Canadians get a record number of US patents in 2010: but lots more to do

January 21st, 2011

The Globe & Mail reports that record number of US patents were issued to Canadians in 2010.

This is good news.

However, it is by no means evidence that the battle to get Canadian companies to be more interested in commercializing innovations has been won. In particular, from a patent perspective, the US is in effect the ‘home court’ for Canadians in terms of filings: Canadians file more patent applications in the United States than they file in Canada. Our peers do not: they file more patents in their home country than elsewhere.

A simple comparison of the number of patents filed (or issued) by country in the United States misrepresents the rate at which Canadian industry is patenting relative to our industrial peers – it creates the mistaken favourable impression that Canada is competitive with countries like the Netherlands and Denmark. It is not. The Globe article falls into this trap. Proper analysis of the data requires comparing apples to apples. First, there is the obvious issue of population. Canada should file more patents than Denmark or Sweden – it is a much more populous place. But on a per capita basis, it lags. Second, there is the issue of ‘home market’. The home market for Danes and Swedes is either Europe or their home countries, but it is not the United States. For Canadian patentees, the US is their home market. So, an apples to apples comparison should compare Canadian filings in the US with Swedish (for example) filings in Sweden.

Or, as I have repeatedly said, the best comparator is the relative filings of patents per capita in the BRIC nations (Brazil, Russia, India, China). None of these markets is the home market for Canadians and its industrial peers (Denmark, Sweden, or perhaps the UK, France ….). And here, the numbers are stunning: Swedes file > 5 times as many patents (and trademarks) per capita in the BRIC nations as Canadians.

Sweden is an excellent comparison for Canada. They were ‘hewers of wood and drawers of water’. Now, they are innovators in the industries that make ‘hewing and drawing’ possible. As the patent data clearly establish, Canadians are way behind the Swedes in the evolution from an economy premised on natural resource extraction, to one premised on innovation for the natural resource extraction industries.

Tags:
Posted in Business of Intellectual Property, Innovative business, Intellectual property for business, patents, Patents Canada, trademarks | 1 Comment »

Canada and the United States renew their patent prosecution highway (‘PPH’) agreement “indefinitely

January 20th, 2011

The patent prosecution highway agreement between Canada and the United States has been extended ‘indefinitely’ (made ‘indeterminate’ in protocol-speak).

This is outstanding news for patentees, who will continue to benefit from fastracked prosecution (largely, but not necessarily, in Canada).

We expected this announcement, but of course it is very pleasing to receive this confirmation.

Even though we believe that a multi-lateral treaty that harmonizes patent prosecution across many nations would be profoundly in the best interests of patentees worldwide, there is no reasonable likelihood of such a treaty being consummated in the foreseeable future. We believe that all but the most parochial patentees now want patent protection in as many countries as they can reasonably afford: ‘I want to patent my invention ’ is really shorthand in most instances for ‘I would like to patent my invention in as much of the world as I can afford, and certainly across the G20 if possible’.

Bilateral ‘patent prosecution highway’ agreements have proliferated much faster than we had ever hoped, and will in large measure remove the urgency for a multi-lateral agreement. The real crux for patentees, however, will be whether patent agents (attorneys) actually advise their clients of their eligibility for PPH treatment. Properly advised patentees stand to benefit enormously. But, we predict that many patent professionals will be loathe to advise their clients of this.

The ‘old boys network’ model of the patent industry was this: many patent firms in ‘small countries’ had very little involvement with drafting and prosecuting originating applications on behalf of inventors. Instead, the made the bulk of their revenue came from prosecution of in-bound applications referred to them by patent agents (attorneys) in the country where the R&D originated (usually ‘large countries’, and in particular the United States, Japan and Germany). Equally, the patent agent who made the referral in the first place charged their client for receiving, reviewing, reporting, and responding to correspondence related to the prosecution of the patent in each ‘receiving’ country. Accordingly, neither referring patent professional nor receiving patent professional has any incentive to reduce the costs to the patentee.

The rapid rise of bilateral PPH agreements is a profound threat to this model at both ends: prosecution revenue per patent will shrink at both referring and receiving firm. Only firms that are able to offer high quality service at lower cost per patent for greater numbers of patents will maintain or grow revenues.

Accordingly, we predict that the most aggressive early adopters of patent prosecution highways to reduce patent prosecution costs will be sophisticated in-house counsel with budgetary constraints who deal directly with local counsel in multiple jurisdictions. And well they ought, because they are getting hosed under the old-boy approach!

Tags: , , , , ,
Posted in Business of Intellectual Property, Intellectual property for business, Patent prosecution highways, patents, Patents Canada | No Comments »

Workers are mobile. Can lawyers keep up?

January 11th, 2011

There has been a very rapid rise in worker mobility, especially for knowledge workers (I use ‘worker’ to include both employees and independent contractors).

Richard Florida posits that good jobs will move to where the creative class wants to live, but in my experience, the creative class moves around a lot to pursue the best jobs. When this worker mobility extends across multiple legal jurisdictions it poses a massive headache for lawyers struggling to provide effective advice at the interface of intellectual property and employment law.

As knowledge becomes more important, in relative economic terms, employers and workers inevitably pay more attention to who owns and controls “proprietary information” generated in their relationship after the relationship ends. The key issues are the ownership of copyrights and inventions (whether patented or not), the existence or waiver of moral rights, and whether there are any post-engagement obligations related to confidential information and trade secrets, non-solicitation and non-competition.

In terms of fundamental principles, all jurisdictions confront tension between the need to support economic growth by protecting ‘proprietary rights’ while encouraging competition and encouraging (or at least not hindering) worker mobility; when worker mobility extends across jurisdictions this adds a further dimension to the already significant challenges for contract drafting and enforcement. Below I have set out 3 scenarios to highlight some potential challenges for worker-firm agreements brought on by cross-border worker mobility.

Scenario 1: The employment of a senior executive employed by a firm in Ontario is terminated; the employee moves to California, takes a job with a competitor, and begins to solicit the clients of the first firm using publicly available information about the clients (ie. The worker is not mis-using any confidential information). We should assume that the employment agreement complied with Ontario law and the non-solicitation covenant was reasonable and not over-broad. However, California Business and Professions Code section 16600 provides: : “… every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void”. In a recent case involving the demise of the Arthur Anderson accounting firm, the California Supreme Court declared invalid the following covenants: If you leave the Firm, for eighteen months after release or resignation, you agree not to perform professional services of the type you provided for any client on which you worked during the eighteen months prior to release or resignation. This does not prohibit you from accepting employment with a client. [¶] For twelve months after you leave the Firm, you agree not to solicit (to perform professional services of the type you provided) any client of the office(s) to which you were assigned during the eighteen months preceding release or resignation. [¶] You agree not to solicit away from the Firm any of its professional personnel for eighteen months after release or resignation.

Knowledge workers moving from Ontario to California is not a rare event, yet how many counsel in Ontario even know that this is a potential problem?

Scenario 2: Consider a graphic artist engaged in Buffalo who later moves to Toronto and finds that works that she created in Buffalo are being used in Canada in association with a cause that she finds reprehensible. Moral rights are not part of US or New York copyright law, and thus it is highly unlikely that even a well drafted engagement agreement made any reference to moral rights. Under Canadian law, moral rights are separate and distinct from copyrights. Accordingly, can the worker assert her moral rights to stop the use in Canada of the work in association with this cause?

Scenario 3. An independent contractor resident in Gatineau, QC works for a firm in Ottawa, ON. They agree to ‘co-own’ any inventions. Inventions are made, and an originating patent application is filed in the United States paid for by the firm. In accordance with US patent law the inventor is the applicant. The worker then licenses worldwide rights to the invention to a competitor of the firm. What rights do the firm and the licensee have? The answer to this question depend greatly on which law property law governs. Is it the law of personal property, or patent law? If it is patent law, is it the law of each country where a patent claiming the invention is filed, with the potential for many different results? In Canada, patent law is a matter of federal jurisdiction; however, ownership issues as between the worker and the firm are matters of provincial jurisdiction. Ontario is a common law jurisdiction; Quebec is a civil law jurisdiction. Accordingly, the concepts of ‘equity’ and ‘fiduciary duties’ which might inform the obligations of co-owners to each other in Ontario are not per se part of Quebec law (although analogous concepts do exist, conceptually they are different). To further complicate matters, the current law in Canada in the common law provinces is that one co-owner of a patent cannot license the patent without the consent of the other co-owner. The law in the United States is the complete inverse: a unilateral license by one co-owner is possible.

What can a reasonable lawyer to do? I have no easy answers, but I do know that the challenges are real, and I suspect that they will increase in frequency and importance.

This article first appeared in The Lawyers Weekly.

Tags:
Posted in copyrights, Intellectual property for business, patents, trademarks | 1 Comment »

Petroleum Patent Pending – Globe article of 11/01/08

January 10th, 2011

Horray – there is an article today in a national Canadian publication about the importance for firms in the oil and gas industry to innovate, and to patent their inventions (Petroleum Patent Pending, Globe and Mail, January 8, 2011)

Is it possible that Canadians businesses and journalists are finally starting to see the light about the importance of being innovative, and the role of intellectual property in general and patents in particular for commercializing these innovations? Perhaps. And certainly, articles like this one are a very important contribution to a discussion that needs to happen. Full kudos are due to the Globe & Mail and Nathan Vanderklippe.

But before we declare that the struggle to transform Canada’s economy to a knowledge-based one is over, a little scepticism is in order. Buried within the Globe’s article is an example of the sort of lazy excuses that typify how we got into this mess:

If you look traditionally at the oil and gas area, people were kind of like good old boys, and so people did business on a handshake – and patenting was the same way,”

Implicit in this is that in some halcyon past men were men and honoured the rights of innovators, but now in a dog-eat-dog world, patents are required. That, with all due respect, is pure twaddle. And, it is the sort of lazy thinking that Canadians use to excuse their pathetic lack of innovation and knowledge about how to commercialize it.

Handshakes are no better or worse than they ever have been for protecting innovation – but the whole point of a patent system is that contractual rights (whether solemnized by a handshake or 20 page written agreements) are not the same as property rights. A property right is enforceable against the world; a contractual right is only enforceable against the person who shook your hand.

Let’s be frank. The reasons that in the past Canadians in the oil & gas industry didn’t patent are:
a) They didn’t need to, because they were so busy making money doing commodity work, that no one thought that they needed to innovate;
b) The competition in their home market was so weak that they saw no need to secure a property right in any innovations they did come up with;
c) They had neither need nor desire to generate revenue outside Canada;
d) Management didn’t know anything about patents as a means to protect innovation; and
e) Shareholders (investors) didn’t know anything about patents and were hostile to the expenditure of funds on them.

As I have said for some time, the era of Canadians staying ‘fat and happy’ from just doing natural resource extraction is over (eg. Forestry, fishing, agriculture) or rapidly coming to an end. Unless we want to be ‘skinny and bitter’, we had better figure out how to compete on a world stage in knowledge-based businesses, fast. And unequiivocally, that means learning the basics of patents and other forms of intellectual property.

Tags:
Posted in Innovative business, Patents Canada | No Comments »

Building an innovation economy

January 1st, 2011

Canada does not suffer a shortage of public sector R&D. What is suffers is a lack in the private sector of the acumen and commitment required to commercialize innovation. Principally, I suspect that the reason for this lack of acumen and commitment is that historically life in Canada for business has been pretty soft.

Commercializing innovation – and developing knowledge-based businesses – is hard work, much harder work than the ‘cut it, dig it, kill it’ foundation of most Canadian businesses. Our businesses have grown fat and happy on natural resource extraction, and while natural resource extraction can be difficult, dangerous, and expensive, there is a fundamental difference between trying to extract something, and trying to create something.

In this indictment of Canadian business, I include not just our principal resource industries, but the service businesses in our economy too. Our corporate finance industry is a prime example – excellent at raising money for extractive industries like mining or oil & gas, almost uniformly poor at raising funds for knowledge-based businesses. And the industries that I am in – law, and patents – were at least as bad as any: coddled, and neither innovative nor competitive on a world stage.

What is lacking? The Canadian private sector is lacking two key ingredients for an innovation culture:
a) Knowledge;
b) Experience; and,
c) Commitment and focus.

In subsequent blog posts I intend to explore these and other issues, within the overall theme of exploring the challenges of commercializing of innovation in Canada and the United States. I intend pay particular attention to the role (positive and negative) of intellectual property (especially but not exclusively patents) in this process. And as a general rule, I will do so from the perspective of small-to-medium sized enterprises (SMEs), not because I am hostile to large enterprises. I do not intend to focus on the minutae of Canadian or US patent law or practice, but will from time to time talk about specific developments in so far as they impact on commercialization of innovation (ie. Not whether they are of arcane interest to patent attorneys).
I welcome your comments, questions, and criticisms.

Tags: , , , ,
Posted in Innovative business | No Comments »

Which way will the traffic flow on patent prosecution highways?

August 17th, 2010

A key question is which patent offices will be winners and which not from PPH agreements.

Examination will not be even distributed across countries who are parties to PPH agreements if there is a perception among patentees that there is an advantage in prosecuting in one country over another. Here, perception may matter far more than reality, at least in the early going as patentees and their advisors make decisions on the fly. Examples of perceptions that could dramatically affect filing patterns include:

a) If patents will be examined more quickly in one country (country A) than the reciprocating country (Country B).

b) If claims are more likely to be allowed in one country (this has significant potential unexpected consequences – more below).

c) If it will be easier to prosecute the same claims in other countries (Country C) as a result of examination being in Country A rather than Country B. The existing of PPH agreements between Country A and other countries, that Country B does not have reciprocity with, will be a significant factor here. For instance, if the USPTO has a PPH agreement with a country (such as the EPO) and Canada does not, then examination in the US will be preferred to examination in Canada for applicants who also wish to claim patent rights through the EPO.

d) If it will be easier to enforce claims examined in one country than another. This issue goes to the heart of reciprocity. Will it, for instance, be possible to enforce in a US court a patent that was issued without examination by the USPTO following examination in a country like Canada. It is almost certain that the non-standard examination history and the element of deferral to a foreign authority inherent in the PPH process will provide fodder for defendants in an infringement suit to claim that the patent is invalid. Patent applicants will need to consider this contingent risk when determine which country to choose for examination.

These factors may produce contradictory forces. Patentees will have to weigh all of these factors, and more when determining where the primary examination should take place.

Factor (b) is troubling: patentees may seek a jurisdiction where examination is permissive, not necessarily where it is of highest quality. This is directly contrary to the stated goal of using PPH agreements to improve patent quality. A partial off-setting consideration is that weak or poorly examined patents are not likely to withstand testing in litigation and thus patentees will have some motivation to seek the highest quality patents. However, this is not a complete answer to the problem as so few issued patents are actually litigated, and issued patents, though weak to the point of invalidity, may still have a substantial chilling effect on third parties (whether targeted for infringement by the patentee or not).

These factors and more suggest that the flow of traffic on patent prosecution highways is unlikely to be symmetric. Some patent offices will carry a disproportionate share of the examination load and incur costs accordingly. National patent offices that are perceived by patentees as being unsuitable choices to lead examination will experience the greatest financial benefit from PPH agreements. For domestic offices, it is perverse but true: will pay to be slow, unfriendly to applicants, and a sink but not a source of examined patents.

Considering all of the above, we anticipate for instance, that the US-Canada PPH will be a financial boon for CIPO, but will produce no measurable benefit for the USPTO. The same number patents will be fied and examined in the US, but more patents will be filed and prosecuted without examination in Canada. Currently the ratio between patents filed in the US and Canada is approximately 10:1. We expect this gap to narrow, as it becomes simpler and cheaper to secure an issued Canadian patent with claims equivalent to the allowed US patent. However, this prediction of asymmetric benefit leads immediately to a fundamental the question: if there is no net benefit for the USPTO, why will it enter into or maintain these agreements?

I currently have no answer to this, yet answering it is crucial for understanding the long term prognosis for PPH agreements.

Tags: , , , , , , ,
Posted in Patent prosecution highways | No Comments »

Why highways? The incentive for PTOs to make agreements.

August 16th, 2010

The stated objectives of patent offices for entering in to PPH agreements are a) to expedite examination of patent applications and b) to improve the quality of the patents are allowed.

These are laudable objectives, and PPHs may assist the first (speed of examination), but without more it is not a given how they will improve overall patent quality. Most importantly, however, these laudable goals are likely not the real motivating force driving the flood of PPH agreements which is money. Only by understanding this motivation can one understand the inevitability of PPH agreements, and in particular, understand why it is so likely that the initial ‘trial’ and ‘demonstration’ agreements will become permanent features of the patent landscape. Perhaps more importantly, this motivation will shape the specific terms of the PPH agreements and thus their impact on patentees, third parties, and their respective patent advisors.

National patent offices collect fees from patent applicants. To my knowledge, no PPH reduces or amends the fees charged by countries to patent applicants. But, PPH agreements have the potential to dramatically reduce the amount of work done by many patent offices in examination. Accordingly, the net result of each PPH in the short run is the same fees collected but far less examination effort. Considering how difficult and expensive it is for many patent offices to attract, train and retrain qualified patent examiners, patent prosecution high agreements have the potential to dramatically improve the profitability of many domestic patent offices. They have the potential to be a financial boon for patent offices.

Moreover, as the cost of domestic patent prosecution falls as a result of PPH agreements, I anticipate that applicants will (on average) file in more countries. This will produce yet more revenue for domestic patent offices.

Posted in Patent prosecution highways | No Comments »

Patent prosecution highways – the road ahead

August 15th, 2010

Patent prosecution highway agreements (“PPH”) appear to be all the rage, and the reasons that patent offices like them are obvious (discussed more fully in a separate post). However, PPH agreements represent an enormous change to patent prosecution that will have profound consequences for patentees, licensees and infringers, patent agents/attorneys, and national patent offices. Some of these consequences will be very positive, and some will not. But considering how significant the changes and challenges ahead are likely to be, it is remarkable how little discussion PPHs have generated.

In a series of posts, I will try to explore the challenges, opportunities, and uncertainties arising from patent offices setting off on these highways, often without much consultation.

First, some terminology. ‘Patent prosecution highway agreements’ are bi-lateral and multi-lateral agreements between nations (or their respective patent offices), which permit patent examiners in one country to recognize (and perhaps adopt or defer to) the work performed by their peers in another country. Most PPH agreements purport to be reciprocal (although the extent to countries and courts will respect that reciprocity is one of the most open issues arising from PPH agreements.)

Posted in Patent prosecution highways | No Comments »