are counterfeit, okay, then that's a battle to be decided between the two. But this bill does not include parallel imports or “grey market goods”, the trademark term for that issue. We're talking about counterfeits and the counterfeits in Canada can be really good. It can be hard to distinguish between the real and the fake, but there are covert and overt technologies built into these items by the rights holders to determine whether the items are real or not.
When we're getting calls now from RCMP officials seizing counterfeit goods, we provide one or two reasons why the items are counterfeit, why they weren't manufactured by the rights holder. That's what this is about, not about articles that went from one country to another country and into Canada at a lower price. That's legitimate. That's the grey market. That's real. That's not what is encompassed in this bill. We're talking about counterfeits and that's what needs to be stopped at the border.
Thank you very much, Mr. Chair.
Welcome to our guests. This issue just gets more and more interesting each time we have a meeting.
I've completely decided that I agree on the personal use. I can't understand why we're going to bring in a bill that would allow people to just a little bit be buying things that they shouldn't be buying. I think either we allow it or we don't. Clearly there's a huge issue of what's coming through the border. Certainly the whole issue of personal use is one that I hope we'll get to discuss further.
It seems like the rights holder, even with this bill, isn't getting the level of respect they should as the rights holder, as I see this going forward. At any rate, we'll have lots of work to do here as a committee, I think, on this issue.
The IP protections are very important, knowing how long it takes and the money and the investment it takes to get there. Can you tell me what the U.S. and Europe have done in the last year to try to deal with this issue? Clearly it's not just an issue for Canada.
That's for anyone on the panel who would happen to know that information.
I don't have the numbers on what the Department of Homeland Security has done, but it's astounding the number of shipments seized at the borders in the United States—and certainly through the administrative regime in the European Union. I'm not going to speculate, but I would say that Canada is here—very little—and they seize a larger majority of counterfeit merchandise.
Let's be honest: Toronto, Vancouver, and Montreal are some of the biggest cities in North America, so anybody who thinks that counterfeiting isn't a huge issue in our country is sadly mistaken. I would like them to spend a day in my shoes and deal with the counterfeiters I deal with on a daily basis.
This legislation isn't about me. I've been trained by the rights holder how to identify counterfeit products. I know what to purchase. But my family, my wife, my son—they don't know. They do not see what we're up against, and it is dangerous. You're dealing with criminals who don't pay taxes, who do not participate in society as it's supposed to be done. That's what this is about.
I can't plead with you any more that the bill needs to do a little bit more to protect our Canadian citizens. That's what this is about.
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.
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?
Thanks very much to the witnesses for coming today. It's quite an exciting debate, which I welcome.
I was walking down my high street in Burnaby and walked into a store and bought a can of Coke. I noticed it was a little squishy, and I realized it was packaged in the U.S. Then I went to another store along the street and I noticed the same can was there.
This goes to the question of parallel goods. The confusion I have is that it's a can of Coke produced in the U.S., and because of the change in border allowances, the small retailers can now drive their truck across the border, stay for 48 hours, bring $800 worth of Coke back, and then either distribute it down the street or keep it in their own stores. I'm wondering if the CBSA is now empowered to stop these goods and hold them. I'm a bit confused about how that all works.
Mr. de Beer or Mr. Lipkus, could you perhaps give me some thoughts on that? I am thinking it might be worth adding this into the bill. I'm not suggesting that, but I'd like some more information.
I think that's excellent.
I'm glad to hear the committee and my fellow witnesses' interest in making sure that the bill doesn't deal with parallel imports and grey market goods. My fear is that particular provisions, such as clauses 44.01, 44.11, and 44.12, don't actually make that clear enough.
I think an exception that specifies that this does not apply to parallel imports, if drafted carefully, would be fantastic. I would strongly advise the committee to encourage your analysts and legislative drafters to put that provision in—I'd be happy to suggest some particular language, if you like—because that would deal with the issue you're talking about.
It's a very common situation for a wholesaler to find lower prices in the United States for particular products, and even with their paying duties and fees and complying with all the taxation and regulatory obligations, they could still offer Canadians a lower price. I think Canadians and Canadian families are entitled to pricing parity, and I worry that this bill could inadvertently jeopardize that.
Thank you for the range of opinions there. That's why I'm enjoying this today.
I also had a question about the following. We know there have been overall cuts to the CBSA in terms of funding, and looking at Treasury Board numbers it looks like we've had 500 staff laid off from the border services.
We had the CBSA in here last session, and they assured us that no front-line staff had been cut. But as we've been discussing today, there will be a lot of extra additional training, probably for the staff and those kind of things. If the current pattern continues and we keep cutting and removing staff—500 last year—do you think that's going in the right direction?
Do you think it's possible for us to make this work, or do you have any suggestions about what we might do there?
I'm happy to address it once again.
What I can tell you is that once there are counterfeit goods that have been identified, a seizure notice goes out to the importer—whether it's anonymous information or real information—and to the rights holder, that there is suspected counterfeit. The rights holder then confirms whether or not that's the case by providing one or two reasons why the item is counterfeit, and provides for the importer to respond either yes, that's the case, or no, that's not the case. In over 70% of the cases, the importer doesn't respond. If the importer comes to the table, then they're opening themselves up to dealing with the rights holder, and to them this is just one shipment that's being seized. It's better for them not to respond, have the goods destroyed, and hopefully stop counterfeiting, or unfortunately, in many cases, attempt another way to import their counterfeit merchandise.
I've heard comments earlier that there are significant resources being expended on the CBSA. An administrative regime eliminates and alleviates the resource issue.
I want to go back to another point that was raised. Treasury Board had announced cuts, and the result is that there are now 500 fewer border agents than there were last year. There were 14,710 agents last year, and this year there are 14,218. This bill is asking them to do more. I have been told that we should not worry, because they are going to be trained. There were also some deep cuts to the budget. Since there are going to be fewer agents and less money, the remaining ones are going to have to do more.
Mr. Lipkus, you said that we need not worry, and that all the agents will have to do will be to work over their noon hour to go and get the training that is already available on websites. Is this a good way to protect our border, to ask these agents to work harder with fewer resources? Moreover, they are going to have to do their work in a state of exhaustion, after having worked during their breaks. They will not be able to stop, they are going to have to work harder. Is this any way to protect the Canadian border?
I apologize again that I have to answer in English, but perhaps my comments were misinterpreted.
Just to be clear, I advised that the rights holders offer the web training program to RCMP officers, customs officials, and any other local police at times that are convenient to them. It's not necessarily that they're losing their lunch break. It might have been during the lunch hour.
I believe every day I'm asked to do more for less on a regular basis and, unfortunately, with today's economy, that is what is expected of our society, given how things are going.
Having said that, I think that everybody at this committee and certainly the drafters of this legislation have now realized that counterfeiting is a serious issue that is harming our Canadian economy. We were involved in a raid a couple of weeks ago and when we walked into the store the first thing we saw was a huge sign that said “Cash only”. When we observed some of the business records we were able to identify business that was being done by one small counterfeit retailer in Ontario, with over $700,000 of revenue.
Do you think this retailer was paying taxes?
Thank you for that question.
Here is my issue and here is the reality, another working example. We received a telephone call from the police that there was a seizure of a shipment that contained 39 different brands. With the value of each brand in each unit—there might have been 12 or 13 items per brand—it would have been less expensive for our firm's clients to purchase the counterfeit items from the importer than to deal with the seizure of that counterfeit in any other way, whether it were assisting the police or through some form of request for assistance.
Right now, the way the bill is drafted, the right's holder essentially has to write a blank cheque to the Canadian government to participate in this program, without any idea of how much money it's going to cost to participate. Brands require certainty and this bill doesn't provide it.
I can tell you that if the pendulum is swinging, it's way more in favour of the importer than it is of the rights holder. That's what we're trying to have swing back to the rights holder, to say that we, as a government, want to eliminate counterfeit goods. We all agree that they're harmful. Let's do it and let's do it the right way. That's why I'm here today.