Copyright

Under the CUSMA, Canada will have a 2.5-year transition period (Article 20.90) to increase the length of copyright protection to life plus 70 years for works, and life plus 75 years for performances. The duration of protection for copyright in performances won’t be changing dramatically (up from 70), but with the length for works currently at life plus 50 years, the new trade deal represents a significant change (i.e. a length of time equivalent to 5/6 of my lifetime) (Article 20.63). It remains to be seen how the deal will affect marginal cases. From the text of the agreement, it seems open for the parties to decide what happens to copyright protections that expire during the transition period. A hard cut-off may be simplest, but it’s not clear that would be fair to owners. The rights-balancing involved should not be understated, since the short transition period means that a more gradual change will be difficult, if not impossible – it is very much a 2-or-20 year extension situation.

Canada’s notice-and-notice framework will persist under the new deal (Article 20.89); for a brief introduction to the notice-and-notice regime, see . While Section J (and its Annex) of the CUSMA IP Chapter preserves the framework, the specificity of the language removes some of the flexibility that Canadian law might otherwise have to respond as notice-and-notice continues to evolve. In the long run, might this increase the risk that Canada shifts to the CUSMA-default notice-and-takedown regime that already governs south of the border?

The CUSMA also goes out of its way to make sure that criminal and civil remedies exist for tampering with digital locks or removing digital watermarks (although criminal remedies were already in place for the former). Nonetheless, a host of common-sense exceptions are directly enumerated, including circumvention by non-profit libraries, archives, educational institutions, or public noncommercial broadcasters, or for research or national security purposes. (Articles 20.67, 20.68)

Trademarks

In trademarks, statutory damages may be required for trademark counterfeiting (Article 20.82). Given the Canadian experience with statutory damages for copyright infringement this is a controversial move; according to Prof. David Vaver, statutory damages may encourage litigation of worthless claims and unfairly compensate rights holders, though on the other hand it may streamline the enforcement of rights protected by law.[1] However, because of the open-ended nature of the provisions, having a system of ‘additional’ (i.e. exemplary or pecuniary) damages instead of statutory ones may suffice (Article 20.82).

The border provisions in the CUSMA also include new procedures for detention of goods that are confusingly similar to registered trademark goods. Arguably the biggest change is the ability of border officials to detain goods in-transit, which, until now, . (Article 20.84)

Patents

Apart from affirming commitments to existing international treaties and trade agreements, the most significant change to patent law is how biologics (large molecules produced by living systems) are protected. Specifically, over a five-year transition period (Article 20.90), the term of market exclusivity will be increased to 10 years, from the current standard of eight (Article 20.49). Given that many novel therapeutic methods depend either directly (for treatment) or indirectly (e.g. for diagnosis) on biologics like antibodies, there are concerns about what even a two-year extension may mean for .

The second big change for patents is more administrative, in that it affects how applicants interact with the Canadian Intellectual Property Office. In particular, those seeking a patent will now be able to expect compensation for unreasonable delays in application processing. The caveat is that a delay can only be unreasonable if more than five years have passed since filing or three years have elapsed since a request for examination. Note also that ‘compensation’ is strictly defined to mean adjusting the lifetime of the patent according to the delay. (Article 20.44)

The ‘Hot Take’

Many commentators view the agreement as a capitulation to US IP demands. I won’t argue for or against that notion. When looking at the larger context of the deal, however, IP stands out as one of the few areas that has been substantively changed by the provisions of the CUSMA. One is left with the uncomfortable question – were American demands acquiesced to in order to appease US negotiators on the substance of the broader deal? On the face of it, that does not seem totally implausible. For Canada, the CUSMA but for opening our dairy market and changes to IP. Unlike the US, though, Canada does not have the luxury of a massive domestic economy to cushion the blow of a lapsing free-trade regime with its largest trading partner, so it’s hard not to see the appeal of taking the best deal we can (sweetened by Canada, and especially Ontario, ).

Regardless of what happened behind closed doors, I hope that the decision to accept these changes to the Canadian IP system was well-reasoned. The ground given on intellectual property will cost Canadian users, but may end up preventing greater damage that would be visited to the Canadian economy writ-large if NAFTA were to end with no replacement. In an international arena increasingly characterized by transactional relationships and realpolitik, such sacrifices may end up being inevitable. At the same time, we should be wary of the potential for IP to end up playing second-fiddle to other policy and economic considerations. There is a reason why other countries are willing to accept concessions on Canada’s IP law and policy in exchange for other, sometimes more tangible, benefits.

Written by Peter Werhun, IPilogue Editor and JD Candidate at Osgoode Hall Law School.

[1] David Vaver, Intellectual Property Law, 2nd ed (Toronto: Irwin Law, 2011) at 644-645.

The post CUSMA: The Highlights appeared first on IPOsgoode.

CIPO has recognized Canada’s “very close economic links to a large neighbor, the United States”[4] and “Canada’s close integration into the global economy”[5], as the two reasons why Canada’s resident application share is lower than most other leading economies. If CIPO is correct, then the current NAFTA negotiations could have a great impact on the patent filing trends in Canada.

NAFTA’s Impact on Canada’s Economy

Since NAFTA came into effect in 1994, the economy of North America has more than doubled in size and Canada-US trade has nearly tripled.[6] Canada is the number one trade partner for more than half of the states in the USA and the second trade partner for the majority of the remaining states.[7]

Therefore, if NAFTA dies, it is very likely that many close economic links between US and Canada will break down. Dissolution of such economic links between the two countries may result in loss of incentives for potential American patent filers to file for patents in Canada. Since the US is the top patent filer in Canada this loss is very concerning. A drop in the number of patents filed by US residents will, considerably, decrease the total number of patent filings in Canada.

Canada as a Gateway to the US Market

Additionally, as a result of NAFTA, Canada is also perceived as a gateway to the US market. A report, prepared by the Government of Canada, which is targeted towards foreign
investors, states that “In North America, Canada enjoys direct access to the NAFTA market, so foreign investors can reach a single market of 480 million consumers, with a combined GDP of over US$20 trillion. Many Canadian production hubs are located closer to US markets than are American production sites.”[8]

If the links that NAFTA has created between the Canadian and American markets are eliminated, there is a chance that other foreign countries such as Germany, Japan, France and Switzerland, that are among the top patent filers in Canada, will have little to no incentive to file for patents in Canada.

Is NAFTA Canada’s Achilles’ Heel?

Killing NAFTA will cut many of the economic channels between Canada and the USA and this may cause hesitancy in foreign patent filers to file for patents in Canada. Since��foreign patent filings account for more than 68% of the total patent filings in Canada [9], such a drop could have dramatic impacts on the total number of patent filings in Canada.

Assuming that the number of patent filings correlates directly with the rate of innovation in a country [10], then a decrease in the former may result in a decrease in the latter. It has been shown that the rate of innovation affects the growth rate of output in manufacturing.[11] The number of patent filings and the GDP from manufacturing in Canada has seen a net increase since 1995, around the time NAFTA came into effect.[12] Therefore, a drop in the number of patent filings could affect the country’s manufacturing industry and the GDP from manufacturing.

Although it has been said that if NAFTA dies, it won’t be the “end of the world” for Canada [13], Canada needs to start thinking about other ways to balance the effects of a possible dissolution or modification of NAFTA. In order to do so, among other things, Canada needs to find ways to attract foreign investors and patent filers and encourage innovation from within.

Being overly-dependent on foreign markets and economies is a risky business, specially in the current unstable political atmosphere.

Nazli Jelveh��is a JD Candidate at Osgoode Hall Law School and was enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.

[1] Canadian Intellectual Property Office, “IP Canada Report 2016” (25 November 2016), Government of Canada (website), online: <https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04112.html>.

[2] Ibid.

[3] Ibid.

[4] Ibid.

[5] Ibid.

[6]�� NAFTANOW (website), online: <http://www.naftanow.org/results/default_en.asp>.

[7] Judi Bottoni, “NAFTA, Trump and Canada: A guide to the trade file and what it could mean for you” (24 January 2017), The Globe and Mail.

[8] The Canadian Trade Commissioner Service, “Invest in Canada Flagship Report” (2016), Government of Canada (website), online:<http://www.international.gc.ca/investors-investisseurs/assets/pdfs/download/1-Flagship_report.pdf> at 24.

[9] Supra note 1.

[10] for more on this, please visit http://www.wipo.int/patent-law/en/developments/research.html.

[11] Hulya Ulku, “R&D, Innovation, and Growth: Evidence from Four Manufacturing Sectors in OECD Countries” (2005) Institute for Development Policy and Management at University of Manchester Working Paper No. 12, online:<http://ageconsearch.umn.edu/bitstream/30542/1/de050012.pdf>.

[12] Supra note 1, figure 4.

[13] Alexander Panetta, “Canada’s original NAFTA negotiator say it’s not ‘end of world’ if deal dies” (18 October 2017), CTV NEWS (website),
online:<http://www.ctvnews.ca/politics/canada-s-original-nafta-negotiator-say-it-s-not-end-of-world-if-deal-dies-1.3638387> and please see Jesse Ferreras, “What if NAFTA ended? These would be Canada’s hardest-hit provinces, industries” (18 October 2017), Global News (website), online.

The post What the End of NAFTA Could Mean for Patent Filing Trends in Canada appeared first on IPOsgoode.

brought its claim after the Canadian courts revoked two of the company’s patents on the basis that these patents lacked utility. The courts applied “” to invalidate the patents on the basis that the patents lack . In ISA, �� argued that the Canadian test for utility of the patent is arbitrary “judge-made law” and thus constitutes a violation of Canada’s international obligations under NAFTA. The company advanced its challenge against Canada on two accounts. First, Eli Lilly claimed that the judicial interpretation of utility in Canada (the so-called “promise doctrine”) contradicts the meaning “capable of industrial application” under NAFTA, Chapter 17. Second, the company alleged that Canada’s utility standard has abruptly changed over the years. According to Eli Lilly, such “dramatic” change in the judicial interpretation of the utility standard is problematic because it violates Chapter 11 of NAFTA. Both arguments questioned the traditional role of the domestic courts in interpreting and applying the patentability criteria. Ultimately, Eli Lilly’s argument failed in ISA. In short, the ISA arbitrators concluded that failed to produce sufficient evidence to support its allegations.

For the Government of Canada, however, it may be too early to celebrate this victory. The reasons become evident after appreciating the context of the Eli Lilly’s claim. First, the Eli Lilly’s dispute lasted more than five years. NAFTA does not provide parties to a dispute with procedural mechanisms to dismiss the claims early, akin to the summary judgment or a failure to state a claim provisions in common law jurisdictions. Accordingly, NAFTA permits claims that may eventually lack any legal or factual foundations without providing an opportunity to ��curb such claims early to minimize the costs. Second, the tribunal did not explicitly address whether a change in the judicial interpretation of the state’s patent law can potentially violate this state’s international legal obligations, including those under IIAs. In practice, it means that the doors for claims similar to Eli Lilly’s remain open. The consequences are significant for states parties to ISAs. to defend the investment claims average at US 5 million dollars per one dispute. Losing such a claim is an even more expensive option for states for two reasons. First, the monetary costs may be substantial. For example, Eli Lilly demanded in damages. Second, losing a claim may result in reputational harm for a state as a potential destination for foreign investment. As a result, some states prefer a settlement of the dispute over facing a foreign investor in the ISA process.

These factors combined create a structure that encourages foreign investors to bring IP claims in ISA against states in hope to achieve a favourable settlement in a fashion similar to the “patent trolls”.�� The claims similar to Eli Lilly’s can become a tool for speculation. In particular, ��the claimants can allege that the states’ patent laws dramatically change and such change constitutes a violation of an applicable IIA. If an effective mechanism for the early dismissal is not available, a state has to defend its claim for a prolonged period of time and face substantial costs. Some states, however, lack financial or expert capacity to uphold such defence. From a policy perspective, the concern the Eli Lilly’s type claims may inspire foreign investors to file claims against states not to vindicate their property rights, but rather to use such claims as a bargaining chip to achieve profitable settlements. Such procedural use of IP rights (and particularly patents) fundamentally contradicts the purpose of the national IP systems that�� grant IP rights for the benefit of society and not merely “”.

The post Eli Lilly v. Canada: Investor-State Arbitration Is an Open Gate for the “Patent Trolls” appeared first on IPOsgoode.

The “Promise of the Patent” Doctrine and its Latest Interpretation

The interpretation of what is considered “useful” as a requirement of patentability in the has been at issue over the last few years, with jurisprudence over the last decade seemingly taking us away from the “” benchmark that has been used historically. As set out in the landmark SCC decision in , in the context of pharmaceutical patents, there is frequently an estimation or “promise” at the time of filing that sets out the pharmaceutical’s clinical effectiveness before it has been (or can be) factually demonstrated.�� The jurisprudence has set out that, in order for the patent to subsequently be held valid, one must be able to factually establish this promise of utility or alternatively, establish it through the doctrine of sound prediction. The sometimes difficult and somewhat paradoxical requirement of demonstrating a “promise” of utility at the time of filing as set out in Wellcome has created a judicial environment that has seen many pharmaceutical patents recently being invalidated for lack of utility, much to the chagrin of the innovative pharmaceutical industry.

The case , revolves around Eli Lilly’s claim that Novopharm infringed their patent for the schizophrenia drug olanzapine. , the case was eventually remanded back to Federal Court where the . In the court’s judgment, it was held that the patent had a “promise” that olanzapine was “substantially better” in the treatment of schizophrenia than other known anti-psychotics, and that the individual advantages asserted in this comparison with other compounds “form the foundation for the overall promise of the patent”�� (paras 124-125). The court goes on to conclude that at the time of filing, “there is no sound and articulable line of reasoning, or a prima facie reasonable inference, that would have led the inventors from the evidence available at the relevant time to the explicit promise of the substantial advantage set out” (para 267), and subsequently found the patent invalid for lack of demonstrated utility. An appeal to the FCA of the decision was , and the most recent with no reasons given, even after the court granted leave to hear oral submissions on the application, a rare occurrence.

What is most interesting about the Canadian “promise of the patent” doctrine is that it is not explicitly found in the or in . In fact, both the and courts have come to contrasting decisions on the same olanzapine patent held by Eli Lilly, both courts choosing not to adopt the Canadian “promise of the patent” approach to utility. In doing so, these courts declined to invalidate the patent on these grounds. This judicial interpretation requires a higher standard in demonstrating utility for pharmaceutical patents from patent applicants in Canada than any of the country's largest trade and political partners

Criticism of the Doctrine at an Important Time

The extra hurdles that are presented by the “promise of a patent” utility requirement have been criticised by both the innovative pharmaceutical industry and Canada’s trading partners. The conflict has spilled out of the courtroom and into the political sphere when Eli Lilly served a under chapter 11 of the NAFTA agreement. Eli Lilly claims that the promise doctrine is non-statutory judicial law-making, violating Canada’s treaty obligations by invalidating useful pharmaceutical patents. In addition, a recent criticized the heightened utility requirements of Canadian pharmaceutical patents, putting pressure on a Canadian government that is in final negotiations for the landmark which .��

Choosing Not to Address the Issue: An Expression of Deference to the Executive Branch?

It is odd and perhaps disheartening that the SCC has not chosen to clarify the issue and lay out a clear judicial test for the contentious “promise of the patent” utility requirement. It is difficult to imagine that resolving this issue, one that has garnered so much scholastic and political attention, would not be in the public’s best interest. It could be that the SCC is trying to stay out of - what it views to be - an issue for the legislature, and is waiting for the outcome of political maneuvering before attempting to determine the issue according to its own reasoning. Although something like the NAFTA tribunal has limited powers and could not make direct amendments to legislation, the that Canada is currently facing means that any outcome of this issue is sure to have large diplomatic ramifications.

On the other hand, as this doctrine is seemingly one of judicial interpretation outside the explicit text of the - and is clearly a heightened utility requirement when compared to the US and the EU - one may feel that the SCC has an obligation to give a definitive justification and clarify the promise doctrine. If Canada is to be the “lone rebel” with this doctrine, the SCC must come out and address this issue. Delaying or avoiding this will only further the deleterious effects that uncertainty will have on all parties involved in these disputes.

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

The post Sitting This One Out: SCC Refuses to Clarify “Promise of a Patent” Doctrine appeared first on IPOsgoode.

To read the report’s section on Canada, click .

Results of the Report: A Commendation with Qualification

In the report, the USTR commends Canada for its recent legislative reform. The two initiatives cited in the report were Canada’s passage of the in June 2012 - legislation that represents Canada’s implementation of the WIPO Internet Treaties - and the introduction of the in March 2013 - which attempts to target commercial-scale trafficking of counterfeit products. Both of these initiatives were endorsed by the USTR, ��who went on to suggest in the report a further expansion of this type of legislation in order to give more power to border officials to seize goods in-transit.

The report was not universally complimentary, however, with the USTR expressing serious concerns regarding Canada’s pharmaceutical industry. One concern that was mentioned was the absence of a right of appeal in the administrative process of Canadian regulatory pharmaceutical approval. In addition, the USTR expressed apprehension regarding the impact of the heightened utility requirements for Canadian pharmaceutical patents. This statement likely refers to the that has taken place over the last decade regarding what constitutes the “utility” required for pharmaceutical patents in Canada; originating from the landmark SCC case .

Reaction to the Report

The movement of Canada from the “Priority Watch List’” to the ‘”Watch List” has been met with some criticism; with some American entities publicly voicing their displeasure with Canada’s new position. The most scathing reaction to the report comes from the Pharmaceutical Research and Manufacturers of America (PhRMA), who stating that they were very “disappointed” with Canada’s changing designation. In the report, PhRMA claims that “Canadian policies and judicial opinions continue to harm international innovators to the benefit of domestic industries” and that the “heightened standard for patentable utility for pharmaceutical patents is inconsistent with Canada’s trade treaty obligations.” The PhRMA statement also contains a critique of India’s pharmaceutical IPR regime - a country that is notorious for their pharmaceutical IP protection. Including these statements side-by-side might reflect the view that the American biopharmaceutical industry has of Canada's pharmaceutical intellectual property laws and policy.

A Precarious Political Climate

Although there have been concerns raised about the legitimacy of the USTR “Special 301 Report” from both and , an evaluation of Canada’s IP regime by its is undoubtedly an important diplomatic and economic concern. Indeed, Canada’s actions over the last few years seem to indicate their intention to conform to the wishes of their American counterparts, with the recent legislative reform that is responsible for Canada’s improvement on the watch list seemingly being a direct response to .

What makes the most recent report particularly interesting is the fact that it has been released at a complex political time period for Canada. The pharmaceutical company Eli Lilly recently launched a , and the (CETA), a free trade agreement between the Canada and the European Union (EU), is bound to be completed in the next few months. The recent legislative changes made by Canada could be viewed as political posturing for the impending CETA, which purportedly has the EU calling for increased . This agreement also allegedly includes an increase in patent protection for innovative pharmaceuticals in Canada at the request of the EU, which for its potential to greatly increase drug costs. However, with drug and health care costs being a sensitive political topic and being significantly in Canada over the next few decades, that the strengthening of IP pharmaceutical protection may not ultimately make it into the final draft of the CETA despite the EU's wishes.

It could be the case that the recent Canadian legislative reform is an effort by Canada to please its biggest trading partners without making drastic changes to its domestic pharmaceutical industry. The issue of rising health care costs is undoubtedly an important domestic political issue, and perhaps the seemingly “Jekyll and Hyde” approach to pharmaceutical and non-pharmaceutical IPR�� is a necessary compromise that Canada has to make in order to function diplomatically with its trading partners while maintaining what it views as a healthy domestic state. It would be hard to name many things that are more complex than trying to adequately fit domestic IP policies within international free trade agreements, but Canada must continue to strive to achieve that seemingly impossible balance. At the end of the day, like in most matters in life (and politics), you certainly can’t please everyone.

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

The post A Cautionary Kudos: Canada Moves Up on USTR IP Watch List appeared first on IPOsgoode.