Argument Overview

1
Argument Overview

• Strong patent protection provides the best
  incentive to increase RD funding, which in turn
  promotes technological innovation, strengthening
  the economy
• Patent protection of Canadian biotechnology IP is
  critical to ensure maximal growth of the industry
• Canadian patent law has restricted patent
  protection on important research tools in todays
  biotechnology industry, e.g. the Harvard Mouse
  Case
• It is critical that patent laws are adjusted in
  parallel with the evolution of technology so that
  strong patents may exist

2
RD Incentives Drives Economic Growth

• Technological change ? Economic growth
• Public benefits from the widespread sharing of
  knowledge
• Inability to protect knowledge is the main source
  of market failure
• Profit maximizing firms have no incentive to
  contribute knowledge spillovers that benefit
  other firms
• IP protection remedies market failure in RD by
  granting the exclusivity

3
Advantages of Strong Patents

• 1. Invention Inducement - Anticipation of
  protection motivates inventors
• 2. Disclosure - Facilitate widespread knowledge
• 3. Investment Inducement - Fuels development
• 4. Prospect Development - Orderly development of
  derivative inventions

4
The Risk of Using Alternatives

• Prizes/Rewards
• arbitrary, difficult to set size and contestant,
  could cause inefficient duplication
• Trade Secrets
• Restricts public release of knowledge, does not
  protect against duplication

5
The Importance of IP in the Biotech and Pharma
Industries

• Strong patent protection essential because
• High costs of RD for innovating firms
• Patents provide a basis for forging alliances,
  which can be used to split the high costs of
  development
• In 1997, gt2/3s of Canadian biotech firms entered
  RD partnerships and 1/2 entered into marketing
  alliances (BIOTECanada, Canadian Biotechnology
  '98 Success from Excellence, 1999.)
• Lengthy regulatory requirements requiring
  disclosure first mover advantages and secrecy
  ineffective appropriability strategies
• High attrition rates monopoly needed on
  successful products to recoup all the costs from
  the failed ones
• Low cost of production once development complete
  allows others to easily duplicate end product

6
The Importance of IP in the Biotech and Pharma
Industries

• Patent protection is thus a leading factor in
  deciding which research to pursue
• Random sample of 100 U.S. firms
• pharma industry indicated that without patents,
  60 of its products would not have been
  developed, and 65 of its products would not have
  been introduced (Mansfield)
• For inventors who must sell or license to reap
  returns, patents even more important

7
IP and Foreign Investment in Canada

• Relatively small biotechnology industry accounts
  for a significant portion of all RD spending by
  Canadian business - over 5
• Canadas ratio of RD spending in Biotech to
  total sales is 53 (BIOTECanada, Canadian
  Biotechnology '98 Success from Excellence)
• Canadian firms are highly dependent on outside
  financing to cover RD and sustain operations
  through long product development cycles
• 1999, 315 million in venture capital was
  invested in Canadian biotechnology firms
• Strong IP portfolio crucial to raise venture
  capital and achieve competitiveness - signals the
  novelty of a firms future products, and thus
  their exclusivity

8
Patenting of Living Organisms

• The infamous Harvard Mouse
• In 1988, Harvard University received a US patent
  on the OncoMouse
• This mouse contained a recombinant oncogene
  (cancer-gene) that caused an increased percentage
  of offspring to develop cancer.
• In Canada, the situation was a bit different
• Dec 5 2002, The Supreme Court of Canada ruled
  the OncoMouse was not patentable

9
Patenting of Living Organisms

• Why did the supreme court come to this decision?
• Passed by 5/4 because of INTERPRETATION of the
  language the 5 judges felt that the Patent Act
  could not extend to higher life forms because
  they were not anticipated when the Patent Act was
  written.
• Canada Patent Act states
• an invention is any art, process, machine,
  manufacture or composition of matter
• Transgenic organisms fit this description as
  they are 100 changed (in all cells), do not
  occur in nature and result from the ingenuity of
  man.
• Also, simple transgenic organisms are patentable
  in Canada. There is no basis for this
  discrepancy. The same arguments hold true.

10
Patenting of Living Organisms

• Implications of the Supreme Court Ruling
• Reduction in RD activity in Canada
• Since HM ruling, no patent applications have
  been received by the Canadian Patent Office for
  transgenic animals
• Meanwhile, 16 patents on other transgenic mice
  have been given in the US
• Canada is seen as an unfriendly environment for
  biotech investment and development
• One month following decision, foreign investment
  in biotech in Canada dropped.
• Isolated from major trading partners
• US, Japan, EU and Australia have all allowed
  patents on the OncoMouse
• Reduced access to related technologies and
  ability to develop related technologies because
  no protection guaranteed in Canada.
• Companies wont license technology to Cndn
  researchers because no protection
• Contrary to Canadas participation in
  international harmonization agreements

11
Call For ActionStatutory Subject Matter
The Patent Act has always had the modest and
focused objective of encouraging the disclosure
of the fruit of human inventiveness in exchange
for the statutory rewards. The balance between
the other competing policy considerations is for
Parliament to strike.

• "invention" means
• any new and useful art, process, machine,
  manufacture or composition of matter, or any new
  and useful improvement in any art, process,
  machine, manufacture, or composition of matter.
• Patent Act, s 2

Supreme Court of Canada
This article has not been changed since 1869
12
Call For ActionWhat has been done since then

• Government plans to consult with Canadians and
  with the Canadian
• Biotechnology Advisory Committee (CBAC) before
  deciding what to
• do
• The considered amendments which are under public
  review
• such as recently the changes to meet with TRIPS
• reissue process, time deadline issues,
  electronic documents filing, reinstatement
  payment, etc.
• Nothing changed regarding to the Statutory
  Subject Matter

13
Current Patents Issues Call for comments on
proposals for privilege and self-regulation of
patent and trade-mark agents Industry Canada is
seeking views on proposals made by the
Intellectual Property Institute of Canada to
grant privilege protection to and establish
self-regulation for Canadian patent and
trade-mark agents. Please consult the discussion
paper and provide your comments no later than
February 23, 2004. Manufacturing and Storage of
Patented Medicines Regulations Amendments to the
Manufacturing and Storage of Patented Medicines
Regulations came into effect October 7, 2000.
Click on the amendments to the regulations to
view more information. Bill S-17, An Act to
Amend the Patent Act The Government of Canada
brings Patent Act into conformity with
obligations under the World Trade Organization.
The amendments to the Patent Act came into effect
July 12, 2001. Click amendments to the Patent Act
to view more information. Patenting of
biotechnological inventions Several informative
and illustrative studies of the economic, legal
and ethical issues associated with the patenting
of biotechnology are available.
http//strategis.ic.gc.ca/epic/internet/inippd-dpp
i.nsf/vwGeneratedInterE/h_ip00067e.html
14
Call For Action DO IT NOWOur Recommendations
Patent protection is the best among other
alternatives

• The Patent Act should be amended to include a
  broadened scope of statutory subject matter, and
  longer term protection to the pharmaceutical
  industry. Only through this expansion, can it
  provide stronger protection in Biotechnology
  The Canadian Patent Act should evolve to provide
  stronger protection to meet the needs of
  Canadians and to promote consistent economic
  growth long term. This amendment is required to
  ensure Canada remains a leader in biotechnology
  at a global level.
• Team BC/DC
• Building a 21st century economy
• - Promoting the development of value added
  industry
• Prompting leading edge technologies, in
  particular health and
• environmental technologies
• - Ensuring Canadas Place in the
  World http//www.pm.gc.ca