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Cablegate: Canadians May Be Beginning to Understand the Importance Of

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

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