This article is part of a series about what the renegotiation of the North American Free Trade Agreement means for the knowledge economy in Canada and the people who turn ideas into innovations within one of the world’s largest free trade zones.

 

Canada has long hoped to transform its economy away from natural resources and toward value-added industries such as computers, software, drugs, biologics and medical devices. In his 1930 book, The Fur Trade in Canada, political economist Harold Innis characterized Canadians with a biblical flourish, as “hewers of wood and drawers of water.” In recent decades, federal and provincial industrial policy has aimed for a shift to coders of software and inventors of pharmaceuticals.

The reasons for this desire are compelling: companies that invent, develop or sell goods or services embodying high intellectual content employ extremely well-educated workforces who earn high salaries, invest in expensive corporate infrastructure — such as state-of-the-art laboratories and production facilities — export high-margin products and sponsor research at universities.

By some measures, Canada is succeeding.

In a research report that my colleague Jevin D. West and I were asked to write last year (Canadian Inventors of U.S. Patents: An Empirical Study for the Canadian Ministry of Innovation, Science and Economic Development), we identified two encouraging findings for the biopharmaceutical industry through the lens of US patents. We found that US patents listing at least one Canadian inventor are 13 percent more valuable than the mean US patent, not to mention 16 percent more valuable than those with at least one non-Canadian, non-US inventor. In addition, we discovered that three of the top five categories of patents have at least one Canadian inventor within the area of biopharmaceuticals. In short, Canadian inventors are associated with many particularly valuable drugs and biologics.1

Despite Canada’s strength in medical innovation, Canadian patent law — a jurisdiction of the federal government — has not been as friendly to biopharmaceutical patents as one might expect. One legal doctrine in particular has been the subject of much complaint from companies in this field: the “promise” or “promise of the patent” doctrine. Under this requirement, if a patent applicant makes a statement in the patent specification (the description of the invention for which patent claims are sought) that amounts to a promise of particular usefulness, the applicant is held to that promise and obligated to demonstrate or soundly predict the accomplishment of that particular usefulness. There is nothing objectively unreasonable about this requirement. Holding applicants to their promises could improve the quality of patent disclosures — documents that should be clear and instructive but are, in fact, often vague and obscure.

Despite Canada’s strength in medical innovation, Canadian patent law — a jurisdiction of the federal government — has not been as friendly to biopharmaceutical patents as one might expect.

One difficulty with maintaining a promise requirement for patents is that Canada’s most important trading partner, the United States, does not have such a requirement in its patent laws. This makes it easier, at least in this one doctrinal respect, to obtain patent protection south of the border. The biopharmaceutical industry has been especially opposed to Canada’s promise doctrine, a requirement long upheld and elaborated by the Federal Court of Canada and the Federal Court of Appeal.

The promise doctrine is a long-standing irritant in trade relations with the United States. The US drug firm Eli Lilly went so far as to challenge Canadian patent law’s promise doctrine under the rules of the North American Free Trade Agreement (NAFTA) for causing some of its important patents to be invalidated, and sought a $500 million payout from the Canadian government. The company lost at its NAFTA tribunal, which upheld the right of Canadian courts to enforce the promise doctrine. The defeat incensed the US biopharmaceutical lobby, which was marshalling its forces for a battle during NAFTA renegotiations when there was an unexpected turn of events. 

With marvellous serendipity, the promise doctrine rose onto the docket of the Supreme Court of Canada just in time for a decision this summer. Unlike its patent-obsessed cousin court in the United States, the Supreme Court of Canada rarely indulges itself in the pleasure of deciding patent cases. On June 30, 2017, it decisively obliterated the promise doctrine in its case AstraZeneca Canada v Apotex. While a lower court had characterized the promise of the patent as “the yardstick against which utility is measured,” the Supreme Court held that section 2 of the Patent Act contains no such requirement. Utility, or usefulness, is mentioned in section 2, as part of the definition of “invention”: “any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter” (emphasis added). Nowhere in the Patent Act did the Supreme Court find any basis for a promise requirement, dismissing it as “unsound [and] an interpretation of the utility requirement that is incongruent with both the words and the scheme of the Patent Act” (para. 36).

Instead, the court simplified the Canadian test for utility, explaining that “ultimately, every invention pertains to a single subject-matter, and any single use of that subject-matter that is demonstrated or soundly predicted by the filing date is sufficient to make an invention useful for the purposes of [section 2]” (para. 49). The Supreme Court contradicted the court below, declaring that “promises are not the yardstick against which utility is to be measured” (para. 63) and warning that the “Promise Doctrine undermines a key part of the scheme of the [Patent] Act” (para. 51). The Supreme Court killed the promise doctrine, declaring that “it is not good law” (para. 51).

The AstraZeneca Canada v Apotex decision has implications far wider than those for the parties and patents involved in the case. Demonstrating the utility of claimed inventions should now be less onerous, making more inventions patentable. This may be especially helpful to applicants for patents in the biopharmaceutical arts, because they seldom have much clinical data available at the time such patent applications are filed and instead have to rely on educated guesses and animal studies to predict the particular applications of their new medicines. For those who lament the fact that a disproportionate number of valuable Canadian technologies lead to US, but not Canadian, patents, a lowered bar for utility might just lead to more Canadian patents.2

The ruling helps defuse what promised to be one of the most explosive issues in the renegotiation of NAFTA. It remains to be seen, however, if the American biopharmaceutical lobby will take yes for an answer, and US trade negotiators may seek to further neutralize the promise doctrine during the talks. They could find, however, that they are pushing on an open door, as the Supreme Court ruling appears to relieve Canadian representatives of much of the burden of defending the doctrine.

The effects of AstraZeneca Canada v Apotex may also embolden Eli Lilly and others that have had patents or patent applications invalidated under the promise of the patent doctrine.

One salutary effect might be the reinvigoration of the Canadian biopharmaceutical industry, a sector various governments have tried to foster with subsidies and favourable changes to Canadian law, with persistently disappointing results. As noted above, my own research has shown that Canada produces excellent biopharmaceutical inventors, whose inventions routinely outcompete those from other countries. It is high time that this impressive local talent led to an equally impressive local biopharmaceutical industry. Only time will tell whether the promise of developing new medicines in Canada will be realized now that the promise doctrine is no more.

1 Because comparable Canadian patent data is not yet readily available, US patent data was used as a proxy.
2 As some of my previous scholarship (e.g., “The Right to Innovate” with E. A. von Hippel [2015]; Set Innovation Free” [2017]) suggests, more patents do not necessarily lead to more innovation, and, indeed, may actually harm it.

About the Author

Andrew W. Torrance is a senior fellow with the Centre for International Governance Innovation’s International Law Research Program. He is also the Earl B. Shurtz Research Professor at the University of Kansas School of Law and has been a visiting scholar in behavioural and policy sciences at the Massachusetts Institute of Technology Sloan School of Management since 2011.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.