Accord<strong>in</strong>g to a study by Frontier Economics,counterfeit<strong>in</strong>g and piracy cost G20 governments morethan €100 billion a year <strong>in</strong> lost tax revenues and place2.5 million legitimate jobs at risk. 35 Ano<strong>the</strong>r reporthas stated that “In total, if counterfeit<strong>in</strong>g and piracycont<strong>in</strong>ue to grow at current trends, it could be worthup to 1.7 trillion by 2015.” 36 In its report <strong>Counterfeit<strong>in</strong>g</strong>and Piracy are Theft, <strong>the</strong> Stand<strong>in</strong>g Committee onIndustry, Science and Technology acknowledgedthat “tax revenue losses can no longer be assumedto be <strong>in</strong>significant.” 37 Despite this acknowledgmentby a unanimous government committee and its callto action, no concrete steps have been taken by <strong>the</strong><strong>Canadian</strong> government to respond to <strong>the</strong> problem <strong>of</strong>counterfeit<strong>in</strong>g and improve its revenue situation.Revenue From Counterfeit Products FundsOrganized CrimeBecause <strong>the</strong>se IP rights are valuable, people try to makemoney from <strong>the</strong>m without <strong>the</strong> owner’s permission, <strong>of</strong>ten<strong>in</strong> ways that are best described as organized crime.This damages both <strong>the</strong> economy and society. Availabledata suggest a strong l<strong>in</strong>k between IP crime and o<strong>the</strong>rforms <strong>of</strong> crim<strong>in</strong>al behaviour, with <strong>of</strong>fenders convicted <strong>of</strong>counterfeit<strong>in</strong>g and piracy also found to be engaged <strong>in</strong> illegalmoney-lend<strong>in</strong>g as well as benefits frauds and anti-socialbehaviour. There is also evidence <strong>of</strong> <strong>the</strong> <strong>in</strong>volvement <strong>of</strong> someengaged <strong>in</strong> IP crime <strong>in</strong> drugs, human traffick<strong>in</strong>g, seriousfiscal and non-fiscal fraud and associated money launder<strong>in</strong>g<strong>of</strong>fences.- Prevention and Cure: The UK IP Crime Strategy 2011.As <strong>the</strong> penalties associated with <strong>the</strong> commission <strong>of</strong>counterfeit <strong>of</strong>fences are generally low, engag<strong>in</strong>g <strong>in</strong>counterfeit production and distribution is a lowriskventure for crim<strong>in</strong>al enterprises. Crim<strong>in</strong>alorganizations are able to take advantage <strong>of</strong> preexist<strong>in</strong>gsupply channels and can use <strong>the</strong> pr<strong>of</strong>its madefrom counterfeit<strong>in</strong>g to fund o<strong>the</strong>r aspects <strong>of</strong> <strong>the</strong>ircrim<strong>in</strong>al operations. The sophistication <strong>of</strong> pr<strong>of</strong>essionalcounterfeiters cannot be underestimated.In 2009, <strong>the</strong> Rand Corporation produced a 150-pagereport on <strong>the</strong> l<strong>in</strong>ks between organized crime andcounterfeit<strong>in</strong>g and piracy. In addition to demonstrat<strong>in</strong>ghow <strong>the</strong> easy money made by crim<strong>in</strong>al organizationswhich traffic <strong>in</strong> counterfeit and pirated goods canbe used to fund o<strong>the</strong>r crim<strong>in</strong>al enterprises <strong>in</strong>clud<strong>in</strong>ghuman traffick<strong>in</strong>g and drugs, <strong>the</strong> report called ongovernments to take positive action to respond to <strong>the</strong>grow<strong>in</strong>g role <strong>of</strong> organized crime <strong>in</strong> counterfeit<strong>in</strong>g andpiracy. Specifically, this report called on governmentsto expand <strong>the</strong> def<strong>in</strong>ition <strong>of</strong> organized crime “to<strong>in</strong>clude large-scale counterfeit<strong>in</strong>g tied to o<strong>the</strong>r crim<strong>in</strong>alactivity. Laws should be enacted to grant <strong>in</strong>vestigatorsgreater authority to susta<strong>in</strong> <strong>in</strong>vestigations, conductsurveillance and obta<strong>in</strong> search warrants.” 38The RCMP has also observed l<strong>in</strong>ks between organizedcrime and IPR <strong>of</strong>fences. “OC [organized crime] groupsuse IP crime as ano<strong>the</strong>r undertak<strong>in</strong>g with<strong>in</strong> <strong>the</strong>ircrim<strong>in</strong>al activities, <strong>of</strong>ten comb<strong>in</strong><strong>in</strong>g IP crime witho<strong>the</strong>r illegal bus<strong>in</strong>ess ventures. Evidence shows thattransnational OC groups are actively <strong>in</strong>volved <strong>in</strong> IPcrime, and that IP crime has been l<strong>in</strong>ked to moneylaunder<strong>in</strong>g, drug traffick<strong>in</strong>g, firearms smuggl<strong>in</strong>g, aswell as o<strong>the</strong>r types <strong>of</strong> crime.” 39 In November 2011, an<strong>in</strong>itiative by <strong>the</strong> RCMP and <strong>the</strong> CBSA lead to <strong>the</strong> arrest<strong>of</strong> eight <strong>in</strong>dividuals <strong>in</strong> Ontario and British Columbia.35 Frontier Economics “Build<strong>in</strong>g a Digital Economy: The Importance <strong>of</strong> Sav<strong>in</strong>g Jobs <strong>in</strong> <strong>the</strong> EU’s Creative Industries” March 2010. Available At:http://www.iccwbo.org/bascap/<strong>in</strong>dex.html?id=3536036 ACTA <strong>in</strong> <strong>the</strong> EU: A Practical Analysis, at p. 7. BASCAP/INTA37 <strong>Counterfeit<strong>in</strong>g</strong> and Piracy are Theft: Report <strong>of</strong> <strong>the</strong> Stand<strong>in</strong>g Committee on Industry Science and Technology, June, 2007, p.7. Available at:http://www.parl.gc.ca/content/hoc/Committee/391/INDU/Reports/RP3060548/391_INDU_Rpt08/391_INDU_Rpt08-e.pdf38 Treverton, Gregory F., et al., “Film Piracy, Organized Crime and Terrorism” Rand Corporation, 2009. Available at: http://www.rand.org/pubs/monographs/2009/RAND_MG742.pdf (Rand Report)39 Project Strider, p. 11<strong>Counterfeit<strong>in</strong>g</strong> <strong>in</strong> <strong>the</strong> <strong>Canadian</strong> <strong>Market</strong> | The <strong>Canadian</strong> Intellectual Property Council 13
In addition to <strong>the</strong> seizure <strong>of</strong> more than half a millioncartons <strong>of</strong> counterfeit cigarettes, authorities seizedover 6,000 kilograms <strong>of</strong> P2P, a key <strong>in</strong>gredient <strong>in</strong> <strong>the</strong>manufacture <strong>of</strong> methamphetam<strong>in</strong>e. 40Counterfeit products are regularly found <strong>in</strong> shipmentsconta<strong>in</strong><strong>in</strong>g o<strong>the</strong>r types <strong>of</strong> illegal goods. In October2010, CBSA agents <strong>in</strong> Vancouver suspected that ashipment conta<strong>in</strong>ed counterfeit goods, and follow<strong>in</strong>glegal requirements <strong>in</strong> Canada, called <strong>the</strong> RCMP <strong>in</strong> to<strong>in</strong>vestigate. The RCMP found that <strong>the</strong> shipment didconta<strong>in</strong> counterfeit shoes but that it also conta<strong>in</strong>edP2P. 41 Given <strong>the</strong> many examples <strong>of</strong> l<strong>in</strong>ks betweencounterfeiters and Canada’s drug trade, any belief thatcounterfeit<strong>in</strong>g is a victimless crime is clearly misplaced.cooperation on IPR. The <strong>Canadian</strong> IPR system, itnotes, “features several shortcom<strong>in</strong>gs… <strong>the</strong> weakunderly<strong>in</strong>g political will—result<strong>in</strong>g <strong>in</strong> both <strong>the</strong> poorimplementation <strong>of</strong> exist<strong>in</strong>g legislation and <strong>in</strong> itsconsistent failure <strong>of</strong> reform legislation be<strong>in</strong>g enacted—is <strong>in</strong>deed very worry<strong>in</strong>g from a developed country.” 43Canada cannot reasonably expect to attract <strong>in</strong>vestmentfrom <strong>the</strong> world’s top <strong>in</strong>novators if it is perceived as<strong>of</strong>fer<strong>in</strong>g lax protection for IPR, a key commodity <strong>in</strong> <strong>the</strong><strong>in</strong>novation economy.Canada’s Lax IP Regime Sends <strong>the</strong> WrongMessage to Our International PartnersThe lack <strong>of</strong> enforcement <strong>of</strong> IPR sends <strong>the</strong> wrongmessage to Canada’s trad<strong>in</strong>g partners and foreign<strong>in</strong>vestors that Canada is a country that does notsufficiently respect IPR. Canada’s trad<strong>in</strong>g partnershave taken notice <strong>of</strong> its poor record and are eager for<strong>the</strong> government to legislate more advanced measuresfor enforc<strong>in</strong>g IPR. In its annual Special 301 Report,<strong>the</strong> Office <strong>of</strong> <strong>the</strong> United States Trade Representative(USTR) has repeatedly placed Canada on its PriorityWatch List <strong>of</strong> countries that <strong>of</strong>fer <strong>the</strong> weakestprotections for IPR. The USTR sees <strong>the</strong> streng<strong>the</strong>n<strong>in</strong>g<strong>of</strong> <strong>Canadian</strong> customs enforcement as a majorrequirement for <strong>the</strong> <strong>Canadian</strong> government. 42The European Union has also been critical <strong>of</strong> Canada’sstand on IPR enforcement, not<strong>in</strong>g <strong>in</strong> <strong>the</strong> Strategyfor Enforcement <strong>of</strong> Intellectual Property Rights <strong>in</strong> ThirdCountries <strong>of</strong> <strong>the</strong> Directorate-General for External Tradethat Canada is a “priority country” for streng<strong>the</strong>n<strong>in</strong>g40 National Post, November 1, 2011 “Eight Arrested <strong>in</strong> Ontario and BC <strong>in</strong> Asian Smuggl<strong>in</strong>g R<strong>in</strong>g Bust” Available at: http://news.nationalpost.com/2011/11/01/eight-arrested-<strong>in</strong>-ontario-and-b-c-<strong>in</strong>-asian-smuggl<strong>in</strong>g-r<strong>in</strong>g-bust/37 <strong>Counterfeit<strong>in</strong>g</strong> and Piracy are Theft: Report <strong>of</strong> <strong>the</strong>Stand<strong>in</strong>g Committee on Industry Science and Technology, June, 2007, p.7. Available at: http://www.parl.gc.ca/content/hoc/Committee/391/INDU/Reports/RP3060548/391_INDU_Rpt08/391_INDU_Rpt08-e.pdf41 RCMP Combat<strong>in</strong>g Intellectual Property Crime, June 6, 201142 USTR 2012 Special 301 Report p. 25. Available at: http://www.ustr.gov/sites/default/files/2012%20Special%20301%20Report_0.pdf43 Commission Staff Work<strong>in</strong>g Document, IPR Enforcement Report 2009 p.10. Available at: http://trade.ec.europa.eu/doclib/docs/2009/october/tradoc_145204.pdf14 <strong>Counterfeit<strong>in</strong>g</strong> <strong>in</strong> <strong>the</strong> <strong>Canadian</strong> <strong>Market</strong> | The <strong>Canadian</strong> Intellectual Property Council