Viewing cable 07TORONTO466, Fight Against Counterfeit Goods Boosted in Ontario

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UNCLAS SECTION 01 OF 03 TORONTO 000466 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
PASS USTR FOR SULLIVAN, MELLE, GARDE 
PASS PATENT AND TRADEMARK OFFICE FOR JENNIFER NESS 
USDOC FOR CATHERINE PETERS 
 
E.O. 12958: N/A 
TAGS: ETRD KCRM KIPR PGOV CA
SUBJECT: Fight Against Counterfeit Goods Boosted in Ontario 
 
Ref: Toronto 461 
 
Sensitive But Unclassified -- protect accordingly. 
 
¶1. (SBU) Summary: On December 1, Toronto police seized C$10 million 
in designer knock-offs on Toronto's black market. On December 4, a 
significant four-day anti-counterfeiting conference in the Toronto 
area included 120-150 law enforcement personnel, government 
officials, and industry representatives from across Canada. Post 
participation included CG's remarks describing U.S. IPR policy to 
the audience and several media interviews. RCMP Superintendent 
Ken Hanson said Canadian law enforcement officials lack formal IPR 
training and lack enforcement resources. Liberal federal Member of 
Parliament Roy Cullen described his standing committee's IPR 
recommendations to the Harper government and his commitment to 
strengthening IPR enforcement. Graham Henderson (President of the 
Canadian Recording Industry Association (CRIA)) told us privately 
that the federal government may introduce new legislation as soon as 
next week. An article in the November 19 edition of "Canadian 
Business" eloquently highlights that Canadian IPR enforcement policy 
does not protect small Canadian entrepreneurs. Until the landscape 
of IPR protection in Canada changes, only rights holders with very 
deep pockets, such as movie or record studios or producers of 
international designer labels, will be able to afford any IPR 
protection at the retail level in Canada. End Summary. 
 
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Police Seize C$10 Million in Counterfeit Goods 
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¶2. (U) On Saturday, December 1, following a seven-month 
investigation called Project Chameleon, Toronto police seized C$10 
million in designer knock-offs on Toronto's black market, reportedly 
the biggest single counterfeiting bust ever executed in Canada. The 
goods, reportedly imported from mainland China, included counterfeit 
wallets, purses, luggage, and clothing with designer labels like 
Louis Vuitton, Gucci, Prada, Chanel, and Armani. Eight men were 
arrested in a counterfeiting ring that involved an underground 
manufacturing operation and distribution center using the cover of a 
bridal shop. 
 
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Anti-Counterfeiting Conference Trains Police 
-------------------------------------------- 
 
¶3. (SBU) On December 4, 120-150 law enforcement personnel, 
government officials, and industry representatives from across 
Canada attended a four-day anti-counterfeiting conference held in 
Markham, Ontario. Toronto Consul General was the opening speaker at 
the conference, along with Liberal federal MP Roy Cullen, 
Vice-Chair, Standing Committee on Public Safety and National 
Security in the House of Commons; and Canadian Recording Industry 
Association (CRIA) President Graham Henderson. The conference, 
organized by Toronto-based lawyer Lorne Lipkus and his law firm, 
Kestenberg Seigal Lipkus, is one in a series he organizes several 
times a year across Canada. Lipkus' legal firm represents many of 
the designers whose copied merchandise was seized in the weekend 
raid in Toronto. 
 
¶4. (SBU) The conference provides law enforcement officials and 
government and industry representatives with practical knowledge on 
investigating and conducting counterfeiting cases. Knock-off 
designer goods and a broad range of mass market counterfeit consumer 
goods such as extension cords, sneakers, and toys, were displayed at 
the conference. Donna Karan, Timberland, Adidas, Hockey Canada, 
Kenneth Cole, Calvin Klein, Vera Wang, Davidoff, and North Face also 
provided handouts to help officials distinguish between genuine and 
counterfeit goods. 
 
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Law Enforcement Lacks Resources to Enforce IPR 
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¶5. (SBU) RCMP Superintendent Ken Hanson told conference attendees on 
December 4 that Lipkus' conferences fill an important educational 
need for the law enforcement community because Canada lacks formal 
police training on investigating counterfeit merchandise. Hansen 
said IPR crimes are reaching epidemic proportion in Canada, and 
police at all levels need more resources to fight these crimes. He 
told the audience that the RCMP does not focus on investigations of 
retail counterfeit operations, instead focusing its investigative 
resources on large shipments, retail operations that will help them 
 
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crack a distribution network, cases that affect public health and 
safety (such as counterfeit pharmaceuticals and unsafe electrical 
equipment), or cases affecting national security. He noted that 
this approach is similar to the strategy the RCMP uses to prioritize 
illicit drug investigations. 
 
¶6. (SBU) Hansen said the RCMP expects the private sector to use 
tools such as Anton Piller orders (a court order for search and 
seizure of evidence) or cease and desist orders to combat 
retail-level counterfeit activities. Hansen said that with stronger 
IPR legislation and greater financial and manpower resources, the 
RCMP and other Canadian police forces would be able to more 
effectively deal with the organized crime rings that profit from 
counterfeiting. 
 
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Federal Parliament Recommends Action 
------------------------------------ 
 
¶7. (SBU) Liberal federal MP Roy Cullen, a Toronto-area MP, told the 
group that the Standing Committee on Public Safety and National 
Security has asked the Harper Government to amend the Trademark Act, 
the Copyright Acts, and the Customs Act, to better protect IPR in 
Canada. He called for a change in mandate for the Canada Border 
Services Agency (CBSA) to allow Canadian border officials to seize 
and destroy counterfeit goods on entry into the country. He also 
called for better cooperation between Canada and the U.S. on IPR 
issues, and suggested the government conduct a public awareness 
campaign to teach consumers how to identify counterfeit goods and 
explain how organized crime profits from IPR violations. Cullen 
said he hopes that Industry Minister Prentice will make IPR a higher 
priority than his predecessor. He said he recommends formation of a 
high-level Assistant Deputy Minister (ADM) Committee to advance IPR 
policy across ministries in Ottawa. 
 
¶8. (SBU) Cullen noted that his committee had focused on the public 
safety aspects of IPR, while the House Standing Committee on 
Industry, Science and Technology had focused on the economic aspects 
of IPR and has forwarded specific recommendations to the federal 
government. The government's response to the committee reports 
largely agreed with the findings and pledged government efforts to 
increase IPR enforcement, update Canada's copyright laws, and work 
with international partners to address counterfeiting on a global 
level. 
 
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CRIA President Calls for IPR Policy Reform 
------------------------------------------ 
 
¶9. (SBU) CRIA President Graham Henderson emphasized that IPR is the 
backbone of innovation, and that public policy must protect IPR, 
both federally and provincially. He pointed to the recent report 
issued by the Ontario Chamber of Commerce (OCC), "Protection of 
Intellectual Property: A Case for Ontario," (reftel) as a roadmap 
for provincial IPR policy reform. Henderson emphasized his belief 
that counterfeiting and piracy cost the Canadian economy at least 
US$22.5 billion per year, US$9 billion of which likely is lost in 
Ontario alone (ref (A)). Henderson said that public tolerance for 
copyright violations inhibits IPR protection in Ontario, and Canada 
as a whole. A recent poll indicated that infringing copyright laws 
by illegal downloading or through buying pirated movies was 
considered more acceptable to Canadians than was stealing office 
supplies from work. He echoed Cullen's recommendation that the 
federal government establish a high level inter-departmental 
committee to coordinate IPR policy across government agencies. 
 
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Canadian IPR Policy Does Not Protect Entrepreneurs 
--------------------------------------------- ----- 
 
¶10. (U) An article in the November 19 edition of "Canadian Business" 
eloquently highlights that Canadian IPR enforcement policy does not 
protect small Canadian entrepreneurs. The article discussed a 
British Columbia entrepreneur who designed a rubberized lifting 
strap that allows weightlifters to lift more by giving them a better 
grip. He patented the product, but comparable products have begun 
popping up on the market. Without the financial backing to launch a 
legal challenge, the patents are a moot point. The article ends by 
quoting the entrepreneur, "'I'm starting to consider abandoning the 
patent route,' says McBride. 'One thing I've learned is that it 
might not be worth the time and expense. And unless you have 
millions to fight it, you don't really have any protection.'" 
 
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¶11. (SBU) Comment: Cullen and Henderson were optimistic that 
progress to improve IPR protection is being made in Ottawa. 
Henderson told us privately that the federal government may 
introduce new legislation addressing the findings of the standing 
committees as soon as next week. Improving the legal framework for 
IPR protection is important. Additional law enforcement resources 
and public education about IPR protection are also needed. Until 
the landscape of IPR protection in Canada changes, only rights 
holders with very deep pockets, such as movie or record studios or 
producers of international designer labels, will be able to afford 
IPR protection at the retail level in Canada. End Comment. 
 
NAY