INDU Committee Report

In order to properly protect IP rights, an adequate IP enforcement system is essential. However, many witnesses suggested that Canada’s enforcement regime lags behind those of other developed countries, where, for example, specialized police and prosecutorial resources are dedicated to IP rights enforcement. These witnesses recommended that CBSA and RCMP policies (or mandates, as required) be changed to place a higher priority on combating counterfeiting and piracy, and that these agencies be given the resources necessary to carry out this work. Groups such as the CACN informed the Committee that there are insufficient government resources directed towards the enforcement of IP laws in Canada, and that innovation and Canada’s global competitiveness are suffering as a result.

Border Enforcement

Some countries have established stringent measures in an attempt to stop counterfeit and pirated goods at their borders. For instance, France takes a hard line against the importation of counterfeit goods. Signs in French airports warn travellers that customs agents will seize any counterfeit goods they find, even if the good is a fake designer purse for the traveller’s personal use. The United States has specialized teams of police and prosecutors dedicated to the enforcement of IP rights and the prosecution of violators. Customs officials there do not need to obtain permission from the police before seizing suspected counterfeit or pirated goods; they may do so on their own initiative.

In Canada, the Customs Act permits the CBSA to detain goods that are prohibited, controlled, or regulated by any Act of Parliament. However, there is no legislation that specifically identifies counterfeit or pirated goods themselves as being prohibited, controlled, or regulated. The CBSA can detain (for a limited period of time) counterfeit or pirated goods only if either the IP holder has obtained a court order or the RCMP (or local police officers) agree to seize the goods. While there are two, small joint CBSA/RCMP teams in Toronto and Montreal to coordinate the agencies’ efforts, the Committee heard from the RCMP that these teams are overwhelmed and do not have enough resources to investigate most cases of IP crime. Despite establishing economic integrity — including IP rights — as one of its five priorities, many witnesses testified that the RCMP needs more resources to effectively combat counterfeiting and piracy. In 2005, the force laid over 700 charges involving IP crime, however, the RCMP testified that the force has only enough resources to investigate a small fraction of the cases brought to its attention.

The Committee believes that Canada’s border enforcement policies should be modernized to target pirated and counterfeited goods, and that customs officials should be empowered to perform this task. It therefore recommends:

That the Government of Canada provide the Canada Border Services Agency (CBSA) and law enforcement officials with the express authority to target, detain, seize, and destroy counterfeit and pirated goods on their own initiative and in accordance with due process and Canadian law. The CBSA should also implement policies promoting the detection of such goods, such as mandatory reporting of brand information with shipments.

The Committee is also of the opinion that collaboration between the CBSA and RCMP with respect to targeting counterfeit and pirated goods at the border can be improved. For this reason the Committee recommends:

That the Government of Canada formalize intelligence sharing between the Canada Border Services Agency and the RCMP.

Enforcement Resources

The RCMP and Department of Justice’s Copyright Enforcement Policy^[9]) is intended to promote a more strategic and effective deployment of scarce enforcement resources. For that purpose, it identifies the type of criminal infringement appropriate for investigation and prosecution. The policy stipulates that “cases selected for investigation and prosecution should, as a matter of priority, constitute copyright piracy on a commercial scale” (i.e., commercial infringement by a manufacturer, wholesaler or importer.) Under the policy, infringement at the retail level is not an enforcement priority in its own right. 

The Committee was told, however, that even some retailers are now involved in large-scale piracy activities. For example, witnesses reported that whereas it once took sophisticated factories with multi-mullion dollar equipment to produce CDs and DVDs, today raids on suspected IP rights violators are finding equipment capable of pirating hundreds of CDs and DVDs per hour hidden in the backrooms and basements of retailers. While witnesses reported that most retailers, and especially those with a reputation for selling high quality goods, want to assist in the fight against counterfeit and pirated goods, there are a handful of retailers that profit from the violation of IP rights. 

The Committee is of the opinion that the RCMP and Department of Justice should be placing a higher priority on piracy and counterfeiting infringements at the retail level, and that the joint enforcement policy should refer explicitly to both counterfeiting and piracy activities. For these reasons, the Committee recommends:

That the Government of Canada amend the RCMP/Department of Justice Copyright Enforcement Policy to target both piracy and counterfeiting, and to place a higher priority on piracy and counterfeiting activities at the retail level.

Witnesses reported that when police do raid locations known for selling counterfeit and pirated goods, stores are closed, market stalls torn down, and suspects flee to avoid being arrested. According to the CACN, so many suspects take off at the first sign of law enforcement, that in some raids conducted by the RCMP, only 10% to 15% of suspects are apprehended. In parts of the United States, landlords can be held liable if their retail tenants sell counterfeit or pirated goods. Doing so helps overcome enforcement problems caused by the transitory nature of many counterfeiters and pirates, but may place an unfair burden on landlords to monitor their tenants. Nonetheless, difficulties in prosecuting retailers have led some groups to recommend such measures be applied in Canada.

The Committee wants to ensure that the RCMP, Department of Justice and other government departments and agencies have adequate resources to stem counterfeiting and piracy activities in Canada.  It therefore recommends:

That the Government of Canada provide the RCMP and the Department of Justice with adequate resources to effectively address counterfeiting and piracy.

That the Government of Canada provide Health Canada officials with sufficient resources to investigate counterfeit food and drug complaints.

According to the CACN, there is inadequate enforcement of IP rights at both the police and prosecutorial levels. The reasons for this void are:  (1) inadequate police resources; (2) inadequate prosecutorial resources; and (3) lack of training or expertise in the prosecution of criminal IP offences. The CACN asserts that very few prosecutors have a substantive knowledge of IP criminal law in Canada and no Canadian prosecutors dedicate themselves exclusively to IP crime. Jurisdictional issues may also affect the prosecution (and enforcement) of counterfeiting and piracy violations. Primary responsibility for IP crime enforcement lies with the Federal Enforcement Branch of the RCMP. The branch deals with enforcement of federal statutes, including the Copyright Act and has authority to lay charges under the Criminal Code.  However, federal prosecutors generally do not prosecute matters under the Criminal Code and provincial and local law enforcement and prosecutors, generally do not lay charges or prosecute under the Copyright Act. Furthermore, criminal prosecutions, including for IP offences, are heard by provincial courts and not by the Federal Court of Canada, the court having the most expertise in IP matters in Canada.^[10]

In addition to civil remedies that are available under the Copyright and Trademark statutes, Canadian law also contains criminal penalties for certain counterfeiting and piracy offences. The Copyright Act provides criminal penalties for infringement of copyright that include fines of up to $1 million and imprisonment for up to five years. Criminal provisions for misuse of trademarks are part of the Criminal Code, and are generally enforced by provincial authorities. Punishment for trademark offences is imprisonment for a term not exceeding two years. Despite the existence of severe penalties for some offences, the Committee heard that in the rare cases where counterfeiters are prosecuted, they typically end up paying minimal fines (usually less than $10,000) and serving no jail time. Even in the most serious cases, fines are typically $25,000 or less.^[11] Many witnesses argued for increased penalties for counterfeiting and piracy offences. However, as pointed out by one witness, even with increased penalties, there is no guarantee that stronger punishments will be handed out by the courts. Although the Committee believes that increasing the penalties for counterfeiting and piracy offences is important, it is also of the opinion that the justice system should be imposing stiffer penalties for such offences within the limits of current legislation. The Committee therefore recommends:

That the Government of Canada immediately encourage prosecutors to seek more significant penalties for counterfeiting and piracy violations, including imprisonment.

According to international agreements, Canada has agreed to provide effective criminal enforcement against wilful trademark counterfeiting and copyright piracy on a commercial scale, as well as to implement border measures to prevent the importation of counterfeit and pirated goods. For example, both TRIPS and NAFTA require criminal enforcement and border measures. As noted in earlier sections of this report, Canada does have a legal framework to protect intellectual property rights and combat counterfeiting and piracy. 

Despite the existence of this legislation, Canada continues to find itself on the United States Trade Representative’s (USTR) “Special 301” Watch List.  The Special 301 annual review examines IP rights protection in 87 countries. Canada was placed on the list for the thirteenth consecutive year in 2007 because it has not ratified and implemented the WIPO Internet Treaties^[12] and does not prohibit the unauthorized camcording of films in movie theatres.^[13]  The USTR also suggests that Canada needs to improve its IP rights enforcement system at the border so that it can take effective action against the trade in counterfeit and pirated products within Canada, as well as curb the amount of infringing products transiting through Canada. The United States did commend Canada for issuing regulations correcting deficiencies in its system for protecting against unfair commercial use of pharmaceutical data generated to obtain regulatory approval.^{[14] [15]}

The Committee understands the importance of the WIPO Internet Treaties and therefore makes the following recommendation:

That the Government of Canada ratify the World Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms Treaty.

Collaboration between enforcement agencies, government departments and industry, in concert with an adequate IP protection regime and anti-counterfeiting/piracy measures from industry, is considered to be a key element in properly protecting IP rights and reducing IP crime. In Canada, a federal interdepartmental working group on intellectual property issues, which is comprised of 10 departments and agencies, is responsible for studying options to improve Canada’s IP regime and for preparing recommendations for each department’s Minister.  The group receives input and advice through surveys, round tables, and seminars from such stakeholders as the Canadian Chamber of Commerce and the CACN.

According to industry representatives that testified before the Committee, industry is doing its part to protect its own IP. For example, companies such as Microsoft engineer their software with anti-piracy devices and spend millions of dollars each year pursuing pirates in civil court. Since 2003, the motion picture industry has imprinted watermarks on its films that allow its investigators to examine pirated movies and determine the theatre at which they where made. Industry is also involved in educating government officials about IP infringement. The Canadian Standards Association and Underwriters Laboratories run anti-counterfeiting workshops to teach officials the dangers that counterfeiting poses to health and safety and how to detect counterfeit products.

Witnesses from companies and organizations affected by counterfeiting and piracy suggested that their efforts to protect their IP could be better coordinated with those of the federal government. IP rights holders need to provide detailed information about a shipment of suspected counterfeit or pirated goods to receive a court order to seize it. Obtaining this information is often difficult due to the clandestine nature of IP violators. However, customs agents and police officers frequently come across these details during the course of their investigations. The witnesses suggested that if the CBSA and the police are unable to take action against counterfeiters and pirates, that they provide the rights holders with any information they have that would facilitate the rights holder obtaining a court order to impound the goods.  The Committee agrees with this suggestion and therefore recommends:

That the Government of Canada make provisions for the release of information and samples to intellectual property rights holders for the purposes of determining whether detained goods are counterfeit or pirated and enabling intellectual property rights holders to exercise civil remedies.

Some witnesses also suggested that the CBSA implement an IP rights registry. Rights holders who are concerned that imported goods may violate their copyrights and trademarks could register these marks with the CBSA. The registry would serve to highlight to the CBSA goods that may be at increased risk of being counterfeited or pirated, provide detail as to how to differentiate a counterfeit or pirated good from the genuine article, and offer information on possible IPR violators. The United States and some European countries already have such registries, and the CACN credits them with assisting in the seizure of tens of thousands of shipments of counterfeit and pirated goods.

A few witnesses requested that there be better collaboration among law enforcement officials, federal prosecutors and industry to fight counterfeiting and piracy activities in Canada. The Committee agrees and recommends:

That the Government of Canada establish an Intellectual Property Crime Task Force, a partnership between government and industry, composed of police officers, customs officers, and federal prosecutors to work with intellectual property business leaders in order to guide and coordinate anti-counterfeiting and anti-piracy efforts in Canada.

Several groups note that stronger education campaigns are required in Canada to inform manufacturers, distributors, retailers, consumers and others about the economic and social impact of counterfeiting and piracy. Many members of the public view infringements related to counterfeiting and piracy as being victimless and harmless. The CACN presented the Committee with the results of a survey of Canadians that it had commissioned indicating that 28% of respondents had knowingly purchased counterfeit products, and another 12% had found out later that they had done so.^[16] The combined figure (40%) is more than triple the proportion (13%) found in the United States by a similar survey.

Groups such as the CACN want the public perception about such activities to change, and are encouraging the federal government to invest further in the area of public education and awareness campaigns. Public campaigns would inform local communities, businesses, and the public on the potential benefits of the intellectual property protection regime, and of buying legitimate goods and services that foster innovation and economic growth. It would also inform them of the health and safety dangers involved with certain counterfeit products. Witnesses pointed to public education campaigns in countries such as France (“Contrefaçon: Non Merci”) as being good examples of collaborative efforts among government, industry and consumer groups to stop counterfeiting and piracy.

The Committee views trademark counterfeiting and copyright piracy as a drain on the Canadian economy, and, in the case of some counterfeit goods, as a threat to public health and safety. The Committee is of the opinion that a stronger legislative framework and adequate financial and human resources are important for the fight against counterfeiting and piracy in Canada. It believes that the recommendations made to the Government of Canada in this report will help reduce the manufacture, importation, distribution and sale of counterfeit and pirated goods in Canada.