Evidence of meeting #35 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 patent.
A recording is available from Parliament.
Conservative
Peter Braid Conservative Kitchener—Waterloo, ON
I have three other witnesses to question. You'll have your opportunity.
Mr. Gold, you gave a great comparison of the Canadian and U.S. jurisdictions. You suggested that in many respects the regime here in Canada is better, that we're further ahead. Are there any aspects of the American system that are good and that we should consider?
Professor, Faculty of Law, McGill University, As an Individual
There are many aspects of the U.S. system. It's a very complex system.
For example, concerning the rules around university funding through the Bayh-Dole Act, the part everybody concentrates on is the aspect whereby the universities have a commercialization mandate. The part we never talk about is that also, the government has what are called march-in rights, which they contemplated using in the case of the drug shortage that was facing the United States.
Some of the rules, as I said.... If you look at their non-obviousness rules in the United States, ours are easier to comply with, but probably less fair to the second-generation innovator. You not only have to worry about the patent holder but also the people building on it. They developed a concept called “obvious to try”, which was imported into Canadian law but didn't quite work.
There is a whole bunch of minutiae I can walk you through, which I presume you don't want to do today. They have patent term extension, which is very important to their pharmaceutical industry. We don't do much research, especially in my city of Montreal. Merck and AstraZeneca are pulling out of research, so the necessity for that in Canada is not as clear.
Overall, they're centralized. The Court of Appeals for the Federal Circuit is a very good innovation, but again, we just don't have enough patent cases in Canada to justify a separate court.
Many of the things are good but are suited to the United States. I don't think we have a whole lot, otherwise, to take on.
Conservative
Peter Braid Conservative Kitchener—Waterloo, ON
Great.
Can you point to one or two examples of the U.S. framework that we definitely don't want to adopt, for which we just don't want to go there?
Professor, Faculty of Law, McGill University, As an Individual
The jury trial is clearly one. I think it's bad for everyone. You could even see the courts pulling back.
I like the U.S. system. It's really well suited to the United States. But you have to remember that they do both the innovation in the United States, the research, and the selling in the United States. As Mr. Page mentioned, our markets are in the U.S., so the incentive is provided by U.S. patent law. The cost to the next generation of innovator is Canadian patent law.
You have to think about the Canadian patent system quite differently from that of the United States, because we're in the unique position whereby the incentive is not under our control; it's under someone else's control. Only the costs are in ours.
Conservative
Peter Braid Conservative Kitchener—Waterloo, ON
Thank you.
Mr. Tortorice, I want to ask whether you would contribute to a debate we've been having as part of this study so far. Some have suggested that software is the one aspect of technology that shouldn't be patented, that it actually stifles innovation, that it should be freer in terms of its development. Could you comment on that?
Corporate Counsel, Microsoft Canada Inc.
Well, I'm not an expert in software patent matters, but I can say that there are many good examples of software patents being used well in industry. There's a lot of cross-licensing between different groups of companies; there are lots of instances when different companies use both proprietary patented software items and open-source items in their development.
I think it's working well. I think software patents should be granted. Doing so helps to set up signposts for the industry as to where people can and can't go. I certainly think that's—
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Tortorice and Mr. Braid.
We now go to Madame LeBlanc.
You have seven minutes.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
Thank you very much, Mr. Chair.
I want to thank you all for coming this morning. I believe this will be a very interesting conversation.
Mr. Gold, you cite a number of examples of open collaboration on intellectual property management in your written presentation, which I read. You mentioned the Consortium for Research and Innovation in Aerospace in Quebec, CRIAQ. Since our study concerns intellectual property that would encourage innovation, could you tell us more about that kind of model?
Professor, Faculty of Law, McGill University, As an Individual
Yes, if you allow me to answer in English.
Professor, Faculty of Law, McGill University, As an Individual
In the brief I talked about two examples, CRIAQ and the Structural Genomics Consortium. I was also the lead author on an OECD study looking at intellectual property and collaborative mechanisms in life sciences and intellectual property. I would be happy to send the link or the document to the committee if so desired.
They held a series of workshops and looked at a whole bunch of examples from around the world. So they are all structured differently. The one thing we know is there is not going to be one structure, one type of collaboration that's going to work in all industries.
What you have to think about is what are you building, and to what extent do people need things to be proprietary and when do they leave it open?
Getting patent protection or any intellectual property protection incurs some expense. Most patents that people obtain never go anywhere and are just an expense. So asking people to patent for the sake of patenting is just costing people more. It's strategically figuring out what to patent. So in a consortium you have to ask what are the key intellectual assets that we need to protect and what in fact are we better off sharing?
In fact the pharmaceutical industry and the aerospace industry have been at the forefront of this in saying there's a whole area of pre-competitive innovation where we're all better off if we fund it and share it, so let's not get into the expense of getting intellectual property protection; we will compete further downstream. So the Structural Genomics Consortium I talked about is basically a patent-free zone. You have Glaxo and Novartis. All the big companies are there. They put up one quarter of the funding, and nothing is patented.
In CRIAQ, the situation is a little bit different. Within the consortium, which is quite large, made up of universities and industry, anybody is able to use the technology for free. So it's helping that local economy, because no matter who innovates, everybody gets access to it. But to the extent that it has an application outside of aerospace, we get a patent and we allow whoever developed it to license it and make revenue that way.
So you can have these tiers of structures in which some of the information is completely free to everyone, and others where it is free within the consortium—it is called the “club good” and everybody is able to use it without having to go to the expense of negotiating licences and so on—and a third set where you have technology that can be licensed for revenue and bring some economic return.
Each consortium will have a mixture of these three things. There is no one right answer for any one consortium.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
This is really interesting. This is not a model that would suit everyone, but which of the models you mentioned would generate more innovation? Is it the one that would entail stricter, clearly defined rules concerning intellectual property, or the one that would be a little more open and based on collaboration?
Professor, Faculty of Law, McGill University, As an Individual
The world is moving towards collaboration. The industrial models about 30 years ago had high intellectual property rights. A single firm would take a product basically from invention all the way to the market.
There was a study done about five or six years ago. They looked at the top 100 innovations, and they said that of those, two-thirds were from collaborations. So the world has changed, because the early stuff that was easy to get could be subject to a property right and commercialized by a single firm. That's no longer true. People have to work together. As soon as you have that, you have transaction costs. So we're moving to more openness, especially greater pre-competitive space, in the pharmaceutical industry, for example, where it's completely free.
It's not a system of one or the other; it's a system of both but with a greater mixture of openness, basically not wasting money on getting patents that you are never going to enforce or that you'll have to spend a lot of time licensing.
I'll give one brief example. In the U.K. they have something called the Lambert agreement, under which any university funding contract with a pharmaceutical company used to have to be negotiated. Now they have a standard form agreement, and it is just signed. It takes twice as long to negotiate an agreement in the United States as it does in the U.K. So there is more openness, making it more broadly available.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
Do you believe our current intellectual property regime is flexible enough to permit that type of collaboration in particular?
Professor, Faculty of Law, McGill University, As an Individual
Well, in some ways our patent system is too strict. If you look at the U.S. Supreme Court, for example, or if you look at the U.K. courts, they're actually softening some of the rules around non-obviousness, about patentable subject matter. We're moving or have moved in the opposite direction. So we need greater flexibility on that side. I think it should be done by the courts or by the Canadian Intellectual Property Office.
But in terms of legislative change to increase it, there's no evidence that I have seen to indicate that giving greater rights or longer rights would increase innovation. In fact, it will just increase the transaction costs that get in the way of collaborations.
NDP
Hélène LeBlanc NDP LaSalle—Émard, QC
What is your view on the free trade agreements currently being negotiated, mainly by Europe, on intellectual property and patents?
Professor, Faculty of Law, McGill University, As an Individual
I don't know what's in the clauses. I've just seen what's being negotiated. I'm assuming the government will be resisting some. Some are put up just to trade away with.
Certainly, we're under pressure from both the United States and Europe to increase patent rights, especially in the pharmaceutical sector. There's no evidence that this will benefit Canadian innovation. It will likely cost us.
The question then becomes whether there are trade-offs that more than compensate for that loss. If we have patent term extension, it means we'll be paying higher prices for longer, so it will cost more to the Canadian system. Is that justified; can we offset it by other things? I don't know.
But in terms of intellectual property itself, are you asking me whether there is a Canadian justification? The answer is no.
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Gold, and thank you, Madame LeBlanc. We're over the time now.
Now we go on to Madam Gallant for seven minutes.
Conservative
Cheryl Gallant Conservative Renfrew—Nipissing—Pembroke, ON
Thank you, Mr. Chairman.
I have questions for each of the witnesses today, starting with the representative from Microsoft.
With respect to piracy and anti-piracy, ultimately cyber-security is the responsibility of the stakeholder. With respect to government, are there any measures that are in our purview which we are not taking and which we could be taking to better defend our intellectual property, from the cyber-security standpoint?
Corporate Counsel, Microsoft Canada Inc.
I have to think about that for a second.
Conservative
Cheryl Gallant Conservative Renfrew—Nipissing—Pembroke, ON
Okay. I'll come back to you, then.
Mr. Page, you mentioned that the legislation we just passed may impede and prevent the forensics from occurring. How do you suggest this be mitigated? Are you looking for exclusions, or...?
Chief Executive Officer, UBM TechInsights
There are a number of ways to do it. We've looked at the legislation around the world. New Zealand's legislation, for example, has the concept of an authorized circumventor, which essentially defines a situation in which circumvention is allowed.
Within our own act there is an investigative exemption, and we think that if the investigative exemption were modified to include investigating breaches of all laws and international IP treaties as well, that could also be a focus of it.
In our mind, it's really more the intent of breaching the TPMs than the act itself. Obviously, breaching a TPM for the purpose of infringing the copyright should be a breach of the law and be heavily prosecuted. But we believe that under the fair dealings provision, you should be allowed to circumvent any provision in order to investigate breaches of personal rights.
So it's a questsion of the circumstances under which you would actually investigate.
Conservative
Cheryl Gallant Conservative Renfrew—Nipissing—Pembroke, ON
Thank you.
Mr. Gold, you mentioned and we had testimony before that there is a sort of blockage in the court system when different patent or IP challenges occur. We've heard that there's a shortage of lawyers. You mentioned yourself, as we've heard before, that there is a shortage of judges who understand patent law. Yet you suggested that maybe we should be contemplating trials by jury.
Professor, Faculty of Law, McGill University, As an Individual
No, I said the opposite—no trials by jury.
Conservative
Cheryl Gallant Conservative Renfrew—Nipissing—Pembroke, ON
So we're not looking for juries. Good. My concern was that we would never find the jurist who would be sufficiently educated. Thank you for clarifying that.
For Hockey Canada, you had mentioned it was your belief that 20% of the total number of jerseys during the 2010 Olympics were authentic. I'm trying to find out how you arrived at that number. Was it an extrapolation of what was seized at the border with the 16,000? How did you come up with...?