Industry Committee on Oct. 23rd, 2012

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

You and Dr. Meulien talked about harmonizing our IP regime with European levels. Our negotiations with the European Union are winding down. This is certainly an approach we could adopt. We are in talks with Asia and we are looking at that aspect. What are the challenges when it comes to a harmonized IP regime with countries in Asia? That question is for Dr. Meulien or Ms. Nolet.

[Pierre Meulien]

The first step is to harmonize our regime with the European and U.S. regimes. I'm no expert on how the Asians operate, but I believe theirs is a more heterogeneous model. That step really comes second in my eyes.

I would like to come back to your first question on investments by major pharmaceutical companies in Canada.

I don't believe Canada specifically is being targeted in that area. The global pharmaceutical model is changing. We won't be seeing investments in major R&D structures in any country. Pfizer just closed its main facility in Kent, England. I would say we need to think about new models of cooperation with the pharmaceutical industry.

In my presentation, I mentioned the Structural Genomics Consortium, which is one of those models. Phase three of the program has begun, and the initiative represents a $50-million investment by the pharmaceutical industry. That is another tool, another model that should be considered, and I'm sure that Canada is very well-positioned to attract that kind of investment.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Very well. Thank you.

Mr. Lumb, do you have anything to add?

[Chris Lumb]

Thank you.

I agree with everything that my fellow witnesses are saying, and absolutely, harmonization with Europe is important. Doing things that we can do to attract investment for major pharmaceuticals is important, but I would also caution the committee to remember that new economic activity clearly comes from early-stage companies. That's where jobs are coming from. That's where new economic activity is coming from.

If this committee spends 90% of its time thinking about how to attract a particular investment or having a sector attract investment, it should do that, but it shouldn't spend 90% of its time on that. It should think about how to create an environment that fosters the creation of early-stage technology companies, because that's where the results come from. Clearly, they come from there. Think about that as well.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

It's a point well taken.

Thank you.

Harmonization has consequences. I want to come back to the pharmaceutical sector because it has an important role in my community.

Some studies report that extending IP rights to meet EU requirements would increase health spending by some $2.8 billion a year, because generic drugs would come onto the market later, as a result. You may already be aware of that argument, but I would like to hear your thoughts on that point. Extending patent protection, for example, may have repercussions on drug prices.

[Brigitte Nolet]

I will start, and then I will ask my colleague Declan if he has anything to add regarding the reports, specifically.

If I understand correctly, the reports focus on products introduced in the past five or ten years, so products that have already been brought onto the market. These were major products, and the reports assumed that all of the products would be granted the highest level of IP protection. But that isn't the case in Europe. It doesn't work that way.

We must bear in mind that health research changes quickly. It is often said that tomorrow's research won't look like today's. The pipelines of yesterday or five years ago have changed considerably.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

But—

[The Chair, Conservative, David Sweet]

We're way over. I was trying to get something of substance, but we're almost a full minute over. We'll have to come back to that. I wanted the witness to try to get something in.

We'll go to Mr. Braid for seven minutes, please.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you very much to all of our witnesses for being here this morning.

Mr. Elliott, I appreciate the company update on RIM and on BlackBerry 10. I've had a couple of previews. It's very exciting technology. We look forward to its release in the first quarter. I know all members of Parliament will be ordering their BlackBerry 10 phones early in the next fiscal year.

Mr. Elliott, you mentioned that in 2010 RIM filed 2,000 patents. Where were most of those patents filed, and why?

[Morgan Elliott]

The number was 6,000 between 1995 and 2012, between the U.S. and the European patent offices.

In Canada we have about 5,400 patents that we've filed. In the last five years we averaged about 650. Canada is a country of second filing. We probably file more than most companies do in Canada, the reason being that filing patents is expensive. The cost to enforce patent rights is even more expensive, so we usually tend to do it in terms of market size, where the country is bigger—thus the U.S. and the European Union, where the market size is larger.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

So that's the main driver in terms of your decision about where to file the patents.

[Morgan Elliott]

Correct.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

You mention in your presentation, and I'll attempt to paraphrase it, that abuse of IP can be an obstacle. Could you elaborate on that and how abuse of IP has adversely affected RIM? What, if anything, can the Government of Canada do to prevent abuse of IP?

[Robert Guay, Director, Intellectual Property Operations, Research In Motion]

Maybe I could speak to that. What we mean by that statement is that every patent system has its shortcomings and a certain number of constraints. When we look at RIM's history with NTP specifically, RIM has faced a number of challenges in the past in relation to how certain IP rights are enforced.

The abusive nature of how IP rights are leveraged is more in the context of people’s taking advantage of the shortcomings of patent offices around the world. That's what we mean. Where Canada can help is to think about how to make sure that the appropriate checks and balances are built into the IP regime, from beginning to end, so that only legitimate IP rights can be leveraged and enforced.

RIM certainly has no issue with a strong IP regime or with IPR holders that might have very strong IP rights. Where we do have an issue is with an IP regime that might be unbalanced and not necessarily have all the right checks and balances built into the system.

Madam Nolet mentioned the right to appeal. It's one of a number of examples where perhaps Canada can build more balance into the regime. Allowing the ability to question, the ability to patent, I think is important. That's just one example of where more checks and balances can be built into the system.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great. Thank you.

You also mentioned that access to IP developed in government research labs would be beneficial to companies like RIM. Could you explain what the barrier is to facilitating that currently?

[Morgan Elliott]

Sure. Not to pick on anyone, but NRC is a great example. If you go to the CIPO patent listings, you can see everyone who has filed a patent. There's a little check box that allows you to see whether it's available for licensing. Usually the government-developed technology is not available for licensing.

The best example that everyone knows about would be DARPA in the U.S., which put its technology out there. We now have the Internet today. That's one great example of why you'd want to do that.

As I said in my comments, if that patent or that technology is just sitting on the shelf, you're not making money. You're not creating jobs. You're not increasing the tax base. The same goes for universities and colleges.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great.

Madam Nolet, you mentioned in your presentation that patent term restoration exists in every OECD country except for New Zealand, Mexico, and Canada. I remember from my time on the copyright committee that being part of a club with New Zealand and Mexico is not the greatest club from an IP or copyright perspective.

Could you elaborate on what patent term restoration is and why it's important?

[Declan Hamill, Chief of Staff and Vice-President, Legal Affairs, Canada's Research-Based Pharmaceutical Companies (Rx&D)]

Sure. Thank you for your question.

Patent term restoration is a life sciences-specific IP provision found in 31 of 34 OECD countries. It allows innovators to claim some element—not all elements—of the time that is expired in the context of regulatory approval times, which can be quite long in Canada and other countries. It allows them to make an application to have some of that time restored at the end of the patent term.

It is on the table with the European Union. There are different models around the world. The European model is one such. The U.S. has a different model. Other countries have different models. Canada is, as you said, in a fairly rarefied atmosphere in having no model whatsoever in place.

There definitely is, from a life sciences perspective, a fairly glaring difference between the Canadian regime and other regimes. It would certainly be of assistance to our industry, on an ongoing basis, to have that rectified and have some sort of PTR system in place.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Hamill and Mr. Braid.

Now we'll go to Mr. Regan for seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman.

Thank you all for coming today.

Ms. Nolet, in 1987, after the Patent Act was amended to increase protection for pharmaceutical drugs, Rx&D committed to increasing its members' annual expenditures on R and D to 10% of sales revenue by 1996. According to the 2011 report of the Patented Medicine Prices Review Board, that ratio was at or above 10% between the mid-1990s and 2002. It was for maybe seven or eight years. Since then, it's fallen below 10%. It was at 6.7% in 2011.

The commitment made in 1987 was kept for a little while, but not on an ongoing basis. That's of concern, particularly when we talk about this proposal Ambassador Matthias Brinkmann talked about yesterday in Halifax. He made it very clear that for the EU, increasing patent protection from eight to 10 years is a big deal in the trade agreement being negotiated. We've heard about the costs. It would potentially cost provinces an added $2 billion per year. I don't know how much it would cost consumers across the country.

You talked about the $1.3 billion investment in R and D that it has grown to. That's important and valuable, and we want to encourage that. Of course, when you talk about $20 billion in R and D over that period, I assume that there was somewhere in excess of $200 billion in sales.

We were talking about the cost and how provinces can manage this increase in costs. You said that provinces have every tool at their disposal to manage them. Recently, in Nova Scotia, the NDP government cut spending on primary and secondary education by $200 million and made a similar cut to post-secondary education. Is that the kind of tool you're talking about that provinces have?

[Brigitte Nolet]

I heard two questions. I'll address the R and D commitment piece, and then I can go to the health piece.

For us, as we were discussing, the nature of research and development has changed in Canada. We've had this definition, as you pointed out, since 1987, but research has changed, and the type of research we do now and the type of investments we attract in Canada have changed. They're actually not captured in that definition.

We have companies like ours that bring global investments directly into the country. We have partnerships with biotechnology companies. We have venture capital, which you've heard about. We have acquisitions. We have private-public partnerships. All of these are different types of research and development that exist now and that are not captured in that definition. In fact, a vast majority of the $190 million in Mississauga I spoke to you about doesn't qualify for the SR and ED tax credit, which is what is used to measure that 10% commitment. I would also add that none of our investments in the Montreal Heart Institute qualify for the SR and ED tax credit, even though they are investments directly into this world-class academic research organization.

What I think might be interesting as you deliberate and consider intellectual property and its impact on investment is to actually look at these definitions. Look at how things are measured to ensure that we are capturing the true definition of research. Look at the true way investment is now coming into Canada, because, as you point out, it's very different from what it was in 1987.

In terms of health care and what we mean by tools, we have very good conversations when we bring our drugs to market. We go to the provinces. We submit our medicines for consideration for reimbursement. There are a number of things we consider and that we negotiate with provincial governments. Those are the tools I'm referring to.

Some provinces may have product listing agreements. Some provinces negotiate very well on criteria. For example, you have your drug, and it can do these things, but we would prefer that it come to market after you've tried this drug or only in this subset of patients. There are a number of different ways we have discussions within the health framework on these products coming through.

I would also add, and Declan may want to chime in as well, that when we're looking at what else happens around the world, I don't believe that there's any other industrialized country that uses the argument that it should weaken the IP regime to control health costs. The two usually aren't married.

[Geoff Regan, Liberal, Halifax West, NS]

Unfortunately, I only have seven minutes. Maybe I'll have another crack at this later.

Let me turn to Mr. Elliott and RIM. As you know, of course, we're delighted to have a RIM facility in my riding, in Bedford, in the Halifax area in Nova Scotia. Actually, I was glad to hear that it participated in or that there was work done there on the PlayBook, which is a great product, as I could tell my colleagues around here who have iPads and other things. I look forward to the BlackBerry 10.

Let me ask you about the impact on RIM. You talked about how RIM benefited from government programs over the years. I think that's also true of Nortel. It thrived for quite a while, and during its development, it had support in terms of procurement costs and other government supports. It developed some very valuable patents that were then, unfortunately, sold outside the country.

What was your view on that? What was the impact on RIM of the loss to Canada of those patents developed with Canadian dollars?

[Morgan Elliott]

First of all, there's no easy answer to that question. Companies are always answerable to their shareholders.

Second, the government also has to answer to the public and balance those needs.

In terms of the Nortel patents, along with some of our competitors, we were part of the consortium that purchased a large chunk of them. It was more of a defensive measure than to gain access to technology.

Again, it's a hard question. We would love the Canadian government to say we're not to let the technology leave the country, but in the same case, as an acquirer of different companies internationally, we don't want another government to say it to us.

It's finding that fine balance between how to keep that technology in Canada and how to allow Canadian companies to succeed in the international marketplace.

[Geoff Regan, Liberal, Halifax West, NS]

Speaking of the international marketplace, you talked about international best practices for patent examination. Would you like to talk some more about that and tell us the kinds of best practices you're speaking of?

[The Chair, Conservative, David Sweet]

If he's going to do that, he'll need to do it on another round, Mr. Regan. We've run out of time. Again, we're always dealing with the clock. It's constantly moving.

We've moved out of our seven-minute round and into a five-minute round. The next questioners will have to be even more prudent.

First is Mr. Wallace, for five minutes.