The Internet Association, a U.S.-based industry association that counts most of the biggest names in the Internet economy as its members (including Google, Amazon, eBay, Facebook, Netflix, and Yahoo), recently released a policy paper on how Canada could become more competitive in the digital economy. The report’s recommendations on tax reform generated some attention, but buried within the 27-page report was a call for patent reform.
The Internet giants warned against patent trolling, which refers to instances when companies that had no involvement in the creation or invention of a patent demand licences or other payments from legitimate companies by relying on dubious patents. Studies indicate that patent trolling has a negative impact on economic growth and innovation and is a particularly big problem in the U.S., which tends to be more litigious than Canada.
Given those concerns, the Internet Association urged the Canadian government to enact reforms to “limit the ability of non-practicing entities [a euphemism for patent trolls] of exploiting patents to make unreasonable demands of productive companies and prevent crippling damage awards.”
While the Canadian government has yet to respond publicly to the recommendations, my weekly technology law column (Toronto Star version, homepage version) reports that according to documents recently obtained under the Access to Information Act, earlier this year Industry Minister James Moore launched a series of private consultations with Canadian business on intellectual property issues. The government came prepared to engage directly on the patent trolling issue, going so far as to identify several potential policy measures. Yet it was Canadian business that discouraged Moore from taking action, warning against the “unintended consequences” of patent reforms.
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This morning Wikileaks released an updated leaked version of the draft Trans Pacific Partnership intellectual property chapter. The latest leak dates from May 2014 (the previous leak was current to August 2013. I assessed it in posts here, here, here, here and here). The 77-page document provides a detailed look at the proposed chapter, complete with country positions on each issue. While a comprehensive assessment of the chapter will take some time, the immediate takeaway is that the U.S. remains fairly isolated in its efforts to overhaul patent and copyright law around the world with Canada emerging as the leading opponent of its demands.
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For the second time in less than a year, Canada and the EU have announced that they reached agreement on the Canada – EU Trade Agreement. Back in October 2013, there was an announcement of an agreement “in principle”. The announcement did not include a release of the text and the parties said there was still further work to be done on drafting and legal analysis. Yesterday, brought another announcement of an agreement on the text. Once again, the announcement did not include a release of the text and the parties said there was still further work to be done on legal review and translation into 23 languages.
Given the agreement is 1,500 pages, the additional work is expected to take a considerable amount of time. While government ministers claimed that CETA “is ready for debate and ratification”, the reality is that there cannot be a meaningful, informed debate without the actual text. Releasing it for full study and comment is the essential next step.
Analysis without the text is difficult, however, the combination of prior leaks and media reports indicate that Canada caved on its concerns regarding the potential replication of Eli Lilly-style pharmaceutical patent lawsuits.
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In the early 1990s, pharmaceutical giant 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.
My weekly technology law column (Toronto Star version, homepage version) notes that under most circumstances, that would conclude the legal story as nine Canadian judges 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 file a complaint under the North American Free Trade Agreement claiming that in light of the decisions, Canada is not compliant with its patent law obligations under the treaty. As compensation, Eli Lilly is now seeking $500 million in damages.
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Media reports last week indicated that finalizing the Canada – European Union Trade Agreement has been delayed by a Canadian demand to exclude intellectual property from the scope of the investor-state dispute settlement system. While that sounds like an arcane, technical issue, it actually involves potentially billions of dollars and the Canadian government deserves kudos for adopting its current position even as the pressure builds to simply cave on the issue.
The investor-state dispute settlement provision is among the most controversial aspects of CETA (and the proposed Trans Pacific Partnership) since it opens the door to private lawsuits by companies against the government over the state of national law. These lawsuits can involve claims for hundreds of millions of dollars, with costs that may ultimately be borne by taxpayers. The Canadian government is keenly aware of the risks, since it is currently facing a $500 million lawsuit by pharmaceutical giant Eli Lilly over the approach of Canadian courts to the concept of utility in patent law. The Canadian government is likely to ultimately win the lawsuit, but the legal risks are still significant, with Eli Lilly effectively demanding that every Canadian pay it nearly $15 due to our patent laws. If Eli Lilly can file a $500 million lawsuit over two patented drugs, the potential for numerous lawsuits and billions in claims is a real possibility.
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