RCMP report details Canada’s serious counterfeiting and piracy problems

The RCMP just published a report surveying the problems posed by counterfeiting and piracy in Canada. Some of the important findings of the report A National Intellectual Property Crime Threat Assessment, 2005 to 2008 are the following:

• Traditionally viewed as being victimless, Intellectual Property (IP) crime has become a source of health and safety concern in Canada. Health, safety, and economic damages from the consumption and usage of counterfeit goods are being reported on an international scale. Victims of IP crime include, among others, people suffering from life threatening diseases who unknowingly use counterfeit medicines containing little or too many active ingredients, or toxins.
• There has been a tangible economic impact not only in terms of lost government revenue, but also on legitimate retailers having to deal with the loss in revenue to online file sharing and the availability of cheaper counterfeit products on Internet websites. Some legitimate retailers have reported difficulty in competing with vendors selling counterfeit goods at unfairly low prices, some having had to lay off staff in order to remain in operation. In more extreme cases, some have had to shut down their business.
• Loss of economic integrity is a threat posed by IP crime to Canadians and the international community. In a knowledge-based economy such as Canada’s, innovation is a key driver of economic growth, productivity and competitiveness. The creative industry has been estimated to encompass 7.4 percent of Canada’s Gross Domestic Product (GDP), and employs more than one million Canadians. The protection of Canadians’ IP Rights (IPR) is therefore vital to support innovation, creativity, and, consequently, to ensure Canada’s long-term economic prosperity.
• The depressed economy and the availability of such goods may play a role in the increasing demand for counterfeit and pirated products.
• Counterfeiting and piracy techniques have become more sophisticated rendering detection more difficult than ever.
• Counterfeiters utilize a variety of methods to evade detection at Canada’s international borders.
• IP Criminals make up an eclectic demographic ranging from organized crime groups, to small-scale retailers who sell small quantities of IP-infringing goods to supplement their income.
• In Canada, the fact that IP crime is difficult to detect, that limited enforcement resources are dedicated to it, and that sentences are not sufficiently significant to deter all serve to generate an attractive criminal undertaking, especially when compared to other crimes such as drug trafficking.
• Given criminals’ increasing awareness of the benefits of counterfeiting, more individuals, criminal networks, and organized crime groups are expected to include IP crimes in their portfolios. Furthermore, given the increasing availability of technology, counterfeiting techniques are expected to improve, rendering detection more difficult than ever.
• Although the RCMP investigated nearly 1,500 cases of IP crime between 2005 and 2008, these numbers are believed to be a fraction of the true IP crime situation in Canada.
• The total retail value of seizures reported by the RCMP alone, from 2005 to 2008, is estimated at more than 63.6 million CAD, highlighting that IP crime is a profitable line of business.
• China (including Hong Kong) is the most common source/transit country for counterfeit goods imported into Canada.
• Canada has been identified as a source of pirated DVD and CD media, primarily for domestic consumption. However, some investigations have revealed Canada as a source country for pirated media found online, as well as a transit country for various IP-infringing goods.
• Current Canadian copyright and trade-mark laws have been criticized by domestic stakeholders and majors trading partners for failing to address IP crime. This criticism stems from the fact that Canada has not implemented an “ex officio” border regime that would enable customs officers to target and detain suspected counterfeit and pirated goods, that Canada has not remedied the perceived ineffectiveness of trademark offences in the Criminal Code, and that Canada has not implemented the World Intellectual Property Organization (WIPO) Copyright Treaty (WCT).
• The notion that current legislative provisions do little to deter IP crime in Canada is generally felt by both private industry and law enforcement. Even after a successful prosecution, penalties imposed are typically mild and reflect, for the accused, the cost of doing business rather than serving as a deterrent. Judges are still faced with sentencing difficulties as there is no precedent, at this time, for imposing stiff penalties.
• International trade has systematically increased the movement and distribution of goods. As a result, border services worldwide, which are the first line of defense in identifying and preventing illicit goods from entering the country, are burdened with increases in transnational shipments.

The RCMP report re-enforces what many who have studied the problem have also concluded. Canada has a significant counterfeiting and piracy problem that is not adequately being addressed by our weak laws and enforcement practices. The porous nature of our borders and the need to upgrade our border controls to world standards to reduce counterfeiting and piracy in Canada has, for example, been noted by two parliamentary committees, three Canadian trade associations, and our major trading partners. Parliamentary Standing Committee on Public Safety and National Security, Parliamentary Standing Committee on Industry, Science and Technology, Ontario Chamber of commerce, Canadian Chamber of Commerce, U.S. Trade Representative,  U.S. Congressional Anti-Piracy Caucus, European Union, and Canadian Anti-Counterfeiting Network (CACN).

Bill C-32 does not specifically address many of the legal shortfalls in our copyright, trademark, criminal, and customs laws that are needed to alleviate the health and safety, economic and criminal problems associated with counterfeiting and piracy. The RCMP report is a further reminder that there is an issue of public importance that needs legislative and other solutions.