A recent Court ruling will boost innovation by encouraging start-ups to develop their intellectual property and leverage it for their own global growth.
As Canadians celebrate 150 years of our history, policy-makers have set their sights on the needs of the next 150, including how to shape the infrastructure of Canada’s future economy. A consensus is emerging that the winning recipe for Canada is a knowledge economy driven by world-class innovation, attracting global investment for its excellence and focusing on sectors where Canada already excels. To do this, we need specific innovation-boosting public policy reforms, and the federal government has set out to provide them. Perhaps no area offers a better view of the possibilities than our intellectual property (IP) framework.
A recent Supreme Court of Canada decision handed Canadian inventors and innovators a win by striking down an errant interpretation of Canadian patent law that certain corporate legal teams had been exploiting to strip patent rights from innovators. The government uses three tests to decide whether a patent should be granted to an inventor in Canada: the item must be novel — it must be the first of its kind; it must be inventive — a non-obvious new development; and it must be useful. The test of utility is meant to be a low bar for prospective patentees to get over, simply ensuring that the patent has a useful function.
The Court found that a loophole known as the “promise doctrine” is not the correct method of determining whether a patent is useful, or capable of a practical purpose. Under the promise doctrine, unique to Canada, patents that had been commercialized for a specific purpose were being stripped from their owners and handed to competitors to exploit for purposes that had not been “promised” in the application. Medicines that had been prescribed and sold for years, for example, were made available for generic manufacturers to produce. “To deprive such an invention of patent protection if even one ‘promised’ use is not soundly predicted or demonstrated is punitive and has no basis under the [Patent Act],” said the ruling.
The decision is important because it settles years of legal debate about the language within the Patent Act, which was, after all, approved by Parliament. It returns Canadian patent law to the original intent of patent policy, which requires a “mere scintilla” of utility, as the Court noted. Globally, the decision brings Canada back in line with the international norm.
Some critics of the existing Canadian IP system have come up with a number of wild opinions on the ruling, going so far as to insinuate that the Supreme Court of Canada has been influenced by nefarious US private sector lobbying efforts, and to link the impact of these efforts directly to the Trump administration. On the contrary, the ruling reinforces the independence of the Court. The justices do not work in the Prime Minister’s Office, setting policy and testing public opinion as they formulate their decisions. The Court is impartial and is not influenced by the opinions of the US President and his cabinet, and to suggest otherwise is the stuff of conspiracy theory.
If anything, this ruling has deprived the Americans of a bargaining chip at the upcoming NAFTA negotiations. The United States Trade Representative had indicated his government’s concern over Canada’s anomalous status on patent utility, but the Supreme Court has essentially resolved the issue. While there may be other IP policies on the table, including increased data protection periods for complex targeted biological therapies, this decision returns Canada’s patent protection standards to equivalence with those of other countries.
And, really, that is what all trade agreements and global IP treaties are about: creating a set of stable and predictable rules to govern trade within and between global economies. Such rules are even more important as Canada looks to further enhance economic growth through innovation and skills upgrading. Intellectual property protection is a central feature of this framework, because without it, innovators cannot recoup the costs of their research, which is increasingly expensive and time-consuming.
In the pharmaceutical sector, a new discovery takes 10 to 15 years and costs an average of $2.6 billion for each new medicine. Without IP protection standards that are on par with those of our global competitors, Canada would be at a disadvantage in competing for global investment, and Canadian companies would not be able to benefit from this protection as they innovate and file for their own patents.
This ruling will encourage Canadian start-ups and scale-ups that are working to develop their own IP to leverage it for their own global growth, to attract partnerships or for sale. These small firms now have the opportunity to develop more and better IP and to monetize their assets. Or they can explore open models of IP such as Toronto’s Structural Genomics Consortium, which makes all its research output available to the scientific community with no strings attached. This consortium has created an open collaborative network of scientists in hundreds of universities around the world and in nine global pharmaceutical companies.
In light of the Supreme Court decision, IP protection is ripe for additional policy consideration and exploration. The Canadian government has launched a timely review of how Canadian innovators can take advantage of the opportunities they create and flex their IP muscles. As the federal health minister has pointed out, the Canadian drug pricing system has safeguards that make it difficult for seedy investors like Martin Shkreli to exploit, but there are other areas to explore to ensure that patent trolls who misuse IP are identified and stopped. Unused IP should not just be hoarded; instead, it should be made accessible to researchers in companies and to academics for further exploration. The Canadian university community should work toward coherent and standardized patent policies that make commercialization easier and less bureaucratic both for inventors and for potential investors.
However important or appropriate it might be to address these policy issues, the basic protections afforded innovators in the Canadian patent system are a foundational piece of our economic policy. Without these protections, Canada would be an outlier, a position that, over time, would only serve to undermine our competitiveness nationally and globally.
The Supreme Court’s ruling is a win for Canadian innovators, whether big or small, and it sends a signal to the world that Canada wants to compete globally and reward those who create new, novel patents to the benefit of consumers, scientists and research-oriented companies.
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