Patents are no barrier to innovation, despite the myths

Bob BarrigarRobert Barrigar has given permission for us to post on our website this article which was published earlier this month in The Globe and Mail.

Innovation and patents are related topics, but both are complex and not well understood. A common myth has it that patents constitute barriers to innovation. Not so. Examine our patent system in detail; it will be found to promote innovation.

A fundamental requirement of our system is that the patent provide a complete disclosure of the invention in sufficient detail to enable anyone skilled in the relevant technology to manufacture and use it. Further, research and development is expensive. Companies will be reluctant to invest in R&D if their innovations are readily available to competitors to exploit. Trade secrets enjoy no statutory protection, and once the cat is out of the bag, the innovator has no further protection in the absence of a patent. In short, a weak patent system is a constraint on R&D investment.

Next, consider a Canadian corporation of medium size that has obtained a patent for its innovation. By using its own resources, the patentee is able to serve, say, the Central and Eastern Canadian market, but not the West or any foreign countries. What is the solution? The Canadian patentee may file counterpart patent applications in selected foreign countries. But for many Canadian entrepreneurs, foreign exploitation using the patentee’s own resources would be impossible or uneconomical. So the patentee may seek a licensee under each of its foreign patents. And the patentee may elect to license another Canadian company to serve Western Canada.

But patent licensing is not a simple matter. In many cases, the patentee has developed its technology beyond the bare-bones innovation described and claimed in its patent. Its prospective licensee is unlikely to be content with a bare-bones licence; the licensee wants its manufactured product to be as industrially and commercially viable as the patentee’s product. So the patentee is usually compelled to grant, along with the patent rights, know-how and trade-secret rights to its licensee. But such rights enjoy no statutory protection, and they evaporate if the details leak out.

Furthermore, once the licensee is in possession of a patent licence and adequate know-how information, it’s in a position to make its own improvements and variants in the licensed technology. Consequently, to protect itself, the patentee may require the licensee to disclose and cross-license all such improvements and variants.

We infer from the foregoing that our patent system, including its various licensing opportunities, enables R&D activity in the applicable field of technology to take place in several countries by several different licensees, all of whom have been educated by the patentee. Without the security provided by our patent system, the innovator would have to rely on its own security measures and limited application of trade-secret law to attempt to protect its innovation. There would be little or no incentive for it to disclose the details of its innovation to anyone else.

Our patent system enables several different companies to develop, share and exploit derivative innovation that is dependent on the opportunities generated by one or more primary patent licences. In short, far from discouraging innovation, patents promote innovation.

What about the benefit to society generally? Society benefits from continuing R&D, regardless of who benefits financially from its exploitation. A weakened patent system might force innovators to seek limited trade-secret protection for know-how rather than be required to publish complete how-to information in the patent disclosure. It’s almost a certainty that licensing and cross-licensing activity will generate far more R&D by more companies that will be willing to invest not only in exploitation of the patented invention but also in making improvements in the technology, than would be the case under a weakened patent system. And society has the “insurance” that patents expire after their fixed term, after which everyone is free to make use of the patented subject matter.

So who loses? Unlicensed competitors of the patentee may sometimes lose. But if the patented invention is of importance, those competitors, in order to remain competitive, may be compelled to invest more heavily in R&D than they normally would. And their R&D may generate more derivative or substitute improvements than are forthcoming from the patentee and its licensees. So again, society wins.

Canadian entrepreneurs should be vigilant to protest against measures that would cripple our patent system to the disadvantage of innovators. This vigilance should extend to monitoring changes that may be proposed to our laws pursuant to international treaty negotiations.

About the Author:  Robert Barrigar has practised and taught intellectual property law, and written a leading textbook on patent law published by Canada Law Book. He has served as president of the Intellectual Property Institute of Canada and on the international executive committee of the International Federation of Intellectual Property Counsel.