IP into the future

  • Subtitle: Cover Story: Special Report: Intellectual Property
Written by  Posted Date: June 6, 2016
IP into the futureIf James Watt, the inventor of the steam engine, thought getting a patent for his clunky machine in 18th-century London was tough, he’d not tried to protect something intangible that people cannot see, feel, or touch. Once exemplified by discoveries like Watt’s steam engine, innovation can now start and end with information, complicating exactly what we mean by “making something.” The value of protecting information-based inventions has risen with the speed of innovation, but designing intellectual property systems to suit today’s breakthroughs remains a slow, delicate art.

“In the last 30 years, we have moved very fast from traditional goods to the age of knowledge,” says Bassem Awad, deputy director of international intellectual property law and innovation at the Centre for International Governance Innovation in Waterloo, Ont. “IP rights have become the global currency for all innovators in all markets these days. We’re talking about intangible assets before talking about the price of oil or the raw materials,” he says.

In March, thinkers like Awad met at a conference in Toronto to talk about rejigging intellectual property laws to accommodate innovations in the “Fourth Industrial Revolution.” There were more questions than concrete answers because emerging technologies “are blurring the lines between the physical, digital, and biological sphere that we used to work within,” says Awad.

Innovators now believe in the power of leveraging big data, but question the value of doing so if it doesn’t translate into competitive advantage through IP protection. Technologies like 3D printing excite and threaten the makers of today because, while the ability to print products from toys, medical equipment, and car parts in one’s garage means virtually no labour and shipping costs, it also means others potentially stealing the technology you or your company put time, effort, and investment in to create.

“So the question is, will the current IP rules be adapted, or will need to be adapted, to respond to these emerging technologies?” asks Awad, before quickly answering his own question. “The answer will be yes. We need to think differently about how to protect these types of technologies,” he says.

NEW IDEAS, OLD RULES
One of the important features of a good IP system is certainty, says Noel Courage, a partner at intellectual property boutique Bereskin & Parr LLP. Certainty about what can be protected by IP laws drives innovators to create and investors to take chances, says Courage. But when it comes to newer technologies — those based on information and knowledge — innovators sometimes have to paint in the dark.

Take, for example, the patentability of software-based inventions. “For a long time in Canada and the U.S., there’s been uncertainty about whether you can patent software-related inventions,” says Courage, adding the decades-old controversy is still ongoing despite software’s place as an important and evolving area of the world economy. “Legislatures don’t want to touch it because it’s a complex issue and it’s not a highly glamorous issue, and courts are kind of making it up as they go.”

He adds that, in the 1990s, a U.S. court opened the door to software patenting, but that decision was overturned by another court in recent years. “So, again, the goal posts have moved,” he says. “There’s a lot of uncertainty around these issues, and it’s not good for the companies and the industry, it’s not good for investors, it’s not good for anybody.”

Controversy also dogs cutting-edge innovation in the pharmaceutical industry, particularly around new forms of diagnostic tools. Courage, who is a member of his firm’s life sciences group, says in the ’80s and ’90s, diagnostic focus was on individual genes, but experts are now working on finding out how combinations of genes work. A new frontier in intellectual property, the endeavour involves analyzing changes that happen in the body of a person who is at risk for a certain disease. Its result is proactive diagnosis and personalized care.

According to Courage, the patent office isn’t convinced diagnostic innovations that measure biomarkers can be patented. “There have been cases saying, basically, that measuring change in biomarkers in the body is effectively a law of nature — you’re just measuring changes that occur in a person, so this has not been touched sufficiently by the hand of a person to be qualified as an invention. So there have been cases where really legitimate inventions have been kicked to the curb because of this type of approach,” he says. “That’s an example of how the patent offices are not keeping up.”

Jacqueline Chernys, senior counsel for intellectual property at Calgary-based, Chinese-owned oil and gas company Nexen Inc., says knowledge-based innovation will replace traditional inventions in oil and gas, too, but whether IP laws create an incentive to do so is still questionable. “A lot of our work going forward won’t necessarily depend on traditional innovation of physical products but on our ability to leverage our intangible assets like data to create certainty on how we will do things in the future,” says Chernys. “We’ll be relying on big data and ways that we can leverage big data. Some of that will depend on the extent to which we can get a competitive advantage from ways of manipulating data.”

The kind of intellectual property issues that could come into question with big data could be both copyright and patent laws. If someone has a proprietary method of looking at historical data to be able to be predictive of future output, then the ability to protect that specific methodology may have an impact on how companies will use their data, explains Chernys. On the flip side, of course, being able to protect unique ways of manipulating data means restrictions for other companies who want to do studies on their own data.

For the oil and gas industry, how patent laws will deal with 3D printing technologies will also have a major impact on business, as companies faced with low commodity prices look for cheaper ways of doing things. Chernys says it’s not to suggest that oil companies will circumvent IP laws via 3D printing, but “if we can do that and still be in compliance with the IP rights of others, we would be looking at that. If the new technologies allow for us to produce or design products that we would otherwise pay for because the company we’re paying has some proprietary advantage, I can’t say that we wouldn’t take advantage of that from a supplier point of view, provided that our initiative to do so will not violate the IP rights of others.”

Tesh Dagne, an assistant professor of law at Thompson Rivers University in British Columbia, studies the relationship between intellectual property and 3D printing and says: “What 3D printing brings to IP generally is uncertainty.” Companies typically use digital locks to protect their computer-aided designs from which 3D prints can be made. Circumventing those locks is a copyright infringement, but exactly how patent laws are engaged when people use CADs to print their own products is unclear. According to Dagne, business lobbyists want to make it illegal to reconstruct products using 3D printers, but consumer groups would argue 3D printing should be permitted for the purpose of repairing products, which is already permitted by the jurisprudence.

“Now, because you do it at home, it will become difficult to know the distinction between the two,” says Dagne, who adds 3D printers will soon become household items. But exactly how patent laws will address 3D printing will have broader economic impact. Chernys says the recent downturn in the oil and gas sector, for example, has taught companies they have to get creative with their technologies. “If oil prices are $30 a barrel but the technologies we currently have in place produce oil at $50 a barrel, then we lose money for every barrel of oil we produce, which is exactly the opposite of what any business wants to do,” she says, adding that creates an incentive to be innovative.

But, Chernys continues: “One has to ask, if we innovate, do we have IP incentive there? What can we do to protect that innovation to give us that competitive advantage? Because, if after this downturn there are 20 oil companies and only 10 will survive, will the determinant of who survives be the strength of their technology, and as an add-on to that, their intellectual property?”

IP AND INNOVATION
Whether IP laws exist to foster innovation or to stifle it is an age-old controversy, and the answer depends on whose shoes you’re walking in. But the question has become more prevalent now as governments and laws struggle to keep up with dramatic changes in the type of technology they’re designed to govern. With easy digital access to almost everything, creators worry more than ever about the security of their brainchild.

In Canada, the link between IP and innovation also come up when people question why this country lags quite dramatically in innovation. The 2015-2016 World Economic Forum’s Global Competitiveness Report said Canada’s “insufficient capacity to innovate” is the most problematic factor for doing business here.
Last year, Canada earned a dismal “C” grade on the Conference Board of Canada’s grading scheme for innovation after it ranked ninth  out of 16 peer countries.

“We need to really think about the role intellectual property plays in that,” says Victoria Lennox, co-founder and CEO of Startup Canada. “As the government of Canada implements an innovation strategy — they are about to pour $800 million into innovation in Canada — I think it’s really important that they consider the role of intellectual property laws and the challenges of the 21st century as it relates to that innovation strategy.”

When it comes to the link between IP laws and innovation, the jury is still out on the degree to which the former drives the latter. According to Michael Geist, Canada Research Chair in Internet and E-Commerce Law, the strength of IP laws has minimal impact on innovation. “When you look through the economic literature, there just isn’t a whole lot of evidence that suggests that there are these strong linkages,” says Geist, adding that in some areas, flexibility, not restrictiveness, of intellectual property rights allows more innovation. “Some of the companies that we look to as being innovative in the Internet space — companies like Google and Facebook, for example — their growth has been largely based on, first, flexibilities in copyright law.”

Google, for example, isn’t looking to create more restrictive copyright rules; it’s a supporter of fair use because it recognizes flexibilities in the law provide the impetus for its kind of innovation, adds Geist. “We don’t have the same kind of flexibility in our law as compared to the United States. So, if I were an Internet company like Google, I’d look at the Canadian rules and the U.S. rules and see that the Canadian rules are more restrictive compared to the U.S. There are things I may be able to do and bring to market as digital products in the U.S. that I can’t do in Canada.”

Surely, there are things we can do in the law to better encourage innovation, but it’s not about “ratcheting up protections,” adds Geist. “In some instances, it’s recognizing that it’s actually flexibilities that help spur innovation.”

Awad agrees stronger IP alone doesn’t drive innovation. He says you need an “IP strategy” that takes into account the different stakeholders in the system — everyone from individual innovators to nimble patent offices and savvy lawyers who can help choose the right type of IP to protect specific innovations. “You need also to develop some cost-effective models to help the universities commercialize the IP coming from their labs,” says Awad, adding the missing link between university innovations and the marketplace is a strategy to commercialize inventions. Canadians are good at doing the kind of cutting-edge research no one else in the world is doing, but lack the know-how to reach the market and thrive in it.

From investors’ points of view, a strong intellectual property strategy isn’t just about traditional patenting, says Lance Laking, investment director with the MaRS Investment Accelerator Fund. Laking says re-imagining intellectual property also means broadening the scope of it to good branding and even a culture of knowledge protection within companies. “Every developer, engineer, and person that you hire signs a bona fide employment agreement with IP and confidentiality component to it so that the invention and the activities of the company are all captured inside,” says Laking. “Those are all the sorts of things we look at as an investor to make sure the company has its house in order around the broader IP system.”

ENFORCEMENT: A GAME OF WHAC-A-MOLE
The thing about obtaining IP is that then you have to enforce it. “There are no IP police to do it for you,” says Patrick Fitzgerald, an IP and technology lawyer at Cox & Palmer in Halifax. Policing breaches against intellectual property are also a costly challenge in the digital age, he adds.

To start, there’s hardly any consensus around how best to issue takedown notices when, say, copyrighted work is illegally used and shared online. “It’s still very polarized even many years later,” says Courage, who adds that many different laws have been tried worldwide.

The music industry, which has perhaps been battling infringing copies online the longest, came up with what was, at least initially, a clever idea to deal with the problem. It teamed up with Google to use the tech giant’s powerful software to track down copyright songs on YouTube. When it finds such songs, the software, called Content ID, would slap an advertisement on the video, and funnel the revenue from the ad to the copyright holder.

It’s a last-gasp attempt to profit from viral videos featuring copyrighted songs, which are difficult to contain, says Courage. Take for example, the case of Alberta man Robert Wilkinson, who belted out his rendition of the classic Queen song Bohemian Rhapsody while sitting in the back of an RCMP cruiser after police picked him up for drinking and driving. Police recorded the whole thing, and later sent Wilkinson the video as evidence in his case. Wilkinson then uploaded the video online at the urging of his friends, according to the National Post. Sure enough, it won the heart of the Internet, getting more than 11 million views. The video is dark and blurry, but 15 seconds into the film, a Google advertisement appears on the screen.

The strategy works until it doesn’t anymore, says Courage, who points out another recent case. A mother of a baby who appeared in a YouTube video dancing to the Prince song Let’s Go Crazy recently succeeded in challenging a record label that issued her a takedown notice. The mother argued the video only contained a snippet of the song, and it constituted fair use. Her success “does throw a wrinkle in the use of technology to enforce,” says Courage. “If a judgement needs to be made on whether it’s fair dealing, you effectively undermined that technology because a human then has to intervene every single time and look at every single potential infringement. Ultimately, that’s not cost-effective . . . to have a human overseeing a Whac-A-Mole game where you take down one and another one comes up.”

With gaps in both policy and resources to enforce IP, innovators have had to do what they do best — get creative — to manage the burden. Take, for example, the approach by toy company Hasbro, whose My Little Pony brand has found a cult-like following among teenagers and even grown men who’ve dubbed themselves “Bronies.” Fascinated with the animation and characters in My Little Pony, the fans have taken to using 3D printers to produce their own ponies. Instead of fighting this, Hasbro allows enthusiasts to order their own ponies online via the 3D printing service Shapeways. It’s a trade-off — the company gives up some creative control, but it still maintains overall control of the brand.

At this point in time, IP infringement as we know it targets human actors. But it’s also interesting to consider how devices using artificial intelligence could become implicated in intellectual property enforcement. In the abstract of an article titled Intellectual Property Infringement by Artificial Intelligence Applications, Eran Kahana, a research fellow at Stanford Center for Legal Informatics, says current laws do not recognize infringement without human involvement. “If there is infringement, a human-based ‘smoking gun’ is a prerequisite for liability and appropriate remedy,” writes Kahana. The need to ascribe blame to human actors is “misguided for a number of reasons,” not least of which is that a human may not even be aware when artificial intelligence-based technologies are in breach of IP rights.

“Instead, I propose that an iterative liability standard be adopted. Under it, infringement inquiry can begin with the original developer/deployer, but where the facts indicate that the AI app behaved sufficiently independently, that individual should not be held liable,” Kahana wrote. “Once we dispose with the human-centric side of the inquiry, we need a legal framework that can handle assigning liability and dispensing remedy vis-à-vis these hyper intelligent AI apps. We could take a pull-the-plug approach and conclude that any AI app that is deemed infringing will be summarily deleted,” he added, noting this might work until, of course, AI technologies become smart enough to evade detection.

SHARING IP
As much as it’s important to nail down ways to protect IP, knowing when to share it with others will also be a big part of innovation in the future. This is especially true because of environmental concerns, which now drive the direction of technology in many sectors.

Part of Awad’s work is at the intersection of IP and climate change technology. His research explores how innovators can be incentivized to create clean technology while ensuring developing countries have access to those technologies. “I’m proposing what I’m calling the Green Global Patent Pledge,” he says, adding the electric car company Tesla, for example, has pledged a number of its patents for anyone to develop them.

The goal of IP sharing isn’t just altruistic. According to Chernys, sharing some IP with others in the oil and gas sector will be part of the future if the industry as a whole is to survive. “We may, on a selective basis, choose to share that IP with certain other producers that are willing to implement a solution that’s more environmentally friendly and thereby help preserve the oil industry as a whole,” she says. “Traditionally, people think of IP as all or none — license it, use it, exclude others, but I think my way of thinking, and I think it’s shared by some people, [is that] we may be willing to allow other producers to utilize that technology if it means that, overall, the oil industry will survive.”

GOING GLOBAL
The broader the reach of their intellecutual property, the happier innovators generally are, and Canada is a signatory to a number of international IP treaties meant to allow patents and trademarks in one jurisdiction to be applicable in others.

These treaties follow a minimum standard and provide some predictability throughout the world. But at a time when digital inventions call for changes in IP laws, becoming a member country to these treaties is like “tying your car to that wagon,” says Courage. “There’s really not a lot of room for change. It’s keeping up with business generally, but it’s not great with new technology.”

Particularly controversial, of course, is Canada’s involvement in the Trans-Pacific Partnership Agreement trade deal and what it could mean for the balance between consumer and innovator interests in intellectual property. Both fans and opponents of the deal argue with equal fervour over its merits. Geist, a vocal opponent, says the TPP “entrenches” into longer patent terms for biological inventions. “Nobody can agree on what the optimal term is. A part of that is because it’s so new, we don’t know,” he says.
“What the TPP does is lock us into a longer period of protection and that’s bad for innovation because, frankly, we’re still at the early stage and we don’t know what the appropriate level of protection is. What we do know is, by locking ourselves in, we’ll make it very difficult to undo that if we find that it actually inhibits innovation.”

Others feel agreements like the TPP are missing key markets around the world. According to Lennox at Startup Canada, trade agreements focus on China, India, and some European markets, while ignoring the potential for commerce in South America. “My call to action here in the capital is that . . . we need a bold vision for innovation in Canada and a willingness to make decisions that are really cutting-edge and moving the bar forward,” she says. “We need to aggressively open up our markets to the world and make sure that the world has more Canada, so making sure we have expedited routes for Canadians to go global. I think we’ll be catching up if we keep following.”

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Yamri Taddese

Yamri Taddese is staff writer for Canadian Lawyer and Law Times. She began her career with Carswell Media in 2012 and has also worked for the Toronto Star, Global Television, Berhan Television, and the Toronto Observer. Yamri can be reached at yamri.taddese@thomsonreuters.com.

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