Category: Innovation Law and Policy

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Canadian Courts Correcting Course

While Canada’s Federal and Supreme courts have long and distinguished traditions in IP jurisprudence, there have been a few hiccups this millennium.  What is wonderful is how quickly the courts are fixing their mistakes.  My essay for the Macdonald-Laurier Institute  here.

 

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Creatives Rights Caucus of the US Congress

At a congressional briefing in Washington DC on Tuesday, December 19 sponsored jointly by the Creatives Rights Caucus of Congress and ACTION on Trade, I addressed the question of how a revised NAFTA, particularly intellectual property (IP) and electronic commerce (EC)  chapters,  might encourage innovation.    In those remarks I presented MLI research to the effect that strong IP laws improve trade.  Nations that strengthen their IP laws are more likely to trade and are more likely to trade with one another.  Another facet of this improved trade is foreign direct investment (FDI) and cross-border technology transfer, which correlate very strongly with strong IP rights in the recipient country.  Canada greatly benefits from FDI.  It is a powerful force in building national and international innovation networks and in increasing economic productivity.

Canada has relatively strong IP laws but has some way still to go, as evidenced by its continual place on the US Special Trade Representative’s Special 301 report, an annual list of IP malefactors maintained by the US government.  As a consequence of its decline in relative strength in IP Canada has seen its rate of R&D investment decline for several years, alone among OECD countries.  There is a strong correlation between strong IP and R&D investment.

Canada seems to worry that its trade deficit in IP protected goods means it needs weaker IP rights.  But trade deficits reflect consumer preference, as much as sectoral strength.  Moreover strong IP rights encourage more production which over a short period of time will overcome any losses from short term cash transfers by trade deficits caused by strengthening IP.  Data are clear on these points.  And indeed, Canada’s trade deficit in technology goods is modest, at around 20% of a robust trade, and according to Statistics Canada it runs a surplus in trade in Copyright goods and services combined.  Strong IP rights are important to allow smaller firms to compete, and Canada’s is an economy of smaller firms.  Strong IP rights are to our advantage—but our national insecurity mistrusts that the call for them originates with our strongest trading partner.

There are signs of hope.  Canada recently did away with the promise doctrine, a peculiarly Canadian utility requirement for patents that invalidated numerous pharmaceutical patents and resulted in a NAFTA challenge by Eli Lilly.  Fair dealing, the Canadian equivalent of fair use under copyright law, had grown far out of hand.  A recent Federal Court case reined it in very effectively.  And the Supreme Court of Canada protected IP rights by sustaining a worldwide injunction requiring Google to take down listings of infringing sites—an order the enforcement of which, unfortunately, has been delayed by a California court. On the Internet front, in spite of Canada’s weak notice and notice regime, Voltage pictures has been successful in requiring disclosure of the names of illegal downloaders by ISP’s.  In fact the weak notice and notice regime encourages such costly and potentially punitive actions by rights holders, since notice and notice does nothing to protect their interests.

It is regrettably hard to figure Canada’s IP trade policies, although they seem to be tending towards a preference for weaker rights.  Our participation in the Trans-Pacific Partnership (TPP) was recently called into doubt when Canada rudely backed out of a signing ceremony at the last moment, ostensibly over the IP rules in the text, ones it had long ago agreed to.  The TPP’s IP rules are good ones, good for Canada, and Canada should not cavil.

Discussion of IP in Canada is timely.  The government of Canada in its recent budget announced its intention to create a new IP policy, and 2018 will be the review of Copyright Act under Standing Committee on Innovation, Science and Economic Development.

 

 

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Cheating Inventors

The patent office has set up a series of internal Examination Guidelines to prevent patents on diagnostic methods from issuing.  The problem is, the guidelines are largely illegal–as is the exclusion of diagnostic methods.  See my recent Financial Post  op-ed.

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The Promise Doctrine

On November 3 2017, I delivered some valedictory remarks on the invidious promise doctrine–the rule that construed additional promises of utility out of drug patents that were not meant to state them.  It was done away with in the 2017 Supreme Court of Canada case, AstraZeneca v. Apotex.  The text of my remarks follows.

The Promise Doctrine

 

Text of remarks to the Centre for Innovation Law and Policy Patent Colloquium November 3, 2017.

 

Richard C. Owens

 

First thanks to the CILP for the invitation and thanks to Justice Brown for organizing this panel– and it would be a serious omission to speak about the promise doctrine and not to acknowledge Professor Siebrasse’s excellent contributions to its study.

Mistakes, as they say, were made.

  • HISTORY The Promise Doctrine is English law domesticated, like the rabbit to Australia, in error.
  • Its origins are clearly traced to the 1981 Supreme Court of Canada (“SCC”) case, Consolboard V. Macmillan Bloedel, a case which did not make clear what Promise Doctrine meant, mentioned it only in passing, and was about disclosure, not utility.
  • The Promise Doctrine is based on a reference in Consolboard taken from Halsbury’s Laws of England, a terse one, to the effect that inutility is that the invention will not do what the specification promises it will do. The edition of Halsbury’s cited, the third, was out of date at the time the SCC turned to it.  The third edition was published in 43 volumes from 1952 to 1964. The 4th was published ‘73-‘87.  Thus, Consolboard fell between updates.   So, out-of-date law was imported; the English “false promise doctrine” was done away with in England by the Patent Act, 1977.  By dint of this new statute, Halsbury’s misstated the law of England as it was in 1981—the result being that Canada inadvertently adopted inapplicable, misunderstood and defunct English law.
  • In England there was no Promise Doctrine per se but there was was the “false promise doctrine”, i.e. not directed to utility per se but to the evil of misleading the crown—the grant of a patent being the prerogative of the crown until made statutory in 1977. This purpose was pointed out in the Supreme Court of Canada’s AstraZeneca Canada v. Apotex,  2017; case, which abolished the promise doctrine, also sets out a long list of the inadequacies of the doctrine:
    • Promise Doctrine is unsound as inconsistent with the words and scheme of the Patent Act.
    • Promise Doctrine is counter to the scheme of the act by conflating ss. 2 (invention) and 27(3) (disclosure).
    • There is a difference between “useful” in S.2, and the 27(3) obligation to describe “operation or use”. That latter phrase does not import utility into specification.
    • A single use makes a subject-matter useful as required by s.2.
    • The Promise Doctrine “antagonistic” to fulsome disclosure.
    • In s.2, utility’s purpose is to prevent the patenting of fanciful, speculative or inoperable inventions—i.e., too early in the inventive process.
    • Utility will differ based on the subject matter of the invention as identified by claims construction. Not any use will do.  Usefulness is required to be related to the nature of the subject-matter.  This is, in fact, the most benign and simple interpretation of Consolboard.
    • And indeed the wording in Consolboard was first applied consistently with scintilla standard. Easy to do: one can read Consolboard to say that utility is contextually determined.  In, for instance, TRW Inc. the Promise Doctrine was cited but applied quite consistently with scintilla standard.
    • But the doctrine transmuted over time from promise of the patent, and became effectively promises in the patent, the result being an inequitable double standard which was not consistent with the statute. Two separate utility tests, as plainly articulated in subsequent case law, (Lilly v Novopharm 2010)
  • THE PRESENT It has been suggested that Canada is left without a workable utility doctrine as a consequence of AstraZeneca, but this is demonstrably far from the case. As AstraZeneca itself demonstrates courts have picked up the scintilla requirement right where they left off, without difficulty—hardly surprising since it persisted simultaneously with promise doctrine in application to patents without discoverable promises.
    • Several decisions since AstraZeneca, kindly brought to my attention by justice Brown, including Pfizer Canada and Wyeth v. Teva, Apotex v. Shire, and Bristol-Myers Squibb Canada v. Apotex, all applied the scintilla standard in light of  Nothing has been lost in the return to the scintilla standard at all except a sort of invalidation lottery for generics.
  • POLICY It is also urged that the Promise Doctrine was good policy, but I think any forensic dissection of it will find none. After all, it developed from double mistake—the wrong doctrine wrongly interpreted–a circumstance which would only adventitiously correspond to sound policy. It verges on the self-evident that to have two separate standards for utility is unfair, confusing and unsupported by the statute. The fact that Promise Doctrine is largely discriminatory against one technology—pharmaceuticals—is itself a strong argument against it. And if, as the SCC found, the main purpose of the utility requirement is to prevent premature patenting, then the doctrine must fail, for only an objective standard can reliably do that, since a promise may fall below the threshold at which this policy goal is attained. Even Promise Doctrine could, thus, be gamed.
    • That the Promise Doctrine had policy value was asserted nonetheless before the NAFTA tribunal. As articulated by the tribunal, the public policy justification for the Promise Doctrine advanced by the government of Canada seems wishful, thin and tautological.
      • at 423 Tribunal stated: “…Respondent has explained that enforcing promises contained in the disclosure helps ensure that “the public receives its end of the patent bargain” (particularly but not solely in connection with ‘new use’ and ‘selection’ patents) and that it ‘encourages accuracy while discouraging overstatement in patent disclosures’’. This is clearly a retroactive justification, a sow’s ear roughly stitched, although it had the merit of apparently convincing the tribunal. Clever Canadians.
    • INNOVATION POLICY The Promise Doctrine is perverse as innovation policy. It severely impaired the potential for drug R&D investment here, however real that potential may have been.  It invalidated many good patents, resulting in real and substantial losses to the innovation ecosystem in Canada.
  • MOTIVE/CAUSE What led courts to wander in the unprecedented wilderness of Promise Doctrine? What was behind the perpetuation of such a costly error?  For however many patents were actually invalidated because of it, billions were lost in and by Canada. Such is the gradual development and warping of the Promise Doctrine that it is hard to point to any clear motive; only the misapplication of old English law.   However, one is led to the observation that the promise doctrine was not inconsistent with Canadian healthcare and patent policy favouring the generic drug industry.  No doubt this was not an overt motive, of course, but perhaps some inherent preference in the system.  Such a minor bias would be hardly unnatural—but, of course, no bias turns law in a better direction.
  • NAFTA CHALLENGE Eli Lilly’s NAFTA challenge was an important signal of how egregious costs and effects of Promise Doctrine were. The point is not that Eli Lilly lost, but that it was reasonable in the first place to sue.  How could Eli Lilly ignore such losses as it had suffered, unique among the nations where it carried on business?  Any law spurring such challenges is almost per se
    • wrong to take comfort in the NAFTA battle won, for the war was lost—the very lengthy decision makes clear that judicial decisions are subject to jurisdiction of tribunals substantively and not only for procedural fairness. A big deal. NAFTA, whatever its future, looms over the SCC, giving others a right of final appeal not allotted to Canadians themselves.
  • NAFTA NEGOTIATIONS It has been suggested that the SCC in AstraZeneca threw away a major NAFTA negotiation point. According to this logic we should keep bad laws on hand in case of negotiations, denying justice and charging the SCC with keeping tally of our negotiating chits.  It is like having a short copyright term—preserving national disadvantages just to trade them away.  This would be a pointless negotiation strategy; my involvement in any NAFTA IP strategy has been in any event minimal.
  • CONSPIRACY THEORY There is even a theory put on the table by a Canadian law professor [R. Gold] that Promise Doctrine never existed but was only a nefarious plot by Eli Lilly and its lobbyists to concoct a NAFTA challenge.   If you are of that camp, then I hope my few remarks will help re-orient you.
  • FINALLY And so we are left with a curious jurisprudential tale of the insidious infiltration of a foreign presence into Canadian patent law. So unique a circumstance, frankly, that it is difficult to draw clear future guidance from it.  At the end of the amusing Coen Bros film Burn after reading, a CIA manager, summing up events, says “Well, we’ve learned never to do THAT again… whatever it was we did…”.  The best part of this Promise Doctrine tale is that it has ended—as do I.  Thank you.