Industry Committee on Nov. 18th, 2014

[The Chair, Conservative, David Sweet]

Good morning, ladies and gentlemen. Welcome to meeting number 29 of the Standing Committee on Industry, Science and Technology.

We have quite a selection of witnesses before us this morning and we have two panels.

I'm going to go very quickly: from Bereskin and Parr, Amrita Singh and Scott MacKendrick; from the Canadian Bar Association, Omar Wakil, who is the chair of the foreign investment review committee; from the Intellectual Property Institute of Canada, David Schwartz and Stephen Perry; and from the United Steelworkers, Mark Rowlinson.

I take it that everybody's been briefed about five minutes for opening comments, is that correct? So we'll begin with Bereskin and Parr.

[Amrita Singh, Associate, Bereskin and Parr LLP]

Good morning. My name is Amrita Singh and I, along with my colleague, Scott MacKendrick, am here on behalf of Bereskin and Parr LLP to provide feedback about the proposed amendments to the Patent Act and Industrial Design Act as set out in part 4, clauses 104 through 142 of Bill C-43, and to answer any questions you might have about those amendments.

Bereskin and Parr is a leading Canadian intellectual property law firm. The firm's practice is comprehensive, encompassing all aspects of intellectual property law, including patents, industrial designs, and IP litigation. A number of the firm's practitioners are consistently ranked as leading practitioners in IP law in Canada and around the world.

We're pleased to have been invited to provide comments on the proposed amendments, many of which provide welcome updates to Canadian patent and industrial design law. Thank you for this opportunity.

I'll begin by addressing the amendments proposed to the Patent Act. The changes to the Patent Act are designed to implement the patent law treaty, the objective of which is to streamline and harmonize formal requirements set by various countries for the filing of patent applications and the maintenance in force of patents, as well as certain additional patent and patent applications requirements related to the communication with applicants or their patent agents, representation and recording assignments, and the like.

The treaty is intended to provide filing date requirements and procedures to avoid loss of filing dates, mechanisms to avoid the unintentional loss of rights arising from a failure to comply with time limits, an internationally standardized set of formal requirements consistent with the patent cooperation treaty requirements, standardized forms, and simplified procedures.

The majority of the amendments will require clarification by the yet to be made public, and presumably not yet drafted, patent rules. Until the rules are made public, it remains to be seen what the full impact of changes to Bill C-43 will mean for Canadian patent law.

I will highlight two things that are of particular interest to us. Intervening rights is the first thing I'm going to speak about.

Presently, there's no provision in the Patent Act for so-called third party intervening rights for someone who takes actions during the time that a patent application might be deemed abandoned, but is later reinstated, where the actions would otherwise be found to infringe the patent as issued. All that the act currently provides is that if a patent is issued, the patent owner may obtain reasonable compensation for the otherwise infringing actions during the deemed abandoned period.

Bill C-43 appears to change this, allowing for innocent infringement as long as the actions are taken in good faith and during the timeframe to be set out in the patent rules. There is no requirement for such a term in the patent law treaty, and what “good faith” means will, most likely, have to be determined by judges. This injects some uncertainty into the patent regime and such uncertainty is almost certain to result in litigation before the Federal Court.

Furthermore, this is a removal of rights already present in the Patent Act and will adversely affect patentees regardless of the reasons why applications were deemed abandoned or for which fees were unpaid at some time.

The second point I will address is reinstatement of applications. Currently, an application is deemed abandoned if a required action is not taken. Once abandoned, the applicant has 12 months to reinstate the application by requesting reinstatement, paying a late fee, and taking the required action.

Under the amendments, however, there are certain circumstances where the applicant must show to the commissioner of patents that the failure to take the required action was notwithstanding the applicant taking due care. The treaty only requires unintentional delay as the basis for reinstatement and this basis has been adopted by the U.S. patent office, among others. Due care is a more onerous standard than the Patent Act currently provides and is likely to result in litigation before the Federal Court as well.

[Scott MacKendrick, Partner, Bereskin and Parr LLP]

Industrial design is an ornamental or aesthetic aspect of an article. It can be either in three dimensions or two dimensions. Examples include Apple's iPhone, the much-litigated industrial designs related to the shaping of that phone.

Another example is Bodum, which has a double-wall glass. This is the case litigated in Canada in 2012. The introduction of the Hague system into Canada will provide a mechanism for registering an industrial design in several countries by means of a single application filed in one language and with one set of fees. Unfortunately the amendment is introducing an issue with respect to design novelty. There is a requirement that a design be new to be registerable. This is something where the devil is going to be in the details of the regulations that are going to come out eventually.

As is apparent from our comments much remains to be done in and through amendments to the patent rules and the industrial design regulations. We recommend consultation on the rules and regulations be broad and that all interested parties be provided with sufficient time to fully consider and work through the details of the proposed changes and avoid unintended outcomes.

On behalf of Ms. Singh, thank you.

[The Chair, Conservative, David Sweet]

Thank you very much.

We will now move to Mr. Wakil.

[Omar Wakil, Chair, Foreign Investment Review Committee, Competition Law Section, Canadian Bar Association]

Thank you very much.

Good morning, Mr. Chair, members of the committee.

I am pleased to appear before you today on behalf of the Canadian Bar Association in response to division 9 of part 4 of Bill C-43 amending the Investment Canada Act.

The Canadian Bar Association is an association representing 37,000 members of the legal profession. Our primary objectives include improvement in the law and in the administration of justice. It is through that lens that we have examined this portion of the bill.

The submission before you has been prepared by the Foreign Investment Review Committee of the Canadian Bar Association's competition law section. This CBA section is composed of lawyers whose practices embrace all aspects of competition law and foreign investment review including direct experiences with transactions and other investments that are subject to review under the Investment Canada Act.

In 2009 the Investment Canada Act was amended to permit the review of virtually any foreign investment into Canada on the basis that it might be injurious to Canada's national security. We have previously expressed concerns about those amendments because of their broad potential application and because of the lack of guidance as to what sorts of investments would be reviewed. Without transparency and guidance it is difficult to advise foreign investors or Canadian businesses on the likelihood of a review or the potential outcome of a review. This creates a risk of chilling foreign investment into Canada.

We're making our comments today against the backdrop of those concerns. The amendments to the Investment Canada Act that are currently proposed would primarily make two changes to the law. First, the list of investments subject to notification requirements would be expanded. That may give rise to an increased number of national security reviews. The CBA section believes it would be helpful for the government to provide an explanation as to why these changes are thought necessary or desirable.

Second, the government would have greater discretion to disclose publicly information about the status and outcome of a national security review unless the Minister of Industry is satisfied that communication or disclosure of that information would be prejudicial either to the foreign investor or the Canadian business.

We fully support efforts to increase transparency and welcome this proposed amendment. However, we think the legislation would benefit from a specific qualification that no disclosure about the national security review process should be made in the context of a specific investment when the fact of that investment has not been publicly disclosed by the parties. Such unwanted disclosure could have the effect of deterring investors from approaching Industry Canada to address national security issues proactively and confidentially, thereby weakening the effectiveness of the process.

We also believe that the government should provide more disclosure about the frequency of national security reviews and the outcomes of those reviews. This would provide the Canadian public, the business community, and investors with better information about how the broad powers to conduct national security reviews are being exercised. In particular it would be helpful for foreign investors and Canadian businesses to have basic information about reviews in general. For example, how many reviews have there been since 2009? What were the countries of origin of the foreign investors? What business segments do the Canadian businesses operate? How many investments have been blocked? How many have been conditionally approved? We don't have access to any of that information. Industry Canada could make this information available in its annual report similar to what the committee on foreign investment in the United States does in that country.

In our view providing aggregate data on national security reviews would not itself be prejudicial to national security. We would encourage the minister to include such information in his annual report. We hope that the government would continue its efforts to increase transparency by considering amending the ICA and, further, require the annual reports to include aggregated data on national security reviews.

Thank you for your attention. I would be pleased to answer any questions later this morning.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Wakil.

Now we'll have Mr. Schwartz from the Intellectual Property Institute.

[David Schwartz, President, Intellectual Property Institute of Canada]

Good morning. Thank you.

I'm not going to read my prepared remarks with the illusion that they're different from what you've already heard, because it's exactly the same talk that Amrita Singh provided, so I'll keep it brief.

I'm David Schwartz. I'm a partner at Smart and Biggar. I'm the president of the Intellectual Property Institute of Canada. I'll speak a little about the Patent Law Treaty and how it's handled under C-43. My colleague Steve Perry is going to speak about industrial design, essentially the same thing you've heard, round two.

Thank you for the invitation to appear today.

IPIC is the professional body in Canada, the association of patent agents, trademark agents, and lawyers practising in all areas of IP.

We're very pleased to speak to you today, and we are very supportive of the government's work on PLT. It's a good treaty that helps prevent minor mistakes from resulting in loss of rights in patents.

I'll emphasize a couple of quick details. Much of the key stuff is left to the regulations; we know that and we want to emphasize the same two points you've heard.

First, this business about reinstatement of deadlines. Currently under the law, as we've heard, you have an absolute right, you pay a fee, and you revive an application if a deadline is missed. This happens routinely. The way the PLT is being implemented, there's a due care standard. Has the applicant, the patentee, exercised all the due care required by the circumstances? We're hopeful that in the regulations there is going to be a period where this isn't going to be required, and that you'll be able to revive the case as a right, pay your fee, and carry on. We don't know what “due care” means. The patent office is going to have to assess due care. Later on the Federal Court can review due care to see if it's been properly exercised.

It creates a lot of uncertainty, and I expect there's going to be a good opportunity in the regulations to fix a case without due care, and this opportunity will be added later. But certainly we're of the view that putting this in the mix early on is problematic and creates a lot of uncertainty.

Second, as we heard, intervening rights are new to the patent law. We've never had a situation where, during a temporary period of abandonment, someone else could start practising the invention, thinking there will be no patent; and then later on the patent is revived. The law is going to require that these intervening rights involve a good faith use. There's language in here about having made serious and effective preparations to commit the infringing act.

These are all things the courts are going to have to explain to us in detail. It creates a lot of uncertainty. Again, we're hopeful that at the regulation-making step, there's going to be an opportunity to revive an application or reinstate it and cure the missed deadline before there's a possibility of intervening rights. It will provide certainty, and it's a reasonable thing to do. I expect that's what we'll see when the regulations are promulgated, and we look forward to working on that.

Third and last, we're very pleased the government is taking an interest in IP. That's a great thing. IPIC is doing backflips over that. We're very happy to see the government working on this. There's more to be done. We've made proposals about the protection of confidential communications between agents and their clients. There's a law of double patenting, and we look forward to working with you on these things in the future, if the opportunity arises.

I'll turn the floor over to Steve, and thank you.

[The Chair, Conservative, David Sweet]

Mr. Perry, very briefly, please, because the time's just about expired....

[Stephen Perry, Chair, Industrial Design Committee, Intellectual Property Institute of Canada]

Yes, Mr. Chair.

Good morning.

Thank you very much. I'm Steve Perry, the chair of the design committee for the institute.

As David mentioned, a number of the issues we wished to raise have been presented quite ably by our friends at Bereskin and Parr. Mindful of the valuable time of the committee members, I won't dwell on them.

Suffice it to say, as Scott mentioned, the devil is in the details. Some very important provisions are being moved from the act into the regulations, and it's uncertain how those may end up getting implemented; it's important that there be as much consultation at that phase as possible. Abandonment and reinstatement is one. The issue of possible self-collision, where a designer files a design application for the overall shape of a device and then perhaps a day later, when the new drawings are prepared, files a second application for the keyboard. Under the proposed legislation it is possible that the first application will destroy the novelty of the second application. Similar provision in the Patent Act applies to different applicants, so it's a race to the patent office.

As I said, I will leave it at that. Further details can be found in our submission. We welcome your questions.

Thank you once again for inviting David and me to speak about intellectual property.

[The Chair, Conservative, David Sweet]

Merci.

Now on to Mr. Rowlinson.

[Mark Rowlinson, Executive Assistant to the National Director, United Steelworkers]

Thank you very much, Mr. Chair.

My name is Mark Rowlinson. I'm the executive assistant to the Canadian director of the United Steelworkers Union. I'm here to comment on the amendments to the Investment Canada Act found in part 4, division 9 of Bill C-43. The United Steelworkers represents more than 200,000 workers across Canada, including many thousands of employees employed by the former Inco, the former Alcan, and the former steel company of Canada, Stelco.

Under the Investment Canada Act, successive federal governments have allowed foreign investors to take over these iconic Canadian companies and then attack the livelihoods of Canadian employees. Based on these and other experiences, our union has long believed that the Investment Canada Act and its enforcement mechanisms must be strengthened to ensure that foreign investments in Canada are truly beneficial for our members and for all Canadians. Our recent experiences with these corporations add even more urgency to the need to strengthen the Investment Canada Act.

I'll just give you one quick example and that's the example of Stelco and U.S. Steel.

After receiving approval to take over Stelco in 2007, U.S. Steel shut down Canada's largest steel blast furnace in Hamilton in 2010. The company also sought to eliminate its defined benefit pension plan by locking out workers in Hamilton in 2010 and 2011 as well as in Nanticoke, Ontario, in 2009 and again in 2013. The Government of Canada filed a lawsuit against U.S. Steel for breaking its Investment Canada Act commitments but then settled that lawsuit in December of 2011 based on the company promising additional investment in its Canadian facilities. U.S. Steel has since announced the end of steel and coke production in Hamilton. Moreover, on September 16, 2014, just two months ago, U.S. Steel placed its Canadian subsidiary into CCAA protection. It is clear that the company will never live up to its Investment Canada Act commitments and there are now considerable fears in the community of Hamilton that U.S. Steel is going to try to walk away from a pension liability that now exceeds $800 million, leaving thousands and thousands of Canadian workers with substantial cuts to their pension benefits.

Finally, a few days ago 13,000 workers in the telecommunications sector joined our union, employees mostly of Telus and Shaw cable systems. I can tell you that these workers are also very concerned that if foreign companies like Verizon attempt to push their way into the Canadian telecom market, the Investment Canada Act will not provide adequate protections to ensure that such investments provide a net benefit to Canadian workers.

We believe that the Investment Canada Act amendments in Bill C-43 are insufficient to prevent the pattern that we see at Stelco. Bill C-43 would require notification when a foreign investor acquires a Canadian enterprise because that enterprise has defaulted on foreign financing. Requiring such notifications is certainly an improvement over the current state of affairs in which the government does not even know how many Canadian enterprises fall under foreign control in this manner. However, such acquisitions will continue to be exempt from a full review.

The other notable Investment Canada Act amendment in C-43 is to allow the minister to disclose why a proposed takeover was accepted or rejected following a national security review. Again, this provides the same limited transparency for national security reviews as currently exist for net benefit reviews. The minister is allowed, but not required, to provide information to the public. While we accept that the minister may need some discretion for national security reviews, net benefit reviews should, in our submission, be more transparent. The great obstacle to enforcing Investment Canada Act commitments is that they are kept secret. We still do not know precisely what Vale, Rio Tinto, or U.S. Steel promised to the Government of Canada to gain approval for their takeovers. Simply disclosing decisions is insufficient if net benefit reviews continue to be conducted behind closed doors. Surely the best way to determine whether a foreign acquisition will be of net benefit to Canada is to hear from the Canadian employees, suppliers, and communities that will be affected. The review process should be open to the public with opportunities for workers, their organizations, and other stakeholders to comment on proposed takeovers.

In summary, Bill C-43 sheds a small amount of light on two aspects of the Investment Canada Act that are now completely in the dark: foreign acquisitions through the realization of security for loans and national security reviews. But Bill C-43 fails to address the glaring lack of transparency and other significant flaws in the net benefit review process. The United Steelworkers believes that the government can and must do more to make the Investment Canada Act work for Canadian workers.

Thank you and I look forward to your questions.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Rowlinson.

We'll be going at four minutes right across the board for each member in order for everybody to get an opportunity.

We'll begin with Mr. Lake.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

I'm going to start with Mr. Wakil. I'll throw the ball to you if you want to comment on Mr. Rowlinson's views on the net benefit test and disclosure of the net benefit test. I'm just curious about the CBA's opinion on that amount of information and the way that it would be released.

[Omar Wakil]

Sure, I'm happy to. I should begin by saying that Mr. Rowlinson's comments go beyond the scope of the issues that we considered as part of our committee when looking at the proposed amendments to the Investment Canada Act in Bill C-43. I would observe, however, that there is a need to balance the protection of confidential commercial information with the need for transparency and openness. That's often a difficult balance to strike. We are generally supportive of a move toward increased transparency in the Investment Canada Act, both in the context of net benefit reviews and in the context of national security reviews, as I said in my remarks. What we would be particularly interested in seeing is more disclosure about national security reviews, not necessarily the outcomes of particular reviews, which is what the proposed amendments are focused on, but information of a general nature about all reviews that are happening under the act. At the moment, it's very difficult for us to advise foreign investors or Canadian businesses. It's just as relevant to Canadian businesses as it is to foreign investors seeking to enter into Canada to assess risk, to determine whether or not a transaction is going to be reviewed at all, to determine whether or not there are going to be conditions, and to determine the timeframe of a review.

I've certainly seen in my practice situations where Canadian businesses are skeptical about accepting an offer from a foreign investor, or a foreign investor is skeptical about proceeding with a transaction because of uncertainty in the process, and transparency helps increase certainty.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I'm struck that most of the testimony today is just about moving forward; not even so much about what we see before us, but about what comes next, both in this regard and from the other witnesses on the patent law.

I guess I could go to any of the other witnesses in terms of talking about the patent law and talking about the regulations moving forward. Maybe I'll get anyone who wants to weigh in to talk about the consultation process: what you want to see in that; what you think the most important information is that government needs to know as we move forward in the future. It was brought up by just about everybody.

[David Schwartz]

Thank you. I'll tackle that.

I think you have a good process for consulting on this. There's a prescribed procedure for doing it. We would just welcome the opportunity to get in early, work with the department, look at the regulations, and have a reasonable time to respond. There were some consultations some time ago on what this will look like; we're very pleased to have had them. It is really, in my mind, just a practical question of having some cooperation and being offered sufficient time to be involved. The areas that we've already mentioned are really the key points in terms of how this is implemented. I appreciate we've come here talking about the future, but it's really setting the stage for what we were hoping to see in the regulations. So you've heard it, that the mechanics avoid these problems with intervening rights and the due care standard. That's our position.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Schwartz.

Mr. Côté, you have four minutes.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

I am really sorry for our witnesses, because they did not have sufficient time to examine the amendments to all the bills that we are studying. I would also like to point out to our witnesses that, at a previous meeting, one of the committee members tried to suggest that our current way of working amounted to splitting this monstrous omnibus bill in order to be able to examine the various parts separately. However, that is absolutely not the case.

Mr. Schwartz, my question is for you.

Since the omnibus bill itself has 40 clauses that amend the Industrial Design Act alone, do you think it should have been examined separately? That way, the government would have had to address the opposition's requests. Should the bill be split to conduct a separate review and address the concerns that you have expressed this morning?

[David Schwartz]

Thank you, Mr. Côté.

I do apologize that I can't respond to you in French; I'm embarrassed that I can't do that.

In this instance, we are implementing the Patent Law Treaty and the Hague treaty, two international treaties. Ideally, everything would get its own day in the sun and be debated extensively, but I appreciate that the government is very busy. There is a lot that has to be accomplished. We are not happy to not have the opportunity for a separate debate, but I do appreciate the need to advance matters, and these are two international treaties that are welcome additions to our law.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you very much, Mr. Schwartz.

You have no reason at all to apologize for not answering in French. Three years ago, I would not have been able to ask you a single question in English. Thank you for your thoughtfulness.

You talked about the uncertainty facing people in the industry who, because of the amendments, must wait until the regulations come into force . That is a very important factor, which can actually have a significant impact on the development of projects. It also has to do with the potential financial impacts.

Would you have instead preferred to see the government retain less regulatory power to make the legislation more specific or to at least ensure that the legislation more directly deals with industrial designs and patents?

[David Schwartz]

It is difficult that so much is left to the regulations, but I expect that's the case with many statutes. I do have a great deal of confidence in the people we work with at the patent office and Industry Canada to set up a system where these kinds of uncertainties won't arise. It can go either way, but I have faith in that group executing that well.

However, we came here today because we do think it's important for the proper measures to be in place. We don't want to get into the situation with the intervening rights and due care. As I put in our written submissions, it's like the old adage that you want a fence at the top of the cliff, not an ambulance waiting at the bottom. That's what we are looking for.

I think it's going to work out.

[The Chair, Conservative, David Sweet]

We'll finish with that statement.

Ms. Bateman, you have four minutes.

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

Thank you very much, Mr. Chair, and thank you to all of our witnesses. It's very interesting, and it's lovely to see the congruence of all of us working together to make things less cumbersome and more effective for the end user. We are reducing red tape. We are making sure that our businesses are going to be competitive, and a lot of the focus of these changes is really making sure that our businesses can compete internationally and have the same playing field as others. It is a global world, and we want them to be competitive.

I just want to boil this down. I know that all the changes and outcomes will be subject to Federal Court review and that's how things will be fine-tuned, but right now I have a question for Mr. Schwartz. I represent Winnipeg South Centre, so when I boil this down for the business people in my riding, how does this reduce their red tape? How does this perhaps reduce their cost, and how does it increase their effectiveness in the world?

[David Schwartz]

The intellectual property protection system does not by itself create the economy and jobs. It's a tool that helps innovators protect the investment that they've made. It doesn't drive it but assists in it. What you're getting today is a series of—

[Joyce Bateman, Conservative, Winnipeg South Centre, MB]

How does this help? I totally agree with you; this is a tool in the tool kit, but how do these changes help?