Industry Committee on May 10th, 2012

[John Carmichael, Conservative, Don Valley West, ON]

At what point does the patent pending label actually kick in?

[Sylvain Laporte]

As soon as they apply.

[John Carmichael, Conservative, Don Valley West, ON]

That's at application, so if I do that right at the beginning of the five-year period, that patent pending lasts as long as it takes for you to finally declare that the scope meets your criteria.

[Sylvain Laporte]

That a decision is made. You could withdraw your patent at some point.

[John Carmichael, Conservative, Don Valley West, ON]

And that would protect me as a business or an intellectual property owner.

[Sylvain Laporte]

With patent pending, no.

I think all you're doing is indicating to the market that you have something playing in that area, and what it does, basically, is it gets your competitors to pay attention to it. They want to make sure that if I'm building something that is pretty much the same as you, but you're ahead in the process.... For example, I may end up having to pay you royalties when you eventually get your patent. As a competing business man, I should be aware of those situations because it may cost me tomorrow.

A patent pending is not a protection in itself.

[John Carmichael, Conservative, Don Valley West, ON]

Clearly, when you talked about the value increase—the value equation over the last few years from 20% of asset value to 70% of asset value—the sooner I can actually get my application before you and get your approvals done, the better off I am if I think I have something of true value.

[Sylvain Laporte]

From that perspective, yes.

[John Carmichael, Conservative, Don Valley West, ON]

Otherwise I'm not protected.

[Sylvain Laporte]

Correct.

There are other situations, for example in the health industries and the pharmaceutical area, where there's a synchronization that has to happen with the allocation of your patent and certification with the health agencies.

They may require more time to process a patent. It's not everyone and it's not every industry that is looking for the fastest grant possible.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Laporte and Mr. Carmichael.

Now to Mr. Harris for five minutes.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, Mr. Chair. Thank you, again, to everyone for being here.

Mr. Regan brought up Nortel, and I'm going to bring it up, perhaps, in the context of the Jenkins report, with the statement from the report that says:

...the preponderance of foreign (mostly US-based) investors in late-stage venture capital and buyouts of Canadian firms means that the intellectual property is likely to be exploited primarily outside Canada.

Frankly, I think for me this raises a concern that there might be a drain of our intellectual property, and in many cases intellectual property that was fostered with government assistance. That intellectual property is then going to be monetized outside of Canada, and the benefits are going to be reaped from non-Canadian firms in the U.S. and elsewhere.

Is that something about which there is a concern in your world, that Canada might be losing some of its intellectual property to elsewhere and losing out on the economic benefits?

[Gerard Peets]

Again, that's a very good question.

The patent is something that can be sold or assigned or licensed. That's provided for, and it's kind of intrinsic to the idea of taking an invention then marketing it.

With respect to the question of patent portfolios moving from Canada to the United States in the context of an investment takeover—an American company or somebody else buys a Canadian company—if that company qualifies for a net benefit review under the Investment Canada Act, then that process would be triggered.

[Dan Harris, NDP, Scarborough Southwest, ON]

Is any of that going to be triggered if only intellectual property is sold, as to whether there would be a net benefit review possibility?

[Gerard Peets]

Yes, the sale of just a patent portfolio without a controlling interest in a corporation wouldn't trigger the Investment Canada Act.

[Dan Harris, NDP, Scarborough Southwest, ON]

So that's potentially something we should be mindful of in looking at the Investment Canada Act down the road.

Because yes, when the Nortel portfolio was sold off, $4.5 billion is a lot of money. But a lot of experts and folks in the industry have estimated that the actual value and worth of that IP is much greater. I worry that we perhaps lost a little bit there.

I'm going to go back to the Jenkins report, but on a separate comment that was made in the report and it actually works out because it's a bit of a question. Are legal and regulatory frameworks and policies—for example, in areas such as competition, corporate taxation, bankruptcy, and most specifically, intellectual property—conducive or not to business innovation?

That's a question that's raised out of the report. So in your opinions, is it conducive to business innovation or not? Are there problems that you see there that need to be fixed?

[Gerard Peets]

One of the messages I tried to get across in the presentation is that there is a lot of convergence in the area of IP policy at the basic level. Between us and our trading partners, intellectual property frameworks, in terms of the basic building blocks—more or less the terms of a deal—are kind of common. Yes, their purpose is to create the conditions for innovation and we think they do, certainly.

You go back to the theory that if somebody is going to make an invention and have no assurance that they might be prevented from marketing it because a competitor comes up and copies it without having invested in the invention, then they're going to be careful before taking it to market. In copyright as well, you're confident to publish your work and spread the knowledge because you know you retain copyright in it—

[Dan Harris, NDP, Scarborough Southwest, ON]

I'm going to have to just cut you off, so I can get one last question in before my time elapses. Do you see areas where it's actually hindering business, where you see changes that need to be made?

[Gerard Peets]

There certainly is a tension when you talk about setting up a right to exclude others from a market—essentially, if you constrain the concept of market to the market for your one little invention. There is tension between that and the idea of competition.

So, to the extent that you have problems in a patent regime where maybe there are too many patents being granted, or maybe they're overly broad, or maybe they're being bundled in certain thickets, you can see a situation where they could create a transaction cost, they could create a friction in the market, create uncertainty that leads to litigation, or extensive negotiations between parties.

All of the energy and resources that are driven into that are energy and resources that are not driven into making new inventions, and marketing and selling them.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Peets.

Mr. Richardson, for five minutes.

[Lee Richardson, Conservative, Calgary Centre, AB]

This is a huge and broad area to cover.

I'd like to just go to the World Intellectual Property Organization for a minute and get a sense of that, because my sense is also that so many of the new technologies are international. They are so worldwide. There are no borders any longer in many businesses, as well as in IP. It's simply so broadly used and identified.

I don't have as great a problem with the parochial protectionist, isolationist folks. We can buy intellectual property from the United States or anywhere else as easily as they can from us, so I don't have that big concern.

What I am concerned about is how we Canadians fit into the World Intellectual Property Organization. Is it a quasi-governmental organization? How does that work? What implication does applying just for a patent or trademark in Canada have, without proceeding further to seek patents in other jurisdictions? Does the World Intellectual Property Organization have an umbrella protection?

[Gerard Peets]

I can perhaps start, and then perhaps my colleagues will want to join in.

Just to answer the last question first, a patent that's granted in Canada applies in Canada. These IP rights apply in the country that they're given in, and that's what's underlying the idea that you patent in the market that you want to sell in.

If it would be beneficial, I have my notes here on WIPO and some other international forums that I could just quickly walk you through.

The WIPO is a 185-member-state organization. It's there to promote the protection of IP and the harmonization of IP laws internationally. Canada has implemented the Patent Cooperation Treaty under that forum. Under Bill C-11, the Copyright Modernization Act, the rights and protections that are set out in two other treaties, which are referred to as the WIPO Internet treaties, would be implemented in our law. There are other treaties in the context of WIPO that are either finalized or being worked on.

There's also the WTO agreement on TRIPS, which is part of the WTO. It's a comprehensive, multilateral treaty that provides standards for the protection of IP rights that are binding, and procedures and remedies for enforcement, and they're subject to dispute settlement. That's been adopted by 154 countries, so it's very broad as well.

We've also taken on commitments in the NAFTA, which has an IP chapter. Recently Canada signed the Anti-Counterfeiting Trade Agreement, which is pluri-lateral, and it's been signed now by, I think, nine countries. It has standards for the enforcement of IP rights as opposed to the provision of IP rights in law.

[Lee Richardson, Conservative, Calgary Centre, AB]

That's very helpful.

One of the things I see from companies that we deal with is trying to have enforcement in other countries, even when you have patents, particularly with regard to—well, with Mike it was digital imaging technologies—computer technologies in China, and piracy and that sort of thing, and how to avoid that. Is there any progress there?

Do you have negotiations with governments of other countries to enforce patents, to protect, for example, Canadian companies with patents in foreign countries?

[Gerard Peets]

The enforcement of patents in foreign countries is important for exporters. We have some data, actually. I don't know if I can bring it up quickly. Yes, here it is.

The RCMP has reported over $76 million in retail seizures in Canada, in 2011, of counterfeit goods. The OECD estimates that global trade in counterfeit and pirated goods amounted to $250 billion in 2007. The International Chamber of Commerce estimated the cost of counterfeiting in G-20 countries at $62 billion, equating that with 2.5 million jobs lost.

One of the things that has recently happened is the ACTA. Some countries were involved in that. I can bring them up. China was not one of them, but definitely there were some key export markets: Australia, the European Union, Japan, Mexico, Morocco, New Zealand, Korea, Singapore, Switzerland, and the United States. Those are all countries that got together to try to develop the ACTA, which is the international gold standard of IP enforcement currently.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Peets. Sorry about the time again.

Now it's on to Mr. Stewart for five minutes.