As the business world increasingly relies on an information-based economy, intellectual property (IP) will be more important than ever for entrepreneurs and lawyers alike. The Commercializing IP seminar course attempts to provide students with some insights��into the ramifications of IP in the��business world��by exploring the many ways in which a business can use their IP strategically to ensure successes and profitability.

Can you briefly give us some background on your current practices and how they relate to the commercialization of intellectual property?

EF: At my law firm , the intellectual property group is involved in practically all aspects of the IP field. My practice focuses on helping my clients accumulate, secure, and exploit their intellectual property rights. I also help my clients with other IP-related services, which can include technology transfer, patent maintenance, and portfolio management. I frequently work with clients to develop a strategy for commercializing their IP. These strategies involve different methods for leveraging IP in the marketplace, and can include licensing, selling IP or giving advice towards the acquisition of other IP portfolios. As an IP legal services provider, one of our fundamental tasks is to determine if the client has accumulated IP rights, and then make sure that they hold and maintain them in a way that they can have an advantageous use of it later on.

LG: At ,��we are commercializing a disruptive and game-changing remote pharmaceutical dispensing technology, initially in Europe and North America. As the General Counsel of a start-up company, I am heavily involved in the day-to-day business beyond the basic legal role. As a Business Lawyer in a “new economy” venture, IP issues abound, and are an important component of my practice. From the IP tasks associated with commercialization of our own technology, to the more strategic questions on offensive and defensive patenting strategies, IP issues figure heavily in our daily decision-making. IP issues become even more complex for a start-up business when multiple markets are considered – these include ensuring the business has freedom to operate in these new markets from a patent perspective, and deciding on what patent strategy works best in those markets (many of the issues are very different from one market to another). ��In the modern, digital world, IP commercialization is a critical component to many new ventures in the marketplace, and MedAvail is no exception.

How do you view the role of commercializing IP in both the business and legal world?

EF: My view is that, even in the sense of a legal practice, intellectual property really is a business asset. From a legal perspective, the work I do is to accumulate rights, whether that is patents, trade secrets etc., and then think; when the client gets to the marketplace with his product or service, how will they make money from it? Do you build the service yourself, or do you find partners though investments?

Whether it is better to secure good IP rights and then launch a product, or develop a good product and then build good IP around it, the legal rights are fundamentally intertwined with business affairs. If you think of commercializing IP in the business world, you might want to think about the fact that IP is a prime asset for some of the most valuable companies in the world. ��IP is important in these companies from both a balance sheet point of view and in being able to offer the best services and products to their customers.

LG: From a business perspective, most new ventures will involve some form of intellectual property.�� In the US marketplace in particular, patent issues associated with commercializing an IP-centric business are very complex – it is a very litigious environment and patent trolls abound.�� A business needs to be mindful of the many IP landmines that, if not careful, may derail a business on the eve of an important event such a financing, trade show or IPO. IP issues invariably involve a mix of business and legal decision-making, as IP strategies typically involve both a risk assessment, and a cost benefit analysis which, in a pre-revenue start-up with limited capital, are extremely important.�� As such, it is not uncommon to have a dedicated senior resource working inside these ventures, closely with management and the Board, to get in front of these issues and map out a plan that allows the business a chance to be successful commercially while avoiding a variety of IP traps.

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How do you see Canada as a player in the commercializing IP space, and what do you think will be the effect of emerging multinational free-trade agreements like on this area?

EF: Canada is an interesting example of the marketplace. When you think of the commercializing IP space you fundamentally think about market size, and Canada certainly couldn’t be considered a large market globally. Yet, despite this, there are some very interesting and unique Canadian programs in the commercializing IP space. For example, there is the very important tax credit program to IP-based businesses that choose to do business in Canada. So there is certainly a lot of Canadian policy that is friendly to the development of IP, which supports businesses that otherwise have a hard time being successful in Canada due to our size in the marketplace.

Regarding multinational free-trade agreements like CETA, IP is not necessarily a large part of these very complex and intricate agreements. But if you think of Canada as a net-exporter of goods rather than a consumer, anytime you add the opportunity for free trade, this is good for the economy. Certainly the CETA agreement is probably going to be beneficial from this view point, and is probably the most important treaty in this area since NAFTA. Being beneficial on the export market, these agreements can help in the commercialization of products that are often based around IP rights.

LG: Canada has a rich history of innovation and IP commercialization – look at Nortel, Blackberry, Desire to Learn, and many other Canadian success stories.�� In recent years, we are seeing a re-emergence of technology businesses and the “knowledge economy” in Canada, with a growing culture of innovation.�� This is the result of a combination of factors – the availability of investment and venture funding (both foreign and domestic); a fertile ground of talent coming out of Canadian universities, and various government initiatives.�� Look at cities such as Toronto, Vancouver, Waterloo – many “clusters” are emerging in a variety of exciting futuristic technologies…. It is truly an exciting time to be a Canadian technology entrepreneur!�� Our company is in contact with investors and funding organizations globally, and many of them have had high praise for many Canadian ventures that have come on line in recent months/years.�� This is something Canadians should be very proud of.

On treaties, my view is that anything the government can do to promote Canadian businesses and talent globally should be encouraged.�� Canadian ventures have shown the world that we can compete on a global stage, and this is one of the reasons that Canadian venture funds have had to compete with many foreign investment sources in funding Canadian ventures in recent years.�� We have a reputation of excellence in technology and innovation, and it is great to see programs in place that facilitate exposure of our innovations on a worldwide stage.

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What do you feel are the biggest misconceptions about the commercialization of IP?

EF: Although I probably wouldn’t consider this purely a misconception, I often see an undervaluing of what we can call the “sweat equity” IP. When we think of commercializing of IP, this is very far from IP rights in the abstract. The misconception is the sentiment that “I have a great idea, and I will get paid”. I am not sure that this is exactly true. There is a lot of sweat equity that goes into commercializing a product that may have some IP rights built around it. There is a tremendous amount of work that goes into securing and maintaining the IP rights themselves, and making a successful business from all of this is even more difficult. Thinking about the amount of work that is required is often lost in the early stages of brilliant ideas, and since commercializing IP is really about taking the idea into the marketplace, this consideration is something that should be at the forefront of any strategy.

LG: In Canada, while good progress has been made in promoting and cultivating innovation, the broader market place and related structures need to catch up with the rest of the world.�� A small yet important example is start-up funding.�� In the US, the JOBS Act was groundbreaking legislation that allowed up to a million dollars to be raised by start-ups from non-accredited investors.�� This enabled and fuelled the growth of such innovative funding programs like crowdfunding.�� By contrast, it took the Ontario regulators several additional years to bring forth something similar.�� In summary, the Canadian “business ecosystem” needs to do a better job of adapting to the new business realities, and the fact that much of the value and wealth to be created in the next 50 years will come from new technologies. We need to be more nimble in supporting these ventures and getting them off the ground.

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What do you think is the most valuable piece of knowledge that students of the commercializing IP seminar can get out of the course? And why do you think this course is important for students?

EF: We view this course as a practical course, not a legal theory course. It is really looking at how the law impacts business enterprises, and more specifically, business enterprises that have significant IP. I think that this type of course is important for law students, as there is no shortage of legal theory courses that go over what the law is. For students, to understand how these laws affect the business world and the marketplace is something that is beneficial. This knowledge and perspective is something that can assist them in being good lawyers, if a legal career is what they are pursuing. Even if they are not��pursuing a career in law, understanding business concepts and the business reality that the law impacts can be a very valuable tool.�� The value for the student is applicable if they are from Osgoode Law, Schulich Business, or Lassonde Engineering. The value in this course is being able to see and understand business operation from the inception-stage forward, especially for a technology-driven business.

LG: Osgoode does an excellent job teaching students how to be good practitioners, understanding the rules, thinking outside the box, and being good technical lawyers. This IP Commercialization Course builds on those critical skill sets, providing students with a “cradle to grave” point of view on how to use IP legal and business skills in the business world.�� The course is cross-listed among Osgoode, the Schulich School of Business, and the Lassonde School of Engineering.�� Fortunately, in our inaugural year, we had representation from all 3 disciplines – Legal, Business and Engineering.�� I believe our class would agree that this multi-disciplined dynamic was a key element to the success of the course, as our discussions on current IP topics included the points of view from all 3 areas.

The course combined both traditional lecturing on core IP topics, and a thread of discussion and exchange that brought topical and current issues into the classroom.�� For example, students were asked to bring in a news article on a topic relevant to the commercialization of IP – throughout the Term, we discussed everything from the Apple/Samsung patent disputes, to Tesla’s patents on solar paneled car roofs, to the Duolingo language learning App, and a whole host of other current IP topics.�� During these presentations, the students were given an opportunity to understand how the commercialization of IP affects real world businesses every day.�� We had a very bright group of students this year, which was reflected in the caliber of the discussions…

Adam Falconi is an IPilogue Editor and a J.D. Candidate at Osgoode Hall Law School.

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Canada Day is fast-approaching.�� This means it’s also time to prepare your submissions to Canada’s IP Writing Challenge!�� The submission deadline is Monday July 1, at 5pm. The winner from each category will receive a prize of $1000 (CAD), publication on the IP Osgoode website, and consideration for publication in the Canadian Intellectual Property Review and/or the Intellectual Property Journal. Please send your submissions to iposgoode@osgoode.yorku.ca.

Do you have a paper from a recently completed intellectual property class? A case note on a intellectual property related decision? Canada's IP Writing Challenge is the perfect chance to showcase your opinions and gain recognition from the greater Canadian intellectual property community. We are looking for thoughtful and well-researched papers on intellectual property and public policy scholarship to enhance our discussion. We encourage a broad range of perspectives and topics from within the various categories of intellectual property law including: patents, trade-marks, industrial design and copyright.

There are three categories for entrants this year:

1. Law student category (LL.B, J.D., BCL, and LL.L students)
2. Graduate student category (LL.M, S.J.D.��and PhD students)
3. Professional category (legal and business professionals who have been practicing 7 years or less, including patent agents and trade-mark agents)

The set topic for the professional category is a case note on an intellectual property related decision issued after January 1, 2012. The submissions for the aw student and graduate student category are welcome on any topic relating to intellectual property law.

Full details of the rules and submission process on are available at .

We look forward to reading your work!

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Thomson-Reuters’ forecast is supported by the People’s Republic of China State Intellectual Property Office’s����(the Strategy), a document that was published November of last year containing tactics to significantly increase the nation’s patent production. The Strategy aims to reach 2 million patent filings per year by 2015 and to double both domestic and overseas applications. The document outlines approaches to achieve this, such as increasing patent examination and approval efficiency by cutting waiting times down to as little as 3 months and doubling patent examiners to 9000, as well as enhancing benefits of utilizing patents and protecting the rights of patent holders by improving patent law and regulations.

The Strategy is certainly ambitious, especially considering that China did not even have a patent law system in place until 1985.������noted their skepticism towards this pending patent explosion, expressing concerns that there may be a major quantity versus quality discrepancy.

Firstly, there are three types of patents in China: invention, utility model, and design. Chinese patent law allows double patenting where an applicant is able to simultaneously apply for an invention patent and a utility model patent. The utility model patent, which provides protection for a product’s shape or structure, requires no substantive examination and is typically granted very quickly. In some sense, it acts as a placeholder “mini-patent” before the invention patent, which does involve a potentially lengthy examination, is granted. A utility model patent must be abandoned before the invention patent is granted for the same product. These utility model patents are also often used to protect new ideas applied to pre-existing products. Hence, China’s numbers may have been artificially inflated. Three years ago, a legal expert proclaimed that the standard is so low that��. Since then, amendments have been made to the law in an effort to raise the quality of Chinese patents to meet international standards but we have yet to see evidence of a genuine technical innovation burst.

The second issue with patent quality is the use of state incentives for filing patents,including cash bonuses, residence permits, tenure, fee waivers, substantial tax breaks, and government contracts. These inducements then trickle down companies to its individual employees��. While these strategies technically work to aggressively increase numbers, they are misleading in painting China as an inventive nation. The problem is that these incentives are granted for patents, and not innovation.

The Strategy suggests that China is aware of these concerns, promising to enhance patent quality, as well as “”. The approach they appear to be taking is to establish themselves as global patent leaders in numbers first and then gradually refine quality. It is possible that what China will end up with is a mountain of useless patents but��. For example,��.

Nancy (Meng Xiao) Situ is a JD candidate at Osgoode Hall Law School and was enrolled in Professor Mgbeoji’s Patents class in Fall 2011. As part of the course requirements, students are asked to write a blog on a topic of their choice.

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In March 2011, Google was granted its long-sought patent for “Google Doodles” by the United States Patent and Trademark Office^[1].�� Google Doodles are logos created by Google to celebrate special events or pay homage to historical figures. There is no doubt about Doodles’ success as an Internet existence; indeed, in the past they have become Internet sensations, with their creative logos found all over the world. Nevertheless, a patent protecting Doodles seems to be far-fetched, leading one to question the legitimacy of the ever-expanding definition of patentability in the US patent system.

In its patent, Google claims to have invented “a system or method for enticing customers to access a web page”^[2]. It is unclear where any innovative creation has taken place. There is no advanced technology implemented and the system/method can be reduced to the following steps^[3]:

1. Create a special logo;
2. Associate a link or search results with the logo;
3. Upload the logo to the web page; and
4. If a user clicks on the logo, the linked document(s) will be provided.

Judging from the above steps, this is not a system/method that is not being used worldwide – it is simply a daily advertisement.

The grant of the patent has elicited numerous negative critiques^[4]. Most concerns center on issues of novelty and non-obviousness as required by § 102 and § 103 of the Patent Act (the Act)^[5]. It has been noted that the advertising practice of using animated images or customized logos on web pages to attract customers is common on the Internet – even a daily update does not change the system at the core^[6]. In this regard, Google’s patent may not have sufficient novelty or even fulfill the requirement of non-obviousness.

Further, the system/method is merely a form of advertising – an abstract idea in itself. This is unpatentable in light of the recent decision in Bilski v Kappos^[7] by the Supreme Court of the United States (USSC). In Bilski, an abstract investment strategy of hedging losses against the price changes in the energy market was held to be unpatentable as an abstract idea. The Bilski decision, conceived along with the Benson-Flook-Diehr Trilogy^[8], suggests that the distinction between unpatentable abstract ideas and their patentable applications hinges on the existence of “a real world focus”^[9].�� If the result of an abstract idea is applied to obtain a practical use or solve a real-world problem, such an application may be patentable^[10]. It is worth noting that the practical use must be integral to the invention. Being able to use the results of a claimed system, which is essentially an abstract idea or theorem, in a practical manner does not make the system itself patentable^[11]. Applying Bilski to Google’s patent, the fact that users may retrieve data after they are enticed to the web page does not create patentability. Furthermore, as held by the USSC in Bilski, allowing Google to patent its abstract idea of interactive advertising would preempt the use of this approach in all fields, and would effectively grant a monopoly over the concept.

A third issue that arises from Google’s patent is related to utility and enablement. An invention must fulfill the requirement of utility as required by § 101 of the Act^[12]. In addition, § 112 of the Act mandates that an invention must satisfy the requirement of enablement^[13]. Case law suggests if an invention is inoperable and lacks utility, it will also fail the enablement requirement^[14]. Since Google claims Doodles work as a system/method to entice customers, it must be proven that customers are indeed enticed by Doodles. The problem here is that Doodles cannot work without fail; not every customer will be attracted by a given Doodle. As such, it remains a question as to how Google can prove Doodles function as it claims in the patent. One may suggest an overall success rate of Doodles helps. Unfortunately, I would argue that it does not. First, prior to Doodle’s existence, Google’s search engine was already an Internet heavyweight. Absent any evidence that Doodles have significantly improved Google’s success, there is no proof of utility to rely on. Second, a success rate may not be reproduced consistently in the future and is thus unreliable. Doodles’ alleged success hinges on things that are not constant and stable – the creativity and initiatives of their artists. Therefore, there seems to be no way for Google to prove utility. As to enablement, the patent cannot teach other companies to be equally successful because the creativity and initiatives of Google’s artists cannot be taught by the patent. Insofar as other companies cannot reproduce Doodles’ previous success, Google’s patent arguably fails the enablement requirement.

Although it is believed that “anything under the sun that is made by man” should be patentable in the US patent system^[15], Google’s patent on Doodles still constitutes a dramatic expansion of patentability. It remains to be seen whether the patent will stand up to judicial examination until it is challenged at courts. If the patent does survive, it is clear that the US patent system does not patent solely “anything under the sun that is made by man”; they simply patent anything under the sun.

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On October 11, 2011, Apotex Inc. its latest successful patent challenge, resulting in the removal of an Order of Prohibition for the production and sale of a generic alternative to Xalatan®, in the Canadian market.�� After the ruling of the Federal Court of Appeal (FCA), Apo-Latanoprost was released to the Canadian market on October 3, 2011, nearly three years prior to the expiry of the patent held by Pfizer Canada Inc. and Atkiebolag (together known as Pfizer). Although, this decision was clearly a victory for Apotex, Apotex held that the real winner was the Healthcare system, stating in its that the “savings to the Healthcare system will be approximately $30 million which the provinces can then reinvest into critical areas of healthcare.” Jack Kay, Apotex president ,

We are proud that our legal victory and launch will deliver needed savings to the healthcare system…It's only through the support of pharmacy as well as the public and private drug plans, that Apotex can continue to take on patent challenges to deliver cost saving medications to market sooner.

Application Court

On September 12, 1989, Pfizer Canada Inc. and Pharmacia Atkiebolag filed the ‘132 patent. This patent addressed certain prostaglandin derivatives and their use for the treatment of glaucoma or ocular hypertension. Prostaglandins are naturally occurring substances, which can be found in human and animal tissues. Lantanoprost was the compound claimed in the ‘132 patent and is a prostoglandin derivative. The ‘132 patent contains 38 claims.

Prior to the introduction of latanoprost, other drugs were used to treat glaucoma and ocular hypertension. There were, however, various adverse side-effects ranging from tingling to death. Latanoprost was claimed to reduce intraocular pressure, without causing substantial ocular irritation.

Pfizer made an application to the court, for an order prohibiting the Minister of Health from issuing a Notice of Compliance to Apotex, for the production and sale of latanoprost, for which Pfizer held a patent (the ‘132 patent). The application was made subsequent to Apotex filing a Notice of Allegation claiming the ‘132 patent was invalid, and in producing its version of the drug it would not be infringing the patent. Further, Apotex held that the compound was based on chronic use and was invalid for double patenting, anticipation, obviousness, lack of utility, lack of sound prediction and over breath. These claims failed and the Order of Prohibition was granted in favour of Pfizer.

Federal Court of Appeal: Apotex Inc. v. Pfizer Canada Inc.,

The appeal by Apotex was from the Order of Prohibition which precluded the Minister of Health from issuing a Notice of Compliance to Apotex. Consequently, Apotex was barred from the production and sale of latanoprost for which Pfizer held a patent (the ‘132 patent). Apotex argued, at the time of filing the ‘132 patent inventors had only conducted “single dose” studies, yet claimed that the compounds could be used chronically without causing any of the adverse side effects of the predecessor drugs. Consequently, Apotex argued that the ‘132 patent was not based on a demonstrated utility, rather, the patent was based on a prediction of chronic treatment without significant side effects. Further, Apotex argued that as a result of the ‘132 patents “failure to disclose a sound line of reasoning to bridge the gap between the factual basis of the patent (the one dose studies) and its promise, it must fail.”

The court applied the three-part test for sound prediction set out in the Supreme Court of Canada , Apotex Inc. v. Wellcome 2002 FCC 77 (at paragraph 70). All parts of the test must be met for a patent to survive:

1. There must be factual underpinnings for the prediction;
2. There must be an articulable and “sound” line of reasoning from which the desired result can be inferred from the factual basis; and
3. There must be proper disclosure.

Factual Underpinnings and Proper Disclosure

Trudel JA held that the Application Judge erred in dismissing ����dzٱ��’s argument about the soundness of the patent, holding that there was “strong and convincing evidence on record” supporting ����dzٱ��’s claim. Trudel JA agreed with Apotex, holding that the Application Judge had discounted �ʴھ������’s own evidence that glaucoma at the time of filing would have been known by the person skilled in the art (POSITA) to be a chronic condition that required chronic treatment. Consequently, Pfizer had failed to satisfy the factual underpinnings of the promise of the patent, as it was “clearly not a chronic use study.” Trudel JA held on the issue of demonstrated utility and sound prediction that the promise of the patent is chronic use of a compound for a chronic medical condition.

Articulable and Sound Line of Reasoning and Proper Disclosure

The court held that there was no requirement to prove demonstrated utility in the disclosure of the patent, only that the disclosure refer to a study which demonstrates that the patent does what it claims it can do. At the time the ‘132 patent was filed, only “single dose” studies had been conducted on animals and healthy humans. The studies had not been conducted on patients with glaucoma, nor had they been tested for chronic use.�� Fatal to �ʴھ������’s position was the fact that none of �ʴھ������’s experts had as Trudel JA held, demonstrated “an articulable and sound line of reasoning bridging the gap between the factual basis and the promise of the patent.” Consequently, Trudel JA held the patent invalid as Pfizer had failed to “bridge the gap” between the single doses studies and the claimed chronic use. Trudel JA held the patent invalid on the principle that the patent was not based on demonstrated utility rather it was based on a prediction which in this case was not sound.

Case Analysis

In attempting to distinguish this decision from the seminal of the Supreme Court in Apotex Inc. v. Wellcome, 2002 SCC 77, the court held that there was a “factual foundation” for the claims in the patent, and thus the patent was valid and infringed. The drug AZT had been tested on human cells in vitro as well as on mouse cells. Consequently, the court held that the data provided by these tests, was sufficient to ground a factual foundation for a sound prediction of the claims. The court in Pfizer seemed rather to focus on the intended use of the drug for a chronic condition as a basis to invalidate the patent. The court held that the disclosure must refer to a study that demonstrates that the patent does what it claims it can do. The court held that Pfizer had failed to meet this test, as the drug had not been used or tested on any patients suffering from glaucoma. Consequently, the court held that the basis of the patent was a prediction, which was not sound.

Pfizer argued that the treatment and use of the drug itself was a matter to be left to physicians to determine and not a matter for the Court to decide in its determination of the construction of the claims. Pfizer also argued that adopting the position that the drug would be used for the treatment of a chronic condition, would amount to “reading in” a chronic element into the claims. However, �ʴھ������’s own expert Dr. Rechtner, had testified that “implicit in the treatment of glaucoma or ocular hypertension, is chronic treatment.”

It seems that this decision may limit the scope for claims of sound prediction. However, it seems that the threshold remains the same namely, the courts require “an articulable and sound line of reasoning bridging the gap between the factual basis and the promise of the patent.” In this decision, it seems that the seminal finding was that the factual foundation could extend to the intended therapeutic use implicit in a drug.

On October 17, 2011, Pfizer Canada Inc. filed an application to the Supreme Court of Canada to appeal the decision for Xalatan®.

In recent news, Pfizer has entered into the generics through the creation of the division , who is expected to produce generic versions of drugs. Could this have been a strategic way for Pfizer to neutralize the economic effects of orders by courts invalidating their patents? It is interesting to note that in this circumstance, a loss of a patent may not necessarily equal a loss in profits.

Judicial Treatment After the Decision

The decision Astrazeneca Canada Inc. v. Mylan Pharmaceuticals ULC came just days after this ruling and in that decision the Justice agreed that the disclosure requirement can be satisfied by simply making reference to a test or study that demonstrates utility.

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While a few bloggers on IPilogue have already commented on the ongoing patent battle between Apple and Samsung, it is worth commenting on some of its recent developments and the battle’s likely prognosis. So far, the battle that began in April 2011 has been a series of victories with Apple’s name written all over them as the German court, the Dutch court, and now the Australian court all granted an order of preliminary injunction against the sale of Samsung Galaxy line products in their respective countries.

Yet another blow awaits already punch-drunk Samsung. US District Judge Lucy Koh, who is presiding over Apple’s request for a preliminary injunction barring sales of Galaxy line products in the US, have recently highlighted during a hearing that . During the hearing, Koh asked Samsung’s counsel whether she could recognize which is which, holding up Samsung’s Galaxy Tab and Apple’s iPad about ten feet away from the counsel. The response: “.”

At the same time, Samsung’s attacks against Apple with its own arsenal of patents were met with as a Dutch court held that before Samsung could request an injunction against the sale of Apple products allegedly infringing on Samsung’s patents, it should have offered to license its patents to Apple at “fair reasonable and non-discriminatory” (“FRAND”) terms. This rule allows the licensing of a patent at FRAND terms once it is established that the patent in question is part of the current industry standard. Without going much further into other details, it is against this rather lopsided backdrop that some commentators have predicted that their differences will be settled most likely on Apple’s terms. It may seem that the ultimate losers of these legal battles would be the end-use consumers as these costs, i.e., litigation costs, licensing fees, etc., tend to get internalized, driving up the price.

Some may be surprised to find out, however, that the relationship between Apple and Samsung is not all about hate. Samsung is the provider of some of the iPhone’s most important components, (overall, Samsung is accountable for 26% of the iPhone’s cost structure). While some commentators have framed this as that the bitter ending of the legal battle would entail losing one of its biggest customers, other commentators have noted that this may work out in favour of Samsung. As much as the relationship matters to Samsung, it will be as difficult for Apple to find another parts supplier that is as good as Samsung. Some have gone as far as to say that “” (emphasis mine).

After all, it seems that there is still some love left in this love-hate relationship for them to set their differences aside and move on.

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On November 2, 2011, the United Kingdom Supreme Court (UKSC) in ¹ unanimously reversed the lower court’s decision that Human Genome Sciences (“HGS”) Neutrokine-α was invalid as it lacked industrial application. Thus bringing UK law in line with the European Patent Office’s (EPO) interpretation of industrial applicability.

The five judges of the UKSC ruled that Article 57 of the European Patent Convention (EPC) does not require that patent application for new genes go as far as providing clinical tests as proof of industrial application.

Article 57 of the EPC states that: “An invention shall be considered as susceptible of industrial application if it can be made or used in any kind of industry, including agriculture.”² It is part of the UK and EPC’s utility requirement.

Lord Neuberger wrote the main judgment for the panel of five justices.

Background

In 1996, HGS filed for a patent for Neutrokine-α, which was granted by the EPO in August 2005. Neutrokine-α is a novel human protein and a member of the TNF ligand superfamily of cytokines (proteins that act as inter-cellular mediators in inflammation and other immune responses). The specification in the patent included the encoding nucleotide, the amino acid sequence and certain anti-bodies of Neutrokine-α; it included contentions as to its biological properties and therapeutic activities along with those of its anti-bodies. The contentions were predictions that were substantially based on the proposition that Neutrokine-α is a member of the TNF ligand superfamily. However, nowhere in the Patent was there any data or suggestions of in vitro or in vivo studies. Bioinformatics assays were the basis of its predictions rather than wet lab tests.

After the Patent was granted to HGS, it became the subject of opposition proceedings brought by Eli Lilly (“Lilly”) at the EPO.�� After the hearing at the Opposition Division (OD) of the EPO in June 2008, the Patent was revoked. HGS appealed to the EPO Boards of Appeal which allowed the appeal, referring the case back to the OD with the direction that the Patent be maintained.

Lilly also brought parallel proceedings in the UK at the High Court for revocation of the Patent in its jurisdiction. The proceeding was heard by Kitichin J, he revoked the patent based on the conclusion that, (described by Lord Neuberger in summary terms at para 31) in light of the common general knowledge, the notional addressee of the Patent would have concluded that the “functions” of Neutrokine-α “were, at best, a matter of expectation and then at far too high level of generality to constitute a sound or concrete basis for anything except a research project”. HGS appealed this decision at the Court of Appeal. The court dismissed HGS’s appeal, following and approving Kitchin J’s approach.�� This ruling by the UKSC was based on an appeal by HGS against the Court of Appeal’s decision.

The Decision

The decision had three main threads of analysis:

a) Consistent Approach: National Courts vs. the EPO

The Supreme Court found that while there is “room for dialogue between the national court and the EPO” and that national courts are free to come to different outcomes than the EPO, the principles behind such decisions must be the same, they must stem from the EPC. The court found that where the EPO has adopted a consistent approach to an issue in a number of decisions, a national court should only rule differently when there are “very uncertain facts to justify” it. The court found that the Technical Board had ruled consistently in its application of Rule 57 to patents for biological material and that there was “little helpful domestic guidance” in the UK on this issue. Therefore, the Court of Appeal and the lower court were wrong in not following EPO’s approach.

b) Wider Policy Concerns

But in making this decision, the court appeared hesitant to overturn the two lower courts ruling, especially since they were consistent with each other, and two patent specialists gave the ruling with extensive trial evidence before them.³ The UKSC’s approach was based on two “strong” policy arguments. Lord Walker elaborates at para 171 that:

The first is to reduce the risk of a chilling effect on investment in bioscience (though here the arguments are certainly not all one way). The other is to align this country's interpretation of the European Patent Convention more closely with that of other contracting states. To my mind these considerations justify this Court in taking what would otherwise be a questionable course.

The court also seemed to agree with the submissions of the BioIndustry Association (BIA), who were interveners in the case. The BIA had argued that it is important that the law is clear and certain in its application of Article 57. The court agreed, especially since it is important for bioscience companies to decide when they need to file for patent protection.�� Lord Neuberger outlines why the Court of Appeal’s approach would be a detriment to UK’s bioscience sector. At Para 100-101, Lord Neuberger points out that:

For obvious reasons, the BIA has not set out to support either of the two parties to this appeal in its trenchant written submissions in these proceedings. However, it does suggest that if we agree with the reasoning of the Court of Appeal there is at least a risk that it will "make it appreciably harder for patentees to satisfy the requirement of industrial applicability in future cases." If that were so, it is suggested that this "would cause UK bioscience companies great difficulty in attracting investment at an early stage in the research and development process".

This consequence is said to arise from the reasoning of the Court of Appeal (and hence of Kitchin J), on the basis that there will normally be a need to conduct tests to provide experimental data to establish to the standard they require that a protein (or its antagonists) have therapeutic use. This in turn is said to lead to two problems. First, such tests will or may involve clinical work, which, as I understand it, would be hard to keep confidential, especially in the age of the internet. Secondly, such tests would often be expensive to run, and, as already mentioned, funding would be hard to obtain for a project of this sort which had no protection in the form of a patent application.

c) Standard for “Industrial Applicability”

At Para 108, the court summarizes the Board’s approach in relation to the requirements of Article 57 in relation to biological material. The court held that the industrial application requirement was met because Neutrokine-α was a member of a TNF ligand superfamily��and��that all the members of the family were��associated with important immune response related activity. Lord Neuberger at Para 111 agreeing with the Boards conclusion states that:

The Board's conclusion was effectively this, that the disclosure of what was accepted to be a new member of the TNF ligand superfamily (coupled with details of its tissue distribution) satisfied Article 57, because all known members were expressed on T-cells and were able to co-stimulate T-cell proliferation, and therefore Neutrokine-α would be expected to have a similar function.

The court counters the lower courts argument that the basis for HGS’s patent is “speculative and did not give rise to an immediate concrete benefit”.�� Lord Neuberger responds by saying that if a statement “is indeed plausible, then, in the absence of any reason to the contrary, it at least prima facie satisfies the requirements of Article 57 according to the Board”.�� He goes on to say that:

I appreciate that the dividing line between "plausibility" and "educated guess", as against "speculation", just like the contrast between "a real as opposed to a purely theoretical possibility of exploitation", can be difficult to discern in terms of language and application, and is a point on which tribunals could often differ... However, as a result of the decisions discussed above, the Board's approach to patents such as that in this case is, I believe, tolerably clear.

The court found that the lower courts were mistaken in interpreting what “immediate concrete benefit means” and that it is enough if the Patent satisfies requirements outlined in its summary of the Board’s case law.

Lord Hope also finds that the Court of Appeal was setting as onerous standard, he states at Para 151 that:

I think that there are indications in these passages that the standard which Jacob LJ was setting for susceptibility to industrial application was a more exacting one than that used by the TBA.

He found that the Board’s approach to industrial application was the use of the molecule for research was sufficient in itself as an industrial activity (Para 155). The court adopted this lower standard on the principle that biotechnology investments should be encouraged in the UK.

Impact on Canada

The case demonstrates that there is a clear functional parallel between the European requirement of “industrial application” and the Canadian utility requirement, which means that Canadian courts and the Patent office can look at UK and EPO jurisprudence on the issue of utility.⁴ But on the point of how far long before a patent should be granted, the Canadian doctrine of Sound Prediction makes it difficult to directly apply European case law on the point, as they don’t have this doctrine.⁵ While harmonizing with EPO law is not a priority for Canadian courts, Professor Siebrasse in his blog points out that “consistency with the law of other jurisdictions is important in light of the practical reality that Canada is effectively just one part of a world-wide patent system”.⁶ Therefore he contends that the principles set out in this case deserve to be seriously looked at in Canada especially on the point of whether patents claiming a new protein and encoding gene satisfy the utility requirement.

Conclusion

The court on the main issue found that HGS’s patent satisfied the requirement of Article 57.�� The court also dismissed Lilly’s cross appeal on the insufficiency issue. The case will now be sent back to the Court of Appeal to deal with other outstanding issues.

¹ Human Genome Sciences Inc. v. Eli Lilly and Company, .
² The European Patent Convention, online: <>
³ James Nurton, “Analysis: Why the Supreme Court Overturned Two Patent Specialists” (2011) Managing Intellectual Property Patents.
⁴ Norman Siebrasse, “What does HGS v. Eli Lilly mean for Canada?” Sufficient Description (November 2011), online:�� <>
⁵ Ibid.
⁶ Supra note 4.

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The patentability of business methods in Canada will soon come one step closer to final resolution, following the impending Federal Court of Appeal decision in the matter of Amazon.com’s “one-click checkout” patent application. Although I believe that Phelan J of the Federal Court was correct to allow for such patents, he was perhaps overly dismissive of policy concerns in his reasons.¹ The higher court(s) may not similarly restrict themselves. Indeed, the participation of interveners in the appeal will almost undoubtedly broaden the scope of the court’s decision.² It is thus timely to discuss several reasons why, as a matter of public policy, I believe that business methods should not be excluded from patentability.

From a policy standpoint, it may be argued that a given category of inventions ought to be eligible for patentability if it would further the purposes of the patent system. This inquiry is best approached as a cost-benefit analysis. The benefit analysis concerns whether such patentability is necessary to achieve the ends of the system. The cost analysis relates to whether such patentability hinders them. Consideration by this framework reveals that business method patents do not limit the patent system but in fact meaningfully further its goals.

Per the Supreme Court of Canada in Free World Trust v Électro Sante, the dual function of the patent system is “to advance research and development and to encourage broader economic activity”.³ While the first half of this formulation seems to have garnered most attention in subsequent literature and jurisprudence, it is perhaps the second half that is the system’s more realistic effect. Following an extensive empirical survey on the effects of patent law, professor Bronwyn Hall concluded that there is no broad evidence that it encourages innovation “always and everywhere”.⁴ Rather, her study’s “most interesting and not immediately obvious conclusion” is that a strong patent system tends to positively affect industry.⁵ It is thought to accomplish this by facilitating the market entry and growth of enterprises possessing intangible assets by offering security to potential investors and business partners.⁶ The merits of business method patents should thus be considered within this framing of the patent system.

Beginning with the cost analysis, it is often directly argued that business method patents limit innovation and restrict economic activity. Professor Rochelle Dreyfuss premises this argument, as it must be, on the view that business method patents are inherently “big ideas” as opposed to “specific applications”.⁷ Such big ideas, she argues, must remain in the public domain because they form a significant basis for further inventiveness. A monopoly of such ideas thus restricts innovation and traps other businesses in inefficient methods of resource allocation in order to avoid infringement, thereby also limiting competition and trade.

There are two serious faults with this argument. The first is the assumption that business methods are inherently “big ideas”. Phrased in the language of Canadian law, this is to say that business methods are naturally incapable of having “practical application” per Shell Oil Co v Canada (Commissioner of Patents).⁸ One need only consider the patent application at issue to realize that this assumption is untenable. Amazon.com’s claimed invention was for a process whereby a client identifier is stored in a customer’s computer and later recognized by company servers. While this may properly be called a business method, it cannot seriously be called an idea.

The argument’s second, broader flaw lies in its assessment of market forces. Patent monopolies are considered to foster business innovation and competition by driving businesses to develop new innovations outside the scope of competitors’ protected inventions. These improvements can then be patented and deployed, thus stimulating economic activity. Many are skeptical that properly granted business method patents should operate differently than other types of patents.⁹

Critics’ other primary argument in the cost analysis of business method patents is that they are of inherently low quality and thus undermine the integrity of the system. Note that “good” patents may generally be distinguished from “bad” by their extent of novelty, non-obviousness and utility.¹⁰ Concerns on these grounds are exaggerated. Regarding novelty, it must be acknowledged that there is a relative scarcity of prior art available, as even common methods of doing business are often not documented in materials available to patent examiners.¹¹ This is a self-correcting problem, however: as business method patents are granted and gain attention, the related prior art will naturally expand. This concern is further offset by the absolute novelty requirement in Canadian patent law, which does not limit anticipation to disclosure in prior art.¹² Other concerns regarding obviousness and utility are more indictments of the patent system in general than business methods in particular. Given the panoply of patentable inventions, it is difficult to see how methods of doing business would perplex our authorities more than any other technical subject matter or lead them to suddenly depart from these standards.

With the cost analysis thus dispensed with, it remains to be established that patent protection of business methods is necessary to further the goals of the patent system. Dreyfuss contends that business methods provide several inherent rewards to innovators that are both sufficient for their purposes and independent of patent protection.¹³ In particular, she argues that business methods naturally yield customer loyalty, which then becomes self-perpetuating such that copying of the business method is no longer a serious threat. The fatal error here is assuming that businesses would be able to become established and even gain some competitive advantage all without the assistance of patent protection.

A related argument that critics raise is that innovation in the business sector does not draw from the promise of patent protection. Indeed, this is the primary justification for barring business method patents in the U.K.¹⁴ Several U.S. and Canadian scholars have also adopted this view. For instance, Greg Fine suggests that it is not private, de novo research and development that drives business method innovations, but rather open, interactive emulation among competitors.¹⁵ Although there is some merit to this observation, it is neither surprising nor fatal given the proper phrasing of the patent system’s purpose, above. Thus to simply claim that business method patents are unnecessary because they do not drive innovation is to seize upon a misstatement of the true purpose of the patent system.

In light of the foregoing cost-benefit analysis, it thus seems warranted to hold that reasons of public policy should not keep business methods from patentability. Now we wait with bated breath for the Federal Court of Appeal’s decision to see if the honourable justices agree.

¹ Amazon.com v Canada (Attorney General), 2010 FC 1011, 86 CPR (4th) 321, Phelan J.
² Amazon.com v Canada (Attorney General), 2011 FCA 127, [2011] FCJ No 555, Trudel JA.
³ World Trust v Électro Sante, 2000 SCC 66 at para 42, 9 CPR (4th) 168, Binnie J.
⁴ Bronwyn H Hall, “Business and Financial Method Patents, Innovation, and Policy” (2009) 56 Scottish Journal of Political Economy 443 at 18.
⁵ Ibid at 14.
⁶ Ibid.
⁷ Rochelle C Dreyfuss, “Are Business Method Patents Bad for Business?” (2000) 16 Santa Clara Computer & High Tech LJ 263 [Dreyfuss] at 276.
⁸ Shell Oil Co v Canada (Commissioner of Patents), [1982] 2 SCR 536, 67 CPR (2d) 1, Wilson J (“A disembodied idea is not per se patentable. But it will be patentable if it has a method of practical application.” at 14).
⁹ See e.g. Stephen J Ferance, “Debunking Canada’s Business Method Exclusion from Patentability” (2000) 17 CIPR 493 at 36.
¹⁰ See Patent Act, RSC 1985, c P-4 [Patent Act] ss 2, 28.3.
¹¹ See Greg S Fine, “To Issue or Not to Issue: Analysis of the Business Method Patent Controversy on the Internet” (2001) 42 BCL Rev 1195 [Fine] at 1205.
¹² Patent Act, supra note 10, s 28.2(1).
¹³ Dreyfuss, supra note 7, at 276.
¹⁴ CFPH LLC’s Patent Application, [2005] EWHC 1589 (Pat), Prescott QC.
¹⁵ Fine, supra note 11, at 1206.

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Through innovation, patents are an important enabler of economic growth. Studies on patent activity are therefore often carried out. These studies have revealed that the European Union, the EU, lags seriously behind other major international players such as the US and Japan in patent activity. The explanation given is that the EU single market for patents is still not complete. Despite numerous calls from Heads of States and major efforts since the 1970’s the EU has not succeeded in making a unitary patent system: an EU patent valid in all EU Member States.

Currently two different patent systems are in effect across Europe; a national patent system governed by the national law of each state and a European patent system governed by the European Patent Convention (EPC). The EPC is not an EU convention, but an agreement between 38 European countries. Under the EPC a European patent can be granted to the inventor if applied for. However, the European patent is not a unitary right, but consists of 38 independent patents. Each patent is governed by national law and is therefore only nationally enforceable and nationally revocable. After a patent has been granted through the European Patent Office () it has to be approved by the national patent offices in each country in which the inventor wants his invention to be protected. This means that the patent application has to be translated to each of the languages used in these countries. Renewal fees have to be paid in each country and auxiliary provisions in the different national laws make the maintenance of the patents burdensome on the inventor.

The administrative complexity and high translation costs (studies have shown that the translation fees amounts to around 70% of the total cost of applying for the patent) of this system has serious consequences for the competitiveness of the EU in relation to other major international players and has led companies to voice a demand that costs be significantly reduced.

In April 2011, this led the European Commission to table a , consisting of two legislative proposals, aimed at creating a unitary patent protection system that will reduce costs of patents within the 25 participating EU countries by 80%. The new system has two main features: the creation of unitary EU patent protection and the creation of a unified patent court for the EU. If adopted, this system will significantly simplify the current system under the European Patent Convention.

As mentioned the Commission’s proposal firstly provides for a system under which a European patent granted by the EPO entails in each of the 25 countries without the need for further action. The patent will ensure the same level of protection in all 25 countries. The system still requires the application to be submitted to EPO. The application can be submitted in any language, but the EPO will continue to examine applications and grant patents in its three official languages: English, French and German. The cost of translation into one of these languages will be compensated. The unitary patent will practically be a European patent granted under the EPO and given unitary effect upon request. In relation to the unitary patents, the EPO will take on further tasks. The EPO will be responsible for collecting, administering and remitting renewal fees for unitary patents and for keeping a register of unitary patents, which would include legal-status information such as transfers, limitation or revocation – all of which are presently dealt with by national authorities under national law.

The second important aspect of the proposed system is a . This litigation system will consist of the Unified Patent Court (UPC). The UPC will comprise of a Registry, a Court of First Instance and a Court of Appeal. The Unified Patent Court will have exclusive jurisdiction in respect of litigation relating to the infringement and validity of a unitary EU patent.

As there is currently a strong political will to get rid of the expensive and complicated system currently in place, the EU is eager to push forward with the Commission’s proposals and significant progress has been made for the first time in several years. Discussions concerning the location of the Unified Patent Court are currently taking place with meetings in the Competitiveness Council that took place on 29-30 September 2011 and more meetings scheduled for 5-6 December 2011. The EU expects the first unitary patents to be granted in 2013 and hopes that the new system will significantly boost research and innovation within the EU. Further, it is anticipated that the new system will increase patent activity and make the EU able to compete with the US and Japan. From a Canadian perspective, the implementation of the unitary patent system will mean easier and less expensive access to EU-wide protection for Canadian inventions.

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Due to the nature of “cloud” infrastructure, companies filing patents for cloud based innovations may not have the legal support they need to protect their perceived IP rights.

As discussed in a previous , the trend towards cloud computing has caused a frenzy of new entrants into the market delivering new and innovative solutions to meet consumer and business needs.�� For example, Apple has filed for a that uses to let a user pause a song or video on one device and then resume it from that same place on another device. For consumers, the attraction to cloud-based services lies in the ability to remotely access storage space, software applications, or server content.�� Moreover, it is a convenient, cost-effective way to share and manage documents and multimedia.

Simply put, cloud computing refers to the delivery of computing services by a provider, remotely over the internet, without ever having to install hardware at the user’s end.�� However, defining the nature of the services, products and rights in cloud-based applications is a difficult task considering the complexity of organizing infrastructure and the number of parties involved.�� Cloud computing service providers will often outsource server tasks to multiple players in several different locations, and therefore, the infrastructure may lie within several jurisdictions.�� Because of the nature of “cloud computing” itself, the data is not tied to any one clear location.���� While it is not necessary for the user of cloud-based technology to know where their data is, businesses, in particular those with a vested interest in the intellectual property of a cloud-based service, should be aware that their rights in the “cloud” could get lost in the haze.

Many have written about the multiplicity of legal issues inherent in “cloud” technology, some of which include .�� In a recent international survey of current outsourcing practice and trends, the Norton Rose group examined whether the with cloud computing were a deterrent to its widespread use.

Like those issues, the , namely patents rights to technology, are complicated by the territorial nature of those rights and how the law in different jurisdictions will apply.�� For example, unauthorized practice of a patented invention across national borders, is not actionable under the Canadian Patent Act.�� A patent issued by the Canadian Intellectual Property Office does not grant the patentee the right to enforce their rights in other countries, posing difficulties for patent holders and licensees trying to assert their rights against alleged infringers.

Similarly, infringing activity is problematic for patent holders.�� As mentioned above, the data and processing server may be situated in more than one location and are often outsourced to different parties.�� As such, a patent holder never has access to an alleged infringer’s complete system, making reverse engineering to impossible.�� Even when a patent holder does manage to detect infringing activity, determining what constitutes infringement must be considered under different patent law regimes.

Cloud computing is creating a in the way we access technology and services.�� As such, it is likely that we will see an increase in the number of disputes surrounding intellectual property rights in cloud computing services in the future.�� How will companies deal with the legal uncertainties that surround the already complex, time-consuming, cost-intensive and distracting litigation process?

One is to let these tech-savvy companies tackle their contract, patent and legal processes in the way they know best: design and develop cloud-based applications to solve their complex business problems.�� However, intellectual property interests may be so deeply rooted or financially motivated that resolution of the dispute may not be achieved through settlement.�� For example, failed attempts at negotiating a licensing agreement resulted in the launch of a recent against Apple and RIM by Openwave Systems for alleged infringement of five of its patents relating to mobile internet.

The general debate over the patent system necessity continues. Cloud computing is just another sub-category of subject matter over which parties are asking whether the patent system is necessary or beneficial, or whether it is a massive deterrent to innovation.�� Some feel that the system should be .

For now, companies considering filing patents for cloud-based innovations must rely on the business and patent claim approaches proposed by the experts.

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