Canadians demonstrate excellence at many things. There are the obvious clichés like maple syrup, hockey, politeness and modesty. However, our excellence at politeness hides some of our other impressive strengths, like innovation and technology. In turn, our modesty seems to keep Canadians from protecting their intellectual property (IP) at rates disproportionate to our OECD counterparts. I have been working in the intellectual property field for nearly twenty years and can share many anecdotes of Canadian companies that are world innovation leaders who, because of that charming modesty, essentially give away their intellectual property.
One recent anecdote is particularly poignant. While I have altered certain facts, this is otherwise a true story, and it is not atypical. XYZ Co. is 30 years-old, Canadian-founded and Canadian-based. It built niche OEM equipment for the tool-and-die industry. XYZ employs about 100 people and has an impressive team of engineers and scientists that invent and design the OEM equipment. An onsite fabrication facility builds the in-house designed equipment. XYZ Co. then sells that equipment globally world to companies that use tool-and-die equipment. The story is impressive so far, but becomes exceptional when you find out that virtually every major advance over the last 30 years in their niche, was developed by XYZ.
Then the story turns tragic. XYZ has less than 5% of the worldwide market share and all of their innovations have been copied by a European company with close to 50% of the worldwide market share. XYZ never filed for a patent for its past innovations, and it is now too late to do so.
Their European counterpart files patents all the time. The consequences to the Canadian economy (and XYZ’s shareholders) are obvious, and XYZ essentially handed an entire industry to a European company. The good news is that XYZ is taking steps to devise an IP program to protect their current and future innovations.
For those who are skeptical – another Canadian strength – there are empirical studies that are consistent with these anecdotes.
- Canadian companies have the dubious distinction of being the world leaders of foreign defendants in US patent law suits. In 2012 Canadians were defendants in 160 patent law suits in the US. The next highest country was a Japan at 95. Many Canadians don’t realize, however, that the best defence is an offence, as an active patent portfolio can be used to fight back against other patent holders.
We are strong in technology and innovation
- In 2007, Canada graduated 22.4% of our students in math, computer science and engineering while the US graduated only about 15%.
- In 2013, Canada received 5.4% of all North American venture capital spending.
- In 2010, Canada spent about 1.8% of its GDP on R&D. It’s at the lower end of the OECD scale but in keeping with many peers.
- Despite our strength in technology and innovation, in 2010 Canada had proportionately fewer patents per capita than our OECD counterparts.
- Overall, Canadians are world leaders in innovation, but we lag in our protection of those innovations and thus we do not always receive the full benefit of those innovations (i.e .- we suffer reduced margins, we face a more competitive marketplace, etc.).
So with that, here are some things that Canadian companies can do.
Put aside your Canadian modesty
When it comes to patents, I hear two regular refrains from skeptics: “Nothing we do is patentable.” and “We don’t believe in patents”. On the first refrain, the statement is usually made without understanding the IP system and conducting a careful mapping of the present business to the IP system. On the second, there are similar underlying issues compounded by a perceptual bias that can pre-empt the analysis altogether. This is a shame because there are many challenging aspects to business, such as taxes, but saying “We don’t believe in taxes” is not an acceptable response; taxes are a business reality that must be addressed as are patents and intellectual property. Ironically, many of these companies that “do not believe in patents” and/or “haven’t done anything patentable” are also actively getting taxpayer subsidies in the form of SRED tax credits, which have very similar criteria to those used to establish patentability.
Get Educated about IP
With the Internet, getting basic education about patents, and IP in general, is easy. There are many online resources about IP, including resources hosted by various patent offices ( www.cipo.gc.ca; www.uspto.gov; www.wipo.org). Furthermore most IP firms have online resources, and some IP firms will offer free in-house training sessions
Develop a Corporate Strategy
Developing a corporate IP strategy doesn’t have to be painful. Indeed, for a technology company, an intelligent IP strategy is as important as a marketing, sales, and R&D strategies. It starts with knowing your product line and which features of your product line give you a competitive advantage. What did you invest to create that advantage? How easy would it be for competitors to copy? Are your competitors registering their intellectual property? Attaching a financial value to those advantages is the starting point for considering whether IP is a useful tool to creating additional barriers to entry to any you already have. Qualified IP counsel will be able to examine those competitive advantages and recommend strategies and provide concrete budgets. After that, it’s a business decision whether the cost of the offered protection represents a meaningful return on the investment, and helps you avoid becoming an XYZ Co.
To close this article I want to urge you to be optimistic. Canadians are amazing innovators and have remarkable talent in the fields of technology and science. These areas of our economy have a tremendous role to play in advancing the Canadian economy both at home and abroad. What I see in my daily practice as a patent agent is truly inspirational. With a slight attitude adjustment Canadians can also build healthy IP protection into the technology development cycle and leverage even greater benefits for Canadian society.
Andrew Currier is the co-founder of PCK (www.pckip.com; @pckip) a combined firm of patent and trademark agents and lawyers, and Andrew is the co-author of “Canadian Patent Law”, the leading legal text on patent law in Canada.