Industry Committee on Oct. 4th, 2012

[The Chair, Conservative, David Sweet]

You have about two minutes.

[Dan Harris, NDP, Scarborough Southwest, ON]

Oh, I have lots of time.

Ms. Garland, you also spoke about “terminal disclaimer”. I'd like to hear more on that, about being able to bring a patent out before all the work is done and how this could improve our IP regime.

[Gail Garland]

The point about a terminal disclaimer is that this is possible in the U.S. and not possible in Canada.

One of the Canadian inventors who belongs to my organization files his patents in the U.S. because he can make use of this terminal disclaimer opportunity. It allows him to continue to add embodiments to the patent.

It doesn't extend the term. It's an effective way of continuing to do the work on your patent as part of your filing and to advance the embodiments that are included in it as part of a single filing, whereas in Canada you have to have all of those embodiments thought through and completely documented as part of your application. That's just a more onerous process. It's easier to use the terminal disclaimer in the U.S..

[Dan Harris, NDP, Scarborough Southwest, ON]

I understand that. I'm asking because we have heard already from many witnesses at the committee that in many cases the United States, or in other cases Europe, is the point of primary filing because that's where the markets are.

We've mentioned that Canada is a very small part of the market, so I'm not sure how much adding this in Canada would result in more primary rather than secondary filings. Often what businesses are doing is filing in the U.S., where the large share of the market is going to be. They can make use of that provision, and then they make their secondary filing in Canada when the product is further along the development line.

I'm just not sure how one would actually help the other.

[Gail Garland]

If I could answer—

[Dan Harris, NDP, Scarborough Southwest, ON]

Unfortunately you can't, but it's not my fault.

[The Chair, Conservative, David Sweet]

I'll take the blame totally. We're well over time again.

We will go on to Mr. Braid for five minutes.

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

Professor Siebrasse, at the very end of your opening remarks you talked about patent trolls. I want to pursue that. You indicated, if I recollect correctly, that patent trolls are an issue in the U.S. that hasn't really affected Canada yet, and you hope that this continues to be the case.

Could you explain what patent trolls are? Also, what can we do or not do to ensure that it remains a non-issue in our jurisdiction?

[Prof. Norman Siebrasse]

I was hoping somebody would follow up on that.

It's rather difficult to define patent trolls. The broad definition of a troll is that it's a non-practising entity, that is, somebody who doesn't actually commercialize and implement the invention, but who instead has licensed it for excessive fees.

The reason it's difficult to define a troll is that trolling is an exaggerated form of behaviour that's common to many legitimate patentees, if I might put it that way.

What can we not do? I was reading the Canadian International Council report and listening to the testimony of Ms. Mazurkewich on Tuesday, and I must say that their chapter 4 sounds to me as if they want to set up a government-funded patent troll, which seems to be quite a bad idea. They say their fund wants, rather than to exclude terms, to see broader access, with large companies paying market rates—big fund managers—with a sliding scale.

Trolls don't want to exclude any firms. Real inventors, real innovators, do exclude other firms, because they're actually commercializing their innovation themselves. If trolls exclude somebody, that somebody is not paying them rent.

Sure they charge a sliding scale, because they charge what the market will bear. They say the fund could salvage IT when tech firms go bankrupt and provide equity to cash-strapped entrepreneurs who have licensing rights to trade. That's where trolls get their patents. They get them from bankrupt firms and then assert them against other practising entities. I don't want to take up the entire answer by going into these details.

Maybe there is something I am missing here, but from everything I read in the report and everything I heard on Tuesday, it sounds to me as though she is proposing setting up a government-funded patent troll. Are you going to troll Canadian companies? That's a bad idea. Are you going to troll U.S. companies? That sounds to me like a bad idea.

That's what we shouldn't do. What should we do to address trolls?

In the short term, much of the patent trolling comes from somebody out to shut down a company.

I'll try to give a quick explanation. Let's say you're going to retire and you are going to sell your tiny condo in Vancouver and take the $3 million you get for it and buy a beautiful dream property in a remote area. You find a property that looks great, but you need to access it across somebody else's property. You would negotiate the access right then to go through the back entrance of their lot with a $10,000 licence. Now instead of negotiating the licence, let's say you build your million-dollar dream home and then you go to the neighbour and say that you need access across his property. Well, you are not going to get it for $10,000. It may be $100,000. What are you going to pay? Your house is there.

That's what trolls do. They don't license at the outset. They license once the business is set up and then they pop out of the woodwork. The patentee has a hard time finding them, because they're not out there practising.

That's what happened to RIM. Somebody popped up. Sure, the idea was good, and there's no suggestion that RIM actually took the idea from NTP or the patentee that NTP acquired it from. This is an aspect of the patent system. Independent creation is not a defence. RIM comes up with this idea. They take the idea, which is valuable in itself, and they put a fortune into commercializing it. They grow a big company, and then somebody says that they need access.

There are reasons why sometimes this happens: you tried to commercialize and weren't able to, or maybe somebody stole your idea. The aspects of the patent system that allow you to do this aren't bad. They're good in the right context, but they can be abused, so patents are dangerous in this respect.

The most straightforward response that we've seen in the U.S., which I think is appropriate in Canada, is to say to the troll that it cannot get an injunction, that it cannot stop the person from running their business. RIM had $25 million in damages awarded against it. That's the value of the patent. They had settled for $623 million. That's the value of their business. To say that you can't shut down a business and that all you get is your $23 million in damages is a step in the right direction.

I think I am over time, so I'll stop there.

[The Chair, Conservative, David Sweet]

There were about 20 seconds left.

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

That was very good. Thank you.

[The Chair, Conservative, David Sweet]

We have a couple of minutes left. We normally don't have this luxury. I can ask the witnesses to make any closing remarks they may have from everything that's been asked, or if there was a question they couldn't respond to and they were dying to say something, now would be the time.

I will start with you, Mr. Keon, for 90 seconds.

[Jim Keon]

I think we made most of our points in our opening remarks or in answering questions.

I would like to ask the committee to focus on the suggestions we have for looking at the patented medicine notice of compliance regulations. They are unique to pharmaceuticals. They block a generic from getting approval at Health Canada until it litigates patents. It encourages, almost demands, litigation. The biggest problem right now is that it doesn't settle the issue and there's ongoing litigation.

We have made proposals to Industry Canada. We would urge the committee to look at that. I think it is generating excessive litigation and business uncertainty. It could be improved and still provide good protection.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Keon.

Madam Garland.

[Gail Garland]

I'll first of all respond to Mr. Harrison's question, which I wasn't able to respond to before.

The sole purpose for filing a U.S. provisional as a first step for an inventor is simply to establish a priority date. It's the formal application that is actually driven by market size.

The second point I would like to make is that we need the IP regime in Canada to allow Canadians to get the benefit of technologies developed here and to give them a reason to stay here and grow here.

Further, without a predictable patent regime, investments won't happen and investors will not invest in our Canadian companies.

[The Chair, Conservative, David Sweet]

Thank you, Madam Garland.

Mr. Dixon.

[George Dixon]

Thank you very kindly. I have no further comment other than to thank the committee for its time and attention.

[The Chair, Conservative, David Sweet]

Mr. Dixon, thank you very much, and by the way, I forgive you.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, David Sweet]

Mr. Siebrasse.

[Prof. Norman Siebrasse]

I'll follow up on Mr. Keon's remarks on the linkage system, the patented medicine notice of compliance system. It's not a perfect system from either the generic or the brand perspective, but I will agree that it's a strong system. I must say I'm a bit annoyed that we're on the U.S. watch list on the patent side because of that. This has been such an issue with the Europeans. Arguably, this aspect of our patent system is stronger than the corresponding aspect in the U.S. or Europe.

It's difficult because the details matter. It's difficult to say, but it is important that we look at the NOC system, the patent system as a whole, and decide whether we have a strong system or a weak system. Can we improve it in the details? For sure, but at the trade negotiation level it's not really fair for anyone to be saying they don't like this or that and therefore the whole system is wrong. We have to look at the system as a whole.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Siebrasse.

On behalf of the committee, thank you all very much. Your testimony has been very illuminating.

Yes, Madam LeBlanc?

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

Mr. Keon, you talked about recommendations made previously to the industry committee. Would it be possible for you to provide them to the committee?

[Jim Keon]

Yes, we would be pleased to do that. We'll follow up and send the recommendations.

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

Thank you very much.