Industry Committee on May 15th, 2012

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen. Bonjour à tous. Welcome to the 31st meeting of the Standing Committee on Industry, Science and Technology.

The first thing I would like you to note is that this morning both clocks are inaccurate, in that they are not following our BlackBerry time. So as usual, as I mentioned to members, we will revert to BlackBerry time, because that's generally synchronized with the House of Commons time. So right now it's 8:45 a.m., according to my BlackBerry.

In front of us we have multiple witnesses: from the Canadian Intellectual Property Council, Graham Henderson, co-chair; from the Intellectual Property Institute of Canada, Mark Eisen, president, and Michel Gérin, executive director; and as individuals we have Jeremy de Beer, associate professor, faculty of law, University of Ottawa, and also Ruth Corbin, managing partner and chief executive officer, CorbinPartners Inc.

I will start at the beginning. Ms. Corbin, you had requested a specific order, so I'll just give you the order right now. It will be Mr. Henderson, Mr. Eisen....

I take it, Mr. Eisen, you're going to be doing the presentation. Is that correct?

[Mark Eisen, President, Intellectual Property Institute of Canada]

I will be sharing that with Mr. Gérin.

[The Chair, Conservative, David Sweet]

Okay. And then we have Ruth Corbin and then Jeremy de Beer. Does that sound fair? Good.

We'll begin with Mr. Henderson for seven minutes, please.

[Graham Henderson, Co-chair, Canadian Intellectual Property Council]

Good morning, Mr. Chairman, honourable members of the committee. Thank you for the opportunity to appear before you. My name is Graham Henderson and I'm the co-chair of the Canadian Intellectual Property Council. I'm also the president of Music Canada, and I remain very involved with both the Canadian and international chambers of commerce and their IP committees.

The Canadian Intellectual Property Council was established in 2008 as a coalition under the banner of the Canadian Chamber of Commerce. The organization quickly became an influential advocate for the promotion of intellectual property and innovation in Canada.

The importance of intellectual property rights has long been acknowledged. Intellectual property encourages innovation that facilitates the development of products and services that enrich our lives, drive economic growth and competitiveness, and most importantly, maybe, create jobs. A strong IP rights system promotes economic prosperity and will protect the health and safety of Canadians.

Five years ago this very committee undertook an extensive study of IP in Canada, with the CIPC appearing as a witness. Around the same time, the Canadian Anti-Counterfeiting Network published their Report on Counterfeiting and Piracy in Canada: A Road Map for Change, of which I have copies here in English and French. It was endorsed by many business associations in Canada.

The road map identified many of the current weaknesses in Canada's IP laws and enforcement system, including a lack of police and prosecutorial resources that are dedicated to counterfeiting; insufficient criminal penalties; a lack of effective civil remedies; and a disempowered customs officialdom.

This report was provided to key federal cabinet ministers, parliamentarians, and policy-makers in Ottawa, and was received positively. Within months of its publication, this industry committee convened hearings and produced a report declaring urgent action.

IP rights, the committee reported, “facilitate and encourage the pursuit of innovation...and the disclosure of knowledge into the public domain for the common good”. It said, “The IP right is the only industrial tool that rewards the innovator commensurate with the innovation's commercial prospects.” It then said, “The Committee is of the opinion that a stronger legislative framework and adequate financial and human resources are important for the fight against counterfeiting and piracy in Canada.”

I might add that the NDP issued a supplementary opinion that actually strengthened some of the committee's recommendations. I believe we have the current vice-chair, Mr. Masse, to thank for that.

In response to the committee's report, which was endorsed by all parties, four government ministers signed a letter on October 2007 pledging action and stating unequivocal support for a strong IP regime. The letter read:

...this government is committed to the importance of providing a robust framework for intellectual property rights, not only to address the risks posed by counterfeit goods to consumer health and safety but to foster an environment conducive to innovation, in an effort to further attract investment and high paying jobs to this country's growing knowledge-based economy.

Other reports have since received positive feedback from the government, parliamentary committees, and policy-makers, including the 2009 CIPC report entitled A Time for Change: Toward a New Era for Intellectual Property Rights in Canada. This growing awareness of the need for reform of Canada's IP regime has been acknowledged by virtually all levels of government in Canada, together with individual creators, inventors, and business leaders.

However, despite this widespread acceptance and despite a commitment to implement this very committee's recommendations, the wheels of change have ground slowly. Of the industry committee's 19 recommendations, I believe only two or three are close to fruition. This is why the renewed commitment of the government to revisit this issue, as evidenced by these hearings, is so refreshing and welcome.

Having said that, many of us have what can only be described as a disconcerting sense of déjà vu. The simplest place for me to begin, I guess, would be to urge the committee to pay close attention to the unanimous eighth report of this committee in 2007, together with the government's response, and to rededicate itself to the realization of that committee's recommendations. These recommendations are, of course, not the end of the line. The 2007 industry committee was mostly focused on establishing the critical role that IP plays in innovation, as can be seen from the quote I read earlier, and establishing rules to better protect IP in the marketplace.

Other studies have focused on the critical role that IP plays in a nation's prosperity and innovative capacity. For example, the Coalition for Action on Innovation in Canada produced a widely praised report entitled An Action Plan For Prosperity. This coalition included a who's who from Canada's most innovative businesses. It was co-chaired by the Honourable John Manley and Paul Lucas.

The third recommendation they put forward in this report was to “adopt the world’s strongest intellectual property regime”. Here's what they said:

A robust climate for innovation is only possible if Canada’s regulatory processes encourage the development and launch of innovative products and if our laws ensure that inventors and those who invest in their ideas can fairly reap the rewards of their work. Canada should aim for a reputation as the best place in the world in which to research, develop and bring to market new products and processes. To achieve that goal, it is imperative that Canada seize current opportunities to improve its protection of intellectual property and thereby create a more attractive environment for investment in innovation.

Now, if I were to add to the 2007 recommendations, I might suggest the following. First, establish an intellectual property rights coordination council consisting of senior government officials, representatives from the business community, and IP rights holders. I would ask for the extension of data protection and for the implementation of a five-year patent restoration system. I would ask that we streamline the patent review system so that we can get products to market more quickly. And I would ask that we create judicial awareness of the importance of IP.

[The Chair, Conservative, David Sweet]

Mr. Henderson, thank you very much. That's your time. We appreciate your comments.

We will now go to Mark Eisen for seven minutes. I understand you will be sharing the time with Mr. Gérin.

[Michel Gérin, Executive Director, Intellectual Property Institute of Canada]

Actually, Mr. Chairman, I'll go first.

Good morning. My name is Michel Gérin, and I am the Executive Director of the Intellectual Property Institute of Canada. Thank you for having us today and for taking on this important study.

IPIC is the professional association of patent agents, trademark agents, and IP lawyers. Our members help Canadians obtain and protect IP rights in Canada and around the world, and they help foreign companies obtain IP rights in Canada. Our members therefore have a unique perspective on the strengths and weaknesses of the Canadian IP regime and how it compares with the regimes in other jurisdictions.

Today we want to use that knowledge to provide you with an overall list of issues affecting the IP system, and propose a framework by which the committee may wish to organize and address these issues as well as the other issues that will come up in the course of your study.

Page 3 of our presentation document contains the mandate of the committee. I will briefly address the question of innovation in the intellectual property regime, and then we'll move on to the effectiveness of the regime.

There are many definitions of “innovation”, and on page 4 we propose a simple one for the purpose of today's discussion: an idea is created, it's protected by intellectual property, and then it's commercialized.

You will notice at the bottom of that page that we have suggested some names of people and organizations that the committee may wish to speak to in the course of its study. Of course this list is by no means complete. We've proposed some throughout the document.

There are eight components to the IP regime in Canada. Today we'll focus on three: patents, trademarks, and industrial designs. These are listed on page 5. We explain to you in the following pages of the document the reasons why we have set aside the other five elements. We also provide information in case the committee wishes to investigate those further.

There are many ways of looking at the IP regime. We propose a framework that is certainly not scientific but is very much practical. On page 9 we talk about “The ABC of an effective IP regime: access, balance, control.” We've applied this ABC to our three areas of focus—patents, trademarks, and industrial designs—to identify the issues that are affecting the system. As you'll see later in the document, we've classified these issues on two scales: the level of controversy surrounding the issue and the effort required by the government to either analyze and/or implement solutions to those issues.

I'll now turn it over to Mark, who will explain further this ABC and give examples of the issues we've identified.

[Mark Eisen, President, Intellectual Property Institute of Canada]

Thank you, Michel.

I'm speaking from the perspective of an intellectual property practitioner. I am a lawyer certified as a specialist by the Law Society of Upper Canada. I was registered as a patent agent and a trademark agent in both the Canadian Intellectual Property Office and the U.S. Patent and Trademark Office back in the 1980s, and I have been practising in the preparation, filing, processing, and examination of applications, which turn into the rights that we're discussing here today, for more than 25 years.

Page 10 of the presentation we've provided deals with the issue of awarenes. There are three issues here that are required for a proper intellectual property regime: awareness of the regime; trust in the system, both by Canadians and by those abroad; and accessibility, including financial accessibility of the system.

On awareness, I believe you heard last week that there is a very low awareness about intellectual property among SMEs in Canada. We need to engage the public and educate them on IP. The Intellectual Property Institute of Canada cooperates with the Canadian Intellectual Property Office, CIPO, in having a bank of speakers who actually do a road show, taking education across Canada, but they hit only small groups at a time.

There has to be a concerted effort to actually educate the public on the uses and benefits of intellectual property and to dispel many of the misconceptions that are out there. IPIC does its part by doing various outreach activities. For example, we recently met with members of provincial governments on the Atlantic coast. However, CIPO needs to have the budget to be able to do this as well. There is a marketing issue here. If people aren't aware of the system, they will not be using it.

Trust—meaning predictability and reliability—is a very important part of this. There are problems, for example, with inadvertent abandonment whereby rights can be irretrievably lost due to causes that can be completely beyond the control of an applicant, or through normal human error of an applicant, and the Canadian system is very unforgiving that way. This is not the fault of the Canadian Intellectual Property Office, but the legislation and regulations under which it works do not provide forgiveness for this type of problem.

I think the United States has a very good model for this. That's one of the things they do quite well. They're very forgiving in terms of inadvertent abandonment. They provide many opportunities to catch up, correct one's rights, and avoid this irretrievable loss of rights.

There are other problems with sound prediction and official marks, which we mentioned in our presentation. I can't go into those in detail, but they result in reduced reliability of the system, because people do not know what to expect, first of all, from CIPO when applications are examined, and second, from the courts when these rights eventually make it into court.

Accessibility includes financial accessibility. We have a scientific research and experimental development program that covers costs up to the point of determining that an invention is patentable, but not past that. So an applicant—that is, an SME—has to pay for this themselves, and very often they'll say no. They'll say either “No, I don't want to spend the money now”, or “Why should I bother getting a patent when it's so expensive to sue?” These types of problems have to be addressed.

We have a small entity system in place, allowing reduced government fees for companies with fewer than 50 employees, universities, and individuals, but it doesn't work. There was a case that came down some years ago that invalidated a patent because somebody accidently claimed to be a small entity when they weren't entitled to, and practitioners are afraid to use it nowadays. It's very important, actually, that practitioners appreciate the reliability and predictability as well, because we're the interface between the users of the system and the Canadian Intellectual Property Office, and we provide an important legal service in that respect.

High-quality patent and trademark examiners and high-quality patent and trademark agents are very important to making the system run efficiently. We can be spinning wheels when the patent profession or the trademark profession and the Intellectual Property Office don't have the same view of how these things should work.

Slide 11 shows how there needs to be a balance between the incentive to innovate and competition. This is the “B” portion of our ABC. There are distinctive trademarks being refused because they're descriptive when sounded. Again, this is referred to in our presentation.

There is an ongoing struggle between IT industries and the patent office on the scope of patentability of business methods, and this is yet to be resolved and needs to be resolved.

Page 12 refers to an efficient enforcement mechanism, which is also required.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Eisen.

[Mark Eisen]

Thank you, Mr. Chairman.

[The Chair, Conservative, David Sweet]

We're just a little bit over time on that. We appreciate your remarks.

We will now move on to Ms. Corbin for seven minutes.

[Dr. Ruth Corbin, Managing Partner and Chief Executive Officer, CorbinPartners Inc., As an Individual]

Thank you. Good morning.

My name is Ruth Corbin. I run an intellectual property research firm. I teach at Osgoode Hall Law School, in intellectual property. I'm a corporate director—you will see some of my remarks reflecting that background—and trained as a marketer. One of the reasons I raise that is because of the title of the presentation called “What's needed most is an IP State of Mind”. That's what I hope to leave you with today.

Remember when customer service was just something people spoke about? It took a whole reorientation of government and business until we understood what it meant to have excellent customer service and satisfied customers. It didn't happen just because we said it. That's what I'm proposing is needed, a reorientation of thinking, which I think individuals in the room can provide leadership for, and that is an IP state of mind for Canada that will allow us to take advantage of our most valuable economic resource.

The four themes I'm going to talk about are on this slide. I have six slides, and I hope to do them in six minutes. There are four things I want to talk about.

First of all, the best news is that extensive research is well in place, and it was sponsored by the Conference Board of Canada. It has taken over a year to complete, with extensive consultation with experts right across the country.

A second message is the need to change the conversation from the well-accepted innovation language to intellectual property, which you have heard about from my colleagues on the panel already.

The third creative suggestion I would invite government to think about is how to influence the culture of corporate governance in businesses. Government and business have been partners for a long time, yet surprisingly their intellectual property agendas are moving in different directions. It's quite interesting. They're not opposing directions, but ones that reflect a lack of vision for Canada.

Finally is a recommendation for government—if I have to leave you with something practical—and that is to exercise leadership through plain measurement: clear definitions and measurement of whether Canada is doing well or poorly and how our progress should be measured.

My first of four themes is to talk about the extensive research that is already available in the Conference Board report. I believe Monsieur Roy has distributed a copy of the executive summary, in which you will find the main themes. That report involved broad national consultation with experts and IP leaders, including every member of the panel represented here—Professor de Beer's colleague, actually....

For added credibility, it received an award of excellence for public policy impact from the Marketing Research and Intelligence Association. It was selected by Industry Canada and featured at a joint meeting between OECD and Industry Canada. It was on the recommended list of Industry Canada's library and knowledge centre. I tell you that to assure you it has endorsements of credibility for the investment the Conference Board made a couple of years ago.

There's no need to reinvent the wheel. The report has a history of international treaties, legislative changes, statistical analysis, and on page 64 the current regime in intellectual property.

The biggest thing is that everybody loves to talk about innovation. They argue about whether Canada is good or not good at innovation, and what you find is that they are talking about different things. I have taken this quote out of Humpty Dumpty, and one of the big issues there was that Humpty Dumpty would use a word to mean whatever he wanted it to mean when he said it.

I've found in my year of research that's what's happening in Canada is all good. We're all talking about things we want to happen, but we're talking about different things. I'm recommending that the conversation shift from innovation to intellectual property. Innovation is our most precious national resource, but intellectual property is what it takes to manage, govern, and organize it.

The recommendation I want to leave you with today, subject to questions you may have, is that in addition to defining innovation and stopping the debates about what it means, who's good at it, and whether we're succeeding or not, what we seem to need in Canada is a measurement directorate.

I don't mean to sound bureaucratic. There's a well-known saying that you can't manage what you don't measure, but also you get what you measure. If the country is aware of where our priorities are, businesses and journalists will respond to talk about Canada's progression in those areas.

One of the biggest areas of weakness is corporate governance of businesses. You may think it's hands off when it comes to businesses: let businesses, especially at the director level, do what they need to do. Suprisingly, intellectual property monetization is not measured systematically at the board level, nor is it even taught in director colleges, nor is it advised by our main securities regulators. It's something government can do to support where our weakest link seems to exist, and that is at the business level.

Finally, through a program of clear measurement the Canadian government would connect more directly with international organizations for harmonized policy and competitiveness tracking. Organizations such as OECD and WIPO, which talk about Canada, whether we're there or not, rank Canada and enable us to talk to them in a consistent language of measurement. That is what we seem to need most.

Thank you for your attention.

[The Chair, Conservative, David Sweet]

Thank you very much, Madam Corbin.

Now to Mr. de Beer, for seven minutes.

[Prof. Jeremy de Beer, Associate Professor, Faculty of Law, University of Ottawa, As an Individual]

Thank you very much for the opportunity to be here today. I'm a law professor at the University of Ottawa whose work focuses on IP and technology innovation, but my views here today are my own, not those of my institution or my colleagues necessarily.

I studied this issue during undergraduate degrees in business and in law and during my graduate studies at Oxford. I practised law as counsel to the Copyright Board of Canada and continue to consult on IP issues with private companies in high-tech, law firms, government agencies, and international organizations, including WIPO.

I've published more than two dozen peer-reviewed articles and authored or edited several books about aspects of IP and technology innovation, and I lead or collaborate on numerous large-scale research projects funded by SSHRC, the IDRC, the European Commission, and Genome Canada.

Based on my research, I'd like to raise three points: first, evidence-based policy-making; second, IP management practices; and third, assessment methods and metrics.

First, on evidence-based policy-making, almost everyone agrees that the right IP framework could help to spur innovation, productivity, and growth, but it is far too simplistic to state that strong IP protection promotes innovation without understanding how. And that's why the work of this committee is so valuable. There is a general consensus among experts that the precise role of IP in innovation systems is highly variable, context-specific, and complex. So we need to inform our ideology and economic theory with evidence of actual business practices and real-world impacts in specific sectors in order to create an effective policy. That's why I echo calls made recently in the Jenkins report and in the Canadian International Council's report, “Rights and Rents”, for a high-level, independent, evidence-based review of Canada's current IP framework, toward the formulation of a nuanced policy integrated into an innovation agenda.

The United Kingdom, as just one example, has recently done this. I cite the Gowers review and the Hargreaves report as examples. Canada would do very well to follow these leads.

The second point, about changing management practices, is dealt with in a policy brief that I recently co-wrote for Genome Canada, analyzing three overlapping IP strategies actually used in practice by science and technology innovators. The focus here is on the life sciences, but the lessons are more broadly applicable to other domains of science and technology as well.

An orthodox model was to acquire as many intellectual property rights as possible in order to maximize commercial opportunities or to stockpile an arsenal to use as strategic leverage against competitors. Now there is a growing body of evidence suggesting that this model is often unviable or that it works only in specific sectors and for specific kinds of organizations. In the public sector especially, most technology transfer offices that have adopted this model can't even cover their operating costs with the revenues they generate.

Where traditional management models are failing, one popular alternative is freely revealing ideas or inventions or even raw data into the public domain. This is not altruism; this is entrepreneurship. Many Canadian firms make money or fulfill mandates with this business model, and many more use the strategy to save on the cost and complexities of acquiring, let alone enforcing, an IP portfolio. A related tactic in the business sector is tapping into the trend of open innovation. This does not abandon opportunities for IP protection. To the contrary, it uses IP in innovative ways, licensing to require rather than to restrict collaboration.

The lesson here for policy-makers is not to presume that all organizations would or should want to manage their IP in the same way. We ought not to create a one-size-fits-all framework, and the practical experience here of Canadian innovators and entrepreneurs shows that research, training, and education—not necessarily treaties and legislation—will equip Canadian companies, especially SMEs, to better exploit IP.

I'll turn to assessment methods and metrics. Because intellectual property management strategies are changing so quickly, we need to adapt the methods and the metrics we use to assess our IP and our innovation policies. This is my third and final comment.

As things stand, as Dr. Corbin pointed out, IP outputs are a substantial part of the formula that many organizations currently use to evaluate Canadian innovation. Intellectual property outputs form one quarter of the weighting of our D grade in innovation. That's attributable to our poor statistical performance in acquiring certain kinds of IP rights.

Unfortunately, the formula wrongly presumes that IP outputs indicate innovation. Innovation and invention are not the same thing. A true innovation has market value. A patented invention may or may not.

Statistics suggest that nearly half of issued patents are invalidated when they're challenged in court. That creates work for lawyers and bureaucrats, but in fact impedes innovation.

Low-quality patents can contribute to the proliferation of thickets, create uncertainty, and lead to anti-competitive practices that stifle innovation. The narrow focus on quantity, not quality, also naively implies that to induce innovation we need only increase IP protection, which could in fact make matters worse.

I submit that we need a more sophisticated analysis like the OECD and WIPO are working toward, with a much fuller range of assessment methods and metrics, including qualitative data.

In conclusion, my comments suggest that the IP-related strategies for Canada's innovation system probably don't involve many legislative reforms or new international agreements for stronger protection or enforcement. What is needed first is a comprehensive, independent, evidence-based review of our entire framework in the context of innovation policy. Only then can we consider some possibilities for meaningful, practical solutions, like better intergovernmental policy coordination, more streamlined application and adjudication procedures, and enhanced cooperation between the public and the private sector.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. de Beer.

We'll go now to our usual rotation of questions, and to the government side, with Madam Gallant for seven minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman, and thank you to our witnesses.

Last week we heard that the courts were the only venue for enforcement of IP or patent law. In the views of your organizations—so this is for each of you—is the court system the most effective venue to guard IP rights?

[Prof. Jeremy de Beer]

Thank you very much for the question.

I think in practice the courts are the avenue of redress for people who feel their IP rights have been infringed. Many have called for—or recommended—a specific division of the Federal Court to be created, to deal with intellectual property issues on an expedited basis, with lower costs, and I would support that recommendation.

[Mark Eisen]

I think the courts are the authority when it comes to this. Parties that are prepared to spend that kind of money and that have unresolvable disputes they can't deal with by alternative resolution methods will have to resort to the courts. So with or without a specialized court, it is the best forum for that.

[Graham Henderson]

I would add that one of the recommendations that has come up repeatedly at all sorts of different levels and in reports is that there is an issue—and maybe this is why there's been a call for a specialized division of the Federal Court to deal with it—about education among judges with respect to intellectual property per se. I think it also applies, by the way, to the ranks of the prosecutors.

In an efficiently operating IP system, I think you're going to have a much more highly specialized group of prosecutors and courts dealing with the issue.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

So if we take enforcement to the international level, where you have offences occurring in different jurisdictions, there is the thought that those in the jurisdiction the case occurs in would be favoured. What are your recommendations—if any—in terms of the international forum when we have disputes between companies in different countries?

[Prof. Jeremy de Beer]

Well, this is a private matter. It's governed by the standard rules of private international law, so there's not a lot that this committee or the government could really do about it.

But it is true. Recent statistics suggest that in the United States, for example, local rights holders win 88% of the cases and foreign rights holders lose 88% of the cases. A common tactic for patent owners, for example, will be to commence litigation in multiple jurisdictions, hoping to get a favourable ruling so that first ruling will influence future rulings, especially in the Commonwealth. So the key to combatting this is probably not, realistically, any kind of an international agreement, but better education, training, and awareness, especially for our SMEs.

[Michel Gérin]

I want to add that because of the international aspect of disputes there is one failing in our system where Canadians are disadvantaged when they go into litigation, for example, in the United States. Communications between clients and their patent or trademark agents are not protected from disclosure in courts, while in the U.S. or other countries they are.

When they go into litigation in the United States--and this has happened to French companies and other companies--they're put at a disadvantage. There's a simple solution, a correction to the Patent Act and to the Trade-marks Act to rectify that so that they're on a level playing ground.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you. Do you have that recommendation?

[Michel Gérin]

Yes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Would you provide it to this committee?

[Michel Gérin]

We can provide it. It's not detailed here, but yes, we can provide it to the committee.