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Supreme Court Serves Stunning Reminder of Patent Bargain

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Thursday November 22, 2012
The House of Commons Committee on Industry, Science and Technology has spent the past few months hearing from a myriad of companies on the Canadian intellectual property system. With few public interest groups invited to appear, one of the primary themes has been the call for more extensive patent protections, as witnesses link the patent system to innovation and economic growth.

While policies that purport to help the economy unsurprisingly generate considerable support, my weekly technology law column (Toronto Star version, homepage version) notes the Supreme Court of Canada recently provided a powerful reminder about the true purpose of patent law in a decision involving Pfizer's patent for Viagra, the well-known erectile dysfunction medication. Teva Pharmaceuticals, one of the world's leading generic pharmaceutical manufacturers, had lost successive challenges against the Viagra patent, but managed to pull out a win when it mattered most. The decision has already had considerable fallout, as Pfizer has asked for a rehearing, had the patent confirmed as invalid in a Federal Court case with Apotex, and dropped its retail price to match the generic pricing.

Proponents of extending patent law often focus on the benefits of encouraging innovation that may come from offering patentees exclusive rights to their invention, yet the foundation of the law is about striking a balance between public disclosure and exclusive rights to the invention.  

The law includes disclosure requirements that mandate that the patentee "correctly and fully describe the invention." In this particular case, Pfizer failed to actually describe which chemical compound was effective. This led the trial judge to remark that the disclosure "plays games with the reader."

The Supreme Court was seemingly in no mood for such games as it reminded the parties that the patent system was based on a bargain that Pfizer had failed to meet. In a paragraph that is likely to be quoted for many years, the court stated:

"The patent system is based on a ‘bargain', or quid pro quo: the inventor is granted exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge. This is the basic policy rationale underlying the Act. The patent bargain encourages innovation and advances science and technology."

Disclosure is therefore a crucial part of the patent bargain. The court clarified that this involves not only a description of the invention and how it works, but rather a much more practical level of disclosure "to enable a person skilled in the art or the field of the invention to produce it using only the instructions contained in the disclosure."

In this case, the court found that Pfizer failed to provide sufficient disclosure, since the pharmaceutical giant "obscured the true invention." Pfizer argued that this should not result in invalidating the patent, but a unanimous court found no other alternative. The immediate effect is that the Viagra patent is therefore voided in Canada, which will allow for generic substitutes.

While some have tried to downplay the significance of the decision - the Viagra patent was scheduled to expire in 2014 and Pfizer filed a motion last week for a rehearing - the real importance lies in the court's unequivocal assertion of the need for balance in the patent system and the broader societal benefits that must accrue in return for patent protection.  

Innovation is a laudable goal, yet the court has reminded Canadians that it is only part of the patent equation. Pharmaceutical companies will undoubtedly continue to lobby for more extensive rights before Parliamentary committees and in trade agreements, but the policy focus from governments and courts should be on ensuring that the "patent bargain" remains intact.
Comments (5)add comment

Dave said:

Seems to exclude software patents
Such a bargain in software would be a net loss as programming "inventions" are self-describing. Disclosure is a given. All that is needed is the right to reverse-engineer for educational/research purposes. There is no need for quid-pro-quo, and software and software-supported services businesses are happily thriving (in spite of the negative publicity and effects of DRM).
November 22, 2012

Crockett said:

How does this apply to media copyright?
Similar to the patent system the copyright system, along with a limited time of exclusivity, is to encourage innovation and a net benefit to society. As mentioned above regarding software, media such as music or video are self describing. There are some rights exclusions such as research, parody, shifting etc. that bring some of the benefit to society balance.

All the above is well and good, but there are artificial barriers such as digital locks that negate these balances. This is left to be reminded primarily by 'market forces' yet this has proven to be of limited effectiveness. Thoughts on this are starting to change though, as can be seen in a recent committee paper from the USA republican party (of all places!)

People still need to be paid for their work and society needs to have access to encourage innovation and growth that benefits everyone. The systems we have now, and the overly generous (and unbalanced) length of terms, I think are being recognized as broken. The next decade needs to seriously look at the basic premises of copyright in the digital age and adjust itself accordingly so everyone, creators and users both, can prosper.
November 22, 2012

Chris Brand said:

Differentiating between "ends" and "means"
It's important with all intellectual property law that politicians particularly recognise what are the "ends" and what are the means to those ends.
Patent - the "ends" is greater innovation, the "means" is granting a limited monopoly in return for disclosure
Copyright - the "ends" is more cultural works, more broadly available, the "means" is granting creators monopoly rights for enough time to encourage them to create more
Trademark - the "ends" is to avoid customer confusion, the "means" is granting limited monopoly rights over "marks"
In all cases, we're granting monopolies, which, in the absence of good justification, is generally recognised as bad for everyone except the monopolist, so it's really, really important that those rights be as narrow and short as possible to achieve the desired effect.

Unfortunately, as soon as companies actually get granted monopolies, they tend to start spending lots of money to convince politicians (and the courts) to expand them in scope and duration. and the more that happens, the more money they have to do it all again. It's a vicious circle. That's why we really need good, solid evidence-based policy-making here, something I don't think we've seen anywhere so far.
November 22, 2012

Darryl said:

Software Patents
@Dave, I agree it is a net loss, and illustrates why we should get rid of software patents all together. Society simply doesn't benefit from them. Do you really think people would stop inventing new algorithms, GUIs, and programming languages if there were no patents on them? There was a huge amount of innovation before 1980 and the existence of software patents, including the entire core of the Internet.

Software patents are a huge problem for small companies with no legal budget and huge liabilities from the threat of patent infringement for what should be obvious inventions.
November 23, 2012

Crockett said:

...
It is not hard to grasp the stiff penalty that the SCC has erected to block Pizer's future profits on this drug. The in and out of it is they played with the system and were caught with their pants down. In the future, corporations should be careful not to go too deep with their level of secrecy and plainly expose the methods as required by the patent agreement.
November 28, 2012

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