Patent agents are not stifling Canadian inventors

We are indebted to Robert Barrigar for permitting us to post this article that was published in the Globe and Mail on March 8, 2017.  Mr. Barrigar is past-president of the Intellectual Property Institute of Canada (IPIC) and was registered as a Canadian and U.S. patent agent and served four years on the Patent Agents Examining Board.

Innovation is a hot topic these days, but often not fully understood. The role of patent agents is one of the most misunderstood subtopics, and a recent argument in these pages (of the Globe and Mail) that patent agents are impeding innovation in Canada only served to cloud the waters. While the author recommended government action to redefine the regulation of Canadian patent agents, he failed to recognize that the Intellectual Property Institute of Canada (IPIC) had previously, on its own initiative, recommended such to the federal government. Canadian patent agents obtain protection for the inventions of Canadian clients; they do not present obstacles, except charging for their services.

It is important to understand the difficulties faced by Canadian innovators. Our market is small compared to that of the United States. For this reason, it is often more difficult for a Canadian innovator to receive financing for obtaining and exploiting a patent than is the case in the United States. Canadian innovators typically prefer to obtain U.S. patents as a first priority, and Canadian patents, at best, a second priority. Accordingly, a Canadian patent agent has to understand the requirements of U.S. patent law and practice, as a Canadian agent will often be charged by a Canadian client with writing and prosecuting a U.S. patent application. The principal challenges to Canadian innovators – financing, marketing, competition – do not involve Canadian patent agents.

A typical Canadian patent agent has a university degree in science or engineering, and an aptitude for effective communication about technical matters relating to clients’ inventions. Historically, the Canadian patent profession has been governed primarily by the Patent Act and Patent Rules, and secondarily by IPIC. At the present time, this set of relationships is under review both by IPIC and the federal government.

The patent profession is sufficiently small that no specific patent-agent-oriented university accreditation is available for individuals who plan to become professional patent agents – they must rely upon their work experience to qualify for writing the patent agents examinations, which they must pass in order to become registered. They need not have been apprenticed to a registered patent agent, but having had such as a mentor and tutor is clearly advantageous.

The members of the Examining Board who set and mark the examinations that must be passed for registration as a Canadian patent agent are appointed by the Commissioner of Patents. The chairperson of the Board and at least three other members must be professional employees of the Patent Office.

When I served on the Examining Board, the pass rate was appreciably below 50 per cent, partly due to the writing of the examinations by lawyers of limited experience; inadequate technical analysis; lack of familiarity with applicable statutory and case law and regulations; and inadequacy of written expression. It is clearly not in the public interest to accept as members of the patent profession those who cannot pass the patent agents examinations. Canada does not need consultants who fail to comprehend the complexities of patent practice nor those who draft inadequate documents. Perhaps the most underrated desirable qualification for a patent agent is adequacy of expression. Unfortunately, not even a PhD nor a law degree guarantees that this quality is among those obtained through an individual’s education. This reflects a deficiency in Canadian education at lower levels.

It is important to note that inventors may represent themselves before the Patent Office; they do not need to retain a patent agent. But they would be well advised to do so, as serious and sometimes irreversible errors can easily be made by untutored inventors. Chances are that any consultant who attempts to draft a patent application without having been registered as a patent agent will be at risk of drafting a legally invalid or economically useless or inferior document. And any such consultant who attempts to respond to a Patent Office Examiner’s objection will face the same set of problems.

It is important to note that patent agents are not, per se, advocates for clients’ inventions. Clients may wish to obtain and enforce their own patents, but they may wish to invalidate others’ patents or obtain opinions so that they do not infringe such. Subject to avoidance of conflicts of interest, patent agents must be prepared to assist clients to obtain any of these objectives.

How Does Your Website Rate?

I like to spread the word when I think someone is doing something right.  Today I am excited about a communication I received from the Business Development Bank of Canada (BDC). I am on the email list for the BDC and receive notices regarding various articles, some of which I download and read.   I received an email offer for a free e-book entitled “Social Media – A Guide for Entrepreneurs”. I know I should improve my knowledge of and activity in Social Media, so I followed a link to the BDC website and signed up for the e-book.   The BDC website confirmed that an email had been sent to me with a link to download my free email.  Then the part I am really excited about occurred.  A message popped up on the BDC website offering a free website evaluation. I always like any kind of objective evaluation.  Your golf score objectively measures whether your golf game is improving.  A metronome objectively measures whether you are keeping time when playing music.  Now here was a tool for objectively measuring the website experience at the Thompson Cooper website.  The resulting report we received from the BDC for the tcllp.ca website was divided into four parts:  Accessibility (to mobile devices), Marketing, Website experience, and Technology (how well designed the website is).  In some areas, such as accessibility to mobile devices and date last amended (currency), the tcllp.ca website scored 10 out of 10.  However, in the Marketing area, the score was a dismal 4.3, with scores of 2 out of ten for meta-tags and 0 out of 10 for feeds (whatever they are).  Clearly there is work to do.  I would like to thank the Business Development Bank of Canada for the free e-book (which I intend to read).  I would also like to thank the BDC for the website evaluation which opened my eyes regarding the shortcomings of our website.   If you like free stuff, as I do, I urge you to go to get on the BDC email list.  For the things that you have missed, articles, social media book, and website evaluation, follow the link to the BDC website and check it out. https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/business-assessments/pages/free-website-evaluation.aspx

2016 Annual Meeting of the Intellectual Property Institute of Canada (IPIC)

convention-brochureOne can gain an understanding of issues that the profession is wrestling with by reviewing the titles of the presentations from the 2016 IPIC annual meeting.  Continuing Professional Development: “The Skill Set of the IP Practitioner of the Future – Where will IP be in 20 years?”  Trademarks: “Trademarks in Metatags and Keywords – A summary of the Current State of the Law in Canada as Contrasted with the U.S. and Europe”, “Brand Boot Camp”, “Best Practices before the Trademark Office”.  Patent Issues: “Patent Issues that Keep In-House Counsel Up at Night”, “Patentability:  Dealing with Challenges in IT and Life Sciences”, “Best Practices before the Patent Office”.  Online Issues: “Managing Online Content: Tips, Traps, and Tariffs for IP Practitioners”.  Rights Issues: “Publicity Rights: Guidelines for Giving Clients Practical Risk Assessments”.  Litigation Issues: “Remedies – Quick Results in Trademark Cases: Myth or Reality”, “Top IP Cases of the Year”, “Appellate Advocacy in Specialized Area of the Law”.
Many of the above issues I deal with on a regular basis and have written articles about over the past year.  However, the presentation of “Futurist” Jeremy de Beer was of general application and may be useful to the reader.  Mr. de Beer described an approach to predicting the future using a “grid”.  He creates this grid by placing a first line that represents a trend that one can see today, such as automation (self driving cars, smart homes with remotely controlled appliances).  One end of the line represents the present and the other end of the line represents the future, if the trend continues. He then places a second line crossing the first line at 90 degrees to create his “grid” having four quadrants.  The second line represents a second trend that one can see today, such as the increasing capability of smart phones. Again, one end of the line represents the present and the other end of the line represents the future, if the trend continues.  A first quadrant will predict what happens if neither trend continues, a second quadrant will predict what happens if the first trend continues and the second does not progress, a third quadrant will predict what happens if the second trend continues and the second trend does not progress, a fourth quadrant will predict what happens if both trends progress.  Mr. de Beer indicates when you extrapolate what may happen some of your “predictions” (especially in the fourth quadrant) should appear to be ridiculous.  If this does not occur, you are not pushing the trend far enough. Self driving cars and everyone carrying miniature computers that connect to the internet would have sounded ridiculous 20 years ago. It is not viewed as being ridiculous today.

 

Comment:  I received some comment from Keith Sketchley that I felt should be shared.  He indicated that one should beware of overly simplistic methodologies.  He identified two fundamental flaw, in the futurists approach that he described as follows:

1. Trends do not continue indefinitely, in part because people change behaviours. In technical things that’s called “feedback”.  For example, increasing prices of a product will be met by reduced consumption in response to prices, demand drops, suppliers lower their prices.
2. It is difficult to predict new products and services, and some predictions fall far short. For example, a professor gave a Mr. Smith a C, sneering at his idea that people would pay a premium for assured delivery timing of documents. Mr. Smith went on to start an industry, he called his company “Federal Express

Balancing of Interests under Copyright Law

johnny-automatic-scales-of-justice-300pxCopyright law often includes a consideration of a “balancing the rights”, usually balancing the rights of content users and the rights of content creators.  Some recent court decisions illustrate how this “balancing” takes place and explore some new issues in copyright law. Maltz v. Witterick (a decision issued by the Federal Court of Canada in May 2016) relates to balancing rights as between two competing content creators.  A writer by the name of Jennifer Witterick was “inspired” to write a fictional novel after viewing a documentary produced by Maltz and some others regarding the life of Francizska Halamajowa and her daughter Helena, who hid three Jewish families when the German army occupied Poland during the Second World War.   Upon becoming aware of the novel, Maltz noted a number of factual similarities between the documentary and the novel, and commenced an action for copyright infringement against the author Witterick and the author’s publisher.  By way of background, the Courts have long held that copyright does not apply to historical facts, such as the German occupation of Poland during the Second World War.  The Judge in Maltz v. Witterick noted that the novel was a fictional story aimed at young readers and had a much different “feel” than the documentary.  The only thing that had been taken were some factual underpinnings for the story.  Counsel for Maltz argued that there was a difference between historical facts in which no one can own copyright and “small facts” drawn from diary entries relating to events on a particular date. In  concluding that the writer Witterick’s use of some actual facts from the life of Halamajowa did not amount to infringement, the Judge made a finding that facts are facts and no one owns copyright in them no matter what their relative size or significance.  A second case, Geophysical Services Incorporated v. Encana et al (a decision of the Alberta Court of Queen’s Bench in April 2016) relates to balancing rights as between content creators and public authorities.  Geophysical Services Incorporated (GSI) was in the business of selling seismic data.   This seismic data was filed with a government board pursuant to a regulatory regime established under the Canada Petroleum Resources Act (CPRA).  After a period of 5 years, the seismic data was made available to the public by the board.   GSI commenced a legal action for copyright infringement against Encana and many other companies that were making use of the seismic data without GSI’s permission.  The Judge confirmed that GSI owned copyright in its seismic data, but held that to the extent that the regulatory regime of the CPRA conflicts with the Copyright Act, the CPRA regulatory regime prevails. The wording of the CPRA, properly interpreted, allows for disclosure without restriction after a defined period of time. It is a complete and specific code that applies to all oil and gas information in the offshore and frontier lands, including seismic data. Its provisions supplant any more general pieces of legislation, such as the Copyright Act.  Both of the foregoing decisions have been met with criticism.  The Maltz v. Witterick case is criticized as it allows a party to use intimate details of someone else’s life without compensation. The Geophysical services v. Encana et al case is criticized as amounting to expropriation by the government without compensation.  What do you think?  Please communicate your views to dthompson@tcllp.ca

Legal Aspects of Art

The link below leads to SLIDESHARE of a presentation sponsored by Community Arts Council of Greater Victoria that I gave at the Victoria College of Art on Wednesday June 29, 2016.

 

Link: http://www.slideshare.net/ThompsonCooperLLP/community-arts-council

Questions and Answers regarding Licensing Technology

LicensingQuestion:  I filed for patent protection. Should I still have potential Licensees sign a secrecy agreement?
Answer:  Secrecy Agreements can get in the way of licensing discussions. Many companies you approach will not sign secrecy agreements.  In fact, large companies often require you to sign an agreement confirming that they are not bound by secrecy.   If discussions are going well, do not hesitate to reveal more information. Bear in mind that a patent application is not “made public” until 18 months after its filing date. The company you are negotiating with can only see such information as you choose to share with them.  If you feel that they are just pumping you for information, do not share more information until they show their good faith by placing a serious proposal before you. These types of proposals are called Letters of Intent, they contain a financial proposal that is subject to receiving and reviewing further information.

Question:  What should I ask for?

Answer:   Generally it is best to capture the company’s interest and then invite them to make the first proposal.   There are a number of reasons for this.  A first reason is that you may undervalue the technology, whereas if you let them make the first proposal you generally will get more.  A second reason is that you may overvalue the technology.  If the company feels you have unrealistic expectations, the company may break off negotiations. A third reason is that every industry has “industry norms”, for example 5% is a typical royalty in some industries.  A fourth reason is that many companies have a “history” of past dealings that they are influenced by (i.e., “this is how we generally structure our licensing deals”).  If you can get a company to make any form of proposal at all, there is potentially a deal to be made.  The greatest problem in licensing is facing the enormous inertia in every industry.  Unless a prospective licensee is actively looking for a better way of doing things, it can be difficult to get their attention if what the industry has been doing for years is still “working” just fine.  An industry executive can lose his or her position spending money on a solution when there was no generally understood problem.

Question:  What should I expect to see in the proposals received from companies?

Answer:  It is unlikely that you will be offered a single large lump sum payment.    Instead you are likely to receive an offer that includes an initial payment of $10,000 to $50,000 and a royalty percentage of sales.  The reason for this is that an executive who pays a huge lump sum on a technology that does not work out is placing his or her career in jeopardy.   If the technology proves itself over time, a buyout offer may come down the road.

Question:  How do I know if the proposal is reasonable?

Answer:   There are “rules of thumb” that are applied to gauge whether a proposal makes sense.  One such rule is the “rule of 25”.   The rule of 25 is sometimes criticized as not taking into account all factors.  This is true, but it works for many situations.   Under the Rule of 25, the labour and materials required to manufacture a product are deducted from a wholesale price for the product to arrive at a gross profit figure.  This gross profit figure intentionally does not include overhead, advertising or administrative costs.   According to the Rule of 25, the company is taking all of the risks and should be entitled to 75% of the gross profit.  You receive 25% of the gross profit for bringing this opportunity to them and providing patent protection to protect their market.  However, the final royalty percentage is never set out in a license agreement as 25% of percent of gross profit. Instead the royalty is converted to a percentage of the wholesale invoice price.  The reason for this is that you need a number that can easily by audited by an inspection of customer invoices.

We stated above that the Rule of 25 does not take into account all factors.  For example, the Rule of 25 does not take into account additional costs that may be incurred in preparing to manufacture a new product.  This can easily be accommodated through a “step royalty”.   A step royalty is a royalty that steps up or down, depending upon the circumstances.  To accommodate the costs incurred in preparing to manufacture, you may agree to take a lower royalty until those costs are recovered and then your royalty will “step up” to a higher level.  Step royalties are used in a variety of situations.  For example, to get volumes up, royalties sometimes “step down” with volume.  In such a situation there may be a royalty of 7 % on the first 50,000 units sold each year, a royalty of 5% on the next 50,000 sold each year and a royalty of 4% on all units over 100,000 sold each year.

Question: Is there any rule of thumb for assessing a lump sum offer?

Answer:  Accounting firms can make projections to determine the amount of royalties expected to be generated over the life of a patent. The accounting firms can then give you a “current value assessment” so that you have a calculation of what lump sum is appropriate as a replacement for the royalty.  This works well when you have been receiving royalties for a number of years.   When the product has not even been on the market and has no sales history, the number is essentially a creative fiction, even working from the best information available.  Even when royalties have been paid for a number of years, the accounting firm must make some assumptions regarding changes to product price due to cost of living and growth of market share that may turn out to be false.  When you have a large lump sum offer presented to you, consider what the alternatives are and how receiving the funds will affect your life.

One client of mine received a 10 million dollar offer and turned it down.  The reason was that he was perfectly happy with the quarterly royalties he was receiving and it did not take an accountant to see that he would be making well over 10 million dollars over the next 5 years by simply keeping his existing royalty stream.  Another client of mine received a 2 million dollar offer and accepted it.  There were no sales.  He could not afford to put the product on the market himself.  If the 2 million dollar offer was withdrawn he had no viable alternative.  He had a wife, two young children, a mortgage and debts incurred in developing the technology.  Receiving the 2 million dollars now would have a major positive impact on his life.

Question:  What should I look out for in any proposal?

Answer:  It is a mistake to focus just on the financial details of the offer.  One should look carefully at what obligations are being imposed back upon you.   Those obligations could cost you more than you will receive.  Who has to pay the expenses associated with completing and maintaining patents in Canada and the United States? If the company wants foreign patent protection, who has to pay the expenses associated with completing and maintaining the foreign patents?  Who has to pay the expenses associated with enforcing the patent against infringers?
If you have granted an “exclusive” license (which often is the case), you need minimum performance requirements to ensure that your technology is not shelved.

On a human level, you and your technology need a “champion” within the company.  Someone you feel is committed to the technology and will drive the implementation of the technology within the company.   Preferably, someone you can relate to.

Trans Pacific Partnership (TPP)

The-TPPI was listening to the radio the other day and caught the tail end of an interview concerning the Trans Pacific Partnership (TPP).  The comment that attracted my attention was a statement that the Intellectual Property provisions of the TPP agreement would cost Canada 57,000 jobs.  The same evening the TPP agreement was on the evening television news and the person interviewed indicated that the ability of Canada to change its laws would be hampered.  I have now read the Intellectual Property provisions of the TPP agreement, which are found in the 75 pages which comprise Chapter 18 and accompanying schedules.   The agreement indicates that countries may change their laws “provided that such measures are consistent with the provisions of this Chapter”.   As indicated by the television commentator, Canada would be in breach of the agreement if, after signing, the government chose to pass laws that contradict the provisions of the TPP agreement.   Looking for the lost 57,000 jobs, I found that most of the 75 pages are consistent with the laws of Canada as they presently exist.  The copyright term has been lengthened, but that change is unlikely to cost any jobs.  Canada’s previous copyright term was the life of the author plus 50 years after his or her death.  The TPP agreement provides for a copyright term of the life of the author plus 70 years after his or her death.   In Canada, there is a government approval process before a company can sell agricultural chemical products, pharmaceuticals, or biologics (complex molecules such as proteins that are isolated from plants, animals or micro-organisms, or made using biotechnology).  The TPP agreement provides for a “patent term adjustment”, lengthening the term of a patent when there are delays in the government approval process.  This change will give drug companies a few more years of protection and will slow the introduction of generic drugs into the Canadian market.   As part of the government approval process, companies must submit test data and, where applicable, data from clinical trials.  There is presently no law, prohibiting subsequent applicants for government approval from using test data submitted by an original applicant. The TPP agreement provides that subsequent applicants are prohibited from using the test data submitted by the original applicant for a period of 10 years when seeking government approval for agricultural chemicals, 5 years for pharmaceuticals, and 8 years for biologics.  This will also slow the introduction of generic products into the Canadian market, as generic manufacturers are forced to either wait or develop their own test data and conduct their own clinical trials.  I have no way of assessing whether 57,000 jobs will be lost.  However, it is reasonable to assume that there will be a loss of jobs in the generic drug industry as these provisions begin to affect generic drug manufacturers based in Canada.  However there are some answers missing from the dialog, that would help me decide whether or not I am in favour of TPP.  How many jobs may be gained in other sectors with the signing of TPP?   How many jobs may be lost if we do not sign TPP?  We rely upon our exports, being frozen out of TPP may not be good for Canada in the long run.

Angel Investor Event

Picture of Mayor HelpsIn Victoria, we love to criticize our local politicians from our safe seats on the sidelines with respect to everything from bridge replacement to sewage treatment.  A common complaint is that they don’t “do” anything.  I thought I would take some time to comment on an Angel Investor event entitled “A Capital Mission” that took place February 17 – 19.  This is an example of local politicians trying to make things happen for the local economy by showcasing our tech community to both local investors and investors from elsewhere in Canada and the United States. The event began the evening of Wednesday February 17 with a welcome reception at which Mayor Lisa Helps assumed the role of gracious host, first by giving a welcoming address and then by inviting Amrik Virk, BC Minister of Technology, Innovation and Citizens’ Services, and United States Consul General Lynne Platt to add their comments.  Tim Catlin of Change.org, one of the U.S. based organizations that has invested locally, indicated that with our existing infrastructure and the comparatively low Canadian dollar, Victoria is a very attractive place for a U.S. citizen to invest.  There followed a “pitch night” with the following entrepreneurs making pitches to secure capital for their ventures. LlamaZoo produces software that provides anatomy training for veterinarian students.   Cooler Heads produces auto-deploying head and face flash fire protection.  OrangeDox produces a software that adds greater functionality to Dropbox.  Craftt Technology produces a beer keg tracking system for craft brewers.  Social Nature promotes peer to peer marketing.  Chatter High is a web platform to allow junior high and high school students to explore post-secondary career options in an entertaining way.  Industrial Plankton produces low cost algae bioreactors for aquaculture. Vertical Organic Garden produces space-efficient vertical hydroponic systems for  in-home use. Plurilock produces biometric security systems that monitor keyboard dynamics. Island Circus Place is seeking to start a circus school.  On Thursday, February 18, the Angel Investors were organized in groups and taken on tours that included a number of technology incubators and co-working spaces.    In the morning on Friday, February 19, an Investor Education Workshop was held with a presentation by Josh Maher, the author of Startup Wealth: How the Best Angel Investors Make Money in Startups.  The assembled Angel Investor were then invited to spend Friday afternoon, at the Discover Tectoria trade show with over 70 exhibits located at the Crystal Gardens.  This three day event will have some modest benefits short term, but may lead to some tremendous advances long term.  Congratulations to all who had a role in making this event happen including: Mayor Lisa Helps, Victoria City Council, University of Victoria, ViaTec, Tourism Victoria, the Downtown Victoria Business Association, the Capital investment Network and the Urban Development Institute.

News From Canadian Internet Registration Authority (CIRA)

On Monday February 22, 2016 local members of CIRA were invited to a meeting for an update on the activities of CIRA.  We were advised that CIRA is dealing with a number of problems.  A first problem is a shortage of IP addresses.  Internet Protocol Version 4 (IPV4), one of the core protocols of the Internet, uses 32-bit addresses which limits the address space to about 4.3 billion addresses.  There is currently a move to Internet Protocol Version 6 (IPV6).   With IPV6 the platform has been increased to128-bit addresses. This will provide enough IP addresses for the foreseeable future.  However, one cannot move seamlessly from IPV4 to IPV6, as the technologies do not talk to each other.  IPV4 will be supported for a number of years to allow users to switch over to IPV6 and then IPV4 will be discontinued.  Of 2.4 million .ca websites, only 40,000 have been built on the IPV6 platform to date.  There are websites still being set up using IPV4.  If you are working with websites, it is important that IPV6 be used, as IPV4 will be obsolete in a number of years.  The transition to IPV6 will be slow, as IPV6 is not compatible with some hardware.  There is, of course, a reluctance to spend the money to upgrade hardware, until the date for discontinuing IPV4 is drawing near. The incentive for switching to IPV6 is that it reduces network access bottlenecks that currently are experienced.  A second problem relates to routing. The Canadian internet uses many United States based internet exchange points.  This results in most Canadian internet traffic being routed through the United States.  There was a discussion regarding further developing more Canadian peer to peer shortcuts so that Canadian internet traffic can be more autonomous.   A third problem relates to domain name system security.  There are individuals who make their living by “highjacking” domain names.  They change domain name system authorization information and then redirect internet traffic.  To avoid having your domain name “highjacked” CIRA has provision for “locks” to secure your information.  There is a configuration test you can perform at the CIRA website to determine whether your information has been “locked” [dntests.CIRA.ca].   Security can also be upgraded by using “anycast” as opposed to “unicast” systems.  There are digital signatures that can be used for authentication.  There is a configuration test you can perform at the CIRA website to check to see whether  digital signature authentication (DNSSEC) is enabled [performance.CIRA.ca].https://cira.ca/soi

Kickstarter Campaign for Cable Organizer

A client of our office is launching a Kickstarter campaign at 6pm on March 3 with respect to  a family of cable organizers.  There is one cable organizer that handles the power cord for a smart phone.  There is another cable organizer that handles the earphones that are used with a smart phone.  We are happy to help “get the word out” .  The Kickstarter campaign will run just over 30 days.  We ask that you give this new product a look.   https://www.youtube.com/watch?v=XcLyLsXLc1s