VZCZCXRO5529
PP RUEHGA RUEHHA RUEHQU RUEHVC
DE RUEHON #0153/01 1362000
ZNR UUUUU ZZH
P 152000Z MAY 08
FM AMCONSUL TORONTO
TO RUEHC/SECSTATE WASHDC PRIORITY 2492
INFO RUCNCAN/ALCAN COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0083
RUEHHK/AMCONSUL HONG KONG 0034
RUEHHI/AMEMBASSY HANOI 0019
RUCPDOC/USDOC WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHDC

UNCLAS SECTION 01 OF 02 TORONTO 000153 
 
SIPDIS 
SENSITIVE 
 
PASS USTR FOR SULLIVAN, MELLE, GARDA 
PASS PATENT AND TRADEMARK OFFICE FOR JENNIFER NESS 
USDOC FOR CATHERINE PETERS 
 
E.O. 12958: N/A 
TAGS: ETRD KCRM KIPR KPAO PGOV CA
SUBJECT: Canadians May Be Beginning to Understand the Importance of 
Protecting IPR 
 
Ref: (A) Toronto 110 (B) 07 Toronto 466 (C) 07 Toronto 461 (D) 07 
Toronto 366 (E) 07 Toronto 315 
 
Sensitive But Unclassified - protect accordingly. 
 
¶1. (U) Summary:  On May 9, Steven Mitchell, Vice President of 
Intellectual Policy at the Entertainment Software Association (ESA) 
and Jason Kee, Director of Policy and Legal Affairs for the 
Entertainment Software Association of Canada (ESAC), described the 
importance of protecting intellectual property rights (IPR) to 
Ontario government officials.  Mitchell and Key said the 
entertainment software industry supports over 10,000 jobs in Canada, 
and Ontario is a global leader in digital media development.   The 
massive development costs required to develop games (US$10-30 
million per game) make effective IPR protection crucial to the 
companies' financial viability.  Canadian public opinion appears to 
be shifting towards supporting stronger IPR protection measures. 
ESAC is urging the Canadian federal government to bring IPR 
protection up to global standards.  End Summary. 
 
¶2. (U) On May 9, Steven Mitchell, VP of Intellectual Policy at ESA 
and Jason Kee, Director of Policy and Legal Affairs for ESAC, 
described the pivotal role IPR-related industries play in Ontario's 
economy to provincial policy advisors and researchers from the 
Ministries of Economic Development and Trade, Culture, Research and 
Innovation, Education, Attorney General, Government and Consumer 
Services, and Children and Youth Services.  Mitchell's outreach 
efforts to key groups in Toronto, Montreal, and Ottawa were financed 
by Mission Canada Public Affairs. 
 
--------------------------------------------- --- 
Economic Importance of IPR Protection in Ontario 
--------------------------------------------- --- 
 
¶3. (U) Kee said Ontario is a global leader in developing digital 
media, and boasts some of world's top development studios.  The 
province is North America's third largest entertainment 
software-developing jurisdiction after California and New York, and 
Canada is third largest globally after the U.S. and Japan.  21 of 
the top 100 selling games in North America and Europe were developed 
by Canadian studios.  Between 1999 and 2007, the industry created 
80,000 net new jobs in Ontario.  The Canadian industry directly 
employs over 10,000 people ( in programming, animation, visual 
effects, game and sound design, production, and marketing) and 
generates an estimated US$2.5 billion in revenues annually.  Most 
games developed in Canada are produced for export, but Canadian 
gaming sales in 2007 were US$697 million, up 37% from 2006. 
 
¶4. (U) The massive development costs required to develop games 
(US$10-30 million per game) make effective IPR protection crucial to 
the companies' financial viability.  Kee cited the wildly popular, 
and somewhat controversial Grand Theft Auto IV (GTA IV), which cost 
US$50 million to develop, and three years to make, as a good 
example.  The sales from the commercially successful GTA IV will 
fund the development of other digital media games, and drive 
investment in research and development of new technology. 
 
¶5. (U) According to Kee, for every GTA IV-like financial success, 
there are nine other less profitable software releases.  Revenues 
from successful titles are used to offset the development costs of 
less successful products.  Without effective IPR protection, this 
kind of labor intensive creative enterprise is not commercially 
viable, he argued.  Kee said the smaller, independent studios are 
the most vulnerable because they often rely on revenue from a single 
game that took years to develop.  He also noted that entertainment 
software development has led to advances in related technologies 
such as medical imaging and artificial intelligence. 
 
--------------------------------------------- - 
Lax Canadian Laws Encourage Counterfeit Market 
--------------------------------------------- - 
 
¶6. (SBU) Kee opined that ineffective Canadian border controls enable 
Asian importers to provide a steady, cheap supply of pre-burnt 
pirated optical discs, and circumvention devices in Canada, some of 
which are subsequently exported to the U.S.  He explained that, in 
violation of WIPO Treaty standards, Canadian law does not prohibit 
circumventing technical protection measures (TPM)s that control 
access to and use of video game software (Note: TPMs prevent 
unauthorized exploitation and transmission of products, and enable 
features such as parental controls.  End Note). 
 
TORONTO 00000153  002 OF 002 
 
 
 
¶7. (U) Since circumvention devices such as modification (mod) chips 
are not illegal in Canada, they are sold openly by Canadian 
retailers (e.g. Pacific Mall, ref (E)) and e-commerce sites. 
Industry investigators estimate that 20-30% of retail specialty 
stores in Toronto and Vancouver sell pirated goods.  Twice as many 
gamers in Canada (34%) compared with the U.S. (17%) have acquired 
pirated games, and in Canada, on average, 22% of those Canadian 
gamers' collections are pirated games, compared with 6% of those in 
the U.S.  According to the ESA, the cost to the U.S. and Canadian 
entertainment software industries is more than US$3.5 billion 
annually (includes only physical game cartridges, not losses from 
illegal internet downloads). 
 
------------------------------------------- 
Industry Calling for Stronger Canadian Laws 
------------------------------------------- 
 
¶8. (U) According to the U.S.-based ESA, more than one million online 
video games are pirated globally each month.  The top 10 infringing 
countries are: the U.S., Canada, Brazil, Spain, Italy, France, 
Germany, the UK, the Netherlands, and Sweden.  In 2007 over 260,000 
cases were traced to Canadian Internet Service Providers (ISPs). 
Canadian ISPs are not required to act upon notices of infringing 
content.  The entertainment software industry wants the Canadian 
federal government to require ISPs to cooperate and take down sites 
that enable online piracy. 
 
¶9. (U) ESAC is calling on the Canadian government to empower the 
Canada Border Services Agency (CBSA) to seize counterfeit goods; 
provide specific criminal and civil remedies for TPM circumvention 
and trafficking in circumvention devices to ensure compliance with 
the WIPO Treaties; strengthen civil remedies for retail piracy; 
increase damages and penalties under the Copyright Act; include 
piracy in the Proceeds of Crime legislation; and provide more 
resources and training for law enforcement officials. 
 
--------------------------- 
Canadian Attitudes Changing 
--------------------------- 
 
¶10. (U) Despite an inadequate Canadian legal framework to protect 
IPR, Canadian public opinion appears to be shifting.  ESAC polling 
found that 80% of Canadian adults believe that it is wrong to obtain 
pirated video games (85% of Canadians older than 35).  65% of 
Canadian teens (13-17) believe that it is wrong to obtain pirated 
video games.  69% of Canadian adults support or strongly support IPR 
protection for software, and 63% of Canadian adults support or 
strongly support stronger legal enforcement of IPR for software. 
This contrasts with what stakeholders have told us in past years 
that most Canadians are indifferent to piracy or would not support 
stronger IPR enforcement measures. 
 
¶11. (SBU) Comment:  We are pleased that Canadian public opinion 
appears to be shifting towards supporting stronger protection 
measures for IPR.  This may make it harder for the small but 
extremely vocal group of IPR opponents to derail government efforts 
to bring Canadian IPR protection up to global standards.  End 
Comment. 
 
NAY