 |
  |
Robert J. (“RJ”) Falconi, B.Sc., LL.B.
Vice President, General Counsel & Corporate Secretary
CSA Group
Toronto, ON
Counterfeiting is a growing concern that affects consumers worldwide on a daily basis. It is a social, economic and safety issue, and no one is immune to counterfeit products.
A common public perception is that the majority of counterfeit products come from Asia, primarily China. However, the reality is that counterfeit products can be made anywhere in the world, including Canada and the United States. Developing economies in Eastern Europe, Central America, and countries to which the outsourcing of manufacturing is on the rise are becoming origin hotspots for counterfeit goods.
The exact economic impact of counterfeiting on the Canadian economy is difficult to determine due to the underground nature of the activities and variety of product areas, but the RCMP and various business and anti-counterfeiting associations estimate it to be in the billions of dollars annually. The costs include lost sales revenue, taxes, and lost jobs due to declining sales of legitimate products. Counterfeits also compromise brand integrity and consumer confidence, and increase the risk of legal action and unfavourable publicity to stakeholders.
Increasingly intellectual property crimes have shifted from name brand watches, CDs and fashion accessories to product categories that weren’t seen a decade ago. Counterfeit items that may present a real danger to people’s lives, such as faulty circuit breakers, computer power supply units, safety footwear, holiday lights, electrical power bars, extension cords and even gas ranges are becoming increasingly prevalent in the marketplace. Additionally, counterfeits are no longer being sold exclusively on street corners or at flea markets and are instead showing up on the shelves of major retailers across North America as criminals use very sophisticated distribution networks.
In Canada, as with most developed countries, a system of safety and performance standards has been put in place to help protect consumers, and against which to test and certify products. CSA International is a leading North American provider of product testing and certification services and the CSA International certification mark lets consumers know that a product has been tested and certified to meet the requirements of the applicable standards for safety and performance.
CSA International certifies and test products in a wide variety of categories including electrical and electronics, construction products and materials, health care technologies, fuel burning equipment, lighting, power tools, plumbing fixtures and more. CSA International is a Nationally Recognized Testing Laboratory (NRTL) in the U.S. and an Accredited Certification Organization (ACO) by Standards Council of Canada (SCC) in Canada. It is qualified to test to Canadian Standards Association (CSA), American National Standards Institute (ANSI), American Society of Mechanical Engineers (ASME), American Society for Testing and Materials (ASTM), American Society of Sanitary Engineers (ASSE), National Sanitation Foundation (NSF), Underwriters Laboratories (UL) and other standards.
The proprietary trademarks of CSA International appear on billions of products worldwide and are among its most valuable brand assets. For consumers, the mark provides increased assurance of quality and safety. For manufacturers, international recognition of the mark helps to ease their entry into foreign markets.
Due the far reaching scope of CSA International, the number, types and brands of products that may bear a counterfeit certification is immeasurable. This presents a challenge to CSA International and other certification organizations that is unique from most other IP rights holders.
Producers of counterfeit products have become increasingly aware of the importance of certification marks and recognize that there are legal requirements for certain goods such as electronics to be sold in Canada. They are becoming much more adept at matching a counterfeit products external appearance to a legitimate product, while at the same time cutting corners on important safety measures in order to make a profit. If left unchecked, counterfeit approval marks enable unsafe or deficient products to gain widespread access to the North American market – a direct risk to consumers.
Counterfeit certification marks pose a real threat to the acceptance of legitimate certification marks and CSA International has a zero tolerance policy toward any unauthorized use of its trademarks. For this reason, CSA International has been very active in battling counterfeiting for several years, with initiatives including: training programs to assist retailers, customs officials and law enforcement agencies with understanding product approval marks and detecting counterfeit marks; the development of a White Paper on Counterfeiting; enhanced marketplace surveillance of various commercial outlets and investigation of tips received from all stakeholders.
At the forefront in the battle against counterfeiting are two teams of specialists at CSA Group: the Anti-Counterfeiting & Intellectual Property Protection (AC&IPP) team, and the Audits & Investigations (A&I) team. Working within CSA Group’s Legal & Risk Management Department, and in-house and external legal IP specialists, these teams investigate incidents involving CSA International certified products; publicizes all-points bulletins, product recalls and safety notices in cooperation with manufacturers; provides feedback on issues to standards development committees; and enforces CSA Group’s zero tolerance policy against counterfeiters. In that regard, CSA Group will take whatever action is deemed necessary against illegal users of CSA Group.
Certification of a product is an ongoing process that involves follow up factory inspections and retail market surveillance to ensure conformity. As such, A&I investigators conduct two distinct types of marketplace surveillance to help identify counterfeits and non-conformance items, overt and covert surveillance.
Overt surveillance is used when Investigators from the A&I team visit a retail outlet to help ensure that the products being sold on the shelves conform to the same applicable standards as the sample items originally tested by CSA International. In this case, investigators visit a retail outlet and inform store personnel that they will be inspecting store items and ask for consent and cooperation.
Covert surveillance is used when investigators suspect a retail outlet may be knowingly selling counterfeit goods. In this case, AC&IPP investigators will visit the location, conduct undercover surveillance, purchase a suspect item and return it to CSA International laboratories for testing.
CSA International also employs multiple advanced security techniques in its marking and traceability programs to deter counterfeiting of its registered trademarks. It works closely with industry experts, such as ID Global, to employ the latest countermeasures to quickly identify products with false CSA International certification marks.
Another important element to CSA’s global anti-counterfeiting program is to forge alliances with key stakeholders, including industry groups such as the National Electrical Manufacturer’s Association (NEMA), International Association of Electrical Inspectors (IAEI), Canadian Manufacturers and Exporters, Electro-Federation of Canada, the Canadian Institute of Heating and Plumbing; retailers such as Sears, Home Hardware and Canadian Tire; investigation firms such as Group 4 Securicor, PICA Investigations, Abacus Security, leading IP law firms such as Kestenberg, Siegal Lipkus LLP, Smart & Biggar, Gowlings LLP, Baker & McKenzie LLP, and Baker & Hostetler LLP; and various levels of government so that all may benefit from each representative’s expertise and experience.
Similarly, CSA Group works closely with law enforcement investigators at the RCMP, Interpol, U.S. Customs and Border Protection, and the US Department of Homeland Security, as well as with regulators at the federal, state or provincial level such as Ontario’s Electrical Safety Authority and Technical Standards Safety Authority to combat the trade in counterfeit products bearing its marks. Typical investigations call for identification of all parties and products involved, disposal and destruction of the illegally marked products and prosecution to the full extent of the law or civil action.
In Canada, the risk of jail time for offenders charged with crimes is low because law enforcement organizations investigational policies are often limited to complaints pertaining to sections 42 and 43 of the Copyright Act or allegations relative to the fraud provisions of the Criminal Code. The RCMP has the primary authority for enforcement of IP crime in Canada but under the current legislation, it is difficult to prosecute offenders. Those charged that go to court typically end up paying relatively small fines and simply continue their illegal activities. While civil remedies are available to organizations such as CSA International, they are often ineffective because counterfeiters are criminals that explicitly carry out their activities in ways designed to avoid the justice system.
There are however other measures that can be effectively employed to deter counterfeiters. CSA’s primary concern in relation to counterfeit certification marks is public safety. When a suspect product is identified, CSA International moves quickly to investigate if a potential hazard is posed by the product. If a hazard is identified, CSA International’s Audits and Investigations team will act as expeditiously as possible to publicize a voluntary recall or alert regulators and the public via the media before someone is harmed. CSA International has found that moving quickly to proactively publicize counterfeit products available in the marketplace with illegitimate certification marks not only serves to protect the public, but it also has the additional benefit of shining a light on the counterfeiter and disrupting their revenue flow. It also demonstrates that CSA International is actively monitoring the market, which serves to reassure the public that there is a system of checks and balances to help protect them.
Retailers and distributors can and have also fallen victim to counterfeiters when sourcing what they believe are legitimate products. When retailers are made aware of fakes on their shelves, they will often cooperate with CSA International to publicize a recall notice, remove hazardous products from the market, and assist with an investigation.
According to Interpol and other law enforcement agencies, criminal activity in connection with IP crime knows no boundaries and is being facilitated through the involvement of organized crime. Theses crime syndicates use established global trading lanes to distribute and sell counterfeit goods worldwide and even work on real time business distribution models.
In the short term it is expected the proliferation of counterfeits will only get worse, especially in Canada. With mark-ups on counterfeit goods averaging more than 1,000 per cent, and little chance of jail time, criminals are finding the lucrative market too hard to resist.
The positive news is that changes may be coming in Canadian IP legislation. Recent moves have been made by various levels of government giving prominence to the need for improved IP and anti counterfeiting measures. A recent report by Parliament’s Standing Committee on Public Safety and National Security (SECU) advocated decisive federal government action on counterfeiting, piracy and copyright reform. The all-party Committee’s unanimous report follows extensive public hearings on counterfeiting and piracy. Separately, the Federal Industry Committee issued a report in February calling for government action on these issues. The Industry Committee is expected to table a comprehensive report on counterfeiting and piracy later this spring, after recently-concluded hearings.
Canada has an extensive history of reports and recommendations that ultimately fade into obscurity but in this case the current government appears to be very receptive to change. The Canadian Anti-Counterfeiting Network (CACN), of which CSA International is a founding member, recently met with the Honourable Stockwell Day, Minister of Public Safety to raise awareness of the need for stronger IP protection and enforcement in Canada. The Minister was very receptive to CACN’s proposals and it expected the Federal government will move forward on at least some of the recommendations.
The courts, government, law enforcement and the public at large need to recognize the potential dangers products with counterfeit certification marks may present, as well as the need for tough anti-counterfeiting measures in Canada. By raising awareness of the dangers associated with counterfeiting and not just the IP concerns, CSA international hopes to bring the issue to the attention of government, the legal community, law enforcement and the Canadian public through the media in order to work together to enact change. There needs to be a cohesive approach that will give law enforcement better powers of seizure and arrest and the courts more options for sentencing.
If you are interested in learning more about CSA’s anti-counterfeiting initiatives and alliances, contact rj.falconi@csagroup.org
CSA International’s anti-counterfeiting initiatives are led by RJ Falconi, Vice President, General Counsel and Corporate Secretary, CSA Group.
CSA Group is an independent, not-for-profit membership association serving business, industry, government and consumers. CSA Group consists of four divisions: Canadian Standards Association, which develops standards and helps people understand and apply them through information products and seminars; CSA International, which provides testing and certification services for electrical, mechanical, plumbing, gas and a variety of other products; QMI, North America's leading registrar, which advances business excellence through client-focused management systems registration; and OnSpeX, a provider of consumer product evaluation, inspections and advisory services for retailers and manufacturers..
1CRIMINAL REMEDIES
Offences and punishment
42. (1) Every person who knowingly
(a) makes for sale or rental an infringing copy of a work or other subject-matter in which copyright subsists,
(b) sells or rents out, or by way of trade exposes or offers for sale or rental, an infringing copy of a work or other subject-matter in which copyright subsists,
(c) distributes infringing copies of a work or other subject-matter in which copyright subsists, either for the purpose of trade or to such an extent as to affect
prejudicially the owner of the copyright,
(d) by way of trade exhibits in public an infringing copy of a work or other subject-matter in which copyright subsists, or
(e) imports for sale or rental into Canada any infringing copy of a work or other subject-matter in which copyright subsists
is guilty of an offence and liable
(f) on summary conviction, to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding six months or to both, or
(g) on conviction on indictment, to a fine not exceeding one million dollars or to imprisonment for a term not exceeding five years or to both.
Possession and performance offences and punishment
(2) Every person who knowingly
(a) makes or possesses any plate that is specifically designed or adapted for the purpose of making infringing copies of any work or other subject-matter in which copyright subsists, or
(b) for private profit causes to be performed in public, without the consent of the owner of the copyright, any work or other subject-matter in which copyright subsists
is guilty of an offence and liable
(c) on summary conviction, to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding six months or to both, or
(d) on conviction on indictment, to a fine not exceeding one million dollars or to imprisonment for a term not exceeding five years or to both.
Power of court to deal with copies or plates
(3) The court before which any proceedings under this section are taken may, on conviction, order that all copies of the work or other subject-matter that appear to it to be infringing copies, or all plates in the possession of the offender predominantly used for making infringing copies, be destroyed or delivered up to the owner of the copyright or otherwise dealt with as the court may think fit.
Limitation period
(4) Proceedings by summary conviction in respect of an offence under this section may be instituted at any time within, but not later than, two years after the time when the offence was committed.
Parallel importation of books
(5) No person may be prosecuted under this section for importing a book or dealing with an imported book in the manner described in section 27.1.
R.S., 1985, c. C-42, s. 42; R.S., 1985, c. 10 (4th Supp.), s. 10; 1997, c. 24, s. 24.
Infringement in case of dramatic, operatic or musical work
43. (1) Any person who, without the written consent of the owner of the copyright or of the legal representative of the owner, knowingly performs or causes to be performed in public and for private profit the whole or any part, constituting an infringement, of any dramatic or operatic work or musical composition in which copyright subsists in Canada is guilty of an offence and liable on summary conviction to a fine not exceeding two hundred and fifty dollars and, in the case of a second or subsequent offence, either to that fine or to imprisonment for a term not exceeding two months or to both.
Change or suppression of title or author’s name
(2) Any person who makes or causes to be made any change in or suppression of the title, or the name of the author, of any dramatic or operatic work or musical composition in which copyright subsists in Canada, or who makes or causes to be made any change in the work or composition itself without the written consent of the author or of his legal representative, in order that the work or composition may be performed in whole or in part in public for private profit, is guilty of an offence and liable on summary conviction to a fine not exceeding five hundred dollars and, in the case of a second or subsequent offence, either to that fine or to imprisonment for a term not exceeding four months or to both.
R.S., c. C-30, s. 26.
2 Manufacturing: Moving Forward - Rising To The Challenge, Report of the Standing Committee on Industry, Science and Technology; James Rajotte, MP, Chair, February 2007, 39th Parliament, 1st Session, p. xv:
RECOMMENDATION 11: That the Government of Canada immediately bring forth legislation to amend the Copyright Act; ratify the World Intellectual Property Organization (WIPO) Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT); amend related acts; and ensure appropriate enforcement resources are allocated to combat the scourge and considerable economic and competitive damage to Canada’s manufacturing and services sectors, and to Canada’s international reputation by the proliferation of counterfeiting and piracy of intellectual property.