Real intellectual-property strategy involves strengthening IP rights, writes Owens in the Financial Post

By Richard Owens, March 13, 2018

Budget 2018 has quite rightly been heavily criticized as being full of symbolism and not substance, as the National Post’s John Ivison summed it up. The budget’s announcement of a new “intellectual property strategy” has not yet received much attention. But it, too, is about signalling good intentions and ignoring effects. Whoever thought it up has clearly never been involved in any sort of transaction involving IP.

The budget announced the creation of a “patent collective.” Here’s what it said: “… the Government proposes to provide $30 million in 2019–20 to pilot a Patent Collective. This collective will work with Canada’s entrepreneurs to pool patents, so that small and medium-sized firms have better access to the critical intellectual property they need …”

The budget gave this definition of the “patent collective”: “A Patent Collective is a way for firms to share, generate, and license or purchase intellectual property. The collective approach is intended to help Canadian firms ensure a global ‘freedom to operate,’ mitigate the risk of infringing a patent, and aid in the defence of a patent infringement suit.”

To understand the budget’s assertions, some context is required. Patent “collectives” are, in fact, practically unknown. Rather, patents are sometimes “pooled” by groups of large corporations to facilitate product development. Industries like computer technology and aircraft manufacturing create patent pools by, effectively, cross-licensing the patents held by each member of the pool to each other member, with corresponding payments to members whose contributions have the highest values.

Imagine if government was setting up a program to help a canoe builder to acquire the right screws

These pools form under rare circumstances, are expensive and difficult to manage, and deal only with owned patents. What the government seems to propose is to deal among small technology firms. They are unlikely to have common interests in the first place, unlike the big patent pools. Moreover, the government wants to not only cross-licence patents, but to acquire patent rights from third parties to create a global “freedom to operate.”

How could such a collective possibly work? Will patent holders readily supply global rights to important patents to a loose Canadian collective? Will the government even know which rights to go after? What about the colossal transactional and administrative costs entailed by such a quixotic effort? And the need for wide technology expertise, which the government cannot realistically hire? What about the confidentiality requirements of enterprises, which would prevent them from disclosing their intellectual property needs and exposures?

This is Podunk Canadiana. Imagine if government set up a program to help a canoe builder to acquire the right screws. This is the level of absurdity afoot here, except it’s worse since the government probably understands screws.

Then there is the budget’s announcement of $4.5 million being spent to create a new “intellectual property marketplace”: “ … This marketplace will be a one-stop, online listing of public sector-owned intellectual property available for licensing or sale…”

First on the block, no doubt, the estimable Phoenix payroll system. Would “public sector-owned intellectual property” include proprietary IP of, say, Canada Post, the Canadian Commercial Corp., or other agencies? Does the federal government itself actually own IP, and have any idea where and what it may be? The real source of intellectual property is in universities, and much of that IP is indeed federally funded. Does the government intend to reach into that reservoir? What would even give it the right to?

I have negotiated transactions pursuant to which one Canadian government or another was supposed to acquire IP developed on its behalf. Typically government does not get what it is supposed to get, let alone the accompanying documentation, specifications, source code, updates, warranties, maintenance and disclosure commitments and other requirements for selling or licensing. I strongly suspect that just proving government title, which would be fundamentally necessary in any transaction, will be a problem. Moreover, the government’s own procurement rules require IP to be left with its originators for further commercialization — not acquired outright by government for resale.

There is even a portion of $21.5 million in the budget set aside for “the creation of a team in the federal government to work with Canadian entrepreneurs to help them develop tailored strategies for using their intellectual property and expanding into international markets.” Oh really? Try to imagine the efficacy of a team of bureaucrats busying themselves with a dizzying variety of complex IP problems; try to imagine the business person desperate, naive or confused enough to get involved with such a lot.

I had hoped the government had come to understand the importance of strong IP laws. The reference to an IP strategy in last year’s budget under “innovation” was a good sign. Yet, this budget makes it clear that Ottawa needs to treat IP rights with greater seriousness — and eschew the effete posturing on display here.

Real intellectual-property strategy involves strengthening IP rights, and there are many open issues concerning those rights the government is ignoring. It would be wise to return to the drawing board before going any further with any intellectual property strategy.

Richard C. Owens is a Munk Senior Fellow of the Macdonald-Laurier Institute and an adjunct professor at the University of Toronto Faculty of Law.

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