Building a new IP strategy makes sense

Laws and regulations governing Intellectual Property or IP, including patents, copyright, trademarks and industrial designs, are a critical part of the legal infrastructure of the world’s economy. Canada is signatory to a number of treaties regarding these matter all of which are administered by the Geneva-based World Intellectual Property Office of the United Nations.

In the last 40 years, beginning with the government of Brian Mulroney, domestic IP legislation has been substantially strengthened both in the scope and in the duration of property rights, whether held by individuals or corporations. Most of these changes were the result of incessant domestic lobbying by international firms, most especially pharmaceutical companies, and a push lead by the U.S. and the European Community.

But, while the rights of IP owners were enhanced, the public interest, in many cases, was ignored. For example, the strengthening and expansion of coverage for copyrighted material has substantially increased the cost of learned journals purchased by academic institutions.

Further, Canada gave up the right to issue compulsory licenses for patents, a decision which some contend has been responsible, at least in part, for drug prices that are among the highest in the developed world.

“IP is the currency for the knowledge-based economy,” said Jim Balsillie, one of the founders of Blackberry. “Innovation without an IP strategy is philanthropy, which what Canada has been doing over the last 20 years.” Mr. Balsillie has also complained that public understanding of the strategic role IP plays in the decisions of enterprises that both generate and use IP in Canada is in too many cases non-existent.

Building a new IP strategy makes sense given that global patent applications by Canadians have been rising faster than both the growth of GDP and export expansion by about 2-to-1. IP held by a firm can contribute an enormous amount to the value of the company. In 2015 an IP advisory firm estimated that intangible assets such as IP accounted for 84per cent of the value of the companies on the US Standard and Poor’s 500 index. That was up from 32 per cent, 20 years earlier.

The Council of Canadian Academies in a recent report showed that patents are draining out of the country, with 26 per cent of patented work leaving Canada in 2014 compared to only 3 per cent in 2003. Moreover, Canada paid two times as much to use foreign-owned patents as it received in 2015.

Now at last the federal government has acted by introducing legislation with the aim of encouraging companies to create more of their own IP and limit the ability of their competitors to come after them with patent or copyright infringement suits. The legislation will provide for the regulation of IP agents and outlaw “patent trolls” who buy patents and then use their holdings to demand payments for patent infringements from other companies using similar patents. These measures should reduce potential liability from suits that can cost corporations major sums and distract management from growing the business.

The government also wants to reduce the cost and the time it takes to settle IP disputes. It will introduce online “portals” to lessen the costs of assessing public sector IP and push for greater Canadian participation in international standard-setting institutions.

In addition, an educational program will help originators of IP to learn about its importance and value as well as providing advice to firms and individuals.

A particularly innovative provision is the creation of a “patent collective” that will hold IP generated by small- and medium-sized firms which could issue licenses and protect them from infringement suits.

Increasingly, companies in all industries will need to document their innovative products and processes in IP if they hope to operate successfully and profitably.

Hopefully the proposed government legislation will help to fill a strategic policy void and create a framework in which even an individual entrepreneur can realize the benefits of the IP she generates.

David Bond is a retired bank economist who resides in Kelowna. This column appears Tuesdays.