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Evidence of meeting #30 for Industry, Science and Technology in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was vote.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Sylvain Laporte  Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry
Gerard Peets  Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry
Konstantinos Georgaras  Director, Policy, International and Research Office, Canadian Intellectual Property Office, Department of Industry
Agnès Lajoie  Assistant Commissioner of Patents, Canadian Intellectual Property Office, Department of Industry
Denis Martel  Director, Patent Policy Directorate, Strategic Policy Sector , Department of Industry

8:50 a.m.

Conservative

The Chair Conservative David Sweet

Good morning, ladies and gentlemen.

Good morning everyone.

Welcome to the 30th meeting of the Standing Committee on Industry, Science and Technology.

We have witnesses before us. We also have two items of business, and it looks like we have agreement that we'll leave the estimates and the moving of a possible motion to the end of our meeting. Our meeting will end at 10:15, at which time we'll deal with the estimates and a possible motion from a member.

Now I'll introduce the witnesses who are before us. From the Canadian Intellectual Property Office, we have Sylvain Laporte, commissioner of patents, registrar of trade-marks, and chief executive officer; Agnès Lajoie, assistant commissioner of patents; and Konstantinos Georgaras, director of policy, international and research office. From Industry Canada, we have Gerard Peets, senior director, strategy and planning directorate, strategic policy sector; and Denis Martel, director of patent policy directorate, strategic policy sector.

Is there just one person with opening remarks, or do we have more than one person with opening remarks this morning?

8:50 a.m.

Sylvain Laporte Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

I'll be doing the opening remarks.

8:50 a.m.

Conservative

The Chair Conservative David Sweet

Okay, then, Mr. Laporte, please go ahead.

8:50 a.m.

Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

Sylvain Laporte

Actually, we have two presentations that we'd like to run you through.

8:50 a.m.

Conservative

The Chair Conservative David Sweet

How long do you think you need, Mr. Laporte?

8:50 a.m.

Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

Sylvain Laporte

We were given 10 minutes each.

8:50 a.m.

Conservative

The Chair Conservative David Sweet

Okay, please go ahead.

8:50 a.m.

Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

Sylvain Laporte

Is that still appropriate?

8:50 a.m.

Conservative

The Chair Conservative David Sweet

Absolutely.

8:50 a.m.

Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

Sylvain Laporte

Good morning, Mr. Chairman, ladies and gentlemen.

Thank you for the opportunity to speak to you this morning about intellectual property. We have two presentations.

Intellectual property is managed in the government through two organizations. The industry department, which is represented by Mr. Peets and Mr. Martel, do the policy development. The three of us who come from CIPO do the administration of intellectual property. CIPO's a special operating agency of the department, so we still work together.

The presentations this morning are split in two, because there is a logic to it. What I'd like to do is start with Mr. Peets' presentation, because there's a logical flow from policy to administration. So if you are okay with that, we'll give the microphone to Mr. Peets.

8:50 a.m.

Gerard Peets Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry

Thank you very much. It's a pleasure to be here today.

We spend our days where I work thinking about IP, thinking about how it affects the marketplace, and thinking about how it can be improved, so we really welcome the work of the committee in this area.

I'd like to start by just talking about the IP framework, what it is, and why it's important.

IP is a marketplace framework that aims to spur innovation and creativity, and this is done largely by granting exclusive economic rights. It's also about supporting the dissemination of knowledge. For example, inventors who file patents not only receive rights over their invention, but also consent to their publication. It also recognizes that follow-on innovation is beneficial and useful. The IP regime sets out the terms under which a person can make use of a rights holder's creation or invention.

I think a theme that often comes up in IP is that of balance. IP grants exclusive rights as an incentive to innovate and to create, but these rights are limited to provide for access in the dissemination of knowledge.

The first area of IP that I'll touch on is that of patents. A patent gives its owner a time-limited, exclusive right to prevent others from making, using, selling, or importing the patented invention without permission. Patents essentially provide a market space in which an inventor can recoup their costs without worrying about a competitor copying it. Patents can be licensed to generate revenue. They can be sold and they can be assigned. They're particularly valuable in businesses that have high upfront costs, long product lives, and low imitation costs.

Turning the page to copyright, which is the second element, like patents, copyright exists to provide an incentive to create. It's foundational for a number of important sectors, including publishing, film, music recording, photography, and software, to name a few.

Turning to trademarks, a registered trademark gives its owner an exclusive right to prevent others from using an identical or confusing mark. In contrast to copyright and patents, which are there to provide an incentive to create, trademarks let firms distinguish and identify themselves. In this way, trademarks are essential to ensuring that products are what they say they are, which is a vital ingredient to inform consumer choice. By supporting branding, trademarks are a means of capturing value of an intangible asset for firms as well.

Lastly, to touch on industrial designs, a registered industrial design grants a right on a shape or style of a product, preventing imitation by competition. Like patents, registered industrial designs can be used to ensure that the benefits from upfront investments of time, creativity, and money are realized by the person who made them.

I will now turn to a bit of the policy discussion surrounding IP. I'd like to focus on three factors that I think drive how we think about IP. The first is the simple fact that IP matters now more than ever before. The Conference Board of Canada in a recent study reported that for S&P 500 firms in 1975, intangible assets—a large part of which are IP—accounted for 20% of asset value. In 2008, that figure is 70%. Also, we're seeing the value of patents as evidenced by recent major transactions. The $4.5 billion sale of Nortel patents to a consortium involving Apple, Microsoft, and Research in Motion is one example, as is the sale of Motorola to Google for $12 billion. So IP matters more now than ever before.

The second factor is that IP policy is by definition a global discussion. While IP rights are provided for under domestic laws, trading nations have been working towards broad consensus in a number of areas. Norms and standards have developed. They've been enshrined in the World Trade Organization under the TRIPS agreement, and the World Intellectual Property Organization has been formed, which is a consensus-building body under the UN, and Canada is a part of that.

The final point, which is fairly self-evident, is that IP is a very complex area of policy.

First, it exists as one policy that supports innovation amongst a suite of other policies. For example, competition is also very important to ensuring an innovative and productive economy. There are many stakeholders in each of the areas of IP, with many views, which often conflict. The administration of IP is also key towards realizing its benefits.

I'll now give you a bit of a sense of some of the topline messages we're hearing from stakeholders. As part of our work, we do maintain relationships with stakeholders such as businesses, academia, and advocacy groups to understand their views and where they're coming from. We also undertake research aimed at gathering evidence to support eventual policy-making.

What we have heard from many is that copyright modernization is long overdue. There's a hope among many that it will soon be a fact.

We've also heard from Canadian business that their next major priority is buttressing IP enforcement, including at the border.

Beyond that, we're seeing an emerging policy debate crystallize around some key questions. I've phrased these as questions because these really are issues that we are coming to grips with ourselves. We don't have answers. But I offer these up as potential issues that you might want to consider as you hear from witnesses and consider this matter.

Are patents being effectively commercialized in Canada? What are the implications of new, strategic uses of patents, such as things like defensive patent portfolios, patent thickets, and non-practising entities?

For exporters, are the patent regimes in our target markets sometimes as important or more important than our own patent regime?

Are Canadian SMEs well served by the patent regime?

Finally, are there issues that we need to consider in changing how we administer IP or enforce it in the courts?

I'll wrap things up by touching on Industry Canada's role. My group is in the strategic policy sector. Our core function is providing policy advice to the Minister of Industry on things like legislative and regulatory modernization.

I have responsibilities as acting director general in a variety of areas of policy, including insolvency, investment, and all the areas of IP. As part of our work, we engage in international forums, such as the WIPO, working with our colleagues, and we support international negotiations. Our recent priority has very much been copyright, with successive bills and a major consultation that have occupied a lot of our time.

Other colleagues in the department include those in the science and innovation sector, which is the lead for coordinating federal science and technology policy. On issues such as technology transfer, commercialization, and the use of government IP—the IP that the government owns—science and innovation are the lead.

Finally, you'll be hearing from my colleague Sylvain, who is the head of the Canadian intellectual property organization, which is the body that administers IP in Canada.

To sum up, thanks again for inviting me. This is an important issue for the Canadian economy. We're very excited that the committee is turning to it. We look forward to monitoring the process as it goes on and certainly to helping in any way we can.

9 a.m.

Conservative

The Chair Conservative David Sweet

Thank you very much, Mr. Peets.

On page 8, where you asked what are the implications of new strategic uses of patents, you used the term “patent thickets”. Just to be sure that everybody is aware of that term, could you quickly give us a definition?

9 a.m.

Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry

Gerard Peets

Sure. Sylvain can perhaps...?

9 a.m.

A voice

You're taking my first question—

9 a.m.

Voices

Oh, oh!

9 a.m.

Conservative

The Chair Conservative David Sweet

I apologize. I just thought it would be good to clarify it if there are going to be other....

9 a.m.

Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry

Gerard Peets

This is the practice of a firm developing multiple patents—it could be in the hundreds—surrounding a core technology. The example that's typically given is the cellphone, which can be the subject of a myriad of patents that cover various aspects of the technology. Some firms will use these as a defensive means of protecting their invention.

9 a.m.

Conservative

The Chair Conservative David Sweet

Thank you very much, Mr. Peets.

Mr. Richardson.

9 a.m.

Conservative

Lee Richardson Conservative Calgary Centre, AB

Thank you, Mr. Chairman. I was going to ask the same question.

There were two other points you made at the same time that you mentioned thickets. You mentioned two other examples. While we're at it, could you explain those as well?

9 a.m.

Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry

Gerard Peets

Sorry, you're reminding me how we're in a little world here and we get used to certain things, one of which is non-practising entities. This is a reference to firms that obtain a patent pool—a bunch of patents—and their business is to monetize those through lawsuits, through litigation, through settlements, rather than actually inventing or marketing the things that are covered by the patents.

9 a.m.

Conservative

The Chair Conservative David Sweet

Thank you very much.

We now move to Mr. Laporte, please.

9 a.m.

Commissioner of Patents, Registrar of Trade-marks and Chief Executive Officer, Canadian Intellectual Property Office, Department of Industry

Sylvain Laporte

Thank you.

Now we'll talk about the administration of intellectual property. As I've mentioned before, we belong to the Canadian Intellectual Property Office, Canada's administrator for IP.

We have a very specific role, basically to examine applications for IP and to grant or register rights. Part of that role also has us manage the first appeals process. We do that for trademarks through our Trade-marks Opposition Board, and on the patent side, through the Patent Appeal Board.

Once we've exhausted those types of administrative activities, the only way to appeal some of our decisions is through the Federal Court.

Our mandate is very clear. We're there to deliver high-quality and timely IP products and services to our clients. We also have a mandate to improve awareness of IP with Canadian companies, and we have an international role to play with the World Intellectual Property Organization.

We've given you volumes for the year 2011-2012. It has been a slower year than usual because of the recession. We get, on average, about 100,000 applications for IP in a given year. It takes many years to go through the process, and what you see on the second line of the table on slide 2 is the number of grants that we will actually allocate in a given year.

If you look at the column for patents, you'll see that we've received about 37,000 applications. Those will not be processed for a number of years, but of the patents that we've processed—which we received a few years ago—we've actually granted 20,911.

What I'm also showing you here is the timeframe required to process an application from the day we receive it to the day a decision is made to either grant or not.

Something to note here is that on the patent side, we're showing 78 months. I just want to highlight the fact that in Canadian patent law, a user who files has up to five years to ask us to treat their application. About 25% to 30% of them wait for the fifth year before they ask us to do that. So this is not a record of our performance, because the users actually have quite a bit of leeway with respect to when they want to start the process. So this circumstance creates a situation of “patent pending” for the duration of the waiting period.

What I'd like to look at now is the global perspective of the IP situation. The three lines on the graph indicate that each type of the three main IP products has been experiencing quite a bit of growth over the last few years. All three of them are growing. The main reason for their growth is the BRIC countries, and in particular China, which has been pursuing a strategy of incremental filings for the last five or six years. In fact, China has seen a sevenfold increase in the number of their applications, so that has had quite a global impact on the IP community.

Now, for the Canadian picture, what I'm showing you in the graph at the top of the page are the Canadian applications. I've broken them down into the two types that we see. The dash lines represent Canadians applying for IP abroad, outside Canada. As you can see, they have experienced quite a bit of growth.

The line at the bottom shows the number of Canadians who apply in Canada. Clearly, we are in a situation where Canadian applicants are filing outside of Canada first.

The table at the bottom is not about applications now. It's about patents that have been approved, so patents that are in force. The first two lines represent the Canadian experience. The first line in the table, “Canadian patents in Canada”, shows the number of Canadians filing in Canada. As you can see, from 2005 to 2010 there has been substantial growth in that.

The number for Canadian patents abroad is substantially higher than the number of patents in Canada, and there's quite a bit of growth there too. In fact, Canadian patents in force have been growing at about 30% since 2005.

What's interesting here is that when we compare the number of Canadian patents in force to the number for the worldwide picture, you can see at the bottom of the table that Canada owns about 1% of patents globally.

We saw a slight decrease from 2006 to 2010. It's relative to global growth, but in essence, Canadian growth kind of meets global growth. We're within a few decimal points. We're losing a little bit of ground, but not too much. We're maintaining the global growth momentum here in Canada.

Because Canadians apply globally, it means that foreigners also apply globally.

I just want to highlight some of the peculiarities that we're seeing here in Canada with respect to the distribution of domestic IP and foreign IP. If I look at the patent filings, in terms of the 36,900 applications we receive in a year, 88% are from foreigners and only 12% are from Canadians. That makes us, in Canada, an office of second filing.

Offices of first filing, such as the United States, China, Korea, and the EU, will actually receive patents before we will, making them an office of first filing. That is usually explained by the interest companies have in filing in their biggest market first. Then they come to offices of second filing. Offices of second filing would include Canada, which is one of the largest in the second filing group, the U.K., Australia, and countries that are usually close to us, from that perspective.

To give you an idea of how many domestic patents the U.S. receives, where we are at 12%, the U.S. IP offices receive about 52% of their patent applications from Americans themselves.

Clearly IP is a global play, particularly with respect to its administration. From an administration perspective, it is essential for us to be well plugged in to other countries and that we spend a great deal of effort harmonizing our intellectual property activities so that it's a lot easier for Canadians to file abroad and a lot easier for foreigners to file in Canada. If that balance is not well achieved, it doesn't make Canadian companies very competitive and it makes it hard for foreigners to invest in Canada.

We have quite a number of activities with the World Intellectual Property Organization. We collaborate on quite a number of committees with them.

We also engage in bilateral agreements. One in particular that I'd like to bring to your attention is something called the patent prosecution highway. We basically give credit for the work done by another country. We have a bilateral agreement with the Americans, for example. If the application that comes to Canada is the same as one filed in the U.S., instead of taking 78 months to process, on average, it takes about six to 12 months. So we greatly accelerate the granting of the patent. That puts the company looking at this service in a very good position to commercialize its goods in Canada a lot sooner.

I'd just like to highlight some of the contributions CIPO makes to innovation and to helping SMEs, in particular, leverage the IP framework to their benefit.

In terms of what we do when we look at granting IP rights on a timely basis, we keep in mind that quite a number of our applicants actually are looking to commercialize their goods. So the sooner we can get to a decision, the better it is for them in terms of taking their goods to market.

Second, the principal thing we do when we examine a patent application, for example, is look at the scope. Typically we get applications that ask for a big scope, because if we grant it, they'll have a monopoly on a whole lot more play.

What we do, through a number of intricate cycles, is bring the scope down to the essence of the innovation, or the invention in the case of a patent. When we take that play from what we typically receive down to what we typically grant, we're looking at the quality of the patent. That's what we call the quality or the “scoping” of the patent. When we don't scope properly, what you will see is a situation where there's no clarity in the market. That will usually lead to litigation.

When companies take each other to court they're using that money, but not necessarily for the purposes of developing new products or for capital investment. We want to make sure that we scope the applications and grant the patents in the best way possible to make sure that we bring certainty to the market.

The third thing that I'd like to bring to your attention with respect to our contribution to innovation is basically what we call incremental innovation. When someone applies for an IP the value proposition is that we will exchange with you, Mr. Inventor, in the case of a patent, a 20-year monopoly in exchange for public disclosure. The public disclosure then is, in essence, to be used by other innovators and other inventors. If the first applicant with the first idea actually commercializes their idea and they create jobs and build a plant there's economic growth and that's good. From an incremental perspective, now if someone takes the idea, reshapes it, adds something to it, and they get another patent and they create jobs in a plant and something else, that's economic growth as well. So that incremental cycle is really at the essence of the value proposition that we look for.

In conclusion, clearly the administration of IP continually evolves. It is truly a global play. I want to leave you with the notion that at CIPO we are quite committed to making sure that we are always going to be in line with helping the innovators out there in Canada.

Thank you, Mr. Chairman.

9:10 a.m.

Conservative

The Chair Conservative David Sweet

Thank you very much, Mr. Laporte.

Everybody was well educated on the two presentations.

We'll go now to our first round of questioning with Mr. Braid, for seven minutes.

May 10th, 2012 / 9:10 a.m.

Conservative

Peter Braid Conservative Kitchener—Waterloo, ON

Thank you very much, Mr. Chair.

Thank you to all of our witnesses for being here.

Thank you to Mr. Peets and to Mr. Laporte for two excellent presentations. I think you've really helped to kick off our study very effectively. These presentations have underscored not only how interesting this subject area is but how important it is to the Canadian economy. This committee has a real opportunity to help shape the policy process with the objective of strengthening our IP regime in this country. Thank you for getting us started so well.

Actually, I had a hard time narrowing down the questions I want to ask.

Mr. Peets, I'll start with a few questions for you.

You talked about stakeholders within the IP landscape. At a high level, could you explain and describe who those stakeholders are?

9:10 a.m.

Senior Director, Strategy and Planning Directorate, Strategic Policy Sector , Department of Industry

Gerard Peets

Sure. To some extent, different parts of IP have different stakeholder groups, and then to some extent, they share them in common and span the groups. For example, the copyright debate is often framed in terms of the copyright rights-holder businesses, and those are some of the businesses that I mentioned earlier: the film industry, the publishing sector, the recording industry, photographers, etc. There are individual artists and individual creators, and they are often bundled as the rights-holder groups.

On the other side, in the copyright area, there's what we generally refer to as the user group—users and consumers. That represents individual people who buy copyright material, that represents institutional users such as the education sector, and that represents advocate groups for user and consumer rights. Then in copyright there's also a group that can be referred to as intermediaries. To the extent that copyright, in particular in a digital environment, has strong linkages with the use of the Internet, ISPs and things like search engines are important stakeholders in that group. There are also broadcasters and others.

In the area of patents, any business that involves invention and the use and marketing of invention has something to say about patents. We often say that the kinds of business sectors that depend most on patent are those with high upfront investments, long product times, and low costs of imitation. An example would be the pharmaceutical sector, but also the high-tech sector. Although the high-tech sector has some shorter product development times and shorter product lives, patents are nevertheless a big issue for them as well, and there's a different range of issues that presents itself there.

Turning to trademarks, there are businesses of all kinds. Every business needs to identify itself and needs a means of identifying its products, and businesses are concerned about the issue of counterfeiting and about the issue of enforcing the trademarks.

So that's a fairly widely felt priority in the business community, and that's the main thing on trademarks.