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As Michael Moore discovered in his 2002 documentary, “Bowling for Columbine,” Canadians are notorious for leaving their front doors unlocked. The same philosophy seems to carry over to their national borders: Canada has become a key stop on the counterfeit road from China to the United States. The country’s lax border controls make it one of the easiest ways to get fake goods into North America. All kinds of counterfeits — from luxury goods, like handbags and watches, to airplane parts, mostly manufactured in Asia — come through Canada, and travel down to the more lucrative U.S. market. There are no definitive statistics on the size of Canada’s problem, but most estimates place the value of counterfeit goods in the Canadian market at around $25 billion and growing, a figure derived from a U.S. Chamber of Commerce study. The Canada problem is attracting international attention. In February the International Anti-Counterfeiting Coalition, a policy group representing 150 companies concerned with IP enforcement, recommended that the United States Trade Representative upgrade Canada to a priority foreign country alongside China, Ukraine and Paraguay, countries notorious for piracy problems. The American government didn’t agree, and in their April 2005 report the USTR opted to keep Canada on its lower priority 36-country “watch list.” The USTR, however, is starting to pay more attention to Canada’s border problem, noting in the report that “Canada’s border measures continue to be a serious concern.” Last year a group of about 50 law firms, companies, and industry organizations (including Microsoft Corp. and Motorola Inc.) formed the Canadian Anti-Counterfeiting Network to lobby for increased funding and better border controls. The root of Canada’s IP enforcement troubles is a complex and expensive seizure process. To stop goods at the border, IP holders need first to obtain a federal court order, a lengthy procedure that involves gathering evidence, going to court and winning a hearing — all before the products enter the country. Most of the time, companies find out about counterfeit goods after they are already in the supply chain, says Baker & McKenzie IP lawyer James Holloway. Sometimes fakes are found in stores, or sales drop off. Occasionally customers return faulty (fake) products — something that happened nationwide this past January with counterfeit Christmas lights prone to bursting into flames. Canada’s court order system technically complies with international protocol: It is consistent with the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights agreement in allowing countries to either use a judicial or administrative process to stop counterfeit goods at national borders. But in practice, it seems to be failing. Just one company obtained a court order in the past five years, says Canadian Border Services Agency spokeswoman Helen Leslie. “Obtaining an order is somewhat cumbersome,” Leslie says. By comparison, U.S. customs seized over 7,255 shipments of goods in 2004, according to the U.S. Department of Homeland Security. In the United States, IP owners can register their products and normal shipping patterns with custom offices. If a questionable product comes in, border officials send a sample to the company and then seize the fake products. A similar registry in Canada would make border controls more effective, says Lorne Lipkus, a founding partner of Toronto-based firm Kestenberg Siegal Lipkus, but wouldn’t solve all of Canada’s woes. “No one thinks the U.S. is seizing all the counterfeit goods coming in, and whenever there’s a [Department of Homeland Security] orange alert, that’s the end of seizures,” says Lipkus, who investigates counterfeiting for 58 clients, including The Walt Disney Co. and Nike Inc. Canada has called in the Mounties to help. Under Canadian law, the Royal Canadian Mounted Police can seize counterfeit goods at the border. In the past, when the Mounties received reports of counterfeits, the agency was too overwhelmed and underfunded to investigate, says Constable Judy Lawrence. Now a new partnership with border officials lets Lawrence spend about 60 percent of her time investigating suspicious goods, and she can call on 25 other Mounties for backup. Another team works in Montreal. The Mounties’ efforts, while well-intentioned, aren’t enough to stop counterfeiters, says Baker & McKenzie’s Holloway. “They just don’t have the resources to do the sort of job I’m sure they all would like to do,” he says. Canada needs a complete customs overhaul, he says, beginning with legislation permitting customs officials to make proactive seizures. Canada will only shake its increasingly bad reputation, says Holloway, if the government starts locking some doors.

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