THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE
EVIDENCE
OTTAWA, Wednesday, November 21, 2018
The Standing Senate Committee on Banking, Trade and Commerce met this day at 2:30 p.m. to give consideration to the subject matter of those elements contained in Divisions 3, 4, 6, 7 and 10 of Part 4 of Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures.
Senator Douglas Black (Chair) in the chair.
[English]
The Chair: Good afternoon and welcome, colleagues and members of the general public who are following today’s proceedings of the Standing Senate Committee on Banking, Trade and Commerce, either here in the room or listening via the web. I am Doug Black, a senator from Alberta and I chair this committee.
Would the senators please introduce themselves to the panelists, starting with my friend Senator Wallin.
Senator Wallin: Pamela Wallin, from Saskatchewan.
Senator C. Deacon: Colin Deacon, from Nova Scotia.
Senator Duffy: Mike Duffy, from Prince Edward Island.
Senator Tannas: Scott Tannas, from Alberta.
Senator Stewart Olsen: Carolyn Stewart Olsen, from New Brunswick.
The Chair: By way of clarity, all senators are my friends.
We are continuing our subject matter examination of five divisions of Part 4 of Bill C-86, the Budget Implementation Act 2018, No. 2, and in particular, Division 7 of Part 4, which deals with the Patent Act. Specifically for this panel, we are examining subtopic H, dealing with the Copyright Board.
I am pleased to welcome in the first panel of our meeting, appearing as individuals, Casey M. Chisick, Partner, Cassels Brock & Blackwell LLP; Jeremy de Beer, Full Professor, Faculty of Law, University of Ottawa; and Howard P. Knopf, Counsel, Macera & Jarzyna LLP/Moffat & Co Patent & TM Agents.
Thank you all for being with us today. We are looking forward to opening remarks, and then we will go to questions from the senators. How do we want to proceed? Mr. Chisick, do you want to start?
Casey M. Chisick, Partner, Cassels Brock & Blackwell LLP, as an individual: I can do that. Thank you, senator.
I am a partner at Cassels Brock in Toronto. I am certified as a specialist in copyright law and have been teaching and practising in that area for just about 20 years. That includes many appearances before the Copyright Board and also in judicial reviews of its decisions, including several times before the Supreme Court of Canada. In my practice, I act for a wide variety of clients, including copyright collectives, music publishers, film and television producer, universities, broadcasters and many others, but the views I express here today are entirely my own.
The Copyright Board is vital to the creative economy in Canada. Rights holders, users and the general public all rely on the board to set fair and equitable rates for the uses of protected material. For the Canadian creative market to function effectively, the board needs to do its work efficiently, timely and in a predictable way, and it needs to render its decisions in that way as well.
I am very glad to see the comprehensive reform proposed in Bill C-86. I applaud the government for recognizing that the board should operate as a tribunal of last resort, with collectives and users also free to negotiate agreements that meet their respective interests. I’m also optimistic that the changes proposed to the board’s processes, along with regulations that I understand are still to come, will help reduce the time that it takes for tariffs to be certified. That should help reverse the trend toward retroactive tariff-setting, which has been a real challenge for stakeholders in the last several years. That said, I have two concerns that I want to raise with the committee today.
The first relates to proposed section 66.501. That section would codify the mandate of the Copyright Board by requiring it to fix royalty rates that are “fair and equitable” with a view to what would have been agreed to by a willing buyer and a willing seller in a competitive market, as well with as an eye to the public interest.
That is a very positive development, in my view. A rate-setting standard that reflects market principles is consistent with many other jurisdictions around the world. Introducing clear, mandatory rate-setting criteria should result in a process that is more timely, more efficient and importantly, more predictable. That is important because an unpredictable process leads and has led to a lot of unnecessary expense for parties before the board. They invest hundreds of thousands of dollars in expert economic evidence that the board often discards in favour of methodologies that it devises itself for valuing protected work. Unpredictable rates can also lead to severe market disruption, particularly in emerging markets like online music.
That is all ver positive, but unfortunately, the bill doesn’t stop there. In addition to the specific criteria, it empowers the board to consider “any other criterion” it considers appropriate. In my view, rather than solving the problems I’ve just described, that could well make the situation worse. It will create, in effect, more mandatory boxes for the parties to check, in addition to boxes that were imposed a few years ago by the Supreme Court and are still being interpreted, but it still won’t guarantee that the board doesn’t discard that evidence in favour of other criteria that it is perfectly entitled to consider under the board but that remain completely unpredictable. If that happens, the result will have been the cost of board proceedings will have gone up with no corresponding increase in efficiency or predictability.
To prevent those explicit rate-setting criteria from being overwhelmed by unpredictable other criteria, I simply recommend that the government reconsider proposed section 66.501 or, in the alternative, that it moves quickly to enact regulations to provide further guidance to the board and, by extension, to the parties who appear before it as to how the criteria should be applied, including what to look for as part of the willing buyer/willing seller analysis.
My second point relates to proposed section 73.3, which is the so-called “prohibition on enforcement” that prevents a collective society from seeking to enforce its rights against a user who has paid or offered to pay royalties under an approved tariff. For the most part, that reflects the law as it exists, and that law was designed to prevent a collective from discriminating between users by agreeing to license some but not others. That is good policy and it should be maintained.
Where the new provision goes wrong, however, is by extending the prohibition to a person who offers to pay royalties under a tariff that hasn’t yet been approved. Because of the time it takes to examine and certify a tariff, what that means in practice is that a user would be able to use the repertoire of a collective for years without paying for it. The collective’s recourse would be to try and collect royalties from that user when the tariff is eventually approved, but that doesn’t help much if a service, in the meantime, has exited the Canadian market, gone bankrupt or otherwise lacks the means to pay when the tariff is eventually approved, which, as we know, can be years later.
The simple solution is to delete subsection (c) from proposed section 73.3, effectively maintaining the status quo, and allowing collectives and users to negotiate between themselves the interim arrangements that will allow users to enter the Canadian market while still assuring reasonable compensation to rights holders.
I have thoughts on other portions of the legislation, but my time is up, so I will look forward to addressing your questions during the Q-and-A session.
The Chair: That was very helpful. Thank you very much, Mr. Chisick.
Senator Wallin: Was this raised in the House of Commons standing committee in terms of amendments that have all been happening in the last 24 hours?
Mr. Chisick: My understanding, Senator Wallin, is that it may have been raised informally with the Department of Industry. I don’t know whether it has been raised in committee. It wasn’t by me, anyway.
The Chair: Thank you very much.
Jeremy de Beer, Full Professor, Faculty of Law, University of Ottawa, as an individual: I am from Saskatchewan, although I am a full professor at the University of Ottawa at the Centre for Law, Technology and Society, based at the university’s faculty of law.
While I appear here as an individual, my testimony today is based on my experience working for the board, first as the board’s legal counsel, then later as an adviser on potential policy reforms, as well as findings from my widely cited empirical study of the copyright tariff-setting process that was sponsored by the departments of Canadian Heritage and what is now Innovation, Science and Economic Development Canada.
Thank you very much for the opportunity to reappear before this committee. It has been almost exactly two years since my last appearance, when the issue of the Copyright Board was put on the agenda and identified as an urgent issue.
Today, I am going to organize my remarks in response to several of the points contained in the government’s own summary in Bill C-86. If you look at the summary, you will hear my remarks on each particular point.
First, as a general matter, I commend the government for providing the human resources of a fully staffed board and the financial resources of the budget for the board to do its job. It is long overdue, but better late than never. This is something I and virtually all other stakeholders, with a handful of exceptions, have been advocating for for a long time, so that is great.
Second, I strongly support procedural reforms that would implement case management practices. This could have been done sooner and better by the board under its existing regulatory powers, but instead, if the bill and the government takes credit for fixing the problem, I think that is fine.
I am, however, concerned that giving the Governor-in-Council a new power that conflicts with the board’s power to regulate timelines for “any procedural step” in a matter before the board is inappropriate and unnecessary. It risks compromising the autonomy of this quasi-judicial tribunal in ways that are unprecedented, it increases the likelihood that substantive lobbying will seep into ostensibly procedural regulations and it presumes that bureaucrats know better than the board and the judge who currently chairs it how to manage cases. I don’t think it’s necessary. I would recommend that clause 295 of the bill, which would amend the regulatory power of the Governor-in-Council in 66.91, simply be deleted.
The mandate and decision-making criteria that Bill C-86 would codify are a hodgepodge of compromises that will make matters worse, not better. It is good that Bill C-86 preserves the important public interest considerations in board decision-making, but while some groups, in particular, got their wish for a willing buyer/willing seller rate-setting criterion, that’s a factor that has always been applied in board decisions and upheld by the Federal Court of Appeal. As many stakeholders warned during the consultation process on this bill, codifying decision-making criteria will do little but unsettle expectations, enable creative new arguments and lead to years or possibly decades of contentious litigation before the board and the courts to figure out what these new criteria are supposed to mean and whether they are the same or different than the criteria that applied before. I don’t think that compromise is worth the price, so I would also I recommend deleting clause 292 from Bill C-86.
I feel the need to warn the committee that reducing the number of matters that might come before the board will leave some stakeholders vulnerable. Particularly small- and medium-sized enterprises businesses will be vulnerable to potential abuses of market power by certain collectives that are in powerful market positions. That is a radical change to the structure of the Copyright Board as it has operated and was recommended to operate since the 1930s. It is problematically being made without corresponding adjustments to the safeguards and regulatory procedures that allow the board and/or the Commissioner of Competition to review agreements that are negotiated in the marketplace without regulatory oversight for potential anti-competitive effects. I also think that unless the board has information about rates that are negotiated in the marketplace, it will be difficult for the board to apply the willing buyer/willing seller criterion. Finally, it could backfire by shifting the board’s workload from one regime to another. What the board saves in work by not having mandatory tariff proposals in one area could be more than outweighed by additional work in what is called the arbitration regime dealing with one-off cases rather than dealing with them in a batch.
Overall, it is a complex issue that I think shouldn’t be solved in a budget bill but which should be properly studied in the context of the INDU committee section 92 review. However, I’m pragmatic. Because this is deeply embedded in the whole structure of Bill C-86, I would urge the committee to at least recommend careful study of counterbalancing measures around the potential anti-competitive effects. That might be warranted.
My final comment pertains to amended provisions regarding enforcement. It is a relief that Bill C-86 does not permit all collective societies to, in essence, bully users into accepting what they may think are unnecessary blanket licences with a threat of statutory damages. That is a bad idea generally but, most notably, it is premature. The courts are still dealing with these issues right now about the nature of certain tariffs, particularly in the education sector, and whether the tariffs are mandatory or not mandatory. To alter the policy balance at this point in time is premature. I think we have to wait for the courts to rule on that issue.
With that, honourable senators, thank you very much for the time to submit these remarks.
Senator Wetston: I’m sorry, what clause was that?
Mr. de Beer: The revisions on amendments on statutory damages will be an amended provision 4.1, attached to new section 38(4.1).
Senator Wetston: Thank you.
Mr. de Beer: Yes, 38.1 would be replaced with a provision 4.1. It’s clause 287 of Bill C-86. That is important, for the record, and 4.1 is an important provision.
The Chair: Thank you very much, professor.
Howard P. Knopf, Counsel, Macera & Jarzyna LLP, Moffat & Co Patent & TM Agents, as an individual: Good afternoon and thank you, senators, for the invitation and the opportunity to compress nearly 40 years of my experience into five minutes or less.
I have been in government in the predecessor of ISED. At one point, I worked with Commissioner Wetston, as he then was, in one of his many previous incarnations. I’ve been in private practice and appeared before the board many times, and the courts, up to and including the Supreme Court of Canada several times.
Frankly, in my view, an omnibus bill approach to all these complex and controversial IP issues is absolutely not the way to proceed here. It is unnecessary and, frankly, unacceptable. There are many serious issues and problems with the nearly 100 pages of IP material in this bill. I was only invited to talk about the Copyright Board. This is, in some respects, the most dramatic and drastic change to the board since 1936, and it is getting only an hour or so of time here in this committee and even less in the other place.
The clarification of criteria, which my friends have talked about, including the inclusion of the terminology “public interest” and “willing buyer and willing seller in a competitive market” may backfire. This will formalize in an untested, unprecedented way what has been an informal exercise that has often resulted, for better or worse, in the averaging of two extreme sets of numbers and will almost certainly result in even more expensive and time-consuming and so-called expert evidence about something that is circular at best and paradoxically impossible at worst, which is the determination of a competitive market rate. There is no such thing as a competitive market in a world where mandatory tariffs can be set by law for the benefit of powerful monopolies that would otherwise be criminal conspiracies were they to exist without the blessing of Parliament, the Copyright Board and the courts. Moreover, the concept of public interest may potentially conflict with that of a competitive market. As others have said, we can expect longer and more expensive hearings and more judicial review in figuring out what, if anything, this will all mean.
As for the commendable idea of encouraging public participation without incurring the costs of full participation, as indicated in the government’s fact sheet, that appears to be more talk than action. If the government means reimbursement for costs of public interest participation, this would require enabling legislation, as we have had with the CRTC, but that enabling legislation is simply not there in the bill.
As to streamlined timelines, the bill simply doesn’t deliver. Moving up the filing date by five and a half months and making tariffs last three years rather than one won’t make any difference to the fact that it has usually taken about four years for a hearing to take place, and there are few, if any, examples of annual hearings on the same tariff. It then typically takes, after the hearing, another three years for the board to render a decision, which is then very retroactive and which often results in judicial review and even re-hearings. Contrary to what you heard earlier today from the board and, with all respect, contrary to my friend Jeremy de Beer’s study, the board certifies, on average, less than five tariffs a year and not 49 or 50, which is a result obtained by artificial parsing of paragraphs on an annual basis. My calculation was fewer than 4.9, which I gave to this committee a couple of years ago in my testimony and documented it.
The enabling legislation for regulations to specify timelines has already been there for three decades, and it still hasn’t been used. The setting of deadlines and timelines has still been postponed and punted yet again. This bill does nothing to impose necessary deadlines as we have for other tribunals and the federal courts, as set by the Governor-in-Council. For example, in the case of the federal courts and the Competition Tribunal, the deadlines and all the detailed rules are set by the Governor-in-Council by regulations. I heard some things earlier when I was in my office about how the board objected to this incursion on their autonomy. If the Federal Court and the Federal Court of Appeal and the Competition Tribunal are not important autonomous bodies, I don’t know what it is. They don’t seem to mind Governor-in-Council regulations to set deadlines and other details, so it should work fine here if the government only has the will, which it has not had to date.
The bill will eliminate the requirements for music industry collectives to file tariffs that require board oversight, even if there is no opposition. This has been a requirement since 1936, following the monumental Parker commission report. That means that the music industry will have even more effectively unchecked monopoly power over organizations ranging from hockey stadiums, movie theatres and shopping malls, on the one had, to barber shops and beauty salons on the other. No wonder SOCAN and Re:Sound have been so quick to welcome this bill.
The last point concerns the elephant in the room here, which is the overwhelming question of whether or not Copyright Board tariffs are mandatory for users. I successfully argued in the Supreme Court of Canada three years ago that this is not the case. It is one thing for the government to provide, as it used to in the past, for a train or plane tariff that sets the rates to get from Ottawa to Toronto, for example, which it once did, but the government never forced anyone to say that if you want to go to Toronto, you have to take the plane or the train. You are always free to take the bus, drive your car, hitchhike or ride your bicycle. There were different ways of getting there, most of which were unregulated.
In theAccess Copyright v. York University case, which you have all hopefully heard about, York University did not address, unfortunately, the issue of whether final approved tariffs are mandatory. Let’s hope that the Federal Court of Appeal gets this right. It will likely end up in the Supreme Court of Canada. It is almost certain to arise in the section 92 INDU hearings as well. I am concerned that this bill may inadvertently touch on that issue in the proposed new section 73.1, which imports language from the mandatory levy scheme in Part VIII of the act regarding the enforcement of terms and conditions.
I had a wonderful professor at law school named Harry Glasbeek, who has recently gone back to Australia, who said that if you see a new decision from the Supreme Court of Canada or a new piece of legislation, you should try to figure out what the worst possible unintended consequence of that might be and go to sleep at night confident that it will surely come to pass sooner rather than later.
With that happy thought, I will be ready to answer your questions. Thank you.
The Chair: Thank you very much.
Senator Wetston: I don’t know where to begin, frankly.
I have said to each panel that we are in pre-study of this bill. We have just received this bill. It is an important and complex bill. It forms part of an omnibus bill. It could have easily formed its own bill where it might have been addressed in a somewhat different way. Having said that, I want to pursue a couple of issues with you, if I might
. One is the notion of public interest. We hear this time and time again from the point of view of whether it is a residual discretion, whether it allows a board, a quasi-judicial body, to be able to develop criteria in the application of public interest, and it is not uncommon. Each and every lawyer or participant in the process of dealing with public interest jurisdiction says the very same thing. Generally speaking, most tribunals will make an effort to provide policy direction on the application of the public interest. You have seen that time and time again. What is wrong with the board being able to do that in this case? The public interest allows you the flexibility to be able to accommodate a changing environment, in particular the kind of environment that we are experiencing each and every day in this country and globally. Can you provide a bit more guidance on that, as opposed to the anxiety that might be created as the result of a provision like this in this legislation?
Mr. Chisick: Let me be clear: I think that a public interest consideration in the tariff-setting process is perfectly appropriate. Though opinions may differ as to whether or not it is appropriate or desirable to set out any mandatory rate-setting criteria at all, if there are going to be mandatory criteria, it is perfectly appropriate to include, as this bill does, considerations of public interest. It will be, of course, up to the board to determine how to apply that in practice, and opinions will differ about that, too, no doubt, but the board has always — as far as I am aware, in the proceedings I have been involved with — applied considerations related to the public interest, and it understands the role that it has as an economic rate-setting tribunal as a guardian of the public interest. That is a consideration that suffuses every decision that the board makes, as far as I am concerned. To me, that is table stakes and status quo.
By codifying additional criteria in addition to whatever else the board thinks is appropriate, the concern that I have, and the anxiety, as you put it, senator, is for the predictability and the cost of the process. That is a whole separate consideration from public interest, which has always been there and which I presume would continue no matter what.
Mr. de Beer: I strongly agree, and I think the public interest is an indispensable part of the board’s mandates.
I would say that none of section 66.501 is necessary and it is essentially better and less risky to go with the status quo, which is that these are the implicit criteria the board has always applied. I don’t share the concern Mr. Chisick raises to the same extent. I understand the challenge of predictability. My hope would be that the board could mitigate that problem through case management. Through the new procedures and rules, if that’s done well, the board could narrow the kind of evidence that’s acceptable and solicited. I would hope that 66.501(d) would work in tandem with case management to ensure predictability.
Mr. Knopf: Here’s an example of where this could cause problems in a different way or example than what my friends have said.
Suppose an argument was made by a so-called expert that the public interest requires authors to be paid a whole lot more than they’re getting paid right now. They’re not making enough money — we keep hearing that over and over again — and that it’s in the public interest for our authors to all be driving nice cars and whatever. That might be an argument for the public interest, and then we’ll have all kinds of experts lined up on what the public interest is in terms of copyright and it will be a horror show, frankly, and very expensive and very long. The board will devote resources to it. The board is getting another million dollars a year. Why, I don’t know, but it will undoubtedly go down this rabbit hole of research.
By the way, Senator Wetston, I think you will probably be interested to know that the board’s budget is already considerably more than that of the Competition Tribunal, with which you are intimately familiar, by about $400,000, and it is about to become $1.5 million more than the Competition Tribunal, which is kind of odd considering the different mandates that they have, the relative importance and the volume and complexity of cases as between them.
Senator Tannas: To start, has anyone here consulted and been paid as a consultant to the Copyright Board in the last five years?
Mr. de Beer: Yes, I have.
Senator Tannas: Okay. That answers that question. Thank you.
You mentioned briefly the fact that there was a comeback from the new vice chair of the Copyright Board that said we can’t compare the Canadian Copyright Board and its work product with the Americans because they certified 50 and the Americans only certified five. Now you’re telling me they actually certified five as well. What do you mean?
I guess my follow-on to that is: Are we getting the wool pulled over our eyes here about whether this problem is fixed? We were interested in seeing it fixed. We made recommendations to get it fixed. This response supposedly fixes it. Give us your comments on what you think.
Mr. Knopf: Thank you, Senator Tannas. My friend Jeremy, for whom I have very high regard, did a study a few years ago, and I’m sure he’ll explain it himself, where he parsed all of the Copyright Board tariffs and broke them down by year, so if the tariff covered three years, automatically there were then three new tariffs involved, and he broke many of them down by pieces. The SOCAN tariff had a marching band tariff component and a busker tariff component and a restaurant tariff component. He came up with this number, which I, frankly, consider untenable, of, I believe, 49 tariffs a year.
I used the board’s previous methodology and published documentation to establish for a study that I just did on my blog, and I think I gave it to you folks two or three years ago, for which I wasn’t paid a penny. I concluded that there were 4.9 tariffs a year and, anecdotally speaking, the board rarely, if ever, renders more than about three important decisions a year. They render countless little procedural decisions about having another two weeks to file this and that, but only three substantive decisions a year.
I think the testimony you were given this morning was simply inaccurate. It certainly serves the purpose of the board to say that they render 50 tariffs a year, but they don’t. They absolutely don’t. A tariff has parts to it, and they should not be broken down by paragraph or sentence.
Mr. Chisick: I don’t have information. Unlike my friends, I haven’t done any studies about how many decisions the board renders a year, so I won’t presume to pronounce on that, but I think Professor de Beer will probably have something to say about that.
Let me address, I think, the larger question I thought you asked, senator, which is: Will this bill solve the problem? The answer is, from my perspective, I don’t know for sure, but I’m certainly encouraged by what I see. The problem is there. It’s real. There are process issues. There are procedural issues. There are substantive issues. What I see in this bill is a good faith and a promising effort to solve those problems.
In practice, it will be a joint effort by the board and the parties who appear before the board and, possibly, the government of the day, using its regulatory power, to see how all of this works in practice. I, for one, am extremely optimistic that once all of this is implemented, we’ll have a more efficient process and a more predictable process, subject to what I’ve said, and certainly timelier steps in the various proceedings.
Senator Tannas: Thank you.
Senator C. Deacon: I’m focused in on the productivity issue. On the details of the legislation, I have to trust the experts. I’m hearing some concerns and I’m looking forward to digging into those, but for me I’m looking at these as systematic changes that are being made in the legislation to empower slight process changes. A 30 per cent increase in budget doesn’t really mean anything if you don’t know whether it was too much before or too little. We’re assuming it was too little, so it’s 30 per cent higher. Do the systemic changes keep the process the same or make them a little better, those that are outside of your door and those that make their way to your door and that you manage once they’re through your door? I’m just wanting you to speak about the extent to which the systemic changes empower better decision-making on the broad range of deals that are being done outside of the tribunal’s work and making it more transparent and easier and motivating parties to do deals, rather than have to bring it to the store.
I’m really struggling over the productivity issues here, and one would hope that legislation is actually making for better and easier decision-making that is enabling markets to function on their own and self-police, versus us having to get involved and have a system that slows everything down. Maybe each of you could just sort of help me there, because I’m struggling on that one.
Mr. de Beer: I’d happily start on the productivity question.
The study that I did for Canadian Heritage and ISED and the Copyright Board, that tripartite study that I discussed in our last hearing, tried to go behind the scenes a little bit to understand what it is that the board does all day and what people at the board do all day.
Although Mr. Knopf is right that there are only a handful of blockbuster decisions issued each year that make it to the Federal Court of Appeal and the Supreme Court, the fact is that the legislation requires the board to deal with all of the tariffs that are proposed to it and every subtariff that’s proposed to it. We have more collective societies in Canada than in any other country that propose tariffs that are spliced and diced all different kinds of ways. The only way to actually empirically measure what’s going on and then to be able to measure progress against that benchmark is to come up with a method that looks at all of the nuances. It doesn’t make for nice headlines, and sometimes the numbers are shocking, but you really have to look at the big picture here. The board is a super busy institution with a lot of very important responsibility for hundreds of millions of dollars of tariffs a year.
I think overall this bill and, more importantly, the fact that it’s in the budget and there are the resources attached to it, will help tremendously. I believe, on balance, that this will start moving toward a solution to the problem. I mean, is it a panacea for everything? No. As you heard during my introductory remarks, I think there are concerns and there’s a risk that certain provisions could backfire but, on balance, this is certainly addressing a problem that is real and certainly moving in the right direction.
Mr. Knopf: Senator, many of the tariffs, as Jeremy alluded to, are uncontested. They’re filed. They’re uncontested. It still takes the board years to approve an uncontested tariff. It just sits there doing I don’t know what, but it takes them years to approve it. They just decided something last week. I haven’t read it in detail. It took them five years to decide that they didn’t need to set a tariff on an issue that the Federal Court had decided many years earlier that —
Senator C. Deacon: A clarification. That’s something that was worked out in the market, as such, and required certification.
Mr. Knopf: It may not have been worked out at all. It may have just been filed and nobody cared about it enough, or it was fine and people liked it and they didn’t see fit to object to it. The costs of objecting are stupendous, so sometimes people just have to grin and bear it. Even when there’s no issue, it still takes the board many years to approve and use its rubber stamp.
Mr. de Beer: What Mr. Knopf is talking about is essentially the board puts out fires. It responds to crises.
Mr. Knopf: The other thing, before I forget, and it’s a bit of a follow-up to Senator Tannas’ question but also relevant to yours, is that the American system needs to be looked at because we’re virtually in the same market involving many of the same parties. You know why it works? It works because it says that you have to render a decision in 11 months. That’s the law. The fellow who came up a couple of years ago to the conference that we had and who is a member of that board said that it works because it has to. The law says they have to do their job in 11 months, so they do it. Here the law says, well, maybe when you get around to it.
Oh, and another cute trick or problem at the board is that if somebody retires from the board, they can continue to deliberate on the matters that they’ve started on, in some cases, for years. I don’t know how much they get paid, and that’s really not the issue, but it’s certainly no incentive to a quick resolution. We’ve seen retired board members — I won’t name names — sitting on decisions for three years after they’ve retired.
Mr. Chisick: I think it’s important to put some of these things in perspective. The U.S. system, for example, is severely constrained in terms of the number of tariffs that can be proposed and the duration of those tariffs and so on. The bottom line is, sure, the Copyright Royalty Judges have a fixed timeline for decision, but they also have a fixed workload, and it’s a workload that’s very different from the workload that our board faces, as Professor de Beer has already explained.
In terms of the productivity gains, here is another reason for my optimism: regardless of how you count the number of tariffs that are certified, anecdotally you would find that the vast majority of the work the board does is devoted to the examination and certification of performing rights tariffs and equitable remuneration tariffs proposed by SOCAN and by Re:Sound, and, as Professor de Beer said, they proposed those tariffs under the current system because they have no alternative. They must do that, or arguably they have no right to collect that remuneration. This bill rectifies that by enabling them to go out into the market and negotiate agreements with users with whom it’s feasible to negotiate agreements.
I say that because, realistically, there’s very little chance, in my view, that resources will permit them to go out and negotiate individual deals with every bar and restaurant and barber shop in the country or, for that matter, with every busker and marching band. They will continue to propose tariffs, I expect, for those uses because the transaction costs of doing otherwise would be overwhelming.
Where this power will come in handy, I believe, is with the larger institutional users like Google and Spotify and other services that are operating in Canada about whom it’s very difficult to argue that there’s any anti-competitive or unlevel playing field between the collectives and the users.
In practice, what’s already happening is those deals are being negotiated in the marketplace and there are enforceability concerns. They’re being negotiated because the timeline for certification of these tariffs has been so long that there’s really been no practical alternative up until this point but to enable the market by allowing deals to be made or by ensuring deals are made to allow the services to come in while they’re waiting for tariffs to be certified. By permitting that to go forward and permitting those collectives to negotiate agreements that are clearly in forcible and binding and are being made between a willing buyer and a willing seller, if you will, that should reduce the Copyright Board’s workload in as much as they’re now forced to examine, with an eye to the public interest, a bunch of tariffs that may not be the most effective way for these markets to develop in this country.
The Chair: I believe Senator Wetston has a short supplemental.
Senator Wetston: I think I can wait, because it’s going to involve the Governor-in-Council’s role in setting timelines for an administrative tribunal that must maintain independence and control over its procedures. You can’t put in place a case management process and then have the Governor-in-Council set timelines. From my perspective, it’s an important consideration.
Senator Wallin: I’ve had many questions asked and answered, but now I have a new one that has come from Mr. Knopf. You said that the costs of objecting are obscenely high. Can you explain that part of the process?
Mr. Knopf: Well, to file an objection, unless you are self-represented, which is a terrible thing to contemplate at the board, you’ve got to hire a lawyer, and typically the cost of engaging on any of these files is in the hundreds of thousands of dollars, if not more. You’ve got to get experts. You have to answer interrogatories that are embarrassingly irrelevant, but the board almost never reins them in. They want to know all kinds of irrelevant details. You get tied up in all kinds of motions about what’s confidential and what’s not confidential, and almost all of it never sees the light of day. If one was conspiratorial or paranoid, one would think it was maybe being done to discourage objections. In any case, the board does not put a meaningful check on it. Questions that would never be allowed in a court, for example, are routine.
Senator Wallin: It’s an individual cost? There’s no subsidization?
Mr. Knopf: With the exception of a couple of strange people who have made a hobby of objecting at the Copyright Board, they’re usually institutional objectors. Some of them are quite well resourced, like the Canadian Association of Broadcasters, although even it went out of business as a full-time entity. You know that business very well. The CAB no longer exists, but they do participate at the board at considerable expense, I’m sure.
The costs are asymmetric. The collectives take in, in the case of SOCAN, over $300 million a year, and in the case of Re:Sound, I believe well over $100 million. In the case of Access Copyright, it used to be $50 million or $60 million. They’ve gone down now for reasons we won’t go into. In any case, the collective spend their members’ money, basically, asking for more and more tariffs, spending it at the Copyright Board.
Mr. de Beer: The difficulties of objecting is one of the reasons why public participation is so important. When you look at the government’s fact sheet released around the Budget Implementation Act, it talks about establishing a mechanism for greater public participation. That’s crucial.
One of the challenges the board faces is that it essentially has to represent the public interest on its own. There’s no procedure for intervenors to go to the board and say that this is in the public interest like there is at the CRTC, for instance. If we were able to provide a model like the CRTC for funding public interest representation at the board, it would lead to better decisions and take strain off the board from doing that job internally.
Mr. Chisick: The costs of board proceedings is something that’s a concern on both sides; right? I’m not going to start quibbling with everything my friend Mr. Knopf said about the practices of collectives or of the large trade associations or any of them. The fact of the matter is, as I said in my opening remarks, the cost is high, and my concern is to make sure that the costs are contained or reduced by this legislation and that the legislation doesn’t have the unintended consequence of causing them to balloon.
Senator Duffy: You mentioned the CAB and the CRTC. As I was listening, including what we heard earlier today, I was reminded of the CRTC 40 and 50 years ago and the food and drug operation, where every broadcaster in every small station had to fax or telex the script of an ad for the local drug store to somebody in Ottawa to put a rubber stamp on it and get a number, and they would actually go down and line up at a counter at Kamloops and Corner Brook for the ad for the local Shopper’s Drug Mart. It was unbelievably old-fashioned, and it has been dramatically changed. Is there any interest that you see on the part of the board, or are they so wrapped up in their quasi-judicial status, to make a sincere effort to try and follow the example of the CRTC? The CRTC used to have hearings on everything, and now a hearing is relatively rare compared to the number of decisions that are handled because they are, in fact, routine.
Mr. Knopf: As I mentioned earlier, and as my friend Jeremy concurred, it would be nice if there was a mechanism such as we have at CRTC for public interest groups to appear and oppose tariffs from Bell or some of the other huge players and get reimbursed a reasonable amount for the cost of doing so. I thought I heard representatives from the Government of Canada in a conference call, and it’s implied in their paper, that they’re proposing that. But it’s frankly misleading because it’s not there in the legislation and, as you know, it has to be in the legislation. The reason that some groups get reimbursed for their CRTC interventions is because the law says they have to be.
Mr. de Beer: There are some measures, Senator Duffy, in here. For example, the provision that you have to publish proposed tariffs in the Canada Gazette is going to be eliminated, so the board can do this in any way that it sees fit, being better connected to users. This is one of the reasons the budget allocation is so important. It will allow the board to modernize its systems, not just its website like the government press release mentions but all of its systems for managing cases more effectively.
Mr. Chisick: The other thing that we haven’t mentioned yet today is that, in the bill, the board is mandated to conduct all of its proceedings as informally and expeditiously as considerations of fairness will allow. That’s a hugely important provision that should not be overlooked because my experience with the board — who are good-intentioned, hard-working people across the board — is that they themselves have been concerned that the quasi-judicial nature of their process is fundamental to fairness. Here we have the statute saying there are routes that you can take and must take to conduct your proceedings informally and expeditiously where possible.
The other thing that just needs to be said is that we have a relatively new chair. We have a brand new vice chair, for whom I personally have enormous regard. We have three new board members who have been appointed in the last several weeks or couple of months. I think there is a new day dawning at the Copyright Board, and that, coupled with the reforms in this legislation, is a big part of what causes me to be optimistic.
[Translation]
Senator Dagenais: Mr. Knopf, I’m puzzled by all the provisions dealing with the Copyright Act in Bill C-86. I think that the very long procedures that can take years may lead to very costly litigation for creators. I have the impression that everyone’s fees are higher than the fees that will be collected by the creators. That said, as I was telling you, I’m obviously puzzled. The people who can claim copyright fees aren’t always industry giants that have infinite financial resources and that can afford lawyers as qualified as you. In fact, I personally knew a lawyer who worked for Sartec, in Montreal. Would you say that the new provisions of the bill will help make it even more difficult for smaller players to access remedies to enforce their rights?
[English]
Mr. Knopf: That’s a really excellent question and a complicated one. What I’m about to say is anecdotal, but I have tried unsuccessfully to get the board to look into the internal workings of collectives to try and determine, for example, simple facts, like the average and median payouts to members per year. They won’t touch that with a barge pole. They say, “That’s none of our business.” But, of course, that’s the ultimate business because this is for the benefit of authors and creators and musicians. It’s not for the benefit of the lawyers who are typically on the staff of these collectives and for the law firms that represent them, but those are the ones that make all the money.
Here’s a statistic that’s going to shock you. It’s anecdotal, but I have very good reason to believe it’s accurate. The average member of SOCAN is lucky to make a couple of hundred dollars a year from SOCAN. The average member of Access Copyright — I happen to be a member, and I’m above average according to my anecdotal study. I just got a cheque for $84.10. That’s more than other people I know.
This system is not benefiting most of the members. The individual creators who get rich from copyright or even make a decent living are people like Margaret Atwood or that professor at the University of Toronto who just wrote that 12-step book, Jordon Peterson. These people do very well by the copyright system. The vast majority of creators earn next to nothing from it and better not quit their day job.
The lawyers involved and the executives at these —
The Chair: Thank you, Mr. Knopf, we have your point.
Mr. Chisick: I worry that Mr. Knopf’s anecdotal evidence, if you can call it that, obscures some important facts about the extent to which authors and others rely on collectives to do a job that otherwise they would be unable to do. There are a handful of people in this country who perpetually raise concerns about the operations of collectives and the return to their members and so on. And, of course, they’re entitled to do that. They’re entitled to raise those concerns. But the reality is that for artists and authors — I happen to be married to one — to collect royalties for all of the disparate uses of their work would be not practically impossible but absolutely impossible without the operation of collectives. So to simply accuse, without evidence, collectives and the people who run them of taking outrageous salaries and so on, it’s a troubling allegation. There’s an important counterweight that I think needs to be considered as well.
[Translation]
Senator Dagenais: I don’t like what I’m going to say, but I’m going to say it anyway. Shouldn’t we recommend that a review board be created to better manage copyright and to hear from the people who are actually affected, namely, the creators?
[English]
Mr. Knopf: I haven’t had a chance to think about that. That’s a good question. We have one dysfunctional board right now. I’m not sure we need another one. I think we need to get this board to do its job.
The Chair: Can we answer that with a yes or no?
Mr. Knopf: I guess the answer would be no, let the board do its job properly.
Senator Dagenais: Thank you very much.
Senator Tkachuk: Just as information before I get to my question: Mr. de Beer, I wasn’t sure if you said you did consulting for the board or work regarding the board. Could you tell us whether you’re a consultant for the board from time to time?
Mr. de Beer: Yes, from time to time. I was formerly a legal counsel for the board. It was my first job after clerking at the Federal Court of Appeal. For a number of years, I would occasionally advise the board on matters around unlocatable owner’s copyright regime, for example, some policy matters. I was assisting the board in assessing the implications of potential policy and procedural reforms in the context of what we’re discussing now, these particular bills. But I’m no longer —
Senator Tkachuk: You actually did work for the board in perhaps proposing some of the pieces of legislation that we have in front of us?
Mr. de Beer: Yes, precisely, in helping the board understand, on the basis of my earlier study for Heritage, ISED and PCH and the board, what the possible implications may be.
Senator Tkachuk: Mr. Chisick, does your company represent the collectives? Do you represent the collectives?
Mr. Chisick: We represent certain collectives. We represent lots of users as well. As I said at the outset, we have a practice that spans the user community, the rights holder community and all of the various permutations and combinations. But when I have appeared before the board, I’ve generally appeared on behalf collectives. I’ve also had involvement in board proceedings on behalf of users.
Senator Tkachuk: When we had a look at this previously with the Banking Committee, there was a lot of concern about how quickly the board made their decisions and the fact that it took so long. All of this stuff was, to all of us at the time, nothing to do with legislation but with the board itself. I, and I think most of us, concluded they were incompetent and that was the biggest cause of the problem. It wasn’t the fact that we needed legislation to force them to do certain work. Was it the legislation that caused the previous problem on the board or was it the board itself?
Mr. de Beer: I strongly believe it was the legislative framework. You may recall my testimony two years ago where I explained the complexity of the legislation that the board was tasked with administering, essentially.
Since the act was dramatically amended in the late 1980s, then again in the late 1990s and then again in 2012, there was no consideration given to the implementation problem. Legislation was just changed and amended and amended, and the board’s job grew and grew. Nobody thought about that until suddenly there was a crisis. It was at that point of crisis that people suddenly said, “Maybe we should have planned ahead and dealt with that issue.”
I think it is important to note the chronic understaffing problem the board faced. Until very recently, as Mr. Chisick pointed out, most of the seats on the board were empty because of the complexity of the issues that are dealt with. It is not just the decisions, as Mr. Knopf pointed out. It is dealing with all the evidence and what are called the interrogatories, the discovery period. Dealing with that takes a tremendous amount of staff support. I would know because I worked inside the board temporarily.
It really is a solution that requires, if not a legislative fix, certainly a regulatory fix.
Senator Tkachuk: Do we have a legislative fix or a regulatory fix in this legislation?
Mr. de Beer: I personally would have preferred to see more of this work done by regulation and less by legislation so that the more difficult issues I mentioned earlier could be handled by the INDU Committee, in the section 92 report. I think that would have been better, but this isn’t horrible.
Senator Tkachuk: As committee members, we have no interest in the board itself, really. Our interest is that artists get paid, that people who write books get paid, and that people who record music get paid as quickly as possible, and that the users of all this music solve their problems as quickly as possible. That is all we want to see, because it is the job of commerce. If that isn’t accomplished, then no one is doing their job. The legislation isn’t doing its job, nor are the people on the Copyright Board doing their jobs. I would like you to comment on that and see if over a year we have any improvement and what we might want to do after that.
Mr. Chisick: All of us here today, to varying degrees, have expressed some concerns about the specifics of the legislation that is before you. I have said, and I will say again, that I think that, overall, what you have before you is a very constructive piece of legislation that does give the board a lot of the tools that it needs to solve the problems. I agree with Mr. de Beer that they were and have been heavily constrained by a combination of the existing legislative scheme and resource problems. Both of those are now being addressed. As somebody who appears before the board regularly and whose clients are reliant on the efficiency of its processes, I think this is a constructive step in the right direction, subject to some of the concerns that I and others have raised. I think we are making a lot of progress here.
Mr. Knopf: I don’t think the board has any resource problems whatsoever. As my late mother used to say — may she rest in peace — “If you want something done quickly, give it to a busy person.”
The board has much too little to do and takes too much time. Why does the Copyright Board need far more resources than the Competition Tribunal, for example? The Copyright Board already has about 10 per cent of the budget of the Supreme Court of Canada, which handles 600 or 800 leaves to appeal and renders 80 complicated decisions a year. That percentage will go up to 15 or 20 per cent of the budget of the Supreme Court of Canada for issuing three decisions a year. So the problem is not resources. The legislation is quite simple for anyone who has spent any time looking at the Copyright Act. The problem is that they have, frankly, not a lot to do and much too much time to do it, and the situation will only get worse.
One another point: By using these additional resources, we will lose sight of who is making the decisions. As any of you who are lawyers know — we have one very distinguished former judge here — the person making the decision is the person making the decision. You can’t ask staff to go off and do research and then use that to make a decision. The person hearing the evidence is the one who has to make the decision on the basis of the evidence that that person heard. We will lose sight of that.
The Chair: Thank you very much. Professor de Beer, do you have anything to add?
Mr. de Beer: I would acknowledge the importance of the work of this committee two years ago in issuing its report that lit a fire and led to this. Everyone thinks you could do this in less than two years, but the truth of the matter is it is a complex process, and it is not too bad. So it is good.
Senator Tkachuk: Thank you.
The Chair: Thank you very much, panellists. This has been spirited. I have had to intervene a bit more than I am used to, but I am feeling some pressure here from my left to keep things moving. It has been very helpful. Thank you also for your comments on the work we did two years ago.
We are continuing our subject matter study of Bill C-86, the Budget Implementation Act 2018, No. 2, in particular Division 7 of Part 4. For this panel, we are examining subtopics A, the Patent Act; B, trademarks; C, notices of claimed infringement; E, preservation of usage rights; and G, the National Research Council Act.
I am pleased to welcome as witnesses in our second panel, from the Intellectual Property Institute of Canada, Patrick Smith, President; as individuals, Richard Gold, McGill University, Professor, appearing by video conference; Teresa Scassa, Canada Research Chair in Information Law and Policy, University of Ottawa; Michael A. Geist, Canada Research Chair in Internet and E-commerce Law, Faculty of Law, University of Ottawa; and from the Canadian Intellectual Property Council, Scott Smith, Senior Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce.
Thank you all for being with us. We look forward to opening statements, and then we will move to questions.
Patrick Smith, President, Intellectual Property Institute of Canada: I would like to begin by thanking this committee for inviting the Intellectual Property Institute of Canada, often known as IPIC, to present to you our main thoughts on the legislative amendments included in Bill C-86 and answer any questions you may have. As you may know, IPIC is the Canadian professional association of patent agents, trademark agents and lawyers practising in intellectual property.
I would like to begin by mentioning that IPIC supports the government’s intentions and stated needs for the development of a national IP strategy to help Canadian businesses compete on the world stage. However, since many of the legislative changes in Division 7, subdivisions A, B, C, F, G and H were only consulted upon in principle without discussions on the transition, implementation or the legislative text, we feel they would benefit from further discussions with the IP profession and innovative Canadian industries.
In order to be able to present you with our thoughts today, we tasked IPIC’s subject matter experts to provide a few important recommendations on issues they identified related to the proposed amendments to the IP-related acts. Our committees continue to review the legislation, and we will provide a fulsome submission to you next week with our detailed recommendations. Today’s comments are just preliminary.
The first issue relates to the need for clarification on the appropriate transition period. This is important for sections 52.1, 53.1 and 55.3, but we feel the most important one is changing the rules for file wrapper estoppel by way of proposed section 53.1. Essentially, this relates to the ability to admit prosecution histories into judicial proceedings. The change overturns judicial precedent. The transition provision proposed section 201 makes this change applicable to active litigation, active patent applications and existing patents obtained under the old rules. Generally speaking, existing rights holders should not have rules imposed upon them that will substantively change their rights, absent compelling policy reasons to do so.
The second issue pertains to the replacement of section 56 of the Patent Act with proposed section 56 subsections (1) to (11). When the subject of a patent has previously been used by another person or business, the current law allows the prior user to keep using the material in their possession. After the patent issues, they cannot make more of the infringing material. The proposed section 56 amendments significantly enlarge a prior user’s rights. If the change is implemented, the prior user can pass on their rights to another, thereby significantly interfering with the exclusive rights granted to the subsequent patentee. Given that the patent system is predicated upon encouraging inventors to disclose their inventions rather than keep them secret, the amendment to section 56 is contrary to this policy objective in that it further rewards secret use.
Turning now to trademarks, our members are encouraged by the attempt in subdivision B to introduce policy to limit trademark squatting. The new provisions allow persons to enforce a trademark within the first three years by demonstrating use of a trademark. IPIC believes that this approach is a Band-Aid solution to fix an issue that was created in 2014 under Bill C-31, which removed the requirement for trademark applicants to show the mark was being used prior to registration.
Our members feel strongly that the amendments to the Trade-marks Act in Bill C-86 would be better if they simply required a showing of trademark use at the time of registration. With the removal of the requirement for a declaration of use before trademark registration, it encourages trademark speculators, where the owner has no real intention of ever using the trademark in Canada, and allows registrations to remain on the register without being used unless challenged at the expense of another entity looking to use that mark. This completely disadvantages Canadian businesses that have used or have a genuine intention to use a similar mark. Due to increased expense, SMEs in Canada are put at a particular disadvantage.
Turning now to copyright, our members want to congratulate the government in amending the provisions of the Copyright Act for recognizing the instrumental role played by the Copyright Board in shaping the law on copyright in the new digital economy. The objective of the new legislation is to create a more efficient decision-making process. With these objectives in mind, we will be providing written representations on a number of important technical issues.
By way of example, the intent of proposed section 68.3(1) is to make clear that the collective may apply to the board to withdraw a tariff or remove an act from a proposed tariff. However, the section as currently drafted may limit the ability of the collective to amend its tariff during the tariff proceedings. There are many circumstances in which, during the normal course of a tariff proceeding, a collective may amend its tariff. As examples, a collective will often seek a different tariff rate once all of the interrogatories are answered and evidence filed, or a collective may respond to various objections by changing the proposed wording of its tariff.
Assuming that the intent of this amendment was to expand the ability of a collective to amend its case with board approval rather than limit it, IPIC will propose a technical amendment.
Those are all of our comments for the panel. As you saw, some of these amendments are quite significant and can have a large impact on Canadian businesses, especially SMEs. We therefore strongly recommend that the government create working groups to ensure that all amendments are properly analyzed in the context of real-world application and in collaboration with practising IP professionals.
The Chair: It would be helpful if the documents that you referred to are provided as soon as possible.
Mr. P. Smith: Thank you, chair.
The Chair: May we go to Professor Gold next? There is some concern we will lose the video connection. We want to hear every word you have to say to us, so please go ahead.
Richard Gold, Professor, McGill University, as an individual: Thank you very much, Mr. Chair and members of the committee, for inviting me to speak today. Thank you for allowing me to do it by via video conference. This way I don’t have to miss my parent-teacher interviews this evening.
I am a professor in the Faculties of Law and Medicine at McGill University. Also, like other colleagues on the panel, I’m a Senior Fellow at the Centre for International Governance and Innovation. I work in the areas of intellectual property and innovation, particularly patent law. Over my career, I have been an expert for both the federal and some provincial governments, the World Intellectual Property Organization, the World Health Organization, the Organisation for Economic Co-operation and Development, and I have testified before legislative committees in Canada and the United States. I have intervened at the Supreme Court of Canada. I think I can say fairly enough that I am one of the leading independent experts in patent law, both in Canada and internationally.
Overall, I commend the government for making these — what I consider — largely housekeeping changes to intellectual property, particularly patent law. For example, one of the provisions deals with standard essential licensing, a practice of increasing importance. Ensuring that patents underlying those standards are widely accessible is essential to maintaining the integrity of those standards.
A second example would be clause 193 of the bill, which adds section 55.3 to the Patent Act, bringing Canada in line with European law. That is particularly relevant given the fact that we have CETA now. It does so by making it clearer that even commercial experimentation is permitted on a patented invention.
I also welcome the written demands provisions introduced by clause 195, although I wait to see the regulations since the details in there.
Back in 2000, I published an article describing the problem of software licencees when their licensor goes bankrupt. The trustee in those cases can sell the copyright, and the new copyright holder does not need to respect the licence under Canadian law. The situation in the United States is quite different, putting Canadian licencees at a differential risk. Clause 266 of the bill remedies this problem and puts Canadians on an equal footing with our American cousins.
I wish to spend the rest of my time on clause 191 of the bill, which adds new section 53.1 to the Patent Act. This new section allows courts to look at written communications between a patentee’s representative and the patent office in construing a patent claim. This change brings Canadian patent law into line with that of the United States. It prevents a patentee saying one thing to the patent examiner in order to get a patent and quite the opposite to a court when pursuing a third party for infringement. Without this provision, frankly, a patentee would not be bound by her word, a situation that easily leads to abuse.
The context for this is that we live in an era where Canadian courts have been loosening standards on patent law, making them easier to acquire and maintain, while U.S. courts have been doing exactly the opposite. Over the last dozen years, U.S. courts have tightened up tests around patentable subject matter, non-obviousness and utility through the enablement provision. Canadian courts, as I said, have done the opposite, loosening subject matter restrictions beyond those in either the United States or Europe, altering the U.S.’s “obvious to try” test into an “obvious to succeed” test and allowing virtually any use, no matter how trivial, to justify a patent. The result is that Canadian patent law is now more skewed in favour of patent holders than comparable laws in our trading countries. The new evidence rules do not counter this fact but provide a breakwall against further erosion of Canadian patent standards.
I support the provision, but there are two faults in the proposed section 53.1 that I would like to bring to your attention, both of which are easily fixed. First, the section only deals with half the problem: the determination of the meaning of a claim. It misses the other half, which is establishing what the invention does, or its utility. The Supreme Court Canada in AstraZeneca v. Apotex last year made clear in paragraphs 54 to 55 that courts must first construe the claim and, as a second step, determine “a single use related to the nature of the subject matter” of that claim, or its utility.
To make this two-step process work, however, both claim construction and determination of utility must be undertaken on the basis of the same evidentiary record. It would be inconsistent to consider written communications for claim construction but not for determinations of utility. Given this, I recommend that proposed subsection 53.1(1) be amended to add the phrase “or its utility” after the words “construction of a claim in the patent.”
A second issue has to do with the fact that the provision does not cover oral communications, leaving a significant loophole because patentees or their representatives frequently phone the patent office and speak to them that way, making undertakings about the meanings of the claims that aren’t recorded. I suggest the new section therefore include “communications reduced to writing” in addition to “written communications” and that we ask the patent office to ensure its practice includes reducing oral communications to writing.
Thank you very much for listening. I am happy to answer questions.
The Chair: Thank you very much, Professor Gold. Good luck with the parent-teacher interview tonight. It is always a source of anxiety, as I recall.
Teresa Scassa, Canada Research Chair in Information Law and Policy, University of Ottawa, as an individual: Thank you very much for the invitation to speak to this committee today. I am a professor at the University of Ottawa, and I hold the Canada Research Chair in Information Law and Policy.
I will be limiting my introductory remarks today to the amendments in clauses 215 and 216 of Bill C-86, which deal with official marks.
Canada’s official marks regime has long been criticized by lawyers, academics and the Federal Court. In fact, it has been the Federal Court that has, over the years, created some much needed boundaries for what are essentially super marks. The problems with official marks are well-known, but they have been largely ignored by Parliament. It is therefore refreshing to see the proposed changes in clauses 215 and 216.
Those clauses address only with one of the problems with the official marks regime. Although it is an important one, it is worth noting that more could be gone. The goal of my remarks will be to identify what I see as two shortfalls in these two particular provisions, although I’m happy to talk about some of the other problems or issues that are not addressed by these amendments.
Official marks are a subcategory of prohibited marks that may not be adopted, used or registered unless consent is provided. They are available to public authorities. A public authority need only ask the Registrar of Trademarks to give public notice of its adoption and use of an official mark for that mark to be protected. There are no limits to what can be adopted. There are no registration formalities, no examination or opposition proceedings.
Until the very recent decision of the Federal Court inQuality Program Services Inc. v. Canada, it seemed that nothing prevented a public authority from obtaining an official mark that was identical to or confusing with an already registered trademark. While Quality Program Services at least provides consequences for adopting a confusing official mark, it is currently under appeal, and it is not certain the decision will be upheld. This is another instance of the Federal Court trying to set boundaries for official marks that simply have not been set in legislation.
Official marks are theoretically perpetual in duration. They remain on the register until they are either voluntarily withdrawn by the owner — and owners rarely think to do this — or until a successful and costly action for judicial review results in one being struck from the register. Until the Ontario Association of Architects decision in 2002 tightened up the meaning of “public authority,” official marks were handed out like Hallowe’en candy, and many entities that were not public authorities were able to obtain them. Many of these erroneously issued official marks continue to exist today. In fact, the Register of Trademarks has become cluttered with official marks that are either invalid or no longer in use.
Clauses 215 and 216 address at least part of this last problem. They provide an administrative process through which either the registrar or any person prepared to pay the prescribed fee can have an official mark invalidated if the entity that obtained the mark is not a public authority or no longer exists. This is a good thing.
I would, however, suggest one amendment to the proposed new subsection 9(4) of the Trade-marks Act. Where it is the case, according to the new subsection 9(3), that the entity that obtained the official mark was not a public authority or has ceased to exist, subsection 9(4) allows the registrar to give public notice that subparagraph (1)(n)(iii) does not apply with respect to the badge, crest, emblem or mark.
As it’s currently worded, this is permissive: the registrar “may” give public notice of non-application. In my view, it should be mandatory. You have succeeded in showing that the public authority no longer exists, and the registrar “shall” give public notice of the invalidity of the mark. That is my comment, and I have given you the text of the proposed amendment. There is no reason why a person who has paid the fee, essentially, should not have their mark invalidated.
I would also suggest that the process for invalidating official marks should extend to those that have not been used within the preceding three years or, in other words, something parallel to section 45 of the Trade-marks Act, which provides an administrative procedure to remove unused registered trademarks from the register.
There are hundreds of public authorities at federal and provincial levels across Canada, and they adopt official marks for all sorts of programs and initiatives, many of which are relatively transient. There should be a means by which official marks can simply be cleared from the register when they are no longer used. Thus, I would recommend adding new sections 9(5) and (6), and I’ve given you wording of those — I’m not going to read through them now — to suggest a means that maps on to section 45 of the act to remove unused official marks from the register.
Those are my comments on changes to the official marks regime that most closely relate to the amendments that are found in Bill C-86 but, as I said, the regime does have other deficiencies that I would be happy to discuss. I will end my remarks there. Thank you for listening.
The Chair: Thank you, professor.
Michael A. Geist, Canada Research Chair in Internet and E-commerce Law, Faculty of Law, University of Ottawa, as an individual: Good afternoon. I am also law professor at the University of Ottawa — we are well represented today — where I hold the Canada Research Chair in Internet and E-commerce Law. I am also a member of the Centre for Law, Technology and Society, but I appear today in a personal capacity representing only my own views.
I’m pleased to have the opportunity to discuss the IP provisions found in Bill C-86. As you know, Budget 2018 prioritized the national IP Strategy and, while aspects of that strategy involved investment in issues such as IP education, there were several legal and policy commitments that require legislative reform.
Many aspects of Bill C-86’s IP provisions are both long overdue and welcome. Since the abuse of intellectual property rights may inhibit companies from innovating or discourage Canadians from taking advantage of the digital market, crafting rules that address misuse can be as important as those rules that provide effective protection.
There are a number of examples of how Bill C-86 tries address IP misuse. You heard earlier from Mr. Smith about trademark squatting. I would focus for a moment on copyright and particularly the notice and notice system, which was formalized back in 2012 as a mechanism to allow rights holders to forward allegations of online copyright infringement to Internet users through their Internet service provider. It was established with the best of intentions. The idea was that that rights holders, where they identified what they thought was infringement, could notify an Internet service provider that they thought they had a subscriber who was infringing their copyright. The Internet provider was required to forward on that notification to the end user. It served the purpose of providing education for end users, as they better understand copyright, and a mechanism for rights holders to ensure that they could try to raise their concerns. It protected the privacy of those individual users, and it played an important role for intermediaries, telecom companies or ISPs, to try to address some of these issues.
Almost immediately after the system was established, we found anti-piracy companies sending out hundreds of thousands of these notifications, not just alleging infringement but setting out demands that these end users would be required to pay. They would click on a link and be told that if they wanted to settle litigation, they would have to settle that.
Bill C-86 amends the Copyright Act to ensure that settlement demands are excluded from the notice and notice process, thereby, I would argue, restoring the original intent of the system.
Now, there are also elements there that try to deal with misuse on the patent side — you heard a little bit of that from Professor Gold — for example, trying to address patent trolling by combatting them through new minimum requirements in patent demand letters, which should hopefully discourage the sending of deceptive letters and allow a right for a recipient to pursue damages or injunctions at the Federal Court. Professor Gold addressed additional issues that I think seek to better restore the balance between supporting innovation and the patent system itself.
While those represent the positives in the bill, there is room for improvement. The House of Commons Finance Committee yesterday passed only a very few minor amendments. I’d like to offer three additional recommendations.
First, the implementation of some of the reforms, including some of the patent reforms that Professor Gold mentioned, is likely delayed for years since they are structured to require regulations to define issues such as the requirements in patent demand letters. This was raised on a call with officials, who indicated that they by and large know what they would like to see included in terms of defining what a patent demand letter ought to include. Yet, by delaying this and putting it into regulation, I think it undermines the likely success of the government’s IP strategy because it’s going to result in potentially years of delays. There is little reason they couldn’t and shouldn’t have been including the requirement for patent letters in the legislation itself, not left to the regulation-making process.
Second, the notice and notice copyright fix that I just mentioned is good, but we can do better. There ought to be penalties for sending abusive notices and common standards should be established to make it easier for Internet providers to identify those notices that are compliant with the law and those that are not and then they are therefore not required to forward on to their subscribers.
Third, Budget 2018 included several references to artificial intelligence, AI, which has become one of Canada’s most important innovative sectors. Yet, despite the prioritization of both AI and IP, it leaves a major AI copyright barrier untouched in this section. Some of the world’s leading AI companies, including Canada’s Element AI, Microsoft and members of the Business Software Alliance, have pointed to the need for a fair dealing exception for text and data mining or informational analysis. Without such an exception, Canada will trail badly behind competitor jurisdictions such as the U.S., Europe and Japan, which have sought to address this particular issue. I don’t think we can wait years to address what could be a significant commercialization barrier and, given that the budget focuses both on AI and IP, there was a room to fix this issue within Bill C-86.
I look forward to your questions.
The Chair: Very helpful. Thank you very much, professor.
Mr. P. Smith: Thank you for the opportunity to address the committee. Unlike my colleagues here at the table, I am not a lawyer, and I wanted to let you know that. As a brief introduction, the Canadian Intellectual Property Council, CIPC, is a special council within the Canadian Chamber of Commerce, which is the national voice of business, representing over 200,000 businesses across Canada. The mandate of the council is to promote an improved environment in Canada for business interested in innovation and intellectual property by raising the profile of intellectual property rights among key policy makers in the government and in the general public.
I would like to start by thanking the government for efforts to recognize the link between innovation and intellectual property rights in its intellectual property strategy. This is reflected in numerous measures contained in this budget, and some of the measures address long-standing concerns of the industry, such as the proposed amendments to the Copyright Board, which we support. For today, I will narrow my remarks to subdivisions A and B.
Bill C-86 amends a number of sections in the Patent Act. In particular, I would like to draw your attention to clause 191, which adds a section after section 53 of the Patent Act that describes items in a patent application that are to be admissible in evidence in any action or proceeding respecting a patent if it was used by the patentee in the patent claim construction.
Patent claim construction is the process in a patent application that describes what the patent is attempting to protect. Asserting patent rights requires proof of infringement. Proving someone stole your idea has two steps: one, the patent claim, which explains the product’s use and make-up; and two, the infringement analysis, which must demonstrate a violation of a claim. The second part cannot be determined without having a strong claim. The construction of patent claims plays a critical role in nearly every patent case. It is central to the evaluation of infringement and validity and can affect or determine the outcome of other significant issues such as unenforceability, enablement and remedies.
Clause 191 of Bill C-86 broadens the scope of admissibility to include what is referred to as the patent file wrapper. Patent file wrapper is an electronic or paper folder that contains a complete record of the application, including all of the documents relating to the patent such as diagrams, drawings, communications between the Canadian Intellectual Property Office and the applicant, statements made by the applicant and records of official actions by CIPO. It may also contain records of interviews of the applicant conducted by CIPO.
This is problematic for four reasons. One, it could alter years of Supreme Court of Canada precedent on purposive patent claim construction by allowing courts to read both the claims and the extrinsic prosecution history. Two, it creates legal uncertainty for patentees arising when claims construction is not limited to the claims themselves, increasing the potential for subjective judicial interpretations. Three, the transitional provisions apply to ongoing proceedings, presenting additional risks of uncertainty by placing courts in a position to apply file wrapper admissibility retroactively to patents that have already been judicially interpreted and that were drafted and approved many years before the bill’s introduction. Four, the provision is unduly broad in scope, extending file wrapper admissibility into the prosecution history of a divisional application, even though such applications are intended to issue as separate patents to separate inventions.
We are concerned that these measures were introduced without consultation with industry and that there will be no further opportunity to address these issues. We urge this committee to consider an amendment that would remove clause 191 from the bill pending further deliberation with industry on this matter.
With respect to subdivision B and trademarks, we note that many of the bill’s provisions address long-standing problematic issues, such as the treatment of licencees in bankruptcy cases, placing limits on the protection of official marks by public authorities and the requirement for leave from the Federal Court to file new evidence in an appeal of any decision by the registrar. We support these changes.
For today, I will focus my attention on clause 225, amending section 53.2 of the Trade-marks Act by adding a bad faith provision that will require use in Canada, or at least a significant excuse for non-use, of a mark in order to seek relief. This provision is an attempt to address an outstanding concern raised in 2014, which I did address in this committee at that time, around the use provisions in the Trade-marks Act. While we appreciate this measure is an attempt to mitigate the concerns of abuse, we caution that it remains unclear as to what will satisfy the requirement and whether use with one or more, but not all, goods or services will be sufficient.
This concludes my remarks. Thank you for your consideration and attention.
The Chair: Thank you very much, Mr. Smith. I would have thought you were a professor of law based on that. That was all very helpful.
Let’s move on to questions.
Senator Duffy: Professor Geist, we’re concerned about copyright, trademarks and protection of intellectual property. My concern is that there are groups and organizations — Google, Facebook and others — who have been in the news in the last week, who find themselves, with the acquiescence of the Government of Canada, in a position where Canadian laws don’t apply to them. I’m referring to a section of the recent free trade agreement, which I believe is clause 19.17, which basically says that Canada’s laws related to defamation would not apply to companies like Google, Facebook and so on. In other words, they claim to be an ISP, not a content creator, and therefore they’re simply the transmission belt.
In your testimony, you mention that part of our copyright infringement regime is for copyright holders to go after ISPs. How will that work? Will the pending new free trade deal undermine the ability of Canadians to receive those kinds of protections that we envisage in this law?
Mr. Geist: Thanks for the question.
I believe when you’re talking about 19.17 and the USMCA, you’re talking about the safe harbour provision for lots of different intermediaries, including companies like Google and others. I should note that there’s an explicit exclusion of intellectual property from that provision. To the extent to which we are focused on IP-related concerns, IP is carved out of that particular article. If the concern is around defamation —
Senator Duffy: Where does IP begin and end, though?
Mr. Geist: Well, this panel has been focusing on copyright and trademark patents, and that’s a pretty good place to start.
If you’re talking about defamation, and that was the context in which you raised it in, that’s not an IP issue per se. That’s defamation. What the safe harbour does — and I think it’s an important provision and has represented for Canada a real problem that we haven’t had that kind of safeguard in place — is that it ensures that it is courts that make decisions on whether or not something is defamatory or not and ought to be removed. There is a significant difference in the way some of those companies practice or deal with allegations of defamation on their platforms between Canada and the United States. In the United States, their response is, “Bring me a court order and I’ll remove it.” In Canada, based merely on an allegation, many of those companies will simply remove the content without any proof that it’s actually defamatory, so I think that provision carves out IP and has the effect of better safeguarding freedom of expression.
Senator Duffy: So copyright is not affected by this.
Mr. Geist: Not that provision.
Senator Duffy: And you’d still be able to go after ISPs for copyright infringement? That wouldn’t be altered in any way?
Mr. Geist: Well, the issue of liability of an Internet provider or Internet platform for the activities that take place either on their system or platforms raises a whole series of different issues. But, if the specific question is whether Canada has carved out liability for an Internet platform for copyright infringement on the platform, the answer is no, they haven’t carved that out.
Senator Wetston: I have a general question and then a more specific one.
We had officials this morning. We’re in pre-study, and you all have a lot of expertise in this area. As Patrick Smith knows, I have had some engagement in this area, but it’s been quite awhile.
How do these amendments support what I think we are attempting to achieve in Canada, which is more of an innovation economy? How do they support that, whether it’s on the trademark side, the copyright side or the intellectual property side? You’ve addressed some areas of this collectively. I think it’s really critical that we have that in mind as we move more and more to a service economy, and I know many of you have done work in this area. That’s my general question, and I might follow up with a specific one. I’m happy for anyone to answer, or all of you, if you could. The Chair would want that briefly.
Mr. S. Smith: I can start this off. The business community always looks for balance in the system, and there is a trade-off between the right granted to copyright holders or patent holders. In exchange for the creation, there is an exclusivity that goes with that creation. Finding that balance in the system and allowing that creator to realize a benefit from that creation for a period of time is what I think it’s trying to achieve.
I think we’re also trying to achieve a balance within the global community. We live in a digital age, and information and ideas can travel across the globe quickly. How do we integrate ourselves in that global community and make sure that we have those protections in place for both Canadian companies, but also encouraging investment in Canada from international companies?
Mr. Geist: I would harken back to the notion of copyright misuse and the need to better foster and facilitate innovation. You need to ensure that there are adequate protections, but you also need to address the misuse side. Patent demand letters and trolling is a perfect example of that, where you can have innovative companies, especially small- and medium-size businesses, who might find themselves stopped dead in their tracks based on patent trolling activities. This is trying to stop some of those activities, to ensure that people can exercise their rights but not do so in an abusive manner.
Senator Wetston: I understand that. I’m talking about a digital economy, as we’re moving more and more towards that. How does this support the progress? We deal with this a great deal, as you all do. I want it to be more specific. I understand the role of intellectual property, but help me. How will this bill advance the notion of a digital economy as it’s evolving within Canada and globally? Or is it just a patchwork?
Ms. Scassa: I think one question is whether it should be more than a patchwork. It does address a number of different problems that have been raised and discussed and debated in the past and it is attempting to fix. But it is an omnibus budget bill, and there is not a lot of time or space to debate things that are of greater magnitude or newer or more innovative. I’m not sure it’s the place to deal with digital innovation, but it is perhaps a place to start fixing some of the problems that have been nagging and haven’t been addressed.
Mr. P. Smith: I think that’s probably right. One of the things we’ve done, not necessarily with respect to this bill but elsewhere, is made representations about how you incentivize people to do that. We’ve made recommendations, and some of them have made it into government documents — not the budget yet, but we’re hoping — that will incentivize people to innovate. That’s probably the place where that belongs.
Mr. Gold: I’m in agreement with the other panelists. This is not solving the issue.
Senator Wetston: This is a question that many of you have addressed, 53.1 of the Patent Act. I want to understand that a bit more. Claim construction. We realize this is complicated and you’re dealing with utility, obviousness and patentable subject matter. Can you tell me the relationship between this provision, which I think some of you agree with — you don’t, Scott Smith — and the use of this evidence in proceedings primarily before the court and how the court is going to use this in a patent construction claim? Does this go to validity, or does it just go to the issue of the claim construction with respect to an infringement case? Does it go to both?
Mr. P. Smith: It does go to both sides. I’m probably the best person to address this one.
Let’s start at the beginning. A patent, at the end of it, has a series of numbered paragraphs, as you know. Those are the claims and they define the specific monopoly. In 2000, the Supreme Court of Canada issued two decisions concurrently, and that’s basically still the law today with respect to how you interpret those claims. You’re supposed to do so through the eyes of a person skilled in the art.
One of the things the court looked at was do you get to look at what people said previously in the file wrapper or the dealings with the patent office or other patent offices around the world? The Supreme Court of Canada said it was a complicating factor because the public should be able to go to a patent, read the claim and know the ambit of the exclusive rights that have been granted to a patentee. Therefore, you shouldn’t have to go back to a file wrapper to figure out what the patent says. As you know, patent construction is going to be relevant for issues of validity, and it will also be relevant for issues of infringement. It’s an important activity that gets done first. That was the policy rationale for the Supreme Court doing that.
In practice, what’s happened is Federal Court judges looked to the Supreme Court and said, “We can’t use what the patentee has said in the patent office for purposes of construction,” but to get around it, they said, “We can look to it to see if the patentee has made admissions.” And for that practical purpose, sometimes courts will actually look at the file wrapper even though the Supreme Court of Canada has said not to do so.
At the end of the day, I think where the rubber hits the road is if there’s a reason why a patentee made some type of admission in the file wrapper, likely through the court process, which is obviously very intensive and very scrutinizing of all patent claims, that admission is going to come out as well anyway. So I think practically speaking, it probably doesn’t make that much difference. That’s my personal view.
The issue of utility is not raised at all with the file wrapper. What Professor Gold was saying I suspect is an attempt to basically overturn what the Supreme Court said on utility, which is a whole other section. It’s got nothing to do with file wrapper itself.
Senator Wetston: Thank you.
The Chair: Does anyone else wish to comment on that, including you, Professor Gold?
Mr. Gold: Yes, if I may. It is a preliminary question that goes both to validity and infringement, and therefore, it is important.
The world has changed since the Supreme Court in the early 2000s said we shouldn’t be looking at the file wrapper because, they said, “Look, it’s not accessible to most people.” Everything is accessible now. The rules of patent claim construction have changed in the U.K. They’ve evolved elsewhere. These documents are publicly available. Other people are able to look at them and make decisions. We are now out of step by not recognizing that these public documents can be a useful tool in determining patent claim construction.
But this provision doesn’t change the substantive law. We still construe claims in the exact same way we always did. The question is, what are you allowed to look at? Right now, we are artificially limiting what courts can look at, and it made sense in the early 2000s, but it no longer makes sense to say you can’t look at written documentation that everybody sees and is easily accessible.
The same goes for utility. We’re not changing the utility rules, but the question is, on what basis is the court allowed to make a determination? Are they going to be blinded to the vast bulk of the communications on record, or are they going to be able to look at it?
So this, to me, is an evidentiary rule and not a substantive rule, and one that, frankly, is required.
Senator Wallin: I have maybe an impossible question, but because you’re sort of at the end of day two or close to the end of day two and we’ve got another round on this — I haven’t been keeping an exact tally, but from all of our panels in the last two days, I think there are maybe a couple of dozen amendments proposed, some of them simple, some of them quite substantive, I think. Where do you think we are? As you’ve noted, this is an omnibus bill that’s part of something else. Is this something that should be carved out? Should we stop it at this point? Do you think overall it’s better than the status quo? I’d like just your assessment of where we’re at with this because the process is complicated in trying to fix part of an omnibus bill.
Mr. S. Smith: I would say it should be unusual to have this level of detail in an omnibus budget bill. That being said, there are a number of things being fixed that I think you’ve heard today have a significant amount of support across various sectors, not just industry but the public interest as well. I wouldn’t want to see those overturned based on the fact that there are a few places where there is some dissent. It’s a difficult challenge for this committee, but I think maybe you should look at some very selective things.
Senator Wallin: Specifically.
Mr. Geist: In an ideal world, we wouldn’t be doing this in an omnibus piece of legislation. At the same time, there has been enormous pressure to try to address some of these IP issues with this committee, of course, on the Copyright Board. With the issue on the copyright notice system, quite literally from the very first week it took effect, people have been calling for change. So some of those issues, I would argue, have been well consulted and will not come as a significant surprise to many people in terms of what the government is trying to do. While I do think it is problematic to be wedging all of these issues into this larger omnibus bill, to pull it out and put a stop to it, all you have to do is look at the political calendar, and stuff there is generally widespread agreement on is going to be delayed by many years.
Senator Wallin: Okay.
Ms. Scassa: I agree. There’s a lot in there that’s good and useful, with the same —
Senator Wallin: Caveats.
Ms. Scassa: — concerns around doing this kind of thing in an omnibus bill. On the trademark side, there are certainly amendments in here that are aimed at fixing some of the preoccupations or concerns with the new regime that’s going to take effect in June 2019. There’s a certain amount of urgency there as well.
Mr. P. Smith: I have nothing further to add.
Mr. Gold: I agree that it’s better to go ahead with this. A lot of the amendments are quite technical in nature, a lot of them are needed, and whatever the other problems are, if the committee can find another way to deal with them, that would be great.
Senator Wallin: Thank you, all. Thanks.
Senator C. Deacon: Thank you, panelists. This has been a very enjoyable session. You are very engaging, I have to say, and it is heartening after some of the sessions we’ve been through. So I offer that.
I noticed, Professor Geist, one of your comments about our trade agreements Americanizing many of our IP provisions. As somebody who has spent a lot of money on patents and IP protection through start-up companies, there isn’t a tech start-up or digital start-up virtually in the country that isn’t focused on global markets. Americanization or certainly globalization of standards is crucial to success.
I just want to hear, though, concerns that any of you might have as it relates to our keeping up with global standards or the risks that that may be bringing into the Canadian marketplace that we haven’t identified or haven’t been identified in the changes that are being suggested through these provisions. This is for each of you. That is the prow of the ship of our economy. That is where we are heading. We have to make sure that we are protecting it. I think this is what Senator Wetston was saying earlier, namely, that we have to ensure the protection for the next 25 years of the exploitation of IP through the actions we are taking today.
Mr. S. Smith: Are you asking if things are missing?
Senator C. Deacon: I personally don’t think it is a bad thing for us to be Americanizing or globalizing our standards, but are there things we haven’t got in here and that have not been taken into account in these changes that are risks or places we have missed, or are there elements in this that are not necessarily allowing us to protect ourselves well enough within the global framework? This is not about protecting IP in Canada; this is about how we fit into the global market and exploit assets internationally.
Mr. S. Smith: That is a fair question. I was before the INDU Committee a few weeks ago talking about copyright and specifically issues around piracy and how to deal with it. There are a number of tools. I think we could accomplish resolving those problems by implementing those tools — things like having intermediaries or site blocking, for example. That is something we will look forward to in the coming months or perhaps next year, once the INDU Committee has put its report forward. It is probably premature to do it here.
There are other things under the Patent Act that we probably could have looked at but didn’t. For example, terms of data protection in the life sciences wasn’t addressed and is still outstanding.
Mr. Geist: I offer three quick points. First, Americanization and globalization are not the same thing, with all due respect.
Senator C. Deacon: Fair enough, thank you.
Mr. Geist: They are distinctly different. One of the challenges we’ve faced in the USMCA as an example is extreme pressure to Americanize our rules, sometimes out of step with global standards. That gives U.S. companies and U.S. entities a significant market advantage over us. We ought to be pushing for globalization and meeting international standards, not acquiescing to U.S. standards under pressure, which is precisely what we did in the USMCA on issues like copyright term extension, which went well beyond the international standard found in the Berne convention.
Senator C. Deacon: Thank you for clarifying that. I appreciate it.
Mr. Geist: This is an important issue because we face this pressure regularly, with the U.S. painting this as meeting an international standard but it often is not.
In terms of the broader issues, there are lots. I mentioned one off the top with respect to artificial intelligence, AI. That is an area where I believe we are out of step with respect to creating the necessary exceptions found in other jurisdictions — not just the United States, but Japan and the European Union — which may create a significant barrier to commercialization for Canadian-based AI entities. We are investing heavily in that sector and I think that is a significant problem.
Senator C. Deacon: Are there specific recommendations you could send to our clerk in that regard?
Mr. Geist: Yes. I would be happy to forward that along.
There are other areas being discussed, as you heard in other panels. For example, in the context of site blocking, I’d argue that the proposal put forward to the CRTC would have put us offside many of the kinds of global standards there. You had a collection of companies argue for site blocking in Canada without a court order, which would put us well offside virtually any country in the world that has moved forward with any sort of site blocking and have almost invariably required a court order.
These are challenging issues to be sure. However, along the lines of Senator Wallin’s question, I am not sure an omnibus bill is the place to deal with some of them.
Ms. Scassa: I agree with Michael’s comments. I think that AI innovation will put pressure on copyright legislation, certainly around text and data mining, but there may be other areas where there may be challenges with the legislation. There has been talk about whether our fair dealing defence needs to be changed to a fair use defence — not just because of AI and data mining, but because we need more flexibility. The way that technology has changed rapidly and the way the defence is framed right now doesn’t give it the responsiveness it needs in an environment where digital technologies are causing so much change. I’d mention that as well.
Mr. P. Smith: On the patent side, it is probably a little late for the Americanization comment. The U.S. first passed their patent statute in 1793, attributed to Thomas Jefferson. Upper Canada and Lower Canada stole some of the sections. Our language today goes back to that American statute of 1793. The definition of invention is virtually identical to what Thomas Jefferson came up with back then.
The first question is what type of system do we have and can we make it better? Largely, you are looking at amendments addressed at that issue.
The second issue is how can we encourage businesses to use the system more and benefit them? That is a broader question that I don’t think really arises from what you are looking at here today. It’s a broader question we are trying to bring forward in other venues. That is the bigger question for the government.
Mr. Gold: Hopefully, I am not fading too much. I agree that the problem for Canadian firms —
The Chair: Just bear with us, Professor Gold. We will get back to you, we hope.
Senator Duffy: This omnibus bill deals with some specific subjects, but in the broad future, for the people at home who are watching this committee meeting, does this bill fix or do we need legislation to fix the concerns people have about their privacy, their Internet commerce and all those security things? The New York Times had an amazing piece last week on Facebook and how they operate. Is that a legislative gap that we have? Is any of that addressed by what you see in this bill?
Mr. Geist: No, but it is not designed to, right? It’s not an IP.
Senator Duffy: Do we need stand-alone legislation to provide that protection to consumers?
Mr. Geist: We desperately need to update our privacy rules. Our political parties ought to be subject to privacy legislation. Cambridge Analytica is directly correlated to that sort of issue. There are certainly places where we do need legislative reform, yes.
[Translation]
Senator Dagenais: My question is for all our witnesses. It will be a question from a neophyte. I’ve heard you talk about the flaws in the bill, which unfortunately can’t be studied in depth. I gather that there are still solutions to some issues. However, if I need a patent for a product in 2018, wouldn’t it be better for me to get the patent in the United States or elsewhere so that the process would be simpler and I would be well protected?
[English]
Mr. S. Smith: I would be happy to start with that. I think the choice of market depends on the product you are developing and what your market strategy is. Regarding the simplicity of getting a patent in Canada versus a patent in the U.S., I don’t think there is a huge difference in the simplicity. It may take you longer here, however. The process is a bit longer, but some of the changes being proposed around the patent rules will solve that. I think the intent from CIPO was to reduce the amount of time it takes to get a patent and to reduce the headaches and some of the costs involved. I think we are moving in the right direction from that perspective.
Mr. P. Smith: One of the things about patents is that they are nationalistic in scope. If you want to enforce a patent in the United States, you need a United States patent. If you want to enforce one in Canada, you need a Canadian patent. That’s just the nature of patent rights.
There is a treaty that was agreed to and that Canada has implemented called the Patent Cooperation Treaty. That ensures that for every country who is a party to that treaty, when you file a patent application, it has to follow the form of the convention. Your filing requirements in terms of what you have to disclose will be the same in every country, and most industrialized countries are subject to this, including Canada. If you have a patent form that follows the form of the PCT, you can file it in whatever country in that form. The Patent Cooperation Treaty allows you to file one application and check off the countries that you want to subsequently drop into their patent systems. A patent filed in Canada under the PCT can become a U.S. patent or a European patent or some other country’s patent if you designate those countries. There was a treaty that has been adopted and implemented in Canada that simplifies the process for obtaining patents.
Senator C. Deacon: I am looking at the Intellectual Property Institute. I read a briefing yesterday from you. You had a concern in terms of how your group would be limited in terms of the number of members who might be available due to restrictions being put in here in section 14(d). I understand a change was made and an amendment proposed in the House this morning. Does that satisfy that? It sounded like a practical concern that you had.
Mr. P. Smith: Yes. We have a very active organization. We have 1,700 members, and about 400 of them actively participate in the committee work. I think this committee here is the beneficiary of some of their work. To limit the involvement of those people in those committees to —
Senator C. Deacon: The move to steering committee was sufficient?
Mr. P. Smith: That is fine.
Senator C. Deacon: It seemed like a practical suggestion.
Mr. P. Smith: We appreciate that.
The Chair: Panellists, it is my privilege to thank you all. This has been tremendous. We are grateful that you take your time to share your clear expertise with us. We have learned a lot. The analysts have created quite a list, because I see it being developed here. I hope that going forward we can count on you on other matters. Thank you all very much.
We are continuing our subject matter study of Bill C-86, the Budget Implementation Act, 2018, Number 2, and, in particular, Division 7 of Part 4. Specifically for this panel, we are examining subtopics D, College of Patent Agents and Trade-mark Agents Act, and F, privileged information.
I am pleased to welcome the witnesses in this panel. From the Intellectual Property Institute of Canada, we have already met Patrick Smith, President, and joining him is Adam Kingsley, Executive Director. Thank you for being with us today.
Patrick Smith, President, Intellectual Property Institute of Canada: I would like to thank this committee once again for inviting IPIC to present to you our thoughts today on Division 7 of Bill C-86. Specifically, for the next few minutes, I will address our recommendations on the enabling legislation for the College of Patent and Trade-mark Agents included in subdivision D of division 7. I am also happy to answer any questions you may have.
As I mentioned during the previous panel, IPIC is the Canadian professional association of patent agents, trademark agents and lawyers practising in intellectual property. Not only do we represent the views of Canadian IP professionals in our many submissions to government, but our activities also include offering education and continuing professional development, raising IP awareness in the business community, and, for the past several years, creating a voluntary code of conduct for the profession to follow as a condition of membership in the institute.
We are happy to see the government move ahead with the enabling legislation for the college in Bill C-86. IPIC, as many of you may know, has been advocating for the need for a self-regulatory governance body structured like those of most other long-standing professions in Canada, and we have been doing that for over 23 years. It is important to mention that we are not seeking regulation because there are major issues or that members of our profession are facing many complaints.
Patent and trademark agents form a profession with a tradition of excellence, and the Canadian Intellectual Property Office, with the assistance from the profession, administers rigorous qualification exams. However, the regulatory framework is incomplete. Although IPIC offers many of the components required in a regulated profession on a voluntary basis, there is no mandatory code of conduct, no continuing education requirement or discipline process.
Our desire is for the Canadian intellectual property profession to be recognized and trusted like the other professionals such as engineers, accountants and lawyers who are governed by a self-regulatory body. This increased level of trust will encourage more Canadian small business to take the necessary steps to protect their intellectual property and include IP as an important part of their business planning. We believe the creation of a college is critical to doing just that.
IPIC’s professional regulation committee has been looking over the legislation in great detail since it was tabled on October 29. We will be providing a fulsome submission next week on suggested improvements to the legislation but have identified a few issues that we felt warranted a discussion with you today.
I can assume that by “next week,” we will do it as soon as we can?
Adam Kingsley, Executive Director, Intellectual Property Institute of Canada: Yes.
Mr. P. Smith: The first relates to clauses 70 and 71. These sections establish who may represent individuals before the patent office and trademark office. Both ISED and IPIC are in agreement that the status quo should be maintained.
The reference to “legal counsel” in clauses 70(2) and 71(2) on their own may suggest that it was intended that lawyers who are not qualified to practise as patent agents or trademark agents may nevertheless represent individuals before the patent office and trademark office. This is prohibited by the current Patent Act and related patent rules which state that only qualified patent agents may represent individuals before the patent office. The same goes for trademarks. This legislation also repeals the sections of the legislation that require you to be a patent or trademark agent to represent applicants in presentation and prosecution of applications.
Although we understand from the government that there is no intent to allow lawyers who are not qualified patent agents or trademark agents to make representations before the patent office or trademark office, we do believe the way these sections are drafted currently, or the proposed draft, is problematic as it relies on removing the legislative requirement to be a patent agent or trademark agent to represent a client in the prosecution of an application and instead relies solely on the requirements in the regulations. We feel this may open up the college and government to future challenges by non-agent professionals, and it also weakens the public protection for Canadian businesses that their representative must be a qualified agent to prosecute their application for IP rights.
In view of the potential confusion that the current wording may create, as well as the weakening of the statutory requirement, it is recommended that clauses 70 and 71 be amended to remove any potential misunderstanding.
Our second issue pertains to proposed section 33(1) of the college legislation, which requires the inclusion of the code of conduct in regulations.
We see the code of conduct as a living, breathing document, and given the rapid pace of change in the innovative industries and the IP profession as a result, we believe it is very problematic for the code to live in the regulation. Although it is not completely unprecedented, it is extremely rare for a profession’s rules of professional conduct or code to be written into regulation. In almost all cases in Canada, where the code is very complex to reflect the multi-faceted nature of work being conducted by a profession, the code is created by the bylaws of the college as approved by their board.
I may remind the committee that there are provisions that require ministerial approval of changes to the code and also that establish a majority of public seats on the college’s board who are appointed by the minister himself.
Our recommendation is to incorporate the code by reference in the regulations but allowing the code to live outside of the regulations. The code may be deemed to be a regulation under the Statutory Instruments Act, but that act allows it to exist as a bylaw or some other form outside the actual regulations as it would be considered, for the purposes of that act, to be a regulation. This structure will allow the college to amend the code efficiently and be a responsive organization to trends and changes in the innovative industries and in the public interest.
To give the committee a point of comparison, we have looked at what the Law Society of Ontario has done regarding their code of conduct. The rules of professional conduct are not actual regulations under the Law Society Act. The benchers, the LSO’s board, oversee and approve the rules of professional conduct, but the rules are not actual regulations under the Law Society Act. Rather, the authority to make the rules and bylaws comes from the Law Society Act by way of legislative delegation.
Thank you for inviting IPIC to present to you our comments today. If there are any questions, we would be happy to address them.
Senator Wetston: I have a question of clarification. You want to be an SRO?
Mr. P. Smith: Yes, a profession.
Senator Wetston: You said self-regulatory organization. I think you used “SRO,” did you not?
Mr. P. Smith: Self-regulated profession.
Senator Wetston: Oh, an SRP?
Mr. P. Smith: Yes.
Senator Wetston: You would equate that to the Law Society, for example?
Mr. P. Smith: It is along similar lines, yes.
Senator Wetston: I was trying to follow the amendment you were suggesting, Mr. Smith, and it is challenging sometimes. It’s technical. It sounds like you want to be more like a regulatory profession rather than a self-regulatory profession.
Mr. P. Smith: It is a question of should patent agents and trademark agents be regulated in some manner? That is the threshold question. The answer to that is yes, they should. The second question is, how should they be regulated? Should it be self-regulated, should it be purely government regulated, or is there a hybrid role? The proposal included in the legislation is a hybrid role. Most of the positions on the college would be appointed by the minister and would not come from the profession itself. The majority are not from the profession.
Senator Wetston: Why would it be necessary for the minister to be engaged in an organization that is I would call more self-regulatory? The minister doesn’t appoint members of the Law Society.
Mr. P. Smith: That is right.
Senator Wetston: The government doesn’t appoint members of the regulatory SROs. I don’t think the minister appoints those engineers. I don’t understand why it is necessary. I am not necessarily opposed to it. I am just trying to understand why you would need to have that political involvement.
Mr. P. Smith: There are two issues there. The first one is IPIC doesn’t represent all patent agents or trademark agents in Canada. It is not a question of our organization being regulated. That is not what we are asking, and that is not what this is about. The question is whether all trademark agents and patent agents in Canada should be regulated. Is that something that is in the interest of the public? The answer is right now there are no rules for disciplinary procedures. There are no requirements that people continue their education like there is in Law Societies. Being a member of that profession, a patent agent and a trademark agent, IPIC is recommending that those types of provisions be in place.
Senator Wetston: I think we have a lot of guidance and information from the U.K. They often come to Canada, as you know. They have an expert judiciary or — I think it’s the judiciary, which has expertise in patent law. I think they have a patent court, as I recall. Maybe they don’t any longer, but they did at one time. In the U.K., are they licensed and regulated, as an example?
Mr. Kingsley: A lot of what you see in this legislation actually follows a similar structure to what they have in the U.K. It is an organization called IPReg. It is essentially a college of patent and trademark agents in the U.K. As far as governance of the organization, they have a four-three structure similar to what is being proposed here where there are four public or lay positions. Those positions have very specific job descriptions of the types of people you’d be looking for; it’s not just “let’s grab four people in the public interest,” but let’s identify people who have experiences that would make them valuable to the board of the college in regulating the profession. Then they have three members of the profession who are essentially the experts on the board in the day-to-day activities of the profession.
Senator Wetston: And would you describe it as a self-regulating profession?
Mr. Kingsley: Yes, we would describe that still as a self-regulatory body. Our proposal, originally, was that we were hoping for a majority of profession on that board, but we understood, in the public interest, that there would be members of the public who would be represented on that board. What we have here today in the legislation is a majority public positions.
Senator Wetston: I see. Thank you.
The Chair: I see that there are no other questions. You’ve been clear and concise, as you were in the former panel. We have noted what you have offered to us. Thank you both for making yourselves available.
Thank you, senators.
(The committee adjourned.)