Canadian Finance Minister Bill Morneau released his government’s 2017 budget today and while the spending promises may be underwhelming for some, the documents sets out an ambitious agenda for digital policy review. In fact, with changes to copyright, patent, broadcast, telecom, net neutrality, digital taxes, fintech, Canadian media, and Cancon all under consideration, the coming year will have enormous implications for the future of Canada’s digital policies.
The budget does include several spending promises, including $13.2 million over five years to support an affordable Internet access program, $50 million for kids coding programs, $29.5 million over five years for digital literacy, and $14.9 million for digitization of Indigenous language and materials. There is also new money for the growth of artificial intelligence sector and the much-anticipated revamping of innovation funding programs.
Yet the biggest digital implications may ultimately come from the policy reforms. First up may be new digital sales taxes. The budget includes a commitment to extend sales taxes to ride sharing companies such as Uber, a move that seems likely to ultimately lead to a broader extension of sales taxes to digital services such as Netflix.
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The release of today’s federal budget is expected to include a significant emphasis on innovation, with the government revealing how it plans to spend (or re-allocate) hundreds of millions of dollars that is intended to support innovation. Canada’s dismal innovation record needs attention, but spending our way to a more innovative economy is unlikely to yield the desired results. While Navdeep Bains, the Innovation, Science and Economic Development Minister, has talked for months about the importance of innovation, Toronto Star columnist Paul Wells today delivers a cutting but accurate assessment of those efforts:
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In the early 1990s, Eli Lilly applied for patent protection in Canada for two chemical compounds, olanzapine and atomoxetine. The company had already obtained patents over the compounds, but asserted that it had evidence to support new uses for the compounds that merited further protection. The Canadian patent office granted the patents based on the content in the applications, but they remained subject to challenge.
Both patents ultimately were challenged on the grounds that there was insufficient evidence at the time of the applications to support the company’s claims. The Federal Court of Canada agreed, invalidating both patents. Eli Lilly proceeded to appeal the decision to the Federal Court of Appeal and later to the Supreme Court of Canada. The company lost the appeals, as the courts upheld the decision to invalidate the patents.
Under most circumstances, that would conclude the legal story as several Canadian courts reviewed Eli Lilly’s patent applications and ruled that they failed to meet the standards for patentability. Yet in June 2013, the company served notice that it planned to use the ISDS provisions in the North American Free Trade Agreement to claim that in light of the decisions, Canada was not compliant with its patent law obligations under the treaty. As compensation, Eli Lilly sought at least $500 million in damages.
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The costs associated with the increased patent protections for pharmaceutical drugs in the trade agreement between Canada and the European Union has long been one of the most controversial elements of the deal. At least one study has pegged the cost to provincial health care at more than a billion dollars. In response to those concerns, the Conservative government promised to compensate the provinces for the increased costs. Earlier this year, when officials from Health Canada appeared before a House of Commons committee, they acknowledged that it is hard to estimate the actual cost but that they knew that the agreement would increase the costs of drugs in Canada.
Last week, Steve Verheul, the lead Canadian CETA negotiator, appeared before another House of Commons committee and was asked if the department has done any analysis on the financial impact of the extended patent protection. Remarkably, Verheul said that it has not, arguing that it is difficult to come up with a projection. In fact, when pressed on the issue, Verheul speculated that perhaps costs would not increase since Canadians already pays higher prices for pharmaceutical drugs than consumers in European countries such as the UK, France or Germany.
These comments from Canada’s lead CETA negotiations are simply bewildering.
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Donald Trump’s stunning win of the U.S. Presidency on Tuesday night has sparked numerous articles speculating about the implications for various policies and issues. Given how little Trump said about digital policy, predictions about telecom or IP policy are little more than educated guesses. Trade policy was a major Trump issue, however, as his opposition to the Trans Pacific Partnership and vow to renegotiate NAFTA was repeated at virtually every campaign stop. Senate Majority Leader Mitch McConnell confirmed yesterday that the TPP would not be brought up for a vote this year, leaving Trump to decide on its future. Officials in other TPP countries such as Australia, New Zealand, and Malaysia have now acknowledged that the TPP is likely dead.
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