THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE

EVIDENCE


OTTAWA, Thursday, November 27, 2014

The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-8, An Act to amend the Copyright Act and the Trade-marks Act and to make consequential amendments to other acts, met this day at 10:30 a.m. to give consideration to the bill.

Senator Irving Gerstein (Chair) in the chair.

[English]

The Chair: Good morning and welcome to the Standing Senate Committee on Banking, Trade and Commerce. Today is the first meeting on Bill C-8, An Act to amend the Copyright Act and the Trade-marks Act and to make consequential amendments to other Acts. Known as the Combating Counterfeit Products Bill, the purpose of Bill C-8 is to combat counterfeiting by amending the Copyright Act and the Trade-marks Act to strengthen enforcement. The amendments made by the bill enact new border enforcement measures and create new civil causes of action and criminal offences.

We are very pleased to welcome the Honourable James Moore, Minister of Industry, to speak about the bill. Minister Moore has had a most distinguished parliamentary resumé, having served as a member of Parliament since 2000. Minister Moore has held several positions in government. He served as Secretary of State for the Vancouver Olympics, the Asia-Pacific Gateway and Official Languages, thus becoming the youngest cabinet minister in British Columbia's history and the fourth-youngest cabinet minister in Canadian history. Before being appointed Minister of Industry in June 2013, he served as Minister of Canadian Heritage and Official Languages for several years.

The minister will be with the committee for approximately one hour, and his officials will be here to respond to questions for the balance of the meeting.

The minister is ably accompanied this morning by Paul Halucha, Director General, Strategic Policy Branch, Industry Canada; John Knubley, Deputy Minister, Industry Canada; Superintendent Jean Cormier, Director, Federal Coordination Centres, RCMP; and Peter Hill, Associate Vice-President, Programs Branch, Canada Border Services Agency.

Minister Moore, welcome. The floor is yours, sir.

Hon. James Moore, P.C., M.P., Minister of Industry: Thank you, Senator Gerstein, for the overly generous introduction, and thank you for introducing the folks who are flanking me and who will assist me in answering any questions that you and your colleagues may have with regard to Bill C-8.

Bill C-8, the combating counterfeit products act and our government's effort to stop goods from entering the Canadian economy is something that's been around for a long time and I think is something that needs to be addressed. As this committee well knows, our government has worked hard to modernize Canada's intellectual property laws to bring them into the 21st century. As a matter of fact, I know some members of this committee were part of the discussion about the Copyright Modernization Act when I was before the Senate committee in that regard.

We promised to modernize Canada's Copyright Act, and our government delivered on that commitment. We introduced and passed a bill that balanced the needs of creators with those of consumers. But this was of course only part of the solution.

[Translation]

Canada continues to open up new markets and expand trade around the world. As you know, our government recently signed two of the most comprehensive trade agreements in history with Korea and the European Union. The latter will provide preferential market access to more than 500 million consumers and to its annual $17 trillion in economic activity.

[English]

Technological change has made trade faster and more sophisticated. The world is quickly realizing the importance of modern, responsive and effective laws to ensure sustained economic growth and job creation. We are no longer simply trading goods and resources to a few close allies. In today's modern economy, we are trading physical goods and intellectual property to more countries and more people, and we're doing so more frequently. With this increased trade comes great opportunity and, of course, reward, but equally responsibility. In trying to exploit these opportunities, we cannot ignore the risks, namely those presented by theft and the resale of Canadian intellectual property. We have already taken the necessary steps to bring our domestic copyright laws in line with international standards.

As this committee well knows, having studied the issue on several occasions, work remains to ensure that goods that violate Canadian laws are not allowed into this country for commercial sale. Not only do such goods undermine the business of legitimate Canadian companies, they all too often represent a threat to the health and well-being of Canadian families.

The bill that's before you will amend the Trade-marks Act and the Copyright Act and will give rights holders, border service officers and law enforcement officers the tools they need to work together to directly confront the growing threat of international counterfeiting and piracy. In today's world, intellectual property rights are at constant risk. Counterfeit and pirated goods are increasingly finding their way through our borders and into the Canadian market. The retail value of counterfeit goods seized by the RCMP has steadily increased from $7.6 million in 2005 to $38 million in 2012. That's a 400 per cent increase within only seven years. That is money and jobs that are being taken away from Canadians.

To give you a context, let me also explain how counterfeit goods can impact our lives.

First of all, counterfeit goods can threaten the health and safety of Canadians. We are not talking just about counterfeit Gucci bags that are sold on the street. Counterfeit airbags, toothpaste, children's toys, and food and beverages all are illegal products that can put the health and safety of Canadians at risk.

[Translation]

Second, there is a direct link between counterfeit goods and organized crime.

Criminal groups use the profits from pirated goods to fund other criminal activities.

[English]

Third, counterfeit and pirated goods are a threat to economic growth and jobs. When counterfeiters steal intellectual property, it is Canadian businesses that are most affected. This is not just through lost revenue from products gone unsold, but also the damage done to brand integrity. When criminals bring counterfeit goods into the country, they are looking to make a quick profit, and they tarnish the strong reputations forged by quality Canadian brands.

Take for example Canada Goose, which has built a reputation as a world-leading manufacturer of high-quality winter wear. Here is a company that has spent valuable time, energy and money to create a brand that is known all over the world and is synonymous with quality. Canada Goose's branding continues to take a hit from subpar knock-offs coming into Canada from abroad. Here is an example of a counterfeit Canada Goose jacket. I have here, by the way, also a counterfeit Canadian hockey sweater, which is good quality and not far off from what the real ones actually look like. But when they fall apart after the first couple of washings and kids get upset, you can imagine how the retailers and creators of these products feel when kids come back with products to their parents that have fallen apart because they're counterfeit or they've been built with materials that are dangerous to their health.

Kevin Spreekmeester, Vice-President of Global Marketing at Canada Goose and Co-chair of the Canadian Intellectual Property Council, has said: “Canadians have long been victims to the illicit counterfeit trade and the new measures announced today should be welcome news for consumers, businesses and retailers alike.”

[Translation]

Food & Consumer Products of Canada agrees that, and I quote:

Counterfeit goods are a very real threat to the health and safety of Canadians. Their presence in the marketplace poses a risk to Canadians and hurts our economy. Our members applaud this government for taking strong and decisive action to address this.

[English]

The Canadian Manufacturers and Exporters also said, “We congratulate the government on taking action to improve the business conditions for companies investing and creating jobs right here in our communities.”

So the need for the legislation is quite clear. The legislation that's before you for deliberation will give Canadian rights holders and law enforcement the tools they need to confront this threat at the border and to take action against those who profit from the trade of counterfeit and pirated goods. It will give the authority to border officers to detain suspected counterfeit shipments and notify rights holders of the detention of those goods, whether the suspected goods are being imported or exported, in either direction.

It will create a new process called a request for assistance, which will allow rights holders to work with border officers and request that they detain commercial shipments suspected of containing counterfeit goods.

Mr. Chair, we undertook serious study and debate of this legislation before the Parliament of Canada on the house side. The Standing Committee on Industry, Science and Technology amended the bill to make it stronger and to respond to stakeholder comments that had been raised. Bill C-8 also received, I should point out, all-party support coming out of the Parliament of Canada, and I think that we can agree that these changes are certainly necessary and long overdue. So this legislation has been studied. I gather there has been some frustration noted about the shortness of time of the proposed examination of this legislation. Obviously it's up to this committee to decide its timelines. But the legislation is overdue. It was given thorough study on the house side. We did accept reasonable amendments from opposition parties about how the legislation can be improved, and they were certainly taken into account. And ultimately when the legislation was put before Parliament for a full vote, it had the support of all Conservative, all Liberal and all New Democrat members of Parliament.

So I would certainly urge all members of this committee to pass this legislation to ensure that Canadian rights holders, customs officers and law enforcement have the tools they need to fight counterfeiting and piracy domestically and at our borders. Thank you very much for your time.

The Chair: Thank you for that opening statement.

The minister will be with us until approximately 11:30. Other members of the augmented panel will be with us for the whole time.

[Translation]

Senator Hervieux-Payette: Welcome, Mr. Minister. I have two questions. First, in your speech, you spoke about an increase from $7.6 million in 2005 to $38 million in 2012. I find it absolutely absurd to believe that the counterfeit goods market in Canada is only $38 million. I would put it rather in the hundreds of millions.

What steps do we have to take to reduce this problem? You also say that combating counterfeit goods is good news for consumers, for business and for retailers. Which individuals will suffer the consequences in large chain stores like Costco, for example, if they have counterfeit goods, in comparison to small gift shops where most counterfeit items are likely to be found? Is it the person selling them? Which individuals will be arrested and who will do that? What mechanism to stop counterfeiting will be used?

Mr. Moore: It is complex. It depends on the circumstances and the details of the investigation. The individuals are the ones who pay, who handle the products and who have received benefits from the transactions. The investigators will determine the best way of finding those who have profited from this criminal act.

As for your first question, my answer is yes. Those amounts come to us from the RCMP and, in my opinion, they are probably much higher. That is the information we have at the moment. If the legislation were already in place, as it is in other countries, the amount would be much higher because we would have the ability to conduct the necessary investigations.

[English]

This bill will create disincentives for those who try to engage in this kind of business practice. Superintendent, perhaps you want to speak to the scale of the investments I mentioned — the growth of 400 per cent. The senator suggested that may be an underselling of the facts.

Superintendent Jean Cormier, Director, Federal Coordination Centres, Royal Canadian Mounted Police: Yes, certainly. I would like to highlight that when statistics are provided, it's not always a good way to measure the scope of the problems.

[Translation]

I am sorry, I will continue in French. Releasing the statistics provides an indication of what we have detected, but it does not necessarily indicate the magnitude of the problem. The figures we release come only from what we have discovered. We recognize that what we have discovered usually represents only a small part of what is going on.

As for effective steps to combat the problem, new legislative measures are necessary. There are already court cases under way that demonstrate the results of these kinds of investigations. New legislation would give us additional tools that will help us in combating this plague, in collaboration with our partners like the Canadian Border Services Agency.

[English]

Mr. Moore: It is a valuable point, senator; and some international data is relevant. In 2012, keeping in mind the Canada-Europe free trade agreement, border officials from the European Union detained over 90,000 shipments containing almost 40 million articles. This represents a value of almost 900 million euros or $1.3 billion. The number of seizures of counterfeit and pirated goods conducted by U.S. custom officials in 2012 reached almost 23,000 with a retail value of $1.2 billion. Counterfeit alcohol in the U.K. was approximately $2 billion per year. Over one in five Japanese companies sustained losses from counterfeiting in 2011.

Globally, this is a serious problem. Of course as you all know, we've gone from Canada having binding free trade agreements with five countries to 43 just in the last couple of years; so this area certainly needs addressing.

Senator Black: I have two questions for you, minister. My first question relates to interventions made to various members of this committee from our friends in the U.S. suggesting that the bill should go further to empower our officials with the authority to examine goods in transit to the U.S. Are you able to respond to that?

Mr. Moore: Yes. I've met with Ambassador Heyman, and Secretary Pritzker was in Ottawa. I spoke with her on the subject matter in Washington, D.C., last month as well.

The main objective of Bill C-8 is to protect the Canadian marketplace; and goods destined for the Canadian marketplace will be confronted. Frankly, the short answer is that we don't have a customs union with the United States. We're a country of 35 million people. We have 293,000 kilometres of coastline; we have the longest and most commercially successful border on the planet with the United States; and we don't have a customs union. It's a bit of a stretch for someone in the American administration — I made this clear to them — to ask the Government of Canada and the Canadian taxpayers to act as a border filter for all goods destined for the U.S. market.

We have procedures in place that will stop goods going into the United States. The Food and Drugs Act, the Canada Consumer Product Safety Act, the Transportation of Dangerous Goods Act and the Criminal Code provide powers to the CBSA, Canada Border Services Agency, and the RCMP to stop goods headed to the United States that may cause any damage possibly to an individual or to public health and safety and so on. The idea that Canada would act as a customs agent for the United States, frankly, is not on the table. The scope of the bill will protect Canadians and the Canadian domestic market; and we think this bill achieves that goal.

Senator Black: Certainly, this is important proposed legislation; I clearly accept that. To my colleague's point, quite clearly there's more work to be done. Therefore, it becomes a question of resources.

Second, do the CBSA and those empowered to enforce the legislation have the appropriate human and financial resources to do the work envisioned by this bill?

Mr. Moore: Yes. Testimony and evidence were provided to that effect at the house committee. I'll certainly invite Mr. Hill and Mr. Cormier to double down on what was said previously in a minute.

I would also point out the international scope as well. The scope of Bill C-8 was requested of the Government of Canada in order for us to have a seat at the table for the Trans-Pacific Partnership. Our relationship with the United States on these cross-border issues in everything we've done from the Beyond the Border agreement, the Windsor-Detroit crossing and the twinning of the Ambassador Bridge, and the Regulatory Cooperation Council, we've worked very well with the U.S. government, effectively to “de-thicken” the existing border between Canada and the United States. And we think we've done that well.

This proposed legislation contributes to a more effective relationship between Canada and the United States on raising Canada to the international standard and meeting the standard that the American government asked the Government of Canada to meet in order for us to move forward with our participation in the Trans-Pacific Partnership negotiations. We've checked all the necessary boxes and are doing what is appropriate to protect the Canadian marketplace.

On the question of resources, I turn to Mr. Hill and Mr. Cormier to speak for themselves.

Peter Hill, Associate Vice-President, Programs Branch, Canada Border Services Agency: Thank you very much, minister. Yes, the agency is sufficiently resourced effectively to implement this proposed legislation. The CBSA has some 5,600 border service officers working on a day-to-day basis, screening commercial shipments that come into this country. The agency currently administers some 90 pieces of legislation on behalf of the Government of Canada, and this legislation would give the CBSA the authority to proactively temporarily detain shipments that are suspected of containing counterfeit or pirated goods. We would integrate that work into our current practices, and we believe that we have the officers and the training required for them to carry out this work in a very professional manner.

[Translation]

Senator Ringuette: Good morning, Mr. Minister. I live in a community in New Brunswick on the border with the state of Maine. I quite agree with your position on the American border services. There are limits.

[English]

One of the first questions I have is on the data that you gave us earlier in regard to what is happening in the EU, particularly in the U.K. Does that data also give you where these shipments are coming from?

Mr. Moore: Some of it does, some of it doesn't. Mr. Hill or Mr. Halucha might want to speak about some of the data and the international dynamic of where goods are coming from. We know one large source, which is pretty self-evident.

Mr. Hill: The information we do have clearly indicates that currently and in the recent past China, including Hong Kong, and Singapore, India and Pakistan are some of the primary sources for counterfeit and pirated goods that are coming not only to Canada but to North America.

We have very good relationships certainly at an agency-to-agency level with our counterparts in U.S. Customs and Border Protection, as well as with the Mexican customs officials, and they're seeing similar patterns of illicit trade.

Senator Ringuette: You already have a target of incoming shipments that you can focus on in regard to policing counterfeit goods, do you?

Mr. Hill: I think, yes, we have a good domain awareness of the threats and the patterns that need to be addressed further through these enhanced tools that we would receive through this legislation.

Senator Ringuette: Do we have any evidence that some counterfeiting is being made in Canada for the Canadian market? That's also a question mark in regard to this issue.

Mr. Moore: Sure. Intellectual property violations do happen all the time. There are people who would take DVDs and CDs, for example, and burn them and stamp them illegally and rip off our artists. I know you in particular have spoken in the past and been quite articulate on the need to protect our artists from that kind of theft that happens in Canada as well.

The copyright modernization act protects goods within Canada. This is legislation that protects goods that are being shipped out of Canada or goods that are coming into Canada. But I have no doubt that there are goods beyond the cultural community that are being manufactured in Canada and sent elsewhere. Goods are captured at the Canada-U.S. border quite frequently.

I'm not sure if you want to give examples of some of the things you've caught in your nets over the years.

Mr. Cormier: Yes, I sure can. Over recent years the RCMP has conducted investigations in Canada, in partnership with CBSA, which related to the counterfeit manufacturing of goods in Canada. I have a couple of examples here that I can provide. In one of them in particular, back in February 2014, charges were laid in relation to a clandestine lab that was dismantled in Longueuil, Quebec, by the RCMP and also CBSA. Upon investigation, steroid and substances that could have been used to produce over 280,000 counterfeit pills of a prescription-type drug were identified. The investigation was conducted in collaboration with CBSA, as I mentioned, and the Longueuil police service and led to the seizure of more than 15,000 counterfeit pills, 22,000 steroid pills and 5 litres of liquid steroid. The packaging quality of the various products looked deceptively similar to real packaging, and the seal and label used for those products would have led a consumer to believe they were legitimate products.

Senator Ringuette: When you state there was $38 million worth of counterfeit goods in 2012, would that include both what is made in Canada and also shipments from foreign countries coming into Canada?

Mr. Cormier: Yes, the statistics for the RCMP that produced those numbers would combine those, correct.

Senator Ringuette: But that would not include the Border Services’ statistics, or yes?

Mr. Cormier: I'm not sure. Would they include your statistics?

Mr. Hill: I think it would. I'd have to actually verify the answer to the question, but my sense is that it would include some of the statistics that relate to the CBSA.

Senator Eaton: Thank you, minister, for coming.

You've made mention a couple of times about Canada's free trade deals and specifically with the TPP, and gentlemen, you talked about China, Singapore and Pakistan, all which are very much a part of the TPP. Will you have agreements and do we have agreements with the EU, for instance, to work with their police? Is it going to be hard for countries like China's own law enforcement to crack down on the counterfeit? Will you have relationships with them, or will you have to wait until the goods actually get to the Canadian border to crack down on them?

Mr. Moore: How do I say this diplomatically? With some countries, where there's a will there's a way. I'll say that. With other countries, yes, we do have obviously much friendlier and cooperative arrangements when it comes to the sharing of information. Obviously the entire effort of the Beyond the Border agreement is to try to do that, to share information with the United States because of the fluency of our economic opportunities, north and south, across our border.

Of course it's a very different relationship in our ports of entry, for example, at the Port of Vancouver and the shipment of container goods and commercial goods coming in. One thing that's important to point out is that this legislation is about commercial exchanges, not somebody who on an individual basis goes to a country, visits a market that may have sketchy goods and comes back with a product. This is about commercial quantities. Frankly, otherwise, it would be impossible for Canada to have any kind of relationship with people moving in and out of countries around the world.

Of course when you visit a country, you have to obey the laws of those countries and not violate the intellectual property laws that impact domestically in those countries.

Yes, obviously we work on having a more fluid and effective trading relationship with all countries in the world, including sharing of information, but I do think it's important to underline, again, that this legislation is bringing us up to the international standard that other countries already impose on themselves. Other countries have mirrored legislation to this that is protecting their consumers from batteries like this that catch fire when you put them in your phone. We don't have these protections. We need these protections for our domestic market.

Senator Eaton: When you talk about international standards, does that mean that most countries in the TPP are also up to international standards?

Mr. Moore: They are. We are ascending up to the standard in order to be at the table. Certainly there are questions of enforcement — enforcement sincerity, enforcement capacity and enforcement dynamics in legislation that is different in jurisdictions around the world, to be sure, and we're always mindful of that and it's always a pursuit. Not to put too fine a point on it, we are lagging behind where we need to be domestically.

Senator Eaton: That's very diplomatic, minister.

Mr. Moore: We'll see how it gets translated by the media, but thank you.

Paul Halucha, Director General, Strategic Policy Branch, Industry Canada: Adding to the minister's comments about information sharing with other countries, one of the key aspects of this bill is that it will provide ex officio authority to border agents, allowing them to stop goods or temporarily detain goods.

It also puts in place the RFA system that the minister mentioned in his opening. This will effectively allow rights holders to register their information at the border, which will be an extremely powerful tool for border agents to share that information. If they have registered marks on there, it will be easy for them to consult what's in the database and have discussions and information exchanges with customs officials in other jurisdictions.

These are two examples of how this bill will support international efforts to deal with counterfeiting.

[Translation]

Senator Massicotte: Thank you for joining us, Mr. Minister, and thanks also to your colleagues. We are dealing with an important bill.

You mentioned the fact that Canada is on a list of countries not taking necessary measures against counterfeiting and the fact that we are a little behind in complying with international standards. Do you believe that, given this bill and the budgets we have allocated, we will be able to catch up and correct the problem? Is this enough?

Mr. Moore: Yes, it was our objective from the start to adopt policies that would put us in the forefront on the international stage. We have to look at the experience of other countries and the lessons we can learn from the policies already in place in some other parts of the world. Of course, our approach will allow Canada to reach those standards in our role as a G7 country that has unprecedented free trade agreements with other countries of the world. We have to find the policies and the amounts of money we need.

I am told that, since our government was elected in 2006, we have increased funding for border services by 26 per cent. It was important to do that. Of course, demands on funding change, but this is one of the government’s stated objectives: to do what it takes to get the money we need. The objective of Mr. Hill and his team is to protect our borders. You heard Mr. Hill testify that the agency has the funds it needs as well as the policies and infrastructures it needs to put in place a Canadian approach.

Senator Massicotte: I kind of understand why the parties are not affected; those who profit from the counterfeiting will be. It is important to prohibit counterfeiting if it is unfair and we recognize that it is unfair for those who have made any kind of product. I understand that it is a difficult situation to manage. But why do we allow individuals to buy products that everyone knows are counterfeit? Why is it legal to do that when everyone calls the practice unacceptable and we are going to implement measures to stop it? Is that a political call? In France, for example, it is clear that buying counterfeit projects is against the law, even for individuals. Why is that not the case in Canada?

Mr. Moore: It is illegal to sell them, but these are private rights.

[English]

In Canadian intellectual property law, these are private rights. If you've created this hockey jersey and somebody is selling it and they're counterfeiting your product, you as the creator of the good are protected within Canada under the Copyright Act, and you can pursue someone who is stealing from you.

This legislation would now go after a person who is stealing from you, creating a good and selling it elsewhere in the world, or stealing your idea, creating it in country X and bringing it into Canada.

Those three dynamics, making it and selling it within Canada; making it and exporting it from Canada; making it, selling it from abroad and bringing it into Canada, two of those three criminal acts against your IP will now be covered by virtue of this legislation.

Senator Massicotte: But when the tire hits the road is when the consumer — it's basically greed. It's money. The consumer buys the good. That's where the whole transaction is completed. Why is it not illegal for the consumer, the retailer, the individual, to buy that good? He clearly knows it's an illegal product. Why is that permitted?

Mr. Halucha: You're talking about if a retailer is purchasing, the individual purchasing is —

Mr. Moore: No. If Joe comes off the street and goes into a kiosk and buys this one hockey jersey, why isn't the purchaser committing a crime?

Mr. Halucha: The objective here is to deal with the market effects of counterfeiting. There are linkages to innovation. We want to have firms innovating, as the minister said in his opening. If I've spent money to develop a product and it's been undermined in the marketplace, what's effective — and I think this is demonstrated in all sorts of areas of law — is to go after the commercial scale, to get it off the marketplace.

Mr. Moore: There is not much realism here. Are you committing a crime? Yes. But are you necessarily?

If I go in and buy this battery, do I know I'm committing a crime? It's a counterfeit good. There is a plausible deniability; the Canon logo is exactly as the Canon logo is. The font is exactly the same. It's in both official languages, looks like, smells like, probably acts like. I don't know. Are you committing a crime? I suppose.

If somebody wants to buy this jersey for $25 rather than $125, which is probably what a typical price would be, are they complicit in it? Maybe, maybe not. Good luck proving it.

Senator Massicotte: I appreciate that, but in a crime, as you know, you have to acknowledge you're making a crime.

In some countries like France, for instance, I brand these. They have a lot of luxury goods and it's their producer.

Canada Goose is a very international product. If we treasure that ingenuity, that creativity, shouldn't we do like other countries where the consumer clearly knows — I'm not saying if he doesn't know and he's innocent, but when you buy goods on the street and the guy opens up his curtain and wants to sell you a watch or whatever, unless you're asleep at the switch, you know this is an illegal product.

Mr. Halucha: It's the practicality of enforcement as well. In talking with rights holders, many of them won't even go after small-scale commercial shipments.

One of the improvements we made in the bill in committee was to add the ability, once CBSA has obtained information that a good is infringing at the border, they can share it with the rights holder with the objective of actually getting an out-of-court settlement.

Practically, there is not going to be an incentive for a rights holder to go after individual after individual to try and get small damages in court. What they want to be able to do is get the product off the market.

I would also note as well that in the civil causes of action in the bill, we've expanded where the rights holder can take action. Currently under Canadian law it has to be on the market before a rights holder can take action. We've expanded that so it can be anywhere from the point of manufacture to distribution, anywhere along the supply chain. This is all with the objective of keeping it off the market so that it never gets in the consumer's hands.

Lastly, I would just say that one of the benefits of the bill being in the public domain is that it has increased education in Canada on the effects of counterfeiting.

I think there is a perception that counterfeit goods are often cheaper, and frankly, they're not. Consumers are often buying goods at top dollar and only then finding out that they've actually received a counterfeit product when, as the minister said, after three washes it falls apart or it degrades quickly or malfunctions or, in the case of an electrical product, it actually could catch fire or something like that. There really is an important education element to this that we are trying to pursue as well.

Senator Massicotte: I appreciate that practicality. We have a lot of laws, including stopping at a stop sign. It doesn't mean you have a cop at every stop sign. There are laws that we encourage people to follow knowing we can’t police every stop at a stop sign.

Mr. Moore: That sounds like a focused Senate private member's bill.

[Translation]

Senator Bellemare: Thank you, Mr. Minister, and congratulations on your bill. I believe that the economic benefits will be greater than the costs.

I would like to pursue the issue of the costs. My sense is, and in the light of your replies to Senator Black and Senator Hervieux-Payette, that this bill has no financial consequences. Do I understand that correctly?

Mr. Moore: It is certainly too easy to say that there will be no consequences. There are costs, of course. We have discussed them with the agencies and they tell us that they have enough money to enforce these powers. This also touches on the questions that Senator Black asked. One of the reasons our approach is more effective for taxpayers, and also for Mr. Hill and his team, is that we do not have the same approach as the United States in engaging those who break the law. They have the responsibility. So basically, costs are involved only if there is an investigation and legal proceedings.

I would like Mr. Hill to talk a little about the agency and what it is doing to get things moving with the money available so that we get a bill that will set guidelines for the policies we want.

[English]

Mr. Hill: This model is the detention model as opposed to the U.S. seizure model. Right off the bat, the government is not responsible for paying the costs associated with goods that are detained or seized. In the model that we're proposing, it's the rights holder who would be responsible up front, through the request for assistance process, to take responsibility for goods that are temporarily detained to allow the rights holder to pursue civil proceedings through the court if they choose to do so. That's one point.

Secondly, yes, there are certainly costs when you're expending resources to this activity. As I mentioned, it is part of the ongoing activity, in many respects. Our commercial examination is ongoing, and this will be integrated into those activities. We will, of course, train our officers to deal specifically with this legislation and to detect pirated goods. The process that will be established will ensure very effective information exchange between rights holders and the CBSA. Through that exchange of information, we will, over time, develop a much more robust and mature capacity to detect indicators for pirated goods. There is a training aspect.

One of our operating principles is pushing the borders out as part of our modernization. We do establish information-sharing arrangements with other governments. As the senator questioned with respect to China, I would like to highlight that, as a result of the Prime Minister's recent trip to China, we have established a customs mutual assistance arrangement, agency to agency, with China.

When you look at complementary measures such as this, we're finding ways to risk manage and to focus on areas of high risk and facilitate the flow of people and goods that are lower risk and therefore expending fewer resources on low risk and focusing precious resources on areas of high risk.

[Translation]

Senator Bellemare: Mr. Minister, does the bill comply with the agreement on counterfeiting that we have with Europe? Are they connected?

Mr. Moore: Yes, those involved in this kind of business will be aware that their intellectual rights will be protected in Canada, just like copyright for those who wish to invest in Canada.

[English]

Senator Lang: My first question is about the CBSA and enforcement. For members' information, we are in the process of completing a study of the Canada Border Services Agency in the Standing Senate Committee on National Security and Defence. We have had a review of the CBSA that's been under way for a number of months this past year.

I want to go back. First of all, perhaps you could explain to us how the system works right now. Right now, we have identified $38 million, I believe, of counterfeit products. I'm assuming we have laid charges. With the system the way it works now, on the ground, who actually goes and does the investigation and lays the charges, and how is it going to change now with the new legislation?

Mr. Hill: In the current system, basically the CBSA does not have the authority to detain goods that are suspected of being counterfeit or pirated. This bill will provide the CBSA with that authority to temporarily detain goods that are suspected of being counterfeit or pirated and set in motion a process whereby, first, if the agency suspects that there is serious criminality or organized crime involved in that shipment or importation of pirated goods, we would refer that to the RCMP, and they would have leadership with respect to pursuing a criminal investigation, and second, if there are suspicions that the products raise health and safety concerns, then the agency would refer that to Health Canada.

If neither of those agencies determines that there is reason to pursue an investigation, then the CBSA would have the authority to refer that to a rights holder. As Paul mentioned earlier, the request for assistance is a process whereby a rights holder at the outset will register their trademark through the Canadian Intellectual Property Office housed in Industry Canada, and then they may submit in advance a request for assistance to CBSA. Therefore, when we detect a suspicious shipment, we will go into our database, see that there was a request for assistance from that rights holder and refer the matter to them.

That's the structure of the process that we would have in place. We have, as you would imagine, standard operating procedures for our officers so that they have clear direction on what their accountability and responsibility is within a management structure at the agency. I hope that answers your question in terms of how we would pursue these particular cases.

John Knubley, Deputy Minister, Industry Canada: It is important to understand broadly in the bill that the processes that were trying to put in place and the intent of the act are very much trying to balance against abuse, on the one hand, and ensure, on the other hand, due process. It's important that senators recognize this is how it's been designed. We're trying to keep this balance and have built in a number of safeguards on the side of this balance.

We've already talked about a few of them, and I won't go through all of them. Criminal provisions apply only to commercial-scale activity. The detention authority that was just referred to is temporary. That allows a well-functioning border and yet respects the presumption of innocence in the case that is examined under the process of law. Court oversight is applied. Border officers don't make decisions on infringement at the border. There is a process that takes place.

On the damages themselves, I know there is this issue around statutory damages, but we believe that, from a safeguard prescriptive, it's better to pursue these damages through the court so that rights holders would have to prove damages. Again, we're trying to get this balance between recognizing abuse and pursuing it versus ensuring due process.

Senator Lang: If I could direct myself to another area here, and that has to do with the actual country where the products were manufactured. I'll use a pragmatic example. Let's say we have a shipment of toys that arrives in Vancouver and you detain that particular shipment. You find that, yes, they have contravened the various laws that we have. We've identified the company that has manufactured those products. What relationship do we have with other countries to go back to the country and say, “Look, this company has been identified. It has been caught shipping illegal products to our country. What are you going to do in your country to stop that particular organization from manufacturing these and sending them to our country?” Do we have any agreements in that context?

Mr. Moore: It depends on the country. For countries with whom we have free trade agreements, this is partly bound into those agreements. With other countries, it's a more challenging pursuit. If somebody sends in a bunch of hockey sweaters with Canada spelled with a “K” and they get held at the border, they are held at the border. We notify the person whose IP has been stolen and let them know. The goods are held for 10 days. The person whose items have been counterfeited can inspect them and decide whether they want to pursue action against the person who was trying to import the items. There still is autonomy of state power, so we don't have the right to impose or enforce laws in other countries around the world. This is why the engagement of the Prime Minister, ministers, members of Parliament and senators on these parliamentary associations going to other countries and raising the issue of IP in certain countries, China, for example, I will not be shy, is important. It is seen by a lot of people in those countries as something of concern that needs to be addressed if they are going to continue to build trade capacity.

As you know, China is in the process of trying to move forward with a free trade agreement with Australia. A big source of debate in Australia is what this means in terms of IP going forward. We pay close attention to those debates to see if there are some things we can do to have better protection of Canada's IP at home by having a better relationship with these countries diplomatically.

Senator Lang: You referred to the agreement just signed between China and Canada. What was is it?

Mr. Hill: It’s a mutual assistance arrangement.

Senator Lang: That would be perhaps the stepping stone. If we identify those illegal products, we would have a path to pursue in respect of trying to ensure that they don't continue manufacturing IPs and just put them in a different container ship.

Mr. Moore: It's about the sharing of information.

Mr. Hill: It's a sharing of information provision that, I believe, over time raises incentive for countries, in this case China, to take action to enforce their domestic laws.

The Chair: Minister, the focus of this bill seems to place emphasis on consumer goods and intellectual property. Forged art is becoming an area of concern. Is this encompassed in Bill C-8?

Mr. Moore: I would think so, yes. I wouldn't see how it couldn't be.

Senator Ringuette: As a follow-up to Senator Lang's question, with regard to prosecution in Canada, the onus is on the owner of the trademark or the patent. Is there a constitutional jurisdiction issue that doesn't allow joint prosecution with the federal government in respect of the consumer protection section of this issue?

Mr. Moore: I'm sorry; do you want to take another run at the question?

Senator Ringuette: There is always a little grey area in terms of jurisdiction and consumer protection, whether it's a federal or provincial area. In some parts of Canada we have both.

The onus is on the trademark owner to decide whether to prosecute the manufacturer in the event of a detained shipment. Could we not go a step further to the matter of consumer protection with regard to counterfeit? At the end of the day, we want to protect the consumer against these counterfeit goods. Why are we not looking at joint prosecution to reaffirm our seriousness in respect of counterfeit?

Mr. Moore: There isn't a need for joint prosecution as it's purely a federal jurisdiction. Certainly, if the CBSA or the RCMP need any assistance if charges are to be laid when a person's rights have been violated, then certainly they would engage with any local law enforcement to gather any necessary information to pursue such an investigation.

Senator Massicotte: Minister, this is a stupid question. You described earlier the need to cooperate. It dawned upon me that we're heavily reliant upon imported goods from China. The poor, small businessperson can't sue everybody that he sees or he'd be in the courts all the time. We advise China that the counterfeit goods are from their country, so execute your laws. Is it against the law in China or is it against the law in Canada to produce goods that you know probably duplicate somebody else's IP that is not registered in your country? The party did not register in Canada for some reason. Is it against the law to produce those goods?

Mr. Moore: That's why you have to register your IP.

Senator Massicotte: Some people might say they'll concentrate in the United States. They have no IP in Canada or China. My point is that you can point to China where the IP is not registered, which would be the case frequently. They can execute only the laws in place, which means you can talk to them a hundred times and it won't make a difference.

Mr. Moore: It's a good question, but my instinct is to say that is why you have to register your IP and be careful about it. In some cases, there is a bit of a grey area because an idea may not be quite so easily defined. I suspect that it would be up to a court to decide whether an IP has been violated and up to a declared rights holder to suggest that his rights had been violated.

Senator Massicotte: But if no IP is registered, I sense from your answer that there would be nothing prohibiting those producers from producing those goods, including in Canada.

Mr. Moore: As was raised a minute ago, including our stop signs and speed limits, we live in a system of voluntary law compliance; and if you get caught, you get punished.

Mr. Knubley: I'm not an expert, but I hear, particularly from firms that go to China, that they will register their IP and the challenge they have is when it goes to court and what happens when they pursue it in court.

The Chair: Minister, on behalf of the committee, thank you very much for your appearance today.

Now joining Mr. Halucha, Superintendent Cormier and Mr. Hill are Michael Ryan, Senior Analyst, Copyright and Trade-mark Policy Directorate, Industry Canada; and Megan Imrie, Director General, Commercial Program Directorate, Programs Branch, Canada Border Services Agency.

There will be no further opening statements, but we are going to continue on with questions.

Senator Tannas: I would like to build a little bit on what Senator Black was asking earlier. First of all, I certainly have understood that the Vancouver and particularly Prince Rupert ports trumpet a competitive advantage, a significant cost advantage, to shippers to ship goods from Asia through our ports and then down to Chicago. That actually is a cost-effective method that is attractive.

I wonder if you could give us some colour on how many people, what the cost, what the implications would be of doing what Senator Black has mentioned that our American friends would like us to do, which is to provide a far more thorough screen on goods in transit. Have you done any modelling? Can you give us any sense of what that might entail?

Mr. Hill: I'll ask my colleague to assist in responding to your question. I would like to point out that we shouldn't underestimate the importance and the advantage of the information that we will be able to share with the Americans. We won't be seizing in-transit goods en route to the U.S., but in the course of our activity under the bill as proposed, the information that we obtain, we envisage in some cases providing that to the U.S. So we would reseal the container, it would carry on through to its destination under the customs seal, and the authorities, our partners in U.S. Customs and Border Protection, would be waiting to receive that container with the foreknowledge that we've been able to provide them around the suspicions and the information that we have been able to obtain as a result. It's important to understand that that information is extremely important and also a cost-effective element to the model. I'll turn to my colleague to comment further.

Megan Imrie, Director General, Commercial Program Directorate, Programs Branch, Canada Border Services Agency: I definitely concur with that. The only thing I would add in terms of volumetrics — you were asking about modeling — just to give you a national picture, CBSA clears over 14 million commercial shipments a year. Based on advanced information and intelligence and targeting, we conduct over 200,000 examinations. The volumetrics are quite high.

The other point I would make is that if there are issues of concerns in Prince Rupert, Vancouver, Montreal or Halifax, if there are currently issues of criminality, if there are products that are unsafe, we are able to refer those to Health Canada or RCMP and take action. And we would just agree that we do. We get a lot of advanced information on shipments, which allows us to perform our duties in terms of the risk management approach.

Senator Tannas: Just to clarify, I think we heard that regardless of where they're going, if they're in transit and if they fall within those designations then it doesn't matter? You've got the ability to act and always have had the ability to act?

Ms. Imrie: That's correct.

Senator Tannas: You mentioned entering and forwarding information. Do you do that currently now, or is this an enhancement coming via this bill?

Mr. Hill: As Megan pointed out, we do that when we come across these cases in the course of carrying out our existing mandate. Currently we're looking for national security threats, maybe chemical, biological, radiological material, and we are certainly looking for contraband, weapons and illegal drugs. In the course of carrying out those examinations, if we come across suspected counterfeit or pirated goods, then we would provide that information to our partners.

This bill gives us the authority to actually target for that, which is an important step forward in terms of modernizing our framework and aligning with frameworks of many of our trusted traders across the world. Essentially there's no reason that Canada should be lagging behind in this business, and this will help us align and modernize our practices.

Senator Tannas: Thank you.

Senator Ringuette: Earlier, I asked a question in regard to the shippers. Now I'd like to ask a question or two in regard to the Canadian receivers.

[Translation]

Mr. Cormier, you are in the best position to answer these questions. From what you have observed, and from the data you have gathered in connection with the action you have already taken with that figure of $38 million, can you easily identify those receiving these shipments in Canada? Are those recipients wholesalers? Do they represent chains, major retail chains, or is the intention to sell online?

Mr. Cormier: Thank you for your question. Before answering it, let me clarify one point that was raised about the statistics given earlier about the $38 million. I think you wanted to know whether they were RCMP statistics or in combination with the CBSA. I should clarify that they are RCMP statistics but they may contain referrals from the CBSA.

Now let me answer your question. I think that the CBSA could also do so because they are the first point of contact for the large containers arriving in Canada. I do not know if you want to comment, but I could then add a comment about the procedures necessary for identifying recipients.

Ms. Imrie: I can try to answer your question. The program we are going to implement will contain information that we will receive and share with the rights holders, that is, those who are registered as rights holders with the Canadian Intellectual Property Office.

Senator Ringuette: Perhaps my question was not clear. What I really want is a picture of the amount of $38 million that has been identified. What kinds of recipients in Canada are waiting for those shipments?

Mr. Cormier: The answer is yes, you identified them yourself. Are they wholesalers, retailers, chains? The answer is yes, all of the above. The recipients can come in various types.

Senator Ringuette: You know that for a fact?

Mr. Cormier: We know for a fact that the largest quantities come from wholesalers. That is why we need to identify the recipients, of course. It is a major process that involves the CBSA. It also involves investigations that can be complex. The reason we want to seek new tools in the bill is so that we can have new investigative options that will move the more complex investigations forward.

Senator Ringuette: In the merchandise that we have been told is worth $38 million, was there any food?

Mr. Cormier: I do not have that information. Nor do I know whether we have access to it.

[English]

Mr. Halucha: The largest category that was reported was in textiles. I can't remember if food was on the list, but it was not one of the principal areas. It's principally consumer products that are the highest.

In terms of the criminal offence that's been added in as a result of this bill, there is a component that you have to do it knowingly. There's a mens rea part of the offence. You can't be found guilty if you've inadvertently signed a contract with a supplier who turns out to be a counterfeit goods dealer and you find out later. There is that. That's a really important protection in the act.

From the perspective of your question of who's going to pay the costs if I've been in good faith trying to source a product and I find out as a result of an RCMP investigation or as a result of an action by the rights holder, and I imagine in most cases particularly the big box chains have obviously an incentive to maintain quality products and they're not going to be sourcing for counterfeit goods, I would expect that if they are inadvertently caught up, that it would be as a result of their having unknowingly signed these kinds of contracts.

Senator Ringuette: Again, in regard to that $38 million and some of them going through a court process, was the court process done by the Canadian trademark owner?

Mr. Cormier: The trademark owner is usually the victim, so certainly the victim has to be willing to pursue the matter for us to go ahead with the criminal investigation. It is part of the consideration.

Senator Ringuette: Maybe you don't have that detail with you, but I —

Mr. Cormier: I can tell you how many cases were prosecuted, for example.

The Chair: We could come back to that.

Mr. Cormier: Okay, sure.

Senator Ringuette: Thank you.

The Chair: Mr. Ryan, you had a comment?

Michael Ryan, Senior Analyst, Copyright and Trade-mark Policy Directorate, Industry Canada: It might help clarify. These prosecutions are led by the Crown, and the trademark owner would be a relevant witness to identify that the rights in play are their rights, and they can identify as evidence, but it's the Crown prosecutors and the police that are conducting the prosecution and investigation.

Senator Ringuette: So we're changing that process right now.

Mr. Ryan: No, we're actually adding more tools with respect to what the police may investigate — a greater deal of importation, manufacture and selling. We're also providing the opportunity for access to information for rights holders where the Crown isn't seeking to prosecute to allow rights holders the opportunity to pursue their rights civilly.

The Chair: Senator Ringuette, I'll put you for second round.

[Translation]

Senator Massicotte: We can see that cooperation between countries is a basic condition for success. With that in mind, when counterfeit goods are in transit in Canada to the United States, and the other way round, we have the right to advise our American colleagues that a shipment of counterfeit goods has arrived. I accept that. So, when a product from Asia goes through Canada on its way to the United States, are our verification procedures as thorough as if the product was being shipped to Canada?

[English]

Ms. Imrie: In terms of in-transit goods, normally it would only be if, as Mr. Hill discussed, there was a shipment of concern from a national security perspective — criminality, contraband, elicit weapons. Those would be areas where we would focus our attention on in-transit goods.

In terms of goods that would arrive in Canada for import into the country, we would administer the 90 acts of Parliament that apply to Canada, which could include other government departments such as CFIA, Health Canada, et cetera. There are more provisions that we would administer on import than in-transit.

[Translation]

Senator Massicotte: In your reply to Senator Tannas, you said that, if you received an in-transit product destined for the United States, you would advise them, but that would be exceptional because, basically, you do not check those products. We help the Americans by the luck of the draw. In terms of international cooperation, that is not a lot.

So let us look at an example in the opposite direction, where goods bound for Canada are shipped via the United States. Do the American just set the product aside without checking it, as we do, or, at very least, do they check the country the shipment comes from, since we are talking about cooperation between countries on this matter?

[English]

Ms. Imrie: It would be important just to underline that, with respect to this bill, we would be protecting the domestic market in terms of the laws of Canada. Canada wouldn't be enforcing our domestic provisions with respect to IP and vice versa. I don't know, Paul, if you would like to add to that

Senator Massicotte: That's not my question. What I was getting at is that the Americans have made the valid point with most senators here, and we've met them, to say, “Goods are coming into Canada for a destination in the United States. Please help us. When you see counterfeit goods, please advise us. Please exercise the authority you have to minimize those goods.” You're saying we have the authority to advise them, but we don't take any particular procedures or inspections to increase the discovery of counterfeit goods. Okay, so that's our position. But they make a valid complaint and they make a valid request, in my opinion, to seek our assistance. On their side, if goods come from China in transit through the United States to Canada, are they helping us in the way they want us to help them?

Ms. Imrie: There is a great deal of information that goes on between Canada and the U.S. currently, and the Beyond the Border initiative is definitely strengthening that, whether it's joint targeting in terms of risks or information sharing with respect to Beyond the Border. We will definitely leverage those initiatives that we have in place to further strengthen information sharing. This bill in particular would be one where we can look at greater information sharing as we move forward.

Senator Massicotte: My question is very particular to goods in transit. If goods in transit come to Canada territorially, legally, but they are destined for the United States, we don't do very much about it unless we are aware of a problem. Is the reverse the case? Do the Americans examine all the products that enter their country, irrespective of whether they’re destined for us or for them? Is there a difference in treatment? Are they making a more detailed review of those issues, more than we are, and therefore their complaint would be valid? I just want to know what they do for us there.

Ms. Imrie: Paul, did you want to add to that?

Mr. Halucha: I'm not an expert on how the U.S. administers its border relationship. I would just say what the minister said, which is that we're not in a customs union. Intellectual property rights are actually territorial, and that's what this bill is about. It is about intellectual property rights. To the extent that the U.S. is stopping shipments coming into Canada where they have concerns that they are counterfeit and someone's rights are being violated, it's not the Canadian laws they are applying in the United States. They are effectively applying U.S. laws on goods that are coming into Canada.

Senator Massicotte: Goods that are physically in Canada, in transit to the United States, that are clearly counterfeit goods, it seems to suggest that our laws don't allow us to stop those goods, even if the final consumer is not Canadian.

Mr. Halucha: That's what this bill is providing authority to the customs agents to do, to stop goods because there is an IP crime.

Senator Massicotte: Even if it’s not destined for Canada, it's against Canadian laws to ship it through Canada?

Mr. Halucha: There's an exception in the bill, which is essentially the reason why the U.S. authorities have been coming to see you and have come to see us as well. The exception says that if there are only IP concerns, then Canadian authorities will pass on information. We will not detain those goods pursuant to our laws.

Senator Massicotte: Is that against our laws?

Mr. Halucha: If it's not destined for the Canadian marketplace, if there are concerns that it could enter the Canadian market, then effectively that's potentially a smuggling offence. They can stop it.

Senator Massicotte: I make the observation — I'm not an expert — that the answer I'm getting is amazing to me.

Therefore, counterfeit goods, counterfeit drugs that come into Canada, are physically here at the Port of Montreal or wherever, and are clearly counterfeit, including IP registered here, but you say we don't have the right to stop those goods because they're not destined for the Canadian consumer.

Mr. Halucha: The example you're giving is a counterfeit pharmaceutical. There are already existing legislative authorities in Canada for the border agents to stop those goods. They don't need additional authorities pursuant to this.

Senator Massicotte: How about a hockey sweater?

Mr. Halucha: A hockey sweater where the only violation was a trademark, then the border agent in Canada could certainly contact the relevant authorities in the United States.

Senator Massicotte: But he cannot seize those goods?

Mr. Halucha: Not on the basis of just an IP offence coming into the Canadian marketplace.

Senator Massicotte: So it's against the law?

Mr. Halucha: If there's a health and safety concern.

Senator Massicotte: Even if they are not destined for Canada, for Canadians, it's against the law?

Mr. Halucha: But whose law?

Senator Massicotte: Canadian laws, for a pharmaceutical.

Mr. Halucha: If it's not coming into the Canadian marketplace, then what right do we have to apply our laws?

Senator Massicotte: Even a pharmaceutical product?

Mr. Halucha: A pharmaceutical product is different. On health and safety concerns, if that was the cause for the concern, then it could be detained.

Senator Massicotte: Even if it’s not destined for Canadians?

Mr. Halucha: Correct.

Senator Massicotte: What do we do to catch those goods?

Ms. Imrie: Certainly if there are, as I mentioned, health and safety concerns in terms of shipments transiting our country, if there is criminal activity, currently we have the authority to administer many acts of Parliament, including those with Health Canada, et cetera.

So we would, again, rely on the tools that we have currently, manifest information, advance information we would receive on shipments, intelligence that we would have from ourselves, our partners internationally, and also the indicators that our Border Services Agency use to determine whether there's an issue of concern. Those would be the focus of our examinations and inspections, and we would take action to make referrals to our partners.

[Translation]

Senator Bellemare: My question has to do with the proposed amendments to the Copyright Act and with the distribution of costs. As I understand it, from now on, the costs of the storage, the handling and the destruction of goods impounded by customs, all those costs will be the responsibility of the rights holders, rather than of the importers, who are the ones committing the offence by importing counterfeit products.

Is it not a little unfair to make the rights holders bear those costs? What happens if the rights holders are not located in Canada? If the rights holders’ property is in Europe or the United States, are importers going to be able to pick up their shipments without paying a cent? Who pays what? Is there not a degree of unfairness in the way the costs are levied?

[English]

Mr. Halucha: In terms of the RFA system, the two principal bases on the system are, first, that there's a presumption of innocence. We always use the word “importers.” We don't make the assumption that they are counterfeiters. That's a determination made in the court; it's not made at the border. The RFA system is going to be put in place to benefit rights holders. They don't have an obligation to register on it. If it's in their interest and they choose to do so, then they are able to do it. It will give them the ability to get the information at the border, to pursue civil causes of action.

It really is in their interest; and as you heard the minister say, it's a private right, intellectual property rights.

The first principle underlying the border is that you're innocent until you're proven guilty, and the courts make that determination. The second one is that because it's a private right, it's up to them to bear the costs of the temporary detention.

In terms of whether it's unjust or not, I would note that if they do make a determination and they acquire these goods with the objective of enforcing their rights in a court, they are able to get damages awarded by a court, including those costs. We've made it very explicit in the legislation that the costs of detention, the costs of storage can be recouped by them in a court of law. So they have that opportunity. It's not an obligation that they be part of the system. Second, they have the ability to recoup those costs in court.

[Translation]

Senator Bellemare: Rights holders are small businesses. Inventors do not have the financial means to absorb those costs. Does this mean that counterfeiting will continue to go unpunished? In other words, what is going to happen if the person whose property rights have been violated does not have the means to take those steps, because that can happen?

Senator Massicotte: That is often the case.

Senator Bellemare: What is going to happen?

[English]

Mr. Halucha: You're asking in the specific case of small and medium-sized businesses? If they've made the determination that it's in their interest to use the RFA system, then they need to have the resources to enforce their rights. That's not different than if they found the goods on the market in Canada. If all of a sudden they were in a store and they saw counterfeit versions of their goods being sold, they would still have, effectively, an access-to-justice problem. They would have to have the resources to enforce their rights. That's how the legal system works in Canada.

[Translation]

Senator Bellemare: Are they going to have to take out a loan or go into debt in order to have their rights upheld? Can the situation get to that point, or is it possible for the government to intervene?

[English]

Mr. Halucha: It's a private right in Canada.

[Translation]

Senator Massicotte: However, as you mentioned before, the Crown has the right to prosecute counterfeiting. In which cases will the Crown decide to help a small business? Surely, you have a policy or guidelines in place? If so, the Crown may get involved, but what are the criteria?

[English]

Mr. Halucha: At the beginning, I would say that you're absolutely right. If there's a counterfeiting network that is potentially producing the goods of a large number of small and medium-sized businesses and an RCMP investigation decided to target that network, then the costs would be borne by the Crown, and the determination there is that there is a higher standard, there's a criminal network that needs to be addressed.

Senator Massicotte: So that's the criteria, a criminal network?

Mr. Halucha: Yes.

[Translation]

Mr. Cormier: We are mainly going to focus on the organized crime groups involved. If they are involved and if the victims are a number of small businesses, we will certainly help them. As for the investigation, the prosecutor and the court case, those costs will remain with the court.

I would also like to take this opportunity to confirm that, in the statistics we provided earlier, there were no food products. In addition, in Canada, from 2005 to 2012, there were 164 convictions in counterfeiting cases.

Senator Massicotte: Mr. Cormier, what part of your annual budget is available for Crown prosecutions?

[English]

The Chair: I'm sorry, that was not a supplementary. I'm putting you on second round.

[Translation]

Senator Hervieux-Payette: I have a question for you, Mr. Cormier. How many extra people will be necessary, after this supposedly results-oriented bill is passed, given that you are going to get additional resources for national security and several other mandates of yours?

In order to enforce Bill C-8, you received a budget for additional resources, as did the customs service. How many additional people will be part of enforcing this law?

Mr. Cormier: There will be no additional people employed in order to enforce this act. That is the way things are in the RCMP. The priorities we deal with change daily. We have to assign our resources accordingly. The cases passed on to us have to be prioritized in the same way and at the same time as our own.

Senator Hervieux-Payette: How many hours of training are you going to provide so that people can enforce the legislation? Are you going to hold a series of meetings with officers on the ground to tell them about the modalities in the new legislation?

Mr. Cormier: There are different ways of communicating information with investigators when legislation is amended. With advances in technology, it is possible for us to provide online courses. The information is also circulated via email. In addition, we will certainly deal with the enforcement of new legislation in future courses.

Senator Hervieux-Payette: Of your two services and the businesses whose trademarks are stolen, where do the greatest numbers come from? Do you start most proceedings or do they come from those whose trademarks have been stolen? Basically, do you deal with most of them or do you get 20 per cent and they get 80 per cent? Who registers complaints most often?

Mr. Cormier: Who registers complaints most often?

Senator Hervieux-Payette: Yes.

Mr. Cormier: Most complaints are passed to us by border services. We are more interested in large quantities that have an impact on Canada. So we give a higher priority to cases involving organized crime, both in Canada and internationally.

Senator Hervieux-Payette: Will this legislation substantially reduce the time that has to elapse between the seizure, the charge, the verdict and the penalty assessed? Is that going to be improved? The courts in Quebec are generally looking at a two-year backlog in almost all cases. Let us say that, tomorrow morning, just before the holidays, Canada had to handle another case involving Canada Goose products. Say we see steps being taken in the market or your colleagues making seizures on the border. How much time will it take to stop the bleeding?

Mr. Cormier: The case and the investigations can be complex. We work with the tools we have been given. They are what we have in our toolbox for investigations. I am not sure that the length of the investigations can be reduced, but these new tools will certainly help us.

I would like to make one point about Canada Goose. The counterfeiting is not necessarily done in Canada. A lot of people are involved. They find a website offering those kinds of products for sale and they buy them online. I am sure that you are aware of the Canadian Anti-Fraud Centre, located in North Bay. They have an established process. A lot of people are calling them. The number of calls from people turning to the centre is increasing. There is a process for helping the victims by advising them about the steps they have to take. The information they receive is shared with authorities internationally and with the banks that issue credit cards so that they are aware of the fraud cases. The banks or the groups managing the credit cards are stopping payments for the products. They are cutting down on fraud that way. It is not just a matter of enforcing the law and going to court. Sometimes, there are other ways to solve the problems. It is what we call having another recourse.

Senator Hervieux-Payette: In terms of enforcing the law, have you developed a communication plan so that, from now on, victims will know that it will be easier to prevent fraudsters from selling counterfeit goods in the Canadian market?

Mr. Cormier: In part, the solution lies in prevention, education and pretty aggressive advertising. We already have advertisements explaining that buying counterfeit goods encourages organized crime. That is the kind of message we are putting out.

Senator Hervieux-Payette: Could you send us the communications budget for enforcing the law?

Mr. Cormier: I do not know if we have a separate document, but I can certainly check.

[English]

Senator Ringuette: Mr. Ryan, I would like to go where we were earlier in regard to prosecution. You were indicating in regard to the statistics of $38 million in 2012 that it was mostly Crown prosecuted. Did I read that correctly?

Mr. Ryan: Yes.

Senator Ringuette: Why was it only prosecutions by the Crown, if we're looking at counterfeiting?

Mr. Ryan: I think there are two important elements to keep in mind. There is the criminal aspect, which is that the RCMP is responsible for investigating and referring cases to the prosecutors, but also there is the civil side, and that's a private action. The RCMP doesn't take a role in the enforcement of private rights.

There's a lot of case law with respect to right holders seeking enforcement of their rights in the Federal Court, but that's enforcement of their private rights, as opposed to the criminal offences and criminal remedies which the RCMP is taking care of.

Senator Ringuette: Of the $38 million, how much would have been a criminal Crown prosecution?

Mr. Ryan: The statistics being provided are the RCMP investigations.

Senator Ringuette: This would only be the —

Mr. Ryan: Crown, RCMP enforcing —

Senator Ringuette: — criminal.

Mr. Ryan: Correct.

Senator Ringuette: Where do you draw the line between what is criminal, what is trademark and what is consumer protection with regard to counterfeiting?

Mr. Ryan: There are multiple angles, and it depends on the nature of the goods themselves. The bill talks about the commercial-scale importation, manufacturing and sale. That's the commercial-scale element and the knowingly selling a counterfeit product that brings into —

Senator Ringuette: Those counterfeit, commercial, high-volume imports, who will decide if they relate to criminal activity or trademark activity? It could also be both. What will happen then?

Mr. Ryan: In that case, what's envisioned is we're trying to target things crossing the border. What's always most important in that case is the state interest in those goods. It will be referred to the RCMP, and whether it meets within their targeting, if it's an investigation that meets their qualifications in order to pursue it and, if not, Health Canada could also be brought in to see if this is something they're interested in pursuing. If not, then the rights holder has an opportunity to move forward and enforce their private rights.

Senator Ringuette: It will be border services that will decide, depending on the items, which direction to take.

Mr. Ryan: They will decide who to refer the matter to.

Senator Ringuette: In fact, it could be all three related, criminal, trademark and consumer protection. Thank you.

The Chair: Is there a concluding short, snappy question from Senator Massicotte? It has to be short, as usual.

Senator Massicotte: Like all my questions. Of your total annual budget, what is dedicated to pursuance by the Crown to help against criminal elements?

Mr. Cormier: For the RCMP, I wanted to indicate — and I don't know if you're referring to the $38 million mentioned — the $38 million is not the budget. That is the value of goods seized.

Senator Massicotte: That's why I'm asking the question.

Mr. Cormier: That is not our budget. The budget is part of the entire federal policing budget for the RCMP. I would have to provide you a global figure on that.

Senator Massicotte: Good stuff. Could you forward it to the clerk so we can get that?

Mr. Cormier: Absolutely.

Senator Massicotte: You see, chair, my questions are always short.

The Chair: Absolutely. Mr. Halucha had a final comment.

Mr. Halucha: I wanted to make a point. We've been talking a lot about accessing the court, and obviously that's an extremely important part of this legislative framework that we are bringing forward for your consideration.

I also note that one of the important amendments made in the House of Commons dealt with how the information could be used when it's been provided to the border guards and the interaction between them and the rights holders. We've clarified that they can actually use that information for the purposes of getting an out-of-court settlement with the importer.

Again, we are making a lot of assumptions because you tend to think about the most extreme example where it's someone who has knowingly imported, but there are cases where someone has imported and thinks they have a good supplier and the first time they find out they potentially have imported a counterfeit good is when they have a lawyer in their office telling them that their goods have been detained at the border and now they have a problem on their hands.

What we need clearly in the legislation, and it was a good change that Parliament made, is to ensure that information exchange can happen between the rights holder and the importer for the purpose of an out-of-court settlement. This would allow for the rights holder to quickly enforce their rights. There is no cost on the Crown. The goods would be moved quickly off the border. Effectively that's the way the system would work I think in most cases. When we did consultations on the bill we were told that 90 to 95 per cent of the cases where their goods are detained, that these out-of-court settlements are the way for clearing it. That is their first response. I think it's very important to add that last part of it.

The Chair: Thank you, Mr. Halucha. To our panel, on behalf of all members of the Senate Banking Committee, we express our appreciation for your appearance today. You have been very helpful in our study of Bill C-8. This meeting is concluded.

(The committee adjourned.)