Co-authored by Linda Dempsey, Vice President of International Economic Affairs
Canada’s attempts to defend a questionable intellectual property approach have taken a hit in recent weeks as government experts faced scrutiny from a team of neutral international arbitrators, based on the official hearing transcripts released on August 3. These hearings are vitally important for a wide range of innovative manufacturing companies using patents or investing internationally.
During two weeks of International Court of Settlement for Investment Disputes (ICSID) hearings in late May and early June, Canadian officials and experts faced crossfire for attempts to defend Canada’s “promise utility doctrine.” This rule, which constitutes a “revolution” in Canadian patent law, was invented by their courts and rests on the concept that patents that do not fulfill their “promise”—as arbitrarily construed by the courts often years after the patent was filed—can be ruled invalid, even if they meet all of the internationally accepted criteria for patentability. Canadian courts began freely applying the rule in 2005 and have since revoked 25 patents that were invented to help millions of people suffering from cancer, osteoporosis, diabetic nerve pain and other serious conditions.
During the hearing, Canadian counsel and witnesses faced significant questions from both opposing counsel and arbitrators on each of the major arguments, including claims that the doctrine is not new, that Canadian courts have blanket protection against review even when they create new policy and that the arbitrators cannot consider all relevant NAFTA provisions in weighing the case.
Canada’s actions are not only out of step with global practice for innovative economies, but also are inconsistent with its obligations under the North American Free Trade Agreement, as the U.S. government and others have pointed out. Intellectual property, like the patents threatened by Canada’s promise utility doctrine, is vitally important for growing innovative manufacturing in the United States and the millions of American jobs manufacturing supports. The NAM’s Manufacturers’ Center for Legal Action raised these and other issues in a February 2016 amicus brief filed with and accepted by the investment tribunal. While this case cannot require Canada to stop applying the doctrine, it sends a strong signal about why Canada needs to rethink its approach.
Canada’s actions also raise serious questions about its ability to promote growth and investment for innovative companies—and not just in the pharmaceutical sector. It is no coincidence that Canada’s innovation score in the World Economic Forum’s Global Competitiveness Report has fallen from 10th in 2006 to 22nd in 2015, surpassed by countries such as Ireland, Malaysia and Qatar.
While Prime Minister Justin Trudeau has talked about the need for Canada to boost innovation and economic competitiveness, barriers like the promise utility doctrine remain in place with little sign that the Canadian government is willing to engage U.S. government and industry counterparts to find a solution.
A long-term solution to Canada’s patentability issues is critical to support good, high-paying jobs for innovative American manufacturers and to promote strong bilateral commercial ties and innovation on both sides of the border.
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